The aforementioned quote
seems to be the mantra of today’s generation. Nowadays
millennials are prioritizing buying cars and homes less and less but instead
spend a lot of money on buying experiences (CNBC reports, 2016). This growing
trend is becoming more and more prominent and while real estate is in decline (HSBC
study, 2017), spending on recreation and
entertainment has increased vastly (70% in the US) in the past decades (Forbes,
2015). Consumer spending has indeed undergone a market shift in the past decade
– people spend less on durable goods and tangible possessions in general
(specifically cars, household goods, furniture, and clothes) while their
spending on travelling, festivals, cultural events, and eating out has nearly
doubled (Fortune, 2016; HSBC study, 2017). There are numerous studies
concluding that purchasing an experience makes you happier than buying a tangible
good (Howell, Pchelin & Iyer, 2012; Dunn, Gilbert & Wilson, 2011; Van
Boven & Gilovich, 2003). Moreover, the statistics show that more than three
in four millennials (78%) prefer spending money on an experience than on buying
consumer goods or other material things (Eventbrite-Harris study, 2014). This
tremendously growing trend makes studying experience products an interesting
matter in marketing and the subject of this research. 

1.1  Problem indication

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Since experience products
are so important to consumers nowadays, it is interesting to study them – to know
how they are different from the rest and how to market them accordingly. First
of all, it is necessary to define them. Experience products are defined as “those
products which consumers choose, buy and use solely to experience and enjoy”
(Cooper-Martin, 1991, p.372) and therefore they have symbolic value and satisfy
a hedonic need. Typical examples of experience products are movies, vacations,
sports events, festivals, restaurant dining, recreational activities and the
performing arts (as pure experiences) and wine, gourmet meals, books, artwork and
recreational drugs (as experiences embodied in physical products).

The problem with this
kind of products is that, as it is known from economics, an experience good is
a product or service whose characteristics – such as quality – are difficult to
be observed in advance. They can only be evaluated upon consumption.
Consequently, consumers have difficulties making choices when it comes to
experience products. They fear that the limited information prior to purchase
may signal a problem with quality – quality uncertainty (Barber, Almanza &
Donovan, 2006). Therefore, they are unsure how to judge the quality of such
products in advance, before making the purchase. They need some sort of quality
cues to justify their product choices. This is a big challenge for managers who
market experience products. It is hard to position a product whose
characteristics cannot be easily described prior to consumption. For the
purposes of this study, wine will be used as an example because it is often
marked by uncertainty about its quality (Barber et al., 2006) and numerous
sources (Cooper-Martin,
1991; Outreville & Desrochers, 2016) define it as a good illustration
of an experience product.

Now that we have entered
a new era, i.e. the era of experiential marketing (Petkus, 2004; Williams,
2006) it is important that marketing managers take new approaches to satisfy
the changing customer needs and adapt their offerings according to them. 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 symbolic value). In order
to do so, marketing managers need to learn how to use and manage product
quality cues. This study aims to contribute to addressing these challenges.

1.2  Problem statement

In order to
address the indicated problem (i.e., the fact that
customers have difficulties when evaluating experience products due to their
quality uncertainty) and to facilitate the consumers’ product choices,
marketing managers should signal the quality of their products (Kirmani &
Rao, 2000). The strategy of using cues to signal quality has been studied in
general before (Olson, & Jacoby, 1972; Richardson, Dick & Jain, 1994; Teas
& Agarwal, 2000) but this study will focus
on the context of experience products. This study
aims to investigate the drivers behind a consumer’s choice of an experience
product. In particular, the focus is on the two of the readily available
attributes before purchase – price and product description. They are
especially important because managing them does not cost much in comparison to
managing other quality cues such as brand name, warranty etc. The purpose of this research is to examine the effect of price,
product description and possibly their interaction
on the expected quality of an experience
product. Also, it aims to investigate whether consumer’s evaluations of
expected quality influences the purchase intention for such products. The
findings from this research can provide important insights for practitioners
from different industries who market experience products. It will bring
guidelines on how to use quality cues to better communicate experience
products’ quality and increase the purchase intentions towards them.

That being
said, the problem statement of this study is formulated as follows:

What is the effect of (a) price, (b) product
description and (c) the interaction of the two on expected quality and purchase
intention for an experience product?

