Partitioned pricing, price fairness perceptions, and the moderating effects of brand relationships in SME business markets

Journal of Business Research 72 (2017) 80–92

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Journal of Business Research

Partitioned pricing, price fairness perceptions, and the moderating effects of brand relationships in SME business markets☆,☆☆ Jodie L. Ferguson, Ph.D., Associate Professor of Marketing a,⁎, Brian P. Brown, Ph.D., Associate Professor of Marketing a, Wesley J. Johnston, Ph.D., CBIM Roundtable Professor of Marketing, Director b a b

School of Business, Virginia Commonwealth University, PO Box 844000, Richmond, VA 23284, United States Center for Business and Industrial Marketing, J. Mack Robinson College of Business, Georgia State University, United States.

a r t i c l e

i n f o

Article history: Received 21 July 2015 Received in revised form 1 November 2016 Accepted 3 November 2016 Available online xxxx Keywords: Affect Brand mandate Partitioned pricing Price fairness Small- and medium-sized enterprise (SME) Business-to-Business (B2B)

a b s t r a c t Partitioned pricing effects on price perceptions have been studied in the consumer (B2C) market context, but not in the business (B2B) market, and particularly not in the small- and medium-sized enterprise (SME), context. The current research investigates SME managers' affective and cognitive (e.g., price fairness perceptions) responses to partitioned pricing and extent of relationship with the selling brand. The first of three experimental studies finds that a partitioned price generates greater price fairness perceptions than an all-inclusive price. Study 2 finds that SME buyers elicit the greatest positive affect and the lowest negative affect when the buyer's firm has an established relationship with the brand and the seller partitions the price. The third study further examines the effects of relationship with the brand by separating brand mandate (i.e., when the buying firm requires employees to purchase from a specific brand) and relationship longevity. © 2016 Elsevier Inc. All rights reserved.

1. Introduction Extant behavioral pricing research, with few exceptions (e.g., Zeng, Yang, Li, & Fam, 2011), has examined pricing phenomena in consumer (B2C) settings. While consumer research findings might very well apply in business (B2B) settings, there are nuances of the business market context that suggest dedicated study, specifically concerning perceptions of price fairness (Homburg, Allmann, & Klarmann, 2014). Purchases in business markets tend to be utilitarian in nature, unlike more self-expressive consumer purchases (Lamons, 2005); they are for business purposes not personal use. In addition, they tend to require a formal, group decision-making process and their purchases tend to be for higher volume quantities and dollar amounts (Monroe, Rikala, & Somervuori, 2015). However, in spite of their more analytical and objective approach, individual business managers may rely on both heuristics and affect as well as thoughtful analysis – just as consumers do – in evaluating offers and making decisions in certain circumstances (Brown, Zablah, Bellenger, & Donthu, 2012; Monroe et al., 2015). Further, B2B managers exhibit behavioral patterns that do not simply follow rational ☆ The authors thank Drs. Suzanne C. Makarem of Virginia Commonwealth University and Danny N. Bellenger of Georgia State University for their comments on this paper. ☆☆ Virginia Commonwealth University's School of Business funded the research in this paper. ⁎ Corresponding author. E-mail addresses: [email protected] (J.L. Ferguson), [email protected] (B.P. Brown), [email protected] (W.J. Johnston).

http://dx.doi.org/10.1016/j.jbusres.2016.11.001 0148-2963/© 2016 Elsevier Inc. All rights reserved.

choice models; psychological aspects (Hinterhuber & Liozu, 2015) and emotions (LaPlaca & da Silva, 2016) may also play a role in pricing decision-making. The study of price fairness perceptions is important to marketing managers because these perceptions are empirically linked to a variety of positive and negative outcomes, including intentions, willingness to pay, switching behavior, word-of-mouth behavior, brand attitudes and relationships, and firm profitability (Bertini & Wathieu, 2008; Bolton, Warlop, & Alba, 2003; Kahneman, Knetsch, & Thaler, 1986; Maxwell, 1995; Zeng et al., 2011). Thus, business managers should strive to understand antecedents to price unfairness perceptions in an effort to reduce negative outcomes. The purpose of this research is to explore partitioned pricing, the strategy of dividing the price of a product offering into two or more mandatory components (Morwitz, Greenleaf, & Johnson, 1998), and its effects on price fairness perceptions in a B2B context. This objective furthers the efforts of recent literature which seek to understand managers' behavioral pricing effects in business markets (Hinterhuber & Liozu, 2015; Homburg et al., 2014; Iyer, Xiao, Sharma, & Nicholson, 2015; Monroe et al., 2015). Additionally, we add to the growing literature on the importance of branding in business markets and the influence of managers' emotions (i.e., positive and negative affect) on business purchase situations (Brown, Zablah, Bellenger, & Johnston, 2011; Leek & Christodoulides, 2012) by examining how buying managers' relationship with a brand and related emotions impact the relationship between partitioned pricing and price fairness perceptions.

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Zhang, Netzer, and Ansari (2014) suggest that B2B and B2C markets are not orthogonal and these markets exist as a continuum with substantial overlap (p. 336). Although there is a hardline distinction in that B2B purchases are for business use and B2C purchases are for personal use, there are B2B contexts, particularly with smaller firms characterized by few buying center members and limited resources, which may exhibit buying behaviors similar to individuals or households. These gray-area business contexts require greater scrutiny. The present research supports recent calls for a greater understanding of small- and medium-sized enterprises' (SMEs') buying behavior, beyond simply considering SME managers as small versions of big enterprises (Ozmen, Oner, Khosrowshahi, & Underwood, 2013). SMEs make significant contributions to most developed economies as evidenced by the fact that they account for 54% of all U.S. sales (Graham, 1999; U.S. Small Business Administration, 2013), yet SMEs generally receive limited attention in academic research and little is known about the purchasing practices of small company owners (Ellegaard, 2009). Research shows that SMEs differ from larger firms in a number of ways, including their overall structure (e.g., formalization, purchasing roles) (Berthon, Ewing, & Napoli, 2008; Coviello, Roderick, & Munro, 2000; Raju, Lonial, & Crum, 2011). These distinctions have led academics to claim that the “conventional principles prescribed in the marketing literature cannot always be fully appreciated or applied within the SME context” (Berthon et al., 2008, p. 29). Accordingly, the responses of SMEs to price stimuli, and partitioned pricing in particular, are likely to differ from larger firms. The current paper presents a conceptualization of business pricing and affective/ cognitive responses, and discusses three experiments that use SME business managers to test relationships between partitioned pricing, relationship with the brand, affect, and price fairness perceptions. It responds to Hinterhuber's (2015) call for research on partitioned pricing effects in B2B markets and LaPlaca and da Silva's (2016) call for a paradigm shift in B2B research from economic exchange to behavioral theory: The importance of such issues as emotion, irrationality, and other noneconomic factors that are entailed in relationship-building, whether tangible or intangible, must be explored. (p. 240). Thus, an important contribution of this research is that it studies the effects of partitioned pricing, emotions, and relationship with the brand on price fairness perceptions from a B2B and specifically an SME perspective. In addition, it considers the role of the brand mandate, a commonly used policy that requires that business employees use only certain brands, as an important brand relationship variable. For example, an automotive firm requires a sales manager to use a corporate-issued American Express card when he prefers to use his personal MasterCard because, as a long-time user, he earns bonus frequent flyer miles with his preferred airline carrier. How might this brand mandate affect the manager's feelings toward the American Express brand? Or, suppose that because of her firm's contractual agreement with Starwood Hotels, a human resource manager must use only Sheraton hotels for employee trainings. How might this manager's feelings toward the Sheraton brand influence her perceptions of quoted hotel prices? These rather mundane scenarios are frequent in business settings but raise questions about pricing in any business context, and particularly SME contexts, and regarding whether a brand mandate influences buying managers' responses to prices. This research begins with a conceptualization for business pricing and managers' affective and cognitive responses. This is followed by the hypotheses, method and results, and a discussion of three experimental studies. Finally, we close with a general discussion, including theoretical and managerial implications, and limitations and future research possibilities.

