Spillover Effects of Status Demotion on Customer Reactions to Loyalty Reward Promotions: The Role of Need for Status and Exclusivity

Abstract

Prior research demonstrates that status demotion in the loyalty reward program heightens negative emotions, particularly when demotion is due to changes in company policies. In this research, we argue that such negative emotions are likely to spillover to evaluations of post-demotion promotions. We further argue that such spillover effects should be attenuated among individuals high in need for status. Study 1 examines the joint effect of the cause of demotion and customers’ need for status on loyalty. In study 2, we investigate the impact of exclusivity cues in post-demotion promotions and show that exclusive promotions diminish the negative impact of policy-based demotions on post-promotion loyalty among individuals high (vs. low) in need for status. Travel and tourism companies might want to consider using geographical location as a proxy for need for status or priming status-seeking via exclusive promotions (“elevate your travel experience”) to alleviate demoted customers’ negative emotions.