Z. John Zhang

• University of Pennsylvania

Retailers often employ professionals known as retail buyers to determine the right quantities of products to order. However, in many economies and industries, a manufacturer may seek to unduly influence the buyer through various means. One such means is to offer the buyer kickbacks (incl. entertainment, travel, gifts) in return for a large order. D...

We show theoretically that when high‐quality, low‐price counterfeits exist and are visibly indistinguishable from authentic products, the status‐seeking wealthy may embrace a “less is more” purchasing strategy or what we refer to as the minimalist luxury strategy, to signal their status. These are the wealthy who have a high disutility of shopping...

This article provides a critical review of pricing issues related to cryptocurrency and NFTs from a marketing perspective and tries to answer the question of whence comes the value for cryptocurrencies and NFTs. It shows that the value for a cryptocurrency like Bitcoin hinges on the collective belief in the marketplace in its long-term survival as...

In this article, we argue that non-fungible tokens (NFTs) challenge established marketing understanding of digital ownership, uniqueness, and value; authenticity, status, and sharing; and branding and distribution. We propose a set of preliminary research questions rooted in these areas, in hopes of offering entry points to future programmatic inve...

This paper develops a theoretical model to study how the revenue model and technology of a social media platform affect its content-moderation strategy.

Purpose The purpose of the study is to introduce the idea of arena-relevant marketing capabilities and examine their impact on firm performance. Arena-relevant marketing capabilities are capabilities particularly relevant for success in a specific competitive arena in which rivals from different industries try to satisfy customer needs with alterna...

The availability of high‐quality, low‐price counterfeits in many luxury markets threatens the role of luxury goods as a status symbol. If those counterfeits look and feel the same as the authentic counterparts, as many professional authenticators observe, and they are available at a fraction of the price of authentic goods, why would self‐intereste...

This paper develops a theoretical model to study the economic incentives for a social media platform to moderate user-generated content. We show that a self-interested platform can use content moderation as an effective marketing tool to expand its installed user base, to increase the utility of its users, and to achieve its positioning as a modera...

Knowledge of consumers' willingness to pay (WTP) is a prerequisite to profitable price-setting. To gauge consumers' WTP, practitioners often rely on a direct single question approach in which consumers are asked to explicitly state their WTP for a product. Despite its popularity among practitioners, this approach has been found to suffer from hypot...

Knowledge of consumers' willingness to pay (WTP) is a prerequisite to profitable price-setting. To gauge consumers' WTP, practitioners often rely on a direct single question approach in which consumers are asked to explicitly state their WTP for a product. Despite its popularity among practitioners, this approach has been found to suffer from hypot...

Knowledge of consumers' willingness to pay (WTP) is a prerequisite to profitable price-setting. To gauge consumers' WTP, practitioners often rely on a direct single question approach in which consumers are asked to explicitly state their WTP for a product. Despite its popularity among practitioners, this approach has been found to suffer from hypot...

In this paper, we incorporate incomplete information about consumer wealth and the presence of high-quality, low-price counterfeits to investigate when a consumer may engage in minimalist , as opposed to excessive, luxury consumption to signal her wealth. Past literature has shown that when wealth is not observable, the wealthy are motivated to out...

Open innovation contests are a popular way to tap into the creativity of customers. Many firms host multiple, successive open innovation contests in response to different, creative challenges they face. To encourage customers to participate and make an effort in such contests, they offer monetary rewards of varying sizes. Although prior research ha...

Some firms use a curious pricing mechanism called “pay as you wish” pricing (PAYW). When PAYW is used, a firm lets consumers decide what a product is worth to them and how much they want to pay to get the product. This practice has been observed in a number of industries. In this paper, we theoretically investigate why and where PAYW can be a profi...

In the last two decades, organized retailing has transformed the retailing landscape in emerging economies, where unorganized retailing has traditionally been dominant. In this paper, we build a theoretical model of unorganized and organized retailing in emerging economies by carefully modeling key characteristics of the retailing environment, the...

We study how luxury brands can use product line expansion as a strategy when facing a threat from the counterfeit market. Consumers who are status-conscious consider the benefits and costs of buying luxury items in order to strengthen the beliefs of others about their status. Our findings suggest that product line expansion strategy serves these hi...

In this paper we study product line scope and pricing decisions in a horizontally differentiated duopoly. Past research has shown that a firm may offer a broader product line to attract higher demand or charge a higher price (or both), and benefit at the expense of its competitor. We show that such outcomes may be reversed, especially when consumer...

We propose a framework for the joint study of the consumer’s decision of where to buy and what to buy. The framework is rooted in utility theory where the utility is for a particular channel/brand combination. The framework contains firm actions, the consumer search process, the choice process, and consumer learning. We develop research questions w...

