Dynamic Management Of Customer Loyalty Reward

Both loyalty rewards and contracts program are increasingly employed by companies to effectively develop and maintain customer relationships.However,in practice,it seems that customer managers have started to integrate these two important programs.But we find that there is still a lack of some researchers to take advantage of both activities simultaneously to increase the customer expansion and resist churn.Specifically,there are several problems xunder solution both practically and academically:(1)Lacking the principle guides of loyalty reward value management,1.e.we don,t how to deliver a loyalty reward to a eontractual customer the most effective,which remains a trial-and-error exercise.(2)The research in loyalty rewards and contractual customer relationships areas are studied in isolation,and research integrating botih two initiatives is limited.After identifying the literature gap,we draw kinds of theory including relationship marketing,social exchange theory,reciprocity norm,and trust-commitment theory’Then,we using a longitudinal field data form a continuous service provider,and this research seeks to understand three drivers of contractual customers’ performance:loyalty reward value,timing,and targeting on customers.The performance is dividing iirto both within-contract expansion and post-contract retention.The result shows that:(1)Reward value increases within-contract performance,i.e.sales expansion,but it does riot affect post-contractual retention directly,however,it has an impact on expansion indirectly via expansion.(2)Reward timing has a tradeoff effect,i.e.early rewards increasing expansion and it enhances retention in late time.(3)Targeting rewards towards new customers(i.e.Current contract is customers5 first contract)increasing expfursion more than for existing customers.(4)Finally,I conclude managerial guidelines basing on the net effect of the tradeoffs on how to allocate a given loyalty reward budget,which identifies loyalty reward value as the primary lever for stimulating expansion and loyalty reward value timing as the primary lever retention.