Effects of Loyality Programmes on Consumer Behaviour


Loyalty programme becomes a popular tactical instrument of customer relationship management, which adopted by most of the marketers since the first loyalty programme was launched in Year 1981 by airline business, named as “AAdvantage”. Marketers can generate information on customer purchasing behaviour, carrying out the function of customer retention, and to make repatronage, finally it can be increased their sales revenue by loyalty programme. The typical ways of loyalty programme is by rewarding, customer can get something without paying extra on their purchasing activities.

Since the introduction of electronic payment cards, most of the people in Hong Kong are not taking too much cash with them, instead in their wallets can find many kinds of payment cards, like credit card, or the store value card, such as “Octopus Card”. There is no doubt that they normally own not only one single payment card, they may own two to three “Octopus Card” and more than two credit cards from different financial issuers. These different types of payments cards bring Hong Kong people too much convenience, they can enjoy “buy now and pay later” benefits from any credit cards, or purchasing by direct deduct certain value from the payment card, for example “Octopus Card”, the card holder just place their card to the card reader to make such transaction. By these high demands on the payment cards, a new technology for value added function is then developed to enhance this convenience - Automatic Add Value Service (AAVS). It is also popular for Hong Kong people in adding value to their “Octopus Card”. There are so many choices for people to choose the payment cards, the card issuers are launched loyalty programmes to maintain their customer base or use loyalty programme to attract new customer, in order to have survival.

The loyalty programme launched by “Octopus Card” is called “Reward$”, card member can use this “Octopus Card” to purchase and earn its rewards dollars. It is also cooperate with another financial issuer to have their co-branded credit card, named as “Octopus Co-branded Credit Card”, it also own its loyalty programme. The card holder of “Octopus Co-branded Credit Card” can be enjoyed double benefits on the combination of two loyalty programmes.

The aim of this study is to find out whether the loyalty programme is affecting to the consumer behaviour, in terms of the usage of the payment cards, loyalty programme itself and the redemption rate. This study will take the case of “Octopus Card”. We are concentrated in studying the purchasing aspect, the view of transportation is not to be consider here. From this study on the case of “Octopus Card”, its loyalty programme – “Reward$” or the loyalty programme of “Octopus Co-branded Credit Card”, both are affecting the usage of both payment cards.

Although this study found out that the loyalty programme can affect to the usage of the payment cards, however, it also found that the card holder may not really aware on the loyalty programme very much, to makes the effective loyalty programme, the writer thoughts the importance on the promotion and the communication between the user and the organization. A good and effective promotion and communication are leading the card holder more understanding on the loyalty programme, what is the loyalty programme really giving to them, and it is directly affecting the usage and be loyal to the corporate.


In the past decade, people are going to exchange their own goods each other in daily life to fulfil their requirements. Later on, time goes by, cash was developed, so people can buy what they want with cash. This type of trade is used until nowadays, the only thing which is different is the kinds of payment methods were born out, besides cash, like cheque, credit cards, and even pre-paid cards.

Technology brings life more convenient and friendly, people are concerning convenience as much as before, and found that using cash is not very convenience in some circumstances, instead they would like to use pre-paid card or credit card in their daily life. In getting more usage of these kinds of payment cards, the card issuers are designed many different ways to attract their potential customer to use their own card, like using attractive promotion, gifts, etc, in order to the let their customer being to use their cards. However, the marketers understand to make themselves to be unique, different from others, and their customer only chooses on them instead of others, this is the critical issue to the marketers. A good marketing strategy helps them to come across this critical issue, loyalty programme is then one of the marketing tools and items in their marketing strategy.

Ndubisi (2007) reported both customer and marketers are benefits through building relationship. As we understand that “relationship marketing means different things in different cultures…..” (Ndubisi 2007) Loyalty programme is the way to make the retention of relationship between customer and marketer in long time.

The innovation of “Octopus Card” brings Hong Kong too much convenience on daily life. The development of “Octopus Card” not only for transportation, it becomes your electronic money pocket, it can provide Hong Kong people to have their consumptions in most of the retailers. To cope with high demands of Hong Kong people, “Octopus Card” starts to make cooperation with financial issuer to bring out their own private label credit card, named “Octopus Co-branded Credit Card”, which provides both the function of “Octopus Card” and normal credit card. The card holder can enjoy double benefits while using this “Octopus Co-branded Credit Card”

The research on how loyalty program impact to customer behaviour is the main area in this study, both primary and secondary data collection methods are adopted. The pinpoint of this research is to find out if there be any increment of the shopping intention of using these two types of payment card for small amount of purchase by respective loyalty programme of both “Octopus Card” and “Octopus Co-branded Credit Card”. In this study, we are only concentrated in the point of view of purchasing, the consumption of transportation by “Octopus Card” is not to be discussed here.


Base on the topic of this study, first of all, we should understand about “Loyalty” and “Loyalty Programme”. What are the elements including in these two things? Do they have a formal definition? They are both reviewed as two parts below:

Need Help with your dissertation?

Why not order a custom dissertation that fits your exact requirements and grade needs?

At UK Dissertations we offer a range of services to help you get ahead in your studies.

Find out more today


Here below some interpretations on explaining what is “loyalty” or “customer loyalty”:

There is a difficulty in building up a relationship; it is more difficult to build a relationship in loyal. The foundation of creating a loyal relationship is related to commitment and trust. Both parties should bring up a certain level of commitment and trust, so that it can make the relationship being loyal, and this loyalty should be carried in long-term basis.

