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• Article | Marketing Science | January–February 2020

  Consumer Reactions to Drip Pricing

  Shelle Santana, Steven Dallas and Vicki Morwitz

  This research examines how drip pricing—a strategy whereby a firm advertises only part of a product’s price upfront and then reveals additional mandatory or optional fees/surcharges as the consumer proceeds through the buying process—affects consumer choice and satisfaction. Across six studies, we find that when optional surcharges are dripped (vs. revealed upfront) consumers are more likely to initially select a lower base priced option that, after surcharges are included, is often more expensive than the alternative. Moreover, consumers exposed to drip pricing tend to ultimately select this lower base price but higher total price option, even after being exposed to the total price and given the opportunity to change their selection, and even though they are relatively dissatisfied with it. We explore why drip pricing has these effects and find that they are driven by consumers’ perceptions regarding the costs and benefits of starting over and switching. Specifically, we find that high perceived search costs (study 2), self-justification (study 3), and mistaken perceptions regarding the potential gains of switching because of inaccurate beliefs that all firms charge similar additional fees/surcharges (study 4) all play roles. We discuss the implications of these findings for marketers, consumers, and policy makers.

  Keywords: drip pricing; pricing; consumer protection; hidden fees; Price; Consumer Behavior; Perception;

  Citation:

  Santana, Shelle, Steven Dallas, and Vicki Morwitz. "Consumer Reactions to Drip Pricing." Marketing Science 39, no. 1 (January–February 2020): 188–210.  View Details

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• Case | HBS Case Collection | February 2001 (Revised November 2019)

  Delivery Problems at Arrow Electronics, Inc. (A)

  Andrew P. McAfee, Frances X. Frei and Kerry Herman

  Describes a dramatic decrease in service levels (on-time shipments) from the warehouse network of a large electronics distributor. Students need to analyze the root cause of the problem and propose actions. A rewritten version of an earlier case.

  Keywords: Order Taking and Fulfillment; Problems and Challenges; Business Processes; Distribution Industry; Electronics Industry;

  Citation:

  McAfee, Andrew P., Frances X. Frei, and Kerry Herman. "Delivery Problems at Arrow Electronics, Inc. (A)." Harvard Business School Case 601-131, February 2001. (Revised November 2019.)  View Details

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• Supplement | HBS Case Collection | February 2001 (Revised November 2019)

  Delivery Problems at Arrow Electronics, Inc. (B)

  Andrew P. McAfee, Frances X. Frei and Kerry Herman

  Supplements the (A) case. A rewritten version of an earlier case.

  Keywords: Order Taking and Fulfillment; Problems and Challenges; Business Processes; Distribution Industry; Electronics Industry;

  Citation:

  McAfee, Andrew P., Frances X. Frei, and Kerry Herman. "Delivery Problems at Arrow Electronics, Inc. (B)." Harvard Business School Supplement 601-132, February 2001. (Revised November 2019.)  View Details

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