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2. Factors likely to affect business manager's response to pricing Early models of organizational buying behavior characterize business market decision-making as a “rational” or a cognitive process (Bendixen, Bukasa, & Abratt, 2004; Bonoma, Zaltman, & Johnston, 1977); they assume that decision-making is logical and dependent on objective criteria (Wilson, 2000). Recent literature challenges these perspectives by contending that while buying decisions partly rely on a rational process, emotional and subjective factors (e.g., relationship with a vendor, company reputation, levels of trust, and brand cues) do play an important role (Brown et al., 2011; Homburg, Klarmann, & Schmitt, 2010; Kotler & Pfoertsch, 2006; Lynch & de Chernatony, 2007; Zhang et al., 2014). Managers' perceptions, evaluations, and decision-making may involve a combination of both emotional (e.g., affective) and calculative (e.g., cognitive) responses (Berghall, 2003). Several factors may influence managers' affective and cognitive responses to price stimuli. These include price presentation, relationship with the brand, size of organization (i.e., SMEs or large entities), size of buying center, reference price (i.e., the price stimuli compared to some point or reference such as price previously paid, perceived market average, or competitor's price (Monroe et al., 2015)), perceived seller motive (Campbell, 2007), type of purchase (i.e., novelty, complexity and importance of purchase (Patterson, Johnson, & Spreng, 1997)), and level of risk (e.g., high/low dollar price). Fig. 1 presents a conceptualization of business pricing, affective/cognitive responses, and factors that influence business managers' response to pricing. While not comprehensive, it provides a general overview of the myriad factors that influence a business manager's response to pricing. Importantly, it highlights gaps in extant B2B research, specifically regarding partitioned pricing, brand mandates and affect. In this empirical research, we examine the effects of the highlighted factors in Fig. 1: partitioned pricing (i.e., pricing presentation), the effects of overall relationship with the brand, and then more specifically, the effects of brand mandate and relationship longevity on affective and cognitive responses to pricing in a SME business context.

2.1. Affective and cognitive responses to pricing When evaluating an offer, managers use available information to interpret and evaluate the offer. Typically, individuals perceive the pricing stimuli and elicit a quick, affective response, followed by a more calculated, cognitive response (Monroe et al., 2015). Affective responses are either positive (e.g., happiness, pleasure, joy) or negative (e.g., anxiety, anger, confusion) and cognitive responses include evaluations of fairness (e.g., Is the price fair? Is this a reasonable quote?) (Xia, Monroe, & Cox, 2004) and perceived value (Zeithaml, 1988). Previous research has found that affective responses to pricing influence subsequent cognitive price fairness perceptions (Campbell, 2007; Ferguson, Ellen, & Piscopo, 2011).

2.2. Pricing presentation The presentation of the price or quote of an offering may affect how SME managers respond. If the seller implements partitioned pricing by separating the price into distinct, individual components (e.g., main and auxiliary services, individual items, taxes, delivery) of the offering, varying affective and cognitive responses may follow. Other pricing presentation aspects that may affect managers' response to pricing include price fluency (i.e., the presentation of numbers and ease of cognitive processing (Coulter & Roggeveen, 2014) and price communication method (e.g., written quote delivered by email or paper, verbal quote over the phone or in person).

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Pricing Presentation: • Partitioned Pricing* • Price Fluency • Price Communication Method

Relationship with the Brand: • Relationship Longevity • Brand Mandate • Buyer-Seller Trust

Business Managers’ Response to Pricing Business Price Stimuli

Affective Responses • Positive • Negative

• First-time Quote • Price Increase • Price Decrease

Cognitive Responses • Price Fairness Perceptions • Perceived Value

Additional Factors: • Size of Organization • Size of Buying Center • Reference Price • Perceived Seller Motive • Buying Task • Level of Risk Fig. 1. A conceptualization for business pricing and affective/cognitive responses. *Factors highlighted are investigated in the current manuscript.

2.3. Relationship with the brand The term brand refers to the selling organization because B2B brands represent the distinctive image of an organization. Indeed, a brand's meaning integrates promises of the value associated with physical products, customer support, logistics, and the policies of the organization (McQuiston, 2004; Ward, Light, & Goldstine, 1999). Relationship with the brand refers to a relational exchange connection between buyer and seller (i.e., the brand) beyond discrete transactions (Dwyer, Schurr, & Oh, 1987). The benefits of relationships with brands are well-documented in consumer literature (e.g., Fournier, 1998) and to a lesser extent in business marketing literature (e.g., Brown et al., 2011; de Chernatony & McDonald, 1998). Interest in brand relationships has heightened in recent years due to the variety of positive outcomes associated with successful branding efforts. Brand relationships are linked to positive word-of-mouth, brand loyalty, and the willingness to pay price premiums and ignore brand failures (Batra, Ahuvia, & Bagozzi, 2012), and relationship with a brand may influence managers' affective and cognitive responses to pricing. Relationship with the brand includes, among other factors, brand mandate (i.e., a buying company's policy that requires all employees to purchase a particular offering from a limited list of vendor(s) or brand(s)), relationship longevity (i.e., the length of time in a relationship or the duration of an interfirm coalition (Mehta, Polsa, Mazur, Xiucheng, & Dubinsky, 2006)), and buyer-seller trust (i.e., the perceived credibility and benevolence of a seller (Doney & Cannon, 1997)). 3. Partitioned pricing and price fairness From the moment individuals enter into a buying situation, they seek information, including pricing information, to increase clarity and

