The Introduction of Loyalty Programs for the Retail Industry

Customer loyalty presents a paradox. Many see it primarily as an attitude-based phenomenon that can be significantly influenced by customer relationship management initiatives such as loyalty and affiliation programs, increasingly. However, empirical research shows that loyalty in competitive repeat purchase markets is formed more by passive acceptance of brands than by strong attitudes about them. From this perspective, the potential for increased demand in loyalty programs is more limited than one might hope. In this article, by studying the literature, customer loyalty programs and its technologies are described under the title of three-stage model, which is mostly focused on the implementation stage. Finally, suggestions for better implementation of the cycle of loyalty programs are provided.


Introduction
The creation of loyalty initiatives The primary challenge for organizations in the retail sector is to revitalize existing loyalty programs and align them with their organization's digital activities and assets in order to gain an advantage over their competitors. The majority of companies in this sector already have a loyalty program and are adding suitable digital channels to their marketing strategies (Liu & Yang, 2009). Additionally, studies have highlighted a few issues with loyalty programs' online migration, such as meeting the demands of consumers without mobile internet connection, as a result of the growing trend of adopting them in corporate sectors (Breugelmans et al., 2015). More research is necessary since there is currently little data about the relationship between loyalty programs, loyalty cards, and customers' loyalty, despite the fact that numerous earlier studies have explored this relationship. The main challenge for organizations in the current retail market scenario is to revitalize existing loyalty programs and align them with their organization's digital activities and assets to gain an advantage over their competitors. The majority of companies already have a loyalty program and are further adding suitable digital channels to their marketing strategies (Liu & Yang, 2009). Additionally, studies have highlighted a few issues with loyalty programs' online migration, such as meeting the needs of customers without mobile internet connection, as a result of the growing trend of adopting them in corporate sectors (Breugelmans et al., 2015). More research is required because there is still little information regarding how customers will behave when loyalty programs become digital, despite the fact that many earlier studies have looked at the relationship between loyalty programs, loyalty cards, and customers' loyalty. Numerous studies have looked into this subject, including the extensive literature that describes the economies of these loyalty programs (e.g., how they affect sales and repurchase behavior drives them); however, the majority of the research that is currently available either includes contradictory evidence or does not discuss the effect of loyalty programs on repurchase behavior (Martenson, 2007). Table 1 presents prior studies on loyalty programs, from which different views and perspectives can be extracted to better understand how loyalty programs' needs have changed over time as well as how the programs have been shaped over the past few years. Additionally, a few scholars (Breugelmans et al., 2015;Purohit & Thakar, 2018) have promoted the investigation of contemporary technology utilization with relation to loyalty programs. There aren't many studies on this subject at the moment. In 2016, Berezan et al. conducted research on the usage of digital channels in the hotel sector, especially in loyalty programs. This particular study found that customers' opinions of the information's style and quality, as well as their loyalty to the program, are influenced by the channel that is selected for sharing information. The report further suggested that users find websites simple to use and understand, and it asserted that social media is an essential communication tool since it acts as "the fastest catalyst and the finest advocate for instant communication (Berezan et al., 2016). According to Purohit and Thakar (2018), previous research on technology in loyalty programs either concentrated on general application and suggestions or offered scant examples of available technologies. They also noted that neither the prenegotiation nor the post-implementation phases of loyalty programs, nor how the most recent technology can be applied at each stage, have been thoroughly investigated (Purohit & Thakar, 2018 Being a LP member does not modify purchase behavior. Events and promotions associated with LP seem to have clear effects on purchase behavior (e.g., purchase acceleration). The effects of LP are mostly short rather than long term. Thus, they seem to work as promotional tools rather than a means to induce loyalty.

2003
Verhoef Financial services LP that provides economic benefit has a positive effect on customer retention and customer share development.

2003
Magi Retailing Loyalty cards have mixed effects on consumer behavior (share of purchase and share of visits).

2001
Rajiv General merchandise LP membership is associated with the longer duration of customer-firm relationships.

2001
Meyer-Waarden and Benavent U.S. grocery industry LP is operationalized as a shocker program (e.g. turkey bucks), not a traditional long-term card program, so it can better be described as a long promotion. There is significant increase in spending (market basket). LPs seem to affect "cherry-pickers" most. Program is profitable. Therefore, this chapter aims to focus on the following: (1) typical tasks that are performed at each stage of the loyalty program lifecycle, (2) recommendations based on research that can enhance the effectiveness of the loyalty program, and (3) the use of relevant technology to achieve the needed tasks.

