All posts by tessazander

Pay What You Want as a Marketing Strategy in Monopolistic and Competitive Markets

If you wouldn’t pay a fixed tuition fee, but were allowed to pay what you want (PWYW), how much would you be willing to pay for the course Customer Centric Digital Commerce? It would probably depend on your expected valuation of the course. However, would you be willing to pay voluntarily?

This is what Schmidt et al. (2015) studied

The authors studied the reasons why buyers are willing to pay voluntarily under PWYW and how competition affects the viability of PWYW. Below, the main advantages for sellers of PWYW are shown, with their corresponding results.

  • Advantage 1: Price discrimination: different customers pay different prices for the same product.

Buyers are willing to make substantial voluntary payments because of their own valuation of the product, the cost for the seller, and because of a strategic motive to keep the seller in business.

  • Advantage 2: Market penetration: maximize unit sales.

When the PWYW seller has a monopoly, almost all buyers buy his product. However, when there is also a posted price (PP) seller in the market, there is no full market penetration.

  • Advantage 3: Competition: drive competitors out the market with PWYWY.

When there is also a PP seller in the market, buyers have a reference price and therefore pay less to the PWYW seller.

When the market is not monopolistic, both sellers using a PP strategy is best. However, when one of them uses PWYW, the other seller is better off also using PWYW.

How did they study this?

They studied this by conducting a laboratory experiment, which is the main strength of the paper. Many field studies confirm that PWYW can be advantageous (e.g. Kim et al., 2009), but cannot explain why.

With a laboratory experiment, all variables can be controlled. Furthermore, the authors choose conservative design features. For example, no personal interactions, no complementary products, a fictitious product and no one observes how much the buyer pays. All these features make it easier for a buyer not to pay anything and therefore if buyers are willing to pay positive prices in the experiment, they are likely to also have a significant effect in real markets.

Managerial implications

There are several managerial implications.

  • PWYW is likely to be more successful for small shops and non-profit organizations.
  • PWYW is best suited for products with low marginal costs, that create high value for customers (e.g. museums, digital products).
  • Neighborhood shops are likely to receive higher payments than sellers dealing with customers only once.


From this, we can determine that a university has a possibility to succeed when applying a PWYW strategy. A university is non-profit, with low marginal costs and high value for students. Students are also recurring customers, since they take many courses. A university might even have a monopoly for certain courses, which benefits the university. However, students often do not have much money and prefer to spend their money on other activities.

Do you believe Erasmus University would survive with a PWYW strategy?


Kim, J.Y., Natter, M. & Spann, M. (2009) Pay what you want: A new participative pricing mechanism. Journal of Marketing. 73(1), 44–58.

Schmidt, K.M., Spann, M. & Zeithammer, R. (2015). Pay what you want as a marketing strategy in monopolistic and competitive markets. Management Science. 61(6), 1217-1236.


Estimating the Helpfulness and Economic Impact of Product Reviews: Mining Text and Reviewer Characteristics

We have all been there, scrolling through all the reviews before we buy something. You want to see all of this user-generated content, since you are afraid you will regret the wrong choice (Tsekouras, 2017). Also, this information overload leads to being less satisfied, less confident and more confused (Park & Lee, 2009). You could look at the average rating of the product, however these are often bimodal distributed and therefore less helpful (Zhang & Pavlou, 2009). How can you feel confident that you have seen all the important reviews, without having to read all of them?

This is what Ghose & Ipeirotis (2011) studied.

The authors looked at data from Amazon over a period of 15 months to study the impact of reviews on products sales and perceived usefulness. They looked at audio and video players (144 products), digital cameras (109 products) and DVDs (158 products) and their reviews.

The paper identified multiple features that affect product sales and helpfulness, by incorporating two streams of research. First, the information within the review is relevant. Second, reviewer attributes might influence consumer response.

What did they find?

An explanatory study found that the following factors are important:


Thus, perceived helpfulness does not necessarily lead to higher product sales.

They also performed a predictive model, which showed the importance of reviewer-related, subjectivity and readability features on predicting the impact of reviews. Furthermore, the predictive model showed that the predictions were less accurate for experience goods, like DVDs, in comparison to search goods, such as electronics.

What are the managerial implications?

Amazon currently uses ‘spotlight reviews’, which displays the most important reviews. However, it requires enough votes on reviews before a ‘spotlight review’ is determined. The predictive model is able to overcome this limitation, since it is possible to immediately identify reviews that are expected to be helpful for consumers and display them first.

