The flip side of drip pricing

Abstract

Purpose – The purpose of this paper is to elaborate on the differences between price partitioning and drip pricing with regard to their influence on price recall, purchase intentions and fairness perceptions. In many industries, sellers advertise low prices and reveal other surcharges sequentially as the customer goes through the buying process. To date, little is known about how these sequential, or drip-pricing, techniques influence consumer behavior. Design/methodology/approach – The study is based on an experimental between-subjects design (N = 95) with two groups. The data collection was conducted with a mixed scenario/stimuli-based online survey for a virtual travel agent. Findings – The findings reveal that underestimation of the total price of an offering is significantly weaker when prices are presented sequentially rather than partitioned. In addition to reduced purchase intentions, drip pricing may negatively affect fairness perceptions when consumers feel deceived by the seller. Originality/value – The study replicates findings of previous research on price partitioning but is one of the first empirical studies to examine the influence of sequence in price presentations. With this focus, the study opens up new avenues for pricing research.

Many a little makes a mickle: Why do consumers negatively react to sequential price disclosure?

“…Rather than encountering a ready-made assortment, consumers can bundle components (or not) in a rather stepwise process. However, bundling applies to situations in which the underlying products or services can also be purchased separately which is not the case for add-ons tied to the base product or service (Robbert & Roth, 2014;Stremersch & Tellis, 2002). In this study, we focus on DP with mandatory surcharges and its temporal aspect of sequentially disclosing price components and presenting the total final price.…”

“…However, it is unclear whether the same holds for the final price disclosure and its timing in a DP context. For example, prior research indicates negative consumer reactions to DP in its basic form, when the different price components are disclosed sequentially (Robbert & Roth, 2014; Sullivan, 2017). Prior work does not examine whether an up‐front final price disclosure can attenuate these negative effects.…”

“…First, prior research indicates negative consumer reactions to DP in its basic form, when the different price components are disclosed sequentially (Robbert & Roth, 2014; Robbert, 2015; Sullivan, 2017). However, it is unclear whether disclosing the final price upfront versus sequentially can attenuate these negative effects.…”

“…With respect to the first question, prior research indicates that consumers' evaluations of multicomponent prices are particularly affected by perceived price complexity, pricing transparency, and price fairness (Homburg et al, 2014; Sheng et al, 2007; Völckner et al, 2012). For example, customers perceive DP negatively in terms of price fairness (Robbert & Roth, 2014). However, DP's impact on consumers' transparency perceptions is still unclear, as it might be perceived positively as a more detailed cost–benefit breakdown (Völckner et al, 2012) or negatively as price shrouding (Santana et al, 2020).…”

“…According to the eye‐mind assumption there should be a positive correlation between visual attention and processing in working memory: when individuals' attention is drawn to salient attributes such as the final price they are likely to be overweighed during decision making (Bordalo et al, 2013; Pieters & Warlop, 1999). However, prior research on consumers' attention to price components traditionally uses indirect measures such as price recall and calculation accuracy (e.g., Robbert & Roth, 2014). Indirect methods cannot directly capture attention the way eye tracking, for example, can do (Greenleaf et al, 2016).…”