ultimately shape fairness judgments (Van den Bos, Vermunt, & Wilke, 1997). Although firms provide more transparency about actual, stated prices in B2B contexts relative to B2C contexts, individuals tend to be limited by the amount of information available regarding a firm's internal price-setting processes and policies. Procedural transparency is unusual in consumer settings, but relatively common in business settings (Ferguson, Ellen, & Bearden 2014). Partitioned pricing is an example of transparent pricing because it presents multiple prices for a single product or service instead of one, all-inclusive price (Carlson & Weathers, 2008). For instance, partitioned pricing could involve a base price plus additional surcharges for shipping and handling, taxes, and processing fees, instead of one total or bundled price (Volckner, Ruhle, & Spann, 2012). Research on partitioned pricing approaches suggests a number of advantages relative to all-inclusive pricing. Morwitz et al. (1998) find that because of the way consumers process partitioned prices, consumers tend to underestimate total product costs. In a study of partitioned pricing, Morwitz et al. (1998) discover that partitioned pricing leads subjects to increase bids in auction experiments, resulting in increased demand. Fairness refers to cognitive judgments of whether an outcome or the process used to reach a particular outcome is reasonable, acceptable, or just (e.g., Bolton et al., 2003). Overall perceived price fairness is a combination of both distributive fairness (i.e., the comparison between one individual's outcome and another's outcome) and procedural fairness (i.e., the assessment of whether the seller adhered to social norms when setting the price) (Ferguson et al., 2014; Maxwell, 2002). We apply procedural fairness in our research as it has been used to examine price-setting practices such as cost-plus (Maxwell, 2002), promotion tactics (Xia, Kukar-Kinney, & Monroe, 2010), pricing policies such as price-matching (Kukar-Kinney, Xia, & Monroe, 2007) and transparency

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in pricing (Heyman & Mellers, 2008). Bolton et al. (2003) suggest that individuals understand a firm's entitlement to a certain referent profit that reasonably covers costs. Therefore, providing information about how a firm determines prices, as with partitioned pricing, could reduce unfairness perceptions. In fact, transparency in pricing reduces consumer perceptions of price unfairness when firms announce a price increase (Ferguson & Ellen, 2013). Further, how offerings are framed (e.g., product bundle versus focal product plus a free gift) affects the perceptions of prices (Liu & Chou, 2014). Sheng, Bao, and Pan (2007) find that if the components of partitioned pricing include a base price and a surcharge, the rate of the surcharge influences perceptions of fairness – the lower the surcharge price compared to the base price, the higher the perception of fairness. Additionally, Xia and Monroe (2004) demonstrate that partitioned pricing leads to increased purchase intentions. Thus, we expect that SME managers will perceive prices as more fair when the selling firm uses partitioned pricing rather than an all-inclusive price. H1. For an SME business manager, partitioned pricing has a direct influence on price fairness perceptions. A partitioned price will bring about greater price fairness perceptions than a price that is not partitioned.

4. Study 1 4.1. Method A single factor (partitioned pricing) experiment using realistic scenarios (e.g., Burman & Biswas, 2007) tested Hypothesis 1. The scenarios were typical purchase situations of SMEs and presented a single business service buying situation in order to effectively isolate key effects. Specifically, the scenario involved booking an out-of-town hotel meeting space for ten business associates. The scenario is comparable to other price fairness studies (Kimes, 2002; Taylor & Kimes, 2011) and allowed for a general business purchase applicable across many different business markets. The instructions directed respondents to read the scenario and answer a questionnaire as though representing a buying team. The short description of the buying task asked respondents to imagine an email from a hotel (no brand name given) sales manager responding to a request for meeting space pricing. The hotel manager's email presented all of the amenities included in the quote. The price across all scenarios was constant. Half the respondents received a partitioned price condition and the other half received an all-inclusive price condition. Hamilton and Srivastava (2008) provide an example of a partitioned price scenario as an auto service repair shop quoting separate prices for both parts and labor, though the consumer must pay for both components for a repair job. Similarly, the hotel partitioned pricing condition involved quoting each component (or amenity) price for the meeting space, along with the total price quote. The other half of respondents only viewed the total price quote, and not the individual amenities' prices. Two marketing practitioners with expertise in this buying context provided feedback on early renditions of the scenarios and prices, and also provided support for the credibility and realism of final scenario drafts. The complete scenarios are provided in Appendix A. The questionnaire consisted of a partitioned pricing manipulation check, measures of price fairness perceptions, and categorizing questions. Three semantic differential seven-point items (Cronbach's alpha = 0.967) captured price fairness perceptions by asking respondents' attitudes (i.e., “unfair—fair,” “unreasonable—reasonable,” and “unacceptable—acceptable” (Xia et al., 2010)) regarding the hotel's method for setting prices for meeting space. The three price fairness items were averaged for the analysis. 4.2. Sample In an effort to preserve external validity, a sample of B2B managers from various firms provided respondents who could objectively think

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about the experimental scenarios from each of their own firm's perspectives. A Qualtrics panel recruited manager participants. B2B data collection methods frequently incorporate online surveys and utilize Qualtrics in particular (Rindfleisch & Antia, 2012). Kumar, Stern, and Anderson (1993) suggest taking care in selecting informants on the outset, rather than settling for a larger pool of potential informants, in order to ensure that informants are reasonably knowledgeable. We pre-screened respondents for experience in booking hotels to ensure our scenario would be a familiar purchase. The sample size was 67, with 32 and 35 respondents per experimental cell. Seventy percent of respondents were female, 76% were white, 24% had a bachelor's degree and 37% had a graduate degree. Respondents' firms had 500 or fewer employees (M = 201.6, SD = 154.2) and averaged $20.4 million in sales (SD = $73 million). 4.3. Results and discussion For the partitioned pricing factor, the manipulation check involved a five-point Likert-type question that stated: “the email provided an excellent break-down of the prices of all the amenities associated with the reservation.” The factor means were in the correct direction (i.e., MPartitioned = 4.40 and MNo_partitioned = 3.44; Z = 3.96, p b 0.01), thus manipulation occurred. To test the first hypothesis (i.e., partitioned pricing has a direct effect on price fairness perceptions), a Z test was conducted. The Z test confirmed that the scenario with the partitioned price brought about greater perceptions of price fairness than the scenario with the all-inclusive price (MPartitioned = 5.52, n = 35 and MNo_partitioned = 4.64, n = 32; Z = 2.41, p b 0.01). Study 1 provides evidence that a partitioned price offer brings about greater perceptions of price fairness in a business purchase than a price that is not partitioned. Study 1 examines partitioned pricing effects on price fairness in isolation and serves as a base for the basic understanding of how partitioned pricing affects price fairness perceptions for SME managers. Price fairness perceptions may also be influenced by the extent of the relationship between the seller and buying firm. In particular, an established relationship may elicit affect that, in turn, impacts price fairness perceptions. 5. Partitioned pricing, affect, price fairness perceptions, and the moderating role of relationship with the brand Negative affect includes feelings of unease, guilt, anger and outrage (Xia et al., 2004), while positive affect includes good feelings, pleasure, and pleasantness. Heyman and Mellers (2008) suggest that uncommon or unfavorable pricing practices such as variable pricing (i.e., when firms sell the same good or service to different consumers at different prices) bring about negative consumer reaction. B2B managers can choose to offer all-inclusive prices or partitioned prices, where they separate the individual price components (Hinterhuber, 2015). A firm that lacks transparency in its price-setting practices may signal that it has something to hide (Bertini & Gourville, 2012). Within business markets, information exchange, or the sharing of information useful to both parties, may lead to greater customer satisfaction and perceptions of supplier performance (Cannon & Perreault, 1999, 444). Thus, less transparency or less information about how prices are set, as in the case with all-inclusive (i.e., not partitioned) pricing, may lead to heightened negative affect towards the brand. Partitioned pricing allows for increased clarity of the price structure (Xia & Monroe, 2004) and provides greater transparency or insight into how firms determine total prices. By providing the price for each component part, firms provide buying managers the opportunity to evaluate the perceived benefit of each component (Hamilton & Srivastava, 2008), unlike with all-inclusive price tactics. The ability to evaluate price offerings may lead to more positive affect and less negative affect.

