Relevant Literature

Consumer reward and loyalty schemes are marketing programs whose main aim is to enhance customer satisfaction thereby making the customer chose the products of the business. The two works hand in hand whereby rewarding a customer is intended to buy the loyalty of the customer. Today, due to new trends and forces in the world of business such globalization as well as the invention of new technology, competition in business has taken a new twist. Businesses in an attempt to remain relevant in the market have had to adapt new marketing programs such as reward and loyalty schemes in order for them to cope with the new marketing demands. For instance, unlike in the past centuries where the owner of goods and services could meet the consumer face to face and convince them to choose and buy their products, today, technology has made it possible for several businesses to access a common market across the world at the same time via the internet (Meyer-Waarden, 2008, pp.87-114). This gives the consumer a variety of goods and services to choose from on almost equal chances.

To ensure that once products are chosen instead of the others, business owners have been forced to use rewards and loyalty schemes. Similarly, globalization has expanded the scope of the competition for customers in the business arena. Today, due to globalization, the number of goods and services one’s products have to compete with in the market have expanded. Unlike in the past where only goods and services from larger business corporations with the financial muscle to buy their space in the market could be recognized, today globalization as well as inventions in the field of technology has made it very easy for products from smaller businesses to make their way into the market and compete favourably with those from large corporations (Lewis & Soureli, 2006, pp.15-31).

This phenomenon has expanded the scope of competition for customers in the market making it increasingly necessary for businesses to adapt to new schemes intended at buying the satisfaction of their customers and making them remain loyal to the specific products of the specific business in the murky marketing arena. For these reasons, loyalty and reward schemes have been developed and used by various businesses as a way to making their customers remain faithful to their products as well as make the old, loyal customers convince their friends to make purchases from such businesses in the market (Smith & Sparks, 2009, pp. 204-218). This is a research project proposal whose aim is to investigate whether consumer loyalty and reward schemes actually works in the business arena. The proposal intends to analyse the relationship between customer loyalty and customer satisfaction, customer loyalty programs, customer rewards schemes in today’s world of business, forces behind customer loyalty and customer reward schemes as well as the various ways of ensuring that reward and loyalty schemes drive the behaviour of the customers.

Due to the drastic and increasing changes in business competition, customer loyalty, customer satisfaction, customer reward schemes as well as business profitability have become areas of great interest in the business world. As a result, these areas have attracted wide spread researches in an attempt to coming up with ways to make businesses thrive in the tricky business competition. In the process, various literatures have been written in these areas. The literature on the relationship among customer satisfaction, customer loyalty, customer reward schemes as well as business profitability is split into two literature groups; the service management literature and the marketing domain.

Research questions

To begin with, literatures written in the area of service management maintains that the customer satisfaction causes a great influence to the level of loyalty of the customer to the products of the particular business (Bridson, et al. 2008, pp.364-374). This phenomenon ends up impacting the level of profitability of the business. For instance Anderson and Fornell (1994) maintain that the level of customer satisfaction and customer loyalty are directly linked and affect the level of profitability of the business. Nelson et al. (1992) in support of the postulations of Anderson and Fornel (1994) offers a demonstration of the how the relationship between customer satisfaction and customer loyalty impacts the profits made by the business. His research was based on hospitals and how the relationship between customer satisfaction and customer loyalty affects the profits made by various hospitals.

In an attempt to demonstrate and support the earlier researches and postulations, Roth and van der Velde (1990, 1991) conducted researches on the banks to establish the relationship between customer satisfaction and customer loyalty and how these relationships affect the amount of profits made by the banking sector (Berman, 2006, pp.123-148). At the end of their researches the two researchers came to a conclusion that customer satisfaction is directly linked to the level of perception the customer has about the value they received during the business transaction at the bank and affects the relationship built by the customer with the bank hence directly determines whether the same customer will come back to the same bank or will chose another bank to do their business transactions next time hence the relationship between customer satisfaction and customer loyalty affects the profits made by the bank at the end of the day.

1. What is the relationship between customer loyalty and customer satisfaction?
2. Do consumer loyalty schemes and reward schemes actually work?
3. What are some of the loyalty and reward schemes used by business to enhance customer satisfaction?
4. What are some of the forces that drive customer reward and loyalty schemes in today’s business world?

1. To establish whether consumer loyalty and reward schemes actually work?
2. To establish some of the reward and loyalty schemes used by businesses to enhance the level of customer satisfaction.
3. To establish the forces that drive customer reward and loyalty schemes in today’s business world.

The aim of this research is to establish whether consumer loyalty and reward schemes actually work.

Consumer loyalty are reward programs that are given to the customers who are able to maintain their loyalty to the business by frequently coming back to make purchases from the specific business. The loyalty program may entail rewarding the loyal customer with discounts, free goods and services, coupons and sometimes giving the customer advance released products (Smith & Sparks, 2009, pp.542-547). The aim of giving all these things to the customer is not only to make them always come back but also to make them convince their friends and relatives to come along and make purchases in the same business. Some of the most common loyalty schemes used by business in the modern business world include; use of a simple point system where frequent customers are given cards that are able to accumulate points after every buy. The points are later translated into rewards for the customer. This system is used commonly in supermarkets. Another example of customer loyalty scheme that is fast gaining momentum in the world of business today is the scenario where businesses partner with other businesses to enable them provide all-inclusive off (Vesel & Zabkar, 2009, pp.396-406). For instance, most supermarkets today have partnered with banks to offer banking services where customers can withdraw money from their accounts at the supermarket and make purchase.

