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IntroductionLoyalty programs recently gained considerable practical and academic attention in thecontext of customer retention and customer relationship management. Thefundamental managerial objective of these programs is to reward loyal customer

behavior with special services or rebates and thereby at the same time to promote thisloyal behavior in order to realize the economic benefit of long-term businessrelationships (Reichheld, 1993, p. 64; Sharp and Sharp, 1997, p. 474). The extent towhich loyalty programs actually achieve this objective has become increasingly thesubject of scientific study (Stauss et al., 2001; Bolton et al. (2000); Verhoef, 2003; Yi and

Jeon, 2003; Noordhoffet al., 2004). Usually, such studies have focused on the question ofhow strong the supposed connection between participation in a loyalty program andincreased customer satisfaction and loyalty actually is.

Supplementation of this perspective appears to be necessary. Everyday observationand media reports on problems that customers experience in loyalty programs suggestthat these programs may also cause negative emotional and/or cognitive effects. Ifthese effects do occur, it is possible that the loyalty programs are not only falling shortof their goal of increasing customer retention, but may even be leading to a reduction inloyalty. In view of the considerable investment required to set up and maintain loyaltyprograms, it appears especially relevant, both scientifically and practically, to examinethe type and extent of negative effects of loyalty programs.

This examination is conducted on the basis of the frustration construct.Frustration involves a highly negative emotion that occurs when a potentiallyrewarding act or sequence of behavior is blocked (Colman, 2001, p. 291). Loyaltyprograms explicitly promise customers rewards for certain loyal behavior patterns.This makes the relevance of the frustration concept in this context evident: if thecustomer does not receive the promised reward or if the indicated benefit provesworthless to him, customer frustration may arise.

It is, therefore, the goal of the present study to examine the negative effects ofloyalty programs from the perspective of frustration theory. To this end, the mainfeatures of loyalty programs are presented and initial indicators of negative effectsdescribed. A basic model of frustration will subsequently be developed by evaluatingthe literature on frustration theory. This model is then applied to loyalty programs byusing the findings of an explorative and qualitative study. The paper ends with asummarizing conclusion, a discussion of limitations of the study and researchquestions that remain to be answered, as well as managerial implications.

Loyalty programsLoyalty programs are marketing efforts which reward and, therefore, encourage loyalcustomer behavior in order to increase the profitability of stable customer relationships(Sharp and Sharp, 1997, p. 474). Firms aim at increasing customer-specific turnoverand profit margins by intensifying customer dialog, developing customized servicepackages and thereby stimulating repurchase and cross-buying behavior. At the sametime, they strive to increase the efficiency of marketing by carefully targeting customercommunication (Dowling and Uncles, 1997; Palmer et al., 2000; Rapp and Decker, 2003).

It is characteristic of all loyalty programs that they grant benefits to customers,depending upon the volume of sales that they generate. These benefits can consist inmonetary or non-monetary incentives like rebates, bonuses or services. In practice,

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loyalty programs differ with respect to the importance which they attach to the varioustypes of benefits and whether they grant them exclusively their most valuablecustomers (Rapp and Decker, 2003).

Research on loyalty programs has increased in the last years. The effect of loyalty

programs on loyalty and their critical success factors were investigated in the contextof various industry settings such as automotive industry (Stauss et al., 2001), packagedgoods (Roehm et al., 2002), financial services (Bolton et al., 2000), airlines (Whyte, 2002),retail stores (Noordhoffet al., 2004) or telecommunication (Gustafsson et al., 2004). Theresults of an empirical study of Stauss et al. (2001) indicate that the membership in anautomotive customer club has a remarkable impact on the customers relationshipsatisfaction and retention. Bolton et al. (2000) show that participants of a loyaltyprogram of a financial service provider actually tend to realize increased revenues andhigher service usage levels and to overlook negative service experiences.

Several studies reveal the importance of a careful program design. Roehm et al.(2002) demonstrate that the loyalty of customers of packaged goods brands increaseswhen the incentives are closely connected to the brand. The study of Hallberg (2004)yields similar results. Another aspect of successful program design is elaborated byKivetz and Simonson (2003). They provide evidence that by heightening the level ofeffort required to receive benefits, the attractiveness of loyalty programs can beincreased.

Yi and Jeon (2003) investigate how different program rewards influence theperceived value of a program and show that customer involvement has an importantmoderating role on the programs success. Noordhoff et al. (2004) find out that a smallnumber of alternative loyalty programs in a market and only little familiarity ofcustomers with these programs positively affect the success of the program. This is inaccordance with the results of the study of Whyte (2002) who finds an especially highlevel of spurious loyalty among members of frequent flyer programs who are

participating in several different programs.

Indications of negative effects of loyalty programsThe aim of loyalty programs is to create a win-win situation for the initiating companyand its customers. The customers receive monetary and non-monetary benefits forproven loyalty, which is supposed to increase their satisfaction and their inclination toengage in further loyal customer behavior (Sharp and Sharp, 1997). The providersbenefit from positive effects on turnover and profits of loyal business relationships.These supposed benefits for both market partners result only when customers findparticipation in the program to be rewarding and have no negative experiences.

There is, however, evidence to indicate that this is not always the case. An analysis

of CRM activities has already shown that the use of certain instruments of customerretention may have quite a negative effect that weakens customers commitment(Stauss and Seidel, 2002). Hansen (2000, p. 429) demonstrates thatcustomer-value-oriented differentiation in loyalty programs may be perceived bycustomers as discriminatory and unfair. In a recent study Gustafsson et al. (2004)provide some indications that operational problems in collecting promised incentivesfor loyal behavior and complicated operational procedures of a telecom companyscustomer club are perceived negatively by customers.

