Boasting and aspiring, as status-reinforcing mechanisms in status-based loyalty programs

In the retail industry, status-based loyalty programs (SBLP) are commonly used as an important marketing tool to award elevated status to customers who exceed certain level of spending. In contrast to previous studies that have considered “target and bystander” and “member–non-member” differentiation, this study responds to the need to account for the dynamics in across-tier effects in loyalty programs (LPs). By undertaking a scenario-based experiment that focuses on a “face-to-face” across-tier social event, this study examines the joint effects of exclusivity, status visibility and social comparison on LP members’ status perception and willingness to spend. Contrary to prior beliefs that the beneficial effects for targets (e.g., VIP members) in status hierarchies are offset by the negative effects on bystanders (e.g., non-VIP members), this study concludes that situations when social comparisons occur in SBLPs are not necessarily zero-sum games. Ultimately, this study uncovered two distinct status-reinforcing mechanisms–“aspiring” and “boasting”–which LP members may experience in SBLPs. The outcome of this study highlights important implications for companies to pursue different strategies aimed at enhancing members’ status perceptions.