The distinct influence of power distance perception and power distance values on customer satisfaction in response to loyalty programs

Abstract

In today's fiercely competitive environment, firms are increasingly relying on loyalty programs to influence customers' repeat purchase behavior. However, little is known about how customers' cultural values shape their satisfaction in response to loyalty programs. Such knowledge is important because it allows marketers to identify cultural segments that may be more or less likely to respond favorably to loyalty programs, and hence increase the effectiveness of such programs. In the current research, we propose that power distance perception — defined as the extent to which people observe power disparities in society — positively influences satisfaction of customers who hold loyalty status, but negatively influences satisfaction of customers who do not hold loyalty status with a firm. In contrast, power distance values — defined as the extent to which people endorse power disparities in society — negatively influences satisfaction of customers who hold loyalty status, but positively influences satisfaction of customers who do not hold loyalty status with a firm. A quasi-field study and several lab experiments support these propositions, shed light on the underlying mechanisms, and rule out alternative explanations. Our findings also uncover several distinct tools that marketers could use to influence non-loyalty status and loyalty status customers' satisfaction with businesses.