While originally viewed as marketing efforts, consumer reward loyalty programs have grown substantially in size and scope during the last two decades, to the extent that they now significantly interact with other firm functions, including operations, accounting, and finance.

In this talk, we consider the new currency introduced by a loyalty program (i.e., loyalty points) and study the problem of dynamically setting the monetary value (i.e., pricing) in this currency. We first identify the important ways in which this problem differs from traditional pricing in cash and propose a model that captures important loyalty program considerations that are absent from standard operations or revenue management models. We then characterize the optimal pricing policies and provide managerial insights and prescriptive recommendations.