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Relationship with the brand may impact the relationship between partitioned pricing and positive and negative affect. Business relationships involve various personal, organizational and brand ties (Burnham, Frels, & Mahajan, 2003), and buyer-supplier relationships are a form of alliance, which include formal and social governance elements (Mukherji & Francis, 2008, p. 154). In practice, business relationships are “complex and long-term and their current form is the outcome of previous interactions” (Hakansson & Ford, 2002, p. 133). Carter and Cater (2010) find that elements of B2B relationships, including product quality, cooperation, and trust positively influence affective commitment (i.e., emotional sentiment stemming from a generally positive feeling towards a relationship partner). When an SME has an established relationship with a brand, the buying manager may expect greater informational exchange (Cannon & Perrault, 1999), including greater transparency in pricing, such as a detailed breakdown of the set price. The transparency implies that the seller trusts the buying manager with greater insight into how the seller sets prices. Thus, when there is an established relationship, buying managers may respond with greater positive affect when a partitioned price is used and less negative affect than when an all-inclusive price is provided. However, when there is no established relationship, SME managers may not have any emotional response – positive or negative – to the price. Since no relationship exists, an overall quote or a complete price breakdown does not elicit affective response because there is no established trust, commitment, or expectation for price presentation, and therefore, the manager has no emotional response. H2. a. For an SME business manager, relationship with the brand and partitioned pricing will have an interactive effect on positive affect. When relationship with the brand exists, partitioned prices will bring about greater levels of positive affect than prices that are all-inclusive. When no relationship with the brand exists, partitioned pricing will have no effect on positive affect. H2. b. For an SME business manager, relationship with the brand and partitioned pricing will have an interactive effect on negative affect. When relationship with the brand exists, partitioned prices will bring about lower levels of negative affect than prices that are all-inclusive. When no relationship with the brand exists, partitioned pricing will have no effect on negative affect. B2B brands that connect with customers beyond functional and objective factors have meaningful advantages. Brands that evoke an emotional association with customers often find themselves in a stronger position to attract and retain customers (Lynch & de Chernatony, 2007). Emotions play a role in delivering brand value (Leek & Christodoulides, 2012) and in business decision-making (Bennett, Hartel, & McColl-Kennedy, 2005). Emotional responses are typically the initial response and often influence, and are followed by, cognitive responses (e.g., perceptions of price fairness) (Machleit & Eroglu, 2000; Monroe et al., 2015). Previous consumer research finds that negative affect towards the seller is an antecedent to price unfairness perceptions (Campbell, 2007; Ferguson et al., 2011). When consumers have negative feelings, they tend to judge prices as unfair. Thus, it is likely that SME managers who have positive (negative) affect towards a seller also judge prices as (un)fair. H3. a. For SME business managers, positive affect mediates the relationship between the interaction of partitioned pricing and relationship with the brand and price fairness perceptions. More positive affect will bring about greater price fairness perceptions. H3. b. For SME business managers, negative affect mediates the relationship between the interaction of partitioned pricing and relationship with the brand and price fairness perceptions. More negative affect will bring about lower price fairness perceptions.

6. Study 2 6.1. Method A 2 (partitioned pricing) × 2 (relationship with the brand) experiment using scenarios tested Hypotheses 2 and 3. The partitioned pricing conditions were the same as Study 1. For the relationship with the brand factor, half the scenarios included a disclosure that “your company has a strong relationship with this hotel brand,” while the other half of scenarios disclosed that “your company has no relationship with this hotel brand.” The complete scenario and conditions for Study 2 are provided in Appendix A. A partitioned pricing manipulation check question and a strength of relationship manipulation check question followed the scenarios. Two Likert seven-point items measuring positive affect asked the extent to which respondents agreed that “Booking this hotel would make me feel good” and “I would get a lot of pleasure knowing that I got this hotel at a good price.” Three seven-point items asked how likely respondents would feel negative affect (i.e., “have anxiety about booking meeting space with this hotel,” “have negative feelings towards the hotel,” and “have negative feelings towards the hotel manager”). The questionnaire measured the three price fairness perceptions items prior to the affect items to reduce order effects of the positively- and negatively-framed affect items. 6.2. Sample A networking and professional development conference for small businesses provided access to actual managers. The experiment and questionnaire were distributed and completed onsite at the conference. Participants entered into a drawing for one of two iPod gifts in exchange for their participation in the study. Ninety-nine respondents participated in the study, however, nineteen were removed because they did not complete the questionnaire, did not follow directions, or were not manipulated. The final sample size was eighty, with 19–22 respondents per experimental cell. Fifty-one percent of respondents were male, 74% were white, 38% had a bachelor's degree and 33% had a graduate degree. Respondents' firms had 500 or fewer employees (M = 82.8, SD = 132.1) and averaged $20.9 million in sales (SD = $68.9 million). 6.3. Results For the partitioned pricing factor, the manipulation check means were in the correct direction (i.e., MPartitioned = 3.43 and MNo_partitioned = 2.13; t = 5.15, df = 78). The relationship with the brand manipulation check included a four-point item asking: “How would you describe the relationship between the hotel brand and your company? Very strong relationship—very weak relationship.” The manipulation worked as intended (i.e., MRelationship = 2.05, MNo_relationship = 3.24; t = 6.21, df = 78). An exploratory factor analysis with the positive and negative affect items revealed two distinct factors (Eigenvalues of 3.16 and 1.24) with factor loadings for positive affect of 0.93 and 0.94 and factor loadings for negative affect of 0.87, 0.94, and 0.90. Table 1 presents construct reliabilities, means, standard deviations, and correlations for positive and negative affect and price fairness perceptions. The constructs' items were averaged for the analysis. A moderated, double mediation regression analysis model (PROCESS Model = 8), conducted using Hayes's (2012) PROCESS macro for SPSS, tested the direct effect of partitioned pricing on positive and negative affect, the interactive effect of partitioned pricing and relationship with the brand on positive and negative affect (Hypothesis 2a and b), and the mediating effects of positive and negative affect on the relationship between partitioned pricing, relationship with the brand and price fairness perceptions (Hypothesis 3a and b). Similar to a path analysis, PROCESS provides an analysis of moderated mediation, including covariates,

