The existing research concerning loyalty programs has mainly focused on positive effects. However, some researchers have discounted such effects due to the excessive costs of loyalty programs. Accordingly, the phenomenon of negative effects, which is caused by loyalty programs designed incorrectly, has a detrimental effect on firm performance. In some circumstances, hierarchical loyalty programs under perform, especially when customer demotion occur. Customer demotion is the removal of or decline in preferred-customer status to consumers when they fall below a certain spending level.
The purpose of our study is to show how customer loyalty intentions are influenced by lagged cognition, affect, and demotional dissonance under sunk-cost conditions from a dynamic perspective when customers experience demotions in loyalty programs. Specifically, we aim to unveil moderating effects of sunk-cost on the relationship between demotional dissonance and loyalty intentions.  Thus, our research attempts to confirm the ambidextrous effectiveness of demotion by analyzing longitudinal data in the field.