Three Studies on Online Consumer Behaviour: Product Scarcity, Price Expectation and Choice

Ms Gao Yuting
Dr Jack Jiang Zhenhui, Professor, School of Computing

  17 Jan 2020 Friday, 10:00 AM to 11:30 AM

 Executive Classroom, COM2-04-02


The emergence of e-commerce makes it easier for companies to get in touch with consumers and increases their sale opportunities. At the same time, e-commerce intensifies the competition between companies and pushes them to develop various tactics to influence consumer behaviour. Two of the various aspects that consumers mostly care about is the product itself and the price. Products of high quality are preferred to those of low quality, so companies try hard to improve product quality and emphasize unique features and functions in promotion campaigns. However, products of good quality usually are popular and sell fast. When products are of limited availability, consumers feel the "urgency' to purchase the product as soon as possible before the product runs out of stock. Therefore, some companies highlight product scarcity to attract consumers. For example, Expedia, the famous online hotel booking websites, often highlights product scarcity with a message like 'We have only 1 room left at this price'. For the same product, consumers prefer low price. However, some products may be readily available, but their prices fluctuate a lot, such as hospitality and air travel. Consequently, some companies use persuasive messages about future price to affect consumers' price expectation. For instance, Google flights sometimes push notifications to users about price changes, such as 'Prices for the route will likely go up'. Traditionally, companies set the price for the product and given the pre-set price, consumers decide whether they want to buy the product or not. Nowadays, some companies invented new pricing strategies that appeal to consumers. For example, for a given product, the company may give three different price options. If consumers want to buy the product, they can choose whichever price to pay. By empowering consumers, companies try to improve people's attitude towards the price. In my thesis, I try to study how the above tactics may influence online consumer behavior through laboratory experiments and field experiments.

In my first study, I study the effect of product scarcity cues on consumers' purchase behaviour. A field experiment was conducted in collaboration with a leading travel meta-search platform. In the experiment, we operationalize the product scarcity information using the number of remaining seats. Results show that, product scarcity messages can significantly increase consumers' flight booking decisions. In addition, the positive effect of product scarcity messages is stronger for flight deals with higher prices.

The second study explores how price expectation affects consumers behaviour. Still in collaboration with the same travel meta-search mobile app, we conducted another field experiment where consumers' expectation about future price was manipulated. Price reassurance comforts consumers that the future price is unlikely to drop, while price alert reminds consumers that price may surge. Results show that price alert can increase consumers' flight bookings and the effect is stronger when price is higher.

The third study aims to investigate an emerging pricing strategy, 'Choose What You Offer', where people can choose one amount to offer from a few (usually three) amount options listed. Compared to pre-determined fixed amount, CWYO features a choice structure and empowers people with autonomy and control. In online shopping, CWYO can improve consumers' attitude towards the product and increase their intention to purchase. In online crowdfunding, CWYO can encourage people to contribute and to contribute more than the pre-determined amount. We also plan to study how reference amount may moderate the effect of 'Choose What You Offer'.