The Effects of Price Rank on Clicks and Conversions in Product List Advertising on Online Retail Platforms

Mengzhou Zhuang (), Eric (Er) Fang (), Jongkuk Lee () and Xiaoling Li ()
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Mengzhou Zhuang: Faculty of Business and Economics, The University of Hong Kong, Hong Kong SAR, China
Eric (Er) Fang: College of Business, Lehigh University, Bethlehem, Pennsylvania 18015
Jongkuk Lee: Ewha School of Business, Ewha Womans University, Seoul 03760, Korea
Xiaoling Li: School of Economics and Business Administration, Chongqing University, Chongqing 400044, China

Information Systems Research, 2021, vol. 32, issue 4, 1412-1430

Abstract: In light of the critical role of price information in consumers’ decision making, this study investigates the effect of price rank on consumers’ responses to product list advertising (PLA) throughout the purchase funnel, as well as the moderating effects of two keyword attributes. A hierarchical Bayesian model, using a unique data set from a leading electronic shopping platform and a simulated experiment, reveals that in the early phases of the purchase funnel, consumers are more likely to click on extremely priced options (i.e., the highest or lowest), which consumers use as anchors to evaluate the broad range of options. Later in the purchase funnel, when clicks tend to convert to purchases, consumers instead are more likely to click on moderately priced options, which usually offer a compromise between price and quality. The effects of price rank diminish among advertisements that sponsor more specific keywords and increase among those that sponsor more popular keywords. These findings provide new insights into the role of price information in the PLA context, as well as managerial implications for devising effective PLA strategies.

Keywords: product list advertising; price rank; keyword specificity; keyword popularity; click-through rate; conversion rate; consumer purchase funnel (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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