Sampling,discounts or pay-what-you-want: Two field experiments

Free sampling and price discounts are important, popular promotional tools used to attract new customers by reducing their risk of trial. The authors investigate pay-what-you-want (PWYW) as an alternative promotional tool to free sampling and price discounts in two field experiments. The authors find significant differences in perceived promotional characteristics and relevant performance measures, such as trial and repeat purchases by new customers. The entertaining and innovative character of PWYW induces many people to try it. PWYW may yield a higher repeat purchase rate of new customers, and sellers using PWYW benefit from higher word-of-mouth behavior. Finally, PWYW yields the highest promotional revenues.     

A Preliminary Study of Fintech Industry: A Two-Stage Clustering Analysis for Customer Segmentation in the B2B Setting

ABSTRACT

This practitioner note proposes a new approach considering two-stage clustering and LRFMP model (Length, Recency, Frequency, Monetary and Periodicity) simultaneously for customer segmentation and behavior analysis and applies it among the Iranian Fintech companies. In this practitioner note, the K-means clustering algorithm and LRFMP model are combined in the customer segmentation process. After initial clustering, for a better understanding of valuable customers, additional clustering is implemented in segments that needed further investigation. This approach contributes to a better interpretation of different customer segments. Customer segments, consisting of 23524 business customers are analysed based on their characteristics and appropriate strategies are recommended accordingly. The first stage clustering result shows that customers are best segmented into four groups. The first and fourth segments are clustered again and the final 11 groups of customers are determined. This note provides a systematic and practical approach for researchers and practitioners for segmentation, interpretation, and targeting of customers especially in the B2B setting and the Fintech industry and helps managers to make effective marketing strategies and enhance customer relationship and marketing intelligence.     

Erratum to: Competitive price-matching guarantees under imperfect store availability

This paper analyzes the role of verification of product availability in the context of competitive price-matching guarantees (PMGs). PMGs involve a retailer matching any lower price offered by competition for an identical item. Until now, researchers focused on the scenario where customers can receive the lower price with a simple proof (e.g., weekly flyers). However, in reality, retailers reserve the right to verify the availability at the competitor location; if the product is not available there, then the price-match request might be declined. We develop a price competition model to investigate the effects of verification of availability on price decisions and profit levels of competing retailers. In our model, demand is driven by the availability levels of retailers as well as the price-search cost and store-switching cost incurred by customers. Price-search cost leads to two customer segments: uninformed ones who have no knowledge about prices, and informed ones who are knowledgeable about prices. On the other hand, store-switching cost determines how many customers search for the product at an alternative location because of high price or unavailability at their preferred retailers. Our analysis reveals, among others, that the outcome of availability verification is linked to three factors: price-search cost, store-switching cost, and the reservation prices of customer segments. Verification of availability allows retailers to price discriminate customers who could not be discriminated otherwise, specifically those belonging to the informed customer segment. Furthermore, it is a significant profit-enhancing mechanism only if there are switching customers in the market. Interestingly, even though customers view the verification of availability as a hassle, it can actually result in them paying lower retail prices by increasing the level of retail price competition.     

Investigating the impact of customer stochasticity on firm price discrimination strategies using a new Bayesian mixture scale heterogeneity model

In this paper, we study the impact of customer stochasticity on firm price discrimination strategies. We develop a new model termed the Bayesian Mixture Scale Heterogeneity (BMSH) model that incorporates both parameter heterogeneity and customer stochasticity using a mixture model approach, and demonstrate model identification using extensive simulations. We estimate the model on yogurt scanner data and find that compared to the benchmark mixed logit and multinomial probit models, our model shows that markets are less price elastic, and that a majority of customers exhibit stochasticity in purchases; our model also obtains better prediction and more profitable targeting strategies.     

