This paper aims to investigate how to design a firm’s customer demotion policy and communication styles differently for customers demoted from top-tier and bottom-tier to promote their willingness to restore lost status and loyalty intentions.
Four scenario-based experiments were conducted in the customer demotion context of an airline’s hierarchical loyalty program. A total of 796 customers recruited from a survey panel participated in the study.
The results reveal that customers in top-tier demotion significantly increase their willingness to restore lost status and loyalty intentions when a short evaluation period (vs a long evaluation period) is given. Further, customers in bottom-tier demotion improve their willingness to restore and, in turn, their loyalty intentions more with a gain-focused communication style than with a loss-focused communication style. Willingness to restore lost status plays a mediating role in the process by which an appropriate match between demotion type and evaluation period type/communication styles leads to higher loyalty intentions.
This study extends the research stream on customer demotion by examining how to execute customer demotion to mitigate its detrimental effects and facilitate demoted customers’ approach motivation and behavioral intentions, a critical but understudied topic that has been ignored by researchers.
Managers are advised to offer customized customer status evaluation periods and communication styles for top-tier and bottom-tier demoted customers to effectively promote their willingness to restore lost status and loyalty intentions.
This study is among the first to explore the possible varying effects of differential demotion policy and communication style on different tiers of customers.
