Marketing Seminar（2016-12）

Title: Consumer Sophistication, WOM and “False” Promotions

Speaker: Yiting Deng,UCL School of Management, London

Time: Wednesday, 14 Sept.13:30-15:00

Location: RoomK02, Guanghua Building 2

Abstract:

Not all retail price promotions provide consumers with additional monetary value. For instance, a retailer might raise the retail price of an item just before a sale and then “promote” the product by listing the initial price as the sales price. This paper addresses the question “Under what conditions would a firm give such a 'false' promotion and with what regularity?”

We construct an analytical model composed of two competing retailers and two segments of consumers. The duopoly firms sell substitutable goods in a finite number of periods to consumers. One firm never offers false promotions, and the second firm accumulates reputation through its promotional actions. One segment of consumers is sophisticated and is able to discern false promotions based on the two firms’ promotional offerings. The other segment of consumers is naive and trusts each firm's claimed promotional offering. Sophisticated consumers pass information on their perception of the second firm via word-of-mouth (WOM) to a fraction of naive consumers.

We find that the possibility of offering false promotions can improve the payoffs for both firms. Moreover, even when consumers can identify that a firm is offering a false promotion and pass this information to others, a firm still finds it optimal to offer such promotions from time to time. In general, the firm is more likely to offer false promotions in an environment with higher percent discounts, fewer sophisticated consumers, and weaker WOM.

Introduction:

Yiting Dengis Assistant Professor of Marketing at the UCL School of Management at University College London (UCL). Previously, she was Assistant Professor of Marketing at the Mendoza College of Business (University of Notre Dame).Yiting applies empirical modeling techniques to marketing data in solving consumer choice and firm decision problems. Her current research is in the area of media consumption, marketing effectiveness, two-sided markets and diffusion of technologies. Her research has been published inMarketing ScienceandStatistical Science.Yiting received her Ph.D. in Marketing and M.S. in Statistics from Duke University in 2015. Prior to this, she studied at Peking University and obtainedher B.A. and M.A. in Economics, and B.S. in Statistics.

https://www.mgmt.ucl.ac.uk/people/yitingdeng

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