How Do Consumers Choose from Competing Loyalty Programs?
What a choice game tells us about consumer strategies, market outcomes, and optimal designs
How many loyalty program tags do you have on your key chain, or loyalty apps on your phone? One? Two? How about a dozen?
The 2020 Loyalty Report from Bond Loyalty says that US consumers on average belong to 14 loyalty programs.
When loyalty programs are that common, competition is bound to happen. Consumers are likely to be loyalty program members of multiple companies that directly compete with each other. In some sectors such as credit cards, restaurants, and travel, this competition can get pretty intense.
How do consumers choose among these competing programs?
A recently published research study in the Journal of Marketing Research by Professor Jia Liu from Hong Kong University of Science and Technology and Professor Asim Ansari from Columbia University can shed some light on that process.
The choice game
The research study can best be described as a choice game. Imagine that there are two (fictitious) rival loyalty programs from the airline industry:
- Company A: they charge higher prices, but program members…
