OBJECTIVES and STRATEGIES
- Drip Pricing
updated 2016 Jan 11
This unit on Drip Pricing
was originally prompted by a Maclean's magazine article (written by Tracey
Lindeman) of the same title in January 2016
Lindeman's article piggybacks on some research and peer reviewed journal articles by Prof. Xianjun Geng of University of Texas.
"Canadians now expect to pay fees for almost everything: paper-bill fees, convenience ticketing fees, delivery fees, cancellation fees. There are fees to pay fines—paying a parking ticket by phone or online will cost you between $1.50 and $3 in most cities—and fees to pay fees, like the $75 fee the University of Winnipeg charges students to pay their tuition with a credit card online. Some unbranded ATMs now charge as much as $5 for a transaction in addition to the fee leveraged by banks for using an out-of-network machine, and many goods and service providers charge a credit-card processing fee. Stand around a water cooler long enough and the conversation will turn to fee gouging. One customer says she racked up close to $300 in banking fees over three months, after her bank, Toronto-Dominion, doubled the minimum-balance requirement on an account she’d held for 20-odd years. In short, we get worse service than we’ve arguably ever had, and we pay more for it than ever."
"At a time when most services cost pennies to administer online, how is it “convenience” fees have risen dramatically? "
looked at as the poster child for drip pricing. They started baggage fees
and, seeing that that was a very lucrative revenue stream for them, you
saw an increase in other fees being added,” says Prof. Shelle Santana at
"Through a series of experiments,
Professor Santana has shown that while drip pricing often increases consumer
demand in the short term, it can also create negative feelings among consumers
and lower their repeat purchase intentions with the seller in the long
run. How then do firms that practice drip pricing stay in business? One
answer may be a continual supply of so-called naïve consumers entering
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