Chinese Management Studies

Emerald Article: Relationships among customer loyalty programs, service

quality, relationship quality and loyalty: An empirical study
Wei-Ming Ou, Chia-Mei Shih, Chin-Yuan Chen, Kuo-Chang Wang

Article information:
To cite this document: Wei-Ming Ou, Chia-Mei Shih, Chin-Yuan Chen, Kuo-Chang Wang, (2011),"Relationships among customer loyalty
programs, service quality, relationship quality and loyalty: An empirical study", Chinese Management Studies, Vol. 5 Iss: 2 pp.
194 - 206
Permanent link to this document:
http://dx.doi.org/10.1108/17506141111142825
Downloaded on: 25-04-2012
References: This document contains references to 42 other documents
To copy this document: permissions@emeraldinsight.com
This document has been downloaded 2662 times.

Access to this document was granted through an Emerald subscription provided by UNIVERSITI UTARA MALAYSIA
For Authors:
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service.
Information about how to choose which publication to write for and submission guidelines are available for all. Additional help
for authors is available for Emerald subscribers. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in
business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as
well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is
a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.
*Related content and download information correct at time of download.

The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1750-614X.htm

CMS
5,2

Relationships among customer

loyalty programs, service quality,
relationship quality and loyalty

194

An empirical study
Wei-Ming Ou
Department of Marketing Management,
Shih Chien University, Kaohsiung, Taiwan

Chia-Mei Shih
Department of Business Administration,
Kun Shan University, Tainan, Taiwan

Chin-Yuan Chen
Department of Finance, Kun Shan University, Tainan, Taiwan, and

Kuo-Chang Wang
Taiwan Sugar Corporation, Tainan, Taiwan
Abstract
Purpose The purpose of this paper is to measure the impact of customer loyalty programs on
relationship quality, relationship commitment, and loyalty.
Design/methodology/approach A survey with 480 qualified observations from department store
customers in Taiwan was conducted. A structural equation modeling approach was used.
Findings Customer loyalty programs have a partially supported positive impact on relationship
quality; service quality has a positive impact on relationship quality; customers with a positive
relationship quality impact their relationship commitment; the higher the relationship commitment, the
higher the loyalty; and a customer loyalty program partially supports a positive impact on loyalty.
Originality/value The paper shows that customer loyalty programs have positive influences on
loyalty. However, short-term customer loyalty programs, namely, Minimum Purchase Gift Cards,
displayed no significant influence on loyalty. The incentive of short-term customer loyalty programs is
not sufficient for loyalty.
Keywords Customer loyalty program, Loyalty, Relationship commitment, Relationship quality, Taiwan,
Consumer behaviour, Consumer loyalty
Paper type Research paper

Chinese Management Studies

Vol. 5 No. 2, 2011
pp. 194-206
q Emerald Group Publishing Limited
1750-614X
DOI 10.1108/17506141111142825

Introduction
The retail business is not as simple as Displaying goods in an open store to satisfy
customer needs. Meeting the diverse customer demand to achieve customer loyalty is an
important issue for management today. Customer loyalty becomes possible through
the development of long term, mutually beneficial relationships with customers
The authors would like to thank the Editor and the reviewers for their helpful comments on
earlier drafts of this paper.

(Athanasopoulou, 2009). One of the most valuable marketing strategies that executives can
exploit is a customer loyalty program, which is a promotional plan designed to increase
loyalty by providing incentives to customers through added benefits (Yi and Jeon, 2003).
Customer loyalty programs are a widely used marketing tool to increase sales and maintain
a stable market share. Many retailers, such as department stores and grocery stores, have
adopted customer loyalty programs as a useful strategic tool that most consumers actively
enjoy. However, most retailers launch loyalty programs simply to follow the competitors
(OMalley, 1998), and do not understand the value that can be provided to customers or the
impact on the organization. Therefore, this study aims to investigate whether retailers that
launch annual customer loyalty programs effectively increase loyalty.
This research focuses on the antecedents of relationship quality, namely, customer
loyalty programs and service quality, as well as relationship quality consequences,
explicitly, relationship commitment and loyalty. The purpose of this study includes:
.
Examine the impact of customer loyalty programs on relationship quality.
.
Examine the impact of service quality on relationship quality.
.
Examine the impact of relationship quality on relationship commitment.
.
Examine the impact of customer loyalty programs on loyalty.
.
Provide recommended strategies for retailers in preparing customer loyalty
programs.
Literature review and hypotheses development
The impact of customer loyalty programs on relationship quality
Relationship quality is the level of relationship between a business and the
customer (Crosby et al., 1990). This level determines how well an organization meets
the customers needs. The service industry contains features that allow customers
to have an ambiguity toward its consumer services. These ambiguities may imply
ineffective services or negative effects, such that the relationship quality helps lower
these ambiguities (Crosby et al., 1990).
Yi and Jeon (2003) believe a customer loyalty program is a marketing plan designed to
increase loyalty by providing incentives to customers through added benefits. Currently
most customer loyalty programs are broadly designed into three categories:
(1) Gift cards with minimum purchase.
(2) Member rebates (including gift cards, exclusive member discounts,
high-consumer benefit programs).
(3) Lottery draws.
There are five elements in the perceived value of customer loyalty programs:
Cash value, Choice of redemption option, Aspiration value, Relevance, and
Convenience (Yi and Jeon, 2003).
Shoemaker and Lewis (1999) believe that customer loyalty programs enhance
customer satisfaction so that when a problem occurs between the relationship of the
customer and service provider, a good customer loyalty program reduces dissatisfaction.
This confirms the importance of the customer loyalty program on customer relations.
Good customer loyalty programs not only improve consumer acceptance that is reflected
in increased sales, they also encourage participation through increased interaction

