Purpose – The purpose of this paper is to explore the dimensionality of price satisfaction. It argues that price satisfaction is composed of several dimensions (price transparency, price-quality ratio, relative price, price confidence, price reliability, and price fairness) and that companies should consider these dimensions when monitoring customer satisfaction.
Design/methodology/approach – Based on a theoretical discussion of the price dimensions, a questionnaire is developed that measures customer satisfaction with individual price dimensions. Using regression analysis the impact of price satisfaction dimensions on overall price satisfaction is measured, using a sample of 160 students.
Findings – The results show that price satisfaction can be conceptualized as a multidimensional construct and that five dimensions influence overall price satisfaction. The application of the questionnaire allows for measuring price satisfaction in firms.
Research limitations/implications – The paper introduces price satisfaction as a multidimensional construct and the study empirically supports the hypotheses. The student sample, however, restricts generalizability and more studies are needed to test the validity and reliability of the questionnaire.
Practical implications – Based on the measurement of price satisfaction, managers are able to identify the drivers of price satisfaction, their satisfaction and relative importance in different market segments and, consequently they are able to take the right measures to increase customer satisfaction and loyalty.
Originality/value – So far price satisfaction has been treated as a one-dimensional construct. This paper contains a theoretical argumentation for why price satisfaction should be treated as a multi-dimensional construct consisting of several dimensions, i.e. price-quality ratio, price fairness, price transparency, price reliability and relative price. These dimensions constitute the determinants of overall price satisfaction.
Customer satisfaction, one of the central marketing objectives, is closely linked to customer loyalty, the likelihood of recommendation to others, cross-buying behavior, up-grading and lower price sensitivity (Anderson et al., 1994; Matzler et al., 2005; Reichheld and Sasser, 1990; Zeithaml, 2000). It therefore, contributes considerably to a company’s growth and profitability. This has been shown in a number of empirical studies across various industries. Using data from the Swedish customer satisfaction barometer (based on 77 firms representing 70 percent of Sweden’s economic output), Anderson et al. (1994) found a significant association between customer satisfaction and return on assets (ROA). Ittner and Larcker (1998) found a relationship between satisfaction and accounting returns. Yeung and Ennew (2000) link data from the American customer satisfaction index (Fornell et al., 1996) to a range of measures of financial performance and Eklo¨f et al. (1999) as well as Anderson et al. (2004) and Matzler et al. (2005) demonstrate empirically a relationship between customer satisfaction and shareholder value. In a bank setting, Hallowell (1996) and Johnson et al. (1996) demonstrated that customer satisfaction is related to customer loyalty, which, in turn, is related to profitability. Hence, customer satisfaction management has become a key issue. Already ten years ago, according to a survey of more than 200 of the largest American companies, more than 90 percent of them were using some form of customer satisfaction management program (Lowenstein, 1996).