Work

Pricing and Product Positioning with Relative Consumer Preferences

Year: 2020

Type: article

Abstract: Especially in markets with frequent price promotions, where consumers constantly have to form preferences over changing offers, product choice may depend on a relative assessment of prices and qualities. We show how such “relative thinking” profoundly influences firms’ pricing and product-positioning strategies, compared to a benchmark with standard preferences. When competition is sufficiently intense, firms want to differentiate in the quality space, and they may find it advantageous to occupy the lower end of the quality spectrum. Such a strategy pays off particularly for firms with a small base of loyal customers, which then compete more aggressively for shoppers.

Source: Journal of Industrial Economics

DOI: 10.1111/joie.12341

Authors: Roman Inderst, Martin Obradovits

Institutions: Goethe University Frankfurt, Universität Innsbruck

Language: English

Topic: Consumer Market Behavior and Pricing

Subfield: Marketing

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,900

Funder: Austrian Science Fund