Redemption Behavior Research Articles

Point Redemption in Loyalty Programs: The Role of Customer Relationship Characteristics and Their Implications for Service Providers

Customer–firm relationship affects firm performance, and loyalty programs are a popular tool to enhance this relationship in service industries. An essential measure of a loyalty program’s effectiveness is its members’ point redemption behavior. Customers engage more with the firm when they periodically redeem points. However, current studies find that customers tend to stockpile rather than redeem points. In this research, the authors investigate the relationships between customer relationship characteristics in loyalty programs (i.e., purchase depth, purchase breadth, purchase recency, redemption depth, redemption breadth, and redemption recency) and customers’ point redemption behavior. The empirical analyses show that customers with higher purchase depth and redemption recency are more likely to redeem points. However, customers with higher purchase breadth, purchase recency, redemption depth, and redemption breadth are less likely to redeem points. In addition, once deciding to redeem, customers with higher purchase breadth and purchase recency will redeem more points. The results imply that managers should motivate point redemptions among customers who purchase a lot from the firm but are concentrated on their purchases and redemptions. The findings also indicate that point redemption is a valuable tool to regain customers who are drifting away from the firm.

Strategic use of fare-reward schemes in a ride-sourcing market: An equilibrium analysis

Reward schemes are common in ride-sourcing markets. Each reward scheme incentivizes users with economic benefits as rewards for rides from the ride-sourcing platform. In practice, reward schemes differ in terms of their operational features. Operational features are the ways in which a ride-sourcing platform manages a reward scheme and users perceive and redeem their rewards. Therefore, different reward schemes involve different decision-making contexts for the platforms. As a result, it poses a challenge to understand the behavior of platforms with different types of reward schemes in the market. To address this challenge, this study analyzes the impacts of point-based and crypto-based fare-reward schemes on a ride-sourcing market. The market is defined as a mathematical model in which a ride-sourcing platform determines trip fares, commission fees, and rewards for passengers and drivers to maximize matching profits. A points-based reward scheme offers loyalty points with fixed redemption values. Issuance of point rewards incurs a liability for the reward scheme to accept users' point redemptions in the future. The crypto-based approach involves the cost of securing cryptocurrencies to reward users. Crypto rewards have various redemption values. Therefore, users perceive the value of crypto rewards based on their beliefs regarding their future value. This study performed an equilibrium analysis to elucidate the relationships between platform decisions and endogenous variables in the market using two fare-reward schemes. Subsequently, the properties of the optimal market solutions are further explored. These properties provide insights into the platform's reward and pricing decisions as follows: First, it is shown that a ride-sourcing platform is likely to adopt a single-sided reward strategy; that is, the platform's reward decisions with reward schemes are made exclusively between passengers and drivers. Second, the heterogeneity of user redemption behavior polarizes the platform's pricing decision on trip fares; that is, a ride-sourcing platform has incentives to set lower and higher trip fares when deciding to reward drivers and passengers, respectively. Third, such distinctive pricing decisions balance passenger demand with driver supply. Therefore, the ride-sourcing market can remain stable and efficient, even in the presence of the platform's reward decisions. A series of numerical experiments were performed to verify the findings of the current study.

Digitalization of Loyalty: Impacts of Mobile Technology on Reward Redemption and Engagement Level

ABSTRACT Although digitalization is a prevalent strategy in reward programs, a minimal amount is known regarding the relationship between reward app usage and reward redemption behaviors. The enhanced availability and accessibility of information via mobile app can alter customers’ reward-redemption patterns and engagement level, highlighting the need for firms to adjust their reward-based service strategies. Using unique datasets that reflect individual consumers’ transactional and reward redemption behaviors, we conducted a series of analyses to capture the dynamics in the latent engagement state transitions of customers according to the type of reward program used. Results show that although reward app usage, on average, induces a more active engagement state, it polarizes the volatility of engagement state transitions. Furthermore, we find that greater volatility of engagement state transitions is significantly associated with a higher likelihood of churn. Finally, a follow-up survey and panel vector autoregression analyses are conducted to uncover the mechanisms that underlie the relationship. The results provide insights into how retailers can strategically design their reward programs in the emerging mobile-based omnichannel environment.

