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Understanding Relationship Marketing and Loyalty Program Effectiveness in Global Markets Joshua T. Beck, Kelly Chapman, and Robert W. Palmatier

ABSTRACT Relationship marketing (RM) and loyalty programs (LPs) are key differentiation strategies for firms facing increasing global competition. Accordingly, global interest in RM and LPs has surged, though researchers examining these mar- keting activities typically apply U.S.-centric frameworks to international research contexts. To understand how RM and LPs may be influenced by factors that distinguish global markets, this review offers a comprehensive framework of both RM and LP mechanisms and considers how cultural and developmental contingency factors may alter the effects of these mechanisms on seller performance. The results from this review produce eight propositions about where spe- cific RM and LP strategies should be most effective. By considering these mechanisms jointly, the authors also simulta- neously delineate RM and LP theories and broaden the scope of global research in both domains.

Keywords: relationship marketing, loyalty programs, culture, economic development, international marketing

T he groundswell of international interest in relation- ship marketing (RM) and loyalty programs (LPs), both in practice and as a substantive area of aca-

demic research, stems from the strategic competitive advantages associated with robust buyer–seller relation- ships (Palmatier et al. 2013; Samaha, Beck, and Palmatier 2014; Tuli, Bharadwaj, and Kohli 2010); the increasing importance of foreign trade, such that foreign receipts are nearly half of total revenues for U.S. firms with foreign trade (Silverblatt and Guarino 2011); and the proliferation of U.S.-based business theories abroad (The Economist 2004; Nelson 2011). For U.S. sellers, both RM and LPs serve as key differentiation strategies, and perhaps as a result, most research into these strate- gies adopts U.S.-centric frameworks, with negligible consideration of how systemic differences between

countries could influence the effectiveness of RM and LPs (Samaha, Beck, and Palmatier 2014). Yet the expanding interest in RM and LPs is global in nature; according to ISI Web of Science, the number of research articles per year examining RM or customer loyalty as a topic tripled from 2003 to 2013, and scholars outside the United States accounted for approximately 80% of this increase.

Thus, to understand how the effectiveness of RM and LPs varies across global markets, we review the mecha- nisms that underpin RM and LP effectiveness and con- sider how their effects might be amplified by factors that differ across global markets. Ultimately, the aim of our review is to establish a comprehensive map of RM and LP mechanisms, collate the contingency factors that may influence the effectiveness of RM and LPs world- wide, and offer specific predictions about how certain contingency factors moderate the benefits of RM and LPJoshua T. Beck is Assistant Professor, Lindner College of Business,

University of Cincinnati (e-mail: [email protected]). Kelly Chap- man is a doctoral student, Foster School of Business, University of Washington (e-mail: [email protected]). Robert W. Palmatier is Pro- fessor of Marketing and John C. Narver Chair in Business Adminis- tration, Foster School of Business, University of Washington (e-mail: [email protected]). Bulent Menguc served as associate editor for this article.

Journal of International Marketing ©2015, American Marketing Association Vol. 23, No. 3, 2015, pp. 1–21 ISSN 1069-0031X (print) 1547-7215 (electronic)

Relationship Marketing and Loyalty Program Effectiveness 1

2 Journal of International Marketing

mechanisms for seller performance. Figure 1 illustrates our conceptual model.

This research advances international RM and LP research in several key ways by addressing the simple but important question, “How should efforts to build customer relationships and loyalty be adapted across countries?” First, we extend extant international cus- tomer loyalty frameworks (Kumar et al. 2013) by delineating and offering propositions specific to the unique and common mechanisms underlying the effects of RM and LPs. For example, we propose that inertia- based mechanisms (e.g., habit), which primarily under- lie LPs but not RM, are more effective in countries whose cultures avoid uncertainty and in those with large accumulations of technological capital. This proposition may be specifically useful to companies expanding retail operations in foreign markets (Swoboda and Elsner 2013) and generally useful to practitioners who are increasingly interested in building profitable customer

habits in developed economies (Marketing Science Insti- tute 2014; Shah, Kumar, and Kim 2014).

Second, we consider the moderating effects of economic development in addition to culture. Culture, which develops and endures over centuries (Hofstede, Hof- stede, and Minkov 2010), has been a primary focus of international marketing research (Sojka and Tansuhaj 1995), whereas economic development, which fluctu- ates more in the short run (Piketty 2014; Schumpeter 1934), is often overlooked, despite its importance. This approach provides a framework that bridges previous theory and informs substantive managerial decisions, such as how to adapt RM investments across export partners to leverage local cultural and economic condi- tions (Zeriti et al. 2014). Overall, we offer 8 proposi- tions (comprising 14 predictions overall) as to where RM and LPs will be most effective.

Third, in this review we outline an agenda for further research based on our proposed framework. For exam-

Figure 1. Conceptual Framework: Moderating Effects of International Contingency Factors on LP and RM Effectiveness

Loyalty Program

Inertia-based mechanisms

Mechanisms

Cultural Contingency Factors

Individualism-collectivism

Power distance

Uncertainty avoidance

ctors

m

Comparison-based

mechanisms

Identity-based mechanisms

Communal-based

E

i C i F

Long-term orientation

Masculinity-femininity

Selle

er performance

Re

Communal based mechanisms

elationship Marketin

Dynamic mechanisms

Mechanisms

Econo

ng

omic Contingency Fa

Resource distribution

echnological capitalTTechnological capital

Security

actors

Relationship Marketing and Loyalty Program Effectiveness 3

ple, further research may consider how the cultural and economic factors presented in our framework influence “dark side” outcomes of RM and LPs, such as how the special treatment of some customers can cause envy and disloyalty among unrewarded customers (Steinhoff and Palmatier 2014). In addition, we suggest that future researchers should consider exchange context, such as whether the exchange involves a high level of service (Voss, Roth, and Chase 2008). We may expect, for example, that communal-based RM strategies are more effective in collectivist cultures and when service levels are higher—and service level may interact with culture to ultimately determine the performance of RM strate- gies. Overall, we generate multiple paths for further research and offer fresh insights to international RM and LP management.

MECHANISMS UNDERLYING RM AND LP EFFECTIVENSS

Relationship marketing is broadly defined as “all mar- keting activities directed towards establishing, develop- ing, and maintaining successful relational exchanges” (Morgan and Hunt 1994, p. 22). Strategies that build customer relationships enhance sales and profit over time, especially when sellers adopt these strategies before competitors and when competitive intensity is high (Kumar et al. 2011). Loyalty programs, which often have relationship building as a goal, typically include “a variety of marketing initiatives, including reward cards, gifts, tiered service levels, dedicated support contacts, and other methods that positively influence consumers’ attitudes and behaviors toward the brand or firm” (Hen- derson, Beck, and Palmatier 2011, p. 258). Because in the modern marketplace sellers increasingly face global competition and commoditization of products and serv- ices, RM and LPs represent key differentiation strategies (Palmatier et al. 2006; Stahl et al. 2012).

