Hyperbolic Perceptions of Black-White Tipping Differences

Jar_for_tips_at_a_restaurant_in_New_JerseyDr. Zachary Brewster and Dr. Gerald Roman Nowak III of Wayne State University recently published an article in Cornell Hospitality Quarterly, which is entitled “Racial Prejudices, Racialized Workplaces, and Restaurant Servers’ Hyperbolic Perceptions of Black-White Tipping Differences.” We are pleased to welcome him as a contributor and excited to announce that the findings will be free to access on our site for a limited time. Below Dr. Brewster reveals the inspiration behind the research, as well as additional information not included in the final publication.

cqx .jpgWhile a fair and growing number of studies have observed statistically significant Black-White differences in tipping, the size of the estimated difference has varied greatly across studies. As such, it is not readily clear how much less Black customers on average actually tip their servers when compared to Whites. Further, there have been no studies published that have seriously interrogated the accuracy of servers’ perceptions of the Black-White tipping differential.  In fact, the existence of a Black-White difference in tipping is often taken as prima facie evidence that servers’ perceptions are generally accurate. Moreover, studies that aim to identify and test for individual and/or environmental factors that encourage the development and sustainment of exaggerated perceptions of Black-White tipping differences are lacking. These shortcoming in the literature on interracial differences in tipping motivated us to pursue this particular piece of research.

More generally, we were motivated to advance this line of inquiry because of the many implications surrounding servers’ perceptions of interracial differences in tipping practices—not the least of which is the threat that such differences pose to customer service. The majority of times that Black consumers visit a full-service restaurant they are likely to receive good service. However, when this is not the case, when Black customers are given a level of service that is less than should reasonably be expected, or even outright poor, it will inevitably sometimes stem from servers’ negativity towards these customers’ tipping practices. To curtail this threat to Blacks’ dining experiences scholars have advocated for initiatives that aim to increase Black Americans’ awareness and adherence to the U.S. norm prescribing that customers leave a tip that is equivalent to 15% – 20% of their bill if the service was acceptable. If Black Americans were as familiar with the 15% – 20% tipping norm as Whites, racial tipping differences would logically be attenuated.

However, our findings indicate that any initiative that is intended to curtail race-based customer service will necessarily have to be targeted towards changing servers’ perceptions as much as, if not more than, changing consumers’ tipping behaviors.  For instance, while a Black-White tipping difference does appear to exist (as a percentage of the bill we estimate the difference to be about 3.3 percentage points) our results underscore a segment of the population of restaurant servers who cognitively exaggerate the magnitude of this difference. Racially prejudiced servers as well as those who work in racialized workplaces are, in particular, likely to overstate the difference between Black and White customers’ actual tipping practices. Thus, to curtail the industry challenges that stem from Black-White tipping differences (e.g., service discrimination, lawsuits, etc.) we encourage restaurant operators to devise strategies to attenuate the individual and environmental manifestations of the racial prejudice that underpins servers’ stereotypic perceptions of Black customers’ tipping behaviors.

Stay up-to-date with the latest research through the homepage!

Tip Jar photo attributed to Free-Photo (CC)

 

Diversification, Branding, and Performance of Professional Service Firms

[We’re pleased to welcome authors Carolina Castaldi of the School of Innovation Sciences, Eindhoven University of Technology and Marco S. Giarratana of the Department of Strategy, IE Business School, IE University. They recently published an article in the Journal of Service Research entitled “Diversification, Branding, and Performance of Professional Service Firms,” which is currently free to read for a limited time. Below, Dr. Castaldi reflects on the inspiration for conducting this research:]

02JSR13_Covers.indd

What motivated you to pursue this research?

We have been interested for a while in figuring out how service companies manage to grow despite the absence of clear economies of scale/scope. Management consulting firms are an example of firms that define themselves as providing high-end customized services to organizations. If this is the value added that they propose, how can they manage to expand beyond simply hiring more professionals to deliver those specific services? The answer had to be found in the specific way in which these professional service firms diversify.

In what ways is your research innovative, and how do you think it will impact the field?

There is already extensive research on how diversification is at the core of companies’ growth. In this paper we are looking at a very specific type of diversification, namely the transition from offering only services to adding products. In the case of management consulting firms, several new business models are appearing that are based on ICT solutions embedded in software and other tools. These solutions offer clear economies of scale but they change the very nature of the service being offered to clients. What our results suggest is that diversification only translates in economic benefits when it is bounded to services. Moreover, it appears important for these firms to opt for branding strategies based on specialized narrow brands developed for each new service segment.