There are a lot of understandings of the word “loyalty”, or “customer loyalty”, but generally speaking, from the view of marketing, the most simply way to understand these concepts, is the customers stick to one retailer with keeping a long period of time. Actually, the real meaning of “loyalty” or “customer loyalty” got a deeper level of interpretation. According to the previous literature reviews, scholars are considered loyalty as a revealed behaviour through repeating purchasing. Further, in a conversation between a marketer and Duffy D. L. quoted in the paper called “Customer loyalty strategies”, Duffy mentioned that the business objective is loyalty, which is also related to relationships, one-to one, is customer-centric. The concept of loyalty is looking for building the relationship to be stronger and more stable.

There are several researches have been found that commitment and trust are related in the process of building loyalty. A well quality of commitment and trust is definitely the foundation of successful relationship marketing development. The well establishment on commitment and trust in the relationship, it then becomes of loyalty.

Morgan & Hunt (1994) brought the commitment–trust theory of relationship marketing, it has been summarized that commitment and trust are directly affecting the successful of the relationship marketing. Aiming to build the strong and stable relationship, again we said that commitment and trust are the main ingredients in building loyalty, many researchers have been further studied on the area of relationship, study on the relationship between commitment and trust with customer. Ndubisi. (2007) in his paper called “Relationship marketing and customer loyalty” reviewed that commitment is one of the essential elements to determine the marketing relationship strength and it also a useful form in measuring the customer loyalty and predicting the frequency of future purchasing. Besides, in the same paper, the writer concluded that “trust is an important ingredient in firm-customer relationships and ultimately in development loyalty….commitment as a critical factor in building customer loyalty….” This is the evident to show both commitment and trust are definitely relating with loyalty. Furinto et al (2009) also pointed out that the root of customer transaction is satisfaction while they are relying on commitment and trust.

Base on this understanding, Hunt & Morgan (1994) went further on this concept; Hunt & Morgan (1994) recognized that commitment and trust are also co-related. Key Mediating variable (KMV) model of relationship marketing was developed by Hunt & Morgan (1994), this model is going to explain the interaction among the commitment and trust. Commitment and trust are not just standing out by one party, they are presented in both, and produced the results of leading the cooperative behaviours that operate the successful relationship marketing.

Commitment and trust is a kind of behaviour, how is the feeling, in other words, loyalty can be interpreted as a kind of behaviour. If the customer feels goods on the marketer, he / she will present his / her loyalty. Divett et al (2003) found that if the customers show their highest loyalty level, and they more tend to repurchase, and spend more, also that loyalty can be affecting the responsiveness positively. So that, in this kind of behaviours, this relationship should be in continuance.

From another angle, some researchers are said customer loyalty is come from customer satisfaction. Customer loyalty should include elements of word-of mouth and purchase intention. Therefore, after several researches on the loyalty, it is concluded that loyalty is built up on commitment and trust, both are a sense of behaviour, and it should in long-term basis. As mentioned, customer satisfaction leads customer loyalty, so that commitment and trust is also makes customer satisfaction, at the end loyalty will result of repeating purchasing. In the paper called “Revisiting the Commitment-Loyalty Distinction in a Cruising Context” by Li Xiang et al (2010), the development of the commitment and loyalty relationship as shown as follows:-



Same between of commitment and trust

Commitment = loyalty

Same between commitment and attitudinal loyalty

Commitment & Loyalty

Commitment leads to behavioural loyalty

Commitments → Loyalty

Although loyalty is difficult to measure as we said, however, there are still different model had been discovered for reflecting the degree of loyalty. Wood (2005) introduced different loyalty models, he mentioned that the measurement of loyalty are useful for designed loyalty scheme. The models that Wood (2005) bought to us are six different loyalty models, they are The Dirichlet model, The Hofmeyr Conversion Model, The RED Matrix model, The Enis-Paul Index model, Reichheld Loyalty Effect model and The retention rate model.

Firstly,The Dirchlet model, was developed by Professor A. S. C. Ehrenberg from South Bank University, which is used to measure repeating buying, and it also used have future sales performance prediction. Secondly, The Hofmeyr Conversion Model was developed by Dr. J. Hofemyr,, which is used to understanding the actual customer repeating purchase behavior. Thirdly, The RED Matrix model was developed by the RED Partnership, a London based consultancy, this model is mainly used to have measurement on the commitment and performance of a corporate. Then, The Enis-Paul Index model is creating an index from an equation, which to calculate the inclination of customer patronization in a specified period of time. Next, Reichhjeld Loyalty Effect model was used by Bain & Co. to review its company profitability on customer retention rate. And The retention rate model is an model to calculate customer retention rate, which is simple but effective.

Another factor affecting the degree of loyalty, consumer being loyalty is because of the convenience. They are not loyal to the brand actually, instead the reasons of the convenience.

More practical, loyalty brings lots of benefits, like cost saving because of the customer already familiar and known very well about the marketer, it is not necessary to bring too much resources on the introduction stage, that means it is more effective use of the resources. The marketer can gain more referrals from the existing customer, this is also a kind of word-of-mouth. Further, the marketer can more understanding the behaviour of the customers by repeating purchasing.

Although there is difficulty on loyalty measurement, Mailey L. (1998) found that there are two dimensions of loyalty, relative attitude and patronage behaviour. Firstly, relative attitude means not only measure on the certain attitude, it is also required to measure on the attitude on the alternatives, so that if the higher relative attitude, the more behaviour will affect by this attitude. Secondly, patronage behaviour is related to the traditional measurement, like purchase sequence, share of wallet, etc. It is the construction in containing attitude and repeat patronage behaviour.

