Will you care when you pay more? The negative side of targeted promotions

Abstract

PurposeThe purpose of the paper is to examine perceptions of unfairness and accompanying cognitive and emotional outcomes exhibited by present versus prospective customers when faced with targeted promotions. The targeted promotions were designed to be alternatively advantageous or disadvantageous to the targeted group.Design/methodology/approachAn experiment was conducted with a two (customers categories: present /prospective customer) × two (inequality conditions: advantaged/disadvantaged condition) between‐subject design. A total of 104 valid questionnaires were completed with a minimum of 24 participants per cell.FindingsPresent customers perceive higher unfairness than prospective customers when faced with disadvantaged conditions. However, perceived unfairness was not significantly different when faced with advantaged conditions. Further, perceived unfairness cognitively and affectively influences purchase intentions through perceived value and negative emotions.Practical implicationsAlthough prospective customers are price‐sensitive, targeted promotions should favor present customers instead of prospective customers to lower the perceived price unfairness of present customers. In addition, when relatively low prices are necessary to attract prospective customers, firms should create a type of “segmentation fence”, where present customers are exposed as little as possible to special offers designed to attract prospective customers.Originality/valueThis research contributes to three streams of literature. The first is related to perceived reference price unfairness, focusing on self/other comparisons (present versus prospective customers) rather than self/self comparisons. The second contribution is related to the outcomes of perceived price unfairness. The mediating effect of perceived value (i.e. cognitive outcomes) and negative emotions (i.e. affective outcomes) between perceived price unfairness and purchase intentions is examined concurrently. The third contribution is that this research raises echoes with the perspective of customer relationship management.