Literature Review on Consumer Loyalty Programs

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Published: 20th Apr 2021

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TABLE OF CONTENTS

INTRODUCTION: NATURE OF REPORT………………………………..1

1.0 CUSTOMER LOYALTY……………………………………….1

1.1 Loyalty: Definition and Measures…………………………………1

1.2 Drivers and Motives of Loyal Customers……………………………..3

1.3 Loyalty Strategies……………………………………….5

2.0 LOYALTY PROGRAMS……………………………………….7

2.1 Background Information: Existing Loyalty Programs………………………..7

2.2 Company Loyalty versus Program Loyalty …………………………….9

2.3 Loyalty Program Strategies…………………………………..10

2.4 Loyalty Program Effectiveness………………………………….12

2.5 Criticisms and Implications…………………………………..14

3.0 CONVENIENCE INDUSTRY APPLICATION……………………………..15

3.1 Loyalty Program Strategies……………………………………15

3.2 Suggestions from Findings……………………………………18

3.3 Convenience Loyalty Program Initiatives: Competitive Overview…………………..19

4.0 RECOMMENDATIONS & CONCLUSIONS: KWIK TRIP, INC………………………21

APPENDIX……………………………………………..27

REFERENCES CITED…………………………………………30

BIBLIOGRAPHY……………………………………………33

REFLECTION REPORT………………………………………..37

INTRODUCTION: NATURE OF REPORT

Loyalty is a marketing concept centered on the idea of acquiring and retaining valuable customers to generate increased profits. Customer loyalty stratagems have grown from an afterthought to leading initiatives among marketers across industries. Major drivers of loyalty include accumulated satisfaction and customer commitment. Strengthening and accrual of these inputs aids customer transition through each of the four loyalty stages. This report analyzes each loyalty stage with respect to relevant loyalty drivers, strategies, and types of benefits offered. Ultimately, the highest levels of loyalty are obtained through cumulative advantage and strategy integration with corporate cultures. The report emphasizes the importance of diversifying benefits, segmenting customer portfolios, and managing data collections. The findings are applied within the convenience store industry, which operates in a low-involvement purchase environment. Furthermore, the findings are applied to Kwik Trip, Inc.’s current and future customer loyalty strategies. Conclusions are elaborated upon and recommendations are provided to construct enduring customer loyalty.

1.0 CUSTOMER LOYALTY

1.1 Loyalty: Definition and Measures

Existing research does not provide a universally excepted definition of customer loyalty. Most researchers, however, agree that customer loyalty exists when customers hold favorable opinions about a brand that generate positive and measurable results, such as repeat purchase behavior over an extended period (Duffy 2003). Richard Oliver, Professor of Management at Vanderbilt University (1999), validates a model for understanding customer loyalty in four stages: cognitive loyalty, affective loyalty, conative loyalty, and action loyalty. Understanding these stages allows marketers to measure customer loyalty as a dynamic and developmental process, in which loyalty strengthens as a customer enters each consecutive stage (Gomez et. al 2006).

Cognitive loyalty represents the first stage in this process, where customers recognize the advantage that a brand holds over its competitors. This stage is associated with “informative” attitudes that relate primarily to product performance. The next stage of customer loyalty, affective loyalty, represents an accumulation of positive associations with a brand that generate a liking or satisfactory attitude toward that brand. Affective loyalty relates to the customer’s degree of liking (affect) towards a brand, but remains subject to brand switching (Gomez et. al 2006). Conative loyalty conveys customers’ behavioral intentions, such as repeat and habitual purchases. However, customers may not consciously realize their loyalty in this stage, as it is dependent upon habit and unrealized actions. The fourth stage of customer loyalty, action loyalty, represents the strongest and most desirable form of loyalty among marketers. In this stage, customers are willing to bear obstacles to purchase from a specific firm or brand. Action loyalty refers to the transition of intentions into actions – customers in this stage exert active efforts to continue their relationship with a specific brand. The difference between conative loyalty and action loyalty lies in the physical action of rebuying, versus simply wanting to rebuy (Oliver 1999). Table 1 is provided in the Appendix to visualize the differences in these stages and vulnerabilities within each.

Firms receive benefits as their customers transition through the four loyalty stages. These benefits can be measured in the following forms: cost savings, referrals, complaint input, channel migration, unaided awareness, brand asset awareness, and impulse behaviors. Dennis L. Duffy (2003) rationalizes each benefit in his study titled Internal and External Factors Which Affect Customer Loyalty. Loyal customers allow for efficient use of resources, thus reducing overall costs. These cost savings derive in forms of customer acquisition and retention. For instance, loyal customers are likely to urge peers to become purchasers of a specific brand – these referred customer acquisitions are twice as valuable long-term than non-referred acquisitions (Kumar 2017). Loyal customers are also more likely to state any complaints to the firm personally, which allows the opportunity for negative-situation reversals. Another benefit, channel migration, refers to the likelihood of loyal customers to purchase through alternative channels, for instance, brick and mortar versus online outlets. The acceptance of multiple-channel purchase behavior results in increased total consumption, and thus, increased profits for the firm. Awareness is also a significant benefit of an established loyal customer, both in the form of unaided awareness and brand asset awareness. Loyal customers naturally obtain top-of-mind awareness for the brand as well as a greater awareness of the firm’s full offerings. Duffy illustrates several examples of these “hidden assets or offerings” by explaining how loyal customers may be more familiar with free delivery services or specific customer service assets that an ordinary customer would not utilize. This asset utilization results in enhanced value perceptions among loyal customers (Duffy 2003).

