Design of a Reward Program Through the Affiliation with Offline Shops, Online Shops, and Gas Stations

In this paper we study the design of a reward program through its affiliation with offline shops, online shops, and gas stations to sustain and grow the participation of its members. Our research questions are threefold: First, how does the lock-in effect affect the frequency and amount of membership usage of the reward program? Second, what role does distance play in the frequency and amount of membership usage? Third, how does the variety of shop types affect the frequency and amount ofmembership usage? We have found that the past visits to affiliated shops mostly affect the frequency of membership usage. So there is a sort of inertia, where the past participation in the reward program raises the chance of present and future participation of its members. Online shops tend to exert a disproportionately larger effect on membership usage than offline shops or gas stations. In addition, distance plays an important role in offline shopping, especially store patronage. Past visits to offline shops and gas stations raises the chance of present visits if they are close by rather than far away. Surprisingly, the concentration (or less variety) of offline shop types promotes the frequency ofmembership usage. Our results showthat the old adage of “size matters” still resonates. So the reward programshould recruit more affiliated shops to reinforce the momentumof past visits stimulating future visits. Howdensely these shops are clustered in a region alsomatters, as evidenced by the role that distance plays in offline shopping. It is also advisable that the reward programto spend its resources on a particular type of offline shops, rather than trying to diversify its portfolio of offline shops.