Online luxury goods with price discount or onsite luxury goods with luxury services: Role of situation-specific thinking styles and socio-demographics

Today, the luxury goods and service market is growing faster than ever. However, despite its growth, we do not know much about the ways in which consumers choose to shop online or in store when buying luxury goods. We also lack insight into the factors that can affect such luxury consumption decisions. The purpose of this study is to investigate whether consumers prefer to buy luxury goods online at a discounted price or would rather buy luxury goods in store with additional luxury services at a cover price. This study also examines the extent to which such decisions can be driven by their situation-specific thinking styles as well as other socio-demographic variables. The results show that participants adopted a rational thinking style when deciding to buy luxury goods online with price discounts. On the other hand, an experiential thinking style was evoked when participants chose to visit a store offering luxury brands and luxury services. In addition to momentary thinking orientations, gender as well as income were found to be relevant to a consumer's choice in a shopping platform when seeking luxury brands. More details about the study's findings and their implications are discussed below.     

Automated inference of product attributes and their importance from user-generated content: Can we replace traditional market research?

User-generated content, particularly online product reviews by customers, provide marketers with rich data of customer evaluations of product attributes. This study proposes, benchmarks, and validates a new approach for inferring attribute-level evaluations from user-generated content. Moreover, little is known about whether and when insights from product reviews gained in such a way are consistent with traditional research methods, such as conjoint analysis and satisfaction driver analysis. To provide first insights into this question, the authors apply their approach to a dataset with almost one million product reviews from 52 product categories and run conjoint and satisfaction driver analyses for these categories. Results indicate that the consistency between methods largely varies across product categories. Initial exploratory analyses suggest that consistency might be higher for categories characterized by low experience qualities, high hedonic value, and high customer willingness to post online reviews—but further work will be necessary to validate these findings.     

Acceptance of recommendations to buy in online retailing

Nowadays, many online shops try to improve their customer service by personalization. Personal welcomings, individual assistance as well as recommendations to inform and buy are getting an integral part of the customer communication. These new elements are assumed to increase the retailer's share of wallet and – ideally at the same time – the customer's satisfaction with the online shop. However, till date only few studies have analyzed which external factors influence the customer's acceptance of such assistance. This paper closes this gap by an experiment, where a modified Technology Acceptance Model is used for measuring the customer's acceptance. Volunteers are offered an online shopping experience with individually generated recommendations to buy. The results show a high acceptance of the generated recommendations and how close this acceptance is connected to the quality and shopping relevance of the recommendations. Even though the results are limited to the specific recommendation types used, they give important implications for an adequate design of modern online shops.     

Online customer service and retail type-product congruence

This study investigates how various elements of customer service affect the behavioral intention to shop at the online or the offline store for different product categories. We focus on the perceived value, trust, interface, empathy, and offline presence as the dimensions of the customer service for the retail store (online or offline). Using 317 respondents from the online stores’ users, this study finds that perceived value is the strongest predictor for future intention to shop at online stores, whereas offline presence of an online store did not enhance the future intention to shop at online stores. Other dimensions such as enhanced trust and ease of interface strengthen the intention to purchase at the offline stores. Finally, perceived value and empathy associated with online stores harm the offline stores. In synch with the Theory of Congruence, this study supports the notion that the perceived congruence between product type and retail store type affect their intention to purchase certain product categories at the online stores and to purchase other groups of product categories at offline stores. Further ramifications of these findings are discussed in the paper.     

Valuation and management of money-back guarantee options

In this article, we model money-back guarantees (MBGs) as put options. This use of option theory provides retailers with a framework to optimize the price and the return option independently and under various market conditions. This separation of product price and option value enables retailers to offer an unbundled MBG policy, that is, to allow the customer to choose whether to purchase an MBG option with the product or to buy the product without the MBG but at a lower price. The option value of having an MBG is negatively correlated with the likelihood of product fit and with the opportunity to test the product before purchase, and positively correlated with price and contract duration. Simulation of our model reveals that when customers are highly heterogeneous in their product valuation and probability of need-fit, and if return costs are low, an unbundled MBG policy is optimal. When customers have high likelihood of fit or return costs are excessive, no MBG is the best policy. When customers have small variance in product valuation, but vary greatly in likelihood of product fit, the retailer may prefer to offer a bundled MBG contract, extracting consumer surplus by charging a price close to the valuation level.     

