Marketing Self-Improvement Programs for Self-Signaling Consumers

Richard Schaefer (), Raghunath Singh Rao () and Vijay Mahajan ()
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Richard Schaefer: Rutgers Business School, The State University of New Jersey, Newark, New Jersey 07102
Raghunath Singh Rao: McCombs School of Business, University of Texas at Austin, Austin, Texas 78712
Vijay Mahajan: McCombs School of Business, University of Texas at Austin, Austin, Texas 78712

Marketing Science, 2018, vol. 37, issue 6, 912-929

Abstract: How does a health club or credit counseling service market itself when its consumer becomes demotivated after a minor slipup? To examine this issue, we utilize a self-signaling model that accounts for the complex process in which a resolution seeker manages his self-control perceptions. Specifically, we employ a planner–doer model wherein a consumer oscillates between long-term resolution planning and short-term implementation: during each implementation juncture, the consumer must determine whether to lapse or use the program as planned, a decision that affects his self-control perceptions in subsequent periods of long-term resolution planning. Using this framework, we derive many significant marketing insights for self-improvement programs, products which assist the pursuit of long-term resolutions. First, we demonstrate that the seller tailors its contract strategy because of self-signaling, the process whereby the decision maker manages his self-control perceptions. Furthermore, we determine that the seller’s program contract depends on the level of noise in self-signaling: when the consumer’s program-use decisions reveal his general level of self-restraint, the seller imposes relatively high per-usage rates; on the other hand, the firm levies low usage fees when implementation decisions depend on short-term fluctuations in self-control. Additionally, we examine program quality as a strategic decision. We determine that the firm offers additional frills when self-signaling is noisy and provides minimal benefits when self-signaling is more informative. Finally, we analyze program length as a marketing strategy and show that lengthy contracts transpire when usage decisions do not sufficiently reveal self-control.

Keywords: self-control; pricing strategy; contracts; game theory; behavioral economics (search for similar items in EconPapers)
Date: 2018
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