Ikanyeng Cleophus Magano Student Number: 2412772 A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management (MMSM) Johannesburg, 2022 (Version January 2022) Brand Loyalty through loyalty programs in the South African banking industry: Perspectives from Gen Y and Z ii ABSTRACT The recent growing popularity of loyalty programmes across industries has sparked a whole lot of interest from not only researchers, but also consultancy firms and practitioners alike. Though there has been noticeable research conducted on loyalty programmes in the preceding decade, not enough focus has been channelled on the youthful age cohorts (Gen Y & Z) in South Africa, especially in a sophisticated industry such as banking. A subject of loyalty programmes is understood and accepted to be premised around the relationship marketing theory, which primarily encourages long-term bonds with customers. As such, the study then sought to assess the intermediating influence of customer brand experience, consumer-brand engagement (CBE) and emotional brand attachment in the relationship between loyalty programmes and brand loyalty in the South African Banking sector. The methodology relied on a cross-sectional survey design in a form of a self- administered online questionnaire partially adapted from preceding studies. Data was then collected from 265 Generation Y and Z targeted respondents who are retail banks loyalty programme members. The study assessed seven hypothesis utilizing standard regression techniques and the study findings presented demonstrate that all seven hypotheses were supported. The findings therefore reveal that loyalty programmes can play a positive role in building customer brand experience, Consumer-Brand engagement (CBE), emotional brand attachment and subsequently brand loyalty. The study not only subsidizes the existing knowledge on loyalty programmes among youthful age cohorts, but it also assists with relevant context to a developing market such as South Africa. It must also be mentioned that the study can aid marketers and practitioners with formulating attractive and thorough loyalty programmes, particularly targeted at the youthful market in South Africa. Key words: Brand loyalty, customer brand experience, Consumer-Brand engagement, emotional brand attachment, loyalty programmes. iii DECLARATION I, Ikanyeng Cleophus Magano, declare that this research report is my own work except as indicated in the references and acknowledgements. It is submitted in partial fulfilment of the requirements for the degree of Master of Management in Strategic Marketing in the University of the Witwatersrand, Johannesburg. It has not been submitted before for any degree or examination in this or any other university. IKANYENG CLEOPHUS MAGANO Signed at …………………………………………………… On the …………………………….. day of ………………………… 20….. iv DEDICATION I wish to dedicate this Master’s degree to my family and my community of Phokeng, Rustenburg. Thank you very much for your endless love and certainly it takes a village to raise a child. - May our final hour find us in service of our people. v ACKNOWLEDGEMENTS I would like to acknowledge my supervisor, Prof. Thomas Anning Dorson, for his relentless support throughout this journey. Thank you very much and certainly it wouldn’t have been possible without your unwavering dedication, selflessness and patience. I would like to express my sincere gratitude to my Wits MMSM 2020 cohort and Syndicate 2 mates – Ntsikie, Marina and Mbongeni. I also wish to extend my gratitude to my employer, Standard Bank of South Africa, for all the support and understanding. vi TABLE OF CONTENTS CHAPTER 1. INTRODUCTION ...................................................... 1 1.1 INTRODUCTION TO THE STUDY ............................................................. 1 1.2 PURPOSE OF THE STUDY .................................................................... 4 1.3 CONTEXT OF THE STUDY ..................................................................... 6 1.4 PROBLEM STATEMENT ........................................................................ 9 1.5 RESEARCH OBJECTIVES ................................................................. 122 1.5.1 OBJECTIVES ......................................................................................................... 12 1.6 SIGNIFICANCE OF THE STUDY .......................................................... 133 1.7 DELIMITATIONS OF THE STUDY......................................................... 155 1.8 DEFINITION OF TERMS .................................................................... 166 1.9 ASSUMPTIONS ............................................................................... 177 1.10 CHAPTER CONCLUSION ..................................................................... 17 CHAPTER 2. LITERATURE REVIEW ......................................... 18 2.1 INTRODUCTION ................................................................................ 18 2.2 DEFINITION OF TOPIC OR BACKGROUND DISCUSSION. .......................... 19 2.2.1 SOUTH AFRICAN RETAIL BANKING LANDSCAPE ...................................................... 529 2.2.2 LOYALTY PROGRAMMES ........................................................................................ 22 2.2.3 BRAND LOYALTY ................................................................................................... 26 2.2.4 CUSTOMER BRAND EXPERIENCE ............................................................................ 29 2.2.5 CONSUMER-BRAND ENGAGEMENT .......................................................................... 31 2.2.6 EMOTIONAL BRAND ATTACHMENT ........................................................................... 34 2.2.7 AGE COHORTS: GEN Y AND Z ................................................................................. 36 2.3 EMPIRICAL REVIEW ........................................................................... 40 2.4 CONCEPTUAL MODEL DESIGN AND HYPOTHESIS DEVELOPMENT .......... 433 2.5 CONCLUSION OF LITERATURE REVIEW ............................................... 49 CHAPTER 3. RESEARCH METHODOLOGY .............................. 50 3.1 RESEARCH METHODOLOGY /PARADIGM .............................................. 50 3.2 RESEARCH DESIGN .......................................................................... 51 3.3 POPULATION AND SAMPLE................................................................. 52 3.3.1 POPULATION ........................................................................................................ 52 3.3.2 SAMPLE AND SAMPLING METHOD ........................................................................... 52 3.4 THE RESEARCH INSTRUMENTS .......................................................... 53 3.4.1 QUESTIONNAIRE PILOT TEST ................................................................................. 55 3.5 PROCEDURE FOR DATA COLLECTION .................................................. 56 3.6 DATA ANALYSIS AND INTERPRETATION ............................................... 56 3.7 VALIDITY AND RELIABILITY ................................................................. 57 vii 3.7.1 EXTERNAL VALIDITY .............................................................................................. 57 3.7.2 INTERNAL VALIDITY ............................................................................................... 57 3.7.3 RELIABILITY ......................................................................................................... 57 3.8 DEMOGRAPHIC PROFILE OF RESPONDENTS ........................................ 58 3.9 ETHICAL CONSIDERATIONS ................................................................ 58 3.9 CONCLUSIONS OF RESEARCH METHODOLOGY ..................................... 58 CHAPTER 4. RESULTS AND FINDINGS .................................... 60 4.1 VALIDITY AND RELIABILITY ................................................................. 60 4.2 DEMOGRAPHIC PROFILE AND BANKING HISTORY .................................. 60 4.2.1 AGE ..................................................................................................................... 60 4.2.2 RESIDENCE IN SOUTH AFRICA ............................................................................... 60 4.2.3 LENGTH OF STAY WITH PRIMARY BANK ................................................................... 60 4.2.4 BANK USAGE ........................................................................................................ 61 4.3 NORMALITY TEST ............................................................................. 61 4.4 CORRELATION ................................................................................. 64 4.5 MODEL DEVELOPMENT ..................................................................... 64 4.5.1 GENERATION Z MODEL RESULTS ........................................................................... 65 4.5.2 MODEL RESULTS FOR GENERATION Y ..................................................................... 67 4.6 MODEL RESIDUAL DIAGNOSTICS ....................................................... 70 4.7 HYPOTHESIS TESTING ...................................................................... 71 4.7.1 HYPOTHESIS ON BRAND LOYALTY .......................................................................... 71 4.8 CONCLUSION OF RESULTS AND FINDINGS ............................................ 73 CHAPTER 5. DISCUSSION OF RESULTS AND FINDINGS ....... 75 5.1 INTRODUCTION .............................................................................. 604 5.2 DISCUSSION OF RESULTS ................................................................ 604 5.1 CONCLUSION OF DISCUSSION OF RESULTS AND FINDINGS ................... 606 CHAPTER 6. CONCLUSION & RECOMMENDATIONS ........... 757 6.1 INTRODUCTION .............................................................................. 607 6.2 CONCLUSIONS OF THE STUDY .......................................................... 607 6.1 RECOMMENDATIONS ....................................................................... 608 6.1 SUGGESTIONS FOR FURTHER RESEARCH ............................................ 82 REFERENCES .............................................................................. 83 APPENDIX A ............................................................................... 105 ACTUAL RESEARCH INSTRUMENT ............................................................... 105 viii APPENDIX B ............................................................................... 111 CONSISTENCY MATRIX ............................................................................... 111 ix LIST OF TABLES Table 1: Operationalization of research study variables ............................ 54 Table 2: Age distribution of respondents .................................................... 60 Table 3: Residence of South Africa .............................................................. 60 Table 4: Period with primary bank ................................................................ 60 Table 5: Bank usage ...................................................................................... 61 Table 6: Correlation matrix ............................................................................ 63 Table 7: Model significance........................................................................... 64 Table 8: F-test results for Generation Z ....................................................... 65 Table 9: Regression model for Generation Z ............................................... 