The two dimensionality of cost states that the price includes an objective component, or the actual cost of the service, and the perceived value on the part of the user (Salvador, et al. 2006). The actual cost of the service and the cost of acquiring the service are called the objective dimension. The perceived dimension is the price is made up of the information on the cost of use. Customer satisfaction has its antecedents and consequences in a study of Anderson Sullivan (1993) where the findings showed that expectation of consumers do not directly affect satisfaction.
Its conclusion is that expectations do not directly affect satisfaction. It was found out that when quality that does not meet the expectations then it has a greater impact on satisfaction and repurchase decision of the consumers. A relationship of the perceived quality, customer satisfaction is related to the price strategy. Customers use their subjective judgment to perceive quality based on suitable the service is for their needs and expectations. The concept of subjective quality is closely related to satisfaction (Salvador 2004).
Quality and prices goes along together. The price has a significant impact on the customer’s perception of value. The importance of the price is a substantial measurement of service managers on how they can reduce their costs and other elements that can cause a positive impact on customers.
The impact of pricing strategy on consumer demand and purchasing behavior. The law of supply and demand dictates the equilibrium level of prices at which quantity supplied and quantity demanded are equal.
Some markets occasionally disobey the law of supply and demand (2009: 66) Basically, the law of supply and demand explains that the higher the supply, the lower the demand while the lower the supply, the higher the demand. Consumers may feel exploited when not informed about the reason of price changes. This is not a good feedback for business as it will leave customers dissatisfied and will likely halt their consumption of products or services. The foundation of price fairness is also based on the principle of dual entitlement that suggests that one party should not benefit by causing a loss to another party (2007: 50).
It is best explained when an organization increased prices following a period of higher consumer demand. The organization used this pricing strategy to its own advantage consequently will make consumers feel exploited and take the prices as an unfair practice of business. A study showed that 82 percent of its respondents judged a price increase forsnowshovels the morning after a snowstorm to be unfair, while only 21 percent of respondents viewed an increase in grocery prices following an increase in wholesale prices as being unfair (Kahneman et al.
1986). Based on supply and demand, it shows that the provider exploitation that made consumers develop perceptions of unfairness based on their own perception of their demand situation. A study conducted by Salvador (2006), found out that customers are interested in the price of the service being adequate to the work rendered and compares the price with other organizations, and if the price speaks for the quality of the product. Hence, customers are keenly aware of particular popular brands that most often fetch a higher than average price.
In times of sales, promos or expiration of goods, it is understood that prices will go lower given the marketing strategy and pricing strategy of the organization (2006: 48).
The impact of pricing strategy on consumers’ willingness to pay or willingness to make trade-offs between price and quality. Price tolerance refers to the association between customer satisfaction and willingness to pay termed as price tolerance. When it comes to perception of price and quality, these are important factors taken by consumers.
For present rationale, the aspect of branding remains to be an important component in marketing a product given the competition in prices, quality, and target market. A good and popular brand often commands a higher price as compared to other lesser-known brands. In general, a provider that offers added service or features may more likely ask for higher costs. The decision of the customers to continue an existing relationship with a provider is called a trade-off between the customer’s assessments of the future costs and long-term benefits. Read also Research Proposal sample on customer satisfaction
A relationship can either be discontinued or patronized when the customer assesses the future value of the relationship wherein the benefits from Research shows that price perceptions directly influence satisfaction judgments as well as indirectly through perceptions of price fairness (2001: 49). Consumers have the vulnerability influenced by a perceived demand-supply relationship and when an urgency of need exists. In the case of trade-offs between price and quality, consumers are willing to have a lower quality product when a considerable discount is given in exchange of the product’s lower quality. Voss et. al.(1998) argues that satisfaction is a function of price, performance, and expectations with the support for a weak expectations-satisfaction link. They propose that price fairness is the principal determinant of satisfaction. Price fairness is when customers are well informed on both procedural and distributive (Herrmann, Xia Monroe, ; Huber 2007). Let’s say a product such as an insurance plan is presented to the potential plan holder, the sales man should thoroughly explain the price offer or initial price as a down payment and the price procedure such as terms, conditions and installment price divided over time.
The influence is determined by the order in which consumers accept the price offer and the price of procedural information (Van Den Bos et al 1997).
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