The effectiveness of loyalty programs for luxury brands

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Master thesis

The effectiveness of loyalty programs

for luxury brands

Evelien Couteaux 11654546

26-01-2018

MSc in Business Administration - Marketing track University of Amsterdam

Supervisor Marco Mossinkoff Word count: 15225

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Statement of originality

This document is written by Evelien Couteaux who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

This study focusses on the role of loyalty programs (LPs) in establishing loyalty towards a luxury fashion brand. More specific, it examines the differential effects of the benefits customers receive from an LP on brand loyalty, as mediated by affective and continuance commitment. Therefore, a survey is performed to gather primary data by means of an experimental vignette study. This study tests the relationships using ANOVA and hierarchical multiple regression analysis. The findings demonstrate that the benefits of LPs do not enhance a consumer’s brand loyalty in the context of this study, and that commitment does not mediate this relationship. On the contrary, this study did find an impact of affective and continuance commitment on brand loyalty, from which the former contributes twice as much as the latter. On top of that, this study also shows that luxury retailing holds different consumer motives than more low-end industries. Although this study does not support the effectiveness of LPs for luxury brands, the findings can still have important implications for these brands. Nevertheless, if a luxury brand would choose LPs as a marketing tool, hedonic benefits would be the most effective.

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1. Introduction

Nowadays, loyalty programs (LPs) are some of the most popular marketing tools (Kang et al., 2015). The main purpose of LPs is to reward customers and therefore encourage loyal behaviour (Sharp and Sharp, 1997). Multiple studies already addressed the importance for brands in making their customers loyal since it creates benefits such as positive word of mouth (Sutikno, 2011), increased market share (Gounaris & Stathakopoulos, 2004), profitability (Kabiraj & Shanmugan, 2011), and a competitive advantage in the market (Iglesias et al, 2011).

One of the most important factors towards achieving brand loyalty is commitment which can be based on emotions and/or rational thoughts (Fullerton, 2003). This is however still an under-researched construct (Iglesias et al., 2011), since previous studies don’t agree on the impact of both commitment types in the establishment of brand loyalty. Some studies found both types enhancing loyalty (e.g. Grayson & Ambler, 1999), while others only found one of the two impacting brand loyalty (e.g. Maheshwari et al., 2012). So, what could explain this? And how can LPs help brands in achieving this commitment and loyalty?

Brands design their LPs with certain benefits to reward their member-customer. Well-known examples of these benefits are discounts or point saving systems. Other examples are invitations to exclusive events or preferential treatment in store. Many studies agree that all these benefits are successful (e.g. Stathopoulou & Balabanis, 2016), but is this true? According to Dilger (2011), in order for LPs to be successful, their benefits must be attuned to the needs of its consumers. Since it can be expected that every industry has different consumer motives, this arises the question whether all benefits are as effective.

Therefore, this study will place the theories of LPs in the context of luxury brands. LPs originated from low-end retailers (Evanschitzky et al., 2012), but are slowly being adopted by more high-end retailers. On top of that, the luxury market is facing continuous and dynamic growth, characterized by a wider availability to consumers than ever before (Hennigs et al.,

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7 2012), enhancing the importance of making their customers brand loyal. However, luxury brands often question whether LPs are effective and appropriate in their market, since they perceive them as a sales promotion tool that reflects a down-market strategy, being inconsistent with the desires of luxury consumers (Thompson, 2014). So, designing an LP that engages the luxury consumer but does not decrease the exclusivity of the brand can be challenging. So, what types of benefits should be offered by these brands to increase the brand loyalty of their customers, and are they as effective as previous studies state?

Thus, this study does not only contribute on a theoretical level, but will also have important implications for luxury brands on whether LPs are an effective marketing tool for them. This research will therefore try to answer the following research question: “What is the impact of loyalty program benefits on a consumer’s brand loyalty, and how is this mediated through their commitment?” by placing it in the context of luxury brands.

The remainder of this study is structured as follows. First, chapter 2 contains a literature review to provide the reader with all relevant information on LPs. Chapter 3 introduces the luxury context and develops a conceptual framework. Chapter 4 contains the research design, followed by a presentation of the results in chapter 5. Finally, chapter 6 discusses the findings of this study and provides suggestions for future research.

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2. Literature review

This literature review consists of two parts. First, all relevant research about loyalty programs (LPs) will be discussed and concluded. The second part will look into the context of luxury brands in order to provide more understanding on the effectiveness of LPs.

2.1 Loyalty programs and their benefits

Leenheer et al. (2007, p. 32) define loyalty programs (LPs) as “an integrated system of marketing actions that aims to make member customers more loyal”. More specific, LPs help a brand to collect customer information, increase customer retention or repeated business, and enhance customer relationships and loyalty (Kang et al., 2015). In order for brands to receive this loyalty, it is crucial that their customers enrol in their LP. When a consumer decides to become member of an LP, it may compare the expected benefits and costs. It is assumable that the more positive consumers perceive the benefits, the higher the likelihood of LP enrolment. Since enrolment hardly ever comes with fees, there aren’t any monetary costs attached to LPs. However, consumer’s might face the non-economic cost of privacy loss (Leenheer et al., 2007). All LPs ask new members to fill in personal information such as their name and (mail)address, together with all the data collected through purchases from the brand. This allows the LP provider to collect detailed information about their members and use this to manage their relationship. This allows them to deliver targeted marketing activities (Liu, 2007) and even influence consumer choices (Breugelmans et al., 2015). Not every consumer would be willing to provide personal information, especially if these concern personal identifiers (Noble & Philips, 2004). According to Leenheer et al. (2007), some customers may perceive privacy concerns due to LPs in general, which leads to a decreased likelihood of LP enrolment. It is

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9 therefore important that the benefits consumers receive through LPs are interesting enough for enrolment.

Most studies make a distinction between monetary and non-monetary benefits. More specific, the benefits customers obtain from joining an LP consist of utilitarian, symbolic, and hedonic benefits (Mimouni-Chaabane & Volle, 2010; Stathopoulou & Balabanis, 2016).

• Utilitarian benefits are economic in nature and represent “hard” rewards such as monetary savings (Dorotic et al., 2012), and are therefore often referred to as monetary benefits. Specific examples are special discounts, vouchers, or points that can save up to a discount (Stathopoulou & Balabanis, 2016). These benefits are perceived as most favourite by consumers because they are tangible in nature, making them easier to evaluate than non-monetary benefits (Dorotic et al., 2012). At first, Mimouni-Chaabane and Volle (2010), thought that utilitarian benefits were partly monetary and partly convenience based, meaning that LPs can reduce a consumers’ search and decision costs, which can also be seen as a benefit. However, their study found no evidence to support this idea and thus are utilitarian benefits generally referred to as purely monetary based.

