Marketing of Digital Products

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2005-04-20

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My dissertation comprises of three essays that theoretically and empirically investigate the marketing of digital products, which are information products such as newspapers and books sold in both physical and electronic form.

In the first essay, we study product form bundling, defined as marketing two or more forms of the same product as a package. We show experimentally that, regarding information products, the usage situations communicated to consumers moderate the effect of the availability of bundle discount on the purchase likelihood for the product form bundle. We also compare the effect of different pricing strategies for information products. When no bundle discount is offered, the likelihood of buying both forms of an information product, holding the sum of their prices constant, can be increased by pricing the electronic form lower than the print form rather then pricing both at the same level.

In the second essay we compare two product strategies that can be used in marketing digital products. Under standard mixed bundling companies offer full content in print and electronic form and the bundle of the two, while under content unbundled mixed bundling companies offer full content in print form, unbundled content in electronic form, and the bundle of the two. Which strategy is more attractive for a company to pursue? We model the profits under these two strategies and outline conditions in which one or the other leads to higher profit. We apply our analytical framework to data from a field experiment implemented on the website of a book publisher.

The third essay investigates the attractiveness of complete product lines of items such as books and newspapers. We employ a choice experiment in which a sample of consumers is presented with hypothetical product scenarios asked to make a choice. The data is used to develop a profit-maximizing configuration of products and prices. Similar approaches to the product line pricing problem have been employed for conventional products, but not when bundling of different forms of a product is an option, and not when the different products may be complements rather than substitutes.

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