The role of marketing channels in consumers’ promotional point redemption decisions

Organizations employ loyalty programs to entice customers to repurchase their products and services. One popular promotional tool is the award of loyalty points. For this promotion to be effective, customers need to redeem these points. Currently, researchers opine that customers tend to stockpile these points. This study investigates customers’ point redemption behavior in an omni-channel environment and posits that point redemption is a two-stage decision: whether to redeem and how many points to redeem. In the first stage, the results show that purchasing through PC channel positively impacts the probability of redeeming the points. However, in the second stage, purchasing through the mobile channel has a positive effect on the number of points redeemed. In an omni-channel world, different channels complement each other by enhancing the effectiveness of various marketing activities. Findings of this research highlight the role played by the online channels in encouraging customers’ point redemption behavior.

Association Between Usage of an App to Redeem Prescribed Food Benefits and Redemption Behaviors Among the Special Supplemental Nutrition Program for Women, Infants, and Children Participants: Cross-Sectional Study.

BackgroundThe Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) is one of the most important food assistance programs in the United States, serving 6.4 million low-income, eligible women, infants, and children under 5 years of age in 2019. In the program, participants are prescribed a list of food benefits, which can be redeemed in WIC-authorized stores. However, there are multiple behavioral barriers in the program and the stores that prevent participants from redeeming the benefits fully.ObjectiveThis study aims to examine the relationship between the use of a widely used mobile phone app, WICShopper, and the redemption of the prescribed food packages.MethodsWIC administrative data were obtained from West Virginia for the period January 2019 to January 2020 and included 30,440 WIC households that had received food benefits in that period. The redemption rates of 18 WIC food benefits were compared between app users and nonapp users, that is, those who never used the app in the study period. The use behaviors were defined for the app users, including the number of active use benefit cycles, active benefit cycle rates, number of active use days in the cycle, and proportion rates of daytime use. Panel linear regressions were applied to examine how the redemption rates were related to these behaviors over time.ResultsApp users consistently had higher average redemption rates than nonapp users; the difference ranged from 3.6% (4.8% relative) for infant formula to 14.3% (40.7% relative) for fish. After controlling for sociodemographics, the coefficients of app use were significantly positive for all benefit categories except for WIC-eligible nutritionals. More active cycles and active days in the cycle were significantly related to redemption rates for all categories, except for frozen juice (coefficient=−0.002, P=.09). Daytime app access was positively associated with redemption rates for most food benefits except only a few, such as infant formula (coefficient=−0.03, P<.001).ConclusionsUse of the WIC app was significantly related to higher redemption rates across food benefits, although the association varied across benefit categories. More active days were positively related to benefit redemptions across food categories, and the app’s daytime use was positively associated with the redemption of most benefit categories. These findings suggest that the WIC app can be an important tool for the promotion of benefit redemption among WIC participants.

Fee-Based Loyalty Programs: An Empirical Investigation of Benefit Redemption Behavior and Its Effects on Loyalty

Loyalty program (LP) membership gives customers access to benefits such as free, discounted, or upgraded products or services; however, firms are increasingly charging customers enrollment fees for access to benefits instead of allowing them to earn benefits through repeat patronage. We sketch the evolution and design of LPs over the past 200 years and distinguish between several types of programs (free rewards-based programs and paid membership programs) and the types of benefits they offer (discounts and giveaways). We propose a theoretical model that hypothesizes that members who pay directly for LPs will use different benefits than customer who receive LP membership as a bundled package. Furthermore, we hypothesis that different benefit use moderates loyalty behavior. We test the hypotheses using a database of restaurant LP customers and find partial support for our hypotheses; in response to the sunk-cost effect and expectancy-value theory, a paid LP enrollment brings with it a need to self-justify and find the easiest path to investment payoff. Bundled members are more inclined to use lesser-used benefits. Our results suggest that proliferation of benefits may not translate into improved service, loyalty, or satisfaction.