Since the customer be a loyal one, the more contribution by the customer, in terms of they are willing to have more communication with the marketer, a loyalty customer will become to collaborator, and the next level will from collaborator become advocator. This is the loyalty hierarchy. Duffy. D. L. (1998)

Loyalty can then be concluded that “The customer’s loyalty is simply not for sales. It cannot be bought for ever by companies or deals. Real brand loyalty results from an emotional bond created by trust, dialogue, frequency, ease of use and a sense of value and added satisfaction Loyalty is the reflection of a customer’s subconscious emotional and psychological need to find a constant source of value, satisfaction and identify.” (Rowley J, 2000 cited Jenkinson, 1995)

As we mentioned at the very beginning, “Customer loyalty is considered an important key to organizational success and project” Divett et al (2003), so that marketers are use different kind of marketing tool in order to retain their customer. One of the marketing tools is loyalty programme, and it had been adopted by airline industry in the earliest century. The more details will be discussed here below.

Need Help with your dissertation?

Why not order a custom dissertation that fits your exact requirements and grade needs?

At UK Dissertations we offer a range of services to help you get ahead in your studies.

Find out more today


Loyalty Programme, a programme for keeping loyalty. Frequent flyer programme, different rewards programme by financial issuers, VIP membership by retailers, such as supermarket, points collection programme by personal care company, etc., these are different kinds of loyalty programme. There are different types of loyalty programme; they are all everywhere and they can find easily around us.

The history of loyalty programme was started up by an airline industry in year 1981, American airlines launched their frequent flyer programme firstly, named as “AAdvantage”. The other airline company was then followed to introduce their own programme afterwards, but they are all similar programme with “AAdvantage”, such as Mileage Plus Programme by United Airlines, so and so. Some airlines may even have more than one loyalty programme for their customers. However, the majority of loyalty programme now operating is based on the operation of “AAdavantage”.

In fact, loyalty programme is the most common customer marketing tool used by the marketers now, and this seems to be an irretrievable item in the relationship marketing. It is because tangible returns can be brought to the marketers through building up loyalty programme, like increasing of sales revenue, and assistance in enlarging their customer bases, and of course easily retaining their existing customers. But actually, there are no a clear definition to explain how to build up an effective loyalty programme. However, by common sense, if a loyalty programme member basically should be a frequent customer and should find the programme is an attractive one with comparing with the non members, who is more easily to establish a long term relationship (Liu Y. 2007)

Warrden. L. M (2008) defined that loyalty programme as an action of integrated marketing system to make customer more loyal and building up relationships with them. In the same article, Warrden (2008) also mentioned that loyalty programme is value added, interactive and long-term focused relationship. Loyalty programme makes customers feel satisfaction on the rewards for purchasing and avoids any additional costs. It also induces the feelings of intelligence and pride. In the operation of loyalty programme, it should provide customers monetary and non-monetary benefits, these benefits are proven to increase customers’ level of satisfaction. In this case, loyalty programme is going affect on the customer behaviour. The stimulus-organism-reaction (S-O-R) paradigm (Waarden 2008 cited Blackwell et at, 2005) has been developed to have explanatory on how the loyalty programme basically act on buyer behaviour. Rewards (S) is about the own memory, perception, self motivation of the purchaser (O) and to set up the reaction (R) – purchase more, or changing its own behaviour. By this model, it is found that loyalty programme is related positively by repeat purchasing behaviour or loyalty.

From a theoretical point of view, there are two different effects on purchase behaviour come out from loyalty programme, they are differentiation loyalty and purchase loyalty respectively. Some scholar has been proven that the differentiation loyalty can be solved by excellent service and quality. And purchase loyalty is creating the impact of “points pressure” and “rewarded behaviour”, and they are in short-term and long-term basis respectively. This is also mentioned by Warrden (2007), cited Taylor and Neslin (2005) that reward programme is increasing sales through two mechanisms, same as before, “points pressure” and “reward behaviour”. Customers are required to accumulated their “points” by repeating purchasing until they are rewarded or satisfaction on redeem. Therefore, most of the loyalty programme are operating in the way of “points collection”.

By the similar concept, Mailey L. (1998) mentioned that loyalty programmes are provided various benefits, including rewarding loyal customers, marketers can generate customer information, to manage customer behaviour. Marketers most likely use the combination of discounts and other kind of “rewards” to customers on their loyalty programme, it can motivate the customers to take part in such programme. Mailey L. (1998) cited that most people like to receive something without paying anything. This concept is similar with the “points pressure” and “rewards behaviour” mentioned before.

Besides, marketers can generate customer information by loyalty programme, because loyalty programme offers rewards to the customer, customers are more willing to provide their purchasing behaviour as marketers request. So that, marketers can analysis and understand the purchasing behaviour in order to build up a more appropriate program or product or service to their customers, in turn customers may feels happy on the arrangement and repeating next time purchasing. Some studies are shown loyalty programme create a positive impact on customers’ repatronage decision. (Liu Y., 2007)

In repatronage intention, the action of redemption cannot be ignored. Simpson B (2004) quoted the conversation of Lars E. Holmquist, executive vice president of a subsidiary of processor Total System Services Inc. (TSYS) that “……. Redemption is the key driver to loyalty”.

Both “hard” and “soft” benefits should be found in loyalty programme (Uddin 2001). “Hard” benefit contains the element of making the customer feel they are worth in getting their money, while “soft” benefit should make the customer feel they are important, for example, some pre-sales opportunities provided, or the free wrapping service. Customers can take advantage by joining loyalty programme.

The “hard” benefit is related to “monetary rewards” (Furnito et al, 2009), it is designed of monetary-based reward, it may be by bonus points, vouchers, etc, any forms of real cash. In principle, “monetary rewards” or “soft” benefit is usually make the rewards value into the equivalent cash value.

