0 The Factors Influencing the Loyalty Programs Effect in Taiwan Department Store Chin-Hsiung Lin, Jung-Chuan Lu, and Kuang-Hui Chiu Dept. of Business Administration, National Taipei University Corresponding author: Chin-Hsiung Lin Email:email@example.com 1 Abstract Loyalty programs are important tools for driving customer retention in many industries, including airlines, credit card companies, retail and hotel chains. Generally the loyalty program can coordinate the company CRM (customer relationship management; CRM) strategy and improve customer long-term relationship. Hence it is very important to use the loyalty program to enhance the customer loyalty. Despite the large number of firms offering loyalty programs and their high levels of consumer membership, many loyalty programs have not been successful. Customer loyalty is only to establish the possibility of feedback in the financial aspects and the customers are unable to be satisfied with psychological and sociological demand. Further loyalty programs can only serve as a disguised form of price promotion. As a result, when a retail store develop loyalty program, in addition to consideration of the content of program, they have to be taken into accounting the customer satisfaction and brand equity. Thus the three independent variables together to consider the analysis to the complete understanding of the impact of loyalty program effectiveness. This article also makes the assumption that customer loyalty for the indicator of loyalty program effectiveness. On the one hand, based on past behavior to understand the customer loyalty, on the other hand, it can also predict future customer behavior on the attitude and intention. Finally, in the empirical research, data from the memberships of the loyalty program in Taiwan some chain-like Department store (S-department store) as the questionnaire data source. Due to this department store more than 25% market share, it has the industry representative, and loyalty programs have been implemented. Positive results should be available for industry reference. Key words: loyalty program, customer satisfaction, brand equity, loyalty intention, customer loyalty 2 1. Introduction We define a loyalty program as an integrated system of marketing actions that aims to make member customers more loyalty (Sharp & Sharp, 1997). Customer loyalty is an important strategic objective of managers around the world. A worldwide survey of chief executive officers conducted by the Conference Board (Bell, 2003) found that customer loyalty and retention was the most important challenge that chief executive officers believed they faced. Loyalty programs are important tools for driving customer retention in many industries, including airlines, credit card companies, and retail and hotel chains. Loyalty customers are reported to have higher customer retention rates, commit a higher share of their category spending to the firm, and are more likely to recommend others to become customers of the firm (Zeithaml, 2000).There are a number of potential benefits to a well-run loyalty program beyond increased loyalty, lower price sensitivity, and stronger attitudes towards brand and retailers. These include access to important information on consumers and consumer trends, higher average sales (due to cross-selling and up-selling opportunities), greater ability to target special consumer segments, and increased success in implementing product recalls. Recently, due to information technological development, the customer loyalty program should contain the following three essential factors: Information technology and database utilization, customer information/knowledge insight, as well as direct and personalized customer communication. For example, Tesco has used data from its loyalty program database to analyze the effectiveness of its advertising. According to a dunnhum by executive, ―Not only can we see the effect of an advertisement on sales. We can also see what type of customer it won over.‖ Tesco also used its loyalty card data to develop its Finest private-label line (which includes items such as duck pâté and cashmere sweaters) when its Club card data showed that its higher-spending customers were not purchasing wines, cheese, and fruit from Tesco ( Berman, 2006). 1.1Loyal Program Hope to Maximize Customer Lifetime Value The customer lifetime value is by the enterprise viewpoint appraisal the profit sum total which lifetime can obtain from a customer. The enterprise should focus on the development of the existing customer long-term relations. The loyal customer’s price sensitivity is low, easy to produce repurchase and can develop the new customer for the product with word of mouth. To retain the existing customer's cost usually is lower than gains the new customer. To increase the existing customer retention rate usually can bring more profits than to attract the new customer. 