ACCT 210 Lecture Notes - Lecture 20: Equity Theory
6 Sep 2020
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VBM Notes Conclusion Value, Bridge Pricing
Pricing to create shared value
Five pricing strategies
1. Focus on relationship, not transactions: use technics that show you value the consumer as a
person and not as a wallet. Ex: age related discounts. Focus on customers’ needs.
2. Be proactive: set prices in ways that encourage customer behavior that both benefits you and
the customer himself.
3. Put a premium on flexibility. By practicing flexible pricing, you can satisfy more different
customers and ensure an equitable sharing of value. Design pricing so that it can change in
response to shifts in consumer demands.
4. Promote transparency: provide the rationale for your pricing to you customers.
5. Manage the market’s standards for fairness: Make sure that your pricing meets customers’
expectations about what is fair and that the pricing process is clear.
Do satisfied customers really pay more?
H1: The price that consumers are willing to pay increases with the level of CS.
- Equity theory: parties in an exchange perceive equitable treatment if the ratio of their outcomes
to input is perceived as fair.
H2: The relationship between CS and the price that customers are willing to pay follows an inverted s
shape function, which is concave at first and then convex.
H3: The more the CS judgement moves from transaction specific to cumulative, the stronger is the
relationship between CS and WTP.
- Attitude behavior link: attitude certainty is stronger for cumulative satisfaction than for
transaction specific satisfaction.
Document Summary
Five pricing strategies: focus on relationship, not transactions: use technics that show you value the consumer as a person and not as a wallet. Focus on customers" needs: be proactive: set prices in ways that encourage customer behavior that both benefits you and the customer himself, put a premium on flexibility. By practicing flexible pricing, you can satisfy more different customers and ensure an equitable sharing of value. H1: the price that consumers are willing to pay increases with the level of cs. Equity theory: parties in an exchange perceive equitable treatment if the ratio of their outcomes to input is perceived as fair. H2: the relationship between cs and the price that customers are willing to pay follows an inverted s shape function, which is concave at first and then convex. H3: the more the cs judgement moves from transaction specific to cumulative, the stronger is the relationship between cs and wtp.
