Rewards Programs

BusinessBriefings.com - November 2013

Companies spend billions of dollars each year on customer loyalty or VIP programs in an effort to reward loyal customers and make them feel special and have a sense of status.  Many loyalty programs, like airline lounges, luxury boxes, and hotel rooms, extend benefits to guests of the VIP, or their "entourage." 

The members of a VIP's entourage have typically done nothing to earn the preferential treatment, and receive the perks merely on the basis of who they know.  In other words, "entourage members" receive undeserved perks.

So the question naturally arises as to whether extending the preferential treatment to the entourage dilutes the prestige of rewards programs. 

However, based on six studies by researchers at the University of Michigan and the University of Alberta, loyalty program members value the ability to share an experience with their guests. 

And surprisingly, they are willing to trade the scarce nature of preferential treatment in order to do so.  For example, in one study, consumers imagined attending a dinner party with a political figure of their choice.  The bigger the entourage, the more the feeling of status increased.

In another study, consumers were invited up to a luxury box during a professional football game.  Those who had an entourage with them felt a higher degree of status. 

Why?  An entourage makes one feel socially connected, and these feelings of connectedness with others make consumers feel a sense of personal status.

Scarcity and value are strongly linked.  The research showed that people are willing to trade rare rewards for more common ones, if they get to share these experiences with their friends.

Resources

Journal of Consumer Research, to be published February 2014, "The Entourage Effect," by Brent McFerran and Jennifer J. Argo.  © 2013 Journal of Consumer Research, Inc.  All rights reserved.

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https://www.jcr-admin.org/pressreleases.php?issue=58