A study of loyalty programs in the Chinese market: the impacts of reward type, reward characteristic and product involvement

Abstract

PurposeThis study investigates how reward type (single vs. plural), reward characteristic (utilitarian vs. hedonic) and product involvement (high vs. low) affect the design of reward programs.Design/methodology/approachA 2 ✕ 2 ✕ 2 fractional factorial experimental design is constructed to explore the main factors influencing the effectiveness of reward programs on a sample of 436 Chinese customers.FindingsThe results indicate that reward type is an important determinant of customers' preference toward reward programs. Plural rewards are preferable to a single reward when the alternatives provide the same benefits, particularly in the low level of product involvement. In the high level of product involvement, reward characteristic has a significant effect on customers' preference. Hedonic rewards are more effective in building a program's value than utilitarian rewards. Moreover, reward characteristic interacts with reward type, positively impacting customers' preference toward reward programs.Originality/valueThis study suggests that managers should consider the effects of reward type, reward characteristic and product involvement to formulate attractive reward programs for sustainable business in China.