Customer loyalty
programs

195

CMS
5,2

between the business and customer. In addition, the customers believe that they can
receive higher economic value, diverse rewards, and an opportunity to win a prize through
the implementation of customer loyalty programs. Therefore, when a customer provides a
higher rating to a business loyalty program, they also reflect a higher level of trust. This
study proposes the following assumptions based on the above-mentioned facts:

196

H1. Customer loyalty programs have a significant positive impact on customer

satisfaction.
H2. Customer loyalty programs have a significant positive impact on trust.
The impact of service quality on relationship quality
To survive in this competitive market, companies should continue to improve their
service performance (Kim et al., 2007). Service quality is known by both academics and
practitioners to contribute to customer satisfaction and market share (Cameran et al.,
2010; Hu et al., 2009; Mohamad and Awang, 2009; Parasuraman et al., 1985; Zeithaml,
2000). The pursuit of service quality has become an essential factor for all businesses
that are driven by the need to remain competitive (Hu et al., 2009).
Furthermore, service quality is one of the antecedents of customer satisfaction and
loyalty (Herington and Weaven, 2009; Hu et al., 2009; Jamal and Anastasiadou, 2009;
Mohamad and Awang, 2009). High level of service performance is believed to be an
effective way to improve customer satisfaction, trust, and loyalty (Huang and Liu, 2010;
Kim et al., 2007). Moreover, the relationship quality model proposed by Crosby et al.
(1990) state that the professionalism of the service provider has a positive impact on
relationship quality. The better professional service provided the higher acceptance
the customer will have toward the assurance of service quality. In other words, the
customers perception of service quality assurance positively influences the relationship
quality. This study proposes the following assumptions:
H3. Service quality will positively impact the degree of customer satisfaction.
H4. Service quality will positively impact trust.
The impact of relationship quality on relationship commitment
Commitment is an emotional link between the individual and the organization (Akehurst
et al., 2009). Relationship commitment is defined as an exchange partner believing that a
continuing relationship with another party is so vital as to warrant maximum endeavors at
maintaining it; in other words, the committed party accepts that the relationship is worth
working on to guarantee that it endures indefinitely (Morgan and Hunt, 1994). Relationship
commitment is affective loyalty to maintain an ongoing relationship with their partner, and
could be intensified by trust that is the aggregate evaluation of customers satisfaction
(Bennet and Cadogan, 2001; Moliner et al., 2007; Morgan and Hunt, 1994).
Gundlach et al. (1995) pointed out that relationship commitment is important in
the success of relationship exchange, and is a strong indicator of the relationship quality.
Trust is the foundation of long-term relationships and an important factor of relationship
commitments (Sirdeshmukh et al., 2002). Morgan and Hunt (1994) express that
relationship commitment is willingly placed with the greatest effort, as it is an important
factor in trust and maintaining relationships between trading partners. When one
party perceives the relationship is important, a relationship commitment exists.

