Behavior-based pricing between organic and general food enterprises. Issue 1 (20th November 2019)

• Record Type: Journal Article
• Authors: Liu, Kanying; Lan, Yong; Li, Wei
• Is Part Of: British food journal. Volume 122:Issue 1(2020)
• Page Start: 107
• Page End: 121
• Publication Date: 2019-11-20
• Subjects: Behaviour-based pricing (BBP) -- Organic food -- Difference in consumption utility -- Consumer share without preference difference; Food industry and trade -- Periodicals; Food -- Marketing -- Periodicals; Food adulteration and inspection -- Periodicals; Food -- Periodicals; 381.456413
• DOI: 10.1108/BFJ-08-2018-0500
• Languages: English
• ISSNs: 0007-070X

Abstract

Abstract : Purpose: The pursuit of healthy and high-quality organic food has gradually become a trend. However, some researchers do not believe that the quality of organic food is higher than general food. Consumers' changed preference for different quality food will also affect the sales strategy of food producer. The purpose of this paper is to consider behavior-based pricing (BBP) and decision-making problems between organic and general food enterprises, based on consumers' heterogeneity. Design/methodology/approach: In this study, two different types of consumers are considered: consumers without preference difference and consumers with an organic food preference. This paper sets up two two-stage hoteling differential pricing models in the duopoly market, including organic and general food enterprises. Then, the optimal loyal price and poaching price of the two types of enterprises are solved, and the influence of each parameter on the pricing, market and profit of the two enterprises is analyzed. Findings: This paper finds that, with the increase of the initial market share, the pricing strategies of organic food enterprises change from a loyal price lower than the poaching price to a loyal price higher than the poaching price, whereas the general food producer has the opposite pricing strategy. Furthermore, the difference in consumption utility between the two food types has a positive influence on the price of organic food, and a negative influence on the price of general food. In contrast, the consumer share without preference difference has a negative effect on organic food prices and a positive impact on the price of general food. Originality/value: The contribution is constructive as no prior research has focused on the BBP and decision-making problems between organic and general food, and it considers the two types of consumers. Besides, the results also provide guidelines for choosing marketing strategies for organic and general food enterprises.