Impact of Loyalty Programs on Consumer Buying Behaviour in Retail Organizations

This study examines the impact of loyalty programs on consumer buying behaviour in retail organizations, with a focus on ALDI. It explores the major loyalty programs used by retail companies, factors affecting consumer buying behaviour, and the influence of loyalty programs on consumer purchase behaviour. The study also compares loyalty programs in the Australian retail sector and provides recommendations for improving ALDI's market share.

Running head: ORGANISATIONAL BEHAVIOUR
Organisational Behaviour
Name of the student
Name of the university
Author note

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Topic: Impact of loyalty programs on the consumer buying behaviour in
retail organisations- A case study of ALDI
Problem: The competition in the Australian retail sector have intensified
in the past few years. IBISWorld has described the competition in the
market as highly competitive and concentrated (Mudditt, 2018). ALDI’s
growth in the industry has shaken up the market due to the increase in
popularity of its private labelled products, extensive loyalty programs and
price ranges. The heavy discounters are expected to dominate and
influence the trends in the supermarket industry. However, even though
ALDI and other discounters are making progress, Coles and Woolworths
comprise 60% of the total market. This is the reason that this study aims
to examine the current strategy implemented by ALDI in terms of loyalty
programs so that suitable recommendations can be made to improve its
share in the market.
The objectives of the current study have been described below:
Research Questions
What are the major loyalty programs used by retail companies?
What are the critical factors affecting the consumer buying
behaviour?
What is the influence of loyalty programs on the purchase behaviour
of consumers?
How does the loyalty programs differ when compared to the market
competitors?
Literature review
Retail industry in Australia has already been discussed as fierce and
competitive and companies have been using various loyalty programs and
schemes to retain their existing consumers and acquire new consumers.
As stated by Bowen and Chen McCain, (2015), there are two ways of
achieving loyalty of the consumers, attitudinal and behavioural. The
behavioural deals with the habit of the consumers to purchase from the
supermarket or retailer which indicates repeat purchasing. On the other

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hand, attitudinal loyalty deals with the psychological connection with the
brand or the service provider.
` Stathopoulou and Balabanis, (2016) defined loyalty programs as the
means of developing an integrated system of marketing which aims to
make the consumers more loyal by creating a relationship with them.
Bowen and Chen McCain, (2015) states that examining of historical
studies shows that majority of the studies have failed to develop a shared
definition of loyalty as it consists of combination of behaviours and
attitude. Therefore, on the basis of the behavioural approach, loyalty has
been defined as the function of all the psychological processes during the
availability of choices. This approach took factors like multidirectional
consumption behaviour, consumption probability, repeat consumption and
other factors into consideration. On the contrary, another approach
considered the combination of behaviour and attitude where the
consumer repeatedly purchased a product based on their conscious
decision. The study also suggested that positive attitude towards a
product or a brand results in repeat purchase of a product.
Ziehe and Stoll, (2011) performed an empirical analysis on the way
bonus programmes such as loyalty cards and other programs on the
purchase intention of the consumers. This study specifically addressed the
retail industry in Germany. The results from the study shows that loyalty
programs in the retail industry have significantly high impact on the
purchase intention of the consumers in Germany. This means that
lucrative loyalty programs attract consumers in Germany and it critical for
the success of any retail organisation.
Asiah et al., (2013) performed a study to examine the relationship
between loyalty programs, service quality, loyalty and satisfaction. This
study effective measured the structural relationship between the
variables. The study shows that loyalty programs may have loyalty
towards the program only rather than being loyal to the products offered.
The study was conducted in Malaysian super market industry which
showed that perceived value is highly affected by service attributes and