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Further evidence of negative effects is found in practice. Critical customer voicesabout loyalty programs can be found in internet chat rooms. The American web siteeopinions.com, for instance, has established a separate category for customer opinionsregarding mileage programs or frequent flyer programs; and in Germany, ciao.com

allows customers to share their experiences with loyalty programs in variousindustries. The critical statements made by customers in these forums show thatparticipants in loyalty programs experience problems that evoke great emotionalannoyance. Customers complain, for example,

. that firms do not keep their promises because they do not provide a sufficientsupply of the products advertised as rewards, so that customers are turned awayor put off;

. that the rewards can only be obtained with some difficulty or not at all becausethe required number of loyalty points is very high, because rewards areassociated with a disproportionately high purchase volume or becauseaccumulated points expire after a certain period of time;

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that the promised rewards prove to be of little value; and. that provisions for privacy protection are violated.

In view of these observations, it seems sensible to focus intensively on the negativeeffects of loyalty programs. For this a frustration-theoretical perspective is adopted.

Reasons for choosing the frustration constructIn general, when negative affective and/or cognitive effects are discussed, one is facedwith the problem of the underlying construct for these effects. In accordance withconventional research into customer behavior, it seems reasonable to choose thedissatisfaction construct, since dissatisfaction is the result of a negative assessment ofa customer experience. Furthermore, it can be assumed that dissatisfaction leads to a

reduction of customer loyalty in terms of decreased willingness to engage in repeatpurchases and word-of-mouth recommendations. Consequently, it seems obvious toanalyze aspects of customer dissatisfaction with loyalty programs and its influence onthe reduction of customer loyalty.

However, both practical experiences and scientific empirical insights have raiseddoubts about the legitimacy of the conceptual dominance of the satisfaction construct.In particular, it turns out that the correlation between customer satisfaction andcustomer retention on one hand, and between customer dissatisfaction and customerdefection on the other hand, is not always as close as is traditionally supposed (Staussand Neuhaus, 1997; Oliver, 1999; Anderson and Mittal, 2000). This leads to theconclusion that the correlation between customer satisfaction and loyalty behaviorshould be looked at in a more differentiated fashion. Among the results of suchanalyses is the finding that, along with other factors, it is strong customer emotions inparticular that induce loyal customer behavior in positive cases and defections innegative cases. With respect to positive emotions, this finding has resulted in the factthat an independent construct in the form of delight has increasingly become thefocus of interest in practice and research (Oliver et al., 1997; Schneider and Bowen,1999, p. 36; Rust and Oliver, 2000; Keiningham and Vavra, 2001).

With regard to highly negative emotions associated with pronounced customerdissatisfaction, the above discussion has rarely had an equivalent. This is astonishing,

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as it is specifically those customers with highly negative emotions that tend to defect(Schneider and Bowen, 1999, p. 36). Among them a higher percentage of terrorists(Heskett et al., 1997, p. 85) can be expected, who take advantage of every opportunity toexpress their dissatisfaction within their social environment and thus can have a

particularly damaging effect on business.Only rather few contributions discuss the relevance of specific negative emotions

like frustration, anger, fear, or rage for disloyal customer behavior. Nguyen andMcColl-Kennedy (2003), for instance, analyze the role of customer anger provoked byservice failures. Soderlund (2003) shows that the explanation of repatronage intentionscan be substantially improved by taking customer frustration into account. Mattssonet al. (2004) investigate the influence of anger, sadness, and fear of complainants onloyalty. All these contributions show that specific and highly negative emotions fromcustomer experiences may represent an alternative or special case of dissatisfactionand possess a stronger predictive power with respect to the negative loyalty effect.

In the context of loyalty programs the construct of customer frustration seems to beof particular relevance. Frustration involves a highly negative emotion that occurswhen a potentially rewarding act or sequence of behavior is blocked (Colman, 2001,p. 291). Loyalty programs explicitly promise customers rewards for loyal behavior. Ifthe customers do not receive the promised reward or if the indicated benefits proveworthless to them, customer frustration may arise.

Definition and theoretical foundation of frustrationFrustration is a concept from psychoanalysis in the Freudian tradition. Freud focusesoriginally on explaining aggression, which he conceptualizes in his early works by theoccurrence of frustration. He uses the term frustration to describe unpleasant innerconditions, which primarily emerge when expected rewards are lacking or targetedgoals are missed (Freud, 2000a,b). Later Freud gives up his early theories and puts

aggression in the context of his dualistic instinct theory (Freud, 1933; 2000c).Building on Freuds early works Dollard et al. (also known as the Yale Group) in1939 published their monograph Frustration and Aggression to explain the origin andconsequences of human aggression and develop the frustration-aggression hypothesis,identifying aggression as a consequence of frustration (Dollard et al., 1939, S. 1). Theyrelate to frustration as an external instigating condition and attribute it to theinterference with the occurrence of an instigated goal-response at its proper time inthe behavior sequence (Dollard et al., 1939, p. 7). In accordance with thisunderstanding, many authors define frustration as the blocking or prevention of apotentially rewarding or satisfying act or sequence of behaviour (Colman, 2001, p. 291;Britt and Janus, 1940, p. 455; Popplestone and McPherson, 1988, p. 137; Anderson andBushman, 2002, p. 37; Bessiere et al., 2004). Frustration sensation is thus triggered by

frustrating incidents which are the negative experiences of not achieving a goal aimedat or to miss an expected and anticipated reward (Berkowitz, 1989, p. 60). Thisfrustration sensation leads to subsequent behavior such as aggressive protest oravoidance designed to prevent the recurrence of the frustration.

