A Comprehensive Literature Review: Loyalty Card Schemes in Marketing

This literature review examines the impact of loyalty card schemes as a marketing strategy. It explores the positive effects, such as improved customer relationships, increased customer satisfaction in the hospitality sector, and the potential for repeat sales and positive word-of-mouth. The review also considers negative effects, including the difficulty in measuring the success of such programs, the potential for market saturation, and the increasing expectations of customers. The review analyzes various perspectives from different authors, including the benefits of providing attractive deals to retain customers, and the drawbacks of increased complexity in business operations. The conclusion summarizes that loyalty card schemes are effective in marketing and achieving organizational objectives but should be designed to balance customer satisfaction and business profitability.

LITERATURE REVIEW

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Literature review..........................................................................................................................1
Positive effects.............................................................................................................................1
Negative effects...........................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Loyalty card program is an effective marketing strategy that is used to attract the
customers and encourage them to make the repeated purchases with the brand. It can be in the
form of discounts or the points whose benefit can be availed in future purchases. This shall
ensure customer loyalty with the brand. The project shall be representing the impact of these
loyalty card schemes on the business.
MAIN BODY
Literature review
As per the views of the Sukmaningsih and et.al. (2019) the loyalty card schemes are used
by the company as a marketing strategy whereby they issue such cards under the loyalty program
which either provides the customers with discounts the purchases that are made currently or shall
be allotted in the form of points which shall give benefits on the future purchases of the clients.
Bombaij and Dekimpe (2020) contradicts that by the application of such marketing strategy the
company shall come to a point of market saturation. As gradually the competitors will be also
following the same strategy and the point of differentiation does not exist any more. Apart from
that many times the company has to withdraw from the promise to avoid loss of sales. Li, X., Ma
and Zhou (2017) proposes that the loyalty program in a company is undertaken as a promotional
technique for the purpose of retaining the customers with the company for longer time through
providing them with attractive deals. This gives competitive edge to the company as compared to
the competitors in the market.
Positive effects
As per the opinion of Chaudhuri and König (2018) the major significance of issuing the
loyalty cards to the customers is that it improves the relationship of the company with its
customers. It helps in facilitating better communication, understanding and trustworthy relations.
The fostering of customer relations can be beneficial in deriving the future growth prospects of
the company. Yang and et.al. (2020) evaluates that the consumer loyalty programs are very
efficient in the flourishing of the hospitality sector. This is due to the intense competition that
lies in the industry and for surviving in the cut-throat competition the differentiation strategy has
to be adopted by the company. With the adoption of the card program the unique selling point is
derived by the company enhancing the level of satisfaction that is experienced by the customers.
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Soosai and Lalitha (2019) evaluates that repeated sales in the hotel industry is determined
when the guest is fully satisfied with the stay at the hotel. Positive word of mouth also plays key
role in determining the profitability of the hotel as such decisions are usually taken with the
consultation of the friends and colleagues of the company. The enhancement of the guest
experience at the hotel can only be maximized by innovative and attractive deals. Corbishley
(2017) interprets that other form of reward system is based on the bookings of the customers.
With each booking of the customer points are awarded and can be capitalized in the next booking
or stay at the hotel. Incentives are received by the customer which helps boosting their morale
and satisfying them to the core. Bozogáň and Hurná (2018) states that there can be variety of
ways in which the loyalty programs can be undertaken in the hotel. One of such scheme is the
point based scheme in which the points are allotted to the guest on the basis of every penny spent
in the acquisition of the services at the hotel. Once a sufficient balance of the points is collected
the visitor can redeem benefits or rewards from it. Parahoo, Lea Harvey and Ayyagari (2018)
represented that a way of generating consumer loyalty for the company is by way of giving cash-
backs to the company on the buying decision. This is the most efficient way as monetary benefits
are always given the highest priority by the guests. Apart from that such benefit is extended on
the spot to the customer, and they do not have to wait long for realizing the advantage of being
affiliated with the company.
