De-targeting to signal quality

Xingyi Liu

doi:10.1016/j.ijresmar.2019.10.003

De-targeting to signal quality

Xingyi Liu

Economics, Finance and Entrepreneurship

Research output: Contribution to journal › Article › peer-review

Abstract

It is important for firms to signal the high quality of their products to consumers in experience goods markets. Conventional wisdom suggests that a high price can be a signal of high quality. However, we argue that the role of price in signaling quality could be weakened when firms resort to the intensive use of targeting in advertising, which could attenuate the informational content of a high price. As a consequence, a high quality firm needs to distort its price more to signal its quality. However, when different levels of targeting are available, a high quality firm may find it optimal to signal its quality with a lower level of targeting.

Original language	English
Pages (from-to)	386-404
Number of pages	19
Journal	International Journal of Research in Marketing
Volume	37
Issue number	2
Early online date	16 Jan 2020
DOIs	https://doi.org/10.1016/j.ijresmar.2019.10.003
Publication status	Published - Jun 2020

Bibliographical note

Keywords

Asymmetric information
Quality signaling
Targeting

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10.1016/j.ijresmar.2019.10.003

De-targeting to Signal Quality
© 2020, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Accepted author manuscript, 323 KBLicence: CC BY-NC-ND 3.0

Cite this

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abstract = "It is important for firms to signal the high quality of their products to consumers in experience goods markets. Conventional wisdom suggests that a high price can be a signal of high quality. However, we argue that the role of price in signaling quality could be weakened when firms resort to the intensive use of targeting in advertising, which could attenuate the informational content of a high price. As a consequence, a high quality firm needs to distort its price more to signal its quality. However, when different levels of targeting are available, a high quality firm may find it optimal to signal its quality with a lower level of targeting.",

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AB - It is important for firms to signal the high quality of their products to consumers in experience goods markets. Conventional wisdom suggests that a high price can be a signal of high quality. However, we argue that the role of price in signaling quality could be weakened when firms resort to the intensive use of targeting in advertising, which could attenuate the informational content of a high price. As a consequence, a high quality firm needs to distort its price more to signal its quality. However, when different levels of targeting are available, a high quality firm may find it optimal to signal its quality with a lower level of targeting.

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De-targeting to signal quality

Abstract

Bibliographical note

Keywords

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