1.2 Drivers and Motives of Loyal Customers

Evidently, the transition of customers through the four loyalty stages results in measurable benefits for firms. Transitions occur as drivers and motives of loyalty strengthen. Existing research distinctly revolves upon two drivers: customer satisfaction and customer commitment. Oliver’s research identifies customer satisfaction as an essential input that requires nurturing and succession to develop into loyalty. For instance, personal determination and social support are both necessary to transform satisfaction into loyal behavior. Likewise, for satisfaction to become loyalty, “frequent or cumulative satisfaction is required so that individual satisfaction episodes become aggregated or blended” (Oliver 1999).

This idea is reinstated in a more recent study by Procter & Gamble Chairman A.G. Lafley and Dean of the Rotman School of Management Roger L. Martin. Lafley and Martin suggest that offering easy, familiar, and consistent offerings (as opposed to constantly updated, perfect offerings) is the most effective way to accumulate satisfactory customer experiences. The researchers use the term cumulative advantage to define this idea. An issue with conventional ideas of purchase behavior is the assumption that customers make logical purchase decisions and, thus, successful business strategies are those that respond to that logic. However, a large portion of purchases result from irrational behaviors resulting from the speed of processing fluency – theoutcome of repetitive experience, or the speed at which thoughts, opinions, and preferences come to mind and determine intuitive judgements. Each time a customer chooses a product or brand, it gains competitive advantage over other products and brands. Familiarity and identifiable stimuli relating to repeat purchases are more easily accepted in consumer minds than unfamiliar stimuli relating to new products or brands (Lafley et. al 2017). The accumulation of satisfactory, familiar, and consistent experiences with a brand lead to customer commitment – another essential driver of customer loyalty.

Dr. Gordon Fullerton (2003) delineates commitment as a driving characteristic of loyal customers. Commitment, however, is a complex and multidimensional concept consisting of both affective and continuous components. Affective commitment is built upon rapport, trust, and personal connections between an individual and a brand. On the contrary, continuous commitment is built upon the notion of customers feeling bound or constrained to a specific brand. As noted by Fullerton, feelings associated with attraction are far more likely to generate positive loyal behaviors than feelings of dependence or entrapment. Therefore, affective commitment is more effective in gaining loyal customer behaviors than continuous commitment.

Defining the drivers and motives of loyal customers, such as degree of satisfaction and commitment, begins by understanding the nature of the brand-customer relationship. To understand this relationship, marketers must question why customers initially choose a brand, stay with the brand, defect from the brand, or fail to provide a brand one-hundred percent of their business (Duffy 2003). Degree of involvement plays a large role in determining initial reasons behind purchases. Did the purchase involve in-depth information search and investments, or was the decision process based more on habit and convenience? The answers to these questions allow marketers to understand how to induce change and amplify repeat purchase behaviors. Likewise, it is important for marketers to analyze reasoning behind disloyalty, such as poor experiences or consumer skepticism. Awareness and understanding of brand issues allows marketers to adjust communications accordingly.

1.3 Loyalty Strategies

Loyalty strategies focalize around two objectives: seeking increased revenues and/or building enhanced customer bonds (Uncles et. al 2003). Successful strategies thrive in both. To increase revenues while also building customer bonds, marketers should analyze which customer segments will be most profitable in both dimensions. Ultimately, the process of building customer loyalty involves creating value for customers while also benefiting from customer value (i.e. customer lifetime value). Firms create value for their customers when perceived benefits outweigh perceived costs. Although a firm’s offering may include many desirable attributes, these attributes are only valuable if the customer believes he/she will receive benefits from it (Kumar et. al 2016).

Substantial studies and academic reports have been conducted in determining strategies that generate value. In summary, the accumulation of value constructs customer loyalty (Bolton et. al 2000; Evanschitzky et al. 2012; Lafley et. al 2017). Oliver provides five specific criteria for accumulating value and building loyalty in his Journal of Marketing publication. Successful loyalty strategies include (1) product superiority, (2) a sizeable customer segment that acknowledges the desired product, (3) products or brands that are susceptible to feelings of adoration or devotion, (4) products that can be embedded within a specific social network or consumer “family”, and (5) a corporate culture that encourages loyalty and invests in brand-community development (Oliver 1999).

A.G. Lafley and Roger L. Martin’s philosophies confirm Oliver’s model. Lafley and Martin (2017) suggest that loyalty strategies should begin by offering a product or service that obtains initial competitive advantage and which subsequent cumulative advantage can be built upon. As explained on Page 4, this model focuses on the importance of familiarity and consistency in gaining a loyal customer base. Cumulative advantage strategies include (1) first-movers advantage in an industry, (2) designing offerings for habitual consumption, (3) innovating and expanding inside the brand to leverage existing brand-name awareness, and (4) simple and honest marketing communications. Products and services should be differentiated to achieve initial advantage, and promotional messages should position the differentiated products consistently within the marketplace. These strategic initiatives direct firms towards cumulative advantage with a byproduct of a loyal customer base (Lafley et. al 2017).

2.0 LOYALTY PROGRAMS

2.1 Background Information: Existing Loyalty Programs

Contextual History

Recent years have seen a rise in loyalty and referral programs as a means of generating and encouraging customer loyalty. In fact, the average United States household is active in twenty-nine different loyalty programs (Kowalewski et. al 2017). This marketing trend began in the early 1980s with the emergence of frequent flier programs – since then, an array of platforms has been built with the same central goal: to gain and sustain repeat customers and increase long-term sales. This goal is built upon the logic that customer retention is less costly than customer acquisition. Additionally, the 80/20 rule, well-known among educated marketers, played a role in the emergence of loyalty-based strategies (Duffy 2005). Loyalty programs target profitable customer segments by providing further satisfaction and value to specific customers; thus, the program becomes integrated with the firm’s value chain and product differentiation strategies (Yi, Jeon 2003).

