The effect of Air Miles: cardholders' behavior in coalition loyalty programs

Matilda Dorotic' thesis studies customer behavior in coalition loyalty programs with multiple vendors, such as Air miles, Nectar and Free Bees. In coalition programs cardholders can collect (and redeem) a reward faster than in other types of loyalty programs. To encourage the purchase and collection of loyalty program points, managers often use marketing instruments (most notably promotional mailings to cardholders).

Dorotic finds that the majority of loyalty program cardholders do not significantly change their behavior in response to such promotional mailings. Yet, the use of multiple communication channels (i.e., mail and e-mail) enhances the effectiveness of mailings. Another important insight is how cardholders respond to rewarding in a loyalty program and whether rewarding affects their behavior before and after the reward redemption. In five weeks before the redemption cardholders are more likely to purchase from a loyalty program vendor, and when they purchase they spend more than usually. Subsequently, increased purchase behavior carries over to five weeks after the reward has been redeemed.

These positive effects of rewarding occur regardless of the cardholders’ previous purchase levels, levels of satisfaction or the type of reward. They are triggered by the reward redemption momentum itself. Reward redemption act makes the program more salient to cardholders and motivates cardholders to purchase more even if they have sufficient points to redeem the reward. Th thesis of Dorotic provides empirical evidence that it is beneficial for firms to stimulate collection and redemption of loyalty program rewards, as this at least temporarily increases cardholder’s loyalty to retailers participating in the coalition program.

Curriculum vitae
Matilda Dorotic (Croatia, 1977) got her Master of Science in Global Marketing at Staffordshire University (UK). She conducted her PhD research at the deparment of Marketing of the Faculty of Economics and Business. Currently, Dorotic is lecturer and researcher at the University of Split (Croatia). She will be awarded her PhD on 2 December 2010 (1.15pm). Het supervisors are prof.dr. P.C. Verhoef and prof.dr. T.M.A. Bijmolt. The thesis title is: The influence of marketing instruments and rewarding on cardholders' behavior in coalition loyalty programs.