The impact of market price volatility on consumer satisfaction with lowest‐price refunds

Abstract

PurposeDespite retailers' growing use of lowest‐price refund policies, little is understood about how consumer satisfaction is influenced by them. This paper examines the potential role of market price volatility and store image on consumers' satisfaction of stores offering a lowest‐price refund.Design/methodology/approachBetween‐subject experimental design is used in which subjects are presented with simulated shopping scenarios. In the shopping simulation lowest price refunds are provided to the subjects under different price volatility and store image conditions. Consumer satisfaction is then measured.FindingsResults indicate that when market price volatility is high consumer satisfaction with lowest‐price refunds tends to be significantly higher for stores with a good image than stores with a poor image. As market price volatility increases, consumer perceptions of value increases for stores with a good image, while it declines for stores with a poor image.Research limitations/implicationsThe results of the study are limited by the simulated shopping methodology that is used and the absence of field shopping behavior and covariate satisfaction and refund data from retail stores.Practical implicationsDespite receiving the same outcome, different consumers' satisfaction with lowest‐price refunds may be highly influenced by the environment. Generally, both market price volatility and store image influence consumer satisfaction.Originality/valueBy identifying specific market conditions that influence consumer satisfaction with lowest‐price refunds, it may be critical for certain retailers to mobilize their refund programs.