Trading Effort for Money

Abstract

Services involve cocreation, such that businesses often treat consumers as partial employees to help boost productivity. However, not all consumers are intrinsically motivated to engage in the effort required to produce a service. Hence, service providers offer monetary incentives to compensate consumers for their effort by using cocreation options where consumers can either spend their own effort in exchange for extra savings or have service providers perform such options and incur additional cost. Consumers are likely to evaluate such options by determining the price that they would be willing to pay and the amount that they expect to save if they were to perform such options. In eight studies, this research shows that consumers seek more compensation for their effort than the amount that they are willing to pay a service provider. However, characteristics of the service option (expected vs. not expected), the service provider (fit with effort), the service itself (cost of labor), and consumers (budget constraints, expertise) moderate the differences between willingness to pay and expectations of compensation. Hence, companies that are expanding their markets and pursuing strategies that offer both full service and do-it-yourself service options would need to (a) consider the fit of such options with the positioning of the brand and (b) identify appropriate consumer segments that would be favorably disposed toward such options. Identifying such options and their prices would lead to effective price structures that will provide not only value to consumers but also profitability to firms.