Influence of customer loyalty program on organizational performance: a case of airline industry

Abstract

Loyalty programs enhance airline’s value proposition. Yet little is known about how customer loyalty programs affect organizational performance. This understanding is important because airlines must decide what design of loyalty program to choose in order to maximize the revenue, profit and the number of passengers. The authors develop and test theory proposing that specific design of loyalty program ensures better organizational performance. The purpose of this study is to examine the influence of loyalty programs on organizational performance of airlines. The methods of systemic analysis of scientific literature, secondary data analysis, comparative analysis, content analysis were used in order to reach the set purpose. Using a sample of airlines in the Baltic States, we conduct an empirical investigation of the influence of customer loyalty programs on organizational performance in airlines. The Mann-Whitney test was used to examine the differences within the organizational performance by the fact of holding a loyalty program. The results indicate that differences in loyalty programs matter. Airlines having a loyalty program can boast of a higher number of passengers carried than the ones that do not. Surprisingly no statistically significant relations were found between holding a loyalty program and airlines’ revenue, profit. It follows that airlines must consider these effects before the allocation of long-term investments into customer loyalty programs.