Targeted reminders of electronic coupons: using predictive analytics to facilitate coupon marketing

Electronic coupon (e-coupon) is one of the most important marketing tools in B2C e-commerce. To improve the e-coupon redemption rate and reduce marketing costs, it is crucial to retarget customers who have received e-coupons and have higher propensity to redeem their coupons. Using log data and transactional data to extract the features of past purchase behavior, past coupon redemption behavior and browsing behavior during coupon validity period, we investigate the factors influencing customers’ propensity for e-coupon redemption. Our results show that almost all the variables used in our analysis (except the visit time) affect consumers’ coupon redemption propensity. Our study can help companies develop promotional strategies that better retarget those customers who are more likely to respond to coupon marketing. It also highlights the potential of using predictive analytics to enhance marketing effectiveness in the era of big data.

The influence of coupon duration on consumers’ redemption behavior and brand profitability

This research proposes an analytical model of the joint optimization of coupon face value and duration together with the product price, and determines the impact of coupon design on consumers’ redemption behavior. A model of rational forward-looking consumers’ redemption behavior is derived that incorporates forgetting (to redeem) and stochastic redemption costs.Results show that when product price is exogenous, long-duration coupons may result in increased seller profits and always increase consumer surplus. Moreover, a one-period coupon is never optimal when (1) the difference in valuations for high-value (loyal) and low-value (non-loyal) consumers or (2) the coupon face value is larger than the redemption costs of high-value consumers. Long-duration coupons tend to be optimal when the level of recall of high-value consumers is sufficiently low, which reduces redemption by high-value consumers.Coupon duration together with face value plays an important role in coupons’ ability to price discriminate between different consumer segments and to avoid head-on competition with other sellers. Results can replicate empirically observed redemptions patterns, which has important implications for the strategic targeting of coupons to different consumer segments.A coupon may result in an increase or decrease in price. When the difference in valuation between high-value and low-value consumers is high (relative to the redemption costs), a seller can either reduce price and lower face value or increase coupon duration for the purpose of avoiding redemption by high-value consumers.

The Influence of Coupon Duration on Consumers’ Redemption Behavior and Brand Profitability

This research proposes an analytical model of the joint optimization of coupon face value and duration together with the product price, and determines the impact of coupon design on consumers’ redemption behavior. A model of rational forward-looking consumers’ redemption behavior is derived that incorporates forgetting (to redeem) and stochastic redemption costs. Results show that when product price is exogenous, long-duration coupons may result in increased seller profits and always increase consumer surplus. Moreover, a one-period coupon is never optimal when (1) the difference in valuations for high-value (loyal) and low-value (non-loyal) consumers or (2) the coupon face value is larger than the redemption costs of high-value consumers. Long-duration coupons tend to be optimal when the level of recall of high-value consumers is sufficiently low, which reduces redemption by high-value consumers. Coupon duration together with face value plays an important role in coupons’ ability to price discriminate between different consumer segments and to avoid head-on competition with other sellers. Results can replicate empirically observed redemption patterns, which has important implications for the strategic targeting of coupons to different consumer segments. A coupon may result in an increase or decrease in price. When the difference in valuation between high-value and low-value consumers is high (relative to the redemption costs), a seller can either reduce price and lower face value or increase coupon duration for the purpose of avoiding redemption by high-value consumers.

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.

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.

Consumers’ redemption behavior of recommended mobile coupons in social network sites

PurposeThe purpose of this paper is to explore the key factors that affect consumer redemption intention toward mobile coupons recommended in social network sites (SNS).Design/methodology/approachA research model that integrates recommendation trust, positive utilities, and negative utilities of coupon redemption is developed. With the important role of trust in social recommendation taken into consideration, the key drivers of recommendation trust were analyzed in the model. Data were collected from 210 users with mobile coupon recommendation experience in one of the largest SNS (i.e. WeChat) in China. The authors used partial least squares technique to analyze the model.FindingsRecommendation trust and positive utilities (economic benefits and perceived enjoyment) positively affect the intention of mobile coupon redemption. Perceived risk, as a negative utility, negatively influences coupon redemption intention. In addition, swift trust (structure assurance, perceived similarity, trust propensity, and expertise of the recommender), knowledge-based trust (familiarity with the retailers), and emotion-based trust (social tie strength) are key drivers that promote recommendation trust.Originality/valueWhile prior research investigated mobile coupon redemption behavior in which coupons were issued by merchants, limited research analyzed consumer responses toward mobile coupons in social recommendation. This study examines the effects of recommendation trust, positive utilities, and negative utilities on mobile coupon redemption in the context of social recommendation and recognizes the key drivers of recommendation trust.