Why offer lower prices to past customers? Inducing favorable social price comparisons to enhance customer retention

Price discrimination policies vary widely across companies. Some firms offer new customers the lowest price; others give preferential prices to their past customers. We contribute to the literature on price discrimination in behavior-based pricing by exploring how customers’ social price comparisons, i.e., comparing one’s price to that received by similar peers, impact the optimal structure of price discrimination. Social price comparisons have a negative (positive) impact on customers’ transaction utility if the price charged to past customers is higher (lower) than a new customer’s price. Using an analytical model with vertically differentiated firms, we show that a firm with relatively large market share will reward its past customers with relatively low prices when social price comparisons have a sufficiently large impact on utility. Furthermore, we find that social price comparisons lead to a relaxation of the price competition for new customers. Thus, both firms can earn higher profits when such comparisons are made than when they are absent. We also examine how other factors, such as horizontal competition and strategic customers, interact with social price comparison concerns to impact pricing strategies. Finally, we show how pricing behavior differs when price comparisons are based on historic reference prices rather than on peers’ prices.     

The effect of permanent product discounts and order coupons on purchase incidence,purchase quantity,and spending

This paper examines the influence of a permanent discount strategy on customer purchase behavior, i.e., purchase incidence in each week, purchase quantity (in units), and total order spending (in CNY). Permanent discounts are defined as discounts continuously provided by retailers. We identify two types of permanent discounts, namely, product-specific price discounts (PD) and order coupons (OD, which can be redeemed for a total order). We collect transactional data from a Chinese online retailer and empirically examine the effects of the two types of permanent discounts and customers’ expectations of PD and OD. We find nonlinear relationships between permanent discounts and customer purchase behavior. PDs negatively influence spending when they are lower than 19% but show a positive effect beyond this threshold, hence depicting a U-shaped relationship. They also affect purchase quantity positively but at a decreasing rate. Customer expectations of PD influence purchase incidence, spending, and purchase quantity following a U-shaped patter with a positive influence appearing when PD expectations are high than 31%, 27%, and 18% respectively. On the other hand, ODs influence spending and purchase quantity positively at an increasing rate. Customer expectations of OD influence purchase incidence, spending, and purchase quantity following a U-shaped relationship where the positive influence on purchase incidence shows beyond OD expectations of 426 CNY, and the positive effect appearing on spending and purchase quantity when these expectations are higher than 34 CNY. We also find that customer expectations of discounts interact with current discount levels in their influence on spending. Combining these results and considering that order coupons negatively affect the profit margin of the total basket, we suggest that retailers should offer order coupons with relatively low value but product-specific price discounts with high discount depth.     

Better or Worse? Effects of online promotion habits on customer value: An empirical study

Online frequent and uninterrupted price discounts easily cause customers to form general tendencies to purchase promotions, or ‘online promotion habits’. Compared with offline promotion shopping, the distinct features of online promotion shopping make customer behaviours highly changeable and leave the effects of online promotion habits on customer value a puzzle. Using a dataset of real transactions from a leading online apparel retailer in China, this study makes continuous observations of customers’ online promotion habits. Drawing on the behavioural learning theory, we empirically investigate the dynamic effects of online promotion habits on customer value. The results reveal that after customers form online promotion habits, their customer value increases significantly. Furthermore, among customers with online promotion habits, online promotion habits exert an inverted U-shaped effect on customer value. Namely, as online promotion habits strengthen, customer value increases accordingly, yet negative outcomes show if online promotion habits exceed a certain level. We discuss the theoretical and managerial implications of our findings, which will enable researchers and practitioners to measure and dynamically manage customers’ online promotion habits.     

Customer perceived value,satisfaction, and loyalty: the role of willingness to share information

This study proposes and tests an integrative model to examine the relationships among customers’ willingness to share information, satisfaction, perceived value, and loyalty in a retailing context. This study extends research on customers’ willingness to share information from trust and privacy concerns toward key outcome measures such as perceived value, customer satisfaction, and loyalty, and is thus among the first to model customers’ willingness to share information with companies in robust theoretical retailing frameworks. The proposed relationships were tested using data from two retailing contexts – groceries (N = 429) and do-it-yourself (DIY) (N = 895). Findings from the two samples suggest that both perceived value and satisfaction are significant determinants of customers’ willingness to share information with a company. Although some differences emerge in the two studies, structural modeling largely supports the hypothesized framework and positions customers’ willingness to share information as an important antecedent of their loyalty intentions and behavior. This study provides practitioners with preliminary insight into the relationship between willingness to share information and perceived value, customer satisfaction, and customer loyalty. This study advances retailing research, as it is one of the few empirical studies investigating the role of customers’ willingness to share information in driving loyalty and its relationship with perceived value and satisfaction in a retailing context.     

Competitive price-matching guarantees under imperfect store availability

This paper analyzes the role of verification of product availability in the context of competitive price-matching guarantees (PMGs). PMGs involve a retailer matching any lower price offered by competition for an identical item. Until now, researchers focused on the scenario where customers can receive the lower price with a simple proof (e.g., weekly flyers). However, in reality, retailers reserve the right to verify the availability at the competitor location; if the product is not available there, then the price-match request might be declined. We develop a price competition model to investigate the effects of verification of availability on price decisions and profit levels of competing retailers. In our model, demand is driven by the availability levels of retailers as well as the price-search cost and store-switching cost incurred by customers. Price-search cost leads to two customer segments: uninformed ones who have no knowledge about prices, and informed ones who are knowledgeable about prices. On the other hand, store-switching cost determines how many customers search for the product at an alternative location because of high price or unavailability at their preferred retailers. Our analysis reveals, among others, that the outcome of availability verification is linked to three factors: price-search cost, store-switching cost, and the reservation prices of customer segments. Verification of availability allows retailers to price discriminate customers who could not be discriminated otherwise, specifically those belonging to the informed customer segment. Furthermore, it is a significant profit-enhancing mechanism only if there are switching customers in the market. Interestingly, even though customers view the verification of availability as a hassle, it can actually result in them paying lower retail prices by increasing the level of retail price competition.     

Can the label ‘member’ in a loyalty program context boost customer satisfaction?

ABSTRACT

This study examines if labeling customers as ‘member’ versus ‘non-member’ in the context of a firm’s loyalty program can influence the customers’ evaluations of the firm. It was assumed that firms’ membership-related labels, which typically are euphemisms in relation to the mere discounts offered by many loyalty programs, can (a) prime customers so that positively charged content in a general member category is activated, and that (b) this content can have a positive impact on evaluations of firms with loyalty programs. An experiment showed that evoking customers’ membership status resulted in a higher level of sense of belonging, and higher customer satisfaction, for members than for non-members. Sense of belonging mediated the impact of evoking membership status on customer satisfaction. A second study confirmed that the content of customers’ general member construct is indeed associated with sense of belonging and satisfaction.     

Weathering consumer pricing sensitivity: The importance of customer contact and personalized services in the financial services industry

In a low-cost switching environment, certain firm actions undertaken by service employees can improve consumer loyalty, satisfaction and reduce price sensitivity. Interestingly, consumers' satisfaction levels can actually increase when experiencing a price increase. Counterintuitively, when consumers experience a price decrease, their loyalty decreases, suggesting that it might be in the firm's best interest to not offer such pricing discounts as these customers may be hypersensitive to price. Overall, it appears much easier for service employees to positively influence customer satisfaction than customer loyalty; satisfied consumers do not necessarily become loyal consumers.     

