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Loyalty Program, Store Satisfaction and Starbuck’s Brand Loyalty Among the Millennial

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The topic of brand loyalty is one of the main attraction and concerns among researcher nowadays. The purpose of this research is to examine the relationship between loyalty program, store satisfaction and brand loyalty of Starbucks’ millennial customers in Sarawak. The independent variables involved in this research are loyalty program and store satisfaction while the dependent variable is brand loyalty. The foundations of loyalty program, store satisfaction and brand loyalty were assessed using a validated questionnaire. A total of 200 respondents of Starbucks’ millennial customers participated in the survey. The empirical results indicate that the loyalty program was found to be significant with strong correlation and positive relationship with brand loyalty. Also, the relationship between store satisfactions was found to be significant with very strong correlation and positive relationship with brand loyalty. The main contribution of this paper has provided empirical evidence about the relationship between loyalty program and store satisfaction on brand loyalty. Moreover, it reveals the factor that influences most on brand loyalty of Starbucks’ millennial customer in Sarawak is store satisfaction. Areas for future research are also discussed in this research.
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Copyright © 2017 American Scientific Publishers
All rights reserved
Printed in the United States of America
Advanced Science
Letter
s
Vol. 23, 74207423, 2017
Loyalty Program, Store
Satisfaction and Starbuck’s
Brand Loyalty among the
Millennial
Ahmad Armim Ramadan1, Jati Kasuma1*, Yusman Yacob2,
Irwan Shahrinaz1, Dayang Hummida Abang Abdul Rahman1
1
Faculty of Business Management, Universiti Teknologi Mara Sarawak
2
Postgraduate, Faculty of Business Management, Universiti Teknologi Mara Sarawak
The topic of brand loyalty is one of the main attraction and concerns among researcher nowadays. The purpose
of this research is to examine the relationship between loyalty program, store satisfaction and brand loyalty of
Starbucks’ millennial customers in Sarawak. The independent variables involved in this research are loyalty
program and store satisfaction while the dependent variable is brand loyalty. The foundations of loyalty
program, store satisfaction and brand loyalty were assessed using a validated questionnaire. A total of 200
respondents of Starbucks’ millennial customers participated in the survey. Th e empirical results indicate that the
loyalty program was found to be significant with strong correlation and positive relationship with brand loyalty.
Also, the relationship between store satisfactions was found to be significant with very strong correlation and
positive relationship with brand loyalty. The main contribution of this paper has provided empirical evidence
about the relationship between loyalty program and store satisfaction on brand loyalty. Moreover, it reveals the
factor that influences most on brand loyalty of Starbucks’ millennial customer in Sarawak is store satisfaction.
Areas for future research are also discussed in this research.
Keywords:
Brand Loyalty, Loyalty Program, Millennial, Store Satisfaction.
1.
INTR
ODUCTION
A globalized market and borderless flow of information have
resulted in an increased of customer expectations and intense
competitive pressures in term of profitability, quality and
consumer loyalty since they are the trendy expressions in
today's business situation that spark interest to the organization
in attracting and retaining customers1. The term trend signifies
a general development or changes in situation or ways of
peoples are behaving at the current time.
Based on the current trend in the world today, “hipster” had
grown to be trendy suddenly in the past few years and they
brought together the culture of drinking coffee among
youngsters. Due to this trend, many coffee houses emerge
throughout the world. The place that was once filled with
seniors now is full of youngsters. Coffee house or café are
terms for a place that basically serves espresso and other hot
refreshments. The first café was established in Italy in 1645. At
that point, in 1652, the café pattern spread into England and
further abroad2. The coffeehouse has gotten to be propensity in
present day society. It is constantly gone by a differing swarm
Ema il Addre ss: j atika suma@hotma il.co m
extending from expertise, executives and even adolescents.
Presently, café offers the things in its menu as well as a climate
that makes individuals feels solace capable.
While in Malaysia, coffee was first introduced in the late 18th
century when it was still under the rule of British. It has existed
in Malaysia for some 200 years and since then the number of
coffee cafes in Malaysia is booming due to the trend of coffee
culture3. One of the partners for Ministry of Coffee cafe, Michael
Tan stated that Malaysian started to enjoy the lifestyle since the
penetration of global chain outlets such as Starbucks, Coffee
Bean and Gloria Jean’s3. He also stated that one of the very
reasons in opening the cafe is due to the fact of different coffee
taste yearn by working class adults and the teenager with their
hipster crazed lifestyle.