Meanwhile, the “soft” benefit can be transformed in other wordings – “Special treatment rewards” (Furinto et al, 2009) It is designed to provide a comfortable and peaceful mindset to the customer. The customer always feels they are the special one. Furinto et al (2009) also mentioned that this “special treatment rewards” can reduce customers’ inquietude, contrarily, it can increase customers’ trust and confidence.

Loyalty programme in credit card markets are found the holders who long to loyalty programs that will spend more than that have not. Liu. Et al (2009) mentioned that promotions are important to make the reward programs success or not. In the paper of “Redemption behaviour for credit card reward programs in China” by Liu et al.(2009), found that the lack of communication or complicated redemption procedure, etc. are the reasons behind the low redemption rate.

Since many of the researchers have been studied on different point of view of loyalty programme, this is the truth that loyalty programme is in relation with the customer behaviour. The loyalty programmer members are most likely to make the repatronage decision than non-members.

The main benefits from loyalty programme is to increase switching cost, since the loyalty programme members continue on purchasing on one firm, the rewards that the customers receive can accumulate quickly, and for a period of time, the switching cost of loyalty programme members is become high, in a sense that these members are less likely to have comparison with others firms. To make customer retention is one of the key reasons to explain why markerters are adopted loyalty programme in their marketing strategy .Stauss et al (2005) concluded that if a corporate has been implemented its own loyalty programme, the quality of the programme perceived by the customer is important, and it should be constantly monitored, so that it can allow the corporate to obtain the prompt information about their loyalty programme.


The main purpose of this paper is to find out either if the loyalty programme of “Octopus Card” or by “Octopus Co-branded Credit Card” are acting as a motivator to encourage the card holders to spent more in the small amount of purchase. Two different kinds of data collection methods are mainly adopted in this study, one is primary data collection and another one is secondary data collection. In order to have primary data collection, a questionnaire is designed for this certain purpose. According to the sample size, this is no special criteria has been set, it is assumed that if the “Octopus Card” card holder has been used the card in purchasing in the past year will be counted as the qualified data. Besides, the secondary data are mainly collected from company portfolio of “Octopus Card” company and the financial issuer. In this part, Citibank Octopus Credit Card has been chosen as the example of credit card.


The method of primary data collection means the data are come from directly by questionnaire. There are total of 50 units of designed questionnaires are conducted for this research, and the total response rate is 68%, which is 34 units of the questionnaires are returned. The questionnaire are widely spread out, no criteria has been set, unless the questions in Part A has been set for screening of the qualified target. Since the interviewee have been used the “Octopus Card” or “Octopus Co-branded Credit Card” to have small purchase in the past year, these data will be treated as qualified, which is the group that is presentable. The data will be divided into two categories, one is “Octopus Card” holder, and the other is “Octopus Co-branded Credit Card” holder.

In the questionnaire, total 20 questions has been asked about the usage of the “Octopus Card” and “Octopus Co-branded Credit Card”, and 11 questions have been asked for both loyalty programme. At the end of the questionnaire has been collected some personal information for further necessary use.


In this part, some secondary data has been adopted. These secondary data was collected from the “Octopus Card” company portfolio and other press release. Besides, in order to understanding of the payment methods background in Hong Kong, we are also obtained the “Payment Methods” document record from Hong Kong Monetary Authority (HKMA).


In Hong Kong, there are several media of payment methods are in common used, which is regulated under Banking Ordinance. Actually most of the countries are in the similar pattern. Usually the common methods are in cash, cheques, direct credit transfers, direct debit transfers and other payment cards, like store value cards.

According the “Payments methods” document record by Hong Kong Monetary Authority (HKMA), there are HKD92 billion Hong Kong Dollars notes and coins are in circulation in Hong Kong at the end of Year 2000. There are three commercial banks are authorized to issue the currency notes and coins by Hong Kong Government through Hong Kong Monetary Authority (HKMA). Currency notes of HKD10, HKD20, HKD50, HKD100, HKD500 and HKD1,000, and coins of HKD1, HKD2, HKD5 and HKD10, together with HKD10 cents, HKD20 cents and HKD50 cents are totally for circulation everyday in Hong Kong.

Cheques are one another common kind of the payment methods in Hong Kong, which are issued by Banks. All the cheques are required to settle through the cheque clearing system in Hong Kong which is operated by Hong Kong Interbank Clearing Limited (HKICL).

Direct credit transfers and direct debit transfers are the kind of order arrangements made by different parties. If the arrangement is instructed by the payer, this is direct credit transfers, the bank will then draw the specific amount from the payer’s account and transfer that amount to the specific payee. Conversely, if the arrangement is instructed by the payee, this is direct debit transfers. The bank will collect the necessary amount from the payer.

Besides, payment cards are also popular used in Hong Kong, such as credit cards, debit cards, and stored value card. Debit cards used in Hong Kong are in form of EPS. EPS is an electronic system link together with the consumers and the merchants. For credits cards and stored value card, it will be discussed further in the following parts. CREDIT CARD

The most popular use of credit card in Hong Kong is VISA, Master, American Express, Diners and JCB. With reference to the survey by Hong Kong Monetary Authority, over 9 million credit card accounts as at the end of Year 2001. Credit card payments involve credit provision by the card issuer; different credit provision is granted subject to the financial institute. That is, the credit provision can offer the cardholders to have free of charge in any interest in a period of time, usually this period of time is at least 30 days, but still depends on the financial issuer. Cardholders can use their named credit card to have their purchasing to enjoy the benefits of “buy now and pay later”. There are different kinds of reward programme are offered by different card issuer. STORED VALUE CARD

Stored Value Card is another payment mode in Hong Kong. According to the record of “Payment Systems in Hong Kong” has been defined store value cards has two different parts, the first part is “single-purpose card” and another one is “multi-purpose card”. Unlike credit cards as mentioned before, stored value card is requested the card holder to store a certain amount of funding before use. A defied amount will be deducted immediately from the store value card immediately. Once the amount stored in the card is over, card holder is requested to store the funding again, otherwise, the card cannot use. But currently, the card issuer is going to have agreement with Bank, it is benefit to the card holder to add the value automatically from the assigned account to the definite card, named Automatic Add Value System (AAVS).


