A Dynamic Structural Model of the Impact of Loyalty Programs on Customer Behavior

We develop and estimate a dynamic structural model to determine the impact of frequency reward and customer tier components of a loyalty program on customer behavior. The contribution of this paper is that: (1) we provide an integrated analysis and measurement of the impact of two critical components of a loyalty program; (2) we develop a comprehensive model incorporating customers’ purchase and cash-in decisions, rewarded behavior, state dependence, heterogeneity, and forward-looking behavior; and (3) our research answers questions regarding the strength of response to frequency reward and customer tier programs, level of heterogeneity, and the corresponding policy implications.



Citation:

Praveen Kopalle, Scott Neslin, and Baohong Sun (2009) ,"A Dynamic Structural Model of the Impact of Loyalty Programs on Customer Behavior", in AP - Asia-Pacific Advances in Consumer Research Volume 8, eds. Sridhar Samu, Rajiv Vaidyanathan, and Dipankar Chakravarti, Duluth, MN : Association for Consumer Research, Pages: 265-266.

Authors

Praveen Kopalle, Dartmouth College, USA
Scott Neslin, Dartmouth College, USA
Baohong Sun, CMU, USA



Volume

AP - Asia-Pacific Advances in Consumer Research Volume 8 | 2009



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