Empirical Study Of Relationship Of Customer Satisfaction And Price Tolerance

In recent years, price war has spread to almost all sectors in China, which indicates that price is still an important means of competition for enterprises, and an important factor to consumer behavior. Because profits are from the most valuable customers, enterprises should make every effort to meet and exceed customer expectations and to improve customer satisfaction, in order to improve revenues. A satisfied customer will change the attitude to prices. Even if the price increases, he/she will still buy the product, i.e. the price tolerance is high. Improving satisfaction influence the price tolerance positively. This will bring greater profits. Foreign scholars, in studying customer satisfaction and price tolerance, simply verified the relationship between the two, without considering the consistency of impact of customer satisfaction to prices tolerance in various industries and if, in addition to customer satisfaction, any other factors affect, or affect through customer satisfaction indirectly, the price tolerance. Because price tolerance is to study if customers will still buy the product when price increases, reflecting to some extent the consumer psychology, the factors affecting consumer psychology and behavior will have an impact on tolerance. This paper is to study the relationship between customer satisfaction and price tolerance from the perspective of consumer psychology.Firstly, the literature related to the price tolerance and customer satisfaction are reviewed, the existing works on customer satisfaction and price tolerance are comprehensively examined, the basic concepts are discussed, and corresponding theories and models are consolidated systematically. On the one hand, the results and experience of previous studies are summarized. On the other hand, the deficiencies and weaknesses of past research are explored.. Then on the basis of previous studies combined with Herrmann's (2004) model of factors affecting price tolerance the theoretical framework of the paper is constructed which includes five variables, Customer Involvement, Conspicuous Consumption Psychology, Perceived price fairness, customer satisfaction, and price tolerance. According to the literature review, the following assumptions are proposed. H1: customer satisfaction positively correlated with price tolerance. H2: customer involvement positively correlated with price tolerance. H3: conspicuous consumption psychology positively correlated with price tolerance. H4: perceived price fairness positively correlated with price tolerance. H5: customer involvement positively correlated with customer satisfaction. H6: conspicuous consumption psychology positively correlated with customer satisfaction. H7: perceived price fairness positively correlated with customer satisfaction.The method of quantitative research is used in the paper. 200 students in the university were surveyed by questionnaire. AMOS 6.0 and SPSS 14.0 statistical software are used for customer satisfaction and price tolerance questionnaire analysis, using descriptive statistics, the independent samples T-test, single-factor analysis of variance analysis and structural equation analysis.Through data analysis, seven assumptions in the model of factors affecting price tolerance are tested. As the study showed, customers involvement, the perceived price fairness, customer satisfaction, and conspicuous consumption psychology influence price tolerance positively. the more important the customer think the product is during purchase process, i.e. the higher customer involvement, the higher price tolerance is. The more conspicuous consumption psychology a customer have, the more he cares for others'recognition, and the higher price tolerance is. The more coincident a customer thinks the price is with pricing mechanism, the more perceived price fairness is and the higher price he/she would like to pay for, and the higher price tolerance is. The more satisfied a customer is with a product, the higher prices he/she would like to pay and the higher price tolerance is. Customer involvement, perceived price fairness and conspicuous consumption psychology positively influence customer satisfaction. The higher customer involvement is, the more conspicuous consumption psychology is, and the more price fairness is perceived, the more satisfied a customer is with a product. Customer involvement, conspicuous consumption psychology, and perceived price fairness not only directly affect customer satisfaction and price tolerance but also indirectly affect price tolerance through customer satisfaction. From the perspective of gender, there are more significant variances in customer involvement and conspicuous consumption psychology in male purchase process than that in female purchase process. From the education perspective, customers with different education background perform differently only along the dimension of customer involvement. From the perspective of monthly expenditure, customers in different expenditure levels perceive different price fairness and satisfaction, thus in different price tolerance levels.According to the findings, 1% increase in customer satisfaction in mobil phone industry, price tolerance will increase 0.405%. This indicates that the enterprise can set a higher price for its new product if the customer satisfaction is improved. As such, if the customer satisfaction is higher, the enterprise will gain more competitive advantages in price competition. That is to say, customers will still purchase the product even when the competitor's price is lower. In serving conspicuous consumers, the enterprise should conduct marketing research to segment the market and differentiate the prices so that it provides the high-income segment with conspicuous consumption and provide the low-income segment with proper consumption.