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Consumer Perceptions of Price (Un)Fairness
Abstract and Figures
A series of studies demonstrates that consumers are inclined to believe that the selling price of a good or service is substantially higher than its fair price. Consumers appear sensitive to several reference points--including past prices, competitor prices, and cost of goods sold--but underestimate the effects of inflation, overattribute price differences to profit, and fail to take into account the full range of vendor costs. Potential corrective interventions--such as providing historical price information, explaining price differences, and cueing costs--were only modestly effective. These results are considered in the context of a four-dimensional transaction space that illustrates sources of perceived unfairness for both individual and multiple transactions. Copyright 2003 by the University of Chicago.
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... Conversely, disclosing low quality or choosing nondisclosure can decrease consumers' willingness to pay (WTP), a drawback firms could avoid without the option of disclosure. Previous research has explored methods to alleviate unfairness concerns, such as providing historical price data, detailed pricing explanations, and highlighting costs (Allender et al. 2021;Bolton et al. 2003). However, applying these findings to the context of quality disclosure is not straightforward. ...
This paper examines the quality information disclosure strategy of a monopolist when faced with two distinct consumer types: fairness-sensitive and fairness-insensitive consumers. We develop a game-theoretic model that accounts for consumer heterogene-ity in willingness to pay and their rational updates to quality expectations based on the firm's choice of disclosure or nondisclosure. Our findings reveal that the firm's nondisclosure can alleviate price reductions driven by fairness concerns among consumers. The resulting opacity in quality information, stemming from the firm's nondisclosure strategy, enhances profitability by enabling the firm to charge a higher retail price as consumers' fairness concerns escalate. Furthermore, we demonstrate that consumers' fairness concerns can act as a barrier to quality information disclosure and exert a non-monotonic influence on consumer surplus, which contrasts sharply with the conventional wisdom that such concerns unequivocally benefit consumers.
... Consequently, price fairness is crucial for consumers and has become a vital topic in marketing (Ma et al., 2023). According to Bolton et al. (2003), fairness can be conceptualized as the degree to which the result and/or the way of attaining it are perceived as realistic, impartial and acceptable. As a pivotal instrument, pricing policy significantly influences customer satisfaction (Do et al., 2023). ...
Purpose
This paper investigates the influence of e-service quality (process and user experience) and price fairness on customer satisfaction, which, as a consequence, affects brand love toward Food Delivery App (FDA) services. More importantly, it examines the moderating roles of generation (Gen Y vs Gen Z) and usage frequency (low vs high) in affecting user behaviors.
Design/methodology/approach
Data were collected from 354 food delivery app users (Gen Y and Z) in Bangladesh through structured questionnaire and analyzed with PLS-SEM.
Findings
The findings show that, apart from reliability, all the dimensions of service quality influence app users’ satisfaction, which, in turn, enhances their brand love. Furthermore, the outcome reveals that the impact of customer satisfaction on brand love is stronger among Gen Y compared to Gen Z. Finally, the outcomes suggest that as users use the FDA services more frequently, the relationship between customer satisfaction and brand love weakens.
Practical implications
The study outcomes facilitate the FDA service providers and restaurant operators to focus on the quality and price of services to ensure the satisfaction and brand love of Gen Y and Gen Z. Separate policies must be taken for Gen Y and Gen Z to manage their brand love towards FDA services.
Originality/value
Grounded on the S-O-R paradigm and the Generational Cohort theory, this study expands the knowledge horizon of FDA services by focusing the behavior of Gen Y and Gen Z. More specifically, investigating how the impact of user satisfaction on brand love towards FDA services changes across generations and usage frequency are the novel contributions of this study.
... customer relationship management) predstavlja nezaobilazan deo upravljanja prihodima. Pravičnost je definisana kao sud o tome da li je ishod i/ili proces koji vodi do ishoda razuman, prihvatljiv i pravedan (Bolton, Warlop & Alba, 2003). Tema percepcije pravičnosti se najviše proučavala sa aspekta cenovnih politika. ...
Mua hàng ngẫu hứng đang nhận được sự quan tâm từ các nhà nghiên cứu. Với sự phổ biến của livestream và sự phát triển của TikTok thì nghiên cứu về hành vi mua hàng ngẫu hứng của người tiêu dùng qua livestream trên nền tảng TikTok đang rất cần thiết. Dựa trên lý thuyết SOR, tác giả đã nghiên cứu để tìm hiểu phản ứng và hành vi của người tiêu dùng sau các yếu tố kích thích nhất định. Bằng cách thu thập bảng câu hỏi từ 400 người tiêu dùng trực tuyến trên TikTok tại Thành phố Hồ Chí Minh, các giả thuyết đã được kiểm định bằng mô hình cấu trúc tuyến tính (SEM) trên phần mềm AMOS. Kết quả cho thấy sự hấp dẫn thị giác và sự thuận tiện mua hàng ảnh hưởng đến hành vi mua hàng ngẫu hứng của người tiêu dùng qua livestream theo các yếu tố phản ứng bên trong là trung gian toàn phần cảm nhận sự thích thú và trung gian một phần là cảm nhận tính hữu ích. Ngoài ra, kết quả còn thể hiện hai yếu tố là sự lôi cuốn của streamer và sự phù hợp về giá không tác động đến hành vi mua ngẫu hứng. Nghiên cứu đề xuất một số hàm ý quản trị nhằm giúp các doanh nghiệp, các nhà bán sỉ, lẻ trên TikTok điều chỉnh những hoạt động kinh doanh của mình.