3 According to the 80/20 principle, the followings are confirmed from many enterprises’ sale data. In an enterprise's total sales volume, probably some 80% comes from its 20% customers. Therefore the enterprise should focus the limited resources reasonably to this 20% customer. Certainly, the 80 and 20 principle proportions are different slightly in the different professions. For example: Tesco’s strongest 5% purchasing power customers have contributed 20% sales volumes, but the bottom 25% customer's consumption quantity are only equal to the sales volumes 2%. Therefore the enterprise may act according to the loyalty program to adjust its marketing resources to the different customers. 1.2 Loyalty Programs Are Everywhere The most current form of customer loyalty programs started in the 1980s with the introduction of frequent flier programs by airlines. After the Airline Deregulation Act of 1978, many airlines struggled to obtain a competitive advantage. In 1981, American Airlines introduced the first frequent flier airline program—A-Advantage, which sought to reward loyal customers through utilizing the airline’s excess capacity. According to Web Flyer, there are 89 million members of airline frequent-flyer programs in the world, 74 million of them in the USA alone. The Food Marketing Institute reports that more than 76 percent of all US grocery retailers with 50 or more stores (Capizzi, & Ferguson, 2005).The U.S. loyalty marketing industry have been estimated as a $6 billion industry with 2,250 separate loyalty programs. Loyalty program usage is similar in the United States, UK, and Canada. One source estimates that 92 percent of UK consumers participate in a loyalty program, with 78 percent being members of two or more programs. One explanation for the lack of success of many loyalty programs is the extent to which consumers are members of multiple loyalty programs. When consumers have the options of collecting points in loyalty programs where the ease of making qualifying purchases, the rewards, and the redemption requirements are similar (Berman, 2006). 1.3 Loyalty Program Trends for the 21st Century According to Capizzi and Ferguson (2005) identified five key loyalty-marketing trends for the twenty-first century that can serve as guideposts as create, expand and revamp your loyalty and customer relationship management (CRM) strategies in the new century: Trend 1: Ubiquity. As we approach the midpoint of the decade, the loyalty marketing industry has reached a state of what can only be termed ubiquity. Trend 2: Technology enables, but imagination. As in most mature markets, new technologies are finding fertile grounds for innovation and productivity gains within 4 the loyalty marketplace. Smart cards, RFID, real-time point-of-sale (POS), wireless, the worldwide web and the third generation of loyalty ―rules engines‖ all enter the twenty-first century with proven cases of success in enabling some form of reward and recognition, somewhere in the world. Only with innovation it creates the new business model. Trend 3: Coalition lite. It means different industry forms an alliance. The coalition model of loyalty – three or more companies banding together to share the branding, operational costs, marketing expense and data ownership of a common loyalty currency – has become the predominant loyalty model outside of the USA. Trend 4: Customer analytics rule Due to the retails face huge customer trade material. However, while these technologies offer great hope to enable, it is their creative and imaginative applications that will win out in the end To use specialty and creativity method to analyze and dig the insight of the customer behavior, then establish a competitive marketing strategy. Trend 5: The Wow! Factor. The retail provides the customers the unique experience. Regarding the loyal customer, the retail should not only provide the finance back coupling, but also alliance with different industry cooperation to provide the unique experience for the customer, this is called ―WOW! Factor‖ (Capizzi & Ferguson, 2005). 