Loyalty program rewards and their impact on perceived justice, cus- tomer satisfaction, and repatronize intentions Magnus Söderlund n , Jonas Colliander Center for Consumer Marketing, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden article info Article history: Received 31 August 2014 Received in revised form 8 March 2015 Accepted 15 March 2015 Keywords: Loyalty programs Perceived distributive justice Customer satisfaction Loyalty Repatronize intentions abstract This study examines three types of rewards in a retail loyalty program context (under-reward, equity- reward, and over-reward) and their impact on perceived distributive justice, customer satisfaction, and repatronize intentions. The results from a between-subjects experiment showed that equity-reward produced higher levels of perceived distributive justice than both under-reward and over-reward. Moreover, equity-reward and over-reward produced higher levels of both customer satisfaction and repatronize intentions than did under-reward. Yet there were no differences in satisfaction and repa- tronize intentions for equity-reward and over-reward. These outcomes suggest that loyalty programs have the potential of not boosting members' loyalty, at the same time as they may reduce loyalty among non-members. & 2015 Elsevier Ltd. All rights reserved. 1. Introduction Loyalty programs have become common in many service and retail industries (Melancon et al., 2011), and some empirical stu- dies suggest that they may have a positive impact on customer loyalty (Leenheer et al., 2007; Liu, 2007; Meyer-Waarden, 2007). These programs typically provide the member with preferential treatment, in the sense that members receive a better deal than non-members. Moreover, researchers have identified a positive association between receiving preferential treatment and variables such as customer satisfaction, customer commitment, increased purchases, positive word-of-mouth, and customer share (Gwinner et al., 1998; Lacey, 2007), thus suggesting that preferential treat- ment produces benefits for both (a) the customer who receives this treatment and (b) the firm providing the customer with the treatment. However, and as a main thesis in this paper, we believe that existing research on the effects of rewards from loyalty programs, and on preferential treatment effects, has overlooked the possi- bility for inter-customer comparisons. Given that we humans are hardwired to make comparisons in resource allocation situations, we assume that loyalty programs designed in the typical way (i.e., members are given preferential treatment) induce comparisons. We also assume that this is particularly likely when loyalty rewards are distributed to members in social settings in which members and non-members can see – and compare – the dis- tribution of the rewards vis-à-vis each other. Moreover, we believe that the rapid development of social media, in which customers often share purchase-related information, are making customer- to-customer comparisons increasingly common. In relation to many previous studies of loyalty programs, in which the customer is depicted as a socially isolated individual, we are thus explicitly concerned with the potential for inter-personal comparison op- portunities to influence the effects of loyalty program rewards. The purpose of this paper, then, is to examine the effects of preferential treatment stemming from a loyalty program in a si- tuation explicitly allowing for inter-customer comparisons of re- wards. Three effect variables are included: perceived justice, cus- tomer satisfaction, and repatronize intentions. We assume that inter-customer comparison is particularly likely to evoke justice perceptions. In general, this variable has to do with the extent to which individuals perceive that the exchange of resources be- tween themselves and another party is fair (Maxham and Nete- meyer, 2003), and it should be seen as one of several parts of the individual's overall framework for assessing moral aspects of ex- change (Carlson and Kacmar, 1997; Ferrell and Gresham, 1985). Our focus is on one specific perceived justice type, distributive justice, which has to do with individuals' perceptions of justice in terms of the distribution of tangible outputs from resource ex- change activities (Cohen-Charash and Spector, 2001; Maxham and Netemeyer, 2002; Tax et al. 1998). In overall moral terms, then, we focus on consequential aspects rather than deontological aspects. Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/jretconser Journal of Retailing and Consumer Services http://dx.doi.org/10.1016/j.jretconser.2015.03.005 0969-6989/& 2015 Elsevier Ltd. All rights reserved. n Corresponding author. E-mail address: Magnus.Soderlund@hhs.se (M. Söderlund). Journal of Retailing and Consumer Services 25 (2015) 47–57