How status demotion undermines loyalty: the role of reciprocity norm and attribution of blame

This chapter deals with how to use data mining technology to find interesting pattern, which can be organized for global customer retention. Customer relationship management (CRM) comprises a set of processes and enabling systems supporting a business strategy to build long term, profitable relationships with specific customers. Customer data and information technology (IT) tools shape into the foundation upon which any successful CRM strategy is built. Although CRM has become widely recognized as an important business strategy, there is no widely accepted definition of CRM. Parvatiyar (2001) defines CRM as the strategic use of information, processes, technology, and people to manage the customer relationship with the company across the whole customer life cycle. Kincaid (2003) defines CRM as a company approach to understanding and influencing customer behavior through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability. These definitions emphasize the importance of viewing CRM as a comprehensive process of retaining customers, with the help of business intelligence, to maximize the customer value to the organization. According to (Swift 2001; Kim et al., 2003) CRM consists of four dimensions: Customer Identification, Customer Attraction, Customer Retention, and Customer Development. They share the common goal of creating a deeper understanding of customers to maximize customer value to the organization in the long term. Customer retention has a significant impact on enterprise profitability. Analyzing and understanding customer behaviors and characteristics are the foundation of the development of a competitive customer retention strategy, so as to acquire and retain potential customers and maximize customer value. Gupta et al. (2004) find that a 1% improvement in retention can increase enterprise value by 5%. As such, elements of customer retention include one-to-one marketing, loyalty programs and complaints management. One-to-one marketing refers to personalized marketing campaigns which are supported by analyzing, detecting and predicting changes in customer behaviors. Loyalty programs involve campaigns or supporting activities which aim at maintaining a long term relationship with customers. Customer satisfaction is the central concern for customer retention. Customer satisfaction, which refers to the comparison of customer expectations with his or her perception of being satisfied, is the essential condition for retaining customers (Chen et al., 2005). Bolton and Ruth N. (1998) have established the positive effect of customer satisfaction on loyalty and O pe n A cc es s D at ab as e w w w .in te ch w eb .o rg

ABSTRACTHierarchical loyalty programmes are widely adopted by service companies to enhance their relationships with customers. However, its negative effect, especially when customers are demoted, is relatively less researched. Building on equity theory, this study explores the effect of status demotion on customers’ loyalty intentions through the mediation of perceived unfairness. The moderating roles of status level and purpose of travel are also examined on the relationship between status demotion and perceived unfairness. Evidence from 220 airline customers in China shows that status demotion significantly influences customers’ perceived unfairness, which eventually decreases their loyalty intentions. The detrimental effect of status demotion on perceived unfairness is found to be higher for members who are demoted from top tier to low tier than those demoted from other tiers (top to middle and middle to low) and for members who travel for business purposes than for leisure purposes.

The paper examined firstly whether companies in the passenger transportation industry have utilised loyalty programs and then ascertained how much value the companies have drawn from them in enhancing market share, operational efficiency and financial benefit. Specifically, the study assessed the influence of loyalty program on customer relationship management, operational efficiency and profitability. The research was undertaken on ten companies who have implemented some form of loyalty programs through applied research’s in-depth interviews with the top executives. The qualitative methodology was utilised to simplify and manage the collection of data without affecting the environment and context. Data collected were further analysed via Chi-square statistics and the three hypotheses were tested at 5% level of significance. The results indicate that companies have begun to utilise loyalty programs in their operations, though not entirely sweating the programs to attain the best possible value from them. Most importantly, the study concluded on the positive significant relationship between loyalty program and customer relationship management, operational efficiency and profitability in the Zimbabwe loyalty program. Both filled a few highlighted gaps in the literature. Research for the road passenger transportation sub-sector offers useful theoretical and managerial implications as few studies have been conducted for the airline industry, which has successfully implemented loyalty programs through frequent flier schemes. It is recommended that companies should ascertain passenger behaviour through passenger registration, thereby enhancing the sustainability of the relationship. This study provides theoretical support for the importance of loyalty programs as passenger relationship management tools if appropriately applied and implemented. Loyalty programs offer companies across industrial sectors with useful benefits such as brand loyalty, business efficiency due to enhanced planning and profitability due to increase in patronage from passengers who are less sensitive to the marketing efforts of competing brands. This knowledge should, therefore, enable transporters to ascertain the value of adopting and using loyalty programs appropriately thereby enhancing their competitive advantage in a fast-paced world economy.

