(The) influence of prior price promotions on customer satisfaction of service upgrades

Abstract

Many service firms face revenue management issues associated with service upgrades. Service companies offer service upgrades when they need to compensate for their mistakes or to reward and attract customers. In general, service upgrades would increase customer satisfaction. This could change, though, when a customer recalls previous experiences related to the service. In this research, we examine the influence of previous price promotion experience on the current customer satisfaction when a service upgrade is offered. We used a car rental firm’s customer survey and transaction data and ordered logistic regression was chosen for the analysis. The results demonstrated that price promotion in the prior transaction negatively affects customer satisfaction of the current transaction when there is a car-level service upgrade. Moreover, this effect turns into a positive relationship as the number of transactions of a customer increase. The findings revealed new insight regarding the influence of previous experience on post transaction satisfaction. In addition, the investigation suggests price promotion and service upgrade strategy in auto rental business.