Abstract:

Despite the prevalent use of loyalty program (LP), the effectiveness and underlying mechanism is not well understood. To this end, the authors introduce the construct of price ambiguity of reward—or the subjective experience of missing price information relevant to a reward—and articulate its important role in understanding LPs. Two relationship types are examined: exchange relationships in which benefits are given to others to get something back and communal relationships in which benefits are given to show concern for other’s needs. Study 1 found that price salient rewards work worse than price ambiguous ones in maintaining the loyalty of communal customers. Further, we try to find out the underlying mechanism of the price ambiguity. Results of Study 2 showed that in LPs, communal norms are vulnerable to salient price information. Price ambiguous (salient) rewards adhere (violate) to the norms of communal relationship and enhance (decrease) communal customer’s loyalty intention. Finally, we discuss the theoretical, practical, and future research implications of these findings.

Key words: reward, price, ambiguity, loyalty program, relationship