IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v143y2022icp157-170.html
   My bibliography  Save this article

How need for closure and deal proneness shape consumers’ freemium versus premium price choices

Author

Listed:
  • Biraglia, Alessandro
  • Bowen, Karen T.
  • Gerrath, Maximilian H.E.E.
  • Musarra, Giuseppe

Abstract

Internet-based firms extensively use freemium pricing strategies to thrive in the hyper-competitive e-marketplace (e.g., Spotify, Tinder). Yet many firms using this pricing strategy operate at a loss. Few studies have theorized whether consumers’ decision to pay for the premium subscription is contingent on their individual traits. In response, this study posits that need for closure and deal proneness explain consumers’ decisions to choose free versus premium pricing options. We test our predictions using one survey and one experiment. Study 1 shows that need for closure prompts consumers to pay for the premium subscription. Moreover, deal proneness negatively moderates this relationship. Study 2 finds that uncertainty reduction mediates the effect of need for closure on the decision to pay for a premium subscription. These findings have important implications for managers aiming to increase conversion rates from free to premium subscriptions.

Suggested Citation

  • Biraglia, Alessandro & Bowen, Karen T. & Gerrath, Maximilian H.E.E. & Musarra, Giuseppe, 2022. "How need for closure and deal proneness shape consumers’ freemium versus premium price choices," Journal of Business Research, Elsevier, vol. 143(C), pages 157-170.
    • Handle: RePEc:eee:jbrese:v:143:y:2022:i:c:p:157-170
    DOI: 10.1016/j.jbusres.2022.01.064
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296322000765
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2022.01.064?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kukar-Kinney, Monika & Xia, Lan, 2017. "The effectiveness of number of deals purchased in influencing consumers' response to daily deal promotions: A cue utilization approach," Journal of Business Research, Elsevier, vol. 79(C), pages 189-197.
    2. Oliver Francis Koch & Alexander Benlian, 2017. "The effect of free sampling strategies on freemium conversion rates," Electronic Markets, Springer;IIM University of St. Gallen, vol. 27(1), pages 67-76, February.
    3. Lichtenstein, Donald R & Netemeyer, Richard G & Burton, Scot, 1995. "Assessing the Domain Specificity of Deal Proneness: A Field Study," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 22(3), pages 314-326, December.
    4. Mª Victoria Bordonaba-Juste & Laura Lucia-Palacios & Raúl Pérez-López, 2020. "Generational differences in valuing usefulness, privacy and security negative experiences for paying for cloud services," Information Systems and e-Business Management, Springer, vol. 18(1), pages 35-60, March.
    5. Ravi Bapna & Akhmed Umyarov, 2015. "Do Your Online Friends Make You Pay? A Randomized Field Experiment on Peer Influence in Online Social Networks," Management Science, INFORMS, vol. 61(8), pages 1902-1920, August.
    6. Ricarda B. Bouncken & Sascha Kraus & Norat Roig-Tierno, 2021. "Knowledge- and innovation-based business models for future growth: digitalized business models and portfolio considerations," Review of Managerial Science, Springer, vol. 15(1), pages 1-14, January.
    7. Ho, Mia Hsiao-Wen & Chung, Henry F.L., 2020. "Customer engagement, customer equity and repurchase intention in mobile apps," Journal of Business Research, Elsevier, vol. 121(C), pages 13-21.
    8. Tran, Trang P. & Mai, Enping Shirley & Taylor, Erik C., 2021. "Enhancing brand equity of branded mobile apps via motivations: A service-dominant logic perspective," Journal of Business Research, Elsevier, vol. 125(C), pages 239-251.
    9. Aydin Gokgoz, Zeynep & Ataman, M. Berk & van Bruggen, Gerrit H., 2021. "There’s an app for that! understanding the drivers of mobile application downloads," Journal of Business Research, Elsevier, vol. 123(C), pages 423-437.
    10. Hamari, Juho & Hanner, Nicolai & Koivisto, Jonna, 2017. "Service quality explains why people use freemium services but not if they go premium: An empirical study in free-to-play games," International Journal of Information Management, Elsevier, vol. 37(1), pages 1449-1459.
    11. Rakshit, Sandip & Islam, Nazrul & Mondal, Sandeep & Paul, Tripti, 2021. "Mobile apps for SME business sustainability during COVID-19 and onwards," Journal of Business Research, Elsevier, vol. 135(C), pages 28-39.
    12. Kardes, Frank R. & Posavac, Steven S. & Silvera, David & Cronley, Maria L. & Sanbonmatsu, David M. & Schertzer, Susan & Miller, Felicia & Herr, Paul M. & Chandrashekaran, Murali, 2006. "Debiasing omission neglect," Journal of Business Research, Elsevier, vol. 59(6), pages 786-792, June.
