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Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value Essay (Critical Writing)


The article selected for this critique is titled, “Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value”. The authors of the article are Ruth N. Bolton from the University of Oklahoma, P. K. Kannan, and Matthew D. Bramlett, from the University of Maryland.

The article was published in the year 2000 on the Journal of the Academy of Marketing Science by the Academy of Marketing Science. In the 14 page article, the authors have endeavored to examine how organizations have for a long time sought to offer price discounts and enhanced services as a form of reward to preferred loyal customers.

Also, the article has also examined the increased prevalence of loyalty program across the different sectors of the service industries. In this regard, the authors have provided excellent examples of the companies whereby these programs have been implemented with success, such as the frequent buyer programs, as practiced by the hospitality and transportation industries.

Another excellent example of the application of loyalty programs in the service industry includes the co-branded credit card program that has been launched by General Motors, a program that seeks to allocate 5 percent of the amount of money that a loyal customer spend towards the leasing or purchase of a new car.

Also, the authors have provided the example of how, during a period of 6 months of travel, American Express has endeavored to provide their heavy card users with two airline tickets as a form of reward.

By and large, these programs are aimed at ensuring that the customer retention levels remain quite high in otherwise profitable segments through the provision of enhanced value and satisfaction to specific customers. In other words, it is more of an attempt by the loyalty card providers to ensure that those customers who have already enrolled with their loyalty card membership program continues to do business with them, and not with their competitors.

For instance, the authors indicate how a majority of the preferred shopper programs as implemented by the supermarkets have the heavy users as their main target. In this respect, the authors argue that in undertaking these programs, the management of such establishments contends that increased customer loyalty and satisfaction impacts positively on the long-term financial performance of such business establishments.

In undertaking the study, the researchers intended to answer a number of questions: Is customers’ satisfaction with the company or product/service enhanced by the loyalty programs? Do the loyalty programs improve the product/service usage levels as well as the duration of provider-customer relationships?

In answering these questions, the authors are convinced that the study the service organizations would find it useful in deciding if the revenue that they generate out of these programs exceeds their cost of implementation. In addition, the authors also intend to assess if at all the loyalty card membership programs can ensure that the loyalty card providers realize a higher level of profitability in comparison with such retention strategies as service guarantees.

The authors argue that previous studies in the same field have managed to impact positively on customer satisfaction in as far as their usage behavior and loyalty are concerned.

As a result, there is the likelihood that in the long-run, such loyalty reward programs would also impact positively on the purchase behavior of the customers, on condition that the customers experience a satisfactory purchase behavior. What this means is that the usage levels of customers, along with their evaluation of service experience, acts as a moderator of the rewards programs.

Literature review

In reviewing of the related literature, the authors of this article have made use of previous studies on customer’s repurchase behavior. To do this, the authors have sought to explore the reasons why customers may decide to enhance relationships with those who provide services to them, such as repurchase behavior, customer evaluations, and repatronage intentions.

In an attempt to capture the theme of repurchase behavior, the authors have made use of prior longitudinal studies that have been carried out to determine the repatronage behavior of customers, over time. In this regard, the intention by customers to continue using the services of a given service provider depended on the overall satisfaction that they have had with such a particular service provider.

In addition, when a customer has had an extensive experience with a given service provider, in effect meaning that the existing customer-company relationship is also longer, such a customer is also likely to conduct repeat business with the company in question. In addition, the authors of this article have documented different reasons as to why customers may manifest switching behavior in the service industry.

Some of the reasons given by the authors include core service failures, pricing, unfulfilled service encounters, inconvenience, competition, and ethical problems. In addition, the authors reveal that the decision by customers to utilize services provided to them depended on how they evaluate the payment levels, previous levels of satisfaction, and the prices (for example, (Bolton 1998; Bolton and Lemon 1999; Jones and Sasser 1995).

In addition, the authors have also cited a number of cross-sectional studies whereby repatronage behavior relied heavily on a customer’s previous satisfaction.

On the issue of repurchase intention, the authors have cited a number of longitudinal studies in which the previous repatronage intentions of customers has been seen to impact directly on their successive repatronage plans. With regard to the impact of the loyalty program membership, the article has examined the role played by regret and how the decision context determines the choice made.

In particular, performance information regarding unavoidable options may have a significant effect on post choice evaluation. A competitive marketplace shall have nonmembers and members of a loyalty program that have already familiarized themselves with the competing service providers.

There is a higher likelihood for a majority of the customers to have experience with for instance, multiple financial institutions, multiple airlines, and multiple long-distance firms, among others.

Nonetheless, there is a higher likelihood for loyalty program members to be less-certain and less-knowledgeable regarding the performance of the service alternative in competition, in comparison with nonmembers since they tend to be more experienced with their present service provider.

