Price as a variable in online Price as a variable in online consumer trade-offsconsumer trade-offs

Ted Karlesson and Christer Kuttainen, Leyland Pitt, Stavroula Spyropoulou

Presenter: Jessie LiuPresenter: Jessie LiuInstructor: Dr. Pi-Ying HsuInstructor: Dr. Pi-Ying HsuDate: October 8, 2012Date: October 8, 2012

CitationCitation

Karlsson, T., Kuttainen, C., Pitt, L., & Karlsson, T., Kuttainen, C., Pitt, L., & Spyropoulou, S. (2005). Price as a Spyropoulou, S. (2005). Price as a variable in online consumer trade-offs. variable in online consumer trade-offs. Marketing Intelligence & Planning, 23Marketing Intelligence & Planning, 23(4), (4), 350-358.350-358.

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ContentContent

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Introduction

Literature Review

Methodology

Result & Conclusion

Reflection

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IntroductionIntroduction

Motivation

Purpose of the Study

IntroductionIntroduction

Local Store:Local Store:

Immediate availability

Local demand

Online Vendor:Online Vendor:

Delivery time

Guarantee availability

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Lower PriceLower Price

IntroductionIntroduction

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CostCostTimeTime DistanceDistance

! ! !

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Availability

Price

Service

Assortment

Delivery costs

MotivationMotivation

-- To identify the extent to which lower To identify the extent to which lower prices can motivate online purchasing, prices can motivate online purchasing, and the effect of other offering and the effect of other offering attributes on the trade-offs that attributes on the trade-offs that customers makecustomers make

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Purpose of the studyPurpose of the study

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Literature Review

Very little is known about the trade-offs consumers are willing to make when making online purchase.

(Odekerken-Schroder & Wetzels ,2003)

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Literature ReviewWheel of Retailing theory

(McNair, 1958)

When a new form of retailing, enters the market, it begins by offering lower prices and accepting lower margins by offering fewer services.

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Literature ReviewThe effect of communications technology on markets is to make them more efficient. So if the Internet as a communication technology makes markets more efficient, the one might expect prices to arise where customers' translation cost are lowered.

(Downes & Mui,1998)

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Literature ReviewWhile the dollar price reflects the direct monetary outlay by the buyer, the extended price refers to the time cost of the consumer incurred by searching and waiting, as well as risk associated with the purchase.

(Talaga & Tucci, 2001)

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How important a motivator is price in online purchasing environments to customers where other factors are also considered in the decision making?

Does the relative importance of price differ between online and physical channels for a particular product bundle?

MethodolMethodologyogyParticipant ． Procedures

Data Analysis

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ParticipantParticipantRespondents consisted of

undergraduate business and engineering students at a large

Swedish university.

Likert ScaleLikert Scale

Question Totally agree Agree Undeci

ded Disagree Totally disagree

1. My mom will be a good rapper.

Conjoint Analysis

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Price

Buyback policy

Ease of returns

In-stock status

Accessibility

Attributes Attribute levels - Online

Attribute levels - Offline

Price 500 SEK550 SEK600 SEK

500 SEK550 SEK600 SEK

Buyback policy Will not buy backWill buy back, but no price guaranteeGuaranteed 250 SEK

Will not buy backWill buy back, but no price guaranteeGuaranteed 250 SEK

Returns policy Cash refundStore / Site credit

Cash refundStore / Site credit

Delivery time Cash refundStore / Site credit

Cash refundStore / Site credit

Place for delivery(online only)

Home

Distance to bookstore(offline only)

500 m10 km

Data analysis

SPSS

Discrete regression model

Pearson’s R Kendall’s T

Result & Result & ConclusionConclusion

Attribute Mean importance per cent Level Part-worth

utilityPrice (SEK) 35.47 500

550600

1.36620.0101-1.3763

Returns policy 9.36 Money back for unused bookUnused book can be exchanged for another book

-0.3617-0.3617

Delivery time 29.59 Two daysSix daysTen days

1.08330.1212-1.2045

Place for delivery 8.28 HomePostal office

0.3201-0.3201

Buyback policy 17.30 Will not buy backWill buy back, but no price guaranteeGuaranteed 250 SEK buy back price

-0.67930.0215

0.6578

5.5177 Constant

35%

9%

27%

8%

19%

Attribute Mean importance per cent Level Part-worth

utilityPrice (SEK) 22.25 500

550600

0.67380.2845-0.9583

Returns policy 6.77 Money back for unused bookUnused book can be exchanged for another book

0.2482-0.2482

Delivery time 25.37 In stockIn stock in six daysIn stock in ten days

1.0071-0.1536-0.8536

Distance to bookstore

26.73 500 m10 km

0.9804-0.9804

Buyback policy 18.89 Will not buy backWill buy back, but no price guaranteeGuaranteed 250 SEK buy back price

-0.6262-0.1333

0.7595

4.8702 Constant

22%

7%

25%27%

19%

ConclusionConclusion

Online shoppers are “bargain-seekers”.

Customers expect prices to be lower in an online environment that in a traditional sales channel.

Respondents are willing to make aneffort to purchase online in order to obtain price savings.

To assume that online stores would always be “in-stock”, this is clearly not the case in reality.

The customers’ satisfaction has a direct and positive effect on customer intention to return.

Originality- it is also an important factor to effect on trade-offs that customers make.

Thank you for Thank you for your your

listening!listening!

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