Power and the appeal of the deal: how consumers value the control provided by Pay What You Want (PWYW) pricing

The current research offers a number of novel findings regarding how individuals respond to Pay What You Want (PWYW) pricing, a strategy that affords consumers complete control over prices. Two experiments integrate research on consumer power into the PWYW literature to show that PWYW’s influence arises primarily with respect to low-power consumers who use PWYW’s pricing control to regulate their power states. Specifically, PWYW is shown to promote stronger intentions to purchase and to recommend a product than fixed pricing, particularly for low- versus high-power consumers. Supporting the notion that PWYW offers the powerless a platform for power elevation, experiment 2 reveals that the more favorable responses of low-power consumers to PWYW are accompanied by increased feelings of self-reliance. Further suggesting that low-power consumers value the pricing control afforded by PWYW for power regulation, the effects are not attributed to differences in the amounts that low- and high-power consumers are willing to pay under PWYW. In addition to providing a deeper understanding of PWYW pricing, the present work extends the power literature by demonstrating that power restoration can transpire not only from the possession of certain products but also through the pricing mechanism by which such products are obtained.     

Partitioned pricing,price fairness perceptions,and the moderating effects of brand relationships in SME business markets

Partitioned pricing effects on price perceptions have been studied in the consumer (B2C) market context, but not in the business (B2B) market, and particularly not in the small- and medium-sized enterprise (SME), context. The current research investigates SME managers' affective and cognitive (e.g., price fairness perceptions) responses to partitioned pricing and extent of relationship with the selling brand. The first of three experimental studies finds that a partitioned price generates greater price fairness perceptions than an all-inclusive price. Study 2 finds that SME buyers elicit the greatest positive affect and the lowest negative affect when the buyer's firm has an established relationship with the brand and the seller partitions the price. The third study further examines the effects of relationship with the brand by separating brand mandate (i.e., when the buying firm requires employees to purchase from a specific brand) and relationship longevity.     

The impact of buyer–seller relationships and reference prices on the effectiveness of the pay what you want pricing mechanism

Pay what you want (PWYW) is a new participative pricing mechanism that delegates the whole price determination to the buyer. Previous research on PWYW suggests that the final prices paid are not only affected by consumer characteristics but also by varying conditions, such as social distance within buyer–seller relationships and the provision of reference prices. Through an online survey and two field experiments, we test varying conditions of PWYW, such as social distance (buyer–seller relationship), provision of external reference price, product value, level of reputation, and duration of an application of PWYW. The results indicate that the provision of an external reference price is advantageous for the seller as the prices paid increase. The seller should also avoid offering products with high product value under PWYW conditions. Furthermore, increasing social distance may decrease the prices paid. Finally, a high level of reputation may be beneficial.     

Sampling,discounts or pay-what-you-want: Two field experiments

Free sampling and price discounts are important, popular promotional tools used to attract new customers by reducing their risk of trial. The authors investigate pay-what-you-want (PWYW) as an alternative promotional tool to free sampling and price discounts in two field experiments. The authors find significant differences in perceived promotional characteristics and relevant performance measures, such as trial and repeat purchases by new customers. The entertaining and innovative character of PWYW induces many people to try it. PWYW may yield a higher repeat purchase rate of new customers, and sellers using PWYW benefit from higher word-of-mouth behavior. Finally, PWYW yields the highest promotional revenues.     

Whether and to What Extent Consumers Demand Fair Pricing Behavior for Its Own Sake

