Impact of Loyalty Programs on Consumer Purchase Behavior

Question: Discuss about the Impact of Loyalty Programs on Consumer Purchase Behavior . Answer: Introduction Service quality and relationship marketing are two important aspects of the current business environment. Service quality entails quality of ideas, action or experience that is offered to customer with exchange for value. Relationship marketing on the other hand is refers to marketing strategy that involves customers participation in marketing of a product or service. There are many literatures that give more information about service quality and related activities that make service delivery to be satisfactory though service is traditionally believed to be intangible. Service can be categorized into tangible, pure service and hybrid of tangible and pure service. Relationship marketing on the other side entails some elements such as social marketing, societal marketing and experiential marketing. Service quality and relationship marketing are interconnected with interactions, networks and service process. The following paper review literature on service quality, relationship marketing and the connection between the two. Goods-Based (2013, pp. 324-35) explains that service refers to an idea, experience, task or activity that can be exchanged for value with the view to satisfy the needs and wants of consumers and businesses. This does not contradict similar definition given by Karmakar (2004, pp 100107) that state service as intangible products that are offered to consumers at a certain value. Achrol and Kotler (2006, pp. 320333) contradict this definition by explaining that service refers to the production of intangible benefit or part of tangible product. Some of the mentioned nature of service includes variability, intangibility and perishability. First and foremost, Grnroos (2006, pp. 354364), indicates that service can be difficult to identify owing to its intangibility and associated to goods. This implies that service lacks the physical evidences depending on the type of service offered. Heiner et al, (2011, pp1), contradict the intangibility of the service by stating that service can also be tangible when place, people, equipment, communication material, symbols, price are attached to service. Moreover, the above elements of service gives physical evidence to service that brings the tangibility of service. Yuping (2007, pp 1935) concludes that service sometimes though has physical evidence; service becomes indistinguishable to tangible good as seen after sale service such as installation. Perishability nature of services according to Miles (2012, pp 285298), is the ability of service to waste due to low demand, time wasted and unaccepted price of service. The perishability nature of service may result from availability of complementary services, low demand, and differential prices. When there are complementary services that customers can resort to during peak seasons. Moreover, low demand for a products make the product to lack customers that can purchase leading to wastage of service. Finally as Gummesson (2006, pp. 339-353), concludes service can have different prices that make its demand to reduce leading to wastage. Variability nature of service as per Gummesson (2007, pp. 113-141) refers to the ability of service to change from one form to another depending on service provider. Services differ depending on the product it is tied to and the service provider. Martinez and Martinez (2007, pp 60-72) states that service variability can be controlled by good hiring and training procedures, service blueprint and monitoring customer satisfaction. Hiring of trained service providers under uniform training can makes service uniform. Development the procedure of offering services can make services be uniform regardless of different service providers. Finally, when a business monitors and reviews customer satisfaction, the customer feedback gives the satisfaction from different services. Variability nature of service makes service categorized in tangible goods service, hybrid of service and tangible and pure service. Kotler et al, (2012) explains that tangible goods service refers to the type of service that also involves tangible good. For instance, a consumer can buy good with after-sale services. When a customer purchase tangible goods the retailer can gives services such as installation and customer care service. In addition, tangible goods and their service element are difficult to separate. As Heiner et al, (2011, pp1) explains tangible good normally require service that sometimes is readily offered by the seller of the product. This does not contradict similar explanation given by Vargo and Lusch (2004a, pp 324335) on tangible product service that also show the connection between good and services tied to it Pure service on the other hand refers to services that are intangible and always are offered to businesses, customer and governments. Pure services as per the definition of Strauss, Ansary and Frost (2003), can be benefit that is accorded some value that is purely intangible. Similarly, Grahame and Mark (2002, pp 8694) explains can be action, system that satisfies needs such as transport, consultation, communication or technological assistance offered to business, government or individual customer. Some businesses are purely service industry since they offers customer services such as financial, accounting and technological services. Firstly, financial services can be in terms of consultation that is offered by economic experts on risk management or project management. Secondly, accounting services according to Vargo and Lusch (2004b, pp. 339-353), include banking services, payment for goods and monetary assistances. Finally, technological services are services such as communication, advertisement and technological information system. Hybrid of goods and services is type of services that include giving product with intangible service attached to the product. The current market the hybrid service is the most common