Many firms today manage their existing customers differentially based on profit potential, providing fewer incentives to less profitable customers and firing unprofitable customers. Although researchers and industry experts advocate this practice, results have been mixed. We examine this practice explicitly accounting for competition and find that...

In the last two decades, organized retailing has transformed the retailing landscape in emerging economies, where unorganized retailing has traditionally been dominant. In this paper, we build a theoretical model of unorganized and organized retailing in emerging economies by carefully modeling key characteristics of the retailing environment, the...

It is often argued that in competitive markets a firm expands its product line to benefit at the expense of its competitor: more products enable a firm to attract higher demand and/or charge higher prices to earn more profits. We show that these conclusions may be reversed, even without market size expansion. In our model, two firms competing in a...

In many markets, a handset vendor and a service provider may enter into a tie-in for a handset to be available exclusively through the service provider. We examine when and why a service provider and a handset vendor may find this arrangement mutually profitable. We find that an exclusive handset arrangement (EHA) may serve a dual strategic purpose...

In recent years, online retailers (also called e-tailers) have started allowing manufacturers direct access to their customers while charging a fee for providing this access, a format commonly referred to as agency selling. In this paper, we use a stylized theoretical model to answer a key question that e-tailers are facing: When should they use an...

In many markets, a handset vendor and a service provider may enter into a tie-up for a handset to be available exclusively through the service provider. We examine when and why a service provider and a handset vendor may find this arrangement mutually profitable. We find that an exclusive tie-up may serve a dual strategic purpose. By restricting it...

Gauging the maximum willingness to pay (WTP) of a product accurately is a critical success factor that determines not only market performance but also financial results. A number of approaches have therefore been developed to accurately estimate consumers’ willingness to pay. Here, four commonly used measurement approaches are compared using real p...

Getting the price right is essential for successful new product introductions. An accurate estimate of consumers' willingness to pay is a crucial part of this task. Measurement of willingness to pay for innovations, however, often yields biased results. In this paper, we investigate consumer-related characteristics and motives that might underlie t...

Besides its familiar demand-redistribution effect, price promotion by a multi-product firm creates cannibalization, as lowering the price of one variety may erode the profits of its other varieties. We study endogenous product line selection and price promotions in a duopoly. In equilibrium, the ex ante symmetric firms may offer asymmetric product...

This paper examines how information provided by online reviews influences firms’ pricing strategy for repeat purchase products. It is commonly understood that online reviews can reduce consumer uncertainty about product characteristics and, therefore, have the potential to increase product demand and firm profits. However, when considering repeat p...

This study compares the performance of four commonly used approaches to measure consumers’ willingness to pay (WTP) to real purchase data (REAL): the open-ended question format (OE), choice-based conjoint analysis (CBC), the incentive-compatible mechanism proposed by Becker, DeGroot, and Marschak (1964) (BDM), and incentive-aligned choice-based con...

This paper shows how analytic modeling research in the Marketing field is focused on answering questions of “How?” and “Why?” It describes the disciplines involved in analytic modeling; examines how the key criteria of parsimony and robustness help to define a good model; and discusses other goodness criteria, including appropriate use of analytic...

In a store-within-a-store arrangement, retailers essentially rent out retail space to manufacturers and give them complete autonomy over retail decisions, such as pricing and in-store service. This intriguing retailing format appears in an increasing number of large department stores worldwide. The authors use a theoretical model to investigate the...

China-Europe International Business School This paper proposes a framework to understand the prevalence of price wars in China and it also uses the framework to articulate the art of planning and executing a price war.

In this paper, we investigate how retailer competition and asymmetry affect store brand strategy when some of the consumers are one-stop shoppers. We find that when the intensity of competition between retailers is low, store brands can be used to shield consumers loyal to the national brand from price sensitive one-stop shoppers. When the intensit...

Under the store-within-a-store arrangement, retailers essentially rent out their retail space to manufacturers and give them complete autonomy over retail decisions like pricing and in-store service. This intriguing retailing format, also known as vendor shops, boutiques or manufacturer-managed retailing, is observed in an increasing number of larg...

Firms routinely face the challenging decision of whether to enter a new market where a firm's strong presence in an existing market has a positive influence (the leverage effect) on product adoption in the new market, but the reciprocal social influence on the existing market is negative (the backlash effect). In this paper, we show that a firm's o...

We investigate in this paper whether dynamic targeted pricing based on consumer purchase history could benefit a practicing firm even when consumers are "strategic" in that they actively seek to avail themselves of a low price in the future. Such strategic behavior on the part of consumers has been shown in the literature to render such dynamic tar...

