It’s not all about money: the role of identity in perceived fairness of targeted promotions

Purpose: This paper aims to examine the effect of targeted promotions on perceptions of fairness from the perspective of consumers who are not targeted. Design/methodology/approach: A scenario-based approach is used. Three studies manipulating promotion selectivity and various bases for promotion selection were conducted. A total of 403 people participated in the studies. Findings: Results showed that these consumers consider targeted promotions unfair, and the primary reason is centered more on damage to relational identity than the economics of reduced perceived value. The effect is moderated by how the targeted promotion is delivered (buyer-discovered vs seller-delivered) and different basis for selection. Practical implications: As companies adopting the practice of dynamic pricing such as targeted promotion, it is important to manage relationship with their consumers. Framing targeted promotions that reduce the salience of seller’s role and provide explanations that not attributed to buyer-seller relationship are important in reducing the potential damage of targeted promotion on relational identity. Originality/value: Existing research on perceptions of price fairness has focused on the role of perceived value. This research tested the relative effect of perceived value, relational identity and personal identity in the context of targeted promotion and identified relational identity as the major mechanism.