Loyalty programs in developing new social identity

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Loyalty programs are sustainable economic schemes that offer deferred, accumulating benefits to the consumer. Usually it takes the form of points, which can be redeemed for discounts, gifts or desired rewards (bonus miles, liters of fuel). The core of these benefits is a special sense of kinship between the customer and the brand, which appears as a result of good work of the loyalty program. Тo achieve this effect  affinity programs are aimed. Affinity programs are a part of loyalty program, a type of business partnerships in which a company offers special rates or services to a customer in an effort to increase revenue for both sides. In other words they are designed to strengthen the emotional connection between the customer and the brand. For this task some marketing processes are set up to improve two-way communication: in the interests of the customer to know the brand and for the company to learn more about the customer. Affinity programs are offered no direct economic benefits to the customer: news subscriptions, call center lines, club membership, alumni associations, web chats, etc. There are also hybrids forms, where the focus is on improving the affective connection between the customer and the brand, but there is a third party to get a financial benefit. It can be also a paid subscription to membership in the program, such as Amazone Prime, a perfect example of non-traditional and innovative loyalty program, based on affinity program.

But according to many researches customer loyalty is a paradox. Researchers see it as a phenomenon which can be significantly influenced by such initiatives on customer relationship management as loyalty and affinity programs. However, the results of empirical research contradict this point of view. According to statistical data, loyalty in competitive repurchasing markets is formed more by passive brand acception than by a structured attitude. From this point of view, the potential of loyalty programs is arranged somewhat differently than it was supposed.

There are two goals of client loyalty programs. The first is to increase sales revenue by increasing the level of purchase/consumption and/or the range of products purchased from a supplier. The second goal is more defensive, by building a closer connection between the brand and current customers, it is assumed to maintain the current customer base. The popularity of these programs is based on the argument that profits can be significantly increased by achieving any of these goals. But there is also an additional effect of the loyalty and closeness program. Let’s suppose that contradictory data on loyalty programs’ work can be explained with the third component. This assumption is acceptable within the framework of the so called loyalty continuum. If we consider the effect of the loyalty program’ work in the social and macrosocial context, we can notice a significant effect from the presence of identity structures. Identity, which is largely achieved by means of attracting clients to trading companies, is a special structure rooted in the idea of globalism.

Social identity theory shows the relationship between a client's positive perception of the brand and a sense of self-confidence. The theory of social identity reveals that people, developing social identity, articulate a sense of their own self, and embed it into ready-made social clusters and categories. Membership in different social categories and association with different organizations is an important source of social identity. This identity is fundamentally collective in its nature. Company identification arises when an individual feels connected to a company and begins to define himself or herself from the company’s perspective. As a result, customers use corporate identity to define themselves as a defined community. The client, and the community at large, can also develop a cognitive perception of their affiliation and use the company to meet their own needs. Mutual influence occurs through the filter of collective perception, community self-assessment. it would be interesting to ask about the internal criteria for this assessment. In general, it can be said that people want to maintain a positive sense of their own self and thus try to identify with companies that have the desired attributes.

Loyalty programs can have a positive impact on target clients through two main mechanisms: gratitude and status. Let us consider them consistently. According to the Cialdini’s reciprocity principle, receiving a reward from a company elicits a target customer’s gratitude. When a customer learns about a benefit, such as a small surprise gift from a department store loyalty program, it should evoke a sense of gratitude. According to studies, gratitude is a typical affective reaction to receiving a gift. Receiving a gift sometimes triggers a powerful reaction that may not correlate in amplitude with the size of the gift. Actually, gratitude is a typical affective reaction when a person gets some kind of goodwill. The effect of gratitude can be enhanced by public resonance - trading companies use this technique with the help of triggers of social emotions such as sympathy, care, joint jubilation. These emotions are especially strong when they are experienced together, so the actions of the shop, which emphasize the possibility of collective experience, are always more successful. These types of shared experiences also work to create a collective identity that is more sustainable and long-lasting, and therefore more profitable for the company that successfully creates this identity. Status offers another significant force that company can use to influence customers’ behaviors. When a frequent flyer passenger who has reached the golden status is invited by the airline staff to walk the red carpet for priority check-in, he becomes the object of attention of other passengers. This status reward gives the customer a sense of superiority over other social groups. This is how the positive identity described in the works of Tayfel and Turner emerges. Positive identity is supplemented by various favorable social comparisons, which are offered as passive or active qualities in the loyalty program. These measures are aimed at strengthening and maintaining the client's perception of his or her high status, as well as the perception of the classes of society and their hierarchy. It’s important that in modern society these classes are mobile and arbitrary. Their hierarchy is momentary and depends on the needs and goals of the company (brand).

Thus, it can be seen that loyalty programs influence the formation of new social collective identity. On the other hand, collective identity is used as a positive argument for the recruitment of new customers by the company. This issue is quite complex and provides an agenda for further study.

Georgetta F. Palsen

Georgetta F. Palsen

About the author

Georgetta F. Palsen spearheads the Loyalty Programs Project, aiming to unravel the global impact of loyalty programs. Leading a dedicated team, she adopts an interdisciplinary approach to explore these programs' influence on consumer behavior and capitalism, offering critical insights for academics and businesses navigating the complexities of today's societal dynamics. More info


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