When Loyalty Goes Mobile: Effects of Mobile Loyalty Apps on Purchase, Redemption, and Competition

Forthcoming, Information Systems Research

42 Pages Posted: 15 Jan 2020

See all articles by Yoonseock Son

Yoonseock Son

University of Notre Dame - Mendoza College of Business - IT, Analytics, and Operations Department

Wonseok Oh

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Sang Pil Han

Arizona State University, W.P.Carey School of Business

Sungho Park

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: December 2, 2019

Abstract

Avenues for the delivery of loyalty programs have rapidly shifted from plastic card schemes to mobile-app-based initiatives; yet, our understanding of the economic value presented by the latter (i.e., loyalty apps) has not kept pace with this development. We examine the effects of loyalty app adoption on customers’ offline purchase patterns, reward redemption and deal-prone behaviors, and store-level competition in a multi-vendor loyalty program (MVLP) context, where multiple offline brands collaborate in the operation of point-sharing initiatives. Mobile-driven loyalty apps substantially lower consumer search costs, thereby enhancing on-demand information accessibility and facilitating the monitoring of reward points. Based on a unique dataset that comprises information on customers’ loyalty app-adoption status, loyalty point-redemption patterns, and purchase behaviors in MVLP environments, we investigate how the transition from plastic-based programs to loyalty apps influences the out-of-pocket spending and point-redemption patterns of consumers. Our findings reveal that the adoption of loyalty apps is associated with an increase in purchase and the predilection for point redemption. Despite these positive outcomes, however, potential adverse consequences may arise in the form of deal-susceptible behaviors and reduced store-specific loyalty. Loyalty app adopters tend to be more vulnerable to deals, with these customers selectively buying highly discounted products of low margin. Additionally, loyalty app consumers visit more stores but spend less in a focal store, thereby diminishing loyalty to this specific store. These results have managerial implications on optimal mobile-based loyalty program designs and implementation, reward-driven platform strategies, and risk management initiatives in an MVLP setting.

Keywords: mobile apps, mCRM, loyalty programs, mobile channel, deal-susceptible behaviors, difference-in-differences, econometrics, spillover effects, propensity score matching, mere exposure, technology adoption

JEL Classification: M1, M2, M3

Suggested Citation

Son, Yoonseock and Oh, Wonseok and Han, Sang Pil and Park, Sungho, When Loyalty Goes Mobile: Effects of Mobile Loyalty Apps on Purchase, Redemption, and Competition (December 2, 2019). Forthcoming, Information Systems Research, Available at SSRN: https://ssrn.com/abstract=3496418

Yoonseock Son (Contact Author)

University of Notre Dame - Mendoza College of Business - IT, Analytics, and Operations Department ( email )

Notre Dame, IN 46556
United States

Wonseok Oh

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro Dongdaemun-Gu
Seoul 02455
Korea, Republic of (South Korea)

Sang Pil Han

Arizona State University, W.P.Carey School of Business ( email )

Tempe, AZ 85287-3706
United States
480-965-8603 (Phone)

HOME PAGE: http://https://apps.wpcarey.asu.edu/directory/people/profile.cfm?person=2255149

Sungho Park

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Marketing Department
PO Box 874106
Tempe, AZ 85287-4106
United States

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