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THE INFLUENCE OF SUPERSTITIOUS BELIEF ON PRICE ENDINGS IN THE MARKET OF THE
ELECTRONICS
Antonio Sze-ToDennis Leung
Tony LowKen Ho
1
Flow of Presentation
Introduction Hypotheses Survey Results Limitations Conclusion
2
Introduction
Review Model Methodology
3
Review
Adopted from http://www.apple.com/hk/
4
Review
Study the distribution of price endings in the market of the electronics.
Study how the customers 'way of thinking towards price endings
8
However…
What is the relation between superstitions
and price endings in the market of electronics?
9
Introduction
Review Model Methodology
10
Decision Making Model
Adopted from http://www.gdrc.org/decision/info-decision.html
11
Decision Making Model
Adopted from http://www.gdrc.org/decision/info-decision.html
12
Decision Making Model
Adopted from http://www.gdrc.org/decision/info-decision.html
13
Decision Making Model
Adopted from http://www.gdrc.org/decision/info-decision.html
14
Decision Making Model
Model Example
1. Defining the problem The place you want to travel in Christmas
2. Finding the information 1. Ask your parents, relatives, friends, classmates, roommates or professors.
2. Read travel guides3. Watch TV programmes about travel4. “Google”
3. Processing the knowledge 1. Judge if your information is valid2. Compare each place in terms of cost,
time, safety, joy and so on.3. Find additional information if
necessary4. Taking the decision Buy the air ticket and have fun !
15
Do we know everything?16
Uncertainty
“Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security.” - John Allen Paulos
Will the Hang Seng Index rise on next Monday? How long will this presentation last ?
17
Decision Making
People find difficulties in making decision when facing well-understood but undifferentiated (i.e. equally attractive or unattractive) alternatives. (Tsang, Eric W. K. (2004), “Superstition and Decision-Making: Contradiction or Complement?”Academy of Management Executive, 18 (4), 92-104.)
19
Superstitions
“A belief, practice, or rite irrationally maintained by ignorance of the laws of nature or by faith in magic or chance.” – www.answers.com
Not based on the laws of nature Based on faith in magic or chance Irrational
21
Superstitions
Superstitious behavior is commonly perceived as a response to uncertainty. (Vyse, op. cit., 201.)
Superstition serves to fill the void of the unknown and to reduce anxiety. (Malinowski, B. 1948. Magic, science and religion. Garden City, NJ: Doubleday.)
22
Superstitions
Divination Consult Feng Shui Experts
23
Points to note
1. Uncertainty exists everywhere. 2. Decision making is hard due to uncertainty. 3. The higher the uncertainty, the harder the
decision making. 4. People rely on superstitions to acquire
additional information to assist in decision making.
24
Introduction
Review Model Methodology
25
Methodology
Online Survey Price Collection
Software or tools: Microsoft Access MATLAB
26
Online Survey28
Online Survey
Bar charts and Pie charts to compare different responses.
29
Online Survey
Do the consumers have any preferences about price-endings?
Does the degree of superstitions matter? Does the degree of innovativeness matter? What decisions will customers make under high
uncertainty?
30
Price Collection
Collect prices of electronic products 618 prices are collected
A variety of sources (Magazine, Leaflets, Websites)
Four categories (Computer, Phone, TV, DC)
Different types of goods (Second-hand, Parallel Imports)
31
Price Collection
Statistical Analysis (Significant level: α = 0.001) Binomial test to check if a digit is over-represented or
under-represented with respect to chance in a distribution.
Chi-square test to check if a digit occurs more than another digit in a distribution.
Positive results are obtained if p < 0.001.
and more…
33
Price Collection
Is the digit 8 overrepresented? Is the digit 4 underrepresented? Is it true that superstitious beliefs tend to affect
the market of electronic products to a less extend ?
How about First-Hand vs. Second-Hand? How about Authentic Products vs. Parallel
Imports ?
