Lowering consumers’ price image without lowering their internal reference price: the role of pay-what-you-want pricing mechanism

Abstract

Retailers often use monetary promotions (e.g., discounts) to sell excess capacity, increase short-term revenue, and create a low price image. However, the frequent use of discounting may lower consumers’ internal reference price, until consumers are not willing to pay anything above the promotional price. This issue can be solved by the use of participative pricing mechanisms, under which the retailer does not set an explicit price to be paid. The results of this experimental study indicate that participative pricing mechanisms, such as pay-what-you-want pricing, create a price image that is as low as the traditional posted price mechanism with discounts.

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Correspondence to Rafael Luis Wagner.

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Appendix 1: ITEMS of the price image scale

Appendix 1: ITEMS of the price image scale

  • Imagine that you have to classify the prices of this store. Would you say they are [1-very low; 5-very high] (Zielke and Toporowski (2012);

  • The prices of this online store are generally higher than in other online stores [1-totally disagree; 5-totally agree] (Hamilton and Chernev 2013);

  • The prices of this online store are very high [1-totally disagree; 5-totally agree] (Hamilton and Chernev 2013);

  • It is possible to find expensive products on this online store [1-totally disagree; 5-totally agree] (Hamilton and Chernev 2013).

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Wagner, R.L. Lowering consumers’ price image without lowering their internal reference price: the role of pay-what-you-want pricing mechanism. J Revenue Pricing Manag 18, 332–341 (2019). https://doi.org/10.1057/s41272-018-00184-0

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Keywords

  • Participative pricing
  • Pricing strategy
  • Pay-what-you-want
  • Price image