Existing studies reveal three driving forces behind the increase in loyalty programs. The first force (and most commonly researched) considers programs as tools for maintaining loyal customers and brand share. Here, marketers must focus on cost-effective ways of maintaining value perceptions and total brand equity, not just loyalty-program equity. The second momentum behind loyalty programs is the power to improve brand accessibility and market prominence. The intent for marketers here lies in increasing top-of-mind awareness among its intended audience. Lastly, the loyalty program trend has sky-rocketed as pressures from competition have increased. Marketers experience pressure to adapt to social trends and follow competitors who have already joined this strategic route (Uncles et. al 2003).

Current Flaws

The momentous development of loyalty programs in the last decade has understandably resulted in numerous marketing flaws. A primary issue in the development of existing loyalty programs is the detachment from the corporate culture. Top managers must be integrated with the loyalty platform efforts, not just the marketing team. Rewarding valuable customers with special treatments is provided through a firm’s core products and services – thus, various departments must be involved and the corporate culture must support loyalty in all areas (Duffy 2005). Another issue with existing loyalty program launches is the failure to adjust programs for differing relationships between the brand and its customers. Too often, marketers implement reward structures identical to frequent flier programs; however, there are few occasions in which the economic value is as substantial as it is in the airline industry. Marketers must ensure that the program is aligned with the brand and acts as a logical brand extension aid with motivational value to the customer. If the program is not successful in this sense, it will not be beneficial to the long-term success of the firm and should be modified or discontinued. Marketers, however, are reluctant to discontinue existing programs that offer little value. Termination of loyalty programs is often considered a failure, when in actuality, investments should be discontinued if return is nonexistent (Uncles et. al 2003; Duffy 2005). Additional flaws with existing loyalty program strategies include treating rewards as short-term “giveaways” as opposed to long-term customer value generators (Yi et. al 2003). Loyalty programs should increase customer lifetime value and sales revenue while leveraging the firm’s core assets for valuable reward offerings. Long-term vision, as opposed to short-term promotions, should the core objective of the loyalty program to maximize lifetime value.

2.2 Company Loyalty versus Program Loyalty

Loyalty program initiatives are intended to benefit firms long-term; to succeed, the specific objective of a program must be carefully determined. Outcomes of loyalty generation can be separated into two types: Company Loyalty and Program Loyalty. Company Loyalty refers to the ability to attract customers to a specific brand, whereas Program Loyalty stimulates additional expenditures once customers are inside the store, due to the program’s offerings. The differences in these outcomes lies in the degree of involvement between the customers and their purchases (Yi et. al 2003). High-involvement purchases and emotional drivers encourage Company Loyalty, whereas low-involvement purchases and economic drivers more often encourage Program Loyalty. Additional drivers of Company Loyalty include company commitment, company trust, and company satisfaction – all parallel to the drivers of general customer loyalty explained in the previous section of this report. Further drivers of Program Loyalty include social benefits, special treatments offered by the program, and overall perceived value of the program (Evanschitzky et. al 2012). A visualization of the drivers of each type of loyalty is presented in Table 2 of the Appendix.

Existing studies conclude that Program Loyalty is apt to generate repeat purchase behavior, while Company Loyalty is more likely to generate increased share of visits and share of wallet. In other words, Program Loyalty influences customers to purchase more and increase sales. Company Loyalty influences customers to prefer a company over its competitors, but is not a strong predictor of purchase behavior (Evanshitzky et. al 2012). Company Loyalty is more apt to sustainability, however, as Program Loyalty can be easily duplicated by competitors since the customer is loyal to the rewards and economic value, as opposed to the specific brand (Yi et. al 2003).

2.3 Loyalty Program Strategies

The implementation approach for the loyalty program will influence the outcome and effectiveness on gaining Company and/or Program Loyalty. Marketers must first analyze the current state of the firm to decide if loyalty strategies are worth pursuing. Duffy (2003) provides the following three questions for analyzing whether a company is prepared for a loyalty program launch: “Does the brand encourage loyalty? Does the company’s culture support customer collaboration? Does the organization integrate information for a single customer view?” These questions infer that investing in loyalty program technologies is not the difficult part of the launch; rather, it is the collaboration of departments and employee cooperation in promoting loyalty that requires extensive effort. Once a loyalty-based corporate culture is established internally, the culture will promote itself and the brand will encourage customer loyalty.

Successful loyalty program strategies result in increased customer lifetime value and customer equity. Strategies should be highly incorporated with marketing research and data analysis to ensure marketers are identifying customers with the highest potential value (Kumar et. al 2016). Marketers must then utilize data collection and analysis to target those valuable audiences. Promotional messages should be kept simple, aligned with brand personality, and remain responsive to negative feedback (Lafley et al. 2017; Uncles 2003). Furthermore, successful loyalty programs offer experiential components that enable emotional interactions. However, programs should remain easy to use to maximize membership numbers. Lengthy or time-intensive registration processes drive potential loyalty members away. However, it is important to note that the registration process should include some form of opting-in to ensure that the customer is consciously aware of their registration. Automatically enrolling customers in loyalty programs could result in unchanged purchase behaviors since the customer will likely be unaware of the program and its value (Cheris et. al 2017).

Loyalty strategies have two primary concerns: (1) type of reward and (2) timing of reward. Types of rewards include both direct or indirect, while timing of reward includes immediate or delayed. Direct rewards contribute to the value proposition of a specific product, whereas indirect rewards result from incentives that are not directly related to a specific product. Immediate rewards are those that are provided with every transaction, whereas delayed rewards are those provided every nth transaction or visit (Yi et al. 2003; Rosenbaum et. al 2005).