Exploring customers’ store loyalty using the means-end chain approach

The study is aimed at revealing the relationships in terms of customer store loyalty by using means-end chains (MEC) analysis, in order to examine the linkages between department stores’ service attributes, involvement, satisfaction and loyalty each of which the customer regards as important. In the study, customer involvement, satisfaction and service quality are connotations that are strongly linked with the customer store loyalty, with service quality being the element to which the platinum tier customers attach the most importance. Data are gathered for a MEC analysis by interviewing 34 platinum tier customers of department stores individually. The results reveal that platinum tier customers are department store customers with a relatively high degree of involvement which is likely to have a positive impact on both core and peripheral service quality, satisfaction toward store loyalty. Although there are numerous studies in the literature that use the means-end chain model to examine customer value within the realm of consumer behavior, few studies discuss platinum tier customers’ store loyalty which is a phenomenon currently receiving a great deal of interest. In contrast to prior research, three connotations are integrated in the study to represent the content and structure of stores’ loyalty attributes for MEC analysis which can offer a different perspective and better understanding for developing highly targeted marketing strategies.     

The role of customer gratitude in making relationship marketing investments successful

This paper recognises that customer loyalty is important for many competitive organisations, and that retail firms make investments to build and maintain loyal relationships with their existing and potential customers (e.g. loyalty programs). However, there has been little focus on the mechanisms by which these relationship investments operate to achieve customer loyalty. This paper examines one mechanism, namely customer gratitude, which works to make a firm’s relationship marketing investment a success or a failure. Using data from 1600 undergraduate students, this study empirically confirms the mediating role of customer gratitude between the customers’ perceptions a firm’s relationship marketing investments and customers’ perceptions of the value of the relationship with the firm. Further, a significant moderating effect of perceived benevolence on the relationship between customers’ perceptions a firm’s relationship marketing investments and customer gratitude was identified. For theorists, this customer gratitude model offers a better psychological explanation of how relationship marketing investments operate to improve the value that customers place on their relationships with retailers. Our research suggests that managers should invest resources to stimulate customer gratitude in order to build strong customer–seller relationships.     

Examining the gamified effect of the blindbox design: The moderating role of price

A blindbox is a product design that incorporates uncertainty; a customer who purchases a blindbox receives a random product from a product series. The recent popularity of blindbox products calls for a rigorous examination of this product design. This study proposes a research model to examine the blindbox effects in an online retailing context. Following the uncertainty principle of gamification marketing, we hypothesize that the blindbox design can induce gameful experiences, thereby increasing customers’ brand engagement and purchase intention. We also investigate the moderation effect of an important design factor: the product price. Data from two experiments support the blindbox effects: this design leads to higher gameful experiences and marketing outcomes than a certain product. Moreover, the blindbox effects largely depend on the price: the effects are more salient at a premium price level and diminish below the average market price. Furthermore, we rule out two rival explanations, novelty and presentation richness, through supplementary tests. The findings, design issues, contributions, and directions for future research are discussed.     

Empirical decomposition of customer responses to discount coupons in online FMCG retailing

This study considers the efficacy of ‘general’ discount coupons: i.e. those whose discounts apply storewide. We decompose purchase behavior into three effects: spending, basket size, and inter-purchase time. The effects of dollar-off vs. percentage-off coupons are examined for 3,827 customers who had redeemed both types of coupon framings in an Australian online fast-moving consumer goods (FMCG) retail context. Results from Bayesian simultaneous equation modelling confirm that compared to dollar-off coupons, percentage-off general coupons induce customers to both spend more and shop more items. Moreover, by capturing consumer heterogeneity the customer base can be segmented into several clusters based on their reaction to coupons.     

Customer defection due to service elimination and post-elimination customer behavior: An empirical investigation in telecommunications

Service industries require rapid innovations in their service portfolios to gain and maintain competitive advantages. Service elimination is a potential tool for portfolio renewal, though it might threaten increased defection rates. To contribute to both service elimination and customer defection literature, this paper proposes a model of customer responses to service elimination, with practical implications for decision-makers in rapidly innovating telecommunication markets.In particular, the main study, conducted in the context of Hungary’s telecommunications sector, reveals that customers’ tenure, usage intensity, and age reduce the negative effects of a price increase on their defection; the price increase, degree to which customers interact with service providers, customer defection, and competitive effects in turn increase post–service elimination usage intensity.These findings suggest implementation strategies that can reduce customer defection following price increase due to service elimination, by focusing on new customers, light users, and the quality of customer interactions.     

