Speaker: Liyuan Wei Assistant Professor of marketing, City University of Hong Kong
Topic: Are points like money? An empirical investigation of reward program effectiveness at multi-category retailers
Time: 1:30-3:00 pm, Dec.3,2008
Location: Room 216, Guanghua Building 2
Abstract
Point-based reward programs are widely adopted by retailers as a sales promotion strategy. Retailers often promote certain categories by offering more favorable conditions for members to earn points. We examine the impact of reward points on consumer purchasing behavior in a multi-category setting can compare it to the effectiveness of prices. We estimate a market basket model using scanner data of member purchases from a large retailer on four categories, grouped into two pairs. We find that rewards positively affect the category choice probability but the elasticity is smaller than price elasticity. Rewards promotions also impact the choice probability of the non-promoted categories closely related to it, and even certain categories not so tightly related. As a form of sales promotion, price discounts and reward points promotions can be substitutes for each other. We construct and compute a measure "reward elasticity of price" to show such substitution quantitatively.
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