Loyalty programs
A loyalty program is advised to create a favorable feeling that motivates participants to make additional purchases. Customers who participate in the loyalty programs developed by Kivetz and Simonson (2002) feel proud of themselves for having earned rewards or points or for having won something free of charge. Customer loyalty is the primary goal of a business' relationship marketing strategy (Palmatier et al., 2006). As a result, businesses across all industries implement loyalty programs to strengthen their relationships with customers (Kivetz & Simonson, 2002).
Loyalty programs are implemented to entice customers to stop by and make purchases. In order to increase customer loyalty, repeat purchase behavior, and switching costs, loyalty programs use an integrated system of marketing communications and actions that also includes informational and social rewards (Meyer-Waarden, et al., 2008). Because a consumer's brand loyalty is crucial for business growth, it's crucial to develop marketing techniques that will speak to each customer on a personal level.

Traditional Loyalty Programs
The punch card, which is typically provided without charge to customers, is the most basic and classic card loyalty scheme. A hole is punched after each purchase of a certain good (such as coffee). The customer receives a gift or a discount after making a certain number of purchases. Since these card loyalty programs are simple to setup, small vendors and shops are more likely to employ them. As a result, more sophisticated and modern loyalty card programs, which have become a hot subject among marketers and retailers, have replaced the idea of classic loyalty programs, where customers are solely rewarded for their in-store purchases. Notably, traditional loyalty programs are becoming obsolete due to the development of smartphones and other digital devices, as well as social media; they no longer satisfy the demands of contemporary clients, who frequently seek synergy across all channels (Verhoef et al., 2015). The retail industry is seeing more rivalry and a greater concern in keeping current clients rather than obtaining new ones. Retailers therefore provide a variety of loyalty programs to encourage repeat business from customers, which helps to enhance sales and brand recognition. Although there are several loyalty programs in the retail industry, little research has examined how these programs affect consumer loyalty and retention in light of technology and their digitalization (Table 1).

Loyalty Programs and Their Use of Technology
Studies that address the use of appropriate technology in loyalty programs are quite limited and focus on a few technologies; it has been noted (Breugelmans et al., 2015). Despite the fact that researchers consistently and strongly recommend the use of digital technology in loyalty programs (Wang et al., 2016). The most recent developments and trends in information technology and communication, marketing analytics, and consumer interface platforms like mobile devices, according to Bijmolt et al. (2011), Liu and Yang (2009) have provided recent developments in loyalty program practices while providing new opportunities as well as challenges because, although it attracts the early adopters to the program and technology, it is only advantageous to those customers (see Figure 1). Such mobile applications and interaction, according to Son et al. (2016), may have a favorable impact on cash outlays and point redemption.

The Design Stage
A loyalty program may not be successful if it was not well planned and implemented. Instead, a wellthought-out and well-designed loyalty program draws clients and discourages them from enrolling in rival programs (Meyer-Waarden, 2008). There is no set formula for creating a loyalty program, as noted by McCall et al. (2010), but there are key elements that necessitate consideration, such as the general structure, point system, membership requirements, reward structure, and program communication. The choice of whether to make a program available to everyone or only to a select group of customers is a crucial one. Depending on the requirements of the company, each has advantages and disadvantages. For instance, a loyalty program that is accessible to everyone would increase program awareness and benefit its customers (Breugelmans et al., 2015). An invitation-only loyalty program, in contrast, would effectively utilize the funds at hand by excluding customer segments with low profitability. Similar choices are made regarding the reward structure throughout the design process. These include the total number of tiers, the point expiration policies, the ratio of points issued, the tier rewards, the tier positioning, and the tier transition policies. An organization may choose either reward option (customer tier or frequency reward), or it may choose to combine both depending on the necessity and nature of the progra. According to Doroctic et al. (2014), businesses shouldn't use point expiry or binding limits to influence customer behavior. In most cases, tier upgrades have been linked to consumers' spending patterns over a predetermined time period. Even so, organizations have the right to raise a member's status to a higher tier before they do so (through purchases). The result would be a mixture of doubt and thankfulness. Companies should only choose clients in these situations who are already on the verge of obtaining the higher tier or status, and the customer should be given a choice in advance (Eggert et al., 2014).
The constructs of loyalty programs' stages such as design, implementation and assessment are prominent in prior literature as shown in Table 2. Furthermore, it is important to determine appropriate metrics, such as customer retention, attitudinal loyalty, and repeat purchase when designing a loyalty program. It would further help to evaluate program performance as well as determine the return on investment (ROI) (Balakrishnan, 2011).

