Loyalty program design, retailer and country characteristics effect on retailer performance in Lesotho

Abstract

Grocery retailers operate in a highly competitive environment with little differentiation between the products sold. Grocery retailers have resorted to loyalty programmes to attract and retain customers to maintain a share of the market. The present study investigated how the design elements of a loyalty programme in the form of rewards timing (immediate and delayed rewards), rewards type (direct and indirect rewards), and plural rewards affect the sales of a grocery retailer. The study also investigated how the retailer characteristics represented by the retailer pricing strategy and the country characteristics represented by competing loyalty programmes affect the sales of a grocery retailer. The study used a questionnaire as the research instrument. Two different questionnaires were used, one to solicit responses from consumers and the other sent to two store managers of Pick n Pay stores in Lesotho to get the perspective of the grocery retailers. The Statistical Package for Social Sciences was used for data analysis and hypothesis testing. Four of the seven hypotheses of this study were supported. A positive and significant relationship was found to exist between immediate rewards, indirect rewards, plural rewards and retailer sales. The strongest relationship was found between plural rewards and retailer sales, which indicated that consumers prefer plural rewards which combine both immediate and delayed rewards and direct and indirect rewards. A significant, negative relationship was obtained between competing loyalty programmes and retailer sales, which indicates that an increase in the number of competing loyalty programmes leads to a reduction in sales of the retailer. Hypotheses which were not supported and found to be not statistically significant were the relationships between delayed rewards, direct rewards, retailer pricing strategy and retailer sales. The study revealed that consumers in Lesotho prefer plural rewards over singular rewards. Thus, to reap maximum benefit from loyalty programmes in Lesotho, grocery retailers must have plural reward programmes in place. Those with existing loyalty programmes, like Pick n Pay, must update their programmes and those thinking of introducing loyalty programmes must think of plural reward programmes.