Optimal Pricing of New Subscription Services: Analysis of a Market Experiment

Peter J. Danaher
Peter J. Danaher
p.danaher(auckland.ac.nz
Department of Marketing, University of Auckland, Private Bag 92019, Auckland, New Zealand
Search for more papers by this author

Peter J. Danaher

p.danaher(auckland.ac.nz

Department of Marketing, University of Auckland, Private Bag 92019, Auckland, New Zealand

Search for more papers by this author

Published Online:1 May 2002https://doi.org/10.1287/mksc.21.2.119.147

Supplemental Material

mksc.21.2.119.147-sm-technical-appendix.pdf (103 KB)

Cited by
- Travel dynamics under MaaS bundles: The role of uncertainty in intertemporal choices and learning behavior
  Transportation Research Part A: Policy and Practice, Vol. 208
- Accelerating the transition from linear to circular systems through a subscription-based approach
  28 December 2025 | International Journal of Production Research, Vol. 64, No. 5
- Optimal subscription pricing strategy for SaaS vendors: short-term, long-term or hybrid?
  5 January 2026 | Information Technology and Management, Vol. 11
- Enhancing customer engagement value: a comprehensive review of integrated program strategies beyond loyalty programs
  28 October 2025 | Journal of Services Marketing, Vol. 39, No. 9
- Will they stay or will they go? application of machine learning classifiers of purchase and churn prediction to a digital journalistic platform
  25 December 2024 | Journal of Media Business Studies, Vol. 22, No. 3
- Optimal ordering for Product-as-a-Service models with circular economy practices
  3 December 2024 | International Journal of Production Research, Vol. 63, No. 11
- Deceleration or Charging Data Plan: Impact on Price, Profit, and Consumer Surplus
  20 March 2025 | Journal of Systems Science and Systems Engineering, Vol. 6
- The Economics of Curated Shopping: Optimal Product Variety and Subscription Pricing
  1 January 2025 | SSRN Electronic Journal, Vol. 24
- Moving to subscriptions: service growth through business model innovation in consumer and business markets
  21 June 2024 | Journal of Service Management, Vol. 35, No. 6
- Subscriber retention management: SRM framework and future research agenda
  17 October 2024 | Journal of Services Marketing, Vol. 38, No. 8
- Aligning product-service systems with environmental sustainability: Investigating the key role of revenue and pricing mechanisms
  Resources, Conservation and Recycling, Vol. 209
- Sunk Cost Effect, Self-Control, and Contract Design
  26 December 2023 | Journal of Marketing Research, Vol. 61, No. 5
- Optimal pricing of subscription services in the restaurant industry
  13 February 2024 | Journal of Revenue and Pricing Management, Vol. 23, No. 3
- Whether to Add a Digital Product into Subscription Service?
  20 April 2024 | Journal of Theoretical and Applied Electronic Commerce Research, Vol. 19, No. 2
- Intertemporal Price Competition in the Two-Sided Market: Reexamining the Seesaw Principle for Startup Platforms
  22 April 2024 | Production and Operations Management
- Subscription Pricing for Free Delivery Services
  11 March 2024 | Production and Operations Management, Vol. 33, No. 4
- Subscription offers in business-to-business markets: Conceptualization, taxonomy, and framework for growth
  Industrial Marketing Management, Vol. 117
- On the Diffusion of Subscription-Based Services: The Roles of Price, Advertising, and Customers’ Defection
  IEEE Transactions on Engineering Management, Vol. 71
- Analysis of Online Platforms’ Free Trial Strategies for Digital Content Subscription
  20 November 2023 | Journal of Theoretical and Applied Electronic Commerce Research, Vol. 18, No. 4
- The Design and Targeting of Compliance Promotions
  Øystein Daljord,
  Carl F. Mela,
  Jason M. T. Roos,
  Jim Sprigg,
  Song Yao
  7 April 2023 | Marketing Science, Vol. 42, No. 5
- What drives demand for paid access to a sharing box with underused items? A choice experiment with Swedish consumers
  Journal of Cleaner Production, Vol. 393
- A choice-based optimization approach for contracting in supply chains
  European Journal of Operational Research, Vol. 305, No. 1
- New Features Free of Charge? Intertemporal Product Versions and Pricing in the Software Market
  Kristina Brecko
  23 August 2022 | Marketing Science, Vol. 42, No. 1
- Price Management Strategies
  2 November 2023
- Does Customer Email Engagement Improve Profitability? Evidence from a Field Experiment in Subscription Service Retailing
  Yiwei Wang,
  Lauren Xiaoyuan Lu,
  Pengcheng Shi
  1 July 2022 | Manufacturing & Service Operations Management, Vol. 24, No. 5
- An empirical model of the effects of “bill shock” regulation in mobile telecommunication markets
  International Journal of Industrial Organization, Vol. 83
- Cloud Computing as a Platform for Monetizing Data Services: A Two-Sided Game Business Model
  IEEE Transactions on Network and Service Management, Vol. 19, No. 2
- Managing Software‐as‐a‐Service: Pricing and operations
  1 June 2022 | Production and Operations Management, Vol. 31, No. 6
- Understanding music streaming services via text mining of online customer reviews
  Electronic Commerce Research and Applications, Vol. 53
- A tale of two frames: Exploring the role of framing in the use discontinuance of volitionally adopted technology
  28 June 2021 | Information Systems Journal, Vol. 32, No. 3
- Product Price, Quality, and Service Decisions Under Consumer Choice Models
  Ruxian Wang,
  Chenxu Ke,
  Shiliang Cui
  11 February 2021 | Manufacturing & Service Operations Management, Vol. 24, No. 1
- Microgiving with Digital Platforms
  1 January 2022 | SSRN Electronic Journal, Vol. 159
- Customer defection due to service elimination and post-elimination customer behavior: An empirical investigation in telecommunications
  International Journal of Research in Marketing, Vol. 38, No. 4
- Indian Telemedicine Industry: Evolving Nature of Business Models and Customer Interactions
  27 August 2021 | South Asian Journal of Business and Management Cases, Vol. 10, No. 3
- Machine Learning Approaches for Marketing Campaign in Portuguese Banks
- Cloud as platform for monetizing complementary data for AI-driven services: A two-sided cooperative game
- Flow theory in the information systems life cycle: The state of the art and future research agenda
  18 January 2021 | International Journal of Consumer Studies, Vol. 45, No. 4
- Factors for Intention to Use for Digital Contents Subscription Service in Korea
  Journal of Digital Contents Society, Vol. 22, No. 5
- How to React to Internal and External Sharing in B2C and C2C
  1 January 2021 | Production and Operations Management, Vol. 30, No. 1
- Sunk Cost Fallacy, Self-control, and Contract Design
  SSRN Electronic Journal, Vol. 35
- The Design and Targeting of Compliance Promotions
  SSRN Electronic Journal, Vol. 55
- Dynamic Plan Control: An Effective Tool to Manage Demand Considering Mobile Internet Network Congestion
  24 December 2020 | Applied Sciences, Vol. 11, No. 1
- Optimale nichtlineare Tarife auf zweiseitigen Medien-Märkten
  2 October 2020 | Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung, Vol. 72, No. 4
- Optimizing Price Menus for Duration Discounts: A Subscription Selectivity Field Experiment
  Longxiu Tian,
  Fred M. Feinberg
  21 October 2020 | Marketing Science, Vol. 39, No. 6
- Toward monetizing personal data: A two-sided market analysis
  Future Generation Computer Systems, Vol. 111
- Understanding users’ dynamic behavior in a free trial of IT services: A three-stage model
  Information & Management, Vol. 57, No. 6
- Pricing Metrics and the Importance of Minimum and Billing Increments
  26 December 2019 | Journal of Service Research, Vol. 23, No. 3
- Why should I pay more? Testing the impact of contextual cues on perception of price unfairness for the price-disadvantaged segment in dual pricing
  Tourism Management, Vol. 78
- “Curated subscription commerce: A theoretical conceptualization”
  Journal of Retailing and Consumer Services, Vol. 54
- Toward a refined conceptualization of IS discontinuance: Reflection on the past and a way forward
  Information & Management, Vol. 57, No. 2
- Design and Development of a Web Extension to Help Facilitate the Learning of a Foreign Language
  4 October 2020
- A Game-Based Secure Trading of Big Data and IoT Services: Blockchain as a Two-Sided Market
  9 December 2020
- Does Continuous Email Engagement Improve Profitability? Evidence from a Field Experiment of a Subscription-based Service Provider
  SSRN Electronic Journal, Vol. 104