One kind of payment cards is credit card, in this study, we have chosen “Octopus Citibank Credit Card” to have studied as an example of “Octopus Co-branded Credit Card”. A briefing introduction of the card, including the service provided and the card benefits are going to be discussed as followings.

Need Help with your dissertation?

Why not order a custom dissertation that fits your exact requirements and grade needs?

At UK Dissertations we offer a range of services to help you get ahead in your studies.


In 16 July 2008, Hong Kong date, a new co-branded credit card – Octopus Citibank Credit Card was introduced by both Citibank and Octopus Card Limited as a new strategy partnership. This new credit card is not only got the normal credit card function, it also included the function of Octopus card. This is a two in one card. The card holder can use this new co-branded credit card in both retail and transportation with small value of payments very convenient over 50,000 points of merchants’ network. The card will automatically reload for Octopus as a default feature. Besides, the card holder can earn cash rebates through their credit card spending all over the world. Mr. Neil Gardner, Director of Cards Business of Citibank Global Consumer Group has been mentioned in that press conference that “…..This co-brand card puts the two of us at the forefront of the e-money market and retail payment card that allows customers to manage all their needs”

Meanwhile, the Chief Executive Director of Octopus Card Limited, Ms. Prudence Chan, also mentioned that “…..represents a major milestone not only in Octopus’ history, but also in the development of payment cards in Hong Kong…….can enjoy a 2-in-1 card with unprecedented convenience and benefits…..” SERVICE PROVIDED

The service provided by Octopus Citibank Credit Card is as same as the general credit card. The card holder can use this named credit card to enjoy “buy now and pay later” in Hong Kong or all over the world.

The difference between a normal credit card and “Octopus Citibank Credit Card”, which is the Octopus function. The card holder not only enjoys the function of credit card, - “buy now and pay later”, besides, the card holder also can use this credit card in Octopus function.

Citibank also provided that Automatic Add Value System (AAVS) let their card holder to auto add value from the credit card to the Octopus Card. The card holder can apply for designed AAVS amount, once the store value for Octopus function is going to be zero, the designed amount will be automatically deducted from the credit card.

Meanwhile, the card holder is automatically joined the loyalty programme of “Octopus Card” – “Reward$”, besides enjoyed the loyalty programme of the credit card. CARD BENEFITS

The financial institute – Citibank, will have different joint promotion with different shopping centres to let their card holders to enjoy purchasing offer. In the past, it tried to make the joint promotion with the two large shopping malls in Hong Kong, Harbour City and Times Square, to let card holder to have purchasing and earn 10X Octopus Cash Rebate within the promotion period.

Meanwhile, the card holder can have their infinite spending rewards in every Hong Kong Two Hundred Dollars (HK$200) the card holder spent, Hong Kong One Hundred Dollar (HK$1) of Octopus Cash. Every time the card holder spent with their credit card, he / she will automatically earn the Octopus “Reward$”.

The card holder can enjoy the “Octopus Reward$” automatically, since the card user use this credit card purchasing, the Reward$ will automatically gained. Double benefits can offer to the card user. The card holder can have a choice on using either the credit card function or “Octopus Card” when purchasing.

If the card holder lost their credit card unfortunately, the card issuer is provided a number for the card holder to report the lost both credit card and their octopus card simply. One hotline can report two lost.


One kind of the payment cards in Hong Kong in common used is stored value card, “Octopus Card” is one of the example of stored value card, and it has been chosen in this study, a briefing understanding on “Octopus Card”, also its function with the loyalty programme – “Reward$” are to be discussed here below. INTRODUCTION TO OCTOPUS CARD

“Octopus Card” was first launched in September of Year 1997 and developed by The MTR Corporation Limited (MTR). Hong Kong’s “Octopus Card” is the world’s leader, with over 2,000 service providers together with 50,000 Octopus readers in the market. “Octopus Card” is the first development in Hong Kong for facilitate the busy public transport network, the card holder can use this “Octopus Card” to take any transportation, like mass transit railway, bus, ferry without using coins. Besides, its applications also encompass car parks, parking meters, fast food outlets, convenience stores and supermarkets, even extend to the access control of residential and school.

“Octopus Card” actually is a smart card by using electronic payment system with a built-in microchip. The card holder just only require using this plastic card over the reader, the correct amount can be deducted from the card automatically. Card holder no longer to use coins when purchasing, and it is avoid of any human mistake while calculation. There are different types of Octopus Card are provided, “On-loan Octopus”, “Sold Octopus” and “Bank Issued Octopus”.

In July of Year 2008, Citibank and Octopus bring their first All-in One Credit Card with Octopus function. After that cooperation with financial institute, Octopus got cooperation with DBS to issue an Octopus ATM card.

Hong Kong Octopus since its first launch in Year 1997, its brand name has been received its great achievements, recognition and awards, such as:

The above are extract some awards which Octopus have achieved since its launched. CARD FUNCTION

“Octopus Card” – by an build in microchip smart card, it is designed for the transportation network originally, however, it can provides the services extended to many different kinds of retailers, like fastfood outlets, bakery, convenience stores, household and personal care stores, etc.

