External equity, loyalty program membership, and service recovery

Abstract

Purpose

The purpose of this paper is to extend research on customer loyalty status, external equity, and satisfaction with service recovery. Most people accept that firms give special treatment to their “best” customers; but after service failures, will they accept firms' offering better compensation to loyalty program members?

Design/methodology/approach

An experiment was conducted involving mobile telephone service failure scenarios affecting two similar customers; the customer received either identical or one‐half the compensation of a referent customer, who was described as either a member or non‐member of the firm's loyalty program. Participants were randomly assigned to conditions in a 2×2 design, completing questionnaires that measured satisfaction with service recovery.

Findings

The paper finds that when both focal and referent customers received equal service recovery, loyalty program status had no effect. When the referent customer received greater compensation, respondents were very dissatisfied with the outcome, but were significantly less dissatisfied if the referent customer was a loyalty program member.

Research limitations/implications

Although respondents were students, 97 percent used mobile telephones and experienced similar service problems.

Practical implications

As communications among firms' customers increase (blogs, online communities), they can compare one another's complaint outcomes. Some inequity in service recovery may be tolerated because of the beneficiary's loyalty program status.

Originality/value

Consumers consider loyalty of other customers when judging fairness of firms' service recovery. Inequity has a powerful effect on satisfaction with recovery initiatives, but the negative impact is moderated by loyalty program status; this paper makes a contribution by showing how inequity and customer loyalty interact.

Citation

Morrisson, O. and Huppertz, J.W. (2010), "External equity, loyalty program membership, and service recovery", Journal of Services Marketing, Vol. 24 No. 3, pp. 244-254. https://doi.org/10.1108/08876041011040640