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To influence or not to influence: External reference price strategies in pay-what-you-want pricing

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  • Johnson, Jennifer Wiggins
  • Cui, Annie Peng

Abstract

Pay-what-you-want pricing mechanisms increasingly are popular among practitioners and interesting to marketing researchers. Prior research only examines strategies in which consumers choose any price without guidance from the firm. Firms currently use several external reference price strategies to influence consumers' chosen prices in pay-what-you-want pricing, including minimum, maximum, and suggested prices. This research examines these strategies' effectiveness to determine which one provides the highest yield and the most benefit to the firm. Four studies show these external reference prices act as anchors, biasing consumers' chosen prices in the direction of the external reference price. Surprisingly, study results find not using external reference prices may be the most beneficial strategy for the firm. Both minimum and maximum prices exhibit a negative influence on consumers' chosen prices in comparison to not offering an external reference price. However, a suggested price strategy appears to be an effective means of maximizing the firm's yield while giving consumers the freedom to choose their own price, especially when the suggested price is close to the consumer's internal reference price.

Suggested Citation

  • Johnson, Jennifer Wiggins & Cui, Annie Peng, 2013. "To influence or not to influence: External reference price strategies in pay-what-you-want pricing," Journal of Business Research, Elsevier, vol. 66(2), pages 275-281.
    • Handle: RePEc:eee:jbrese:v:66:y:2013:i:2:p:275-281
    DOI: 10.1016/j.jbusres.2012.09.015
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    References listed on IDEAS

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