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This paper aims to examine how customer heterogeneity influences absolute price thresholds in a service industry.

Customer purchase behavior is studied in the context of a firm’s and competitor’s price changes. Customer purchase behavior is further examined in the context of specific customer attributes such as loyalty, motivation, online purchase channel, gender and frequency of purchase. The study uses a longitudinal data set spanning over 44 months and tracks over 13,000 of a firm’s customers, totaling over 200,000 transactions from a parking services provider.

Results show that absolute price thresholds affect purchasing decisions. Customers are willing to pay a range of prices for a considered purchase, and when a price is within customers’ acceptable price range, it does not induce a change in their purchase behavior. However, specific identifiable customer attributes influence the propensity to continue buying and influence the acceptable price range.

Knowledge from this study can be applied to developing a deeper understanding of customers and their price thresholds to improve customer retention and firm performance after a price change.

For a better understanding of the consumer choice process, it is essential to understand what factors affect price thresholds. Additionally, very few studies are using transaction-level data to empirically validate concepts from behavioral price research in the service industry, and none that do it at an individual customer level over three years.

This research enables the authors to highlight the importance of proper pricing for retailers. The purpose of this paper is to demonstrate the importance of demand-based pricing, providing empirical results that reveal the validity of this pricing philosophy in the sport retailing industry. In particular, this study has identified the limits of acceptable prices for the products studied, selected the most appropriate method for pricing products suffering from high competition and compared the impact produced on price perceptions according to different retail environments to be able to relate changes in the acceptable prices ranges according to the geographical location of each point of sale, differentiating between rural or urban environment and type of client.

The authors have carried out surveys of 350 customers in each of the three points of sale analysed. Therefore, there are a total of 1,050 interviewees, for the three products analysed. The direct method of acceptable prices setting is developed. In addition, ANOVA and t-test have been carried out to find differences between the three shops.

One main finding is that the acceptable price range is not unique. Each point of sale has one that is distinct because it depends on many factors: the competition, the economic capacity of the closest residents, the location of the point of sale or the ability to attract customers.

The foremost contribution of this paper is to demonstrate empirically how considering the local demand at setting prices would generate larger earnings, even for a small retail chain. The direct method of setting acceptable prices enables us to set the prices according to the demand. The best option is if these prices are above the costs. It can be noted that the prices should be set according to each shop, and a different price used in each point of sale to maximise profits and to adapt to what the typical customer of each shop is willing to pay, despite the products being the same and the points of sale belonging to the same retail chain.

Esta investigación nos permite resaltar la importancia de una fijación de precios adecuada para los minoristas. El objetivo principal de esta investigación es demostrar la importancia de la fijación de precios basada en la demanda, proporcionando resultados empíricos que revelan la validez de esta filosofía de fijación de precios en el sector minorista de productos deportivos. En particular, en este estudio se han identificado los intervalos de precios aceptables para los productos estudiados; se ha seleccionado el método más apropiado para la fijación de precios de productos que sufren alta competencia; y se ha comparado el impacto en las percepciones de precios según el entorno detallista y se han encontrado cambios en los intervalos aceptables de precios en función de la localización geográfica del punto de venta, diferenciando entre entorno rural y urbano, y el tipo de cliente.

Los autores han realizado encuestas a 350 clientes en cada uno de los 3 puntos de venta analizados. Por lo tanto, hay un total de 1050 entrevistados, para los 3 productos analizados. Se desarrolla el método directo de fijación de precios aceptables. Además, se han realizado pruebas ANOVAs y T para encontrar diferencias entre las 3 tiendas.

Un hallazgo principal es que el intervalo de precios aceptable no es único. Cada punto de venta tiene uno distinto porque depende de muchos factores: la competencia, la capacidad económica de los residentes más cercanos, la ubicación del punto de venta o la capacidad de atraer clientes.