These dimensions of the loyalty strategy should be considered alongside the involvement of the company-customer relationship. For high-involvement situations, direct rewards are more effective than indirect rewards. Here, loyalty programs directly add value and heighten Company Loyalty. For low-involvement situations, immediate rewards are proven more effective than delayed rewards. In this case, loyalty programs add indirect value to the brand and the program only heightens Company Loyalty to the degree that the customer considers the program valuable. Thus, the level of involvement plays an important role in structuring the loyalty program due to the route of value perception. It is important to note, however, that Company Loyalty can be achieved through Program Loyalty, as long as customers consider the program valuable and motivational (Yi et. al 2003; Chapman 2017).

To transition customers from being Program-Loyal to Company-Loyal, marketers must apply segmentation strategies within the loyalty strategy. Understanding demographic factors, behavioral elements, and preference differences allows marketers to expose common motivators and capitalize on them. Segmentation methods should also consider customer frequency. High-frequency customers should be encouraged to try new products, while low-frequency customers should be encouraged to increase visits (Chapman 2017). Failure to target differing customer segments can erode profits “by sending offers to those who would have purchased the item anyway” (Otocki 2017). Additionally, irrelevant and invaluable offers may encourage customers to discontinue program membership, resulting in loss of future revenue for the firm.

2.4 Loyalty Program Effectiveness

Types of Benefits

Existing research frequently analyzes the success of loyalty programs based solely on the economic value provided to customers. However, loyalty program effectiveness can be categorized in three benefit-types: utilitarian, hedonic, and symbolic (Mimouni-Chaabane et. al 2009). Please refer to Table 3 in the Appendix for visual representation of the three benefit categories.

Utilitarian benefits refer to the economic value or monetary rewards that customers collect for loyal behavior. Financial savings and convenience, for example, serve as primary utilitarian motivators for initial loyalty program membership. Hedonic and symbolic benefits refer to non-monetary rewards. Loyalty programs are most successful when these benefits are provided to customers. Hedonic benefits include those that derive from emotion, experience, and entertainment. Symbolic benefits consist of self-esteem enhancements, personal expression, and social approval (Mimouni-Chaabane et. al 2009). Hence, these benefits affect customer confidences and allow for personal identification with a brand (Ning et al. 2010). Studies suggest that customers experience greater “brand love”, or personal attachment and loyalty, when the company provides hedonic and symbolic benefits, as opposed to strictly utilitarian benefits (Carroll et. al 2006). Thus, loyalty programs that offer experience, personal expression, and social benefits are most successful in customer loyalty generation.

Affective and Conative Loyalty Generation

Loyalty program effectiveness is also analyzed regarding different loyalty types, specifically Affective and Conative Loyalty. Empirical research conducted by Professors Gomez, Arranz, and Cillan (2006) suggests that loyalty program members experience greater Behavioral Loyalty to the company and are less apt to purchase from competitors compared to nonmembers. Behavioral/Conative Loyalty is related most directly to utilitarian benefits, as in repeat purchase behaviors are linked to cost savings and convenience benefits. Additionally, loyalty members experience greater Affective Loyalty, including positive attitudes, satisfaction, trust and commitment towards the company than non-loyalty members. Findings suggest that providing hedonic and symbolic benefits are most effective in creating Affective Loyalty (Yi et. al 2003; Gomez et al. 2006; Bolton 2000). Combining hedonic, symbolic, and utilitarian benefits, however, results in optimal loyalty program effectiveness and encourages Action Loyalty.

Effectiveness Based on Involvement

In addition to benefit-type and its relation to loyalty-type, purchase involvement must also be considered in analyzing the effectiveness of a loyalty program. As suggested on Page 11, loyalty programs are more effective for high-involvement situations because Company Loyalty can be reached through direct routes (Yi et. al 2003). Low-involvement purchase situations are often less susceptible to loyalty program effectiveness because the programs do not offer direct value routes. The firm may be unable to offer their customers a sense of status and community, and strategies in these circumstances are also easy for competition to duplicate (Rosenbaum et al. 2005). Program Loyalty may be a more relevant and attainable goal for loyalty program providers in low-involvement purchase situations, as Program Loyalty relates to economic value, convenience, and cost savings.

Overall, the success or failure of a loyalty program is dependent upon the following factors: timing of rewards, ease and convenience, monetary value, aspirational value, effort for redemption or reward achievement, range of reward choice, and organization of data collection (Rosenbaum et. al 2005; Yi et. al 2003). Results from existing findings show that if loyalty programs excel in a majority of these factors, the program will be effective in loyalty generation. Additionally, loyalty members have been proven to disregard negative assessments of the company via competition and gain greater perceptions of product/service quality and value (Bolton et. al 2000). Positive company connotations and quality perceptions resulting from loyalty programs proves the long-term benefits of the strategy.

2.5 Criticisms and Implications

Much of existing research defines loyalty programs as an effective tool for boosting customer loyalty; yet, critics offer opposing viewpoints and implications. Implications include views that customers will only buy what they need and desire, which results in unredeemed loyalty points and unchanged purchase behaviors (Bolton 2000; Uncles 3003). Program Loyalty also poses challenges for marketers. For low-involvement situations, a customer may build a relationship with the program rather than the company; thus, the company could become dependent upon the program even if it is indirectly aligned with the brand and can be easily duplicated by competition (Rosenbaum et al. 2005). Studies also suggest that loyalty programs are effective only in the sense that they attract existing loyal customers, rather than acquiring new loyal customers (Gomez 2006). Failure to acquire new loyal customers can negatively affect loyalty program break-even-points and return on investment. It is also important to note that most customers purchase from more than one brand in a certain product category. If customers have logical reasons for being multi-brand loyal, it is illogical to assume that a loyalty program will suddenly change their behavior to single-brand loyalty (Uncles 2003). These issues raise concern and should be further researched to fully understand the magnitude of the implications.

