When consumers purchase service plans, they often fail to choose the lowest cost alternative because of their general tendency to avoid pay-per-use pricing. The present research examines the role of psychological process in consumer’ preference for price plans, focusing on the reasons for lower preference for pay-per-use plans. In addition, this research proposes a novel method to increase the preference for pay-per-use pricing by simply reframing it as a price plan with an initial allowance and gains and losses from the allowance. The results of seven studies demonstrate that the reframed pay-per-use plan is preferred to the regular pay-per-use plan, although the actual costs are the same. The increased preference for the reframed pay-per-use is caused by the change in the salient reference point that influences the perceived gain and loss of the price plan.
Usage below the allowance is more likely to occur because consumers tend to prefer the allowance that is higher than the actual usage volume (Kridel et al., 1993; Lambrecht & Skiera, 2006). This assumption is tested in Study 6.
We also compared the participants’ choice of the pay-per-use plan when the alternative option was a flat-rate plan (i.e., choice sets 2 and 3). The proportion of the participants choosing the pay-per-use plan was significantly higher for the reframed presentation than for the regular presentation (47.6% vs. 32.9%; z = 1.93, p = .054).
A post-hoc explanation about the non-significant difference in the 1 GB usage condition is that because usage is too close to zero, the zero-usage volume may serve as a salient reference point in both the regular and reframed pay-per-use conditions.