Brand recognition, service quality and price competition

ABSTRACT

The Internet has significantly improved the bargaining power of consumers. Many online shopping search engines allow users to find most retailers that sell a specified product, compare product prices, and review detailed store ratings. With competition just a click away, online retailers do not have much leverage to prevent consumers from switching and changing where they would shop. Offering the lowest price alone does not guarantee that consumers will come and buy at your site. Other non-price attributes, such as the e-service quality and the brand recognition, also play important roles in helping online retailers to build competitive advantages. This paper develops a competitive model in which firms sequentially choose a level of brand recognition, service quality, and price to maximize their profits.

REFERENCES

• 1: M. R. Baye, J. Morgan, and P. Scholten. Persistent price dispersion in online markets. The New Economy. University of Chicago Press, Chicago, IL, 2004.
• 2: G. Biglaiser and C. Ma. Price and quality competition under adverse selection: market organization and efficiency. Rand Journal of Economics, 34(2):266--286, Summer 2003.
• 3: Erik Brynjolfsson , Michael D. Smith, Frictionless Commerce? A Comparison of Internet and Conventional Retailers, Management Science, v.46 n.4, p.563-585, April 2000 [doi>10.1287/mnsc.46.4.563.12061]
• 4: Ernst & Young, The second annual Ernst & Young Internet shopping study: the digital channel continues to gather steam. p. 11, 1999.
• 5: D. A. Griff and J. Palmer. Leveraging the Web for corporate success. Business Horizons, 39:3--10, 1999.
• 6: S. L. Jarvenpaa and P. A. Todd. Is there a future for retailing on the Internet. Peterson, R. A., (ed.) Electronic Marketing and the Consumer. Sage Publications, Thousand Oaks, CA, 1997.
• 7: K. S. Moorthy. Product and price competition in a duopoly. Marketing Science, 7(2):141--168, 1988.
• 8: Roland T. Rust , P.K. Kannan, E-service: a new paradigm for business in the electronic environment, Communications of the ACM, v.46 n.6, June 2003 [doi>10.1145/777313.777336]
• 9: R. T. Rust and K. N. Lemon. E-service and the consumer. International Journal of Electronic Commerce, 5(3):85--101, 2001.
• 10: N. Stokey. Job differentiation and wages. The Quarterly Journal of Economics, 95(3):431--449, November 1980.
• 11: J. Tirole. The Theory of Industrial Organization. MIT Press, Cambridge, MA, 1989.
• 12: A. C. R. van Reil, V. Liljander, and P. Jurriens. Exploring consumer evaluations of e-service: a portal site. International Journal of Service Industry Management, 12(4):359--377, 2001.
• 13: V. A. Zeithaml, L. L. Berry, and A. Parasuraman. The behavioral consequences of service quality. Journal of Marketing, 60:31--46, 1996.

INDEX TERMS

Keywords:
brand recognition, e-service, price competition, service quality