Price Partitioning of Socio-Moral Surcharges

Abstract

Many companies are levying mandatory surcharges on products to raise funds for socio-moral causes (e.g., carbon-offset, living-wage, fair-trade, and sustainability surcharges). Should these surcharges be presented separately from the product price (ie, partitioned pricing) or combined with the product price (ie, all-inclusive pricing)? This research argues that partitioned pricing for socio-moral surcharges can backfire. When socio-moral surcharges are partitioned, consumers feel that the company is avoiding its own responsibility towards the cause, reducing intrinsic corporate social responsibility (CSR) attributions and consequently leading to adverse consumer reactions. This theorization is specific to surcharges attached to socio-moral causes; the effects reverse for non-socio-moral surcharges. Further, we document three ways via which firms can alter consumer beliefs and attenuate negative reactions. These include approaches that signal that the firm is not seeking reputational benefits, that the firm is not avoiding responsibility, and by shifting consumers’ focus from the costs they have to bear to the benefits they accrue. Hence, this research presents implications for managers and policymakers seeking to incorporate socio-moral surcharges into product prices while mitigating consumer backlash.