The coffee culture is expected to grow continuously. The
Starbucks’ loyalty program delivers big outcomes for the
company. A rewards program which is My Starbucks Rewards
was launched in 2009. The reward program gives their loyal
coffee lover free drinks or food based on the number of stars that
they manage to earn4.
7420 Adv. Sci. Lett. Vol. 23, No. 8, 2017 doi:10.1166/asl.2017.9489
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By using Starbucks’ mobile application, all the customers can
view their rewards online and even can pay for their coffees using
their phones. In Malaysia, Starbucks card was introduced during
year 2011 and 1.6 million has been registered up to date.
According to5, “when you visit Starbucks, you will receive more
than just a cup of coffee. At Starbucks, we are going to meet
great people, top-rated music, a cozy and comfortable meeting
place, and sound exhortation on preparing amazing a cup of
coffee at home”.
A child that is born between 1977 and 2000 is considered as
millennial generation. When the Baby-boomers retire, the
millennial will replace them since have diverse characteristic than
any generation before them. Millennial have grown up differently
than any generation before them in a society due to the fact that
this generation were exposed to technology since they were
babies. According to6, starting in 2017, the millennial generation
will have spending power of over $200 billion or equivalent
around $10 trillion in their whole life.
There are nearly about 1/3 of the millennial’ purchasing
decisions based on a brand’s values and a consumer base.
Recently, Starbucks launched a ‘acting locally to create impact
globally’ campaign which met the millennial’ generation desire
towards the social activism6. The consumer base includes both
loyalty program and store satisfaction.
According to7, the Starbucks Public Affairs and Digital
Strategy manager which are Mr. Salleharon Ahmad, he described
that the growth and feedback from the society in Sarawak is very
healthy. Starbucks have received very good response from the
crowds in Sarawak. He also said that Starbucks is becoming a
‘third-place’ choice after home and work. People like coming to
Starbucks to clear up their mind and enjoy the relaxing
atmosphere. Since implementing free wireless connectivity,
Starbucks also started seeing a lot of youths patronizing
Starbucks premises2. When consumers start to become more
demanding, it can be a problem to Starbucks. If they could not
satisfy their demand, they might lose their customer. Starbucks
must ensure that their loyalty program and their stores can make
their customers loyal to the Starbucks brand. The objectives of
this research are to examine the relationship between loyalty
program, store satisfaction and millennial loyalty to a brand.
Then, the research will examine the strength of the relationship
between loyalty program, store satisfaction and millennial loyalty
to a brand.
2.
LITERATURE REVIEW
2.1 Brand Loyalty
The concept of loyalty is very well known among researchers in
various disciplines due to its strong impacts to the marketing.
Customer’s loyalty can be developed over time by consistently
meeting and exceeding customer’s expectations8. Brand loyalty
is very important for the future of the business and should be
studied carefully to ensure that the business can create loyal
customers9. Loyal customers are very important to a business
and have strong implication on the business’s profits. According
to10, in different studies, it is proven that attracting new a
customer costs a business about five times more than retaining
the existing one. This makes why brand loyalty and customer
loyalty become very desirable to businesses.
2.2 Loyalty Program
Nowadays, loyalty programs have emerged as a separate retail
strategy, which often managed externally and internally of
the retailer. Almost all companies are now utilizing the loyalty
program more than before in order to ensure the customer stays
loyal to the company11. This clearly shows that it is not only part
of the retailers’ strategy repertoire, but it has also evolved to
operate independently of traditional strategies such as the store’s
atmosphere, pricing and quality decisions, advertising budgets or
staffing levels within the companies12.
Before, the loyalty program use stamps programs waned and
todays loyalty programs can be seen in a modern resurgence with
the emergence of technology. Most of programs are centered
around on card that a customer is given when signing up for the
program, when scanned at the point of sale, it will contributes
information of their account in a company database tracking their
progress within the program, development toward the program’s
goals and also providing the company specific information about
their purchase preferences12.