The meaning is defined as A persistent demand present when maintaining important

relationships. Hennig-Thurau et al. (2002) studied three different service industries,
finding that customer satisfaction will directly affect relationship commitment.
According to these two dimensions of relationship quality (satisfaction and trust) and
the facts in relationship commitment reviewed in this paper, we know that satisfaction,
trust and commitment are closely related (Anderson and Srinivasan, 2003;
Hennig-Thurau et al., 2002; Moliner et al., 2007; Morgan and Hunt, 1994; Wu et al.,
2008). We therefore propose the following assumptions:
H5. Customer satisfaction has a positive impact on the relationship commitment.
H6. Customer trust has a positive impact on the relationship commitment.
Loyalty
Customer loyalty is defined as a held commitment to re-buy or re-patronize a preferred
product consistently in the future (Ganesh et al., 2000; Jamal and Anastasiadou, 2009; Kim
et al., 2007; Oliver, 1999; Stank et al., 1999, 2003). Loyal customers tend to have a higher
level of recommendation intention and repurchase intention (Bowen and Shoemaker, 1998;
Chi et al., 2009; Hennig-Thurau et al., 2002; Kim et al., 2007; Singh and Sirdeshmukh, 2000;
Stank et al., 1999, 2003; Yu and Dean, 2001). Loyalty increases repurchase behavior
because loyal customers demonstrate greater resistance to counter persuasion and
negative word of mouth. Loyal consumers might be less price sensitive, and decrease the
risk of defection due to competitors promotional activities (Stank et al., 2003).
Oliver (1999) believes that customer loyalty is the repeat purchase intention of a
customer toward a service or product no matter the varying influencing situations or
marketing activities. Bettencourt (1997) found that relationship commitment had a
strong positive effect on loyalty; the higher the customer commitment, the more willing
the customer is in providing word-of-mouth recommendations for the business.
Therefore, this study proposes the following hypothesis:
H7. The higher the customers relationship commitment, the higher the customer
loyalty.
Yi and Jeon (2003) believe a customer loyalty program is a useful marketing tool designed
to increase loyalty by providing incentives to consumers through added benefits.
A successful customer loyalty program further strengthens the relationship between
existing customers, lengthening customer life cycle, and increasing its share of customer
expenditure. The overall objectives of these programs are to enhance consumer repeat
purchase behavior and increase customer conversion costs of switching stores by
stimulating product or service usage (Magi, 2003). Magi (2003) also found that retail
loyalty programs had a high degree of influence on customers share-of-purchase and
share-of-visits. In this study, we propose the following assumptions:
H8. Customer loyalty programs have a positive impact on customer loyalty.
Research framework and methods
This study focuses on the antecedents of relationship quality (customer loyalty program
and service quality), as well as relationships consequences (relationship commitment and
loyalty). This study proposes a conceptual framework, as shown in Figure 1.

Customer loyalty
programs

197

CMS
5,2

Customer loyalty
programs

H8

Minimum
purchase
gift card

198

Membership
card rebate

Relationship
quality
H1
Satisfaction

H5

H2

Relationship
commitment

Lottery
draw
H3

Trust

H7

Loyalty

H6

H4

Figure 1.
Conceptual framework

Service
quality

This study uses software SPSS version 12.0 and AMOS version 5.0 for statistical
analysis. To test the hypotheses presented in this study, the following statistical
methods were used: reliability analysis, factor analysis, and path analysis.
This research targets department store customers in Taiwan. Surveys to collect data
from consumers as they were leaving department stores in Taiwan were conducted. The
study population consists of shoppers of major department stores in a Taiwan city.
Potential respondents were approached and asked to participate in a short interview.
They were told that the research was being conducted by universities, and the individual
results were to be kept strictly confidential. A total of 600 surveys were conducted,
528 were collected for a recovery rate of 88 percent. By deducting incomplete surveys,
480 qualified surveys remained for an effective collection rate of 80 percent. In the
sample, a total of 141 were male (29.4 percent) and 338 female (70.4 percent). The highest
concentration of ages was between 18 and 35 years, representing 136 people
(65.9 percent).
Data analysis
Factor analysis and reliability analysis
After testing, the customer loyalty programs scale (Minimum Purchase Gift Card,
Membership Card Rebate, and Lottery Draw) deleted Minimum Purchase Gift Card one
item, Membership Card Rebate three items, and Lottery Draw two items for a total
of six items, leaving nine items on the scale. Using the largest variance in the orthogonal
rotation factor analysis to extract the three factors larger than one, the cumulative
explained variance was 75.579 percent. Because the composition of each factors
Cronbachs Alpha value was greater than 0.7, this indicates a good and credible scale.
In addition, the dimensions of each factor are consistent with the original design of this
study, proving that this scale has appropriate constructive validity. The original design
of the department store service quality scale was constructed with six items. After
statistical analysis, no item was deleted with an eigenvalue of 3.679 for a cumulative

explained variance of 61.309 percent. Because the composition of each factor has a
Cronbachs Alpha value of 0.861, this indicates the scale is reliable.
The relationship quality scale contains customer satisfaction (five items) and trust
(five items). After trial testing, three items of customer satisfaction were deleted leaving
a remainder of seven questions. Using the largest variance in the orthogonal rotation
factor analysis to extract the two factors larger than one resulted in a cumulative
explained variance of 75.579 percent. Because the composition of each factor had a
Cronbachs Alpha value greater than 0.7, this shows that the scale is reliable.
Through factor analysis, the relationship commitment scale has an eigenvalue of
3.705 and a cumulative explained variance of 74.101 percent. Because the factor
composition has a Cronbachs Alpha value of 0.912 and is consistent with the original
design, this proves the scale is reliable. In addition, the customer loyalty program scale
has an Eigenvalue of 6.293 and a cumulative explained variance of 69.918 percent.
Because the factor composition has a Cronbachs Alpha value of 0.946 and is consistent
with the original design, this proves that the scale is reliable.

