Impact Of Consumer Learning On Purchasing Decision And Firm Marketing Strategy

Social media has become ubiquitous and is increasingly changing the consumers' behavior.Before purchase,growing members of consumers learn their peers' personal product experiences and reviews via online forums and review platforms,learn the thrid-party product reviews and experiences via third-party reviews sites,and learn the product information from product demonstrations,free sampling and free trial by the seller.And then the consumers make a more informed purchase decisions based on these.After purchase,the consumers creat,share and disseminate their usage experience and review the product.We consider the above three types of consumer learning—social learning,third-party induced learning and sellerinduced learning and analyze how these learnings impact the consumers' purchase decisions and the firm's marketing strategies—such as firm pricing,product release and diffusion.(1)We investigates how social learning impacts the dynamic pricing and adoption of a new product in the presence of forward-looking consumers in a completely covered market.Consumers are uncertain about the extent to which a new product matches their preference or usage condition and their uncertainty can be reduced via social learning.Three main results are obtained.First,the optimal pricing strategy is derived.For a niche product,the optimal pricing strategy is a margin-driven strategy(selling only to the well-matched consumers who are informed at a high price).For a mainstream product,if the group of forward-looking consumers is small and the learning intensity is high,it's optimal to choose a margin driven strategy;otherwise,a volume-driven strategy(selling to both the entire uninformed and informed consumers above mean match level at a low price)should be chosen.Second,we present the forward-looking consumers' equilibrium adoption decisions.For a niche product,adoption frenzy(where all purchase early)arises when the market growth rate is high enough,and dispersed adoption(where partial purchase early and others delay)occurs when the market growth rate is in a midrange and the size of forward-looking consumers is large enough.Adoption inertia(where all purchase late)arises otherwise.For a mainstream product,if only if there is a small group of forward-looking consumers and a high social learning intensity,we derive the same results as that for a niche product.Otherwise,only the adoption inertia arises.Finally,we show that the firm can incur a substantial loss by ignoring the presence of forward-looking consumers??failing to recognize forward-looking behavior leads the firm to inaccurately pricing.The profit loss increases in the size of forward-looking consumers and the market growth rate.(2)We extend the above analysis to the market where the mismatch cost can be so low that the firm can serve the whole market.Several results are obtained.First,equilibrium pricing strategy may demanstrate penetration pricing,fixed pricing and skimming pricing.Specifically,penetration pricing adopted when the misfit cost is high or when the misfit cost is medium and the review informativeness is sufficiently high.Skimming pricing occurs when the misfit cost is low and the review informativeness is enough high.Otherwise,fixed pricing arises.Second,the seller profits increase in review informativeness for high misfit cost but decrease in review informativeness for low misfit cost.For medium misfit cost,the seller profits first decrease and then increase with review informativeness.Last,we identify the market conditions under which a seller to provide the platform for consumers to post their reviews.In particular,it is beneficial for the seller to offer consumer reviews when the misfit cost is high and unbeneficial when the misfit cost is low.(3)Considering the seller-induced learning and the third-party induced learing,we develop a two-period model to analyze how the seller-induced learning and third-party induced learning drive the product release and dynamic pricing.Several results are reached.First,the firm's optimal product release and pricing strategies are derived.For a high mismatch cost product,it's optimal to delay release and charge a high price to the informed consumers with well match.For a medium mismatch cost product,equlibrium release may demonstrate early release or deferred release.The trade off between early realy and deferred release is detemined by learning intensity and the relative magnitude of mismatch cost.When the mismatch cost is relatively low,early release is optimal.When the mismatch cost is in the midrange,delayed release is optimal if learning intensity is week and early release otherwise.When the mismatch cost is relatively high,delayed release is optimal if the learning intensity is enough week or sufficiently strong,otherwise,the firm should release early.For a low mismatch cost product,early release is optimal.Second,the decision of seller-induced learning investment is analyzed.For a high mismatch cost product,seller-induced learning investment is beneficial for delayed release and charging a high price to the informed consumers.For a medium mismatch cost product,seller-induced learning investment is not beneficial for delayed release and charging a high price to the informed consumers but beneficial for early release and charge a relatively high price to the uninformed consumers.For a low mismatch cost product,sell-induced learning investment will decrease the demand and hence the firm should not invest in learning.Finally,we identify the conditions under which the firm benefits from the third-party induced learning.The third-party induced learning is beneficial for the firm for a high mismatch cost product and detrimental for a low mismatch cost product.For a medium mismatch cost product,the firm will not benefit from the third-party induced learning unless the mismatch cost is relatively high and the profits from informed consumers exceed the expected willingness to pay of the entire consumers.(4)We consider the common seller-induced learning activities such as free sampling,free trial and free experiencing and analyze their impact on product diffusion.Several results are obtained.First,we show that firm should select different sampling levels according to different pricing strategies and product types.Skimming pricing has the highest optimal sampling level,fixed pricing takes second place,and penetration pricing is the lowest.Second,digital product has higher optimal sampling level than physical product.Third,it is never too early for the firm to select free sampling.Moderate sampling can increase the expected return on the business.At lase,product diffusion is promoted to achieve peak sales more quickly.Digital product has better sampling effect than physical product.