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Managing your Customer’s Tariff Choice: What to do when your Customers Pay too Much

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  • Lambrecht Anja

    (London Business School, Regent’s Park, London NW1 4SA, United Kingdom)

  • Skiera Bernd

    (School of Business and Economics, Goethe University Frankfurt, Grüneburgplatz 1, 60323 Frankfurt am Main, Germany)

Abstract

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.

Suggested Citation

  • Lambrecht Anja & Skiera Bernd, 2009. "Managing your Customer’s Tariff Choice: What to do when your Customers Pay too Much," GfK Marketing Intelligence Review, Sciendo, vol. 1(1), pages 16-23, May.
    • Handle: RePEc:vrs:gfkmir:v:1:y:2009:i:1:p:16-23:n:3
    DOI: 10.2478/gfkmir-2014-0081
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