See-To, E W K (2006) When do you pay? The business impact of payment time perception. Working Paper. The Department of Management Science, Lancaster University.
Recent advances in consumer research have shown that billing schedule has significant impacts on consumer decisions and consumption patterns. The strategy of devising different billing schedules to influence a customer's purchase decision (or choice of consumption pattern) is well-accepted, and should be effective as long as billing schedules are exactly the same as the perceived payment outlays. Payment card technology makes the payment time perceived by consumers ambiguous and may enable the decoupling of payment outlay and billing schedule. If the decoupling hypothesis is supported, customers will no longer subject to the mental account manipulation by the payment scheme. Working with a large electronic payment service provider, we conducted a survey to collect data on usage and perception of payment card in late 2003. Results strongly supported the decoupling hypothesis and firms need to rethink their bundling and pricing strategies based on billing schedules. The possible use of this decoupling phenomenon to increase the willingness-to-pay of consumers and other managerial implications are discussed.
Actions (login required)