Equity-based Customer Loyalty Program Study

In the past several years, customer loyalty program has already became a key marketing strategy of Customer Relationship Management (CRM), because loyalty program can stimulate customer to buy more products or service and it also can help some companies to keep their marketing share. But, we know little about why some of the loyalty programs are successful while some others can't achieve their goals. And that's one of things marketing managers must be interest in. After systemically reviewing the literature in this field, this study proposes a model which can solve the problems and then collects data in hotel industry in which loyalty program is ubiquitous to prove the hypotheses in the model.The essence of loyalty program is to reward the most valuable customers by providing different customers with different benefits. But people always hope to be treated fairly, and it was more significant in the corporation-customer relationship. So based on the equity theory, this study design a scenario-based experimental in which the author control two factors (the number of loyalty program tiers (1/2/3); respondent's purchase frequency (1/2/3)). And at last there are some useful conclusions. Firstly, the number of loyalty program tiers influence customer preference and customer loyalty. Secondly, respondent's purchase frequency influence customer preference. Thirdly, the interactions of the independent variables can influence customer preference, customer fairness and customer loyalty. Fourthly, firms can use the loyalty which has three tiers to reward more valuable customers without alienating less valuable customers.There are three great contributions of this study. Firstly, this study has academic and practical meaning. Secondly, in this study a model based on equity theory was proposed to study loyalty program. Thirdly, in this study, there are some useful suggestions for marketing managers.