Is transparency a good thing? How online price transparency and variability can benefit firms and influence consumer decision making

The internet has empowered consumers and changed the way they search and shop for products and services by increasing the availability and transparency of pricing and other comparative information. However, what is less clear from a managerial perspective is just how transparent pricing information should be. While it might seem that increasing price transparency would reduce consumer search, we find that it may actually increase search and delay. In this article, we review the use of firms’ application of price transparency in practice and propose that specific types of information can influence how transparent prices are to consumers, and how such transparency can influence consumer decisions in a way that is beneficial for the firm. We focus on a specific form of transparency: whether or not the consumer knows the range of pricing. We also discuss whether a high variability pricing approach versus a low variability pricing approach influences consumer decision making—and whether this influence is moderated by transparency.     

Whether and to What Extent Consumers Demand Fair Pricing Behavior for Its Own Sake

This article contributes to scholarly understanding of the significance of procedural fairness in pricing contexts. It has been widely recognized that price fairness judgments concern both the outcome (fair price) and the procedure leading to the outcome (fair pricing). However, extant research has traditionally viewed procedural fairness as a means to outcome fairness. According to this instrumental view, procedural fairness is a component or antecedent of outcome fairness, but has no direct effects on consumers’ responses to prices. Building on the relational perspective on fairness, we develop and test a model of price procedural fairness as an end in itself. In three lab studies, we show that (1) when information regarding outcome (an unfavorable price difference) and procedure (the pricing practice underlying the price difference) is available simultaneously and unambiguously, procedural fairness has direct and stronger effects than outcome fairness on consumers’ responses and (2) procedural fairness mediates the effects of pricing practices on these responses. In all three studies, adding procedural fairness as a direct predictor of consumers’ responses increases the explanatory power of a model of price fairness significantly. Our model can explain peculiar real-world cases in which consumers reacted very strongly over relatively small price differences. The research findings point to the significance of the non-instrumental aspect of consumer’s demand for ethical (fair pricing) behavior and the need for companies to assess the fairness of their pricing practices from the consumer perspective.     

Price Intransparency,Consumer Decision Making and European Consumer Law

Price comparison is a basic element of competition. For comparison to work, at least prices need to be transparent. Moreover, price is usually a focal point in consumer thinking and deciding on transactions. Hence, obfuscating prices can be detrimental to consumers. Therefore, it is vital for policymakers to know how transparent pricing is in reality. Commercial practices involving price intransparency can be detrimental to consumer decision making and may be associated with market failure. So, legislative intervention to ensure price transparency is sometimes warranted. Suppliers may disclose and frame pricing information in such ways as to influence consumers. For some suppliers, advantages may be gained by obfuscating price—through practices ranging from the outright hiding of price terms in the small print to subtle ways of throwing in gifts or adding charges during the vending process. Do consumers appreciate the implications of the fact that by framing price in different ways suppliers actually try to influence their demand for products? And how does the law broadly speaking respond to problems of price intransparency? In this article, behavioural science insights are combined with a legal analysis of European consumer law in order to chart some of the detrimental influences of price intransparency on the consumer decision-making process and to answer whether and to what extent European consumer law addresses these issues. In doing so, this article first reviews research from consumer psychology, marketing, and behavioural law, and economics regarding the influence of presentation, framing, and transparency of price on the consumer decision-making process. Subsequently, it describes and evaluates the legal framework offered by European consumer law and how this framework responds to practices of price intransparency. Particular problematic pricing techniques are identified and discussed. In conclusion, attention is drawn to the disadvantages of the increasing full harmonization character of European consumer law for combating price intransparency at Member State level.     

Pricing practices: A critical review of their effects on consumer perceptions and behaviour

With the present challenge to compete on price or product assortment, retailers and manufacturers are increasingly focusing on state-of-the-art pricing strategies which have their roots in behavioural economics and psychology. The current review is an empirical investigation on the relative effectiveness of various pricing practices on consumer perceptions and behaviour. Six pricing strategies were reviewed; drip pricing, reference pricing, the use of the word ‘free’, bait pricing, bundling and time-limited offers. The review shows that the former three have received a significant amount of attention and have a robust impact on consumer perceptions and behaviour. There is less research on the latter three; however, the available evidence does suggest that they, too, may be capable of influencing consumers’ choices. Finally, it is also clear that the effects of pricing practices can be moderated by a variety of factors. Overall, the current review indicates that sellers are able to influence perceptions and purchase decisions of consumers based on the manner in which prices are displayed. The implications of these findings for retailers, policy makers and researchers are discussed.     

