The joint effects of compensation frames and price levels on service recovery of online pricing error

Abstract

Purpose

The purpose of this research is to explore the joint effect of compensation frames and product‐price levels on consumer attitudinal reactions and behavioral intentions after a service failure involving online pricing error.

Design/methodology/approach

A 2 (compensation frames: dollar off versus percentage off) x 2 (product‐price levels: high‐price versus low‐price) between‐subjects factorial design was used to test the hypotheses.

Findings

The findings indicate that consumers perceive a price reduction for compensation framed in dollar terms as more (less) fair than the same price reduction framed in percentage terms for high‐price product (low‐price product). The higher consumer perceptions of compensation fairness are, the more likely consumers are to have positive post‐recovery satisfaction and trust. Consequently, consumers who are satisfied with the compensation effort are more likely to trust the service firm, engage in positive eWOM behavior, and purchase the item.

Practical implications

When online retailers decide to honor their erroneous pricing on their web sites by compensating consumers with price reduction, they must learn the product‐price conditions in which the effectiveness of compensation frames can reach a higher level.

Originality/value

To the best of the authors' knowledge, no previous studies have examined the joint effect of compensation frames and product‐price levels on consumers' attitudinal reactions and behavioral intentions involving service recovery of online pricing errors.

Citation

Lii, Y. and Lee, M. (2012), "The joint effects of compensation frames and price levels on service recovery of online pricing error", Managing Service Quality: An International Journal, Vol. 22 No. 1, pp. 4-20. https://doi.org/10.1108/09604521211198083