    13. Thomas Niemand & Robert Mai, 2018. "Flexible cutoff values for fit indices in the evaluation of structural equation models," Journal of the Academy of Marketing Science, Springer, vol. 46(6), pages 1148-1172, November.
    14. Cziehso, Gerrit Paul & Schaefers, Tobias & Kukar-Kinney, Monika, 2019. "Free no more - investigating customer reactions to unexpected free-to-fee switches," Journal of Business Research, Elsevier, vol. 101(C), pages 229-242.
    15. Hamari, Juho & Hanner, Nicolai & Koivisto, Jonna, 2020. ""Why pay premium in freemium services?" A study on perceived value, continued use and purchase intentions in free-to-play games," International Journal of Information Management, Elsevier, vol. 51(C).
    16. Kapitan, Sommer & Mittal, Sarah & Sundie, Jill M. & Beal, Daniel J., 2021. "What a great deal…I need that! Updating need drives frugal consumers’ responses to deep discounts," Journal of Business Research, Elsevier, vol. 134(C), pages 467-479.
    17. Girish Punj, 2015. "The relationship between consumer characteristics and willingness to pay for general online content: Implications for content providers considering subscription-based business models," Marketing Letters, Springer, vol. 26(2), pages 175-186, June.
    18. Wagner, T. & Benlian, Alexander & Hess, Thomas, 2014. "Converting freemium customers from free to premium - The role of the perceived premium fit in the case of music as a service," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 66722, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    19. Alford, Bruce L. & Biswas, Abhijit, 2002. "The effects of discount level, price consciousness and sale proneness on consumers' price perception and behavioral intention," Journal of Business Research, Elsevier, vol. 55(9), pages 775-783, September.
    20. Vermeir, Iris & Van Kenhove, Patrick & Hendrickx, Hendrik, 2002. "The influence of need for closure on consumer's choice behaviour," Journal of Economic Psychology, Elsevier, vol. 23(6), pages 703-727, December.
    21. Mai, Robert & Niemand, Thomas & Kraus, Sascha, 2021. "A tailored-fit model evaluation strategy for better decisions about structural equation models," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    22. Wagner, C. & Benlian, Alexander & Hess, Thomas, 2014. "Converting freemium customers from free to premium - The role of the perceived premium fit in the case of music as a service," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 63495, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    23. Lee, Ju-Yeon & Fang, Eric & Kim, Jisu J. & Li, Xiaoling & Palmatier, Robert W., 2018. "The Effect of Online Shopping Platform Strategies on Search, Display, and Membership Revenues," Journal of Retailing, Elsevier, vol. 94(3), pages 247-264.
    24. Strong, Carolyn A. & Martin, Brett A.S. & Jin, Hyun Seung & Greer, Dominique & O'Connor, Peter, 2019. "Why do consumers research their ancestry? Do self-uncertainty and the need for closure influence consumer's involvement in ancestral products?," Journal of Business Research, Elsevier, vol. 99(C), pages 332-337.
    25. Lee, Young-Jin & Ghasemkhani, Hossein & Xie, Karen & Tan, Yong, 2021. "Switching decision, timing, and app performance: An empirical analysis of mobile app developers’ switching behavior between monetization strategies," Journal of Business Research, Elsevier, vol. 127(C), pages 332-345.
    26. Daly, Timothy M. & Nataraajan, Rajan, 2015. "Swapping bricks for clicks: Crowdsourcing longitudinal data on Amazon Turk," Journal of Business Research, Elsevier, vol. 68(12), pages 2603-2609.
    27. Wagner, T. & Benlian, Alexander & Hess, Thomas, 2014. "Converting freemium customers from free to premium - The role of the perceived premium fit in the case of music as a service," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 69900, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    28. Kuester, Sabine & Konya-Baumbach, Elisa & Schuhmacher, Monika C., 2018. "Get the show on the road: Go-to-market strategies for e-innovations of start-ups," Journal of Business Research, Elsevier, vol. 83(C), pages 65-81.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philipp Brüggemann & Nina Lehmann-Zschunke, 2023. "How to reduce termination on freemium platforms—literature review and empirical analysis," Journal of Marketing Analytics, Palgrave Macmillan, vol. 11(4), pages 707-721, December.
