The interaction of reward contingencies and causality orientation on the introduction of cooperative tactics in buyer–seller negotiations

This article reports results of an experiment designed to see if reward contingencies and individual differences in causality orientation can interact to affect the frequency with which buyers and sellers introduce cooperative tactics into a sales negotiation. A face‐to‐face simulation is employed to consider these effects. A 2 × 2 ANOVA (task‐contingent/task‐noncontingent rewards × control/autonomy orientation) tests this interaction. These two factors interact to affect cooperation. A buyer or seller with an autonomous causality, in a situation with task‐noncontingent rewards, is most likely to introduce cooperative negotiation tactics. Task‐noncontingent rewards are more effective than task‐contingent rewards for autonomous causality buyers and sellers, but not for control causality buyers and sellers. © 2001 John Wiley & Sons, Inc.     

Cross-reward effects in a coalition loyalty program: The impact of a point currency devaluation

While single-brand reward programs encourage customers to remain loyal to that one brand, coalition programs encourage customers to be “promiscuous” by offering points redeemable across partner stores. Despite the benefits of this “open relationship” with customers, store managers face uncertainty as to how rewards offered by partners influence transactions at their own stores. We use a model of multi-store purchase incidence and spend to show how the value of points shared among partner stores can explain patterns in customer-level purchases across them. We also allow reward spillovers to be moderated by three measures of store affinity that characterize a coalition’s portfolio: the relative popularity, geographic distance, and overlap in product categories between each pair of stores.For the coalition studied, popularity affinity was the main determinant of the valence of cross-reward effects, both before and after the devaluation. In contrast, category and geographic affinity had a smaller and more heterogenous impact. Through the use of an event where the loyalty program uniformly devalued the entire coalition’s value of reward points, we show that cross-reward effects changed (lessened), leading to larger financial losses for the most popular stores. While we do not observe changes to the composition of the coalition’s portfolio, our results also suggest that the value of a shared reward currency may be driven by the inclusion of smaller partners.     

Accumulation versus instant loyalty programs: The influence of controlling policies on customers' commitments

Loyalty reward programs play an important strategic role attracting and retaining customers. Surprisingly, reward redemptions receive minimal research attention. Despite widespread reward program offerings, evidence suggests customers increasingly abandon them due to controlling (restrictive) redemption policies, such as blackout dates. The present study considers controlling redemption policies' effect on consumer commitment levels for accumulation-based and instant loyalty programs across social and economic award types. A 2 (low/high controlling) × 2 (accumulation/instant program) × (social/economic rewards) design tests hypotheses informed by cognitive evaluation and rational choice theories. Results show firms employing accumulation programs with highly controlling policies should highlight their social rewards (e.g., a hotel with blackout dates on redeeming rewards would want to highlight their special lounges or dining areas); whereas, low controlling policies work best when offering financial rewards (e.g., free upgrades or percentages off). In instant programs, the type of reward generally does not influence consumers' commitment levels.     

Do reward programs build loyalty for services?: The moderating effect of satisfaction on type and timing of rewards

While reward programs have been widely used as a means to engender customer loyalty, it is not clear if the ends are justified. Some researchers argue that we do not fully understand the mechanism underlying reward programs and how it affects consumer acceptability of such programs. In this study, we examine two variables; timing (immediate vs. delayed) and type (direct vs. indirect) of rewards in two service conditions (satisfied vs. dissatisfied). We conduct the experiment in two service settings and the results indicate that when consumers are satisfied, they prefer delayed, direct rewards (of higher values) to immediate, direct rewards. However, when consumers are dissatisfied, they prefer immediate, direct rewards to delayed, direct rewards (of higher values). Interestingly, the preference for direct over indirect rewards is apparent only if the rewards are delayed (for the satisfactory service experience) or immediate (for the dissatisfactory service experience).     

Buying free rewards: the impact of a points-plus-cash promotion on purchase and reward redemption

While many studies have investigated consumer purchase behavior in reward programs, a better understanding of customer redemption behavior is lacking, particularly when promotions affect a core aspect of reward programs—free rewards. In this paper, we examine the impact of a promotion on purchase and reward redemption in a reward program in which consumers can partially cover the cost of a free reward with their money. The literature on reward programs suggests a positive reinforcement caused by reward redemption, whereas the literature on promotion provides different views regarding the existence of a postpromotion dip. Using data from a major retailer’s reward program, we verify that such a promotion attracted customers with less transaction activity and shorter tenure. Interestingly, consumers using the promotion increased their preference for hedonic rewards compared to their previously observed behavior. This change in preference persisted after the promotion ended. Overall, the promotion significantly increased the number of redemptions but generated a negative impact on subsequent consumer behavior by decreasing purchase incidence and quantity. Our findings point to a need to understand the trade-off between spending money on buying an otherwise free reward and future regular purchases.

