Over the years a number of strategies aimed at optimizing service production capacities using a “dynamic” form of pricing have been developed. The first one, service bundling, groups several different products or services into a single package with a price that is generally lower than the sum of the individual components. The intend here is to reduce part of the costs, to provide added value, to attack new markets, to shift part of the demand to periods of diminished request, to increase average customer spending and in general to encourage a policy of price personalization (Guiltinan, 1987; Radas-Shugan, 1998). A second strategy is well known as Yield Management; initially developed by airline companies but then has been rapidly adopted in other industries such as the hotel, health and electricity supply sectors. This strategy focuses on optimizing the allocation of resources, and therefore on maximizing yield by adopting specific segmentation criteria. Yield Management uses bid price models and therefore, in relation to the expected request for each service configuration, it defines the number of production units to be assigned as well as the request acceptance. Online auctions are another example of this attempt of intercept purchaser’s willingness to pay. For instance, Priceline.com allows customers to fix their own prices for airline tickets or hotel accommodation, whilst e-bay.com held over 10 million auctions in 1999 for a huge variety of product categories. The way these auctions operate varies widely and is often highly sophisticated (English auction, Dutch auction, sealed bid-first price, sealed bid-second price etc.), but what they have in common is the intention of establishing the reservation price of the individual purchaser (single bidder and final purchaser). Another practice that service companies are developing more and more is that of advance selling in order to reduce uncertainty about future consumption and unused capacity (Lee K.S., Ng I.C.L. 2001; Xie J.-Shugan S.M., 2004). Numerous authors (Simon, 1992; Nagle & Olden, 1995; Dolan & Simon 1996; Berry & Yadav, 1996) have shown that pricing strategies lead in the short term to an increase in earnings and to the creation of a more or less infinite number of versions of the service, perhaps even to different offers capable of satisfying demand expectations. Pricing strategy and fairness perception It is already settled the risk companies run when they charge different prices to different customers is that of being perceived as unfair by the consumers (Kimes, 1994; Campbell, 1999; Cox, 2001; Maxwell, 2002). Using an empirical case study we will seek to identify the conditions in which a diversified price system can be applied without compromising customer relations. Martins & Monroe (1994) claims that price fairness influences the perception of sacrifice and product value, thereby affecting the willingness to purchase; notice that perception of unfairness is only rationalized when a precise incident or a service failure occurs and the customer gains some concrete experience (Seiders & Berry, 1998). In September 2000, Amazon.com put a series of DVDs on the market applying different prices to customers on the basis of previous purchases made on the Amazon.com site. Protests on the part of those who had already made purchases obliged the distributor to quickly reimburse these customers and avoid any further embargos. This case is just one of many examples of how critical it is to consider whether consumers feel they have been treated unfairly or not, as they could react by attempting to re-establish a form of justice, even if this might leads to additional costs. On one hand, consumers could seek to punish the opposite party and be reimbursed; on the other hand they could seek to ensure that this situation does not repeat itself in the future (Adams, 1965). More precisely (see e.g. Piron & Fernandez 1995): - the perception of a company’s conduc...
FAIRNESS, CUSTOMER SATISFACTION AND REPURCHASE INTENTION IN THE AIRLINE INDUSTRY: AN EXPLORATIVE ANALYSIS / G. Cappiello; D. Scarpi. - ELETTRONICO. - (2006), pp. 1-8. (Intervento presentato al convegno 35th EMAC conference tenutosi a Atene nel 23-26 maggio 2006).
FAIRNESS, CUSTOMER SATISFACTION AND REPURCHASE INTENTION IN THE AIRLINE INDUSTRY: AN EXPLORATIVE ANALYSIS
CAPPIELLO, GIUSEPPE;SCARPI, DANIELE
2006
Abstract
Over the years a number of strategies aimed at optimizing service production capacities using a “dynamic” form of pricing have been developed. The first one, service bundling, groups several different products or services into a single package with a price that is generally lower than the sum of the individual components. The intend here is to reduce part of the costs, to provide added value, to attack new markets, to shift part of the demand to periods of diminished request, to increase average customer spending and in general to encourage a policy of price personalization (Guiltinan, 1987; Radas-Shugan, 1998). A second strategy is well known as Yield Management; initially developed by airline companies but then has been rapidly adopted in other industries such as the hotel, health and electricity supply sectors. This strategy focuses on optimizing the allocation of resources, and therefore on maximizing yield by adopting specific segmentation criteria. Yield Management uses bid price models and therefore, in relation to the expected request for each service configuration, it defines the number of production units to be assigned as well as the request acceptance. Online auctions are another example of this attempt of intercept purchaser’s willingness to pay. For instance, Priceline.com allows customers to fix their own prices for airline tickets or hotel accommodation, whilst e-bay.com held over 10 million auctions in 1999 for a huge variety of product categories. The way these auctions operate varies widely and is often highly sophisticated (English auction, Dutch auction, sealed bid-first price, sealed bid-second price etc.), but what they have in common is the intention of establishing the reservation price of the individual purchaser (single bidder and final purchaser). Another practice that service companies are developing more and more is that of advance selling in order to reduce uncertainty about future consumption and unused capacity (Lee K.S., Ng I.C.L. 2001; Xie J.-Shugan S.M., 2004). Numerous authors (Simon, 1992; Nagle & Olden, 1995; Dolan & Simon 1996; Berry & Yadav, 1996) have shown that pricing strategies lead in the short term to an increase in earnings and to the creation of a more or less infinite number of versions of the service, perhaps even to different offers capable of satisfying demand expectations. Pricing strategy and fairness perception It is already settled the risk companies run when they charge different prices to different customers is that of being perceived as unfair by the consumers (Kimes, 1994; Campbell, 1999; Cox, 2001; Maxwell, 2002). Using an empirical case study we will seek to identify the conditions in which a diversified price system can be applied without compromising customer relations. Martins & Monroe (1994) claims that price fairness influences the perception of sacrifice and product value, thereby affecting the willingness to purchase; notice that perception of unfairness is only rationalized when a precise incident or a service failure occurs and the customer gains some concrete experience (Seiders & Berry, 1998). In September 2000, Amazon.com put a series of DVDs on the market applying different prices to customers on the basis of previous purchases made on the Amazon.com site. Protests on the part of those who had already made purchases obliged the distributor to quickly reimburse these customers and avoid any further embargos. This case is just one of many examples of how critical it is to consider whether consumers feel they have been treated unfairly or not, as they could react by attempting to re-establish a form of justice, even if this might leads to additional costs. On one hand, consumers could seek to punish the opposite party and be reimbursed; on the other hand they could seek to ensure that this situation does not repeat itself in the future (Adams, 1965). More precisely (see e.g. Piron & Fernandez 1995): - the perception of a company’s conduc...I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
