Newer and Better? Impact of Different Pricing Strategies on Optimal Marketing Modes

Innovative products, as quintessential experiential goods, often exhibit quality uncertainty when firms introduce new features, as some consumers may find it difficult to assess the value of these non-digital attributes. By studying consumers’ strategic behavior driven by quality uncertainty across two product generations, we segment the market into upgraders, laggards, leapfroggers, and non-adopters. Based on a two-period game model under experience-driven marketing (EDM) and data-driven marketing (DDM), we reveal that the optimal marketing mode is influenced by pricing strategies. Under the dynamic pricing, there is no dominant optimal marketing mode, which is jointly influenced by product quality difference, quality uncertainty and consumer market structure. When quality uncertainty and product quality differentiation are low, the consumer consists solely of non-adopters and leapfroggers under the EDM mode. This enables firms to implement easy price discrimination and the EDM mode is the optimal strategy. When quality uncertainty and product quality differentiation are high, consumer behavior proves more conducive to price discrimination under the DDM mode, thereby establishing DDM as the optimal decision. However, under the commitment pricing, DDM consistently outperforms EDM.