Bijmolt et al. (2010)
"Loyalty programs: Generalizations on their adoption, effectiveness, and design". "In general, an LP design comprises the program's structure, rewards, and a number of program partners." Kreis and Mafael (2014) "The influence of customer loyalty program design on the relationship between customer motives and value perception".

Implementation
Kongarchapatara and Shannon (2012) Investigating the effectiveness of a loyalty program through the relationships of program design, implementation, and customer loyalty".

Shugan (2005)
"The design and implementation of loyalty programs is both an important and growing area of research." Breugelmans et al. (2015) "Assessment of LP performance".

Kang et al. (2015)
Beyond traditional behavioral measures, CCID and company latent financial risk offer alternative assessments of (LP) effectiveness." It is clear from the literature cited above that key decisions regarding the creation of loyalty programs are based on information and/or data that can be gleaned from a variety of sources distributed across channels, including the enterprise systems of the company, partners, the market, and the industry. In addition to traditional methods and sources, the necessary information can also be acquired through contemporary sources, including social media and site logs, and it can be utilized to make decisions that will successfully present clients with relevant programs and offers. According to Purohit and Thakar (2019), it is also possible to use simulation tools to forecast the likely results of a particular design decision using a what-if analysis after gathering the necessary data. Retailers and businesses can benefit from time and money savings from this. Similar to this, the fluctuating demand for computing power during the design phase can make using cloud-based services cost-effective. The overall outcome of the design stage can be seen in Figure 2.

The Implementation Stage
The implementation stage of any loyalty program is at least equal to, if not more than the design phase, in creating an effective loyalty program (Xie & Chen, 2013). The implementation process should coexist with and match the relevant parameters of the design process. The key activities and tasks as well as the role of technology in the implementation process are discussed below.

Communication
A well-known marketing statement suggests that it is better to retain an existing customer than to acquire a new one because it results in repetitive interactions. The retailer then becomes more familiar with such customers and can offer tailored promotions and products. For instance, cosmetic retailer Sephora creates a beauty profile for each member of its loyalty program. The specific profile then generates personalized offers and recommendations based on skin and hair types to communication can be either firm or customer-created. Studies have found that, by supporting both of these communications types, social media and other touchpoint platforms can influence intention to spread positive electronic word of mouth (eWoM) and thus create and enhance loyalty (Zhang & Benyoucef, 2016).

• Organizational Communications
The ability of the retail and service sectors to satisfy or even surpass customers' wants has been substantially enhanced by the constant evolution of communication channels, expectations for precise and individualized information, and increased customer touchpoints. Businesses are attempting to use all touchpoints through a variety of strategies, including personalization, such as direct emails and mail, personalized letters, website interaction, machine-generated interaction, and personal interaction between the business and its customers during the pre-selling, consumption, and post-selling stages (Ball et al., 2004). For this reason, a successful loyalty program must create an interpersonal connection between the company and its customers through solid communication. Numerous studies have focused on the importance of personalized communication in order to gain customers' loyalty. If an organization manages data properly, and couples that with technology, such as Internet and other platforms, it can lead highly personal communication (Zahay et al., 2014).

Firm-Created Communication
The ability of the retail and service sectors to satisfy or even surpass customers' wants has been substantially enhanced by the constant evolution of communication channels, expectations for precise and individualized information, and increased customer touchpoints (Ray et al., 2005). Businesses are attempting to use all touchpoints through a variety of strategies, including personalization, such as direct emails and mail, personalized letters, website interaction, machine-generated interaction, and personal interaction between the business and its customers during the pre-selling, consumption, and post-selling stages. Because of this, an effective loyalty program must build human connections through effective communication between the business and its clients. Numerous studies have concentrated on the significance of tailored communication to win over customers (Allen & Wilburn, 2002;Lemon et al., 2001). An organization can enable highly personalized communication if it handles data efficiently and combines it with technology, such as the Internet and other platforms (Zahay et al., 2014).