• Hedonic benefits are non-monetary based. These benefits are more psychological or emotional, and reflect “soft” rewards since they have no monetary value (Dorotic et al., 2012). Hedonic benefits refer to exploration and entertainment benefits LPs provide members with, which also include getting joy out of collecting points (Stathopoulou & Balabanis, 2016). Examples of these rewards are the trial of new products, invitations to special events, unique experiences, and information on new trends (Mimouni-Chaabane & Volle, 2010). Hence, hedonic benefits refer to everything that gives consumers joy from being member of a brand’s LP. These benefits are mostly tailored towards the brand itself but should not be confused with getting pure joy from the actual

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10 brand itself. It is of course likely that consumers only become an LP member if they also like the brand, and therefore also perceive the hedonic benefit from the LP stronger. • Symbolic benefits are also non-monetary based. They refer to recognition and social

benefits LPs provide to consumers, such as a sense of belongingness, preferential treatment, personal attention, and social status or social approval (Dorotic et al., 2012). Again, these benefits are received through the LP of the brand, which is not the same as a non-member receiving personal attention during a single visit at their store.

2.2 Brand loyalty

As already stated in the introduction, the ultimate goal for brands with their LPs is to increase the loyalty of their customers. But what exactly is brand loyalty? Khan and Mahmood (2012, p. 33) define brand loyalty as “the customer’s unconditional commitment and a strong relationship with the brand, which is not likely to be affected under normal circumstances”. So, once a consumer becomes loyal to a brand through commitment, this loyalty will not change unless something unusual happens. Multiple studies already addressed the importance for brands in making their customers loyal. According to Amine (1998), increasing consumer loyalty is important because the success of a brand in the long term depends on its regular buyers.

The first studies on brand loyalty defined the concept as purely repeat purchasing from the same brand. However, a later study by Dick and Basu (1994) argued that loyalty should not be regarded are mere repurchase behaviour. Purely consistent purchases are not true brand loyalty because they are made on the basis of habits or routines that enable consumers to cope more effectively with time pressures and search efforts (East, 1997). Amine (1998) refers to this as spurious loyalty since the repeated purchases of the brand then appears to be a habitual behaviour to reduce mental and physical efforts, which could fall apart when these habitual

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11 supply conditions change, leading to brand switching. So, just increasingly purchasing from a brand does not mean a consumer is brand loyal because this can be based on convenience factors, meaning that consumers easily switch to a different brand of this gives them more convenience. For example, if a consumer always goes to the nearest grocery store, this could be seen as loyal behaviour. However, when a new grocery store opens which is closer, the consumer might switch to that one, also for convenience reasons. So, loyalty cannot purely be based on purchase behaviour. This lead to the addition of an attitudinal component when measuring brand loyalty (Amine, 1998). Hence, when a consumer also feels a certain affect towards the store or brand, or repeatedly visits it because he/she likes the brand, they won’t switch to another brand as easily. So, brand loyalty consists of a behavioural and an attitudinal component. This is in line with a study by Dick and Basu (1994), who argue that brand loyalty should be regarded as the strength of the relationship between an attitudinal evaluation and a behavioural intention. Amine (1998) explains the attitudinal component as a strong internal disposition of the consumer to continue purchasing the same brand and this is operationalized through the measurement of a consumer’s attitude towards the brand, which induces resistance to brand switching when situational changes occur in the selling conditions. Hence, a consumer can be viewed as loyal when either their relative attitude towards the brand is highly favourable or the latter is clearly differentiated from other competitors as well, when they consistently purchase from the same brand (Amine, 1998). Thus, brand loyalty does not only represent the regular intention to buy from a certain brand, but is also consists of a relationship between the brand and the consumer (Atilgan et al., 2005). This emphasizes the importance of commitment in achieving true brand loyalty, but what is commitment exactly?

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12 2.3 Commitment

The importance of commitment is clearly displayed in its definition, as it illustrates that a highly committed consumer will work harder to maintain a relationship with a brand compared to a consumer that holds a low level of commitment (Maheshwari et al., 2014). Cater and Cater (2009) define commitment as the desire to maintain a valued relationship. Commitment consists of different types that found its roots in organizational behaviour research (Amine, 1998). This can be commitment towards many things such as a person, an organisation, a store, or a brand. This study looks at commitment towards a brand as a consequence of their LP. Therefore, commitment is about establishing and maintaining a valued relationship between a consumer and a brand, based on their LP.

Allen and Meyer (1990) originally stated that commitment consists of three components: affective, continuance, and normative commitment. Pandit and Vilches-Montera (2016) explain the components as follows: affective commitment is a certain feeling of connectedness and emotional bonds, continuance commitment is about the rational thought that continuing with the brand’s LP is a good deal, and normative commitment is the feeling that consumers feel obliged to continue with the LP. However, Allen and Meyer (1990) argue that there is an overlap between affective and normative commitment, and a shortage of existing literature on normative commitment, which makes normative commitment a less studied construct for commitment. Therefore, multiple studies (e.g. Fullerton, 2003; Iglesias et al., 2011) agree that commitment only consists of affective and continuance commitment, so this study will only focus on these two. Together they explain the psychological state that characterizes the nature of a relationship, which has implications for staying or leaving the relationship (Allen & Meyer, 1991). So, commitment towards a brand as a consequence of their LP, can be based on emotions and/or rational thoughts. Hence, a relationship could be based

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13 on either affective or continuance commitment, both forms or neither (Fullerton, 2003). A more detailed definition of the two constructs can be found below.

• Affective commitment is built on the “affective or emotional attachment to the

organization such that the strongly committed individual identifies with, is involved in, and enjoys membership in the organization” (Allen & Meyer 1990, p. 2). Amine (1998) explains that affective commitment is the extent to which a consumer wants to maintain a relationship with a brand based on their emotional attachment to it. Therefore, many studies refer to it as emotional commitment. This study will refer to affective commitment as having a relationship with a brand because a consumer identifies with it, is involved with it, and gets joy out of being member of the brand’s LP. These factors will lead to the desire of maintaining a relation with the brand. Affective commitment is commonly used as a mediating factor towards achieving loyalty. Iglesias et al. (2011) found that it mediates experience and loyalty, while Fullerton (2005) also found it mediating between satisfaction and loyalty.

• Continuance commitment is the more rational part of commitment which is also known as calculative commitment (Srivastava & Owens, 2010), or economic commitment (Evanschitzky & Wunderlic, 2006). This type of commitment occurs when the cost of leaving the relationship, and a lack of other alternatives, creates a rational reason for the consumer to be committed (Meyer & Herscovitch, 2001; Bansal et al., 2004). Lewicka (2014) explains calculative commitment as the need to maintain a relationship given the significant loss of benefits and/or anticipated switching costs associated with leaving. Bansal et al. (2004) define continuance commitment as the extent to which a consumer wants to maintain a relationship with a brand based on the benefits of staying in that relationship trumps the costs of leaving. Hence, consumers will become and stay enrolled in a brand’s LP, as long as the benefits exceed the costs

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14 of switching to another one or when there is no alternative brand with a better LP to switch to.

