THE DOUBLE-EDGED SWORD OF
INCREASED TRANSPARENCY
Master Thesis Defense – Franziska Dürre – 29.06.2015
The Effect of Extended Information –
Increased transparency
The internet provides access to abundant information
Consumers use it as decision aid
The market becomes more transparent
“On the internet the competition is just a click away“
(Varian, 1999)
Consumers spend more as a result of using digital channels
(Lobaugh et al., 2014)
2
Discussion in literature:
Price Convergence < > Price Dispersion
Focus on price transparency
Transparency
A differentiated perspective
Necessity to assess transparency in detail
Previous studies
Type of information makes a difference
(Granados et al., 2012; Li et al., 2014; Lynch & Ariely, 2000)
Theoretically unlimited access, but difference in ability &
preference
(Kuruzovich et al., 2008; Rigby et al., 2011)
How is the information available used by consumers?
Research Objective
Differentiated understanding of increased transparency, in
particular regarding quality information
How does the extent of quality information influence
consumers’ judgment of price & quality?
Concept of Value:
Comprehensive Judgment of Price and Quality
(Degeratu et al., 2000)
What is received – what has to be given in return
(Zeithaml, 1988)
Conceptual Model
Main Effects
5Price Downgrade
Consumer Judgment
Quality Upgrade
Extent of Consumer
Orientation
Depth
Amount of information Limited / ExtendedBreadth
Number of different sources
Limited / Extended
+
+
Main Hypotheses
Conceptual Model
Moderation & Mediation
6
Price Downgrade
Perceived Level of
Expertness
Consumer Judgment
Quality Upgrade
Extent of Consumer
Orientation
Depth
Breadth
Retailer Equity Context
Equal vs. differentiated
Control Variables
- Demographic
- Study Specific
- General Shopping Attitude
–
+
Research Design
Choice Scenario
Controlled Experiment with additional survey
Washing machines as exemplified product
Core: Manipulation and Choice Scenario
Create setting, exposed to information
Price Matrix:
3 machines (increasing quality & brand equity) – at 3 price levels
“Which offer would you most likely choose?”
7
Research Design
Manipulation
Manipulation
Amount of Information (Depth)
Research Design
Manipulation
Manipulation
Amount of Information (Depth)
Number of Information Sources (Breadth)
Research Design
Manipulation & Set-Up
Manipulation
Amount of Information (Depth)
Number of Information Sources (Breadth)
Retailer Equity Context
high price offered by a high equity retailer
2x2x2 between-subject factorial design
Random assignment to experimental conditions
German and Dutch version, majority of respondents German
Sample size: n=222 (after purification)
Results
Overall
Preference for high quality and low price overall
Further analysis to assess the influence of information extent
11
10%
39%
51%
Frequency Chosen Quality Level (Brand)
Low Quality
(Indesit)
Medium
Quality (AEG)
High Quality
(Siemens)
79%
5%
16%
Frequency Chosen Price Level (Retailer)
Methodology
Multiple regression
Two binary independent variables
Depth (0=limited / 1=extended)
Breadth (0=limited / 1=extended)
Dependent variables: Price level / Quality level chosen
assumed to be continuous scaled (results verified with logistic
regression)
Corrected for individual differences (control variables)
Multicollinearity: all correlations below critical value of
0,7
(Leeflang et al., 2000)
& VIF values uncritical
Results
Quality Upgrade Effect (QUE)
No significant influence of Depth and
Breadth on QUE
Brand familiarity and product knowledge
strong direct effect
“swallow” an initial significance of breadth
Product knowledge revealed to be moderator
Influence of Breadth on QUE is significant,
when considering an interaction with
individual product knowledge
The more consumers already know, the higher
the QUE (direct effect)
at the same time this weakens the effect of
information breadth on QUE (interaction effect)
13
Results
Price Downgrade Effect (PDE)
Significant influence of Depth and
Breadth on the PDE
The more extensive information consumers
have, the more likely they are to choose
for the lowest price available
Product knowledge has a negative
(direct) effect
the more consumers know, the weaker
the PDE
14
Relationships Found
15Price Downgrade
Quality Upgrade
Extent of Consumer
Orientation
Depth
Breadth
Retailer Equity Context
Managerial Implications
Increased level of Information Price Downgrade & Quality Upgrade
Beneficial for retailers to embrace need to confirm information
Pro-actively provide/encourage access to independent & interpersonal sources
Use the knowledge that consumers search broad for advertising
Product Knowledge as buffer for PDE and enhancer of QUE
Possible starting point for segmentation
Relevant for both online and traditional retailer
Traditional: interact with consumer enhance service attribute
Research Limitations &
Further Research Opportunities
Limitations
Product: high-involvement, utilitarian products
Sample: conclusions have to be limited to population with
rather high education (university level)
Methodology: more differentiated, ideally continuously
scale for measuring price and quality attitude
Further research
Study which takes into account the influences of several
channels (traditional and offline) simultaneously
(Heitz-Spahn, 2013)
DISCUSSION
References
19
Degeratu, A., Rangaswamy, A., Wu, J., 2000. Consumer choice behavior in online and traditional supermarkets: The effects
of brand name, price, and other search attributes. International Journal of Research in Marketing 17, 55-78.