A comprehensive examination of internet banking user behaviour: evidence from customers yet to adopt,currently using and stopped using

Abstract

Despite the surge in interest in research on customers’ adoption of internet banking (IB), how discontinued users can be brought back to IB has not received much attention. To respond to this question and to provide a comprehensive understanding of IB customer behaviour, we develop a conceptual model grounded on the extended technology acceptance model, and empirically validate it using a sample of 614 IB customers (including those yet to adopt, current users and discontinued users) from China. Perceived value is the most important driver for explaining all categories of customers’ IB-related behaviours. Banks that implement measures that aim to increase the perceived usefulness of IB and enhance the value of IB are likely to be rewarded with increasing IB adoption amongst its customer base.     

Customer value and customer loyalty: Is competition a missing link?

This study is aimed at providing an insight into the effects of competition on customer value delivery for customer loyalty. Data were collected using a questionnaire on dyads of service employees and customers. The techniques of ANOVA, ordinary least squares, and logistic regression were used to analyze the dyad data in terms of research purposes. Results show that competition is a moderator of the relationship between customer value and customer loyalty from the consumer perspective. Also, competition is a predictor of customer loyalty from the employee perspective. Insights into this asymmetry in the view on competition between employees and consumers are found. Findings of the moderating effects of competition on the customer value-customer loyalty relationship suggest the significance of competition in the service encounter. In addition, this study found that the predictive validity of the loyalty model for consumers is significantly higher than that for employees. This finding suggests that the factors driving customer loyalty are better captured from the consumer perspective. Findings of the impact of competition on the consumer’s experience of different types of value provide insights as to where to invest in generating customer value to achieve desired customer loyalty. This study also suggests to managers how service employees could be recruited and managed to achieve a service competitive advantage. This study extends our understanding of the customer value–customer loyalty relationship by uncovering the significant role of competition from a dyadic viewpoint.     

Buying free rewards: the impact of a points-plus-cash promotion on purchase and reward redemption

While many studies have investigated consumer purchase behavior in reward programs, a better understanding of customer redemption behavior is lacking, particularly when promotions affect a core aspect of reward programs—free rewards. In this paper, we examine the impact of a promotion on purchase and reward redemption in a reward program in which consumers can partially cover the cost of a free reward with their money. The literature on reward programs suggests a positive reinforcement caused by reward redemption, whereas the literature on promotion provides different views regarding the existence of a postpromotion dip. Using data from a major retailer’s reward program, we verify that such a promotion attracted customers with less transaction activity and shorter tenure. Interestingly, consumers using the promotion increased their preference for hedonic rewards compared to their previously observed behavior. This change in preference persisted after the promotion ended. Overall, the promotion significantly increased the number of redemptions but generated a negative impact on subsequent consumer behavior by decreasing purchase incidence and quantity. Our findings point to a need to understand the trade-off between spending money on buying an otherwise free reward and future regular purchases.

     

How to retain customers in omnichannel retailing: Considering the roles of brand experience and purchase behavior

The opportunities and challenges of omnichannel in retail industry have been widely discussed, yet despite these benefits, the key elements that constitute an effective omnichannel and how customers respond to omnichannel retailing strategies remain unclear. This research conducted online surveys to test the effects of omnichannel elements on various brand experiences and customer retention, considering the moderating role of purchase behavior. The results indicate that omnichannel elements (integration, individualization, and interaction) are generally helpful in retaining customers, through omnichannel elements influence brand experiences differently. In addition, these omnichannel elements have different influences on customer retention due to different purchase behaviors. The findings suggest that retailers can use different omnichannel strategies to attract customers’ purchases and provide insights for practitioners who want to use omnichannel strategies to deliver superior experiences for customers.