36
Flow of Presentation
Introduction Hypotheses Survey Results Limitations Conclusion
37
Hypotheses
H1: The digit 8 is overrepresented with respect to chance among the rightmost salient ending digits. X H2: The digit 4 is underrepresented with respect to chance among the rightmost salient ending digits that are not overrepresented. Χ H3: Superstitious beliefs tend to affect the market of electronic products to a less extend. The price endings tend to be more evenly distributed. X H4: Overrepresentations of the digit 8 are more pronounced among second-hand market than among first-hand market. X H5: Overrepresentations of the digit 8 are more pronounced among parallel imports than among authentic products.
38
H1: The digit 8 is overrepresented with respect to chance among the rightmost salient ending digits. (binomial test, p<0.001)
0 1 2 3 4 5 6 7 8 905
1015202530354045
All goods(total=618)
Endind numbers
Perc
enta
ge%
This result agree with the previous survey done by Lee C. Simmons and Robert M. Schindler.Possible explanations:(1). According to the traditional Chinese culture, the digit 8 means good luck and enrichment. Make the managers choose it in order to attract customers.
(2). Due to the habit in price-setting procedure. Decision-making in setting a price to a product may cause time and money wasting. Digit 8 is a “standard solution” to resolve the problem 39
X H2: The digit 4 is underrepresented with respect to chance among the rightmost salient ending digits that are not overrepresented.
(binomial test, p = 0.8366)
0 1 2 3 4 5 6 7 8 905
1015202530354045
All goods(total=618)
Endind numbers
Perc
enta
ge%
1. Digits: 5, 8, 9 have relatively high chance2. Digits: 0, 1, 2, 3, 4, 6, 7 are having similar chance of representation in the price ending.3. It means digit 4 is not special in the price ending in the electronic product markets.4. Then this means that the unfavorable superstitious meaning of digit 4 disappears.Possible explanation:The preference of choosing 5, 8, 9 as price endings is a habit for technical reasons. Otherchooses are made according to various factors.
40
X H3: Superstitious beliefs tend to affect the market of electronic products to
a less extend. The price endings tend to be more evenly distributed.
41
All goods(total=618)
0
5
10
15
20
25
30
35
40
45
0 1 2 3 4 5 6 7 8 9
Endind numbers
Perc
enta
ge%
1. The difference in data of the two studies are statistically significant (X2 [9] = 45.771, p < 0.001). Variation in culture in the places. The previous survey was conducted in a range of 3 cities including Shanghai,
Taiwan and Hong Kong whereas our study was done solely in Hong Kong.
Fig 1. Previous result Fig.2 Our result
All goods(total=618)
0
5
10
15
20
25
30
35
40
45
0 1 2 3 4 5 6 7 8 9
Endind numbers
Perc
enta
ge%
Fig 1. Previous result Fig.2 Our result
2. More prices ended with 9 in our study. Owing to consumers’ tendency to truncate partially perceived prices they will encode the actual price into easier-to-use round numbers by doing so
42
All goods(total=618)
0
5
10
15
20
25
30
35
40
45
0 1 2 3 4 5 6 7 8 9
Endind numbers
Perc
enta
ge%
Fig 1. Previous result Fig.2 Our result
3. the difference in percentage of goods ended with 8 in both groups is not statistically significant (X2 [1] = 0.1285, p = 0.72).
43
Summary in H3 :
1. The distribution of prices is not even at all.2. Violate our H3 .
44
X H4: Overrepresentations of the digit 8 are more pronounced among second-hand
market than among first-hand market. (X2 [1] = 16.0829, p < 0.001)
Possible explanations:(1). Essential differences between sellers in firsthand market and that in secondhand
market secondhand seller pay less attention to the details of price-setting strategy, and difficulties involved in price evaluation
45
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
30
35
40
45
501st hand(total=527)
Endind numbers
perc
enta
ge
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
2nd hand(total=91)
Endind numbers
Perc
enta
ge%
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
2nd hand(total=91)
Endind numbers
Perc
enta
ge%
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
30
35
40
45
50
1st hand(total=527)
Endind numbers
Endi
nd n
umbe
rs
Possible explanations:(2). Systematic error in data collection
The size of secondhand electronic market may be underestimated since less than a hundred of price endings from this market are collected in our study.
