On-demand features: Consumer reactions to tangibility and pricing structure

Abstract As a service innovation in the sharing economy, on-demand features (ODFs) allow customers to temporarily access additional features of a product they already own in return for a fee. Using ODFs, manufacturers can infuse existing product-centric business models with sharing economy and servitization principles, in order to generate recurring revenues. This article conceptualizes the novel phenomenon and delineates it from other concepts. Moreover, based on two experimental studies and drawing from fairness theory, first evidence is provided for how consumers react to key characteristics of ODFs, namely their tangibility and pricing structure. While intangible, software-based ODFs appear to find acceptance, consumers perceive on-demand access to tangible, hardware-based features as unfair, which explains their reduced purchase intent. Moreover, fairness perceptions and behavioral intentions are more positive towards ODFs that offer flat rate pricing compared to those that employ a pay-per-use pricing structure.