Towards identifying customer profiles in reactions to financial overcompensation: The role of self‐interest and fairness sensitivity in explaining who prefers more money

Abstract

AbstractIn the aftermath of a product failure, companies often offer a financial compensation. The present research compares the effects of equal compensation (i.e., a refund that is equivalent to the purchase price) and large overcompensation (i.e., a refund that is five times larger than the purchase price) on customer loyalty, which was hypothesized to be moderated by individual differences in self‐interest and fairness sensitivity. Our results, first of all, revealed that, overall, large overcompensation does not result in higher customer loyalty than equal compensation. Although overcompensation does not appear to be a worthwhile strategy in general, our results also showed that large overcompensation nonetheless entails positive effects for a particular type of customer. Indeed, relative to equal compensation, overcompensation had an incremental effect on customer loyalty for customers low on perpetrator fairness sensitivity and for customers high on victim fairness sensitivity. Variables related to self‐interest (i.e., materialism and greed) did not demonstrate such a moderation effect. Theoretical and practical implications are discussed.