The Hidden Contract in Your Customer’s Mind

Loyalty Science Lab
9 min readOct 5, 2023

How to leverage psychological contract to optimize customer relationship management

Your business works hard to cultivate close relationships with your customers. You may “wine and dine” them, offer special treatments, or use social media to engage them socially and emotionally. But is this always appreciated by your customers?

Dr. Lin Guo, a marketing professor and Loyalty Science Lab researcher at Old Dominion University, says it depends. In a study published in the Journal of the Academy of Marketing Science, Dr. Guo and her coauthors show that companies’ relationship overtures are not always welcome or effective. How consumers react to relationship investments depends on their psychological contract with a business.

Analyzing the responses from 700 consumers across multiple service sectors, the researchers tried to reconcile the paradoxes observed among the consumers. For example,

  • Some consumers happily collect relational rewards from a company’s loyalty program but fail to increase their spending with the company.
  • Some consumers are never satisfied with a company but continue to reward the company with ongoing purchases.
  • Even some of the most frequent travelers surprisingly loathe their most used airlines, stating, “I’m not loyal; I’m just a hostage.”

In short, consumers often do not respond to relationship investments the way we expect them to.

“I’m not loyal; I’m just a hostage.”

How should your business account for such differences across customers and invest wisely in fostering the right relationships? The key is to understand the psychological contract customers have regarding your business.

Read on to discover:

What is a Psychological Contract?

Let’s start with what a psychological contract is not: it is not a legal contract or agreement with your customers. Instead, it is what people believe to be the terms and conditions of…



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