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- Title
The Impact of Consumption Goals on Flat-Rate Choice: Can “Hedonizing” a Service Increase Customers’ Propensity to Choose a Flat Rate?
- Authors
Uhrich, Fabian; Schumann, Jan H.; von Wangenheim, Florian
- Abstract
Flat rates are a dominant pricing scheme in many consumer service industries that largely benefit service providers: Many customers exhibit a bias and choose flat rates even though a pay-per-use plan would be less expensive for them. Yet, whereas the degree of flat-rate bias varies strongly across services, no study has determined whether consumers’ consumption goals might influence its extent. The authors argue and show that consuming services to attain hedonic gratification leads to a significantly higher flat-rate bias than using services to fulfill utilitarian needs. The three well-known flat-rate bias effects (taximeter, insurance, and overestimation) fully mediate the relationship between the consumption goal and flat-rate bias. In three experimental studies, the authors consistently show that these findings apply across different services, for a service that relies on natural variance in customers’ consumption goals, and for the same service framed as hedonic, utilitarian, or a hybrid. These findings show that managers need to be aware of major “natural” industry differences in the level of flat-rate bias. However, service providers can also actively manage and increase consumers’ hedonic consumption goals for their services and thus increase their share of flat-rate contracts. A further experiment shows that the hedonization tactic has no negative side effects on consumers’ price perceptions in terms of willingness to pay (WTP). Service providers can benefit from hedonizing their services as long as it is compatible with their value proposition.
- Subjects
FLAT rates; CONSUMPTION (Economics); HEDONISTIC consumption; CUSTOMER satisfaction; COST per click (Marketing); CONSUMER behavior; CUSTOMER services; WILLINGNESS to pay
- Publication
Journal of Service Research, 2013, Vol 16, Issue 2, p216
- ISSN
1094-6705
- Publication type
Article
- DOI
10.1177/1094670512464430