Loyalty programs lie within the scope of customer retention strategies through a planned reward scheme based on customer purchasing histories (Bolton, Lemon, & Verhoef, 2002). Then their associated databases can be used to target particular segments of customers which in turn enables firms to employ their marketing resources better and raise customer retention.
Although loyalty programs have attained a prominent position in the marketing mix of many companies and loyalty cards have infiltrated customers’ wallets, empirical evidence on their potential impacts is limited and the empirical research provides mixed evidence (Sharp & Sharp, 1997; Bolton, Kannan, & Bramlett, 2000; Benavent, Crié, & Meyer-Waarden, 2000; Meyer-Waarden, 2002; Leenheer, Bijmolt, van Heerde, & Smidts, 2003; Mägi, 2003; Lewis, 2004; Meyer-Waarden, 2004).

Furthermore, little research has investigated whether the loyalty programs are perceived as valuable to the customer (Kivetz & Simonson, 2002; Roehm, Bolman Pullins, & Roehm Jr., 2002; Yi, & Jeon, 2003). Questions about the efficiency of gratifications, nevertheless important to create value for the customers and therefore determinant for the program adoption and use, are only partially solved. The overall purpose of this study is therefore to identify factors affecting the utility of a loyalty scheme which is then supposed to influence the underlying mechanisms between the program and loyalty.
We draw on Dowling and Uncles’s (1997) as well as Roehm et al. (2002) conceptual frameworks that are based on timing, type and tangibility of rewards. We first provide a theoretical background for loyalty programs and then develop our hypotheses about the effects of gratifications on loyalty programs’ utilities. Subsequently, we describe the survey used to examine the hypotheses and present the results, which are based mainly on conjoint analysis. We conclude with a discussion and suggestions for further research.

Theoretical Background about loyalty programs and value perception of rewards

A loyalty-card program offers an integrated system of marketing actions as well as various economic, psychological, and sociological rewards on cumulative purchasing and therefore should create a more tied relationship because of the customers’ general cumulative satisfaction, commitment, and trust.
The overall objective is to modify customer behavior positively, encourage repeat buying and increase switching costs to prevent a customer from switching to a competitor by providing incentives to purchase more frequently and in larger volumes.

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Effects of gratifications on loyalty program utilities.pdf