Customer loyalty
programs

199

Customer perceived value for customer loyalty programs

This study uses ANOVA analysis to find the significant perceived differences between
the customer loyalty programs (Minimum Purchase Gift Card, Membership Card
Rebate, and Lottery Draw) of three department stores in a Taiwan city. For commercial
confidentiality, A, B, and C represent the names of the three department stores.
There is a significant difference (F 9.975, p , 0.001) of the perceived value of the
Minimum Purchase Gift Card for the customers of the three department stores. The
Duncan test in Table I indicates that the customers of department store A have a
significant higher perceived value of the Minimum Purchase Gift Card than those of
department store C. Department store B has a significantly higher perceived value than
department store C.
There is a significant difference (F 3.15, p , 0.05) in the perceived value of
Membership Card Rebates for the customers of the three department stores. The Duncan
test in Table I indicates that the customers of department store A have a significantly
higher perceived value of Membership Card Rebates than department store C.
Department store B has a significantly higher perceived value than department store C.
There is a significant difference (F 25.9, p , 0.001) in the perceived value of
Lottery Draw for the customers of the three department stores. The Duncan test in
Table I indicates that the customers of department store A have a significantly higher
perceived value of the Lottery Draw than department store C. Department store B has a
significantly higher perceived value than department store C.
Average
Perceived value of customer loyalty program Store A Store B Store C
Minimum Purchase Gift Card
Membership Card Rebate
Lottery Draw

5.19
5.27
4.40

5.28
5.20
5.24

Note: Significance at: *p , 0.05, * *p , 0.01 and * * *p , 0.001

4.77
4.97
4.58

F-value

Duncan test

9.975 * * *
3.135 *
25.900 * * *

(A C), (B C)
(A C), (B C)
(A B), (B C)

Table I.
Differences of the
perceived value of
customer loyalty
programs

CMS
5,2

200

Analysis of theoretical models and goodness of fit

This study uses the AMOS version 5.0 to verify the structural equation modeling (SEM)
and uses the maximum likelihood to analyze the theoretical models for goodness of fit.
The use of SEM estimates the effects simultaneously and is thus more true to the
simultaneous nature of the impact of these variables in the research model. It also allows
for convenient estimation of the effects of individual predictors (Ou et al., 2006).
The theoretical model fit analysis achieved significant results: x 2 (3) 7.492
( p 0.058), with a standard x 2-value ( 2.497) between the acceptable range of 1 and 3.
In addition, GFI 0.996 is higher than the accepted standard value of 0.9; here, the
closer the value is to 1, the better indication of goodness of fit. AGFI 0.953 and
CFI 0.998 is higher than the accepted standard value of 0.9; RMSEA 0.056 is lower
than the accepted standard value range of 0.08; the mean residual square root of RMR
( 0.01) is lower than the acceptable standard value 0.05. A value close to 0 suggests a
better goodness of fit. Overall, we found that the model had an acceptable goodness of fit.
Significance of hypotheses
The impact of customer loyalty programs on relationship quality
In the impact of customer loyalty programs on satisfaction, Minimum Purchase Gift
Cards had a significant positive effect on satisfaction (g 0.247, p , 0.001),
Membership Card Rebate had no significant effect on satisfaction (g 2 0.055,
p . 0.1), and Lottery Draw had a significant positive effect on satisfaction (g 0.382,
p , 0.001). From this, we see that H1 customer loyalty program has a significant
positive impact on customer satisfaction is partially supported.
In the impact of customer loyalty programs on trust, Minimum Purchase Gift
Cards had no significant effect on trust (g 0.061, p . 0.1), Membership Card Rebates
had a significant positive effect on trust (g 0.107, p , 0.05), and Lottery Draws had a
significant positive effect on trust (g 0.186, p , 0.001). From this, we see that H2
customer loyalty program has a significant positive impact on trust is partially
supported.
The impact of service quality on relationship quality
In the impact of service quality on satisfaction, service quality had a significant positive
effect on satisfaction (g 0.293, p , 0.001). From this, we see that H3 service quality
has a significant positive impact on satisfaction is true. In the impact of service quality
on trust, service quality had a significant positive effect on trust (g 0.518, p , 0.001).
From this, we see that H4 service quality has a significant positive impact on trust is
true. Thus, service quality has a significant positive impact on relationship quality.
The impact of relationship quality on relationship commitment
In the impact of customer satisfaction on relationship commitment, satisfaction had a
significant positive effect on relationship commitment (b 0.642, p , 0.001). From this,
we can see that H5 Customer satisfaction has a positive impact on the relationship
commitment is true. Moreover, in the impact of trust on relationship commitment, trust
had a significant positive effect on relationship commitment (b 0.331, p , 0.001).
From this, we can see that H6 Customer trust has a positive impact on the relationship
commitment is true. Therefore, relationship quality has a significant positive impact on
relationship commitment.

