Perceived Price Fairness in the Airline Industry A Customer Perspective

Transcription

1 Perceived Price in the Airline Industry A Customer Perspective SiB Kongress Wirtschaftskongress der Hochschule Bremen Hochschule Bremen Standort Airport Dipl.-Kfm. Mark Friesen, Institute for Public Services and Tourism, University of St. Gallen, 9000 St. Gallen, Switzerland, address: mark.friesen@student.unisg.ch

2 Page 2 Agenda 1. Theoretical Background 2. Problem 3. Research Question 4. Objective 5. Model 6. Methods 7. Q&A

3 Page 3 Agenda 1. Theoretical Background 2. Problem 3. Research Question 4. Objective 5. Model 6. Methods 7. Q&A

4 Page 4 Theoretical Background (1/2) Particularities of services (e.g. airlines) Price within the marketing-mix (revenues/profits and customer behavior) Customer value as prerequisite to absorp willingness of payment Behavioral or demand-based pricing theory: Price as an equivalent of the perceived utility of a service Price often key to customer satisfaction (Herrmann et al., 2001) Little research on relation of customer satisfaction and price satisfaction/fairness (Homburg, 2001 and Herrmann, 2001) First experimental research by economists in 1986: Kahnemann, Kntesch and Thaler (1986) explored antecedents and consequences of price fairness (dual entitlement and prospect theory) Former philosophical and sociological approaches of fairness two centuries ago (Aristoteles, Plato) Price fairness, considered to be part of marketing reseach, a quite recent research stream

5 Page 5 Theoretical Background (2/2) Selected definitions of price fairness: [Price] has been defined as a judgement of whether an outcome and/or the process to reach an outcome are reasonable, acceptable or just. (Xia, Monroe and Cox, 2004, p. 1) A customer who pays more for a similar service and cannot perceive a difference in the service may view this situation as unfair. (Kimes, 2002, p. 21) Preisfairness, d. h. die bewusst oder unbewusst von Gerechtigkeitsüberlegungen geprägten Wahrnehmungen der Transaktionsbedingungen und Abläufe. (Diller, 2002, p. 165) [ ] als eine minimale Differenz zwischen erwartetem und tatsächlichem Produktpreis. (Herrmann, Wricke and Huber, 2000, p. 134)

6 Page 6 Agenda 1. Theoretical Background 2. Problem 3. Research Question 4. Objective 5. Model 6. Methods 7. Q&A

7 Page 7 Problem (1/4) Airline Revenue Management (RM): Price [EUR] 800,00 700,00 600,00 500,00 400,00 300,00 200,00 100,00 0, Helvetic Swiss Austrian Flyniki Date [Days]

8 Page 8 Problem (2/4) Flying becomes a commodity High price sensivity (price elasticity) among passengers ( smart shopper ) Dynamic pricing strategy (RM) enhances complexity for the customer Increaed stress and risk perception due to lack of transparency ( when, how and why do prices change? ) Monetary and non-monetary burden of booking a flight not anticipatable Excessive yielding (price dispersion) and aggressive price promotions can lead to consumer confusion and erosion of the reference price Not getting a deep discounted fare could lead to the feeling of injsutice and unfairness Airlines do react: This is a new pricing structure developed to establish lower, more consistent fares. There will be sales in the future, but this restructuring is intended to deliver everyday low fares in an easy-to-understand context. (Delta Airlines SimpliFare, 2004)

9 Page 9 Problem (3/4) To orientate price to customer value, an airline needs to know, how it can create additional value for the customer Shortcomings of taditional economics (price-demand function, homo oeconomicus) Behavioral pricing theory (bounded rationality) as the theoretical background: The construct of perceived price fairness has to be operationalized Perceived price fairness is of compensatory and unstable nature during the whole purchasing process A fair price structure has some quantifiable consequences for a service company

10 Page 10 Problem (4/4) Fruitful lack of research in the area of perceived price fairness: Research in the area of price fairness has been sparse until recently. (Xia, Monroe and Cox, 2004, p. 10) The psychology of pricing has been neglected amost completely. (Shapiro, 2000, p. 14) Die Preisfairness ist bisher [ ] wissenschaftlich wenig durchleuchtet. (Diller, 2002, p. 183) Unberücksichtigt bleiben dabei freilich Imageaspekte, etwa die von den Kunden empfundene (Un-) fairneß solcher Preissysteme (Diller, 1999, p. 47) Eine Zusammenfassung der Literatur zur Preisfairness lässt erkennen, dass dieses Konstrukt für die Erklärung und Prognose des Kaufverhaltens eine zentrale Bedeutung besitzt. (Herrmann, Wricke and Huber, 2000, p. 133)

