Description

• Title:
  How do loyalty programs affect goodwill? An optimal control approach
• Creator:
  Machowska, Dominika;
  Górajski, Mariusz
• Contributor:
  Department of Econometrics, Faculty of Economics and Sociology, University of Lodz;
  dominika.machowska@uni.lodz.pl;
  mariusz.gorajski@uni.lodz.pl
• Description:
  This paper examines the long-term impact of loyalty programs on a company’s profit and reputation among customers, and with different durations of product use. We analyze how the launch of loyalty programs may change the profitability of optimal advertising activities. The basis of this study is a modified goodwill model where the market is segmented according to usage experience. The main novelty is the role of loyalty programs and consumer recommendations in the creation of product goodwill, and also their influence on optimal advertising. The dynamics of goodwill are described by a partial differential equation. The firm maximizes the sum of discounted profits by choosing a different advertising campaign for each market segment. For a high-quality product, we observe that there is a trade off between the loyalty program and optimal advertising strategies. For a low-quality product, the loyalty program causes more profitable companies to invest heavily in additional advertising efforts.;
  The authors gratefully acknowledge financial support from the National Science Centre in Poland. Decision number: DEC-2011/03/D/HS4/04269.
• Object availability:
  free access
• Rights:
  Uznanie autorstwa 4.0 Międzynarodowe;
  http://creativecommons.org/licenses/by/4.0
• Date:
  2021.12.17;
  2019
• Type:
  Article
• Language:
  English
• Format:
  application/pdf
• Publisher:
  Springer
• Relation:
  A Quarterly Journal of Operations Research;17
• Subject:
  Loyalty program;
  Goodwill;
  Advertising efforts;
  Optimal control
• Identifier:
  Górajski, M., Machowska, D. How do loyalty programs affect goodwill? An optimal control approach. 4OR-Q J Oper Res 17, 297–316 (2019). https://doi.org/10.1007/s10288-018-0386-2;
  1619-4500;
  http://hdl.handle.net/11089/40085 ;
  1614-2411;
  10.1007/s10288-018-0386-2
• Data provider:
  Repozytorium Uniwersytetu Łódzkiego
• Can I use it?:
  check license
• Type:
  image