Consumer Reactions to Drip Pricing

Shelle Santana (), Steven K. Dallas () and Vicki G. Morwitz ()
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Shelle Santana: Harvard Business School, Boston, Massachusetts 02163
Steven K. Dallas: Duke University School of Law, Duke University, Durham, North Carolina 27708
Vicki G. Morwitz: Columbia Business School, Columbia University, New York, New York 10027

Marketing Science, 2020, vol. 39, issue 1, 188–210

Abstract: This research examines how drip pricing—a strategy whereby a firm advertises only part of a product’s price up front and then reveals additional mandatory or optional fees/surcharges as the consumer proceeds through the buying process—affects consumer choice and satisfaction. Across six studies, we find that when optional surcharges are dripped (versus revealed up front) consumers are more likely to initially select a lower base priced option which, after surcharges are included, is often more expensive than the alternative. Moreover, consumers exposed to drip pricing tend to ultimately select this lower base price but higher total price option, even after being exposed to the total price and given the opportunity to change their selection and even though they are relatively dissatisfied with it. We explore why drip pricing has these effects and find that they are driven by consumers’ perceptions regarding the costs and benefits of starting over and switching. Specifically, we find that high perceived search costs (study 2), self-justification (study 3), and mistaken perceptions regarding the potential gains of switching because of inaccurate beliefs that all firms charge similar additional fees/surcharges (study 4) all play roles. We discuss the implications of these findings for marketers, consumers, and policy makers.

Keywords: drip pricing; pricing; consumer protection; hidden fees (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:39:y:2020:i:1:p:188-210

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