Consumer Information, Marketing Strategy and Market Share.

A conceptual framework is developed and economic models presented for the analysis of consumer behavior under different levels of information about competitive products. The models are mainly drawn from the literature and are used to explain and test the mechanism of price, quality and advertising competition and its impact on market share in consumer markets. The conceptual framework and the empirical test help to integrate two divergent research traditions in marketing on the effects of competitive price: (1) econometric models which indicate that consumers respond negatively to high prices; (2) experimental studies which find that consumers use price as an indicator of quality and hence could be favorably disposed to high prices. Similarly, they also help to integrate two conflicting traditions on the economic effects of competitive advertising: (1) that advertising is informative and favors competition, (2) that advertising is counter-informative and hinders competition. A major finding of this study, based both on an indepth review of the literature and the empirical analysis, is that of a high level of competitive price and quality sensitivity in consumer markets. The hypothesis of an uninformed consumer, or one overwhelmed by the complexity of modern products, may be confidently rejected. This position is further confirmed by a strong positive relation from relative quality to relative price and to relative advertising in the empirical analysis, both of which require a consumer population which is at least partly informed and appreciative of competitive quality offerings. At the same time the empirical analysis indicates that consumers respond positively to advertising, hence they are not perfectly informed about competitive products. However, this response to advertising coexists with strong price and quality sensitivity, and it is the better quality br and s that advertise more; hence consumers are not overwhelmed by advertising but respond to it skeptically. That information is imperfect is also supported by the finding that inefficient businesses pass on costs to consumers through higher prices. Implications of the study are discussed.PhDMarketingUniversity of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/159840/1/8402385.pd