This article contributes to scholarly understanding of the significance of procedural fairness in pricing contexts. It has been widely recognized that price fairness judgments concern both the outcome (fair price) and the procedure leading to the outcome (fair pricing). However, extant research has traditionally viewed procedural fairness as a means to outcome fairness. According to this instrumental view, procedural fairness is a component or antecedent of outcome fairness, but has no direct effects on consumers’ responses to prices. Building on the relational perspective on fairness, we develop and test a model of price procedural fairness as an end in itself. In three lab studies, we show that (1) when information regarding outcome (an unfavorable price difference) and procedure (the pricing practice underlying the price difference) is available simultaneously and unambiguously, procedural fairness has direct and stronger effects than outcome fairness on consumers’ responses and (2) procedural fairness mediates the effects of pricing practices on these responses. In all three studies, adding procedural fairness as a direct predictor of consumers’ responses increases the explanatory power of a model of price fairness significantly. Our model can explain peculiar real-world cases in which consumers reacted very strongly over relatively small price differences. The research findings point to the significance of the non-instrumental aspect of consumer’s demand for ethical (fair pricing) behavior and the need for companies to assess the fairness of their pricing practices from the consumer perspective.     

Budget over health unless overweight: A Solomon four‐group study

Budget and health motivations for food purchase (e.g., discounts and health consciousness, respectively) affect consumer choice while shopping and well‐being afterward. However, not all findings from research have suggested that discounts/taxations on healthy/unhealthy food encourage health‐conscious food choice. On the other hand, the consumer behaviour line of research on the influence of front‐of‐package health messages has mostly echoed similar results that such communication leads to overconsumption; thus, obesity. We examined the influence of market practices targeting consumers’ budget and health‐related motivations for food purchase in a 2 (price: recommended retail price, discount price) × 2 (product: regular potato chips, potato chips with ‘75% less saturated fat’) experiment using six Solomon four‐group designs. Our results indicate that overweight consumers are not prone to discounts, unlike their normal‐weight counterparts. A price cut nullifies the influence of health messages on purchase intentions among normal‐weight buyers when the regular and healthier packaged foods are both on discount.     

Are Low Price and Price Matching Guarantees Equivalent? The Effects of Different Price Guarantees on Consumers’ Evaluations

Some retailers offer price match guarantees, whereas others offer guarantees making the same promise but labeling these low-price guarantees. Do consumers respond differently to these different price guarantee labels? To address this research question, this paper leverages insights from pricing, signaling, and regulatory focus theories to demonstrate – across multiple studies – that consumers perceive price match versus low price guarantees differently. In turn, contingent on consumers’ regulatory focus, this difference in perceptions feeds forward and influences consumers’ purchase intentions and post purchase (e.g., repurchase) intentions. This paper contributes to theory, not only by showing differences across price match versus low price guarantees, but also by being the first to jointly examine purchase and post purchase intentions relating to price guarantees. This paper also speaks to practice, noting contingencies that determine whether the price match or the low-price guarantee label should be used.     

A guide to pay-what-you-wish pricing from the consumer’s viewpoint

As customer participation in business transactions increases, it is important to investigate how consumers approach financial transactions with firms in terms of selfishness and fairness. Pay-what-you-wish pricing models continue to attract managerial and academic interest as allowing customers to set prices provides an unorthodox setting in which to examine forces that drive buyer-seller interactions. This Executive Digest provides an overview of the current state of pay-what-you-wish (PWYW) pricing and the benefits it can provide to a firm.     

Profit for friends,fairness for strangers: Social distance reverses the endowment effect in proxy decision making

Buyers often price a product lower than sellers do, a pricing discrepancy known as the endowment effect. We investigated the way buyers and sellers change their pricing decisions as a function of social distance when making decisions on behalf of another person. In Study 1, the pricing discrepancy persisted when making a decision for a close social contact whereas the pattern was reversed when making a decision for a distant social contact. Study 2 replicated this reversed pattern using a social proximity manipulation, and this effect was mediated by participants’ prioritizing of fairness over immediate profit of the transaction. The current work suggests that people allocate different value to objects depending on the subjective closeness towards another for whom they make the pricing decision.     