     

Tactical use of rewards to enhance loyalty program effectiveness

A key member benefit for participating in a loyalty program (LP) is the rewards earned for points accrued. One popular reward structure is a catalog of many diverse items. The rewards among this broad selection are likely to differ in their appeal due to their intrinsic differences and customer heterogeneity. Prior research has shown that after redeeming a reward, LP members are more motivated to increase their purchase volume/frequency and share-of-wallet within the program, thereby becoming more active. In this study, we fit a hidden Markov model to a 4½ year longitudinal data set of points accrual and reward redemption activity for about 4500 members of a large coalition LP. Our analysis reveals three latent states — active, hyperactive and inactive. We then investigate the likelihood of LP members transitioning between these states across successive time periods, and examine the reward categories and marketing effort associated with these transitions. Subsequently, we use our model to optimally promote particular reward categories to encourage LP member migration to managerially desirable states or prevent them sliding into a less desirable state. Our proposed optimal reward strategy potentially increases the estimated proportion of LP members in the hyperactive latent state from 35.7% to 40.1%, with a resultant increase in sales revenue for retailers and service providers in the LP of 7.7%. We find that rewards which are more fungible have the strongest influence on increasing points accrual activity.     

The effectiveness of reward systems on innovative output: An empirical analysis

This study investigated the relationship of patent output to the reward systems for individual R&D scientists in high technology firms. A survey of technical managers in 57 Connecticut firms collected information on firm size, R&D expenditure, and the frequency of use of eighteen different reward systems. Using a regression model, patent output was found to be dependent on firm size, R&D expenditure, and on monetary and non-monetary reward systems, informal award programs and variable bonuses based on the issue of patents. When a subset of small firms was investigated separately, non-monetary rewards were shown to be ineffective. However, variable bonuses remained important to patent output and large sum reward payments ($50,000) also demonstrated a significant effect.     

The effect of loyalty program expiration policy on consumer behavior

Although loyalty programs can help divert costs to the future by using delayed rewards, unredeemed program currency can become significant liability for the firm. To alleviate this concern, many programs have introduced a point expiration date or have shortened their expiration time horizon. This issue of point expiration has received scant attention in the literature. Contrary to an intuitive negative effect one would expect from a more stringent expiration policy, our real-life data and lab experiment demonstrated that a finite expiration policy can affect purchases positively but only for consumers who have the flexibility to adapt their behavior to such a policy. We identified usage level and engagement in multi-store shopping as two sources contributing to flexibility. Overall, our findings point to a need to understand one’s customer base to design the optimal point expiration policy and program communication.     

Designing successful temporary loyalty programs: An exploratory study on retailer and country differences

Retailers increasingly adopt temporary loyalty programs (TLPs), in which consumers have limited time, often less than half a year, to save stamps and redeem highly discounted rewards. These programs often run alongside the retailers’ permanent loyalty programs in an attempt to increase customer engagement. Despite the growing popularity of TLPs, the literature on the topic remains limited. We address this gap by looking at the redemption rate, the industry’s primary success indicator, of almost 900 TLPs across a broad set of grocery retailers in 45 countries. We study the effects of four key design characteristics (the duration of the program, the discount offered, the spending requirement before an award can be redeemed, and the reward depth) on the redemption rate, and explore how these effects vary across a broad range of retailer and country characteristics. In doing so, we control for both a retailer’s potential self-selection into running a TLP and the potential endogeneity of the subsequent design choices. We derive a set of actionable results on how to design successful TLPs and show that high redemption rates are not only beneficial for the program operator and reward manufacturer, but also translate into higher sales and profit for the retailer.     

Tactics to Enhance the Effectiveness of Delayed Incentive Offerings in a Competitive Environment

Abstract

Managers often try to gain repeat purchases by using delayed incentives such as bounce-back coupons or continuity programs that require consumers to make multiple or long-run purchases to receive the incentive's reward. Yet, given a choice, consumers presumably would rather receive their rewards sooner, than later. We used choice scenarios in a study to identify tactics that likely result in consumers' preferences for incentive offers delayed in time over competitors' offers whose rewards are realized immediately. The results suggest that offering a delayed incentive that has a higher face value than competitors' immediate incentives may result in consumers choosing the delayed reward. Additionally, framing the incentives as gains appears to be more effective at acquiring consumers' choice than framing them as reduced losses. Finally, some limited findings indicate that targeting delayed incentive programs toward consumer segments high in future time orientation may be effective at gaining choice of delayed incentive offers.     

Customer Referral Reward–Brand–Fit: A Schema Congruity Perspective

Customer referral programs (CRPs) are widely applied as an effective means to stimulate word‐of‐mouth. While previous research mainly focuses on CRPs’ impact of acquiring new customers, this study introduces referral programs as a strategic brand management tool. In doing so, this article emphasizes what has been largely neglected by scholars: A “recommenders‐perspective.” Guided by two competing theoretical perspectives, this article proposes that the perceived congruity between a reward and the recommended brand is an essential driver of referral program performance outcomes. The results show that rewards that conform to the image of the recommended brand yield more favorable reward attractiveness perceptions. Furthermore, the authors show that reward attractiveness perceptions inevitably affect the brand customers are asked to recommend in exchange for receiving this reward. The research reported here extends the literature on judgmental evaluations resulting from schema‐based processing and provides novel insights into the design of CRPs.     

