A Study on Factors Influencing the Selection of a Third Party Customer Loyalty Application

Research Paper (postgraduate), 2016

43 Pages, Grade: A












Table No: 01 – Frequency Table of Category of Business

Table No: 02 – Frequency Table of Size of Business

Table No: 03 – Frequency Table of Age of the Business

Table No: 04 – Frequency Table of Website for the Business

Table No: 05 – Frequency Table of Offering of Products and Services through Mobile Application

Table No: 06 – Frequency Table of Awareness about Third Party Customer Loyalty Application

Table No: 07 – Frequency Table of Association with Third Party Customer Loyalty Application

Table No: 08 – KMO and Bartlett’s Test

Table No: 09 – Communalities

Table No: 10 – Total Variance Explained

Table No: 11 – Rotated Component Matrix.


Figure: 01 – Category of Business

Figure: 02 – Size of the Business

Figure: 03 – Age of the Business

Figure: 04 – Website for the Business

Figure: 05 – Offering of Products and Services through Mobile Application

Figure: 06 – Awareness about Third Party Customer Loyalty Application

Figure: 07 – Association with Third Party Customer Loyalty Application.


Today, every business wants to have loyal customers, as it knows that loyal customers provide more benefit than those non loyal ones. Therefore to retain their existing customers and make them loyal, the businesses have understood the importance of customer loyalty programs. But, they are unable to develop and maintain an appropriate loyalty program. Therefore, the aim of this study is to understand the importance of customer loyalty application provided by third party and to determine the various factors which influence the decision of the merchants to select a customer loyalty application provided by third party. To achieve the objectives, data from various merchants was collected. The research methodology used in this research report is quantitative in nature, where primary data was collected from respondents using structured questionnaire. The respondents were asked various questions, where few questions were open- ended questions, some questions had multiple options, and the remaining questions were to be rated on a Likert scale. The data collected was analyzed using the SPSS tool. Two types of analysis were performed on the data: Frequency Analysis and Factor Analysis.

The Frequency Analysis performed on the Open-ended Questions and Multiple Options Questions suggest that: majority of the merchants own a medium sized restaurant or a boutique, which is into the market between 0 to 2 years. Majority of the merchants do not have a website for their business. But, the number of merchants who are willing to offer their products and services through mobile application is almost equal to the number of merchants who are not willing to offer their products and services through mobile application. The analysis also says that, the majority of merchants are already aware and also associated with the customer loyalty application provided by the third party. Whereas, the Factor Analysis performed on the questions which were to be rated on the Likert Scale, has summarized various variables under six factors which are as follows: Usability; Service Offerings; Pricing Conditions; Ease of Use; Brand Offering; Service Quality. The findings clearly show that the factor: Usability (Technical Features, Maintenance Cost, Accessibility, Flexibility, Security of Transaction, Adaptability and Interactive) has the most positive effect on the merchant for the selection of customer loyalty application. Whereas, the factor: Service Quality (OS Compatibility, Trial Offer and Complaint Handling) has the least effect on the merchants for selection of customer loyalty application.



As rapid changes are taking place in the business environment, the competitive advantage achieved by companies due to their product differentiation has reduced due to similar looking products produced by other companies. Also, it has become difficult for the customers to distinguish between the products and services provided by various companies because of the similar customization. This increase in the choice of products and services has increased the level of alternatives received by a customer.

In such a situation, having loyal customer has become a challenge for the businesses. Therefore, it has become important for the businesses to stop their customers from switching to their competing products and services by using various marketing tactics. One such marketing tactic is “Customer Loyalty Program“ which means to reward the customers for their repeat purchase behavior, which might help in reducing the switching of customers to products and services provided by other companies by forming an exit barrier.

Customer loyalty is the willingness of a consumer to purchase the same product and keep the same profitable relationship with a particular business. In other words, it the continuous buying of a consumer for a particular business and suggesting to other friends and family. There must be something attractive in a brand which keeps a customer to buy that product over period of time without preferring any other competitor brand.

Loyal customers are usually more beneficial to a business’s when compared to those non loyal ones, as they spread positive word of mouth and so on. Therefore, businesses today are using these loyalty programs to increase their competitive advantage and not just to gain profits from the loyal customers.

