Practical Implications

Results of the current study offer insight into various implications for airline management in terms of marketing communications and customer relationships. For example, results of this study suggest that airline management needs to understand their passengers‟ price fairness perceptions and the antecedents of the perceived price fairness in order to better predict passengers‟ subsequent behavioral intentions.

Results suggest that passengers‟ cognitive attribution is a significant predictor of their price fairness of extra fees. That is, depending how passengers understand the reasons for price increases or new prices, they may or may not feel the extra fees as fair. This result suggests that airline management needs to consider remedies as to how they can persuade passengers. For example, giving the right justification (e.g. this price

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change is uncontrollable) to customers in a timely manner can be considered as one tool for successful marketing communications.

Recently, many airlines in America and Europe began charging extra fees for services that used to be free. They have also introduced new fees schemes for other reasons. For instance, some airlines have insisted that charges for carry-on bags would ultimately benefit customers because passengers might want to bring fewer bags to avoid the fees, which could speed up the check-in in the end (CNN, 2010). Some airlines have also stated that fewer bags and services due to the extra fees help cutting handling costs, which are ultimately used to cut airfares (Economist, 2006). However, it appears that although those justifications could be very persuasive to some segments, they would not be to others (e.g., business travelers may be supportive for that, while leisure travelers with some carry-on bags and checked-in bags would likely not be). Accordingly, a marketing strategy that focuses on customer benefits does not seem successful. The extra fees initiatives have recently led to passengers‟ negative reactions and resistances, and have become a controversial issue in the airline industry (CNN, 2010; Wilkening, 2009).

It could be argued that the unfairness perception of passengers is caused by the Airlines‟ inappropriate marketing communications, not by the extra fees scheme per se. Thus, a marketing strategy in line with the price fairness model of this study could be considered (e.g. having passengers attribute the extra charges to some external uncontrollable reasons such as falling traffic and surges in fuel costs).

In addition to the predicting role of cognitive attribution for price fairness, the results of the current study suggest that airline management needs to understand how

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passengers form their cognitive attributions and perceptions of price fairness in an extra fees context. Different from previous studies arguing that cognitive attribution and price fairness are multidimensional, this study found that passengers are more likely to

perceive the concepts to be unidimensional. That is, cognitive attribution is a

unidimensional concept encompassing locus of causality and controllability, and price fairness is also found to be a global assessment of whether extra fees are reasonable, or justifiable. This finding means that a complicated explanation for the causes of the fees reflecting all three dimensions such as locus of causality, controllability, and temporal stability (as the traditional attribution theory has suggested) may not be efficient. Instead, the results of this study suggest that airline management needs to give justification of extra fees by focusing only on who is responsible for the fees. For example, a message like “We have done our best efforts to protect against price increases, but, inevitably, we have to start charging checked-bag fees because of the oil price increase” could be considered. This concise message may sound more clear and comprehensible, and could be an efficient way to deliver marketing communications.

This strategy is also applicable in a price reduction situation. A company is usually concerned that lowering prices will result in lower quality perceptions to consumers, and it may be true because of the positive relationship between price and quality. However, if plausible reasons for reducing price are given, it is likely more understandable that consumers would not attribute the lower price to lower quality (e.g. using low quality of resources or poor service) (Vlaev, Chater, Lewis, & Davies, 2009).

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Instead, consumers may think that the company has given up parts of their profits, or adopted innovative technologies and management systems to reduce costs.

However, it is important to note that passengers may be suspicious that airline management intentionally takes advantages of this psychological mechanism based on attribution theory. For instance, a company might abuse marketing communications by disguising its motives for increasing prices due to “uncontrollable reasons”. In the summer of 2000, oil companies blamed the cost increases imposed by OPEC countries, and increased the oil prices for individuals. However, the price increase was indeed found to be beyond what could be reasonably acceptable (Vaidyanathan & Aggarwal, 2003). Therefore, it is believed that airline management needs to consider how they can place more trust on their communications. The factors that influence price fairness along with the positive inferred motive (e.g. reputation and trust) certainly need to be

considered for marketing strategies for pricing policies and should also be investigated in future research.

