What Effect Does Status Endowment Have on Customer Loyalty Programs?

02JSR13_Covers.indd[We’re pleased to welcome Lena Steinhoff of the University of Paderborn in Germany. Dr. Steinhoff recently collaborated with Andreas Eggert of University of Paderborn and Ina Garnefeld of the University of Wuppertal on their paper from Journal of Service Research entitled “Managing the Bright and Dark Sides of Status Endowment in Hierarchical Loyalty Programs.”]

When I opened the envelope and found a golden customer card issued by a hotel chain that I had hardly patronized, I was surprised and had some mixed feelings about it, which is how this research project began. Indeed, service companies purposefully offer elevated status to some customers who do not meet the required spending level, in an attempt to profit from the profound allure of status. This is what we call status endowment, which we define in our paper as awards of elevated status to customers who are not entitled to it.

Recently, several service firms have begun experimenting with status endowment, including Accor Hotels (A|Club), Hertz Car Rental (Hertz Gold Plus Rewards), and Hilton Hotels & Resorts (Hilton HHonors). An Internet search of company websites and customer forums reveals that among the top 100 North American loyalty programs, status endowment exists in more than 40% of those that rely on hierarchical programs. Yet, the emotional, attitudinal, and behavioral consequences of status endowment are not well understood, so scholarly research has a chance to provide marketing practitioners with a better understanding of this customer management instrument before it becomes a standard tool.

Employing three research formats (qualitative, experimental, survey) and covering various industries, we identify differential effects of status endowment that have three key implications for services management. First, there is a bright and a dark side of status endowment. Customer gratitude enhances loyalty, yet customer skepticism acts as an opposing force. Conventional wisdom assumes that people react positively to preferential treatment, but our research also demonstrates the unintended dark sides of relationship marketing investments on focal customers.

Second, the dark side of endowed elevated customer status is contingent on the design of the status endowment. Managers should carefully consider how to avoid fostering further skepticism. Status endowment should not be designed as a “pure” endowment but rather should augment customers’ perceptions of their own personal choice or achievement.

Third, the effectiveness of status endowment also depends on the characteristics of the loyalty program, including the perceived value of the preferential treatment. When elevated status offers high value benefits, customers’ attitudinal loyalty is higher than if the company provides elevated status with only low value, stemming from enhanced customer gratitude and reduced customer skepticism. While service companies such as airlines and hotels can easily offer high value preferential treatment by exploiting their underutilized, perishable assets at low additional costs, firms that lack unused capacities face a more challenging position.

You can read “Managing the Bright and Dark Sides of Status Endowment in Hierarchical Loyalty Programs” from Journal of Service Research for free by clicking here. Want to know about all the latest research like this from Journal of Service Research? Click here to sign up for e-alerts!

EggertAndreas Eggert is a chaired professor of marketing at the University of Paderborn, Germany. He is also a strategic research advisor at Newcastle University Business School, Newcastle upon Tyne, UK. His research interests focus on the profitable management of customer relationships in both business-to-consumer and business-to-business markets, and his work has appeared in Journal of Marketing, Journal of the Academy of Marketing Science, Journal of Service Research, Journal of Supply Chain Management, Journal of Business Research, European Journal of Marketing, Journal of Marketing Theory and Practice, Industrial Marketing Management, Journal of Business-to-Business Marketing, and Journal of Business and Industrial Marketing, among others.

csm_Lena_Steinhoff_2014_7847c236f1Lena Steinhoff is an assistant professor of marketing at the University of Paderborn, Germany. Her research interest is relationship marketing, with a particular focus on managing customer relationships through loyalty programs and customer engagement initiatives. Current projects include examining the impact of customer engagement initiatives on existing customer relationships and the performance effects of relationship marketing investments over the relationship life cycle. Her work has appeared in Journal of the Academy of Marketing Science, Journal of Service Management, and the Marketing Science Institute (MSI) Working Paper Series.

inaIna Garnefeld is a chaired professor of service management at the Schumpeter School of Business and Economics at the University of Wuppertal, Germany. Her research interests are services marketing and customer relationship management. Current projects include examining online and off-line word-of-mouth behavior and the use of incentives for managing customer communication behavior. Her work has appeared in Journal of Marketing, Journal of Service Research, International Journal of Electronic Commerce, and Journal of Service Management, among others.

