Factors that Influence Customer's Participation, Willingness to Pay, and Payments in Pay What You Want Pricing

Abstract

Research on Pay What You Want (PWYW) pricing has received considerable attention from academicians and practitioners. A large number of researchers have explored the factors that influence customers’ payment when exposed to PWYW. However, little work has been done to explore the factors influencing a customer’s decision to be involved in the price-setting process (PWYW). This study was undertaken with the aim of delineating participation, willingness to pay, and payments from one another. Before mapping customers’ willingness to pay or payments, it is crucial to determine if the customer wanted to buy from the seller selling at PWYW price. Further, willingness to pay is different from payments, and the present work has attempted to establish this difference in the context of PWYW. In order to address these three aspects of PWYW pricing, three different frameworks have been designed. Research framework one has been designed to study the influence of the independent variables on customer participation in PWYW. Independent Variables have been derived from three different categories; namely, customer linked variables (perceived control, mindset, concern for fairness, price consciousness), product linked variable (brand familiarity), and marketer linked variable (external reference price). The second research framework was framed to study the relationship between the independent variables and the willingness to pay, which is the dependent variable. The independent variables for this study are the external reference price and the organizational objective of using PWYW pricing. The framework has been designed to explore the direct effect of the two independent variables and the interaction effect between organizational objective and the external reference price. Research framework three was designed to assess the effect of willingness to pay, descriptive norms, and social visibility on payments made by the customers. Other than the direct effect of the three independent variables, interactions between social visibility and descriptive norms have been hypothesized and studied. Experimental research design has been used for the study. For research framework 1 and 2, scenario-based experiments have been used, and a simulated laboratory experiment has been used to study research framework 3.