Which loyalty program do customers prefer: a coalition program or a single-firm program?

Abstract

Purpose This study aims to examine consumers’ responses to two types of loyalty programs: coalition and single-firm programs. This study explains the mechanism underlying the link between this program structure and consumers’ program evaluation by incorporating the type of firm offering the program (i.e. a more hedonic or a more utilitarian disposition), the type of rewards (i.e. presence/absence of experiential rewards) and consumers’ reactance. Design/methodology/approach Two online experiments were employed to test the proposed framework. Findings Consumers commonly preferred a coalition program to a single-firm program. This preference for the coalition program was strengthened when a utilitarian-dominant firm offered the program. Additionally, consumers evaluated the program lower when a utilitarian-dominant firm provided experiential rewards. Furthermore, situational reactance toward the program mediated the effect of the program structure on the program evaluation. Practical implications This study’s findings suggest that firms should consider whether the value consumers predominantly perceive from the firms is utilitarian or hedonic when launching coalition programs. Consumers may not be pleased by the coalition programs offered by hedonic-dominant firms as much as those provided by utilitarian-dominant firms. Moreover, this study’s results help design reward options. Consumers may not well evaluate the inclusion of experiential rewards when offered by utilitarian-dominant firms. For utilitarian-dominant firms, rewards requiring less time and effort may be more suitable. Originality/value This research significantly contributes to the literature on loyalty programs. This study showed that consumers viewed single-firm and coalition programs differently and elucidated the mechanism behind the response.