J.L. Ferguson et al. / Journal of Business Research 72 (2017) 80–92

Mean SD

0.901 0.912 0.961

4.05 3.66 4.46

Positive affect

1.44 1.43 −0.405⁎ 1.35 0.592⁎

Negative affect

−0.541⁎

⁎ Correlations are significant at p b 0.01.

in an integrated conditional process model (Hayes, 2012). The analysis included the two experimental factors, as well as two covariates (i.e., core business offering, minority-owned business). The PROCESS bootstrap model was set to 10,000 samples. Table 2 provides regression results of the analysis. The covariates, core business offering and minority-owned firm, were significant predictors. While not hypothesized, those respondents who worked for a service-offering firm and those respondents who worked for a minority-owned firm indicated higher levels of positive affect and those that worked for a minority-owned firm indicated lower levels of negative affect. The moderated (interactive) effect of relationship with the brand on the partitioned pricing—positive affect and the partitioned pricing—negative affect relationship are significant, providing support for Hypothesis 2a and b (coeffPositive_affect = 1.615, p = 0.01 and coeffNegative_affect = − 1.307, p = 0.04)). Fig. 2a and b provides the means per experimental cell and illustrate the interaction effects of partitioned pricing and relationship with the brand on positive affect and negative affect. The bootstrap confidence intervals for the conditional indirect effects of partitioned pricing at value 0 of the moderator (no relationship with the brand) contained zero (CI (positive affect) = (− 0.595, 0.172), CI (negative affect) = (− 0.508, 0.195)), while the confidence intervals at value 1 of the moderator (established relationship with the brand) did not contain zero (CI (positive affect) = (0.195, 1.018), CI (negative affect) = (0.085, 0.787)), indicating non-significance at value 0 and significance at value 1 of the moderator. These confidence intervals support the hypothesized relationships of H2: when a relationship with the brand exists, partitioned pricing brings about greater positive affect and less negative affect then an all-inclusive price. When no relationship with the brand exists, partitioned pricing has no effect on affect.

b. Negative Affect 5.2

Negative Affect

Positive affect Negative affect Price fairness perceptions

Cronbach's alpha

a. Positive Affect 5.2

Positive Affect

Table 1 Study 2 construct reliabilities, means, standard deviations, and correlations.

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3

3 Relationship with the Brand

No Relationship with the Brand

Partitioned Pricing No Partitioned Pricing

Relationship with the Brand

No Relationship with the Brand

Partitioned Pricing No Partitioned Pricing

Fig. 2. a-b Study 2 results: Interaction effect of partitioned pricing and relationship with the brand.

The third hypotheses predict that positive affect and negative affect mediate the relationship between the interaction of partitioned pricing and relationship with the brand and price fairness perceptions. For the positive affect mediation, the path between the interaction term (partitioned pricing x relationship with the brand) and positive affect was significant, as was the path between positive affect and price fairness perceptions (coeff = 0.408, p = 0.00). The direct path between the interaction term and price fairness was not significant (coeff = 0.342, p = 0.29). Additionally, the indirect effect bootstrap confidence interval (0.195, 1.469) did not contain zero, indicating positive affect does mediate the relationship between the interaction term and price fairness perceptions. Thus, H3a is supported. For the negative affect mediation, the path between the interaction term and positive affect was significant, and the path between negative affect and price fairness perceptions was significant (coeff = − 0.337, p = 0.00). As predicted, higher levels of negative affect lead to greater perceptions of price unfairness. H3b is also supported in that the indirect effect bootstrap confidence interval (0.055, 1.130) did not contain zero, indicating significance for the mediating effect of negative affect.

Table 2 Study 2 moderated double mediation PROCESS model results.

(Constant)

Negative affect mediation model X → M

Positive affect mediation model X → M

Direct effect (double mediation) model

3.536⁎⁎⁎ (0.441)

3.223⁎⁎⁎ (0.412)

0.281 (0.439) 0.789⁎

−0.380 (0.410) −0.428 (0.423) 1.615⁎⁎⁎ (0.584) 0.378⁎

3.678⁎⁎⁎ (0.610) −0.337⁎⁎⁎ (0.090) 0.408⁎⁎⁎ (0.097) 0.342 (0.322) 0.008 (0.337) −0.425 (0.482) 0.282 (0.138) 0.319 (0.288) 0.486 1.025 9.717 (7, 72)⁎⁎⁎

Negative affect Positive affect Partitioned pricing Relationship with the brand

Minority-owned firm

(0.452) −1.307⁎⁎ (0.624) 0.065 (0.181) −0.814⁎⁎

R-sq MSE F (df1, df2)

(0.375) 0.115 1.928 1.932 (5, 74)⁎

Interaction (partitioned pricing × relationship with the brand) Firm's core offering

⁎ p b 0.10. ⁎⁎ p b 0.01. ⁎⁎⁎ p ≤ 0.05.

(0.169) 0.857⁎⁎ (0.351) 0.238 1.685 4.626 (5, 74)⁎⁎⁎

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6.4. Discussion Study 2 provides insights as to how partitioned pricing and relationship with the brand influences SME managers' affective response and subsequent cognitive price fairness perceptions. The findings of Study 2 suggest that partitioned pricing, combined with a firm's established relationship with the brand, brings about greater positive affect and less negative affect. SME managers indicated the greatest positive affect and the lowest negative affect when the buying firm had an established relationship with the brand and the seller partitioned the price. Study 2 revealed that a firm's relationship with the brand plays an integral role in managers' emotional responses to price presentation and subsequent price fairness perceptions, however Study 2 did not delve into the effects of the extent of the relationship with the brand. The extent of a relationship with the brand can include a company's enforcement of relationship commitment with the brand (such as in the case of a brand mandate) as well as the number of years doing business with the brand (i.e., relationship longevity). Study 3 explores the effects of brand mandate, relationship longevity, and partitioned pricing on positive and negative affect towards the brand and subsequent price fairness perceptions.

H4. a. For SME business managers, both brand mandate and relationship longevity will moderate the mediation of positive affect on the relationship between partitioned pricing and price fairness perceptions. A partitioned price, within the context of a brand mandate and several years in the relationship will bring about greater positive affect while an all-inclusive price in the same context will bring about less positive affect. b. For SME business managers, both brand mandate and relationship longevity will moderate the mediation of negative affect on the relationship between partitioned pricing and price fairness perceptions. A partitioned price, within the context of a brand mandate and several years in the relationship, will bring about less negative affect while an all-inclusive price in the same context will bring about greater negative affect. Fig. 3 presents the hypothesized H4a and b relationships in a statistical model. Included in the statistical model are all of the paths from the main effects, 2-way interactive effects, and 3-way interactive effect combinations of partitioned pricing, brand mandate, and relationship longevity. Also illustrated in the statistical model are the direct and indirect paths from each variable and product to positive and negative affect and price fairness perceptions. Study 3 tests the relationships in the fourth hypotheses.

