Models and methods for planning and operational decision-making in loyalty programs industry

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This research program is directed towards the modeling of planning and operational issues faced by loyalty reward programs (LRPs). The loyalty programs industry is today an important economic sector that involves millions of Canadians who have embraced the many LRPs that exist across a spectrum of industries (travel, hotel, retail, telecommunication, banking, etc.). New LRPs are being established worldwide and existing ones have been restructured to contribute to value growth and enhance their competitive advantage. The growth of many LRPs has been considerable in recent years in terms of, for example, membership enrolment and activities; joint ventures with customer partners; diversification of sources for collection of points; diversification of reward offerings; and total rewards cost incurred. This growth has considerably increased the complexities faced by firms in managing their loyalty programs. However, despite increases in complexities, few academic models exist today to support planning and operational decision making in loyalty program industry. This work seeks to contribute to the reduction of this gap by developing and implementing analytical-based (operations research/management science) models to address a number of issues that are central for the efficiency and the effectiveness of LRPs organizations. The objectives on this research work include: (a) developing aggregate and disaggregate models to address predictive modeling issues such as liability forecasting, redemption forecasting, and prediction of award supply and demand; (b) exploring how revenue management methodologies can be applied to LRPs; (c) proposing models for designing and managing partnership relationships; and (d) developing and comparing alternate methods to cope with the determination of the breakage factor, a key component for revenue recognition in loyalty programs industry.