IDEAS home Printed from https://ideas.repec.org/a/kap/mktlet/v33y2022i3d10.1007_s11002-021-09610-7.html
   My bibliography  Save this article

Prepayment and future cross-buying: an exploratory analysis

Author

Listed:
  • Shinhye Kim

    (University of Missouri-Columbia)

  • Alberto Sa Vinhas

    (Washington State University)

  • U.N. Umesh

    (Washington State University)

Abstract

Recent research has provided important insights on consumers’ preferences for prepayment mechanisms and on its impact on consumption of a given product or service. However, little is known about how prepayment influences future purchases of goods and services. We consider this question in a contractual setting within the services industry, involving different purchasing decisions over time. Based on a large-scale empirical test, we find that prepay customers make fewer changes to their cross-buying levels (i.e., the number of different services they buy from the company) from one contractual period to another, and that this effect is more salient for the firm's new customers. We propose possible explanatory mechanisms for this effect. For instance, based on mental budgeting theory, we suggest that prepayment customers may set mental budgets and track expenditures against this budget leading them to resist further investments. Alternatively, prepayment customers may be more certain about their consumption behavior leading to fewer changes over time.

Suggested Citation

  • Shinhye Kim & Alberto Sa Vinhas & U.N. Umesh, 2022. "Prepayment and future cross-buying: an exploratory analysis," Marketing Letters, Springer, vol. 33(3), pages 415-439, September.
    • Handle: RePEc:kap:mktlet:v:33:y:2022:i:3:d:10.1007_s11002-021-09610-7
    DOI: 10.1007/s11002-021-09610-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11002-021-09610-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11002-021-09610-7?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. Hawkins, Scott A & Hoch, Stephen J, 1992. "Low-Involvement Learning: Memory without Evaluation," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(2), pages 212-225, September.
    2. Soman, Dilip, 2001. "Effects of Payment Mechanism on Spending Behavior: The Role of Rehearsal and Immediacy of Payments," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 27(4), pages 460-474, March.
    3. Heath, Chip, 1995. "Escalation and De-escalation of Commitment in Response to Sunk Costs: The Role of Budgeting in Mental Accounting," Organizational Behavior and Human Decision Processes, Elsevier, vol. 62(1), pages 38-54, April.
    4. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    5. Drazen Prelec & George Loewenstein, 1998. "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, INFORMS, vol. 17(1), pages 4-28.
    6. Besharat, Ali & Nardini, Gia, 2018. "When indulgence gets the best of you: Unexpected consequences of prepayment," Journal of Business Research, Elsevier, vol. 92(C), pages 321-328.
    7. Schulz, Fabian & Schlereth, Christian & Mazar, Nina & Skiera, Bernd, 2015. "Advance payment systems: Paying too much today and being satisfied tomorrow," International Journal of Research in Marketing, Elsevier, vol. 32(3), pages 238-250.
    8. Heath, Chip & Soll, Jack B, 1996. "Mental Budgeting and Consumer Decisions," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 23(1), pages 40-52, June.
    9. Gourville, John T & Soman, Dilip, 1998. "Payment Depreciation: The Behavioral Effects of Temporally Separating Payments from Consumption," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 25(2), pages 160-174, September.
    10. Gourville, John T, 1998. "Pennies-a-Day: The Effect of Temporal Reframing on Transaction Evaluation," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(4), pages 395-408, March.
    11. Avni M. Shah & Noah Eisenkraft & James R. Bettman & Tanya L. Chartrand, 2016. ""Paper or Plastic?": How We Pay Influences Post-Transaction Connection," Journal of Consumer Research, Oxford University Press, vol. 42(5), pages 688-708.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Silva, Emmanuel Marques & Moreira, Rafael de Lacerda & Bortolon, Patricia Maria, 2023. "Mental Accounting and decision making: a systematic literature review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).

