Perceived Fairness of Differential Customer Treatment

Abstract

Following the principles of relationship marketing, many service providers treat customers differently based on their profitability. We investigate consumers' fairness perceptions of such differential customer treatment in two major service economies, the United States and Germany. Applying the concept of distributive justice to differential customer treatment, we find that consumers' preference for the principle of equity versus the principle of equality predicts fairness perceptions in both countries. We also find that consumers' reactions to nonpreferred treatment are more intense than their reactions to preferred treatment. That is, results indicate that not only does customers' understanding of distributive justice have an influence, but also the principle of loss aversion comes into play when differential customer treatment is examined from the consumers' perspective. We also investigate differences between U.S. and German consumers and find that U.S. consumers perceive differential customer treatment as less unfair. Though rather critical of differential treatment at large, we also find that German consumers report reacting more positively when preferred. Although fairness is an issue, results overall show that most service providers should not refrain from differential customer treatment. Because, generally, consumers do not seek complete equality and like to be preferred, service providers applying differential treatment need to clearly communicate the equity principle and to make sure to treat their best customers preferred-without treating other customers badly. We also recommend including customers' fairness perceptions as a key performance indicator in firms' market research plans and considering regional adjustments rather than standardized practices when applying differential treatment strategies in different countries.

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