Dynamics of the relationship between product features, quality evaluation, and pricing

Abstract

Examines the relationship between a product’s features, the consumer’s quality evaluation, and the marketer’s pricing in the context of a dynamic product/market environment. Estimates a simultaneous system model using two‐stage‐least‐squares regression on Consumer Reports data of three high‐technology consumer durables which have shared common product/market characteristics but reached different levels of household ownership in the late 1980s. The results of pairwise correlation and 2SLS regression analyses revealed that the associations between prices and quality evaluations were insignificant, but the associations between product features and prices or between product features and quality evaluations, varied across the three product categories at their different levels of market penetration. As a product’s customer base widens or the consumer’s knowledge and experience with the product accumulates, the significant association of marketer’s prices changes from “with the product’s feature availability” to “with the consumers’ experience‐in‐use advantages,” while the significant association of consumers’ quality evaluations changes from “with the consumers’ experience‐in‐use advantages” to “with the consumers’ experience‐in‐use disadvantages.” The empirical results, however, suggest no relationship between the marketer’s pricing of a product and the Consumer Reports’ overall quality evaluations on the product.