But how can commitment lead to an increase of a consumer’s brand loyalty?

2.4 Commitment on brand loyalty

As previously stated, relationship building is very important towards achieving true brand loyalty. Jacoby and Kyner (1973) emphasize that commitment provides the essential basis to distinguish brand loyalty from other forms of repeated purchasing behaviour. Many studies agree that highly loyal consumers are those that are strongly committed to it (Amine, 1998). It is expected that a highly committed consumer will work hard to maintain their relationship with a brand. Fullerton (2003) already emphasized the great importance of both commitment types in achieving brand loyalty. If a consumer becomes committed towards something, this means he/she desires a relationship with it and is less likely to leave this relationship. Hence, the higher their commitment, the stronger their loyalty will be. Fournier et al. (1998) and Grayson and Ambler (1999) both recognised that brand loyalty could be influenced by positive feelings of affect as well as feelings of continuance. However, previous literature does not agree on whether both constructs lead to brand loyalty. Many studies agree that affective commitment has a stronger impact than continuance commitment, because it enhances long-term effects in the form of repurchases and loyalty. According to Melancon et al. (2011), affective commitment produces the most relationally valuable consumer to an organization. But how can commitment towards a brand, based on their LP, lead to loyalty towards the brand itself? According to the attachment theory, a person’s emotional commitment to another person impacts their behaviour. For example, a strong emotional attachment in a romantic relationship may lead to a higher willingness to make sacrifices or investments in that person (Fraley & Shaver, 2000). Therefore, bonding with the attachment

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15 object induces the desire to prolong the connection felt with it through the avoidance of switching (Grisaffe & Nguyen, 2011). Using this theory, Pandit and Vilches-Montero (2016) found that commitment to an LP card, can translate into connectedness with a related object, in their study being a store. So, commitment which is based on an LP can be used as a strategy to build positive responses such as loyalty towards the store (Pandit & Vilches-Monetero, 2016), or brand in this study. It is therefore expected that commitment towards brands, even though this is a consequence of their LP, can also be translated into loyalty towards the brand itself.

Continuance commitment on the other hand, is not always found to impact loyalty. A study by Maheshwari et al. (2014) found that continuance commitment did not have any considerable impact on the consumer’s loyalty towards a brand because factors such as price and other available alternatives do not influence the desire to maintain a relationship. Feelings related to continuance commitment engages the consumer in a brand relationship, but these feelings are not enough to develop feelings of loyalty in the consumer’s mind (Maheshwari et al., 2014). Other studies find their motivation in the factor “lack of other alternatives” that is part of the continuance commitment construct. The consumer market often has several alternatives available to them, as well as low switching costs, so affective commitment generally has a greater impact on brand loyalty than continuance commitment does (Evanschitzky & Wunderlic, 2006). On top of that, in markets where many brands have an LP, it is likely that one consumer holds multiple LPs which could induce the idea that they purely use them for rational reasons because it gives them the best deals, and that they don’t have the LPs because they like the brands so much. This could be a reason for these studies to have found evidence for no positive impact of continuance commitment on brand loyalty. For example, Demoulin and Zidda (2008) argue that customers who hold loyalty cards of competitors are less loyal to the store than customer who only hold the focal store card. Loyalty

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16 from continuance commitment might be different than from affective commitment since it is based on cognitive evaluations of the brand’s LP, leading to loyalty just for opportunistic reasons (Amine, 1998). On top of that, Fullerton (2003) emphasizes the importance of measuring both constructs in order to fully explain a consumer’s loyalty. Many studies have not found an impact of continuance commitment on brand loyalty, but this does not imply it should be excluded from the commitment construct. According to Fullerton (2003), many marketing scholars have erred in defining and operationalizing commitment only as affective commitment. However, understanding the impact of affective commitment must be viewed in the light of degree to which continuance commitment is also present or not (Fullerton, 2003). Since continuance commitment looks at whether people leave the relationship for a better opportunity, it is important to know whether this type of commitment plays a role for the consumer or not, in order to fully understand why consumers maintain relationships with a brand based on their LP.

So, commitment can lead to brand loyalty, but how can a brand make these consumers committed first? In other words, how can the benefits of LPs increase a consumer’s desire to maintain a relationship with a brand?

2.5 LP benefits on commitment

According to De Wulf et al. (2001), companies offer benefits to customers for many reasons, such as to develop a closer relationship between the brand and the customer, to create resilience to alternative options for the customer, and to reward them for their loyalty. The former already explains that the benefits are designed to enhance commitment. Due to the nature of the different benefits, previous literature suggests that some benefits have a stronger impact on continuance commitment whereas others lead to more emotional commitment.

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17 Mimouni-Chaabane and Volle (2010) state that hedonic and symbolic benefit are important in building long-term relationships with customers since these rewards make customers feel appreciated and valued. These benefits create a strong and more binding relationship (Berry, 1995), and are therefore more long-term. Hedonic and symbolic benefits also enhance other feelings such as a sense of belonging (Dowling & Uncles, 1997), gratitude (Palmatier et al., 2009), or an elevated sense of status (Dreze & Nunes, 2009). Hence, these types of benefits create emotional feelings and thus enhance affective commitment. This is in line with a study by Amine (1998), who states that consumers can become emotionally committed to a brand because they enjoy their relationship with it for hedonistic or symbolic reasons. So, if a consumer perceives joy or a feeling of prestige because of their LP membership, this can increase their emotional commitment towards the brand. But is it also possible for non-monetary benefits to increase continuance commitment? Melancon et al. (2011), did a study in the sports entertainment industry and found that perceived social rewards

lead to affective commitment, while perceived economic rewards lead to continuance commitment, and explains this by using the cognitive evaluation theory (CET). CET implies that the nature of a reward has an impact on whether commitment takes an intrinsic or extrinsic form (Melancon et al., 2011). According to CET, internal rewards refer to intangible rewards that increase internal behavioural enjoyment and internal reasons for maintaining the behaviour, and can therefore be seen as the hedonic and symbolic benefits of LPs. External rewards on the other hand, are tangible in nature. Money and prizes are some of the most commonly cited external rewards in the psychology literature (Rummel & Feinberg, 1988), and in the context of LPs, they are viewed as financial incentives such as discounts in order to increase behavioural loyalty (Berry, 1995), and thus as utilitarian benefits of LPs. So, according to Melancon et al. (2011), hedonic and symbolic benefits lead to an intrinsic motivation or emotional reason to be in a relationship with a brand. Melancon et al. (2011) explain

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18 continuance commitment as similar to a consumer’s extrinsic motivation, and thus states that utilitarian rewards increases continuance commitment. They explain that extrinsic motivation involves behaviour for any reason other than interest in the activity itself, and is marked by feelings of pressure to obtain the offered reward. Peterson (1995) also argues that utilitarian benefits are able to increase commitment with a brand, since consumers often initiate relationships with organizations to obtain economic rewards. This initiates the idea that utilitarian benefits can be important in forming commitment in the earlier stage of the relationship.