Frustration as a special form of dissatisfactionFacing the fact that frustration is defined as a negative customer emotion followingfrom unfulfilled expectations, the question comes up where to draw the line between


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frustration and the customer satisfaction construct, which mostly is defined asdisconfirmation of expectations and, therefore, includes similar definition components.The differentiation between the two constructs can be made considering the followingfive aspects (Stauss, 2004):

(1) The satisfaction construct regards both positive and negative expectationdisconfirmations (satisfaction/dissatisfaction). In contrast to this, frustration isexclusively the result of a negative expectation discrepancy.

(2) Dissatisfaction may refer to the whole spectrum of unaccomplishedexpectations. But frustration only refers to the negative consumer events inwhich the expected goal or reward is not reached.

(3) Frustration is defined as a strongly negative emotion. In this respect there is adifference to dissatisfaction, where the arousal can also be weak.

(4) Dissatisfaction may appear ex post, without the customers being aware of theirexpectations before the consumption. In contrast, frustration postulates ex antean explicit goal, i.e. the customers have a definite idea about the aspiredsituation or the expected rewards.

(5) A necessary precondition of frustration but not of dissatisfaction is that thecustomers assume that they will reach the aspired goal because of theirprevious experiences or explicit promises by the company.

Thus, frustration is the special case of a strongly felt dissatisfaction, which appears ifindividuals do not reach goals that were thought as feasible or do not get rewards thatwere pledged.

General frustration modelModel elements

According to the definition above, the following three elements of frustration may bedifferentiated (Britt and Janus, 1940, p. 453; Stacker, 1977, p. 7): frustration incident,frustration sensation and frustration behavior.

A frustration incident is understood to be the withdrawal of a positive affirmationor a non-affirmation following an affirmation that occurred previously. Frustrationthus implies the expectation of a reward based on a preceding reward experience or atleast the antecedent promise of a reward (Stacker, 1977, p. 15; Smith and Ellsworth,1985, p. 833). A number of frustration incidents have been differentiated in frustrationresearch (Stacker, 1977, p. 17). In business relationships primarily the following formsof frustration are involved: refusal of reward, reduction of reward and postponement ofreward. In the case of a refusal of reward, the expected reward is completely withheldfrom the person in question; in the case of a reduction of reward, a part of the reward iswithdrawn or withheld; and in the case of a postponement of reward, the reward ismade available later than promised before. In the frustration-aggression hypothesis itwas assumed that frustrating incidents lead directly to aggressive behavior. But asBerkowitz (1989, p. 68) argues, frustration is an aversive event which does notinstantaneously lead to an (aggressive) behavior but in an intermediate step evokesnegative affect in the sense of a frustration sensation.

The frustration sensation triggered by frustration incidents is a negativeemotion and is described as very unpleasant (Smith and Ellsworth, 1985, p. 833).

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This negative emotion is associated with a high degree of arousal and particularattentiveness toward the causing incidents and the person who can be maderesponsible (Janis, 1971, p. 152). This is confirmed in the study by Smith andEllsworth (1985), who determine in their comparative empirical analysis of 15

different emotions that frustration was accompanied by a stronger desire toattend to the situation than for any other negative emotion (Smith and Ellsworth,1985, p. 833).

Frustration behavior involves the actions following the frustration sensation,seeking to lessen or eliminate the negative feeling (Berkowitz, 1989, p. 68). Thesesubsequent actions may be basically classified as protest, intensification of effort andavoidance.

Protest is a form of aggressive behavior that has been the main topic ofpsychological frustration research for a long time. Aggressions as the consequence offrustration have attracted a great deal of attention, primarily in the context of thefrustration-aggression hypothesis (Dollard et al., 1939; Miller et al., 1941; Alcock, 1994).According to this theory, an aggressive activity designed to remove or to breakthrough the frustrating barrier is carried out as the consequence of the aversiveemotion. Such activities include not only physical violence, but also thoughts ofrevenge and verbal punishment and protests. Frustration behavior is primarilydirected against the person (or even thing) that is regarded as being responsible for thefact that the target was missed (Harriman, 1961, p. 143). Alternatively, however, thisbehavior may also be directed toward persons or objects that cannot be maderesponsible for the problem at all (Anderson and Bushman, 2002, p. 37). Originally, itwas assumed that the existence of frustration always leads to some form ofaggression and aggression is always a consequence of frustration (Dollard et al.,1939, S. 1). Based on empirical studies, however, this assumption was revised andnowadays it is acknowledged that other behavioral reactions are possible (Miller et al.,

1941, p. 339; Berkowitz, 1989).Frustration behavior may also involve actions that can be interpreted asconstructive in the sense of an intensification of effort toward coping with the problem.As a result of the emotional activation, energy is produced that is then used toovercome the frustrating barrier. In this case, the failure in the expected performanceleads to compensatory reactions that make achievement of the goal seem possible(Stacker, 1977, p. 67).

Avoidance is a collective term for various forms of withdrawal behavior.Individuals display avoidance tendencies in order to evade situations that lead tofrustration incidents and hence to frustration. This avoidance behavior may have apassive character in the form of evasion, withdrawal and refusal (Stacker, 1977,p. 69) and, therefore, be of a resigned type. However, active avoidance is also

conceivable. In this case, individuals develop a strategy in order to achieve theirgoal, preferably while eliminating or reducing the frustrating conditions.

