How does power distance belief impact consumers’ responses to demotion in hierarchical loyalty programs? The dual processes of monetary and psychological losses

Huachao Gao () and Yinlong Zhang ()
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Huachao Gao: University of Victoria
Yinlong Zhang: University of Texas at San Antonio

Journal of the Academy of Marketing Science, 2022, vol. 50, issue 4, No 10, 822-840

Abstract: Abstract Across five studies, we find that high-power distance belief (PDB) consumers (i.e., consumers who value social hierarchy) tend to show lower loyalty after being demoted in loyalty programs than low-PDB consumers (i.e., consumers who value equality). This occurs because while low-PDB consumers are only sensitive to the monetary losses associated with the demotion, high-PDB consumers are sensitive to both the monetary and psychological losses. More importantly, we find that when consumers receive the appropriate monetary (for low-PDB) or status-symbolic (for high-PDB) compensation, the negative effect of demotion is attenuated. Additionally, we find that proactive approaches are more effective in mitigating negative responses to demotion; accordingly, marketers should warn consumers of a prospective demotion and offer consumers help in maintaining their existing membership tier. Doing so results in a win-win situation where consumers avoid demotion and marketers achieve higher profits. The theoretical and practical implications of the research are also discussed.

Keywords: Customer demotion; Power distance belief; Self-threat; Loyalty; Monetary and psychological losses (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11747-021-00825-8

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