What recovery options to offer for loyalty reward program members: Dollars vs. Miles? |
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| Institution: | 1. Assistant Professor, School of Hotel and Tourism Management, The Hong Kong Polytechnic University, Hong Kong;2. Marriott Professor of Lodging Management, School of Hospitality Management, The Pennsylvania State University, United States;1. School of Hotel and Tourism Management, The Hong Kong Polytechnic University, 17 Science Museum Road, TST East, Kowloon, Hong Kong Special Administrative Region;2. 224 Mateer Building, The Pennsylvania State University, University Park, PA, 16802, United States;1. School of Hospitality Management, The Pennsylvania State University, United States;2. School of Hotel and Tourism Management, The Hong Kong Polytechnic University, Hong Kong;1. School of Hospitality Management, The Pennsylvania State University, 221 Mateer Building, University Park, PA 16802, United States;2. School of Hospitality Management, The Pennsylvania State University, 224 Mateer Building, University Park, PA 16802, United States;1. Conrad N. Hilton College of Hotel & Restaurant Management, University of Houston, 4450 University Dr. #227, Houston, TX, 77204, United States;2. Department of Hotel Management, Cheju Halla University, 28 Halladae-gil, Heungeop-myeon, Wonju-si, Gangwon-do, South Korea;3. Chaplin School of Hospitality & Tourism Management, Florida International University, Biscayne Bay Campus, 3000 Northeast 151 Street, North Miami, LF, 33181, United States |
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| Abstract: | Research shows that offering monetary compensation is effective in restoring customers’ equity perceptions following a service failure. However, little is known about loyalty reward program members’ responses to various types of recovery options. This study fills this important void by investigating two types of compensation: a discount coupon (in dollars) and bonus reward points (in miles) in the airline context. This study further investigates the boundary effect of controllability of a service failure. Our findings show that, when the flight delay is perceived as highly controllable by the airline company (i.e., scheduling error by flight crews, repatronage intention was higher in the 50-dollar discount vs. 2500 bonus miles condition. Conversely, repatronage intention did not differ between the two compensation options when the flight delay was perceived as uncontrollable i.e., inclement weather. Our findings help hospitality and tourism firms leverage service recovery initiatives for loyalty reward program members. |
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| Keywords: | Service recovery Service failure Recovery compensation Loyalty program Construal level |
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