Many service providers offer supplementary products related to their ongoing services (e.g., fitness centers offer fitness smartwatches). In seven studies, we show that the payment method for such supplementary products (multiple payments vs. a single lump sum) affects customers’ tendency to defect from the provider’s core service.
Specifically, when customers pay for add-ons in multiple payments—provided that (i) they perceive the add-on as being bundled with the core service, and (ii) they payment period has an endpoint—they are initially less likely to defect from the service provider than when they pay in a single payment. Over time, however, as payments are made, this gap closes, such that defection intentions under the two payment methods eventually become similar.
We propose that this phenomenon reflects “commitment projection,”, wherein a decrease in customers’ commitment to the add-on product over time is projected onto customers’ commitment to the service provider.
These findings carry important managerial implications, given that many service providers offer add-on products in multiple-payment plans, and that customers’ defection decisions substantially affect firms’ profitability.