EXPRESS: Reward-program promotions: How brands can capitalize on retailers’ temporary reward programs

Abstract

In a reward-program promotion (RPP), brand manufacturers offer additional stamps or collectibles when their product is bought, which enables consumers to accelerate toward their collection goal in a retailer-led reward program. Such retailer-manufacturer collaboration has become especially popular in the context of temporary reward programs where consumers have limited time to complete their collection. By examining over 800 RPPs across a broad set of categories in 26 reward programs at six Dutch grocery retailers, we provide a first comprehensive analysis of RPPs, which we contrast to regular price promotions. Our results show a clear positive effect of RPPs on brand sales, comparable in size to that of a 21% price discount, and point to program lock-in as likely mechanism of why RPPs work. RPPs work better in programs with a high requirement to complete a collection, in a later stage of the program, and when other brands in the same category participate with RPPs as well. They are less effective, however, when combined with regular price promotions, indicating negative synergies between the two. Importantly, the drivers of RPP effectiveness are largely similar for category and brand sales, highlighting RPPs’ potential for retailer-manufacturer collaboration.