TECHNISCHE UNIVERSITÄT MÜNCHEN Lehrstuhl für Dienstleistungs- und Technologiemarketing Perceived Fairness of Differential Customer Treatment Sabine Mayser Vollständiger Abdruck der von der Fakultät für Wirtschaftswissenschaften der Technischen Universität München zur Erlangung des akademischen Grades eines Doktors der Wirtschaftswissenschaften (Dr. rer. pol.) genehmigten Dissertation. Vorsitzende: 1. Univ.-Prof. Dr. Claudia Peus Prüfer der Dissertation: 1. Univ.-Prof. Dr. Florian von Wangenheim 2. Univ.-Prof. Dr. Hugo M. Kehr Die Dissertation wurde am 28.07.2011 bei der Technischen Universität München eingereicht und durch die Fakultät für Wirtschaftswissenschaften am 16.11.2011 angenommen. English Summary I English Summary The growth of the service economy as well as technological advancements led to the emer- gence of relationship marketing in the 1990s. Since then, many service providers have learned from long-term profitability analyses that some of their customer relationships are unprofit- able. Consequently, more and more service providers—for example banks and telecommuni- cations companies—have systematically aligned their services to customer profitability in recent years. The present work uses the term differential customer treatment to denote these profitability-based gradations of service to customers. That is, differential customer treatment represents a continuum spanning the top priority treatment of a given firm’s most profitable customers at one extreme and the divestment (‘dismissal’) of a given firm’s persistently un- profitable customers at the other extreme. Put in everyday language, the idea that the cus- tomer is always right has expired. Although first empirical evidence suggests that differential customer treatment pays off (at least in the short term), several voices—in the media as well as in academic marketing—have criticized this practice as unfair, especially from the consumers’ perspective. To date, criti- cism from marketing researchers has mainly comprised general remarks and theoretical side notes. Surprisingly, a thorough empirical analysis of the consumer perspective is missing. Hence, the present dissertation provides an empirical investigation of consumers’ fairness perceptions of differential customer treatment. Different facets of the consumer perspective are examined in two empirical projects. Project I investigates consumers’ fairness perceptions of differential customer treatment in two major service economies, the United States and Germany. Project II analyzes how different forms of a service provider’s self-presentation affect consumers’ expectations and fairness perceptions of differential customer treatment. Project I demonstrates in two studies, using a descriptive and a pre-experimental design, that US consumers and German consumers perceive differential customer treatment differently: US consumers regard this strategy as more fair than German consumers across different serv- ice industries (i.e., in telecommunications, financial services, and air travel). In medical serv- ices, however, differential treatment is regarded as similarly unfair in both countries. Within both countries, consumers tend to accept differential customer treatment most easily in rela- II English Summary tion to airlines. Overall, German consumers are particularly strong opponents of customer divestment. Applying the concept of distributive justice to differential customer treatment, Project I also shows that consumers’ preference for the principle of equity versus the principle of equality predicts their fairness perceptions of differential customer treatment in both the United States and Germany. Because German consumers and US consumers consistently display the same level of equity preference—they favor a balance between equity and equality—this construct cannot explain country differences in fairness perceptions, however. Project I shows that country differences in fairness perceptions are partly explained by con- sumers’ economic locus of control beliefs. German consumers are generally much less con- vinced than US consumers that economic success is contingent upon effort. This belief affects fairness perceptions of differential customer treatment in Germany, but not in the United States. Put more simply, differential customer treatment is regarded as fair in the United States if the preferred customer pays more to the company than the non-preferred customer. In Germany, differential customer treatment is regarded as fair if the preferred customer pays more and if this ‘surplus’ is looked upon as well earned. In terms of consumers’ intended reactions to differential customer treatment, Project I reveals that German consumers react more extremely than US consumers. That is, German consumers report reacting more negatively when non-preferred and, regardless of their unfairness con- cerns, more positively when preferred. Within both countries, negative reactions to non- preferred treatment are more intense than positive reactions to preferred treatment, which suggests the loss aversion principle is at work. Beyond the focus on country differences in Project I, Project II examines how different forms of corporate self-presentations affect consumers’ expectations and fairness perceptions of differential customer treatment. An experiment in the telecommunications context, using a German sample, shows that consumers who are exposed to a service provider’s self- presentation as the consumers’ friend (pointing to social norms) expect differential customer treatment to a lesser extent than consumers who are exposed to a service provider’s self- presentation as the consumers’ business partner (pointing to market norms). Still, consumers do not differ in their overall fairness perceptions of differential customer treatment: The level English Summary III of perceived unfairness of differential customer treatment is high, independent of the service provider’s self-presentation as a friend or as a business partner. That is, although a cordial, friend-like self-presentation leads to a certain credit in consumers’ minds at first, this credit is lost when it comes to the implementation of differential customer treatment. Overall, the present dissertation shows that consumers do not always consider fair what serv- ice providers consider equitable and self-evident. Even though the fairness of differential cus- tomer treatment is controversial, the results of this thesis also show that most service provid- ers should not completely refrain from this practice. To avert false expectations and (the re- proach of) unfairness, service providers should consider two recommendations. Firstly, serv- ice providers should avoid self-presentations hinting at social norms if differential customer treatment is planned or already implemented. Secondly, international service providers need to bear in mind the country-to-country differences presented in this thesis when implementing differential customer treatment. That is, it is advisable for service providers to refrain from differential treatment in medical services in both the United States and Germany and to gen- erally abstain from customer divestment in Germany, but not in the United States. If some customers receive preferential treatment in the German market, it is also advisable to empha- size that this treatment is well deserved. Although managers may regard fairness as a subordinate goal when compared to their targets for profit and growth, this thesis makes a case for considering consumers’ fairness percep- tions (i.e., the above recommendations): For one thing, service providers are reliant upon well-functioning customer-firm relationships—that can be severely disrupted when consum- ers feel treated unfairly. For another thing, mutual fairness can be regarded as a general socie- tal goal to which businesses should contribute, be it for intrinsic or instrumental reasons. Theoretically, this work highlights the importance of consumers’ understanding and rationale of distributive justice as well as their responsiveness to different relationship norms in the context of differential customer treatment. Against this background, this thesis finally devel- ops an integrative conceptual framework of differential customer treatment that not only links the ideas investigated and discussed in the two separate projects presented, but also suggests areas for future research. IV English Summary Deutsche Zusammenfassung V Deutsche Zusammenfassung Vor dem Hintergrund technologischer Innovationen und der zunehmenden Bedeutung des Dienstleistungssektors hat sich im Marketing seit den 1990er Jahren die Strategie des Bezie- hungsmarketings (relationship marketing) etabliert. Durch die Erfassung und kontinuierliche Analyse von Kundendaten wurde seither vielen Dienstleistungsanbietern bewusst, dass einige ihrer Kundenbeziehungen nicht gewinn-, sondern verlustbringend sind. Immer mehr Dienst- leistungsunternehmen—zum Beispiel Banken und Telekommunikationsanbieter—haben in den vergangenen Jahren hierauf reagiert und ihre Dienstleistungen systematisch der Profitabi- lität ihrer Kundenbeziehungen angepasst. Diese Ausrichtung des Service-Niveaus an der Pro- fitabilität der Kunden wird in der vorliegenden Arbeit als differentielle Kundenbehandlung (differential customer treatment) bezeichnet. Differentielle Kundenbehandlung kann als Kon- tinuum aufgefasst werden. Dieses reicht von der speziellen, bevorzugten Behandlung beson- ders profitabler Kunden auf der einen Seite bis hin zur Ausgliederung