What advice would you give to new scholars and incoming researchers in this particular field of study?

We would like to encourage more scholars to exploit trademarks data in empirical research at the firm level. In this study we have used trademarks to capture both the product diversification of professional service firms and their branding strategy. Trademarks are registered for specific product and/or service classes. Here we have captured the transition to products by looking at companies shifting their trademark applications towards including service classes. One can also use trademarks to capture the opposite process, namely servitization, i.e. adding services next to products. Trademarks are used extensively across all economic sectors, including service sectors. They are also used by firms of all sizes. These are two properties that make them salient data for constructing novel indicators of market strategies. For more ideas, check out our other papers as well.

Stay up-to-date with the latest research from the Journal of Service Research and sign up for email alerts today through the homepage!

 

Journal of Service Research Call for Papers: Customer Engagement through Automated Service Interactions

02JSR13_Covers.inddMake an impact on service research and submit to the Journal of Service Research’s upcoming Special Issue,  which will seek to explore ways in which automated service interactions engage customers and create customer and firm value!

Journal of Service Research (JSR), peer-reviewed and published quarterly, is widely considered the world’s leading service research journal. It is a must read to keep up with the latest in service research. Practical and readable, JSR offers the necessary knowledge and tools to cope with an increasingly service-based economy. JSR features articles by the world’s leading service experts, from both academia and the business world.

For more details click here.

Manuscripts should be submitted electronically to http://mc.manuscriptcentral.com/jsr.

You will need to create an account in order to submit your manuscript. The system will notify you once we receive the manuscript and have sent it out for review.

Don’t forget to sign up for email alerts through the journal homepage so you never miss the latest research.

Surcharges and Price Increase

[We’re pleased to welcome authors Dr. Florian Pallas of Iskander Business Partner GmbH, Dr. Lisa E. Bolton of Pennsylvania State University, and Dr. Lara Lobschat of the University of Groningen. They recently published an article in the Journal of Service Research entitled “Shifting the Blame: How Surcharge Pricing Influences Blame Attributions for a Service Price Increase” which is currently free to read for a limited time.” Below, Dr. Pallas reflects on the inspiration for conducting this research and its impact on the field:]

02JSR13_Covers.inddWhat motivated you to pursue this research?

Dealing with price increases—which are frequently unavoidable and/or beyond a company’s control—remains a significant challenge for firms. Surcharges (i.e., additional mandatory charges for performing a service, which are added to the base price) are frequently used when prices and, moreover, price increases, are communicated to consumers. In the service sector, surcharges account for up to 20% of total revenues of companies across different industries, such as airlines or car rentals. A case in point is the U.S. lodging industry, where fees and surcharges increased by nearly 60% over 10 years to a record level of $2.55 billion in 2016. Understanding how surcharges affect consumer blame responses addresses several key questions regarding surcharge pricing: when should service companies use surcharge pricing to accompany a price increase? what types of surcharges help (vs. hurt) companies? and, what are the consumer consequences of surcharge pricing? Our research addresses these managerially important questions in several ways.

In what ways is your research innovative, and how do you think it will impact the field?

Our research contributes theoretically by drawing upon attribution theory to understand its role in consumer response to surcharge pricing. We propose that various kinds of surcharge information act in concert to drive blame attribution for a price increase: Internal (vs. external) surcharges increase blame attribution and minimize the influence of other drivers captured in surcharge information, such as temporal stability, surcharge benefit, and more than one kind of surcharge. In comparison to all-inclusive pricing, we find that (i) surcharge pricing is detrimental to service firms when surcharges cue internal locus of causality, regardless of the temporal stability or surcharge benefit; whereas (ii) surcharge pricing is beneficial when surcharges cue external locus of causality, particularly when the surcharges are permanent and high-benefit; (iii) consumers are more sensitive to increases in the magnitude of internal (vs. external) surcharges, and (iv) in the case of mixed surcharges, internal surcharges are more prominent and minimize the buffering effect of adding external surcharges. Together, these findings demonstrate how surcharges that accompany price increases drive blame attributions in systematic ways as a function of theoretically distinct and managerially relevant surcharge characteristics

What advice would you give to new scholars and incoming researchers in this particular field of study?