1.3  Research questions

In order to address the
specified problem appropriately, it is necessary to break it down to several
research questions and provide answers to these first. The research questions
of this study are formulated as follows:

What is the effect of price on expected quality of an
experience product?
What is the effect of price on purchase intention for
an experience product?
What is the effect of the type of product
description on expected quality of an experience product?
How does
the type of the product description affect the relationship between price and
expected quality? SB1 JK2 
What is the effect of expected quality of an
experience product on purchase intention for that product?

 

1.4  Research
method and design

In order to study these questions an empirical research via an online
experiment will be conducted. The study has a 2×2 between-subject design. Both
independent variables each have two levels – two different product descriptions
and two price levels. For the analysis of the results two-way ANOVA will be used. The
analysis will check for significance of the main effects of the two independent
variables and their interaction term on the expected product quality and
whether it has effect on the purchase intention for the product. In order to
conduct the complete moderated mediation analysis, PROCESS will be used. The
data is primary since respondents’ opinions about the expected quality of the
product and their purchase intention will be collected via an online questionnaire.

1.5  Academic relevance

Price as a
signal of quality has been vastly researched in the existing literature (Dawar
& Parker, 1994; Grewal & Monroe, 1995; Bagwell & Riordan, 1991;
Erdem, Keane & Sun, 2008) but research on that
topic is limited when it comes to experience products. Literature review shows
that people often use price as a proxy for quality and that there is a positive
relationship between the two variables known as the price-quality heuristics
(Gneezy, Gneezy & Lauga, 2014; Rao, 2005). Since experience products have
the property of difficulty to assess their quality prior to consumption, it is
expected that the price-quality heuristic will play even bigger role for such
type of products. This study aims to investigate whether this price-quality
relationship holds for experience products.

Alternatively, the
product description as a quality cue has not been studied extensively but
existing literature offers empirical support that it is possible to prime
consumers’ interpretations and to control the inferences made about a product,
and consumer’s evaluations of products (Rajagopal & Burnkrant, 2005).
Potcheptsova, Labroo and Dhar (2010) demonstrate that product evaluation is determined
by the type of constructs that come to consumer’s mind. Additionally, there is
ample literature support that small differences in wine descriptions can have
substantial impact on product evaluations and purchase decisions (Li, 2017;
Labroo, Dhar & Schwarz, 2008; LaTour, LaTour & Feinstein, 2011). The
purpose of this study is to check whether appropriately formulated product
description can prime consumers to think that the product has high quality and
whether that expectation would translate into higher purchase intentions for an
experience product.

Interestingly, several
sources suggest a moderation effect. A study by Miyazaki, Grewal, and Goodstein
(2005) shows that when product information is scarce, as for experience
products, the price quality-relationship is stronger when a positive price cue
is paired with a positive second cue. The purpose of this study is to
investigate whether these findings apply in the context of experience products.
In particular, the objective is to test whether a suitable product description,
used in combination with the right price, can enhance the expected quality and increase
the purchase intention for an experience product.

1.6  Managerial
relevance

Studying this matter could bring important insights for
practitionersJK3 . Supporting our expectations would mean that price can be
successfully used as a quality cue and that by using the right product
description, managers can prime the customers to hold specific beliefs about
their products. That way by just formulating appropriate product description
managers can justify a higher price and consequently receive better margins. These two quality cues are especially important because managing them can
be done at lower costs. It does not cost much to set a proper price and formulate
an appropriate product description, unlike managing warranty policy, brand and
store name. SB4 

Interesting finding would be to know whether the two quality
cues interact (e.g. whether the right product description and the high price
used in conjunction enhance the effect on expected quality).  This is especially useful for products for
which consumers face higher risks and quality uncertainty prior to the product
consumption, as is the case for experience products. This research could provide guidelines on how to set the price and
formulate the product description of an experience product to be able to communicate
the quality of the product and decrease the risks associated with purchasing
experience products. Another important finding will be to know whether investing
in increasing the quality expectations pays off by leading to higher purchase
intention for these products.

To conclude, this research can bring valuable insights to marketing
managers working in the market for experience products. The findings will be
valuable to practitioners from a wide range of industries who market experience
products – whether it is restaurant meal and wine or pure experience such as a
concert or movie. As recent statistics show, the market for such products is
becoming too vast and important to be managed based on gut feeling only.

 SB1Is
this question formulated correctly?

 JK2Instead
of type, you can mention the complexity of the product description already here

 JK3Do
not argue on the basis of potential results. Why is it interesting for managers
to get these results (no matter how they are)

 

Okay you do this afterwards, but set this up better

 SB4Not
sure if this explanation is proper. 

Author