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De-targeting to signal quality

Author

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  • Liu, Xingyi

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.

Suggested Citation

  • Liu, Xingyi, 2020. "De-targeting to signal quality," International Journal of Research in Marketing, Elsevier, vol. 37(2), pages 386-404.
    • Handle: RePEc:eee:ijrema:v:37:y:2020:i:2:p:386-404
    DOI: 10.1016/j.ijresmar.2019.10.003
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    Cited by:

    1. Ham, Sung H. & He, Chuan & Zhang, Dan, 2022. "The promise and peril of dynamic targeted pricing," International Journal of Research in Marketing, Elsevier, vol. 39(4), pages 1150-1165.
    2. Ming-Hui Huang & Roland T. Rust, 2021. "A strategic framework for artificial intelligence in marketing," Journal of the Academy of Marketing Science, Springer, vol. 49(1), pages 30-50, January.

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