So, the relationships between the benefits and commitment, and commitment and brand loyalty are now discussed. The remaining of this chapter will put all the variables together to give a clearer understanding on the full picture. It will summarize the current literature, state the most important findings, state the literature gaps, and propose the different context in order to answer these gaps and provide more understanding on the topic of LPs.

2.6 Conclusion

The first part of the literature can be concluded as follows:

• Organizations, stores and brands use LPs as a marketing strategy to enhance the loyalty of their customers since this leads to multiple advantages such as a competitive advantage in their market (Iglesias et al, 2011). A consumer is brand loyal when their favourability towards that brand is clearly differentiated from competing brands, in combination with consistent purchases from the same brand (Amine, 1998). Brands use LPs to provide their members with three types of benefits: utilitarian (e.g. discounts), hedonic (e.g. entertainment), and/or symbolic (e.g. social status) (Dorotic et al., 2012). • Commitment works as a mediating variable to explain the impact of all benefits on

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19 a brand and can be based on emotions such as joy and involvement, or because it gives them more benefits than costs, together with a lack of alternatives (Bansal et al., 2004). The former is called affective commitment, the latter is known as continuance commitment. So, when members are offered certain benefits, this enhances their desire for a relationship with the brand, which leads to a positive attitude towards the brand and/or increasing purchases.

• Previous studies agree that all three benefits are suitable and effective for LPs because they are able to increase brand loyalty. However, their impacts can slightly differ. Utilitarian benefits are perceived as most favourite by consumers in low-end retailing (Dorotic et al., 2012) and can be important in forming commitment in the earlier stage of the relationship. Hedonic and symbolic benefits on the other hand, create a stronger and more binding relationship (Berry, 1995), so are more focussed on the long-term. Utilitarian benefits could also be focussed on the long term if members get more discount when they buy more, which could also reinforce the relationship over time, and increase loyalty.

• Utilitarian benefits have a stronger impact on continuance commitment (Melancon et al., 2011), while hedonic and symbolic benefits have a stronger impact on affective commitment.

• Affective commitment has the strongest impact on brand loyalty. Earlier studies (e.g. Grayson and Ambler, 1999) also found an impact of continuance commitment on brand loyalty, whereas more recent studies (e.g. Maheshwari et al., 2012) did not find an impact. An explanation can be found in the consumer market these brands operate in, which offers consumers with many alternative options, as well as low switching costs, leading to switching behaviour when a better option comes along, and thus not towards brand loyalty.

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20 A reason for the previous findings could lie in the industries these studies were performed in. Many studies were done in industries where utilitarian consumer motives are important, such as the grocery- and low-end retailing. On top of that, values such as hedonism and symbolism are also not expected to be as important in low-end industries. So, since the benefits of LPs are closely related to consumer motives, this could imply that the benefits offered by LPs should reflect these motives. Hence, other industries might perceive other benefits as more favourable and effective. So, it is interesting to place the previous theories in a different setting where utilitarian motives are not as important as hedonic and symbolic motives, since most studies used industries where utilitarian benefits are important consumer motives. This could then prove the fact that not all three benefits are as effective as previous studies state. It might even be possible that utilitarian benefits are not effective at all. Furthermore, the new context should also contain a lack of alternative brands with LPs, in order to give more understanding on whether this could prove the impact of continuance commitment on brand loyalty since previous findings are very contradicting. Hence, when there can be found an impact of continuance commitment on brand loyalty while the brands in the industry face a lack of alternative options, this could explain the impact of continuance commitment on brand loyalty. So, when the previous literature and theories are placed in a different context, will the same results occur?

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3. Research design

This chapter starts with the introduction of the new context where the previous literature will be placed in. This is followed by the conceptual model and the main research question. Finally, it discusses the hypothesis based on the literature review and the new context.

3.1 New context

The previous chapter concluded the following research gaps. Previous studies state that all three benefit types can enhance brand loyalty, but these findings come from industries where utilitarian consumer motives are present. However, there are contexts where these consumer motives are not as present or important, which could lead to a different, or even no impact of this benefit on brand loyalty. Secondly, previous studies were done in contexts where consumers don’t face a lack of alternative options. This led to the findings that brand loyalty is only affected by affective commitment and not by continuance commitment. Therefore, this study will place all the previously discussed literature in the context of luxury fashion brands for a variety of reasons:

1. This industry holds different consumer values than most previously studied industries which could lead to different impacts of the benefits on commitment and loyalty. 2. Hardly any luxury brand has an LP. This increases the lack of alternatives and could

therefore give more understanding of the role of continuance commitment on brand loyalty.

3. Brands itself play a very important role so brand loyalty could be stronger.

4. There is a shift from low-end retailers towards high-end retailers when it comes to adopting LPs (Evanschitzky et al., 2012) so more understanding is in order.

5. However, very little is known about the effectiveness and appropriateness of LPs in the luxury brand industry. On top of that, luxury brands often question whether LPs are

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22 effective and appropriate in their market (Thompson, 2014). This makes this research not only interesting from a theoretical point of view, but also from a managerial point of view.

The rest of this study will look deeper into the industry of luxury brands, in order to find more understanding on the effectiveness of LPs. This arises the question: what are luxury brands exactly?

