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One firm, one product, two prices: Channel-based price differentiation and customer retention

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  • Vogel, Julia
  • Paul, Michael

Abstract

Every multichannel retailer must decide whether and how to apply channel-based price differentiation. This study identifies channel-related price differentiation instruments and considers their effects on customer retention. It empirically tests hypotheses using a laboratory experiment and analytically investigates feasibility conditions. Results show that channel-based price differentiation positively affects customers through perceived value but harms retention through price unfairness and limited self-determination. The mobile communications retailer in this study would require 5.1% lower operating costs online to ensure its profitability. These results indicate that multichannel retailers with channel-based price differentiation should carefully select their price instruments and meet the feasibility conditions.

Suggested Citation

  • Vogel, Julia & Paul, Michael, 2015. "One firm, one product, two prices: Channel-based price differentiation and customer retention," Journal of Retailing and Consumer Services, Elsevier, vol. 27(C), pages 126-139.
    • Handle: RePEc:eee:joreco:v:27:y:2015:i:c:p:126-139
    DOI: 10.1016/j.jretconser.2015.07.007
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