service since most of customers prefer that after purchasing products some other services are also offered as element of product. According to Palmer (2011), some physical evidence may also contribute to the tangibility of the service for example buying table with maintenance service attached to it facilitate the hybrid nature of some service. Service quality on the one hand refers to the comparison between expectations of a service and the performance. Service quality according to Grnroos (2006, pp. 354364), has elements such as improved operation processes, performance measures, problem identification, customers satisfaction measures. Firstly, improving operation process within the business help the business to understand customers needs and adjust operation process according to customer expectation. Secondly, the quality of service offered to customers requires problem identification that affects customers which will otherwise lower the performance of a firm. Thirdly, as Martinez and Martinez (2007, pp 60-72) put it, service quality develops performance measure that ensures that the business performs exceeding the customers expectation. Finally, service quality entails analyzing and measuring customers satisfaction to establish the degree of satisfaction. Determinants of service quality There are some factors that determine the quality of services offered by service production firm. According to Yuping (2007, pp 1935) some of these determinants of service quality include competence, accessibility, credibility, tangibility, security, communication, customer knowledge and reliability. Skills, knowledge and training makes the service providers to be qualify to offer the quality service that is required by customers. Accessibility of the services increase the quality of service since customers can contact the service provider through physical evidence such as office. Credibility as per Brady, Cronin and Brand (2002, pp 17-31) is the worthiness of business that is connected to honesty and good reputation of a company. Tangibility on the other hand provides the physical evidence of service such as office, equipments and the service provider. Security as determinant of service quality reduces risk associated with service such as doubt and financial security. For services t o be of quality three is need for good communication that is connected to customer knowledge. Gap model is a service quality model that is important for service quality process development. The model shows the gap that is required to deliver high quality service to customer as oppose to unsuccessful service delivery. The first gap exists between customer expectation and management perception on service delivery. This gap is due to difference in customers opinion and management view on type of service offered. The second gap exists between management perception and quality service. Sometimes service providers know what clients want but deliver lower standards service. GAP 3 exists between service quality and service delivery. For instance, doctors office has the required standards yet others staffs using the same office are not trained according to the standards required in that position. GAP 4 exists is between external communication and service delivery. Marketing team show the customer the kind of service they offer though the customer expectation according to advertisement is not met. GAP 5 exists between customers experience on service and the expected service creating misunderstanding on the service quality (Frost Kumar 2000, pp 358-377). Relationship marketing refers to marketing strategy that employs customers loyalty, interaction and engagement. According to Miles (2012, pp 285298), relationship marketing ensures there is strong connection between customer and the business through direct provision of services and long-term customer relationship. This implies that relationship marketing promote open customer communication that facilitate connection between customer and the business offering services. As cited by Michael (2007, pp 327334) the overall aim of relationship marketing is to acquire, retain and build relation with customers. The key objectives of relationship marketing include consumer personal value, social influences, consumer segments, and experiential marketing Personal value with respect to product is the beliefs about on product against another product and influences personal purchasing power. Customer personal value is connected to individuals value and influence regarding to purchase behavior and product evaluation. In relationship marketing business establish relationship with customer putting into consideration personal value. Moreover, Goods-Based (2013, pp. 324-35) shows that personal value of customer is important for business since it determines the ability of customer to purchase a product. Social influence on the other hand is connected the social compliance and normative influence brought by peer or reference group. Individuals social group play an important in their ability to purchase certain product. Consumers segmentation comprises of interaction between customers need, behavior and characteristic. Customers needs are consumers demand and their ability to purchase certain product at a price. As cited by Booms and Bitner (1981), customers behaviors are physical, psychological and cultural responses towards a product or service. Customers characteristics are behavioral system of a particular customer that also include their preference and belief about a product. Some other relationship marketing elements includes experiential marketing, Employee empowerment and Social marketing. Experiential marketing refers to the marketing strategy that focuses customer engagements and encourages participation of customers. According to Gummesson (2006, pp. 339-353), experiential is also called engagement marketing. Elements of experiential include customers experience, consumption experience, customers characteristics and eclectic methods. Firstly, customers experience is the emotional and satisfaction