5 1.4 The Type of Loyalty Program In addition, according to research Berman (2006) identify four types of loyalty program: Program Type Characteristics of Program Example Type 1: • Membership open to all customers Supermarket programs Member receive • Clerk will swipe discount card if member forgets or does additional discount not have card at register • Each member receives the same discount regardless of purchase history • Firm has no information base on customer name, demographics, or purchase history • There is no targeted communications directed at members • Membership open to all customers Local car wash, nail salon, Type 2: SuperCuts, Airport FastPark, Members receive 1 free • Firm does not maintain a customer database linking PETCO when they purchase n purchases to specific customers units Airlines, hotels, credit card Type 3: • Seeks to get members to spend enough to receive programs, Staples, Office Depot Members receive rebates or qualifying discount points based on cumulative purchases • Members are divided into segments based on their Tesco, Dorothy Lane Markets, Type 4: purchase history Wakefern’s ShopRite, Giant Members receive Eagle Supermarkets, targeted offers and • Requires a comprehensive customer database of HarrisTeeter, Winn-Dixie, mailings customer demographics and purchase history Harrah’s, Hallmark Today, competition is so intensive among different industries with all kinds of methods. But to strive for customer's loyalty is at the end the key for an enterprise’s long-term operation. Only when an enterprise could obtain certain amount of loyal customers, it creates long-term, stable income and profit. The implementation of loyalty program is the most concrete method to improve customer loyalty. If this program cannot enhance the customer consumer loyalty effectively, not only the enterprise wastes resources but also pushes aside other marketing tool and will lead the enterprise competitive power to decline. Therefore many scholars then begin developing theoretical models that can estimate loyalty program implement, whether it can affect a consumer to become more loyal. This research reorganizes the beforehand research results. AS a result, it is to develop an adapted model that includes both endogenous and the exogenous factors influencing effectiveness. 6 2. Literature Review 2.1 Loyalty Programs We define loyalty programs as long-term-oriented programs that allow consumers to accumulate some form of program currency, which can be redeemed later for free rewards. An airline’s frequent-flier program represents a typical loyalty program. By focusing on long-term programs, we exclude promotional programs that offer only one-shot, immediate benefits, such as instant-win scratch cards and grocery stores’ discount card programs. Program-related factors include both program design and management. From the design perspective, a loyalty program needs three key specifications: (1) participation requirements, (2) point structure, and (3) rewards (Yuping & Rong, 2009). The effectiveness of a loyalty program is likely to depend on its design. Loyalty programs provide members with benefits such as discounts and saving rewards, which make these programs popular among consumers. Many retailes have introduced loyalty programs to enhance customer loyalty (Kumar & Reinartz, 2005). This evidence may relate at least partly to the fact, expenditure differences between members and non-members (van Heerde & Bijmolt, 2005) may be partly driven by the most loyal customers into the loyalty program (Leencher, Harald, Tammo, Bijmolt, & Smidts, 2006). Further, consumers are often regular buyers at different companies. The relevant issue is that in a model with customer loyalty as the dependent variable and loyalty program content as an independent variable .We must identify variables that influence the customer loyalty factors. Loyalty programs enhance customer loyalty through several economic, psychological and sociological mechanisms (Leencher et al., 2006). 2.2 Economic Benefit From an economic perspective, loyalty programs provide members with rewards as economic benefit. The key economic design elements of the loyalty program are its discount and saving features (Yi & Jeon, 2003). The program with a discount feature gives price discounts on certain items of the assortment for loyalty program members only. In this way, a discount feature supplies member customers with immediate rewards for their purchases (Yi & Jeon, 2003). A program with a saving feature gives loyalty program members saving points, dependent on the monetary amount spent at the company. A program member can redeem these points for a reward, such as a free product, after reached a saving threshold. Further, a saving feature creates switching costs (Zhang, Krishna, & Dhar, 2000): if a consumer stops purchasing s/he loses the accumulated saving points. A saving feature stimulates purchases of the entire assortment and not only of specific items (as the discount feature does). Obtaining 7 saving rewards requires considerable consumer effort, so that we expect stronger feelings of uniqueness and pride. On the other hand, customers prefer to obtain a reward immediately instead of getting it sometime in the future (Yi & Jeon, 2003). Regarding the issuing of reward points, and find that though point threshold stays the same, the way points are issued over each purchase (ascending points versus same points per purchase) affects consumers’ choices. This suggests that point issuance is not a nuisance to consumers and should not be determined arbitrarily. Point threshold is another important aspect of point structure, and it has been tied in to program relevance. If the point threshold for a free reward is too high, it will be considered unobtainable for the average consumers and thus will be dismissed as irrelevant (Yuping, & Rong, 2009). 