3.2 Luxury brands

In order to understand why different results might occur when placing LPs in the luxury fashion brand context, it is necessary to know what these brands are. Yet, previous literature has not found a consensus on the perfect definition of luxury brands. The most basic definition shared by academics is that luxury is something more than necessary (Bearden & Etzel, 1982). However, multiple other definitions are used by scholars. Vigneron and Johnson (1999) define luxury brands as the highest level of prestigious brands that encompass several physical and psychological values, where the simple use or display of a particular branded product brings esteem for its owner. Nia and Zaichkowsky (2000) state that the main distinction between luxury and non-luxury brands is the importance of the psychological benefits consumers derive from it. Examples of these psychological benefits that luxury consumers perceive are the desire for status (Dreze & Nunez, 2009), and the desire to impress others (Berry, 1994). The world dictionary by Neufeldt and Sparks (2002) defines luxury as non-essential items or services that contribute to luxurious living, an indulgence or convenience beyond the indispensable minimum, compared to necessities as utilitarian objects that relieve an unpleasant state of discomfort. Still, all these definitions still do not clearly state what a luxury brand actually is. A study by Heine (2012) compared and analysed all these definitions in order to define luxury brands and products. Heine (2012, p. 46) came with the following definition: “luxury brands

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23 are regarded as images in the minds of consumers that comprise associations about a high level of price, quality, aesthetics, rarity, extraordinariness and a high degree of non-functional associations”. These six primary characteristics are mutually dependent, and the higher a luxury product scores on all six of these definitions, the more it is perceived as luxurious. Since luxury brands are highly associated with their core products (Kapferer, 2012), the characteristics of their products transfer to the brand, making the brand consist of the same characteristics as their products. Therefore, this study will use the following definition: “From all brands, luxury brands are those that consist of products that are more than necessary and score the highest on price, quality, aesthetics, rarity, extraordinariness, and symbolic meaning, which are able to bring the consumer psychological benefits such as status, prestige, and esteem” (Vigneron & Johnson, 1999; Nia & Zaichkowsky, 2000; Dreze and Nunez, 2009; Heine, 2012).

The previous chapter stated that the benefits of LPs are closely related to consumer motives and that this could imply that the benefits offered by LPs should reflect these motives. According to the relationship investment theory, if the benefits the brand offers match the needs and expectations of the consumer, the consumer will recognize the effort and investment made by the brand (De Wulf et al., 2001). In order to understand which types of benefits should be included in the LPs of luxury brands to enhance their customers’ loyalty, it is important to dive deeper into the consumption values of luxury consumers. So, what are these?

3.3 Luxury consumption values

In line with the previous paragraphs, many scholars agree that the main strategic principle for the marketing management of luxury brands is the consumer’s motivation to impress others (e.g. Berry, 1994; Vigneron & Johnson, 1999). Wiedmann et al. (2009) researched the customer perceptions and motives for purchasing luxury brands and state that it

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24 is not sufficient to explain the whole picture of luxury consumption in terms of socially oriented consumer motives and the desire to impress others. Their study argues that individual, functional, social and financial aspects must be considered in the marketing management of luxury brands, so they developed a four dimensional model, that explains luxury consumption through consumer perceptions of the four value dimensions of luxury. The social dimension focusses on the perceived utility that individuals acquire from products or services, that are recognized within their own social group, such as prestige and conspicuousness, which may significantly affect the evaluation and propensity to purchase or consume luxury brands (Liu & Hu, 2012; Vigneron & Johnson, 1999). The individual dimension refers to a customer’s personal orientation towards luxury consumption and addresses personal issues, such as materialism (Richins & Dawson, 1992), hedonism, and self-identity (Vigneron & Johnson, 2004). The financial dimension refers to direct monetary aspects such as price, resale cost, discount, and investment, and refers to the value of a product and what consumers are willing to sacrifice to obtain a luxury product (Chapman, 1987). Lastly, the functional dimension addresses the core product benefits and basic utilities, such as usability, durability, quality, uniqueness, and reliability (Sheth et al., 1991). All four dimensions operate independently but interact with one another and can explain luxury consumption together. Every consumer can score differently on these dimensions, but they generally show some of the most important motives for buying luxury products. Although you cannot exactly match every dimension to a specific LP benefit, all the previous theory does show a general idea of the most important values, needs, and expectations of luxury consumers. The financial dimension consists of values that can be related to the utilitarian benefit. Nevertheless, the goal of the utilitarian benefit is to increase loyalty through providing members a lower price through discounts, whereas the financial dimension is more about the price a consumer is willing to pay and not about paying the lowest price possible because luxury consumers accept the fact that they have

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25 to pay a higher price for a luxury product, when they could also buy a similar product much cheaper product from a lower brand. On top of that, as the most basic definition of luxury consumption already states it is something more than necessary (Bearden and Etzel, 1982), meaning it goes against the utilitarian benefit of wanting to pay the lowest price since luxury consumption is all about paying extra for psychological benefit it gives. The social and individual dimensions are more related to hedonic and symbolic benefits. The former is closely related to the symbolic benefit that LPs offer since they both have to do with prestige, esteem, social status and fitting into a certain social group. The latter comes the closest to the hedonic benefit because they reflect an individual’s enjoyment of luxury products, and as a way to identify who they are which comes back in the symbolic benefit. This is in line with a study by Kastanakis and Balabanis (2012), who argue that hedonic and symbolic values are important determinants of consumers’ experience in luxury consumption. So, what are the implications of the previous information on luxury brands, for the effectiveness of loyalty programs?

3.4 Hypotheses

The overall purpose of this study is to answer the following research question: “What is the impact of loyalty program benefits on a consumer’s brand loyalty, and how is this mediated through their commitment?” by placing it in the context of luxury brands. Figure 1 shows the conceptual framework of this research.

H1(+) H2(+)

Figure 1: conceptual framework LP Benefits - Utilitarian* - Hedonic - Symbolic Commitment - Affective - Continuance Brand Loyalty

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26 *there is no impact of the utilitarian benefit expected in this research. Although, it is included in the model to prove that it has no impact in this study’s context since previous studies did find an impact.

As already stated in the literature, the shopping motivation of luxury consumers is very different than for non-luxury consumers. Consumers that buy luxury brands do not only expect functional utility such as quality and usability, but also unique experiences, preferential treatment, and social recognition (Dilger, 2011; Hennigs et al., 2012). So, luxury consumption is not just about the tangible product but also about the intangible value consumers derive from it such as joy and feelings of status. As already explained before, the relationship investment theory (De Wulf et al., 2001) states that the benefits the brand offers should match the needs and expectations of the consumer, since the consumer will recognize this as effort and investment done by the brand. Hence, if consumers have the feeling the brand invests in their relationship by matching consumer needs with the LP benefits, consumers invest more from their side of the relationship too, which means more commitment. This is in line with a study by Wiedmann et al. (2009), that states that when the value derived from luxury consumption match the consumer’s expectation, positive affective states and arousal result. It is therefore assumable that hedonic and symbolic benefits fit the best in the LPs of luxury brands, compared to utilitarian benefits. Stathopoulou and Balabanis (2016) already found that in luxury retailing, non-monetary benefits lead to more satisfaction and trust with the LP, compared to monetary benefits. Since satisfaction, trust and commitment are some of the strongest determinants of brand loyalty, it can be assumed that non-monetary benefits also have a positive impact on commitment in this context.

