Skip to main content
SpringerLink
Log in

Can attempts to delight customers with surprise gains boomerang? A test using low-price guarantees

  • Original Empirical Research
  • Published:
Journal of the Academy of Marketing Science Aims and scope Submit manuscript

Abstract

Despite cautionary advice against it, delighting consumers by offering them pleasant surprises is widely advocated. In this paper, using a low-price guarantee context, we show that retailers’ attempts to use surprise gains to delight consumers might lead to subpar outcomes, if a countervailing cognition such as suspicion of retailer opportunism dominates consumers’ thinking. In a low-price guarantee, retailers promise consumers refunds if consumers discover a lower price for a purchased product. We propose that providing a surprise component in the refund over and above the promised refund might boomerang, by increasing the likelihood of countervailing cognitions related to opportunistic signaling, in turn decreasing future purchase intentions. Over multiple studies, we provide evidence for this proposition, illustrate the underlying process, and identify boundary conditions.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Similar content being viewed by others

Notes

  1. There are apparent similarities between the context we examine and service failure/recovery (Dong et al. 2008; De Matos et al. 2007; Roggeveen et al. 2012). Thus, locating a lower price after purchase under an LPG is akin to service failure and the retailers’ subsequent offering of a refund (with or without an additional surprise component) is akin to service recovery. However, there is an important difference between our context and that involving service failure/recovery per se. Service failure can occur without a pre-purchase guarantee preceding a service, just as consumers might locate lower prices following a purchase that was not made under an LPG. However, our paper is about failure of a pre-purchase signal, and not the failure related to the purchase per se. Thus, locating lower prices when a purchase was not made under an LPG would not be considered a failure in the specific context we examine, whereas perceptions of service failure might occur even without a pre-purchase guarantee. The strict analogue of our situation in the service context is failure of service (and subsequent recovery efforts) when the service is qualified with a service satisfaction guarantee; which has not been examined in the service failure literature, to the best of our knowledge.

  2. In this paper, we focus more on when offering surprise refund components backfire, and so reduce future purchase intention. Nevertheless, in some cases, offering surprise refund components may indeed increase delight, and so increase purchase intention. Given that this latter point is not the focus of this paper, we only briefly examine this issue (in a follow-up study to Study 2), examining how exactly delight increases future purchase intention.

  3. Including these six respondents in the analyses did not materially change the results reported. For example, the interaction result reported in the next paragraph (F1, 84 = 19.61; p < .001) was materially unchanged when these six respondents were included (F1, 90 = 15.95; p < .001).

  4. In Studies 1–2, based on pretests described in Appendix 3, we used a moderate signal default magnitude of $60. In Study 3, we had to choose a signal default magnitude smaller than $60, and yet one for which participants would exhibit refund-seeking behavior. Based on the pretests, we chose to use $30 as the small signal default magnitude.

  5. In the build-up to H3, we noted that differences between conditions involving small surprise refund component versus large surprise refund component were expected to be driven by differences in delight when signal default was small. Since this paper is more focused on boomerang effects of including surprise components in refunds, we examine only the role of OPPSIG in this and future studies.

  6. Locating lower prices may be easier on the internet; however, some retailers explicitly exclude online-only prices when considering LPG default (Tuttle 2013)

References

  • Andreassen, T. W. (2000). Antecedents to satisfaction with service recovery. European Journal of Marketing, 34(1/2), 156–175.

    Article  Google Scholar 

  • Arkes, H. R., Joyner, C. A., Pezzo, M. V., Nash, J. G., Siegel-Jacobs, K., & Stone, E. (1994). The psychology of windfall gains. Organizational Behavior and Human Decision Processes, 59(3), 331–347.

    Article  Google Scholar 

  • Becker, L. (1986). Reciprocity. London: Routledge & Kegan Paul.

  • Berman, B. (2005). How to delight your customers. California Management Review, 48(1), 129–151.

  • Biswas, A., Pullig, C., Yagci, M. I., & Dean, D. H. (2002). Consumer evaluation of low price guarantees: the moderating role of reference price and store image. Journal of Consumer Psychology, 12(2), 107–118.