The repatronage behavior model that has been adopted by the present study entails two vital components regarding the repatronage decision: a decision to either repurchase, or not (that is, cancel/stay credit card membership), and a decision on the usage level of a service (that is, how many transactions a user made in the successive year).

In addition, the authors of the study also came up with the following hypotheses:

  • Hypothesis 1a: There is a positive impact of the repatronage intentions of customers on their successive repatronage decision
  • Hypothesis 1b: Loyalty programs members are more likely to heavily assess repatronage intentions in comparison with nonmembers while executing repatronage decisions.
  • Hypothesis 2a: The decision by customers to evaluate the prevailing experiences less satisfactorily in comparison with the service levels of competition negatively impacts on the apparent inconsistency on their repatronage discrepancy, even as the experiences assessments of customers tend to be more satisfactory in comparison with the service levels of competitors.
  • Hypothesis 2b: members of loyalty programs are more likely to weigh comparisons of services offered by their current providers with those of the competition less heavily when compared with nonmembers as they seek to make repatronage decisions.
  • Hypothesis 3: when the comparison levels of customers’ satisfaction with their service providers with the services of competitors suffer from a negative discrepancy, the ensuing repatronage decision tends to be larger, in comparison with a positive discrepancy.
  • Hypothesis 4: There is the higher likelihood for customer experiencing comparable services to integrate them into their subsequent repatronage decision.


In an attempt to estimate the model for the study, the researcher made use of time-series, cross-sectional; data obtained from a global financial service organization that provides a loyalty reward program.

In particular, the study stresses on credit card customers of some three European nations. The loyalty program in question is also open to any cardholder, regardless of their level of usage. A fee is normally charged so that one can become a loyalty member, and it differs from one country to another.

When loyalty program members purchase different services, they benefit from an accumulation of points. Later, they have a chance to redeem the points in the form of different goods and services, including air certificates, vacation options, car rental, and retail gifts. A sample of some 405 customers from some three different European countries was identified for this study.

The database entailed usage behavior data and customer survey from November 1995, up to November 1997. The databases entailed information regarding if between March 1996 and November 1997, the customer had decided on canceling services, along with the actual dates of such a cancelation.

A panel design was used to assemble this data, whereby various waves of the usage of service records and survey measures were achieved from related customers. Descriptive statistics were used to calculate and summarize the various variable of the study.


The suggestion offered by the study findings pears to indicate that the decision by customers to choose repatronage decisions in as far as the credit card service is concerned largely depends on their earlier repatronage behavior or intentions, as informed by comparison with the satisfaction levels that they have realized from the organizations in question, in comparison with the amount of satisfaction that they have realized from competitors.

Nonetheless, it is essential to note that the comparison of the customers could be somewhat complex, seeing that customers have a tendency to make comparison on the basis of diverse fundamental service dimension. In addition, customers are also more likely to weigh losses far more heavily in comparison with gains.

The fundamental conclusions about the impact of loyalty program that the researchers seem to have arrived as are as follows. By and large, loyalty programs members tend to be far less sensitive to losses within the context of the overall billing aspects and quality rating at a time when they are comparing the firm providing such services with its competitors.

On the other hand, loyalty programs customers tend to be far less sensitive to the general price gains that competitors are likely to have in comparison with the company. What this means is that loyalty program members discount or overlook negative assessments of a firm in comparison with the competitors.

Nonetheless, the researchers revealed that customers often tend to reduce these assessments while making their repatronage decisions. This observation has prompted the authors to deduce that the reason why customers react this way is because of harboring a perception that they might, in fact, be getting better services and quality for the price that they pay, that is they are getting a “good value” for their money.

As a result, the authors postulate that a relationship between loyalty program membership and the perception of good value exists. On the basis of the foregoing argument, is it conceivable then to claim that when one belongs to a loyalty program this result in customers perceiving good value? Better still, does the perception of “good value” by customers ensure that they become loyalty program members?

Whereas this could be quiet difficult to infer on the basis of the narrow scale of the survey questionnaire that the researcher of the study has utilized, however, we need to realize that loyalty programs and vale hypotheses perception are complementary and are thus vital in the establishment of long-lasting relationship with one’s customers.


In summary, the researcher of the present study has inferred that the loyalty programs as developed by credit card companies seemingly enhances the perceptions of customers of value proposition, in effect resulting in customers to reduce their assessments of the firm in comparison with competitors as they endeavor to make their repatronage decisions.

