IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v34y2015i6p789-803.html
   My bibliography  Save this article

Practice Prize Winner—ECO: Entega’s Profitable New Customer Acquisition on Online Price Comparison Sites

Author

Listed:
  • Martin Natter

    (Faculty of Business and Economics, Department of Marketing, Goethe University Frankfurt, 60323 Frankfurt am Main, Germany)

  • Ana-Marija Ozimec

    (HEAG Südhessische Energie AG (HSE), 64289 Darmstadt, Germany)

  • Ju-Young Kim

    (Department of Economics and Management, Institute of Information Systems and Marketing, Karlsruhe Institute of Technology, 76131 Karlsruhe, Germany)

Abstract

Market liberalization of the German household electricity market has led to an excessive number of competitors (1,150 electricity providers) and volatile price dynamics on price comparison sites. To date, providers that are struggling to achieve a top ranking on price comparison sites do not appear to implement a consistent or elaborate strategy for attracting customers. We developed a pricing tool, E lectricity C ontract O ptimization (ECO), that addresses this highly competitive market situation by integrating various available data sources, such as data from price comparison sites, demographic data, and regional sales or cost data. ECO sets regionally varying one-time bonuses to attract new customers on price comparison sites with the goal of optimizing sales and profit targets or optimally allocating sales budgets. Based on two field experiments, we demonstrate that ECO’s optimization procedure reduces ENTEGA yearly sales costs for new customer business, on average, by 35% relative to previously used pricing heuristics. ENTEGA uses ECO monthly to analyze different scenarios or to set prices and one-time bonuses on price comparison sites.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mksc.2015.0943 .