A customer loyalty program gives various benefits to the businesses such as: it helps attract more customers, help increase customer engagement, help the businesses understand their customers and reward them based on their purchase preferences, and so on.


The businesses today have recognized the importance of loyalty programs. But, not every business can develop and maintaining a loyalty program. Therefore, the businesses need to understand the importance of outsourcing a customer loyalty application from a third party. There are many loyalty applications in the market today, but not all end successfully. So, to establish a successful loyalty program application, companies need to analyze the various factors and benefits provided by the third party before outsourcing them.

Therefore the aim of this study is:

1) To understand the importance of third party customer loyalty application.

2) To determine the various factors influencing the selection of a third party customer loyalty Application.


This study is to help the companies (third-party) by providing them the various factors to understand the requirements of the loyalty application by the businesses.


This study is focused on finding the factors influencing the selection of a third party customer loyalty application.



This section presents the reviews of all the available literature that reveals the several investigations that have been made to improve the understanding of loyalty programs.


Loyalty programs have long been an important element of customer relationship management for firms in travel related industries such as airlines, hotels, and rental cars. Information technology that enables firms to practice individual-level marketing has facilitated the spread of loyalty programs into such diverse industries as gaming, financial services, and retailing. Loyalty programs that base rewards on cumulative purchasing are an explicit attempt to enhance retention. Such programs encourage repeat buying and thereby improve retention rates by providing incentives for customers to purchase more frequently and in larger volumes. This study is based on a dynamic programming model of customer response to a loyalty program and other marketing tactic. It measures the influence of rewards by considering customers’ sequences of purchases as a solution to a dynamic optimization problem. The model includes both the influence of previous behavior in terms of cumulative purchases and forward-looking factors, such as expectations of future prices and loyalty rewards. It also estimates the effects of e-mail coupons, pricing changes, shipping fees, and the loyalty program (Lewis, 2004)

In the service industry, loyalty cards represent an established phenomenon. Developing this knowledge, the present study focuses on the role of loyalty-card programs in establishing loyalty towards a retail store. The impact of store satisfaction and these loyalty-card programs on store loyalty is tested empirically. Therefore, a survey was performed among grocery store customers in Singapore and The Netherlands. The comparative findings demonstrate that these programs do indeed impact on attitudinal as well as behavioral store loyalty, as long as the number of alternative programs is limited and customers over time have not become accustomed to loyalty cards. The effect of national culture on store loyalty was examined by an independent sample t-test in which we specified behavioral and attitudinal store loyalty as test variables and national culture as grouping variable (Noordhoff, Pauwels and Odekerken-Schro¨der, 2004 )

Customers are always a basic part of an organization despite of the type of activity the company’s focus on. The aim of this research study is to analyze and evaluate advantages and disadvantages of customer loyalty programs by providing future perspectives focusing on foreign countries experience. The task of this research study is to provide conception of loyalty, as the main aim of relationship marketing, to analyze loyalty programs as basic means to build customer loyalty and reveal their advantages and disadvantages, to formulate and provide the primary regulations influencing further successful establishments of loyalty programs. The research methodology used for the study includes logical analysis, generalization and interpretation of scientific literature. The result of the research study are the six key loyalty marketing trends which are explored and analyzed in detail i.e., ubiquity, non economic benefits win economic, technology enables but imagination wins coalition lite, customer analytics and the Wow Factor ( Zikiene and Bakanauskas, 2007 )

Advances in electronic service technology have created great opportunities as well as threats to organizations in various business and services sectors. As such businesses, either willingly or reluctantly, are increasingly embracing the Internet as distribution channel in order to remain competitive or gain market share. With particular reference to e-services, absence of accurate information on factors that have influenced users' behavior to adopt or use e-services could mislead an organization into adopting unhelpful solutions as it strives to accelerate the implementation of e-services. This study, based on the diffusion of innovations (DOI) theory leveraged into the online environment, investigates factors that influence adoption and usage of e-service, especially, in Saudi Arabia. These factors were empirically tested against data collected from participants using survey questionnaires. Perceived Complexity was found to be the most significantly related factor affecting e-service adoption in Saudi Arabia, followed in turn by Privacy and Compatibility. Quality of the Internet and its relative advantage also had a notable affect on e-service usage and adoption in Saudi Arabia (Al-Gaith, Sanzogni and Sandhu,2010 )

