Effect of Customer Loyalty Programs on Performance of Nakumatt Supermarket in Western Region in Kenya

Kenya’s worth of retail industry has reached 1.8 trillion with increase in 13% of consumer spending in the industry. However, in spite of being Kenya’s biggest retail chain, Nakumatt supermarket is currently facing a rise in the debt level from 4.7 billion in 2012 to 18 billion at the start of 2017. Financial problems have manifestations in the dwindling customer base. Yet customer related problems can be cured by good relationship marketing practices such as adoption of customer loyalty programs which can increase customer traffic and enhance revenue and customer retention. Even though past empirical studies have linked loyalty programs and organization performance, none has focused on the collective effects of three dimensions of loyalty programs namely: point system, upfront fees for VIPs and non-monetary program, on organizational performance. The purpose of this study is to examine the effect of customer loyalty program on organizational performance. The study population constitute 83 management staffs and include branch managers, assistant managers and supervisors of the five Nakumatt branches in Western region. A total sample of 73 respondents was selected using saturated sampling techniques while the remaining 10 respondents shall be used for pilot study. The findings revealed that customer loyalty programme explained 48.9% (R² =0.489) variation in organizational performance. The study concludes that point system and non-monetary programme are both critical antecedents of performance in Nakumatt Supermarket in Western Kenya. Therefore, it recommends that the two dimensions should be enhanced to significantly increase the level of supermarket’s sales performance. The study may be useful for the retail industry as it aid in re-design of customer loyalty arrangements in order to get more revenue and enhance profitability.