2.3 Store Satisfaction
Satisfaction is defines as the consumer’s fulfillment response13.
Satisfaction is a judgment that a product or service feature, or the
product or service itself, whether if it provide a pleasurable level
of consumption-related fulfillment. The consumption-related
fulfillment included the levels of under-fulfillment or over-
fulfillment. There is much debate surrounding the working of
store satisfaction in terms of whether it should be measured as a
global form or be based on separate components of the retailer’s
customer recommendation. In this study, satisfaction refers to the
customer’s satisfaction with the store.
In obtaining the greater specificity, the store or retail offer is
comprised of four dimensions which are the store’s merchandise,
customer service, trading format and customer communication.
Each one of the dimensions is evaluated differently by
consumers14,15. A commercial enterprise dedicated to the
purchase of finished goods and their resale for a profit8. Customer
service includes the level of assistance being provided by the
retailer, the speed of service and the friendliness of worker or
staff. Customer service obviously will add value to a product and
build a strong relationship between the retailers and their
customers.
A trading format is how the business being run. Trading format
encompasses aspects such as the location, layout and atmosphere
of the Starbucks store. Starbucks store are always located at the
strategic places such as at the mall, residential areas and at the
highways. Finally, communication is a two-way process of
reaching mutual understanding, in which participants not only
exchange (encode-decode) information, news, ideas and feelings
but also create and share meaning8. In a simpler word,
communication is a means of connecting people or places. Things
such as catalogues, advertisements and social media newsfeeds
comprise the customer communication elements of Starbucks.
Figure 2.1: Research Framework
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Loyalty Program
Store Satisfaction
Starbucks’
Brand Loyalty
of Millennial
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, 2017
Figure above is the proposed framework that would be used for
this research project. In this research, the researchers are going
to determine the relationship between loyalty program, store
satisfaction and brand loyalty of Starbucks’ millennial customers
in Sarawak. Table 2.1: Hypothesis
HYPOTHESIS
H1
There is a significant relationship between loyalty program
and brand loyalty of Starbucks’ customers.
H2
There is a significant relationship between store
satisfaction and brand loyalty of Starbucks’ customers.
3.
METHODOLOGY
A quantitative data based research has been designed, and a
survey questionnaire was employed as an instrument to collect
data. The target respondent for this research is the Starbucks’
millennial customer in Sarawak. Stratified sampling method is
used for data collection. G-Power analysis software 3.1.9.2 is
used to determine the sample size of this research, the effect size
of “f square” 0.15, α error prob 0.05, power (1-β err prob) 0.8
with a number of 2 predictors, based on the result from
G*Power, 68 respondents is the minimum sampling size for this
research. Therefore, a total of 300 questionnaires were
distributed among the target population but only 200 survey
questions were given back and can be used to analyze. As
suggested by16, sample size larger than 50 and less than 500 are
appropriate for most studies. 5 Point of Likert Scale was used to
assess respondents’ level of agreement.
4.
FINDINGS AND DISCUSSION
The highest frequency of the respondent gender with 103
respondents were female (51.5%) and 97 of the respondents
were male (48.5%). In terms of age, the finding indicates that the
highest age range for this research are those from 21-30 years
old which holds the highest frequency of 90 with 45% followed
by those ranging from 20 and below which has a total frequency
73 with 36.5%. The least frequency is from those ranging from
31 40 years old which has a total frequency of 37 with 18.5%.
Out of 200 respondents, 119 respondents or 59.5% of the
respondents have a Starbucks Rewards Card while 81
respondents or 40.5% do not have the Starbucks Rewards Card.
There are 140 respondents or 70% of the respondents went to
Starbucks at least once a week while 44 respondents or 22% of
the respondents went to Starbucks at least twice a week. 12
respondents with 12% went to Starbucks three times a week. The
least is more they went more than four times a week to Starbucks
which the total frequency of 4 respondents with 2%.
