The Impact of Loyalty Programs on Convenience Store Customer Shopping Behavior

Introduction3

Research Problem4

Research Question5

Research Hypotheses5

Problem Background6

Purpose of the study7

Significance of the Study7

Literature Review8

Theoretical and Conceptual Framework8

Independent Variables10

Dependent Variables11

Methodology15

Comparison of Research Methods15

Advantages and Disadvantages of Quantitative Research Methods15

Research Method and Design16

Population and Samples16

Instrumentation18

Validity and Reliability18

Organization of Literature Review19

Analysis20

Conclusion20

References22

The Impact of Loyalty Programs on Convenience Store Customer Shopping Behavior

Introduction

This research relates to understanding the relationship between consumers shopping behaviorand loyalty program implemented as part of a relationship marketing strategy at convenience stores. Relationship marketing focuses on building and maintaining long term relationship with customers and other stakeholders for a mutual benefit (Brumley, 2002). Additionally, relationship marketing enhances the communication between customers and convenience stores (C-Store) in order to create a unified image for the c-store and its products. For example, “by sustaining relationships with profitable customers and reducing customer defection by just 5 percent, a company can increase future profit by as much as 30-90 percent” (Belch & Belch, 98). According to Pareto's Rule, 80 percent of a company's business should come from 20 percent of the customer base. Moreover, it is cheaper for a business to maintain an existing customer than attracting new ones. Therefore, making relations with the customers and retaining them is instrumental in shaping the platform for true business success. Customer Relationship Management (CRM) has therefore, been studied extensively in the realms of marketing literature (Morgan & Hunt, 1994; Grönroos, 1995).

Relationship marketing focuses on consumer behavior in order to identify strategies that build good relationships with consumers. When marketers understand specific choices of customers regarding certain products and the intent behind their purchases, they can create elements that trigger the decision making process in order to influence like-wise customers for the company's own profitable benefits. Understanding the needs and wants of these customers thus, ensues successful potential for sustained businesses since it then creates a holistic understanding about the requirements of each respective customer in addition to enabling the company to “produce” according to what is being “demanded”.

Consumer behavior is a dynamic interaction of affect, cognition, behavior, and the external environment. Consumers can be influenced by some factors that shape their decision and choice in the marketplace; for example, perceptions, attitudes, and loyalty are factors that shape consumer behaviors (Raju, 1995). Loyalty reward programs are popular amongst customer since they are ta a very mature stage in their lifecycle. According to AC Nielson fifth annual shopper survey, reward program related shopping frequency is increasing every year. For example, household card usage is up from 70 percent in 1999 to 74 percent in 2000; most consumers carry more than two cards (Dennis, 2001). Moreover, AC Neilson reported that 70 percent of the U.S homes have a membership in a loyalty program. The number of c-stores and grocery stores offering loyalty cards are also increasing dramatically (Frazier McKenna 1999). Therefore, loyalty programs are widespread across the U.S. and loyalty membership grew by 35.5 percent from 2000 to 2006 to reach 1.3 billion individual membership in the United State by 2006 (Ferguson ...