How to move services from free to fee without jeopardizing the customer relationship : the role of pricing schemes, service level, and communication strategies

Grohmann, Marcella; Zimmer, Marcus; von Wangenheim, Florian; Ulaga, Wolfgang

Publication type:	Conference other
Type of review:	Peer review (abstract)
Title:	How to move services from free to fee without jeopardizing the customer relationship : the role of pricing schemes, service level, and communication strategies
Authors:	Grohmann, Marcella Zimmer, Marcus von Wangenheim, Florian Ulaga, Wolfgang
et. al:	No
Conference details:	Institute for the Study of Business Markets Biennial Academic Conference 2016, Atlanta, Georgia, USA , 3-4 August 2016
Issue Date:	3-Aug-2016
Language:	English
Subject (DDC):	658.8: Marketing management
Abstract:	Over the past decades, manufacturing companies have been enriching their product portfolio through the addition of value-added service, which they often give away for free. In order to capture additional revenues and to stop services from being a pure cost driver, scholars and practitioners have recommended a transition of services “from free to fee”. However, customers have been conditioned to getting these services for free and thus it may pose a problem when free services are suddenly charged. Our online experiment with 347 customers of a large tool manufacturer shows that customers respond with negative perceptions and behavioral intentions when manufacturers start billing their services. Although we find that customers’ willingness-to-pay for individual services at a pay-per-use pricing scheme is 48 % higher than for a packaged version, the choice of this specific pricing scheme cannot fully mitigate customers’ disadvantageous reactions. We also investigate the effect of enhancing the presented service level on customers’ evaluations of the service offering and find that when moving services from free to fee, customers evaluate an enhanced service level not better than the one they are used to. Results also indicate that customers who are accustomed to paying a fee for productrelated services show similar evaluations of the service offering as in a condition where services are free. In this context, our next goal is to understand how to overcome the “from free to fee” hurdle to attenuate customers’ detrimental assessments of the service offering. Hence, we are currently working on a second online experiment to examine whether specific communication strategies exist that help shifting customers’ reference point away from a zero price and therefore facilitate a transition from free to fee. Results are expected to be available by the end of April and can thus be presented at this conference.
URI:	https://digitalcollection.zhaw.ch/handle/11475/20836
Fulltext version:	Published version
License (according to publishing contract):	Licence according to publishing contract
Departement:	School of Management and Law
Appears in collections:	Publikationen School of Management and Law

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Grohmann, M., Zimmer, M., von Wangenheim, F., & Ulaga, W. (2016, August 3). How to move services from free to fee without jeopardizing the customer relationship : the role of pricing schemes, service level, and communication strategies. Institute for the Study of Business Markets Biennial Academic Conference 2016, Atlanta, Georgia, USA , 3-4 August 2016.

Grohmann, M. et al. (2016) ‘How to move services from free to fee without jeopardizing the customer relationship : the role of pricing schemes, service level, and communication strategies’, in Institute for the Study of Business Markets Biennial Academic Conference 2016, Atlanta, Georgia, USA , 3-4 August 2016.

M. Grohmann, M. Zimmer, F. von Wangenheim, and W. Ulaga, “How to move services from free to fee without jeopardizing the customer relationship : the role of pricing schemes, service level, and communication strategies,” in Institute for the Study of Business Markets Biennial Academic Conference 2016, Atlanta, Georgia, USA , 3-4 August 2016, Aug. 2016.

GROHMANN, Marcella, Marcus ZIMMER, Florian VON WANGENHEIM und Wolfgang ULAGA, 2016. How to move services from free to fee without jeopardizing the customer relationship : the role of pricing schemes, service level, and communication strategies. In: Institute for the Study of Business Markets Biennial Academic Conference 2016, Atlanta, Georgia, USA , 3-4 August 2016. Conference presentation. 3 August 2016

Grohmann, Marcella, Marcus Zimmer, Florian von Wangenheim, and Wolfgang Ulaga. 2016. “How to Move Services from Free to Fee without Jeopardizing the Customer Relationship : The Role of Pricing Schemes, Service Level, and Communication Strategies.” Conference presentation. In Institute for the Study of Business Markets Biennial Academic Conference 2016, Atlanta, Georgia, USA , 3-4 August 2016.

Grohmann, Marcella, et al. “How to Move Services from Free to Fee without Jeopardizing the Customer Relationship : The Role of Pricing Schemes, Service Level, and Communication Strategies.” Institute for the Study of Business Markets Biennial Academic Conference 2016, Atlanta, Georgia, USA , 3-4 August 2016, 2016.