We expand the literature on surcharge pricing to incorporate additional theoretically and pragmatically relevant surcharge characteristics (e.g., temporal stability, perceived benefit), as well as the case of both individual and multiple surcharges. Future research is encouraged to examine the impact of causal information in surcharge pricing in other contexts, such as when communicating a price decrease, or in the absence of price change or total price information. Furthermore, our research points to a new and important avenue for future research that takes into account the inter-relationships across surcharges when considering their impact. Last, we find that—in the absence of surcharge pricing—firms do not entirely attribute price increases to internal locus of causality. Does this goodwill benefit depend upon the reputation of the firm or other aspects of consumer-firm relationships?

Visit the journal homepage to sign up for email alerts!

How Consumers Assess Free E-Services

cyberspace-2784907_1920[We’re pleased to welcome authors Björn A. Hüttel of the University of Passau, Jan Hendrik Schuman of the University of Passau, Martin Mende of Florida State University, Maura L. Scott of Florida State University, and Christian J. Wagner of the University of Passau. They recently published an article in the Journal of Service Research entitled “How Consumers Assess Free E-Services: The Role of Benefit-Inflation and Cost-Deflation Effects,” which is currently free to read for a limited time. Below, Dr. Hüttel reflects on the inspiration for conducting this research:]

02JSR13_Covers.inddWhat motivated us to pursue this research was that free digital services are dominating the Internet, however to date it is not well understood why free online services are so successful. In particular, the business model of successful service firms such as Google or Facebook rest on consumers’ nonmonetary payments, for example users must pay the “free” service by giving their attention to advertising. To illustrate further, consumers may receive a free email account or music subscription, but incur nonmonetary costs through exposure to advertisements or disclosure of personal information. Due to the importance of nonmonetary costs for the design of free digital services, we were interested in how consumers perceive nonmonetary costs and how these cost perceptions influence their decisions for or against the usage of free online services.

Because we identify novel mechanisms that help explain free services’ success we believe that our findings can impact the research field of “free” as a business model as well as the behavior of consumers when deciding to purchase free digital services. Specifically, from a consumer perspective, we find that consumers should be cognizant that their decision for or against the usage of free online services is influenced by two distinct effects: a benefit-inflation effect, such that they tend to overemphasize the benefits of free service offerings, and a cost-deflation effect, such that they judge the corresponding nonmonetary costs as lower. These two effects are separate drivers of the success of free digital offerings and consumers must recognize that the effects can and will be leveraged by marketers such as by bundling free services with relatively more advertisements. Consumers thus must realize that a label “free” means that they often have to contribute more nonmonetary costs, a fact which they should consider when evaluating a free digital service offering.

From an industry point of view, our findings have implications for the success of business models in the online environment. Firms that intend to switch their business model from free to fee and offer e-services for very low prices (i.e., apps for $.99) should note that consumers will likely judge the associated nonmonetary costs as significantly higher in the presence of the monetary fee, with negative downstream effects on demand. Therefore, it may be more effective to offer the service for free and benefit from the cost-deflation effect by selling more advertising

We like to thank Kristina Shampanier, Nina Mazar, as well as Dan Ariely for their inspiring initial work on the zero-price effect, on which we build heavily. To continue, we believe that future research in this field is necessary, especially in light of the growing importance of nonmonetary cost-related topics in the society such as consumer privacy concerns, private data usage and the employment of customers for conducting co-creation tasks in order to receive free offerings.

02JSR13_Covers.inddStay up-to-date with the latest research from the Journal of Service Research and sign up for email alerts today through the homepage!

Customer Service photo attributed to jarmoluk. (CC)

Customer-Firm Interactions

cup-2884023_1920[We’re pleased to welcome authors Jesús Cambra-Fierro of the University Pablo of Olavide, Iguácel Melero-Polo of the University of Zaragoza,  F. Javier Sese of the University of Zaragoza, and Jenny van Doorn of the University of Groningen. Wakefield. They recently published an article in the Journal of Service Research entitled “Customer-Firm Interactions and the Path to Profitability: A Chain-of-Effects Model,” which is currently free to read for a limited time. Below, Dr. Melero-Polo reflects on the theories and implications of this research:]