On the other hand, it is useful for manufacturers, since they are able to modify future versions of the product or the marketing strategy, based on the reviews that affected sales most.

The main strength of this paper is that it has relevant managerial implications for both consumers and manufacturers, since it studied both the effect on sales and on helpfulness for consumers.

Would the findings be similar on different websites?

Probably, findings will be similar for other retailers of electronics, therefore Coolblue and Mediamarkt could benefit. On the other hand, book reviews on are not expected to have as much benefit from the model, since they are experience goods, similar to DVDs.

Not as straightforward, are the implications for clothing retailers. However, I expect these retailers will not benefit as much from the model, since often there is no overload of reviews on clothing websites and therefore there is no need to reduce the information.


Ghose, A., & Ipeirotis, P. G. (2011). Estimating the helpfulness and economic impact of product reviews: Mining text and reviewer characteristics. IEEE Transactions on Knowledge and Data Engineering23(10), 1498-1512.

Hu, N., Zhang, J. and Pavlou, P.A. (2009). Overcoming the J-shaped distribution of product reviews. Communications of the ACM, 52(10), pp.144-147.

Park, D. H., & Lee, J. (2009). eWOM overload and its effect on consumer behavioral intention depending on consumer involvement. Electronic Commerce Research and Applications7(4), 386-398.

Tsekouras, D. (2017). Customer centric digital commerce: Personalization & Product Recommendations [PowerPoint slide]. Retrieved from Blackboard.

Feature image retrieved from: Enzer, J. (2016, August 17). How to reward product reviews and supercharge your e-commerce business. Retrieved from:

Showaround: Disrupting the Industry of City Tours

City tours are a great way to discover new places. However, often the tours only visit the touristic places and can feel somewhat generic. To be able to experience the more authentic feeling of a city, local guides are a perfect solution. Though, finding these locals may be a hurdle and therefore Showaround is here to help you out!

“There’s is no reason to be just a mere tourist anymore, not when locals can show you an edgier, more beautiful and more authentic version of their city.” – Showaround

What is Showaround?

Showaround is a platform which connects local guides with tourists in 198 countries and 7202 cities. Showaround was launched in June 2015 by Linas Sablosvskis and currently 75744 guides are signed up.

Locals have a profile with their interests, spoken languages, hourly rate, reviews and feedback from tourists. As a tourist, you are able to find guides based on the city you are visiting. Another option for tourists is to ‘create a trip’, on which locals are able to respond with an offer.


When the guide has accepted the offer, the tourist pays Showaround and you can message your guide via the platform’s messaging system, to tailor the tour. The money will only be transferred to the guides, when there are no complaints. Also, they provide a money-back guarantee to the tourists.

How does the business model work?

Showaround is able to make revenue from these tours, by imposing an 18% commission on each tour, paid by the guides. This 18% covers the costs they incur, which include support, platform management services and promotion.

The cross-side network effects are important in this business model, since the value to a tourist depends on the number of guides and vice versa (Granados et al., 2008). This is beneficial for Showaround, since they also have two competitors who offer similar services with less guides, Tours by Locals and Shiroube. Furthermore, this network effect raises barriers to entry, because of the users that have no incentive to leave (Granados et al., 2008).


Efficiency criteria

One of the problems, which can be found in any ‘gig’ model, is that the guides are not employed directly by Showaround. This excludes them from employment rights, such as right to a minimum wage, breaks and restricted working time and a pension scheme (McIlroy, 2016). Until the law is able to catch up, Showaround should consider who is working for them and how they are treated.

However, it is clear that there is joint profitability for both consumers and Showaround. Tourists are able to experience the city in a tailored and authentic manner, for little costs and are able to choose from many guides. Locals are able to flexibly make some extra money, share their passion and make new international friends. On the other hand, the firm does not require any assets, except for the platform, and therefore incurs little costs.

Showaround might be your solution to experience a new city in an authentic way!


Granados, N. F., Kauffman, R. J., & King, B. (2008). How has electronic travel distribution been transformed? A test of the theory of newly vulnerable markets. Journal of Management Information Systems25(2), 73-96.

McIlroy, E. (2016, March 18) Comment: ‘Gig economy’ – stretching blurred lines of employment to the limit. Retrieved from <;.