The Role of Power Distance in Influencing Non-Loyalty Status Customers’ Satisfaction

Loyalty programs are increasingly being preferred by businesses as a tool to increase customer retention (Dreze and Nunes 2009). We explore how power distance belief – the extent to which hierarchy and inequality is prevalent in society – influences non-loyalty-status consumers’ satisfaction with businesses that offer loyalty programs (Hofstede 1980, 2001). Current conceptualizations of power distance suggest that, because they expect and observe inequalities, non-loyalty status consumers in high (vs. low) power distance contexts would be more tolerant of preferential treatment given to loyalty status consumers. Hence, they should be less dissatisfied when loyalty-status consumers receive priority. Contrary to this hypothesis, we suggest that in high (vs. low) power distance contexts, people low in the social hierarchy dislike being at the low end of the rung, and desire equality. Hence, they are more dissatisfied with businesses giving preferential treatment to loyalty-status consumers (H1). Although research has not directly explored the link between power distance and desire for equality, some limited research points to the relationship. Based on a study of 116,000 respondents from over 50 countries, Hofstede (2001) suggested that inequality is rarely considered desirable and especially so in high power distance contexts. Similarly, Carl et al. (2004) found a negative correlation between the level of inequality in a country (which they referred to as power distance-in-practice) and its citizens’ desire for hierarchy (which they referred to as power distance-values). Accordingly, we propose and find that because consumers in high (vs. low) power distance contexts have a stronger desire for equality, the inequality of loyalty programs affects consumers in high (vs. low) power distance contexts more negatively. In brief: non-loyalty-status consumers’ desire for equality mediates power distance’s effects on their satisfaction with businesses that offer loyalty programs (H2).