Loyalty programs have been introduced by many companies in different industries in highly developed countries with mature market economies and the popularity of this widely used marketing tool does not seem to decline. Customer loyalty originally referred to repeated purchase behavior but currently a there is a distinction between behavioral and attitudinal loyalty concepts, which has been widely accepted. Card programs on the various soft attributes and the hard attributes of the schemes offered in the loyalty program. To get the results data was collected through online survey. Therefore the results reported that the customer experience in loyalty card programs has effects on the importance of soft attributes of the schemes but has no significant influence on the hard attributes (Gyulavári, 2010 )

Today rapid changes are taking place in the business environment as the competitive advantage that the business achieved due to product differentiation is no longer good as most of the organizations today can mass customize products and services making it difficult for the customers to distinguish between the products and services provided by various companies. In such a situation the challenge of having loyal customers has increased for the marketers. The aim of this research study is to capture how customers perceive benefits from loyalty programs launched by companies in the Indian context and to understand the factor structure of the scale and its applicability in a different country. In order to achieve this objective the instrument developed by Mimouni-Chaabane and Volle was adapted. For this research study Five-point Likert Scales having the options of strongly disagree to agree were used. Also the exploratory factor analysis (EFA) and confirmatory factor analysis (CFA) were used to test the validation of the scale in the Indian context. The results of this research study suggested that unlike the five dimensions found by Mimouni-Chaabane and Volle namely, monetary savings, exploration, entertainment, recognition and social, the perceived benefits from loyalty program as per Indian customers are to be revised to four namely, monetary benefits, exploration benefits , social benefits and go pleasure benefits ( Bose and Rao, 2011)

The customer loyalty programs collect a large amount of customer data which gives the companies an opportunity to create knowledge about their customer and understand their buying habits. The aim of this study is to determine the relationship between the consumer behavior in the field of choosing an outlet and the mechanism of remaining loyal. The research study is based on deductive approach that gives the confidence that the truth of the conclusions will be based on completely guaranteed and tried not to just make probable by the truth of premises. This study used non-probability samples due to the weakness to calculate the total population of loyalty card holders and the lack of information about the demographic segmentation of the interest population. In this study the data from the collected questionnaires catalogued and analyzed using SPSS. The analysis of the results came from Descriptive analysis, Factor analysis and Gross tabulation analysis. Therefore the results of this research study suggest that, for a loyalty program to have a long term effect on brand perception: the store / service has to provide satisfaction, the incentive level and type has be such as to allow cognitive dissonance, and re-assuring brand communication has to be designed to target program members (Babaliaris and Kyriazopoulos, 2011)

As the lifestyle of the urban consumers is changing according to the century, the Generation Y prefers to eat outside or involve in social gathering activities at the fast food outlets. The fast food operators in Malaysia have recorded the sustainable growth in the fast past few years due to high consumption of fast food products among the Generation y. Therefore the research study is focused on the customer loyalty among Generation Y for the Western Fast Food Industry. The research design methodology used for this study is quantitative method which involved mainly structured questions. The results of the study indicates that customers with high perceived switching cost showed higher association between trust and customer loyalty compared to those customers who perceived it to be low (Ling, Mun and Mee Ling, 2011 )

Customer loyalty is the willingness of a consumer to purchase the same product and keep the same profitable relationship with a particular company. In other words, it the continuous buying of a consumer for a particular company brand and suggesting to other friends and family. This research study is mainly focused on that how customer satisfaction and customer retention contribute towards customer loyalty. For this research study questionnaire has been used for the data collection in order to get accurate information. The results of this research study suggest that customer loyalty is more dependent upon Customer satisfaction in comparison of customer retention. Customer perceived value and customer perceived qualities are the major factors which contribute for the customer loyalty (Bagram and Khan, 2012)

Customer Relationship Management (CRM) has emerged as one of the powerful marketing tools in recent years. The retail sector, in particular has experienced a massive increase in their sales and profit maximization with the supportive roles that CRM can play. Customer Relationship Management is an essential phenomenon for any business entity. The objective of this research study if to explore the key influential aspects of CRM and to identify and critically discuss the current trends of CRM adoption. The research methodology adopted for this study was the depth interview techniques with the use of semi structured questions. The results of this study indicated that, effective CRM can influences positively and thus to ensure business growth and profitability. The Loyalty Card holders of both Tesco and Sainsbury’s do not frequently shop at other retailers, responsiveness is the key factor for effective CRM, and newsletters sent to the customers are the most reliable way for information sharing ( Hassan and Parves, 2013 ).

