The such as quality, taste, fun, thrill etc.

The current chapter
provides a critical review of the existing literature with regards to the
business problem indicated in the first chapter. The purpose of this chapter is
to summarize insights and develop hypotheses to put these into the context of
experience products. First, a definition of experience products is provided, followed
by an explanation of what experiential marketing means. Next comes a revision
of the existing literature on the signaling effect of price, the priming effect
of a product description and the possible interaction of the two. Finally,
expected product quality is defined and its effect on purchase intention is
discussed.

1.1  Defining experience products

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According to economics,
experience good is a product or service which has characteristics that are
difficult to be evaluated in advance, i.e. before purchasing and consuming the
product. Philip Nelson (1970) is probably the first to distinguish it from a
search good. Later on, Klein (1998) defines experience good as “dominated by
attributes that cannot be known until purchase or use of the product or for
which information search is more costly and/or difficult than direct product
experience” (p.199).  Cooper-Martin (1991)
suggests a different definition according to which experience products are ones
which consumers choose, buy and use solely to experience and enjoy. In
addition, she classifies them as either tangible experience products such as
wine and recreational drugs, and services such as sports events and vacations.
Holbrook and Hirschman (1982) conclude that the main benefit of such products
is hedonic consumption – the feelings and sensations experienced during
consuming the product. And since product experience in its essence is ambiguous
(Hoch & Ha, 1986), experience products could also be viewed as rather ambiguous
type of products.

This literature review
helps to hereby formulate a concise definition of experience product. It is a
product which is purchased for the purpose of satisfying a hedonic need. It
possesses attributes which are difficult to be described prior to consumption
such as quality, taste, fun, thrill etc. It can be a physical product such as
wine and gourmet meal or a pure experience such as a movie, festival, and the
performing arts.

1.2  Experiential marketing

In a number of
industries, companies have changed their focus from traditional “features-and-benefits”
marketing towards creating experience for their customers (Schmitt, 1999).
According to Schmitt (1999), traditional marketing views customers as rational
decision makers while experiential marketing views them as rational and
emotional human beings. The first ones care only about functional features and
the second are concerned with achieving pleasurable experiences. In
experiential marketing, consumption is a holistic experience, and consuming the
product satisfies a symbolic or hedonic need (Schmitt, 1999). Experiential
marketing has become the milestone of the advances in branding, retailing and
events marketing (Petkus, 2004), and it is marketing’s most contemporary
orientation (Williams, 2006). Marketers need to take advantage of the
opportunities offered by experiential marketing and use them to address the
challenges posed by experience products (e.g., their quality uncertainty prior
to purchase and their hedonic value).

1.3  Signaling product quality

One of the problems with
experience products is that due to their ambiguous nature assessing their
quality is more difficult, especially prior to consumption. So in order to
convince the customers of the quality of the product even before they have
consumed it, the marketers ought to signal product quality with some sort of
quality cues (Moorthy & Srinivasan, 1995; Zhao, 2000). As Kirmani and Rao
(2000) conclude, the strategy of signaling product quality is especially
successful for products whose quality is unknown before consumption and for
which customers are quality sensitive (as is the case of experience products). Experience
products pose higher risks for consumers of making the wrong consumption
choice. That is why in order to justify their choice, consumers need some sort
of quality cues to decrease the risks associated with buying a product for
which they have scarce intrinsic information prior to purchase (Shimp &
Bearden, 1982).  Shimp and Bearden (1982)
find out that customers use different risk-reduction strategies and the most
central one is relying on product cues to indicate quality and performance. Chang
and Wildt (1996) specify several situations when consumers rely heavily on
extrinsic attributes to evaluate a product, including:

 

–       Inability to process intrinsic attribute information

–      
The
existence of intangible functional qualities that cannot be attributed totally
to generic intrinsic attributes

–       The existence of nonfunctional quality (symbolic or prestige
quality) due to extrinsic attributes

All of the above
mentioned can be observed with experience products – due to the intangibility
of their functional qualities, difficulty of processing intrinsic information
and their symbolic functions; customers find it easier to process their
extrinsic attributes (price, brand, product description) and use them in their
product evaluations. JK1 

1.4  Price as a signal of quality

Price is such extrinsic
product attribute (Olson & Jasoby, 1972) meaning that it is not part of the
physical product and has no direct effect on functional performance.
Nevertheless, as an extensive body of literature suggests, customers regularly
use it in their quality judgements and product evaluations.

