How Profound Is the Allure of Endowed Status in Hierarchical Loyalty Programs?

Hierarchical loyalty programs are common relationship marketing instruments that award elevated status to customers exceeding a certain spending level (e.g., gold membership, platinum customer). In business practice, some companies also offer elevated status to selected customers even if they do not meet the required spending level, in an attempt to profit from the profound allure of status. Relying on social psychology research, this study analyzes the loyalty impact of such a status endowment. A first experimental study reveals the bright and dark sides of endowed status, with customer gratitude and customer skepticism acting as mediating mechanisms. A second experiment delineates that in order to alleviate the dark side, managers should let target customers make an active choice to be endowed with status and select target customers who are close to achieving that status on their own