Do Economic and Social Satisfaction Matter Equally in Sustainable Business? Hotel Membership Types and Sales Promotions

By inergency On Mar 28, 2024

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1. Introduction

Customer satisfaction undoubtedly improves business performance. Satisfaction can be differentiated into economic and social perspectives, especially in business-to-business (B2B) and consumer-to-consumer (C2C) transactions [1,2]. Specifically, economic satisfaction focuses on customers’ evaluations of economic outcomes, whereas social satisfaction focuses on their evaluations of psychological aspects. However, researchers have mainly investigated economic and social satisfaction from the customer relationship management perspective [1,2,3]. The underlying premise of these studies is that customers prioritize economic considerations in the initial stage of a relationship with a service organization and begin to pay attention to the importance of the social perspective in the developmental or maturity stages [2,4,5].

These studies emphasize psychological and attitude changes from a customer relationship perspective but fail to consider that a fundamental state of satisfaction with a particular object must be secured. In other words, the premise that customers’ attitudes shift to non-economic satisfaction after obtaining economic satisfaction is required, suggesting that customer satisfaction responds differently based on several conditions. For example, hotels in Korea invest significant effort in managing membership levels and promoting sales through loyalty programs [6,7,8]. However, despite these investments, some problems remain unaddressed.

Using a dataset of survey responses from hotel membership holders, we address the following research questions:

Do customers with memberships respond more strongly to social satisfaction than economic satisfaction when considering membership renewal?
Do sales promotions respond more powerfully to economic satisfaction than to social satisfaction?

Research distinguishing between economic and social satisfaction is still in its infancy within the hospitality literature, suggesting potential research gaps. Addressing these gaps will allow researchers to support sustainable business.

In line with these observations, prior work has left two fundamental issues unexamined. First, little is known about the relative influence of both satisfaction types in facilitating paid membership renewal intentions. Economic satisfaction (i.e., monetary outcomes) and social satisfaction (i.e., interactions and psychological fulfillment through long-term exchanges) are both helpful in predicting the direction of a relationship [2,9]. However, when additional moderating variables are involved in the two satisfaction types, do previous findings hold equally? For example, whether both types equally affect paid membership renewals remains unclear. Furthermore, while the existing related literature focuses on the shift from economic to social satisfaction in the importance of customer evaluations [2,10,11], these studies fail to consider that the two satisfaction types differ in their responses to sales promotions by membership type.

As such, the existence of a relationship among key determinants may help clarify hotel membership renewal performance aligned with customer typology, promotional levels, and an extension of the satisfaction theory. We are particularly interested in how these satisfaction types are affected by three-way moderating effects. If the membership type and promotional level change, is there a shift in the perceived overall satisfaction with a hotel? Specifically, this study aims to examine how membership type and promotional level affect the relative importance of economic and social satisfaction in determining a sustainable relationship between parties.

We make two fundamental contributions to satisfaction research by demonstrating a three-way interaction. First, this study examines the relative influence of both satisfaction types on paid membership renewal intentions. Satisfaction positively relates to an increase in desired behavioral intentions [12,13,14]. However, the significance and relative influence of economic and social satisfaction vary based on the evolution of satisfaction assessments. Thus, we offer a theoretical domain considering the significant distinctions between economic and social satisfaction across customer membership types.

Second, our work advances the contributions of previous studies on the relationship between the satisfaction types and their impact on sales promotions (e.g., tourist satisfaction and intentions to patronize) by demonstrating a three-way interaction [15,16,17]. Essentially, the mediated moderation effect reflects an empirical approach that investigates the indirect determinants of the satisfaction–intention mechanism by compiling existing studies and assessments of hotel customers to provide new insights on satisfaction.

The structure of this study is as follows. In the next section, we introduce the core theoretical framework of our research and develop our hypotheses based on a conceptual model. Then, we address data collection and methodological issues. Following this, we analyze the data and explain our study results. Finally, we summarize the overall results, discuss theoretical and practical insights, and suggest limitations and future research directions.

3. Methods

To facilitate a complete understanding of hotel memberships, it should be noted that most hotels provide free memberships, which differ from paid membership, at least in the Korean hotel context. For example, InterContinental Seoul operates three paid membership options. This hotel offers entirely different benefits for each level, such as club rooms, free restaurant meal vouchers, restaurant discounts, and valet parking benefits. However, the free membership provided by most hotels only allows points to accumulate through use.

