Marco Bertini

Research Note---Attention Arousal Through Price Partitioning

Existing evidence suggests that preferences are affected by whether a price is presented as one all-inclusive expense or partitioned into a set of mandatory charges. To explain this phenomenon, we introduce a new mechanism whereby price partitioning affects a consumers perception of the secondary (i.e., nonfocal) benefits derived from a transaction. Four experiments support the hypothesis that a partitioned price increases the amount of attention paid to secondary attributes tagged with distinct price components. Characteristics of the offered secondary attributes such as their perceived value, relative importance, and evaluability can therefore determine whether price partitioning stimulates or hinders demand. Beyond its descriptive and prescriptive implications, this theory contributes to the emerging notion that pricing can transform, as well as capture, the utility of an offer.

Price Promotion for Emotional Impact.

Managers and academics often think of price promotions merely as incentives that entice consumers to accept offers that they might not have considered otherwise. Yet the prospect of paying a lower price for a product of given quality can also discourage deliberation, in a sense “dumbing down” the purchase encounter by making it less consequential. The authors examine this possibility in a dual-system theory of consumer behavior. Specifically, they argue that price promotion lowers a consumers motivation to exert mental effort, in which case purchase decisions are guided less by extensive information processing and more by a quicker, easier, strong conditioner of preference: affect. Field data from a large daily deal company and four controlled experiments support this idea and document its implications primarily for product choice, in turn providing insight into the form and cause of brand switching that manufacturers and retailers can leverage to improve the allocation of promotional budgets and category management.

The Impact of Add-On Features on Consumer Product Evaluations

The research presented in this article provides evidence that add-on features sold to enhance a product can be more than just discretionary benefits. We argue that consumers draw inferences from the mere availability of add-ons, which in turn lead to significant changes in the perceived utility of the base good itself. Specifically, we propose that the improvements supplied by add-ons can be classified as either alignable or nonalignable and that they have opposing effects on evaluation. A set of four experiments with different product categories confirms this prediction. In addition, we show that the amount of product information available to consumers and expectations about product composition play important moderating roles. From a practical standpoint, these results highlight the need for firms to be mindful of the behavioral implications of making add-ons readily available in the marketplace.

Money, Time, and the Stability of Consumer Preferences

Consumers often make product choices that involve the consideration of money and time. Building on dual-process models, the authors propose that these two basic resources activate qualitatively different modes of processing: while money is processed analytically, time is processed more affectively. Importantly, this distinction then influences the stability of consumer preferences. An initial set of three experiments demonstrates that, compared with a control condition free of the consideration of either resource, money consideration generates significantly more violations of transitivity in product choice, while time consideration has no such impact. The next three experiments use multiple approaches to demonstrate the role of different processing modes associated with money versus time consideration in this result. Finally, two additional experiments test ways in which the cognitive noise associated with the analytical processing that money consideration triggers could be reduced, resulting in more consistent preferences.

Profiting When Customers Choose Value Over Price

Increasingly recognised by academics and practitioners as the most effective approach to pricing for companies that wish to achieve increased profitability and sustained success, value-based pricing faces numerous obstacles. But Andreas Hinterhuber and Marco Bertini say the advantages of this approach to pricing far outweigh any difficulties.

The Perils of Popularity

The iPhones worldwide success would seem to be an unqualified win‐win for Apple and the mobile operators that sell it. Not so, explain Marco Bertini and Ricardo Cabornero, as mobile operators must maintain a delicate balance between winning new customers and retaining existing ones. This task is made more difficult when their own brands can actually be diminished by selling the iPhone.

Putting Customer Back into Customization: A Pricing Intervention

The benefits of customization are not always self-evident to consumers who seek to minimize decision costs or are generally uncertain of what they really want. We argue that the mere posting of a starting price can increase a consumer’s readiness to appreciate customized goods. We discuss this phenomenon in the context of a simple model of reference-dependent preferences and propose four experiments to support our predictions. In experiment 1 and 2, we show that announcing a starting price accentuates consumer sensitivity to the match quality and relevance of customization, respectively, enhancing purchase intent and perceived product value to the extent that these qualities are present. Experiment 3 reveals that the effect of starting prices implicates the judgments of novices more so than those of experts. In experiment 4, we revert the effect and demonstrate that consumers who seek conformism and avoid personalization will be more likely to reject customized products when exposed to a starting price.

Beyond Posted Prices: The Past, Present, and Future of Participative Pricing Mechanisms

Driven by the low transaction costs and interactive nature of the internet, customer participation in the price-setting process has increased. Today, platforms such as eBay have popularized online auctions on a global scale, Priceline has made headlines with its name-your-own-price (NYOP) business model, and Humble Bundle has enabled independent musicians and game developers to market their works through pay-what-you-want (PWYW) pricing. Advertising exchanges conduct several hundred million individual auctions per day to sell online advertising slots. The present paper contributes to the literature on participative pricing in three ways. First, we propose a definition of participative pricing mechanisms, as well as a useful taxonomy. Second, we discuss the current understanding by synthesizing conceptual and empirical academic literature. Third, we outline promising research questions with a key focus on the related behavioral aspects of buyers and sellers.

Price and Quality Decisions by Self-Serving Managers

Managers like to think well of themselves and of the firms that employ them. Yet, such positive illusions can prejudice the evaluation of market outcomes and, as a result, provoke biased responses. In particular, we examine the possibility that managers self-servingly credit success in the market to product quality but blame failure on price. We draw on the social psychology of causal attributions to substantiate this idea and predict how managers adjust price and quality on the basis of prior results. Next, we report one experiment that tests the different elements of our theory, as well as insights from two surveys and a marketing simulation that add robustness to the findings. Finally, we develop an analytical model of price-quality competition to understand the profit impact of self-serving behavior. Counter to intuition, we find that under certain conditions firms can benefit from the biased actions of their managers.

A Novel Revenue Architecture to Monetize Digital Goods

The shift of commerce to the digital domain has forced many organizations to rethink their attitude to value creation, at times backtracking to the very question of what “value” actually means. Electronic commerce facilitates and thrives on social interaction, yet the way companies convert digital anything into cash they can bank seems to be stuck in time, obeying rules and practices that may have worked for physical goods but make far less sense today. We believe that earning revenue in the digital age needs a fresh approach. This short article seeks to lay the foundations for such an approach and proposes FairPay as one viable alternative.