Malaysian Journal of Mathematical Sciences, December 2019, Vol. 13(S)
Special Issue: Conference on Mathematics, Informatics and Statistics (CMIS2018)
A Model for Optimal Value of Loyalty Point in Loyalty Rewards Program
Nasir, W. N. F. W., Lola, M. S. and Deraman, A.
Corresponding Email: [email protected]
Received date: -
Accepted date: -
Abstract:
Generally, one view held among consumers is that a loyalty reward program offered by the reward server are not significant benefits because most consumers are not able to redeem the reward due to several factors such as inconvenience to redeem reward points in accordance with the terms and conditions imposed, the length of time required to achieve the rewards or maybe the item that they want to redeem is not available. In this paper, we develop a model for optimal value in providing the reward points in a loyalty reward program so that the reward server and the consumers will get the maximum profitability. Almost 500 catalog items were examined for four loyalty programs spread in this country and we found that point�s price is higher than the market price which is not good for the viability of
loyalty programs. Then we proposed a dynamic to find the optimal point value for a loyalty program. We focused on the pricing policies in cash and points for the manager who would maximize expected profits and also considered the effects of important managerial implication.
Keywords: Loyalty program, Reward points, Dynamic programming, Optimization problem
