Pricing Service Innovations: The Influence of Consumer Characteristics and Expectations?

Abstract

Research has highlighted the importance of the pricing strategy for the successful launch of innovations. Still, pricing service innovations (SIs) is a major challenge for managers. Despite the relative absence of appropriate price comparators in the case of SIs, price fairness is the key link between a new service’s launch price and adoption intention. Consumers’ future price expectations and consumer innovativeness are two potential moderators of the negative effect of new service launch price on perceived price fairness. In an between - subject design experiment (N=123) we find that the negative effect of a high versus a low launch price on perceived price fairness is moderated by consumer innovativeness and expected future price reduction. Furthermore, we find price fairness to mediate the pricing strategy - adoption intention relationship. Results provide valuable insights regarding consumer reaction to launch prices for SIs and help managers to better design pricing strategies for SIs