There is a vast amount of
literature on the relationship between the marketing mix component price and
the quality of a product. (Dawar & Parker,
1994; Grewal & Monroe, 1995; Bagwell & Riordan, 1991; Erdem, Keane
& Sun, 2008). In summary, people use
the price as a proxy for quality (Makasi & Govender, 2017). The so-called
price-quality heuristic is used as a shortcut for making a product choice – if
the price is high, it must be of good quality (Gneezy et al., 2014). Typically,
experience products have even lower price elasticity as consumers are afraid
that a lower price might be due to lower quality or unobservable problems with
the product (Vining & Weimer, 1988). Rao and Monroe (1989) are probably the
first to test experimentally the positive relationship between price and
buyers’ evaluations of perceived quality. Consumers often lack the time,
resources or inclination to judge a product’s quality and that is why they use
available cues – such as price (Gneezy et al., 2014). They conclude that very
often extrinsic attributes influence people’s evaluations of a product (in
their study the product is wine). The pleasure of consuming a product depends
not only on sensory input such as smell and taste, but also on extrinsic
attributes such as brand name and price. This assumption is further supported
by Shiv, Carmon and Ariely (2005) who researched the so called placebo effects
of marketing actions, they demonstrate that the pricing can alter the actual
perception of product efficacy (in their case an energy drink). Their
substantial research on the topic can be summarized as follows: price can exert
a nonconscious influence on expectancies about product quality; such
expectancies can have an impact on actual product performance; and such
expectancies can also be induced through non-price information such as
advertising claims about product quality. To conclude, there is enough
theoretical background to support the assumption that customers use quality
cues when evaluating products and the price is probably the most prominent cue.

The existing literature
provides insight into that phenomenon mainly in the context of consumer goods.
Here, it is aimed to investigate whether the price quality heuristic also applies
to the context of experience products. Consequently, the first hypothesis
regarding price is formulated.

H1a: Price has a positive effect on expected quality of an
experience product.

1.5  Price as a factor in purchase
intention

So far it has
been established that price is a prominent factor in the quality evaluations of
a product. Next, it is necessary to investigate its effect on a more
behavior-related concept – purchase intention. According to Chiang and Jang
(2007) perceived price is one of the main considerations in purchase
decision-making together with value (combining price and quality). JK2 They find out that perceived price positively
affects purchase intentions when leisure travelers evaluate hotel bookings. As
the hedonic factor is present in both their case and in this study, it is
reasonable to expect that the same effect could also be found for experience
products. Since this type of products poses higher risks for consumers because
of the quality uncertainty prior to purchase and because of these products’
symbolic value and hedonic benefits, it is expected that a higher price will lead
to higher purchase intention. Thus, the next hypothesis about price is
formulated as follows:
JK3 

H1b: Price has a positive effect on purchase
intention for an experience product.

1.6  The effect of product description

Understanding how
consumers use product information is an interesting issue and it has been
researched from different perspectives (Chang & Wildt, 1996). But what is
even more interesting is studying how to convince consumers to use and
interpret product information in a certain way. This can be achieved by using a
priming technique which allows a customer to interpret an advertising message,
product description etc. in the way intended by the marketer (Yi, 1990).  Potcheptsova et al. (2008) demonstrate that it
is possible to induce customers to frame an ambiguous target product as every-day
or special by using a priming technique. According to Rajagopal and Burnkrant
(2005) when using different cues “it is possible to prime consumer
interpretation strategies so as to control the inferences made about the
product by consumers and the evaluations of such products” (p.362).  But how does it actually work? Srull and Wyer
(1979) find out that priming leads to judgments of the target object that
assimilate towards primed constructs. Priming technique works as people
mistakenly interpret the high accessibility of primed concepts as their
reaction to the target object. Therefore, just as an illustration, when reading
a product description which evokes excitement, exhilaration, the customer
associates these with the product and believes that it is exciting as well.

Hereby, it is expected
that this type of influencing the customer would be especially appropriate for
experience products, where product information is scarce prior to the purchase
and where people base their product choices on emotions and feelings more than
on functional characteristics because of the hedonic nature of the experience
products (Hirschman & Holbrook, 1982). Jourdan (2001) confirms this assumption
– he states that experience products tend to be evaluated on affective criteria
which are more subjective or emotional. Consequently, the choice of the message
is very important. Existing literature suggests that product evaluations depend
on the type of information customers consider when making these evaluations. E.
Cooper-Martin (1992) finds out that the different product information sources
have different effect on the customers’ evaluations of the credibility and
usefulness of the message. She also finds out that for experience products,
experiential information sources are more useful and credible to consumers (in
the case of movies).

