Examining Redemption Levels in Loyalty Program Structure: The Role of Choice Abundance

Abstract

Although loyalty programs (LPs) with different redemption levels offering different reward options have frequently been used, our understanding of customer redemption behavior is rather limited. The current research suggests that a consumer’s decision to redeem a reward may depend on the number of options offered at different redemption levels. Four studies show that redemption levels with a higher number of options are perceived as relatively more attractive than levels with a lower number of options, which increases the likelihood that a consumer will redeem a reward. However, this effect weakens when the redemption level with fewer options offers familiar brands. Our findings provide novel theoretical insights into how consumers react to LPs with different redemption levels. From a managerial perspective, this research suggests strategies that retailers can use to restructure their LPs and increase the likelihood of retaining consumers over the long term.