An Investigation of Nonbeneficiary Reactions to Discretionary Preferential Treatments

[We’re pleased to welcome authors Kimmy Wa Chan of Hong Kong Baptist University, Chi Kin (Bennett) Yim of the University of Hong Kong, and Taeshik Gong of Hanyang University ERICA. They recently published an article in Journal of Service Research entitled “An Investigation of Nonbeneficiary Reactions to Discretionary Preferential Treatments,” which is currently free to read. Below, they reflect on this research:]

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Some service firms, particularly those in the hospitality industry, have resorted to explore less structured preferential treatments, in addition to traditional loyalty programs. The most famous example being The Ritz-Carlton who gives its staff the discretion to spend up to US$2,000 for offering free treats or room upgrades to selected guests, without any approval from a supervisor. Offering discretionary preferential treatments (DPTs) could be an effective customer relationship management tool because they are not granted based on contractual and publicly stated policies, thus will not become firms’ ongoing obligations. Doing so also stimulates a feeling of being special because it encourages decision flexibility by frontline employees to offer unexpected, surprise benefits, above and beyond the core services. Yet, service managers need to evaluate DPTs on their ability to stimulate positive effects among beneficiaries while still preventing negative reactions of nonbeneficiaries. Particularly, they are advised to apply their understanding of nonbeneficiaries’ psychology when implementing DPTs.

Our study offer some important insights on how nonbeneficiaries react to witnessing DPTs in order to help service companies manage the offering of DPTs effectively. For example, to avoid nonbeneficiaries’ feelings that they are treated badly, employees could help nonbeneficiaries understand why the DPT was granted in order to enhance the perceived deservedness of beneficiaries. This research also suggests that nonbeneficiaries who have strong relationships with the firms might react more negatively to witnessing DPTs that are offered on a one-off basis. We are not asking firms to restrain from strengthening relationships with their customers. Instead, employees may be trained to identify those frequent customers and only offered DPTs when they could be offered on a continuous basis. Moreover, a DPT perceived to have high continuity creates a hopeful pathway for nonbeneficiaries to achieve similar treatments in the future. Firms should make their DPTs available for a longer period or framing them accordingly to induce more hope among nonbeneficiaries. Better yet, firms may help nonbeneficiaries to see not receiving the preferential treatment as a challenge rather than threat. Service firms could also offer multiple and smaller or more accessible goals, e.g., granting DPTs based on a multitude of reasons such as being a regular customer, being nice or polite, etc. Findings from this research emphasize that implementing DPTs requires close monitoring to avoid too much autonomy of the employees in turning DPTs into sweethearting behaviors. Firms still need to provide employees with general guidelines for whom they prefer to target with DPTs. Finally, firms can leverage database technology to provide employees with an easy access to customer information for granting customized DPTs to targeted customers.

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