Management Science | June 2008
our knowledge, the extant literature has not investigated in-depth whether asymmetric equilibrium can exist where only one firm chooses to offer a loyalty program and the other firm chooses to compete via lowering prices. Such a question is important because some markets do support such asymmetric equilibriums with
respect to loyalty programs. Also, the existence of asymmetric equilibrium shows that a loyalty program need not be profitable for some firms.
In this paper, we use a game-theoretic framework to investigate specific types of customer loyalty programs that provide benefit to loyal customers in the form of discount over market prices. The model considers consumer
switching and includes two types of consumer heterogeneity. The first type of heterogeneity concerns the differences between customers with respect to their liking for loyalty programs, and the second type concerns the differences among the loyalty program members with respect to their ability to collect enough loyalty points to redeem loyalty rewards. By analyzing a duopoly market, we find that both symmetric equilibrium
(i.e., where both competing firms offer the loyalty program) and asymmetric equilibrium (i.e., where one firm alone offers the loyalty program) can be sustained. The paper explores conditions for the existence of these two equilibriums.
Siddharth Shekhar Singh is an Associate Professor of Marketing at the Indian School of Business (ISB). He previously served as Senior Associate Dean (Admissions and Financial Aid), Associate Dean (Digital Transformation, eLearning, and Marketing; and RCI Outreach and Engagement), and was the first Director of the Doctoral Programme at ISB. He is a member of the Board of Directors of DLabs, a technology business incubator of ISB. He also serves as an Independent Director on the Board of Directors of Petronet LNG Limited and the International Schools of Business Management (ISBM—a UK-based charity). He holds a PhD in Marketing from the J. L. Kellogg School of Management, Northwestern University (USA), an MBA in Marketing and Finance from the University of Illinois at Urbana-Champaign (USA), and a BTech in Electronics & Communications Engineering from the Indian Institute of Technology, Banaras Hindu University (India).
Professor Singh’s research broadly focuses on a firm’s ability to achieve sustainable competitive advantage. His work attempts to help firms identify the “right” customers for acquisition and retention, and more profitably manage relationships with them over time. He researches marketing initiatives such as customer engagement, customer loyalty programs, and online customer communities. He also works on issues related to the online training of salespersons, the development of financial metrics to evaluate marketing decisions (e.g., customer lifetime value), customer segmentation, purchases, returns, and marketing analytics.
Professor Singh has co-authored four textbooks for MBA students and business executives. The books—titled Managing Marketing: An Applied Approach, Managing Marketing: A Concise Approach, Essentials of Managing Marketing, and Digital Marketing: Strategy & Tactics—are published by Wiley India.
Because of his rare combination of academic rigour and real-world business experience, he is an in-demand columnist and speaker whose expert commentary has appeared in globally prestigious print and broadcast outlets, including CNN-News18, NDTV, CNN Money, Forbes India, Fortune India, The Economic Times, The Times of India, Business Today, The Hindu, Livemint, Businessworld, and others. He also publishes in distinguished academic journals such as Marketing Science, Management Science, Journal of Marketing Research, Quantitative Marketing and Economics, and the Journal of Service Research.
Professor Singh has a keen interest in new ventures. He has been teaching the New Product Development and Marketing course for the past 18 years in both India and the USA. He is a co-founder and strategic advisor at Bsharp Sales Enablers Pvt. Ltd. He advises numerous startups and regularly participates in various capacities (e.g., juror and speaker) at startup events.
Prior to his PhD, he worked for several years with Johnson & Johnson (J&J) in product and sales management roles. Hired through J&J’s prestigious global leadership development program—the IRDP—his responsibilities included managing several product lines and launching new products for J&J hospital products group in India. His consulting experience includes firms in a variety of industries such as consumer products and services, healthcare, agriculture, media, high technology, and retail.
