Perceived Cost of Payment Using Cash, and Points: When Do Consumers Use Their Points?

Abstract

When do consumers decide to use the points they have accumulated in loyalty programs for making purchases? A hypothesis was developed, which stated that the major determinant of using points is the number of points that customers possess. Experiments were conducted on the use of points at electronic retail stores and grocery stores to examine the validity of this hypothesis. The results indicated that the number of points that customers possess affected their intention to use the points, the choice of payment method, and perceived cost of payment. Different from findings of previous studies, the value of the payment was not a major factor in making these decisions. These results suggest that asking customers with a few accumulated points to use these points might increase the perceived cost of a payment.