Moral identity and compensation preferences:The role of self- consistency and social approval

Abstract

We examine how organizations can make amends with their customers after service failures that threaten consumer relationships. We propose that customers of ethical companies will be more satisfied when the company provides compensation that corresponds with and reinforces their moral identity. In particular, we explore the impact of two dimensions of moral identity - internalization and symbolization - on customers’ satisfaction with different types of private versus public (psychological and tangible) compensation following service failures. We propose that high moral identity internalization will be associated with higher satisfaction with private (psychological and tangible) compensation, while high moral identity symbolization will be associated with higher satisfaction with public (psychological and tangible) compensation. We find support for these predictions in two studies; an organizational survey study (N=159) of customers of a green social enterprise and an online scenario study (N=214). Moreover, the results of Study 2 show that the relationships between these moral identity dimensions and compensation are driven by different underlying mechanisms, namely self-consistency and social reinforcement respectively.