Redemption behavior for credit card reward programs in China

Abstract

Purpose This paper aims to identify the factors affecting the redemption of reward points, a form of customer loyalty program used by many Chinese credit card issuers. In addition it also assesses Chinese credit card users' level of awareness about the reward‐point programs. Design/methodology/approach A total of 401 telephone surveys were conducted in five major cities in China in 2007. Regression analysis was also conducted in the exploratory study. Findings Results show both low customer awareness about point‐based reward programs and, not surprisingly, low redemption rates. More specifically, lack of awareness about the reward points programs and the redemption procedure was shown. The important conditions positively affecting redemption of reward points were found to include awareness of the reward point program, a positive attitude about the incentives, and average frequency of credit card usage. Also, redemption rates were higher for cards that had been issued more recently. Practical implications The paper suggests that credit card marketers could communicate with their customers more effectively in order to spread and reinforce awareness about point‐based reward programs and encourage them to experience their benefits. Originality/value The study provides an original insight into an important element of consumer behavior with credit card reward programs in the banking industry serving a lower‐middle‐income segment in a developing region such as China. Guidance is also offered for marketing managers responsible for promoting credit card usage and reward programs.

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