Call for Papers on Organizations, Cosmopolitanism, and Sustainable Cities

sustainable-buildings-1156226-mOrganization and Environment is currently accepting papers for a special issue on Organizations, Cosmopolitanism, and Sustainable Cities. This issue will be dedicated to exploring the organizational drivers of sustainable (and smart) cities in emerging cosmopolitan contexts. The issue will be guested edited by Boyd Cohen of Universidad del Desarrollo, Jose M. Alcaraz-Barriga of Murdoch University, Pablo Muñoz of Universidad Adolfo Ibañez, and Katerina Nicolopoulou of University of Strathclyde.

The journal welcomes a wide range of articles dealing with the role of new and established businesses in shaping the smart and sustainable agenda in cities around the globe. Research building or testing theory is welcome. Empirical research using qualitative, quantitative or mixed methods is particularly encouraged. Submitting authors are advised to review relevant articles published in Organization and Environment and build on those works, as appropriate.

Some potential topics of interest include:

• How are organizations, cities and entrepreneurs fostering collaboration in order to provide innovative sustainability solutions to major environmental and/or socio-economic challenges?

• How are companies scaling solutions from one city to the next and are they utilizing sustainable city networks, such as ICLEI, C40 and Covenant of Mayors as a vehicle?oae cover

• How can theories on cosmopolitanism and civic mindsets stimulate insights regarding organizations and environment at a (g)local level?

• What is the role or contribution of rural areas in fostering sustainable development in cities? How can sustainable regions be fostered?

• What is driving corporate interest in sustainable cities?

• How are agency conflicts minimized between the private sector and local governments

• What factors drive place-based civic entrepreneurs to act (g)locally towards sustainability? To what extent can civic and sustainable entrepreneurship drive the development of smart cities?

• What are the new innovation models and potential relationships between sharing economy business models and environmental impact on an urban scale?

• What role do citizens (including those beyond Western-based urban cultures) play in enabling cosmopolitanism and city-based solutions around sustainability?

Deadline for submissions is October 1, 2015. First review decision is expected by February 1, 2016. More information on this call can be found by clicking here. Submissions should follow the formal submission guidelines of the Organization and Environment, which can be viewed by clicking here. The contributors should electronically submit the paper by clicking here.

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Unproctored Internet Test Verification

Guido Makransky,  and Cees. A. W. Glas, both of the University of Twente in the Netherlands, published “Unproctored Internet Test Verification: Using Adaptive Confirmation Testing” in the October 2011 issue of Organizational Research Methods. Other articles in this new issue can be found here.

The Abstract:

Unproctored Internet testing (UIT) is commonly used in employment test administration. When the test is high stakes, the International Guidelines on Computer-Based and Internet-Delivered Testing recommend to follow-up the results with a confirmation test in a controlled setting. This article proposes and compares two methods for detecting whether a test taker’s original UIT responses are consistent with the responses from a follow-up confirmation test. The first method is a fixed length adaptive confirmation test using the likelihood ratio (LR) test to evaluate cheating and the second method is a variable length adaptive confirmation test using an extension of the stochastic curtailed truncated sequential probability ratio test (SCTSPRT) to evaluate cheating. Simulation studies indicated that the adaptive confirmation test using the SCTSPRT was almost four times shorter while maintaining the same detection power. The study also demonstrated that cheating can have a detrimental effect on the validity of a selection procedure and illustrated that the use of a confirmation test can remedy the negative effect of cheating on validity.