experience that contributes largely contributes to customers product or service usage. Physical experience and cognitive experience play role in customers satisfaction on product. Secondly, consummation experience according to Achrol and Kotler (2006, pp. 320333) is critical for engagement of customers that makes firm credible in provision of service. Finally, customers characteristic such as beliefs and cultural behavior about a certain product influences customers participation. Employee empowerment Employees need to be empowered psychologically and motivational empowerment. Structural and relationship approach is important in empowerment to motivate employees in their marketing experience. Psychological empowerment involves self efficiency, self determination and meaning. Employee motivation is important for determine their relationship with customers. This is part of experiential marketing that makes employees to participate fully on marketing engagement. Finally, consumers are also part of empowerment through encouragement that influences their behavior in purchasing products (Schmitt 1999, pp 53-67). Social marketing includes all marketing activities with the aim achieving behavioral goal with social good. Social marketing is also associated with societal marketing, sustainable practices and business ethics. Firstly, relationship marketing is connected to societal marketing that allow customers participation on awareness of impact of certain product or service on society. Secondly, sustainable practices are actions of a firm that protect resources and environment from depletion. Thirdly, business ethics are behaviors that are according to acceptable code of conduct (Nelson 2007, pp 98106). Relationship marketing is influence by factors that determines its effectiveness in marketing of services or products. Some of the factors that influence relationship marketing include increase in technology, environmental pressure, growing retail power. As explained by Baron, Conway and Warnaby (2010) Increase or growth in technology has highly influence the marketing activities as customer can connect to business over the internet. Some of the current technological growth that affects marketing include: computerized ordering and inventory, internet, e-commerce. Firstly, with the current technology customers are able to order goods and services using computerized automated systems. Secondly, internet has offers marketing alternative such as email marketing and internet advertisement. Thirdly, e-commerce also known as online shopping is selling and buying of goods and services over the internet. Environmental pressure due to continuous use of resource available is influencing development and use of marketing strategies. Many businesses have come up with marketing strategies that are environmental sustainable in nature. As many firms come up the growth of market has resulted in increase environmental pressure. Sustainable environmental practices aim to manage environment to avoid available resources from being depleted. In conclusion, environmental pressure influences the type of marketing strategy that is used to market goods or services (Gummesson 2006, pp. 339-353). Wheel of loyalty model is relationship marketing model that is concerned with building of customer relationship. The wheel of loyalty model is founded on three key components; these are build a foundation for loyalty, create loyalty bonds and reduce churn drivers. Firstly, building a foundation for loyalty of customers entails selecting the right customers on the target market segment followed by service delivery beyond the customers satisfaction. Secondly, this is the component of wheel that shows the actual bond between the business and customers. The business may decide to give loyalty rewards to customers to build up bonds. Thirdly, drivers to losing customers and replace the lost customers to the business (Frederick 2001, pp 8485). Wheel of loyalty Service quality is connected to relationship marketing since there is interconnection of service marketing that entails marketing services rather than products. Service offered to customer is aided be some service marketing elements. Service businesses or companies have some marketing strategies that incorporate marketing of services offered by certain firm. According to Martinez and Martinez (2007, pp 60-72), services quality interacts to relationship marketing through interconnection of marketing service management and network and service process. Marketing service management composes of the interaction between marketing network and service process. Marketing service management concerns with the relationship between service delivery and networks. As explained by Gronroos (2007, pp 1) studying of networks and service provisions help in development of good marketing strategy for high quality service provision. Interactions involve customer or client and service provide through establishing of relationship with customers. Creating sustainable customer relationship enhances service delivery and performance of business or service quality. Networks on the other hand refer to service networks that are interlinked determining the quality of service offered to customer. Service process includes giving services to subjective customers depending on time, human resources and customers perception about the service or business (Baron, Conway Warnaby 2010). Service marketing is use of marketing strategies to market services offered as oppose to products. Service marketing incorporates social marketing as an element of relationship marketing in marketing of services. Services may include educational, financial and leisure that are marketed using relationship marketing strategies. According to Booms and Bitner (1981), every business has service offered to customers. Marketing of services has been enhanced by technology, need specialization, privatization of firms, competition, deregulation, quality of life changes and franchising growth. The above factors interconnected forming a system that enable