“Octopus Card” can provide a reliable and secure payment method with one card for a wide range of applications to the card user. Card holder can use one card to fulfil the usage in their daily life. Card holder can use this smart card to make their daily consumption easily, just place the card on the card reader, a sound “dood” can be heard, it means that transaction makes successfully.

The Automatic Add Value Service (AAVS) can also allow the “Octopus Card” holder to register, to enjoy the benefits of convenience in reloading cash value from designated channel (cash or by credit card account) to the “Octopus Card”. The Automatic Add Value Service (AAVS) is provided by 21 banks in Hong Kong. This value added service is applicable to all “Octopus” products. There are two options for the reloading amount, HKD250 or HKD500, which is subject to the user’s choice. While the store value of “Octopus Card” reached zero or negative balance, the card will automatically deduct the reloaded amount from the designed account.

Need Help with your dissertation?

Why not order a custom dissertation that fits your exact requirements and grade needs?

At UK Dissertations we offer a range of services to help you get ahead in your studies.

Find out more today LOYALTY PROGRAMME – “REWARD$”

“Reward$” – is the loyal programme of Octopus Card. It was launched at the end of Year 2005, over 2.4 million of “Octopus Card” owner has already registered for “Reward$”. There are widely variety of retailers are Octopus Rewards Partners, from the range of fast food outlets to supermarket, etc. Members of “Reward$” can earn their Octopus reward dollar, no matter using by “Octopus Card”, cash, credit card or other payment methods which accepted by the Octopus Rewards Partners, at a rate of at least 0.5% of the relevant spending. Members can earn their cash value by Octopus “Reward$” loyalty programme when they display their Octopus Card on the machine, when a sound “dood” heard that means the Reward$ has been entered directly to the members’ account.

Members of the programme can also check their reward balance from Octopus Rewards Station and receive updated e-newsletter for the promotion events, they can use their Reward$ for redemption activities. When there is a lost of the Octopus Card, members still can restore their Reward$ by reporting to the Octopus Rewards Customer Service Hotline in order to relink the membership and restore their reward dollars.

MTR Malls were the first shopping centres to join the Octopus Rewards loyalty programme, which was launched in Telford Plaza and Paradise Mall in Year 2007, then extended to Maritime Square in Year 2008, and further proven the successful in the above malls, afterwards, this was taken further to Luk Yeung Galleria and The Edge in Year 2009. Through this loyalty programme, shoppers / card holders were provided the opportunity to earn Reward$ by making one-stop purchase in MTR malls. After spending designed amounts, shoppers / card holders can earn their Reward$, by entering into “extra Reward$ lucky draw” and be rewarded with a certain amount MTR Malls cash coupons by earning Reward$ five times in the same week. They believe that this can create a spending cycle.

For other “Octopus Card” partners, they are also provided different offer to their customers, in order to let them earning special amount of “Reward$” through purchasing.


There are 34 units of questionnaires (Appendix A ) are returned within a short period of time, which is out of 50 units were sent out. All the returned questionnaires are classified as the qualified one, all the qualified target groups are all own “Octopus Card” or “Octopus Co-branded Credit Card” and use them to have purchasing at least once in the past year. These data are definitely valuable for this study. However, in the questionnaire, we found that some questions are no answers, or the answers were found that not valid, for example, multiple answers were chosen in one single answer question.

The analysis in pie charts can be found in Appendix B. And the overall results are recorded in usage, loyalty programme, and redemption rate.

4.3.1 USAGE

“Octopus Card” are widely used by Hong Kong people in their daily life, however, this is not meant that they will intent to use this payment card more by introducing the loyalty programme – “Reward$”.

We found that there be normally one (1) “Octopus Card” can be found in Hong Kong people wallet, even they will apply more than one (1), say two to three (2-3) “Octopus Card”, it is around 53% portion recorded in this study. Except there are recorded that 3% of that group of people are own four to five (4-5) “Octopus Card”

For that “Octopus Card” holder, the analysis show us that most of the card holders will use their card to purchase one to two (1 – 2) times per day on regular basis, and average they will spent in a range of around HKD20 – HKD50 each time.

It is also found that two kinds of retailers are to be visited by the group in using their “Octopus Card”, they are fast-food outlets, and supermarkets, which own 28% and 26% respectively. Besides convenience stores are also popular, in 19%. The remaining are record under 10% are personal care stores and self service kiosks, etc. The usage of “Octopus Card” is going into people’s daily life – diet. Acting as a part of their life.

In these 34 units of returned questionnaires, it is shown that only 41% of the interviewees have been registered Automatic Add Value Service (AAVS), for that 47% are not registered, the most reasons of the customer says “NO” are because lack of confidence on the security for this service, and prefer to add value by cash. This has not shown that there be any increment on the AAVS registration rate, if the AAVS amount can be changed by own request, any amount they can instruct to have this value adding, that may result the user to consider to register AAVS. That meant the convenience of AAVS cannot reflect the usage of “Octopus Card”.

For the results on “Octopus Co-branded Credit Card” usage, there are a big portion of the returned questionnaires shown that 91% people not owned “Octopus Co-branded Credit Card”, and the remaining 9% of the group got only one (1) “Octopus Co-branded Credit Card”.