    Article  Google Scholar 

  • Biswas, A., Dutta, S., & Pullig, C. (2006). Low price guarantees as signals of lowest price: the moderating role of perceived price dispersion. Journal of Retailing, 82(3), 245–257.

    Article  Google Scholar 

  • Biswas, A., Bhowmick, S., Guha, A., & Grewal, D. (2013). Consumer evaluations of sale prices: role of the subtraction principle. Journal of Marketing, 77(4), 49–66.

    Article  Google Scholar 

  • Boulding, W., & Kirmani, A. (1993). A consumer-side experimental examination of signaling theory: do consumers perceive warranties as signals of quality? Journal of Consumer Research, 20 (1), 111–123.

  • Campbell, M. C. (1995). When attention-getting advertising tactics elicit consumer inferences of manipulative intent: the importance of balancing benefits and investments. Journal of Consumer Psychology, 4(3), 225–254.

    Article  Google Scholar 

  • Campbell, M. C., & Kirmani, A. (2008). I know what you’re doing and why you’re doing it: the use of the persuasion knowledge model in consumer research. In C. Hugvstedt, P. Herr, & P. Kardes (Eds.), Handbook of Consumer Psychology (pp. 549–574). New York: Psychology Press.

    Google Scholar 

  • Cotte, J., Coulter, R. A., & Moore, M. (2005). Enhancing or disrupting guilt: the role of ad credibility and perceived manipulative intent. Journal of Business Research, 58(3), 361–368.

    Article  Google Scholar 

  • Curtin, S. (2013). Delight your customers: 7 simple ways to raise your customer service from ordinary to extraordinary. New York: American Marketing Association.

    Google Scholar 

  • De Matos, C. A., Henrique, J. L., & Rossi, C. A. V. (2007). Service recovery paradox: a meta-analysis. Journal of Service Research, 10(1), 60–77.

    Article  Google Scholar 

  • Dixon, M., Freeman, K., & Toman, N. (2010). Stop trying to delight your customers. Harvard Business Review, 88(7/8), 116–122.

    Google Scholar 

  • Dong, B., Evans, K. R., & Zou, S. (2008). The effects of customer participation in co-created service recovery. Journal of the Academy of Marketing Science, 36(1), 123–137.

    Article  Google Scholar 

  • Dutta, S., Biswas, D., Biswas, A., & Pullig, C. P. (2006). Price matching guarantees as signals of value: the role of perceived risk and estimate of lowest market price. Advances in Consumer Research, 33, 527.

    Google Scholar 

  • Dutta, S., Biswas, A., & Grewal, D. (2007). Low price signal default: an empirical investigation of its consequences. Journal of the Academy of Marketing Science, 35(1), 76–88.

    Article  Google Scholar 

  • Dutta, S., Biswas, A., & Grewal, D. (2011). Regret from postpurchase discovery of lower market prices: do price refunds help? Journal of Marketing, 75(6), 124–138.

    Article  Google Scholar 

  • Emmons, R. A. (2004). The psychology of gratitude: an introduction. New York: Oxford University Press.

    Book  Google Scholar 

  • Eneriz, A. (2015). Price match guarantees. Retrieved from http://www.aol.com/article/2015/06/18/walmart-other-stores-offering-price-match-guarantees/21197468/ on 20 December 2016.

  • Estelami, H., Grewal, D., & Roggeveen, A. L. (2007). The negative effect of policy restrictions on consumers’ post-purchase reactions to price-matching guarantees. Journal of the Academy of Marketing Science, 35(2), 208–219.

    Article  Google Scholar 

  • Folkes, V. S. (1988). Recent attribution research in consumer behavior: a review and new directions. Journal of Consumer Research, 14(4), 548–565.

    Article  Google Scholar 

  • Friestad, M., & Wright, P. (1994). The persuasion knowledge model: how people cope with persuasion attempts. Journal of Consumer Research, 21(1), 1–31.

