Glenn B. Voss, A. Parasuraman, & Dhruv Grewal The Roles of Price, Performance, and Expectations in Determining Satisfaction in Service Exchanges In this article, the authors examine the roles that price, performance, and expectations play in determining satis- faction in a discrete service exchange. The authors maintain that the price fluctuations common to the many ser- vice industries that implement demand-oriented pricing, combined with the inherent heterogeneity of service performance, likely result in price-performance combinations that vary widely. Furthermore, the authors propose that the level of price-performance consistency in a service exchange moderates the relationship between performance expectations and subsequent performance and satisfaction judgments. When price and performance are consistent, expectations have an assimilation effect on performance and satisfaction judgments; when price and performance are inconsistent, expectations have no effect on performance and satisfaction judgments. To ex- amine these issues, the authors develop a contingency model that they estimate using data from a multimedia ex- perimental design. The results generally support the contingency framework and provide empirical support for normative guidelines that call for creating realistic performance expectations and offering money-back service guarantees. S atisfaction research to date has been extensive and has focused primarily on the relationship between prepurchase perfonnance expectations and postpur- chase satisfaction (for a review, see Yi 1990). The empirical evidence from this research has been equivocal, with sever- al studies reporting a positive relationship between expecta- tions and satisfaction (e.g., Anderson, Fornell, and Lehmann 1994; Cadotte, Woodruff, and Jenkins 1987; Churchill and Surprenant 1982 [one experiment]; Oliver 1980 [one sam- ple]; Tse and Wilton 1988) and others reporting no signifi- cant relationship (e.g., Churchill and Surprenant 1982 [one experiment]; Oliver 1980 [one sample]; Spreng and Ol- shavsky 1993). Normative guidelines for managing cus- tomer expectations are unclear as well, with the proposed recommendations ranging from inflating expectations (e.g., Boulding, Kalra, and Staelin 1996; Boulding et al, 1993) to keeping them at levels consistent with actual perfonnance (e,g., Parasuraman, Berry, and ZeithamI 1991) to deflating them (e,g,, Davidow and Uttal 1989),' Glenn B, Voss is Assistant Professor of Marketing, College of Manage- ment, North Carolina State University, A, Parasuraman is Professor and James W, McLamore Chair in Marketing, and Dhruv Grewal is Professor of Marketing, College of Business Administration, University of Miami, The authors thank the Marketing Science Institute and the Center for Retailing Studies at Texas A&M University for providing financial assistance. They also thank David Szymanski, Manjit Yadav, and David Paradice for their guidance during the execution of this research, and four anonymous JtVI reviewers for their helpful comments on previous drafts of this article. The effect of price on satisfaction has received consid- erably less research attention than have the roles of expec- tations and performance perceptions (Spreng, Dixon, and Olshavsky 1993), Yet price-based prescriptions for satisfy- ing customers are proffered and practiced fairly widely. For example, money-back guarantees have been advocated for achieving total customer satisfaction (e.g,, Heskett, Sasser, and Hart 1990), and fixed price (e,g,, everyday low price) strategies have been recommended to satisfy and reward loyal customers (e,g,, Ortmeyer, Quelch, and Salmon 1991), However, satisfaction literature offers little insight into the effect these pricing decisions might have on cus- tomer satisfaction. Another shortfall in the extant satisfaction research is that only a small proportion of it focuses on services. This is a major deficiency because the paucity of search quali- ties associated with services is likely to produce greater performance uncertainty and, thus, decreased accuracy in consumers' predictive expectations. Prior research sug- gests that, when faced with performance uncertainty, con- sumers are likely to use price as a cue in forming performance expectations (Dodds, Monroe, and Grewal 'Throughout the article, we use the term expectations to refer to predictive expectations, consistent with how the construct typical- ly is defined in satisfaction literature (e,g,, Yi 1990), The term is not to be confused with other types of "expectations" that have been suggested as comparison standards for service quality assess- ment (cf, Boulding et al, 1993; Parasuraman, ZeithamI, and Berry 1994) or satisfaction determination (cf, Spreng, MacKenzie, and Olshavsky 1996; Spreng and Olshavsky 1993), 46 / Journal of Marketing, October 1998 Journat of tVtart(eting Vol. 62 (October 1998), 46-61