Applying Probabilistic Model Checking to Financial Production Risk Evaluation and Control: A Case Study of Alibaba’s Yu’e Bao

The core challenge of financial companies is to maximize business profits and minimize capital risks in enterprise operations management, mainly by considering their liquidity risk and liquidity surplus control. Thus, an effective approach to financial production risk evaluation and control must be found to positively determine the optimal cash reserve ratio. In this paper, we were motivated to analyze Ali Pay data sets, published by Alibaba’s Yu’e Bao, to demonstrate that purchase amounts and redemptions strongly influence user behaviors. To this end, first, we employ a probabilistic model to verify the uncertainty of user behaviors by computing the probabilities for financial production risk evaluation and control. Second, investors’ behaviors are formalized into a discrete-time Markov chain model (DTMC) that can factually describe the probability profiles of investors’ purchases and redemptions. Third, we use probabilistic computation tree logic (PCTL) to determine the probability that users will exhibit purchasing or redemption behaviors. Furthermore, the probabilistic model-checking tool PRISM, which takes the formal model and properties as input and outputs quantitative results, is employed to perform automatic verification. Fourth, based on the verification results, a strategy evaluation model that considers profits and risks is proposed to measure the capital reserve ratio. Finally, we employ a real-world test data set that includes 2.8 million transaction log records published by Ant Financial Services. These data are used to conduct experiments to demonstrate the effectiveness of our proposed method.

Are loyalty program members really engaged? Measuring customer engagement with loyalty programs

In a quest to engage customers in long-lasting relationships, many firms rely on loyalty programs (LPs). They do fairly well in acquiring new members of LPs, but firms often fail to engage them in the long term. This article seeks to understand what engagement in LPs is, how to measure it, and how it relates to company engagement. With four studies, the authors conceptualize LP engagement as six behavioral manifestations: proactively using cards, redeeming points, adapting purchase behavior, being receptive to information, sharing information, and searching for information. The 20-item scale proposed to measure these behaviors provides a viable, novel tool for determining customers' LP engagement. Whereas previous research on LPs mainly considers card usage or point redemption behaviors as proxies for customers' LP engagement, the current research shows that these behaviors are insufficient indicators of the actual level of engagement in LPs.

An Inattention Model for Traveler Behavior with e-Coupons

In this study, we consider traveler coupon redemption behavior from the perspective of an urban mobility service. Assuming traveler behavior is in accordance with the principle of utility maximization, we first formulate a baseline dynamical model for traveler's expected future trip sequence under the framework of Markov decision processes and from which we derive approximations of the optimal coupon redemption policy. However, we find that this baseline model cannot explain perfectly observed coupon redemption behavior of traveler for a car-sharing service. To resolve this deviation from utility-maximizing behavior, we suggest a hypothesis that travelers may not be aware of all coupons available to them. Based on this hypothesis, we formulate an inattention model on unawareness, which is complementary to the existing models of inattention, and incorporate it into the baseline model. Estimation results show that the proposed model better explains the coupon redemption dataset than the baseline model. We also conduct a simulation experiment to quantify the negative impact of unawareness on coupons' promotional effects. These results can be used by mobility service operators to design effective coupon distribution schemes in practice.

WIC Cash Value Voucher Redemption Behavior in Jefferson County, Alabama, and Its Association With Fruit and Vegetable Consumption.