Research Objective 1: Relationship between loyalty program and
Starbucks’ brand loyalty among millennial
Table 4.1 Correlations Table of Loyalty Program and Brand
Loyalty
Loyalty
Program
Brand
Loyalty
Loyalty
Program
Pearson
Correlation
1
.640**
Sig. (2-tailed)
.000
N
200
200
Brand
Loyalty
Pearson Correlation
.640**
1
Sig. (2-tailed)
.000
N
200
200
**. Correlation is significant at the 0.01 level (2-tailed).
Finding shows that the loyalty program and Starbucks’ brand
loyalty of customers has a strong and positive correlation
relationship with r = 0.640 which indicates the strength of the
relationship between each dimension are strong, and the positive
correlation relationship (p value=0.000) is significant at 0.01 level
(2 tailed) This means, the objective of this study was answered
as the result shows that brand loyalty of Starbucks’ customers is
influenced by loyalty program offered by Starbucks. Thus,
hypothesis 1 is accepted. This finding was supported by17, by
stating that loyalty programs can increase brand loyalty by
creating switching costs and avoiding competition.
Research Objective 2: Relationship between store satisfaction and
Starbucks’ brand loyalty of millennial
Table 4.2 Correlations Table of Store Satisfaction and Brand
Loyalty
Correlations
Store
Satisfaction
Brand
Loyalty
Store
Satisfaction
Pearson
Correlation
1
.757**
Sig. (2-
tailed)
.00
N
200
200
Brand
Loyalty
Pearson
Correlation
.757**
1
Sig. (2-
tailed)
.000
N
200
200
**. Correlation is significant at the 0.01 level (2-tailed).
Finding shows that the store satisfaction and brand loyalty of
Starbucks’ customers has a very strong and positive correlation
relationship with r = 0.757 which indicates the strength of the
relationship between each dimension are very strong, and the
positive correlation relationship (p value=0.000) is significant at
0.01 level (2 tailed) This means, the objective of this study was
answered as the result shows that brand loyalty of Starbucks’
customers is influenced by store satisfaction offered by Starbucks.
Thus, hypothesis 2 is accepted. This finding was supported by a
research that stated the brand loyalty of customer is resulted from
their satisfaction with the store and this will protect brand from
competition18.
Research Objective 3: The strength of relationship among loyalty
program and store satisfaction towards Starbucks’ brand loyalty.
The linear regression test of the model disclosed that R Square of
the model is 0.567. It illustrates that 56.7% of the variance in the
Brand Loyalty of Starbucks has been significantly explained by
Loyalty Program and Satisfaction in this research. Meanwhile, the
remaining 43.4% cannot be explained. That means there were
other factors that can determine their Brand Loyalty of Starbucks.
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Table 4.3: Regression Analysis
Model Summary b
Mode
l
R
R
Square
Adjusted R
Square
Std. Error
of the
Estimate
1
.759a
.567
.571
.48670
a. Predictors: (Constant), Mean Loyalty Program, Mean Store
Satisfaction
b. Dependent Variable: Mean Brand Loyalty of Starbucks
Table 4.4: Standardized Coefficient Based on Beta Value
Coefficient*
Model 1
Standardized
Coefficient
t
Sig.
Beta
(Constant)
1.974
.050
Mean Loyalty Program
.089
1.135
.258
Mean Store Satisfaction
.658
8.768
.000
a. Dependent Variable: Mean Brand Loyalty of Starbucks
The result shows all the independent variables had
relationship with the dependent variable. According to Sekaran
2010, the significant below of p < 0.05 is generally accepted
conventional level in social science research. The finding
shows one p-value for Store Satisfaction is below 0.05 and
Loyalty Program is above 0.05. This shows that the variable
named Loyalty Program is not significant to the research.
Based on the standardized coefficients, the Store Satisfaction
represents the highest Beta Value of 0.658 followed Loyalty
Program with 0.089. This estimation of Beta Value notifies the
amount of increase in Brand Loyalty that would be predicted
by a one unit increase in the predictor namely Store
Satisfaction, and Loyalty Program. Thus, it shows that Store
Satisfaction leads to the most critical effect size towards
Starbucks’ Brand Loyalty followed by Loyalty Program.
5.
CONCLUSIONS AND RECOMMENDATIONS
This study was conducted due to the popularity of brand loyalty
of millennial towards certain brand. Result shows that loyalty
program and store satisfaction are positively related to brand
loyalty towards Starbucks. Store satisfaction is found to having a
very strong relationship towards brand loyalty as compared to
loyalty program indicate a strong relationship. Store satisfaction
is found to have the highest effect size as compared to loyalty
program. In addition, the 56.7% variance explained the effect of
those dimensions towards brand loyalty of Starbucks. As
recommendations, more variables need to be explored in
determining the best variable that can increase brand loyalty.