2.2 Non-economic Benefit 2.2.1 Psychological Benefit Several psychological drivers enhance customer loyalty. First of all, consumers appreciate rewards -- not only in an absolute sense, but also relative to other consumers (Feinberg, Krishna, & Zhang, 2002). Knowing that you are provided with better value than others creates feelings of being a preferred or special customer, and thereby further stimulates loyal behavior. Second, loyalty program incentives can induce smart shopper feelings (Kivetz & Simonson, 2002), and pride about being economical. The effort to obtain the reward may even justify luxury consumption. Third, existing research shows that customers overvalue the rewards they obtain, as they tend to maximize the value offered by the medium (the loyalty program), rather than the final outcome. This implies that customers aim to maximize discounts and saving points, whereas it would be rational to assess the utility of the final products and rewards minus the disutility of their costs. 2.2.2 Sociological Benefit Loyalty programs can also have sociological effects. The need to belong to groups is a fundamental human motivation, and identification with commercial organizations is intensifying due to the growing centrality of consumption and materialistic desires in society. Strategies to develop customer identification are especially beneficial in industries where consumers purchase frequently, and differentiation between suppliers is low. DeWulf, Odekerken-Schröder, and Iacobucci (2001) show for relational investments in consumer-firm relationships the existence of a reciprocity norm: customers evoke obligation towards those who treat them well or provide value. In addition, customers who become members of the loyalty program are likely to identify more strongly with the company, because the membership relates them to a group of 8 privileged customers (Oliver, 1999). Hence, loyalty programs can create affective commitment, loyalty programs not only buy, but also earn, customer loyalty (Edvardsson, Johnson, Gustafsson, & Strandvik, 2000). 2.3 Switching Costs Another economic driver consists of switching costs, because loyalty program members lose value if they stop purchasing from the retail store. The value consists of saving points or a purchasing track record that ensures privileges. Some studies have used the switching cost argument as a rationale for the existence of loyalty programs. Because of switching costs, a loyalty program creates a certain degree of calculative commitment or stickiness in customers’ relation with the company. Calculative commitment can be defined as to which consumers perceive the need to maintain a relationship, given the significant termination or switching costs associated with leaving (Geyskens, Steenkamp, Scheer, & Kumar, 1996). When loyalty programs are involved, these costs increase switching costs can be defined as time, money, and effort associated with changing service providers. In contrast to loyalty programs that are designed to create a future orientation and increase switching costs over the long run, these short-term promotions are more likely to create sudden changes in sales without producing sustained customer loyalty or revenue potential for a firm. Research has shown different mechanisms underlying these one-shot, immediate reward programs compared with long-term loyalty programs that offer consumers delayed rewards (Yi & Jeon, 2003; Zhang, Krishna, & Dhar, 2000). Confirming this view, Leenheer and Bijmolt (2008) find that delayed rewards in a loyalty program have a significant impact on customer loyalty (Yuping, & Rong, 2009). The goal of such programs is to enhance customer relationships by offering high value to profitable market segments (Bolton, Kannan, & Bramlett, 2000; Kumar & Shah 2004).Reward programs are also effective in increasing customers’perceptions of switching costs, thus further fostering customer retention (Bendapudi & Berry, 1997;Guiltinan, 1989). 