Two essays on digital and multi-channel marketing pricing strategy

Pricing is the process whereby a business sets the price at which it will sell its products and must be considered as a core part of the business's marketing plan. In recent years, there has been a growing awareness of the complex nature of price as a determinant of consumer decision making process. Recent research indicates there is no simple explanation of how price influences firm performance and individual consumer purchase decisions. The pricing strategy in traditional brick-and-mortar stores has received consistent attention from both academia and industry. However, as the raising of digital technology, the evolving business circumstance changed, or even re-introduced, many practically and theoretically important questions. Given this importance, the two essays tackle the strategic pricing strategy in the two critical perspectives of marketing — advertising and retailing. In the first essay, I explore the effects of displayed product price on keyword advertising performance in online shopping websites, as well as on consumers’ decision processes. With a hierarchical Bayesian model using a unique data set from a leading electronic shopping platform and a simulated experiment, I empirically test the asymmetric effects of price rank on advertising performances (i.e., click-through rates and conversion rates) in study one and the underlying mechanism in study two. Specifically, I find that consumers tend to click more on extreme price options (i.e., highest or lowest) in the early phases of the purchase funnel, which serve as anchors to evaluate a broad range of options. Clicks at later stages, which tend to convert to purchases, instead are more likely for moderately priced options, which offer a compromise across different product features. The effects of price rank diminish among advertisements sponsoring more specific keywords but grow for those sponsoring more popular keywords. This essay demonstrates that the keyword advertisements provides a context for price comparison, which further influences consumers’ responses toward advertisements. While the first essay focuses on gaining competitiveness through enhancing the price competition in digital advertising context, the second essay focuses on avoiding price competition in multi-channel retailing context through switching the business focus. The second essay explores the causal effects of multi-channel retailer implementing cross-channel price integration. Leveraging a revised pricing policy implemented by one of the leading house appliance retailers, I empirically investigate how cross-channel price integration affects product sales and consumer preferences. This change of cross-channel pricing strategy reveals varying impact across time, products, channels, and customer segments. In the short term, price integration leads to a 14.70% decrease in sales of products without services but a 14.68% increase in sales of products with services. The price integration effect is more positive in the long run, such that sales of products increase by 10.07% without services and 36.07% with services. Further, using a latent class model with zero-inflated Poisson framework, I empirically differentiated the effects of price integration on three consumer segments with different preferences (i.e., lovers, haters and adaptors). The findings of the second essay contribute to the multi-channel pricing literature by providing an empirical examine of the effectiveness of cross-channel price integration and consumer migration. The findings of the two essays contribute to the pricing, keyword advertisements and multi-channel literature, and shed lights on the strategic implications of pricing activities. Specifically, the first essay connects the pricing literature, consumer search and keyword advertising literature by exploring the effects of contrast among displayed product prices in the keyword advertising context. This essay is among the first few to investigate how advertised product price affects advertising performance. The study suggests the advertised product price display two contrasting effects on consumers’ clicking and purchasing behaviors along their purchase funnel. In addition, the research extends understanding of two keyword characteristics by theoretically differentiating keyword specificity and keyword popularity. The second essay connects the multi-channel pricing literature and transaction value literature by empirically examine the effects of retailers implementing cross-channel price integration policy. Advancing prior research on perceived transaction value and multi-channel pricing literature, this research proposes two contrasting mechanisms (i.e., price change and pricing consistency), through which the cross-channel price integration affects the product sales and consumer sales. The empirical findings shed lights on managerial implications to multi-channel retailers

Buyer beware : consumer response to manipulations of online product reviews

Online product reviews have become an important and influential source of information for consumers. Firms often manipulate online product reviews to influence consumer perceptions about the product, making it a research topic of urgent need for theory development and empirical investigation. In this thesis, we examine how consumers perceive and respond to the three commonly used manipulation tactics. Firstly, an exploratory pre-study via in-depth interviews with online shoppers indicates that consumers commonly have the knowledge for online review manipulations as well as for detecting them. In the first study, a survey was used to investigate the three popular manipulation tactics in terms of ethicality and deceptiveness. They rated hiding/deleting unfavorable messages as the most deceptive and unethical, followed by anonymously adding positive messages, and then offering incentives for posting favorable messages. In study 2, in a simulated field experiment, we introduce persuasion knowledge to further examine the negative influence of review manipulations on consumers’ attitudes. The results suggest that review manipulation increases suspicion of manipulations but can hardly reduce purchase intention of focal products. We also find that consumers’ persuasion knowledge enhances suspicion of manipulation, but lessens the negative impact of suspicion on purchase intention. The third study uses secondary data of a branded e-retailer and its third party website to cross-validate the effect of manipulations on product sales. The results confirm our hypotheses that review manipulation are effective in promoting sales; however, this influence would decrease over time. This research contributes to the online marketing literature by augmenting the Information Manipulation Theory and Persuasion Knowledge Model to examine the deceptive persuasion in the online context and its impact on consumer behavior. Furthermore, we also contribute to the literature of online WOM by empirically examining the influence of review manipulations on sales. Our findings provide valuable insights to practitioners and policy makers on the pitfalls of online manipulation activities and the need to ensure the healthy development of e-commerce

What do seller manipulations of online product reviews mean to consumers?

There is growing evidence that consumers are influenced by online product reviews when making a variety of purchase decisions. Firms are therefore tempted to monitor and manipulate online product reviews on the company\u27s website or forum to influence consumer perceptions by anonymously posting positive reviews, hiding or deleting unfavorable reviews, or offering rewards to consumers who post favorable reviews. Our review of the literature has revealed a surprising shortage of work directed at the development of an integrative theoretical framework or rigorous empirical studies on the effectiveness and the exact impact of such activities on the payoffs to various parties. This study fills a void in the online marketing and information manipulation literature by studying consumers\u27 suspicion, awareness and evaluation of specific manipulation tactics through in-depth interviews with 16 experienced online shoppers in China. We adopt a grounded theory approach to analyze the qualitative data and end up with a series of research propositions (research framework) for further testing and verification. The findings about consumers\u27 views of online manipulations would provide valuable insights to industry associations and policy makers on whether and how to regulate online manipulation activities to ensure the healthy development of the e-commerce