- Bayesian Dynamic Pricing and Subscription Period Selection with Unknown Customer Utility
  SSRN Electronic Journal, Vol. 23
- Estimating the Demand for Service Bundles under Three‐Part Tariffs
  5 February 2020 | The Journal of Industrial Economics, Vol. 67, No. 3-4
- CHARACTERISTICS OF MOBILE COMMUNICATION DEMAND: THE CASE OF TURKEY
  12 July 2019 | Bolu Abant İzzet Baysal Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, Vol. 19, No. 2
- Price differentiation model: its challenges and solutions
  27 February 2019 | Journal of Revenue and Pricing Management, Vol. 18, No. 2
- Product Price, Quality and Service Decisions under Consumer Choice Models
  SSRN Electronic Journal, Vol. 40
- Modeling consumers’ intention to use fashion and beauty subscription-based online services (SOS)
  18 September 2018 | Fashion and Textiles, Vol. 5, No. 1
- Optimal Marketing Strategies for the Acquisition and Retention of Service Subscribers
  Tarek Ben Rhouma,
  Georges Zaccour
  13 June 2017 | Management Science, Vol. 64, No. 6
- The Peril of Surprises: How Risk Influences Attitude Towards Product Subscription Models
  SSRN Electronic Journal, Vol. 81
- Snubbing the old to embrace the new: the impact of cross-buying on the usage of existing services
  18 October 2017 | Journal of Services Marketing, Vol. 31, No. 6
- How Service Offerings and Operational Maturity Influence the Viability of Health Information Exchanges
  1 November 2017 | Production and Operations Management, Vol. 26, No. 11
- Entertainment Marketing
  16 October 2017 | Foundations and Trends® in Marketing, Vol. 10, No. 4
- Survey on Revenue Management in Media and Broadcasting
  Shinjini Pandey,
  Goutam Dutta,
  Harit Joshi
  12 April 2017 | Interfaces, Vol. 47, No. 3
- Online Grocery Retail: Revenue Models and Environmental Impact
  Elena Belavina,
  Karan Girotra,
  Ashish Kabra
  31 May 2016 | Management Science, Vol. 63, No. 6
- Field Experiments in Marketing
- Optimal dynamic pricing of mobile data plans in wireless communications
  Omega, Vol. 66
- Product Quality, Service and Pricing
  SSRN Electronic Journal, Vol. 40
- When Random Assignment Is Not Enough: Accounting for Item Selectivity in Experimental Research
  Fred M. Feinberg,
  Linda Court Salisbury,
  Yuanping Ying
  16 August 2016 | Marketing Science, Vol. 35, No. 6
- Creating Enduring Customer Value
  1 November 2016 | Journal of Marketing, Vol. 80, No. 6
- Determining bucket structures in pricing plans for private user cloud computing storage services
  Journal of Modelling in Management, Vol. 11, No. 2
- Free Versus For-a-Fee: The Impact of a Paywall on the Pattern and Effectiveness of Word-of-Mouth Via Social Media1
  1 March 2016 | MIS Quarterly, Vol. 40, No. 1
- The Perils of Proactive Churn Prevention Using Plan Recommendations: Evidence from a Field Experiment
  1 February 2016 | Journal of Marketing Research, Vol. 53, No. 1
- Where, When, and how Long: Factors that Influence the Redemption of Mobile Phone Coupons
  1 October 2015 | Journal of Marketing Research, Vol. 52, No. 5
- An Empirical Analysis of Consumer Purchase Decisions Under Bucket-Based Price Discrimination
  Yacheng Sun,
  Shibo Li,
  Baohong Sun
  17 September 2015 | Marketing Science, Vol. 34, No. 5
- From Technological Transitions to Service Transitions : A Study of Attenuation Effects in IT Service Provisioning
  Journal of the Korea society of IT services, Vol. 14, No. 2
- The Challenge of Retaining Customers Acquired with Free Trials
  1 April 2015 | Journal of Marketing Research, Vol. 52, No. 2
- The Perils of Proactive Churn Prevention Using Plan Recommendations: Evidence from a Field Experiment
  SSRN Electronic Journal, Vol. 32
- Network competition with income effects
  25 July 2014 | The RAND Journal of Economics, Vol. 45, No. 3
- Customer Complaints and Recovery Effectiveness: A Customer Base Approach
  1 September 2014 | Journal of Marketing, Vol. 78, No. 5
- Modeling Customer Opt-In and Opt-Out in a Permission-Based Marketing Context
  1 August 2014 | Journal of Marketing Research, Vol. 51, No. 4
- Estimating Demand for Mobile Applications in the New Economy
  Anindya Ghose,
  Sang Pil Han
  23 April 2014 | Management Science, Vol. 60, No. 6
- Optimal choice and consumption of cost cap tariffs: theory and empirical evidence