6.5. Brand mandate and relationship longevity 7. Study 3 As the relationship between a buyer and a seller progresses, managers may gradually develop commitments to preferred brands. Commitment for a business relationship is typically “a phenomenon in which one side of a social interaction voluntarily restricts one's behavioral alternatives due to the presence of a long-term orientation” (Berghall, 2003, p. 61). Brand mandates may have advantages, most notably regarding cost containment (Eggert and Ulaga, 2010), but they have disadvantages as well. In particular, managers may feel a sense of frustration with a policy that restricts their autonomy or choices (Conger & Kanungo, 1988). When SME managers are required to use a brand, and are therefore limited in their ability to evaluate a price, as in the case with all-inclusive prices, they may elicit more negative feelings as well as lower positive feelings. However, a partitioned price and the buying firm's endorsement of the brand through a company mandate, may limit the impact on emotional responses. B2B relationships are a result of complex interactions, adaptations, and investments between (and within) companies over time (Hakansson & Ford, 2002). The length of time that a buying firm has purchased from a supplier positively influences the perception that both parties (i.e., buyer and supplier) expect the relationship to continue into the future (Heide & John, 1990). Zhang et al. (2014) modeled effects of buyer-seller relationships over time and found that time, along with seller's price stimuli (e.g., dynamic pricing), affect how B2B managers respond to future pricing events. Mehta et al. (2006) find that relationship longevity moderates the relationship between relationship closeness and cooperation. If relationship longevity combined with closeness increases cooperation with the firm, then buying managers with longer connections with a brand may also elicit more positive affect and less negative emotions connected with that brand. Both the length of time in a relationship with a brand and the buying company mandate could moderate the relationship between partitioned pricing and price fairness perceptions. When the buying firm has been in a relationship with a brand for several years and when the buying firm has a brand mandate, an all-inclusive price may compound the feeling that the buying manager's evaluation and choice is limited, thus causing the manager to elicit more negative emotions and less positive emotions. On the other hand, a partitioned price used in the same long relationship, brand mandate context gives the buying manager the opportunity to evaluate the make-up of the price and gives the feeling that manager's firm endorses the brand, resulting in greater positive affect and less negative affect elicited.

7.1. Method Study 3 utilizes scenario experimentation similar to Studies 1 and 2 to examine Hypotheses 4a and b. The study was a 2 (partitioned pricing) × 2 (brand mandate) × 2 (relationship longevity) experiment conducted online. The context for the scenarios again was a hotel meeting space price quote. The partitioned pricing and all-inclusive pricing descriptions were the same as in Study 1 and 2. For the brand mandate factor, half the scenarios stated “your company requires employees to book with this brand of hotels whenever possible” while the no brand mandate condition stated “your company does not require employees to book a particular brand of hotels.” The relationship longevity factor stated either “your company has used this brand of hotels for many years” or “your company has never used this brand of hotels before.” Appendix B presents brand mandate and relationship longevity conditions. The measures for the partitioned pricing manipulation check, positive affect, negative affect, price fairness perceptions, and covariates and categorizing questions were all identical to Study 2. The questionnaire for Study 3 included additional manipulation checks for brand mandate and relationship longevity. Table 3 presents correlations for the items for Study 3. 7.2. Sample As with Studies 1 and 2, Study 3 utilized an authentic sample of managers. This time, a Qualtrics panel recruited manager participants. Two hundred and six SME managers participated in the online experiment and questionnaire, however, three were removed because they had missing data for variables needed for hypothesis testing. The experimental cell sizes ranged from 20 to 28. Respondents' firms had 500 or fewer employees (M = 124.0, SD = 149.7) and averaged $10.4 million in sales (SD = $72.0 million). Fifty-seven percent of respondents were male, 72% were white, 12% had a bachelor's degree and 40% had a graduate degree. 7.3. Results The partitioned pricing manipulation check means were in the correct direction (i.e., MPartitioned = 1.76 and MNo_partitioned = 2.56; t = 7.60, df = 186.68). The brand mandate relationship manipulation

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Fig. 3. Study 3 moderated mediation statistical model: The three-way interaction (partitioned pricing × brand mandate × relationship longevity) with double mediation (positive affect and negative affect) on price fairness perceptions.

check involved a four-point item asking: “How much pressure do you think your company's employees would feel to book a particular brand of hotels? Lots of pressure—no pressure?” The brand mandate factor was significant and in the predicted direction (i.e., MBrand_mandate = 2.17 and MNo_mandate = 2.90; t = 7.40, df = 201). Finally, the manipulation check for relationship longevity asked: “How long would you say your company has been doing business with this brand of hotels? very long time—very short time.” The manipulation worked as intended (i.e., MMany_years = 2.13, MNever_before = 3.02; t = 8.36, df = 193.89). A PROCESS moderated double mediation analysis with two moderators (Model = 12), with bootstrap set to 10,000, tested Hypotheses 4a and b. Again for Study 3, the overall analysis (i.e., both direct and indirect effects) included covariates of core business offering and minority-owned businesses, although only core business offering was marginally significant (p = 0.08) in the negative affect regression model. Table 4 presents the regression results from Study 3. The main effects of partitioned pricing, brand mandate, and relationship longevity were not significant on positive affect, negative affect, or price fairness perceptions. Fig. 4a-d illustrate the effects of partitioned pricing × brand mandate in the zero years relationship conditions and the many years relationship conditions on positive and negative affect, and Table 5 provides the bootstrap confidence intervals for the indirect effects at values of the moderators (brand mandate and relationship longevity) and the highest order product. Table 3 Study 3 construct reliabilities, means, standard deviations, and correlations.

Positive affect Negative affect Price fairness perceptions

Cronbach's alpha

Mean SD

0.883 0.877 0.953

4.29 4.06 4.61

⁎ Correlations are significant at p b 0.01.

Positive affect

Negative affect

1.46 1.41 −0.110 1.44 0.615⁎

−0.253⁎

For positive affect, the 3-way interaction was not significant (a’13 = 0.736, p = 0.37) and the confidence interval for the highest order product (i.e., 3-way interaction) positive affect mediation model (CI = (− 0.481, 1.363)), included zero, failing to support Hypothesis 4a. For negative affect, the 3-way interaction was significant (a’14 = −1.512, p = 0.05) and the confidence interval for the highest order product negative affect mediation model (CI = (0.024, 0.811)), did not include zero, providing support for Hypothesis 4b. That is, both brand mandate and relationship longevity moderated the partitioned pricing—negative affect—price fairness perceptions mediation relationship. Table 5 provides interpretation of the 3-way interaction by presenting the conditional indirect effects of partitioned pricing on negative affect at each value of the moderator. The only significant confidence interval (CI = (0.063, 0.518)) was the combination of brand mandate and many years in relationship with the brand. A t-test isolating the brand mandate/many years condition revealed a significant difference in negative affect levels such that a partitioned price brings about significantly lower negative affect than when the price is all-inclusive (MPartitioned = 3.20, MNo_partitioned = 4.39, t = 2.91, df = 48, p = 0.00). Consistent with Study 2, both the positive affect and negative affect coefficients had significant effects (b1 = −0.193, p = 0.00; b2 = 0.583, p = 0.00) in the price fairness regression model. Greater negative affect leads to lower levels of price fairness and greater levels of positive affect leads to higher levels of price fairness. While we did not see the predicted three-way interaction effect (e.g., partitioned pricing × brand mandate × relationship longevity) on positive affect, however, the direct effect (c’7 = −1.06, p = 0.10) of the three-way interaction on price fairness perceptions is approaching significance. 7.4. Discussion Study 3 further examines the effects of partitioned pricing and relationship with the brand on emotional responses and price fairness perceptions in business markets. This study brings to light the importance of relationships in business when SME managers are responding to

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Table 4 Study 3 moderated double mediation PROCESS model results.