The results of the current study also suggest that price sensitivity influences the degrees of price fairness perceptions and negative emotions. Although no moderating role of price sensitivity in the price fairness model was found in this study, a further examination of mean differences in variables showed that high price sensitivity passengers were more likely to feel price unfairness and negative emotions than low sensitivity people in the extra fees situation. It was also found that the higher their price sensitivity is, the lower they have willingness to pay and the more they exhibit serious revenge behavior toward the extra fees. This result suggests that airline management

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needs to do differentiated marketing communications to heterogeneous passengers. It appears that more research is required to classify the segmentation in terms of price sensitivity. Nonetheless, it is believed that airline management needs to consider the underlying dimensions related to price sensitivity when applying the price fairness model of this study in practice.

Finally, this study showed that price fairness significantly influences passengers‟ future behavioral intentions. In particular, it was found that in the case of price

unfairness perception, negative emotional response had a mediating role in complaining and revenge behavior. That is, if passengers inferred that extra fees were inevitably charged due to the uncontrollable reason, they tended to be tolerant of the fees, while, if individuals felt unfairness of extra fees for some reasons, they were more likely to exhibit complaining or revenge behavior with anger, disappointment, and distress. This finding suggests that emotional response is critical in the price fairness model. In other words, it is important to cope with consumers who already feel price unfairness because the unfairness judgments tend to evoke negative emotions which consequently lead to unfavorable behavioral intentions (e.g. negative word-of-mouth or switching behavior).

As found in this study, negative emotional responses play a critical role in tourists‟ behavioral intentions along with cognitive processes. That is, if passengers believe that they are unfairly treated in terms of prices, they are more likely to report it to external agencies and the media, or spread word-of-mouth throughout the Internet. The importance of dealing with customers‟ negative emotional responses has also been

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emphasized in the service industry literature (e.g. Dubé & Menon, 1998; Smith & Bolton, 2002).

For airline management, several ways of handling angry passengers because of the unexpected extra fees need to be suggested in order to protect against potential subsequent negative behaviors. This proactive consumer relationship management is required rather than reactive consumer relationship management because it can anticipate concerns before they are serious problems. More specifically, front-line employees need to be empowered to handle angry customers immediately and fairly because passengers or prospective passengers are most likely to show the front-line staff (e.g. customer service and check-out desk) their negative reactions. Thus, as suggested by the results of the current study, giving justifiable explanations to passenger in a timely manner could be effective, and guiding alternative ways to resolve these concerns could be an efficient way of dealing with angry customers. For example, a loyalty program or credit card membership (e.g. frequently flyer membership) could be

introduced to the customers in order to have the extra fees waived. US airways actually promotes this strategy, that is, their loyalty members can have checked baggage for free, while normal passengers pay for their checked baggage. Thus, passengers who complain about the extra fees could be encouraged to register the airline frequently flyer

membership to get the benefits they deserve.

However, a more serious problem is that an (internally) angry customer with unexpected extra fees could easily leave the company and exhibit switching behavior without showing their anger in front of employees. This situation is worse than dealing

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with angry passengers on site because there is likely no chance to make excuses for their concerns. That is, the airline is not even aware of the existence of problems of

passengers who have bad experiences. Therefore, training to front-line employees is suggested in order to improve their capability of detecting passengers who might not show their anger in front of the company, but could willingly exhibit negative reactions to the company since this study showed that negative emotions of passengers predict negative behavioral intentions including revenge and complaining. Specific techniques related to the training could be studied for further research.

In addition, this study showed that angry passengers are more likely to report their negative experiences to external agencies and media as well as the airlines. Thus, it is suggested that airline management needs to consistently monitor external agencies and media (e.g. websites). Management can set up a department for this function, and

professional staff can be hired to monitor any negative feedback and complaints online including online consumer forums, tourism-related blogs and bulletin boards. These practices should be a part of customer relationship management, and the resultant activities can be utilized to improve marketing strategy in regards to pricing schemes in the future.

7.3 Recommendations for Future Research