The impact of relationship commitment on customer loyalty

Relationship commitment had a significant positive impact on the loyalty (b 0.331,
p , 0.001). From this, we can see that H7 The higher the customers relationship
commitment, the higher the customer loyalty is true.
The impact of customer loyalty programs on loyalty
Membership Card Rebates in customer loyalty programs had a significant positive
impact on loyalty (g 0.096, p , 0.01); Lottery Draws had a significant positive impact
on loyalty (g 0.111, p , 0.001). However, the Minimum Purchase Gift Card had no
significant impact on loyalty (g 0.040, p . 0.1). From this, we can see that H8
customer loyalty programs have a positive impact on customer loyalty is partially
supported.
Path analysis is found in Table II.

Customer loyalty
programs

201

Conclusions
The impact of customer loyalty programs on relationship quality
The results showed that the hypothesis customer loyalty programs had a significant
positive impact on customer satisfaction was partially supported; the customer loyalty
programs significant positive impact on trust was also partially supported.
Shoemaker and Lewis (1999) suggested a satisfactory customer loyalty program
reduces customer dissatisfaction and reinforce satisfaction. However, a poorly designed
customer loyalty program may produce adverse effects. The study results show that
Minimum Purchase Gift Cards and Lottery Draws in customer loyalty programs have a
positive significant impact on customer satisfaction, while Membership Card Rebates
showed no significant results. Therefore, customer loyalty programs have a significant
positive impact on customer satisfaction was only partially supported. This may be the
result of customer dissatisfaction with poorly designed Membership Card Rebates.
In addition, for Minimum Purchase Gift Cards, no significant impact on
department store customers trust was observed. This indicates trust may not be
Path
Minimum Purchase Gift Card ! satisfaction
Membership Card Rebate ! satisfaction
Lottery Draw ! satisfaction
Minimum Purchase Gift Card ! trust
Membership Card Rebate ! trust
Lottery Draw ! trust
Service quality ! satisfaction
Service quality ! trust
Satisfaction ! relationship commitment
Trust ! relationship commitment
Relationship commitment ! loyalty
Minimum Purchase Gift Card ! loyalty
Membership Card Rebate ! loyalty
Lottery Draw ! loyalty

Hypothesis Standardized coefficient Results

H1
H1
H1
H2
H2
H2
H3
H4
H5
H6
H7
H8
H8
H8

0.247 * * *
20.055
0.382 * * *
0.061
0.107 *
0.186 * * *
0.293 * * *
0.518 * * *
0.642 * * *
0.331 * * *
0.648 * * *
0.040
0.096 * *
0.111 * * *

Supported
Not supported
Supported
Not supported
Supported
Supported
Supported
Supported
Supported
Supported
Supported
Not supported
Supported
Supported

Notes: Significance at: *p , 0.05, * *p , 0.01 and * * *p , 0.001; R 2: Trust, 0.535; satisfaction, 0.510;
relationship commitment, 0.363; loyalty, 0.736

Table II.
Path analysis

CMS
5,2

202

formed by the design of Minimum Purchase Gift Cards. We believe the incentive of
short-term marketing activities, such as Minimum Purchase Gift Cards, is not sufficient
for trust. Trust is the result from the customers faith and confidence after receiving
service from a provider (Huang and Liu, 2010; Morgan and Hunt, 1994). When the
customer affirms the department stores loyalty program is fair and just, the generated
trust toward the department store is positive. However, when customers feel distrust
toward the design of loyalty programs, their consumption behavior reflects this.
The impact of service quality on the relationship quality
Study results show a significant positive impact of service quality on
customer satisfaction; hence, there is a significant relationship between service
quality and satisfaction (Anderson and Narus, 1990; Cameran et al., 2010; Crosby et al.,
1990; Herington and Weaven, 2009; Hu et al., 2009; Jamal and Anastasiadou, 2009;
Parasuraman et al., 1988). Service quality has a significant positive impact on trust,
which is aligned with the view of Nicholson et al. (2001) that the customers perception of
service quality affects the level of trust given a service provider.
The impact of relationship quality on relationship commitment
This study found that both the impact of customer satisfaction and trust positively and
significantly impact the relationship commitment. This aligns with previous findings
of customer satisfaction and trust having a significant positive impact on relationship
commitment (Bennet and Cadogan, 2001; Hennig-Thurau et al., 2002; Moliner et al.,
2007; Morgan and Hunt, 1994).
The impact of relationship commitment on customer loyalty
Results show that the higher the relationship commitment, the higher the loyalty. This
confirms previous findings that relationship commitment has a significant positive impact
on loyalty (Bennet and Cadogan, 2001; Bettencourt, 1997; Evanschitzky et al., 2006).
The relationship between customer loyalty programs and customer loyalty
Successful loyalty programs further strengthen the relationship between existing
customers, increase customer life cycles, increase the share of customer expenditure, and
thereby strengthen customer loyalty. Magis (2003) study pointed out that retail loyalty
programs have a large influence on customers share-of-purchase and share-of-visits.
To verify the impact of department store customer loyalty programs on loyalty,
we found that the design of Membership Card Rebate and Lottery Draw had a significant
positive impact on customer loyalty. However, only Minimum Purchase Gift Cards
displayed no significant influence. We believe the incentive of short-term customer
loyalty programs, such as Minimum Purchase Gift Cards, is not sufficient for customer
loyalty. If customer loyalty programs are not designed to meet customer demands, they
will not be recognized by customers, let alone build their loyalty.
Managerial implications
Retailers sales come from long-term customers. Therefore, organizations need a loyal
customer base for profits and sustainable growth. Based on the results of this study,
we propose the following management recommendations.

