Work more, pay more? The impact of customer participation on customer pay-what-you-want payments

Abstract

PurposeThe optimal level of customer participation is an important factor in service design. However, researchers know little about the impact of customer participation for their willingness to pay and hence organizations’ financial outcomes. This paper examines the impact of customer participation in a pay-what-you-want (PWYW) pricing system, allowing customers to pay any price they want for a product or service.Design/methodology/approachThis paper reports the results of three experiments, in which the authors manipulated the level of customer participation (Study 1: Low versus high, Study 2: Medium versus high, Study 3: Low versus medium versus high) and measured customers' PWYW payments (Studies 1–3), customer satisfaction (Studies 1–3), perceived equity (Study 3) and perceived enjoyment (Study 3). Studies 1 and 3 were scenario-based experiments, while study 2 was a field experiment. Study 3 was preregistered.FindingsThe results support a direct effect of customer participation in service production on customer PWYW payments, yet only when comparing low to high levels of customer participation. High levels of customer participation lead to a decrease in perceived equity and an increase in perceived enjoyment, which in turn spilled over to customer PWYW payments through customer satisfaction.Originality/valueThis research provides causal evidence at the individual level of analysis for the relationship between customer participation in service production and financial results. The paper also provides insights into its underlying mechanisms.