The effect of loyalty programs on customer patronage of supermarkets in Nairobi County
Customer loyalty programs are a common strategy adopted in business to increase customer value and achieve competitive advantage. This study sought to investigate the effect of loyalty programs on customer patronage of supermarkets in Nairobi County. The research sought: to analyze the effect of loyalty programs on consumer patronage of supermarkets; establish the influence of perceived value of loyalty programs on patronage behaviour and to determine the mediating role of supermarket’s service quality on loyalty program effects. Descriptive research design was used. Questionnaires were administered to a sample of 384 supermarket loyalty card holders from Nairobi County’s four administrative divisions namely: Nairobi West, Nairobi East, Nairobi North and Westlands. Stratified sampling technique was used. The sampling unit was all consumers with a supermarket loyalty card. Data was analyzed using Chi-square tests and hierarchical regression analysis. The results showed that after accounting for consumer demographics, convenient location and service quality, loyalty programs explained 5.7% of the variability in customer patronage of supermarkets to a statistically significant degree (p<.05). It was concluded that loyalty programs positively influenced patronage behaviour of consumers towards supermarkets in Kenya, although the degree of influence was relatively small. Perceived value of loyalty program rewards moderated patronage behavior of card holders to supermarkets. Generally, loyalty programs were not that important to card holder’s shopping experience although they conferred a sense of prestige as card holders felt special. Instead, convenient location was a more important store attribute that determined patronage behavior. It was recommended that supermarkets need to be more innovative at their rewards program offerings. Loyalty schemes should provide instant gratification to customers. Supermarkets should exploit the sense of prestige conferred by the loyalty cards through appropriate brand positioning strategies. Supermarkets that do not enjoy strong brand identity should reallocate resources away from loyalty schemes to improving store attributes such as speed of service and staff responsiveness as well as location convenience. Further studies could focus on the contribution of loyalty schemes to the operational efficiencies of supermarkets in Kenya.