Content area
Full Text
Introduction
The popularity of customer loyalty programs has attracted widespread attention among marketing scholars in recent years (e.g. Kivetz and Simonson, 2002; Nunes and Dreze, 2006; Roehm et al., 2002; Uncles et al., 2003). Much of the research has been directed towards investigating how these programs contribute to the firm's financial and market performance (e.g. Bolton et al., 2000; Kim et al., 2004; Lewis, 2004; Sharp and Sharp, 1997) and their ability to cultivate customer loyalty (e.g. Dowling and Uncles, 1997; O'Malley and Prothero, 2004; Uncles et al., 2003). Despite the abundance of customer loyalty program research – and emerging perspective that firms must move from their traditional position of providing all participating customers with equivalent benefit enhancement offerings – few studies have evaluated aspects of program fairness and privacy from the customer's vantage point.
While critics of loyalty programs argue that marketers should strive to enhance the value proposition for every customer, the nature of customer loyalty programs is such that tiered levels of benefits and customer services are created. Furthermore, programs that target specific customers or customer segments in order to reward customer loyalty will require even greater value proposition differentials among customers and more precise market segmentation than currently exists with most loyalty programs. Firms that utilize these programs are explicitly shifting resources away from non‐participating customers in favor of customers who participate in their loyalty programs, which may lead to accusations of discriminatory customer treatment. For customers who participate in loyalty programs, there is potential for increased concern about the misuse of personal information and loss of control over how information is being collected and disseminated (Langenderfer and Cook, 2004), given that current regulatory measures designed to protect consumer information privacy may not be sufficient (Petty, 2000). Meanwhile, the collection and use of information that can favorably impact the longevity and profitability of customer relationships is often dependent upon consumers' voluntary participation in these programs.
To our knowledge, no published work has examined the issue of consumer fairness as it relates to how firms use loyalty programs to collect proprietary information and differentiate value propositions among customer segments. This is a critical gap in the literature because loyalty programs continue to be used by organizations as...