The observations by the present study are in agreement with the conventional idea that loyalty rewards programs offer a chance to build stronger, deeper and stronger relationships with customers. The statistical assessments carried out by the researchers reveal that the loyalty programs offered by credit card companies result in enhanced revenue owing to increased service usage levels and fewer cancelations.


The topic of this article helps to further shed light on the fact that although companies seeking to offer their loyalty customers loyalty reward programs could be convinced that these programs tend to impact positively on customer behaviors and evaluations, in the long-run, on the other hand, in case of increased usage levels and durations by these loyalty reward programs, there is the likelihood that this could, in fact, help to expose the customers in question to a wider range of service experiences, such as would result in the customers switching their service provider.

Since the article has also endeavored to assess the necessary conditions in order that a reward program may have a positive impact on customer behaviors, evaluations, and repeat purchase intentions, this information would be useful in helping to enhance organizational effectiveness in the UAE.

The introduction section of the article starts by exploring the issues of rewarding loyal customers by organizations from a historical context, then narrows down to the current practices regarding the same issue.

The authors have also provided excellent examples of modern-day organizations in which the loyalty reward programs have been implemented with success. Finally, the introduction section provides an outline of what the rest of the article shall entail, in effect giving the reader a preview of the study.

The review of literature by the article is quite elaborate and comprehensive. For example, the authors provide the reader with a perspective on loyalty rewards programs from prior studies, in effect helping to establish a foundation for the study’s modeling effort. In addition, the authors have also made use of diverse and credible cross-sectional and longitudinal studies to further gain an insight into the research.

Moreover, the authors provide an elaborate estimation model of the impact that a loyalty program would have on the decisions by customers to repurchase a given service, in addition to their decision regarding the usage rate of a given service.

This is important because it helps to form an ideal foundation for answering the research questions. The study has also included hypotheses that need to be tested. Besides, the researchers have also endeavored to review the literature on these hypotheses, in effect allowing them to make coherent predictions of them.

Some of the strengths of the article include sufficient and credible reference sources, a coherent definition of the research problem, and an in-depth analysis of the reviewed sources and research findings. On the other hand, the article lacks in the use of definite subtitles, such as an introduction, literature review, and methodology, among others, thereby making it rather hard for the reader to connect the flow of the article without first having to read through it.

The present article contributes to a broader body of knowledge in strategic management by way of examining the need for a company to quantify the influences that a loyalty rewards program has on such future purchase behavior as usage levels.

Since there are only a limited number of studies that have thus far been undertaken on the impact that the loyalty programs have on the purchases of customers or on the financial outcomes of a company for that matter, the present study as reported by the article under review helps to further shed light on the impact that services experiences and loyalty program membership has on customer value and retention.

The study findings further helps to draw a correlation to the conventional idea that loyalty rewards programs act as a chance to establish stronger, deeper and longer relationships with customers.

In terms of readability, the reader does not find it hard to comprehend the ideas. In addition, the authors have not used technical terms and therefore, this makes it possible for readers from diverse educational backgrounds to comprehend the ideas obtained therein.

The article would, therefore, be of enormous benefit to academicians as it could enable them build on their existing body of knowledge regarding the effects that service experiences and loyalty programs membership has on customer value and retention. In addition, the article acts as a credible source of reference for the academicians when they decided to conduct related studies.

On the other hand, the practitioners would find the article valuable in their quest to develop policies that companies offering loyalty reward programs needs to follow while implementing their programs.

Works Cited

Bolton, Ruth. A Dynamic Model of the Duration of the Customer’s Relationship With a Continuous Service Provider: The Role of Satisfaction. Marketing Science, 17.1(1998): 45-65.

Bolton, Ruth and Bramlett, Matthew. Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value. Journal of the Academy of Marketing Science, 28.1(2000):95-108

Bolton, Ruth and Lemon, Katherine. A Dynamic Model of Customers’ Usage of Services: Usage as an Antecedent and Consequence of Satisfaction.” Journal of Marketing Research, 36. 2(1999): 171-186

Jones, Thomas Sasser, Earl. Why Satisfied Customers Defect. Harvard Business Review 73.6(1995): 89-99.

This Critical Writing on Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value was written and submitted by user Jeram1ah to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.

Jeram1ah studied at the University of Southern California, USA, with average GPA 3.11 out of 4.0.

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Jeram1ah. (2019, September 26). Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value [Blog post]. Retrieved from

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Jeram1ah. "Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value." IvyPanda, 26 Sept. 2019,

1. Jeram1ah. "Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value." IvyPanda (blog), September 26, 2019.


Jeram1ah. "Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value." IvyPanda (blog), September 26, 2019.


Jeram1ah. 2019. "Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value." IvyPanda (blog), September 26, 2019.


Jeram1ah. (2019) 'Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value'. IvyPanda, 26 September.

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