The validity of the price-endings collected should be examined due to informational confusion on the Internet
46
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
2nd hand(total=91)
Endind numbers
Perc
enta
ge%
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
30
35
40
45
50
1st hand(total=527)
Endind numbers
Endi
nd n
umbe
rs
Some features: Digit 5 and 0 are as frequently presented as digit 8 To create discount illusion. This result occurs only in secondhand market, but not in the market of parallel import.
47
X H5: Overrepresentations of the digit 8 are more pronounced among parallel imports than among authentic products. (X2 [1] = 1.0598, p = 0.3033)
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
30
35
40
45
50 Authentic(total=445)
Endind numbers
Perc
enta
ge%
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
30
35
40
45
Parallel import(total=82)
Endind numbers
Perc
enta
ge%
Possible explanations:(1). There are information gap between the authentic products sellers and parallel imports sellers Authentic products are often sold by relatively large companies which in general have more resources Large companies can also research on the consumer behavior to know more about the market The middle-sized or small companies know less about the market.
48
X H5: Overrepresentations of the digit 8 are more pronounced among parallel imports than among authentic products.
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
30
35
40
45
50 Authentic(total=445)
Endind numbers
Perc
enta
ge%
0 1 2 3 4 5 6 7 8 90
5
10
15
20
25
30
35
40
45
Parallel import(total=82)
Endind numbers
Perc
enta
ge%
Possible explanations:(2). The sample size of the parallel imports is comparably less than that of authentic products
49
Flow of Presentation
Introduction Hypotheses Survey Results Limitations Conclusion
50
Respondents
164 responses are collectedMale : 109 / 164Female : 55 / 164Age: majority from 21 to 30Education level: 55% from university or above
51
Question (1)
1. General image on parallel imports & secondhand products
Q8 你曾經購買過水貨電子產品嗎 ? Q9 你認為行貨電子產品比水貨電子產品更能給予你信心嗎 ?Q10 你曾經購買過二手電子產品嗎 ? Q11 你認為一手電子產品比二手電子產品更能給予你信心
嗎 ?
52
Response (1)
是76%
非24%
你認為行貨電子產品比水貨電子產品更能給予你信心嗎 ?
53
Response (1)
是77%
非23%
你認為一手電子產品比二手電子產品更能給予你信心嗎 ?
54
Question (2)
2. Willingness to pay higher for a lucky price ending
Q42 假設你要購買一部行貨手機,你找到兩部相同型號的手機,而價錢只有少許分別,你會選擇下列哪一部? ($1004/$1008)
Q45假設你要購買一部新推出的貴價電話,你在兩家公司找到這手機,而價錢只有少許分別,你會選擇下列哪一部? ($8004/$8008)
55
Response (2)
$100477%
$100823%
假設你要購買一部行貨手機,你找到兩部相同型號的手機,而價錢只有少許分別,你會選擇下列哪一部?
56
Response (2)
$800477%
$800823%
假設你要購買一部新推出的貴價電話,你在兩家公司找到這手機,而價錢只有少許分別,你會選擇下列哪一部?
57
Response (2)
$100477%
$100823%
假設你要購買一部二手手機,你找到兩部相同型號的手機,而價錢只有少許分別,你會選擇下列哪一部?
$100477%
$100823%
假設你要購買一部水貨手機,你找到兩部相同型號的手機,而價錢只有少許分別,你會選擇下列哪一部?
58
Response (2)
$65559%
$644491%
試想像你需要購買一部數碼相機。你找到了一部五百萬像數、五倍變焦、內置閃光燈的相機,但在不同地方的售價有點不一,你將會購買哪一部?