With this foundation, we review mechanisms unique to RM and LPs, as well as those that are common to both (e.g., when LPs constitute RM strategies). To build our conceptual framework, we have reviewed extant frame- works (Henderson, Beck, and Palmatier 2011; Palmatier et al. 2006) and recent extensions, including dynamic mechanisms (Palmatier et al. 2013), to develop a com- prehensive map of current RM and LP theory. To specify how the effects of RM and LP mechanisms on seller per- formance vary across countries, we first thematically categorize and review mechanisms that underlie the effects of RM and LP on performance (i.e., main

effects), as Table 1 outlines, and then consider how these mechanisms might be moderated by global market con- tingency factors, as Table 2 outlines subsequently.

Inertia-Based Mechanisms

Inertia-based mechanisms enhance seller performance by increasing the advantages of prior behaviors (e.g., repurchasing from a known seller) relative to new behaviors (e.g., purchasing from a competing seller), usually through the cognitive ease associated with dupli- cating previous actions (Wood and Neal 2009). These mechanisms often establish the effectiveness of LPs (Liu- Thompkins and Tam 2013). For example, a loyalty rewards card may increase retention by cuing shopping behavior at a specific store (Henderson, Beck, and Palmatier 2011). The effectiveness of inertia-based mechanisms is evident in customer purchase data: as much as 85% of customer needs are satisfied through repeat brand purchases (Schneider and Hall 2011), even though customers rarely exhibit actual emotional attachment to the brands they repeatedly buy (The Economist 2014). In this sense, inertia-based mecha- nisms may operate outside traditional RM mechanisms, such as trust and commitment. We consider habit, cog- nitive lock-in, and economic switching costs.

Habits are the “associations between situational cues and repeatedly performed behavior options” (Tobias 2009, p. 409). Customers with strong habits rarely stray from their previous behaviors, and LPs often activate habits by reinforcing situational cues, such as accrued reward points, that trigger associated purchase behaviors (Henderson, Beck, and Palmatier 2011). For example, a club card that dangles from a customer’s key chain might serve simultaneously as a reminder of the customer’s intention to buy milk and a cue to buy milk from the seller that offers the club card. Although habit underlies the effectiveness of many LPs, the programs also can undermine or break habits if they introduce new situa- tional cues, such as when LPs promote complementary products and thus interrupt habitual purchases or reduce retention (Liu-Thompkins and Tam 2013). However, we focus on the positive effects of habits that LPs reinforce. On an international level, habits likely are pervasive but can vary at the category level, depending on the cultural tradition. For example, habitual tea and juice drinking in the Czech Republic has limited the success of cola brands in that market (De Mooij 2004).

Similar to cue-based habits, cognitive lock-in, which refers to cognitive barriers created by brand-specific

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Mechanism Definition Key International Findings Business Examples

Comparison-Based Mechanisms

Prestige Respect and admiration based on achievement, success, or knowledge (Cheng et al. 2013)

Relationships with foreign brands enhance prestige in emerging economies as foreign brands are symbolic of achieve- ment (Zhou and Hui 2003).

Bufori’s prestige-based promotion strategy targeted toward male con- sumers failed in Malaysia, whose culture emphasizes more equality between genders (De Mooij 2004).

Envy Emotional discontent based on inferior posi- tion or inferior receipt of benefits provided relative to others (Feather and Sherman 2002)

The positive effects of envy on purchase intentions are reversed in egalitarian cultures that value modesty (Watson et al. 1999).

Many customers own multiple cars in masculine cultures such as Ger- many and the United Kingdom, whereas car ownership rates are lower in countries such as the Netherlands and Scandinavia (De Mooij 2000).

Identity-Based Mechanisms

In-group association Pursuit of association with desired reference groups (White and Dahl 2006)

The effect of in-group brand association on performance is stronger in more developed countries, where foreign brands are less prestigious (De Mooij 2004).

Japanese advertisements insert domestic symbols (e.g., Mount Fuji) in foreign brand communica- tions to increase in-group associa- tions (Keillor and Hult 1998).

Table 1. Review of Research into RM and LP Mechanisms

Mechanism Definition Key International Findings Business Examples

Inertia-Based Mechanisms

Habit “Slowly developed associa- tions between situational cues and repeatedly per- formed behavior options” (Tobias 2009, p. 409)

Habits are pervasive but can vary at the category level, depending on country-specific traditions (De Mooij 2004).

Tea and juice brands in the Czech Republic enjoy natural barriers to competition from cola brands due to pervasive beverage consump- tion habits (De Mooij 2004).

Cognitive lock-in Cognitive barriers created by brand-specific knowl- edge investments (Mur- ray and Häubl 2007)

Cognitive lock-in is a competi- tive advantage for well-under- stood domestic brands; foreign brands may compete better in less familiar categories (Batra et al. 2000).

Early education investments in the Chinese market protected Volk- swagen from competitors; cus- tomers were hesitant to learn a competing foreign supplier’s new policies and procedures (Frynas, Mellahi, and Pigman 2006).

Economic switching costs

Losses arising from transi- tions between products or competitors (Jones, Mothersbaugh, and Beatty 2000)

Collectivist cultures may be more likely to risk financial losses, because they are sup- ported by large social net- works (Mandel 2003).

Chinese customers are more likely to switch to high-risk investment products because of their higher tolerance of downside risks (Weber and Hsee 1998).

Out-group dissociation Avoidance of association with undesired reference groups (White and Dahl 2006)

Conflict between home and for- eign countries can strengthen the negative effect of foreign country dissociation on perfor- mance. (Carvalho 2004).

Chanel’s Égoïste fragrance comme- cial was confusing and “too French” for U.S. consumers, even though Chanel was a familiar brand (Curry 2009).

Mechanism Definition Key International Findings Business Examples

Communal-Based Mechanisms

Trust “Confidence in an exchange partner’s relia- bility and integrity” (Morgan and Hunt 1994, p. 23)

Trust has a greater effect on per- formance when environmental uncertainty is higher (Guseva and Rona-Tas 2001).

Trust in large brands such as Haier and Lenovo is especially effective in China, where product uncer- tainty is high (Cayla and Arnould 2008).

Commitment “An enduring desire to maintain a valued rela- tionship” (Moorman, Zaltman, and Desh- pandé 1992, p. 316)

Collectivist cultures tend to emphasize personal rather than company-based forms of commitment (Skarmeas, Kat- sikeas, and Schlegelmilch 2002).

Salesperson turnover is especially damaging to customer relation- ships in China (Wang 2007).

Gratitude “The emotional apprecia- tion for benefits received” (Palmatier et al. 2009, p. 1)

The effect of gratitude on reci- procity is stronger in collec- tivist cultures where customers focus more on the efforts of others instead of themselves (Kitayama, Mesquita, and Karasawa 2006).

P&G gave away millions of prod- uct samples in Japan, where dis- tributors returned the favor by prominently showcasing P&G in retail locations (Kaynak and Her- big 2014).

Relationship Marketing and Loyalty Program Effectiveness 5

Table 1. Continued

Dynamic Mechanisms

Velocity The rate and direction of change in commitment (Palmatier et al. 2013)

Relationship velocity may be weaker but more stable in countries with a greater long- term orientation (Williams, Han, and Quall 1998).

Compared with those from Western countries, customers from Japan, China, and Korea exhibit slower but less variable relationship development (Hofstede, Jonker, and Verwaart 2008).