Partitioning or bundling? Perceived fairness of the surcharge makes a difference

Partitioned pricing charges a base price and a surcharge instead of an equivalent all‐inclusive price. In contrast, a bundling strategy offers a bundled price instead of separate prices for products in one package. Which pricing practice is more profitable? Previous research has shown conflicting results. This research identifies the boundary conditions which circumscribe the profitability of partitioned and bundled pricing. Results of three experiments indicate that the relative significance of the surcharge to the base price influences consumers' perception of the fairness of the surcharge, which in turn influences consumer purchase intentions. Furthermore, given the same level of surcharge, consumers' perceptions of the fairness of the surcharge moderates the effect of the pricing strategies. Thus, perceived fairness of the surcharge appears to be the key in determining whether or not the partitioning strategy is more profitable than the bundling strategy. © 2007 Wiley Periodicals, Inc.     

Would you bring home ugly produce? Motivators and demotivators for ugly food consumption

It is important to reduce food waste by successfully promoting ugly food consumption. Thus, this study uses the food quality attribute model to investigate certain key factors - motivators and demotivators that can influence consumers’ attitudes toward and subsequent purchases of ugly produce. This study further examines differences in these key factors between ugly food buyers and non-buyers. The results indicate that price consciousness and environmental self-identity stimulate ugly food consumption, but physical appearance discourages its purchase. The influences of the motivators are more salient for buyers, while the influences of the demotivators are more salient for non-buyers.     

How consumers form product quality perceptions in absence of fixed posted prices: Interaction of product cues with seller reputation and third-party reviews

The uncertainty about product quality has increased in online settings, and consumers' often use multiple product cues to assess product quality. The authors have tested the simultaneous effects of multiple product cues in Pay-what-you-want (PWYW) online settings. PWYW lacks posted prices and allows buyers to decide the prices. This paper investigates how consumers process multiple cues of varying diagnostic nature simultaneously and form product quality perceptions. Specifically, study 1 examines the interactions among seller reputation, online product presentation, and external reference price and study 2 examines the interaction effect of third-party reviews and online product presentation and the external reference price. The results add to the theoretical domain by suggesting that consumers' online cue processing behaviour is much more complicated than previously presented in the literature.     

Examining differences in consumer reactions to partitioned prices with a variable number of price components

Partitioned pricing is a tactic in which a seller presents multiple prices for a single product or service instead of one, all-inclusive price. This research investigates effects of partitioned prices containing a variable number of price components, under varying levels of seller trustworthiness, and with or without the presentation of the total price. The results indicate that partitioning into a large number of price components, relative to a small number of price components, negatively affects perceived fairness and purchase intentions for less trustworthy, but not more trustworthy, sellers when the total price is not presented. However, partitioning into a large number of price components positively affects fairness and purchase intentions, regardless of seller trustworthiness, when the total price is presented. The research also examines effects of partitioning on price estimation and recall.     

动态定价团购模式下消费者参团行为研究

随着在线电子商务的发展,团购成为现代生活的重要部分。为了吸引更多的消费者参团,各网站推出了许多新的团购模式,包括天猫事业部推出的动态定价团购,即商品价格随着人数增加而降低。有研究发现,动态定价团购存在价格下降效应——价格下降前一定参团人数规模阈值内,参团人数激增,而价格下降后一定参团规模阈值内,参团人数下降。文章针对这一现象,模拟三级价格阶梯动态团购模式,设计网络团购行为实验,研究价格比较和虚幻的控制感对参团行为的作用机制。结果表明,当价格快要下降时,控制感越强越能吸引到更多的消费者。文章对电子商务平台调整团购机制,卖家确定定价策略给出了指导性建议,更好地理解价格变动在吸引消费者时的作用。     

How do you feel when you see a list of prices? the interplay among price dispersion,perceived risk and initial trust in Chinese C2C market

The issues of trust fraud, product genuineness and price dispersion jointly make Chinese C2C buyers difficult to identify trustworthy sellers with a low price. Little is known about the generation of initial trust when buyers search products and receive lists of widely ranged prices. This study proposes a theoretical model to explain how price dispersion interacts with other factors in C2C purchase, such as initial trust, perceived risk, perceived value and purchase intention. Product type is considered as a moderator. 261 students were invited in a survey-based experiment. The results from PLS analysis show that price dispersion negatively affects perceived value, whilst, positively affects perceived risk, which further influences perceived value negatively. Price dispersion also negatively influences initial trust through perceived risk. Moreover, the negative effects of price dispersion are stronger when buyers purchase high-touch products.     