Over the past few years, customer relationship management and loyalty programs (LPs) have been widely adopted by companies and have received a great deal of attention from marketers, consultants, and, to a lesser degree, academics. In this research, we examine the effect of the level of effort required to obtain a LP's reward on consumers' perception of the LP's attractiveness. We propose that, under certain conditions, increasing the program requirements can enhance consumers' likelihood of joining the program, thus leading consumers to prefer a dominated option. Specifically, we hypothesize that consumers often evaluate LPs based on their individual effort to obtain the reward relative to the relevant reference effort (e.g., the effort of typical other consumers). When consumers believe they have an effort advantage relative to typical others (i.e., an idiosyncratic fit with the LP), higher program requirements magnify this perception of advantage and can therefore increase the overall perceived value of the program. This proposition was supported in a series of studies in which the perceived idiosyncratic fit was manipulated either by reducing the individual effort or by raising the reference effort. The findings also indicate that (a) idiosyncratic fit considerations are elicited spontaneously, (b) idiosyncratic fit mediates the effect of effort on consumer response to LPs, and (c) an alternative account for the results based on signaling is not supported. We conclude that these findings are part of a broader phenomenon, which we term the idiosyncratic fit heuristic, whereby a key factor that affects consumers' response to marketing programs and promotional offers is the perceived relative advantage or fit with the individual's idiosyncratic conditions and preferences.

This present paper aims to validate the relationship between loyalty programs and to recognize the value of implementing CRM systems by the dimensions of CRM realize and commercial banks. This article also presents an emerging CRM research literature as CRM's customer-focused component, investigating the relationship between CRM and customer loyalty. By implementing robust information management, CRM aims to improve customer interactions through a portfolio of trust-building activities. Simultaneously, most CRM literature focuses on banks designing and executing CRM initiatives. The current research explored various customer loyalty determinants but pay less attention to understanding the relationship between product dimensions and fundamental loyalty mechanisms. The study used both quantitative and qualitative data, focusing on Saudi banks' CRM dimensions and customer loyalty. The Data were collected using surveys and interviews. The finding of this study indicates that the basis of the relationship between the bank and customers is the element of credibility and security privacy and confidentiality of information. However, customer acquisition practiced more than preserving customers (contact, quality of service, market response). Building relationships with them, so the Bank services focused on the retention customers and building relationships with them in the short term, because it is a Less cost, and ameliorate part of customer segmentation actual and potential market of banks on the long term strategy. The study enriches the banking literature on how to implement customer relationship management (CRM) in financial institutions. This topic has not been discussed mainly in the Middle East except in a few studies. Despite the challenges facing banks in light of the spread of Fintech companies and their repercussions on banks operating in the region.

Subject area Marketing management, services marketing, customer relationship management and strategic marketing management. Study level/applicability This case can be taught effectively to MBA/MS students. Case overview Hyundai Motor India Ltd (HMIL) commenced operations in India in 1996 and launched its first car in India – the Hyundai Santro – in 1998. Since then, there has been no looking back for the company. Its domestic and export sales figures have risen manifold each year and the car maker has gone on to become the second largest manufacturer in the Indian car market with a market share of 18.10 percent as of 2010-2011. By 2009-2010, most of the major international car makers were setting up production facilities in India. The market was set to become highly competitive and it became imperative for manufacturers like Maruti Suzuki India Ltd (MSIL) and HMIL to retain their customers in order to maintain their market share. Nalin Kapoor, General Manager (Sales & Marketing) was contemplating the marketing strategies he could use to counter the stiff competition. Customer retention was one of the major problems in the automobile industry as the purchase time span varied between three and five years and the cost of brand switching was nil. HMIL had been pursuing customer relationship management activities but its customer retention ratio was declining. Kapoor and his team decided to study the loyalty programs of some companies in the automobile industry to ascertain whether launching a loyalty card could solve their problem of retention. The marketing strategy department with the help of a management intern extensively studied the existing loyalty program of Hero Honda, MSIL, and Ford to identify how those programs were designed and promoted to the customer. The reports also indicated the shortcomings of each program and the features which were highly accepted by the customer. The loyalty program also had cost implications as there was a need for a strong technical support team to run it successfully. With the reports in hand, Kapoor was in a dilemma on whether launching a loyalty card would be feasible or not. If yes, then how should it be structured to motivate the customers to stay loyal to the company? Also, how could the cost in terms of promotion, training, and technical support be justified? If not a loyalty program, then what marketing strategies should the company pursue to retain customers effectively? The problem demanded immediate attention and action and Kapoor was well aware of the implications that a delay in decision making would have for the market share of the company in the growing and dynamic automobile industry in India. Expected learning outcomes These include: the concept of customer relationship management; relationship marketing; customer retention; customer loyalty; customer profitability segments; relationship bonds; and designing loyalty programs. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email: support@emeraldinsight.com to request teaching notes.

