Managing the Bright and Dark Sides of Status Endowment in Hierarchical Loyalty Programs

Abstract

In service industries, hierarchical loyalty programs are common relationship marketing instruments that award elevated status to customers who exceed a certain spending level (e.g., gold membership). In practice, service companies offer elevated status to some customers who do not meet the required spending level, in an attempt to profit from the profound allure of status. Relying on social psychology research and a mixed-method approach, this study analyzes the loyalty impact of status endowments, defined as awards of elevated status to customers who are not entitled to it. An exploratory qualitative study identifies customer gratitude and customer skepticism as positive and negative mediators, respectively, of customers' attitudinal responses to endowed status. Quantitative studies-two experimental and one survey-substantiate these bright and dark sides of endowed status. The efficacy of status endowment is contingent on the context. To alleviate the dark-side effect, managers can allow target customers to actively choose whether to be endowed, especially those who are close to achieving the status already, and provide valuable preferential treatment to customers elevated by either endowment or achievement. These insights offer guidelines for whether and how to use status endowment in hierarchical loyalty programs.

Attracting new customers to loyalty programs: The effectiveness of monetary versus nonmonetary loyalty programs

“…To date, most studies focused on the appeal of loyalty programs from the perspective of existing program members (e.g., Eggert et al . , ; Keh & Lee, ; Leenheer et al . , ; Suh & Yi, ).…”

“…Second, by focusing on current nonmembers, we shed light on strategic factors that can be used to attract new customers to a loyalty program. To date, most studies focused on the appeal of loyalty programs from the perspective of existing program members (e.g., Eggert et al, 2015;Keh & Lee, 2006;Leenheer et al, 2007;Suh & Yi, 2012).…”

“…Suh & Yi, 2012). Findings may also fail to generalize to hierarchical loyalty programs, where preferential treatment, thus mostly nonmonetary rewards, is of greater prominence (Eggert et al, 2015). Finally, it is possible that results are different, if customers encounter a loyalty program through the social setting of referrals (Jin & Huang, 2014).…”

“…By focusing on monetarism, the paper provides a simple lens that helps judging whether a reward program is likely to attract members. By focusing on nonmembers, the paper adds to a literature that has tended to focus on existing members (e.g., Eggert, Steinhoff, & Garnefeld, ; Keh & Lee, ; Suh & Yi, ), which may behave systematically different from nonmembers (Leenheer, van Heerde, Bijmolt, & Smidts, ).…”

Establishing Patient Loyalty by Investigating Its Relationship with Relationship Quality, Alternative Attractiveness, and Patient Gratitude in Hospitals

“…Eggert et al [12] proposed that a customer-oriented program provided by an enterprise would contribute to customer's loyalty intentions via customer gratitude. Customers feel they should maintain the relationship and express the thankfulness by returning loyalty [13].…”