Firms typically utilize loyalty programs to encourage repeat purchases. In particular, frequency reward programs and customer tier programs are the two predominant loyalty program structures. However, there is little insight on the conditions under which these loyalty program structures can be more effective. This research investigates how different, discrete positive emotions such as pride and happiness can leverage the effectiveness of these loyalty program structures. Findings from four studies show that while pride and happiness can similarly increase repurchase intentions following a frequency reward program, only pride (vs. happiness) differentially increases repurchase intentions following a customer tier program. Further, the effects of these emotions are mediated by two distinct paths: the intensity of positive affect (for frequency reward programs) and signaling motives (for customer tier programs). These findings have beneficial implications for marketers and firms in employing appropriate positive emotion appeals to promote their loyalty programs.

Firms engage in different retention strategies, such as encouraging customers to join loyalty programs, to improve customer loyalty and repeat business. Indeed, loyalty programs can provide substantial benefits for both customers (e.g., rewards and higher status) and firms (e.g., repeat patronage and rich customer data) (Liu, 2007; Rust, Zeithaml, & Lemon, 2000). Unfortunately, many loyalty programs do not produce the expected financial performance (Daryanto, Ko, Wetzels, & Patterson, 2010; Henderson, Beck, & Palmatier, 2011), forcing firms to terminate them (Business Insider, 2018; Melnyk & Bijmolt, 2015; Nunes & Drèze, 2006). Hence, while some loyalty programs can be effective (Leenheer, Van Heerde, Bijmolt, & Smidts, 2007; Shugan, 2005), firms clearly need an in-depth understanding of “what sets a successful [loyalty program] apart from an unsuccessful one” (Kumar & Reinartz, 2006, p. 172). Although there are various forms of loyalty program, frequency reward and customer tier programs are two predominant structures (Blattberg, Kim, & Neslin, 2008). Frequency reward programs encourage customers to “buy X amount/collect X points, and then get some rewards”.