PRICING STRATEGY & PRACTICE“Why did you do that?” The important role of inferred motive in perceptions of price fairness
| Date | 01 April 1999 |
| DOI | https://doi.org/10.1108/10610429910266995 |
| Pages | 145-153 |
| Published date | 01 April 1999 |
| Author | Margaret C. Campbell |
| Subject Matter | Marketing |
PRICING STRATEGY & PRACTICE
``Why did you do that?'' The
important role of inferred
motive in perceptions of price
fairness
Margaret C. Campbell
Assistant Professor of Marketing, The Anderson Graduate School of
Management, University of California at Los Angeles, Los Angeles,
California, USA
Keywords Advertising, Consumer behaviour, Perception, Pricing, Pricing strategy
Abstract There is research evidence that suggests that perceptions of price unfairness
give rise to consumer resistance to prices and result in decreased profit to the firm.
However, it is as yet unclear what factors influence perceptions of unfairness. Answers
the question, ``What is fair?'' by proposing that consumers sometimes infer a firm's
motive for a price and that the inferred motive influences perceived price fairness. A
study provides evidence that consumers use contextual information to infer a firm's
motive. When consumers infer a negative motive, the price is perceived to be unfair and
when consumers do not infer a negative motive, the same price is perceived to be fair.
Suggests that marketers should: provide reasons for prices; consider consumers' likely
inferences of motive and either avoid taking actions that are likely to give rise to
inferences of negative motive or manage the motive inferred; and consider the inferences
that consumers may make for other marketing actions in addition to price.
Introduction
Setting and managing prices are critical elements of the marketing manager's
job. Whereas the other areas of marketing ± product, promotion, and
distribution ± involve the outlay of resources, the price is the one element of
the marketing mix that directly influences an inflow of resources. From the
marketing manager's perspective, the price is what the consumer is willing to
pay for the value of the bundle of attributes offered and is what produces the
resources that cover all of the other activities of the firm. From the
consumer's perspective, the price represents what the consumer must
sacrifice to gain the value of the bundle of attributes in the product offering.
In addition, it is clear that prices can mean more to consumers than just a
monetary exchange of value. It is well established that a consumer's
psychological reaction to a price is an important determinant of the overall
response to the price (Kamen and Toman, 1970; Monroe, 1973). Consumers'
perceptions and inferences about prices are significant components of
consumers' evaluations of and responses to the prices that marketers set
(Monroe and Petroshius, 1981). Thus, it is critical for marketers to
understand how consumers are likely to perceive a given price.
Research shows that one important way in which consumers can respond to a
price is in terms of the perceived fairness of the price. Consumers care about
price fairness, have shared ideas about when prices are fair and when prices
are unfair, and often try to ``punish'' ± by taking their business elsewhere ±
firms that set unfair prices (Kahneman et al., 1986a, 1986b). It has been well
Financial assistance from the UCLA Marketing Study Center, and comments from
participants at the Marketing Science Institute Conference on Behavioral Aspects of
Pricing and from Patricia D. Campbell are greatly appreciated.
Perceived fairness of price
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 8 NO. 2 1999, pp. 145-152, #MCB UNIVERSITY PRESS, 1061-0421 145
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