IDEAS home Printed from https://ideas.repec.org/a/eee/joreco/v32y2016icp23-31.html
   My bibliography  Save this article

Does the reward match the effort for loyalty program members?

Author

Listed:
  • Danaher, Peter J.
  • Sajtos, Laszlo
  • Danaher, Tracey S.

Abstract

Many loyalty programs (LPs) are structured so that members accrue points, and these points have effectively become a currency, with a dollar-value. Multiplying the points dollar-value by the number of points required to redeem a catalog reward item gives the “points price.†Our primary objective is to compare a points price with a corresponding market price to see if LP members are being fairly rewarded for their points-earning effort. To achieve this, we examine almost 7000 catalog items for six LPs spread over three countries and find that, on average, the points price is higher than the market price, which is not good for the viability of LPs. We subsequently undertake a survey of members from the Fly Buys LP to see how much they care about points prices exceeding market prices. We find that if the points price exceeds the market price by as little as 10% then more than half the LP members are somewhat or very annoyed, many to the extent of wanting to quit the LP.

Suggested Citation

  • Danaher, Peter J. & Sajtos, Laszlo & Danaher, Tracey S., 2016. "Does the reward match the effort for loyalty program members?," Journal of Retailing and Consumer Services, Elsevier, vol. 32(C), pages 23-31.
    • Handle: RePEc:eee:joreco:v:32:y:2016:i:c:p:23-31
    DOI: 10.1016/j.jretconser.2016.05.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969698916300571
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jretconser.2016.05.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Demoulin, Nathalie T.M. & Zidda, Pietro, 2009. "Drivers of Customers’ Adoption and Adoption Timing of a New Loyalty Card in the Grocery Retail Market," Journal of Retailing, Elsevier, vol. 85(3), pages 391-405.
    2. Demoulin, Nathalie T.M. & Zidda, Pietro, 2008. "On the impact of loyalty cards on store loyalty: Does the customers’ satisfaction with the reward scheme matter?," Journal of Retailing and Consumer Services, Elsevier, vol. 15(5), pages 386-398.
    3. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    4. Steven M. Shugan, 2005. "Brand Loyalty Programs: Are They Shams?," Marketing Science, INFORMS, vol. 24(2), pages 185-193.
    5. Dorotic, Matilda & Verhoef, Peter C. & Fok, Dennis & Bijmolt, Tammo H.A., 2014. "Reward redemption effects in a loyalty program when customers choose how much and when to redeem," International Journal of Research in Marketing, Elsevier, vol. 31(4), pages 339-355.
    6. Siddharth S. Singh & Dipak C. Jain & Trichy V. Krishnan, 2008. "Research Note--Customer Loyalty Programs: Are They Profitable?," Management Science, INFORMS, vol. 54(6), pages 1205-1211, June.
    7. N. Demoulin & P. Zidda, 2008. "On the impact of loyalty cards on store loyalty:does the customers' satisfaction with the reward scheme matter?," Post-Print hal-00285809, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Yanyan & Mandler, Timo & Meyer-Waarden, Lars, 2021. "Three decades of research on loyalty programs: A literature review and future research agenda," Journal of Business Research, Elsevier, vol. 124(C), pages 179-197.
    2. Hu, Xin & He, Liuyi & Liu, Junjun, 2022. "Status reinforcing: Unintended rating bias on online shopping platforms," Journal of Retailing and Consumer Services, Elsevier, vol. 67(C).
    3. Meyer-Waarden, Lars & Bruwer, Johan & Galan, Jean-Philippe, 2023. "Loyalty programs, loyalty engagement and customer engagement with the company brand: Consumer-centric behavioral psychology insights from three industries," Journal of Retailing and Consumer Services, Elsevier, vol. 71(C).
    4. Hsin Hsin Chang & Kit Hong Wong, 2018. "Consumer psychological reactance to coalition loyalty program: price-consciousness as a moderator," Service Business, Springer;Pan-Pacific Business Association, vol. 12(2), pages 379-402, June.
    5. Ioannis ANTONIADIS & Stamatis KONTSAS & Konstantinos SPINTHIROPOULOS, 2019. "Blockchain and Brand Loyalty Programs: A Short Review of Applications and Challenges," International Conference on Economic Sciences and Business Administration, Spiru Haret University, vol. 5(1), pages 8-16, November.
    6. Lin, Chen & Bowman, Douglas, 2022. "The impact of introducing a customer loyalty program on category sales and profitability," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    7. Ricardo Montoya & Constanza Flores, 2019. "Buying free rewards: the impact of a points-plus-cash promotion on purchase and reward redemption," Marketing Letters, Springer, vol. 30(1), pages 107-118, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Yanyan & Mandler, Timo & Meyer-Waarden, Lars, 2021. "Three decades of research on loyalty programs: A literature review and future research agenda," Journal of Business Research, Elsevier, vol. 124(C), pages 179-197.
