Consumer decision to upgrade or downgrade a service membership

Abstract

Service memberships are commonly used to support consumer relationships, yet the mechanisms for consumers’ membership decisions are poorly understood. This paper develops a model of consumers’ decision to modify (upgrade or downgrade) a service membership conditional on their decision to renew. Bridging insights from relationship marketing and consumer behavior, the proposed model conceptualizes how relational drivers differentially influence the upgrade/downgrade decision while also modeling the effect of transactional, membership and socio-demographic variables. The posited hypotheses are tested with a multinomial logit model with selection using multi-source (archival and survey) consumer-level data related to renewable service memberships in a not-for-profit context. Results suggest that modification decisions are driven by relational payoffs from ongoing experiences such that upgrade decisions evidence a “motivator” effect of consumer trust (quadratic), while downgrade decisions indicate a negative influence of consumer trust conditional on perceived knowledge. Managerially, the study indicates that, while membership modification and renewal are disparate decisions with remarkably divergent mechanisms, to examine and analyze them as independent decisions is to risk misjudgments about their determinants and waste resources in investments that are unlikely to yield desired return.