Which one do you prefer to use? Real Money or Loyalty Points? I’d say it depends on what is on offer. As an example, do people use loyalty points in the same way they use cash when paying for things like flight, in-game add-ons, or when shopping at their regular stores? Well, the choice of what to use does not only depend on what is on offer but also who is making the purchase.
A 2024 research by So Yeon Chun, Freddy Lin, and Ville Satopää titled “Loyalty Currency and Mental Accounting: Do Consumers Treat Points Like Money?” helps to find a conclusion to whether people prefer to use either real money or loyalty points or both equally.
In their study, they analyzed more than 29,000 accrual and redemption transactions made by 500 U.S. airline loyalty-program customers over two years. The researchers found that point users fell into four distinct categories. With this, we can make the assumption that using either real money or loyalty points depends on the person using either.
The four distinct categories.
- Money Advocates:
These are people who prefer to save their cash and spend points.
- Currency Impartialists:
These are people who see points and cash as interchangeable and have no preference for either.
- Point Gamers:
These are people who wait for the most advantageous redemption opportunities before they use their points.
- Point Lovers:
These are people who prefer to spend cash and hoard their points.
Which category do you fall in? I am most likely a Point Gamer.
Recognizing these distinct categories can help companies personalize their customers’ experience and boost engagement. For example, companies can tailor offers to the distinct preference by their customers instead of offering a flat discount to all customers.
Want More?
If you want to learn more about this research, you can check out the link posted earlier in this post.
