Investigating the responses of bystanding customers to loyalty programs : a moderated-mediation model

The purpose of this study is to provide insight as to how middle-tier frequent flyers react to witnessing the preferential treatment of a top-tier customer, how rule clarity concerning the top tier impacts this effect and which mediators are present.This study used a single between subjects' scenario-based experimental design, with 235 MTurk respondents participating. Two treatment groups and a control group were used. PROCESS Macro Models were used for analysing the data.The results support self-enhancement motivation functioning as a positive mediator of this effect, along with it being positively moderated by rule knowledge. There were no significant findings regarding unfairness perceptions functioning as a mediator. The results also suggest middle-tier bystanding customers respond negatively when attainability and rule knowledge are low, but positively when both moderators are high.The findings show that when planning and evaluating either the amount of preferential treatment given to frequent flyer top-tier customers, or how clear the rules are for obtaining top-tier frequent flyer status, managers must not only consider the top-tier customers. Middle-tier frequent flyer customers must also be included in planning or evaluating these elements of the frequent flyer club, or the business risks inaccurate planning, evaluation and ultimately decreased profits.This research considers secret tiers, which are common in frequent flyer clubs. However, past researchers have surprisingly failed to consider the impact of this design feature on customer loyalty. Considering their commonality and lack of research, the findings are both valuable and novel.