A New Card-Linked Loyalty Program: Estimated and Anticipated Benefits for Payment Transaction Parties

Abstract

Electronic card payments are getting more and more popular, mainly because of their simplicity, convenience, processing time and high level of security. The fact that a single payment card is issued for a particular cardholder makes it possible to link a card to various services. In this paper, we investigated a usage of a payment card in the loyalty program that incorporates our Contextual Risk Management System (CRMS) to assure a novel intangible reward: Shorter transaction processing time. In the beginning, we emphasize the importance of soft benefits in modern loyalty programs and recall the risk management algorithms and the reputation system that has been used in the CRMS. Then, using an extensive dataset of 2.5 million payment transaction traces (collected within a year from 68 terminals) we estimate potential benefits for merchants and cardholders and try to predict an effect of this system for the future. We also discuss the impact of this system on the real and user-perceived security level.

Hedonic adaptation to preferential treatment: the moderating effect of the structural characteristics of loyalty programs

“…We also found that customer tenure reduces the positive effect of preferential treatment on customer gratitude and engagement. These findings challenge the belief that preferential treatment is critical to improve the effectiveness of loyalty programs (Melancon et al, 2011;Harmeling et al, 2017;Sitek and Kotulski, 2020). Our findings suggest that the positive effect of preferential treatment on relationship performance significantly weakens as customer tenure increases, which shows that the adaptability of customers to marketing strategies needs to be fully considered in loyalty program research.…”

“…Research reveals that the preferential treatments provided by loyalty programs are more difficult for competitors to imitate and surpass than the homogeneous competition and multi-loyalty behaviors triggered by tangible rewards (Dowling and Uncles, 1997). Therefore, preferential treatment has become a key strategy for improving the effectiveness of loyalty programs (Melancon et al , 2011; Harmeling et al , 2017; Sitek and Kotulski, 2020). Preferential treatment is a relationship marketing strategy for loyalty programs to meet the personalized service needs of member customers based on their own resources and customer heterogeneity.…”