Figure 1 shows an overview of the general frustration model.

Relationships of model elementsThe relationships between the model elements that is, the relationships betweenfrustration incidents and frustration sensation on one hand, and between frustration


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sensation and frustration behavior on the other hand will be examined more closelyin the following section.

The relationship between frustration incidents and frustration sensation isprimarily a matter of which types of frustration incidents lead to a stronger or weaker

frustration sensation. Frustration research has chiefly emphasized four aspects:(1) the extent of the (withheld) reward;

(2) the time of the withdrawal;

(3) the perceived deliberateness or arbitrariness of the reward withdrawal; and

(4) the expectation of the reward withdrawal (Stacker, 1977).

Extent of the reward withdrawal. The intensity of the negative arousal that is, theintensity of the frustration sensation tends to be greater, the larger the anticipated(and then withheld) reward (Alcock, 1994, p. 42).

Time of the reward withdrawal. The time of the reward withdrawal also plays a

major role. Empirical frustration research shows that the intensity of the frustrationsensation grows when the withdrawal happens at a time shortly before realization is tooccur that is, shortly before the goal is achieved. The sensation is less intense, on theother hand, when the withdrawal occurs long before the intended goal is to beachieved. The later the frustration incident occurs, therefore, the longer the aversivefeeling can be expected to last (Stacker, 1977).

Perceived deliberateness or arbitrariness of the reward withdrawal. The perceiveddeliberateness or arbitrariness of the reward withdrawal is also of fundamentalimportance in determining the intensity of the frustration sensation. Stronger arousalcan be expected if the withdrawal is perceived to be deliberate/arbitrary (Janis, 1971,p. 156; Berkowitz, 1989). This perception influences the frustration behavior in such away that protest behavior becomes more likely and intensification of efforts, in terms

of a constructive search for solutions, decreases. It is also likely that there is a directeffect on frustration behavior that is to say, aggressive behavior is encouraged byperceived deliberateness or arbitrariness (Stacker, 1977, p. 53).

Expectation of the reward withdrawal. The intensity of frustration also depends onwhether individuals expect that they will be frustrated when trying to achieve theirgoals. Insofar as frustration incidents have already been anticipated, the situationbecomes less unpleasant, the arousal is less intense when the frustrating incidentoccurs, and a change in the frustration behavior takes place (Berkowitz, 1989). If

Figure 1.General frustration model

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individuals assume, based on their experiences, that their expectations will befrustrated and that protests will change nothing about the situation, a high tendencytoward avoidance can be expected as these individuals attempt to evade situations thatlead to frustrating incidents and thus to frustration sensation (Stacker, 1977, p. 58).

As far as the relationship between frustration sensation and frustration behavior isconcerned, there are established findings that the intensity of activation/arousaldetermines the frustration behavior. In general, this means that greater arousal leads toan intensification of the subsequent behavior. As Berkowitz states: It is not the exactnature of the aversive incident that is important but how intense the resulting negativeaffect is (Berkowitz, 1989, S. 68). The type of the frustration behavior is furtherdetermined by a number of influencing factors (such as situational conditions) (Stacker,1977, p. 60). Some general statements are, however, possible. The probability ofaggressive behavior increases as the arousal intensifies. The greater the arousal, themore likely is protest behavior. Accordingly, efforts toward finding constructivesolutions decrease when large rewards are withdrawn from individuals or when thedeliberateness/arbitrariness of the reward withdrawal leads to greater arousal.

In considering the relationships between the model elements, frustration toleranceshould be considered the primary moderating variable. The assessment andprocessing of frustration incidents are dependent upon the personalitycharacteristics and the conditioning of the individual, which are reflected in thefrustration tolerance (Rosenzweig, 1938). Frustration tolerance is the ability of anindividual to tolerate a frustrating situation for a longer period of time withoutdistorting the objective factors of the situation (Rosenzweig, 1938, p. 153; Rutishauser,1994, p. 36), without making efforts either to resolve the tensions indirectly or tosatisfy the motive directly (Harriman, 1961, p. 144) or without disruption ordisordering of ones behaviour (English and English, 1974, p. 217). The morepronounced the frustration tolerance, the fewer aggressive forms of behavior are found.

Individuals with high frustration tolerance will thus tend to exhibit either aconstructive intensification of efforts or avoidance behavior.Figure 2 shows the detailed general frustration model with its relationships, which

will form the basis of the following examination of frustration in loyalty programs.

Research questions and methodological approachIn order to analyze the extent to which frustration incidents that lead to customerfrustration and frustration behavior occur in loyalty programs, an exploratoryqualitative study was conducted among participants of a loyalty program. Theempirical study had a two-fold purpose. First, the existence and type of customerfrustration in the specific loyalty program was examined from a descriptive

perspective. To that effect the following research questions were defined:. Do customers experience frustration incidents?. What types of frustration incidents can be observed?. What subsequent effects do the triggered frustration sensations have with

respect to the behavior of customers?

Second, the findings of the exploratory study were used to develop a system ofpropositions that generate a specific model of customer frustration.


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Figure 2.Detailed generalfrustration model

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The research object was a loyalty program for frequent travelers of a transportationservice provider. The program has a clear emphasis on status components aiming toidentify, get to know and bind valuable customers to the firm. For each trip,participants in the program are credited a certain number of points, depending on the

price of the ticket. Accumulated points expire one year after they are earned. If acertain number of points is exceeded during this year, the travelers are awarded aspecial status that remains in effect for at least 24 months and is associated withvarious exclusive services that are either not available for customers without thisstatus or only upon payment of a fee.