Suggested Citation

  • Martin Natter & Ana-Marija Ozimec & Ju-Young Kim, 2015. "Practice Prize Winner—ECO: Entega’s Profitable New Customer Acquisition on Online Price Comparison Sites," Marketing Science, INFORMS, vol. 34(6), pages 789-803, November.
    • Handle: RePEc:inm:ormksc:v:34:y:2015:i:6:p:789-803
    DOI: 10.1287/mksc.2015.0943
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.2015.0943
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mksc.2015.0943?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Michael D. Smith & Erik Brynjolfsson, 2001. "Consumer Decision-making at an Internet Shopbot: Brand Still Matters," NBER Chapters, in: E-commerce, pages 541-558, National Bureau of Economic Research, Inc.
    2. Rajiv Lal & Miklos Sarvary, 1999. "When and How Is the Internet Likely to Decrease Price Competition?," Marketing Science, INFORMS, vol. 18(4), pages 485-503.
    3. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    4. Gary L. Lilien & John H. Roberts & Venkatesh Shankar, 2013. "Effective Marketing Science Applications: Insights from the ISMS-MSI Practice Prize Finalist Papers and Projects," Marketing Science, INFORMS, vol. 32(2), pages 229-245, March.
    5. Ganesh Iyer & Amit Pazgal, 2003. "Internet Shopping Agents: Virtual Co-Location and Competition," Marketing Science, INFORMS, vol. 22(1), pages 85-106, November.
    6. Baye, Michael & GATTI, RUPERT J & Kattuman, Paul & Morgan, John, 2004. "Estimating Firm-Level Demand at a Price Comparison Site: Accounting for Shoppers and the Number of Competitors," Competition Policy Center, Working Paper Series qt923692d1, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    7. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
    8. Michael D. Smith & Erik Brynjolfsson, 2001. "Consumer Decision-making at an Internet Shopbot: Brand Still Matters," NBER Chapters, in: E-commerce, pages 541-558, National Bureau of Economic Research, Inc.
    9. Eric K. Clemons & Il-Horn Hann & Lorin M. Hitt, 2002. "Price Dispersion and Differentiation in Online Travel: An Empirical Investigation," Management Science, INFORMS, vol. 48(4), pages 534-549, April.
    10. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    11. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, March.
    12. Michael R. Baye & John Morgan, 2009. "Brand and Price Advertising in Online Markets," Management Science, INFORMS, vol. 55(7), pages 1139-1151, July.
    13. Ganesh Iyer & Amit Pazgal, 2003. "Erratum: Internet Shopping Agents: Virtual Co-Location and Competition," Marketing Science, INFORMS, vol. 22(2), pages 271-271, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. V Kumar & Amalesh Sharma & Shaphali Gupta, 2017. "Accessing the influence of strategic marketing research on generating impact: moderating roles of models, journals, and estimation approaches," Journal of the Academy of Marketing Science, Springer, vol. 45(2), pages 164-185, March.
    2. Magdalena Six & Franz Wirl & Jaqueline Wolf, 2017. "Information as potential key determinant in switching electricity suppliers," Journal of Business Economics, Springer, vol. 87(2), pages 263-290, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grewal, Dhruv & Janakiraman, Ramkumar & Kalyanam, Kirthi & Kannan, P.K. & Ratchford, Brian & Song, Reo & Tolerico, Stephen, 2010. "Strategic Online and Offline Retail Pricing: A Review and Research Agenda," Journal of Interactive Marketing, Elsevier, vol. 24(2), pages 138-154.
    2. Ratchford, Brian T., 2009. "Online Pricing: Review and Directions for Research," Journal of Interactive Marketing, Elsevier, vol. 23(1), pages 82-90.
    3. Moraga-Gonzalez, Jose L. & Wildenbeest, Matthijs R., 2011. "Comparison sites," IESE Research Papers D/933, IESE Business School.
      • Jose Luis Moraga-Gonzalez & Matthijs R. Wildenbeest, 2011. "Comparison Sites," Working Papers 2011-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    4. Jie Jennifer Zhang & Bing Jing, 2007. "The Impacts of Shopbots on Online Consumer Search," Working Papers 07-34, NET Institute, revised Sep 2007.
    5. Michael R. Baye & John Morgan, 2005. "Red Queen Pricing Effects in E-Retail Markets," Working Papers 2005-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    6. Michael R. Baye & John Morgan, 2009. "Brand and Price Advertising in Online Markets," Management Science, INFORMS, vol. 55(7), pages 1139-1151, July.
    7. Florian Morath & Johannes Münster, 2018. "Online Shopping and Platform Design with Ex Ante Registration Requirements," Management Science, INFORMS, vol. 64(1), pages 360-380, January.
    8. Eymann, Torsten (Ed.), 2007. "Tagungsband zum Doctoral Consortium der WI 2007 [WI2007 Doctoral Consortium Proceedings]," Bayreuth Reports on Information Systems Management 24, University of Bayreuth, Chair of Information Systems Management.
    9. Zhuang, Hejun & Popkowski Leszczyc, Peter T.L. & Lin, Yuanfang, 2018. "Why is Price Dispersion Higher Online than Offline? The Impact of Retailer Type and Shopping Risk on Price Dispersion," Journal of Retailing, Elsevier, vol. 94(2), pages 136-153.
    10. Bachis, Enrico & Piga, Claudio A., 2011. "Low-cost airlines and online price dispersion," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 655-667.
    11. Lindgren, Charlie & Daunfeldt, Sven-Olov & Rudholm, Niklas, 2021. "Pricing In Retail Markets With Low Search Costs: Evidence From A Price Comparison Website," HFI Working Papers 18, Institute of Retail Economics (Handelns Forskningsinstitut).
    12. Chuan He & Yuxin Chen, 2006. "Research Note—Managing e-Marketplace: A Strategic Analysis of Nonprice Advertising," Marketing Science, INFORMS, vol. 25(2), pages 175-187, 03-04.
    13. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 463-496, December.
    14. Dinlersoz, Emin M. & Pereira, Pedro, 2007. "On the diffusion of electronic commerce," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 541-574, June.
    15. Häring, Julia, 2005. "The Virtual Location of E-Tailers: Evidence from a B2C E-Commerce Market," ZEW Discussion Papers 05-52, ZEW - Leibniz Centre for European Economic Research.
    16. Fay, Scott, 2008. "Selling an opaque product through an intermediary: The case of disguising one's product," Journal of Retailing, Elsevier, vol. 84(1), pages 59-75.
    17. David Ronayne, 2021. "Price Comparison Websites," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 1081-1110, August.
    18. Haynes, Michelle & Thompson, Steve, 2008. "Price, price dispersion and number of sellers at a low entry cost shopbot," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 459-472, March.
    19. Michael R. Baye & J. Rupert J. Gatti & Paul Kattuman & John Morgan, 2009. "Clicks, Discontinuities, and Firm Demand Online," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 935-975, December.
    20. Kocas, Cenk & Kiyak, Tunga, 2006. "Theory and evidence on pricing by asymmetric oligopolies," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 83-105, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:34:y:2015:i:6:p:789-803. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.