Table of Contents
TRANSPARENT PRICING: THEORY, TESTS, AND IMPLICATIONS FOR MARKETING
PRACTICE 2
CONSUMER POWER: EVOLUTION IN THE DIGITAL AGE 4
Week 2
Intro
• Messages that include some negative info can be more effective than no negative info is
included, especially in terms of enhancing credibility
• Persuasive mechanisms of two-sided communication increase our knowledge of the basic
communication and persuasion processes between marketers or policy makers and
consumers.
Theoretical background
• Attribution theory (correspondence theory) - Consumers can attribute claims either to the
advertiser's desire to sell the product or to actual characteristics of the product
o Negative info à advertiser is truthful à increased credibility
o But doesn’t mean that message is > persuasive
• Optimal arousal theory – 2sided messages are novel à ^ positive affect à consumers pay
attention and process the message à ^ probability of favourable changes in attitude
• Inoculation theory – mild attacking arguments, then countering them à strengthens
cognitions, reduces counterarguments à enhances attitudes
o Special type of 2sided messages: adv presents positive and negative then refutes/
discounts negative (attempts to inoculate audience against possible counterclaims
by competitors)
• Variables that moderate and mediate the impact of message sidedness:
Results/ Discussion/ Conclusion
• Impact of message sidedness on source credibility significantly enhanced when:
o Discounting experience or credence attributes are the focus of the message
, o Negative information is not placed first
o Marketers make the negative disclosure voluntarily.
• Impact on attitude toward the ad is significantly lowered when:
o More negative information is included
o The negative information is important
o Negative information is placed first
o The ad is transmitted via broadcast media
• The impact on attitude toward the brand is significantly enhanced when:
o The negative attribute is correlated with a positive attribute
o Negative information is placed last
o More negative information is included
Transparent pricing: theory, tests, and
implications for marketing practice
RQ: if consumer choice is affected by exposure to transparent prices? What are the conditions under
with transparent pricing may trigger departures from rational expectations and classical economic
theory?
Transparent pricing: information revealing the allocation among agents in a supply-chain of proceeds
from the sale of a product or service. It postulates that consumers differentiate among agents,
triggering social components of utility. (economic & social)
àFocus: whether consumer utility and decision-making will be systematically influenced if marketers
communicate a price allocation in a neutral manner.
àbuyers rationally maximize an expanded utility function
Opaque Pricing: consumers pay for the least pricing product. (economic)
Conclusion:
- Transparent prices typically increase a product’s utility (similar to brand equity effect)
- Under transparent pricing, consumers may voluntarily select the more expensive instance from a
set of identical goods or services.
àmoderated by individual characteristics, especially the perceptions about the appropriate
allocation of price among supply-side agents.
Ground of Transparent Pricing:
1. Economic perspective
Consumer should be indifferent to transparent pricing information and select the least expensive
alternative from a set of otherwise perfect substitutes.
2. Social perspectives
Consumers response to price and price fairness is influenced by
- procedural justice: individuals’ perceptions about the fairness of formal procedures governing
decisions involving their treatment and benefits. àprice transparency enhances price-setting
observabilityàincrease procedural justice perceptions (fairness)
- inequity aversion: consumers not only make fairness decisions about themselves, but also try
to reduce perceived unfairness to other parties involved in an exchange (hurt both)
- altruism: consumers may incur a cost to avoid scenarios that are unfair to third parties (think
for others). PWYW is a particular scenarios of altruism.
Hypotheses of transparent pricing:
1. Holding retail price constant, consumer utility is higher for an option priced transparently than
for the same option priced opaquely.
- transparent priceàinfo about price-setting processàfairness perceptions
TRANSPARENT PRICING: THEORY, TESTS, AND IMPLICATIONS FOR MARKETING
PRACTICE 2
CONSUMER POWER: EVOLUTION IN THE DIGITAL AGE 4
Week 2
Intro
• Messages that include some negative info can be more effective than no negative info is
included, especially in terms of enhancing credibility
• Persuasive mechanisms of two-sided communication increase our knowledge of the basic
communication and persuasion processes between marketers or policy makers and
consumers.
Theoretical background
• Attribution theory (correspondence theory) - Consumers can attribute claims either to the
advertiser's desire to sell the product or to actual characteristics of the product
o Negative info à advertiser is truthful à increased credibility
o But doesn’t mean that message is > persuasive
• Optimal arousal theory – 2sided messages are novel à ^ positive affect à consumers pay
attention and process the message à ^ probability of favourable changes in attitude
• Inoculation theory – mild attacking arguments, then countering them à strengthens
cognitions, reduces counterarguments à enhances attitudes
o Special type of 2sided messages: adv presents positive and negative then refutes/
discounts negative (attempts to inoculate audience against possible counterclaims
by competitors)
• Variables that moderate and mediate the impact of message sidedness:
Results/ Discussion/ Conclusion
• Impact of message sidedness on source credibility significantly enhanced when:
o Discounting experience or credence attributes are the focus of the message
, o Negative information is not placed first
o Marketers make the negative disclosure voluntarily.
• Impact on attitude toward the ad is significantly lowered when:
o More negative information is included
o The negative information is important
o Negative information is placed first
o The ad is transmitted via broadcast media
• The impact on attitude toward the brand is significantly enhanced when:
o The negative attribute is correlated with a positive attribute
o Negative information is placed last
o More negative information is included
Transparent pricing: theory, tests, and
implications for marketing practice
RQ: if consumer choice is affected by exposure to transparent prices? What are the conditions under
with transparent pricing may trigger departures from rational expectations and classical economic
theory?
Transparent pricing: information revealing the allocation among agents in a supply-chain of proceeds
from the sale of a product or service. It postulates that consumers differentiate among agents,
triggering social components of utility. (economic & social)
àFocus: whether consumer utility and decision-making will be systematically influenced if marketers
communicate a price allocation in a neutral manner.
àbuyers rationally maximize an expanded utility function
Opaque Pricing: consumers pay for the least pricing product. (economic)
Conclusion:
- Transparent prices typically increase a product’s utility (similar to brand equity effect)
- Under transparent pricing, consumers may voluntarily select the more expensive instance from a
set of identical goods or services.
àmoderated by individual characteristics, especially the perceptions about the appropriate
allocation of price among supply-side agents.
Ground of Transparent Pricing:
1. Economic perspective
Consumer should be indifferent to transparent pricing information and select the least expensive
alternative from a set of otherwise perfect substitutes.
2. Social perspectives
Consumers response to price and price fairness is influenced by
- procedural justice: individuals’ perceptions about the fairness of formal procedures governing
decisions involving their treatment and benefits. àprice transparency enhances price-setting
observabilityàincrease procedural justice perceptions (fairness)
- inequity aversion: consumers not only make fairness decisions about themselves, but also try
to reduce perceived unfairness to other parties involved in an exchange (hurt both)
- altruism: consumers may incur a cost to avoid scenarios that are unfair to third parties (think
for others). PWYW is a particular scenarios of altruism.
Hypotheses of transparent pricing:
1. Holding retail price constant, consumer utility is higher for an option priced transparently than
for the same option priced opaquely.
- transparent priceàinfo about price-setting processàfairness perceptions