There is a highly explorative character to the research problem, since up to thispoint neither proposals for the operationalization of the frustration construct norextensive knowledge about customer frustration in loyalty programs exist. For thisreason, a qualitative research approach was selected (Flick, 1998). In order to obtain themost comprehensive and precise insight into the frustration experience of customers intheir roles as participants in loyalty programs, the focus group method was adopted.Particularly for the exploration of so far unknown customer evaluations the focusgroup method has considerable advantages (Morgan, 1988; Frey and Fontana, 1991;Krueger, 1994; Flick, 1998; Fontana and Frey, 1998). The method allows participants todepict their experiences with the program in the content and language of their choiceand to reflect and analyze these experiences in the course of their conversation with theother participants (Krueger, 1994, p. 24; Fontana and Frey, 1998, p. 53). Thecommunication situation largely corresponds to everyday discourse, which makes itpossible to record opinions and attitudes as they would be expressed in privatediscussions. On one hand, this process prevents research-led directing of the testsubjects. On the other hand, the moderator can ensure that participants precisely depicttheir experiences, their impressions and the resulting actions (Fontana and Frey, 1998,p. 53; Chrzanowska, 2002, p. 19; Imms and Ereault, 2002, p. 78). Deep insights could

thus be expected in terms of which specific incidents triggered frustration, how strongthe frustration sensation was in each case and which behavioral steps frustratedcustomers took.

Since it was to be expected that the potential frustrating incidents would differ forvarying customer groups, depending upon whether the customers had alreadyqualified for the exclusive status or were still in the qualification phase of reaching therequired point total, the customers were divided into groups. This division is based onthe assumption that members of the groups differ in their expectations andexperiences, especially with regard to the experienced frustrating incidents. Therefore,they might feel a different amount of frustration sensation or display differentfrustration behavior. The division into groups fulfills the methodological requirementto establish reasonably homogeneous focus groups whose members share particular

and similar experiences (Imms and Ereault, 2002, p. 77).For dividing the customers into groups, first, customers who had already reached

exclusive status as a result of having reached the required number of points(Qualified) were differentiated from those who were accumulating points but werenot yet among the status customers because their point total was still too low(Non-Qualified). Second, the group of Non-Qualified was further divided into thesub-groups Just Missed and Bound to Fail, in terms of their chances of reachingQualified status. The Just Missed group included all customers who traveled


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frequently and consequently were able to accumulate a large number of points, but fellshort of the point limit, as they only had 50-99 percent of the necessary points.Customers in the Bound to Fail group also accumulated points, but had or have noreal chance of ever reaching the status level, since their point accounts showed less

than 50 percent of the necessary number of points.The Qualified group of customers and the two sub-segments of Non-Qualified

(Just Missed and Bound to Fail) were examined separately. For each of the threesub-groups, two focus group discussions were conducted, in which on average sixcustomers participated. The potential participants were selected from the programproviders customer database based on their membership in the respective customersegments. The customers were contacted by telephone and the final 36 participantswere acquired after a total of 418 telephone contacts had been made. All groupdiscussions were recorded on video and subsequently fully transcribed as a necessarybase for a thorough qualitative analysis (King, 1995, p. 25). Afterwards, a qualitativecontent analysis of the discussions was conducted (Krueger, 1994). The goal of thisqualitative content analysis was to find out to what extent the members of the loyaltyprogram experienced frustrating incidents, perceived a feeling of frustration andshowed frustration behavior. Therefore, as a first step, during a multi-level iterativecontent analysis customers statements in the different groups were analyzed fornegative customer emotions that could be interpreted as frustration sensation. Thatwas the case when the incidents causing the emotions could be interpreted as refusal,reduction or postponement of a reward. Then, in a second step, the frustrationincidents were assigned to categories (Strauss and Corbin, 1998, p. 113). Afterwards,the results of the different customer groups were compared with respect to kinds andfrequencies of the perceived frustration incidents and the occurrence of frustrationbehavior.

A total of 169 participants statements contained depictions of experiences that were

associated with negative customer emotions related to loyalty programs. Of these, 123incidents were judged to be frustration incidents and a total of seven categories offrustration incidents could be identified. Furthermore, for each customer depiction of afrustration event, it was analyzed how pronounced the frustration sensation was (low

medium high) and what type of frustration behavior resulted from it. The resultsof the content analysis are presented below in the context of developing the specificmodel of customer frustration in loyalty programs.

Developing a model of customer frustration in loyalty programsThe customer depictions of frustration incidents could be classified into sevencategories. During the analysis it turned out that the customers statements differedregarding their point of reference. Some were directed mainly at the loyalty programwhile some were directed at the company itself. A total of 86 out of 123 customerstatements related directly to the loyalty program and could be assigned to fourcategories. Directly related means that the frustration sensation in these 86 cases wasnot only triggered by experiences connected with the loyalty program but also thatboth the frustration sensation and the subsequent behavior of customers were directedtowards the program. The four program-related categories are Inaccessibility,Worthlessness, Redemption Costs and Qualification Barrier. The remaining 37frustration incidents were also directly triggered by participation in the loyalty

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program; however, participants frustration sensation and frustration behavior werenot focused simply on the program itself, but rather affected their perception of therelationship with the firm as well. These relationship-related frustration incidents canbe assigned to the categories of Discrimination, Defocusing and Economization.

