Dynamic and personalized pricing
DYNAMIC AND PERSONALIZED PRICING
Managing Guest Editor:
Giampaolo Viglia, University of Portsmouth, U.K., University of Aosta Valley, Italy.
Hong Yuan, University of Oregon, U.S.A.
e-mail address: email@example.com
Aulona Ulqinaku, University of Leeds, U.K.
Price is the monetary request in exchange for a good or a service. It is not only a commonly used indicator of a product’s quality and value (Dodds, Monroe, & Grewal, 1991) but also one of the most powerful levers for driving profitable growth. Based on this, price should at least match the value offered to customers. As much an art as it is a science, successful pricing strategies rely on a solid understanding of how value is created and how to align a revenue model with a customer’s buying process.
Given the central role of the customer, previous theories that set a price level based on the cost for the firm are now obsolete. A current trend, which is here to stay, is the use of dynamic and personalized prices (e.g., Chen & Gallego, 2019). This means varying prices based on demand and contextual conditions. For instance, retailers, given their capacity constraint, manage unexpected demand by fluctuating prices. This can be done based on i) the type of client, ii) the type of product or iii) time of purchase, iv) ubication (i.e., the location in which a person is). The use of software allows automatizing these processes and setting prices efficiently and effectively. All this involves the use of artificial intelligence, software-based robotics and cloud platforms. While firms benefit from dynamic pricing practices, understanding the potential for (un)fairness perceptions and its role as a determinant of customer satisfaction (Voss, Parasuraman, & Grewal, 1998) to mitigate these advantages is important.
Guided by the customer-centric view of pricing, firms have also begun experimenting with pricing strategies that delegate some or all of the price determination task to customers. Such participative pricing strategies, in which “consumers participate in setting a final price for a product” (Chandran & Morwitz, 2005, p. 249), can boost sales, enhance brand loyalty, and contribute to competitive positions. Specifically, new mechanisms where customers have an active role in the price settings are Pay-What-You-Want (Kim, Natter, & Spann, 2009), Name-Your-Own-Price (Amaldoss & Jain, 2008), and Pick-Your-Price (Wang, Beck, & Yuan, 2021).
From the end customer side, price is a signal for value. For example, odd-ending numbers, like 9 ending prices, while they can drive sales up, they are harder to be recalled later on and more likely to be underestimated when a recall is attempted (Schindler & Wiman, 1989). Customers make use of the so-called “reference price”, which is their expected price for a product based on their past memory. They also compare the price they see with prices of similar products. This is much easier thanks to online comparison tools.
From a research design’s perspective, most of the pricing research in marketing revolves around self-stated intentions. This is flawed, because customers might say a different (and probably lower) price to what they would be actually be willing to pay. There is therefore the need for a methodological shift to increase the proportion of empirical findings using field experiment that tests actual behavior. In field experiments, participants are unaware that they are taking part in a study, and the study occurs in the natural setting where certain phenomena are likely to occur. For instance, Viglia, Maras, Schumann, and Navarro-Martinez (2019) use a field experiment to investigate the impact of Pay-What-You-Want on profitability, comparing this mechanism to traditional regular prices.
Going forward, innovation in new pricing mechanisms such as cashback (Vana, Lambrecht, & Bertini, 2018) and price personalization such as promotions will be key for profitability in marketing. An additional topic that will gain more ground is carbon footprint. In particular, offsetting carbon emissions can create a win-win outcome for companies for the firm. Specifically, customers will be willing to pay more for sustainable options.
Based on the importance of pricing and promotion as tools to increase sales and customer satisfaction, we seek novel empirical and review research on Pricing and Promotions. We particularly look for research making theoretical, practical, and (or) empirical contributions to strategy and customer behavior literature. An indicative list of topics is provided below:
Price as a tool from practitioners:
Dynamic vs. fixed pricing – consideration of ethical aspects
Promotions based on price vs. quantities
The active role of customers in pricing:
Empirical challenges of pricing research:
Measuring effects of price on customer behavior using consequential data
Measuring customers’ willingness to pay using real behavior
Price as determinant of customer behavior/preferences using field experiments
Amaldoss, W., & Jain, S. (2008). Joint bidding in the name-your-own-price channel: A strategic analysis. Management Science, 54(10), 1685-1699.
Chandran, S., & Morwitz, V. G., (2005). Effects of Participative Pricing on Consumers’ Cognitions and Actions: A Goal Theoretic Perspective,” Journal of Consumer Research, 32 (2), 249-59.
Chen, N., & Gallego, G. (2019). Welfare analysis of dynamic pricing. Management Science, 65(1), 139-151.
Dodds, W. B., Monroe, K. B., & Grewal, D. (1991). Effects of price, brand, and store information on buyers’ product evaluations. Journal of Marketing Research, 28(3), 307-319.
Kim, J. Y., Natter, M., & Spann, M. (2009). Pay what you want: A new participative pricing mechanism. Journal of Marketing, 73(1), 44-58.
Schindler, R. M., & Wiman, A. R. (1989). Effects of odd pricing on price recall. Journal of Business Research, 19(3), 165-177.
Vana, P., Lambrecht, A., & Bertini, M. (2018). Cashback is cash forward: delaying a discount to entice future spending. Journal of Marketing Research, 55(6), 852-868.
Viglia, G., Maras, M., Schumann, J., & Navarro-Martinez, D. (2019). Paying before or paying after? Timing and uncertainty in pay-what-you-want pricing. Journal of Service Research, 22(3), 272-284.
Voss, G. B., Parasuraman, A., & Grewal, D. (1998). The roles of price, performance, and expectations in determining satisfaction in service exchanges. Journal of Marketing, 62(4), 46-61.
Wang, C. X., Beck, J., & Yuan, H. (2021). The Control–Effort Trade-Off in Participative Pricing: How Easing Pricing Decisions Enhances Purchase Outcomes. Journal of Marketing. (forthcoming).
PLEASE SUBMIT YOUR PAPER AT THE JBR WEBSITE BETWEEN APRIL 1 TO JULY 31 2021. BE SURE TO SELECT “DYNAMIC/PERSONAL PRICING” ARTICLE TYPE. FROR MORE INFORMATION CONTACT GIAMPAOLO AT firstname.lastname@example.org