Hence, to give wider perspective the trends across cultures in
other countries could be established. These factors can be
considered as areas for future research.
References and Notes
1. K. R. Alok and S. Medha, Customer Loyalty Attributes:
A Perspective. NMIMS Management Review, 22 (4), 49-
76 (2012)
2. K. Pongsiri, Market Feasibility for New Brand Coffee
House: The Case Study of Thailand. International Journal
of Social, Behavioral, Educational, Economic, Business
and Industrial Engineering 7 (8), 2414-2417 (2013)
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3. N. Nevash, There’s something brewing with coffee - SME
| The Star Online (2014)
4. H. Rebecca, Why Starbucks Is Winning At Loyalty:
http://www.marketingmag.ca/brands/why-starbucks-is-
winning-at-loyalty-152974 (2015)
5. S. Howard and Y. Dori Jones, Pour Your Heart Into It:
How Starbucks Built a Company One Cup at a Time
(1999)
6. C. Shanks, Think Kaleidoscope. Retrieved From What
Starbucks Can Teach Us about Marketing to Gen-Y:
http://www.thinkkaleidoscope.com/blog/marketing-to-
gen-y/ (2013)
7. T. Ronnie, Starbucks continues to see healthy growth in
Sarawak. Retrieved from the Borneo Post (2013)
8. J. Kasuma, Micro-enterprise Owners’ Loyalty Towards
Their Favorite Bank: A Conceptual Framework. Jurnal
Manajemen dan Kewirausahaan, 14 (1), 1-6 (2012)
9. S. A. Aydin, The analysis of antecedents of customer
loyalty in the Turkish mobile telecommunication market.
European Journal of Marketing, 39 (7/8): 910-925 (2005)
10. P. A. Kotler, Marketing Management. Prentice Hal.
(2012)
11. O. Steve, Marketing Land. Retrieved from:
http://marketingland.com/8-reasons-loyalty-programs-
imperative-marketers-109077 (2014)
12. K. E. Bridson, Assessing the relationship between loyalty
program attributes, store satisfaction and store loyalty.
Journal of Retailing and Consumer Services, 364-374.
(2008)
13. R. Oliver, Satisfaction: A Behavioral Perspective on the
Consumer. McGraw-Hill, Boston (1997)
14. P. H. McGoldrick, International positioning: Japanese
department stores in Hong Kong. European Journal of
Marketing, 26 (8/9), 61-73 (1992)
15. D. K. Walters, Competitive strategies in retailing. Long
Range Planning, 22 (6), 74-84 (1989)
16. J. T. Roscoe, Fundamental Research Statistics for the
Behavioural Sciences, 2nd edition. New York: Holt
Rinehart & Winston (1975)
17. B. Kim, M. Shi, and K. Srinivasan, Reward Programs and
Tacit Price Collusion. Marketing Science 20: 99-120
(2001)
18. C. Fornell, National Customer Satisfaction Barometer:
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18. (1992)
Received: 14 November 2016. Accepted: 23 November 2016.
7423
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Purpose – Corporate image, perceived service quality, trust and customer switching costs are the major antecedents of customer loyalty, and loyal customers may buy more, accept higher prices and have a positive word-of-mouth effect. Also we know that the cost of selling to new customers is much higher than the cost of selling to existing customers. Although this fact is apparent to everyone, many companies are still losing customers at a formidable rate. In this context the main aim of this paper is to examine the relationships between these factors and customer loyalty, and the relationships among these factors in the Turkish GSM sector. Design/methodology/approach – Data was obtained from 1,662 mobile phone users in Turkey via questionnaire. The data was analyzed by structural equation modeling (SEM) in order to test all the relationships between variables in the model. Findings – The findings supported the proposed hypotheses, which are consistent with the theoretical framework. Analysis results showed that perceived service quality is a necessary but not sufficient condition for customer loyalty. Research limitations/implications – In order to generalize the findings from the paper, the model should be studied in different sectors. The contribution of this paper is to model all the relationships between customer loyalty and its antecedents, and to test these relationships simultaneously. Practical implications – In order to better understand customer loyalty, as well as perceived service quality, corporate image, perceived switching costs and trust should be taken into consideration. Lately, technological change has shifted competition in the GSM sector from price and core service to value-added services. Therefore, operators should differentiate their services and guarantee their services' quality because of this shift in competition. Originality/value – In this paper, the effects of all the factors on customer loyalty are analyzed simultaneously via SEM.