First, we found that Membership Card Rebate and Lottery Draw of customer
loyalty programs had a significant positive impact on loyalty. However, only Minimum
Purchase Gift Cards displayed no significant influence on loyalty. In the design of
Minimum Purchase Gift Card, customers may question the sincerity of the department
stores rebate and impact their level of trust. For example, vouchers provided only
for high minimum expenditure or restrictions on the purchase of items are sources of
gaining customers distrust. We recommend that the minimum purchase amount for
vouchers should be lowered so that consumers are motivated to purchase again. Costs
can be shared with suppliers based on a suitable ratio so that both parties achieve
desired results.
Second, consumers usually show high expectations and dependency on the
rebate gifts of customer loyalty programs provided by the retailers. Therefore, the gifts
chosen should try to meet consumer expectations as closely as possible. Consumers may
criticize these gifts as useless and trivial from the consumers self-interest perspectives;
therefore, organizations should listen to the advice of customers and sales
representatives in choosing suitable gifts to win consumer satisfaction and trust.
Third, relationship commitment significantly impacts customer loyalty; hence,
the higher the commitment, the more willing the customer is to spread word of mouth and
provide recommendations. This study suggests that retailers should provide appropriate
responses to customer feedback, as well as frequent non-commercial activities to enhance
customer interaction and corporate reputation. Examples include: public welfare
activities, social group management, and society activities. A fruitful, long-term
relationship can be enhanced through the interaction between the customer and business.
Finally, marketing activities must be designed to meet customer spending habits
and consumption levels, especially for customer loyalty programs. For retailers to
establish good customer loyalty, not only is service quality, relationship quality, and
good customer relationship management important, but the design of customer loyalty
programs must also be able to provide differentiation. Retailers are recommended to
gather customers data, such as share of wallet, travel time to the store, lifetime duration,
or even customer loyalty card portfolios, and then make use of these data to segment.
With the information, retailers can embark on tailored incentives and promotional
strategies to attract distinctive segments and restore their patronage (Meyer-Waarden,
2007). For instance, based on the information from customer loyalty programs,
providing priority parking permits to premium customers or customers of long travel
time to the store is recommended. The travel time to a store is assumed to measure the
effort, both physical and psychological, to reach a retailer (Darley and Lim, 1999; Ou and
Abratt, 2006). Travel time has negative effects on the utility. However, the negative
impact of travel time could be partly compensated by ease of parking. It is appropriate
for restaurants, department stores, and grocery stores. Another example would be
sending different direct mails to different targeted audiences based on their annual
consumption in Membership Card Rebate activities. This allows these premium
customers to receive preferential treatment when shopping at the store in comparison to
regular members. Moreover, the rebate gifts to premium customers should be different
from regular members and the gifts to different age levels should be different so that
customers can experience the thoughtfulness and importance that the retailer places
on these activities. These loyal customers will decide to shop at these retailers first,
which allows a long-term relationship to grow between consumer and business.

Customer loyalty
programs

203

CMS
5,2

Research limitations
In this study, all variables were measured at one point in time in this research, thus
essentially from a static perspective (Bloemer and de Ruyter, 1998; Ou and Abratt,
2006). Given the emphasis on the practical application of data collection, dynamic
relationship quality over time was not surveyed here. It is recommended that further
interpretation of the findings for other circumstances should be made with caution.