Following the breadcrumbs: An analysis of online product review characteristics by online shoppers

Consumer-generated product reviews are a driving force behind online purchases; at the same time, unfavorable reviews can discourage interested online shoppers and eventually hurt the brand. The objective of this exploratory study was to analyze a diverse range of characteristics and the valence of online product reviews that would aid in responding to customer dissatisfaction. Product reviews (N = 1982) from Amazon.com were collected and content analyzed. Some of the key findings include the following: (a) price was the most commonly discussed product feature; (b) online shoppers found two-sided reviews to be most informative, contradicting the commonly held assumption that negative reviews were more informative and diagnostic in nature; and (c) ‘no action’ was the most common end action across two-sided and negative reviews, indicating that varying levels of dissatisfaction might not always lead to a negative end action. Implications for marketers are discussed.     

Constraint-based Ontology Induction from Online Customer Reviews

We present an unsupervised, domain-independent technique for inducing a product-specific ontology of product features based upon online customer reviews. We frame ontology induction as a logical assignment problem and solve it with a bounds consistency constrained logic program. Using shallow natural language processing techniques, reviews are parsed into phrase sequences where each phrase refers to a single concept. Traditional document clustering techniques are adapted to collect phrases into initial concepts. We generate a token graph for each initial concept cluster and find a maximal clique to define the corresponding logical set of concept sub-elements. The logic program assigns tokens to clique sub-elements. We apply the technique to several thousand digital camera customer reviews and evaluate the results by comparing them to the ontologies represented by several prominent online buying guides. Because our results are drawn directly from customer comments, differences between our automatically induced product features and those in extant guides may reflect opportunities for better managing customer-producer relationships rather than errors in the process.     

Effect of knowledge on decision making in the context of organic cotton clothing

This research was designed to study whether consumer knowledge on organic cotton and relevant issues influences attitude toward and price acceptance of organic cotton clothing. The effect of consumer knowledge was also studied on the way consumers use product label information in purchasing organic cotton clothing. An online survey was developed to measure the variables including experimental choice‐based conjoint models for mandatory and auxiliary label specifications. Four hundred ninety‐eight people completed the survey. The results indicated that moderately and highly knowledgeable participants were more willing to buy organic cotton clothing at higher price points and they had more positive attitudes toward organic cotton clothing than low knowledgeable participants. The results suggest that differentially knowledgeable consumers may attend to different types of information provided on product labels to evaluate organic cotton apparel products. Providing product‐related information on product labels is essential; however, providing additional information on the benefits of using organic cotton and socially responsible business practices may improve consumers’ knowledge and acceptability of organic cotton apparel products.     

Effectiveness of promotional premiums: The moderating role of affective state in different contexts

This research explores the influence of affective state on ad and product judgments for advertising that features promotional offers of high and low price value. Consistent with expectations, Study 1 found that for happy participants, high‐price value premiums generated higher ad believability ratings, which in turn enhanced ad and brand attitudes. For sad participants, however, the positive effects of high‐price value premiums were attenuated due to message believability discounting. It is proposed that the moderating influence of affective state on responses to ads featuring premiums should be more likely to emerge when attention to premiums is high, as in situations where ads feature less important product attributes or when consumers plan to purchase a product. Study 2 found that the interaction between affective state and premium value was significant when ads featured less important product attributes, but not when they featured important product attributes. Study 3 found that the interaction was significant for participants who intended to purchase the product in the near future, but not for those who did not have purchase intentions. © 2009 Wiley Periodicals, Inc.     

