The Role of Bonuses in Loyalty Programs – A literature review

Hagström Marcus, Sara Rosengren () and Johan Hagberg ()
Additional contact information
Hagström Marcus: Center for Retailing, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Sara Rosengren: Marketing and Strategy, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Johan Hagberg: University of Gothenburg, Sweden

No 2022:1, SSE Working Paper Series in Business Administration from Stockholm School of Economics

Abstract: Loyalty programs have become commonplace in consumer markets such as travel, hospitality, and retailing. There is extensive academic research which examine the content of loyalty programs and their effects. This working paper focuses on one key aspects of loyalty programs, namely bonuses (monetary rewards linked to purchase volume). More specifically, it answers the following research questions: “What are the effects of the introduction (RQ1), change (RQ2) and removal (RQ3) of bonuses in loyalty programs?” through a literature review of articles in scientific journals. The review suggests that introducing a loyalty program with a bonus is likely to have a positive impact on consumer and firms, but this effect will depend on the type of bonus and will vary between customer groups as well as the competitive environment, and the country in which it is introduced. Changing the bonus in loyalty program is likely to impact future purchase behavior, but the effect will depend on whether changes are made in terms of accrual or redemption as well as the current loyalty level and buying behaviors of customers. Changing the bonus can also impact firm performance, but the effects are likely to depend on the actual execution and time perspective applied. Removing the bonus in a loyalty program is likely to have a negative impact on consumer behaviors when there are competing loyalty programs on the market. However, default behaviors are less likely to be affected than behaviors that have been stimulated by the reward. No research was found on the firm effects of removing a bonus.

Keywords: loyalty; loyalty programs; retail; bonus (search for similar items in EconPapers)
Pages: 25 pages
Date: 2022-04-28
Note: This work was supported by a grant from the Hakon Swenson Stiftelsen.
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