Customer equity drivers (CEDs) include value, brand, and relationship equity, which have a strong link with loyalty intentions. This study aims to examine the incremental effects of positive and negative emotions on loyalty intentions and to determine whether these emotions moderate the positive link between CEDs and loyalty intentions. We use customer data with 102 leading firms across eighteen services industries in the Netherlands. The results show that (1) positive and negative emotions have incremental effects on loyalty intentions, (2) positive emotions weaken the positive link (negative interaction), and (3) negative emotions strengthen the positive link, but only for brand and relationship equity (positive interaction). Thus, positive and negative emotions also explain loyalty intentions. However, managers should be cautious when combining CEDs with positive and negative emotions. We provide a strategic matrix to help managers arrive at effective combinations.
Loyalty intentions are an important outcome that helps firms protect their bottom lines and grow top-lines (Kumar, Pozza, & Ganesh, 2013). The loyalty literature finds three customer equity drivers (CEDs) that significantly influence loyalty intentions (e.g., Rust, Lemon, & Zeithaml, 2004): value equity (VE), brand equity (BE), and relationship equity (RE).1 CEDs are customers' assessments of value received, brand image perceived, and relationships established. In addition to CEDs, customer emotion is also a pervasive part of customer experiences and might heavily influence customer loyalty (e.g., WARC_1_2016). However, while prior studies have extensively studied CEDs (e.g., Ou, de Vries, Wiesel, & Verhoef, 2014; Ou, Verhoef, & Wiesel, 2017; Rust et al., 2004; Vogel, Evanschitzky, & Ramaseshan, 2009), they ignore how CEDs and customer emotion jointly influence loyalty intentions and hence it is unknown whether emotions affect loyalty beyond the established effects of CEDs. In addition, does a combination of CEDs and customer emotion effectively influence loyalty intentions? We will take Amazon.com as an example to illustrate the importance of these two questions. To expand its customer base, the eretailer uses both functional and emotional advertising to promote Fire TV and Prime (Whiteside, 2016). However, as Andy Donkin, Amazon's former head of worldwide brand and mass marketing, points out, “The farther we push from functional into emotional, the more skepticism there is about whether that can deliver” (Whiteside, 2016). This statement indicates that managers still question whether managing customer emotion is the right thing to do. This doubt may stem from two reasons. First, companies strive to create positive emotional experiences, as creating memorable and personalized customer experiences is crucial for competitive advantages in the experience economy (Pine & Gilmore, 1998), which assumes that customer emotion has an enduring effect on retaining customers. However, emotions are short lived and context specific and can be positive or negative (Andrade & Ariely, 2009). Can the effects of positive and negative emotions be proved when we account for regular strategies, such as improving CEDs? That is, while CEDs have a strong link with loyalty intentions, the extent to which customer emotion can incrementally contribute to loyalty intentions remains unclear. Second, services, brands, relationships, and emotions are important ingredients for creating customer experience (Lemon & Verhoef, 2016; Verhoef et al., 2009). One unresolved question is whether the combination of CEDs and customer emotion creates strategic synergies or results in dis-synergies.