%0 Journal Article
%T How Consumers Assess Free E
%A Bj£¿rn A. H¨¹ttel
%A Christian J. Wagner
%A Jan Hendrik Schumann
%A Martin Mende
%A Maura L. Scott
%J Journal of Service Research
%@ 1552-7379
%D 2018
%R 10.1177/1094670517746779
%X Despite the ubiquity of free e-services (e.g., free music/video streaming services), little empirical research has examined how consumers assess such service offerings. This research reveals the crucial role of consumer-perceived nonmonetary costs (NMCs; e.g., related to advertising intrusiveness) to better explain the zero-price effect (ZPE). Four experiments show that free e-services elicit positive affect in consumers, which leads to two distinct effects that drive the ZPE: a benefit-inflation effect, such that consumers overemphasize the benefits of free e-services, and a cost-deflation effect, such that they also judge the corresponding NMCs as lower. Furthermore, the authors find that the social norm of reciprocity increases consumers¡¯ acceptance of NMCs. This research provides managerial guidance on how to better market free service offerings. Companies that consider providing basic and premium offerings should include a free basic option, which increases consumers¡¯ benefit perceptions, lowers their perceptions of NMCs, and consequently increases demand for this service option. Finally, the findings help managers model the trade-off between immediate additional revenue generated by the fees consumers pay for a premium option and the revenue stream that a free basic option generates (e.g., through higher advertising revenues)
%K zero-price effect
%K nonmonetary costs
%K nonmonetary value contributions
%K free
%K e-services
%U https://journals.sagepub.com/doi/full/10.1177/1094670517746779