La principal contribución de este artículo es demostrar empíricamente cómo considerar la demanda local al establecer precios generaría mayores ganancias, incluso para una pequeña cadena minorista. El método directo de establecer precios aceptables nos permite establecer los precios de acuerdo con la demanda. La mejor opción es si estos precios están por encima de los costos. Se puede observar que los precios deben establecerse de acuerdo con cada tienda, y se debe usar un precio diferente en cada punto de venta para maximizar los beneficios y adaptarse a lo que el cliente típico de cada tienda está dispuesto a pagar. A pesar de que los productos son los mismos y los puntos de venta pertenecientes a la misma cadena minorista.

Discusses a conceptual model of consumers′ product evaluation that should help marketers′ understanding of price setting. Provides a conceptual model that incorporates acceptable value range and that examines the influence of price and store name information on quality, monetary sacrifice, value, and willingness to buy. Argues that unlike brand name image, which takes considerable time, money and managerial talent to develop, price and retail outlet are two distinct marketing tools for making quick position movements in a competitive market. Concludes that understanding the effects of price and store name information should lead to more effective and efficient behaviour in the marketplace by both buyers and sellers.

The effect of the antecedents of satisfaction on consumer satisfaction is an issue still under debate in the academic literature. Thus, the primary goal of this article is to analyze the relationship between two of the most important antecedents of consumer satisfaction – namely perceived quality and price.

To analyze the relationship between tourist consumer satisfaction and its main antecedents, we performed an empirical study on such issues with regard to the purchase of a package tour.

The results of this research are that the tourist's perception of quality has a positive and significant effect on his or her satisfaction. This effect is of greater magnitude than the effect produced by perceived price. The present study identifies two components in the total effect of perceived price on satisfaction. Those components have opposite signs: the negative effect of the sacrifice perceived by the consumer and the positive effect that shows the influence of price as a sign of quality. One can estimate the first effect from the price that the consumer recalls paying, which shows a non‐linear negative effect on satisfaction (following the model of “decreasing returns”). One can estimate the positive effect by the range of minimum and maximum prices that the consumer considers acceptable to pay for the product.

Entrepreneurs must know how improvement in service quality influences customer satisfaction and what price levels they might consider to increase consumer satisfaction and to influence positively the quality perceived by the consumer.

In September 2000, Amazon.com attempted to implement a differential pricing structure that would track online purchasing behaviors to charge loyal customers higher prices for the same product. Amazon’s customers met this new pricing initiative with extreme displeasure, forcing the company to end its trial with differential pricing. Differential pricing is not new. Industries such as travel and retail have charged consumers different prices for years through special promotions such as frequent flyer miles and loyal customer discount cards. Why is it then that Amazon’s customers perceived the company’s differential pricing structure as being unfair? More importantly, are there times when such pricing is acceptable? An understanding of the concepts of distributive and procedural justice, as well as equity theory and dual entitlement, provides managers with the defining principles of price fairness. Implementing these concepts and theories into the firm’s pricing practices will increase the likelihood that customers will perceive differential pricing as being fair.

This chapter traces the development of the pricing research program of Kent Monroe, beginning with his doctoral dissertation and continuing to the present time. Drawing on psychophysics and adaptation-level theory the early research efforts concentrated on validating two important concepts relative to behavioral pricing research: reference price and acceptable price range. Then the behavioral pricing research program expanded to explore how the context of a purchase situation, including the structure of the prices available for judgment, influences buyers' price perceptions and willingness to buy. In the early years his research included pricing models and research on patronage behavior. Subsequently, concentrating primarily on behavioral pricing research, he began to integrate findings from the research program into examining how various sellers pricing strategies and tactics influence buyers' judgments and purchase decisions. These efforts led to the first edition of his book Pricing – Making Profitable Decisions published in 1979. The book was subsequently revised and expanded in 1990 and again in 2003.

