Asperities of Revenue Management - The effects on price fairness perceptions.

Abstract: In the recent past there has been a significant increase in the adoption and use of various dynamic pricing and revenue management strategies in consumer product and service sectors. The overall goal of these strategies is often to maximize the revenue of the firm. Nevertheless, engaging in revenue management may lead to customers perceiving that they are being treated unfairly, which often results in perceptions of price unfairness. These perceptions of price unfairness have been shown to influence customers' behaviour resulting in severe consequences for the firm, in the end affecting sales and the final results. Two of the most commonly researched determinants of customers' price fairness perceptions are; the seller's motive for a price increase, as well as, what other customers have paid for the same product/service, to the same seller. This thesis aims to examine how the two determinants, when combined, affect customers' price fairness perceptions. As well as, to investigate what the effects of those perceptions are, more specifically how price fairness perceptions affect perceived monetary sacrifice, perceived transaction value, satisfaction, and behavioural intentions. An experimental study was carried out through a survey with written scenarios. The results showed that both of the determinants influence customers' perceptions of price fairness. Rising the price with the motive of increasing the profits of the firm often results in low levels of price fairness perceptions. Awareness and knowledge regarding what another customer paid for the same product, at the same seller, was also found to affect the price fairness perceptions. However, no full interaction between the two determinants was found. In addition, lower levels of perceived price fairness were shown to result in higher levels of perceived monetary sacrifice, and lower levels of perceived transaction value and satisfaction. The recommendation is to not neglect the effects revenue management practices have on customers' perceptions and behaviours, but at the same time not to have a "one price fits all" kind of policy. The key lies in making price changes and differences perceived as fair and acceptable among customers.