2.4 The other’s Costs Further, the Economic costs are program membership fees. Participation modes can be differentiated by voluntary versus automatic enrollment and free versus fee-based membership. Programs also differ in terms of how convenient it is for consumers to participate. In addition, customers may face non-economic costs: loss of privacy. A customer who enters a loyalty program usually has to fill out a subscription form in which s/he must provide personal data. A company can use this information in combination with purchase data for direct mailings or to apply marketing. Some customers may not be willing to provide personal information, especially if this concerns personal identifiers such as 9 address information (Phelps, Nowak, & Ferrell, 2000; Noble & Philips, 2003). Hence, some customers may perceive potential privacy infringements of loyalty programs in general as a non-economic cost, leading to a decreased likelihood of loyalty program participation. Finally, most direct benefits accrue from the saving reward rate (percentage of money amount spent that is reimbursed as a saving program reward) and the discount rate (percentage immediate discount on all purchases) that the program offers. But customer loyalty is not simply the intent of the impact of loyalty programs, customer loyalty program about the exogenous variables, there are two types: one is the customers satisfaction for the purchasing experience of the store (Carrillat, Jaramillo, & Mulki, 2009). The other hand, the brand equity for the retail store, these two factors are the result of long-term efforts is key success factors for many businesses, (Vogel, Evanschitzky, & Ramaseshan, 2008; Liu & Yang, 2009). 2.5 Customers Satisfaction Customer satisfaction has traditionally been regarded as a fundamental determinant of long-term consumer behavior (Oliver, 1980; Yi, 1990). Much of the research on customer satisfaction and customers’ actual behavior has focused on the relationship between satisfaction and retention. We conceptualize customer satisfaction as a cumulative, global evaluation based on experience with a firm over time. According to researcher ―both practitioners and academics have accepted the premise that customer satisfaction results in customer behavior patterns that positively affect business results.‖ But another one argues that ―customer satisfaction has come to represent an important cornerstone for customer-oriented business practices across a multitude of companies operating in diverse industries.‖ Finally, Mittal and Kamakura (2001, p.131) added that ―customer satisfaction management has emerged as a strategic imperative for most firms.‖ Recent empirical research has also shown that satisfied customers are fewer prices sensitive and willing to pay a higher price premium (Homburg, Koschate, & Hoye, 2005). By virtue of premium prices and customer loyalty, we believe that a company with satisfied customers can obtain higher revenues from its existing customers and reduce its dependence on costly marketing communications programs. By far, the most commonly used customer perceptual metric by managers is satisfaction (Gupta & Zeithaml, 2007). Zeithaml et al., 2006 (p. 170) observe that ―because it is generic and can be universally gauged for all products and services (including nonprofit and public services).‖ Even without a precise definition of the term, customer satisfaction is clearly understood by respondents, and its meaning is easy to communicate to managers.‖ With regard to satisfaction’s relationship to customer behavior, research has shown a link been satisfaction and customer retention. 10 This emphasis is largely the result of early research, which identified customer retention as a key driver of firm profitability (Reichheld, 1993, 1996; Reichheld & Kenny, 1991; Reichheld, Markey, & Hopton, 2000; Reichheld & Sasser, 1990). Capraro, Broniarczyk, and Srivastava (2003, p. 164) observe that ―today, most firm’s programs to control customer defections center heavily on the management of customer satisfaction.‖ Research appears to support this approach. Many studies have linked customer satisfaction to purchase behavior (Anderson & Sullivan, 1993; Bolton, 1998; Jones & Sasser, 1995; LaBarbera & Mazursky, 1983; Loveman 1998; Mittal & Kamakura, 2001; Newman & Werbel, 1973; Rust & Zahorik, 1993; Sambandam & Lord, 1995). 