The purpose of this research is to contribute to a better theoretical and empirical knowledge about the impact of retailing loyalty programs on customer purchase behaviour. It is based on the BehaviorScan single-source panel which has been crossed with the store data base of a French retailer. Our investigation has been carried out for a 36 month period and involves 7 hyper-and supermarkets covering 397.000 purchase transactions from 2.476 panellists. The impact on individual purchase behaviour is relatively weak and short-term. However, loyalty programs primarily attract heavy customers of the store but not of the category.

Loyalty programs, in particular those employed by distributors, are currently regarded as fundamental by many companies. They lie within the scope of rather defensive customer retention strategies, being based on the double conviction that retaining customers is less expensive than conquering new ones, and that the best customers are the most profitable (Bolton and Drew 1994, Reichheld 1996).
Many companies therefore spend a huge amount in the management of loyalty cards. Indeed, retailers, such as E. Leclerc in France, reinforce their marketing expenditures by devoting approximately 18 million ??of their marketing budget to the animation and management of their program. Considering these invested sums, there seems to be a need for rigorous empirical evidence on efficiency of loyalty programs. While anecdotal evidence seems to be plentiful, certain academic authors worry about their effectiveness (Dowling and Uncles 1997, Sharp and Sharp 1997, Benavent et al. 2000).
Given the scarce academic literature, we shall therefore explore the impact of a retailing loyalty program, situated in the BehaviorScan test market in Angers (France), on customer behaviour.

Loyalty programs offer customers incentives, typically in the form of points that can be redeemed for travel or other items of value, to encourage repeated purchases in the store. Usually there is a hurdle in terms of requiring a significant number of purchases in order to be able to claim any benefit.
This creates the incentive for the customer to keep on buying (i.e. to buy for longer, to not drop the store from their repertoire) and to concentrate their purchasing from the product category on the one retailing outlet (i.e. to increase the share of category requirements devoted to the loyalty program store, increasing their purchase loyalty).

The effectiveness of loyalty programs which reward specific types of consumer behaviour should therefore, logically, be evaluated in terms of the type of behavioural changes they aim to bring about. On the other hand, managers wish to focus on the 20% of their customers realizing 80% of the company’s turnover.

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Do loyalty programs modify purchase behaviour ?.pdf