McDonald's is a leading fast-food company popular among Malaysians. Due to the increasing work pace and the desire for idleness, the consumer demand for a quick yet convenient meal grows steadily. This study focuses on the marketing mix of 4Ps implied by McDonald's, including product, price, promotion, and place in order to position itself in the competitive market of the fast-food industry. The objective of this study is to analyse the marketing performance of McDonald's while suggesting further improvements based on the significant factors. A total of 200 McDonald's customers completed the online survey through Google Forms. The results indicate that McDonald's is a highly reputed fast-food restaurant in Malaysia while showing that the customer satisfaction with the innovations and localization of the products and services it offers are the key factors of marketing performance. This study suggests certain implications based on the significant element to improve the marketing performance.
This study was conducted to answer the question of how artificial intelligence-based pricing systems affect customer satisfaction and the financial performance of Vietnamese travel agencies. The study was conducted to explore factors that enhance customer satisfaction and financial performance in travel agencies using artificial intelligence-based pricing strategies, with a specific focus on understanding the interaction between the effectiveness of perceived artificial intelligence systems, the extent to which artificial intelligence is applied, the trust of regulators, and perceptions of price fairness based on artificial intelligence. Using a linear structure model, we collected and analyzed survey data from 372 people to test five research hypotheses. The findings show that the perceived effectiveness of artificial intelligence systems, the level of application of artificial intelligence and the trust of managers significantly increase customer satisfaction, thereby positively impacting the financial performance of travel companies in Vietnam. However, the study did not find a statistically significant effect of perceptions of price fairness based on artificial intelligence on customer satisfaction. These results are important because they show that travel companies need to focus on the application of effective, adaptive and reliable artificial intelligence systems while addressing fairness concerns through transparency and effective communication with customers. The implications underscore how travel companies can improve the customer experience and achieve financial efficiencies by leveraging artificial intelligence technologies in their dynamic pricing strategies.
The effect of reference price on brand choice decisions has been well documented in the literature. Researchers, however, have differed in their conceptualizations and, therefore, in their modeling of reference price. In this article, we evaluate five alternative models of reference price of which two are stimulus based (i.e., based on information available at the point-of-purchase) and three that are memory based (i.e., based on price history and/or other contextual factors). We calibrate the models using scanner panel data for peanut butter, liquid detergent, ground coffee, and tissue. To account for heterogeneity in model parameters, we employ a latent class approach and select the best segmentation scheme for each model. The best model of reference price is then selected on the basis of fit and prediction, as well as on the basis of parsimony in cases where the fits of the models are not very different. In all four categories, we find that the best reference price model is a memory-based model, namely, one that is based on the brand's own price history. In the liquid detergent category, however, we find that one of the stimulus-based models, namely, the current price of a previously chosen brand, also performs fairly well. We discuss the implications of these findings.
Using two studies, the author examines the influence of the inferred motive for a firm's price increase on perceptions of price unfairness. Prior to the research presented here, the only established causal antecedent of perceived price unfairness was increased relative profit. In Study 1,the author extends the existing research by demonstrating that the inferred motive, as well as inferred relative profit, provides causal explanation of perceived price unfairness. When participants inferred that the firm had a negative motive for a price increase, the increase was perceived as significantly less fair than the same increase when participants inferred that the firm had a positive motive. In addition, the author shows in Study 2 that the firm's reputation can influence the inferred motive, thereby altering perceptions of price unfairness. Specifically, participants sometimes gave a firm with a good reputation the benefit of the doubt when inferring motive. If the "good" firm did not profit from the price increase, participants inferred significantly more positive motives than if it did profit. The firm with a poor reputation did not receive this benefit; inferred motive was equally negative regardless of whether the firm profited from the price increase. Together, these studies provide evidence that consumer inferences of the motive for a price increase influence the perceived fairness of the increase. Furthermore, reputation is shown to moderate the effect of inferred relative profit on inferred motive. Finally, analyses show that perceived unfairness leads to lower shopping intentions and demonstrate that perceived unfairness mediates the effects of inferred motive and relative price on consumers' shopping intentions.
The authors expand and integrate prior price-perceived value models within the context of price comparison advertising. More specifically, the conceptual model explicates the effects of advertised selling and reference prices on buyers' internal reference prices, perceptions of quality, acquisition value, transaction value, and purchase and search intentions. Two experimental studies test the conceptual model. The results across these two studies, both individually and combined, support the hypothesis that buyers' internal reference prices are influenced by both advertised selling and reference prices as well as the buyers' perception of the product's quality, The authors also find that the effect of advertised selling price on buyers' acquisition value was mediated by their perceptions of transaction value, In addition, the effects of perceived transaction value on buyers' behavioral intentions were mediated by their acquisition value perceptions. The authors suggest directions for further research and implications for managers.
