EXPERIMENTAL ANALYSIS OF PARTICIPATORY PRICING WITH REFERENCE TO PAY-WHAT-YOU-WANT

Abstract

Participatory pricing allows customers’ involvement in the price determination process through a bid or an offer. The growing application of participatory pricing in various industries demands further examination of the impact of enhanced participation on customers’ decision-making process. The present research focusses on the extreme form of participatory pricing, i.e. Pay What You Want (PWYW) pricing. PWYW entails buyers the complete control over the price setting decision. PWYW does not have fixed posted prices, and customers can pay any price ranging from zero to any higher amount. The present research comprises of theoretical and empirical investigation of PWYW. The theoretical investigation aims to expand PWYW knowledge base by presenting a systematic investigation of the existing literature and a roadmap for taking this pricing further by providing key future research issues. An extensive review of 61 articles spanned across leading journals identified from different online academic databases between 2009 and 2019 was carried out. Selected papers were thoroughly analysed on various criteria, and three main research themes were identified. Findings propose significant developments in research focus; research on PWYW has largely been application oriented with rigorous experimental research designs. Majority of studies emanate from developed countries in the last five years. The three research streams focus on factors influencing PWYW outcomes, customers perceptions and PWYW outcomes. This study is beneficial because it provides a comprehensive understanding of PWYW on a single platform with a central feature to illustrate state-of-the-art research with a set of actionable takeaways for both researchers and practitioners. Based on the research gaps identified in the theoretical investigation, empirical research aims to investigate the viability of PWYW in online purchase settings. Customers use various cues of different diagnosticities to assess a product in online shopping. The present empirical investigation includes two studies. Study 1 investigates the interaction effect of brand reputation and product presentation while study 2 examines the interaction effect of brand reputation and external reference price on customers’ responses towards online PWYW offers. Both studies employ a between-subject factorial design and scenario-based approach to collect data from the respondents. MANOVA and structural equation modeling technique were used to assess the data. Findings indicated that positive assessments of high-scope cues relay to the low-scope cues, thus impacting their credibility. Customers tend to have faith in the high reputed brands and believe that they will not risk their reputation by conveying misleading claims through marketing cues. Whereas, brands with low reputation are likely to communicate false product information. Furthermore, findings demonstrate that customers perceived product knowledge impact the likelihood of their purchase and product quality perceptions influence their willingness-to-pay. Besides practitioners of participatory pricing, online retailers may also get valuable insights from the present study on designing offerings wherein the payment is made before the consumption. The present thesis interpolates material from the author’s research papers published in journals of repute such as Journal of Retailing and Consumer Services, Journal of Consumer Marketing and Journal of Revenue and Pricing Management.