Retail Store Customer Loyalty Program Validity Measurement Study

As one of the most important Customer Relationship Management (CRM) means, Customer Loyalty Programs (LPs) have been widely applied in airlines, hotels, and financial services. Meanwhile, LPs gradually prevailed in retailing in forms of incentive program, membership card, and club. However, when retail stores' LPs are featured great importance, whether they truly cultivate customer "loyalty" and bring considerable profits is being challenged. In order to comprehensively measure the effectiveness of retail stores' LPs, on the basis of previous literatures domestically and overseas, and according to the distinctive features of LPs in retailing, this study is trying to setup a framework to research on the effectiveness measurement, establishing retail stores' Loyalty Programs Effectiveness (LPE) measurement model in two dimensions, one is the economical benefits, the other is customer loyalty.In the dimension of economical benefits measurement, the cost indicators of LPs have been analyzed in detail to calculate the profit variation caused by the implementation of LPs, which can directly reflect the short-term returns. In the dimension measuring customer loyalty, after scientifically selecting the customer loyalty indicators that closely related to LPs' effectiveness, a principal component analysis is done based on the research data to determine their weights, and comes up with a customer loyalty measurement model, whose score can reflect the long-term returns. In addition, the essay also makes correlation analysis on demographics and other factors that may affect LPs' effectiveness.Since the model is proved practical by empirical analysis, retailers can adjust their strategies on the findings of measurement accordingly, to lower input costs and increase the implementation efficiency, so as to realize the goal of profit maximization.