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27 In line with the relationship investment theory, utilitarian benefits are not needed or expected by luxury consumers. So, if luxury brands would offer their members monetary benefits, this might give them the idea that the brand does not put effort in their relationship, which could lead to no commitment of the customer either. Also, monetary benefits could decrease the exclusivity, reliability and quality of the brand, which are important consumption values for luxury consumers, and could therefore lead to possible switching behaviour by the member. It is therefore expected that utilitarian benefits do not lead to commitment in this study’s context, and therefore also not to brand loyalty. This is in contrast with previous studies (e.g. Melancon et al., 2011) who argue that utilitarian benefits have a stronger impact on continuance commitment, than on affective commitment.

H1b: Utilitarian benefits do not have an impact on either commitment types and brand loyalty.

So, hedonic and symbolic benefits have a positive impact on commitment. But commitment consists of two types, so how are the benefits related to these specifically? As reflected in luxury brands itself, it might be possible that becoming enrolled in the LP of a luxury brand is perceived as something special and exclusive too. Additionally, when consumers receive benefits from a luxury brand, from which they know they are not able to simply get everywhere due to the exclusiveness of the brand, this gives them the feeling thet get a good deal and might enhance the feeling they lose the benefits if they stop investing in their relationship with the brand. Thus, leading to continuance commitment since this reflects the desire to maintain a relationship due to a fear of loss of investment (Melancon et al., 2011), and the believe that continuing with the LP is a good deal (Meyer & Herscovitch, 2001).

However, the benefits are expected to have a stronger impact on affective commitment than on continuance commitment. In line with the relationship investment theory, when the LP benefits

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28 match with what the consumer expected to receive in luxury retailing, positive feelings arise which could increase their affective commitment towards the brand. Additionally, non-monetary benefits are focussed on emotional and psychological benefits, so it is expected that they also enhance the emotional commitment type more than the rational type. This is in line with a study by Melancon et al. (2011), who already stated that hedonic and symbolic benefits lead to an intrinsic motivation or emotional reason to be in a relationship with a brand.

H1c: Hedonic and symbolic benefits have a stronger impact on affective commitment, than on continuance commitment.

Furthermore, this study also expects both commitment types to increase a consumer’s brand loyalty. So, when consumers have the desire to maintain their relationship with a brand, it is expected that this has the consequence that they build affection towards to brand and keep purchasing from the brand. However, previous studies (e.g. Maheshwari et al., 2012), did not find an impact of continuance commitment on brand loyalty. On the contrary, this study does expect on impact of both commitment types since there are hardly any luxury brands with an LP. When a certain brand is also one of the few that offers these benefits in an LP compared to other luxury brands, it is expected that this enhances the lack of alternatives which leads to brand loyalty because consumers keep buying from the brand because other brands can’t offer them the same benefits. On top of that, LP members of luxury brands might perceive their membership as something they have built overtime which not every consumer can do because of the high prices, together with the idea that membership is something exclusive like the brand. Leading to keep investing in and purchasing from the brand. This could also explain the impact on continuance commitment on brand loyalty.

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29 H2a: Both commitment types have a positive impact on brand loyalty.

From the two commitment types, affective commitment explains the relationship between the hedonic and symbolic benefits on brand loyalty the most, because an emotional relationship enhances the reluctance towards switching to another brand. Just continuously buying from a brand without any emotional attachment, could easily lead to switching when a better option comes along. If a person would easily switch to another brand, this means that they are no longer as brand loyal as they were, so the emotional connection with a brand is very important. Hence, affective commitment is strongest determinant of brand loyalty. On top of that, the lack of alternative luxury brands with an LP, doesn’t mean that people would immediately switch to another brand if they have a better LP. Also, in the case that there are a few luxury brands with an LP, it is expected that the benefits they offer are similar. For example, a commonly used benefit could be member-emails with the newest fall trends, and an exclusive insight preview on the new collection that fits perfect with this. Hence, the type of benefits per luxury brand might not be a reason to switch. Nevertheless, the fact that a certain luxury brand has an LP and another luxury brand doesn’t, does not mean that a consumer would always choose the brand with the LP, but it could play a role. An impact of continuance commitment on brand loyalty is thus expected, but less effective and important as affective commitment.

H2b: Affective commitment is a stronger determinant of brand loyalty, than continuance commitment.

In conclusion, it is expected that hedonic and symbolic benefits have a positive impact on brand loyalty, explained through a consumers’ desire to have an emotional relationship with

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30 the brand, but also based on the rational thought that they receive more than it costs. As already stated in the literature review, brand loyalty is a customer’s unconditional commitment and strong relationship with a brand, which is not likely to be affected under normal circumstances, and which consists of a behavioural and attitudinal component (Amine, 1998; Khan & Mahmood, 2012). From the definition, it is clear that it is important that consumers are commitment towards the brand, in order to become loyal. This commitment is enhanced by the benefits, and therefore works as a mediator. The benefits thus indirectly increase the consumer’s positive attitude towards the brand and makes them repeatedly buy from the brand.

H3: Hedonic and symbolic benefits have a positive impact on brand loyalty, as mediated by both commitment types.

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4. Methodology

This chapter will provide detailed information on how the hypotheses were investigated. It includes the used sample, the used research method, what pre-tests were done, the procedure, and the variable measures and scales used.

4.1 Sample

Since this study is done in the context of luxury brands, the research object of this study is luxury consumers in the fashion industry. Similar studies in the area of loyalty programs (LPs) mostly used participants who were customers of a specific brand or store, and were enrolled in their LP. Unfortunately, luxury brands with LPs are extremely scarce and this study had no access to any luxury brand’s customer base. Therefore, all participants were manipulated into a situation of being an LP member of a luxury brand. However, they had to be familiar with luxury consumption in order to increase the external validity of this research. The first question of the survey therefore asked respondents whether they ever bought a luxury product from a pre-tested list of luxury brands. In case they did not, the survey stopped.

In total, 204 respondents confirmed they ever purchased a luxury product and thus answered the first question with “yes”. Eventually, 135 respondents were used for the data analysis. Detailed information on this number can be found in chapter 5. Furthermore, the majority of the respondents was female (85%) and 52% of the respondents was between the ages of 21 and 30 years old. 73% of the respondents was Dutch.

4.2 Research method

This quantitative study collected primary data through an online survey, using Qualtrics. An experimental vignette study was used because it allows the researcher to

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32 manipulate and control the independent variable (Atzmuller & Steiner, 2010). A concern with experimental designs is that they usually sacrifice external validity and generalizability while enhancing the internal validity (Scandura & Williams, 2000). Many studies often use students as respondents who are not always the right sample to generalize results to the research population. It is therefore important that the sample of the study matches to the larger population of interest (Aiman-Smith et al., 2002; Hughes & Huby, 2002; Wason et al., 2002), in order to increase the external validity. Respondents who answered the first question about luxury consumption with yes, continued with the survey. These remaining participants were presented with carefully constructed and realistic scenarios to assess the dependent variable, in order to enhance experimental realism (Aguinis & Bradley, 2014). Within this vignette study, a between subjects design was used, meaning each participant receives only one vignette, and comparisons are made across participants (Atzmuller & Steiner, 2010). So, three different surveys were prepared based on the three variations in the independent variable, to see how their impacts differ on the mediator and dependent variable. If respondents would receive all the manipulations of the independent variable, an internal bias could occur since they would know which questions to expect in the second and third condition, decreasing the internal validity. The three manipulations were based on the literature review and pre-tested to check whether they were perceived as utilitarian, hedonic, or symbolic.

