Do frequency reward programs create switching costs? A dynamic structural analysis of demand in a reward program

Abstract

Switching costs, Reward programs, Dynamic programming, Discrete-choice, D40, L10, M31,

Grocery retail loyalty program effects: self-selection or purchase behavior change?

“…Furthermore, empirical evidence implies that there are some significant switching costs only when lighter purchasers are close to earning a reward (Hartmann and Viard 2008). On the other hand, lighter buyers rarely purchase frequently enough to come close to receiving a reward.…”

“…Thus, the proportion of late adopters who become loyal is small or nonexistent (Blattberg and Neslin 1990;Mela et al 1997). Possible explanations include inertia or variety-seeking behavior that results from low switching costs (Hartmann and Viard 2008).…”

Understanding Active Loyalty Behavior in Hotel Reward Programs Through Customers’ Switching Costs and Perceived Program Value

“…They further pointed out that customers possess different perceptions toward different loyalty-program characteristics and different levels. For example, customers place much greater value on a reward when they are closer to earning a reward, and they tend to place less value on a reward at the beginning of the program (Hartmann & Viard, 2008). In effect, as the value of accumulated spending increases and the expiration date for reward redemption approaches, customers are more likely to increase their purchases (Lewis, 2004).…”

Can Non-Tiered Frequency Reward Programs Be Profitable?

“…They find mixed results, and are unable to conclude that loyalty programs have a substantial impact on repeat-purchase behavior. Hartmann and Viard (2008) tests whether a 'buy 10 get 1 free' rewards program creates switching costs for members. They examine a particular manifestation of switching costs by looking at whether customers accelerate their purchases as they move closer to achieving a reward.…”