Planning the supply of rewards with cooperative promotion considerations in coalition loyalty programmes management

Coalition loyalty programmes (CLPs) are owned and operated as for-profit enterprises. We consider the ordering decisions of rewards that arise in this context, under a general setting in which not only is the demand for rewards uncertain, but also the CLP firm offers bonus points, a very common coop...

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Bibliographic Details
Published in:The Journal of the Operational Research Society Vol. 66; no. 7; pp. 1140 - 1154
Main Authors: Cao, Yuheng, Nsakanda, Aaron L, Diaby, Moustapha
Format: Journal Article
Language:English
Published: London Taylor & Francis 01.07.2015
Palgrave Macmillan
Palgrave Macmillan UK
Taylor & Francis Ltd
Subjects:
aggregate planning
Brand loyalty
Business and Management
Business models
Cost control
Currency
Customer services
General Paper
General Papers
Liability
Linear programming
Literature reviews
Loyalty programs
loyalty reward programmes
Management
Marketing
Operations research
Operations Research/Decision Theory
optimization
Purchasing
stochastic linear programming
Studies
supply chain management
stochastic linear programming
loyalty reward programmes
optimization
supply chain management
aggregate planning
ISSN:0160-5682, 1476-9360
Online Access:Get full text
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Summary:Coalition loyalty programmes (CLPs) are owned and operated as for-profit enterprises. We consider the ordering decisions of rewards that arise in this context, under a general setting in which not only is the demand for rewards uncertain, but also the CLP firm offers bonus points, a very common cooperative promotion mechanism used in loyalty programmes. The rewards are acquired either at a wholesale 'discounted' cost or at a wholesale 'non-discounted' cost by the CLP firm from its multiple commercial partners and supplied to customers seeking to redeem their accumulated 'reward points', subject to commercial partners' capacities for offering rewards, the firm's overall budget for purchasing rewards, and its control policy on points liability. We formulate the problem as a stochastic linear programme with recourse and solve it using a sampling-based heuristic solution procedure previously discussed in the literature. We report on the managerial applicability of our model in dealing with the redemption budget spending resulting from changes in demand variability, changes in the redemption budget, and the control of liability levels within a reasonable range.
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ISSN:0160-5682
1476-9360
DOI:10.1057/jors.2014.81