Resilience The ability to recover from stressors and flexi- bly adapt or even grow in response to adversity (Liu, Wang, and Lu 2013)

Cultures that emphasize per- sonal control reduce resiliency, because relationship fluctua- tions, which are outside the actors’ control, are percieved as more unfavorable and more damaging to the relationship (Baker, Gentry, and Rittenburg 2005).

Customers emigrating from Mexico, whose culture is more collectivist and deemphasizes per- sonal control, maintain strong relationships with multinational companies, despite the disruption caused by moving abroad (Broder- ick et al. 2011).

knowledge investments (Murray and Häubl 2007), pro- motes repeat purchase behaviors and thus enhances seller performance, albeit through a different process. When customers invest in learning the cognitive opera- tions associated with an LP’s rules and points system, switching to a competitor becomes more challenging because customers would have to replace their previ- ously formed knowledge with competitor-specific knowledge. Thus, for example, sellers familiar with

Delta’s frequent-flyer program may shy away from learning Alaska Airline’s points system, even if Alaska Airlines provides slightly more value. By creating a unique system to reward customers, sellers can create barriers to competition (Kivetz and Simonson 2003). International research has suggested that cognitive lock- in is especially effective for early entrants in foreign mar- kets. For example, Volkswagen’s early-to-market loyalty-building education programs secured Chinese

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Table 2. Review of Research into International Contingency Factors

Factor Definition Key Findings

Cultural Contingency Factors

Individualism– collectivism

“Extent to which people are expected to be self-reliant and distant from others (individu- alism) instead of mutually dependent and closely tied to others (collectivism)” (Samaha, Beck, and Palmatier 2014, p. 82; see also Hofstede, Hofstede, and Minkov 2010)

Customers in more collectivist cultures are more motivated to maintain harmony and more persuaded by relational partners (Laroche, Kalamas, and Cleveland 2005). Thus, RM is more effective in more collectivist cultures (Samaha, Beck, and Palmatier 2014).

Power distance “Extent to which inequalities between more and less powerful members of society are considered acceptable” (Samaha, Beck, and Palmatier 2014, p. 83; see also Hofstede, Hofstede, and Minkov 2010)

Customers in cultures with greater power distance are more likely to make social comparisons, increasing the effective- ness of status cues such as seller expertise (Pornpitakpan and Francis 2001).

Uncertainty avoidance

“Extent to which the members of a culture feel threatened by ambiguous or unknown situa- tions” (Samaha, Beck, and Palmatier 2014, p. 83; see also Hofstede, Hofstede, and Minkov 2010)

Customers in cultures with greater uncertainty avoidance exhibit a stronger resistance to change and place more importance on stability (Kale and Barnes 1992; Kale and McIntyre 1991) because they are more aware of the poten- tial risks associated with change (Deleersnyder et al. 2009).

Masculinity– femininity

“Degree to which ‘tough’ (masculine) values prevail over ‘tender’ (feminine) values in a society” (Samaha, Beck, and Palmatier 2014, p. 83; see also Hofstede, Hofstede, and Minkov 2010)

Whereas masculine cultures deemphasize relationships in favor of competition and achievement, feminine cultures emphasize relationships and cooperation as means of achievement (Hofstede, Hofstede, and Minkov 2010; Kale and Barnes 1992; Steensma et al. 2000).

Long-term orientation

Extent to which members of a society focus on perseverance and thrift (long-term orienta- tion) over respect for tradition and obliga- tions (short-term orientation) (Hofstede, Hof- stede, and Minkov 2010)

Customers in cultures with a greater long-term orientation focus more on long-term goals but are less forgiving of vio- lations of trust, which signal short-sightedness that is incompatible with a long-term focus (Hofstede, Jonker, and Verwaart 2008).

Developmental Contingency Factors

Resource distribution

Degree of inequality in the income or wealth distributed among members of a society (Heshmati 2006)

Customers in societies with higher income inequality engage in more self-enhancement, which may increase the perfor- mance of highly visible, comparison-based loyalty rewards programs (Loughnan et al. 2011).

Technological capital

Accumulation of capacities to invent, commer- cialize, and utilize technology (Avila and Evenson 2010)

Technology facilitates customer relationship management efforts (Ahearne, Hughes, and Schillewaert 2007) but also can have deleterious effects on RM implementation. For example, when rapport building is expected in a service encounter, the use of technology reduces positive evalua- tions of the exchange (Giebelhausen et al. 2014).

Security Freedom from or protection against physical threat (Kramer, Meyerson, and Davis 1990; Moeller and Harvey 2011; Thomas and Tow 2002)

Low levels of security reduce general levels of trust (Blanco and Ruiz 2013), which reduces trust in sellers overall (Grayson, Johnson, and Chen 2008).

Relationship Marketing and Loyalty Program Effectiveness 7

customers, who then became hesitant to learn about subsequent competitive entrants to their market (Fry- nas, Mellahi, and Pigman 2006).

Financial barriers also can enhance repeat purchase behavior and, thus, performance. Economic switching costs describe such barriers, referring to the financial losses that potentially arise when a customer transitions to a competitive seller (Jones, Mothersbaugh, and Beatty 2000). These costs can include contracts with cancellation penalties or the threatened loss of loyalty rewards (e.g., airline points) if customers fail to main- tain requisite purchase activity levels or defect to a com- petitor. Even if sellers offer very similar LPs, economic switching costs may deter customer defection. Research has also suggested that economic switching costs are more effective in certain countries; customers in Thai- land are more likely to overcome switching costs than those in Australia, for example (Patterson and Smith 2003); this tendency may stem from the stronger social support systems in more collectivist cultures such as Thailand, which reduce the personal consequences of economic risk (Mandel 2003). Overall, inertia-based mechanisms typically underlie the effects of LPs on per- formance and enhance customer loyalty through cue– behavior associations (habits), knowledge barriers (cog- nitive lock-in), and financial barriers (economic switching costs).

Comparison-Based Mechanisms

Whereas inertia-based mechanisms relate to the cognitive ease associated with duplicating previous actions, com- parison-based mechanisms are social in nature and involve assessments of status or rewards relative to the status or rewards of others. These mechanisms underpin RM as well as LPs if they include special treatment or gifts (Palmatier et al. 2009; Steinhoff and Palmatier 2014). They enhance seller performance by increasing the prestige value of a current relationship or by increasing the desirability of a potential relationship through envy.

Prestige refers to respect and admiration based on achievement, success, or knowledge (Cheng et al. 2013). Loyalty programs can enhance prestige by rewarding customers for an achievement (e.g., reaching a purchase threshold) or offering them exclusivity in the form of selective access to benefits available only to cus- tomers who provide high margins (Henderson, Beck, and Palmatier 2011). Airlines reward higher-paying or frequent customers with priority boarding or upgraded seating, for example. Similarly, relationships with lux- ury brands may offer a form of prestige that enhances

seller performance. Bufori, an Australian auto manufac- turer, signals that a customer relationship with its brand constitutes an achievement and thus enhances its cus- tomers’ prestige. However, this RM strategy proved unsuccessful in countries such as Malaysia that empha- size cooperation over individual achievement (De Mooij 2004). As this example highlights, the effectiveness of prestige-based LP or RM strategies can vary widely across markets, because some markets are far more prone to social comparison. In addition, an exclusive benefit that creates prestige for one customer may invoke envy in another.

