Temporal Discounting of Different Commodities in Airline Customer Reward Programs

Customer reward programs are commonly used by airlines in order to entice customers to collect points or miles. If customers engage in the reward program they are more likely to stay loyal to the airline and also purchase more trips. One problem with getting customers to engage in customer reward programs is that rewards that are going to be delivered at a future date tend to be less valuable to the customer than immediate rewards. This holds true even if the reward that would be received some time in the future is larger. Here we have determined if the rewards typically provided by airline customer reward programs, points, upgrades to first class travel or free trips are devalued over time. We also posed the question if these rewards are devalued at different rates over time. In addition, we investigated if the devaluing over time of different rewards is similar in different groups of customers defined by their age, location, income or gender. This was achieved by recruiting subjects by email to fill out a questionnaire containing questions that determining the value of different rewards at different time points using a fill-in-the-black method of measuring temporal discounting, as well as demographic information. Our results demonstrate that all three rewards investigated, points, upgrades and free trips, were less valuable when they were received at a later time point. Free trips were devalued the least over time in comparison to points and upgrades. Location, income and gender did not have a significant impact on how participants devalued the different types of rewards. However, age did affect how much upgrades were devalued over time, with the older groups (56-75) of participants devaluing the upgrades less over time than the younger groups (18-55)