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| Author: | Danaher, P.J. |
| Title: | Optimal pricing of new subscription services: Analysis of a market experiment |
| Journal: | Marketing Science
2002 : SPRING, VOL. 21:2, p. 119-138 |
| Index terms: | Customers Markets Pricing Policy Profit Telecommunications industry Service Models Statistical methods USA |
| Freeterms: | Subscriptions |
| Language: | eng |
| Abstract: | There are now available a number of new subscription services that comprise a dual pricing system of a monthly access fee (rental) and a per-minute usage charge. Examples include cellular telephones, the Internet, and pay TV. The purpose of this study is to derive a revenue-maximizing strategy for subscription services, that is, the combination of access and usage price that maximizes revenue over a specified time period. An additional objective is to determine access and usage price elasticities because they have historically played an important role in theoretical pricing models. The application area is the cellular phone market, but for a new rather than an existing product. To help gauge the likely usage rates and customer retention, a field experiment is conducted in which several alternative price combinations are used. In general, the results show that access and usage prices have different relative effects on demand and retention. |
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