Paying with points versus delaying redemption: How payment methods shape satisfaction and return intentions

Abstract

Drawing on self-perception theory, this research finds that redeeming loyalty points, rather than saving them and paying with money, increases return intentions to service establishments. The positive effect of paying with loyalty points is driven by increased satisfaction. Furthermore, this effect is moderated by the offer of bonus incentives, such that the positive effect is attenuated when consumers forgo a bonus offer in exchange for saving points. Two studies confirm these effects. Study 1 demonstrates that redeeming points leads to higher satisfaction, which drives increased return intentions. Study 2 shows that bonus incentives can diminish these benefits, as consumers who forgo a bonus experience reactance, leading to lower satisfaction. The findings highlight the dual impact of loyalty program design: point redemption fosters loyalty, but poorly designed bonus incentives can unintentionally counteract these benefits. For practitioners, the results suggest encouraging point redemption to maximize satisfaction and loyalty. However, caution is warranted, as bonuses may undermine program effectiveness if not redeemed. This research enhances understanding of the dynamics of loyalty programs and payment methods, offering practical insights for boosting loyalty.