(Constant)

Negative affect mediation model X → M

Positive affect mediation model X → M

Direct effect (double mediation) model

3.877⁎⁎⁎ (0.343)

3.756⁎⁎⁎ (0.3358)

−0.023 (0.373) 0.060 (0.406) −0.359 (0.378) −0.085 (0.553) 0.408 (0.533) 0.475 (0.559) −1.512⁎⁎ (0.777) 0.192* (0.110) 0.039 (0.314) 0.079 1.887 1.846 (9, 193)⁎

0.548 (0.390) −0.396 (0.424) 0.398 (0.395) −0.187 (0.578) −0.425 (0.557) 0.368 (0.585) 0.736 (0.812) 0.080 (0.115) 0.459 (0.328) 0.085 2.062 2.002 (9, 193)⁎⁎

2.960⁎⁎⁎ (0.422) −0.193⁎⁎⁎ (0.058) 0.583⁎⁎⁎ (0.056) 0.020 (0.303) −0.347 (0.329) −0.260 (0.307) 0.497 (0.448) 0.560 (0.432) 0.526 (0.454) −1.063⁎ (0.635) −0.005 (0.090) −0.268 (0.256) 0.435 1.235 13.340 (11, 191)⁎⁎⁎

Negative affect Positive affect Partitioned pricing Brand mandate Years in relationship Interaction 1 (partitioned pricing × brand mandate) Interaction 2 (partitioned pricing × years in relationship) Interaction 3 (brand mandate × years in relationship) Interaction 4 (partitioned pricing × brand mandate × years in relationship) Firm's core offering Minority-owned firm R-sq MSE F (df1, df2) ⁎ p b 0.10. ⁎⁎ p b 0.01. ⁎⁎⁎ p ≤ 0.05.

pricing information, as brand mandates and relationship longevity both play a role in influencing affective responses when buying managers evaluate prices for a purchase. When a company implements a brand mandate for a business purchase and the company exists in a relationship with the brand for several years, a partitioned price will bring about lower levels of negative affect, which in turn results in greater price fairness perceptions.

8. General discussion The current research extends price fairness literature (Bolton et al., 2003; Xia et al., 2004) by examining price fairness perceptions in a business market setting. Studies 2 and 3 suggest that, like consumers (Campbell, 2007), business managers who respond with greater positive emotion and less negative emotion likely also have greater price fairness perceptions. Unlike in consumer purchase situations where individuals or households make purchases, this research involved SME business managers in order to gain insight from an organizational buying perspective. In this way, the current research assesses behavior that might trigger an emotional response as might occur in a practical business purchase situation (e.g., when management requires the exclusive use of a set of brands). Bambauer and Gierl's (2008) empirical research examines multiple contexts using a base price plus surcharge and concludes that marketers should not use partitioned pricing because of the perceived complexity of the price structure and higher perceived manipulative intent of the marketer. However, partitioned pricing has more applications than simply base price plus surcharge. While extant research typically examines two component prices (e.g., base plus surcharge, see Bambauer & Gierl, 2008; Burman & Biswas, 2007; Morwitz et al., 1998), the current research extends Carlson and Weathers (2008) research by examining six component prices and a total price. The findings of these two studies also build on Love's (2012) efforts to better understand combined partitioned pricing and branding effects. In particular, partitioning a price can lower negative affect toward the brand when a firm requires

that employees use that brand and when the relationship between the firm and the brand is well-established. There are similarities between consumer and business manager responses to price. The current research reinforces recent findings that managers' emotions (i.e., positive and negative affect) indeed influence business purchase situations and supports the growing literature on the importance of branding in business marketing (Brown et al., 2011; Leek & Christodoulides, 2012). Additionally, the brand mandate condition is integral for understanding SME managers' emotions elicited from price presentations and subsequent price fairness perceptions, thus providing further evidence that paradigms that label B2B decision-making as rational or cognitive are limiting (Hinterhuber, 2015). Both Studies 2 and 3 suggest that brand relationships enable partitioned pricing effects on SME managers' affective responses. When relationships exist, buying managers may feel they are entitled to pricing information beyond an overall quote. This phenomenon may be an issue of perceived trust between the seller and buyer. The buying firm has invested some time and effort into the relationship and the buying manager expects the seller to trust the manager with more inside information – such as pricing break-downs – to help make purchasing decisions. If that expectation is not met (e.g., the seller simply provides an all-inclusive price), the buying manager may feel frustration or anxiety about the price. Thus, a brand mandate and long relationship reduces negative affect and subsequent perceptions of price unfairness when prices are partitioned. In Study 3, we did not find support for the positive affect hypothesis (H4a), however, the three-way interaction was approaching significance on the direct path to price fairness perceptions (i.e., the cognitive response to price); perhaps with a larger sample size, the p value would fall under 0.05. The unexpected finding for H4a may be the result of the cognitive response taking mental processing precedence over the affective response. Shiv and Fedorikhin (1999) suggest that affective and cognitive responses have opposite valences. If the manager does not have a negative affective response, the manager may be indifferent and we would not see variance in positive affect. Instead, the buying manager's cognitive response takes over and we see more of a direct

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a. Zero Years in Relationship

b. Many Years in Relationship

8.1. Implications

5.2

Positive Affect

Positive Affect

5.2

89

3

3 Brand Mandate

No Brand Mandate

Brand Mandate

No Brand Mandate

Partitioned Pricing

Partitioned Pricing

No Partitioned Pricing

No Partitioned Pricing

c. Zero Years in Relationship

d. Many Years in Relationship

5.2

Negative Affect

Negative Affect

5.2

3

3 Brand Mandate

No Brand Mandate

Brand Mandate

No Brand Mandate

Partitioned Pricing

Partitioned Pricing

No Partitioned Pricing

No Partitioned Pricing

Fig. 4. a-d Study 3 results: Interaction effect of partitioned pricing and brand mandate on positive affect.

effect of brand mandate, relationship longevity, and partitioned pricing on price fairness perceptions. Moreover, the level of involvement (Zaichkowsky, 1994) of an SME manager in a hotel meeting space selection decision may offer an explanation. While important, it is unlikely that the manager would be highly involved in such a purchase decision – it is not particularly important or complex relative to other purchase decisions. In truth, such a purchase is likely to be considered low risk with little individual upside beyond the gain of loyalty points.

