IMPACT OF PERSONALIZED REWARDS ON CUSTOMER RETENTION IN DIGITAL LOYALTY PROGRAMS

Abstract

This study examines the impact of personalized rewards on customer retention in digital loyalty programs based on food delivery services, e-commerce, and quick commerce in India. Even after investing heavily in loyalty programs, many companies still use the same reward structures which fail to consider varying consumer preferences. Primary data was gathered using an online survey from 120 urban customers in India to determine the relationship between personalization and retention. Methodologically, the research follows a descriptive quantitative approach, adopting an online structured questionnaire. Analysis included frequency distribution, descriptive statistics, Cronbach's alpha test, Pearson correlation, and simple linear regression. In the study, personalization was considered a composite variable and measured using five attitudinal questions, while customer retention was measured by a three-item behavioral scale. Customer satisfaction and loyalty behavior are regarded as the secondary dependent variables in the study. Major findings include a highly significant relationship between the quality of personalization and customer retention (r = 0.572, p < 0.001). Personalization explained about 32.8% of variance in retention ratings (R² = 0.328). Furthermore, there exists a significant correlation between rewards' relevance and satisfaction (r = 0.547, p < 0.001). App usage frequency increases the connection between personalization and loyalty behavior. The measure of the scale exhibits high internal reliability with (Cronbach's Alpha = 0.855). On the part of respondents, personalized discounts (36.7%), cashback (25.8%), and reward points (14.2%) were the preferred reward categories. Most participants belonged to two age groups: people aged 25–34 and working professionals with high perception towards personalization quality (mean for question number 7 = 4.02). About 64.2% of respondents reported being satisfied with their personalized rewards experience. 5 Based on the results, the hypotheses formulated in this study were all supported: personalization enhances customer retention, reward relevance improves satisfaction level, and app usage frequency mediates the relationship between personalization and loyalty behaviour. Therefore, there are various practical implications of the study concerning marketing strategies in designing loyalty programs.