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loyalty programs. The study also highlighted the role of loyalty programs
in influencing satisfaction, loyalty and value among the loyalty program
holders.
Yi and Jeon, (2003) investigated the impact of reward schemes of
different types of loyalty programs on the perceived value and the way it
affects the loyalty of the customers. The findings showed that
involvement acts as a moderating factor in the effect of loyalty schemes
on the loyalty of the consumers. In case of high-involvement scenarios,
consumers direct rewards than the indirect rewards. On the contrary, in
case of low-involvement cases, immediate rewards have more impact
than the programs with delayed rewards. Similarly, in case of low-
involvement programs no direct influence has been experienced on
perceived value and loyalty of the brand. On the contrary, brand loyalty
and perceived value is highly affected in high-involvement programs.
Ruzeviciute and Kamleitner, (2017) conducted a study to examine
the different types of loyalty programs affecting the loyalty and repeat
purchase of the consumers. In this research, six studies were performed
sequentially to investigate whether the impact of monetary rewards in
more effective than the non-monetary rewards. The results showed that
the monetary reward programs not only have influence on individual
consumers but also increases the attractiveness of the overall loyalty
scheme. In different industries, the consumers preferred monetary loyalty
schemes as more attractive than the non-monetary programs. Therefore,
the monetary program is expected to have better impact on the
consumers in case of acquiring new customers. In light of analysing the
different consumption objectives of the consumers, the effect was similar.
Th effect was consistent and non-negligible in case of the medium sizes in
effect which was the scenario in majority of the cases.
As per the investigation conducted by Chetthamrongchai, (2018,
June), loyalty programs are considered to be one of the major tools of
marketing and sales promotion. These programs have always been used
to stimulate loyalty among the consumers. The main purpose of using a

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loyalty program is to motivate the customers in making frequent
purchases in case of both services and goods. The essence of these
programs is to rewards the customer for showing such a behaviour. The
loyalty programs have always emphasised on developing a long-term
relationship with the consumers. The concept behind these tools is the
fact that 20% of the consumers have the capability of contributing to the
80% of the sales in any organisation. The study aimed to examine the
impact of loyalty programs in Thailand and the reasons why the
consumers were attracted to the programs. The results showed that the
benefits attached to these programs have been the main motivators
behind the consumers choosing these loyalty programs.
The evaluation of the past literature shows that considerable
amount of studies has been performed to examine the impact of loyalty
programs on the purchase intention of the consumers. However, most of
the studies have failed to identify the ways heavy discounters use loyalty
programs and schemes and how they impact the consumers behaviour.
The past studies have also failed to put a comparison between the
companies in the retail sector. Therefore, the current study will evaluate
the difference in programs in Australian retail by focusing on ALDI as the
choice of organisation.

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References
Asiah Omar, N., Aniza Che Wel, C., Abd Aziz, N., & Shah Alam, S. (2013).
Investigating the structural relationship between loyalty programme
service quality, satisfaction and loyalty for retail loyalty
programmes: evidence from Malaysia. Measuring Business
Excellence, 17(1), 33-50.
Bowen, J. T., & Chen McCain, S. L. (2015). Transitioning loyalty programs:
A commentary on “the relationship between customer loyalty and
customer satisfaction”. International Journal of Contemporary
Hospitality Management, 27(3), 415-430.
Chetthamrongchai, P. (2018, June). Consumer behavior and customer
loyalty program: Case of Tesco in Thailand. In Proceedings of
International Academic Conferences (No. 7208909). International
Institute of Social and Economic Sciences.
Mudditt, J. (2018). Spotlight on Australia’s supermarkets and grocery
industry - Retail World Magazine. Retrieved 8 September 2019, from
https://retailworldmagazine.com.au/spotlight-australias-
supermarkets-grocery-industry/
Ruzeviciute, R., & Kamleitner, B. (2017). Attracting new customers to
loyalty programs: The effectiveness of monetary versus
nonmonetary loyalty programs. Journal of Consumer
Behaviour, 16(6), e113-e124.
Stathopoulou, A., & Balabanis, G. (2016). The effects of loyalty programs
on customer satisfaction, trust, and loyalty toward high-and low-end
fashion retailers. Journal of Business Research, 69(12), 5801-5808.
Yi, Y., & Jeon, H. (2003). Effects of loyalty programs on value perception,
program loyalty, and brand loyalty. Journal of the academy of
marketing science, 31(3), 229-240.
Ziehe, N., & Stoll, R. (2011). The Effect of Customer Loyalty Programs on
the Shopping Behavior in Retail: Loyalty Programs versus Loyalty

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Cards in the German Food Retail [Die Wirkung von
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