In mature markets with competing firms, a common role for advertising is to shift consumer preferences towards the advertiser in a tug-of-war, with no effect on category demand. In this paper, we analyze the effect of such "combative" advertising on market power. We show that, depending on the nature of consumer response, combative advertising can...

Critics have long faulted the wide-spread practice of trade promotions as wasteful. It has been estimated that this practice adds up to $100 billion worth of inventory to the distribution system. Yet, the practice continues. In this paper, we propose a price discrimination model of trade promotions. We show that in a distribution channel characteri...

One-to-one marketing advocates tailoring of one or more aspects of the firm's marketing mix to the individual customer (Peppers and Rogers 1997; Peppers, Rogers and Dorf 1999; Shaffer and Zhang 2002). One-to-one marketing represents an extreme form of segmentation, with a target segment of size one. There are two forms of one-to-one marketing: pers...

Many …firms today quantify the value of individual customers and serve them differentially; providing better service, prices and other inducements to high value customers. We refer to this practice as Customer Value-based Management (CVM). While previous research and popular press has strongly advocated CVM, …firms have often met with mixed results...

The tailoring of a firm’s marketing mix to the individual customer is the essence of one-to-one marketing. In this paper, we distinguish between two forms of one-to-one marketing: personalization and customization. Personalization occurs when the firm decides what marketing mix is suitable for the individual. It is usually based on previously colle...

Firms in many industries experience protracted periods of pricing power, the ability to successfully enact price increases. In these situations, firms must decide not only whether to raise prices, but to whom. Specifically, in a competitive context, they must determine whether it is more profitable to increase prices across-the-board or to a specif...

Abstract In this paper, we incorporate the concept of fairness into the conventional dyadic channel to investigate how fairness may affect the interactions between the manufacturer and the re- tailer. We show that channel coordination in a channel where partners care about fairness does not require any nonlinear pricing scheme such as a two-part ta...

The marketing and operations management arms in a firm must work in coordination: marketing efforts to create demand go to waste if supply is suboptimal, and vice versa. However, achieving this coordination has remained a long-standing problem, because in most firms these units are managed in a decentralized manner. A major source of conflict is th...

Movie studios often have to choose among thousands of scripts to decide which ones to turn into movies. Despite the huge amount of money at stake, this process--known as green-lighting in the movie industry--is largely a guesswork based on experts' experience and intuitions. In this paper, we propose a new approach to help studios evaluate scripts...

Abstract The emergence of power retailers, such as Wal-mart, Best Buy, and Home Depot, has signif- icantly changed the competitive landscape in the retailing industry over the past two decades. These power retailers frequently dominate other small retailers by charging lower prices (market dominance). Some also pursue the strategy of dominating the...

We develop a game-theoretical model to show that in the markets where price consistency across channels is critical, an incumbent brick-and-mortar retailer can deter the online entry of a pure-play e-tailer by strategically refraining from entering online. In the markets where price consistency is not a constraint, we find that the incumbent can de...

In this paper, we explore channel interactions in an information-intensive environment where the retailer can implement personalized pricing and the manufacturer can leverage both personalized pricing and entry into a direct distribution channel. We study whether a retailer can benefit from personalized pricing, and how upstream personalized pricin...

romotional tools such as rebates and coupons are usually seen as different ways of price discriminating among consumers. We focus on a different property of rebates: their ability to price discriminate within a consumer among her postpurchase states. Unlike price discrimination between consumers, this property is unique to rebates because, by desig...

The retail trade today is increasingly dominated by large, centrally managed “power retailers.” In this paper, we develop a channel model in the presence of a dominant retailer to examine how a manufacturer can best coordinate such a channel. We show that such a channel can be coordinated to the benefit of the manufacturer through either quantity d...

Behavioral decision researchers have documented a number of anomalies that seem to run counter to established theories of consumer behavior from microeconomics that are often at the core of analytical models in marketing. A natural question therefore is how equilibrium behavior and strategies would change if models were to incorporate these anomali...

Consumer reservation price is a key concept in marketing and economics. Theoretically, this concept has been instrumental in studying consumer purchase decisions,competitive pricing strategies,and welfare economics. Managerially,knowledge of consumer reservation prices is critical for implementing many pricing tactics such as bundling,tar get promo...

One-to-one promotions are possible when consumers are individually addressable and firms know something about each customer's preferences. We explore the competitive effects of one-to-one promotions in a model with two competing firms where the firms differ in size and consumers have heterogeneous brand loyalty. We find that one-to-one promotions a...

