The Value of Rewards in a Referral-Based Loyalty Program

Abstract

Loyalty and rewards programs provide incentives to customers in exchange for their membership. The presence of these programs is widespread in the marketplace and consumers are beginning to expect such programs to be available across many industries. However, the cost of operating these programs is significant.

This study analyzed a rewards program in which members of a health club are rewarded for referring other new members. The purpose of this study was twofold; identify who participated in the rewards program, and determine if members value rewards. Secondary data on member participation within the program was gathered, and a survey was distributed to members. The secondary data displayed that behaviors varied by age group, gender, and stage of membership tenure. The survey found that a majority of members value this firm’s rewards program. Based on the data, suggestions for improving the program are provided.