Status demotion in hierarchical loyalty programs and its effects on switching: Identifying mediators and moderators in the Chinese context

Abstract

© 2018 Elsevier Inc. Hierarchical loyalty programs (HLPs) are widespread across many service industries; however, research on the effects of status demotion in an Eastern cultural context is relatively scant. Based on the psycho-evolutionary theory of emotions, the theory of embarrassment and the literature on losing face, this study explores the effect of status demotion on customers' intentions to switch service providers in the Chinese context. By doing so, the study examines how feelings of frustration and social discomfort mediate the relationship between status demotion and the switching intentions of Chinese airline HLP members. It further examines how relationship age and gender moderate the link between status demotion and feelings of frustration and social discomfort. Three hundred and forty-seven active members of airline HLPs in China participated in a structured survey. The data collected were then analyzed using partial least squares-based structural equation modeling. The results show that status demotion causes members to experience feelings of frustration and social discomfort, which further lead them to switch service providers. These effects of status demotion on frustration and social discomfort are found to be higher (lower) among the members with longer (shorter) relationship age and male (female) members. The findings of the study have significant theoretical and managerial implications.