66 Table 10: R-squared statistics results for Generation Y ............................. 67 Table 11: F-test results for Generation Y ..................................................... 67 Table 12: Regression results for Generation Y ........................................... 68 Table 13: Correlation matrix .......................................................................... 70 Table 14: Consistency matrix ...................................................................... 110 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855098 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855098 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855098 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855098 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855098 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855098 x LIST OF FIGURES Figure 1: Dimensions of Brand loyalty (Khan, 2009) .................................. 27 Figure 2: Brand loyalty pyramid (Aaker, 1991) ............................................ 28 Figure 3: Customer-based brand experience dimensions model (Schmitt, 2011) ................................................................................................................ 31 Figure 4: Consumer-Brand Engagement dimensions model (Hepola et al, 2017) ................................................................................................................ 34 Figure 5: Brand emotional loyalty pyramid (Keller, 2009) .......................... 36 Figure 6: Defining generations: Where millennials end and generation Z begins (Dimock, 2021) ................................................................................... 37 Figure 7: True Gen: Generation Z and its implications for companies (Francis & Hoefel, 2020) ................................................................................ 38 Figure 8: Conceptual model (by author) ...................................................... 43 Figure 9: Impact of brand experience on loyalty (Ong et al., 2018) ........... 46 Figure 10: Antecedents of consumer brand engagement and brand loyalty (Leckie et al., 2016) ........................................................................................ 47 Figure 11: QQ plots for normality (Calculated from study results, 2022) . 62 Figure 12: Histograms of the residents of regression models (Calculated from the study results, 2022) ........................................................................ 69 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 file:///C:/Users/a154368/Documents/Personal%20docs/2020%20Masters/2020-2021%20Research%20Journey/Research%20Proposal/WBS%20Masters%20of%20Management%20Research%20Proposal%20Template.docx%23_Toc378855108 1 CHAPTER 1. INTRODUCTION This chapter aims to introduce the research issue under consideration. The background, as well as, most crucially, the research problem, study objectives, research questions, and, finally, the study's significance, are all discussed in this current research chapter. Furthermore, the chapter briefly touches on and sketches out some of the delimitations, definitions of widely used terminology in the study, assumptions, and, finally, the study's recommended structure. 1.1 Introduction to the study In today's economic environment, businesses are fighting to keep their existing clients in the face of fierce competition. Retailers will be able to differentiate themselves from other firms and enhance consumer loyalty, particularly among the younger generation, by improving service quality and other vital relational aspects. Despite the fact that most, if not all, industries have a highly competitive landscape, practitioners and researchers continue to stress the importance for businesses to form close bonds and relationships with their customers (Kang et al., 2015). As a vital strategic marketing tool to advancing customer relationship management, loyalty programs are accepted to be enjoying wider use across industries, ranging from banking, airlines, retail supermarket, hotels, and many other industries. As such, these loyalty schemes or programmes have, of late, attracted extensive interest among researchers and practitioners alike (Ivanic, 2015) For years, several loyalty programs and methods have been utilized to recruit and maintain loyal clients. Allowing customers to earn points, physical rewards- based techniques, special treatment-based strategies not available to other customers, and perceived status-based strategies are examples of these strategies. All of these techniques are intended to encourage desired consumer behaviours, which will lead to higher profitability and some level of loyalty. 2 In the banking business, loyalty programmes were originally meant to link rewards to purchases made with credit and debit cards (Kumar & Reinartz, 2018). This was primarily to help banks position themselves in the market and be first in customers' wallets when it came to spending. Overall client loyalty in the South African retail banking industry had fallen by more than 3% over the previous three years since 2017, which is cause for concern as banks continue to promote the ease of switching to their institutions (Mackay & Major, 2017). In efforts of arresting the persistent client switching, retail banks have placed a strong emphasis on the use of loyalty or incentive programs to guarantee or ensure that current customers are not enticed by competitors to move or switch banks. Similarly, South African banks have also in turn begun to put increased focus on the use of loyalty programs by investing billions of Rands to ensure that customers are not easily attracted to switch banks (Major, 2017). These programmes, however, are yet to convincingly prove effective, as client attrition continues to plague some of South Africa's top retail banks (Mokoena, 2015). The increasingly competitive character of the South African retail banking market, which is frequently challenged with new competitors, adds to sustainability problems. When one of the main South African banks introduces a new item into the market, other banks frequently follow shortly after. As a result, the main products and services that banks offer to their consumers are generally identical. As a result, it's not uncommon for clients to consider switching banks, forcing banks to employ marketing techniques geared at gaining new customers or retaining existing ones (Magasi, 2015). According to Major (2017), consumers are more inclined to switch banks if they are displeased with their current bank's products or services, as demonstrated by FNB and Capitec's advertising campaigns, which promote the simplicity with which customers can switch to their bank if they are unhappy with their current bank. Apart from the increasing levels of competition in the retail banking industry, customers are highly knowledgeable and selective, and are becoming 3 increasingly demanding in terms of the quality of the services they expect to receive (Mackay & Major, 2017). It is therefore particularly vital for banks to develop a better appreciation and understanding of their customers and their preferences as this would be necessary during loyalty programmes design. Francis and Hoefel (2018) for instance warn that the Gen Z-ers’ influence and economic power are projected to, in the coming years, hastily surge and it is therefore astute for organisations or brands to study and constantly scrutinise their continually intensifying influence, buying behaviours and decision-making processes as they differ from other generations before them. Kaabachi (2022) adds that the financial value of Gen Y and Z to the financial system is projected to grow significantly in the succeeding five years and that traditional banking may not be appealing to these generations especially as FinTechs continue to emerge A question of whether or not loyalty programmes do in actual fact create loyal customers as well as brand loyalty remains to be vastly debated, however, emotional attachment to the brand is accepted by researchers and practitioners to be a key driver for brand preference as well as continued patronage. Dlamini and Chinje (2019) argues if loyalty programmes purely incentivises repeat purchase by customers who are ordinarily stirred by the actual rewards and not necessarily the brand itself? However, few studies, both globally and locally, have attempted to measure their impact on emotional connection and customer brand experience, two crucial components for brand loyalty and relationship marketing. This study intentionally aims to examine how South African banks can build and/or enhance their brand loyalty of their younger population through loyalty programmes, which would then result in customer retention as well as reduced switching. Darzi and Bhat (2018) add that customer retention plays a very significant role in banking given a fact that it is often very expensive to recruit a new client. Additionally, the research study purposely aims to firmly place its lenses on the two generations being Gen Y and Z as those are known to be susceptible to switching as they possess a lot of product information, largely due to the internet, since they are accepted as digital natives as argued by (Bhalla et al., 2021). 4 Chakraborty (2017) contends that there is a conspicuous difference in the purchasing behaviours of various generations. It is observed that while gen X is less concerned about trying out a new brand and as such less likely to switch brands, gen Y and Z are more conscious and is very likely to switch from one brand to the other. Chakraborty (2017) concludes that it is worthy then to appreciate that both gen Y and Z constitute the majority of the current as well as future consumers in the banking industry, as such, their loyalty to a bank or brand, will have significant impact on the immediate and future profitability of a said bank/brand. 