Price unfairness: the indirect effect on switching and negative word‐of‐mouth
| Pages | 547-557 |
| Date | 26 October 2012 |
| DOI | https://doi.org/10.1108/10610421211276330 |
| Published date | 26 October 2012 |
| Author | Cristiane Pizzutti dos Santos,Kenny Basso |
| Subject Matter | Marketing |
Pricing strategy & practice
Price unfairness: the indirect effect on
switching and negative word-of-mouth
Cristiane Pizzutti dos Santos and Kenny Basso
School of Management, Universidade Federal do Rio Grande do Sul, Porto Alegre, Brazil
Abstract
Purpose – This study aims to present and test a conceptual framework for the consequences of price unfairness, positing trust and emotions as two
important mediators of the perception of price unfairness and its relationship to switching and negative word-of-mouth intentions.
Design/methodology/approach – An experiment with one factor with three levels (price unfairness: no price unfairness vs low price unfairness vs
high price unfairness) is applied to 253 participants. The mediation analysis is made using bootstrapping procedure.
Findings – The findings reveal that existing customers that compare their price to a lower price offered to prospective customers experience the
perception of price unfairness that, in turn, triggers negative behavioral intentions toward the company, through trust (cognitive driver) and negative
emotions (emotional driver).
Practical implications – The findings indicate that companies should consider the damage that targeted promotions to new customers may do
among existing customers in the long run. They also highlight the importance of the companies’ strategies to build consumer trust over time as this
construct seems only partially affected by perceived price unfairness and is a key determinant of customers’ behavioral intentions.
Originality/value – This study contributes to the understanding of price unfairness perception and its negative behavioral consequences, testing and
validating a parallel mediating process with trust and negative emotions as mediators.
Keywords Price unfairness, Trust, Negative emotions, Switching intentions, Negative word-of-mouth, Pricing, Marketing strategy,
Customer relations
Paper type Research paper
1. Introduction
I have used the internet service from [company’s name] for a couple of
months and currently I pay R$ 79.90 per month. I have accessed [company’s
name] site and found out that the company is promoting this service for
prospect clients. Those clients who buy it until the end of April, will not have
to pay anything until the June and after this, the monthly payment will be R$
59.90, a lower price than I – an “old subscriber” – pay for the same service.
[...] I really do not understand this absurd policy practiced by [company’s
name] which benefits only the new clients and penalizes the loyal ones. I am
feeling completely injured at this moment (Complaint from: www.thecompla
intreport.com – post made April 1, 2012).
As illustrated by this story, consumers can feel frustrated and
hurt when they believe a company has treated them unfairly.
Because offering lower prices to attract prospective customers
is a common practice in the marketplace, stories like this are
not unusual (Feinberg et al., 2002). Even so, companies often
underestimate the negative reactions these promotions
provoke among existing customers. Notably, these
promotions create the perception of price unfairness.
Several researchers study this perception (e.g., Bolton et al.,
2003; Campbell, 1999; Cox, 2001; Garbarino and Maxwell,
2010; Grewal et al., 2004; Herrmann et al., 2007; Kukar-
Kinney et al., 2007; Xia et al., 2004) to gain an understanding
of the behaviors that occur as a result of a perception of price
unfairness and to provide companies with important input for
future pricing decision making. Price unfairness importance
has also been highlighted in other disc iplines such as
behavioral economics and social neuroscience (Maxwell,
2008).
Following this line of research, several researchers (e.g.,
Anto
´net al., 2007; Grewal et al., 2004; Kukar-Kinney et al.,
2007) find that consumers with a perception of price unfairness
engage in behaviors that result in negative consequences for the
company responsible for the causing the perception. In their
theoretical paper, Xia et al. (2004) advance the understanding
of the consequences of price unfairness and propose an
“unfairness perceptions !emotions !actions” sequence. In
this sequence, price unfairness perceptions lead to negative
emotions – such as anger – that, in turn, generate behavioral
responses – such as switching intentions. Within the context of
service recovery, some researchers present evidence of
relationships among perceptions of justice, emotions, and
behaviors (e.g., Barclay et al., 2005; Chebat and Slusarczyk,
2005). Schoefer and Diamantopoulos (2008) find emotions as a
central mechanism through which effectual complaint handling
leads to a sense of justice thus translating into subsequent
behaviors including positive word-of-m outh (WOM) and
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
21/7 (2012) 547–557
qEmerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610421211276330]
547
To continue reading
Request your trial