Reward Redemption Effects in a Loyalty Program When Customers Choose How Much and When to Redeem

Redemption of loyalty program (LP) rewards may have an impact on LP members’ behavior, particularly on purchase behavior before and after redeeming a reward. However, little is known about the interplay between members’ purchase and redemption behavior when members are not pressured with points expiration and they choose themselves when and how much to redeem. Analyzing behavior of 3094 members in such an LP, we find that the mere decision to redeem a reward significantly enhances purchase behavior before and after redemption even when companies do not impose any expiration deadlines. The decision to redeem a reward may enhance motivation in the LP, which enhances purchase behavior (an effect we termed redemption momentum). The length of LP membership, number of direct mailings, age and income moderate the reward redemption effects.