1.2 Purpose of the study The purpose of this research is to examine the influence of loyalty programmes in building and/or enhancing brand loyalty, specifically in the South African Banking sector, among Gen Y and Z. The constructs analysed in this study are crucial elements of a marketing research and they have received much focus in the marketing literature in the last decades as marketers and practitioners remain determined to develop brands which will lead to sustained profitability. Clemes et al. (2010) concedes that the banking sector ought to develop long-term and profitable relationships with its consumers in order to endure a highly contested retail banking terrain. The competitiveness nature of the banking sector coupled with the relative homogeneity and undifferentiated nature of services as well as products seem to make the sector mostly susceptible to clients switching behaviour, especially among younger consumers, adds (Clemes et al., 2010). The researchers conclude that there is a proven solid relationship between profitability and customer loyalty in retail banking. A selection of an industry in this case was necessitated by a fact that the banking industry is largely associated with high switching among younger population as well as low-income earners or the so-called the bottom of the pyramid as highlighted by (Mackay & Major, 2017; Clemes et al., 2010). It must be stated though that the existing literature on switching and retail banking provides little 5 evidence on younger consumers’ responses to loyalty programmes, especially in a context of South African banking and hence this study. This study places a strong emphasis on the notions; Consumer-Brand engagement, customer brand experience and emotional brand attachment, which are all critical in achieving brand loyalty. Noble et al. (2014) confirms that loyalty rewards, depending on the type of loyalty programme, do have an ability to create some emotional connection, memorable customer brand experience as well as commitment between the organisation and the customer, which would then ordinarily result in a strong customer loyalty to the organisation or even brand. Providing quality essential products and services, through loyalty programmes, have become the preoccupation of firms. It is observed that leading firms in today’s businesses are those who offer quality products and better rewards services (Arunmuhil & Arumugam, 2013). The implication of this is that firms compete with each other to through loyalty programs in a bid to capture customer’s interest and to satisfy its customer. Customer satisfaction thus compels customer loyalty to a particular brand. Spiess et al. make an observation that, given operational costs involved in attracting new customers, organizations prioritize investing more time and resources to retaining existing customers through loyalty programmes. In a study of Indian firms, Jain and Singhal (2012), observe that loyalty programmes enhance repeat purchase and customer loyalty. In general, Dorotic et al. (2012) note that loyalty programmes have become a necessary means through which customer retention and loyalty is achieved. In this case, brand loyalty is tied to quality services and about 96% of consumers in the world will always consider quality product and services in their choice of loyalty to a particular brand (Willott, 2020). On a study of brand loyalty, Willott (2020), observe that about 70% of customers link their loyalty to quality service and 52% of the consumers have done repeat purchases due to previous quality service. This shows that there is a connection between loyalty programmes and brand loyalty. 6 Kang et al. (2016) emphasizes that, in a vastly competitive landscape across most, if not all industries, practitioners as well as researchers continue to highlight the importance for organisations to formulate close bond and relationships with customers. As a vital strategic marketing tool to advancing customer relationship management, loyalty programmes are accepted to be enjoying wider use across industries, ranging from banking, airlines, retail supermarket, hotels, and many other industries. As such, these loyalty schemes or programmes have, of late, attracted extensive interest among researchers and practitioners alike (Ivanic, 2015). This research will examine how loyalty programmes in the South African banking sector enhance brand loyalty of generation Y and Z among University of the Witwatersrand’s student population. This research will particularly focus on the so called; “Big four” South African retail banks being: ABSA, FNB, Nedbank and Standard Bank, as they record the highest and active usage of loyalty programs in South African Banking sector. 1.3 Context of the study An attractive proposition to conduct the study within the University of the Witwatersrand student community is primarily based on its diverse nature of varying student types registered with the University which is in line with the targeted generations cohorts for the study, which reflect the students’ profiles within the university. As with any University student community, the students’ profile would reflect varying economic profiles, such as Gen Y who are generally accepted as economically stable, while Gen Z who are digital natives with relative near future economic stability. The University of the Witwatersrand was instituted in 1896 and its founding roots lies in the South African School of Mines which was constituted in Kimberley and later transferred to the City of Johannesburg under a new name, Transvaal University college in 1906 (Harington et al., 2019). The University of the Witwatersrand is a multi-campus public university in South Africa, situated in the 7 Northern area of Johannesburg’s CBD (MacGregor, 2010). It is also commonly referred to as Wits University. As at 2018, Wits University enrolled, 40, 259 students; of which 63% registered for undergraduate degrees, while 35% registered for postgraduate degrees. The remaining 2% being Occasional students (Wits University online, 2022). Wits University, like most universities in Post-Apartheid South Africa, is often seen as notorious for its promotion of diversity and inclusion, towards addressing inequalities which were perpetuated by the then apartheid government (Ndlovu, 2018). The university promotes equality and diversity by admitting students from a wide range of backgrounds in terms of race, age, sex, sexual orientation, gender, religion, nationality, ethnicity, (dis)ability, socio-economic background, as well as urban or rural geographic locations (Wits University online, 2022). This makes Wits University a viable target population for this study, as it will provide diverse backgrounds and varied experiences with the banking sector in South Africa. As stated by the South African Reserve Bank, the banking sector in South African, comprise of 17 domestic banks, 11 international banks, two mutual banks and 1 co-operative bank, concludes (Ateba et al., 2015). While they exist many banks within this sector, some banks, however, seem to dominate others as a result of their customer base and turn-overs as well as through their reward systems and loyalty programs. According to Maredza and Ikhide (2013), these banks, commonly referred to as the ‘big four’ which among others include, The Amalgamated Bank of South Africa (ABSA), First National Bank (FNB), Nedbank and Standard Bank; make up about 90% of retail banking in South Africa (Ateba et al., 2015). These banks had “approximately 34.5 million accounts open in 2011, which was expected to grow to approximately 40 million accounts by the year 2014” concludes (Ateba et al., 2015). Tracing the profiles of these four banks, however, shows a high level of competition amongst them in the past years and currently. ABSA, founded in 1991, upon the coalition of four banks namely, Allied, Volkskas, United Bank and Trust Bank (Mackay & Major, 2017), offer services such as commercial banking, insurance, retail, credit cards, investment management as well as private equity. 8 As at December, 2015, BusinessTech as contained in Mackay & Major (2017), published that ABSA has 9.4 million customers and holds 22% market share of the South African retail bank customers. While ABSA had a customer base of 9.4 million as at 2015, FNB (currently trading as a division of FirstRand Bank Limited) is the oldest South African Bank. It was founded in 1838 and had, as at 2015, 7.2 million customers and holds 16% market share of South African retail bank customers (Mackay & Major, 2017). FNB offers services such as retail banking, instant accounting, pro and pre-paid card, merchant services, eWallet, cell pay points, etc. (Mackay & Major, 2017). Nedbank, a subsidiary of the Nedbank Group, established in 1888 offers services which include wholesale and retail banking, insurance services, asset as well as wealth management (Mackay & Major, 2017). Nedbank, as at 2015, had a customer base of 7.4 million and at 18% market share of South African retail banks (Mackay & Major, 2017). Compared to the aforementioned banks, Standard Bank has the highest customer base of 11.6 million (Mothabine, 2021). They offer services such as corporate banking, business and personal banking, wealth-liberty as well as investment banking (Mothabine, 2021). Currently, as at March 2020, the South African Reserve Bank published its annual report which states that South Africa’s banking sector is dominated by the ‘big five’ banks (including Capitec Bank). They further state that these five banks; ABSA, FNB, Nedbank, Standard Bank and Capitec Bank, collectively hold 90.5% of the total asset in the banking sector (Mothabine, 2021). This control over the banking sector in the country, encourages competition amongst them and each one constantly finding strategies to better market their products and services to enhance brand loyalty. With these, figures, Mackay and Major (2017), observe that the South African Banking industry thrives in competition. This competitiveness is seen in their offering of different interest rates, access to loans, lending limits, bank charges, rewards and loyalty programs. According to Moyo (2018), “competition is the main driver of strong and effective markets, encourages firms to innovate, enhances productivity, and results in the efficient allocation of resources”. Moyo (2018) further observes that this 9 competitiveness puts businesses under pressure to provide quality goods and services to its and clients and this in turn, drives productivity in any economy. Similarly, Mothabine (2021) observes that intense competition increases customer expectations, which in turn, leads to customer loyalty. In South Africa, in other to keep us with the competitiveness of the banking sector, banks, spend billions of Rands on rewards and loyalty programs in a bid to attract new customers as well as maintain old ones (Mackay & Major, 2017). The banking sector, specifically the ‘big four’, in this case, are increasingly in competition with each other. Hence, their focus on marketing strategies that targets improving their services and technologies to better serve their customers and attract new ones. This is because, interests and needs of customers change per period and generation, especially the young generation who are tech savvy. It is acknowledged globally that new trends in technology such as cell phone banking applications, electronic money transfer systems amongst others have proliferated the whole retail banking sector (Mackay & Major, 2017). As such, it becomes necessary to investigate how loyalty programs, delivered through these mediums, enhance brand loyalty among generation Y and Z. 1.4 Problem statement The study warrants investigating not only because of the recent proliferation of loyalty programmes, but also given huge financial spend by retail banks with little or no traceable or assured returns. Researchers, and practitioners alike, continue to question whether some of the known positive financial outcomes of the loyalty programmes exceed the investments injected in them (Bolton et al., 2015). The global rapid popularity of loyalty programmes as well as its argued effectiveness has spurred considerable academic research even though most empirical research previously conducted demonstrates divergent findings and could introduce more misperception than guidance to marketing practitioners and managers as loyal programmes are lately accepted as an integral part of organisation’s marketing strategies and tools (McCall & Voorhees, 2010). 