Effectiveness of Loyalty Programs in Customer Retention

 - Jindal Journal of Business Research

Loyalty program is part of marketing strategy which concerned to maintain long-term relationship with customers to increase profitability, and it is widely used by the small and big organization to help to predict the future improvement activities.

The loyalty program emphasizes services and products that can be easily customized and to be effectively marketed the products according to customers’ needs and wants.

The Malaysian automotive industry is the third largest in Southeast Asia, and the 25th largest in the world, with an annual production output of over 500,000 vehicles. The automotive sector contributes 4% or Malaysia ringgits (RM) 40 billion to Malaysia’s GDP and employs a workforce of over 700,000 throughout a regional ecosystem. The automotive industry in Malaysia primarily serves domestic demand, and only several thousand complete built-up (CBU) vehicles are exported annually.

There are many ways to formulate loyalty programs. A typical approach uses platinum, gold, and silver tiers, typically based on purchase volumes. Fifty-seven percent of airlines and 41% of hotel chains reward consumers for a range of engagement behaviors. Some other examples are offering discounts, resale assistance, free services, etc.

The market approach had transformed to customer-centric approach from product-centric approach due to highly competitive market and varieties of services offered to customers, hence, marketing strategy to prioritize to grow a sustainable business and to increase customers satisfaction. This study aims to assess the impact of loyalty programs on customer retention. It then seeks to investigate the mediating effect of brand association and customer satisfaction in three ways, viz., in parallel, distinct, and sequential.

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