TABLE OF CONTENTS

INTRODUCTION: NATURE OF REPORT………………………………..1

1.0 CUSTOMER LOYALTY……………………………………….1

1.1 Loyalty: Definition and Measures…………………………………1

1.2 Drivers and Motives of Loyal Customers……………………………..3

1.3 Loyalty Strategies……………………………………….5

2.0 LOYALTY PROGRAMS……………………………………….7

2.1 Background Information: Existing Loyalty Programs………………………..7

2.2 Company Loyalty versus Program Loyalty …………………………….9

2.3 Loyalty Program Strategies…………………………………..10

2.4 Loyalty Program Effectiveness………………………………….12

2.5 Criticisms and Implications…………………………………..14

3.0 CONVENIENCE INDUSTRY APPLICATION……………………………..15

3.1 Loyalty Program Strategies……………………………………15

3.2 Suggestions from Findings……………………………………18

3.3 Convenience Loyalty Program Initiatives: Competitive Overview…………………..19

4.0 RECOMMENDATIONS & CONCLUSIONS: KWIK TRIP, INC………………………21

APPENDIX……………………………………………..27

REFERENCES CITED…………………………………………30

BIBLIOGRAPHY……………………………………………33

REFLECTION REPORT………………………………………..37

INTRODUCTION: NATURE OF REPORT

Loyalty is a marketing concept centered on the idea of acquiring and retaining valuable customers to generate increased profits. Customer loyalty stratagems have grown from an afterthought to leading initiatives among marketers across industries. Major drivers of loyalty include accumulated satisfaction and customer commitment. Strengthening and accrual of these inputs aids customer transition through each of the four loyalty stages. This report analyzes each loyalty stage with respect to relevant loyalty drivers, strategies, and types of benefits offered. Ultimately, the highest levels of loyalty are obtained through cumulative advantage and strategy integration with corporate cultures. The report emphasizes the importance of diversifying benefits, segmenting customer portfolios, and managing data collections. The findings are applied within the convenience store industry, which operates in a low-involvement purchase environment. Furthermore, the findings are applied to Kwik Trip, Inc.’s current and future customer loyalty strategies. Conclusions are elaborated upon and recommendations are provided to construct enduring customer loyalty.

1.0 CUSTOMER LOYALTY

1.1 Loyalty: Definition and Measures

Existing research does not provide a universally excepted definition of customer loyalty.  Most researchers, however, agree that customer loyalty exists when customers hold favorable opinions about a brand that generate positive and measurable results, such as repeat purchase behavior over an extended period (Duffy 2003). Richard Oliver, Professor of Management at Vanderbilt University (1999), validates a model for understanding customer loyalty in four stages: cognitive loyalty, affective loyalty, conative loyalty, and action loyalty.  Understanding these stages allows marketers to measure customer loyalty as a dynamic and developmental process, in which loyalty strengthens as a customer enters each consecutive stage (Gomez et. al 2006).

Cognitive loyalty represents the first stage in this process, where customers recognize the advantage that a brand holds over its competitors. This stage is associated with “informative” attitudes that relate primarily to product performance. The next stage of customer loyalty, affective loyalty, represents an accumulation of positive associations with a brand that generate a liking or satisfactory attitude toward that brand. Affective loyalty relates to the customer’s degree of liking (affect) towards a brand, but remains subject to brand switching (Gomez et. al 2006). Conative loyalty conveys customers’ behavioral intentions, such as repeat and habitual purchases. However, customers may not consciously realize their loyalty in this stage, as it is dependent upon habit and unrealized actions. The fourth stage of customer loyalty, action loyalty, represents the strongest and most desirable form of loyalty among marketers. In this stage, customers are willing to bear obstacles to purchase from a specific firm or brand. Action loyalty refers to the transition of intentions into actions – customers in this stage exert active efforts to continue their relationship with a specific brand. The difference between conative loyalty and action loyalty lies in the physical action of rebuying, versus simply wanting to rebuy (Oliver 1999). Table 1 is provided in the Appendix to visualize the differences in these stages and vulnerabilities within each.

Firms receive benefits as their customers transition through the four loyalty stages. These benefits can be measured in the following forms: cost savings, referrals, complaint input, channel migration, unaided awareness, brand asset awareness, and impulse behaviors.  Dennis L. Duffy (2003) rationalizes each benefit in his study titled Internal and External Factors Which Affect Customer Loyalty. Loyal customers allow for efficient use of resources, thus reducing overall costs. These cost savings derive in forms of customer acquisition and retention.  For instance, loyal customers are likely to urge peers to become purchasers of a specific brand – these referred customer acquisitions are twice as valuable long-term than non-referred acquisitions (Kumar 2017).  Loyal customers are also more likely to state any complaints to the firm personally, which allows the opportunity for negative-situation reversals. Another benefit, channel migration, refers to the likelihood of loyal customers to purchase through alternative channels, for instance, brick and mortar versus online outlets. The acceptance of multiple-channel purchase behavior results in increased total consumption, and thus, increased profits for the firm. Awareness is also a significant benefit of an established loyal customer, both in the form of unaided awareness and brand asset awareness. Loyal customers naturally obtain top-of-mind awareness for the brand as well as a greater awareness of the firm’s full offerings. Duffy illustrates several examples of these “hidden assets or offerings” by explaining how loyal customers may be more familiar with free delivery services or specific customer service assets that an ordinary customer would not utilize. This asset utilization results in enhanced value perceptions among loyal customers (Duffy 2003).

1.2 Drivers and Motives of Loyal Customers

Evidently, the transition of customers through the four loyalty stages results in measurable benefits for firms. Transitions occur as drivers and motives of loyalty strengthen.  Existing research distinctly revolves upon two drivers: customer satisfaction and customer commitment.  Oliver’s research identifies customer satisfaction as an essential input that requires nurturing and succession to develop into loyalty. For instance, personal determination and social support are both necessary to transform satisfaction into loyal behavior. Likewise, for satisfaction to become loyalty, “frequent or cumulative satisfaction is required so that individual satisfaction episodes become aggregated or blended” (Oliver 1999).

This idea is reinstated in a more recent study by Procter & Gamble Chairman A.G. Lafley and Dean of the Rotman School of Management Roger L. Martin.  Lafley and Martin suggest that offering easy, familiar, and consistent offerings (as opposed to constantly updated, perfect offerings) is the most effective way to accumulate satisfactory customer experiences.  The researchers use the term cumulative advantage to define this idea. An issue with conventional ideas of purchase behavior is the assumption that customers make logical purchase decisions and, thus, successful business strategies are those that respond to that logic. However, a large portion of purchases result from irrational behaviors resulting from the speed of processing fluency – theoutcome of repetitive experience, or the speed at which thoughts, opinions, and prefer