service growth thus service quality. As Miles (2012, pp 285298) concludes, service marketing employs relationship marketing to establish good customer participation that result in service quality. Though there has been augments on intangibility of services, some firms interconnect service quality to service marketing through relationship marketing. Service marketing strategy therefore combines the marketing mix and added dimensions to improve on the quality of service (Achrol and Kotler 2006, pp. 320333). The traditional marketing mix is added dimensions that include service delivery and other Ps. The traditional marketing mix composed of place, price, product and promotion. The dynamic marketing in the current relationship marketing add another Ps to the traditional marketing mix to enhance service quality. These Ps are people, physical evidence, processes, political power and public opinion. Firstly, people are the key participants in the product marketing or service marketing that ensures there is customers participation in the marketing program. Secondly, physical evidence such as equipments, office and people are evidence that make service tangible and eliminate customer doubt or insecurity. Thirdly, service delivery processes is another part of marketing mix that ensures that there are system that is followed to deliver service to clients. Political power governs the current marketing environment and need to be considered before designing marketing mix. Finally, public opinion also forms part of the current marketing mix and gives the customer power to participate in mar keting when there is good reputation of the firm (Booms and Bitner 1981). Additional dimensions to marketing mix Marketing mix that functions currently has some added dimensions such as service delivery and maintenances. The marketing mix that incorporates relationship marketing and service quality is expanded to include other forms of services such as installation, delivery, maintenance, billing, customer education and customer complainants. These services are meant to increase the quality of products and service that is offered to customer (Schmitt 1999, pp 53-67). Marketing triangle is interactive model that connect service delivery to relationship marketing. Marketing triangle is analytical model that connects the three important components of marketing model such as external marketing, internal marketing and interactive marketing (Frederick 2001, pp 8485). At the top of the marketing triangle is the business organization that offers products and services, at the two bottom corners of triangle are employees on one corner and customers on the other corner. Firstly, internal marketing form the side of triangle that connect organization and employees. The interaction exists between company and employees are on training, customers satisfaction techniques and business goals. Secondly, external marketing forms the side between organization and customers. Components of external marketing are advertisement and social media interaction. Thirdly, interactive marketing is the bottom line that connects customers and employees. The interactive marketing r elates to employees service delivery to customers using relationship the marketing strategy (Miles 2012, pp 285298). Coca Cola Company is a very innovative company that has exploits relationship marketing. One of the most interesting bits with Coca Cola involves making service tangible as reflected on Coca Cola logo. Coca Cola Company launches a friendly twist marketing initiative where the marketing team traveled to Colombian college to conduct relationship marketing. During the Coca Cola relationship marketing each fresh college student receives a bottle of Coke. Opening of bottle cap need click with another bottle cap thus students had to collaborate to open bottle cap. Collaboration between students initiated conversation between strangers to remove loneliness. In the marketing strategy makes a cool environment that is associated Coca-Cola logo. The viewers therefore attach positive bonds that are developed through sharing bottle of coke together. Coke therefore plays an important role in making fresh student meet and reduce the awkwardness of first day of college. This implies that coca cola i s associated with friendship, joy and long-lasting memories (Jean Diaz 2016). Starbucks social relationship marketing Starbucks launched online social media-based scavenger hunt program that connects its popular pumpkin spice latte drink to fans in 2014. The company gives consumer first taste of the brand through customer interaction in its twitter handle @TheRealIPSL starting august of 2014. The Starbucks customers were then guided through secrete passcodes called FIRST PSL. By visiting local Starbuck store guest could get beverage early using the passcode. Starbuck ideally receive more customers through this connection and made a huge sale. Many funs submitted 62000 photos in the social media that include their excitement thus Starbuck became the best beverage seller. Starbuck therefore used its social relationship marketing into sales opportunity through creating personality for beverage and interaction with its excited fans on major social media (Starbuck.com). Conclusion Service quality is clearly the quality of produced services and is connected to customer through relationship marketing. There are many models that explain service quality such as gap model. Relationship marketing on the other hand presents strategies that allow participation of customers in the marketing. Marketing triangle explains the relationship marketing through connection between customer, employees and company. Finally, customer wheel of loyalty is the marketing model that combines service quality and relationship marketing. A good example of the relationship marketing is the Coca Cola relationship marketing such as Coca Cola Twist. References Achrol, R, S. Kotler, P, 2006, The Service-Dominant Logic for Marketing: A Critique, in R.F. Luschand S.L. 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