The Economics of Loyalty Programmes: Checkpoint 1

Quick checkpoint - five questions on the economics of loyalty programmes.

Question 1 of 5 What does the goal-gradient effect describe?

People pay taxes People overspend at once People speed up as they near a reward People lose interest

Stamp cards use it.

Question 2 of 5 What is 'breakage'?

A late fee A broken card A discount Points never redeemed

It benefits the company.

Question 3 of 5 Which airline launched the first big frequent flyer programme in 1981?

American Airlines IndiGo Air India Emirates

AAdvantage.

Question 4 of 5 How are card rewards partly funded?

Interchange fees and interest from other users Bank profits only Free advertising Government grants

Rewards are not free.

Question 5 of 5 Why do firms use loyalty programmes?

To lose money To ban customers Retention is cheaper than acquisition and they give data To raise taxes

They also segment customers.

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