Competing with loyalty: How to design successful customer loyalty reward programs

For industries with low switching costs, customer loyalty programs (LPs) have potential to drive differentiation and sustain a competitive advantage. However, incentives provided through LPs also have a potential to escalate into costly price wars. In this article, we discuss how to design successful customer loyalty reward programs that bring value to participants and that cannot be emulated by competitors easily. We focus on three distinct aspects of improvement: personalization, reward types, and additional services. Through personalization, companies can leverage the knowledge they already have on their customers to tailor offers that they find relevant and appealing. For the reward structure, we argue in favor of a certain degree of opacity. We also encourage loyalty programs to consider giveaways that are unique and difficult to imitate and to use all the information they have available to provide rewards that fit with each customers’ idiosyncratic situation or preference. Finally, competitive LPs should look beyond offers and rewards. In addition to purchases, LPs can reward participants for other desirable behaviors; they can also provide additional services that impose minimal costs on firms, but bring value to customers.     

Peer Pressure in Voluntary Environmental Programs: a Case of the Bag Rewards Program

This paper studies stores that voluntarily reward consumers for changing their convenience-oriented, waste-increasing consumption behaviors. We focus on shopping bag rewards programs which encourage consumers to substitute reusable bags for plastic bags. Instead of assuming that consumers have environmental consciousness, we consider the peer pressure of participating in rewards programs among consumers as the driving force increasing the number of consumers behaving in environmentally friendly ways. The results show that rewards programs can be effective in reducing plastic bag users in the long term and can increase profits for the stores implementing them. Unlike former studies suggesting a plastic bag ban or levy to reduce plastic bag use, these findings suggest that the policymakers should support these long-term-effective bag rewards programs by educating consumers about the value of using reusable bags and offering subsidies for stores that implement bag rewards programs.     

Effects of loyalty program rewards on store loyalty

This investigation examines consumers' preferred loyalty program (LP) designs across two retail contexts, grocery retailing and perfumery, with varying degrees of personal involvement. The research employs in-store full profile conjoint analysis by using the following attributes: timing of the reward, reward compatibility with the store's image, and tangibility.Our research reveals that the underlying effects of reward types on preferences and intended store loyalty differ depending on the level of consumers' personal involvement. In sectors with high personal involvement, compatibility with the store's image and intangible rewards increase LP preference and loyalty intentions. The time required to obtain the reward (immediate/delayed) has no impact. In sectors with low personal involvement, immediate and tangible rewards increase LP preference and loyalty intentions. Compatibility with the store image has no impact.     

How push messaging impacts consumer spending and reward redemption in store-loyalty programs

Retailer loyalty programs (LPs) are pervasive in grocery retailing. However, participant spending and redemption typically wear off over time and traditional communication has not revealed very effective at maintaining program engagement. We study the impact of in-app mobile push notifications on consumer participation and reward collection in store-loyalty programs. Using a unique data set covering consumer spending before and during such a program, we estimate the effect of push messaging on expenditure and reward redemption during the program. We report positive effects of push messages on spending, and even stronger effects on redemption, relative to a control group not receiving such messages. Due to the savings dynamics, the total spending impact is larger for messages sent early on rather than late in the program, while the opposite holds for the total number of stamps redeemed. Conditioning on observable consumer characteristics, we allow for heterogeneous treatment effects and find that the spending and redemption effects of push messaging increase with high levels of pre-program spending. Our findings reveal which loyalty-program stakeholders benefit the most from mobile marketing campaigns, and help to formulate rules for campaign scheduling and targeting.     

Managing loyalty program communications in the digital era: Does culture matter?

This research addresses an important, yet under-researched, issue concerning the real-time management of loyalty programs (LPs) in the digital era: how to leverage culture-specific communications to motivate LP members to pursue and redeem program rewards. Two experimental studies in different LP contexts provide corroborating evidence that to-date (to-go) progress feedback is more effective in motivating consumers from individualist (collectivist) cultures to pursue LP rewards. Moreover, process evidence suggests that these culture-specific progress framing effects are driven by individual differences in regulatory focus and realized through perceived reward attainability. Overall, this paper contributes to the LP and goal pursuit literatures by verifying that communication framing is an effective means to strengthen reward pursuit motivation.     

Turning dissatisfied into satisfied customers: How referral reward programs affect the referrer׳s attitude and loyalty toward the recommended service provider

Referral reward programs are becoming a popular tool for acquiring new customers and bonding existing ones. Yet their benefits are contentious, since such campaigns are prone to the opportunistic behaviour of customers who merely want to reap the reward. This paper examines how participating in a referral campaign affects opportunistic recommenders. By conducting two experimental studies, this article shows that giving counterattitudinal referrals enhances the communicator׳s attitude and loyalty toward the recommended provider. However, the positive effect depends on the reward size. While referral reward programs with small incentives strengthen the recommender׳s attitude and loyalty, no impact was found for referrals with large rewards. The results show that a stronger focus on reward programs is worth considering, since service providers can benefit from opportunistic customers with regards to the bonding effect.