204
Recommendations for future research
First, because most existing relationship quality studies are quantitative, it requires
more qualitative studies to obtain more detailed insights into the variables that impact
relationship quality. The complex constructs involved in relationship quality, its
inherent dimensions, its antecedents, and its consequences call for significantly more
qualitative enquiries to make richer theory available (Athanasopoulou, 2009). Second,
future study may investigate whether the relationships between customer loyalty
programs and consumer behavior vary across different retailers (for example,
convenience stores, discount outlets, bookstores, and grocery stores), and different
industries (for example, restaurants, airlines and electronic commerce). Especially, for
electronic commerce, trust of online retailers is more difficult to build than
bricks-and-mortar stores, because the lack of human interaction and physical facilities
make online retailers less certain to customers than bricks-and-mortar stores. Customer
loyalty programs could play a part in easing customers uncertainly toward virtual
retailers and developing trust between shoppers and online retailers. Virtual retailers
could issue co-brand loyalty cards with prestige financial institutes to promote trust and
reputation. Analyzing the relationships between customer loyalty programs, trust,
corporate reputation, and inter-purchase time for online retailers is highly recommended.
Given the diversity of service industries, researchers may assess how the model works
in varying service industry contexts (Hu et al., 2009; Ou et al., 2006). The possible links
between customer loyalty programs and consumer behavior could be examined in future
research for better understanding of relationship marketing. The nature of relationship
quality in various contexts remains a vital issue for future marketing studies.
References
Akehurst, G., Comeche, J.M. and Galindo, M.-A. (2009), Job satisfaction and commitment in the
entrepreneurial SME, Small Business Economics, Vol. 32 No. 3, pp. 277-89.
Anderson, J.C. and Narus, J.A. (1990), A model of distributor firm and manufacture firm
working relationship, Journal of Marketing, Vol. 54 No. 1, pp. 42-58.
Anderson, R.E. and Srinivasan, S.S. (2003), E-satisfaction and e-loyalty: a contingency
framework, Psychology & Marketing, Vol. 20 No. 2, pp. 123-38.
Athanasopoulou, P. (2009), Relationship quality: a critical literature review and research
agenda, European Journal of Marketing, Vol. 43 Nos 5/6, pp. 583-610.
Bennet, G.A.M. and Cadogan, J.W. (2001), Partner symmetries, partner conflict and the quality
of joint venture marketing strategy: an empirical investigation, Journal of Marketing
Management, Vol. 17 Nos 1/2, pp. 223-5.
Bettencourt, L. (1997), Customer voluntary performance: customer as partners in service
delivery, Journal of Retailing, Vol. 73 No. 3, pp. 383-406.
Bloemer, J. and de Ruyter, K. (1998), On the relationship between store image, store satisfaction
and store loyalty, European Journal of Marketing, Vol. 32 Nos 5/6, pp. 499-513.

Bowen, J.T. and Shoemaker, S. (1998), Loyalty: a strategic commitment, Cornell Hotel &
Restaurant Administration Quarterly, Vol. 39 No. 1, pp. 12-25.
Cameran, M., Moizer, P. and Pettinicchio, A. (2010), Customer satisfaction, corporate image, and
service quality in professional services, The Service Industries Journal, Vol. 30 No. 3, pp. 421-35.
Chi, H.-K., Yeh, H.-R. and Yang, Y.-T. (2009), The impact of brand awareness on consumer
purchase intention: the mediating effect of perceived quality and brand loyalty, Journal of
International Management Studies, Vol. 4 No. 1, pp. 135-44.
Crosby, L.A., Evans, K.R. and Cowles, D. (1990), Relationship quality in services selling:
an interpersonal influence perspective, Journal of Marketing, Vol. 54 No. 3, pp. 68-82.
Darley, W.K. and Lim, J.S. (1999), Effects of store image and attitude toward secondhand stores
on shopping frequency and distance traveled, International Journal of Retail &
Distribution Management, Vol. 27 No. 8, pp. 311-18.
Evanschitzky, H., Iyerb, G.R., Plassmannc, H., Niessinga, J. and Mefferta, H. (2006), The relative
strength of affective commitment in securing loyalty in service relationships, Journal of
Business Research, Vol. 59 No. 12, pp. 1207-13.
Ganesh, J., Arnold, M.J. and Reynolds, K.E. (2000), Understanding the customer base of service
providers: an examination of the differences between switchers and stayers, Journal of
Marketing, Vol. 64 No. 3, pp. 65-87.
Gundlach, G.T., Achrol, R.S. and Mentzer, J.T. (1995), The structure of commitment in
exchange, Journal of Marketing, Vol. 59 No. 1, pp. 78-92.
Hennig-Thurau, T., Gwinner, K.P. and Gremler, D.D. (2002), Understanding relationship
marketing outcomes: an integration of relational benefits and relationship quality,
Journal of Service Research, Vol. 4 No. 3, pp. 230-47.
Herington, C. and Weaven, S. (2009), E-retailing by banks: e-service quality and its importance
to customer satisfaction, European Journal of Marketing, Vol. 43 Nos 9/10, pp. 1220-31.
Hu, H.-H., Kandampully, J. and Juwaheer, T.D. (2009), Relationships and impacts of service
quality, perceived value, customer satisfaction, and image: an empirical study,
The Service Industries Journal, Vol. 29 No. 2, pp. 111-25.
Huang, E. and Liu, C.-C. (2010), A study on trust building and its derived value in C2C
e-commerce, Journal of Global Business Management, Vol. 6 No. 1, pp. 186-95.
Jamal, A. and Anastasiadou, K. (2009), Investigating the effects of service quality dimensions
and expertise on loyalty, European Journal of Marketing, Vol. 43 Nos 3/4, pp. 398-420.
Kim, K.-J., Jeong, I.-J., Park, J.-C., Park, Y.-J., Kim, C.-G. and Kim, T.-H. (2007), The impact of
network service performance on customer satisfaction and loyalty: high-speed internet
service case in Korea, Expert Systems with Applications, Vol. 32 No. 3, pp. 822-31.
Magi, A.W. (2003), Share of wallet in retailing: the effects of customer satisfaction, loyalty cards
and shopper characteristics, Journal of Retailing, Vol. 79 No. 2, pp. 97-106.
Meyer-Waarden, L. (2007), The effects of loyalty programs on customer lifetime duration and
share of wallet, Journal of Retailing, Vol. 83 No. 2, pp. 223-36.
Mohamad, M. and Awang, Z. (2009), Building corporate image and securing student loyalty in
the Malaysian higher learning industry, Journal of International Management Studies,
Vol. 4 No. 1, pp. 30-40.
Moliner, M.A., Sanchez, J., Rodriguez, R.M. and Callarisa, L. (2007), Perceived relationship
quality and post-purchase perceived value: an integrative framework, European Journal
of Marketing, Vol. 41 Nos 11/12, pp. 1392-422.
Morgan, R.M. and Hunt, S.D. (1994), The commitment-trust theory of relationship marketing,
Journal of Marketing, Vol. 58 No. 3, pp. 20-38.

