Make a customer, not a sale : A study on customer's perception of loyalty programs

Abstract: The Swedish food retail industry is one with fierce competition, small product differentiation and increasingly disloyal customers. Consequently in order to create and retain loyal customers many of the stores offer some kind of loyalty schemes. The effectiveness of loyalty programs have been questioned, but it is proposed that in order for a loyalty program to be successful it must offer benefits that are perceived as valuable by customers. Thus the purpose of this qualitative study is to investigate how customers value loyalty programs and how this might affect them in a context where many companies reward their loyal customers. Customer perception of loyalty programs are considered to be grounded in multiple factors such as the design of the loyalty program as well as the competition in the industry. The empirical data was collected through semi-structured interviews with twelve respondents that shopped in a suburban area of Stockholm. The process of the study was influenced by the Grounded theory of method and as coding was used as the method of analysis, three themes related to how customers perceive reward components of loyalty program emerged: Offset of what I give and what I gain, Plan to have control of one’s finances and My perception of value is grounded in me.The findings of the study propose that a customer’s perception of reward components are influenced by what they are offered and by the overall design of the loyalty program. The most significant factor is however the customer self and where she is in life. This is displayed as different customers stated to have different reasons to join a loyalty program, mentioned different reward components as the most valuable one, highlighted different disadvantages as well as perceived the same reward components very differently.