10 Clemes (2010) acknowledges that the undifferentiated landscape of products as well as services in the banking appear to make the sector mostly susceptible to clients switching, particularly among younger consumers such as Gen Y and Z. Brand loyalty in the South African retail banking, generally, has decreased over the last few years for a number of varying reasons (Mackay & Major, 2017). This is due to increase in bank switching by customers because of dissatisfaction and a number of other reasons such as bank service costs, service inconsistencies, platform unavailability, new FinTech entrants, etc. Customer loyalty has decreased significantly by 3% within the banking sector, in the last three years (Mackay & Major, 2017). This is significant and a major concern to banks looking to grow its customer base as well as enhance profitability. In addressing the issue of customer switching and enhancing customer loyalty, retail banks in South Africa have invested in loyalty programmes to ensure their current customers are not easily swayed by services from competing banks and switching (Mackay & Major, 2017). It, however, must be mentioned though that the current literature on switching and retail banking gives little evidence on younger consumers’ responses to loyalty programmes, particularly in a context of South African banking industry and this is seen as a crucial research gap identified. Research shows that though loyalty programmes are adopted by banks to improve their services and further enhance brand loyalty, these programmes are feared to be ineffective, as high-profile banks in the country are still losing customers to other banks (Mackay & Major, 2017). This implies that the South African banking sector focuses its energy in improving the quality of their products and services to retain their customers yet have little to no strategy to measure as well as manage brand loyalty. This oversight is due, in part, to limited measuring models which leads to the inability to accurately measure brand loyalty. Also, generation Y and Z, comprise of the youth and economically active group of customers and their loyalty to a particular bank signals near future profitability to the bank. Hence, there is a need to understand and measure contributory factors to brand loyalty by these cohorts in a bid to effectively enhance brand loyalty by 11 these cohorts through loyalty programs. Kaabachi (2022) advises that the financial value of youthful consumers, such as Gen Y and Z, to the global financial system is forecasted to grow enormously in the next five years or perhaps even sooner. To this end, by engaging with generation Y and Z cohort of the University of the Witwatersrand student population, this research will examine if loyalty programmes by the ‘Big four’ South African banks enhance loyalty among aforementioned cohorts. Also, how the ‘Big four’ South African banks, can better enhance brand loyalty through customer brand Experience, Consumer-Brand engagement (CBE) and emotional brand attachment. A subject of loyalty programmes is understood and accepted to be premised around the relationship marketing theory, explains Menidjel and Bilgihan (2021), which primarily is a theory which largely defines an umbrella or a set of marketing strategies which formulates various methods of producing long-term bonds with customers, with a clear end goal of realizing customer or brand loyalty (Beck et al., 2015). While exists quite a few academic studies which historically assessed a role of loyalty programmes in driving brand loyalty, customer brand experience, brand resonance, consumer brand engagement and a bond with customers in a Banking sector context (Ong et al., 2018), there is however still no conspicuous accord in the research community on the effectiveness of loyalty programs in driving these factors. This is especially vital to investigate on the two generation cohorts under study as they are accepted as economically active and possesses immense product or brand information prior to any purchase decisions. This study is worth investigating not only because of the current prevalence of loyalty programmes, but also given enormous financial spend by retail banks, both locally and certainly globally, on these programs. Moreover, a measure of success or the effectiveness of loyalty programmes continues to be debated, as outlined by Thompson (2020), and academic researchers acknowledge that sales alone may not be an adequate measure to solely rely upon and hence the notion of brand loyalty and its elements such as a bond with customers then becomes of importance when assessing a role of loyalty programmes. 12 This is also predominantly vital to investigate as competition in the retail banking industry, not only in South Africa but globally too, continues to intensify among existing competitors as well as new market entrants. A main research question at a centre of this research journey was to investigate whether loyalty programmes, in the South African banking industry, does result or contribute to brand loyal customers and thus prevent or curb switching. 1.5 Research Objectives This research study aims to realise the resulting theoretical and empirical research objectives. 1.5.1 Objectives i. To examine the influence of loyalty programmes on customer brand experience among Gen Y and Z in the University of the Witwatersrand student population. ii. To examine the influence of loyalty programmes on Consumer-Brand Engagement among Gen Y and Z in the University of the Witwatersrand student population. iii. To examine the influence of loyalty programmes on emotional brand attachment among Gen Y and Z in the University of the Witwatersrand student population. iv. To examine the influence of loyalty programmes on brand loyalty among Gen Y and Z in the University of the Witwatersrand student population. v. To examine the influence of customer brand experience on brand loyalty among Gen Y and Z in the University of the Witwatersrand student population. vi. To examine the influence of Consumer-Brand Engagement on brand loyalty among Gen Y and Z in the University of the Witwatersrand student population. 13 vii. To examine the influence of emotional brand attachment on brand loyalty among Gen Y and Z in the University of the Witwatersrand student population. 1.6 Significance of the study The banking sector has proved quite difficult to attain competitor advantage just by solely relying on product differentiation (Moyo, 2018). The products and services are relatively easy to duplicate by other competing banks, hence the homogenic nature of the sector. Moyo (2018) adds that it has now become almost obligatory for banks to find new approaches and possible prospects which can be able to develop their relationships with customers can enhance the loyalty. This study first and foremost seeks to contribute to an ongoing debate on the effectiveness of loyalty programmes in building or enhancing brand loyalty. Salem (2021) argues that, given a plethora of alternate options and product information that a present-day customer possesses at their disposal; especially as a result of internet and social media in particular, brand loyalty is increasingly proving to be quite challenging for businesses or brands to realize. It is precisely for this afore reason that this study primarily pursues to meaningfully contribute to the examination on the effectiveness of loyalty programmes in building or enhancing brand loyalty by customers, especially amongst younger economically active generations. It, furthermore, seeks to provide guidance to organisations, particularly in the banking industry, in ensuring that they effectively design their loyalty programmes in a manner which would not solely focus on realizing increased profitability and sale but to create as well as enhance their bond and lasting memorable experiences with their customers. Gandomi (2013) precisely argues this narrative by highlighting the fact that increase in profitability as well as sales, ought not to be the only criteria followed to measure a success, or lack thereof, of loyalty programmes. The researcher further reveals that findings from 600,000 customer interviews around the globe does indicate that if marketers or/an practitioners are genuinely devoted to 14 building brand loyalty, they would then make efforts to use their programmes to first build consumers emotional connection or attachment with the brand and not just be preoccupied with repeat purchase, which will ordinarily follow any way. Forsström (2020) in supporting this point, through his/her findings reveals that the greater the emotional connection or loyalty to a particular brand, the more chances a customer would purchase and further highlights that the relationship is more somewhat exponential and not necessarily linear. Brand experience dimensions, on the other hand, can present a unique opportunity for organisations, banks included, to create lasting brand experiences across touch points (Schmitt, 2009). This study therefore seeks to establish how loyalty programmes can further enhance brand experiences in a banking context, for younger generations such as Generation Y and Z. Marketers and scholars alike would benefit from the study through appreciating these constructs and how they can contribute to lasting relationship formulation. This study is significant as it seeks to establish how loyalty programmes of the ‘Big four’ South African banks can further enhance brand experiences in a banking context, for younger generations such as Generation Y and Z cohort of the University of the Witwatersrand student population. This study will further be of significance to retail bankers and scholars alike who would benefit from the study through appreciating these constructs and how they can contribute to lasting relationship formulation. The choice of target population, that is, generation Y and Z cohort of the University of the Witwatersrand student, is significant. This is because the Wits community is diverse and is made up of diverse people in terms of nationality, age, sex, gender, sexual orientation as well as race. A recognition and adoption of the target population makes this research of utmost significance as results gotten from the field will reflect, to a large extent, the current situation within the South African banking sector, as well as offer credible ways through which banks can better market their product and services to enhance brand loyalty among a wide range of customers and subsequent profitability. 15 The use of quantitative methodology in this research is significant as it will provide quantifiable empirical evidence for further studies on brand loyalty through loyalty programs. According to Du Plooy-Cilliers et al. (2014), the use of quantitative approach is strategic in a research study as it helps to translate replies or responses of respondents from a questionnaire or other research tool, into measurable and quantifiable units that can be utilized for numerical analysis and empirical evidence. 1.7 Delimitations of the study • The research study is largely focused on the so-called “Big four” South African retail banks being, ABSA, FNB, Nedbank and Standard Bank as they are the ones with traceable and active usage of loyalty programmes and as such it excludes private banks, investment banks and other types of banks. • Capitec Bank clients are also excluded as they are do not have loyalty programmes though they constitute a huge customer base. It must be mentioned though that Capitec Bank recently added Baby City as well as Dis-Chem cashback benefits in what seemingly appears to be an imminent birth of their loyalty rewards programme. • The study is also only limited to respondents who are registered or affiliated to a loyalty programme or have prior experience with any of the afore-mentioned banks. • The study is also specifically targeting and limited to Generations Y and Z as the working class and the economically active and digital savvy generations. • Target population, University of the Witwatersrand student population, and as such may not be generalized as it does not quite provide a broader perspective outside of an academic community/environment. 