Abstract:

Firms often use a pricing strategy in which the total price of a product or service is partitioned into two or more mandatory components. Although there are quite a few extant studies on partitioned pricing, relative scant research has explored in how this tactic takes effect in the field of services, especially experienced services. This article examines how partitioning the total price differently across the components affects consumer preferences toward experienced services. As partitioned pricing increases the amount of attention paid to the nature of distinct price components, the attribute of perceived heterogeneity can therefore determine whether price partitioning stimulates or hinders demand. In three experiments, consumers’ reactions to price partitioning are influenced by the perceived heterogeneity of the component performance. Specifically, consumers tend to infer the quality of the heterogeneously performing component from price information, while interpret price information as an indicator of monetary sacrifice for the homogeneously performing component. Consequently, when evaluating different partitions of the same total price, consumers prefer partitions in which the price of the homogeneously performing component is lower and the price of the heterogeneously performing component is higher.

Key words: Partitioned pricing, Experience services, Perceived heterogeneity, Dual role of price