An Exploratory Study of Divided Pricing Effects on Financial Service Quality Expectations

• Main Authors: Estelami, Hooman, DE MAEYER, Peter
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: pricing; financial service; firm reputation; Finance and Financial Management; Marketing; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/1906; https://doi.org/10.1057/fsm.2010.4
• Institution: Singapore Management University

Financial services are often provided to consumers over an extended period of time. In pricing these services, financial services marketers have the ability to charge lump-sum amounts in advance, of the time period during which the service will be provided, or to divide their prices into a sequence of payments extended over the length of the service agreement. Consumer perceptions of the offer and their subsequent expectations regarding service quality may be affected by the marketer's choice of divided or lump-sum pricing. Service quality expectations may be further affected by the reputation of the financial services provider and the risk associated with the financial transaction. The goal of this article is to explore the perceptual effects of divided versus lump-sum pricing, and potential interactions that may exist with company reputation and financial service risk. Using an experimental design, the results indicate that divided pricing has varying effects on consumer expectations of service quality, depending on firm reputation and the underlying risk associated with the financial service. The article concludes with a discussion of the findings and implications for practitioners and researchers.