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Crafting Qualitative Research

Ann L. Cunliffe, University of New Mexico, published “Crafting Qualitative Research: Morgan and Smircich 30 Years On” in the October 2011 issue of Organizational Research Methods. Dr. Cunliffe kindly provided some background about  her article.

What inspired you to be interested in this topic?

My interest in this topic stems from two sources: challenges in my own work, which utilizes narrative, dialogic and poetic ‘methods’, and the curiosity and urging of PhD students at the University of Hull where I taught qualitative research methods and non-traditional qualitative research methods courses. My aim was to encourage students to consider the various approaches to research and the wide range of methods available to them. Many students were interested in non-positivist qualitative methods, but were using surveys and structured coded interviews because they were ‘safer’. I wanted to encourage my students to expand their horizons, but common concerns included: “How can narrative research or discourse analysis be considered rigorous and valid?” and “I’ll never get that type of work published.”

We discussed the various ways of thinking about the nature of social reality and how they influence research design.  We also talked about how important it was to be consistent in research – to ‘walk the talk’: If you are claiming to take a subjectivist perspective or a social constructionist approach, then what does that mean for the way you do your research? The only article I could find that really addressed this issue head-on was Morgan and Smircich’s 1980 paper.

The students asked why there had not been a more recent paper and urged me to write one to help them understand the issues involved in crafting qualitative research and to justify the approach they wanted taking.  So I did, and this article is the result.

How do you see this study influencing future research and/or practice?

My hope is that the ideas in the article will encourage PhD students and early career researchers to recognize the extent, depth and richness of our field.  We can explore a whole range of methods, various sources of ‘data’, and different ways of theorizing – each being valid in it’s own right if our research is crafted carefully and consistently.  In other words, we should not feel pressured into carrying out a particular type of research because we feel there are no other options.  One of my favourite quotes on this issue is from John Van Maanen, who in his defense of pluralism in organization studies says,

“I am appalled at much of organization theory for its technocratic unimaginativeness. Our generalizations often display a mind-numbing banality and an inexplicable readiness to reduce the field to a set of unexamined, turgid, hypothetical thrusts designed to render organizations systematic and organization theory safe for science (1995, p. 139).

I agree!  And the article offers some of the many possibilities for doing interesting research.

The article may also be useful to reviewers and journal editors, who sometimes find it all too easy to reject non-positivist empirical papers because they are ‘not rigorous or valid’.  One key point in the article is that the way we judge rigor and validity should not be based on universal criteria (usually positivist), but depend on the problematic one is working within. Evaluating an intersubjective study from an objectivist problematic (to paraphrase an editor commenting on a desk reject of a now-published paper ‘this does not contribute to theory because you are not testing propositions’) does not make sense and excludes a whole range of interesting and thought-provoking research that can help us to see something differently.

What, if anything, would you do differently if you could go back and do this study again?

As with any paper, this one changed and developed as it went through the review process.  The Editor, Bob Gephart, challenged me to better articulate the intersubjective problematic. In response to reviewer comments, two Tables became one, and a continuum became clouds after one reviewer asked if the lines in the Table implied fixed boundaries.  All of these comments helped shape the paper.

In terms of future changes, the three problematics and my placing of methods etc in the Table will, I am sure, be contested and are by no means exhaustive.  New methods, approaches and ways of theorizing will emerge and the ‘clouds’ may change. Which brings me to a concrete change … If I could do something differently then I would hire a graphic designer to come up with a more creative way of portraying the characteristics of each problematic!

Van Maanen, J. (1995). Style as theory. Organization Science, 6, 133-143

To view the other articles in this issue, please click here. More information about Organizational Research Methods can be found here.

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Do Mixed Methods Articles Have a Higher Impact?

Jose F. Molina-Azorin, University of Alicante, investigates this question in the article, “The Use and Added Value of Mixed Methods in Management Research”, published in the January 2011 issue of the Journal of Mixed Methods Research.

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