Analyzing patterns of points redemption in a loyalty program at a bank : the case of a commercial bank Lebanon

Abstract

Purpose - This research attempts to analyze the impact of demographical factors and credit cardholder's criteria of clients on their credit card spending to investigate how the total spending affects accumulation of loyalty points of cardholders to after the introduction of a loyalty program. Design/methodology/approach - This study relies on a sample of 477 credit cardholders active on the bank's loyalty program over a period of 2 years. This research is deductive and quantitative in nature, and it tests 15 hypotheses linking the demographical factors and cardholders' characteristics to total spending on card and effect on client's accumulated loyalty points. Findings - The findings show that frequency of redemption, total of points redeemed in various categories of rewards and income are antecedents of the total spending on cards after the inception of the loyalty program at the bank. There are also some minor indications of significant variations in the dependent variable with respect to gender, marital status, profession, average income and country of residence. Research limitations/implications - The sample used for this research was small and not normally distributed but was not considered an issue since the loyalty program at the bank has been available for two years only. The process to extract the data required to execute the study proved to be lengthy and complicated and contained inconsistent records that were omitted throughout the study. Practical implications - The findings of this research provide a valuable insight to the management of the bank subject of study and equips them with fresh information on the attributes relevant to their clients, especially those who are active on bank X's loyalty program and are continuously redeeming their collected points. It also gives a new perspective for policy makers in the financial institutions on the factors that affect the spending behavior of clients on their credit cards and the patterns behind the accumulation of loyalty points. Originality/value - This research paper studies the potential explanatory proxies of loyalty points accumulation of cardholders to the bank, depicted in the total spending on their cards since program inception. Else than being unique of its kind in Lebanon, other studies only concentrated on the credit card spending of clients without extending the findings onto clients who active on a bank's loyalty program. This study also relies on archival data unlike other papers based on questionnaires results, thus ensuring the originality and objectivity of this paper with high reliability.