In the current research, the presentation of price was found to have an effect on both affective and cognitive (e.g., price fairness) SME manager responses to price stimuli. However, an important finding of this research is that there are situations where partitioned pricing results in significantly greater positive outcomes and situations when partitioned pricing has no effect on outcomes. Selling managers should be aware of situations when using partitioned pricing is effective and when an all-inclusive or a simple bundled price is sufficient. Situations where partitioned pricing provides significantly less negative affect and subsequent greater price fairness perceptions include when the SME and seller have an established relationship and when the SME has a brand mandate for the selling brand. For example, if a local automotive parts distributor uses the same headlights vendor for several years and the SME has designated that all headlights orders must go through that vendor, the automotive parts distributor would have less negative affect and view prices as more fair if the headlight orders have the prices broken down by product or service included in the offer. In the instances where the relationship is well established and there is a commitment (e.g., brand mandate), communication or information exchanges between the buyer and seller leads to greater trust, more cooperation, stronger commitment, and less propensity to leave and uncertainty (Morgan & Hunt, 1994). The transparency of pricing, such as with partitioned pricing, provides extra information sharing, potentially leading to greater positive outcomes for the seller-SME partnership. There are multiple ways sellers can partition the price for SME managers. First, sellers can choose to either post a standard price with breakdowns on their website or use a request for price quote based pricing policy where the seller can customize the breakdown based on the client. By offering a request for price quote policy, the SME manager can monitor demand and price sensitivity (Zhang et al., 2014). Also, the pricing breakdown may include the price for the core product or service and then a list of prices for supplement or auxiliary products and services. For example, the pricing for a headlights order might include the price of the headlights (core product) and a list of prices for the included supplemental services, such as handling fees, packaging, transportation, and taxes. Alternatively, the seller could provide the price of the core product or service and then offer all of the supplementary products or services as a la carte additions to an order. Anderson and Narus (1995) term this option “naked solutions,” which could create lower priced solutions for some customers, while selectively adding services and options – with all prices transparent – for other customers to provide more customized solutions. On the other hand, if there is no brand mandate or in cases of a new relationship, SME managers do not seem to prefer a partitioned price presentation. The SME manager's indifference may be due to viewing the vendor's as just one of multiple quotes. In that case, the manager does not need much detail about how the seller set the price; he or

Table 5 Study 3 bootstrap confidence intervals for the conditional indirect effects of partitioned pricing at values of brand mandate and relationship longevity and highest order product. Mediator

Brand mandate

Positive affect No mandate Positive affect No mandate Positive affect Mandate Positive affect Mandate Indirect effect of highest order product (3-way interaction) – Positive affect Negative affect No mandate Negative affect No mandate Negative affect Mandate Negative affect Mandate Indirect effect of highest order product (3-way interaction) – Negative affect ⁎ p b 0.05.

Relationship longevity

Effect

CI – Lower limit

CI – Upper limit

Zero years Many years Zero years Many years

0.319 0.072 0.210 0.392 0.429

−0.145 −0.439 −0.264 −0.010 −0.481

0.789 0.593 0.674 0.826 1.363

Zero years Many years Zero years Many years

0.004 −0.074 0.078 0.234⁎ 0.292⁎

−0.132 −0.287 −0.118 0.063 0.024

0.183 0.052 0.205 0.518 0.811

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she may just want to know if the vendor is a realistic option given the buying firm's budget constraints. In these new business situations, brands may choose to simply provide a bundled price, rather than breaking down the price for each amenity. When there is limited effect on affective and cognitive SME manager responses, sellers may find providing an all-inclusive price more appealing than partitioned for a couple of reasons. First, the all-inclusive price may lend itself well to including price cushions in quotes because the seller does not have to account for exactly where the price will cover costs. Also, an all-inclusive quote may save the firm time and resources to reply quickly to the inquiring SME. Finally, by not providing the amenities' breakdown, less proprietary information will be available in case the SME manager takes the quote to competitors for comparison shopping. 8.2. Limitations and future directions Vinhas et al. (2010) encourage experimentation in B2B research, although experimentation is challenging due to the difficulty of capturing the richness of the relational environment. While Iyer et al. (2015) recommend experimentation for B2B behavioral pricing research specifically, they also admit that finding appropriate manager subjects can be difficult, which results in smaller sample sizes in B2B experimental designs. This is true with our experiments as our sample sizes are small. However, Biong (2013) suggests that small samples can still produce valid results. As with other price fairness research studies (Bolton et al., 2003; Campbell, 2007), the current research utilized experimental scenarios. Ours used a typical SME business purchase – booking hotel meeting space. However, using a specific service context may limit the generalizability of the findings. Future re-

search should also consider differences between SME managers and large business entities (Berthon et al., 2008; Paiola, Gebauer, & Edvardsson, 2012). For example, SME buying managers tend to have more responsibility to make purchase decisions and fewer individuals may make up the SME buying center, if one exists at all, which might bring about stronger affective responses than a manager at a large firm where decision-making (and potential blame for poor purchase-decisions) may be spread over more individuals (Berthon et al., 2008). How might size of firm (e.g., number of employees) impact affective and cognitive responses to pricing? Managers' perceptions of brand mandates should also be further explored. For example, do buying managers perceive brand mandates as a good policy, perhaps because the buying firm has helped make decision-making easier for the manager, or a bad policy because the mandate reduces choices? Partitioned pricing is a form of transparency in pricing (Ferguson & Ellen, 2013). As such, future research might consider the extent to which managers perceive a partitioned price as more transparent than all-inclusive prices. The current research examined partitioned pricing effects in a price-setting context. Partitioned pricing effects may also vary by price increase and decrease contexts. Future research should consider these important distinctions. Additionally, perceived motives in price-setting may impact affect and price fairness responses. Trustworthiness may also play a role in the brand relationship—affect relationship. For example, does the existence of a relationship create more trust and does the subsequent trust elicit positive and negative affect? Future research should consider how relationship with the brand, perceived negative motive, such as a seller trying to take advantage of the buyer (Campbell, 1999), and negative affect result in price unfairness perceptions.

Appendix A. Studies 1 and 2 scenarios Please reflect on the scenario and answer the following questions as though you were representing your company's buying center. (A buying center is a team or committee responsible for selecting a particular product or service for your company.) Imagine you are traveling to another state for business purposes. You are in need of a hotel meeting space to host one day of meetings for ten people. After searching different area hotels online, you decide to contact a hotel sales representative to get pricing for the meeting space. (Study 2 Relationship with the brand condition) Your company has a strong relationship with this hotel brand. (Study 2 No relationship with the brand condition) Your company has no relationship with this hotel brand. In reply to your request, the hotel sales manager sends you the following email:

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