Impact of credit card loyalty initiatives on high income earners in South Africa
Date
2014-02-19
Authors
Jasmath, Pranisha
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Abstract
The purpose of this research was to determine whether credit card rewards and other value added benefits have an impact on the lifetime duration and profitability of credit card holders in the High Income segment of the South African market.
It is well known that companies across various industries implement loyalty initiatives with the aim of encouraging increased and repeated spend which falls under the realm of customer relationship management. Specifically in the financial services industry, loyalty rewards have almost become a standard issue within the credit card business and consumers have come to expect rewards on their credit card purchases (Ferguson & Hlavinka, 2007a). The aim of the research was to determine if these loyalty initiatives had the intended impact in a segment of the market that makes up an exceptionally small proportion of the overall South African population i.e. the high income segment, defined in this research as individuals earning greater than one million rand per annum. Generalised Linear Model regression was used on an extract of data from one of the big four banks of South Africa to determine the impact that Loyalty Participation had on the lifetime Duration and Profitability of High Income earners as well as to compare High Income Earners to Lower Income Earners. High Income Loyalty Participants were found to have a higher lifetime Duration than non-Loyalty Participants and Active Loyalty Participation was found to have an even greater impact. High Income Loyalty Participants were also found to have a higher lifetime Duration than Lower Income Loyalty Participants. No significant relationship was found was between High Income Loyalty Participation and Profitability but Active Loyalty Participation did display some impact. Lower Income Loyalty Participants were also found to have a higher Profitability than High Income Loyalty Participants.
Description
MBA thesis
Keywords
Loyalty programmes