The following presentation first refers exclusively to the program-related categories offrustration incidents, after which the relationship-related categories will be addressedin detail in a separate section.

Program-related frustration incidentsThe four categories derived from the content analysis can be characterized as follows:

Qualification Barrier. Frustration incidents that belong in the categoryQualification Barrier are related to circumstances in which the reward is tied toconditions that are difficult or impossible to fulfill. Non-qualified program participantscomplain about the amount of required points that has been set, because they view it asan insurmountable barrier (example: . . . for me as a private customer it is simply

impossible to collect the necessary number of points in 12 months that is somethingfor the business customers; . . . it can be pretty difficult to collect the points and it isusually quite an effort).

Inaccessibility. A different category of frustration incidents exists when customers infact do overcome the qualification barrier, but cannot access the expected reward in theform of program benefits e.g. because the provided capacity is insufficient, orbecause employees are poorly trained and hence do not or cannot perform the promisedservice (example: . . . when I wanted to actually use the preferred support, I found outthat in my hometown there just is no such exclusive counter).

Worthlessness. Frustration incidents fall into the category Worthlessness whencustomers do not see the program benefit they receive as being a reward because theyfind the additional value to be too low (i.e. worthless). Participants report their

disappointment about the fact that the benefits either prove not to be exclusive or thatthe value of the benefits bears no relationship to the volume of sales the customer mustgenerate in order to receive them (example: . . . there are no real advantages becausethe benefits are totally irrelevant to me . . . ).

Redemption Costs . It is also frustrating to customers when they can only access thereward by investing additional material or mental costs. With respect to the loyaltyprogram investigated, qualified participants of the program reported situations thatovertaxed them because they had to make their demands during the presence or evenat the expense of the Non-Qualified participants, which partly deterred the qualifiedfrom claiming the benefits at all (example: The system is designed in a way that I haveto overcome certain inhibitions to come to my right. It was really embarrassing that Ihad to ask other customers to leave their seat and make room for me, so I waived myprivilege).

All customer depictions included in the analysis are rightly designated frustrationincidents, since each represents a form of reward refusal, reward reduction and/orreward postponement, and since each triggered strong negative emotions. Clearly,inaccessibility is to be classified as reward refusal. A qualification barrier can also beinterpreted as a reward refusal, provided that the reward proves to be unattainable, inspite of loyal behavior. Should the required number of points and, therefore, the rewardbe actually acquired, but later than expected, this incident can be classified as


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postponement of reward. Worthlessness and redemption costs represent reductions inthe expected amount of the reward from the customers perspective.

Based on these results, we may make the following proposition:

P1. Program-related frustration incidents do occur in loyalty programs.A comparison of the various customer segments (Qualified, Just Missed andBound to Fail) showed that the different categories of frustration incidents occur withdiffering frequencies. In the group of qualified customers, most of the frustrationincidents are attributed to a perceived worthlessness of the program. Next are theperceived redemption costs and the inaccessibility. Worthlessness also clearlydominates among non-qualified customers. In view of the fact that they are not yet ableto claim the benefits, however, this perceived worthlessness may also be regarded, atleast to some extent, as the result of a dissonance reduction, in that the services thatcannot be or have not been procured are devalued. For non-qualified customers,frustration about the height of the qualification barrier ranks second. In light of thisdivision between the two groups, the following proposition may be formulated:

P2. Different frustration incidents occur, depending upon the possibility ofclaiming the reward.

Program-related frustration sensationConsiderations in frustration theory have indicated that the level of the frustrationsensation is dependent upon the extent of the reward withdrawal, upon the time of thereward withdrawal, upon the perceived deliberateness/arbitrariness and upon theexpectation of the onset of frustration.

Participants of the Qualified group primarily displayed highly negative emotions

in the case of frustration incidents of the Inaccessibility and Redemption Costscategories. With reference to the theoretically ascertained determinants of thefrustration sensation, this result would appear to be quite plausible. When thepromised benefit is refused or high material or mental costs must unexpectedly be paidby the customer in order to claim the reward, then the extent of the reward withdrawalis judged to be high. Moreover, the withdrawal occurs only after what is sometimes along qualification phase and when the actual claim is made; that means the time of thereward withdrawal is late. In addition, the results from the Inaccessibility andRedemption Costs categories cannot be interpreted as random or temporaryoccurrences from the customer point of view, but rather as the intentional results of aconcept that was planned by the provider. Furthermore, occurrence of inaccessibility orredemption costs was not anticipated, meaning that no reduction of the frustrationsensation could occur for this reason.

Also in the case of the numerous frustration incidents in the Worthlessnesscategory, many program participants experienced a strong frustration sensation,because they viewed the reward withdrawal as serious in view of the great effort theyhad expended in accumulating points, because the reward withdrawal occurred lateand because the incident was clearly the result of a purposeful decision on the part ofthe company. The frustration sensation was, however, less clearly pronounced in thecase of some participants, since these participants had already scrutinized the

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promised reward before making their claim, had determined its value to be low andthus had also expected the onset of frustration (Table I).

The following proposition can thus be phrased:

P3A. The frustration sensation of participants in loyalty programs is greater, themore intensely they experience the extent of the reward withdrawal, the laterthe reward is withdrawn and the more the reward withdrawal is seen asdeliberate or arbitrary.