With the “Octopus Co-branded Credit Card”, the results found that the owner will use their “Co-branded Credit Card” on retailers which are similar with the results that found from “Octopus Card”, fast-food outlet, convenience stores, and supermarkets are the most common for using “Octopus Co-branded Credit Card”, both are recorded in 29%, and there be only got 14% of the group will use their “Octopus Co-branded Credit Card” on apparel shops. Meanwhile, we are also found that the amount they will spend is under HKD100. The amount spent was recorded that so close between “Octopus Card” and “Octopus Co-branded Credit Card”, it may assume that the owner of “Octopus Co-branded Credit Card” only use the function of “Octopus”, and have not used the function of “Credit Card”.


Although the loyalty programmes are found easily around us, however how is the loyalty programme really works, or how to make redemption, the members may not really know. Criteria have been set on different level of awareness, such as fully aware, partial aware and completely unaware, to study on the behaviour of the card holder to the loyalty programme. The results have been shown to us that 49% of the “Octopus Card” holders are just only partially aware of “Reward$”, that means they just aware there is an loyalty programme launched by “Octopus Card” and they also know they can earn “Reward$” by purchasing, however, how the programme really works, for example, how is the calculation of the “Reward$”, they may not fully understand. Similar with the situation of “Octopus Co-branded Credit Card” holder, the holder of the “Credit Card” are just only know they can earn the value from purchasing, however, this is the co-branded credit card with “Octopus”, there be the combined loyalty programme let the card holders to enjoy double benefits. Although the card holder can enjoy double benefits through the loyalty programme, however, there are 60% of the group which marked completely unaware of the loyalty programme. They are fully not understood how much spending with their “Octopus Co-branded Credit Card” can get how much “Reward$”.

Furthermore, we have made the designed calculation rate (Appendix C) of both “Reward$” and the loyalty programme launched by “Octopus Co-branded Credit Card”, in order to study if the content of the loyalty programme changes will affect the usage of the card holder. The results showed us that there are 2% differences between the existing and designed calculation for the loyalty programme. This difference let us know that card holder still concern the how much value that they earn, this value may affecting the usage of the card finally.

In the questionnaire, we have stated the current promotion that “Reward$” is currently offering, to see if it can be the motivator to motivate the card holder to have more use on the card. The result said that surprisingly it is difficult to find if the current promotion can be motivate the card user, it is because the portion came out is the same.

However, the result also let us know the card holder of “Octopus Card” and “Octopus Co-branded Credit Card” is happy to keep using on the card, since the loyalty programme can be offered what they want.


From the literature review, we are notified that redemption is also a factor in affecting to the loyalty programme, and also affecting to the usage. So, in this study, we also consider the redemption rate, there are 58% people have tried to get their redemption, most of them are redeemed the category of goods are cash coupons. For that have not tried, we found that most reasons are not aware about redemption process and never earned sufficient points. There is recorded that 3% of the group with no response on the redemption.

As mentioned above, the current promotion cannot provide a clear direction on the motivation, so that the card holders are not aware what new on the loyalty programme.


At the end of the questionnaire, we have gained some general information also, such as the gender distribution and the personal monthly income of the group. In these 34 units of questionnaires are contains 74% of female and most of these females are married. In that primary data collection, we found that most of them are being clerical / administration work, with the monthly personal income range in HKD8,001 to HKD15,000. That is reflecting that the consumption of this group of people are likely intent to consider on the cash value, the more they can get back from the loyalty programme, they are more willing to stay in using the card.

This is also concluded that the loyalty programme can have a certain effect on the usage of the payment cards. We assume the 34 units of the qualified samplings feedback are the representative of others population. Under this assumption, we said most of the Hong Kong people are got more than one (1) “Octopus Card” or own at least one (1) “Octopus Co-branded Credit Card”, and they will use these payment cards to have their purchasing frequently. They normally spent a small amount of purchasing in their daily life with their “Octopus Card”, normally spent at the fast food outlets, supermarkets, or convenience stores. A part of the card holders have been joined the loyalty programme of “Octopus Card” – “Reward$”, but not all are fully aware of the loyalty programme operation, some of the participants have tried to make their redemption. The most reasons causing the card holders are not going to make their redemption, they are not aware of the redemption process, and even not sufficient points / cash value to make the redemption. Meanwhile, the redemption list is not just to most majority group of card holders, cash coupons are one of the best items that the card holders would like to add more. This is also reflecting that as mentioned earlier, there are 74% are married in the gender of female, the married group would like to have more monetary rewards from the loyalty programme.

Besides, the promotion of the loyalty programme seems fail to motivate the card holders to have more purchasing, conversely, they are confirmed that keep using these payment cards. For that group have not joined the loyalty programme, they are even not aware of the loyalty programme – “Reward$” at all, this is reflecting the loyalty programme is lack of well communication.

We are also concluded that The Automatic Add Value Service (AAVS) is not successful to make the card holder to use this service, because they are concerning of security matters.

The aim of this study with the case of “Octopus Card”, is to find out if there be any influences on the customer behaviour in sense of the usage of the “Octopus Card” by the loyalty programme. This is to be finalized and concluded “Reward$” can make the card holder to keep using the card on purchasing, but it is failed to motivate the more purchasing. Besides, “Reward$” only provided the hard benefits to the card holders, in monetary and non-monetary items, however, it is lack of “special treatment benefits” which introduced by Furnito et al (2009), the card holders is hardly feel they are special while they own this payment card, no matter “Octopus Card” or “Octopus Co-branded Credit Card”.

Need Help with your dissertation?

Why not order a custom dissertation that fits your exact requirements and grade needs?

At UK Dissertations we offer a range of services to help you get ahead in your studies.

Find out more today


Base on this study, although we found that the loyalty programme of “Octopus Card” – “Reward$” can make their card holders continue to keep in use of their cards, however, it does not means that the card holder may use more. Cause we found that “Octopus Card” is not effectively make use of its loyalty programme – “Reward$”, referring to the literature review before, loyalty programme has been proven that it should contain both “hard” and “soft” benefits and under this format of combination, loyalty programme can make the customer feels trust and comfort on the provider, and it is also bringing positive feedback at the end.

