VIP loyalty programs: Consumers prefer awards they can share

Oct 15, 2013

Consumers appreciate being able to share their perks with others, and will sacrifice exclusivity to do so, according to a new study in the Journal of Consumer Research.

"Companies spend billions of dollars each year on customer loyalty or VIP programs in an effort to loyal customers and make them feel both special and a sense of status," write authors Brent McFerran (University of Michigan) and Jennifer J. Argo (University of Alberta). Many , like airline lounges, luxury boxes, and hotel rooms extend benefits to guests of the VIP, or "an entourage."

"These entourage members have typically done nothing to earn the preferential treatment, and may potentially dilute the prestige of the services, because the perks are extended to people merely on the basis of who they know," the authors explain. "In other words, entourage members receive undeserved perks, and these people make VIP rewards less scarce."

The authors wondered whether extending the preferential treatment to the entourage dilutes the prestige of rewards programs. Across six studies, they found that loyalty program members value the ability to share an experience with their guests. Most surprisingly, they are willing to trade the scarce nature of preferential treatment in order to do so. For example, in one study, 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. Finally, they showed that feelings of social connection underlie the effect. 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. What we found most interesting was not just that people want to bring guests, but that they were willing to trade off scarcity of rewards in order to do so," the authors write. "People are willing to trade rare rewards for more common ones, if they get to share these experiences with their friends."

Explore further: Free perks and upgrades: Could they actually embarrass consumers?

More information: Brent McFerran and Jennifer J. Argo. "The Entourage Effect." Journal of Consumer Research: February 2014.

add to favorites email to friend print save as pdf

Related Stories

Recommended for you

Study finds law dramatically curbing need for speed

Apr 18, 2014

Almost seven years have passed since Ontario's street-racing legislation hit the books and, according to one Western researcher, it has succeeded in putting the brakes on the number of convictions and, more importantly, injuries ...

Newlyweds, be careful what you wish for

Apr 17, 2014

A statistical analysis of the gift "fulfillments" at several hundred online wedding gift registries suggests that wedding guests are caught between a rock and a hard place when it comes to buying an appropriate gift for the ...

Can new understanding avert tragedy?

Apr 17, 2014

As a boy growing up in Syracuse, NY, Sol Hsiang ran an experiment for a school project testing whether plants grow better sprinkled with water vs orange juice. Today, 20 years later, he applies complex statistical ...

Creative activities outside work can improve job performance

Apr 16, 2014

Employees who pursue creative activities outside of work may find that these activities boost their performance on the job, according to a new study by San Francisco State University organizational psychologist Kevin Eschleman ...

User comments : 0

More news stories

Egypt archaeologists find ancient writer's tomb

Egypt's minister of antiquities says a team of Spanish archaeologists has discovered two tombs in the southern part of the country, one of them belonging to a writer and containing a trove of artifacts including reed pens ...

NASA's space station Robonaut finally getting legs

Robonaut, the first out-of-this-world humanoid, is finally getting its space legs. For three years, Robonaut has had to manage from the waist up. This new pair of legs means the experimental robot—now stuck ...

Ex-Apple chief plans mobile phone for India

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

Filipino tests negative for Middle East virus

A Filipino nurse who tested positive for the Middle East virus has been found free of infection in a subsequent examination after he returned home, Philippine health officials said Saturday.

Airbnb rental site raises $450 mn

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.