Pay today, or delay the pay: Consumer preference for double flat-rate pricing plans

Abstract

Double flat-rate pricing plans are a pricing strategy used in a variety of industries, including digital add-on services for durable products. These pricing plans consist of two distinct components: a nonrecurring flat rate and a recurring flat rate. A nonrecurring flat rate consists of a one-time, initial, nonrecurring provisioning fee. A recurring flat rate is a recurring (usually monthly) subscription fee that entitles consumers to unlimited access to the service without additional usage-based charges. While previous research has extensively studied single flat-rate pricing plans, consumer preference for double flat-rate pricing plans compared to single flat-rate plans has not yet been studied. We conduct two discrete choice experiments for utilitarian products in different industries and find that—contrary to the increasing use of double flat-rate pricing plans—consumers tend to prefer single flat-rate plans. Moreover, we find substantial preference heterogeneity for the two pricing plan components. Nonrecurring flat-rate fees have a greater influence on consumer choice than recurring flat-rate fees. We discuss the theoretical implications for behavioral pricing and consumers’ tariff choice decisions, as well as the managerial implications for firms’ pricing menu decisions.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 6 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.