Fault trees represent problem situations by organizing "things that could go wrong" into functional categories. Such trees are essential devices for analyzing and evaluating the fallibility of complex systems. They follow many different formats, sometimes by design, other times inadvertently. The present study examined the effects of varying 3 aspects of fault tree structure on the evaluation of a fault tree for the event "a car fails to start." The fault trees studied had 4 to 8 branches, including "battery charge insufficient," "fuel system defective," and "all other problems." Six experiments were conducted, 5 of which used a total of 628 college community members and 1 of which used 29 experienced auto mechanics. Results show the following: (a) Ss were quite insensitive to what had been left out of a fault tree. (b) Increasing the amount of detail for the tree as a whole or just for some of its branches produced small effects on perceptions. (c) The perceived importance of a particular branch was increased by presenting it in pieces (i.e., as 2 separate component branches). Insensitivity to omissions was found with both college Ss and mechanics. It is suggested that, aside from their relevance for the study of problem solving, results have implications for (a) how best to inform the public about technological risks and to involve it in policy decisions and (b) how experts should perform fault tree analyses of the risks from technological systems. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
An emerging consensus in marketing is that consumers respond to price relative to some standard or reference price. Most researchers modeling brand choice have reasoned that this standard is based on past prices of the brand. The authors argue that consumers do use reference prices, but one that is also based on context—other prices in the store—rather than on past prices alone. An analysis of households’ brand choices in two subcategories and over three cities supports this premise. Within context, the lowest price seems to be an important cue for reference price, whereas within time, a brand's own past prices seem to be the most important cue. Households’ use of a contextual reference price also varies predictably across some consumer characteristics. Though their model can be applied to other categories, the findings have important managerial implications: Managerial focus on temporal reference prices could lead to an everyday high price, whereas focus on contextual reference prices could lead to an everyday low price. Only the inclusion of both contextual and temporal reference prices justifies variable pricing.
This paper explores the influence of retail store environmental cues on consumers' price acceptability. An empirical study examines the effects of three types of environmental factors; ambient, social and design. Results indicate that the price of an item (a picture frame) is more acceptable in a high-social store environment than is the same product at the same price in a low-social store environment. The results also provide partial support for the effects of store ambient and design factors on the acceptability of the price of the picture frame. Finally, consumers' price acceptability is positively related to purchase intentions.
Consumers develop over their life span a pragmatic expertise in marketplace metacognition and marketplace interactions. Marketplace metacognition and social intelligence refer to people's beliefs about their own mental states and the mental states, strategies, and intentions of others as these pertain directly to the social domain of marketplace interactions. Drawing from the recent study of evolutionary psychology, theory of mind, multiple life-span intelligences, and everyday persuasion knowledge, I discuss the importance to our field of studying marketplace metacognition and social intelligence and of research-based consumer education programs on those topics.
The representation of duckweed multiplying itself in a pond is used as a research paradigm to study underestimation of exponential growth. The advantage of this paradigm is that the growth process is presented in a direct non-numerical way. The results show that the underestimation observed in earlier studies where growth was presented by means of tables or graphs, occurs in the pond-and-duckweed situation as well. By manipulating the way the process is presented it is possible to obtain some insight into the sampling strategies used by the subjects when they subjectively extrapolate the perceived processes. These experiments lead to the conclusion that subjects base their extrapolations on three or four samples only.
Both practitioners and academics understand that consumer loyalty and satisfaction are linked inextricably. They also understand that this relation is asymmetric. Although loyal consumers are most typically satisfied, satisfaction does not universally translate into loyalty. To explain the satisfaction-loyalty conundrum, the author investigates what aspect of the consumer satisfaction response has implications for loyalty and what portion of the loyalty response is due to this satisfaction component. The analysis concludes that satisfaction is a necessary step in loyalty formation but becomes less significant as loyalty begins to set through other mechanisms. These mechanisms, omitted from consideration in current models, include the roles of personal determinism ("fortitude") and social bonding at the institutional and personal level. When these additional factors are brought into account, ultimate loyalty emerges as a combination of perceived product superiority, personal fortitude, social bonding, and their synergistic effects. As each fails to be attained or is unattainable by individual firms that serve consumer markets, the potential for loyalty erodes. A disquieting conclusion from this analysis is that loyalty cannot be achieved or pursued as a reasonable goal by many providers because of the nature of the product category or consumer disinterest. For some firms, satisfaction is the only feasible float for which they should strive; thus, satisfaction remains a worthy pursuit among the consumer marketing community. The disparity between the pursuit of satisfaction versus loyalty, as well as the fundamental content of the loyalty response, poses several investigative directions for the next wave of postconsumption research.