Consumer Reactions to Drip Pricing

This research examines how drip pricing—a strategy whereby a firm advertisesonly part of a product’s price up front and then reveals additional mandatory or optionalfees/surcharges as the consumer proceeds through the buying process—affects consumerchoice and satisfaction. Across six studies, we find that when optional surcharges aredripped (versus revealed up front) consumers are more likely to initially select a lower basepriced option which, after surcharges are included, is often more expensive than the alternative. Moreover, consumers exposed to drip pricing tend to ultimately select this lowerbase price but higher total price option, even after being exposed to the total price andgiven the opportunity to change their selection and even though they are relativelydissatisfied with it. We explore why drip pricing has these effects and find that they aredriven by consumers’ perceptions regarding the costs and benefits of starting over andswitching. Specifically, we find that high perceived search costs (study 2), self-justification(study 3), and mistaken perceptions regarding the potential gains of switching because ofinaccurate beliefs that all firms charge similar additional fees/surcharges (study 4) all playroles. We discuss the implications of these findings for marketers, consumers, and policymakers