Increased access to individual customers and their purchase histories has led to a growth in targeted promotions, including the practice of offering different pricing policies to prospective, as opposed to current, customers. Prior research on targeted promotions has adopted a tenet of the standard economic theory of choice, whereby what a consumer...

Many established industries, such as the online service industry, the telecommunication industry, or the fitness club industry, are access service industries. When using services in these industries, consumers pay for the privilege of accessing the firm's facilities but do not acquire any right to the facility itself. A firm's pricing decisions in...

Price-matching guarantees are widely used in consumer and industrial markets. Previous studies argue that they are a marketing tactic that facilitates implicit price collusion. This is because once a store adopts this marketing tactic, its rivals can no longer steal its customers by undercutting its price, and hence they have little incentive to in...

Our research investigates the competitive ramifications of individual marketing and information management in today's information-intensive marketing environments. The specific managerial issues we address are as follows. First, what kinds of incentive environments do competing firms face when they can only target individual customers imperfectly?...

Price-matching guarantees are widely used in consumer and industrial markets. Previous studies argue that they are a marketing tactic that facilitates implicit price collusion. This is because once a store adopts this marketing tactic, its rivals can no longer steal its customers by undercutting its price, and hence they have little incentive to in...

How should a firm decide whether or not to enter an untested market when a competing firm is vying for the same market? Should a firm always speed to the market in an effort to capitalize on pioneering advantages? We address those questions by developing a simple game-theoretical model that captures the most essential factors in a firm's market ent...

We examine the key factors that influence a firm's decision whether to use front-loaded or rear-loaded incentives. When using price packs, direct mail coupons, FSI coupons or peel-off coupons, consumers obtain an immediate benefit upon purchase or a front-loaded incentive. However, when buying products with in-pack coupons or products affiliated wi...

In many markets, firms can price discriminate between their own customers and their rivals' customers, charging one price to consumers who prefer their own product and another price to consumers who prefer a rival's product. We find that when demand is symmetric, charging a lower price to a rival's customers is always optimal. When demand is asymme...

Retailers have long recognized that some categories are more important than others in consumers' store choice decisions. The overall profitability of a store requires careful category-level merchandising decisions to draw the most desirable consumers into the store. However, the traditional accounting measure of category profits offers imperfect he...

United States firms collectively spend over $6.5 billion annually on coupon promotions and are becoming increasingly concerned with their profitability. FSI (free-standing-insert) data show that coupon duration varies across brands. In this paper, we show how coupon duration can affect coupon profitability. We also provide answers for some empirica...

The Quantity Flexibility (QF) contract is a method for coordinating materials and infor- mation flows in supply chains operating under rolling-horizon planning. It stipulates a maximum percentage revision each element of the period-by-period replenishment ...

Price-matching guarantees are widely used in consumer and industrial markets. Previous studies argue that they are a marketing tactic that facilitates implicit price collusion. We show, however, that when consumers have incomplete price information, the adoption of price-matching guarantees allows consumer to shop opportunistically and reduce their...

Our analysis shows that in entering a new market a firm should not just focus its attention on the price that the market awards to a pioneer, or the tradeoff between first mover advantages and disadvantages. It should also consider the adverse consequences of being laggard.

We present a model which explains the puzzling phenomenon of quantity premiums (vis-a-vis quantity discounts) when consumers opportunistically switch between large and small packages and when cost differences would logically favor the offering of quantity discounts. Our analysis shows that the imposition of occasional quantity premiums can increase...

This research analyzes the strategic use of targeted promotions for customer retention and acquisition in a dynamic and competitive environment. The normative analysis shows that a firm's optimal targeting strategies, both offensive and defensive, depend on its actual market share, the relevant redemption rate of its targeted promotions, customer p...

Our analysis shows that in entering a new market a firm should not just focus its attention solely on the prize that a market awards to a pioneer or the trade-off between first mover advantages and disadvantages. It should also consider the adverse consequences of being a laggard. Thus, in a competitive context, an optimal decision may call for a f...

This paper shows that if duopolists are allowed to choose their product locations, a price-matching policy, and their prices sequentially and independently, both tacit collusion and minimum differentiation occur. Copyright 1995 by Blackwell Publishing Ltd.

With the advent of panel data on household purchase behavior, and the development of statistical procedures to utilize this data, firms can now target coupons to selected households with considerable accuracy and cost effectiveness. In this article, we develop an analytical framework to examine the effect of such targeting on firm profits, prices,...

As cities in the developing world grow, their poor residents are being deprived of services, especially water, sewer, and solid waste collection, that can only be purchased expensively in private markets. But the inadequate provision of urban environmental services is not inevitable. A lack of will in this respect is partly due to an ambivalent att...