4.3 Pre-tests

Two pre-tests were conducted before the actual survey. The first pre-test was done with 31 respondents and had two research goals. The first goal was to test which brands are perceived as most luxurious and mirrors the theoretical definition used in this study. Respondents were shown the following definition: “From all brands, luxury brands are those that consist of products that are more than necessary and score the highest on price, quality,

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33 aesthetics, rarity, extraordinariness, and symbolic meaning. They are able to bring the consumer psychological benefits such as status, prestige, and esteem” (Vigneron & Johnson, 1999; Nia & Zaichkowsky, 2000; Dreze & Nunez, 2009; Heine, 2012). They were then asked to rate 17 fashion brands on their level of luxuriousness from which 8 brands were found to be the most luxurious. The results of the first pre-test can be found in table 1. This method was used since the context of this study is luxury fashion brands and because these will also be the ones to adopt the LPs. Therefore, this study did not look at products that consumers perceive as luxurious in the definition of being something more than necessary, but as the brands that were considered as most luxurious according to the definition of luxury brands used in this study.

Table 1: results brands pre-test 1. Note: bold brands scored the highest as luxury brand

The second part checked whether the three manipulations of the independent variable that were based on the literature, were perceived as utilitarian, hedonic, or symbolic. This

pre-Brand Mean SD Brand Mean SD

Calvin Klein 4.65 1.52 Michael Kors 4.52 1.46

Chanel 6.67 .80 Primark 1.23 .43

Diesel 4.03 1.33 Ralph Lauren 4.74 1.03

Dior 6.52 .81 Scotch and Soda 3.87 1.46

Dolce and Gabbana 6.45 .81 Tommy Hilfiger 4.19 1.35

Gucci 6.48 1.31 Valentino 6.23 1.02

Hermes 6.74 .77 Versace 6.45 .89

H&M 1.93 .91 Zara 3.00 1.51

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34 test showed a Cronbach’s alpha of respectively 0.600, 0.851, 0.831, and means of respectively 4.11, 5.71, 5.42. The utilitarian manipulation did not result as expected, so the text and scale items were slightly adjusted and pre-tested again. The second pre-test with 35 respondents came out as positive. Results showed a Cronbach’s Alpha of 0.754 and a mean of 4.92, so the manipulation now worked out as expected.

4.4 Procedure

A pilot test with 5 respondents has been conducted to check whether all questions were clearly understood. After this pilot test, minor adjustments were made.

The survey was distributed through Facebook, WhatsApp and SurveyCircle. As already stated before, a prerequisite of the study was that respondents are familiar with luxury consumption. Multiple studies about luxury consumption also restricted their respondents as being luxury consumers (e.g. Kim & Ko, 2012). A range of brands was used so participants could pick their favourite one or one they perceive as equally luxurious, and to make it more generalizable to more luxury brands. By making them choose one that is most favourite, the manipulation will come the closest to reality since it is expected that consumers only buy and enrol in the LP of a luxury brand if they also like the brand. Making the manipulation the closest to reality is important for the external validity of vignette studies (Aguinis & Bradley, 2014). After choosing their favourite luxury brand, they were told they are enrolled in the LP of this brand, that they are a regular consumer, that enrolment is free, and that it provides them with exclusive offers non-members don’t receive. Respondents are then randomly assigned to one of three scenario’s: either a situation of utilitarian, hedonic, or symbolic benefits. They will read a short text about the exclusive offers they receive due to their membership. It is assumed that important factors which make up the individual’s decision process are known a priori (Priem & Harrison, 1994). Therefore, all respondents were provided with enough information

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35 on the LP and the assigned type of benefit. Although it is important that respondents have enough information to answer the most truly, the text could not be too long so the amount of fall outs was limited. The remaining of the survey was the same for all participants. Non-probability random sampling was used, but the researcher also targeted people from who she knew they were luxury consumers. Lastly, all respondents participating in the survey knew they had a chance to win a gift card from De Bijenkorf. This was done to reward them for participating, to increase the response rate and to limit the drop outs because they had to finish the survey in order to participate in the raffle.

To ensure high data quality and to increase the validity of the responses, certain measure were taken in the survey design. Threats to data quality are created by respondents who engage in certain response styles, classified as “cheaters” and “speeders” (Smith et al., 2016). A cheater does not pay attention to the questions which might lead to dishonest answers and a speeder does not thoroughly read the questions and uses minimal cognitive effort to provide answers that satisfy the question (Smith et al., 2016). To avoid cheaters, an item of the brand loyalty construct was reversed to a counter-indicative item. This detects participants with the tendency to respond in an indiscriminately positive or negative way. To avoid speeders, any responses below 2.5 minutes (150 seconds) were eliminated from the data. The limit of 2.5 minutes was decided in the pilot test as the minimum needed time to read and answer all the questions thoroughly.

4.5 Measures

All constructs will be measured on the basis of multi-item scales drawn from previously tested and validated scales. Some items were adjusted to fit the context of this study. The items for the manipulation checks for the level of utilitarian, hedonic, or symbolic benefits were based on Mimoumi-Chaabane and Volle’s (2010) scale, and used again in the actual survey.

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36 Affective and continuance commitment were measured based on Allen and Meyer’s (1990) scale. Brand loyalty was measured based on Zeithaml et al. (1996) scale. Their items and Cronbach’s Alpha can be found in table 2 of the next chapter. All items were assessed on a 7-point Likert scale, ranging from 1 = “strongly disagree” to 7 = “strongly agree”. Finally, the survey ended with questions regarding gender (nominal), age (ratio), and nationality (nominal). Nationality was asked since the initial plan of the researcher was to ask international customers of the luxurious department store De Bijenkorf to fill in the questionnaire to see whether luxury consumers from different countries show different results. However, the approval of this took longer than expected so the gathering of these respondents did not take place.

Additionally, every questionnaire contained questions regarding respondents’ attitude and knowledge of LPs to provide more detailed information. Respondents were also asked to rate the match between the assigned benefit and their chosen luxury brand since this could give interesting and important results.

