The effects of buyer identification and purchase timing on consumers’ perceptions of trust, price fairness, and repurchase intentions

Abstract

The ease of use and commercial feasibility of Internet-enabled technologies for price segmentation have found increased managerial applications as well as a concurrent rise in questions about fairness and legality. We examine the role of two price segmentation tactics and assess their effects on consumer perceptions of trust, fairness of the price differences, and repurchase intentions using two studies. We find that consumers report lower levels of trust, price fairness, and repurchase intentions when Internet-enabled buyer identification techniques are used (as compared to purchase timing tactics) to segment consumer markets. Our experimental results also suggest that the difference between these two tactics is more pronounced when firms do not provide an explanation for the price differences. The results also indicate that the size of the price difference has a significant effect on trust, fairness, and willingness to buy.

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

“…Along the lines of previous research on price fairness (e.g., Bolton et al, 2003;Grewal et al, 2004;Tsai and Lee, 2007;Maxwell et al, 2009), we used a survey-based experimental design approach. The experimental method employed a 2 Â 2 betweensubjects factorial design, where subjects were divided in two segments, new and existing customers, and were presented with two hypothetical scenarios, one under the advantaged inequality condition and the other under the disadvantaged inequality condition.…”

“…Trust was measured through a three-item scale by Grewal et al (2004), while to measure satisfaction we have used a three-item scale from Oliver and Shor (2003). Finally, to measure (re)purchase intention, one item from Grewal et al (2004) was used ("How likely are you to buy from the health club in the future? ", with possible responses ranging from Very Unlikely to Very Likely).…”

“…Price unfairness exists when a customer assesses a seller's price as unreasonable, unacceptable or unjustifiable (Xia et al, 2004). Grewal et al (2004) provide empirical evidence that differential pricing tactics have a significant impact on consumers' judgments of price fairness. If a customer perceives that another similar customer receives better treatment from the same firm, unfairness perceptions are increased (Feinberg et al, 2002).…”

“…Differential pricing is defined as the practice of charging customers different prices for essentially identical goods or services (Hoffman et al, 2002). This practice can be based on different types of discrimination (Iyer et al, 2002;Grewal et al, 2004;Lacey and Sneath, 2006;Gelbrich, 2011), such as time (e.g. early vs late booking), purchase quantity (e.g.…”

“…However, if in a society people feel that a pricing tactic is against the norm, they might react negatively regardless of whether they were offered the higher or the lower price (Garbarino and Lee, 2003). Grewal et al (2004) argue that pricing tactics contrary to the social norm, such as charging a regular customer more, engender less trust than pricing tactics consistent with norms, especially benevolence trust (Garbarino and Maxwell, 2010). Firms that fail to meet these social expectations are often accused of exploiting the consumer and are treated with suspicion (Maxwell et al, 2009).…”