Research objectives

Similarly the customers are allowed to use credit cards to make purchases which means they do not have to unnecessarily walk around with cash. Some of the most commonly used reward systems include offering after sale services, discounts, coupons among other rewards (Demoulin & Zidda, 2009, pp.391-405). Through rewards schemes, businesses hope to maintain the customer loyalty and hence achieve customer satisfaction.

Why emphasize on consumer loyalty and reward schemes

• A good number of customers always look out to establish an involving relationship with their brands of choice.
• Some of the customers are always loyal to specific brands and are only interested in buying such brands in the market.
• In any business, the hard core, loyal buyers always constitute a big chunk of buyers, do not disappoint and make frequent buys hence contribute heavily to the profits of the business.
• Reinforcing the loyalty of the loyal customers encourages them to be more loyal to the business hence boosts the profits of the business.
• Due to the technological innovations, today, it is possible through database technology for marketers to establish personalized dialogues with their customers with a view to improving the loyalty of such customers (Huang & Chen, 2010, pp.128-135).

1. Consumer loyalty and reward schemes affect customer satisfaction.
2. The relationship between consumer loyalty, reward schemes and customer satisfaction impact on the profits made by the business.
3. Consumer loyalty and reward schemes in deed works in the ideal business setting.

The research project will study various businesses to establish whether consumer loyalty and reward schemes affect customer satisfaction and the profitability of the business. Using various research techniques, the research will seek to answer the question, does consumer loyalty and reward schemes actually work?

The research project will use a descriptive research design to collect data. A case study will be conducted on various businesses whereby the chosen respondents will fill in a questionnaire. The questionnaire will be designed and distributed randomly among the target respondents. The respondents for the purpose of this research project will be manufacturers of various commodities, retailers as well as the consumers of the commodities. To ensure that realistic results are realised at the end of the research, the collation of data will be distributed over a large sample population.

The research will use various techniques for data collection to collect both primary and secondary data. Using questionnaires administered to a heterogeneous sample population, the research project will collect data from the selected respondents which will be geared towards answering the research questions. The research will also use the already available sources such as books, journals and the researches conducted in the past to find information that will help answer the research questions.

Activity/stage	No. of respondents	Time take
Questionnaire (consumers)	10	3 weeks
Questionnaire (manufacturer)	10	1 week
Questionnaire (Retailers)	10	1 week

The survey questionnaire will be administered to respondents comprising of a sample population chosen from consumers, the manufacturers as well as the retailers. The questionnaire is made up of multiple choices where the respondent will be expected to select from among the provided choices. In the first part, the responded will be expected to provide information concerning their demographic factors (Chen & Pearcy, 2010, pp.674-685). In the second part of the questionnaire, the respondent will be expected to provide information concerning consumer loyalty and the reward schemes used. The responded will choose from among the five scale level which is already pre-defined in the questionnaire. The five include; “Agree,” “Disagree,” “Strongly Agree,” “Strongly Disagree,” and “No Comment.”

The expected findings at the end of this research include an outcome that uses a regular study to analyse and measure the impact that consumer reward and loyalty schemes have on customer satisfaction as well as the impact of the relationship between loyalty and schemes and customer satisfaction on the level of profitability of the business. The outcomes of this research will aide in the development of hypothesis which will be based on the theories of loyalty and reward schemes that exist such as the Leaky Bucket theory as well as the existing publications on loyalty and rewards schemes (Gomez, et al.2012, pp.492-500). 

The information obtained from the respondents will only be used for the purpose of the research and not for any other purpose. The researcher will respect the opinions of the respondents in compliance with the set down rules that guide the ethical conduct of a research.

Berman, B., 2006. Developing an effective customer loyalty program. California management review, 49(1), pp.123-148.

Bridson, K., Evans, J. and Hickman, M., 2008. Assessing the relationship between loyalty program attributes, store satisfaction and store loyalty. Journal of Retailing and consumer Services, 15(5), pp.364-374.

Chen, Y. and Pearcy, J., 2010. Dynamic pricing: when to entice brand switching and when to reward consumer loyalty. The RAND Journal of Economics, 41(4), pp.674-685.

Demoulin, N.T. and Zidda, P., 2009. Drivers of customers’ adoption and adoption timing of a new loyalty card in the grocery retail market. Journal of Retailing, 85(3), pp.391-405.

Demoulin, N.T. and Zidda, P., 2008. On the impact of loyalty cards on store loyalty: Does the customers’ satisfaction with the reward scheme matter?. Journal of Retailing and Consumer Services, 15(5), pp.386-398.

Gómez, B.G., Arranz, A.M.G. and Cillán, J.G., 2012. Drivers of customer likelihood to join grocery retail loyalty programs. An analysis of reward programs and loyalty cards. Journal of Retailing and Consumer Services, 19(5), pp.492-500.

Huang, C.T. and Chen, P.T., 2010. Do reward programs truly build loyalty for lodging industry?. International Journal of Hospitality Management, 29(1), pp.128-135.

Lewis, B.R. and Soureli, M., 2006. The antecedents of consumer loyalty in retail banking. Journal of consumer Behaviour, 5(1), pp.15-31.

Meyer-Waarden, L., 2008. The influence of loyalty programme membership on customer purchase behaviour. European Journal of marketing, 42(1/2), pp.87-114.

Smith, A. and Sparks, L., 2009. “It’s nice to get a wee treat if you’ve had a bad week”: Consumer motivations in retail loyalty scheme points redemption. Journal of Business Research, 62(5), pp.542-547.

Smith, A. and Sparks, L., 2009. Reward redemption behaviour in retail loyalty schemes. British Journal of Management, 20(2), pp.204-218.

Vesel, P. and Zabkar, V., 2009. Managing customer loyalty through the mediating role of satisfaction in the DIY retail loyalty program. Journal of Retailing and consumer Services, 16(5), pp.396-406.