2.6 Brand Equity Brand equity is the subjective appraisal of a customer’s brand choice. It is the value added to a product or service as a result of prior investments in the marketing mix (Keller, 1993; Rust, Zeithaml, & Lemon, 2000). If customers judge a particular brand as strong, unique, and desirable, they experience high brand equity (Verhoef, Langerak, & Donker, 2007). Because a brand attaches additional value to a product or service, it increases the value compared with a non-branded product or service. If customers perceive a brand as having a favorable and strong image, it could positively influence their likelihood of choosing that particular brand rather than competing offerings. In a similar a favorable perception of a brand could have an impact on affective commitment. Rust, Zeithaml, and Lemon (2000) state that brand equity is likely to influence a customer’s willingness to stay, repurchase probability, and likelihood to recommend the brand. Thus we measured brand equity, which focuses on the overall perception of brand image, with four items, using the scale that Verhoef, Langerak, and Donkers (2004) introduced, with an additional item pertaining to the liking of the brand. We used ―likable‖ because of its demonstrated importance in brand equity measures and as a result of our qualitative. (Vogel, Evanschitzky, & Ramaseshan, 2008) 2.7Loyalty Intention Loyalty intentions can be viewed as a customer’s psychological disposition toward an object. In a purchase situation, loyalty intentions reflect favorable attitudes toward the brand or firm (Dick & Basu, 1994). The drivers of loyalty are complex and dynamic, and they change and evolve over time. Several specific psychological antecedents motivate loyalty. Consistent with Taylor, Hunter, and Longfellow (2006) marketing models trying to explain the evolution of loyalty need to consider not only cognitive aspects but also affective aspects. We define loyalty intentions as customers’ behavioral intentions to continue buying at a retail store in the future, accompanied by a deeply held commitment to that store. We adapted the scale from Zeithaml, Berry, and 11 Parasuraman (1996) behavioral intention battery and included two items. Researchers have long used repurchase intentions to help predict future purchasing behavior. 2.8Costomer Loyalty The main distinction in loyalty measures is between attitudinal loyalty and behavioral loyalty (Dick & Basu, 1994). But will satisfy will only affect the manner (Olivor, 1997). Attitudinal loyalty reflects the consumer’s psychological attachment toward a particular provider or brand .One such question pertains to how loyalty is conceptualized and measured. Researchers and managers have become increasingly interested in consumers’ share of spending as a behavioral measure of customer loyalty. Zeithaml (2000) proposes a model in which customer retention leads to firm profits in one of four ways: (1) lowering costs to service customers, (2) the ability to charge premium prices, (3) word of mouth, and (4) increased volume of purchase (i.e., increased share of wallet). However, Reinartz and Kumar (2000, 2002) find that customer retention does not result in loyal customers costing less to serve, paying higher prices for the same bundle of services, or marketing the company through word of mouth. Rust, Lemon, and Zeithaml (2000) also note that the way researchers have treated customer retention does not accurately portray customers’ actual behavior patterns, observing that researchers frequently treat customers who defect as ―lost for good.‖ They argue that a ―more realistic scenario‖ is that customers may leave and return and be either serially monogamous or polygamous in terms of the number of firms with which they conduct business in the category. The observation that consumers continuously leave and return to a product, service, or institution over a period of time is consistent with commonly In addition, which links satisfaction to retention as (1) satisfaction to (2) share of wallet to (3) revenue to (4) profit. Although longitudinal examinations of the effect of customer satisfaction on other performance measures have found a positive relationship to customer retention, firm revenues. 3. Conceptual Framework and Hypotheses According to literature discussion loyalty program, customer satisfaction, and brand equity are influential to the customer loyalty intention. Further the loyal intention actually is leader factor of the customer loyalty; therefore this research reorganizes the following research construction and the research hypothesis. 12 3.1 Conceptual Framework Customer Satisfaction (CS) Perceived Level (PL) Expected Level (EL) Loyalty Program (LP) Customer Loyalty (CL) Perceived Switching Cost (PSC) Repurchasing Willing (REW) Loyalty Intention Repurchasing Behavior (REB) Perceived Loss of Privacy (PLP) (LI) Word of Mouth (WOM) Brand Equity (BE) Brand Awareness (BAS) Brand Loyalty (BL) Perceived Quality (PQ) Brand Association (BAS) Other’s Brand Assets (OBA) Framework Structure 3.2 Development of Hypotheses We tested the variables referred to in the four hypotheses for the model. 