A Decision Support Framework for Customer Loyalty Program Managers: Reward Mix Optimization

Abstract

<p class="Abstractorclever" style="margin: 0cm;"><em><span lang="EN-US" style="font-size: 11.0pt; font-weight: normal;">Customer Loyalty Programs are a proven methodology for establishing and maintaining customer relationships. With the development of mobile technologies and the power of digitalization, what was once a simple punch card has now evolved into a full-fledged mobile application. The paradigm shift has opened up research areas on an individual customer level, especially in non-contractual traditional commerce, which was previously impossible due to a lack of loyalty data. The cost and budget of Customer Loyalty Programs increase with their strategic value. Balancing the attractiveness of a reward to the customer with the unit cost to the organization is essential for designing effective programs. In this study, we propose a framework that combines the attractiveness and unit cost of rewards to provide an optimized reward mix, thereby aiding Customer Loyalty Program managers in their decision-making processes.</span></em></p>