  13 May 2014 | Business Research, Vol. 7, No. 1
- Marketing in Computer-Mediated Environments: Research Synthesis and New Directions
  1 January 2014 | Journal of Marketing, Vol. 78, No. 1
- Online Fresh Grocery Retail: A La Carte or Buffet?
  SSRN Electronic Journal, Vol. 58
- Money and Privacy Android Market Evidence
  SSRN Electronic Journal, Vol. 24
- Dynamic pricing for subscription services
  Journal of Economic Dynamics and Control, Vol. 37, No. 11
- A Joint Model of Usage and Churn in Contractual Settings
  Eva Ascarza,
  Bruce G. S. Hardie,
  22 May 2013 | Marketing Science, Vol. 32, No. 4
- The Framing Effects of Multipart Pricing on Consumer Purchasing Behavior of Customized Information Good Bundles
  Kim Huat Goh,
  Jesse C. Bockstedt,
  27 July 2012 | Information Systems Research, Vol. 24, No. 2
- Operation Management
  5 December 2012
- When Random Assignment is Not Enough: Accounting for Intentional Selectivity in Experimental Research
  SSRN Electronic Journal, Vol. 31
- Usage Rates, Facebook Likes, and Online Piracy: Using Big Data to Manage Entertainment Products
  SSRN Electronic Journal, Vol. 36
- The Effects of Perceived Values of Mobile Shopping on Customer Loyalty and Purchase Intention
  The e-Business Studies, Vol. 13, No. 5
- Lock in and switch: Asymmetric information and new product diffusion
  13 April 2012 | Quantitative Marketing and Economics, Vol. 10, No. 3
- Customer Churn
  7 August 2012
- Ad Pricing by Multi-Channel Platforms: How to Make Viewers and Advertisers Prefer the Same Channel?
  Journal of Media Economics, Vol. 25, No. 3
- Price discrimination in service industries
  17 May 2012 | Marketing Letters, Vol. 23, No. 2
- Measurement of consumer preferences for bucket pricing plans with different service attributes
  International Journal of Research in Marketing, Vol. 29, No. 2
- Paying with Money or Effort: Pricing When Customers Anticipate Hassle
  1 February 2012 | Journal of Marketing Research, Vol. 49, No. 1
- Bibliography
  2 October 2015
- Joint Price and QoS Market Share Game with Adversarial Service Providers and Migrating Customers
- Network Competition with Income Effects
  SSRN Electronic Journal, Vol. 25
- Measuring Consumers' Preferences for Metered Pricing of Services
  4 December 2011 | Journal of Service Research, Vol. 14, No. 4
- The Impact of Tariff Structure on Customer Retention, Usage, and Profitability of Access Services
  Raghuram Iyengar,
  Kamel Jedidi,
  Skander Essegaier,
  Peter J. Danaher,
  15 July 2011 | Marketing Science, Vol. 30, No. 5
- Success Drivers of Fiction Books: An Empirical Analysis of Hardcover and Paperback Editions in Germany
  9 March 2011 | Journal of Media Economics, Vol. 24, No. 1
- Modeling Multivariate Distributions Using Copulas: Applications in Marketing
  Peter J. Danaher,
  Michael S. Smith,
  4 November 2010 | Marketing Science, Vol. 30, No. 1
- Paying with Money or with Effort: Pricing When Customers Anticipate Hassle
  SSRN Electronic Journal, Vol. 110
- A Joint Model of Usage and Churn in Contractual Settings
  SSRN Electronic Journal, Vol. 26
- Optimization and analysis of the profitability of tariff structures with two-part tariffs
  European Journal of Operational Research, Vol. 206, No. 3
- Managing the Online Crowd: Motivations for Engagement in User-Generated Content
  16 March 2015 | Journal of Media Business Studies, Vol. 7, No. 3
- Strategic Online and Offline Retail Pricing: A Review and Research Agenda
  1 May 2010 | Journal of Interactive Marketing, Vol. 24, No. 2
- An Interdisciplinary Perspective on IT Services Management and Service Science
  8 December 2014 | Journal of Management Information Systems, Vol. 26, No. 4
- Use of Pricing Schemes for Differentiating Information Goods
  Vidyanand Choudhary,
  25 March 2009 | Information Systems Research, Vol. 21, No. 1
- Buyer Uncertainty and Two-Part Pricing: Theory and Applications
  I. P. L. Png,
  Hao Wang,
  12 January 2010 | Management Science, Vol. 56, No. 2
- Customer Complaints, Defection and Lifetime Value
  SSRN Electronic Journal, Vol. 12
- A First-Passage Time Model for Predicting Inactivity in a Contractual Setting
  SSRN Electronic Journal, Vol. 13
- Dashboards as a Service
  17 August 2009 | Journal of Service Research, Vol. 12, No. 2
