Customer satisfaction and price tolerance

This study investigates the association between customer satisfaction and willingness-to-pay or price tolerance, The goal is not only to determine whether the association between customer satisfaction and price tolerance is positive or negative but also to gauge the degree of association. The Swedish Customer Satisfaction Barometer provides the data. The empirical analysis indicates a negative association between the level of customer satisfac-tion provided by the firm and the degree of price tolerance exhibited by its customers. However, a positive asso-ciation is found between year-to-year chnnges in the levels of customer satisfaction and price tolerance. To what extent does improving customer satisfaction increase customer willingness-to-pay or price tolerance and consequently, decrease price sensitivity? The goal of this study is to inves-tigate whether the association between satisfaction and price tolerance is positive or negative, as well as to gauge the degree of association between these two important constructs. Adding to our understanding of the different ways increasing customer satisfaction can benefit the firm is important to managers considering initiating or continuing such efforts, as well as to researchers interested in developing theory in the area. This is particularly true in the case of price tolerance, as it has not received the degree of attention paid other consequences of sat