Travel Reference
In-Depth Information
To combat this, what is required is the provision of an appropriate level of information on the
company's pricing policy and this is believed to have a positive impact on customers' perceived
fairness of RM (Choi and Mattila 2003, 2005, 2006; Rohlfs and Kimes 2005). Clear information
about booking, cancellation and amendment terms needs to be available and understood by
customers (Ivanov and Zhechev 2012).
Other studies (McMahon-Beattie 2009; McMahon-Beattie, Palmer and Yeoman 2011)
have considered the impact of variable pricing on the level of consumer trust in a company.
They have explored whether variable pricing, and the fact that a company may not be offering
a customer the best price available, undermines trust, which many studies have argued to be a
central characteristic of long-term buyer-seller relationships (e.g. Ganesan 1994; Morgan and
Hunt 1994). It has been noted that trust is a particularly important factor early in a relationship
and an essential precondition for the relationship to move to more committed stages of
development (Dwyer, Schurr and Oh 1987; Grayson and Ambler 1999). Findings have shown
that variable pricing in itself does not cause distrust, but consumers' level of knowledge of the
'rules' in which variable pricing operates does. Indeed, if customers understand how and why
the benefi ts from variable pricing can be obtained, and they have experienced such benefi ts,
they may come to trust a business' use of variable pricing as a legitimate business practice. This
re-emphasizes that consumers' familiarity with the rules, terms and conditions associated with
variable pricing should be a key consideration for RM professionals.
RM and CRM
The adoption of RM strategies by companies in the tourism industry has often been accompa-
nied by the development of CRM systems. CRM has been seen by many (e.g. Bull 2003;
Muther 2002) as a solution for developing a true marketing orientation by a company - that is,
providing a differentiated product offer that meets the needs of individual customers, rather
than the 'average' customer. However, a number of commentators (Mathies and Gudergan
2007; McMahon-Beattie, Palmer and Yeoman 2011; Mauri 2012) have noted that service
companies face a number of challenges when they engage in RM and CRM practices simulta-
neously. For example, CRM focuses on lifetime values of current and potential customers.
RM, however, aims to maximize revenue on a single transaction by allocating perishable inven-
tory to existing demand using price discrimination. As such, the essential difference between
RM and CRM is the time horizon for revenue maximization (Mathies and Gudergan
2007). RM does not consider the long-term gains that might be achieved from each customer.
Additionally in RM customer segmentation utilizes price elasticities and associated consumer
willingness to pay whilst in CRM customers are segmented on their lifetime profi tability.
As a result some customers with a high lifetime value could fall into a number of different
elasticity segments and receive inconsistent treatment and pricing. For example a business travel-
ler who is usually price insensitive in terms of airline and hotel room bookings may be very price
conscious when booking the family holiday.
Noone, Kimes and Renaghan (2003) and Mathies and Gudergan (2007) highlight the
need to develop a customer-centric value based RM if customer lifetime values are to be
realized. Metters, Queenan, Ferguson, Harrison, Higbie, Ward, Barfi eld, Farley, Kuyumcu and
Duggasani (2008) have reported some success in the casino industry which has integrated
data from CRM systems and player tracking systems in order to set room rates based on
potential spend. However, the integration of RM and CRM systems remains a challenge and
requires further development in terms of software development and appropriate managerial
decision-making.
