Sampling And Pricing Strategies With Consumer Valuation Uncertainty

For many new products and experience goods such as cosmetics,clothing,foods,and electronics,consumers are always uncertain about how these products fit their individual preferences before their purchases.To resolve such uncertainty,many retailers offer free product samples.We refer to sampling with such a focus as fit-revelation sampling.The Promotion Marketing Association shows that product samples reach 70 million U.S.households each quarter.According to the market research firm Cegedim Strategic Data,$6.3 billion worth of free pharmaceutical samples were handed out in 2011.Despite the popularity and significance of the product samples,academic research on this topic is still relatively scant.In this study,I focus on the fit-revelation sampling strategy from a multitude of perspectives.Firstly,I discuss how the fit-revelation sampling strategy interacts with other marketing instruments,that is,whether sampling is complementary or substitute with persuasive advertising and market expansion(ME)advertising,respectively.This study highlights the distinct impact of persuasive and ME advertising on the firm's sampling strategy and provides the firm guidelines on how to adjust advertising efforts.In addition,it characterizes the firm's strategy space that sheds light on the optimal selling and pricing decisions in an environment characterized by consumer fit uncertainty.Secondly,this study explores how to implement the fit-revelation sampling strategy in an olipogoly market with different intensities of product competition.This work points out the trade off in sampling: sampling can resolve consumer fit uncertainty and build up customer goodwill for products by reducing consumers' risk of uncertainty on one hand,on the other hand,however,consumers who realize poor fits after sampling trials may switch with certain probability to competing products.Through analyzing these different effects of sampling,this study give guidelines for competing retailers how to adjust the sampling strategy in response to the consumer switching behavior,the goodwill effect of sampling,the probability for a consumer to realize a good fit,and the intensity of product competition.In addition,this work highlights the importance of sequences of decisions by comparing a sequential sampling and pricing game with a simultaneous game.At last,this study focuses on the targeted sampling and pricing strategy,i.e.,how to provide samples or coupons only to particular types of consumers.It has aroused lots of attention recently.This work shows how a targeted sampling strategy and a targeted pricing strategy are dependent on each other in markets characterized by consumer fit uncertainty,suggesting that managers should coordinate different types of targeted strategies.In addititon,it reveals that choosing proper consumer attributes to group and target consumers counts a lot when implementing a targeted strategy.It further shows the criterion of choosing which attributes to group consumers is affected by a firm's imperfect tartgetability to distinguish different types of consumers and consumers' imperfect learning ability to know true values of products.This study sheds light on how the factors such as choosing which attributes to target consumers,the firm's imperfect targetability and the consumers' imperfect learning affect the success of a targeted strategy.