Effectiveness of Loyalty Programs in Customer Retention: A Multiple Mediation Analysis

Abstract

The impact of loyalty programs on customer retention was investigated in this study. Concomitantly, the mediating effects of brand association and customer satisfaction between loyalty programs and customer retention were also tested in three ways, viz., in parallel, distinct, and sequential through a series of structural models. The study focuses on the Malaysian national car sector, and empirical data was collected from 313 Malaysian national cars users through convenience sampling. This explanatory, quantitative research adopts a questionnaire as a survey instrument, and the collected data was first subjected to normality and reliability assessment followed by confirmatory factor analysis, structural equation modeling using IBM SPSS AMOS 24. Multiple mediation analysis was then conducted, and results were confirmed through bootstrapping. Findings show that there is a significant positive impact of loyalty programs on customer retention. The brand association has a full mediation effect between loyalty programs and customer retention when tested in parallel with customer satisfaction; on the contrary, customer satisfaction demonstrated an insignificant mediation effect. On the other hand, when tested distinctly, brand association showed a partial mediating effect while there was no mediation effect of customer satisfaction. Besides, customer satisfaction and brand association demonstrated sequential partial mediation.