Revenue Management and Its Impact On Consumer Trust

Revenue management is widely practiced in services where fixed costs are high relative to variable costs, allowing discriminatory prices to appeal to buyers with differing levels of price elasticity. However, price discrimination which is implicit in Revenue Management systems may undermine trust in an organisation, when buyers perceive that they have been treated less fairly than other buyers. Trust is at the heart of Relationship Marketing strategies, therefore there would appear to be a potential conflict between the aims of Relationship Marketing and Revenue Management. This paper reports on the interim results of an ongoing longitudinal study involving 2273 customers on a hotel chain’s database, who were divided into a test group (variable prices for a specified product offer) and a control group (constant prices). Initial results suggest that variable pricing may not itself be a cause of distrust, but rather trust/mistrust is likely to derive from individuals’ prior experience, which leads to expectations based on knowledge of an organisation’s or industry sector’s pricing “rules”.