Pricing, Frills, and Customer Ratings

Kuksov, Dmitri; Ying Xie
September 2010
Marketing Science;Sep/Oct2010, Vol. 29 Issue 5, p925
Academic Journal
This paper explores whether and how a firm should adapt its strategy in view of consumer use of prior customer ratings. Specifically, we consider optimal pricing and whether the firm should offer an unexpected frill to early customers to enhance their product experiences. We show that if price history is unobserved by consumers, a forward-looking firm should always modify its strategy from single-period optimal one, but it may be optimal to do so by lowering price, by lowering price and offering frills, or by raising price and offering frills, depending on the market growth rate. Specifically, the last strategy becomes optimal when market growth rate is high enough. The results are similar when the price history is observed by consumers, except that no deviation from single-period profit maximization choices is optimal when market growth is low enough. We also analyze whether the firm should prefer that the price information be stated in or left out of consumer reviews. In addition, in considering the effects of consumer heterogeneity, we conclude that the optimal firm's effort to affect ratings is higher when the idiosyncratic part of consumer uncertainty is larger.


Related Articles

  • Marketing Matters When Strategies Match Tactics. Goldglantz, Harvey F. // Pest Management Professional;Oct2013, Vol. 81 Issue 10, p68 

    The article focuses on matching tactics with marketing strategies to achieve success in business. It states that strategy is a plan of action which identifies the goals of the organization. It mentions that tactics are the means in achieving the strategic intent and subgoals. It adds that...

  • THE INTERDEPENDECY OF ECOLOGICAL AND HEALTH ISSUES IN THE CHOICE OF ORGANIC FOODS. Pál, Zsuzsa // Annals of the University of Oradea, Economic Science Series;2012, Vol. 21 Issue 1, p1187 

    In the last two decades the number of the studies on actual and potential consumer's behavior toward the organic foods has been increased considerably. The main issues investigated by these studies are concentrated among themes like motivation, purchasing intention, barriers of the adoption, and...

  • When Advertising Integration with Media Content Fails and Succeeds. Jing Wang; Calder, Bobby // Advances in Consumer Research;2007, Vol. 34, p686 

    Consumers are exposed on a daily basis to more and more advertising. A key strategy that some advertisers have embraced in the face of this increasing level of media clutter is to integrate their advertising with media content. In Study 1, we show that if the viewer is highly engaged by the...

  • The Executive Reel. Jones, Kensinger // Journal of Advertising;1972, Vol. 1 Issue 1, p24 

    In this article the author describes a technique that an advertising agency uses to analyze their own commercials. The author notes that the majority of advertising is successful in producing a quality advertisement for a useful product. He examines how purchasing decisions are being made and...

  • Trade Area Analysis Using Trend Surface Mapping. PETERSON, ROBERT A. // Journal of Marketing Research (JMR);Aug1974, Vol. 11 Issue 3, p338 

    Trade area analysis has long been recognized as one of the fundamental prerequisites for successful marketing management. Not only is such analysis essential for effectively allocating firm resources, but it is vital as an initial step in understanding consumer behavior [18, pp. 128-9]. Thus,...

  • Issues and Advances in Segmentation Research. Wind, Yoram // Journal of Marketing Research (JMR);Aug1978, Vol. 15 Issue 3, p317 

    The author reviews the current status and recent advances in segmentation research, covering segmentation problem definition, research design considerations, data collection approaches, data analysis procedures, and data interpretation and implementation. Areas for future research are identified.

  • Plan for success. BORTH, KELLY // Smart Business Columbus;Sep2013, Vol. 21 Issue 12, p5 

    In this article, the author shares strategies to make a marketing plan as per her experience as a marketing professional. It suggests the end of third quarter of 2013 as an optimum time to begin the development of a marketing plan for 2014. The steps suggested include researching to know about...

  • Prospects Prefer Stories. Ryan, John // Sales & Service Excellence Essentials;Apr2013, Vol. 13 Issue 4, p1 

    The article offers guidelines on the creation of effective story-based marketing strategies. The use of the straight-forward language of customers who utilized a product or service is highlighted. The significance of allowing a customer share her/his story is emphasized which enables the...

  • Great Service. Hodes, Bruce // Sales & Service Excellence Essentials;Apr2013, Vol. 13 Issue 4, p14 

    The article offers guidelines on how to provide excellent customer service in the U.S. Two essential factors to be considered when adding value to a service proposition are outlined which include timing and context. The experiences of the author about great customer services provided by hotels...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics