Communicating Social Price Reasons does not Always Benefit a Firm: Role of Individualism on Socially Related Price Increase Justification: An Abstract

Abstract

Consumer behavior strongly depends on the cultural context in which an individual is embedded (De Mooij 2011; Kumar and Pansari 2016). This might also hold for price increase communication by firms. While culture is a multidimensional phenomenon, in particular individualism seems interesting in the context of price increases and fairness perception. Studies showed that individualism was even the only cultural dimension which explained consumer behavior (Moon et al. 2008), and meta-analyses indicated that individualism moderates the relationships of several variables with switching costs (Pick and Eisend 2014, 2016). Despite these studies on the role of individualism, its influence on price perception is less researched. Our study addresses several research gaps: First, it considers individualism as an antecedent of price fairness perception. Second, as prior research suggests that customers prefer different types of price increase justifications (Homburg et al. 2005), we focus on three types of price increase justifications: better payment of suppliers, better payment for employees, and more environment-friendly production. These socially oriented price increase justifications are insofar important because many companies communicate their CSR activities such as helping the environment and they hope to motivate positive responses of their customers. We conducted a paper-and-pencil survey across consumers in Germany using established 7-point Likert scales. The sample consists of more than 400 respondents (mean age = 24.08 years, 45.9% females). After an exploratory factor analysis, we run several regression analyses. Our analyses showed that individualism traits differently influence fairness perceptions of price increases. In detail, independence has no impact on fairness perception of price increases caused by (a) higher payments for suppliers and (b) environment-friendly production. However, for independent-feeling consumers, price increases are perceived as fairer if the firm communicates paying their employees better. More, consumer competition decreases price fairness perception for all three price increase reasons. Perceived uniqueness has no influence on fairness perceptions of price increases caused by (a) higher payment for suppliers and (b) better payment for employees but increases fairness perception of price increases caused by environment-friendly production. Our work contributes to marketing research by showing that differences in cultural orientations within a country can explain fairness perceptions of socially justified price increases. Further, consumer competition has a negative impact on price fairness for all price increase justifications, while independence has mostly neutral and uniqueness partly positive effects. The results show that fairness perceptions differ across social price increase justifications and are affected by different cultural orientations. References Available Upon Request