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

Abstract

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.