When Loyalty Goes Mobile: Effects of Mobile Loyalty Apps on Purchase, Redemption, and Competition

This research investigates how a shift from traditional loyalty cards to mobile-driven loyalty apps affects consumers’ reward redemption patterns, purchase behaviors, and store-level competition. The findings indicate that loyalty app adoption is associated with increased expenditure and purchase frequency as well as more active point redemption. In a multivendor loyalty program (MVLP) context, the use of loyalty apps is associated with spillover effects in which case customers visit more stores that they had not previously considered and exhibit diminished allegiance to their focal shop after they adopt a loyalty app. Finally, the adoption of loyalty apps is related to deal-prone behaviors because informed consumers tend to selectively purchase highly discounted products. Our findings provide several valuable implications for managers and platform owners who are considering launching mobile loyalty programs (LPs) and participating in an MVLP market. Although the merits of loyalty app adoption are apparent, we caution against potential downsides at individual store levels. Many customers are likely to succumb to deals, selectively purchasing highly discounted products with low margins through loyalty apps. The thrust of LPs should be directed toward fostering a strong connection with a brand, going beyond the promise of deals and promotions.