Consumer Reactions to Drip Pricing

This research examines how drip pricing—a strategy whereby a firm advertises only part of a product’s price upfront and then reveals additional mandatory or optional fees/surcharges as the consumer proceeds through the buying process—affects consumer choice and satisfaction. Across six studies, we find that when optional surcharges are dripped (vs. revealed upfront) consumers are more likely to initially select a lower base priced option which, after surcharges are included, is often more expensive than the alternative. Moreover, consumers exposed to drip pricing tend to ultimately select this lower base price but higher total price option, even after being exposed to the total price and given the opportunity to change their selection, and even though they are relatively dissatisfied with it. We explore why drip pricing has these effects and find that they are driven by consumers’ perceptions regarding the costs and benefits of starting over and switching. Specifically, we find that high perceived search costs, self-justification, and mistaken perceptions regarding the potential gains of switching because of inaccurate beliefs that all firms charge similar additional fees/surcharges all play roles. We discuss the implications of these findings for marketers, consumers, and policy makers.