Abstract: In consideration of the customer heterogeneity,we present a customer discrete choice model to analyze the effect of reward programs on customer brand choice behavior;we also validate the model using longitudinal panel data from retail customers. The results show that the discrete choice model is an effective tool to analyze the customer choice behavior. In addition,it is evidenced that reward programs can be viewed as an effective relationship marketing strategy to positively influence customer choice behavior and increase customer choice probability. On the other hand,in a highly competitive market,supermarket busmess should adopt reward programs as an important marketing strategy. At the same time,the business must strive to attract more customers to join its reward program. Moreover,heterogeneous behavior between customer segments is validated by a latent class method. The analysis indicates that reward programs only can impact on a special customer segment significantly. The managerial implications are also discussed.

Key words: customer reward programs, brand choice, discrete choice model