Envy refers to emotional discontent resulting from an inferior position or inferior receipt of benefits relative to others (Feather and Sherman 2002). Whereas pres- tige likely enhances retention of the rewarded con- sumers, envy might increase the loyalty of excluded customers, who engage in an upward comparison with rewarded others. Envy motivates customers to improve their position by seeking the same benefits granted to others (Van de Ven, Zeelenberg, and Pieters 2009). However, if bystander customers determine that others’ rewards were unearned, a type of malicious (rather than benign) envy may emerge, which can cause them to defect to competitors (Van de Ven, Zeelenberg, and Pieters 2011). In this sense, attributions largely define whether feelings of envy produce approach or avoid- ance motives. In international research, the positive effects of envy on purchase intentions seem to reverse in egalitarian cultures that value modesty (Watson et al. 1999). In such settings, conspicuous consumption is widely regarded as an odious process guided by ulte- rior, condemned, attention-seeking motives (Ferraro, Kirmani, and Matherly 2013). Such differences might explain why many customers in masculine (vs. femi- nine) cultures such as China, Germany, and the United Kingdom own a higher number of expensive watches (De Mooij 2004).

Identity-Based Mechanisms

Identity-based mechanisms involve “me/not me” appraisals, reflecting the attributes that people use to define their personal and social identities (Bhattacharya and Sen 2003; Brewer 1991). These identity-based mechanisms primarily define RM effectiveness because customers pursue relationships with companies as a means to express their individual characteristics (e.g., intelligence) and social affiliations (e.g., group member- ship) (Ahearne, Bhattacharya, and Gruen 2005). Two mechanisms are inherent to this process: in-group asso- ciation and out-group dissociation.

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In-group association is the pursuit of self-connections with desired reference groups (White and Dahl 2006). Customers form stronger self–brand connections with brands that represent in-groups (Escalas and Bettman 2005); RM strategies that emphasize in-group associa- tions therefore can enhance loyalty and word of mouth (Bhattacharya and Sen 2003). Prior research has sug- gested that these associations vary internationally, depending on the desirability of the in-group. For exam- ple, customers are less likely to form relationships with foreign brands in developed countries because domestic brands that symbolize their home country are more respected and desirable (De Mooij 2004). Foreign brands trying to build relationships in global markets thus tend to incorporate local symbols in their commu- nications to increase in-group association; for example, many foreign brands use Mount Fuji in their Japanese advertisements (Keillor et al. 2011).

In contrast, out-group dissociation implies the avoid- ance of self-connections with undesired reference groups (White and Dahl 2006). This effect seems stronger in more independent countries, where customers have stronger self-differentiation goals (Escalas and Bettman 2005). Accordingly, RM strategies that involve partner- ing with undesirable reference groups can quickly result in widespread customer defection (Berger and Heath 2008), even when the out-groups are mostly favorable. For example, Chanel’s famous Égoïste fragrance was deemed “too French” for U.S. customers, even though Chanel was a popular brand in the U.S. market (Curry 2009).

Communal-Based Mechanisms

Communal-based mechanisms describe the norms or rules that govern an exchange between customers and sellers (McGraw and Tetlock 2005; Mende, Bolton, and Bitner 2013). For their RM efforts, marketers often seg- ment customers on the basis of these mechanisms, defin- ing them as either transactional or relational (Garbarino and Johnson 1999). Prior RM research has indicated that three primary communal-based mechanisms guide relational exchanges: trust, commitment, and gratitude (Palmatier et al. 2009).

Trust is “confidence in an exchange partner’s reliability and integrity” (Morgan and Hunt 1994, p. 23). It enhances the seller’s performance by lowering transac- tion costs, and it reflects the firm’s size, salespeople, expertise, and likeability (Doney and Cannon 1997). International research has suggested that trust is more effective for reducing transaction costs and increasing

performance in countries with more uncertain markets or industries (Grayson, Johnson, and Chen 2008; Guseva and Rona-Tas 2001). Accordingly, the trustwor- thy reputation of large firms historically has been espe- cially important in emerging economies such as Brazil or China (Cayla and Arnould 2008).

Commitment, which can arise from trust (Morgan and Hunt 1994), is “an enduring desire to maintain a valued relationship” (Moorman, Zaltman, and Deshpandé 1992, p. 316). Commitment builds over time based on perceptions of relationship value, and it enhances per- formance by increasing intentions to remain loyal to (i.e., repurchase from) a seller (Johnson, Herrmann, and Huber 2006). International research has suggested that the effect of commitment on seller performance is mod- erated by cultural dimensions. For example, commit- ment exerts a stronger effect in cultures that tend to value status hierarchies and emphasize the importance of allegiance (Samaha, Beck, and Palmatier 2014). Cul- ture also shapes the target of commitment: people in cultures that emphasize interpersonal relationships tend to exhibit commitment toward salespeople rather than companies (Skarmeas, Katsikeas, and Schlegelmilch 2002). Thus, salesperson turnover harms customer com- mitment in collectivist countries such as China (Wang 2007).

Gratitude, or “emotional appreciation for benefits received” (Palmatier et al. 2009, p. 1), operates along- side trust and commitment and also can have a direct effect on commitment. Gratitude is a prosocial emotion that enhances the performance of high-effort sellers by increasing their favorable attitudes and retention (Morales 2005). The positive effects of gratitude are stronger in collectivist cultures, where customers focus more on the efforts of others than of themselves (Kitayama, Mesquita, and Karasawa 2006). This trend may explain the success of Procter & Gamble’s (P&G’s) RM initiative to give away millions of product samples as gifts in Japan, where distributors reciprocated the favor by prominently showcasing P&G in their retail locations (Kaynak and Herbig 2014). Overall, trust, commitment, and gratitude constitute communal-based mechanisms that shape the norms that govern exchanges, thereby enhancing seller performance.

DYNAMIC MECHANISMS

Finally, communal-based mechanisms develop dynami- cally (Palmatier et al. 2013), so a full understanding of RM effectiveness demands consideration of the dynamic

Relationship Marketing and Loyalty Program Effectiveness 9

mechanisms that regulate relationship development. However, research on dynamic mechanisms remains relatively nascent partly because of methodological obstacles (Luo and Kumar 2013). Early research exam- ined relational mechanisms at various life cycle stages (Jap 2001); more recent studies consider change as a construct itself. Two dynamic mechanisms have emerged from these approaches: velocity and resiliency.

Velocity is the rate and direction of change in commit- ment (Palmatier et al. 2013) driven by trust, communi- cation, and investments. It offers a better predictor of performance than the level of commitment because cus- tomers base their decisions more on relational trends than on their current states (Palmatier et al. 2013). In addition, relationship velocity may be weaker but more stable in countries with a stronger long-term orientation because, in these settings, relationships develop over a longer time horizon (Williams, Han, and Qualls 1998). Thus, compared with buyers in Western countries, cus- tomers from Japan, China, and Korea tend to exhibit slower but less variable relationship development over time (Hofstede, Jonker, and Verwaart 2008).

