Customer preferences and service pricing in a non-profit organization

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School of Business | Master's thesis
Degree programme
Information and Service Management (ISM)
66 + 3
Increasing competition and commercialization of some non-profit sectors in Finland has created the need for non-profit organizations to better understand their customers’ preferences and strategically make decisions about developing their offerings and pricing. Non-profit organizations serve a social mission and have an objective other than profit maximization, which creates a unique environment for them to make decisions about pricing. The non-profit sector currently has limited information about customers’ willingness to pay for services provided by a non-profit organization and about how customers perceive such organizations as commercial service providers. In the end, the goal of these organizations is to fulfill their mission, which also requires staying financially viable, so they too must keep the customers’ needs in the center of their decision making. While there is wide research on service pricing and brand image in the for-profit context, research on these topics in the non-profit sector is limited. This thesis contributes to the research field by conducting a case study on service pricing in a Finnish non-profit sports club. Attributes related to the pricing model of the case organization and brand image items from earlier research were combined to create a survey that received 444 responses from the customers of the case organization. Choice-based conjoint analysis, the main method employed in this thesis, is commonly used for studying customer preferences and willingness to pay. It was utilized to reveal the preferences of the customers. Exploratory factor analysis was employed to analyze the perception the customers have of the organization in terms of non-profit characteristics. The analyses resulted in insights into the preferences of the customers and their willingness to pay for the current service options. The perception of the customers, used to supplement their preferences on pricing, was summed up by the two constructs “meaningfulness” and “stability”. The preferences were used for clustering of the customers into interpretable segments and the perceptions were used to profile the segments along with demographics. The findings provide contributions to the pricing research in non-profit organizations as well as valuable managerial implications for the case organization. The customer segments identified based on the preferences are extremely useful when designing service options and developing the pricing model. The willingness to pay of the customers, discovered in this thesis, shows support for the current pricing level of the case organization in the most popular service options but also presents opportunities to improve the offerings in the future.
Thesis advisor
Halme, Merja
non-profit, preferences, pricing, willingness to pay, Finland
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