Managing your customer’s tariff choice: what to do when your customers pay too much
Lambrecht, Anja and Skiera, Bernd 2009, Managing your customer’s tariff choice: what to do when your customers pay too much, GfK marketing intelligence review, vol. 1, no. 1, pp. 16-23, doi: 10.2478/gfkmir-2014-0081.
Telecommunications companies traditionally offer several tariffs from which their customers can choose the tariff that best suits their preferences. Yet, customers sometimes make choices that are not optimal for them because they do not minimize their bill for a certain usage amount. We show in this paper that companies should be very concerned about choices in which customers pick tariffs that are too small for them because they lead to a significant increase in customers churn. In contrast, this is not the case if customers choose tariffs that are too big for them. The reason is that in particular flat-rates provide customers with the additional benefit that they guarantee a constant bill amount that consumption can be enjoyed more freely because all costs are already accounted for.
The article is adapted with permission from the Journal of Marketing Research published by the American Marketing Association: Lambrecht, A. and Skiera, B. (2006), “Paying Too Much and Being Happy About It: Existence, Causes and Consequences of Tariff-Choice Biases”, Vol. XLIII (May 2006), 212–23.
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