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One firm,one product,two prices: Channel-based price differentiation and customer retention
Institution:1. School of Business and Economics, Loughborough University, Loughborough, Leicestershire LE11 3TU, UK;2. Department of Economics, Faculty of Economics and Business, University of Malaysia, Sarawak, Malaysia;1. Kohl''s Professor of Retail Marketing, Northern Illinois University, College of Business, DeKalb, IL 60115 USA;2. QUT Business School, Advertising, Marketing and Public Relations, Brisbane, Australia;1. Department of Marketing, College of Business and Administration, Southern Illinois University Carbondale, Rehn Hall Building, Carbondale, IL 62901, USA;2. Department of Marketing, Graduate School, Universidad Rafael Belloso Chacín, Edificio URBE, Avenida Circunvalación 2, 4005, Maracaibo, Venezuela;1. Center for Consumer Marketing, Stockholm School of Economics, Sweden;2. Roskilde University, Denmark;1. Department of Industrial and Management Engineering, Pohang University of Science and Technology, 77 Cheongam-ro, Nam-gu, Pohang, Gyung-buk 790-784, Republic of Korea;2. Department of Industrial Engineering, Seoul National University, 599 Gwanak-ro, Gwanak-gu, Seoul 151-742, Republic of Korea;3. IT Convergence based Manufacturing System R&D Group, Korea Institute of Industrial Technology (KITECH), 143 Hanggaul-ro, Sangnok-gu, Ansan, Gyung-gi 426-171, Republic of Korea
Abstract:Every multichannel retailer must decide whether and how to apply channel-based price differentiation. This study identifies channel-related price differentiation instruments and considers their effects on customer retention. It empirically tests hypotheses using a laboratory experiment and analytically investigates feasibility conditions. Results show that channel-based price differentiation positively affects customers through perceived value but harms retention through price unfairness and limited self-determination. The mobile communications retailer in this study would require 5.1% lower operating costs online to ensure its profitability. These results indicate that multichannel retailers with channel-based price differentiation should carefully select their price instruments and meet the feasibility conditions.
Keywords:Multichannel management  Price differentiation  Mobile communications services
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