Introduction: Service industries that practice revenue management strategy focus mainly on increasing the profitability of its organization.

Research has shown that increase in customer retention results in increased profitability. Also, it has been proved that service quality; relationship quality and overall service satisfaction can foster customer retention. Reichheld and Schefter (2000) found, for example, that increasing cutomer retention rates by 5 percent increased profits by 25-95 percent. A high level of customer satisfaction leads to an increase in repeat patronage, brand loyalty, as well as recruiting new customers by enhancing an organizations reputation. The purpose of the case was to examine the effect of price on customers return intentions. To be specific, the study examined the moderating influence of satisfaction and reward programme membership on the relationship between price and return intent. However, can price cause service firms that practice revenue management to lose their customers?

Case analysis: Pricing is a key strategic lever used by firms to manage revenue. Basic economic theory suggests that a utility-maximizing customer will rationally respond to changes in incremental price by marginally changing his usage level. This notion leads to the wellknown downward sloping demand curve, which indicates that higher prices are associated with less demand. This influence of price on demand has been given substantial support in the economic as well as in the marketing literature.

The used of demand-based pricing in revenue management states that, during periods of high demand, lower rates will be closed in order to maximize revenue. This approach helps in yielding short-term revenue gains. But, it does not help in retaining customers and also does not generates long-term revenue. In fact, it has negative impact on customers reactions to the price that they have to pay. Unfavorable price perceptions have been found to have a direct negative effect on customers behavioral intentions. The study consisted of the following two hypotheses: H1: Satisfaction does not moderate the effect of price on return intentions. Regardless of satisfaction levels, price has a direct negative effect on customers return intentions. H2: Reward programme membership does not moderate the negative effect of price on return intent. Hierarchical multiple regression using data drawn from the survey database of a major hotel chainthat practices revenue management strategy, was employed to test the above hypotheses. The database included information regarding customers self-reported evaluative assessments of their hotel stay. Also, to test the robustness of results, the database accessed data relating to guest stays from seven diverse brands (full service, limited service, mid-scale, economy, boutique and extended stay (mid-scale and economy) brands). The database included behaviors and reactions of real customers in a real service environment.

Results:

In this hierarchical linear regression, customers intention to return to the brand was the dependent variable. A test of the difference between the R2 for the model without the interaction term and the model with the interaction term was insignificant. Thus indicating that the overall satisfaction with the hotel stay did not moderate the negative effect of room rate on intent to return to the brand. Hence, hypothesis 1 is proved. In similar way, hypothesis 2 was also proved. Conclusion: In a nutshell, the study demonstrated that the actual price paid for a given service has a direct and negative effect on customers return intentions. Variables such as customer satisfaction and service quality are important drivers of customer retention. But regardless of how satisfied a customer is with the service experience, it is not sufficient to override the direct influence that price has over intent to use the brand again in the future. Price is an additional factor that should be considered in order to understand customer defections from service firms fully. Price sensitivity measurement (PSM) and conjoint analysis are the two techniques that can be used to measure the price sensitivity of different customer segments. PSM is a method for determining optimal price. It is based around four questions:

y y y y

What price represents a good value (is appropriate)? What price would be expensive, yet still acceptable? What price would be too cheap, thus raising doubts about quality? What price would be too expensive, thus ruling out any consideration of purchase?

Hence by asking the above questions, the following statements can be derived.

y y y

Certain / possible buyers Optimal / Indifference Pricing Point Point of Marginal Inexpensiveness / Expensiveness Conjoint analysis is a statistical technique used in market research to determine how people value different features that make up an individual product or service. The objective of conjoint analysis is to determine what combination of a limited number of attributes is most influential on respondent choice or decision-making. A controlled set of potential products or services is shown to respondents and by analyzing how they make preferences between these products; the implicit valuation of the individual elements making up the product or service can be determined. Thus, management needs to develop a comprehensive understanding of the price sensitivity of their different market segments.