Multi-level loyalty program rewards and their effects on top-tier customers and second-tier customers

Abstract

Purpose The purpose of the paper is to examine how members at different levels in a multi-level loyalty program react when they are allowed the opportunity to compare the rewards they receive with the rewards received by other members. The authors believe this is crucial, as previous research often ignores the social setting in which exchanges concerning loyalty rewards take place. The authors believe such interactions in social settings are likely to induce justice perceptions, which in turn will affect customer satisfaction and repatronizing intentions. Design/methodology/approach The research question was addressed through a between-subjects experiment in an airline setting. Findings The results show that belonging to the top-tier level of a multi-level loyalty program seems to boost perceived justice. Participants assigned to this level in the experiment perceived the program as more just than did participants assigned to the lower level. Importantly though, members assigned the second-tier who compared themselves to the top-tier did not perceive to program as more unjust than did second-tier members comparing themselves to other second-tier members. The levels of customer satisfaction and repatronizing intentions followed the same pattern. In social settings, multi-level loyalty programs thus seem to be able to increase justice perceptions, customer satisfaction and repatronizing intentions of top-tier members, while at the same time avoiding the potential drawback of alienating second-tier members. Originality/value The study bridges the gap between research on perceived justice, loyalty programs and the effects of social settings on consumer interactions. In doing so, it brings valuable insights to both researchers and practitioners.