3.1. Data Collection

Data were obtained from paid membership lists managed by five-star hotels in Korea. We mainly focused on (1) customers whose paid membership renewal occurred within the past three months and (2) customers with paid memberships at only one hotel. Based on these criteria, we used a purpose sampling method as a non-probability sample. As the primary rationale was the intention to renew a paid membership as a dependent variable, we assessed that collecting data on customers whose membership will expire soon was consistent with the nature of our study. Also, to maintain privacy, the hotels only provided customers’ emails. We fully accepted their policy and contacted paid members by email.

Initially, a list of 1165 paid members was obtained from the hotels. To eliminate data collection redundancy, we set the Google survey form to accept only one response per respondent. Respondents were contacted via email from late February to early March 2022, through which we collected 289 responses. We excluded 28 respondents with a significant period remaining until their renewal and 19 respondents who were skeptical of membership renewal, as indicated through the questionnaire response items. Additionally, 14 participants were excluded due to careless responses. Thus, we obtained 228 usable responses (response rate = 19.5%). All respondents were given coffee vouchers as an incentive to improve the response rate. Respondents’ demographic characteristics were majority male (69%) and older than 40 (86%). Also, 74% had renewed their membership more than once. This result is representative as it was similar to the hotel loyalty program statistics (active, habitual, and situational loyalty = 75% vs. active disloyalty = 25%).

3.2. Measures

Table 1 shows the measures applied in this survey. Economic and social satisfaction were measured using three items adapted from Geyskens and Steenkamp [9]. These items were partially modified for this study as they had been developed for a B2B context. Paid membership renewal intentions were measured using three items adapted from Lam and Hsu [56]. All items were rated on a five-point Likert scale ranging from 1 (strongly disagree) to 5 (strongly agree).

The two moderators, membership types and promotions, were measured as dummy variables. Respondents selected their membership type as lower-tiered (1) or premium (2) grade. Promotions were divided into price discounts (1) and coupons (2). A 10% discount on membership fees was presented for price discounts. For coupons, benefits equivalent to 10% were introduced in the form of a voucher. Respondents selected their preferred promotion from these options.

We conducted a manipulation check on sales promotions using a t-test to diagnose the effectiveness of our promotional manipulation with the promotion type (discounts vs. coupons) as a key moderating variable. Our results demonstrated that a significant difference exists between the groups (Mprice discount = 3.78 vs. Mcoupons = 3.46; t(226) = −2.68, p < 0.01), indicating an effective manipulation.

5. Discussion

5.1. Theoretical Implications

This study contributes to the theoretical understanding of the two satisfaction types based on which paid members determine their membership renewal. Contrary to the traditional findings on customer satisfaction in the B2B context, Chen et al. [1] found that in the C2C context, only economic satisfaction influences customers’ repeat purchases. Interestingly, our findings have similarities and differences with previous studies. For example, unlike Chen et al.’s findings, our results demonstrated that both economic and social satisfaction affect behavioral intentions. While conventional wisdom tends to view economic satisfaction as a determinant of social satisfaction [9,10], our results showed that these satisfaction types are independent and respond differently to membership types and marketing stimuli. In particular, Butcher [65] found that social satisfaction has the greatest influence on repurchase intentions for initial visits to a café, but this effect gradually dilutes. Our findings show that social satisfaction dramatically improves repurchase intentions, especially when coupons are provided to premium customers.

In line with these observations, our primary contribution is an exploration of how economic and social satisfaction in the B2C context significantly affect paid membership renewal intentions, helping us gain a deeper understanding of hotel membership renewal behavior. Paid hotel members tend to show more significant renewal intentions when pursuing social satisfaction, as their focus shifts from economic satisfaction to social satisfaction when the relationship with a specific partner is prolonged. This contribution extends a comprehensive understanding of satisfaction theory from the existing B2B and C2C contexts to the B2C context. In doing so, this study uncovers similarities and differences in satisfaction types that have differential relationships with membership renewal intentions, which have not been previously examined in the literature.

Furthermore, our results broaden the understanding of the effectiveness of sales promotions from a customer segment perspective, as emphasized in previous studies [66,67]. This study demonstrates that lower-tiered members prefer price discounts to coupons when economic and social satisfaction are high. In contrast, premium members prefer coupons to price discounts when economic and social satisfaction are high. Notably, regardless of the hotel membership level, customers respond eagerly to price discounts and coupons for paid membership renewals when pursuing social satisfaction. Therefore, these results provide insights into hotel customer segments, highlighting that customers seeking social satisfaction respond strongly to promotions. Thus, ensuring customer relationships endure is fundamental to successful relationship management [68].

