EURO 2024 Copenhagen
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2780. The Shift from Immediate Discount Coupons to Reward Points Coupons: Does It Promote Short- and Long-Term Buying?

Invited abstract in session TA-50: Retail Analytics, stream Retail Operations.

Tuesday, 8:30-10:00
Room: M2 (building: 101)

Authors (first author is the speaker)

1. Yordan Sölter
Chair of Production Management, WHU - Otto Beisheim School of Management
2. Arnd Huchzermeier
Production Management, WHU - Otto Beisheim School of Management
3. Christian Schlereth
Faculty of Business and Economics, University of Frankfurt

Abstract

Loyalty programs are widely popular amongst firms and consumers. These programs usually offer reward points for purchases that can be redeemed at the firm to pay for future transactions. Firms may use reward points as an incentive in promotions instead of offering a price discount. Offering reward points as incentive in a promotion may address challenges associated with price discounts, such as the direct margin impact and failing to boost repeat purchases. In using reward points from their loyalty program as an incentive in promotions (reward points coupons) instead of immediate discounts (price discount coupons), firms seek to optimize the gross profit from the promotion by reducing costs and strengthening repeat purchase behavior. We compared both coupons in a field experiment with a retailer, finding: (i) Both boost short-term sales significantly. (ii) Compared to immediate discount coupons, future-credit coupons cut redemption revenues by 50%, despite higher average transaction spends, due to fewer redemptions. Despite cost benefits, they yield less profit than immediate discounts. (iii) Redemption of future-credit coupons fails to increase total spend or repeat purchases post-promotion in comparison to the redemption of an immediate discount coupon. Retailers' hopes for loyalty points over immediate discounts in promotions don't pan out.

Keywords

Status: accepted

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