Customer loyalty plays a critical role in an organization’s success and customer loyalty becomes more important especially when customer acquisition alone does not equate to long term success. The purpose of this study is to examine empirically the influence of satisfaction, trust and commitment on customer loyalty in online shopping. This paper describes a theoretical model for investigating the influence of satisfaction, trust and commitment on customer loyalty toward online shopping. Based on the theoretical model, hypotheses were formulated.( Sharma, 2013)

For this study primary data was collected through questionnaires which were distributed to students having access to the internet and who have the experience of purchasing from online stores. According to the results of the study all the six hypotheses i.e., H1- E Satisfaction directly influences trust of online shopping, H2 - E Satisfaction directly influences e-loyalty, H3 - E Satisfaction directly influences e commitment, H4 - E-trust directly influences e- loyalty, H5 - E- trust directly influences commitment, H6 - E-commitment directly influences e- loyalty are supported. Satisfaction has positive relationship with trust, commitment, and loyalty. Trust also has positive relationship with commitment and loyalty, and commitment has impact on loyalty. The results of the study indicated that customer satisfaction showed great impact on customer loyalty. The existence of e-loyalty emerged from experience (Pratminingsih, Lipuringtyas, and Rimenta, 2013 )

Marketing is an important aspect of a business as it has various effective marketing tools. Traditional way of marketing has changed with the use of the Internet to facilitate innovative ways of doing business that impact marketing. The objective of this research study was to identify the perception of online marketing adoption by SMEs in Coimbatore. For this research study exploratory and descriptive methods were used were structured questionnaire was the main data collection instrument. Questionnaire questions were formulated based on literature and objectives of the study and the data were collected through the structured questionnaire. The studies showed that most of the SMEs still have not adopted online marketing and are willing to implement it in the future. SMEs need to first understand the purpose of the online marketing i.e., they can use it for receiving feedback, payment, product comparability, price comparison and creating awareness. Most of the SMEs prefer online marketing because of cost factor only; they have to understand the business model which they operate before adopting online marketing. Therefore, the study reveals that the potential of the Internet to be exploited is enormous and the benefit to be gained is only limited by the imagination of the business users.(Balamurugan, Sathish, Jublee and Sathyanarayanan, 2014 )

Electronic business (E-business) is a process of conducting business through the use of Information and Communication Technology (ICT), specifically the Internet Information and Communications Technology (ICT) involves the use of computer hardware, software and telecommunication devices to store, manipulate, convert, protect, send and receive data. ICTs are necessary components of business culture. Nowadays, the use of ICTs is no more a distinctive characteristic by itself. Only an effective and efficient usage of ICT helps organizations and individuals gain competitive advantages. An important factor of e-business adoption is that organizations need to design a model for user acceptance of technology through the theoretically extended TAM2. Through relevant literature and an assessment of the Technology Acceptance Model 2 (TAM2), this paper presented a perception of e-business adoption in the hospitality industry of Ghana. The paper generally discussed e-business literature in relation to its evolution, concepts, models and adoption as well as e-business benefits and challenges. Additionally, the paper reviewed the hospitality industry in Ghana and further discussed how TAM2 is important for the adoption of e-business in the hospitality industry of Ghana ( Asabere, Doku, Kusi-Sarpong and Oppong, 2014 ).