    2. Numminen, Emil & Sällberg, Henrik & Wang, Shujun, 2022. "The impact of app revenue model choices for app revenues: A study of apps since their initial App Store launch," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 325-336.
    3. Xiaoyan Chen & Wei Geng, 2022. "Enroll now, pay later: optimal pricing and nudge efforts for massive-online-open-courses providers," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(2), pages 1003-1018, June.
    4. Martin Adam & Konstantin Roethke & Alexander Benlian, 2022. "Gamblified digital product offerings: an experimental study of loot box menu designs," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(2), pages 971-986, June.
    5. Falko Lucht, 2019. "The Success of the Freemium Business Model. How Riot Games flourishes with a free to play game," Manager Journal, Faculty of Business and Administration, University of Bucharest, vol. 29(1), pages 114-124, December.
    6. Kang Li & Jingwei Zhang & Lunchuan Zhang, 2021. "Optimal Software Feature-Limited Freemium Model Design: A New Consumer Learning Theoretical Framework," Mathematics, MDPI, vol. 9(9), pages 1-24, April.
    7. Danckwerts, Sebastian & Meißner, Lasse & Krampe, Caspar, 2019. "Examining User Experience of Conversational Agents in Hedonic Digital Services – Antecedents and the Role of Psychological Ownership," SMR - Journal of Service Management Research, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 3(3), pages 111-125.
    8. Wann-Yih Wu & Phan Thi Phu Quyen & Adriana A. Amaya Rivas, 2017. "How e-servicescapes affect customer online shopping intention: the moderating effects of gender and online purchasing experience," Information Systems and e-Business Management, Springer, vol. 15(3), pages 689-715, August.
    9. Florian Wiesböck & Thomas Hess, 2020. "Digital innovations," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(1), pages 75-86, March.
    10. Tang, Hua & Chen, Jing & Ai, Xingzheng & Li, Xiaojing & He, Haojia, 2023. "First-party content decision under competitive hardware/software platforms: Free vs. charge," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1068-1083.
    11. Mª Victoria Bordonaba-Juste & Laura Lucia-Palacios & Raúl Pérez-López, 2020. "Generational differences in valuing usefulness, privacy and security negative experiences for paying for cloud services," Information Systems and e-Business Management, Springer, vol. 18(1), pages 35-60, March.
    12. Hamari, Juho & Hanner, Nicolai & Koivisto, Jonna, 2017. "Service quality explains why people use freemium services but not if they go premium: An empirical study in free-to-play games," International Journal of Information Management, Elsevier, vol. 37(1), pages 1449-1459.
    13. Roll, Oliver & Loh, Patrick, 2020. "Der Einfluss der Digitalisierung auf das Preismanagement – Ansatzpunkte, Modelle und Methoden," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 74(4), pages 334-348.
    14. Zijun (June) Shi & Kaifu Zhang & Kannan Srinivasan, 2019. "Freemium as an Optimal Strategy for Market Dominant Firms," Marketing Science, INFORMS, vol. 38(1), pages 150-169, January.
    15. Hongshuang (Alice) Li, 2022. "Converting free users to paid subscribers in the SaaS context: The impact of marketing touchpoints, message content, and usage," Production and Operations Management, Production and Operations Management Society, vol. 31(5), pages 2185-2203, May.
    16. Davazdahemami, Behrooz & Kalgotra, Pankush & Zolbanin, Hamed M. & Delen, Dursun, 2023. "A developer-oriented recommender model for the app store: A predictive network analytics approach," Journal of Business Research, Elsevier, vol. 158(C).
    17. Tamilmani, Kuttimani & Rana, Nripendra P. & Prakasam, Naveena & Dwivedi, Yogesh K., 2019. "The battle of Brain vs. Heart: A literature review and meta-analysis of “hedonic motivation” use in UTAUT2," International Journal of Information Management, Elsevier, vol. 46(C), pages 222-235.
    18. Le Wang & Paul Benjamin Lowry & Xin (Robert) Luo & Han Li, 2023. "Moving Consumers from Free to Fee in Platform-Based Markets: An Empirical Study of Multiplayer Online Battle Arena Games," Information Systems Research, INFORMS, vol. 34(1), pages 275-296, March.
    19. Oliver Francis Koch & Alexander Benlian, 2017. "The effect of free sampling strategies on freemium conversion rates," Electronic Markets, Springer;IIM University of St. Gallen, vol. 27(1), pages 67-76, February.
    20. Manuel Trenz & Jan Huntgeburth & Daniel Veit, 2019. "How to Succeed with Cloud Services?," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 61(2), pages 181-194, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:143:y:2022:i:c:p:157-170. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.