Alternatively, resilience refers to the ability to recover effectively from stressors and then flexibly adapt or even grow in response to adversity (Liu, Wang, and Lu 2013). Research on resilience as it relates to RM is scarce, but social psychology studies of interpersonal relationships have indicated its key role in predicting long-term relationship persistence. When partners can overcome fluctuations in commitment over time, they are more likely to maintain a relationship (Arriaga et al. 2006). International research on resilience has sug- gested that cultures that emphasize personal control suffer lower resilience because relationship fluctua- tions, which are outside the actors’ control, are per- ceived as less favorable and thus more damaging to the relationship (Baker, Gentry, and Rittenburg 2005). As an illustration, emigrants from Mexico, a more collec- tivist culture that deemphasizes personal control (Hof- stede, Hofstede, and Minkov 2010), often maintain strong relationships with multinational companies, despite the disruption caused by their move abroad (Broderick et al. 2011).

Overall, we thus contend that the mechanisms under- lying the effectiveness of RM and LPs can be categorized thematically: inertia-based mechanisms (habit, cognitive lock-in, and economic switching costs) enhance seller performance by increasing cognitive ease through the repetition of previous action; comparison-based mecha- nisms (prestige and envy) do so by affixing feelings of

prestige and envy to otherwise routine purchases; iden- tity-based mechanisms (in-group association and out- group dissociation) enhance seller performance if their products or services help define customers’ identities; communal-based mechanisms (commitment, trust, and gratitude) benefit sellers by altering the norms that gov- ern exchanges; and dynamic mechanisms (velocity and resiliency) enhance seller performance by shifting the levels of the communal-based mechanisms over time. We consider next how and why each of these perfor- mance-enhancing mechanisms should be leveraged across global markets.

HOW RM AND LP EFFECTIVENESS VARY GLOBALLY

To understand how the effectiveness of RM and LP mechanisms vary globally, we begin by reviewing the cultural and developmental contingency factors, out- lined in Table 2, that distinguish global markets. Then we offer predictions about how these factors might moderate the effects of RM and LP mechanisms on seller performance. Culture describes the configuration of values, norms, and expectations that influence how members in a society process information and experi- ence emotions (Hofstede and Minkov 2010; Kitayama, Mesquita, and Karasawa 2006; Samaha, Beck, and Palmatier 2014; Steenkamp and De Jong 2010). We adopt Hofstede’s five-factor model of culture to describe how cultural contingency factors might moderate the effectiveness of RM and LPs (Hofstede and Minkov 2010). Development instead refers to the relative eco- nomic progress and capital accumulation that character- izes global markets (Ellis 2003; Heshmati 2006). Whereas culture ripens over centuries and is passed on from generation to generation, economic development features punctuate growth and can vary sharply, even between countries with very similar cultures (Hofstede, Hofstede, and Minkov 2010; Piketty 2014). We present three developmental contingency factors derived from our review of international research, after considering culture.

Moderating Role of Cultural Contingency Factors

Individualism–Collectivism. The individualism–collectivism cultural contingency factor captures the “extent to which people are expected to be self-reliant and distant from others (individualism) instead of mutually dependent and closely tied to others (collectivism)” (Samaha, Beck, and Palmatier 2014, p. 82; see also Hofstede, Hofstede, and

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Minkov 2010). Previous research has demonstrated that RM mechanisms such as trust and commitment are more effective in societies with more collectivist cultural values (Samaha, Beck, and Palmatier 2014), possibly because collectivism enhances the importance of in-groups and instills beliefs that relationships should be mutually rather than personally beneficial (Steensma et al. 2000). Customers in collectivist cultures also are more con- cerned with maintaining relationship harmony and thus more persuaded by relational partners (Laroche, Kala- mas, and Cleveland 2005).

In line with the greater importance of close relationships and concerns for relational harmony, we expect that higher levels of collectivism increase the effectiveness of identity-based and communal-based RM and LP mecha- nisms because customers in more collectivist cultures focus more on the importance of relationships and the significance of in-group identity (Hofstede, Hofstede, and Minkov 2010). As collectivism increases, the mark- ers of group identity provided by LPs should satisfy cus- tomers’ stronger in-group identification motives. The evidence of LP successes and failures worldwide sup- ports this prediction. For example, membership cards increase purchase behaviors more effectively in more collectivist countries (e.g., Singapore) than in more inde- pendent countries (e.g., the Netherlands) (Noordhoff, Pauwels, and Odekerken-Schröder 2004). Furthermore, consumers in more collectivist cultures should be more responsive to communal norms that regulate relation- ships and promote reciprocity in the form of greater loy- alty (Samaha, Beck, and Palmatier 2014); this rationale may explain why Japanese customers were quick to reciprocate P&G’s gift campaign, in that Japan is char- acterized by relatively high collectivism (Hofstede, Hof- stede, and Minkov 2010; Kaynak and Herbig 2014). We therefore predict the following:

P1: As cultural collectivism increases, (a) identity- and (b) communal-based mechanisms exert stronger effects on seller performance.

Power Distance. The power distance cultural contin- gency factor captures the “extent to which inequalities between more and less powerful members of society are considered acceptable” (Samaha, Beck, and Palmatier 2014, p. 83). Greater power distance increases people’s focus on social rank because they view society in terms of hierarchies and social roles (Hofstede, Hofstede, and Minkov 2010). Customers in cultures with greater power distance therefore may be more likely to make social comparisons, which should increase customer reactions to cues that suggest differences in ranking or

status (Pornpitakpan and Francis 2000). Comparison- based RM and LP mechanisms—such as prestige and envy that arise from receiving exclusive treatment or observing its conferral on others (Steinhoff and Palmatier 2014) or from relationships maintained with luxury brands (De Mooij 2004)—thus should have stronger effects on seller performance in cultures marked by greater power distance because customers in these cultures likely compare their rewards with the rewards received by others or their exchange relation- ships against the exchange relationships maintained with others. This prediction is congruent with recent evidence of the effectiveness of status-based marketing in high-power-distance markets such as China, where customers exhibit stronger preferences for exclusivity and status-based exchange relationships (Atsmon et al. 2012). Thus, we predict the following:

P2: As cultural power distance increases, comparison- based mechanisms exert stronger effects on seller performance.

Uncertainty Avoidance. The uncertainty avoidance cul- tural contingency factor captures the “extent to which the members of a culture feel threatened by ambiguous or unknown situations” (Samaha, Beck, and Palmatier 2014, p. 83). Previous research has demonstrated that products diffuse more slowly in cultures marked by greater uncertainty avoidance (Tellis, Stremersch, and Yin 2003), because uncertainty avoidance increases people’s resistance to change and simultaneously increases the importance they assign to stability (Kale and Barnes 1992; Kale and McIntyre 1991). Customers in cultures with higher uncertainty avoidance are more aware of the potential risks associated with change (Deleersnyder et al. 2009). Therefore, as uncertainty avoidance increases, inertia-based mechanisms that enhance seller performance by increasing the relative advantage of previous behaviors should be even more effective. The risks associated with changing their behav- iors are highly salient among customers in uncertainty- avoidant cultures, making them less likely to stray from their previous behaviors. That is, customers in these cul- tures should be more likely to rely on habits or previ- ously learned knowledge because breaking those habits or learning about a new company’s policies and proce- dures seems riskier. A customer survey by Garcia, Lacayo, and Martinze (2012) offers evidence in support of this prediction. The authors find that fewer than 2% of Mexican customers (vs. 11% of U.S. customers) switched to lower-cost food brands in the previous 12 months. The stronger effects of prior purchasing habits in Mexico (vs. the United States) may be explained by

Relationship Marketing and Loyalty Program Effectiveness 11

Mexico’s much greater uncertainty avoidance (Hof- stede, Hofstede, and Minkov 2010).