16 1.8 Definition of terms The research has highlighted the following key terms that are pertinent to this research study: i. Loyalty programmes: this is a scheme wherein consumers are members and they get to collect or qualify for rewards based on their spending and/or certain milestones attained (Hofman-kohlmeyer, 2016) ii. Brand: a term, design, name, symbol and/or term or even a blend of them, which is or are envisioned to serve as unique identity to goods and services of a seller by means of differentiating them from other competitors (Keller, 2013) iii. Brand loyalty: Continuous use or purchase of a brand’s services and/or products resulting from a customer feeling a sense of positivity towards a brand (Saif et al., 2018) iv. Brand experience: a personal, internal response of a customer by way of sensations, cognition, emotions and lastly, behaviours that are ordinarily aroused by the branding or brand stimuli (Brakus et al., 2009) v. Brand resonance: a construct is commonly followed to characterize brand relationships with customers as well as an extent to which a customer feels, connect or resonates with a certain brand (Raut, 2020) vi. Emotional attachment: refers to a notion which represents a state of mind or feeling connected or attached to the brand – a general feeling towards a brand (Sherkat, 2018) vii. Generation Y: The Millennial Generation, also known as Generation Y, refers to people born between the early 1980s and 1999. (Meister, 2020) viii. Generation Z: Generation Z (also known as Gen Z, centennials or iGen), refers to the generation that was born between 1996-2010, following millennials (Meister, 2020). ix. Financial stability: It is often simply defined as a lack of system risk or even a lack of financial fragility in an economy and/or market (Schinasi, 2004). x. Fintechs: they can often be referred to as start-ups or technology entities which combine financial services as well as technology to disrupt/compete 17 with the business models of traditional banking (CarbÓ-Valverde, 2017; Fatah, 2018; Zaikovska, 2018). 1.9 Assumptions The subsequent are assumptions were made as part of this study: i. The study assumes that all the targeted respondents possess the ability to answer the questionnaire accurately and candidly ii. The study assumes that all the targeted respondents have a clear understanding of the South African Banks that are under study. iii. The study does also assume that respondents’ responses were not influence in a way of form. iv. The study also assumes that members of retail bank loyalty programmes vary in their buying behavioural patterns from other non-members. 1.10 Chapter conclusion The above section introduced the study and offered a background and rational for conducting the study. The Study objectives and question where also discussed including the research problem that the study is seeking to unpack. The purpose and significance of the study was also addressed. Additionally, the chapter also looked into the possible delimitations and assumptions of the study. The next chapter will look into literature relating to the study from empirical and theoretical review perspectives. 18 CHAPTER 2. LITERATURE REVIEW This chapter seeks to introduce the literature which is backing or grounding this research study. Its primary aim is to largely highlight previous existing research around a similar topic and importantly what they were able to contribute. The chapter commences by unpacking the most crucial theories as well as concepts which form part of the study. 2.1 Introduction This research study seeks to inspect the concepts of brand loyalty and loyalty programmes within the context of South African retail banks and to, as such, establish if there’s any relations between those 2 concepts, together with its elements or sub-concepts such as customer brand experience, emotional brand attachment, to mention but a few. Brand as well as brand loyalty does present some solution for organisations, including in the banking sector, to create a robust and long-term competitive advantage thus affording organisations a platform to develop formidable relationships with their valued customers (Hadidan, 2019). A primary objective of this study is to closely examine the constructs of brand, brand loyalty as well as loyalty programmes. The study also does rely on secondary data from the currently existing literature to define and unpack the significance of each and every one of the afore-mentioned constructs as well as their inference on the organisations. There are immense benefits that can be realized by both the organisation as well as the customers from developing brand loyalty and indeed from a creation of a strong brand. Gorlier (2020) similarly states that there has been noticeable benefits introduced by loyalty programmes over the years which, when applied properly, may also result in added profitability as well as forging long-term relationships with their customer base. Building meaningful, intimate as well as long-lasting relationships with customers is the only way for organisations to attain and/or maintain their leading positions in a rather crowded marketplace (Gorlier, 2020). 19 Of importance, this study seeks to appreciate any relation between loyalty programs as well as brand experience and emotional connection in achieving the overall organisational goal of sustained brand loyalty. This is even fascinating to examine in the banking industry which is largely known to be relationship driven. 2.2 Definition of topic or background discussion. 2.2.1. South African Retail Banking landscape The banking industry is quite an imperative sector which must be safeguarded, as its failure or collapse could have very severe spiral effects on the broader economy of any country, in fact, the banking sector is central to any country’s financial system (Munangi, 2020). It is often accepted that the South African banking sector is quite unique for numerous reasons, which has been a common feature for years now. The sector is, and has been, one of the largest as well as the most sophisticated in Africa and does, to a larger degree, also liken favourably to those of advanced economies, which does certainly distinguish South African banking industry from many other emerging economies (Petzer et al., 2017). The banking sector is generally known to be the largest stand-alone component which forms part of the financial system in a country, including South Africa, which equally does also incorporate the insurers as well as the securities. Alhassan and Biekpe (2016) state that the South African Banking industry can ordinarily be viewed as being quite dynamic in nature as well as largely informed by competitive pressures, technology evolution, macro-environmental factors, constantly changing consumer expectations as well as, lastly, high rate of regulatory shifts. In South Africa, the banking sector is generally known for its relatively small number or participants or organisations which largely operate as an oligopoly, and in line with the law, only registered commercial banks are eligible to take deposits, with the exception of Postbank (Mnyandu, 2020). 20 Banks are indeed a very crucial part of the efficacy of any economy and they are also accepted as dominant players in the national payments system. Munangi (2020) however warns that there has of recent been quite low economic growth in South Africa, which certainly does raise credit risks and as well as negatively impact the profitability of banks in particular. Hollander (2019) through his review of the South African Reserve Bank’s financial stability policies narrates that some of the present risks as well as vulnerabilities to the financial stability sighted in the SARB stability report includes among others the closely guarded domestic fiscal position, sluggish growth rates, the related deterioration in the quality on some banks balance sheets, global risk premia strident upsurge and some outside probable effect of protectionist policies. Hollander (2019) further adds that vulnerabilities and endemic risks regrettably don’t only result from the local behaviour, but shocks could also emanate from outside of borders. It must, however, be mentioned that in spite of the current overall negative economic outlook of a worrying domestic and global economic climate, the South African banking industry remains financially sound and stable. Hollander (2019) concludes that one of the key mitigating strategies of addressing any potential financial stability vulnerabilities and risks to start by intentionally reducing a build-up of imbalances through building resiliency as well as augmented supervision, concludes Hollander. The banking sector in South Africa is one of the highly regulated industries, which is arguably one of the traits which has contributed to the stability in the sector over the years. Coetzee (2019) reminds us that it must also be mentioned that the South African banking industry is known for its competitiveness across all its products or segments, especially in the retail banking business units. The sector is highly concerted with the so-called “Big four” which is largely made up of the four main competitors in this regard, namely, ABSA, First National Bank (FNB as it is commonly known), Nedbank and lastly Standard Bank (Coetzee, 2019; Jenkin, 2019). It is also vital to mention that Capitec Bank, has certainly emerged as an earnest competitor in the retail side of banking, most particularly in a terrain of low-end spectrum which is accepted as their specialized niche and it is 21 currently valued as the 17th most valued brand in South Africa at US$846m (Bashman, 2019). Relationship management as well as customer centricity are among a few very vital aspects to achieving success in retail banking as that could also serve as a competitor advantage (Mahadin, 2019). Achieving sustainable competitor advantage and success in the banking sector has, over the years, proved to be quite a major challenge partly as a result of the industry’s lack of differentiation across major players, which has also led to reduced brand loyalty as well as South African customers becoming multi-banked (Mackay & Major, 2017). It is for these reasons that we are witnessing a battle for the “main-bank” customer’s relationships, which can be viewed as a contest for a largest share of the customer’s wallet. Bashman (2019) confirms that competition in the banking has continued to intensify in the South African Banking industry, especially recently with the emergence of new entrants to the market such as Discovery bank as well as Tyme Bank which are both the latest entrants to this fiercely contested terrain. Bashman (2019) further highlights that Tyme Bank has introduced to the market a branch-less low-cost business model given a widely held perception in the market that banking is expensive and inaccessible to the inclusive market in particular, while discovery on the other hand has introduced the market a model which is largely driven by behavioural banking which is centred around customer- centricity. Added to the afore-mentioned new entrants, the banking sector has also, of late, been witnessing an introduction of FinTech (Financial Technology) organisations, which is also a noticeable global trend aided by the evolution of information technology and digitalisation in particular (Jenkin, 2019). This development does, more than ever, highlight the importance for banks to jealously solidify their relations with existing customer base through enhancing relationships as it is quite a challenge to recruit new customers. 