The correlations between price cuts/changes and fee sensitivity on the choice of mobile phone service provider

Yi-Fei Chuang and Yih-Ching Tsaih

The Service Industries Journal, 2013, vol. 33, issue 12, 1178-1192

Abstract: This study adopts fee thresholds to measure users' fee sensitivity and employs a two-step logit model to predict a phone user's probability of choosing a certain service provider. The results indicate that the choice probability can be overestimated if the reference fee effect is not taken into consideration. Furthermore, the lower calling fee image and perceptions shaped by the telecommunications service provider can increase the probability of it being chosen. Users' benefit (saving money) perceptions also reveal a significant difference. In this regard, price promotion effects may not necessarily be successful for every service provider at the time. Service providers with a larger base of benefit perception users have a relative advantage in price-cutting activities. The characteristics of users in the low-loss perception (insensitive to an expensive fee) group are younger, female, and college-educated. Service providers could focus on this segmented market and implement a non-price strategy in order to attract more users. This study may be useful to mobile phone service providers in terms of price-setting policy and image management.

Date: 2013
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DOI: 10.1080/02642069.2012.716827

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The Service Industries Journal is currently edited by Eileen Bridges, Professor Domingo Ribeiro, Ronald Goldsmith, Barry Howcroft and Youjae Yi

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