On The Reference Point Effect of Reserve and Buy It Now Prices

In recent years, a trend in retail pricing has been to give consumers greater autonomy in setting their own prices, be it through auctions or other forms of participative pricing. Such consumer pricing autonomy often requires the seller to set limits in the form of price floors and price ceilings. Price floors and ceilings in our auction settings are referred to as reserve prices (RP) and Buy It Now (BIN) prices, respectively. We examine the effect of RP and BIN presence and magnitude on the number of bidders and ending price. Using auctions, we uncover consumers’ willingness to pay (WTP) through bids. WTP is malleable through reference cues. Our focus is on two such cues: BINs and RPs. Results of two field studies, augmented with a laboratory study, show that both BINs and RPs result in lower bidder entry, but have an overall positive effect on ending price. Furthermore, results show that RP is more effective than a comparable BIN magnitude and that these two pricing cues are substitutes. The study design allows the authors to rule out alternative explanations. Open RP and BIN's effect on ending price is due to a reference point effect rather than a price truncation effect. Thus, retailers can increase WTP through changing these reference cues and exploit a richer choice set over which to shape a malleable WTP. The quantification of the interaction between RP and BIN gives managers the ability to jointly take advantage of both RP and BIN.     

人工智能时代个性化定价行为的反垄断规制--从大数据杀熟展开

人工智能时代,数据规模显著扩张,算法能力持续优化。科技实力雄厚、市场力量强大的经营者凭借大数据与算法工具的紧密结合,收集和分析能够反映消费者特征和行为的相关信息,以无限接近消费者购买能力和支付意愿上限的方式对消费者实施个性化定价。个性化定价行为涉及对条件相同的交易相对人在交易价格上实施差别化待遇,可能构成反垄断法所禁止的价格歧视行为。但与以往反垄断实施重点关注的排他性价格歧视不同,个性化定价突出表现为直接针对终端消费者实施的剥削性价格歧视,且在具体情形下呈现出不同的限制竞争效果,引发消费者选择能力与选择范围的双重限制。鉴于此,个性化定价行为的反垄断规制需要准确识别涉案行为,综合判断竞争效果,慎重选择福利标准。对于同时降低消费者剩余和社会总福利的个性化定价行为,可认定其具有限制竞争效果且不具备正当理由,从而构成违法价格歧视;对于降低消费者剩余却提高社会总福利的个性化定价行为,如果选择消费者福利标准则可认定其构成违法价格歧视,如果选择社会总福利标准则可认定其具备正当理由;对于同时提高消费者剩余与社会总福利的个性化定价行为,因涉及消费者之间的剩余转移,对其竞争效果的评价仍待反垄断实施予以明确。     

Integrative effects of firms' price and endorsement strategies on consumers' loyalty intention

This research examines the effects of price and brand endorsement that are adopted by firms from a consumer-based viewpoint, and provides practical brand management discussions as a reference for both manufacturer brands and retail store brands. According to the findings, manufacturer brands support high prices and boost those vivid impressions which are helpful in engendering consumer loyalty intention. Without a careful evaluation process, a brand-endorsing strategy may prove detrimental to the manufacturer. Retail store brands follow distinct pricing policies and carry out brand-endorsed strategies. Price/endorsement stimuli influence consumer brand loyalty through the partial mediating effect of brand impression. Manufacturers and retailers could define appropriate price premiums on products with a potential for a manufacturer–retailer brand co-branding as identified by market research, thus increasing the sales of both.     

Dynamische Preissetzung — Wer profitiert?

In the context of digitalisation, recent approaches for automatic price adjustment are gaining importance. However, these approaches can affect consumer behaviour in a way which is disadvantageous for consumers, businesses and the state as a whole. In September 2016, consumer researchers met at the Heinrich Heine University in Düsseldorf in order to discuss the impact of dynamic pricing from the viewpoint of their research fields. As the articles make clear, the researchers found that dynamic pricing based on competitors’ prices is common, while personalised prices are extremely rare. The question arises as to what extent consumers consider dynamic prices unfair. The experts disagree about the necessity of a stricter legal regulatory framework. Furthermore, digital technology can be used to help consumers find their way through the complex online world. Ultimately, the question of who profits–the consumer or the trader–has not been settled. The discussants conclude that there is need for further research in many different research fields.     

