The role of the loyalty programs

Abstract

Most companies have developed loyalty programs to build customer loyalty in the belief that the enhanced loyalty will result in an increase in sales. The research question raised here is in whether the loyalty programs performed in the online market are of effective in customer loyalty and sales. Little evidence comes from the previous literature because very few empirical works have been done in terms of loyalty programs in e-commerce. The purpose of this paper is to study the role of the loyalty programs used by online shopping malls. More specifically, this study aims to discuss the role of loyalty programs on customer retention and acquisition in online shopping studied customer behaviors in online shopping malls mainly focused on the effectiveness of price competition in e-commerce. In online shopping malls, customers are easy to compare prices of products or services and move to other competing shopping malls. Therefore, many previous studies raised the questions, are online shoppers in online shopping malls mercenaries or loyal customers? This study starts point the assumption that the customers in online markets are mercenaries. Then this study tries to answer what loyalty programs are being used by the leading online shopping malls in Korea. However, one problem ahead of this research is that the history of loyalty programs is not long enough to explain online shoppers`` behaviors. Thus, this study makes use of interview methodology to find the role of loyalty programs in online shopping malls. The main finding from the research is that online shopping malls have different views on the definition of loyalty programs and use different programs. Online shopping malls especially are skeptical on point programs. Second, online shopping malls recently focus on adopting customer segmentation strategy. They started to analyze the purchase pattern of customers and began to set up different loyalty programs for different customers. In the online market, new str...