Loyalty for sale: Customer's response to a reward's design program

Zisu, Amalia
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University of Guelph

Retailers have designed loyalty programs in an effort to make it more rewarding for customers to do business with them than to switch to their competitors. As empirical studies show, differences in a loyalty programs' effectiveness may be driven by differences in reward design components (O'Brien and Jones, 1995; Kivetz and Simonson, 2002). This is the first research that investigates how consumers make trade offs among brand, price, amount of reward and type of reward for a frequently purchased product. Results from a discrete choice experiment show that overall, a loyalty program positively affects brand loyalty but the magnitude is different from one brand to the other. Also, the findings enhanced our understanding about types of rewards offered in a loyalty program. More specifically, customers prefer rewards in this order: cash discount, car-wash coupon, miles and points.

loyalty programs, rewards, customers, reward design components, brand loyalty