Granados, N., Gupta, A., Kauffman, R., 2012. Online and Offline Demand and Price Elasticities: Evidence from the Air Travel Industry. Information Systems Research, 23(1), 164-181. Available online:
http://ink.library.smu.edu.sg/sis_research/1743 (last accessed: 21.06.2015).
Kuruzovich, J., Viswanathan, S., Agarwal, R, Gosain, S., Weitzman, S., 2008. Marketspace or Marketplace? Online
Information Search and Channel Outcomes in Auto Retailing. Information Systems Research, 19(2), 182-201.
Heitz-Spahn, S., 2013. Cross-channel free-riding consumer behaviour in a multichannel environment: An
investigation of shopping motives, sociodemographics and product categories. Journal of Retailing and Consumer
Services, 20, 570-578.
Leeflang, P., Wittink, D., Wedel, M., Naert, P., 2000. Building Models for Marketing Decisions. Dordrecht: Kluwer
Academic Publishers.
Li, T., Kauffman, R.; van Heck, E., Vervest, P., Dellaert, B., 2014. Consumer Informedness and Firm Information Strategy.
Information Systems Research, 25 (2), 345-363. Available online: http://ink.library.smu.edu.sg/sis_research/2194 (last
accessed 21.06.2015).
Lobaugh, K., Simpson, J., Ohri, L., 2014. The Digital Divide. Deloitte Digital. Available online:
http://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-rd-thenewdigitaldivide-041814.pdf (accessed 15.06.2015).
Lynch, J., Ariely, D., 2000. Wine Online: Search Costs Affect Competition on Price, Quality, and Distribution. Marketing
Science, 19 (1), 83-103.
Rigby, D., 2011. The Future of Shopping. Harvard Business Review, 64-76.
Varian, H., 1999. Market Structure in the Network Age. Conference Paper Understanding the Digital Economy, May 25-26, Department of Commerce, Washington, DC.
20
Back-Up
21
Hypotheses
Product Selection Washing Machines
Regression
Quality Upgrade Effect
Quality Upgrade Effect including moderation of
product knowledge
Price Downgrade Effect
Moderation Retailer Equity Context (2)
Back-Up: Hypotheses
(H1a) High depth (extended amount of information)
(H1b) High breadth (extended number of information sources)
quality upgrade effect
(H4) The relationship is partly mediated by the level of perceived expertness
(H2a) High depth (extended amount of information)
(H2b) High breadth (extended number of information sources)
price downgrade effect
(H3a/b) The relationship is negatively moderated by a differentiated
retailer equity context
Back-Up: Product Selection
Washing Machines as suitable example
23
No regular purchase
emphasis of the information given
expectation to conduct product research
Utilitarian nature, rather rational decision
relative importance of online channel for utilitarian goods
(Cheema & Papatla, 2010)
High involvement
motivation to conduct research
Back-Up:
Quality Upgrade Effect
Back-Up:
Price Downgrade Effect
Back-Up: Results
Retailer Equity Context as Moderator
Only significant for the relationship Depth
Price Downgrade Effect
High equity of a retailer has a buffering effect on the PDE (direct effect)
But in interaction with high information depth, the PDE remains positive
26
