Title: A stochastic linear programming modelling and solution approach for planning the supply of rewards in Loyalty Reward Programs

Authors: Yuheng Cao; Aaron L. Nsakanda; Moustapha Diaby

Addresses: Sprott School of Business, Carleton University, 1125 Colonel By Drive, Ottawa ON K1S 5B6, Canada ' Sprott School of Business, Carleton University, 1125 Colonel By Drive, Ottawa ON K1S 5B6, Canada ' School of Business, University of Connecticut, 2100 Hillside Road, Storrs CT 06269-1041, USA

Abstract: In this paper, we consider the problem of planning the supply of rewards in a Loyalty Reward Program (LRP). We formulate this problem as a two-stage stochastic linear program with simple recourse, and develop a new, sampling-based stochastic optimisation heuristic procedure for solving it. The proposed heuristic is general and can be applied in other contexts as well. Our computational experiments demonstrate the viability of the modelling and solution approaches for solving realistically-sized (large-scale) problems.

Keywords: stochastic linear programming; sample average approximation; heuristics; stochastic optimisation; LRP; loyalty reward programmes; rewards supply planning; modelling; marketing; consumer incentives; consumer rewards; purchase behaviour; motivation.

DOI: 10.1504/IJMOR.2012.048902

International Journal of Mathematics in Operational Research, 2012 Vol.4 No.4, pp.400 - 421

Published online: 23 Dec 2014 *

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