Do Loyalty Programs Really Enhance Behavioral Loyalty?
Author InfoLeenheer, J. Heerde, H.J. van Bijmolt, T.H.A. Smidts, A. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University) Abstract One of the pressing issues in marketing is whether loyalty programs really enhance behavioral loyalty. Loyalty program members may have a much higher share-of-wallet at the firm with the loyalty program than non-members have, but this does not necessarily imply that loyalty programs are effective. Loyal customers may select themselves to become members in order to benefit from the program. Since this implies that program membership is endogenous, we estimate models for both the membership decision (using instrumental variables) and for the effect of membership on share-of-wallet, our measure of behavioral loyalty. We use panel data from a representative sample of Dutch households who report their loyalty program memberships for all seven loyalty programs in grocery retailing as well as their expenditures at each of the 20 major supermark