How online reviews and coupons affect sales and pricing: An empirical study based on e-commerce platform

With rapid economic growth largely fueled by digital technologies, online reviews are among the new wave of technologies that still make a significant contribution to this new digital economy. However, there is scarce academic research in promoting or responding online reviews using reduction coupons with threshold issued by sellers and pricing decisions. We employ a three-stage least squares (3SLS) model to estimate the effects of online reviews and coupons on online product sales and price. We also extend our research using the data of two product categories. Our results mainly include: (1) Negative impact of negative online reviews on sales is moderated by price, and consumers are more tolerant of negative reviews of high-priced products. (2) Consumers' perceived usefulness of online coupons helps promote more sales and weaken the relationship between negative reviews and sales. (3) Positive online reviews weaken the negative relationship between online negative reviews and the price of product. (4) Consumers’ increased perceived usefulness of online coupons will encourage sellers to set a higher price and weaken the negative relationship between negative reviews and the price of product. (5) Compared with the search product, sellers regard negative reviews from the product with experience attributes as less helpful and apply less effective coupon promotion to response to negative reviews. Our study clarifies the interaction between online reviews and online coupons on e-commerce platforms under the operation scenario. We also provide empirical support for accurate promotion and higher sales revenue through reasonable pricing decisions and specified reduction coupons.     

The influence of multi-channel pricing strategy on price fairness and customer confusion

ABSTRACT

Multi-channel retailers face the challenge of coordinating marketing variables across their channels. In this respect, one of the main issues arising is whether to differentiate or integrate prices. Our study examines the impact of three multi-channel price differentiation instruments on perceived price fairness, customer confusion, and their consequences. In a scenario-based online experiment, we use a 2 x 2 × 2 between-subjects design and manipulate product price differentiation, online promotion and online shipping fees. The results indicate that price differentiation has an impact on fairness evaluations and customer confusion. Product price differentiation and online promotion are perceived as more unfair and lead to more confusion than price parity. Price fairness perceptions of shipping fees depend on product price differentiation. Customers perceive shipping fees as fairer than no shipping fees when prices are cheaper online but perceive shipping fees as less fair when prices are integrated. These results suggest that customers expect a consistent consideration of channel cost advantages and disadvantages and that shipping fees might serve as a cue for customers to consider the retailer’s channel costs. We further show that price fairness and customer confusion mediate effects of pricing instruments (in particular online promotion) on attitudinal and behavioral consequences.     

The Impact of Price Disclosure on Dynamic Shopping Decisions

A potentially powerful way to assist consumers in making dynamic shopping decisions is to disclose price information to them before they shop, for example by posting prices on the Internet. This paper addresses the differential impact of disclosing either only current, or both current and future prices, on consumer shopping decisions in multi-period tasks involving multiple product purchases. In the context of an Internet-based experiment, we find that consumer expenditure deviates more strongly from that of a normative model when both current and future prices are disclosed than if only current prices are disclosed. We investigate the behavioral effects underlying this finding by estimating a model that allows for variations in consumer discounting, strength of store price format preferences, as well as choice consistency between different price disclosure conditions.     

The reluctant Hong Kong consumer: purchasing travel online

Hong Kong consumers have embraced the web but appear reluctant to buy airline tickets online, suggesting that perceptions of risk outweigh perceived convenience. In this study we identify that both risk and convenience factors are associated strongly with willingness to purchase, particularly privacy, security and poor customer service, time savings, site usability and information provision. We identify further that the experienced shopper is only moderately satisfied and that satisfaction appears to be associated strongly with willingness to make further purchases. Overall, findings suggest that although consumers recognize a number of benefits, there is deep‐rooted resistance to buying this particular product online. The explanation may lie in a combination of the physical density of the Hong Kong market, love of the whole shopping experience and a desire to minimize risk. We conclude that to tempt consumers online airlines and agents must target the Hong Kong market with a clear value proposition which includes user‐friendly sites, streamlined payment procedures, on‐ and offline customer support, price‐related promotions and tailored offline services which reinforce online offerings.     

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Unveiling user-generated content: Designing websites to best present customer reviews

Online customer reviews are an important type of user-generated content, through which consumers share their experiences with products and services in order to help others make informed purchasing decisions. In this article, we discuss the goals of online customer reviews and develop practical, actionable principles that can be used to improve the presentations of customer reviews. We identify four goals—two ultimate, and two intermediate—of online customer reviews. The two ultimate goals are: (1) to assist consumers in making accurate choices, and (2) to reduce the cognitive costs of making such choices. The two intermediate goals are: (1) to help consumers form an unbiased understanding of the product, and (2) to construct a set of evaluative criteria. Drawing on the constructive view of consumer judgment and choice, we present a conceptual model of online-review based consumer judgment and choice. We report principles that will improve the presentation of reviews, and discuss the benefits of the new design over the traditional presentation of online reviews.     

