Cross-Merchant Spillovers in Coalition Loyalty Programs

54 Pages Posted: 3 May 2022

See all articles by Donald Ngwe

Donald Ngwe

Microsoft Corporation

Michael Els

affiliation not provided to SSRN

Daniel Schwam

RAND Corporation

Sunil Gupta

Harvard University - Business School (HBS)

Date Written: April 26, 2022

Abstract

Loyalty programs are a widely used marketing tool for firms seeking to improve outcomes ranging from customer retention to data collection. In coalition loyalty programs, consumers can earn and spend points at any merchant within a network. Merchants in a coalition loyalty program must anticipate the effects on their performance of further merchant entry into the coalition. We analyze data from a large coalition loyalty program to identify and measure spillovers to pre-existing members from the entry of a new merchant into the network. Through difference-in-differences as well as Bayesian structural time series approaches, we find convergent evidence of significant positive spillovers. Pre-existing merchants benefit from the entry of a new merchant by gaining more transactions, larger basket sizes, and higher aggregate sales. These spillovers are highest from customers who spend points at the new merchant and from stores that are nearest to stores of the new merchant.

Keywords: loyalty program, coalition loyalty program, rewards

Suggested Citation

Ngwe, Donald and Els, Michael and Schwam, Daniel and Gupta, Sunil, Cross-Merchant Spillovers in Coalition Loyalty Programs (April 26, 2022). Available at SSRN: https://ssrn.com/abstract=4094153 or http://dx.doi.org/10.2139/ssrn.4094153

Donald Ngwe (Contact Author)

Microsoft Corporation ( email )

One Microsoft Way
Redmond, WA 98052
United States

Michael Els

affiliation not provided to SSRN

Daniel Schwam

RAND Corporation

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Sunil Gupta

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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