Attribute-based choice model and willingness to pay for industrial services

Abstract

PurposePricing is widely acknowledged as a market entry challenge for servitising companies. The purpose of this research is to ascertain the attributes that contribute to willingness to pay (WTP) for industrial services and suggest incorporating those attributes to a pricing model.Design/methodology/approachThree attributes (Quality of Service, Nearness of Service Provider and Brand Equity of Service Provider) were analyzed at three respective levels to ascertain their importance on WTP. Conventional conjoint analysis (CCA), using an orthogonal design, was the method used. The 346 respondents were decision-makers and top management professionals from various industries.FindingsBrand Equity emerged as the most significant attribute contributing to WTP, having more than 45% importance – followed by the Quality and Nearness.Research limitations/implicationsThe scope of the study is limited to the industries and its Allies. However, the relative importance of the attributes may vary depending on the type of service.Practical implicationsThe importance of attributes and their WTP preference helps future researchers create a pricing model involving these attributes. This helps service providers price their services rationally, thus succeeding in servitization.Social implicationsProduct life is extended because the manufacturers themselves are servicing it and also help recycle the product with their expertise. Servitization is also helpful for the Indian economy, as it is turning into a manufacturing economy.Originality/valueThis research investigates three attributes that contribute to WTP, in accordance with their level of contribution. It also provides a direction to establish an adequate pricing model for industrial services.