Dynamic Pricing, Do Customers Prefer a

Systematic and Unsystematic Time-Based

Dynamic Pricing, Do Customers Prefer a

Pattern?

First supervisor: dr. A.E. Vomberg Second supervisor: dr. E. de Haan

Peter Neef Thesis Defense

Table of contents

8. Limitations and Future Research

“

About 1.3 billion ton of food gets

wasted per year, a part of this is

Introduction

▸ Dynamic pricing is adopted in the supermarket industry

▸ Simple discounts on fresh products based on the quality of the

product increases revenue (Herbon et al., 2012) and reduces waste (Buisman & Haijema, 2019)

▸ There are multiple ways of dynamic pricing

▸ Do customers prefer a pattern in time-based dynamic pricing?

Previous Research

▸ Customers are more likely to accept prices that are easy to understand and transparent (Kannan & Kopalle, 2001)

▸ Dynamic pricing that breaks a social norm leads to lower perceived price fairness and customer satisfaction and a higher likelihood of punishment actions from the customer towards the retailer

(Garbarino & Maxwell, 2010)

Previous Research

▸ Positive attitudes of customers are lower towards a firm when they perceive that prices of this firm are unfair (Campbell, 1999).

▸ A wide variation of time-based dynamic prices increases uncertainty (Kannan & Kopalle, 2001)

▸ Ambiguity aversion stems from the fear of criticism people have

Previous Research

▸ For non-perishable products it is more likely that a dynamic pricing strategy has a negative impact than for perishable products (Kannan & Kopalle 2001).

Methodology

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▸ Story based experiment

▸ New supermarket

Methodology

▸ Measures for unfairness, uncertainty, purchase satisfaction and switching intention

▸ Leaflets and approached via social media

▸ 109 complete responses

▸ Confirmatory Factor Analysis

Results Purchase Satisfaction

Results Moderation

Hypotheses

H1a: Systematic versus Unsystematic Dynamic Pricing  Purchase Satisfaction H1b: Systematic versus Unsystematic Dynamic Pricing  Switching Intention H2a: H1a is mediated by Price Unfairness

H2b: H1b is mediated by Price Unfairness H3a: H1a is mediated by Price Uncertainty H3b: H1b is mediated by Price Uncertainty

Additional Important Findings

Conclusion

▸ Systematic relative to unsystematic dynamic pricing influences customer attitudes and intentions directly and/or indirectly

▸ Perceived price unfairness and (to some extent) perceived price uncertainty mediate these effects

Managerial Implications

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▸ Choice between systematic and unsystematic dynamic pricing

▸ Managers need to decrease perceived price unfairness when implementing unsystematic time-based dynamic pricing

Limitations and Future Research

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▸ Convenient sample

▸ Reverse causality cannot be ruled out

▸ A large part did not pass both manipulation checks

▸ Relevant to look at the explanation from the supermarket

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Thank you!