Another primary loyalty program concern includes the issue of privacy. According to a 2016 survey, two-thirds of consumers are uncomfortable with the amount of personal information collected through loyalty programs. Additionally, eighty-four percent of consumers are concerned with what businesses their personal information is being shared (Graham 2016). These concerns create a new market for the preservation of privacy, in which some consumers are willing to pay a monetary cost to avoid loss of privacy (Kumar et. al 2016). Loss of privacy serves as the cost of joining loyalty programs and may negatively affect customers’ perceptions of the value the program provides. Marketing intentions and communications should remain as transparent as possible to avoid such concerns and ethical issues.

3.0 CONVENIENCE INDUSTRY APPLICATION

3.1 Loyalty Program Strategies

The discussed customer loyalty and loyalty program findings can be purposely applied within the Convenience-Retail Industry. Specific types of loyalty programs are relevant to the industry including Coalition Programs, ACH (Automated Clearing House) Cards, Fuel-Branded Programs, and Grocery/Gas Offers. Marketing specialist Kimberly Otocki demonstrated each type of program in her 2017 webinar “Finding a Reward Program That’s Right for You.” Coalition programs offer ease and cost effectiveness for the firm; however, these programs include multiple brands and do not align directly to single-brand loyalty. ACH Card Programs are especially popular in the convenience industry because they entice fuel-only customers to enter the store by utilizing rollbacks at the pump. These programs reward the most valuable customers, but they are often tied to customers’ bank accounts and involve lengthy enrollment processes. Fuel-Branded Programs offer cents off the gallon for every visit, and the linked debit/credit card can be used at various locations to gain additional rewards points. These programs capture customer attention because fuel-purchases are often emotional in nature – hence, customers highly value cost-savings relating to fuel. In fact, a 2016 survey conducted by Convenience Store News concluded that fuel discounts are listed as the preferred loyalty program reward because it is desirable to earn rewards from every day purchases (“Consumers Rank Fuel” 2016). Grocery/Gas Offers allow customers to earn fuel discounts based on their grocery purchases, which means more in-store purchases leads to greater value for the customer (Otocki 2017).

In addition to type of loyalty program, the core program components should also be strategically determined for success in the convenience industry. Core components include items such as earned points, fuel discounts, clubs, member pricing, sweepstakes, and tiers. Vendor funding should be strategically allocated across each of the core components. For instance, vendor funds should be utilized in a manner that allows customers to earn points for purchasing vendor items, rather than redeeming earned points towards the purchase of vendor items. Additionally, vendor funds should be expended for any giveaways or prizes relating to sweepstake component (Otocki 2017).

Loyalty programs within the convenience industry typically incorporate a range of campaign strategies. The Association for Convenience and Fuel Retailing describes eight possibilities: Fuel-Only, Idle Customer, Frequent Customer, Top-Tier Customer, Cross Product, Text Message, E-Statement, and Social Network Campaigns (Brooks 2010). Please refer to Table 4 in the Appendix for complete descriptions and suggestions relating to each execution strategy. The differences among these campaign strategies lies in the targeted customer segment, intended outcomes, and mediums used.

Certain strategies should be considered when targeting precise customer segments, such as millennials. Research shows that millennials desire choice, authentic information, un-biased sources, personalization, and convenience (Sieger 2017; CSD Staff 2017). Therefore, this segment should be targeted with personalized Social Network and Text Campaigns, and circulating Word-of-Mouth messages should also be closely monitored.

Successful segmentation and implementations involve ensuring that the intended customers receive their first reward fast, to prove the value and benefits the program provides. This is especially important among millennials because of their desire for convenience and instant gratification. Additionally, programs should only reward valuable and profitable behaviors, especially “Silver Customer” segments. Silver Customers include those that are not yet loyal, but see the brand value and offer growth potential (Otocki 2017). This ensures that not all efforts are allocated towards “Gold Customers” who already exhibit loyal behaviors.

3.2 Suggestions from Findings

An array of conclusions can be drawn from existing findings relating to the application of loyalty programs within the convenience industry. Throughout the report, the concept of high-involvement versus low-involvement purchase situations has been delineated. Convenience retail stores typically exist in low-involvement situations. Thus, marketers must strategically position the loyalty program and consider the types of benefits it will provide customers. Researchers D. Bowman and D. Naravandas (2001) demonstrate the importance of interactional elements in loyalty generation. Their findings state that loyal customers frequently value customer service quality and experience more than they value tangible loyalty rewards. This suggests that “customer’s value perceptions of the loyalty program might also be related to the processes employed in administering the loyalty program” (Yi et. al 2003). In other words, for low-involvement situations, marketers may still be able to attain Company Loyalty by including hedonic benefits like quality service and experience.

Value can also be delivered to customers in low-involvement situations by offering symbolic benefits, such as a sense of community. Integration in brand communities offers four benefits to customers: (1) membership and entitlement to a specific group, (2) feelings of influence and empowerment within the group, (3) feelings of reward and fulfillment for group participation, and (4) shared emotional connection or integration with self-identity. As loyalty members experience enhanced sense of community, they also show stronger Company Loyalty to the program provider (Rosenbaum et. al 2005).