Additionally, in their
study on menu items descriptions, McCall and Lynn (2008) discuss the heuristics
theory of Tversky and Kahneman (1974) which assumes that customers use
shortcuts to simplify complex decisions. One of the best examples of this theory
was already discussed in the previous section – the price-quality heuristic.
McCall and Lynn (2008) conclude that choice options which are described in more
complex, elaborate terms are seen as having higher quality and being more
desirable than items described in basic terms. A very important implication of
that idea is the fact that these higher quality perceptions allow for pricing
strategies which are consistent with the customers’ price-quality beliefs (Nagle
& Holden, 2002). Li (2017) studies how description cues for wine influence
purchasing behavior. He finds out that even small differences in wine tasting
description can have substantial impact. Additionally,
Shiv et al. (2005) do an extensive research on the placebo effects of marketing
actions and find out that a favorable advertising copy induces expectancies
about quality and that it can also reinforce the price-quality perceptions.

In summary, it can be
concluded that by using priming technique, marketers can create appropriate
product descriptions for their experience products, which customers can
successfully use as a quality cue to form their product evaluations. This leads
to formulating the next hypothesis.

H2: The complexity of product description positively affects
the expected quality of an experience product.

1.7  Interaction of price and product
description

What would be even more
interesting is to find out whether these two variables (price and product
description) interact i.e. whether the effect of one of them depends on the
level of the other. Miyazaki et al. (2005) study the effect of multiple
extrinsic cues on quality perceptions and conclude that the consistency of the
cues is essential. Moreover, they find out that when intrinsic information is
scarce (as in the case of experience products), the price-quality relationship
is stronger when a positive price cue is used in combination with another
positive cue (e.g., strong warranty, positive country of origin, or strong
brand). Thus, it is expected that when one quality cue is paired with another
one which is consistent with the first, the effect will be enhanced. Rao and Sieben
(1992) also hypothesize that “the effect of consumers’ product knowledge may
moderate the price-perceived quality effect” (p.256). As already mentioned
in the previous section, Shiv et al. (2005) study the relationship between the
advertising message and the expected quality, they also conclude that it can strengthen
the price-quality perceptions. Chang and Wildt (1996) also research the impact
of product information on the use of price as a quality cue and conclude that “the
use of price in subjective quality evaluations is influenced by the nature and
availability of other product information” (p.55).

This study expects that a
positive moderation between the two exists, meaning that the positive effect of
price on expected quality is enhanced when it is paired with an appropriate
product description. Consequently, the next hypothesis is formulated as follows:

H3:
The effect of price on expected quality of an experience product is positively
moderated by the complexity of the product description.JK4 JK5 

1.8  Mediating effect of expected
quality

Despite the fact that the
term quality is extensively used in everyday life as well as in marketing, the
literature does not provide a universal definition
for quality. Since this research is interested in how marketing managers can
use cues in order to increase quality perceptions of customers in an effort to
influence their purchase intention, it is vital to define what quality means in
order to understand fully how consumers evaluate it. Product quality is a
pivotal determinant of product choice and purchasing behavior (Zeithaml, 1988).
He defines perceived quality as “the consumer’s judgement about a product’s
overall excellence or superiority” (p.3). Additionally, he views it as a
global assessment, a higher level abstraction rather than a product attribute. Zeithaml
(1988) also differentiates perceived and objective quality. In this study the
interest is in the expected quality since that variable is measured before the
consumers have made a purchase and consumed the product. Therefore, we
distinguish it from perceived quality, conceptualized as post-purchase measure (Sanchez,
Callarisa, Rodriguez & Moliner, 2006); and objective or actual quality,
defined as superiority on the basis of some measurable and verifiable
characteristics and predetermined ideal standards (Zeithaml, 1988).

According to Olson and
Jacoby (1972) “quality perception seems to be strongly related to actual
purchasing behavior” (p.167). Since testing actual purchasing behavior
would be hard considering our resources, purchase intention is used instead. Purchase
intention is considered a behavior related construct. Spears and Singh (2004)
summarize available literature on the topic and define purchase intention as “an
individual’s conscious plan to make an effort to purchase a brand” (p.56).
It is widely used construct in marketing because purchase intentions are
considered an important indicator of actual purchase (Chang & Wildt, 1994).

Therefore, for the purposes
of this research, it is important to investigate whether the quality
evaluations of consumers translate into intention to purchase an experience product.
Consequently, the next hypotheses are formulated as follows:

 JK1Put
your research questions at the end of your literature review

 

Research gap à
Question you will answer

RQ1

RQ2

 

Etc

 

Then put a new chapter for hypothesi development.

The hypothesis should be in parallel to your research
questions

 

RQ2 à
Hypo

 JK2I
do not fully get this

 JK3I
do not fully get it – consider rewording?

 JK4In
which way does it depend

 JK5Or:
The complexity of the product description positively moderates the effect of
price…

x

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