Dlamini and Chinje (2019) states that the reward is not necessarily extended by way of
cards and allocation of points. It can also be enjoyed by the customer in terms of providing the
general incentives like the free parking, free room service, additional up gradations, welcome
offerings, gifts or choice of preferred rooms. Such perks are also equally delightful for the
customer and is also very convenient for the hotel to exercise the option. Florez-Acosta (2020)
studies that the loyalty programs that are designed by the hotel leads to positive impact on the
customer satisfaction levels and the loyalty. With the allotment of card and its respective points
the customers are fascinated towards the products and services that are offered by the hotel. This
initiates frequent visits to the hotel for redeeming the rewards that are due on the customers. This
may or may not be profitable in the short run but is definitely effective in the long term growth
of the hotel.
Kwiatek and Thanasi-Boçe (2019) presents the view that such reward systems shall
motivate the customer to be loyal with the company as it makes them feel special and derive
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value for the money that is paid for the hotel services. Achieving value for the money paid is the
biggest motivating factor and the company can capitalize upon it. Son and et.al., (2020) stated
the opinion that the current trends of the hotel industry are that the guests are staying for
completing the quarantine periods in the rooms due to the corona pandemic that has spread round
the world. In such circumstances where the economy is low and personal disposable income is
also affected, if the company provides any additional benefit or rewards to the guests it will lead
to higher level of satisfaction in them.
Negative effects
On the contrary Perez and et.al. (2020) believes that the success of such program is not
measurable by the management of the company and so the cost benefit analysis cannot be
ascertained. As customer retention ratio with the help of the cards is difficult to be evaluated as
many purchases made are due to the offers and profitable deals and does not mean the loyalty of
the buyers. Chang and Wong (2018) analyses that this market scheme not only retains the
existing customers but also helps in widening the market share of the company through attracting
the new potential customers of the company. By designing an effective marketing plan to
generate the brand awareness regarding the reward program shall ensure the enrolling of new
customers to the target market list of the company.
Bačík and etal. (2019) against the opinion mentioned that nowadays customers’
expectations in relation to a hotel are increasing and the quality services cannot be offered by the
company at the lower prices or at discounts. This shall decrease the profit margin of the company
and cause obstacles in the future expansion programs of the company. Pareek and et.al. (2018)
criticizes that these marketing schemes increases the complexity of the business operations. The
company has to employ an expert in order to maintain the data of the all the customers enjoying
the benefits of the loyalty program. Apart from that the major challenge is the data cannot be
used to predict the actual impact of such scheme on the generation of customer loyalty.
Formánek and Tahal (2017) argues that providing cashback to the customer is a loss
making deal for the officials of the company. This is because if the benefit is extended in once
the company cannot ensure the repeated purchase by the clients. Also, the system of providing
the advantage at the same time does not allow the organization to take the benefit of time value
of money. Kaur, Mishra and Mallik (2021) against the idea believes that customer loyalty is
badly affected as soon as the scheme is closed or the promises are not responded by the
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company. Apart from that if the trend in the market has changed and the hotel has not innovated
its operations, then the customer shall switch the hotel despite of getting the reward points.
Wang, Hung and Huang (2019) contrasted that since the epidemic has already caused
huge loss to the hospitality sector it cannot afford providing any further loyalty programs to the
customers. The quarantine law is the only ray of hope for the hoteliers, and so they cannot
compromise or adjust in that. Though the long term impact may be positive but the short term
goals and objectives of the hotel shall not be achieved and the operations cannot be run smoothly
by the management. Author realizes that in the current era the fulfilment of the needs, desires
and expectations regarding the quality is of higher priority to the customer then the rewards for
lowering down the cost. Also, it is a perception that the services are cheap will be of lower
quality and efficiency. So it can be understood that the hospitality should focus upon advancing
the technology and operations prior to the loyalty card schemes.
Chiguvi and Guruwo (2017) proposes that loyalty card programmes must be designed in
a way to ensure that dual objective of the business is fulfilled, one is the customer satisfaction
and the other is the profitability of the business that remains intact. This will be better for the
future growth prospects of the business.
CONCLUSION
It can be summarized from the above project that loyalty card schemes are effective to
market the products and services of the business and to capitalize on the competitive advantage
that can be3 gained in the industry. Apart from that it shows the positive impact on the business
and achievement of its organizational objectives.
