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The Role of Effort Advantage in Consumer Response to Loyalty Programs: The Idiosyncratic Fit Heuristic

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  • Kivetz, Ran

    (Columbia U)

  • Simonson, Itamar

    (Stanford U)

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    Abstract

    Over the past few years, customer relationship management and loyalty programs (LPs) have been widely adopted by companies and have received a great deal of attention from marketers, consultants, and, to a lesser degree, academics. In this research, we examine the effect of the level of effort required to obtain a LP's reward on consumers' perception of the LP's attractiveness. We propose that, under certain conditions, increasing the program requirements can enhance consumers' likelihood of joining the program, thus leading consumers to prefer a dominated option. Specifically, we hypothesize that consumers often evaluate LPs based on their individual effort to obtain the reward relative to the relevant reference effort (e.g., the effort of typical other consumers). When consumers believe they have an effort advantage relative to typical others (i.e., an idiosyncratic fit with the LP), higher program requirements magnify this perception of advantage and can therefore increase the overall perceived value of the program. This proposition was supported in a series of studies in which the perceived idiosyncratic fit was manipulated either by reducing the individual effort or by raising the reference effort. The findings also indicate that (a) idiosyncratic fit considerations are elicited spontaneously, (b) idiosyncratic fit mediates the effect of effort on consumer response to LPs, and (c) an alternative account for the results based on signaling is not supported. We conclude that these findings are part of a broader phenomenon, which we term the idiosyncratic fit heuristic, whereby a key factor that affects consumers' response to marketing programs and promotional offers is the perceived relative advantage or fit with the individual's idiosyncratic conditions and preferences.

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    Bibliographic Info

    Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1738r.

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    Date of creation: Mar 2003
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    Handle: RePEc:ecl:stabus:1738r

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    1. Winer, Russell S, 1986. " A Reference Price Model of Brand Choice for Frequently Purchased Products," Journal of Consumer Research, University of Chicago Press, vol. 13(2), pages 250-56, September.
    2. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
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    6. Itamar Simonson & Ziv Carmon & Suzanne O'Curry, 1994. "Experimental Evidence on the Negative Effect of Product Features and Sales Promotions on Brand Choice," Marketing Science, INFORMS, vol. 13(1), pages 23-40.
    7. Corfman, Kim P & Lehmann, Donald R, 1993. " The Importance of Others' Welfare in Evaluating Bargaining Outcomes," Journal of Consumer Research, University of Chicago Press, vol. 20(1), pages 124-37, June.
    8. Borenstein, S., 1993. "Repeat Buyer Programs in Network industries," Papers 93-10, California Davis - Institute of Governmental Affairs.
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    Cited by:
    1. Liberman, Varda & Ross, Lee, 2006. "Idiosyncratic matching and choice: When less is more," Organizational Behavior and Human Decision Processes, Elsevier, vol. 101(2), pages 168-183, November.
    2. Teerling, M.L. & Huizingh, Eelko K.R.E., 2006. "Exploring the concept of web site customization: applications and antecedents," Research Report 06F07, University of Groningen, Research Institute SOM (Systems, Organisations and Management).

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