P3: As uncertainty avoidance increases, inertia- based mechanisms exert stronger effects on seller performance.

Masculinity–Femininity. The masculinity–femininity cultural contingency factor captures the “degree to which ‘tough’ (masculine) values prevail over ‘tender’ (feminine) values in a society” (Samaha, Beck, and Palmatier 2014, p. 83). Whereas masculine cultures deemphasize relationships in favor of competition and achievement, feminine cultures emphasize relationships and cooperation as means for achievement (Hofstede, Hofstede, and Minkov 2010; Kale and Barnes 1992; Steensma et al. 2000). Customers in more feminine cul- tures thus are more likely to help strangers, in an effort to build relationships (Lam, Lee, and Mizerski 2009). Consistent with the intense affiliation focus in more feminine cultures, we expect that as cultural masculinity increases, the effectiveness of communal-based RM and LP mechanisms (trust and commitment) diminish. Fur- thermore, the emphasis on competition in more mascu- line cultures may accentuate the effects of comparison- based mechanisms (prestige and envy) because competition naturally increases social comparisons (Gibbons and Buunk 1999). Thus, for example, cus- tomers try to build relationships with high-status auto- motive brands, which increase prestige and invoke envy, more in masculine cultures such as Germany and less in feminine cultures such as the Netherlands (De Mooij 2000; Hofstede, Hofstede, and Minkov 2010). Thus, we predict the following:

P4a: As cultural masculinity increases, communal- based mechanisms exert weaker effects on seller performance.

P4b: As cultural masculinity increases, comparison- based mechanisms exert stronger effects on seller performance.

Long-Term Orientation. The long-term orientation cul- tural contingency factor captures the extent to which members of a society focus on perseverance and thrift (long-term orientation) rather than respect for tradition or obligations (short-term orientation) (Hofstede, Hof- stede, and Minkov 2010). Customers in cultures with a stronger long-term orientation focus more on long-term goals but are less forgiving of violations of trust because such violations signal a short-sightedness that is incom- patible with a long-term focus (Hofstede, Jonker, and Verwaart 2008). Therefore, we expect a long-term ori-

entation to moderate the effectiveness of inertia-based and dynamic mechanisms. Specifically, customers with a longer-term goal focus should be more likely to imple- ment their intentions to override inertia-based mecha- nisms such as habit (Wood and Neal 2009); prior behav- iors should have less bearing on present behaviors when customers focus more on the future. Customers with a long-term orientation also are more likely to change their spending habits and make long-term investments (Howlett, Kees, and Kemp 2008), so we similarly expect that they might change their routine purchase behaviors, despite the incentives of loyalty rewards, to achieve their personal goals. Therefore, inertia-based mechanisms should be weaker in cultures with a stronger long-term orientation. In addition, dynamic mechanisms such as velocity and resilience should be less effective as long- term orientation increases. This is because violations of trust or commitment, which naturally arise in any rela- tionship, are more damaging in cultures with stronger long-term orientation, which should make relationships grow more slowly. These predictions are consistent with findings that customers in Eastern cultures, which have stronger long-term orientations, are slower to develop relationships (Hofstede, Jonker, and Verwaart 2008). We therefore predict the following:

P5: As long-term orientation increases, (a) inertia- based and (b) dynamic mechanisms exert weaker effects on seller performance.

Moderating Role of Developmental Contingency Factors

A society’s culture develops and endures over centuries (Hofstede, Hofstede, and Minkov 2010); its economic development is a more short-term feature. Since the Industrial Revolution, economics and social welfare scholars have classified countries on the basis of how their development compares with that of their neighbors (Piketty 2014; Schumpeter 1934). In marketing, despite substantial investigations of the role of culture (Steenkamp 2001), less attention has focused on devel- opmental factors. This oversight may be significant because economic development influences markets and can be orthogonal to culture (Henrich et al. 2010). For example, despite the relative cultural similarity between Iran and Saudi Arabia (Hofstede, Hofstede, and Minkov 2010), the per capita gross domestic product of Iran is one-fifth that of Saudi Arabia (World Bank 2014). We thus consider three developmental contingency factors, derived from comparative international frameworks that may influence the effectiveness of RM and LPs: resource distribution, technological capital, and security.

12 Journal of International Marketing

Resource Distribution. This developmental contingency factor captures the degree of inequality in the income or wealth distributed among members of a society (Hesh- mati 2006). Distribution inequality relates quadratically to economic development, such that the greatest inequality occurs at moderate levels of economic devel- opment (Chen 2003; Kuznets 1955). Greater distribu- tion inequality reduces the general level of trust in a society, especially among low earners, because they view the world as less fair; in addition, communities become more divided (Oishi, Kesebir, and Diener 2011). Thus, as resource distributions become more unequal, communal-based RM and LP mechanisms such as trust and commitment should have stronger effects on seller performance because rare, trust-based relationships grow more notable, important, and effective (Guseva and Rona-Tas 2001). Thus, for example, customer trust and commitment have twice the effect on seller perfor- mance in Brazil compared with Norway (Samaha, Beck, and Palmatier 2014) possibly because resource distribu- tions in Brazil are twice as unequal as those of Norway (World Bank 2014). Greater resource inequality also reduces customers’ satisfaction with their level of pos- sessions because they note wider possession gaps with wealthier customers (Ordabayeva and Chandon 2011). Accordingly, customers in countries with greater resource inequality engage in more self-enhancement (Loughnan et al. 2011). We predict that the wider pos- session gaps that characterize societies with greater dis- tribution inequality increase the effectiveness of RM and LP comparison-based mechanisms because customers try to “keep up with the Joneses” by forming relation- ships with more prestigious companies (Ordabayeva and Chandon 2011) or signaling their status with exclu- sive loyalty rewards (Steinhoff and Palmatier 2014). That is, we predict the following:

P6: As resource distribution becomes more unequal, (a) communal-based and (b) comparison-based mechanisms exert stronger effects on seller performance.

Technological Capital. Defined as the accumulation of capacities to invent, commercialize, and exploit innova- tive technologies (Bell and Pavitt 1997; Robertson and Gatignon 1986), technological capital correlates with economic development. Specifically, greater market integration and competition enhance the opportunities for sellers in a society to develop and use technologies (Bustos 2011; Guillén and Suárez 2005). If the country possesses higher levels of technological capital, sellers also are more likely to use technology to facilitate their customer relationship management (Payne and Frow

2005). These expanded RM tactics may lead customers in these countries to become acclimated to sellers’ con- stant attempts to build trust and commitment, such that they no longer respond to most sellers’ RM attempts (The Economist 2014). Previous findings indi- cate that RM strategies are more effective for first- movers that implement the strategies before their com- petitors (Kumar et al. 2011). Thus, difficult-to-form customer relationships, once formed, should be more valuable to sellers in countries with greater technologi- cal capital. That is, existing levels of trust, commit- ment, and gratitude (communal-based mechanisms) should be more effective in countries with higher levels of technological capital because customers learn to ignore competitors’ attempts to build relationships, rendering these efforts less effective.