Finally, the hospitality literature offers mixed results regarding price discounts and coupons from a customer segment perspective. For example, coupons are more crucial in motivating first-time customers to return [69], whereas mixed promotions are important in retaining repeat customers [32]. Additionally, repeat customers prefer bundled discounts to price discounts [70]. However, price discounts are consistently positive for all customer segments. Thus, we conclude that lower-tiered members show a sharp upward response to price discounts when economic and social satisfaction are positive, at least within the hotel industry.

5.2. Managerial Implications

In this section, we focus on how sales promotions affect the relationship between economic or social satisfaction and paid membership renewal intentions by customer segment. Promotions are important in helping existing customers decide whether to renew their membership and exhibit loyalty through continued hotel stays. It is critical to consider how the impact of these promotions may differ depending on the type of paid member. Choosing an effective promotion level can create opportunities and constraints for the various paid hotel membership types. For example, hotel managers can effectively design price discounts to maximize benefits for lower-tiered customers even when these customers are pursuing economic value. For this segment, coupons can somewhat increase renewal intentions; however, price discounts can reduce uncertainty regarding future visits and sharply increase membership renewal intentions.

Managers should consider what price discount level is optimal for these customers. For example, some customers may be delighted with a 5% discount, while others may find even a 10% discount insufficient. Therefore, monitoring and responding to customer experiences through purchasing characteristics, visit frequency, usage history, and light interviews with relevant department representatives may be beneficial.

Promotional strategies for premium membership customers are also essential. Although this segment responds positively to price discounts, they prefer coupons when renewing paid memberships, regardless of satisfaction type, which is consistent with previous studies [32,71]. However, a new approach is required as lower-tiered members can also be repeat customers. For example, the InterContinental Hotel provides premium customers with a free restaurant voucher equivalent to 20% of the membership renewal fee, increasing the frequency of membership renewals and hotel visits. However, as mentioned, it is necessary to utilize customer feedback to determine the coupon payment equivalent to the price discount, as some customers renew their membership without receiving coupons. Thus, determining the payment helps establish the optimal benefits of offering coupons. This is achieved by identifying the characteristics of premium customers to suggest metrics for measuring the potential needs of this group.

6. Conclusions, Limitations, and Future Research Directions

Examining the customer behavioral intention responses to sales promotions is a recent trend in hospitality research [32,72,73]. Naturally, customer satisfaction must precede this intention. However, when different types of satisfaction exist, service providers may experience confusion. Our findings show that social satisfaction has a greater direct effect on behavioral intentions than economic satisfaction.

Prior research on three-way interactions has mainly focused on the direct effect of promotions on behavioral intentions [16] and customer switching intentions [74]. However, this study shows that sales promotions positively affect members’ behavioral intentions when they are satisfied regardless of membership type. While both economic and social satisfaction directly impact paid membership renewal intentions, the satisfaction–intention linkage responds differently by membership type when varying promotional levels are involved. In the paid hotel membership context, when social satisfaction is positive, the impact of different sales promotions on paid membership renewal intentions increases dramatically regardless of membership type. More specifically, low-tier members respond more positively to price discounts when considering renewing their paid membership, while premium members prefer coupons. However, the slope of customer responses is steeper for social satisfaction than economic satisfaction, suggesting that the impact of sales promotions differs by membership type. Our findings provide evidence that the satisfaction–intention mechanism varies by membership type when promotions signal different benefits.

Meanwhile, this study’s limitations derive from the sample size and sales promotions used in our research. Although the sample was based on paid membership lists provided by hotels, it was relatively small. If future researchers do not have a sufficient sample size, comparing popular hotels in large cities with hotels in tourist areas could be an alternative.

Another limitation of our findings is the lack of variation in sales promotion levels. This study used 10% price discounts and coupons with benefits equivalent to a 10% discount to compare the choices of the two member groups. However, four- or five-star hotels sometimes offer non-monetary coupons or gifts rather than price discounts. That is, hotel managers may prefer coupon strategies that exclude direct monetary discounts and encourage frequent hotel visits. Therefore, future research should provide an alternative to how customers choose coupon promotions by comparing coupons (e.g., a complimentary buffet restaurant voucher for a weekday lunch or dinner per person) and through mixed bundling (e.g., a gift voucher with benefits equivalent to coupons or an upgrade to a room with a view), which affords the same benefits as the coupons. As mixed bundling is ubiquitous [75,76], future studies can broaden our findings to provide additional insights into satisfaction and pricing literature.

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