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Determinants of customer price sensitivity: an empirical analysis

Sérgio Dominique-Ferreira (School of Management, Polytechnic Institute of Cavado and Ave, Barcelos, Portugal and School of Economics, University of Porto, Porto, Portugal)
Helder Vasconcelos (School of Economics, University of Porto, Porto, Portugal)
João F. Proença (School of Economics, University of Porto, Porto, Portugal)

Journal of Services Marketing

ISSN: 0887-6045

Article publication date: 9 May 2016

6279

Abstract

Purpose

Consumer price sensitivity has become a major issue over the past few decades. This paper aims to investigate the importance that insurance customers give to premiums, insurers, intermediary recommendations and bundling strategies. The relationship between attributes and consumer price sensitivity is also studied.

Design/methodology/approach

To calculate the importance of attributes and part-worth utilities, a Conjoint Analysis with Full Profile was performed. To segment the market, a two-stage cluster analysis was performed. The traditional formula for estimating price elasticity of demand was also used.

Findings

Price sensitivity is affected by the level of purchase involvement, bundled discounts and brand loyalty. Also, brand loyalty has a strong influence on customer acceptance of bundled discounts. Price bundling increases a firm’s revenues and profits.

Research limitations/implications

The size of the sample of the second stage of the research could be higher.

It would also be interesting to have the collaboration of an actuary to carry out more precise analysis of premium estimation of bundling strategies and to study the ideal number of products that would compose the bundling strategy. Moreover, it could be relevant to consider life insurance products as part of the bundling strategy. It would also be interesting to study whether there is any benefit in applying the bundle discount to the anchor product instead of applying it to the accessory product.

Practical implications

Insurers and intermediaries can benefit from price bundling strategies to increase sales and profit.

Originality/value

The study contributes to the service marketing literature and marketing of the insurance sector by providing empirical evidence of the impact of price bundling on insurance customer sensitivity, with the use of a methodological and experimental approach.

Keywords

Acknowledgements

The authors are very grateful to the Editors (Professor Steve Baron and Professor Rebekah Russell-Bennett), to the Associate Editor (Professor Javier Reynoso) and to three anonymous referees for their thorough and thoughtful reports.

Citation

Dominique-Ferreira, S., Vasconcelos, H. and Proença, J.F. (2016), "Determinants of customer price sensitivity: an empirical analysis", Journal of Services Marketing, Vol. 30 No. 3, pp. 327-340. https://doi.org/10.1108/JSM-12-2014-0409

Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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