Customer loyalty
programs

205

CMS
5,2

206

Nicholson, C.Y., Compeau, L.F. and Sethi, R. (2001), The role of interpersonal liking in building
trust in long-term channel relationship, Journal of the Academy of Marketing Science,
Vol. 29 No. 1, pp. 3-15.
Oliver, R.L. (1999), Whence consumer loyalty?, Journal of Marketing, Vol. 63 No. 4, pp. 33-45.
OMalley, L. (1998), Can loyalty schemes really build loyalty?, Marketing Intelligence &
Planning, Vol. 16 No. 1, pp. 47-55.
Ou, W.-M. and Abratt, R. (2006), Diagnosing the relationship between corporate reputation and
retail patronage, Corporate Reputation Review, Vol. 9 No. 4, pp. 243-57.
Ou, W.-M., Abratt, R. and Dion, P. (2006), The influence of corporate reputation on store
patronage, Journal of Retailing and Consumer Services, Vol. 13 No. 3, pp. 221-30.
Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1985), A conceptual model of service quality
and its implications for future research, Journal of Marketing, Vol. 49 No. 4, pp. 41-50.
Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1988), SERVQUAL: a multiple-item scale for
measuring consumer perceptions of service quality, Journal of Retailing, Vol. 64 No. 1, pp. 12-40.
Shoemaker, S. and Lewis, R.C. (1999), Customer loyalty the future of hospitality marketing,
International Journal of Hospitality Management, Vol. 18 No. 4, pp. 345-70.
Singh, J. and Sirdeshmukh, D. (2000), Agency and trust mechanisms in consumer satisfaction
and loyalty judgments, Journal of the Academy of Marketing Science, Vol. 28 No. 1,
pp. 150-67.
Sirdeshmukh, D., Singh, J. and Sabol, B. (2002), Consumer trust, value, and loyalty in relational
exchanges, Journal of Marketing, Vol. 66 No. 1, pp. 15-37.
Stank, T.P., Goldsby, T.J. and Vickery, S.K. (1999), Effect of service supplier performance on
satisfaction and loyalty of store managers in the fast food industry, Journal of Operations
Management, Vol. 17 No. 4, pp. 429-47.
Stank, T.P., Goldsby, T.J., Vickery, S.K. and Savitskie, K. (2003), Logistics service performance:
estimating its influence on market share, Journal of Business Logistics, Vol. 24 No. 1,
pp. 27-55.
Wu, W.-Y., Shih, H.-A. and Chan, H.-C. (2008), A study of customer relationship management
activities and marketing tactics for hypermarkets on membership behavior, The Business
Review, Vol. 10 No. 1, pp. 89-95.
Yi, Y. and Jeon, H. (2003), Effects of loyalty programs on value perception, program loyalty, and
brand loyalty, Journal of the Academy of Marketing Science, Vol. 31 No. 3, pp. 229-40.
Yu, Y.-T. and Dean, A. (2001), The contribution of emotional satisfaction to consumer loyalty,
International Journal of Service Industry Management, Vol. 12 No. 3, pp. 234-50.
Zeithaml, V.A. (2000), Service quality, profitability and the economic worth of customers:
what we know and what we need to learn, Journal of the Academy of Marketing Science,
Vol. 28 No. 1, pp. 67-85.
Corresponding author
Wei-Ming Ou can be contacted at: weimingou@ntu.edu.tw

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints