Pricing and product adoption · Pricing field experiment and utility-based retention model
The Impact of Tariff Structure on Customer Retention, Usage, and Profitability of Access Services
Iyengar, R., Jedidi, K., Essegaier, S., & Danaher, P. J. (2011). Marketing Science, 30(5), 820–836.
Plain-English take
Compared with pay-per-use pricing, the two-part tariff reduced annual retention by an average 10.5% and yearly usage by 38.7%, after controlling for income effects. For your marketing: Evaluate the behavioral effects of access fees separately from per-use prices.
How much weight to give this
3.5/5 Useful evidence with meaningful caveats
The 1–5 evidence-check score is a practical reading aid, not a formal peer review or a probability that a conclusion is true. It combines design strength (2 points), sample reporting (1), comparison/control clarity (1), and how much of the paper could be checked (1). Access affects how confidently this directory can assess a study, not the study's underlying quality. Blinding is reported separately because it is not relevant to every design.
An experiment is useful for causal evidence, but the accessible profile does not establish random assignment.
A usable sample size is not stated in the profile's accessible source.
Experimental comparison is described; randomization or control details need checking in the paper.
This profile could be checked against an abstract or metadata, not the full paper.
Double-blind? Blinding is not reported in the source reviewed; that does not establish whether blinding was or was not used.
Research question
What the authors investigated
How do pay-per-use and two-part-tariff pricing affect service retention, usage and profit?
Design
A utility-based model is estimated with data from a pricing field experiment for a new telecommunications access service.
Sample and setting
Customers of one new telecommunications service in a market experiment; the abstract reports model-based average effects across the experimental tariff conditions.
Reported result
What the study found
Compared with pay-per-use pricing, the two-part tariff reduced annual retention by an average 10.5% and yearly usage by 38.7%, after controlling for income effects. Despite these declines, the two-part tariff remained profit-maximizing in the studied setting. Ignoring the tariff-structure effect reduced modeled firm profit by 11%.
This is a paraphrase of the source. Check the original paper for definitions, estimates, statistical uncertainty and analysis details.
Scope and transfer
Limitations to keep in view
A single telecommunications service and historical market experiment. The profitability result depends on the study's demand, cost and pricing assumptions and should not be treated as a SaaS pricing benchmark.
Possible founder application
Evaluate the behavioral effects of access fees separately from per-use prices. A plan can reduce usage and retention yet still improve profit, so test the full customer and margin outcomes.
Evidence access
Publisher abstract
INFORMS publisher abstract; the experiment setting, tariff comparison and reported percentages are stated there.
If only an abstract or metadata was available, the profile is limited to claims supported there. A paper's paywall does not change its evidentiary status, but it limits what we can substantiate from accessible text.