Evaluating Customer Loyalty Program: Starbucks India

Abstract: This paper provides an empirical analysis of customer loyalty programs as a relationship management tool in experience-based service context with special references to Starbucks India. Although loyalty programs have become commonplace in the cafe and quick service restaurant (QSR) industry, there is little empirical research on how the particular features of the programs are converted into customer loyalty results based on implicit psychological and relational processes. To fill this gap, Structural Equation Modeling (SEM) will be used to test the interrelationships of the attributes of the loyalty programs, the perceived value and customer satisfaction, brand trust, and customer loyalty. The research is based on the relationship marketing theory, customer equity theory, expectancy-disconfirmation theory, and social exchange theory; it provides a sequential mediation model that is proven by empirical research. The findings have shown that the perceived value (β = 0.54, p < 0.001) is affected by the attributes of loyalty programs (β = 0.54, p < 0.001) and leads to customer satisfaction (β = 0.49, p < 0.001). Growth of brand trust (β = 0.46, p < 0.001) follows as a result of customer satisfaction and customer loyalty (β = 0.52, p < 0.001) is a resultant outcome. The analysis also indicates the relationship between perceived value and customer loyalty to be mediated by customer satisfaction (indirect effect = 0.18, p < 0.01). The degree to which the hypothesized relationship is significant is statistically significant and the structural model has good fit as indicated by various goodness-of-fit measures (CFI = 0.93, TLI = 0.92, RMSEA = 0.06). The findings add to the research on the loyalty program in the emerging markets by showing that the loyalty of the premium cafe type brands is best achieved by using the sequential process of value creation, satisfaction and building of trust and not by the single transactional incentives. The research has provided theoretical contributions to relationship marketing and customer equity literature and has also provided managerial implications that can be used by managers to create value-based loyalty programs in competitive and experience-based service settings

Keywords: Customer loyalty programs • Loyalty program attributes • Perceived value • Customer satisfaction • Brand trust • Customer loyalty • Relationship marketing • Structural Equation Modeling (SEM) • Premium café brand • Emerging market • India • Experiential services • Customer equity • Service marketing • Mediation analysis