In Malaysia, traditional retail stores are always attracting the low and middle level income consumers. Modern retail formats are attracting the upper and middle income shoppers but at present it is fast changing as improved consumer lifestyles, changing consumer’s preferences and changing educational level of population The main purpose of this research study is to examine the factors that influencing consumers’ loyalty in Malaysian hypermarkets context. For this research study a self-administered questionnaire was developed to collect information through random sampling method. The study employs structural equation modeling (SEM) approach using confirmatory factor analysis and test the hypothesized positive correlation between exogenous and endogenous constructs to identify the customers’ loyalty. The collected data were examined using descriptive frequency, correlations, principal component and exploratory factor analysis (EFA), confirmatory factor analysis (CFA), measurement model, structural model and hypothesized path coefficient. The results of this study suggested that service quality, product quality and price strategy both have positive impact on customer loyalty. The finding also revealed that price strategy was highly significant with consumers’ loyalty in Malaysian hypermarkets context (Rahman and Jalil, 2014)

Loyalty Program is one of the most important element today of the relation between the customer and the management which is "Information technology that enables firms to practice individual-level marketing has facilitated the spread of loyalty programs into such diverse industries as gaming, financial services, and retailing. The research is based on analysis and study of how organizations gain a customer loyalty, and what are affect a consumer behavior. This research is based on existing theory and research. The following were found from the study: Customer Lifetime Value, Build real customer relationships based on relevance, influencing the elasticity of a purchasing decision, Increasing share of wallet. These are the most effective factors that affect a customer behavior. Therefore, applying these factors increase customer lifetime value, build real customer relationship base on relevance, influence the elasticity of a purchase decision, and increasing share of wallet will enhance the understanding of the customer behavior which will guide to gain bigger market share by win a customer loyalty (Alazzam, Fahad and Bach, 2014)

Companies use various tools like email promotions, customer loyalty programs etc to get loyal customers and for maintaining existing customers. Where the loyalty programs that were introduced with an intention of rewarding customers for their continued patronage and purchase over time help in reducing customer switching. Also the loyalty programs that are designed with a long term focus may also improve customer loyalty by strengthening customer- business relationship. But to understand the factors influencing the decision of a customer to accept or not accept the membership of a loyalty program a qualitative study was conducted which comprised of 25 in depth interviews. For this study, two types of respondents were selected, one respondents who had a membership of loyalty program or were a part of a loyalty program in the past and were knowledgeable about the same and the other respondents were those who did not have any membership of any loyalty program till date to understand the reason why they decline the membership offers. This study gave five important factors such as the purchase, attitude, concerns, loyalty program characteristics and the sales person’s expertise. These factors may help the businesses structure it loyalty program that would be readily accepted by the customers. ( Roy, 2014 )

Loyalty programs are a present marketing tactic, yet many of them perform poorly and the reasons for loyalty program failure remain unclear to both marketing managers and researchers. Therefore this paper presents three studies—two experiments and one survey. The results are given by offering implications for theory and practice. This study has several theoretical implications. Such as the negative effects of rewards on bystanders in some situations suggest the need for more theoretical and empirical work focused on understanding the “dark side” of loyalty programs, considering the need to evaluate the entire target and bystander customer portfolio where the managers must be aware of the multiple processes that loyalty programs are likely to spur in customers’ mind, the main aspect for managers to influence loyalty programs effectiveness is the reward delivery ( Steinhoff and Palmatier, 2014 )

The young consumers around the world are fascinated with digital gadgets such that in particular mobile phones. This fascination has presented the telecommunication marketers an opportunity to target this group. This study aims to evaluate the effect of various variables such as price, service quality, brand and trends on customer loyalty of service providers of mobile phones in Saudi Arabia. For this study a questionnaire was developed and distributed to a convenient sample throughout the major cities of Saudi Arabia. The study showed that the majority of respondents had prescribed to more than one service provider at the same time. Additionally, it was revealed that all the variables tested; price, service quality, brand image and trends, had a direct effect on customer loyalty of service provider. Results obtained from this research will offer necessary feedback for improving a company’s strategy, marketing mix, services, and product offerings, thereby, achieve customer satisfaction and improve their customer loyalty while attracting new ones.( Khizindar, Al-Azzam and Khanfar, 2015 ).


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A Study on Factors Influencing the Selection of a Third Party Customer Loyalty Application
Institute of Computers and Business Management –School of Business Excellence
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ISBN (Book)
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Third Party, Customer loyalty, Application, Factor Analysis
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Dr. Kunal Gaurav (Author)Kirti Dixit (Author), 2016, A Study on Factors Influencing the Selection of a Third Party Customer Loyalty Application, Munich, GRIN Verlag, https://www.grin.com/document/375898


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