    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. Dalla Costa, Aldo Fortunato & Mollica, Vito & Singh, Abhay, 2021. "Payment methods and the disposition effect: Evidence from Indonesian mutual fund trading," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    2. Bernadette Kamleitner & Erich Kirchler, 2006. "Personal loan users’ mental integration of payment and consumption," Marketing Letters, Springer, vol. 17(4), pages 281-294, December.
    3. Ina Garnefeld & Andreas Eggert & Markus Husemann-Kopetzky & Eva Böhm, 2019. "Exploring the link between payment schemes and customer fraud: a mental accounting perspective," Journal of the Academy of Marketing Science, Springer, vol. 47(4), pages 595-616, July.
    4. Silva, Emmanuel Marques & Moreira, Rafael de Lacerda & Bortolon, Patricia Maria, 2023. "Mental Accounting and decision making: a systematic literature review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    5. Ma, Qingguo & He, Yijin & Tan, Yulin & Cheng, Lu & Wang, Manlin, 2024. "Unveiling the Impact of Payment Methods on Consumer Behavior: Insights and Future Directions," OSF Preprints 3fphk, Center for Open Science.
    6. Rufina Gafeeva & Erik Hoelzl & Holger Roschk, 2018. "What else can your payment card do? Multifunctionality of payment modes can reduce payment transparency," Marketing Letters, Springer, vol. 29(1), pages 61-72, March.
    7. Besharat, Ali & Nardini, Gia & Roggeveen, Anne L., 2021. "Online daily coupons: Understanding how prepayment impacts spending at redemption," Journal of Business Research, Elsevier, vol. 127(C), pages 364-372.
    8. Yizhao Jiang, 2022. "The Influence of Payment Method: Do Consumers Pay More with Mobile Payment?," Papers 2210.14631, arXiv.org.
    9. He, Haonan & Wang, Shanyong, 2019. "Cost-benefit associations in consumer inventory problem with uncertain benefit," Journal of Retailing and Consumer Services, Elsevier, vol. 51(C), pages 271-284.
    10. Priya Jha-Dang, 2006. "A Review of Psychological Research on Consumer Promotions and a New Perspective Based on Mental Accounting," Vision, , vol. 10(3), pages 35-43, July.
    11. Dilip Soman & Amar Cheema, 2002. "The Effect of Credit on Spending Decisions: The Role of the Credit Limit and Credibility," Marketing Science, INFORMS, vol. 21(1), pages 32-53, September.
    12. Antonides, Gerrit & Manon de Groot, I. & Fred van Raaij, W., 2011. "Mental budgeting and the management of household finance," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 546-555, August.
    13. Manel Baucells & Woonam Hwang, 2017. "A Model of Mental Accounting and Reference Price Adaptation," Management Science, INFORMS, vol. 63(12), pages 4201-4218, December.
    14. Spiller, Stephen A. & Ariely, Dan, 2020. "How does the perceived value of a medium of exchange depend on its set of possible uses?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 161(C), pages 188-200.
    15. Kirchler, Erich & Hoelzl, Erik & Kamleitner, Bernadette, 2008. "Spending and credit use in the private household," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(2), pages 519-532, April.
    16. Cheng, Andong & Baskin, Ernest, 2021. "Disproportionate redemption discounting: Mental accounting of discounted credit," Journal of Business Research, Elsevier, vol. 128(C), pages 156-163.
    17. Sarofim, Samer & Chatterjee, Promothesh & Rose, Randall, 2020. "When store credit cards hurt retailers: The differential effect of paying credit card dues on consumers' purchasing behavior," Journal of Business Research, Elsevier, vol. 107(C), pages 290-301.
    18. Qiu, Shangzhi & Wu, Laurie & Yang, Yanjia & Zeng, Guojun, 2022. "Offering the right incentive at the right time: Leveraging customer mental accounting to promote prepaid service," Annals of Tourism Research, Elsevier, vol. 93(C).
    19. Marie-Claire Broekhoff & Carin van der Cruijsen, 2022. "Paying in a blink of an eye: it hurts less, but you spend more," Working Papers 760, DNB.
    20. Shi, Haijiao & Chen, Rong & Xu, Xiaobing, 2021. "How reward uncertainty influences subsequent donations: The role of mental accounting," Journal of Business Research, Elsevier, vol. 132(C), pages 383-391.

    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:kap:mktlet:v:33:y:2022:i:3:d:10.1007_s11002-021-09610-7. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.