Pricing · Randomized online pricing field experiment and choice model
Optimizing Price Menus for Duration Discounts: A Subscription Selectivity Field Experiment
Marketing Science · 2020
Summary
The experiment shows that overall price increases reduce opting in and selection of higher-priced plans.
For your marketing
Possible founder application
A useful design for testing both conversion and plan mix when changing monthly/annual prices. Measure opt-out alongside which plan is chosen; don’t optimize annual-plan share alone.
Reported result
What the study found
The experiment shows that overall price increases reduce opting in and selection of higher-priced plans. Their joint model estimates different substitution patterns from standard choice models and suggests the studied firm priced its menu too low, especially its longest commitment.
Research question
What the authors investigated
How should subscription businesses set menus that combine different commitment lengths and duration discounts?
Design
Randomized online pricing experiment varying overall price level and the steepness of duration-discount menus; the authors jointly model opting in and choosing a plan.
Sample and setting
Users considering subscription plans on a major online dating service.
Scope and transfer
Limitations to keep in view
One consumer subscription site and a model whose conclusions depend on the tested menu and demand specification. An online dating commitment menu may not predict B2B SaaS annual-plan behavior.
Research sources
INFORMS publisher page and abstract retrieved with Firecrawl; the full experiment paper was not inspected.