In terms of the Qualification Barrier category, the empirical findings for theNon-Qualified group are especially insightful in illustrating the reducing influence ofexpecting the frustration on the frustration sensation, as is implied in proposition P3B(see below). The findings provide clear indications that the problem of falling short ofthe high number of points required led to a high frustration sensation among themembers of the Just Missed segment, whereas this was not the case to the sameextent among the Bound to Fail group. This result appears to be likely when takinginto consideration the determinants of the frustration sensation. For the Just Missedgroup, the reward withdrawal occurs late that is, shortly before the minimumnumber of points is reached and the frustration is unexpected, as long as overcomingthe barrier is still seen as a possibility. The reward withdrawal for those Bound toFail, by contrast, is recognized early on, and the frustration is thus to be expected andtherefore frustration sensation is lower.

On the basis of these findings, the following proposition may be formulated:

P3B. The frustration sensation of participants in loyalty programs is lower whenthe participants expect that they will be frustrated.

Program-related frustration behaviorFindings in frustration theory suggest that differing types of frustration incidents orvarying degrees of the intensity of frustration sensation also lead to varyingexpressions of frustration behavior (protest, intensification of efforts or avoidance).According to the general frustration model, protest behavior can particularly beexpected, when the reward withdrawal is perceived to be deliberate/arbitrary andwhen the frustration sensation is intense, whereas avoidance behavior tends to occurwhen the onset of frustration is expected.

A corresponding relationship can also be observed in the exploratory study. ThoseQualified participants, that were especially frustrated by incidents in the categoriesof Inaccessibility, Redemption Costs and Worthlessness respond with protestbehavior that is to say, complaints against employees of the firm or intense negativeword-of-mouth in their social environment.

Concerning the frustration behavior of the Non-Qualified, a clear distinction canbe observed between the Bound to Fail and Just Missed groups. For customers inthe Just Missed group, barely falling short of the required number of points isespecially frustrating. Therefore, those customers who still believed that they couldreach the required number of points responded with an intensification of their efforts that is, an increased accumulation intensity whereas the others were disappointedand exhibited protest behavior. Participants in the Bound to Fail group indeed


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Categoriesof

program-related

frustrationincidents

Extentofthereward

withdrawal

Timeofthereward

withdraw

al

Perceived

deliberateness/arbitrariness

oftherewardwithdrawal

Expectationoftheonset

offrustration

Re

sulting

fru

stration

sensation

Inaccessibility

High,asthebenefitwas

promised

Late,asonlyoccurred

whenbenefitwas

claimed

Low,aseventnot

foreseeablebeforehand

High

RedemptionCosts

High,asthebenefithas

alreadybeenpayedfor

Late,asonlyoccurred

whenbenefitwas

claimed

High,astheresponsibility

fortheresultcanbeclearly

attributed

Low,aseventnot

foreseeablebeforehand

High

Worthlessness

Mediumtohigh,

dependingupon

customer-specific

assessment

Late,asonlyoccurred

whenbenefitwas

claimed

Mediumtohigh,

dependingupon

customer-specific

assessment

Mediumto

high

Table I.Characteristics of thefrustration sensation ofQualified participantswith program-relatedfrustration incidents

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experienced the deliberateness/arbitrariness of the reward postponement in an intenseway, but they had been expecting the onset of this frustration for a long time.Consequently, they exhibited heightened avoidance behavior by abandoning furtherattempts to accumulate points.

Therefore, we can formulate the following propositions:

P4A. Highly frustrating frustration incidents tend to lead to protest behavioramong qualified participants of loyalty programs, less frustrating frustrationincidents to avoidance behavior.

P4B. Highly frustrating frustration incidents lead to an intensification of effortsamong non-qualified participants of loyalty programs, provided that theyexpect to overcome the qualification barrier; otherwise, such incidents lead toprotest behavior.

P4C. Non-qualified participants with no prospect of overcoming the qualificationbarrier respond with avoidance behavior.

Relationship-related frustration incidentsThe results of the focus-group discussions led to the conclusion that frustrationincidents occurred that differed from the program-related incidents in their relevance tothe customer relationship. Indeed, these frustration incidents also stemmed from theloyalty program, but the frustration sensation was not primarily focused on theprogram itself, but rather on the firm and the customers perceived relationship withthis firm. These frustration incidents will be referred to here as relationship-related

frustration incidents.From the focus-group participants statements 37 could be attributed to three

categories of relationship-related frustration incidents whose reference point is thecompany or the overall customer relationship. Those categories are Discrimination,Defocusing and Economization.

Discrimination. Frustration incidents in this category occur when less valuablecustomers are disadvantaged by the company treating the valuable status customersfavorably. The customers that are less valuable from the firms perspective may stilldemonstrate a strong commitment to the firm and perceive themselves to be valuablecustomers. As Non-Qualified customers, they see the denial of equal treatment asdiscrimination. Interestingly, participants in the Qualified group, who were notaffected by the discrimination themselves, also criticized other customers unfavorabletreatment as being discriminatory (example: I dont like superior treatment of certaingroups. They cant do that (Non-Qualified), Everybody should be treated equally,nobody should feel discriminated (Qualified), How unimportant must I be for thecompany that I do not even get this advantage (Non-Qualified)).

Defocusing. Many customers rate the core service of the provider as only somewhatsatisfactory. This impression leads to a perception that the firm has wrongly focusedits priorities on the loyalty program instead of on the core service. The participants inthe focus groups thus see the program as a reduction of the possible value, in terms of


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service quality that the firm could in fact offer to them, provided that the firm wouldhave directed the resources used for the loyalty program toward measures designed toimprove the core service (example: What do I need points for when I arriveunpunctually or receive wrong information. In the first place they should improve the

core service).Economization. Loyalty programs move the economic character of the relationship

to the forefront of customers consciousness. For some customers who had strongemotional ties to the firm, this development led to a re-evaluation of the businessrelationship, as there was no reciprocity on the part of the firm for the customersemotional commitment (example: For every point I receive I have to spend one Euro,making me realize how much I really spend for the company to become a valuedcustomer).