3.2.1Customer Satisfaction and Loyal Intention Seiders and colleagues (2005, p.26) state that ―marketing literature consistently identifies customer satisfaction as a key antecedent to loyalty and repurchase.‖ Repurchase intentions represent the customer’s self-reported likelihood of engaging in future repurchase behavior, whereas repurchase behavior is the objectively observed level of repurchase activity. The default expectation is that satisfaction positively influences both repurchase intentions and behavior. Customer loyalty has been defined and measured as a behavior operation of customer loyalty included purchase intention indicators as well as actual purchase measures. However, others have noted that customer loyalty is an attitude that reflects a long-term commitment of the customer to the organization. Previous research has found support for the customer satisfaction to attitudinal loyalty relationship. Furthermore, customer satisfaction is often viewed as an antecedent of attitudinal loyalty. A well-supported concept in services is that attitudinal loyalty is formed from the accumulated satisfaction that results from multiple positive service experiences, which links satisfaction to retention as (1) satisfaction to (2) share of wallet to (3) revenue to (4) profit. Although longitudinal examinations of customer satisfaction effect have been found a positive relationship to 13 customer retention and firm revenues. According to Carillat, Jaramillo, and Mulki (2009) aims at 276 customer's research to point out that the customer satisfaction has the positively influence to the purchase intention and the loyal attitude. The effects of customer satisfaction on customer behavior and business results are widely believed to be nonlinear and asymmetric. The nonlinearity and asymmetry of the relationship between customer satisfaction and repurchase intentions has been confirmed in several studies. Mittal and Kamakura (2001) find that this nonlinear and asymmetric relationship also holds true for repurchase. Satisfaction is strongly influenced by customer expectations. Researchers have found multiple expectation thresholds. As expectations converge with respect to what is expected to happen, what should happen, and what would happen in the ―ideal‖ situation, firms achieve greater competitive positioning. This implies that there are expectation thresholds based on the consistency of delivery that must be met for customers to consider a firm which links satisfaction to retention as (1) satisfaction to (2) share of wallet to (3) revenue to (4) profit. Although longitudinal examination of the effect of customer satisfaction on other performance measures have found a positive relationship to customer retention and firm revenues. Therefore this research establishes the first hypothesis: H1: Customer Satisfaction has a positive impact on Loyalty intention. 3.2.2 Loyalty program and Loyalty Intention Some studies found the loyalty program positive effects of retail loyalty programs on purchase behavior (Bell & Lal, 2003; Lewis, 2004; Taylor & Neslin, 2005). Because the customer participates in the loyalty program obtaining the benefit higher than the cost, therefore is willing to continue to repurchase. Further the customer continues to purchase, accumulates the more switching costs. Hence the customer will become the company long-term partner. The enterprise will also provide more incentives to improve customer relationship. According to the scholar Leencher, Harald, Tammo, Bijmolt, and Smidts (2006) use panel data from a representative sample of Dutch households who report their loyalty program memberships for all seven loyalty programs in grocery retailing as well as their expenditures at each of the 20 major supermarket chains. The results show that creating loyalty program membership is a crucial step to enhance share-of-wallet. They find a small positive yet significant effect of loyalty program membership on share-of-wallet. Therefore we establish the second hypothesis: H2: Loyalty program has a positive impact on Loyalty intention. 14 3.2.3 Brand Equity and Loyalty Intention The variety of definitions is demonstrated by Aaker’s (1996) approach reflecting brand equity as a business asset; Yoo, Donthu, and Lee’s definition ―as the difference in consumer choice between the focal branded product and an unbranded product given the same level of product features. Gil, Andres, and Salinas (2007) suggested that brand equity is closer to the concept of brand loyalty. Brand loyalty is a fundamental concept of strategic marketing and is generally recognized as an intangible asset. Successful brands create wealth by attracting and retaining customers as certain loyal customers may be willing to pay more for a brand. Brand equity has a strong impact on loyalty intentions (Vogel, Evanschitzky, & Ramaseshan, 2008). Depicts brand equity as something that can help a firm achieve financial outcomes by increasing consumers’ brand purchase behavior. Rust, Zeithmal, and Lemon (2002) pointed out that the brand equity has the possibility to let the visitor be willing to pause, buys again. Therefore the brand equity has the positive impact on loyalty intention. The research for the survey of the European 5694 customers during six months pointed out that brand equity positively influenced customer loyalty intention (Vogel, Evanschitzky, & Ramaseshan, 2008). Therefore we propose the following hypothesis: H3: Brand equity has a positive impact on loyalty intention. 