Facilitating Fit Revelation in the Competitive Market

Gu, Zheyin; Xie, Ying

doi:10.1287/mnsc.1120.1594

Cited by 83 publications

(33 citation statements)

References 39 publications

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“…Fit has also been the subject of some recent modeling research. For example, Gu and Xie (2013) study the strategic decision of retailers in a competitive market to facilitate fit revelation as a function of product quality, and Gu and Liu (2013) study how retailers can influence fit search with their shelf layout decisions. Our work complements this literature by empirically estimating the causal impact of providing virtual fit information.…”

Section: Literature Reviewmentioning

confidence: 99%

The Value of Fit Information in Online Retail: Evidence from a Randomized Field Experiment

Gallino

Moreno²

2018

M&SOM

131

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Online channels generate frictions when selling products with non-digital attributes, such as apparel. Customers may be reluctant to purchase products they have not been able to try on and those customers who do purchase may return products when they do not fit as expected. Virtual fitting-room technologies provide information about how a product fits a particular customer and promise to mitigate some of the frictions the information gap generates in the retailers' supply chains. By implementing a series of randomized field experiments, we study the value of virtual fit information in online retail. In our experiments, customers are randomly assigned to a treatment condition where virtual fit information is available or to a control condition where virtual fit information is not available. Our results show that offering virtual fit information increases conversion rates and order value, and reduces fulfillment costs arising from returns and home try-on behavior, i.e., customers ordering multiple sizes of the same product. We explore mechanisms through which providing virtual fit information helps customers and retailers. We argue that the virtual fitting tool creates spillovers even to products that are not available for virtual try-on, increases loyalty, helps customers better parse their choice sets, and reduces uncertainty by providing size recommendation.

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Section: Literature Reviewmentioning

confidence: 99%

The Value of Fit Information in Online Retail: Evidence from a Randomized Field Experiment

Gallino

Moreno²

2018

M&SOM

131

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“…We assume that each product's quality and price are costlessly observable, as in Anderson and Renault (2009), Guo and Zhang (2012), and Gu and Xie (2013). However, its match value is idiosyncratic and can only be discovered via evaluation by each customer.…”

Section: Modelmentioning

confidence: 99%

“…However, whereas advertising may fully convey relatively simple product attributes, in the market scenarios noted above firms' advertising and efforts to provide information rarely eliminate search, although they effectively lower customers' evaluation costs. Whereas Rajiv et al (2002), Anderson and Renault (2009), and Gu and Xie (2013) examine how the sellers' exogenous quality levels affect their advertising and information provision decisions, we also show how firms' customer learning efforts may impact their endogenous quality choices. In a setting with identical products and service free riding, Desai et al (2010) examine retail competition in service and price advertising.…”

Section: Introductionmentioning

confidence: 99%

“…The four antidepressants with superior quality, i.e., Sertraline, Paroxetine, Fluoxetine, and Citalopram, use stronger sampling intensities than the other antidepressants (Gu and Xie 2013).…”

Section: Introductionmentioning

confidence: 99%

“…In models of informative advertising, those exposed to advertisements are assumed to costlessly learn the value of advertised attributes whereas the other consumers remain uninformed (Grossman and Shapiro 1984) or resort to search (Robert andStahl 1992, Desai et al 2010). Similarly, information provided by the firm is also assumed to inform consumers about their product valuation (Lewis and Sappington 1994, Guo and Zhao 2009, and Gu and Xie 2013. Therefore, advertising and information provision are treated as perfect substitutes for consumer search.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Lowering Customer Evaluation Costs, Product Differentiation, and Price Competition

Jing

2016

Marketing Science

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W hen match uncertainty is resolved via costly evaluation, the first product sampled by a customer is more likely to make the sale. This prompts firms to lower their products' evaluation costs to attract customers to sample their products first. Such efforts by firms are called customer learning investment (CLI). When product quality is freely observable but horizontal match is not, we examine how CLI choices interact with quality and price competition in a duopoly. CLI has a competition effect in that a higher CLI of a firm increases its demand but decreases that of its rivals. In the market-covered duopoly, both qualities will decrease (increase) when the high-end (low-end) firm invests more in customer learning, and remain unchanged when they invest equally, relative to when neither firm invests. We further show that the firm with a higher relative production efficiency invests more in customer learning than the competitor. In the market-not-covered duopoly, CLI by the lowend firm also creates a market-expansion effect by inducing some additional low-end customers to sample and purchase its product. This may induce it to invest more than the high-end firm, even when the latter has a higher relative production efficiency.

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The effect of online reviews' information on quality and pricing decisions

2023

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Consumers often rely on the peer reviews to make smart purchase decisions in the face of new experience products. Such information is also available to firms, which can help them learn about consumers' purchase intention and hence better deal with the tripartite price–quality–demand relationship. In this study, we develop a two‐period model to examine the impact of online reviews on product quality and price decisions. The market is characterized by the two‐dimensional heterogeneity of customer valuation and their willingness to pay for quality. Interestingly, we find that the informativeness of reviews plays different roles in firm–consumer interactions depending on the market's average willingness to pay (AWTP). Such informativeness exerts an information value‐added on both the firm and consumers in a high‐AWTP market and a negative impact in a low‐AWTP market. These two effects respectively induce consumers to purchase more in the high‐AWTP market while expel consumers from the market in the low‐AWTP market. We also compare the price path and quality level under commitment pricing and dynamic pricing both with and without informativeness, the results of which show that the information inducing effect changes the marketing strategies for new products. Furthermore, we present the conditions on which the firm should strive to disclose its quality information and explore the difference of firms' decisions in monopoly and competitive market.

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Facilitating Fit Revelation in the Competitive Market

Cited by 83 publications

References 39 publications

The Value of Fit Information in Online Retail: Evidence from a Randomized Field Experiment

The Value of Fit Information in Online Retail: Evidence from a Randomized Field Experiment

Lowering Customer Evaluation Costs, Product Differentiation, and Price Competition

The effect of online reviews' information on quality and pricing decisions

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