These three categories of relationship-related customer statements are frustrationincidents because each of them was a form of reward refusal or reward reduction andbecause they triggered highly negative emotions. The discrimination is a willfulrefusal of a possible reward. The defocusing can be understood as a reward reductionbecause the service received in return for the price paid by the customer is diminishedby supposedly incorrect corporate investments in the loyalty program. Economizationmay also be taken as a reward reduction, as the emotional reward for the customersemotional ties is withdrawn.

In the case of these relationship-related incidents participants cannot intensify theirefforts as a possible reaction to the strong frustration sensation. Thus, the affectedcustomers chose either protest or avoidance as alternative actions. For instance, theycomplained to the firm about the discrimination they experienced or decided to use thecore service less often in the future.

Accordingly, propositions P5A and P5B are as follows:

P5A. In loyalty programs frustration incidents occur that have negative effects on

the customers perception of the relationship with the firm.

P5B. Highly frustrating relationship-related frustration incidents lead to protest oravoidance behavior with respect to the loyalty program and/or the coreservice.

DiscussionConclusionMore and more companies are implementing loyalty programs in order to enhance

their knowledge of their customers, to identify the valuable customers, to differentiateand give personal attention to these valuable customers and especially to raise profitsby increasing customer retention and by a more efficient use of marketing tools. Fewfirms, however, systematically verify whether the programs they implement actuallyachieve these goals. An even more neglected question is whether customers asparticipants of loyalty programs have negative experiences that frustrate them. Theconsequence could be that the programs do not achieve the retention effect aimed at, oreven that the overall relationship with the firm is weakened.

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Discussions in internet forums provide initial indications that participatingcustomers are annoyed with loyalty programs. The present exploratory study firmlysupports this impression. Customers do in fact experience a number of differentincidents that greatly frustrate them. Chief among frustration incidents directly related

to the loyalty program are difficulty of access (qualification barrier), impossibility ofclaiming the reward (inaccessibility), low value of the reward (worthlessness) andbeing required to invest additional material and mental costs in order to enjoy thebenefits (redemption costs). In addition, customers experience frustrating incidentsthat directly affect their relationship with the firm. They feel disadvantaged by thefavorable treatment of other customers (discrimination), believe that the firm haswrongly focused its priorities on the loyalty program, in light of a perceived deficiencyin the core service (defocusing) and are offended by the exclusive focus on the economicaspects of the relationship (economization).

The frustration incidents lead to highly negative emotions the frustrationsensation that leads to frustration behavior in the form of an intensification ofefforts, protest behavior or avoidance behavior. It is in the interest of the firm ifcustomers intensify their efforts in order to be able to enjoy the benefits offered in theloyalty program. This effect only sets in, however, if customers actually achieve theirgoal and are not left with negative emotions. Protest behavior as a sign of intensecustomer frustration must certainly be taken seriously by the firm as evidence ofundesirable developments in the program. The most problematic situation arises whenthe participants choose avoidance behavior without providing feedback, particularlywhen the behavior is directed not only to the use of the loyalty program, but alsoextends to the use of the actual core service or to the assessment of the overallrelationship.

Limitations and research implicationsThis research contributes to theory by revealing new research perspectives in tworegards. First, the general frustration-theoretical model presented offers an importantstarting point for further research. Second, the study on frustration effects in loyaltyprograms directs the attention toward the previously highly neglected area ofunintended negative side effects associated with customer-retention andcustomer-relationship management measures.

So far, very few articles address the construct of customer frustration (Soderlund,2003; Stauss, 2004). This paper moves beyond the existing discussion by developing ageneral frustration model and examining its adequacy for explaining the specificbehavior of frustrated customers. As this succeeds, it seems reasonable to expand thethought and, for example, to reflect the suitability of using the frustration construct to

explain the behavior of customers who experience other frustrating situations. Amongcases to be considered in this context would be, when customers complainunsuccessfully or when customers have to encounter breach of companies guarantees.

However, the limitations of the theoretical perspective have to be considered. Thediscussion as to the exact differentiation of frustration from related constructs (such asdissatisfaction) is by no means concluded. Above all, further work is necessary thatwould allow deeper insights into the relationships between the model elements: therelationship between frustration incident and frustration sensation, the relationship


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. offering only those service benefits that represent genuine additional value tocustomers so as to avoid perceived worthlessness;

. making sure that the rewards can be claimed by customers at any time and inany place in order to avoid inaccessibility; and

. making sure that customers are not overburdened by being required to investadditional material or mental costs in order to claim benefits so as to avoidredemption costs.

If loyalty programs have already been implemented, it is important that the quality ofthe program perceived by the customer is constantly monitored on a customersegment-specific basis, thus allowing the firm to obtain prompt information aboutpossible customer frustration. Furthermore, the behavior customers exhibit whenaccumulating points and claiming benefits should also be monitored continuously, sothat the firm can recognize the first signs of avoidance behavior by customers in atimely manner. Moreover, indications of protest such as customer complaints should be viewed with particular attention. In this regard, not only must employeeshaving contact with customers be empowered to answer these complaints and toconduct a dialog with the complainants, but also to forward the complaints, so that thecritical aspects and proposals contained in customers protests are also used to improvethe program on an ongoing basis.

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