Realtional price discounts : consumers' metacognitions and nonlinear effects of initial discounts on customer retention / M. J. del Rio Olivares, Kristina Wittkowski, Jaakko Aspara, Tomas Falk & Pekka Mattila.
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TextPublication details: English : ,Edition: relational price discounts ; marketplace metacognition ; customer retention ; nonlinear effects ; price promotionsDescription: Practitioners increasingly employ relational price discount by granting initial discounts to new customers with the goal of building sustainable relationships. However, extant research has provided mixed findings on the long-term effects of initial discounts on customer retention. The current research aims to reconcile this mixed evidence by exploring nonlinear effects of initial discounts on customer retention. Drawing on marketplace metacognition theory, the authors hypothesize that moderate initial discounts (5% - 35%) have positive effects on customer retention, whereas low (<5%) and high (>35%) discounts have negative effects. Two large-scale field studies in an insurance company`s car insurance branch and property insurance branch provide empirical support for the hypothesized patterns. An additional laboratory experiment tests the psychological mechanism underlying the nonlinear effects. When compared with low and high discounts, moderate initial discounts lead customers to form higher expectations of future relational benefits provided by the firm, as well as to lower their expectations of future discounts. Finally, this research offers customer lifetime valueimplications based on the depicted findingsUniform titles: - Journal of Marketing
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