Unintended negative consequences of loyalty programs: endowed vs earned loyalty

Abstract

Purpose

Loyalty programs are pervasive across service industries. However, the examination of cross-customer effects represents a critical gap in the loyalty literature. To address this gap, this research conducts two between-subjects experimental design studies to examine traditional versus endowed loyalty status earner attitudinal loyalty intention toward the company, switching intentions and perceived unfairness.

Design/methodology/approach

Study 1 conducts a 2 (self: earned vs endowed) × 2 (others: earned vs endowed) between-subjects experimental design on the direct effects of attitudinal loyalty intention toward the company and switching intentions. Study 2 builds upon these findings by examining the mediation effect of perceived unfairness on the attitudinal loyalty intention toward the company and switching intentions.

Findings

Results from Study 1 find that cross-customer comparisons exist, and traditional loyalty members have negative attitudinal loyalty intention toward the company and switching intentions when comparing their rewards to endowed earner rewards. Study 2 examines an airline context and finds that unfairness mediates the relationship.

Originality/value

The research builds upon the literature surrounding cross-customer comparisons, loyalty programs, equity theory and endowed status and discusses the unintended negative consequences related to endowed loyalty rewards on other customer intentions that have critical managerial implications.

Citation

Baker, M.A. and Legendre, T.S. (2021), "Unintended negative consequences of loyalty programs: endowed vs earned loyalty", Journal of Services Marketing, Vol. 35 No. 2, pp. 210-221. https://doi.org/10.1108/JSM-02-2019-0089