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)

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)

How to Recover Customer Trust After Unsatisfactory Service

6279924331_f857af05f4_z[We’re pleased to welcome Kenny Basso of IMED Business School. Kenny recently published an article in Journal of Service Research, entitled “Trust Recovery Following a Double Deviation,” with co-author Cristiane Pizzutti. ]

The number of complaints on sites such as and and complaint boards around the world illustrate that service failures are frequent and even inherent to service encounters. To avoid this public exposition, company can perform a service recovery. However, some times, the results of the service recovery are also negative to the client, or else, company is unable to appropriately restore service after a failure. In this situation, there is a double deviation of the client initial expectations about the service. The double deviation situation imposes a severe violation of the trust that the client has on the company. This paper focus on elucidates how a company can recover JSR coverclient trust after a double deviation.

Our results demonstrate that, contrary to what some may think, money (i.e., financial compensation) does not buy trust after double deviation; instead, companies can restore the client’s trust (at least in part) and maintain the relationship with him/her by making an apology or a promise of non-recurrence of the failure. However, it is worth noting that whereas making an apology does not require many resources, making a promise requires that the internal problems that generated the initial failure be resolved; otherwise, the promise will be a deception. Furthermore, it is important for firms to match the type of double deviation to the recovery strategy. Hence, promises have more efficacy in restoring trust when the trust violation is based on a company’s competence, as, for example, slow service in an understaffed store or by unprepared employees in on-the-job training programs, a room that is not clean, a meal that is cold, or baggage that arrives damaged. On the other hand, apology has more efficacy when the client perceives the failure as resulting from a lack of integrity or improper company principles and values, such as treating the customer badly because he bought a ticket from a daily deal web site, having rules that benefit the company written in fine print to make it more difficult for consumers to read them or giving a table reserved by one client to another who arrives earlier at the restaurant to ensure its occupancy.

The abstract for the paper:

Although double deviation (i.e., unsatisfactory service recovery) is an acknowledged phenomenon in the field of marketing, little attention has been devoted to determining what actions firms can take to restore consumer trust in the wake of such an event. Across four experimental studies of different populations and service sectors, we show that double deviation intensifies the trust violation generated by the initial service failure and that recovery from double deviations requires fundamentally different strategies than recovery from single deviations. Our results suggest that financial compensation is not an especially effective strategy for double deviations compared to the effectiveness of apologies and promises that the problem will not occur in the future. However, it is important for firms to match the type of double deviation to the recovery strategy, with apologies being more effective for integrity violations and promises being more effective for competence violations.

You can read “Trust Recovery Following a Double Deviation” from Journal of Service Research free for the next two weeks by clicking here. Want to know all about the latest research from Journal of Service ResearchClick here to sign up for e-alerts!

*Customer service image attributed to Didriks (CC)

Kenny Basso Professor of Marketing at the IMED Business School, Faculdade Meridional – IMED, Brazil. His research interests include services marketing, trust and consumer behavior. He has papers published in the Journal of Services Marketing, Journal of Retailing and Consumer Services, International Journal of Bank Marketing and Journal of Product & Brand Management.

Cristiane Pizzutti Professor of Marketing at the Universidade Federal do Rio Grande do Sul – UFRGS, Brazil. Her research interests include consumer behavior and services marketing. She has papers published in the Journal of Product & Brand Management, Journal of Services Marketing, Journal of Retailing and Consumer Services, International Journal of Retail & Distribution Management, and International Journal of Electronic Commerce.

Congratulations to Seigyoung Auh of Journal of Service Research!

_KKL9867We are delighted to congratulate Seigyoung Auh, winner of Journal of Service Research‘s Best Reviewer Award! Dr. Auh, kindly provided us with some information on his work:

Seigyoung’s research interests are in the areas of knowledge sharing/transfer in sales teams, frontline service employee extra role behavior, salesperson customer orientation diversity, sales team learning and conflict, service climate, service innovation, and service leadership.

His work has been published in journals such as Journal of Retailing, Journal of the Academy of Marketing Science, Journal of Service Research, Journal of Consumer Psychology, Sloan02JSR13_Covers.indd Management Review, International Journal of Research in Marketing, Marketing Letters, Journal of Personal Selling & Sales Management, Industrial Marketing Management, and Journal of Business Research, among others. Seigyoung has worked as a marketing scientist before entering academia where he has taught in Australia, Canada, and Korea, before joining Thunderbird.

He is currently the Associate Editor at Journal of International Marketing and European Journal of Marketing. He is also on the editorial boards of several journals including Journal of Service Research, International Journal of Advertising, Journal of Business Research, among others.

More information on this award can be found by clicking here.

In honor of this award, you can read the latest issue of Journal of Service Research free for the next 30 days! Click here to access the Table of Contents. Want to know about all the latest news and research from Journal of Service Research? Click here to sign up for e-alerts!

Journal of Service Research Invites Research on Health Service

medical-doctor-1314903-m Journal of Service Research is now accepting research for the upcoming special section entitled “Health Service Research: A Multidisciplinary Perspective,” which will publish in November of 2016! Editor Mary Jo Bitner will be joined by guest co-editors Tracey S. Danaher of Monash University, Australia and Andrew S. Gallan of DePaul University, USA for this section.

Scholars from both within and outside of business disciplines including marketing, management, information technology, economics, anthropology, design, education policy, health and public administration, psychology, public policy, social work, sociology and other related disciplines are invited to submit papers that examine the relationship between service and health care. All approaches (empirical, analytical, or conceptual) that create or extend theory in health service are welcome.

  • Examples of topics include, but are not limited to:
  • Service Innovation, Design, and Quality in Health Care Delivery
  • The Impact of Servicescapes in Health Services02JSR13_Covers.indd
  • New Service Models of Delivering Health Care
  • Front Line Employees and Service Provision in Health Care
  • A Network View of Health Care Services
  • Innovative Measurement and Metrics in Health Care Services
  • The Role of New Technologies in Providing Health Care Services (Electronic Medical Records, Health Information Technology, etc.)
  • Understanding the Patient Experience
  • Consumer Behavior in Health Services
  • Value Cocreation, Participation, and Engagement in Health Care Services
  • Methodological Breakthroughs in Health Service Research

Manuscripts are due May 15, 2015. For more information on this call, including how to submit, click here. Want news and notices like this from Journal of Service Research? Click here to sign up for e-alerts!

Sneak Preview of the August Issue of Journal of Service Research!

Journal of Service Research is a leading service research journal, offering an international and multidisciplinary perspective on the best management practices in various fields including service marketing and operations, JSR coverservice information systems, customer satisfaction and service quality, global issues in service and more. Right now you’re invited to read a sneak peek of the August issue of Journal of Service Research for free! These seven articles are available for you to peruse at your pleasure and can be accessed by clicking here!

Articles include:

And more!

Don’t miss out on this chance to get an early look at the August issue of Journal of Service Research! Click here to view all seven articles! Click here to sign up for e-alerts and be among the first to know all the latest from Journal of Service Research!