Enduring Effects of Goal Achievement and Failure Within Customer Loyalty Programs: A Large-Scale Field Experiment

This research investigates whether there are enduring effects of goal achievement and failure within customer loyalty promotion programs. We collaborated with a major hotel chain to launch a large scale field experiment involving 95,532 existing loyalty customers. We observed customers’ hotel stays for eight months before the experiment, eight months during the experiment, and eight months after the experiment. Customers in the treatment group were asked to increase their hotel nights during the 8-month promotion by a set percentage relative to their baseline to receive a reward. Overall, the promotion led to increased purchasing in the post-promotion period. However, only 20% of customers successfully reached the goal whereas 80% missed the goal. We use a propensity score analysis to examine the distinct effects of goal achievement versus goal failure. Results show that goal attainment significantly increased post-promotion purchasing whereas goal failure significantly reduced post-promotion purchasing. Additionally, we use econometric methods to empirically test a behavioral theory of relationship-based reciprocity. We find that customers in a high status tier relationship, with the most invested in the firm, are most affected by goal failure whereas customers in a low status tier relationship, with the least invested in the firm, are most affected by goal success. Because the type of loyalty program described in this paper is widely used in a variety of industries the findings suggest that marketers should set reachable goals within loyalty promotion programs. Firms should be particularly cautious about the impact of goal failures for the firm’s most loyal customers.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mksc.2015.0966 .