PurposeStatus demotion in hierarchical loyalty programs (HLPs) has received considerable academic attention. However, little is known about whether status demotion engenders two widely recognised behavioural intentions: revenge and avoidance. This study aims to make up this gap by examining the effects of status demotion on customers’ revenge and avoidance intentions. The underlying mechanism and boundary conditions of these effects are also explored.Design/methodology/approachTwo studies were conducted to test the hypotheses. Study 1 was conducted using a structured survey from 347 active HLP members/customers of Chinese airlines. Study 2 used an online experiment amongst 268 active HLP airline customers in Australia. Partial least squares-based structural equation modelling and Hayes’ (2013) PROCESS macro were used for data analysis.FindingsThe results of Study 1 show that status demotion increases customers’ revenge and avoidance intentions simultaneously. Meanwhile, these effects are more significant for demoted customers with an external locus of causality than those with an internal locus of causality and demoted customers with higher entitlement tend to possess more revenge intentions than avoidance intentions. Study 2 further identified perceived inequity as a mechanism, which links status demotion to revenge and avoidance intentions of demoted customers.Research limitations/implicationsThis study examines demoted customers’ revenge and avoidance intentions amongst Chinese and Australian airline travellers. Future research may focus on actual behaviour and test the current study’s model in cross-cultural and cross-industry settings.Practical implicationsManagers should deal with demotion decisions carefully as the failure to manage outraged customers may weaken customer-company relationships.Originality/valueThis study extends the existing literature on relationship marketing and HLPs by offering a better understanding of how and under what conditions status demotion elicits customers’ intentions for revenge and avoidance.

Status demotion in hierarchical loyalty programs and its effects on switching: Identifying mediators and moderators in the Chinese context

PurposeStatus demotion in hierarchical loyalty programs (HLPs) has received considerable academic attention. However, existing research is relatively silent on whether HLP status demotion fosters service relationship fading by influencing demoted customers’ psychological disengagement and the likelihood of patronage reduction. Drawing on the relationship fading literature and the stimulus–organism–response framework, this study aims to examine these effects. It further investigates the moderating role of psychological ownership on the links of status demotion with psychological disengagement and the likelihood of patronage reduction.Design/methodology/approachTwo studies (Studies 1 and 2) were conducted in the context of airline HLPs. Study 1 was a structured survey conducted among 213 demoted airline HLP customers in Australia, and Study 2 was an experiment conducted among 178 executive MBA students in Bangladesh. The PROCESS macro was used to test the moderated mediation model.FindingsThe results of both studies show that HLP status demotion significantly influences customers’ psychological disengagement and the likelihood of patronage reduction. The findings also reveal that psychological disengagement mediates the relationship between status demotion and the likelihood of patronage reduction. Further, customers with high (low) psychological ownership feel high (less) psychological disengagement and show high (less) likelihood of patronage reduction due to their HLP status demotion.Originality/valueThis study extends the existing literature on relationship marketing and HLPs by offering a better understanding of how and under what conditions status demotion elicits customers’ psychological disengagement and the likelihood of patronage reduction.

PurposeIn managing hierarchical loyalty programs (HLP), firms often use a reward point expiration and status demotion policy to reduce financial liability and to encourage repeat purchases. This study aims to examine how point expiration and status demotion policies affect customer patronage, the role of extension strategies in mitigating the negative effects of these policies on customers and the moderating role of status endowment in the effect of point expiration on customers patronage following status demotion experience.Design/methodology/approachThree experiments were conducted using the hotel industry as the context. The hypothesized relationships were tested using ANOVA and a serial moderated mediation analysis using SPSS PROCESS Macro.FindingsCustomers subjected to reward point expiration exhibited a higher level of anger and perceived severity of the problem than those subjected to status demotion in HLP. Consequently, when customers experienced both point expiration and status demotion, the point extension strategy rather than the status extension strategy was found to be a more effective remedy for reducing perceived unfairness, although there was no change in the level of patronage reduction between the two extension strategies. Importantly, the effect of point expiration on patronage reduction was stronger among endowed-status customers than earned-status customers, serially driven by heightened feelings of embarrassment and perceived unfairness.Originality/valueThe study adds to the existing literature on HLP by comparing the effects of point expiration and status demotion on customer patronage with practical insights for HLP managers.

This study, considering various viewpoints and concepts about customer relationship management (CRM), aims to propose a comprehensive set of customer retention programs of CRM (including customer service, loyalty programs, customization, and online community) and describe the correlation between each of these programs and customer retention. In doing so, the empirical data collected by the means of the designed questionnaire distributed to the top managers working in e-banking sector of two private and two governmental Iranian bank branches were analyzed. The results of this analysis represent the positive and significant correlation between each of the customer retention programs of CRM and customer retention. Moreover, based on the findings of this research, among these programs, customer service has the most significant and customization has the lowest correlation with customer retention in e-banking of these banks.

