LAUSR

Hospitality and tourism firms use two different strategies in customer relationship management: rewarding loyalty program customers with earned rewards (earned preferential treatment) and delighting the nonprogram customers with surprise rewards (unearned preferential treatment). However, research overlooks the key impact of how these two customer relationship management strategies may negatively affect the observing loyalty program customers. To address these gaps, Study 1 finds that providing a nonprogram customer with a high-value unearned treatment significantly decreases perceptions of distributive justice, status, and loyalty among the observing loyalty program customers. No significant interaction effects of a firm’s explanation were found, suggesting that the practice of unearned preferential treatment cannot be justified simply by presenting a reason for the practice. Study 2 finds that compensating the affected program customers with tangible compensation is the only significant factor that enhances the observing loyalty program customers’ perceived trust, suggesting rebuilding customers’ trust as the key element in recovery. This research is grounded in social comparison and justice theory and builds upon the loyalty, social servicescape, and customer delight literature to explicitly examine the reward comparison stemming from the social presence of other customers.