Customers' Reactions to Price Increases: Do Customer Satisfaction and Perceived Motive Fairness Matter?

Abstract

Most of the previous research on price changes has focused on price decreases. This article investigates the effects of price increases at an individual level. The authors argue that customers’ reactions to price increases (i.e., re-purchase intentions) are strongly driven by two factors: the magnitude of the price increase and the perceived fairness of the motive for the price increase. In this context, the authors examine the role of customer satisfaction in influencing the impact of these two variables on repurchase intentions after a price increase. Their findings reveal that as satisfaction increases, the negative impact of the magnitude of a price increase is weakened. Furthermore, the results suggest that satisfaction moderates the impact of perceived motive fairness. The authors also find that the level of satisfaction can influence the valence of the perceived motives in response to a price increase.

Unfairness in consumer services: Outcomes of differential treatment of new and existing clients

“…Furthermore, not only do we highlight the direct impact of unfairness on intention to repurchase, but we also demonstrate the significance of trust and satisfaction as mediators. The examination of a mediating role of trust and satisfaction expands knowledge in this research area, since the role of trust in the relationship between fairness perceptions and repurchase intentions remains under-investigated (Santos and Basso, 2012), while fairness and satisfaction have mainly been studied in isolation (Homburg et al, 2005). Moreover, little research focuses on the consequences of offering different prices to prospective as opposed to current customers taking both perspectives into consideration (e.g.…”

“…Price-disadvantaged buyers view differential pricing tactics as unfair, and they subsequently express lower repurchase intentions , avoid transactions or do not buy at all (Cockrill and Goode, 2010). Moreover, Homburg et al (2005) found a direct link between perceived fairness and intention to repurchase. Therefore, customers' perception of fairness of a retailer's action can affect customer retention (Chebat and Slusarczyk, 2003).…”

“…Satisfied customers are more inclined to remain in a relationship, whereas a dissatisfied customer is likely to look for alternative options (Nguyen and Simkin, 2013). Homburg et al (2005) draw on economic theory to examine how satisfaction can moderate the link between price fairness and repurchase intention and conclude that satisfaction can play an important role in terms of how customers react to marketing activities. Thus, research suggests a relationship between perceived price fairness, trust, satisfaction and repatronage Garbarino and Maxwell, 2010;Xia and Monroe, 2010).…”

Consumer–brand identification revisited: An integrative framework of brand identification, customer satisfaction, and price image and their role for brand loyalty and word of mouth

“…Thereafter, customer satisfaction occurs when the performance of a product or service meets or exceeds the customer's expectations (Oliver, 1980). In this research, we follow this performance-focused conceptualization of satisfaction, under which price is not included as part of the satisfaction judgment (Homburg et al, 2005a). We further take on a cumulative perspective, which is based on repeat purchases, of satisfaction because it better explains loyalty behavior than transaction-specific satisfaction, which is based on a single experience (Olsen and Johnson, 2003).…”

“…As a result, marketing scholars have increasingly focused on relationships and brands, thus neglecting the role of price perception in the management of customer satisfaction and customer loyalty (Steiner et al, 2013;Varki and Colgate, 2001). However, price still plays a considerable role even for branded products because it may have a stronger influence on consumers' assessment of a brand than quality (Voss et al, 1998) and it is directly linked to profitability (Homburg et al, 2005a). Hence, an important field of marketing has remained vastly untapped in relationship marketing (Varki and Colgate, 2001;Steiner et al, 2013).…”