How consumers identify and evaluate the fairness of differentiated prices
Even if both, companies and consumers, can benefit from price differentiation, consumers identifying these practices may feel discriminated. Our study showed that independent of whether consumers benefitted from a pricing scheme,74.8 % of consumers across six price differentiation schemes considered the shown difference as unfair. Among the beneficiaries, this number dropped only slightly to 65.2 %. This is likely because consumers may fear that a price differentiation scheme might be turned against them another time. To what extent consumers perceive price differentiation as fair or unfair depends on several criteria and on the types of price differentiation measures a company implements. Figure 2 summarizes the impact the different criteria have on trust in a retailer.
How similar is the purchase situation?
The less similar the purchase situation is, the less likely a different price is considered unfair. For example, a company can offer a basic, and a premium version of the same good. Additional services or features added to products, or different distribution channels reduce the perceived similarity. Also, the timing of price differentiation plays a role. From the consumer’s viewpoint, it makes a difference whether, e.g. an available coupon expired just the day before or the last promotion was several months ago. If the difference is clear, offers tend to be classified as separate and not as a form of pure price differentiation. Overall, the dissimilarity of offers has a high impact on trust.
Can I decide which price to pay?
If a good deal is accessible through extended search or other consumer action, consumers have some degree of control over the price they pay. Price-sensitive consumers are likely to incur greater effort and time to receive a good price, while less sensitive consumers may accept the higher price without much complaining when, for example, they need a product urgently or have little time. Our study showed that consumers who have more control, e.g., when they can use coupons or use a specific channel, their attitude and loyalty towards the retailer improves. However, more control by itself has a smaller effect on perceptions of fairness and behavioral consequences than other criteria. It seems, that consumers do not only base the evaluation on their own advantage, but also consider the effects on disadvantaged consumers. A feeling of solidarity with less knowledgeable people may induce a feeling of rejection towards the retailer and reduce the overall positive influence of control on trust.