    Article  Google Scholar 

  • Friestad, M., & Wright, P. (1995). Persuasion knowledge: lay people's and researchers' beliefs about the psychology of advertising. Journal of Consumer Research, 22(1), 62–74.

    Article  Google Scholar 

  • Hayes, A. F. (2013). Introduction to mediation, moderation, and conditional process analysis: a regression-based approach. New York: Guilford Press.

  • Heilman, C. M., Nakamoto, K., & Rao, A. G. (2002). Pleasant surprises: consumer response to unexpected in-store coupons. Journal of Marketing Research, 39(2), 242–252.

    Article  Google Scholar 

  • Herr, P. M. (1989). Priming price: prior knowledge and context effects. Journal of Consumer Research, 16(1), 67–75.

    Article  Google Scholar 

  • Hoch, S. J., & Loewenstein, G. F. (1991). Time-inconsistent preferences and consumer self-control. Journal of Consumer Research, 17(4), 492–507.

    Article  Google Scholar 

  • Jain, S., & Srivastava, J. (2000). An experimental and theoretical analysis of price-matching refund policies. Journal of Marketing Research, 37(3), 351–362.

    Article  Google Scholar 

  • Keiningham, T. L., & Vavra, T. G. (2001). The customer delight principle: exceeding customers' expectations for bottom-line success. New York: McGraw-Hill.

  • Kelley, S. W., & Davis, M. A. (1994). Antecedents to customer expectations for service recovery. Journal of the Academy of Marketing Science, 22(1), 52–61.

    Article  Google Scholar 

  • Kelley, S. W., Hoffman, D. K., & Davis, M. A. (1993). A typology of retail failures and recoveries. Journal of Retailing, 69(4), 429–452.

    Article  Google Scholar 

  • Kirmani, A., & Rao, A. R. (2000). No pain, no gain: a critical review of the literature on signaling unobservable product quality. Journal of Marketing, 64(2), 66–79.

    Article  Google Scholar 

  • Komter, A.E. (2004). "Gratitude and Gift Exchange", in The Psychology of Gratitude, R. A. Emmons and M. E. McCollough, eds. New York: Oxford University Press, 195-213.

  • Kukura, J. (2015). These stores have the best price matching policies. Retrieved from http://time.com/money/4164674/best-price-matching-stores/ on 12 October 2016.

  • Kunda, Z. (1990). The case for motivated reasoning. Psychological Bulletin, 108(3), 480.

    Article  Google Scholar 

  • Laran, J., & Tsiros, M. (2013). An investigation of the effectiveness of uncertainty in marketing promotions involving free gifts. Journal of Marketing, 77(2), 112–123.

    Article  Google Scholar 

  • Lemon, K. N., & Verhoef, P. C. (2016). Understanding customer experience throughout the customer journey. Journal of Marketing, 80(6), 69–96.

    Article  Google Scholar 

  • Mehta, N., Rajiv, S., & Srinivasan, K. (2003). Price uncertainty and consumer search: a structural model of consideration set formation. Marketing Science, 22(1), 58–84.

    Article  Google Scholar 

  • Mellers, B. A., Schwartz, A., Ho, K., & Ritov, I. (1997). Decision affect theory: emotional reactions to the outcomes of risky options. Psychological Science, 423–429.

  • Mellers, B. A., Schwartz, A., Ho, K., & Ritov, I. (1999). Emotion-based choice. Journal of Experimental Psychology: General, 128(3), 332.

    Article  Google Scholar 

  • Morales, A. C. (2005). Giving firms an “E” for effort: Consumer responses to high-effort firms. Journal of Consumer Research, 31(4), 806–812.

  • Mussweiler, T., Rüter, K., & Epstude, K. (2004). The ups and downs of social comparison: mechanisms of assimilation and contrast. Journal of Personality and Social Psychology, 87(6), 832.

    Article  Google Scholar 

  • Nickerson, R. S. (1998). Confirmation bias: a ubiquitous phenomenon in many guises. Review of General Psychology, 2(2), 175.

    Article  Google Scholar 

  • Oliver, R. L., Rust, R. T., & Varki, S. (1997). Customer delight: foundations, findings, and managerial insight. Journal of Retailing, 73(3), 311–336.

