Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

The impact of consumption goals on flat-rate choice

08.05.2013
Can 'hedonizing' a service increase customers' propensity to choose a flat rate?

Can you imagine a world where a subway ride becomes the highlight of your day? Where going to the laundromat isn't such a dreary duty? A recent study published in the Journal of Service Research found that our perception of certain services can drastically change with the right adjustments, and not everyone needs Mickey Mouse and daily parades to make their experience magical.

German professors Fabian Uhrich, Jan H. Schumann, and Florian van Wangenheim conducted studies on amusement parks, public transportation, museums, and spas to evaluate the payment behaviors of consumers. The goal: to shed light on consumer spending patterns in various service industries. Their research uncovered what they call a 'flat rate bias'; customers are more likely to pay flat rates, or fixed prices, for unlimited use of a service, instead of paying per use, regardless of whether the flat rate is the cheaper option.

"This flat rate bias contradicts standard economic theory," says Uhrich. "But it's very beneficial for service providers, because consumer spending is much more constant and predictable with flat rates." While more hedonic, or fun, services (i.e. Disney World) enjoy a natural flat rate bias, other providers of more utilitarian services (i.e. laundromats) must make adjustments so that customers perceive them as more pleasurable and satisfying.

In order to do this, the researchers say companies can initiate marketing campaigns with keywords such as fun, exciting, thrilling, delightful, or enjoyable. Their study found that "hedonizing," or making services more enjoyable, doesn't have a negative effect on a consumer's willingness to pay, thereby making this a must-do for service firms. However, "Managers must ensure that the experience actually is enjoyable," cautions Urich, "because not delivering as promised can lead to serious customer dissatisfaction."

So, how can companies bring the fun back into business? Start with a smile; the researchers say you'll never reach success without one. Staff must be trained to provide friendly service—which is hardly surprising—but this must work in tandem with an evolved and enticing physical environment.

"Museums and zoos should offer services such as movie theaters with exciting and funny movies, nice coffee shops, and themed playgrounds," Uhrich explains, "Even language schools can incorporate more fun into their programs, by cooking country-specific cuisine every so often."

Some service companies and attractions in the United States have already mastered this method.

"Boston's Museum of Science is great example of a service that offers this diversified experience," says Katherine Lemon, Boston College Accenture Professor of Marketing and Journal of Service Research editor. "Making what otherwise might be an unpleasant educational experience much more exciting for families, through its Omni theatre and interactive exhibits."

Co-authors Uhrich, Schumann, and van Wangenheim point out this approach can even be applied to uninviting yet necessary entities like public transportation. For example, managers might be able to encourage public transport riders to purchase season-long passes instead of single-day tickets if they advertise with promotions that are more festive and fun, train employees to be exceptionally friendly, and add entertainment to help offset what many consider to be a headache and hassle of their daily routine.

That said, consumers should be wary of paying flat rates if they are looking to be cost conscious because pay-per-use plans can sometimes be the more affordable option. For example, purchasing a monthly subway pass makes financial sense if someone is taking the metro everyday, but less frequent riders will save money by paying for each individual ride.

Will metro stations ever be as magical as "The Happiest Place On Earth?" Probably not, but there is certainly a future in fun when it comes to businesses - even the ones we would rather not interact with.

The Journal of Service Research is edited by Katherine Lemon, Accenture Professor of Marketing at Boston College's Carroll School of Management, and published by Sage in Thousand Oaks, California.

Contact: Fabian Uhrich
TUM School of Management
Technische Universitaet Muenchen, Germany.
Email: Fabian.Uhrich@marketing.wi.tum.de
Phone: +498928928402
Address: Lehrstuhl fuer Dienstleistungs- und Technologiemarketing, Arcisstrasse 21, Muenchen, 80333, Germany

Sean Hennessey | EurekAlert!
Further information:
http://www.bc.edu

More articles from Studies and Analyses:

nachricht New study: How does Europe become a leading player for software and IT services?
03.04.2017 | Fraunhofer-Institut für System- und Innovationsforschung (ISI)

nachricht Reusable carbon nanotubes could be the water filter of the future, says RIT study
30.03.2017 | Rochester Institute of Technology

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Making lightweight construction suitable for series production

More and more automobile companies are focusing on body parts made of carbon fiber reinforced plastics (CFRP). However, manufacturing and repair costs must be further reduced in order to make CFRP more economical in use. Together with the Volkswagen AG and five other partners in the project HolQueSt 3D, the Laser Zentrum Hannover e.V. (LZH) has developed laser processes for the automatic trimming, drilling and repair of three-dimensional components.

Automated manufacturing processes are the basis for ultimately establishing the series production of CFRP components. In the project HolQueSt 3D, the LZH has...

Im Focus: Wonder material? Novel nanotube structure strengthens thin films for flexible electronics

Reflecting the structure of composites found in nature and the ancient world, researchers at the University of Illinois at Urbana-Champaign have synthesized thin carbon nanotube (CNT) textiles that exhibit both high electrical conductivity and a level of toughness that is about fifty times higher than copper films, currently used in electronics.

"The structural robustness of thin metal films has significant importance for the reliable operation of smart skin and flexible electronics including...

Im Focus: Deep inside Galaxy M87

The nearby, giant radio galaxy M87 hosts a supermassive black hole (BH) and is well-known for its bright jet dominating the spectrum over ten orders of magnitude in frequency. Due to its proximity, jet prominence, and the large black hole mass, M87 is the best laboratory for investigating the formation, acceleration, and collimation of relativistic jets. A research team led by Silke Britzen from the Max Planck Institute for Radio Astronomy in Bonn, Germany, has found strong indication for turbulent processes connecting the accretion disk and the jet of that galaxy providing insights into the longstanding problem of the origin of astrophysical jets.

Supermassive black holes form some of the most enigmatic phenomena in astrophysics. Their enormous energy output is supposed to be generated by the...

Im Focus: A Quantum Low Pass for Photons

Physicists in Garching observe novel quantum effect that limits the number of emitted photons.

The probability to find a certain number of photons inside a laser pulse usually corresponds to a classical distribution of independent events, the so-called...

Im Focus: Microprocessors based on a layer of just three atoms

Microprocessors based on atomically thin materials hold the promise of the evolution of traditional processors as well as new applications in the field of flexible electronics. Now, a TU Wien research team led by Thomas Müller has made a breakthrough in this field as part of an ongoing research project.

Two-dimensional materials, or 2D materials for short, are extremely versatile, although – or often more precisely because – they are made up of just one or a...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Expert meeting “Health Business Connect” will connect international medical technology companies

20.04.2017 | Event News

Wenn der Computer das Gehirn austrickst

18.04.2017 | Event News

7th International Conference on Crystalline Silicon Photovoltaics in Freiburg on April 3-5, 2017

03.04.2017 | Event News

 
Latest News

Bare bones: Making bones transparent

27.04.2017 | Life Sciences

Study offers new theoretical approach to describing non-equilibrium phase transitions

27.04.2017 | Physics and Astronomy

From volcano's slope, NASA instrument looks sky high and to the future

27.04.2017 | Earth Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>