Internal reference price response across store formats

Reference price models have a long tradition in marketing and consumer research. Pricing strategies can utilize consumer response to gains and losses relative to internal reference prices, which are price expectations developed from past-observed prices. Consequently, many previous studies have been devoted to analyzing differences in internal reference price response across product categories and consumer characteristics. However, knowledge about internal reference price response across different store formats is missing. Our study aims to fill this research gap. To do so, we estimate a reference price model for the same set of brands and the same sample of consumers across two store formats (discount chain vs. supermarket chain). The prices for the brands in our model are similar across store formats. Results from our proposed model show that the same consumers are loss-averse at the discount chain while gain-seeking at the supermarket chain. Predicted by previous literature, we attribute the difference in internal reference price response to the different price image of the store formats. Overall, our research contributes to the reference price literature and provides important implications for pricing strategies at stores with different price image.     

Creating Competitive Advantage for Calabrian-Made Products: The Influences of Culture and Price Perception

The purpose of this article is to investigate the influence of culture on consumers’ price perception of local products as well as the creation of competitive advantage for local firms. In particular, we analyze the locally produced goods of the Calabrian region in southern Italy. The research methodology is based on qualitative approach and quantitative approach. The results of the study offer important insights into consumers and firms. Since the firm has a better understanding about the role of culture and its effect on consumer perception, it will be able to adjust or improve its pricing policy and thus achieve consumer satisfaction and retention and gain competitive advantage to increasing sales. In this study we introduce specific cultural factors, such as the image and tradition of Magna Græcia culture. Although substantial research on the influence of cultural factors on consumer’s perception exists in the field of consumer research, this study further contributes to the literature by acting as a catalyst for future scientific enquiries in this important area.     

Uniform pricing effect: The influence of uniform pricing on product value judgement and purchase intention

Uniform pricing, which is a pricing strategy that sets a unified price for all products in the store or all products in the same category, is becoming increasingly popular over the past decades. However, scarce attention has been paid to investigating its impact on consumer behaviour. This research investigates the influence of uniform pricing on product value judgements and purchase intentions. Four studies demonstrate that uniform pricing (vs. non-uniform pricing) could induce stronger promotion perception, which leads to more positive product value judgements and purchase intentions. Moreover, price sensitivity and product involvement moderate this effect, and this effect only exists for high price-sensitive consumers and low product involvement consumers.     

Informative Brand Advertising and Pricing Strategies in Internet Markets with Heterogeneous Consumer Search

The use of information intermediaries has been shown to undermine the effect of brand in online markets. In this paper, the effect of consumer search on the relationship between brand advertising and pricing strategies is analysed. Price data are taken from the leading UK motor insurance comparison website, with the advantage that prices can be related to the search characteristics of consumers and to the advertising expenditure of firms. The paper finds that more-advertised firms have lower price rankings at the comparison site, indicating that advertising is informative in this market. The main result is that consumer search weakens the relationship between advertising and pricing. An implication is that increased usage of price comparison sites will make informative brand advertising less important.     

Price-aware enhanced dynamic recommendation based on deep learning

Price is one of the essential elements influencing consumer purchase behavior. Like consumers’ preferences in products, their price preferences also dynamically change over time. However, dynamic price preferences haven’t been fully considered in existed recommendation studies. In this study, we propose a deep learning-based dynamic recommendation model by considering consumers’ dynamic preferences in both product and price. We specially design a review-and-rating-based sequence generator to select products whose prices the consumers are satisfied with to form the new purchase sequence. We also develop a multi-level attention mechanism in the transformer layer to explore the correlations between consumers’ price choices and to combine the price preferences with the product preferences. Experimental results show the proposed model outperforms the state-of-the-art models on some real-world datasets. Our findings can help retailers understand consumers’ price preferences and make informed decisions related to pricing, discounting, and bundle sales strategies.     

Healthy Food: Determinants of Price Knowledge of Functional Dairy Products

Agri-food business pricing practices assume that consumers know about prices and that price is an impediment to healthy food purchase and consumption. The present article assesses functional dairy food shoppers’ price knowledge accuracy and its determinants. The data were gathered from 207 face-to-face interviews with shoppers at the point of sale and were analyzed with binary logistic regression testing a number of set hypotheses. Results show that healthy food price knowledge is higher than for conventional food but still low, and consumers tend to underestimate the price paid. Price knowledge accuracy increases with high purchase frequency, promotional products, hedonistic consumption, and for enhanced function products. Results provide a basis for higher sustainable pricing strategies. Consumers’ inability to distinguish misleading pricing strategies calls for regulators to ensure fair and ethical market practices, especially for healthy food.     

