An emerging theory of loyalty program dynamics

As exemplary instruments of relationship marketing, loyalty programs are being implemented and studied at an unprecedented rate. Yet real-world efforts often fail—or at least do not live up to expectations—and despite the growing richness of loyalty program literature, the field remains fragmented. Thus, a comprehensive perspective is required. To guide further research and suggest ways that managers might improve loyalty program effectiveness, this article synthesizes insights on loyalty programs from empirical research and underlying psychological theories. The proposed conceptual model of loyalty program effectiveness consists of psychological, design, and operational elements; in turn, it suggests a set of 12 propositions that account for differential effects across customer acquisition, onboarding, expansion, and retention stages. With an evolving theory of loyalty programs across relationship dynamics, this propositional inventory parsimoniously delineates the trade-offs associated with relationship stage–based management of these programs. The proposed comprehensive foundation can guide loyalty program practice and research.