The influence of multi-channel pricing strategy on price fairness and customer confusion

ABSTRACT

Multi-channel retailers face the challenge of coordinating marketing variables across their channels. In this respect, one of the main issues arising is whether to differentiate or integrate prices. Our study examines the impact of three multi-channel price differentiation instruments on perceived price fairness, customer confusion, and their consequences. In a scenario-based online experiment, we use a 2 x 2 × 2 between-subjects design and manipulate product price differentiation, online promotion and online shipping fees. The results indicate that price differentiation has an impact on fairness evaluations and customer confusion. Product price differentiation and online promotion are perceived as more unfair and lead to more confusion than price parity. Price fairness perceptions of shipping fees depend on product price differentiation. Customers perceive shipping fees as fairer than no shipping fees when prices are cheaper online but perceive shipping fees as less fair when prices are integrated. These results suggest that customers expect a consistent consideration of channel cost advantages and disadvantages and that shipping fees might serve as a cue for customers to consider the retailer’s channel costs. We further show that price fairness and customer confusion mediate effects of pricing instruments (in particular online promotion) on attitudinal and behavioral consequences.     

How buyers frame problems: Revisited

This article investigates the following propositions: a useful approach for building an organizational‐buying–behavior taxonomy might begin with classifying how buyers frame purchasing problems followed by how such frames affect subsequent perceptions and actions in the decision process. Unlike previous taxonomies of buying situations, direct questioning of organizational buyers is used to learn: (1) whether or not they identify different categories of buying problems; (2) if they do, what dimensions they use when framing buying problems; and (3) how do such frames influence their choices of value‐added service alternatives offered by suppliers. To test the propositions empirically, supplier choices are modeled with the use of buying‐decision exercises. A key result of this study is that the buyers’ framing of problems affects their preferences for vendor designs of value‐added customer services. Most likely, the framing of buying problems by organizational buyers is layered and more complex than related taxonomies found in the marketing literature. © 2001 John Wiley & Sons, Inc.     

The effect of privacy choice in cookie notices on consumers' perceived fairness of frequent price changes

Recent regulatory changes (i.e., General Data Protection Regulation of the European Union) enforce that seller (e.g., retail and service) and all other websites disclose through cookie notices which data they collect and store. At the same time, websites must allow consumers to disagree to the tracking of their browsing behavior. Despite sellers' concern about the loss of consumer insights—as consumers might disagree to the collection of their browsing data—cookie notices might also have a surprising side-effect: Consumers might accept frequent price changes (from personalized or dynamic pricing) more readily, if they agree through a cookie notice that their behavior can be tracked. Specifically, two experimental studies show that consent to the tracking of browsing behavior increases consumers internal attribution of a price change, as consumers attribute the cause of the change (here: giving up data) to themselves. This increases price fairness perceptions and, in turn, purchase intent. As a result, for online sellers of goods or services the implementation of cookie notice should no longer be thought as a matter to be avoided, but rather a trade-off decision: Loss of a part of consumer insights versus higher acceptance of data-driven marketing mix decisions, such as frequent price changes.     

A Welfare Evaluation of History-Based Price Discrimination

We design an asymmetric duopoly model with inherited market dominance such that the dominant firm and the smaller firm can price discriminate based on consumers’ purchase history. We show that uniform pricing softens competition leading to higher industry profits than under history-based pricing. Consumers benefit from history-based price discrimination unless the switching cost is sufficiently high and the inherited degree of dominance is sufficiently weak. A ban on history-based pricing would typically introduce a distributional conflict between consumers and producers. Finally, we establish that the gains to industry profits associated with uniform pricing exceed the associated losses to consumers.