- A demand‐based model for the advance and spot pricing of services
  Journal of Product & Brand Management, Vol. 18, No. 7
- Price war with migrating customers
- The Role of Within-Brand and Cross-Brand Communications in Competitive Growth
  1 May 2009 | Journal of Marketing, Vol. 73, No. 3
- Quantifying the benefits of entry into local phone service
  16 September 2008 | The RAND Journal of Economics, Vol. 39, No. 3
- Market segmentation with mixture regression models: Understanding measures that guide model selection
  7 July 2008 | Journal of Targeting, Measurement and Analysis for Marketing, Vol. 16, No. 3
- Moving from Free to Fee: How Online Firms Market to Change Their Business Model Successfully
  1 May 2008 | Journal of Marketing, Vol. 72, No. 3
- A Conjoint Approach to Multipart Pricing
  10 October 2018 | Journal of Marketing Research, Vol. 45, No. 2
- Herausforderungen in der Musikindustrie
- Understanding Service Retention within and across Cohorts using Limited Information
  1 January 2008 | Journal of Marketing, Vol. 72, No. 1
- Managing Customer Relationships through Price and Service Quality
  SSRN Electronic Journal, Vol. 10
- Quantifying the Benefits of Entry into Local Phone Service
  SSRN Electronic Journal, Vol. 25
- A Model of Consumer Learning for Service Quality and Usage
  1 November 2007 | Journal of Marketing Research, Vol. 44, No. 4
- Does Uncertainty Matter? Consumer Behavior Under Three-Part Tariffs
  Anja Lambrecht,
  Katja Seim,
  Bernd Skiera,
  1 September 2007 | Marketing Science, Vol. 26, No. 5
- An Integrated Virtual Store-Based Approach for Price Determination Before Product Launch
  8 December 2014 | International Journal of Electronic Commerce, Vol. 11, No. 4
- Marketing Models of Service and Relationships
  Roland T. Rust,
  Tuck Siong Chung,
  1 November 2006 | Marketing Science, Vol. 25, No. 6
- Invited Commentary—Technology Innovation and Implications for Customer Relationship Management
  Baohong Sun,
  1 November 2006 | Marketing Science, Vol. 25, No. 6
- Asymmetric effects of dynamic usage behavior on duration in subscription-based online service
  1 August 2006 | Journal of Interactive Marketing, Vol. 20, No. 3-4
- Quantifying the Benefits of Entry into Local Phone Service
  SSRN Electronic Journal, Vol. 25
- Reference Price Research: Review and Propositions
  1 October 2005 | Journal of Marketing, Vol. 69, No. 4
- Transactions vs. Relationships: What Should the Company Emphasize?
  1 August 2005 | Journal of Service Research, Vol. 8, No. 1
- Marketing-Controlling von Abonnements im Verlagsgeschäft
  13 July 2005 | Controlling & Management, Vol. 49, No. S8
- Marketing-Controlling von Abonnements im Verlagsgeschäft
- Pricing of Software Services
  SSRN Electronic Journal, Vol. 48
- Effect of price on the diffusion of cellular subscriptions in Finland
  Journal of Product & Brand Management, Vol. 13, No. 3
- Is Having More Channels Really Better? A Model of Competition Among Commercial Television Broadcasters
  Yong Liu,
  Daniel S. Putler,
  Charles B. Weinberg,
  1 February 2004 | Marketing Science, Vol. 23, No. 1
- Price-Based Global Market Segmentation for Services
  1 July 2003 | Journal of Marketing, Vol. 67, No. 3
- Editorial: Compartmentalized Reviews and Other Initiatives: Should Marketing Scientists Review Manuscripts in Consumer Behavior?
  Steven M. Shugan,
  1 May 2003 | Marketing Science, Vol. 22, No. 2
- Marketing Perspectives on Federal Communications Commission Policies
  1 April 2003 | Journal of Public Policy & Marketing, Vol. 22, No. 1

Volume 21, Issue 2

May 2002

Pages iii-222

Article Information

Supplemental Material

Metrics

Information

Received:February 08, 2001
Published Online:May 01, 2002

Cite as

Peter J. Danaher, (2002) Optimal Pricing of New Subscription Services: Analysis of a Market Experiment. Marketing Science 21(2):119-138.

https://doi.org/10.1287/mksc.21.2.119.147

Keywords

PDF download

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Available Issues

Optimal Pricing of New Subscription Services: Analysis of a Market Experiment

Supplemental Material

Volume 21, Issue 2

Article Information

Supplemental Material

Metrics

Information

Cite as

Keywords

Sign Up for INFORMS Publications Updates and News