How corporate reputation affects customers' reactions to price increases

The study investigates the impact corporate reputation has on cognitive, affective and behavioural customer reactions after price increases. Specifically, it includes inferred motive, price fairness, anger and purchase intentions. On the basis of equity theory, attribution theory and the theory of cognitive dissonance, the conceptual model is developed and tested using an experimental design set in the airline industry. Partial Least Squares serves to determine direct, mediated and moderating effects. Findings confirm that the more favourable the perceived reputation, the less likely customers are to attribute negative motives for the price increase or price unfairness. A larger price increase does not diminish the impact reputation has on perceived price fairness or on purchase intentions. Reputation also has an effect on anger mediated by price fairness. Firms should consider corporate reputation in pricing strategies as analysis of reputation can assist in forecasting consumer reactions to price increases and in augmenting profitability.