Option Framing and Product Feature Recommendations: Product Configuration and Choice

When configuring a customized product, consumers must decide which product features to include. While many times firms allow consumers to add features to a base item (hereinafter referred to as additive option framing), it is also possible in some settings to remove undesired features from a fully equipped product (subtractive option framing). At the same time, companies not only provide different option‐framing formats, but also include recommendations from different sources such as what other customers have chosen previously or what is recommended by the company. This research provides evidence from two field experiments using a German car manufacturer's online configurator that customer recommendations in an additive option‐framing format affect customer spending equally well as subtractive option framing. A follow‐up experiment reveals that customer recommendations lead to increased positive thoughts about the recommended option, which stimulates consumers’ intention to buy the final product.     

Assessing the Impact of Price Promotions on Consumer Response to Online Stockouts

The recent growth of e‐commerce technologies has disrupted the traditional retail environment, leading to more consumers shopping online. While the manner in which consumers shop is changing rapidly, our understanding of how changing consumer behaviors affect retail supply chain management is lacking. In particular, our understanding of how consumers react to stockouts in an online shopping environment remains unclear. Making the challenge even more difficult is the fact that price promotions are heavily used to attract consumers in an online retail environment where consumer switching costs are low. This research develops a theoretical framework, based on expectation‐disconfirmation theory, to explain the effect of price promotions on consumer expectations of product availability and their reactions to stockouts in an online retail environment. Surprisingly, our findings suggest that consumers are actually less dissatisfied with a stockout of a price promoted item than a nonprice promoted product and are less likely to switch to another retailer's website. These findings may suggest that price promotions actually create a type of switching cost in the online retail environment, leading to interesting implications for researchers and supply chain managers.     

Does online observational learning matter? Empirical evidence from panel data

The information presented on a product sales page plays an important role in consumers' purchase decisions. This study examines the persuasive effect, whether a customer's choice is heavily driven by information inferred from others' behavior, and how these impacts are moderated by market age and product type. Results show that online customer choice was significantly affected by historical cumulative sales and times saved. Positive cumulative sales and shop service quality have a significant positive impact on product sales. The times saved have no direct impact on product sales. For different types of products, the times saved of experiential products has a significant impact on product sales, while the shop service quality information of search products has a greater impact on product sales. The influence of online observation learning on product sales will be significantly moderated by a combination of product type and market age. These findings not only offer important theoretical contributions to e-commerce research but also provide practical implications for online sellers and managers of social commerce platforms.     

The effect of negative online customer reviews on brand equity and purchase intention of consumer electronics in South Africa

This study investigated the effect that negative online customer reviews have on brand equity and purchase intention. This research examined the influence of negative electronic word of mouth (eWOM) on brand equity, as influenced by customer review quality, product involvement and source credibility. A 3 (high quality review versus low quality review versus no review) × 2 (high product involvement versus low product involvement) factorial experiment with 236 respondents was conducted. The results revealed that the presence of negative eWOM has a significant detrimental effect on brand equity and purchase intention. Furthermore, the effect of negative online customer reviews is more detrimental to the brand equity of a high involvement product than a low involvement product. The results also revealed that high quality reviews are more influential than low quality reviews with respect to brand equity, and the difference between the levels of eWOM source credibility has no significant effect on brand equity.     

Linking Order Fulfillment Performance to Referrals in Online Retailing: An Empirical Analysis

Referral management for online retailers is a strategically important activity, as referrals offer a highly cost‐effective method of customer acquisition. In fact, online customers mention referrals as the second‐most common reason for choosing to shop at a particular retailer, second only to search engine suggestions. However, while online retailers are able to improve their visibility on search engines through focused keyword insertions, they are often unable to pinpoint the drivers of referral behavior among their customers. The current research examines the relationship between two key dimensions of online retailing: order fulfillment cycle times and referral behavior. Employing a theory of customer appraisal and empirically testing the ensuing model using structural equation modeling, we find that excellent order fulfillment is instrumental in generating referrals for the online retailer, even after factoring in product quality.