11 Page 11 Agenda 1. Theoretical Background 2. Problem 3. Research Question 4. Objective 5. Model 6. Methods 7. Q&A

12 Page 12 Research Question Main research question: What consequences do airline revenue management systems have on perceived price fairness during the whole purchasing process? Partial research questions: i. Which attributes of revenue management systems do customers/customer type perceive as being fair? ii. Is there a difference in the perceived price fairness of revenue management systems due to specific environmental conditions (booking channel, socio-demographics etc.)? iii. Which price fairness attributes have a particularly great influence on the customer s reaction? iv. How can a price-discriminating fare structure create customer value during the whole purchasing cycle?

13 Page 13 Agenda 1. Theoretical Background 2. Problem 3. Research Question 4. Objective 5. Model 6. Methods 7. Q&A

14 Page 14 Objective Contribution to academia: Synthesis-model of perceived price fairness (purchasing process & S-O-R) Conceptualization and operationalization of determinants of perceived price fairness (antecedents) Implications of a fair pricing model on customer s reaction (consequences) Practical contribitions: Consequences of perceived price fairness Awareness of fair pricing within companies Optimum of fair, transparent and simple pricing system

15 Page 15 Agenda 1. Theoretical Background 2. Problem 3. Research Question 4. Objective 5. Model 6. Methods 7. Q&A

16 Model (1/4) Post-Trip SiB Kongress Bremen Page 16 Trip Pre-Trip Booking Information Post-Purchase Decision Pre-Purchase Price Price Expectation Expectation of of Pric Pric Perception Perception of of Price Price Price Price Expectation Expectation of of Pric Pric Perception Perception of of Price Price Price Price Expectation Expectation of of Pric Pric Perception Perception of of Price Price

17 Page 17 Model (2/4) Price Attributes Customer Reaction Contextual Factors: Comparability of Service Reference (I, Others, Third Person) Informationen to Pricing Shopping Experience & Confidence Buyer-Seller-Relation (e.g. Respect) Asymmetry of Information & Power Cost-Utility-Distribution Social Norms and Values Knowledge of Market Transactional Factors: Transparency of Prices Justice of Prices Reliability of Prices Voice Goodwill Consistent Behaviour Urgency of Use Degree of Costs of Reaction Distribution of Power Perceived Price C/D-Paradigm Equity Theory Attribution Theory Dissonance Theory Adaption-Level-Theory Assimliation-Contrast-Theory Prospect Theory Mental Accounting Direct Customer Reaction: No Reaction Selfprotection (Withdrawal, Credit, Complaint) Revenge (Word of Mouth, Legal Steps) Indirect Customer Reaction: Price Customer Satisfaction Contribution Margin Share of Wallet

18 Page 18 Model (3/4) Information Booking Pre-Trip Trip Post-Trip Pre-Purchase Decision Post-Purchase S O R S O R S O R Endogenous Effect

19 Page 19 Model (4/4) Search Assessment Decision Use Repurchase Pre-Purchase Possible Development Decision Readiness to Recommend Cross-Buying-Probability Post-Purchase high low Intention to Repurchase Endogenous Effect Exogenous Effect Development of Price

20 Page 20 Agenda 1. Theoretical Background 2. Problem 3. Research Question 4. Objective 5. Model 6. Methods 7. Q&A

21 Page 21 Methods Qualitative Quantitative Methods Desk Research Case Study Interviews with Experts Focus Groups Survey Research Experiment Progress 80% 100% 40% 30% 10% 10%

22 Page 22 Methods Qualitative Quantitative Methods Desk Research Case Study Interviews with Experts Focus Groups Survey Research Experiment Progress 80% 100% 40% 30% 10% 10%

23 Page 23 Agenda 1. Theoretical Background 2. Problem 3. Research Question 4. Objective 5. Model 6. Methods 7. Q&A

24 Page 24 Q&A