In addition to providing hedonic and symbolic benefits, marketers should remain heavily focused on the utilitarian benefits provided through convenience-industry loyalty programs, as economic value is a main driver in low-involvement situations. Utilitarian benefits include elements such as timing and type of rewards. Frequent, relevant rewards will entice convenience store customers to increase visits and purchases. It is also important to note that nearly one-third of convenience-store customers claim their “usual convenience store does not have a loyalty program, but they would enroll if it did” (Lisanti 2017). This suggests that loyalty programs are desired among convenience store customers, even if the purchase does not involve great levels of involvement. Studies also suggest excluding expiration dates on rewards (Graham 2016). Elimination of expiration dates appeals to customers’ desire for ease, simplicity, and enduring value (Cheris et. al 2017).

Loyalty consulting agency and customer science company Dunnhumby (2017) offers suggestions for loyalty building in the convenience store industry. According to their strategists, personalized, consistent messages and supplier collaboration are crucial elements to the success of the loyalty program. Supplier collaboration can ultimately decrease costs for the loyalty provider while also gaining greater attentiveness among certain customer segments. Likewise, Dunnhumby suggests placing the customer at the heart of every decision and treating each as individuals. Data analysis is an essential element for customer differentiation and allocation of personalized, relevant offers.

3.3 Convenience Loyalty Program Initiatives: Competitive Overview

Implementation of discussed loyalty programs and campaign strategies are demonstrated in numerous recent launches in the convenience industry – specifically, those implemented by Kum & Go, BP, Chevron, and Wawa. Kum & Go’s recent strategies have tested the barrier between loyalty program and gamification. This strategic approach often includes augmented reality apps that allow customers to enhance their shopping experience through gamification. Gamification strategies often require customers to “check in” or share their location via social networking platforms to generate viral interest. Although Kum & Go has not implemented an entire augmented reality app, the company utilizes gamification strategies by engaging customers through Snapchat. The company provides barcodes through the social networking platform, which send customers “on a mission” to a local Kum & Go to receive the coupon after screenshotting the code (Rigik 2016).

Meanwhile, BP has implemented loyalty program strategies that appeal to simplicity of use. In the past two years, the firm has made efforts in simplifying their program by offering a choice between three different cards – BP Visa with Driver Rewards, BP Credit Card with Driver Rewards, and BP Rewards Loyalty Card. The differences in these options lies mainly in the depth of involvement between credit, retail, and loyalty options (“BP Launches Simpler” 2015). New implementations also include the ability to link eligible Visa cards with BP loyalty accounts, which enables members to earn and redeem points without needing a separate loyalty card (Abcede 2016). Single-swipe transactions are expected to appeal to consumer desire for ease of use and convenience.

Chevron has also launched an ExtraMile Extra Rewards Program in hopes of gaining customer retention. This loyalty program focuses on a brand-specific mobile app, website, and email and text alerts systems. Customers earn points, or “Shields”, for each transaction; once five Shields are collected, a free item is redeemable. Redemption requires account registration through either Chevron’s mobile app or website. One registered, email and text alerts serve as reminders for Chevron customers to return to the store for additional purchases and relevant offers (“Chevron Launches ExtraMile” 2017).

Wawa has also faced loyalty innovation and success within the convenience industry. Recent loyalty promotions include its “Fall Free for All” campaign launches in fall of 2016, which served as a way for the company to reward customers for their membership and use of the mobile app. During the campaign period, Wawa gave away free items and surprises to its rewards members each week for nine weeks, breaking the record for their number of giveaways since the launch of the Wawa Rewards program. The campaign served as an effective way to increase engagement and generate excitement among their customers (“Wawa Wants Rewards” 2016).

4.0 RECOMMENDATIONS & CONCLUSIONS: KWIK TRIP, INC.

How will knowledge generated from this report benefit Kwik Trip, Inc.?

Findings and conclusions from the study can be purposefully applied for Kwik Trip, Inc.’s long-term benefit. The studies analyzed in the report offer numerous implications and strategic considerations that will allow Kwik Trip to acquire and retain loyal customers. Future strategies should ensure consistent, satisfactory experiences that will increase both affective commitment and action loyalty among customers. Likewise, cumulative advantage should be pursued by maintaining and building upon initial sources of competitive advantages, such as affordable, quality product offerings. Loyalty strategies should also remain integrated with the corporate culture, as it takes an entire corporation to encourage loyalty as opposed to only the marketing department. Company-wide efforts will increase the likelihood of gaining long-term Company Loyalty. However, depth of involvement must be considered in all strategic decisions. Kwik Trip exists in a low-involvement purchase industry, which implies that additional service-based efforts will be needed to generate symbolic or hedonic benefits.

The study also emphasizes the importance of data collection and the application of marketing research, which will benefit Kwik Trip’s customer relationships. Extensive customer analysis and data interpretation will allow for effective reward offerings, both in terms of type and timing. These rewards should be personalized and treat each customer as individuals with unique desires. Rewards should also remain consistent with marketing messages and campaign strategies, which should also be highly targeted to attract specific segments. Additionally, vendor funds should be allocated appropriately for optimal return on rewards.

Current Strategies

Currently, Kwik Trip offers rudimentary programs for loyalty generation including Milk Moovers Kid’s Club, Milk Punch Cards, and Karuba Gold Punch Cards. Milk Moovers provides value for both children and parent customer segments by rewarding the child with a cookie, donut, bagel, or fruit item each time their parent or guardian purchases Nature’s Touch milk. This program also sends children birthday/occasion coupons, which encourages both parents and children to revisit Kwik Trip/Kwik Star stores. The Milk Punch Cards and Karuba Gold Punch Cards also encourage loyal behaviors by rewarding customers with a free gallon of milk or Karuba Gold drink after completing all punches. These programs focus on utilitarian benefits and encourage Program Loyalty; however, they offer little to no symbolic or hedonic benefits that will heighten long-term Company Loyalty (personal communications 2017).

