Perceived value and price of digital products:The contribution of consumer perception to pricing

The pre-existence free version of a digital product increases the profit potential of a paid version, that’s why freemium model is widely spread, but organizations still have difficulty establishing the price of their digital products. This paper proposes an adjustment to pricing processes of the paid version of a digital product, with the contribution of consumer perception through the collection and understanding of the perceived value of the free version. An instrument was adapted from a multiple factor construct of perceived value to investigate over a hypothetical paid version of WhatsApp. A total of 523 observations were obtained, which were subjected to correlation analysis and partial least square structured equation modeling to identify the contribution of perceived value to pricing. This made it possible to establish that consumers perceive WhatsApp has good value, and the perceived value has predictive strength for the consumer’s perception of the paid version; but the factors of perceived value have different impacts and informative levels, so each one will have different relevance to the pricing. By elucidating these dynamics, our findings may help managers gain essential insights for making informed pricing decisions and encourage them to innovate in pricing as a significant competitive advantage.