Effects of Culture and Service Sector on Customers' Perceptions of the Practice of Yield Management

Beginning of article

1. Introduction

Price perceptions and price-related information processing are popular topics in current research (Xia, Monroe & Cox 2004), and at the heart of many discussions about these topics rests yield management (YM) practices, which have consequences for customer satisfaction (Wirtz et al., 2003; Noone et al. 2003; Choi & Mattila, 2003) and customer loyalty (Bowen & Shoemaker, 1998; Shoemaker & Lewis, 1999; Reinartz & Kumar, 2002). Researchers generally agree that marketers must justify the price differences they institute through YM implementations (Kimes & Wirtz, 2002; Shoemaker, 2003). If they can do so, they might meet one of the basic conditions for YM deployment, namely, customer acceptance (Desmet, 2000). That is, YM cannot impact customers' perceptions negatively or trigger feelings of inequity, injustice, and dissatisfaction if the practice is to succeed. Such negative feelings might represent responses to unjustified price differences (Bolton, Warlop & Alba, 2003; Xia, Monroe & Cox, 2004), though an overly complex YM system also could generate negative reactions.

Some recent investigations suggest that customers' reactions depend more on the context in which YM gets implemented. For example, the industry might influence perceptions of price differences. According to Kimes (1994, 2002), hotel customers perceive price differences more negatively and accept them less frequently than do consumers in the airline industry. But if YM systems in hotels simply duplicate airline systems (Selmi, 2008; 2009), might negative customer reactions indicate a lack of familiarity rather than an outright rejection? In other words, will negative reactions disappear as customers become accustomed to YM practices? A 1985 survey by Fisk & Young concluded that price differences in the airline industry initially caused significant customer dissatisfaction and low repurchase intentions, yet today, such activities are widely accepted.

Another topic for debate involves the relationship between YM and the culture within which such practices get implemented. Mattila & Choi (2006) recently established that customers' satisfaction and perceptions of price inequity vary with the cultural context. However, moving beyond their conclusions and similar results (Lee & Ulgado, 1997; Kimes & Wirtz, 2003), another question arises: Do customers' perceptions of price differences and acceptance of YM techniques vary across their own culture?

This study attempts to answer both questions. After reviewing briefly the concept of YM, we present a synthesis of the impact of YM techniques on customer behavior. Next, we examine the link between YM and price perceptions. To clarify the effect of cultural context and type of industry on price perceptions, we conduct research that involves data collections from two countries (France and Tunisia) and two industries (airline and hotel). Thus, after we present the methodology, results, and recommendations, we outline the contributions, limits, and further possible developments of this research.

2. Yield Management (YM)

2.1 Definition

YM techniques rely on precise segmentation to determine different prices that will maximize revenues and optimize available capacity. The practices also pertain to managing capacity in real time to maximize revenues through timely price adaptations (Desiraju & Shugan, 1999) and segmentation (Desmet, 2000). A consensus seems to be found around the idea that yield management is a sophisticated form of managing the supply/demand relation by means of a simultaneous manipulation of rates and available capacities, largely adopted by sectors such as airlines or hotels (Avlonitis & Indounas, 2007; Selmi, 2009). From this perspective, we can say that yield management "manage the company's existing capacity by monitoring the different market segments' demand and charge maximum price to segments that they are willing to pay" (Avlonitis & Indounas, 2007, p. 742).

A large body of literature confirms the success of YM in industries including hotels (Selmi, 2009), car rentals, cruise lines, and rail transportation. The positive impact of YM on firm performance also appears to apply across various countries, including the United States (Kimes, 1989), the United Kingdom (Jauncey et al., 1995), Italy (Luciani, 1999), and Turkey (Emeksiz, Gursoy & Icoz, 2005). In addition, recent research has focused largely on the consequences of YM from a customer standpoint. Thus, the debates have moved away from the relevance of applying YM techniques.

2.2 Impact of YM Practices on Customers (Selmi N., 2008)

In research into the impact of YM practices on customer perceptions and behavior, the main recommendation has been to adopt a customer orientation (Wirtz, et al., 2003). Moreover, to avoid negative effects on the firm, YM techniques must follow an ethical strategic vision (Desmet, 2000) and reflect a culture focused on customer satisfaction (Reinartz & Kimes, 2002; Noone et al., 2003; Shoemaker, 2003).

Although YM techniques rely on a precise segmentation of the customer base, that segmentation does not remain static. Therefore, dynamic monitoring of demand within each price segment is necessary (Belobaba, 1989; Weatherford & Bodily, 1992). In most service industries, demand structures are neither stable nor homogeneous, but because reservation predictions in the hospitality industry require a reliable demand forecast, the forecast must include the concept of risk.

A reservation agent faces a dilemma (Selmi & Dornier, 2010): Sell a unit right now at a specified price or wait until a customer is willing to pay a higher price. Each option entails a risk. If the agent denies the current reservation at a low price, the unit may remain unsold (risk of spoilage). Conversely, accepting the lower-priced offer immediately may result in losing a subsequent customer ready to pay a higher price (dilution risk). In addition, overbooking comes into play as a third option. In the airline …