Effects of Consumer Learning and Channel Choice in Loyalty Programs

Based on a large-scale, unique longitudinal dataset comprising more than four million individual transactions, we study linkages between consumer learning, channel choice, and purchase behavior. We focus on online versus traditional over the counter channels. First, we investigate how the occurrence of consumer ‘learning’ is related to ‘unlearning’ in loyalty programs, and how (un)learning depends on the chosen channel. Second, we study how (un)learning effects, along with other contingent factors, impact customer loyalty, and explore whether the strength and/or significance of effects change over time. Hypotheses are tested in the context of two-part pricing schemes in travel services that are particularly intended to create loyalty, and offer a rare opportunity for an objective assessment of learning effects. Results show that (un)learning, as well as channel choice, and pricing issues, are significantly associated with contract cancelation. We provide managerial implications that help retailers re-develop, communicate and fine-tune loyalty programs more effectively.