• Customer-Created Communication
Electronic and conventional WoM are both examples of customer-created communication. Through customer interactions on various social media platforms, a customer's knowledge base can be expanded and he or she can optimize the benefits of the loyalty program. This may also improve the user's perception of the program's worth and the entire experience.

• Customer Support
Negative incidents can happen when customers are using services or when making purchases, despite companies' best efforts and protections. According to Stauss et al. (2005), these instances may lead to customer resentment as well as unfavorable opinions of the loyalty program and the business as a whole. However, if these occurrences are effectively integrated with customer support systems, which may be utilized to assign the problem the proper priority depending on the member's tier and profile, these problems can be properly resolved. For instance, reward points can be provided to ensure consumer loyalty.

Privacy Matters
Organizations all across the world are already leveraging information gleaned from member profiles to present tailored offers. Customers may not feel secure and comfortable disclosing personal information because they worry about its misuse because of this, which can lead to mistrust. Furthermore, the acceptance of loyalty programs has suffered as consumers' awareness of privacy and security concerns has increased (Blanco-Justicia & Domingo-Ferrer, 2016). Employing information security controls and related policies is one approach that businesses can take to address this issue. This entails implementing enhanced authentication processes, such as Captcha codes, across all customer-facing digital channels. A multitier privacy management method is another option that businesses have which would increase trust among program participants.

Location Based Services
Retailers are benefiting from location-based services by being able to deliver precise and pertinent offers to their particular clients. As previously mentioned, these services may also be effectively incorporated into merchants' digital loyalty programs in order to deliver pertinent and customised offers by taking into account profile features like gender, age, purchasing patterns, and purchasing history. These location-based services can be used by retailers to find and track potential repeat consumers who simply visit the store without making a purchase. The shop can then start sending these members tailored offers in an effort to keep them and win their loyalty.

Automation and Efficiency
Any reward program's member support staff typically carries out a variety of operational duties on a regular basis, such as processing redemption requests, overseeing the fulfillment of promotional goods, keeping an eye on member activity statements, and/or handling complaints and inquiries. The majority of these tasks entail following set protocols. Brynjolfsson and Mitchell (2017) extended on this notion by explaining how some tasks can be automated by assessing the applied criteria. Artificial intelligence (AI) can be employed in such situations to study and learn human decision-making. Organizations can improve productivity, reduce operating expenses, and use the resources saved by automating the repetitive processes of their loyalty programs to focus on other strategic initiatives.

The Performance Assessment Stage
For loyalty programs, there are many different performance indicators, such as customer traffic, enrollment, frequency of purchases, share of wallet, WoM, decreased price sensitivity, etc (Breugelmans et al., 2015;McCall et al., 2010). However, defining appropriate criteria that are in line with the company's or the reasons the loyalty program was established are the first and most crucial steps to measuring the ROI (Balakrishnan, 2011). Some studies (Breugelmans et al., 2015) have suggested a dashboard approach to assess a loyalty program. This approach is possible if the firm: (1) Defines and identifies the appropriate metrics during the design phase, (2) Collects accurate elements of the data for the metrics at implementation phase (3) Extracts, transforms, and loads the data into a data warehouse for the purpose of analysis.

Discussion
There is no doubting that loyalty programs are becoming more and more sophisticated, even though they are still the most crucial CRM tool in the retail sector. However, current technological improvements can have an impact on all parties, including clients, partners, and businesses (if any). Thus, information and contemporary technology can play crucial roles in loyalty programs and its components, enabling businesses to continue offering value and generate higher returns on investment.
The following contributions are made possible by this article explanation of the advantages of employing information and technology throughout the lifecycle of a loyalty program: • Demonstrates the tasks that are being performed at each phase of loyalty program lifecycle.
• Provides an extensive list of technology for the program lifecycle, including specific technologies that can be useful for each stage. • Demonstrates how the technology can be implemented in each phase of program's lifecycle to achieve goals and increase effectiveness. • Explains how the use of technology in loyalty programs can effectively retain the customers and enhance their loyalty toward the program as well as the brand.