To examine cash value voucher (CVV) redemption behavior and its association with fruit and vegetable (FV) consumption among women who participate in the Supplemental Nutrition Program for Women, Infants, and Children (WIC). Cross-sectional. Jefferson County, Alabama. Between October 2014 and January 2015, 300 women (mean age: 27.6 years; 66.8% non-Hispanic black; 45.1% obese) who participated in the Birmingham WIC program were surveyed. Self-reported information on demographics, produce shopping behaviors, and residential access to fresh produce retailers (eg, supermarkets and farmers markets) was examined. Fruit and vegetable intake was collected via the Block Fruit-Vegetable-Fiber screener. Participants who self-reported redeeming the WIC CVV in each of the 3 prior months were classified as regular redeemers. Multivariable-adjusted regression models were used to examine associations between variables of interest and regular WIC CVV redemption. There were 189 (63.0%) study participants classified as regular WIC CVV redeemers. Regular redeemers and other participants (ie, irregular redeemers and nonredeemers) were similar with respect to demographics. Regular redeemers were more likely to use grocery stores to purchase FVs ( P = .003) and consumed significantly more servings of FVs per day (β = .67; standard error = 0.24; P = .007). Regular WIC CVV redemption was associated with some produce shopping behaviors and increased FV consumption and among WIC participants in Jefferson County, Alabama.

Consumers’ Redemption Behavior of Mobile Coupons: The Role of Cognitive Trust

The formation of trust and the impact on information sharing behavior have been widely studied. However, how cognitive trust affects users’ trust in SNS mobile coupon recommendation is still unknown. This study investigates the effects of swift trust, knowledge-based trust, and their interactions in the mechanism of enhancing trust in social recommendation. Except perceived similarity, swift and knowledge-based trust is positively related with recommendation trust. Moreover, the familiarity with the retailer is complementary with expertise of the recommender, and substitute with trust propensity in enhancing recommendation trust. Theoretical and practical implications are discussed.

Mobile Targeting Using Customer Trajectory Patterns

Rapid improvements in the precision of mobile technologies now make it possible for advertisers to go beyond real-time static location and contextual information on consumers. In this paper we propose a novel “trajectory-based” targeting strategy for mobile recommendation that leverages detailed information on consumers’ physical-movement trajectories using fine-grained behavioral information from different mobility dimensions. To analyze the effectiveness of this new strategy, we designed a large-scale randomized field experiment in a large shopping mall that involved 83,370 unique user responses for a 14-day period in June 2014. We found that trajectory-based mobile targeting can, as compared with other baselines, lead to higher redemption probability, faster redemption behavior, and higher transaction amounts. It can also facilitate higher revenues for the focal store as well as the overall shopping mall. Moreover, the effect of trajectory-based targeting comes not only from improvements in the efficiency of customers’ current shopping processes but also from its ability to nudge customers toward changing their future shopping patterns and, thereby, generate additional revenues. Finally, we found significant heterogeneity in the impact of trajectory-based targeting. It is especially effective in influencing high-income consumers. Interestingly, however, it becomes less effective in boosting the revenues of the shopping mall during the weekends and for those shoppers who like to explore across products categories. Our overall findings suggest that highly targeted mobile promotions can have the inadvertent impact of reducing impulse-purchasing behavior by customers who are in an exploratory shopping stage. On a broader note, our work can be viewed as a first step toward the study of large-scale, fine-grained digital traces of individual physical behavior and how they can be used to predict—and market according to—individuals’ anticipated future behavior. This paper was accepted by Anandhi Bharadwaj, information systems.

The impact of personalised incentives on the profitability of customer retention campaigns

ABSTRACTTraditional approaches to managing customer churn have typically concentrated on those customers most likely to defect. While accurately predicting customer churn probability is important, this metric alone does not sufficiently empower managers to make optimal decisions. Hence, the current study focuses on the relationship between retention incentives and profit maximisation. Specifically, we improve existing churn management practices by: (1) allowing for customer heterogeneity in incentive redemption behaviour, (2) introducing the dependence of the probability of accepting an incentive on its monetary value, and (3) offering an improved model for developing retention campaigns. We support our conclusions with empirical data and simulations and make tangible managerial recommendations.

Impacts of Reward Accrual Effort on Redemption Behavior in a Multi-Vendor Loyalty Program

This research explores two key facets of behavior (reward point accrual and redemption) that consist of a loyalty program. It focuses on assessing the impact of accrual effort level on three types of redemption behavior: speed, unit size, and hedonic preference at the individual level by using large scale transaction data from a multi-vendor loyalty program providing flexible environment for point accrual and redemption. Findings from this research demonstrate that customers tend 1) to speed up point redemption, 2) to enlarge the size of redeemed points, and 3) to prefer utilitarian rewards as the level of effort at the accrual stage of reward point increases.