Market Information Strategies for Online Retailers

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Market information strategies for online retailers

Ruiliang Yan Received (in revised form): 31st July, 2007

School of Business, Virginia State University, P.O. Box 9209, Petersburg, VA 23806, USA Tel: þ 1 804 524 5791; E-mail: ryan@vsu.edu

Ruiliang Yan is Assistant Professor of Marketing at the Virginia State University. He received his PhD in Marketing from the University of Wisconsin, Milwaukee, MS from Sichuan University, China and Bachelor’s Degree from Southwest Agricultural University, China.

ABSTRACT KEYWORDS: internet/online marketing, market information, product strategies, marketing strategies

With the rapid development of the internet, many retailers or individuals nowadays use this technology to engage in direct online sales. When a retailer sells its product through the internet-based market, the value of market information has an important impact on its expected profit. The value of market information depends not only on its forecast accuracy but also on the product characteristics the retailer sells. We develop a theoretic approach to examine how the effect of market information on firm profit is moderated by product characteristics. Our results suggest that more accurate market information always is more valuable for firm profit when product quality is higher and web-product fit is larger. Based on our analytical results, we propose the optimal marketing strategies for the online retailers to adopt.

Journal of Revenue and Pricing Management (2007) 6, 200–211. doi:10.1057/palgrave.rpm.5160083

INTRODUCTION The advent of internet-based electronic commerce over the past decade has given businesses

an unprecedented marketing opportunity. According to Comscore Networks, online retail spending in 2006 reached $102.1bn, marking a 24 per cent increase over 2005’s $82.3bn. An estimated 6 per cent of all nontravel consumer retail spending (excluding expenditures for autos, gasoline, and food) is spent online. Also,...