Pay-What-You-Want Pricing Mechanism and the Influence of National Culture

Ségolène Geron

Student thesis: Master thesis

Abstract

This thesis aims to analyse the effect of culture on pay-what-you-want (PWYW) pricing mechanism. With increasing market competition, marketers need to be able to differentiate their product or service. One way to achieve this is through innovative pricing mechanisms, a rather uncommon ground as fixed pricing strategy is one of the most common tools used. However, participative pricing strategies seem to be promising. They are all reviewed independently, but the focus is set on PWYW. This pricing system gives full control to the buyers to decide on the price they want to offer to the seller. There is no threshold and the seller cannot refuse the price set, even if it is zero. The arousal of this topic in academic literature is recent, many research papers tried to demystify the main drivers of PWYW. The influence of buyer characteristics, reference prices and the principal settings of the mechanism are the main areas considered. However, there is no research on the influence of culture on PWYW. To investigate this matter, the cultural framework of Hofstede is selected. A deductive approach using quantitative research method is adopted to test the moderating impact of Hofstede’s cultural dimensions on the relationship between fairness and PWYW. Participants from 18 different countries were selected to answer a questionnaire portraying hypothetical PWYW situations. Four situations were extracted out of it and thoroughly analysed. The results first showed that fairness is a strong predictor for PWYW in the different hypothetical scenarios. Regarding the moderating impact of cultural dimensions, no consistent findings could be discovered across the different situations. However, some specific effectsin specific scenarios could be observed. Power distance had a negative moderating impact on the relationship between fairness and PWYW in the McDonald scenario. Long-term orientation also had a negative moderating impact in the movie cases. Finally, indulgence had a positive moderating impact in one of the movie scenarios as well. Overall, it shows that cultural dimensions do influence the behaviour of the customers and consequently the amount they are willing to pay. Therefore, it cannot be neglected when implementing PWYW strategy in different countries. One suggests that culture is context dependent as different scenarios with different settings had different results. This means that the service or the product and the conditions of the offer might be perceived differently across culture and influence the fairness-PWYW relationship differently. Consequently, it is really important to assess the product or service and the settings before launching this strategy. Nevertheless, further research in this direction with field experiments is needed.

EducationsMSocSc in Service Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages117
SupervisorsAd de Jong