By Professor Saravana Jaikumar, IIM Calcutta
Consumers today have both more options of goods to buy and
more information about those goods than ever before. Now, shopping in an
e-marketplace involves the consideration of more products and more sellers at
more price points. In such a complex commerce world, how do you develop the
right price strategy and increase sales? My findings, recently published in the
Journal of Advertising Research (“How
Do Consumers Choose Sellers In E-Marketplaces”) show that the cheapest version of
a product is not always the one chosen. Products with strong word of mouth may
have greater preference.
There are interesting dynamics at hand. Observational and
eye tracking research on anchoring (the lead or display priced product) and
eWOM (seller review volume, also known as Electronic Word of Mouth) was conducted.
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Let’s look at what happens in a highly competitive category
like consumer electronics. If you search for Microsoft Xbox One on Newegg, you
come up with 17 sellers offering the product. The price displayed in the search
results was the lowest price ($249)
and appeared on the product detail page in a bold font. But in another instance
involving Samsung Galaxy phones, the price listed in bold was not the lowest
price. This price, termed as the display price of the product, acts as an anchor price with which all other
prices are compared. Anchor prices like these are key, as they create a
temporary representation of that number in our short-term memory that influences
further evaluation.
So, beyond price and how and where that price appears on the
page, what makes the difference? User-generated word of mouth. More so than
what those reviews say, even the sheer volume of them has influence. eWOM in
product sales can be divided into reviews of the product as well as reviews of
the seller, and there are three aspects to reviews: valence (the nature of the
content, or whether it is positive or negative), volume and dispersion of
reviews.
To investigate the high review volume over price factor, eye
tracking research was done with both high and low price points as display
prices. Besides the choice of the seller for each product, eye movements and
fixations were recorded. Areas of interest (AOIs) were created for all the
stimuli (display prices, seller-review volumes, and seller prices). Once again,
despite the price in the display unit, review volume had more impact. Display
price acted as an anchor and biased further evaluations of the sellers.
When a low price is used as the display price, consumers likely
will purchase the product from the low-price seller only if that seller has
high review volume. Similarly, when the high price is used as the display
price, consumers more likely will purchase the product from the high-price
seller if that seller has higher review volume than others. Given this,
e-marketplaces that rank on price should consider ranking on the basis of
review volume of sellers.
Review volume — positive, negative, modest or glowing — is
what makes the sale. To get their customers to write reviews, marketers and
sellers should treat their customers with great care and offer incentives to do
so. For example, they can make appeals about posting a review in purchase
confirmations and any follow-up emails to increase response rate. They also can
show examples of reviews that answer factual questions and give detail about
the product, rather than purely attitudinal statements that do not add to the
general knowledge base.
The key takeaway for e-marketplace sellers and marketers is
that many online marketplaces are choosing the featured price from those with
high review volume, and therefore, more reviews will ultimately benefit the
seller.
Professor Saravana Jaikumar is a Fellow
(Ph.D.) of Marketing from IIM Ahmedabad and MBA from Cardiff Business School,
UK. He is currently affiliated with Indian Institute of Management Calcutta as Assistant Professor in the Marketing group. His research
work has been published in reputed international journals including Journal of
Advertising Research, Journal of Business Research, Marketing Letters and
Journal of Product and Brand Management. He is interested in research related
to pricing, pharmaceutical price regulation and consumer behavior at the
‘bottom of the pyramid’.
