The Economic Worth of Loyalty Programs: An Event Study Analysis

Ashkan Faramarzi*, Abhi Bhattacharya

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

4 Citations (Scopus)
213 Downloads (Pure)


Despite significant research and progress in examining the effects of loyalty programs on consumer behavior and firm performance, the firm value implications of these programs are still unclear. The article investigates whether loyalty program introduction affects firm value, as measured by abnormal stock returns. The authors test the hypotheses empirically by conducting an event study of 260 announcements which cover 110 firms in the United States across different industries for 18 years from 2000 to 2017. Findings reveal that the introduction of loyalty programs, on average, positively influences firm value. The results of this study also reveal the existence of contingencies including synergies with complementary market-based assets and market conditions of lower uncertainty in determining the value of loyalty programs. The authors conclude that the value of loyalty programs is greater when the perceived risks of purchase are lower.

Original languageEnglish
Pages (from-to)313-323
Number of pages11
JournalJournal of Business Research
Publication statusPublished - Feb-2021

Cite this