The Impact of Customer Loyalty Programs on Customer Retention in the Retail Industry

Abstract

As the importance of the concept of customer loyalty increases, organizations are investing more towards loyalty programs for retaining their existing customers as well as attracting new customers. This study analyzes the literature to synthesize some debatable areas such as types of customer loyalty programs and their impact on customer retention. This research is carried out as a systematic review, evaluating ten recently published research articles due to their high relevancy. Our analysis identifies four major categories of customer loyalty programs in the retail industry namely, point system, rewarding system, loyalty card system and gift card system. Further, it is found that a rewarding system is the most effective type of loyalty program in the retail industry where retailers can provide additional rewards based on the customers’ loyalty levels. Through this study, it is found that all four types of customer loyalty programs are positively correlated with customer retention while the rewarding system has the highest co-relation with customer retention.