Gratitude versus Entitlement: A Dual Process Model of the Profitability Implications of Customer Prioritization

Abstract

Customer prioritization strategies, which focus a firm's efforts on its most important customers, are expected to improve account profitability. Anecdotal evidence suggests, however, that such strategies may also undermine account profitability by inducing customers to become overly demanding. Building on social exchange theory, this research evaluates these competing perspectives across two field studies and finds that prioritization is best understood as a double-edged sword. Specifically, the results reveal that prioritization efforts initiate both a gratitude-driven process, which enhances sales and profit, and an entitlement-driven process, which increases service costs and reduces profit. Importantly, the findings indicate that prioritization tactics differ in the extent to which they trigger these competing processes and thus in their ability to influence account profitability. Finally, the results also reveal that critical moderators (competitive intensity and prioritization transparency) determine the extent to which the entitlement-driven process undermines the gratitude-driven process. For managers, the findings suggest that both the tactics employed and moderating conditions determine whether prioritization has a positive, negative, or negligible effect on prioritized accounts' profitability.

When Frontline Employee Behavior Backfires

“…First, since prior work has often, but perhaps unintentionally, treated customer gratitude and indebtedness as substitutes (Palmatier et al 2009;Wetzel, Hammerschmidt, and Zablah 2014), our findings present a strong theoretical contribution by empirically demonstrating the importance of treating them as separate constructs occurring within the service encounter. Treating these emotions as distinct will avoid ''deficient and contaminated measures,'' ''measurement model misspecification,'' and ''weak theoretical rationale for hypotheses,'' as noted by MacKenzie (2003).…”

“…While marketing research notes gratitude's significant effects on key outcomes (see our opening discussion), even when including indebtedness items in its measurement (Palmatier et al 2009;Wetzel, Hammerschmidt, and Zablah 2014), a review of the limited number of psychology studies comparing gratitude and indebtedness suggests these two emotions prompt different consequences. One finding is that gratitude promotes strong, positive relationships unlike indebtedness.…”

Gratitude: does it have a place within media-practice education?

“…We know however within contexts outside education, that beneficial outcomes of gratitude can be undermined by entitlement (Wetzel et al 2014) and that entitlement decreases the positive effects of perceived value on gratitude (Pelser et al 2015).…”

Transformational Relationship Events

“…Strong relationships increase partners' vulnerability to opportunistic behavior because of their reliance on trust (Seggie, Griffith, and Jap 2013), decrease competitiveness due to greater complacency, or increase the cost of servicing "entitled" customers (Wetzel, Hammerschmidt, and Zablah 2014). Strong relationships increase partners' vulnerability to opportunistic behavior because of their reliance on trust (Seggie, Griffith, and Jap 2013), decrease competitiveness due to greater complacency, or increase the cost of servicing "entitled" customers (Wetzel, Hammerschmidt, and Zablah 2014).…”