A similar prediction arises for the effectiveness of inertia- based mechanisms. Customers in societies with higher levels of technological capital are continually bom- barded with LP offers (Ferguson and Hlavinka 2007), many of which involve complicated accrual and redemption rules (Henderson, Beck, and Palmatier 2011). As technological capital increases, we anticipate greater competition among LPs, each with specific rules that customers must learn, such that the likelihood that customers seek out novel LPs may decrease. The inertia- based mechanisms therefore may be more effective in cultures with greater technological capital because cus- tomers are less likely to stray from their previous behav- iors. The tendency for technology to create a narrowed focus is particularly evident in studies of telecommuni- cations: Internet expansion has made more information more readily available to users, but people are less likely to seek out or receive exposures to unfamiliar informa- tion as the web increases in complexity (Pariser 2011). Increased variety also can cause consumers to feel over- whelmed, such that they simply stick with what they know. Accordingly, customer habits are receiving increasing research attention in countries with high technological accumulation (Marketing Science Institute 2014; Shah, Kumar, and Kim 2014), possibly out of recognition that customers in these societies find it more difficult to overcome entrenched behaviors. In summary, we expect the following:

P7: As level of technological capital increases, (a) communal-based and (b) inertia-based mechanisms exert stronger effects on seller performance.

Security. Finally, security refers to freedom from or pro- tection against physical threat (Kramer, Meyerson, and

Relationship Marketing and Loyalty Program Effectiveness 13

Davis 1990; Moeller and Harvey 2011; Thomas and Tow 2002). It might be provided by formal institutions (e.g., police force) or greater social capital, defined as “the information, trust, and norms of reciprocity inher- ing in one’s social networks” (Woolcock 1998, p. 153). As societies develop and become more integrated in global markets, institutions and social norms evolve in ways that tend to increase overall security (Henrich et al. 2010). The association between development and security is so fundamental that even the dilapidation of physical structures can reduce people’s perceptions of security (O’Brien and Wilson 2011). Low levels of secu- rity in turn invoke several key effects for customers. First, insecurity reduces institutional trust (Blanco and Ruiz 2013), which may make it more difficult for sell- ers to build trust among customers (Grayson, Johnson, and Chen 2008). Second, insecurity reduces perceptions of personal power, which subsequently amplify the effects of disorder on mistrust (Ross, Mirowsky, and Pribesh 2001). That is, insecurity creates a vicious cycle of mistrust. Third, insecurity can cause fear, which prompts coping responses (Sternthal and Craig 1974), such as becoming more emotionally attached to famil- iar brands (Dunn and Hoegg 2014). Customers experi- encing fear also may become anxious (Keller and Block 1996) and engage in regulatory processes to reduce these unpleasant feelings, which can lead to fatigue or psychological depletion (Gailliot, Schmeichel, and Baumeister 2006).

Drawing on these findings, we offer several predic- tions about how security should influence the effec- tiveness of RM and LP mechanisms. Because insecu- rity reduces the availability of psychological resources needed to change behaviors (Muraven and Baumeister 2000), we predict that lower levels of security increase the effectiveness of inertia-based mechanisms. In other words, customers who experience low levels of secu- rity and expend cognitive and emotional resources to cope with that insecurity should be more likely to rely on their prior behaviors when making decisions, which would increase the effectiveness of habits or cognitive lock-in created by LPs. Because insecurity also reduces trust, we expect that lower levels of secu- rity increase the efficacy of trust and commitment toward current sellers. This prediction is similar to P6a, in which we argue that lower levels of general trust make existing relationships more valuable. Thus we anticipate the following:

P8: As the level of security increases, (a) inertia- based and (b) communal-based mechanisms exert weaker effects on seller performance.

DISCUSSION

Relationship marketing and LPs are potent strategies for increasing seller differentiation and enhancing retention (Palmatier et al. 2006; Stahl et al. 2012). Recent increases in international competition have prompted an expansion of global interest in RM and LPs, though researchers still tend to apply U.S.-based frameworks abroad (Samaha, Beck, and Palmatier 2014). To understand the potential for international differences in RM and LP effectiveness, this review proposes a comprehensive framework of the multiple mechanisms that underlie RM and LPs, as well as how each mechanism may be moderated by multiple cul- tural and developmental contingency factors. As a product of this effort, we offer 8 propositions (comprising 14 pre- dictions overall) about how the effect of each RM and LP mechanism might be leveraged in international markets. Table 3 contains a summary of these predictions.

Our propositions provide key directions for managers aiming to tailor their RM and LP strategies to appeal to a specific culture. What adjustments should a manager make to the structure of an LP or RM strategy to suc- ceed in a different culture? Our review of the mecha- nisms that underlie RM and LPs outlines the determi- nants of success for various RM or LP strategies. We also use cultural factors to extend these findings and propose more appropriate circumstances for emphasiz- ing certain mechanisms. That is, our eight proposals leverage prior findings about different aspects of cul- ture, apply these findings to the RM and LP domains, and identify unique cultural circumstances in which spe- cific RM or LP mechanisms should be particularly bene- ficial. For example, a hierarchical LP that activates sta- tus needs should be more successful in a masculine culture because it invokes comparison-based mecha- nisms that appeal to members of highly masculine cul- tures (P4b). However, implementing the same LP in a highly feminine culture, without adjusting its structure, may result in less success because these latter cultures are less likely to respond to prestige or envy mecha- nisms; instead, they likely respond better to communal- based mechanisms such as trust and commitment.

In addition, the interaction of developmental contin- gency factors with RM and LP mechanisms can be critical to the strategy’s success. In countries with severe resource inequality, for example, communal-based RM mechanisms should have substantial effects on seller performance, so establishing a strong reputation and gaining consumer trust may be a higher priority. Fur- thermore, these effects may be additionally strength- ened when cultural feminism is higher. This example

14 Journal of International Marketing

would suggest that communal-based RM mechanisms are especially effective in many South American coun- tries such as Chile, Costa Rica, and Guatemala, where inequality and cultural feminism is relatively high. In other words, RM strategies that enhance trust and commitment (e.g., communication, expertise, relation- ship benefits; Palmatier et al. 2006) may be most effec- tive in these countries.

Overall, we offer 14 testable propositions for further research. Testing individual propositions across coun- tries may prove challenging, but recent efforts, such as meta-analyses that incorporate country-level informa- tion about samples to test country-level moderating effects (Samaha, Beck, and Palmatier 2014), have demonstrated that such research is feasible. In addition, we consider several approaches for building on our pro- posed framework.