02JSR13_Covers.indd

This study investigates a chain of effects to understand the causal path from customer informational inquiries (CIIs) and firm-initiated contacts (FICs) to customer profitability. Customer–firm interactions are the starting point of the relationship between these parties, and contribute to determining the relationship’s future (Dwyer, Schurr, and Oh 1987; Anderson and Weitz 1992). These interactions can be initiated either by firms or by customers. Although companies have traditionally taken the initiative to contact customers (FICs), nowadays, the growing importance of the customer in value-creation processes has changed the rules of the game. Thus, there has been a significant increase in the number of CIIs that companies have to properly manage. However, despite the importance of this topic, more research was needed to clarify the effectiveness of FICs and CIIs (Hennig-Thurau, Gwinner, and Gremler 2002; Hogan et al. 2002; Palmatier et al. 2006).

Drawing on social exchange theory, our framework identifies a set of attitudinal (perceived relationship investment and relationship quality), behavioral (customer cross-buy and service usage), and financial (customer profitability) consequences of CIIs and FICs, and also explores the extent to which customer-perceived financial risk and customer involvement shape attitudinal reactions to CIIs and FICs. We follow Bolton, Lemon, and Verhoef (2004), who propose a causal sequence of the effects of marketing instruments (FICs): (1) FICs influence relationship perceptions, (2) which influence customer behaviors, (3) which, in turn, affect financial outcomes. However, we go a step further and empirically analyze the chain of effects following FICs and CIIs. Furthermore, we include two contingency variables that can help in understanding how these customer–firm interactions (FICs and CIIs) contribute to building stronger relationships.

Through our analysis of this chain of effects, we are able to propose specific guidelines for managers in order to improve customer–firm relationships and increase the value that each customer can provide to the firm.
Our contingency framework reveals that the impact of FICs and CIIs may vary between different customers depending on their levels of perceived risk and customer involvement. Specifically, FICs and CIIs are a particularly valuable tool for strengthening the relationship with customers with a low level of involvement, but high perception of financial services risk. For highly involved customers, FICs and CIIs are not very effective; CIIs can even backfire if the customer also perceives the risk to be low. Our results highlight the importance of market segmentation for marketers to more effectively manage when and to whom they should target marketing activities (FICs) and steer CIIs.

Stay up-to-date with the latest research from the Journal of Service Research and sign up for email alerts today through the homepage!

Interaction photo attributed to rawpixel. (CC)

How People Think About Prices

shopping-1724299_1280 (1)[We’re pleased to welcome authors Lane T. Wakefield of Mercer University and Kirk L. Wakefield of Baylor University. They recently published an article in the Journal of Service Research entitled “An Examination of Construal Effects on Price Perceptions in the Advance Selling of Experience Services,” which is currently free to read for a limited time. Below, they reflect on the inspiration for conducting this research:]

02JSR13_Covers.inddWhat motivated you to pursue this research?

As a huge sports fan and one that enjoys concerts and vacations as much as the next person, I find this research interesting as it suggests how people think about ticket prices.

In what ways is your research innovative, and how do you think it will impact the field?
This research can impact the field by offering practitioners guidance in identifying who, when and where buyers of experiences are likely to be more or less price sensitive and perceive more or less value. This information helps managers to deliver the right offers or, at least, frame their current offerings more effectively.

Were there any surprising findings?

Our most surprising finding was that buyers tend to think about what other buyers are doing in the market. We found that the majority (65%) of buyers consider what others may perceive as a good price. When it comes to fun experiences, buyers assume that others see those experiences as having high value even if they do not share that feeling personally. Sellers may do well to frame their offerings in terms of how typical fans may see them rather than asking the buyer for their own thoughts. Price perceptions are affected by who you bring to mind (self vs others).

What did not make it into your published manuscript that you would like to share with us?

We identified a segment of consumers who are more price sensitive when they perceive high value. Typically, this relationship is seen as the opposite. That is, those who perceive high value may be less price sensitive (i.e. can you really put a price tag on the Cowboys vs Redskins on Thanksgiving?). However, we believe that there are some who enjoy attending games, concerts and the like so much that they become price sensitive in order to be able to afford to have more experiences within their limited budgets. Hopefully you’ll see more about this research soon!

Stay up-to-date with the latest research from the Journal of Service Research and sign up for email alerts today through the homepage!

Price tag photo attributed to gdakaska. (CC)