59
Analysis (2)
Consumers are less exposed to risk than retailers in transactions => Placing 8 as price-ending is not profitable
An extra exposure to risk will not affect the overall consumers’ attitude
61
Question (3)
3. Which group of consumers will favor digit 8 as price-ending?
Q12 在很多情況下,命運決定了發生在人們身上的事。Q13 天體的排列決定了人的性格。Q14 「八」能帶來好運。Q15 因為命運的存在,我時常對發生在自己身上的事感到無能為力。Q16 生日日期決定了我的命運。Q17 「四」能帶來噩運。Q18 好的「氣」能帶來健康、財富和繁榮。Q19 配帶幸運飾物能帶來好運。Q20 在球賽前進行團隊拜祭能引致球隊獲勝。Q21 在工作前祈求得到成功能為我帶來成功。
62
All Respondents
Superstitious( > 3rd quartile)
$1008 in Q42
Normal(In between)
Nonsuperstitious( < 1st quartile)
$1008 in Q42
Procedure (3)63
Response (3)
Superstitious Group Non-superstitious Group0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Percentage of respondents choosing $1008 in Q4264
Response (3)
Superstitious Group Non-superstitious Group0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Percentage of respondents choosing $1008 in Q45
65
Percentage of respondents choosing $8008 in Q45
Question (4)
Innovativeness (Q22- Q25)
Q22 我喜歡去到能接收新產品和牌子資訊的地方。Q23 我經常尋找新產品和服務。Q24 我持續地尋找新產品的體驗。Q25 在購買新產品前,我很少問朋友關於該產品的使用經
驗。
67
Procedure (4)
All Respondents
Innovative( > 3rd quartile)
$1008 in Q42
Normal(In between)
Non-innovative( < 1st quartile)
$1008 in Q42
68
Response (4)
Innovative Group Non-innovative Group0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Percentage of respondents choosing $1008 in Q42
69
Response (4)
Q42 假設你要購買一部行貨手機,你找到兩部相同型號的手機,而價錢只有少許分別,你會選擇下列哪一部?
Q43 假設你要購買一部二手手機,你找到兩部相同型號的手機,而價錢只有少許分別,你會選擇下列哪一部?
Q44 假設你要購買一部水貨手機,你找到兩部相同型號的手機,而價錢只有少許分別,你會選擇下列哪一部?
Q45 假設你要購買一部新推出的貴價電話,你在兩家公司找到這手機,而價錢只有少許分別,你會選擇下列哪一部?
70
Possible Explanation (4)
Innovativeness is positively related to (proactive) superstitious belief( Hernandez, Wang, Minor and Liu, 2008)
72
Survey
Placing the digit 8 as price-ending is not much profitable to retailers.’
Respondents are less responsive to 4 than 8. A larger exposure of risk to consumers will not
make any difference. The more superstitious/innovative, the more likely
to choose a product priced at a lucky price-ending.
73
Flow of Presentation
Introduction Hypotheses Survey Results Limitations Conclusion
75
Limitations
The interviewees are invited via facebook invitations
Sample size may not be large enough
Limitations
Focus mainly put on 4 and 8
Merely considering superstition as the contributing factor in pricing strategy
how-much-to-buy decision versus purchase-not-purchase decision.
Further investigation
A larger and more randomized survey to verify our preliminary results
Pricing strategies in other industries
Interviewing shop owners to learn about their pricing strategies
Further investigation
Combination and length of prices instead of price ending only
Field experiment rather than online survey
difference in price ending distributions in Chinese and western markets
Adopted from Robert M. Schindler and Patrick N. Kirby, Patterns of Rightmost Digits Used in Advertised Prices: Implications for Nine-Ending Effects, The Journal of Consumer Research, Vol. 24, No. 2 (Sep., 1997), pp. 192-201
Our study US study
Further investigation
Flow of Presentation
Introduction Hypotheses Survey Results Limitations Conclusion
81
Summary
Overrepresentation of 8 in the market
Uneven distribution of price endings
Differences in distribution in First-Hand vs. Second-Hand Authentic Products vs. Parallel Imports
Summary
Trend for superstitious and innovative people to buy product with lucky price endings
Unlikeliness for businessmen to profit from using 8 as price endings
Risk not being associated with lucky price endings
Recommendations
Act as a reference for businessmen Not necessary to use prices ended with 8 More in-depth investigation on consumer behavior
Let the public understand the pricing strategy 8, 9 used extensively as price ending Not to truncate prices
Thanks You
Q & A
85
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