When Reward Convenience Meets a Mobile App: Increasing Customer Participation in a Coalition Loyalty Program

Coalition loyalty programs (CLPs) have been gaining popularity in recent years. A CLP, such as Plenti introduced by American Express in 2015, is a third-party program that lets its customers accrue points by transacting at a variety of businesses and retailers, and customers can redeem rewards from the CLP when they have enough points. In this research, using a natural experimental setting, we investigate tactics that a CLP can implement to encourage customers’ participation through point accruals and reward redemptions. We propose that a CLP can stimulate existing customers’ participation by providing information and reward convenience. By analyzing a unique dataset, we find that the additions of a mobile app (information convenience) and a point-of-sales (POS) redemption structure (reward convenience) increase accruals and redemptions for those who adopt them, particularly for occasional customers who previously accrue at a below-average level and rarely redeem. We also find that the two tactics are synergistic for customers who previously accrue at an above-average level but rarely redeem. As for active customers, information and reward convenience encourage further redemptions, which reduces a CLP’s liability. Finally, we posit that customers follow the “Principle of Least Effort” and show that they tend to accrue the additional points by spending on convenient, high-penetration categories in light of information and reward convenience. From our findings, we recommend that a CLP should invest in increasing its convenience proposition such as building a mobile app or allowing POS redemptions to encourage customers’ continuing participation.