Saravana Jaikumar, from the Indian Institute of Management Calcutta, examined this subject in an article entitled, How do consumers choose sellers in e-marketplaces? The role of display price and sellers' review volume.
“E-marketplaces have the flexibility to select one of the many prices of a product (from multiple sellers) as the display price. Many players, such as Snapdeal and Newegg, use the lowest price offering as the display price of the product,” Jaikumar wrote.
“Amazon and Sears, however, use seller-performance algorithms (mostly proprietary) to decide the price offering that is used as the display price, and the display price often is not the lowest price offering.”
The first study underpinning Jaikumar’s research involved 164 respondents, who were asked to “imagine that they had joined a health club” and been advised to purchase a particular daily multivitamin product by an instructor.
Participants then had to “acquire” this product from a mocked-up e-marketplace, and were presented with a different mix of vendors, prices and number of reviews for different sellers.
An eye-tracking study – that covered the amount of time consumers spent looking at a given piece of information, as well as their eye movements – was used to validate the original results.
One aim was to assess the impact of a “low display price” strategy, where the cost charged by the lowest-priced seller is used as the display, or “anchor”, price, before a consumer then saw higher-priced offerings and sellers’ reviews.
Under this logic, where a low-priced seller enjoys a high review volume, “the consumer hence likely will purchase from the low-price seller,” Jaikumar predicted. If the seller has a low review volume, this likelihood will decline.
For the “high price display” strategy, the assumption is that consumers would be more likely to make a purchase where the high-priced seller has many reviews – and less likely if the review volume is low compared with another seller.
“Participants favoured buying from high-display-price sellers with high review volume, versus low-display-price sellers with low review volume,” the study found.
“This suggests that the display price should be from a seller with relatively higher review volume and emphasises the importance of review volumes to sellers.”
One recommendation from the study was that “e-marketplaces give more weight to sellers with higher review volumes rather than following a low-display-price strategy”.
Sellers should also encourage buyers to leave reviews when possible. “The influence of review volume on product sales might not be unidirectional but might include a positive feedback mechanism,” the study added.
Sourced from WARC