Value is a word that is frequently used by consumers, retailers and manufacturers. Understanding how consumers define value is imperative to the success of the industry. Value has often been defined as price or quality; other factors such as time, energy, product category and type of retail outlet may determine the definition of value by consumers. The purpose of this research was to define value, specifically how department store consumers define apparel value. Value ivas examined with two apparel products, a man's dress shirt and a woman's jacket. Research was conducted using focus groups (qualitative) and in‐store data collection (quantitative). The two hypotheses were tested by using t‐tests and forward step‐wise regression. Results from the 533 department store consumers indicated that: (a) value can be defined using qualitative and quantitative methods, (b) the definition of value was different for the two product categories, men's dress shirt and women's jacket, (c) the value definition for the majority of this study's consumers was ‘I look for the highest quality with an acceptable price’, and (d) product features and marketing attributes are weighted differently, yielding three consumer value equations for the sample's department store consumers. Implications exist for fibre producers, textile mills, apparel manufacturers and retailers in the product development and marketing of ‘value’ apparel products to meet diverse core consumer groups.

The use of drugs outside the approved indication, called off‐label use, is a growing phenomenon in medical practice. Especially, when a drug approved for systemic use is used locally in small quantities, the drug price per treatment can fall far below the potential value of the drug. This paper aims to outline the potential value of off‐label Avastin^® used for wet/neovascular age‐related macular degeneration (AMD), the leading cause of legal blindness in western countries.

The van Westendorp price sensitivity measurement (PSM) method was used to find an optimal price range for an Avastin formulation potentially approved by German regulatory authorities for neovascular/wet AMD. A survey was conducted among a majority of German AMD specialists as the central part of the buying center. Germany, the largest pharmaceutical market in Europe, was selected for the study.

The effective total response rate was 25.1 percent (51 questionnaires).The price range found is clearly above the price for currently used “off‐label” Avastin and far below the price for other comparable drugs approved for the treatment of neovascular AMD. The van Westendorp PSM method found for Avastin used in the eye the optimal price at €95 ($131), the indifference price at €200 ($276) and the acceptable price range between €90 ($124) and €310 ($428). The discussion provides further implications for pricing strategies for new drugs.

As price sensitivity and availability of drugs have become an increasingly political and public topic, off‐label application of drugs is turning into an important challenge for the pharmaceutical industry. Taken in total, the results provide support for the view that off‐label application not only creates major threats for pharmaceutical companies, but can also offer growth opportunities.

Questionnaire measures of consumers’ willingness to pay (WTP) and price sensitivity are biased, yet these declarative methods can aid managerial decision-making. Additional choices involve which question formats to use (open-ended or discrete choice) and how many questions (unique versus multiple). This paper aims to inform such choices for online data collection with an empirical evaluation of the size of the bias induced by four methods (price acceptability, price judgements, multiple discrete choices and single discrete choices) in a realistic choice context.

An experimental framework collects online data about a staple product whose price should be well known. Price sensitivity, WTP and their confidence intervals are derived from a logistic binary model of acceptability, then ranked to evaluate the size of the bias of each method, relative to an indirect benchmark.

Online data collections with self-administrated questionnaires lower respondents’ involvement and create substantial bias; hypothetical methods overestimate WTP and underestimate price sensitivity, especially with methods using unique questions (both discrete choice and price acceptability). Multiple questions (price judgements and repeated random discrete choices) increase attention to price information and reduce the bias. The round price effect also is notable in data collected by open-ended methods.

To measure declarative WTP and price sensitivity with online data collections, researchers should use a random discrete choices method. Price acceptability questions and split tests are not recommended. Price judgements provide reliable information about consumer reactions to prices, but the strong round price bias is problematic.

This study adds to marketing and economic literature by comparing actual measurement methods used by firms, rather than hypothetical versions, and offers strong external validity.

Discusses methods of tailoring prices to buyers who differ in their willingness to pay while maintaining a semblance of fairness and uniformity – filtered pricing. Considers microeconomic theory, geographic discrimination, filtering methods such as couponing, skimming, quality and features, sales, as well as newer methods like rebates and price packaging. Surmises that there is a challenge to create new price filtering techniques, without ignoring the ethical questions involved.