Canbrand Affairs Result in Commitment? Evaluating the Impact of Strategic Partnerships
Canbrand affairs result in commitment? Evaluating the impact of strategic partnerships on reward program member loyalty.
Anjala S. Krishen, Ph.D.
Associate Professor
Marketing & International Business Lee Business School
University of Nevada, Las Vegas
Orie Berezan, PhD
Assistant Professor
Department of Management and Marketing
College of Business Administration and Public Policy
California State University Dominguez Hills
Michelle Yoo, Ph.D.
Assistant Professor
Collins College of Hospitality Management
California State Polytechnic University
Canbrand affairs result in commitment? Evaluating the impact of strategic partnerships on reward program member loyalty.
Abstract
Loyalty programs have become a vital aspect of strategic marketing for many businesses, particularly in the hospitality industry. More recently, loyalty programs have been forming alliances with many seemingly non-related brands, reaching far beyond the core of their product when forming alliances in a competitive attempt to create more value for the customer, thereby having a positive impact on loyalty. There is limited amount of empirical research that examined the effect of strategic alliances on customer loyalty in the hospitality industry. The purpose of this study is to examine the effect of strategic alliances on customer loyalty with hotel loyalty programs. Study findings are expected to contribute to the existing literature on customer loyalty as well as provide valuable implications for industry.
Keywords: Loyalty, Loyalty programs, Perceived Value, Satisfaction, Strategic Partnership
Introduction
The most essential theory of loyalty marketing is that a small increase in loyal customers can bring a significant increase in profitability to a business. Over the past decade, businesses in various industries have turned single-brand loyalty programs into corporate-wide loyalty programs across different brands. More recently, loyalty programs have been forming alliances with many seemingly non-related brands, reaching far beyond the core of their product when forming alliances in a competitive attempt to create more value for the customer, thereby having a positive impact on loyalty. For example, Delta Airline’s SkyMiles loyalty program has alliances with organizations ranging from credit card and mortgage companies to online shopping portals, car rental companies and hotels. In fact, SkyMiles’ relationship with Starwood Hotel’s loyalty program (Starwood Preferred Guest) has gone as far as extending upgrades and other benefits to elite members of each other’s program with crossover benefits. Such strategic partnerships seem like a good thing to do, but are they effective in doing what these programs were meant to do – positively impact loyalty? If so, which type of loyalty do they impact, and is it toward the loyalty program or the brand itself? Until now no study has examined the effect of strategic alliances on customer loyalty in the hospitality industry. The purpose of the study is to examine the effect of strategic alliances on customer loyalty in the hospitality industry, specifically with hotel loyalty programs.
Literature Review
The impact of customer loyalty is significant for companies worldwide.A loyal customer can simultaneously reduce customer acquisition costs and increase revenue, ideally leading to greater profitability (Lam, Shankar, Erramilli, & Murthy, 2004).L. Rather, (Kandampully, 1998).Loyalty has also been shown to result in partner-like activities whereas customers with attitudinal loyalty are psychologically attached to a firm and thereby demonstrate advocacy towards them (Bettencourt, 1997; Rauyren & Miller, 2007). This attachment results in a partnership where customers cooperate with each other, and with the firm, to achieve the best outcome (Bendapudi & Berry, 1997).
Loyalty programs have become a vital aspect of strategic marketing for many businesses, particularly in the hospitality industry (Laskarin, 2013; Ha & Stoel, 2014). Such programs are intended to nurture customer loyalty by increasing partnership activities with and between their customers, largely through affective bonding (Mattila, 2006). Despite these marketing efforts, the effectiveness of such loyalty programs is often questioned, with programs often merely copying the efforts of their competitors and not providing a sustainable competitive edge. Therefore, marketers are constantly racing to improve their programs so that they provide more perceived value for their members and thus create more loyalty with their customers.
Recently, many loyalty programs have implemented strategic partnerships with other firms as an effort to further increase perceived externality value and thereby positively impact customer loyalty (Xie & Chen, 2014).Strategic partnerships are considered as collaborative efforts between companies to pool their joint resources to achieve mutually compatible goals (Lambe, Spekman, & Hunt, 2002).Strategic partnershipscan be regarded as a potential source of value creation as partnering firms use each other’s strengths to boost market opportunities (Chathoth & Olsen, 2003).Hospitality businesses have been making efforts to maintain strategic partnerships to achieve the resources needed to increase and sustain competitive advantage (Lambe et al., 2002).
A recent study has shown that frequent hotel guests become even more frequent after they joined the program, resulting in a 50-percent increase in revenue compared to those who are not program members (Voorhees, McCall & Carroll, 2014).Over the past decade, businesses in various industries have turned single-brand loyalty programs into corporate-wide loyalty programs across different brands. Loyalty programs have been forming alliances with many seemingly non-related brands, reaching far beyond the core of their product when forming alliances in a competitive attempt to create more value for the customer, thereby having a positive impact on loyalty. For example, American Airlines’ Aadvantage loyalty program has alliances with organizations ranging from credit card and mortgage companies to online shopping portals, car rental companies and hotels. In fact, Aadvantage’s relationship with Hilton Hotel’s loyalty program (Hhonors) has gone as far as extending the program’s elite status to each other’s most loyal customers, offering crossover benefits such as upgrades, waived checked bag fees, VIP recognitions, and so on.
Based on the literature, the following study hypotheses were derived shown in Figure 1.
H1: Perceived program value from strategic partnershipswill positively impact member satisfaction.
H2: Member satisfaction will positively impact loyalty toward reward programs.
H3: Member satisfaction will positively impact loyalty towards hotel brands represented by the loyalty program.
H4: Reward program loyalty will positively impact loyalty towards hotel brands represented by the loyalty program.
Figure 1. Conceptual Model
Methodology
This study implemented a primary field survey design and developed a questionnaire to test the study hypotheses. The self-administered survey was divided into a total of four sections: perceived program value, member satisfaction, loyalty, and demographic information. Data was collected from active members (N=500) of hotel loyalty programs via an online research panel. UsingSEM, this study will reveal valuable theoretical and managerial implications.
Findings
This research is in progress. Results of the study are expected to indicate a positive relationship between strategic alliances and customer loyalty towards both the reward program representing the brand, and the brand itself. Furthermore, the study will evaluate the anticipated relationship between program loyalty and brand loyalty.
Relevance/Contribution
Study findings are expected to contribute to the existing literature on customer loyalty as well as provide valuable implications for industry.
References available upon request.
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