Effect of Loyalty Programs on Consumer Behavior: A Literature Review

Running head: CONSUMER BEHAVIOR
Articles on loyalty programs
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CONSUMER BEHAVIOR
Abstract
This report has discussed the effect of loyalty programs in the minds of the customers who
indulge in frequently purchases. They are offered rewards from the companies both tangible
and intangible and show loyalty to the brands. The companies follow different strategies to
attract and retain customers among which this loyalty program is one important strategy.
Introduction:
The aim of this report is to discuss the impact of loyalty programs in the purchasing
behaviour of the customers in the current business context. This report will conduct a
literature review to understand the definition of loyalty programs and Strategies used for
designing loyalty programs in the business context.
Loyalty programs
Loyalty programs are rewards programs which the customers who frequently make
purchases, get from the companies. According to McCalland McMahon (2016), loyalty
programs have proliferated in different types of industries including the hospitality industry
where the customers expect rewards in exchange of their patronage. This is the reason why
the managers modify their reward programs to become more profitable and competitive. As
stated by Bowen and Chen (2015), the business today builds loyalty models perfectly fitted
with the behaviour of their customers so that they can attain them regularly and gain
competitive advantage in this highly competitive industry settings. The paper has made three
propositions to explain the loyalty of the customers to the business. Finally, according to
Melnyk and Bijmolt (2015) the companies need to investigate the effects of loyalty programs
accounting for the simultaneous effects on the loyalty program designs, competition effects
as well as cross-customer effects. To these authors, despite the fact that the business spread a
lot in their loyalty programs, it is not always clear that these are enhancing the loyalty of the