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REFERENCES
Books and Journals
Bačík, R. and etal., 2019. The impact of selected quality management attributes on the
profitability of top hotels in the Visegrad Group countries. Polish Journal of
Management Studies. 19.
Bombaij, N. J. and Dekimpe, M. G., 2020. When do loyalty programs work? The moderating
role of design, retailer-strategy, and country characteristics. International Journal of
Research in Marketing. 37(1). pp.175-195.
Bozogáň, M. and Hurná, S., 2018, November. Use of Modern Technologies at Baggage
Tracking and Its Impact on Airline Revenue. In EAI International Conference on Smart
Cities within SmartCity360° Summit (pp. 73-111). Springer, Cham.
Chang, H. H. and Wong, K.H., 2018. Consumer psychological reactance to coalition loyalty
program: price-consciousness as a moderator. Service Business. 12(2). pp.379-402.
Chaudhuri, B. and König, L., 2018. The Aadhaar scheme: a cornerstone of a new citizenship
regime in India?. Contemporary South Asia. 26(2). pp.127-142.
Corbishley, K. M., 2017. Retail loyalty programmes: relationships between the customer and the
retailer in South Africa–an exploratory study. Journal of Business and Retail
Management Research. 11(4).
Dlamini, S. and Chinje, N. B., 2019. The influence of loyalty programs on South African
Youth’s repeat purchase behaviour. Journal of Business and Retail Management
Research. 13(3).
Florez-Acosta, J., 2020. Do preferences for private labels respond to supermarket loyalty
programs?. Available at SSRN 3324595.
Formánek, T. and Tahal, R., 2017. Socio-demographic and lifestyle determinants of loyalty
program participation in the Czech Republic. Management & Marketing. Challenges for
the Knowledge Society. 12(4). pp.524-539.
Hossain, M. Z., Kibria, H. and Farhana, S., 2017. Do Customer Loyalty Programs Really Work
in Airlines Business?—A Study on Air Berlin. Journal of Service Science and
Management. 10(04). p.360.
Kaur, K., Mishra, A. and Mallik, V., 2021. Impact of E-Marketing on Consumer Purchase
Behaviour: An Empirical Study. IJRAR-International Journal of Research and
Analytical Reviews (IJRAR), E-ISSN, pp.2348-1269.
Kwiatek, P. and Thanasi-Boçe, M., 2019. Loyalty program activity: make B2B customers buy
more. Marketing Intelligence & Planning.
Li, X., Ma, B. and Zhou, C., 2017. Effects of customer loyalty on customer entitlement and
voiced complaints. The Service Industries Journal. 37(13-14). pp.858-874.
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Parahoo, S. K., Lea Harvey, H. and Ayyagari, M., 2018. Marketing of Public Services: The
Impact of Service Quality, Reputation and Consumer Engagement on Customer
Perceived Value, Satisfaction and Loyalty. Economic Analysis (0013-3213). 51.
Pareek, B. and et.al., 2018. Tracking the Impact of Media on Voter Choice in Real Time: A
Bayesian Dynamic Joint Model. Journal of the American Statistical
Association. 113(524). pp.1457-1475.
Perez, L. J. D. and et.al., 2020. A loyalty program based on Waves blockchain and mobile phone
interactions. The Knowledge Engineering Review. 35.
Son, Y., and et.al., 2020. Impact of customers' digital banking adoption on hidden defection: A
combined analytical–empirical approach. Journal of Operations Management. 66(4).
pp.418-440.
Soosai, V. and Lalitha, N., 2019. Micro Enterprises and its impact on livelihood. MJP Publisher.
Sukmaningsih, D. W. and et.al., 2019. Loyalty Program Dimension and Future Trend for
Hospitality and Travel Industry: A Systematic Literature Review. International Journal
of Mechanical Engineering and Technology. 10(3).
Wang, B., 2020, October. The Research on the Influence of Virtual Feedback of Beverage
Industry on Customer Loyalty and Other Factors. In 2020 The 4th International
Conference on E-Business and Internet (pp. 97-105).
Yang, H. and et.al., 2020. Integrated reward scheme and surge pricing in a ridesourcing
market. Transportation Research Part B: Methodological. 134. pp.126-142.
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