ABSTRACTHierarchical loyalty programs are being operated currently by many firms to improve customer relationships. While past work has demonstrated the negative effects of status demotion in such programs, research on how these effects may vary across different customer group based on payment source is almost nonexistent. This paper examines the moderating role of payment source (‘own money’ versus ‘others money’) on the effects of status demotion on customer attitudes and behavior in hierarchical loyalty programs. Analysis of data collected from members of airline loyalty programs show that the negative effects of status demotion on customer attitudes, loyalty intentions, and share-of-wallet are stronger for demoted ‘own money’ customers than for demoted ‘others money’ customers. The study provides a deeper insight about the effects of status demotion and points out that firms could possibly be endangering the loyalty of many potentially valuable customers, in particular among the ‘own money’ customer group.

Customer loyalty has been an important issue in the service marketing. Many companies were benefited from developing loyalty programs. However, some companies have increased in cost. Loyalty program should not change the basic structure. While the loyalty program (eg. Customer loyalty card) brings great benefits for retail industry, it has become simplified as ”Bonus card” and caused spurious loyalty. That is, the goal of loyalty programs will become ambiguous as an information- gathering mechanism focusing on gaining more detailed information to retain customers. Therefore, the related literature was collected and the method of in-depth interview was used in this study to examine the effectiveness of loyalty programs in different Scottish hotels, five marketing managers were participated to determine important factors of loyalty. The results indicated that customer loyalty card is not enough to maintain customer loyalty, the combination key factors such as positive word of mouth, customers have the feeling ”value for money” and long-term customer relationship management are vital in producing true customer loyalty.

Purpose– The purpose of this study is to explore polygamous program loyalty in hotel loyalty programs and the relationship between members’ behavioral loyalty and their perceptions of the program effectiveness.Design/methodology/approach– Descriptive statistics, discriminant analysis, ordinary least square regression and one-way ANOVA methods.Findings– This study suggests that the flexibility to purchase points in a loyalty program is significantly associated with the polygamous program loyalty. Members will stay in only one program if they perceive such flexibility. Although members tend to emphasize purchasing accommodation from the loyalty programs’ hotels, they do not necessarily advocate or pay price premiums for the brand. Compared with basic members, elite members exhibit higher levels of loyalty behaviors in general, but not in terms of paying price premiums.Research limitations/implications– The results suggest that how customers value a loyalty program can differentiate the number of membership(s) they have. Increasing the flexibility of point purchase in hotel loyalty programs encourages customers to stay in only one program. With a majority of the participants in the study being senior travelers, the results and implications should be generalized only in the senior market. A larger and more diverse sample is recommended for future research.Practical implications– If loyalty programs seek to keep members from joining other loyalty programs, they should increase members’ likelihood to achieve their expected benefits such as increased flexibility of point purchase. In addition, loyalty programs should encourage, recognize and incentivize members’ reciprocal behaviors based on the norm of reciprocity to build a reciprocal chain in loyalty programs. However, in seeking sustained loyal behavior, loyalty programs need to demonstrate value beyond transactional rewards.Originality/value– This paper explores the reason why customers join multiple loyalty programs (i.e. polygamous program loyalty) and identifies a broken reciprocity link in hotel loyalty programs. Many members primarily focus on the utilities of loyalty programs rather than contributing back to the program; therefore, the norm of reciprocity is suggested to improve loyalty program effectiveness.

Customer service and relationship management play a crucial role in sustaining long-term business growth and customer satisfaction. This study explores the effectiveness of customer service strategies and relationship management practices at Felin Machine Tools Private Limited, Chennai. The research aims to identify key factors influencing customer satisfaction, service efficiency, and client retention in the machine tools industry. A combination of qualitative and quantitative methods was employed, including surveys, interviews, and data analysis, to assess customer perceptions and service performance. The findings reveal that prompt response times, personalized interactions, and after-sales support significantly impact customer loyalty. Additionally, the study highlights areas for improvement, such as optimizing communication channels and enhancing service training programs for employees. The research concludes that an integrated approach to customer service leveraging technology, proactive engagement, and relationship-building strategies can drive higher customer satisfaction and strengthen long-term business relationships. Recommendations include adopting CRM software, conducting regular customer feedback sessions, and implementing structured training programs to improve service quality. This study provides valuable insights for businesses in the machine tools sector to enhance their customer service framework and establish a competitive advantage through superior relationship management. Keywords: Customer Service, Customer Relationship Management (CRM), Customer Satisfaction, Service Quality, Client Retention, Machine Tools Industry, Felin Machine Tools, Customer Loyalty.