    Article  Google Scholar 

  • Oppenheimer, D. M., Meyvis, T., & Davidenko, N. (2009). Instructional manipulation checks: detecting satisficing to increase statistical power. Journal of Experimental Social Psychology, 45(4), 867–872.

    Article  Google Scholar 

  • Palmatier, R. W., Jarvis, C. B., Bechkoff, J. R., & Kardes, F. R. (2009). The role of customer gratitude in relationship marketing. Journal of Marketing, 73(5), 1–18.

    Article  Google Scholar 

  • Palmer, A., Palmer, A., Bejou, D., & Bejou, D. (2016). Retrospective: service failure and loyalty: an exploratory empirical study of airline customers. Journal of Services Marketing, 30(5), 480–484.

    Article  Google Scholar 

  • Png, I. P., & Hirshleifer, D. (1987). Price discrimination through offers to match price. Journal of Business, 365–383.

  • Roggeveen, A. L., Tsiros, M., & Grewal, D. (2012). Understanding the co-creation effect: when does collaborating with customers provide a lift to service recovery? Journal of the Academy of Marketing Science, 40(6), 771–790.

    Article  Google Scholar 

  • Roggeveen, A. L., Goodstein, R. C., & Grewal, D. (2014). Improving the effect of guarantees: the role of a retailer's reputation. Journal of Retailing, 90(1), 27–39.

    Article  Google Scholar 

  • Rubinstein, A. (1982). Perfect equilibrium in a bargaining model.  Econometrica 50 (January), 97-109.

  • Rust, R. T., & Oliver, R. L. (2000). Should we delight the customer? Journal of the Academy of Marketing Science, 28(1), 86–94.

    Article  Google Scholar 

  • Sherif, M., & Hovland, C. I. (1961). Social judgment: assimilation and contrast effects in communication and attitude change. New Haven: Yale University Press.

    Google Scholar 

  • Shiv, B., & Fedorikhin, A. (1999). Heart and mind in conflict: the interplay of affect and cognition in consumer decision making. Journal of Consumer Research, 26(3), 278–292.

    Article  Google Scholar 

  • Srivastava, J., & Lurie, N. (2001). A consumer perspective on price-matching refund policies: effect on price perceptions and search behavior. Journal of Consumer Research, 28(2), 296–307.

    Article  Google Scholar 

  • Steinhoff, L., & Palmatier, R. W. (2016). Understanding loyalty program effectiveness: managing target and bystander effects. Journal of the Academy of Marketing Science, 44(1), 88–107.

    Article  Google Scholar 

  • Thompson, B. (2012). KEEP trying to delight your customers, while… Retrieved from http://www.customerthink.com/article/keep_delighting_your_customers on 07 January 2015.

  • Tuttle, B. (2012). The one big asterisk in retailer price matching guarantees. Retrieved from http://business.time.com/2012/10/05/the-one-big-asterisk-in-retailer-price-matching-guarantees/ on 12 October 2016.

  • Tuttle, B. (2013). Bait-and-switch: beware low-price guarantees. Retrieved from http://business.time.com/2013/05/04/the-bait-and-switch-behind-low-price-guarantees/ on 12 October 2016.

  • Valenzuela, A., Mellers, B., & Strebel, J. (2010). Pleasurable surprises: a cross-cultural study of consumer responses to unexpected incentives. Journal of Consumer Research, 36(5), 792–805.

    Article  Google Scholar 

  • Vohs, K., Baumeister, R., & Chin, J. (2007). Feeling duped: emotional, motivational, and cognitive aspects of being exploited by others. Review of General Psychology, 11(2), 127.

    Article  Google Scholar 

  • Westbrook, R. A., & Oliver, R. L. (1991). The dimensionality of consumption emotion patterns and consumer satisfaction. Journal of Consumer Research, 18(1), 84–91.

    Article  Google Scholar 

  • Wood, S. L., & Haws, K. L. (2005). Anticipating returns: preemptive compensation as a double-edged sword. Advances in Consumer Research, 32, 226.

