Loyalty programs and dynamic consumer preference in online markets

Loyalty programs and dynamic consumer preference in online markets

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Article ID: iaor201527704
Volume: 78
Start Page Number: 104
End Page Number: 112
Publication Date: Oct 2015
Journal: Decision Support Systems
Authors: ,
Keywords: behaviour, marketing
Abstract:

  • Our game‐theoretic model examines the profit implications of loyalty programs.
  • Loyalty programs are more likely to succeed in online than in offline markets.
  • The lower cost of revisiting a store facilitates customer retention with rewards.
  • The higher dynamics of consumer preference reduces the loss from rewards.
  • Data collected through loyalty programs provides stronger profit incentives.
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