1 The impact of online group-buying to relationship quality: FAIRSERV as a moderating variable Advisor: Kate Chen Presenter: Erin Hsu Date: April 21, 2010

2 Literature Review Online Group-Buying FAIRSERVE Relationship Quality

3 Definition of Online Group-Buying Online Group-Buying Model Operation of the Group Buying Model Typologies of Group Buying Online Group-Buying

4 Definition of Online Group-Buying Online group-buying uses of websites or online platforms to get discounts and occurs when online groups of consumers unite to buy particular goods when manufacturers have offered wholesale prices to consumers. (Gottlieb, 2000)

5 Online Group-Buying Model Vakrat and Seidmann (2000) noticed that the number of bidders—or bid density—in an auction is closely related to a number of factors, which included the duration of the auction, the minimum bid increment required, the quantity of items available, and the average closing price.

6 Operation of the Group Buying Model Participation Externality Effect Price Drop Effect Price-Level Effect Cycle-Ending Effect

7 Participation Externality Effect A potential buyer perceives a higher utility once the group size gets larger; cyclically higher perceived utility increases demand, and increased demand contributes to even higher perceived utility. (Kauffman & Wang, 2001)

8 Price Drop Effect Through the price-drop effect, which is the embodiment of movement along the demand curve, the price is also expected to fall in the near future. More people decide to take part in a group buying model, as they might conjecture that only a few orders are needed to reach a lower price level. (Kauffman & Wang, 2001)

9 Price-Level Effect Consumers do not anticipate a price fall in a price level until the number of orders needed is smaller than his or her price threshold. (Kauffman & Wang, 2001)

10 Cycle-Ending Effect As Kauffman and Wang (2001) mentioned, cycle-ending effect is a phenomenon in which more orders are placed or more products are purchased as the end of the trading period approaches, if trading is subject to a time constraint.

11 Typologies of Group Buying Tsvetovat, Sycara, Chen, and Ying (2000) classified group buying into two categories, with five stages which are negotiation, coalition formation, leader election/voting, payment collection, and execution/distribution. The two categories are pre-negotiation and post- negotiation.

12 Pre-negotiation: -The leader of a consumer coalition negotiates with a supplier about price and volume. Post-negotiation: - After the total number of orders has been realized, the leader negotiates with the producer.

13 FAIRSERV Carr (2007) pointed out that when service providers are delivering services, consumers are not only interested in service quality, but also service fairness.

14 Equity TheoryThe Structure of Fairness Dimensions of Fairness

15 Equity Theory In equity theory, scholars have proposed that “individuals are motivated by comparing the ratio of their inputs to their outcomes with the same ratio of others.” (Adams, 1963, p.424) Humans do not make efforts to get the best services; what they want is to get fair services and consistent treatment.

16 The Structure of Fairness Interpersonal Procedural Informational Distributive Fairness

17 Dimensions of Fairness - Definitions Interpersonal fairness: - Showing concern for individuals regarding the manner in which outcomes are distributed ( Greenberg, 1993) Informational fairness: - Providing enough information or knowledge about procedures, services, and so on. These procedures demonstrate regard for people’s concern (Greenberg, 1993) Distributive fairness: - The cognitive, affective, and behavioral reaction to outcome distributions from a source (Cohen-Charash & Spector, 2001) Procedural fairness: - The fairness of the policies and processes that contribute to outcomes, embodying certain types of normatively acceptable principles (Lind & Tyler, 1988)

18 Relationship Quality Henning-Thurau and Klee (1997, p.738) defined relationship quality between customers and companies as the “degree of appropriateness of a relationship to fulfill the needs of the customer associated with the relationship.”

19 Crosby et al. (1990) proposed that relationship quality is a higher-order construct composed of at least two dimensions: (1) Trust (2) Satisfaction Dorsch, Swanson, and Kelly (1998) argued for the addition of relationship commitment as a dimension of relationship quality.

20 Relationship Quality Henning-Thurau et al. (2002) argued that there was a general agreement that satisfaction, trust and relationship commitment are key components of relationship quality.

21 Relationship Quality Trust Trust Satisfaction Satisfaction Commitment Commitment

22 Trust Trust has been broadly defined by Anderson and Weitz (1992, p.20) as “one party’s belief that its needs will be fulfilled in the future by actions undertaken by the other party.” Kristof, Gaby, and Dawn (2001) considered that trust is a dimension of relationship quality and define trust as a customer’s confidence in a retailer’s reliability and integrity.

23 Satisfaction Kristof et al. (2001) defined relationship satisfaction as a customers’ affective state resulting from an overall appraisal of the customers’ relationship with a retailer. A customer who is not satisfied with the service received by a service provider cannot be expected to have a good relationship with the firm, as the satisfaction of customer needs is at the core of the exchange relationship. (Robers et al. 2003)

24 Commitment Morgan and Hunt (1994) suggested that commitment is the key construct that differentiates successful relationships from unsuccessful ones. Relationship commitment is defined as a consumer’s enduring desire to continue a relationship with a retailer accompanied by the consumer’s willingness to make efforts to maintain it. (Kristof et al., 2001)

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