Unfortunately, from the analysis shows us that, the part of “soft” benefits is failed to be found from “Reward$”, therefore this is to recommend “Reward$” that she should address the necessary of building the “soft” benefits, the aim is to let the members feel they are the special and feel honour of being a member of “Reward$”. For example, as we known MTR Malls is the first partners with “Reward$”, so that “Reward$” is recommended to have cooperation with MTR Malls, in setting an concierge for “Reward$” members, the members are free of charge to use the service of concierge, iin which the concierge can be provided some resting area and some lockers for their members in storing their goods while purchasing. This recommendation can make the existing members feel they are special treated and being considered. In further, it can also be drawn the attention from the group of non-members. Some staff in the concierge can be placed to have a small chat with their members, to get their comments on the “Reward$”. “Soft” benefits should be enhanced to gain the positive effect of word-of-mouth, in order to create the referral from the existing member to another not yet being the member of “Reward$”.

Meanwhile, the “hard” benefits may not be executed so well by “Reward$”, the redemption rate is still found that there are 3% of the group have not answer on their redemption experience, so that these groups of people are floating to have a chance in redemption, may be just depends on the “hard” benefits. Referring to the literature review, Wardeen L. M. (2008) mentioned loyalty programme is a way of value added, interactive and also a long term focused relationship. If “Reward$” have successfully fulfil the requirements of both “soft” and “hard” benefits, it can make their customer to be more satisfied, and with this satisfaction, they will make their reportage more (in a sense of increase usage), through redemption.

Furthermore, “Reward$” is also be recommended that she used to enhance her communication channel as well, to make sure their members to have fully aware of the current promotion, benefits updates, even the redemption process. Well communication can let “Reward$” more understanding on what their member’s need, and make the necessary improvement on the programme, offer, or redemption list. For example, they can make a section that receiving comments from the user, as the advice before, providing a concierge to receive comments from their existing members.

Referring to Liu and Brock (2009) in their paper “Redemption behaviour for credit card reward programs in China”, recapped that promotions are the important element for reward programme. Therefore, “Reward$” should be made clear explanatory on the details of loyalty programme, for example, the redemption process, the redemption requirements or the calculation rate.

“Reward$” is also recommended that to use more different kinds of communication media, except using the existing website and email. She should consider if it is possible to use the telecom network in sending the current promotion and the balance of “Reward$” to their members though Short Message Service (SMS) or direct phone calling, in considering that the members are not familiar in using computers. Everyone can read the message from their mobile, or they can receive the direct call from “Reward$” staff, so that for that group of people which not familiar in using the computers, can also receive the latest news of “Reward$”.

Furthermore, for the opportunity in association with financial institute, “Octopus Card” company can consider to have more cooperation with other financial institutes if possible, to make good use on the customer base of financial institute, and to share the resources with the financial institute. Different financial institute got their different customer base, by the cooperation with different financial institute to make the private label credit card, as same as “Octopus Citibank Credit Card”. It can let the non member of “Reward$” under that customer base, to aware of the “Reward$” and find the advantage on it. Besides, customers are happy to enjoy double benefits though both loyalty programmes.


A supplementary session is designed at the end of this paper, it is because during this study on how the loyalty programme of “Octopus Card” affecting to consumer behaviour, a case on sharing the “Reward$” customer data to third parties is bringing up to Hong Kong Legislative Council. This action is going to break up the trust and commitment that built between the members / card holder and “Octopus Card”. The concern of data protection is one of the intangible elements while building up the trust and commitment. The card holder or members are believe in “Octopus Card” company will keep their personal data in confidential when they filled in the membership application form in joining “Reward$”, this is a kind of trust. However, the disclosure of the members’ personal data to third parties by revenue return, this is totally breaking up the trust and commitment which built up before.

Therefore, the short term effect on “Octopus Card” on “Reward$”, because loss of trust, there are a chance that the members may terminate the membership, and “Reward$” in a result of losing their members, and if the members that have not terminate their membership, the usage of the cards may then be lower, as the members are lack of confidence on the transaction while they are purchasing. For long term effect, “Reward$” is going to use extra time to build up the trust and commitment with their member again. As we understand that trust and commitment cannot build suddenly, it takes time.

Of course, all the above assumption is required to have further study on that, however, there is no doubt that the certain affect on “Reward$”, they should manage carefully and seriously in doing some recovering action, this is a kind of frustration.

Need Help with your dissertation?

Why not order a custom dissertation that fits your exact requirements and grade needs?

At UK Dissertations we offer a range of services to help you get ahead in your studies.

Find out more today


  • Li. X. and Petrick J. F. (2010), “Revisiting the Commitment-Loyalty Distinction in a Cruising Context”, Journal of Leisure Research, Vol. 42, No. 4, pages 67 – 90
  • Hong Kong Monetary Authority, “Payment Systems in Hong Kong”, Hong Kong Monetary Authority [pdf] Available at: www.info.gov.hk/hkma/eng/infra/clearing_settle/HK_chapter.pdf (Assessed at 24 July 2010)
  • Octopus Card Limited, Company Portfolio, [pdf] Available at: http://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdfhttp://www.octopus.com.hk/web09_include/_document/en/company_profile.pdf (Assessed at 30 June 2010)
  • Octopus Card Limited, Press Release, [pdf] Available at: http://www.octopus.com.hk/about-us/press-releases/en/index.html (Assessed at 30 June 2010)