    2. Rehnen, Lena Marie, 2016. "Exit strategies of loyalty programs," jbm - Journal of Business Market Management, Free University Berlin, Marketing Department, vol. 9(1), pages 564-596.
    3. Amirhossein Bazargan & Salma Karray & Saeed Zolfaghari, 2021. "Can restrictions on redemption timing boost profitability of loyalty programs in competitive environments?," Computational Management Science, Springer, vol. 18(1), pages 99-124, January.
    4. García Gómez, Blanca & Gutiérrez Arranz, Ana M & Gutiérrez Cillán, Jesús, 2012. "Drivers of customer likelihood to join grocery retail loyalty programs. An analysis of reward programs and loyalty cards," Journal of Retailing and Consumer Services, Elsevier, vol. 19(5), pages 492-500.
    5. Alex Belli & Anne-Maree O’Rourke & François A. Carrillat & Ljubomir Pupovac & Valentyna Melnyk & Ekaterina Napolova, 2022. "40 years of loyalty programs: how effective are they? Generalizations from a meta-analysis," Journal of the Academy of Marketing Science, Springer, vol. 50(1), pages 147-173, January.
    6. Nesset, Erik & Bergem, Ola & Nervik, Bjørn & Schiøll Sørlie, Even & Helgesen, Øyvind, 2021. "Building chain loyalty in grocery retailing by means of loyalty programs – A study of ‘the Norwegian case’," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    7. Gandomi, Amir & Zolfaghari, Saeed, 2018. "To tier or not to tier: An analysis of multitier loyalty programs׳ optimality conditions," Omega, Elsevier, vol. 74(C), pages 20-36.
    8. Hu, Xin & He, Liuyi & Liu, Junjun, 2022. "Status reinforcing: Unintended rating bias on online shopping platforms," Journal of Retailing and Consumer Services, Elsevier, vol. 67(C).
    9. Bies, Suzanne, 2022. "Examining the effectiveness of activation techniques on consumer behavior in temporary loyalty programs," Other publications TiSEM ade86df3-4846-4318-938f-a, Tilburg University, School of Economics and Management.
    10. Noah Lim & Teck-Hua Ho, 2007. "Designing Price Contracts for Boundedly Rational Customers: Does the Number of Blocks Matter?," Marketing Science, INFORMS, vol. 26(3), pages 312-326, 05-06.
    11. Amir Gandomi & Amirhossein Bazargan & Saeed Zolfaghari, 2019. "Designing competitive loyalty programs: a stochastic game-theoretic model to guide the choice of reward structure," Annals of Operations Research, Springer, vol. 280(1), pages 267-298, September.
    12. Sharma, Dheeraj & Verma, Varsha, 2014. "Psychological and economic considerations of rewards programs," Journal of Retailing and Consumer Services, Elsevier, vol. 21(6), pages 924-932.
    13. Bazargan, Amirhossein & Karray, Salma & Zolfaghari, Saeed, 2017. "Modeling reward expiry for loyalty programs in a competitive market," International Journal of Production Economics, Elsevier, vol. 193(C), pages 352-364.
    14. Pandit, Ameet & Vilches-Montero, Sonia, 2016. "Are reward cards just a business deal? The role of calculative versus emotional card commitment in driving store loyalty," Journal of Retailing and Consumer Services, Elsevier, vol. 31(C), pages 355-360.
    15. Firend Al. R., 2018. "Marketing Strategies of Services and Purchasing Incentives in Asia," GATR Journals jmmr187, Global Academy of Training and Research (GATR) Enterprise.
    16. Arbore, Alessandro & Estes, Zachary, 2013. "Loyalty program structure and consumers' perceptions of status: Feeling special in a grocery store?," Journal of Retailing and Consumer Services, Elsevier, vol. 20(5), pages 439-444.
    17. Yoonseock Son & Wonseok Oh & Sang Pil Han & Sungho Park, 2020. "When Loyalty Goes Mobile: Effects of Mobile Loyalty Apps on Purchase, Redemption, and Competition," Information Systems Research, INFORMS, vol. 31(3), pages 835-847, September.
    18. Demoulin, Nathalie T.M. & Zidda, Pietro, 2009. "Drivers of Customers’ Adoption and Adoption Timing of a New Loyalty Card in the Grocery Retail Market," Journal of Retailing, Elsevier, vol. 85(3), pages 391-405.
    19. Arts, Joep W.C. & Frambach, Ruud T. & Bijmolt, Tammo H.A., 2011. "Generalizations on consumer innovation adoption: A meta-analysis on drivers of intention and behavior," International Journal of Research in Marketing, Elsevier, vol. 28(2), pages 134-144.
    20. Jisu J. Kim & Lena Steinhoff & Robert W. Palmatier, 2021. "An emerging theory of loyalty program dynamics," Journal of the Academy of Marketing Science, Springer, vol. 49(1), pages 71-95, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joreco:v:32:y:2016:i:c:p:23-31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-retailing-and-consumer-services .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.