Existing customers’ reaction to new customers’ exclusive discount : The impact of strategies that reduce long-term but not short-term inequity

Abstract

Previous research suggests that new customers’ exclusive discounts lead existing customers to a perception of price unfairness and thus negative behavioral intentions. This finding has raised widespread concern that such discounts may not be a sustainable marketing practice. Drawing on fairness research, this article argues that firms can effectively mitigate existing customers’ adverse reaction by strategies that reduce long-term inequity but not short-term inequity. A series of experiments supports this argument, examines the robustness of such strategies, and investigates the underlying psychological mechanism. Overall, the findings suggest that when properly managed, new customers’ exclusive discounts are a sustainable marketing practice.