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Reward programs, a promotional tool to develop customer loyalty, offer incentives to consumers on the basis of cumulative purchases of a given product or service from a firm. Reward programs have become increasingly common in many industries. The best-known examples include frequent-flier programs offered by airlines, frequent-guest programs offered by hotels, and frequent-shopper programs offered by supermarkets. Despite the widespread business practice of reward programs, research efforts on reward programs, particularly in marketing, have been scarce. Our paper takes an important step towards understanding the design of reward programs and its implications on pricing strategies. We study a market that consists of two segments: heavy- and light-user segments. The key distinction between the two segments is that the heavy-user segment purchases in each period and thus is a candidate for the reward programs. In contrast, the light-user segment exits the market after one purchase and is not in a position to exploit reward programs. An important feature of our model is that we allow for different price sensitivity between heavy-user and light-user segments. Our model closely examines the type of rewards. A reward worth a dollar to the consumer might have different cost implications for the offering firm, depending on the type of reward. For example, cash rewards have higher unit reward cost () for the firm than a free product of the firm, such as an airline ticket or long-distance minutes (). Specifically, we examine an interesting puzzle observed in the marketplace. Several firms offer a cash reward or a product made by the firm, such as jackets, electronic items, etc. These firms could offer their own product as rewards and significantly lower their cost. We examine whether there is any reason for such a seemingly suboptimal practice. Our analysis shows that reward programs weaken price competition. By offering the incentives for repeat purchases, reward programs increase a firm's cost to attract competing firms' current customers. Because firms gain less from undercutting their prices, equilibrium prices go up. Moreover, as consumers become unwilling to switch because of potential rewards, the firm with a larger market share in the heavy-user segment charges higher prices. Therefore, a low price in the first period, which leads to a larger market share in the heavy-user segment, will always be followed by a high price in the second period. In our model, consumers are rational and can correctly anticipate firms' incentive to offer lower prices initially to enroll them into the reward programs. Our paper offers an explanation as to why the type and amount of reward may vary across the programs. We identify two determining factors for the selection of rewards: size and relative price sensitivity of the heavy-user segment. We find that in a market with a small heavy-user segment that is also much more price sensitive than the light-user segment, it is optimal for firms to offer the rewards. The intuition is based on the firms' incentive to exploit the price-insensitive light-user segment. By offering inefficient rewards, firms are able to commit to weaker competition and, therefore, higher prices. When the heavy-user segment is large or not very price sensitive, when compared to the light-user segment, competing firms should adopt the most efficient rewards to maximize their profit. This may well be the case in a number of real-world situations in which efficient rewards are quite prevalent. We also find that optimal reward amount has a negative relationship with unit reward cost. Because both firms use rewards to attract the heavy users, they tend to offer more when they adopt the more efficient rewards. Finally, our paper identifies the relationship between market characteristics and theimpact of reward programs on firms' profits and consumers' benefits. We find that firms gain from the adoption of reward programs as long as light users are not too price sensitive. When light users are very price sensitive, firms engage in intense price competition, thus benefiting little from the loyalty of heavy users created through rewards. Because reward programs increase market prices, light users, who do not get the reward, earn strictly lower benefit. In contrast, heavy users often stand to gain more from the reward program. In most cases, firms and the heavy users are better off at the expense of light users.
After a decade of research there is still much to understand about the relationship between loyalty programs and whether they deliver on their promise of building customer loyalty towards a store and understanding the mediating role of store satisfaction. Our results suggest that loyalty program as a summary construct, explains a significant proportion of the variance in store satisfaction and store loyalty. However, disaggregation of the construct into hard versus soft attributes, promotes greater specificity, precision and accuracy in uncovering the differential impact on store satisfaction and store loyalty.
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