3.2.4 Loyalty Intention and Customer Loyally Although many behavior control research pointed that is not all intentions can transform the behavior. But also has many research proofs, between the behavior intention and the behavior exists highly is being related (Vogel, Evanschitzky, & Ramaseshan, 2008). The considerable effort necessary to do so, between especially the intention (Self-Reported Behavior) describes (Armstrong, Morwitz, & Kumar, 2000). Further many research also pointed out that many independent variables influence customer loyalty (particularly loyalty behavior) is penetrates the loyalty intention the intermediary effect (Moderating Effect) (Yim, Tse, & Chan, 2008). Studies finding support for a positive link between intention and action are not without methodological biases. Most empirical studies consider the influence of loyalty intentions on self-reported behavior much stronger test of the intention–action link would be to relate loyalty intentions to actual purchases. To observe customer’s behavior have found a positive relationship. For example, Bolton, Kannan, and Bramlett (2000) show that repurchase probability rises by 1.67 times if intention increases by one point. Researcher emphasize that an increase of one standard deviation in purchase intentions (from a rank of .5 to a rank of .8), meaning a corresponding increase of .36 15 standard deviations in sales, translates to a $500 million increase in quarterly sales for accompany. A much stronger test of the intention–action link would be to relate loyalty intentions to actual purchases. However, some studies that combine survey data with observed behavior have found a positive relationship. Therefore we propose the following hypothesis: H4: Loyalty intention has a positive impact on customer loyalty. 4. Research Setting and Data Collection In this research, data is gathered via questionnaire in Taiwan some chain-like Department store customers with the member card. After the customers paying up, ask them to fill out this questionnaire. The sample will comprise 1100 respondents randomly .We will use the data to exam the hypotheses, to weigh the customer loyal validity, and to take narrates the statistics, the related examination, the t-test, the regression analysis and so on. 4.1 Questionnaires All items were measured on 5-point Likert-type scale, ranging from 1=strongly disagree to 5=strongly agree unless otherwise stated. Loyalty 1. I fell stronger connected to the S-department store of which I hold a loyalty card. programs design 2. Having a loyalty card makes me fell like a regular customer. 3. I prefer loyalty program over lower price. 4. I enjoy participation in loyalty or saving programs. 5. If S-department store doesn’t have a loyalty programs, I miss important benefits. 6. Loyalty and saving programs offer attractive benefits. 7. I am paying more attention on special offers because of the loyalty card. 8. The registration systems of loyalty programs infringe on my privacy. Customer 9. How well has (S-department store) met my expectations? 10. How much I agree with the statement (S-department store) is satisfaction worth what I pay for? Brand equity 11. S-department store is a strong brand . 12. S-department store is a attractive brand. 13. S-department store is a unique brand. 14. S-department store is a likable. Loyalty 15. I will repurchase at this S-department store. 16. This is the department store that I prefer over others. intention Customer 17. I will recommend S-department store products and services to your associates. loyalty 18. I will keep on being a member of S-department store. 16 5.Conclusion Loyalty programs can serve different goals, such as retaining customers, increasing spending, and gaining customer insights. Therefore, each program should have its own unique set of success measures depending on its intended goals. In this paper, we identify factors influencing the effectiveness of loyalty programs in Taiwan department store. 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