Future Strategies

Future loyalty strategies will include integration of current programs with an enhanced, new loyalty program in summer 2017: The Kwik Rewards Program. The Kwik Rewards Program will have four primary objectives: encourage brand loyalty, increase guest purchase amount and visit frequency, grow Kwik Card and Debit Card accounts, and develop data collection practices and analysis. The program will consist of three primary categories including Kwik Rewards Base Loyalty, Kwik Rewards Debit/Credit, and Kwik Rewards Fleet (Kwik Trip, Inc. 2017). The categories will allow customers to choose their level of involvement based on their consumption behavior. Table 5 in the Appendix outlines the differences in these Kwik Rewards categories.

Numerous utilitarian benefits are available through Base Loyalty. For instance, all loyalty members will receive a free item of choice every fifteen visits. Choice of rewards range from fountain drinks, coffee, bakery items, fruit, fuel, or sweepstakes entries. The program will also offer digital punch cards that will take the place of previously outlined punch cards. These will include Nature’s Touch milk, regular Karuba coffee, Kitchen Cravings pizza pies, and additional vendor supported items. These punch cards will be trackable through the Kwik Rewards mobile application. Additional utilitarian benefits will include fuel rewards and surprise or delight coupons. Fuel rewards will be earned based on in-store purchases. For instance, certain products will allow loyalty members to earn a certain number of cents off per gallon. Surprise or delight coupons will reward customers based on special occasions, such as birthdays and holidays. Additionally, these coupons will be based on past purchase habits to ensure relevancy and desirability. These rewards will automatically be loaded to a customer’s account and applied after qualifying purchases (Kwik Trip, Inc. 2017; personal communications 2017).

Kwik Rewards Debit/Credit and Kwik Rewards Fleet will offer supplementary utilitarian benefits in addition to the Base Loyalty benefits. Debit/Credit members, for example, will receive an additional five percent off in-store purchases and three cents per gallon. Fleet members will be categorized into three tiers: Welcome Level, Premium Level, and VIP Level. Descriptions of each tier are available in Table 6 of the Appendix. In general, points received for diesel purchases will be redeemable for most in-store merchandise (Kwik Trip, Inc. 2017).

The Kwik Rewards Program will also feature a launch of the Kwik Rewards Mobile App. The app will serve primarily as a means of account management and accumulated rewards reporting. The app will communicate to customers any redeemable rewards and status of visits and punch cards. A separate “offers tab” will allow customers to gain awareness about current in-store specials and daily communications. Lastly, the mobile app will include a location finder to allow convenient and simple methods for customers to find nearby stores (Kwik Trip, Inc. 2017).

Success of the loyalty program, including each of the three Loyalty Membership categories, benefits, tiers, and mobile app use, will be closely monitored using several metrics. Kwik Trip, Inc. will measure overall success by assessing the average order and visit increase. That is, are customers spending more and visiting Kwik Trip more often after becoming Kwik Rewards members? Additionally, SMS and Text Message subscriptions will be assessed in hopes of increased registrations. Kwik Card Credit/Debit conversions will also be analyzed with the goal of converting a large portion of Kwik Rewards Base Loyalty members to the Credit/Debit category. Purchase data will routinely be monitored, segmented, and utilized to better group segmentation for SMS or Email and coupon targeting. To balance costs, vendors will also be allowed to view certain customer data obtained through the program (Kwik Trip, Inc. 2017).

How can we apply this knowledge towards the Kwik Rewards Program?

According to Convenience Store News, seventy-five percent of convenience store customers purchase fuel at the pump and drive off without entering the physical store. The convenience industry, on average, experiences 1,000 customer visits per store per day – which means nearly 750 of these customers will not enter the store (Romano 2017). Firms have three general options for changing this behavior: (1) do nothing and hope something will entice customers to enter the store; (2) utilize pump and outdoor signage to draw attention to in-store offers; or (3) blasting offers such as “buy one, get one free”. However, these three strategies are arbitrary and do not offer full potential for gaining in-store sales. Signage may become expensive and inefficient due to promotional changes, and BOGO offers may entice customers to take advantage of free products instead of spending money on items they otherwise intended to purchase (Otoki 2 2017). A fourth option is made available through implementation of loyalty programs. Loyalty programs allow marketers to adjust strategic approaches and question whether the firm truly understands their customers’ characteristics and desires. Loyalty program data collection allows convenience retailers to segment fuel-only purchasers and in-store purchasers with differentiated offers. Knowledge from this report will allow Kwik Trip the tools and strategies for proper segmentation and creation of personalized experiences.

As Kwik Trip, Inc. analyzes customer trends, company-customer connectivity will heighten. Connectivity and relationship building allows potential creation of symbolic and hedonic benefits. For instance, loyalty programs offer the possibility of brand community emergence and self-identity congruence (Oliver 1999). The Kwik Rewards Program will primarily focus on monetary incentives through punch cards, visit/frequency points, and fuel rewards. Knowledge from this report suggests that the program must also exploit nonmonetary rewards to promote a diversity of benefits and relate to multiple consumer motivations (Mimouni-Chaabane et al. 2009). Personalized services and value-added information, such as the location finder, will serve as means for differentiation through nonmonetary benefits.

John McHugh, Kwik Trip, Inc. Director of Corporate Communications, claims that converting one guest from satisfied to loyal brings in several thousand dollars of additional revenue each year. Additionally, creating guest experiences that induce viral responses generates even more revenue – up to tens of thousands of dollars (Kwik Trip, Inc. 2017). If executed according to the findings, the Kwik Rewards Program will confidently achieve both. Moving forward, there are many avenues for Kwik Trip to explore when considering future success of the program. Whether this includes diversifying benefits, encouraging communal/brand village development, revising marketing communications, or including additional vendor options, each decision will impact the program’s position and value perception among members. The ability to adapt to changing market trends and technological advancements will pose new issues, especially when ensuring a consistent brand image. However, customer-driven enhancements will cultivate Kwik Trip’s loyal customer base. Prioritizing customer desires will undoubtedly secure the success of the loyalty program. Aligning the Kwik Rewards Program with the results of the report will ensure future customer retention and acquisitions for Kwik Trip, Inc. – a loyal customer base will be secured and increased profits achieved.