    Google Scholar 

  • Zimmermann, S. (2014). Fine print surprise in Travelocity’s low price guarantee. Retrieved from http://abcnews.go.com/Blotter/fine-print-surprise-travelocitys-low-price-guarantee/story?id=22682415 on 01 Nov 2016.

Download references

Author information

Authors and Affiliations

  1. Mike Ilitch School of Business, Wayne State University, 5201 Cass Avenue, Detroit, MI, 48202, USA

    Sujay Dutta & Abhijit Biswas

  2. Darla Moore School of Business, University of South Carolina, 1014 Greene Street, Columbia, SC, 29208, USA

    Abhijit Guha

  3. Marketing Division, Babson College, 213 Malloy Hall, Babson Park, MA, 02457, USA

    Dhruv Grewal

Authors
  1. Sujay Dutta
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Abhijit Guha
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Abhijit Biswas
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Dhruv Grewal
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Dhruv Grewal.

Additional information

The first three authors collected and analyzed data; all authors contributed towards writing of the manuscript.

Anne Roggeveen served as Area Editor for this article.

Appendices

Appendix 1: Overview of studies

Table 4
Full size table
Table 5
Full size table

Appendix 2: Sample scenario (Cell 4 in Table 2)

figure a

Appendix 3: Pretests for Study 1

Pretest 1

The first pretest was to identify the minimum price difference that would motivate consumers to seek refund. Thirty-nine (39) business students (48.7% males) were asked to imagine that they had purchased a TV for $799.99 from a local (fictitious) retailer, which offered an LPG. Next, if they were to find the same TV for sale in the market for a lower price, participants were asked for the minimum price difference that would motivate them to approach the retailer for a refund. On average, participants indicated that a price difference of $27.28 would motivate refund-seeking behavior. Based on this finding, we decided to use $30 as the lowest price difference in the studies in this paper.

Pretest 2

The second pretest was to choose the specific price difference to be used in Study 1. Eighty-seven (87) business students (56.3% males) participated in a 3-cell (Price difference: $30; $60; $90) between-subjects experiment. In each condition, participants were asked to imagine that they had purchased a TV for $799.99 from a focal (fictitious) retailer offering an LPG. A few days later, they heard that the same TV was being sold a different local retailer for $769.99 ($739.99; $709.99) – i.e., $30 ($60; $90) lower than the price charged earlier by the focal retailer. Next, participants indicated: (1) how small or large they felt the $30 ($60; $90) price difference was compared to what they paid for the TV; and (2) how much cheaper they thought the local retailer’s price was, vs. the focal retailer’s price of $799.99, using two 7-point scales (very small =1/ very large =7; not much cheaper =1/ substantially cheaper =7). These two items (r = .77) were summated to assess perceived magnitude of price difference. An ANOVA indicated that perceived magnitude differed significantly across the conditions (F2, 86 = 12.69; p < .01). Planned contrasts showed that there were significant differences between the three conditions (M30 = 3.66; M60 = 4.57; M90 = 5.39; ts > 2.40; ps < .05), indicating $90 to be the highest in magnitude, followed by $60 and $30. Based on these findings, we labeled $30/ $60/ $90 as a small/ moderate/ large price difference.

For Study 1, we used the $60, moderate price difference as the magnitude of signal default. In Study 3, which requires a contrast with a signal default of lesser magnitude, we used $30, small price difference as the magnitude of signal default – noting here that $30 still reflects a case wherein consumers would return to the store to make an LPG-related claim. In no case did we use $90, large price difference as the magnitude of signal default; our belief here is that perceptions of opportunistic signaling would be so high that it could not be overridden by any delight stemming from inclusion of a surprise component in the refund.

Appendix 4

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Dutta, S., Guha, A., Biswas, A. et al. Can attempts to delight customers with surprise gains boomerang? A test using low-price guarantees. J. of the Acad. Mark. Sci. 47, 417–437 (2019). https://doi.org/10.1007/s11747-017-0522-0

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11747-017-0522-0

Keywords

Search

Navigation