Optimizing pricing and ordering strategies for new products in the presence of consumers with pre-purchase beliefs

The new retail era has dramatically altered consumer behavior, with more people now making purchases based on their pre-purchase beliefs about products, even if they lack prior experience with them. Pre-purchase beliefs represent the anticipated value consumers associate with buying a product or service. This study examines how such beliefs influence consumer purchasing decisions and, in turn, affect retailers’ operational decisions and selling strategies. To achieve this, we create an analytical model that characterizes the consumer decision-making process driven by pre-purchase beliefs and has framed the problem of launching new products as a newsvendor problem. We determine the optimal pricing and ordering strategies for retailers and explored the most effective strategies for different consumer types. Our research indicates that deliberately emphasizing or downplaying product attributes can be more effective in pre-launch marketing than providing strictly accurate information. For value-for-money brands, it’s advisable to adjust the operational strategy to “sell less but at a slightly higher price” as the new product struggles to meet consumer expectations. In markets with diverse consumer segments, retailers must accurately estimate the market sizes of each consumer type and anticipate their pre-purchase beliefs. The value consumers place on these beliefs, along with the market sizes of different consumer categories, play a pivotal role in strategy selection. In summary, this study offers valuable insights into the relationship between consumer purchasing behavior driven by pre-purchase beliefs and retailers’ operational decisions and selling strategy choices.