Customer behavior across competitive loyalty programs

Farnoosh Khodakarami (), J. Andrew Petersen () and Rajkumar Venkatesan ()
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Farnoosh Khodakarami: San Diego State University
J. Andrew Petersen: The Pennsylvania State University, University Park
Rajkumar Venkatesan: University of Virginia

Journal of the Academy of Marketing Science, 2024, vol. 52, issue 3, No 15, 892-913

Abstract: Abstract Customers can belong to multiple competing loyalty programs each with multiple reward levels. We extend loyalty program theories by proposing five mechanisms that capture the competitive effects in multi-firm, multi-level loyalty programs. We empirically test our hypotheses using data from a loyalty program management app where customers manage points independently across competing firms. We utilize goal shielding theory to show how a customer’s purchase at the focal firm is affected by the customer’s purchases and redemptions across competing firms. Specifically, we find that a customer’s purchase probability at the focal firm decreases after they qualify for a reward independent of redemption at a competing firm (competitive mere reward qualification) and after they redeem a reward at a competing firm (competitive rewarded behavior). Further, we find that the customer’s purchase probability at the focal firm increases if the customer is far from both the qualified and higher-level rewards at the competing firm (competitive stuck-in-the-middle), and if the customer accelerated their purchase frequency to qualify for or redeem a reward at the competing firm (competitive effort balancing post qualification and redemption). Four lab experiments supplement our empirical findings with causal evidence. Our research shows that customer progress toward a goal in a loyalty program is influenced by competing loyalty programs.

Keywords: Loyalty programs; Competition; Goals; Goal shielding; Customer relationship management; Mobile app (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11747-023-00965-z

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