Research on Point-sharing Policy under Competition

Abstract

To encourage reward redemption and effectiveness of loyalty programs, many retailers have found ways to augment and improve conventional marketing methods. For instance, retailers from different industries in South Korea have created a point-sharing policy in which customers are able to enjoy the privileges of spending at multiple participating outlets while enjoying flexible point redemption at any participant retailer, thus increasing demand of all retailers under the umbrella of the joint point policy. This thesis develops a supply chain model consisting of one supplier and two competitive retailers under the point-sharing policy, enabling retailers to optimize their marketing strategies in order to maximize long-term profits. Meanwhile, this thesis also proposes a two-stage transfer payment contract for supply chain coordination, in order to achieve profit optimization for the whole supply chain.