How effective are loyalty reward programs in driving share of wallet?

Abstract

This study, set in a credit card context, examines the impact of loyalty programs on share of wallet and explores the moderating role of attitudinal loyalty on this relationship. The authors are particularly interested in two characteristics of reward programs: their perceived attractiveness and perceived switching costs between loyalty programs. Their findings suggest that perceived switching costs are highly effective in driving share of wallet at low rather than high levels of attitudinal loyalty, and only when combined with an attractive reward program. The attractiveness of a reward program, on the other hand, has a positive impact on share of wallet regardless of the level of psychological attachment to the company. These findings are particularly important for service providers in markets characterized by undifferentiated product offerings and low perceived switching costs between service providers. © 2007 Sage Publicaitons.