Future Research Directions

This review bridges theory across multiple disciplines to shed light on how RM and LP strategies should be adapted internationally. In addition to offering multiple propositions, the framework presented in this review is a springboard for further research. For example, we only considered moderation effects that were clearly supported by extant theory, but as the many theories drawn on in this research are refined and expanded, new moderation predictions will likely emerge. In addi- tion, we only consider performance as a key outcome,

but other outcomes (e.g., word of mouth) may also be affected. Moreover, future studies may extend the framework presented in this review in several key ways, which we outline in detail next.

Delineating RM and LPs. Relationship marketing and LP research has largely ignored key similarities and dif- ferences between RM and LP strategies. If the goal of an LP is to build or maintain customer relationships, it can be categorized as an RM strategy. However, this goal is not always central, so LP research is distinct from the RM domain. In this review, we sorted the thematically categorized mechanisms according to their relevance to either LP or RM research, in an effort to help clarify the overlap between these domains. For example, inertia- based mechanisms primarily affect LPs, often beyond the scope of RM, whereas identity-based, communal- based, and dynamic mechanisms primarily affect RM and relationship-oriented LPs. Comparison-based mechanisms affect both RMs and LPs, as long as the LP involves rewards or special treatment. These insights are helpful, and yet there is also benefit in studying RM and LPs separately. For example, the overlap between RM and LP mechanisms suggests the need to consider inter- actions between the mechanisms that underlie both con- cepts, such as the relationship between habit as an iner- tia-based mechanism and commitment as a communal-based mechanism. Further research might consider ways in which LPs give rise to mechanisms that leverage RM to understand how LPs can complement rather than simply serve as RM strategies.

Table 3. Summary of Predictions

General Mechanisms Specific Constructs Leveraging Factors (Direction) Propositions

Inertia-based mechanisms

Habit, cognitive lock-in, eco- nomic switching costs

Uncertainty avoidance (+), long-term orientation (–), technological capital (+), security (–)

P3, P5a, P7b, P8a

Comparison-based mechanisms

Prestige, envy Power distance (+), masculinity (+), resource inequality (+)

P2, P4b, P6b

Identity-based mechanisms

In-group association, out- group dissociation

Collectivism (+) P1a

Communal-based mechanisms

Trust, commitment, gratitude

Collectivism (+), masculinitiy (–), resource inequality (+), technological capital (+), security (–)

P1b, P4a, P6a, P7a, P8b

Dynamic mechanisms

Velocity, resilience Long-term orientation (–) P5b

Relationship Marketing and Loyalty Program Effectiveness 15

Examining the Dark Side of RM and LPs. Future stud- ies should also consider how the negative aspects of RM and LP strategies vary internationally. For example, unrewarded customers who observe dispensation of loy- alty rewards to others are one key example of a negative effect of relationship-orientated LPs, in which LP strate- gies have unintended consequences on observing cus- tomers. More specifically, a hierarchically structured LP that gives highly ranked members visible, special treat- ment above members who are lower on the hierarchy may cause these lower-ranked members to feel extreme envy (Steinhoff and Palmatier 2014). This effect may be greater in egalitarian cultures, where customers are less likely to respond to status signals (Kim and Zhang 2014), or in feminine cultures, where customers are more concerned about the needs of others (Hofstede 1998).

In addition, as relationships age, levels of commitment may decrease, increasing the chance for opportunism to occur after trust has been established (Moorman, Zalt- man, and Deshpandé 2008). This negative effect has the potential to be particularly destructive in collectivist cul- tures, where communal mechanisms are predicted to have a stronger effect. Furthermore, this type of oppor- tunism and disregard for the history of the relationship may be more likely in individualistic cultures and cul- tures without a long-term orientation because short- term-oriented cultures may be more preoccupied with outcomes related to the immediate future rather than relying on the implied long-term outcomes of any estab- lished relationship. Members of individualistic cultures may similarly be distracted from the well-being of others or the relationship itself in favor of concern for their individual well-being.

Furthermore, in relationships, customers often feel pres- sure to return a favor or kindness. This “norm of reci- procity” (Palmatier et al. 2009; Perugini et al. 2003) may lead to a trade-off situation in which the costs of reciprocation outweigh the benefits of continuing the relationship. Feminine cultures, collectivist cultures, and long-term-oriented cultures are predicted to be more sensitive to this norm. Masculine cultures, individualis- tic cultures, and cultures with a shorter-term orientation may be more likely to break off a relationship because of the high costs of reciprocation.

Evaluating Exchange Context. Further research may also consider how the proposed effects of the mecha- nisms and contingency factors vary contextually. For example, we expect identity- and communal-based mechanisms to be especially effective in more collectivist

cultures. These effects may further vary across business- to-consumer versus business-to-business markets, as business-to-consumer customers consider their peer groups more when making purchase decisions (Hof- stede, Hofstede, and Minkov 2010). In addition, the effects of inertia- and communal-based mechanisms may also vary depending on whether a firm is selling a service or a product. Services are becoming increasingly experience-centric, which usually implies an emotion- ally engaging relationship between the consumer and the service provider (Voss, Roth, and Chase 2008). The importance of communal-based mechanisms in service contexts suggests that the moderating effects of contin- gency factors may be strongest when service levels are high (vs. low). Prior research has identified many addi- tional business contexts (e.g., channel vs. direct, exchange with an individual vs. organization; Palmatier et al. 2006) that future researchers might consider as further moderating the effects proposed by our model.

Expanding International Frameworks. Current inter- national research on RM and LPs has examined cul- tural differences extensively but has largely failed to consider economic development, despite its direct influ- ence on markets and variance across cultures. Similar cultures might react in entirely different ways to the same RM and LP strategies; we posit that developmen- tal contingency factors explain some of these differ- ences. The three developmental contingency factors that we identify in this study should serve as starting points for continued research into the impact of eco- nomic development on RM and LP outcomes. Researchers should particularly consider their inter- action with cultural factors, in that developmental con- tingency factors may have significant psychological consequences that likely vary alongside cultural factors and thus indirectly shape the effectiveness of RM and LPs. Finally, additional research should investigate which factors (cultural or developmental contingency) exert stronger effects on RM and LP effectiveness, as well as the circumstances in which one type might be more influential than another.

Examining Contingency-Level Interactions. Finally, further research may consider interactions among cul- tural and developmental contingency factors. For example, high levels of resource inequality may accen- tuate the effects of power distance. Previously, we posited that comparison-based mechanisms would have stronger effects in countries with greater cultural power distance. These effects may be further enhanced when economic inequality is high (vs. low). In other words, when values match economic realities, customers may

16 Journal of International Marketing

be even more likely to seek rewards that suggest higher social rank.

Conclusion

Our review assimilates current RM and LP research and links it to findings on culture and economic develop- ment. We list multiple mechanisms that underpin RM and LPs, categorize them thematically, discuss the mod- erating roles of cultural factors and developmental con- tingency factors, and outline eight resultant propositions that contribute to extant literature and offer managerial implications. Researchers should continue to investigate the relationship between cultural factors and develop- mental contingency factors; research on RM and LPs would also benefit from a focus on the interactions of their respective mechanisms as well as a greater consid- eration of the dynamic aspect of communal mechanisms. Overall, this study broadens the scope of global research on RM and LPs and contributes to prior literature by delineating RM and LP research, such that it provides a clear framework for further investigations.

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