Price Awareness and Consumers’ Use of Deals in Brand Choice

There is evidence that consumer knowledge of prices is limited, implying that, on occasions, consumers may not be fully informed of prices when making a brand purchase. On such occasions, how do consumers make their brand choice decision? One possibility is that consumers use their expectation of prices. This raises an interesting question. To what extent is brand purchase either a function of preferences and posted prices or, of preferences and expectation of brand prices? Another important issue relates to the role of displays and features in simplifying consumer brand choice. First, do promotions cause consumers to restrict their attention to only promoted brands? Second, do promotions affect the price aware consumers more than the price unaware consumers? Our study uses scanner data on ketchup and peanut butter categories to answer the foregoing questions. We find that between 40 and 50% of the purchases are made by consumers using expectations of prices rather than posted prices. Consumers using price expectations may be thought of as being “unaware” of prices. We also find that promotions cause some consumers to focus exclusively on promoted brands, and this effect is greater on the price aware consumers than on the price unaware consumers. Our findings have an important bearing on the rationality of consumer expectation of prices, especially of the promoted brands. Price aware consumers act as a check against firms promoting without accompanying price cuts.     

A nearly perfect market?

Internet shopbots allow consumers to almost instantly compare prices and other characteristics from dozens of sellers via a single website. We estimate the magnitude of consumer search costs and benefits using data from a major shopbot for books. For the median consumer, the estimated benefit from simply scrolling down to search lower screens is $6.55. This amounts to about 60% of the observed price dispersion and suggests that consumers face significant search costs, even in this “nearly-perfect” market. Price elasticities are relatively high compared to offline markets (−7 to −10 in our base model). Furthermore, contrary to the common assumption, search intensity is not correlated with greater price sensitivity. Instead, consumers who search multiple screens put relatively more weight on non-price factors like brand.     

Effects of Expiration Date-Based Pricing on Brand Image Perceptions

Expiration date-based pricing (EDBP) occurs when a grocery retailer reduces the price of a perishable product according to its remaining shelf life. While, conventional wisdom suggests that this practice leads to negative consumer evaluations of brand quality, a series of field experiments reveal negative effects on brand quality perceptions only among loyal consumers and those who perceive low risk associated with perishables. The effect is also mediated by consumer distrust (Study 1). In addition, EDBP has no effect on brand quality image if consumers are already familiar with this pricing practice (Study 2), and it may even generate positive consumer evaluations when framed as a cause-related marketing activity to reduce waste (Study 3). Additional evidence indicates that psychological contract violation perceptions provide the underlying mechanism for explaining consumer responses to EDBP (Study 4). This article ends with an agenda for further research and implications for retail practice.     

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.     

Profiling the reference price consumer

Researchers in marketing have devoted considerable attention to understanding how price impacts the purchase decision. Some individuals, termed memory-based reference price (MBR) consumers, take into account price expectations developed from past purchase behavior when making a current choice. Other individuals, termed stimulus-based reference price (SBR) consumers, make choices by constructing a reference point from the currently observed distribution of prices. Using a latent class model of structural heterogeneity applied to purchase histories from the toilet tissue category, we classify households in terms of the pricing mechanism used in buying decisions. We find strong evidence that memory-based (internal) reference price consumers are more price sensitive than other consumers. Moreover, we find that variables associated with the accessibility of price information are predictive of consumer use of memory-based reference prices. Managerial implications of these results are discussed.     

The market value for product attribute improvements under price personalization

Personalization of the marketing mix is a topic of much interest to marketing academics and practitioners. Using discrete choice demand theory, we investigate the aggregate market value for product attribute improvements when firms are engaged in personalized pricing. Our results provide a theoretically grounded rule for how to aggregate consumer valuations to assess the overall profitability of attribute improvements under price personalization. Under common pricing, each consumer contributes the same margin. Profitability of an attribute improvement is thus driven by inducing more consumers to buy. Consumers with high choice probabilities are given less weight in the market valuation under common pricing as they are less responsive to attribute improvements. Under personalized pricing, profitability of an attribute improvement is driven by extraction of consumer surplus from high valuation consumers. Consumers with higher valuations, and consequently higher choice probabilities, are given more weight in the market valuation under personalized pricing. Since individual consumers play a more central role in the market valuation under personalized pricing, estimation of consumer-level valuations is of increased importance. Under common pricing, the market valuation for an attribute improvement is robust to extreme estimates of the consumer-level valuations. Through our theoretical and empirical analyses, we demonstrate that this robustness does not hold under personalized pricing.