The Role of Relational Reward Benefits for Developing the Non-Financial Value of a Customer to an Organization: Structural Equation Modeling Approach

  • Enny Kristiani Bogor Agricultural University
  • Ujang Sumarwan Bogor Agricultural University
  • Lilik Noor Yuliati Bogor Agricultural University
  • Asep Saefuddin Bogor Agricultural University
Keywords: structural equation modeling, reward benefits, human resource management

Abstract

Research on the customer value to an organization has been widely explored, yet most studies only determined on the financial value based on the customer’s purchasing behavior. The value of customers beyond their purchasing behavior –defined as the relational worth - has not been commonly captured yet. This non-financial value is one of the drivers in retaining customers, hence it becomes a crucial factor in preserving the profitability of the organization. For this reason, this paper aims to examine the customer non-financial valuations of a loyalty reward program. The scope of the study covered a reward program involving consumer exertions in the context of a Frequent Flyer Program (FFP) offered by an airline in Indonesia. The hypotheses are empirically tested with a sample of FFP members conducted through an online survey (n=475). The data were statistically analyzed using structural equation modeling (SEM) as a first order construct. Results indicate that the perceived social rewards lead to an affective and normative commitment as well as consumers’ satisfaction, while the economic reward did not have an effect on developing affective bonds with members for long-term relationships. The relational benefit offered through the FFP creates affectively and normatively committed members who produce relational behaviors, in terms of WOM, immunity, openness and acquiescence of the members to the airline. Furthermore, the FFP members produced social behaviors toward the airline when they felt satisfied with their relational exchanges.

Author Biographies

Enny Kristiani, Bogor Agricultural University

KRISTIANI, Enny is Vice President of Fleet Management, PT Garuda Indonesia (Persero) Tbk. She received her doctorate degree in Management & Business, Bogor Agricultural University (Institut Pertanian Bogor), Indonesia and her Master of Science from Material Science & Engineering, Stanford University, Palo Alto, USA. She earned  B.Sc (Sarjana) degrees in Chemical Engineering, Gadjah Mada University, Jogjakarta, Indonesia. She received diploma of Air Law from International Air Transport Association (IATA), Montreal. Her dissertation’s title was Modeling of Customer Financial & Non-Financial Valuation. Case Study: Non-paid & Accumulated Reward Program of Frequent Flyer Program.

Ujang Sumarwan, Bogor Agricultural University

SUMARWAN, Ujang is a Professor of Consumer Behavior in the Graduate Program of Management and Business and in the Department of Family and Consumer Sciences, College of Human Ecology, at Bogor Agricultural University, Indonesia. He is Assistant Director for Academic and Student Affairs in the Graduate Program of Management and Business-Graduate School-Bogor Agricultural University 2008-2013. He is now Head of Department of Family and Consumer Sciences.  He earned B.Sc (Sarjana) degrees in Agricultural Economics at Bogor Agricultural University in 1985, and a Ph.D in Consumer Studies at the Department of Human Development and Family Studies, College of Family and Consumer Sciences, Iowa State University, Ames, Iowa USA.

Lilik Noor Yuliati, Bogor Agricultural University

YULIATI, Lilik Noor is a lecturer in the IKK Department, Faculty of Ecology, Bogor Agricultural University. She earned B.Sc (Sarjana) degrees in GMSK Bogor Agricultural University, Master of Science (M.Sc) from Department of Food Science and Nutrition, College of Home Economics, University of the Philippines at Diliman, and a Ph.D in PS GMSK from Bogor Agricultural University

Asep Saefuddin, Bogor Agricultural University

SAEFFUDIN, Asep is a Professor of Statistics in the Department of Statistics, Bogor Agricultural University. He is now a rector of Trilogi University, Jakarta. He earned B.Sc (Sarjana) degrees in Applied Statistics from Department of Statistics, Bogor Agricultural University, Master of Science (M.Sc) in Quantitative Genetics from University of Guelph, Canada, and a Ph.D in Biostatistics & Population Medicine from University of Guelph, Canada.

References

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Published
2014-10-30
How to Cite
Kristiani, E., Sumarwan, U., Yuliati, L. N., & Saefuddin, A. (2014). The Role of Relational Reward Benefits for Developing the Non-Financial Value of a Customer to an Organization: Structural Equation Modeling Approach. Gadjah Mada International Journal of Business, 16(2), 111-142. Retrieved from https://dev.journal.ugm.ac.id/v3/gamaijb/article/view/15464
Section
Articles

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