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37

5. Results

This chapter will discuss the main results of the analysed data, which was done in SPSS. It includes some descriptive statistics of the data, correlations, and all the analyses used to statistically proof whether the hypotheses were supported or not.

5.1 Data and final sample

First of all, the data was screened using frequencies to examine any errors in the data. No errors were found. The data was also screened for outliers, which led to one respondent being removed.

From the 204 respondents that filled in the survey, 32 did not finish the survey. In case respondents missed 3 or more questions, they were deleted list wise. The few missing cases were coded as 999. From the respondents left, 16 were considered as speeders and 11 as cheaters. Lastly, in order to measure commitment and brand loyalty, it was important that all participants perceived the manipulation of their benefit well enough. Therefore, all respondents with an average below 4, meaning they did not agree with the manipulation perceived, were eliminated from the data. Because if they did not perceive the manipulation as such, then commitment and loyalty could not be tested based on the manipulation. In total, 135 respondents remained for the final data analysis. The utilitarian, hedonic and symbolic groups consisted of 42, 53, and 40 respondents respectively.

The item BrLoy_2 was phrased a counter-indicative, meaning that it was phrased so that an agreement with the item represents a low level of the construct being measured. This item was recoded to rBrLoy_2.

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38 5.2 Construct reliabilities

Reliability checks have been computed on all variables in order to test whether the items in each scale measures what they should measure, using Cronbach’s Alpha. As previously stated, the three benefit types already showed a good internal consistency in the pre-tests, but were tested again in the actual survey. All constructs show a high level of internal consistency (>.7). The items that measured the hedonic benefit showed a Cronbach’s Alpha of 0.728 but deletion of the second item (HedChk_2) increased its reliability to 0.804. Table 2 exhibits the results.

Table 2: construct measurement summary and covariates

Variable / items Name α

Utilitarian benefits

I buy their products for a lower price I spend less money on their products I save money UtiTOT UtiChk_1 UtiChk_2 UtiChk_3 .715 Hedonic benefits

I discover new products

I discover products that I wouldn’t have discovered otherwise (removed)

I try new products

These benefits are entertaining These benefits are enjoyable

When I redeem these benefits, I feel good

HedTOT HedChk_1 HedChk_2 HedChk_3 HedChk_4 HedChk_5 HedChk_6 .804 Symbolic benefits

They take better care of me

I’m treated better than normal customers I’m treated with more respect

I feel I’m more distinguished than normal customers

I belong to a community of people who share the same values

SymTOT SymChk_1 SymChk_2 SymChk_3 SymChk_4 SymChk_5 .728

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39

5.3 Descriptives

All variable items have been computed into new variables in order to test the full variables. The new variable names got the addition TOT to their initial name, for example BrLoyTOT. A new variable has been computed which contains the type of benefit a respondent

I feel close to the brand

I feel I share the same values as the brand

SymChk_6 SymChk_7 Affective commitment

I enjoy discussing the loyalty card of this brand with other people I really feel like a part of the family of the brand when it comes to their loyalty card

I do not think I could become easily attached to any other loyalty card as I am to this one

AffComTOT AffCom_1 AffCom_2 AffCom_3 .701 Continuance commitment

It would be hard for me to quit this loyalty card even if I wanted to I would lose valuable benefits if I stopped using my loyalty card Some things in life would be disrupted if I decided to quit my loyalty card ConComTOT ConCom_1 ConCom_2 ConCom_3 .740 Brand loyalty

I am likely to say positive things about the brand to other people I would not recommend the brand to someone who seeks my advice

I would encourage friends and relatives to purchase from the brand I consider the brand my first choice to buy the appropriate products I am likely to continue purchasing from the brand in the next few years BrLoyTOT BrLoy_1 BrLoy_2 BrLoy_3 BrLoy_4 BrLoy_5 .725 Covariates

I am familiar with loyalty programs

I have a positive attitude towards loyalty programs

I am aware of the risks involved when giving my personal information

The benefit example in this survey matches with luxury brands

LPfam LPatt LPrisk FitBen

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40 received, where 1 = utilitarian, 2 = hedonic, 3 = symbolic. This variable was called BenType and was used in the analysis as the independent variable since the scores on the benefit types were manipulation checks. Furthermore, the means and standard deviations were calculated for each variable. Since the independent variable consists of three groups, the means and standard deviations of the other variables were also calculated per benefit type. The results can be found in table 3. The scores already show that the hedonic benefit group scored the highest on affective commitment, continuance commitment and brand loyalty, followed by the symbolic benefit group.

Table 3: means and standard deviations in total and per benefit type

Variable Mean SD N

Utilitarian benefit 5.21 .86 42

Hedonic benefit 5.58 .74 53

Symbolic benefit 5.25 .69 40

Variable Per benefit type Mean SD N

Affective commitment Utilitarian 3.82 1.23 42 Hedonic 4.49 1.17 53 Symbolic 4.18 1.19 40 Total 4.19 1.22 135 Continuance commitment Utilitarian 3.58 1.32 42 Hedonic 3.95 1.39 53 Symbolic 3.87 1.38 40 Total 3.81 1.36 135

Brand loyalty Utilitarian 5.21 .76 42

Hedonic 5.47 .68 53

Symbolic 5.46 .81 40

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41 5.4 Correlations

In order to get more information on the bi-directional influence that two variables have on one-another, a correlation matrix has been computed of all main variables and the covariates from which a relation was expected. Table 4 exhibits the results.

Table 4: Pearson Correlations

Variable 1. 2. 3. 4. 5. 6. 7. 1. BenType 2. AffComTOT .120 3. ConComTOT .084 .608** 4. BrLoyTOT .128 .543** .427** 5. LPfam -.240** .004 -.041 .204* 6. LPatt -.036 .386** .199* .409** .466** 7. LPrisk -.079 -.145 .002 -.018 .097 -.103 8. FitBen .234** .327** .094 .244** .189* .177* -.001 ** Correlation is significant at the <.01 level (2-tailed)

* Correlation is significant at the <.05 level (2-tailed)

Affective commitment, continuance commitment and brand loyalty show a positive relation with eachother but they have no significant relation with the benefit types. The benefit types only show a correlation with LP familiarity and the benefit-brand fit. LP familiarity shows a positive relation with brand loyalty, LP attitude, and the benefit-brand fit. LP attitude is positively correlated with the benefit-brand fit.

The hypotheses state that the utilitarian benefit has no impact on commitment and brand loyalty, and that the hedonic and symbolic benefit do increase both. Therefore, a new correlation matrix has been composed to show the relationships between both commitment types and brand loyalty for all three benefit types. The results can be found in table 5. The correlations show that for the utilitarian benefit, there is a positive relation between the commitment types, but not between commitment and brand loyalty. For the hedonic and

The effectiveness of loyalty programs for luxury brands

Master thesis