We propose a predictive model of redemption and liability to support short, medium, and long term planning and operational decision-making in Loyalty Reward Programs (LRPs). The proposed approach is an aggregate inventory model in which the liability of points is modeled as a stochastic process. An illustrative example is discussed as well as a real-life implementation of the approach to facilitate use and deployment considerations in the context of a frequent flyer program, an airline industry based LRP.

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Keywords Accumulation, Forecasting, Liability, Loyalty Reward Programs, Markov chain, Redemption
Persistent URL dx.doi.org/10.1007/s10796-010-9247-z
Journal Information Systems Frontiers
Nsakanda, A, Diaby, M. (Moustapha), & Cao, Y. (Yuheng). (2011). An aggregate inventory-based model for predicting redemption and liability in Loyalty Reward Programs industry. Information Systems Frontiers, 13(5), 707–719. doi:10.1007/s10796-010-9247-z