22 2.2.2. Loyalty Programmes Ryu (2020) describes loyalty as a practical propensity to remain in an intrinsically valued relational and/or associational attachment that requires a possibly costly commitment to secure or at least not threaten the object of loyalty's interests or well-being. Inertial, functional, transactional, and emotional loyalty are the four categories of loyalty as highlighted by (Kataria, 2020; Lentz, 2021), each of which indicates a distinct level of differentiable value and interest. However, it is critical to consider the concept of a loyalty spectrum; there are real opportunities to improve programme performance and efficiency by understanding the type of loyalty you want to drive and the levers that drive that kind of loyalty, as well as not wasting resources on behaviour that is either unnecessary or too difficult to achieve, concludes (Kataria, 2020). Alshurideh et al. (2020) simply defines loyalty programs as a strategic marketing tool that can be utilized by organisations to increase sales and, most importantly, to ensure that they retain customers. Over the years, since the formalized introduction of loyalty programmes, many studies (Hwang et al., 2019; Tanford, 2013; Wait, 2020) have channelled their lenses into loyalty programmes and indeed quite a few have also examined its relationship with brand loyalty in particular. Banks utilize customer loyalty programmes to gain and retain customers, raise customer spend, boost share-of-wallet, influence client purchasing habits, and stimulate the purchase of new products, among other things (Alshurideh, 2019). Indeed, some loyalty programmes have become so closely associated with company brands that they have become a primary product offering, according to the aforementioned argument (Alshurideh, 2019). Businesses adopt loyalty programs for a variety of reasons, and often invest considerably in their development and upkeep. Hariharan (2017) adds that customers are affected by "the sunk-cost fallacy," in which they continue to patronize a business or loyalty programmes because they are focused on the quantity of points they have already acquired, according to the aforementioned. As a result, people become engrossed in the program and continue to interact even if they are not actually 23 (attitudinally) loyal. Loyalty programmes encourage customers to spend more of their money with a company and less with competitors by offering additional rewards, concludes (Hwang et al., 2019). The customer appreciation, or favourable view, of a loyalty programme's advantages or rewards determines its worth. Clear organizational goals, as well as appropriate procedures for implementation and measurement, are necessary for successful loyalty programmes to be implemented (Lee et al., 2015). Serving loyal clients is cost effective; such programs are less price sensitive, more profitable, and loyal to customers; and loyal consumers become champions for the company (Alshurideh, 2019). Client loyalty programmes, moreover, are designed to foster retention of customers, boost customer gratification, and advocate for value realized by customers (Justin et al., 2015; Hwang et al., 2019). Rasool (2021) acknowledges that very little studies globally as well as in most local economies, have made an attempt to assess their influence on emotional connection and brand experience as the 2 quite vital constructs for brand loyalty as well as relationship marketing. Alshurideh (2019) adds that loyalty programmes do have the ability of making a customer feel special as well as feel challenged by ensuring that they reward their purchases and indeed targets achieved. Subsequently, loyalty programmes would then assist an organisation with enhancing customer and/or brand loyalty which would then result increased purchases as well as activity (Koo et al., 2020). The foremost benefit to an organisation in this case is certainly an increase in turn-over and productivity. Kumar (2019) in closing admits that there is certainly no doubt that loyalty programmes remain an integral part of modern marketing strategic tools in ensuring that increased profitability and as well as those organisations remain competitive. The only challenge for organisations, banks included, is to ensure the effectiveness of the programs they choose to employ so that it does not result in fruitless expenditure and that they are fit for purpose. This is because of the fact that organisations tend to spend billions of Rands on these loyalty programmes annually (Steinhoff & Palmatier, 2016). 24 Loyalty programmes effectiveness. Though loyalty programmes have been in existence for quite some time now, the consumer eagerness to embrace these programs has not subsided but rather has hastily grown over recent years (McCall & Voorhees, 2010; Alshurideh, 2020). It must also be added that loyalty programmes are commonly utilized by organisations as a planned and deliberate customer relationship management (CRM) instrument to build and enhance consumer-supplier relationship (Alshurideh, 2020). The global rapid popularity of loyalty programmes as well as its effectiveness has spurred considerable academic research even though most empirical research previously conducted demonstrates divergent findings and could introduce more confusion than guidance to marketing practitioners and managers (McCall & Voorhees, 2010). Researchers remain divided on the effectiveness of loyalty programmes and it has since impelled calls from numerous marketing scholars and practitioners for more research on the loyalty programmes. Chaudhuri et al. (2019) admits that as a result a mere fact that majority of loyalty programmes are just simply based of rewarding repeat purchases; the effectiveness of loyalty programmes is often assessed only by the level of continued patronage, which may not necessarily be an indicator for true loyalty. It is also believed that loyalty programmes are often accepted as a one of a marketer’s collection of promotional items or tools, which assists with fostering repeat purchase rather than the required attitudinal commitment which is indicative of a shorter rather than long term commitments (Alshurideh, 2019). As many service organisations, such as banks, offer undifferentiated offerings or products as well as low switching costs, loyalty programmes may be an effective tool to relationship building. Alshurideh (2020) advises that there are several ways and/or techniques which can be utilized to evaluate a loyalty programmes’ success and/or effectiveness; and those includes but not limited to; customers’ likelihood to use a particular brand or to shop at a certain store, consumers’ continuance with the membership 25 program, increased brand/product/store patronage, increased market share, increased sales and profitability. Loyalty programmes in South African Banking South African banks compete for clients utilizing customer service, products excellence, and customer loyalty, among other techniques, according to (Bisschoff, 2020). Despite the fact that banks place a great emphasis on customer service and loyalty as a competitive advantage, they simply track and monitor customer service. Quite a few banks or organisations track or manage customer loyalty to their brand (Tayob, 2021). Limited operational models or measurement tools, as well as a failure to effectively manage brand loyalty among their banks' clientele, are contributing to this strategic neglect, concludes (Bisschoff, 2020). In comparison to other industries in South Africa, and probably even globally, retail loyalty programmes are at the forefront and said to be increasing with an annual take-up of 11 percent each year, which is somewhat on par with a global percent increase (Lekhuleni; 2019). The usage thereof as well is known to be the highest as the retail environment is commonly accepted as a terrain that is largely volumes, attitudes and relationships driven, adds (Lekhuleni; 2019). Myanmar (2018) adds that it must also be mentioned though that positive attitude and attitudes towards a certain brand, remains intricately connected to the overall consumer spend, purchase volumes as well as economic confidence of any country, including South Africa. Similarly, loyalty programmes are directly interrelated to spend habits, which are without any shadow of doubt of late under threat because of a more unstable and unfavourable economic climate, concludes (Myanmar, 2018). Tayob (2021) confirms that, in a recent annual report released by Truth & BrandMapp South African Loyalty Landscape is dominated by retail shops as well as commercial retail banks, Clicks ClubCard once again topped the list, for an impressive third successive year, followed by Pick n Pay Smart Shopper as well as Dis-Chem Benefit in position 2nd and 3rd respectively. Of importance to note, 26 however, is that all of the Big four banks in South Africa, who are also active participants or offer loyalty programmes, do feature in this Top 10 of the most used loyalty programmes in South Africa according to (Tayob, 2021). 2.2.3. Brand Loyalty While loyalty studies can be traceable to decades ago, customer and brand loyalty is still considered as a very vital and relevant research topic. Today, the mindfulness of marketing practitioners on influencing and inducing customer loyalty is continuously taking an added significance. Bisschoff and Joubert (2020) views brand loyalty as a component of intricate set of consumer decision making criteria, which includes both external and internal influences. Researchers and practitioners agree that, given intensifying competition, retention of customer base has become a key goal for many organisations (Taghipourian, 2016). Certainly, in a context of brands, loyalty is one of the most well-defined terms in the marketing lexicon. Generally, brand loyalty can be defined as a predisposition of customers to unceasingly prefer one brand over competitive branded offerings (Bisschoff & Joubert, 2020). Brand loyalty generally makes reference to a degree of attachment a consumer has for a certain brand (Liu et al., 2012). As is the case in this study; brand loyalty is quite a vital outcome variable in scholarly marketing literature and, as such, its usage as well as definitions differ across studies and contexts (De Villiers, 2015; He et al., 2012). Brand loyalty assumes a vital role in the brand equity process and, as such, leads to numerous marketing advantages, such as reduced marketing and advertising costs, recruiting new customers and certainly a better leverage within the trade (Aaker, 1991). Khan (2009) has presented the research community with a simple model which depicts the dimensions of brand loyalty as shown in figure 2.1, and those includes behavioural as well as attitudinal loyalty. 