Quantifying Mileage Runs

Abstract

This paper reports on the results of a large-scale field quasi-experiment in a premium status tier reward loyalty program setting. Our main goal is to understand strategic consumer behavior in such programs, and quantify the value of the tier reward by estimating the associated change in reward points collected strategically by consumers. We follow the addition of a new reward tier to an existing loyalty program and by using the program participants as their own controls, compare their behaviors before and after the change in the program structure. We further hypothesize heterogeneity within program participants with respect to their strategic response and document rich patterns of participants' behaviors, which we associate with their baseline spending habits and with whether they are obtaining or maintaining their current status.

Keywords: strategic behavior; premium status; tier reward; loyalty program; empirical; quasi-experiment