APPENDIX

Table 1

LOYALTY PHASES WITH CORRESPONDING VULNERABILITIES
Stage	Identifying Marker	Vulnerabilities
Cognitive	Loyalty to information such as price, features, and so forth	Actual or imagined better competitive features or price through communication (e.g. advertising) and vicarious or personal experience. Deterioration in brand features or price. Variety seeking and voluntary trial.
Affective	Loyalty to a liking: “I buy it because I like it.”	Cognitively induced dissatisfaction. Enhanced liking for competitive brands, perhaps conveyed through imagery and association. Variety seeking and voluntary trial. Deteriorating performance.
Conative	Loyalty to an intention: “I’m committed to buying it.”	Persuasive counter-argumentative competitive messages. Induced trial (e.g. coupons, sampling, point-of-purchase promotions). Deteriorating performance.
Action	Loyalty to action inertia, coupled with overcoming of obstacles.	Induced unavailability (e.g. stocklifts – purchasing the entire inventory of a competitor’s product from a merchant). Increased obstacles generally. Deteriorating performance.

Obtained from “Whence Consumer Loyalty?” by Richard L. Oliver published in Journal of Marketing: Volume 63 (Special Issue 1999), pp. 36.

Table 2

Company Commitment

Company Loyalty

Company Trust

Future Sales

Price Premium

Share of Wallet

Share of Visits

Company Satisfaction

Social Benefits

Program Loyalty

Program Value

Special Treatment

Obtained from “Consequences of Customer Loyalty to the Loyalty Program and to the Company” by H. Evanschitzky, B. Ramesashan, D.M. Woisetschlager, V. Richelsen, M. Blut, and Backhaus published in J. of the Acad. Mark. Sci. (2012) 40: pp. 630.

Table 3

PERCEIVED BENEFITS OF LOYALTY PROGRAMS
Dimensions of Benefits	Sub-Dimensions of Benefits	Definition
Utilitarian	Monetary savings Convenience	To spend less and save money To reduce choice, and save time and effort
Hedonic	Exploration Entertainment	To discover and try new products sold by the company To enjoy collecting and redeeming points
Symbolic	Recognition Social	To have a special status, to feel distinguished and treated better To belong to a group that shares the same values

Obtained from “Perceived Benefits of Loyalty Programs: Scale Development and Implications for Relational Strategies” by A. Mimouni-Chaabane and P. Volle published in Journal of Business Research (2010) pp. 33.

Table 4

CONVENIENCE INDUSTRY: LOYALTY CAMPAIGN EXECUTION
Strategy	Description	Suggestions
Fuel-Only Campaign	Incentivize fuel-only customer to enter store for an offer	Offer high-margin product such as a free cup of coffee or fountain drink Run campaign to fuel-only customers on a recurring basis
Idle Customer Campaign	Identify and target customers with little or halted purchase behaviors	Communicate directly, through email and phone, to regain their interest
Frequent Customer Campaign	Encourage customers to purchase outside of their routine items	Leverage point-of-sale devices Identify opportunities to engage with customers
Top-Tier Customer Campaign	Target highly probably candidates who respond to promotions and reach rewards quicker	Encourage them to spend more per visit and select more items per transaction These customers typically have more disposable income
Cross-Product Campaign	Motive customers to purchase a product outside of a category, but complementary to the basket	Create an email campaign to incentivize related purchases; i.e. a bag of chips with a fountain drink Work with your margins
Text Message Campaign	Use creative promotions to drive traffic	Encourage visits during slower dayparts (i.e. 2:00 Text Tuesdays) Create excitement and build relationships
E-Statement Campaign	Send customers summaries of their purchase and reward earnings from the previous month	Send statement summaries on the nth of each month Work with vendors to provide promotions with the statement
Social Network Campaign	Utilize platforms such as Facebook, Twitter, and YouTube as an extension to your loyalty strategy	Send consistent and relative posts that customers can respond to Tap into unreached audiences

Content obtained from “Eight Ways to Execute Smart Loyalty Campaigns” by Roger L. Brooks published in NACS Online Magazine (October 2010).

Table 5

Kwik Rewards Family
Member Options	Description
Kwik Rewards Base Loyalty	Majority of members Simple registration and signup
Kwik Rewards Credit/Debit	Base loyalty plus payment Rebrand from existing Kwik Card Base loyalty and payment rewards processed with one swipe (no need for a separate rewards card)
Kwik Rewards Fleet	Commercial drivers base loyalty Rebranded from existing Kwik Bucks Program No payment integration but compatible with any payment type

Content obtained from Kwik Trip Inc. PowerPoint presentation titled “Kwik Rewards Intro” received in April 2017.

Table 6

Kwik Rewards Fleet
Loyalty Member Level	Description
Welcome Level	After registration Earn 1 point per every gallon of diesel purchased Free fountain drink or coffee refill every 50+ gallons
Premium Level	After 500 gallons Earn 2 points per gallon of diesel purchased
VIP Level	After 1,000 gallons Earn 4 points per gallon of diesel purchased Free showers and drink refills (limit 2 redemptions per day)

Content obtained from Kwik Trip Inc. PowerPoint presentation titled “Kwik Rewards Intro” received in April 2017.

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