27 Figure 2.1: Dimensions of Brand loyalty (Khan, 2009) • Behavioural loyalty involves a number of services that an individual purchase or intends to purchase repeatedly. This type of loyalty can ordinarily be calculated through various ways such as frequency of purchase, share of purchase or wallet and so forth (Khan, 2009). It more simpler terms, this theory and logic of behavioural loyalty assumes that the customer’s preferences can be located through their behaviour. • Attitudinal loyalty on the other hand assesses the customer’s psychological attachment to an organisation or a said brand, which is often translated long-term and enduring relationship with the brand (Khan, 2009). Some of the tool which can be utilized to measure this type of loyalty includes willingness to recommend, supplier prioritization, purchase intention and preferences (Khan, 2009). Because trust is a necessary component of relational trade and loyalty is needed for keeping such a valuable connection, loyalty is an essential component of developing a Consumer–Brand Relationship (CBR) (Ledikwe et al., 2018). The importance of brand loyalty in establishing a beneficial relationship between customers and brands cannot be overstated (Sultan et al., 2019). In fact, acquiring new customers is a time-consuming and costly endeavour. Furthermore, loyal customers play an important part in a company's future growth and survival (Synodinos & Sharp, 2019). Since its inception in the 1950s, the concept of brand loyalty has gotten a lot of attention in the marketing world. 28 Initially, the phenomenon of brand loyalty was examined from a narrow perspective, focusing solely on the purchasing behaviour of customers. Customers are deemed loyal when they buy a product from a company on a regular basis (Sultan et al., 2019). Scholars gradually realized that the phenomena of brand loyalty is more complex than such a simple operational description. Because of these constraints, researchers looked at customer sentiments as a substitute for brand loyalty (Setiawan & Sayuti, 2017). According to Kotler & Keller (2009), brand loyalty does have an ability to assist organisations with cost-effectiveness as it is ordinarily accepted that acquiring new customers is relatively more expensive than to retain existing customers. Current economic environment also support retention through brand loyalty as it would be costly to recruit customers into the customer database Latif et al. (2014) confess that brand loyalty possesses an ability to propel organisations to realize long-term success of the product or/and brand as customers will purchase frequently and can also serve as a defensive strategy or mechanism against competitive pressures emanating from existing competitors as well as potential new entrants int the market thus protecting the organisations market share. Figure 2.2: Brand Loyalty Pyramid (Aaker, 1991) 29 Brand loyalty pyramid, provide organisations and practitioners with a view which demonstrates the varying degrees of loyalty: i. Switchers: these are customers that demonstrates no form of loyalty towards the brand and they are generally still indifferent on which brands to purchase or use (Aaker, 1991). ii. Habitual: these are generally customers who are known to purchasing a product or brand out of mere habit and they can merely be persuaded to switch to competitors’ products or brands (Aaker, 1991). iii. Satisfied: these types of customers are content with the product or brand though they can still somewhat be enticed into switching by competitors if the switching costs that are associated with a switch are slightly reasonable comparatively (Aaker, 1991). iv. Likes: these are customers who ordinarily relish the brand or product and they are also known to have some emotional attachment towards the brand. They can be partnered with for long-term relationships (Aaker, 1991). v. Committed: these are customers that are enormously loyal to the brand and they are also highly likely to spread positive word of mouth to others about the brand (Aaker, 1991). 2.2.4 Customer Brand Experience Walter et al. (2013) admit that customers in present day markets, are no longer only just on the lookout for functional values, but they are also seeking for symbolic values. Shahzad et al (2018) add that the uniqueness as well as subjectivity of an experience can over a period of time serve as a sustainable competitive means for an organisation. It is widely accepted that competitive advantages which are very challenging to imitate or replicate could serve as a sustainable competitive advantage, conclude (Shahzad et al., 2018). Fascinatingly, brand experience has lately been receiving a great deal of attention within the marketing practice terrain as well as research (Schmitt, 2011). 30 Marketing practitioners and researchers have come to a realisation that comprehending how consumers experience brands is crucial in building marketing and brand strategies for goods and services (Ahn, 2020). Schmitt et al. (2015) advise that every service exchange leads to customer experience irrespective of its form or nature. Although Brand experience is seen as a relatively novel construct in brand strategies, it also appears to be gaining immediate attention as it basically defines how customers relate or associate to brands in a holistic manner, as it encompasses all interactions with the organisation or brand such has cognitive, sensory, emotional, social and even spiritual (Bolton et al., 2014). This certainly refers to all the brand-related stimuli which have an ability to evoke a memorable and lasting brand experience, either through brand communications or any other touch points that are associate with the brand. Afterall, brand experience is really about committing to and advancing the brand promise through consistent action, add (Walter et al.,2013). Brakus et al. (2009) describe brand experience as a customer’s internal reaction by way of sensations, cognition, emotions and lastly, behaviours that are ordinarily evoked by the branding or brand stimuli. Ong et al. (2015) further adds that brand experience is quite a significant tool to use in approaching differentiation which would then ordinarily result in brand loyalty. The significance of brand experience is also solidified by the fact that, not only does have a correction with brand loyalty as well as brand resonance, but it also contributes immensely to brand equity which is accepted as a vital tool in measuring the value of any brand (Iglesias et al., 2011). Brand experience comprises of four dimensions which are namely; a sensory dimension, an affective dimension, an intellectual dimension and then lastly, a behavioural dimension which all form part of vital components of brand experience (Nawaz et al., 2020). 31 Figure 2.3: Customer-based brand experience dimensions model. (Schmitt, 2011) The term "sensory experience" relates to a customer's perception of a brand's sensory connection, such as emotion, smell, touch, sight, and sound. The term "behavioural experience" refers to a customer's interaction with a brand that has the potential to lead to an action-based response. Affective experience is primarily concerned with the customer's experience, which may stem from genuine emotions such as favourable feelings about a brand. The customer's experience arising from an intellectual relationship with a brand, on the other hand, is captured by intellectual experience (Corbishley, 2017). 2.2.5. Consumer-Brand Engagement (CBE) Customer Engagement generally is a crucial component of relationship marketing and embodies the significance of an individual’s participation or partaking in and connection with the organisation’s activities and offerings (Vivek et al. 2012; Brodie et al. 2011; Hinson et al, 2019). Engagement, in present day, does differ from the traditional relational concepts such as “participation and involvement” since it now firms capture the notion of interactive as well as co-creative experiences (Brodie et al. 2011; Hinson et al, 2019). Customer Engagement is generally referred to as the mechanics of a consumer’s value accumulation to the organisation; either through indirect or/and direct contribution (Pansari & Kumar 2017). Consumer-Brand engagement in a context of virtual brand community generally refers a psychological state largely 32 associated with changing intensity levels which manifests within iterative and dynamic engagement methods (Brodie et al., 2013; Hinson et al., 2019). Customer engagement has been deliberated on expansively in the preceding decade in both academia as well as the business world and it was the eighth most commonly used buzz phrase in business in 2014, which signifies its importance to academia and business (Pansari, 2017; Rasool, 2021). Consumer-Brand engagement is a fairly current concept to be introduced in the marketing literature which researchers view as a welcome addition to the realm of relationship marketing (Vivek et al., 2012) and also currently underlined as a key driver of both consumer decision-making progression and brand equity; while also largely considered by practitioners and marketers as a precedence in near future branding strategies (Schultz & Block, 2011). Currently emerging insights on CBE appear to be strongly positioning CBE as establishing robust and enduring bond between consumers and brands, primarily based on a continuing effort of the brand to stimulate consumers through interactions, experiential contents, shared values and certainly rewards (Brodie et al., 2011; Hollebeek 2011b; Hinson et al., 2019). Moliner-Tena et al. (2019) add that Consumer-Brand engagement (CBE) is generally believed to promote relational consequences such as, but not limited to, retention, communication, positive word of mouth and loyalty through co- creation of consumer’s values. One of the most unique features of CBE is its proactive nature in that consumers are regarded interactive actors who bestow pertinent cognitive, physical and emotional resources to co-create value from certain brand interactions (Higgins & Scholer, 2009; Moliner-Tena et al., 2019). Majority of studies, such as (Hao, 2020), which are focused on CBE, commonly operationalise it as a multi-dimensional construct which captures cognitive, behavioural as well as affective dimensions. Brodie et al. (2013) for instance describe CBE as a consumer’s positively balanced brand-related cognitive, behavioural and emotional activity experienced during or somewhat related to 33 focal brand/consumer interaction. As illustrated in Figure 2.1, these crucial dimensions are individually elaborated further below: • Cognitive processing demonstrates a customer’s level of brand-related thoughts processing and amplification when connecting or interacting with a certain brand. Goldsmith et al. (2010) describes a crucial role of a consumer’s cognitive processing as a mental activation method towards a brand and as such considered as a self-concept demonstrating the variable inclination of consumers to embrace brands in their self-concepts. Other related studies summarized this engagement dimension by making reference to the ability of traditional, new media and/or advertising which are intentionally aimed at provoking consumer’s attention (Hepola et al., 2017). • Affection generally refers to a consumer’s degree of positive brand-related affect in a brand-consumer interaction. A key role of occasioning consumer engagement towards advertising is in this case demonstrated by the feelings stimulated during the actual processing when engaging with a certain brand (Hepola et al., 2017). • Activation / Behavioural manifestations outlines a consumer’s level of energy, commitment, efforts as well as time spent on a particular brand. These entails the consumer’s behavioural indicators aimed towards a brand or organisation, and these go beyond the actual purchase (Van Doorn et al., 2010; Verhoef et al., 2010; Hepola et al., 2017) 34 Fig 2.2: Consumer-Brand Engagement dimensions model (Hepola et al., 2017) CBE firmly arises as a meta-organiser of the rapport between a consumer and the brand which most researchers and practitioners lately see as an overarching marketing construct capturing various consumer decision-making facets that are largely characterized by a upward intensity while reinforced by various other integrated marketing communication activities (Bowden, 2009; Brodie et al., 2011; Hao, 2020). If executed correctly, CBE can basically develop intense but momentary consumer-brand relational bond grounded on catchy initiatives to achieve short-term revenues (Schultz & Block 2011). In summary, CBE is increasingly emerging as a dynamic concept growing over a period of time in intensity on the basis of the organisation or brand’s aptitude of continuously capturing consumer’s needs and expectations by way of utilizing every possible physical and/or virtual touchpoints available between consumers and the brand (Pansari & Kumar, 2017). 