Time preferences for online subscriptions : the impact of framing, benefits as price discounts or bonus time

Valli, Veronica ; Stahl, Florian ; Bartels, Daniel M.

Document Type: Conference presentation
Year of publication: 2017
Conference title: 46th European Marketing Academy Conference 2017
Location of the conference venue: Groningen, Netherlands
Date of the conference: May 23-26, 2017
Publication language: English
Institution: Business School > Quantitatives Marketing und Konsumentenverhalten (Stahl 2013-)
Subject: 330 Economics
Abstract: When consumers make choices about subscriptions, they make choices about consumption and a series of payments made over time. To induce consumers to accept longer-term subscriptions, firms either offer a price discount—lowering the cost-per-time unit for longer contracts—or offer bonus time—thereby extending the consumer’s subscription time “for free” rather than lowering the unit price. This paper examines how consumers’ time preferences change alongside changes to the framing of subscription benefits. An online field experiment on digital newspaper subscriptions and six survey-based experiments reveal these two ways of framing a long-term subscription’s benefits affect time discounting. We find consumers prefer contracts offering price discounts to those offering bonus time for short contracts, but prefer the opposite for longer contracts. This preference reversal is robust across different methods for the elicitation of individual discount rates and replicates when manipulating multiple factors that affect this pattern of discounting according to the previous literature. We find financial literacy moderates this discounting behavior, because financially literate respondents do not show any preference reversal. From a managerial perspective, firms should offer short-term subscription-contract promotions with price discounts, and long-term contracts with bonus time.

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