Millions of Americans will hit the road this holiday season, many of them seasoned travelers who routinely rack up up hotel points, airline miles and other kinds of customer loyalty credits.
But what happens when loyal customers don’t receive those rewards? New research shows the fiercest road warriors might be the most likely to turn on their favorite companies when they don’t achieve those all-important incentive goals.
“In a large field experiment, we found a negative response from customers who did not reach incentivized goals, with the strongest negative reaction coming from the firm’s most loyal customers” said Cynthia Cryder, PhD, assistant professor of marketing at Olin Business School at Washington University in St. Louis.
Cryder and her collaborators, Yanwen Wang, PhD, assistant professor of marketing at the University of Colorado Boulder, and Michael Lewis, PhD, associate professor of marketing at Emory University, conducted a large-scale field experiment at a major hotel chain with more than 95,000 existing loyalty customers. The group observed the customers’ hotel stays for eight months prior to the experiment, eight months during and eight months after the experiment.
Customers in the treatment group were asked to increase their hotel nights during the eight-month promotion period by a set percentage relative to their baseline to receive a reward. Only 20 percent of the customers attained the goal; 80 percent missed it. The results showed that hitting the goal increased purchasing after the promotion, while goal failure led to significantly reduced purchasing after the promotion.
The researchers also found that the elite customers — those with the most invested in the hotel chain — were the most affected by goal failure, while the customers with lower status were the most affected by goal success.
“Loyal customers have invested in the company, and expect to be treated well,” Cryder said. “When loyal customers feel like the company is withholding rewards, or not offering them the chance to succeed, they react.”
Cryder is available for comment about this research. Email her at email@example.com or contact Erika Ebsworth-Goold in Washington University’s Office of Public Affairs at firstname.lastname@example.org or 314-401-7684.