2.2.6. Emotional brand attachment In general terms and certainly in social psychology, a term attachment is associated with an emotional interconnected bond between an individual and a certain object, while in marketing theory, attachment refers to how consumers 35 can similarly generate and sustain emotion-driven bond with brands (Kim, 2019). Hwang and Lee (2019) also confirm that brand attachment serves as an indication of the closeness of the connection or relationship between brands and customers. Acharya (2018) adds that as sales and repeat patronage in most sectors continue to worryingly stagnate, most companies, especially retailers, lately tends to employ emotional attachment and bonds as a way to establish bonds with their customers as a way of retaining and holding on to their current customer base. Rajumesh, (2014) admits that an individual having attached relationship desire ordinarily remains persuaded that the relationship partners as distinct and inimitable element. So et al., (2013) further confirm that emotional brand attachment remains a critical construct in marketing and in brand management in particular as it illustrates the strength of the bond which customers have with the brand, which will in turn affect their behaviour and drive profitability as well as customer lifetime value (CLV). Brand attachment has an ability to generate a deep emotional link between organisations and the actual brand and as such numerous studies conducted in other parts of other industries elsewhere in the world, have indicated that brand attachment or emotional connection have a meaningfully positive effect on brand loyalty (Park et al., 2010; Kim, 2019). One of the motivators which encourages customers to opt for certain products or brand and to connect with them, is emotions. It must also be added that emotional connections between organisations and customers do not occur instantly, but they are however known to be formed gradually over a period of time, concludes (Kim, 2019). Emotional attachment generally refers to a concept that represents a mental state or feelings connected or attached to the brand –a general feeling toward a brand (Berry, 2000; Rungruengarporn, 2020). It is also quite vital to indicate that customer brand experience dimensions such as sensory, affective, behavioural and intellectual, all have proven to positively influence CBE, as investigated by researchers such as (Rungruengarporn, 2020). 36 Figure 2.4: Brand Emotional loyalty Pyramid (Keller, 2009) Keller (2009) through his brand emotional loyalty pyramid, presents us with a model which illustrates the various stages of emotional loyalty by customers. At the stage of No presence, a customer at that stage has no awareness or knowledge of the brand and as such there are no emotional loyalty. At a stage of presence, a customer is somewhat aware and does possess some understanding, with minimal emotional loyalty. At the relevance and performance stage, that is where the emotional loyalty is starting to build as the customer is seeing a rand as suitable for him/her. At a stage of advantage, customer has knowledge and awareness of the product, however they are convinced that the product or brand has some stand-out added qualities over competitors’ brands. Finally, the bonding stage is where every organisation aspires to be with the customers as it is a stage where emotional loyalty peaks. Customers at this stage don’t just like the actual brand, but they are in love with it, concludes (Keller, 2009). 2.2.7. Age Cohorts: Gen Y and Z According to Cogin (2012) a generation is defined as “a group that shares both a particular span of birth years and a set of worldviews grounded in defining social or historical events that have occurred during the generation’s formative development years”. This implies that one generation exist distinct from the other socially, politically, economically and technologically, etc. 37 Figure 2.5: Defining generations: Where millennials end and generation Z begins (Dimock, 2021) Meister (2020) confirms that generations are also defined by shared birth years, political, economic as well as technological shifts that occur per historical period and is also bound by sets of values that are different from the other. Generation Y, which is also called the Millennials and the Google generation, is mostly characterized by a growing access to and use of technology. Meister (2020) and Belo (2021) adds that the millennials are tech savvy and the highest number of people who have access to and can use cell phones and the internet. This generation generally refers to people born from 1980 to 2000 (Rahulan et al., 2015; Alfred-Stewart, 2018; Meister, 2020; Belo, 2021). While there are conflicting and slightly differing figures regarding the periodization of generation Y, there seem to be an agreement in the study that suggests that people born in this period share similar characteristics. That is, most specifically, the fact that generation Y, are technologically inclined and places great value on technologically advanced product and services more than other generations before it, concludes (Rahulan et al., 2015). Viswanathan (2013) adds that Gen Y customers are said to be much aware of a purchasing power they possess and they as such spend their money as soon as 38 they acquire the actual cash and they mostly spend it on personal services as well as consumer goods. Figure 2.4: True Gen: Generation Z and its implications for companies (Francis & Hoefel, 2020). The Gen Z customers have been acknowledged as an inimitable and unique as they are a first generation of the so-called digital natives and who are ordinarily understood to have been born with digital chromosomes in their DNA. Kahawandala et al. (2020) admit that, while researchers somewhat agree and acknowledge that some of the purchasing behaviours as well as the unique characteristics associated with the Generation Z largely remains questionable; there is however an appreciation that using and/or including additional constructs such as technology self-efficacy, market mavenism as well as lastly social identity can assist with accurately capturing some of the factors which are understood to be influencing the purchasing behaviour of Generation Z. The technology self-efficacy and connectness attribute associated with the Generation Z sets them apart from prior generations as they are quite comfortable with manoeuvring a number of digital terrains as well as engaging with new online applications and as such their confidence with dealing with issues associated with technological sources is accepted to be very high (Rothman, 2016). The 39 technology self-efficacy relating to the Gen Zs in this case generally refers to their own ability to ordinarily perform or conduct any or most technologically complex or sophisticated tasks and these are generally based on their accomplishments performed previously when dealing with a similar technology as well as their verbal persuasions and lastly any emotional arousal when interfacing with a said technology or product, (Francis & Hoefel, 2020). Francis and Hoefel (2020) adds that the Gen Z’s social connectivity as well as most importantly, their comfort and/or confidence with modern technology is accepted to be much greater than the other generations before them. With the above said, the Gen Zs economic power as well as influence are predicted to rapidly increase in the coming years and it therefore would be wiser for organisations to study and continuously analyse their constantly rising influence, decision making processes and buying behaviours as they vary from the other generations before them. On the other hand, generation Z, usually referred to as ‘digital natives’, are those born between 1995 and 2010, who are between the ages of 9 and 24 (Pillay, 2021). Generation Z are similar to Y in the sense that they are technologically savvy and obtain most of their information from the internet and/or social media platforms (Pillay, 2021). As observed by Pillay (2021), this generation places value on regular access and use of social media, as such, places importance on relationships with people as well as with brands. Pillay (2021) further observes that generation Z tend to be diverse and would always go for brands that reflect diversity, in terms of sex, gender, sexual orientation, religion, political views, etc. One major thing about generation Z, is the fact that they want to obtain every information needed in a very short time and concise manner; as such, brand’s content needs to be concise enough to catch their interest within a very short frame of time (Pillay, 2021). Westerman (2007) has made an observation that both generations are actually more similar than they are different. They note that both generations, are technical and practical, multi-tasking, accepting diversity, able to cope with change as well as being competitive. Chakraborty (2017) argues that there is a 40 difference in the purchasing behaviour of different generations. They observe that while generation X is less concerned about purchasing from a new brand, and will less likely change brands, generation Y and Z are more conscious and is very likely to move from one brand to the other. Similarly, Braciníková and Matušínská (2018) argues that younger generation tend not to trust brands as compared to older generations. Thus, the younger generation which refer to gen Y and Z, are less likely to trust and/or stick to a particular brand. This is quite unlike gen X, who are more proven to be loyal to a particular brand. It is worthy then, to note that, both generation Y and Z constitute, the majority of the current as well as future customers in the banking sector, as such, their loyalty to a bank or brand, will have significant impact on the profitability of such brand/bank. Understanding these generations and their specific needs will aid retail banks in devising relevant marketing strategies in a bid to gain loyalty from these cohorts. Thus, by targeting the University of the Witwatersrand’s student population, this research will examine how loyalty programmes enhance brand loyalty among gen Y and Z and will also investigate the variations that exists in the loyalty behaviour of gen Y and Z clients of the ‘big four’ South African banks. 2.3 Empirical review The foregoing section primarily considered the theoretical underpinnings of the relationship between brand loyalty, loyalty programmes, consumer brand engagement (CBE), emotional brand attachment (EBA) and customer brand experience (CBX). Brand loyalty was posited as a positive function of the four variables. The empirical aspects of relationship