The Impact Of Loyalty Programs On Customer Lifetime Value Of Commercial Bank

With the development of market economy and the influx of foreign capital, loyalty programs have been used widely. The researches on the effectiveness of loyalty programs have been improved. Enterprises use customer lifetime value (CLV) to measure the effects of loyalty programs. In theoretical, this practice has been recognition. But whether the loyalty programs have significant effects on customer lifetime value, and whether the plan can bring high customer lifetime value as we expected, all these questions need further studies.In the paper, we use the data from one of Chinese commercial bank's actual transaction data of the current saving customers to do the empirical studies, and use hierarchical linear model to analy the impact of loyalty programs on customer lifetime values, customer transaction frequency and customer transaction size.The main innovation places are as following:On the aspects of customer lifetime value calculation, according to the need of research, we redefine variables and improve customer lifetime value calculation mode combing with the banking industry characteristics. On the aspects of the accuracy and credibility of the conclusions, we join the control group and compared the control group and ample group to exclude the interference of other factors. So we can ensure the accuracy of the conclusions of the study. And we broaden the content of the research. In the paper, we use hierarchical linear model to analysis the impact of loyalty programs on customer lifetime values, customer transaction frequency and transaction size in the customer level. The conclusion has significant theory and practical significance to the banking industry. In the paper we found that, as time goes on, the customer who participate in the loyalty programs, their customer lifetime value drop faster than the customer who not participate in the loyalty programs. The transaction frequency of the customer who participate in the loyalty programs grow faster than the customer who not participate in the loyalty programs. But the current saving account balances is not significant difference between these two kinds of customers. The total balance of all kind of savings has significant positive effect on the monthly average balance of current saving account. The remaining score after exchange has negative influence on the customer lifetime value who not participates in the loyalty programs. In these customers who not participate in the loyalty programs, the more saving account kinds they have the lower transaction frequency they will. But the impact of remaining score and saving accounts kinds are unsignificant in the customer who participates in the loyalty programs.Accordingly, we give the following suggestions:Banks must strengthen the communication of these cuatomers who have exchanged their reward points. They also need to do something to advertise the rules about accumulate reward points and redeem points clearly. Banks should indepth analysis the influences of loyalty program on customer lifetime value, and improve the positive effects of loyalty programs. So they can increase the influences of loyalty program on customer lifetime valure. Banks should improve the loyalty programs. From this they can lead customers'trading behaviors, reduce banks'cost, improve customers lifetime value. Through the plan, retail banks can expand their brand awareness and promote their overall competitiveness.