Purpose
This study aims to examine how customers’ inherent tendencies and capacity to engage with loyalty programmes (LPs) shape their actual engagement, and how this subsequently influences their engagement with and loyalty to retailers.

Design/methodology/approach
In Study 1, the components of loyalty programme engagement (LPE) are validated using data collected from 250 Australian supermarket retail customers. In Study 2, using data from 820 Australian supermarket retail customers the proposed research model is tested. Both symmetrical partial least squares structural equation modelling and asymmetric fuzzy-set qualitative comparative analysis (fsQCA) are used to enhance the rigour of the findings.

Findings
Results show that customers’ disposition towards LP engagement, in the form of internal tendencies and capacity, are important drivers of LP engagement. In addition, results also show that LP engagement leads to retailer engagement and customer loyalty (both attitudinal and behavioural loyalty). fsQCA results show that combination of trust, commitment and perceived benefits is the key configuration whose presence or absence determines the enhancement or impediment of LP engagement.

Research limitations/implications
These findings will help retailers design LPs based on a better understanding of the factors (i.e. trust, commitment, perceived benefits and temporal and spatial price searches) influencing customers’ LPE.

Practical implications
Retailers should consider customers’ internal tendencies and capacity to engage with LPs. Importantly, retailers must aim to focus on a combination of perceived benefits, trust and commitment towards LPs when designing these.

Originality/value
The central role played by customers’ disposition towards LPE as a key driver of both LP engagement and customer loyalty represents an important contribution to the existing LP literature. In addition, providing the recipe for designing effective LPs provides another valuable and original contribution to the LP research.