Segregation vs aggregation in the loyalty program: the role of perceived uncertainty

Purpose – The present study seeks to examine how perceived uncertainty of reward schedule and reward frame (i.e. segregated vs aggregated) affect consumers ' evaluation of loyalty programs. Design/methodology/approach – The authors conducted three experiments to test the hypotheses. Findings – Ambiguity aversion was salient when the subjects perceived low uncertainty in the schedule of a loyalty program, which led to customers ' choice of a loyalty program with an aggregated frame. In contrast, the subjects displayed ambiguity proneness when they detected a high level of uncertainty in the reward schedule; as a result, the subjects preferred a loyalty program that employed a segregated frame. Research limitations/implications – The findings show that individuals adopt different types of attitudinal pattern and show dissimilar choice behaviors depending on reward schemes. The findings also provide insights to enhance the understanding concerning how consumers perceive the value of loyalty programs. Practical implications – Previous research suggests the importance of random elements in relationship marketing. The present study supports this assertion by demonstrating that reward programs providing unexpected benefits can enhance the effectiveness of a loyalty program. Originality/value – The results provide a more refined understanding about the relationship between perceived uncertainty and reward frame and the psychological mechanism underlying this relationship.