ISSN 0253-2778

CN 34-1054/N

Open AccessOpen Access JUSTC Research Articles:Management Science and Engineering

The impact of consumer confusion on the product rollover strategy

Cite this:
https://doi.org/10.3969/j.issn.0253-2778.2017.11.009
  • Publish Date: 30 November 2017
  • With frequent product upgrades, consumers have substantive difficulty in differentiating products from various generations, which leads to consumer confusion. This brings great challenges for the firms when choosing product upgrading strategies. To address the impact of consumer confusion on firm's rollover strategy, a joint quality and pricing optimization model was constructed, incorporating the effect of consumer confusion. It was found that, under the single rollover strategy, wherein only one upgraded product is offered, the price and quality of the upgraded product decrease with the increase in consumer confusion, and so will the demand and profits of the firm. Under the dual rollover strategy, wherein both an upgraded product and the base product are offered, if the level of consumer confusion is lower than a threshold, the price and quality of the new product increase with the increase in consumer confusion, and so will the demand and profits of the firm. However, when the level of consumer confusion is higher than the threshold, the price and quality of the new product remain unchanged, and so will the demand and profit. When consumer confusion is at a high level, the price and quality of the new product under the dual rollover strategy are greater than those under the single rollover strategy. If consumer confusion is at a low level, the firm chooses a single rollover strategy and otherwise dual rollover strategy is profitable.
    With frequent product upgrades, consumers have substantive difficulty in differentiating products from various generations, which leads to consumer confusion. This brings great challenges for the firms when choosing product upgrading strategies. To address the impact of consumer confusion on firm's rollover strategy, a joint quality and pricing optimization model was constructed, incorporating the effect of consumer confusion. It was found that, under the single rollover strategy, wherein only one upgraded product is offered, the price and quality of the upgraded product decrease with the increase in consumer confusion, and so will the demand and profits of the firm. Under the dual rollover strategy, wherein both an upgraded product and the base product are offered, if the level of consumer confusion is lower than a threshold, the price and quality of the new product increase with the increase in consumer confusion, and so will the demand and profits of the firm. However, when the level of consumer confusion is higher than the threshold, the price and quality of the new product remain unchanged, and so will the demand and profit. When consumer confusion is at a high level, the price and quality of the new product under the dual rollover strategy are greater than those under the single rollover strategy. If consumer confusion is at a low level, the firm chooses a single rollover strategy and otherwise dual rollover strategy is profitable.
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