Newswise — How can a company that makes an excellent product — say, really effective software — communicate that quality to the consumer? One way is to set a respectably high price.
Another way of "signaling" high quality is to offer a relatively long trial period for the product, according to new research from the University of Washington Bothell School of Business and the University of Texas at Dallas.
The findings come in a paper accepted for publication in the journal Operations Research by Gülru F. Özkan-Seely, UW Bothell assistant professor of business, with co-author Shouqiang Wang of the Naveen Jindal School of Management at the University of Texas at Dallas.
"One may wonder why in certain markets, companies offer free product trials for a certain length of time," Wang and Özkan-Seely write. "Our research offers an answer to this question.
"We show that a high-quality firm offers a longer trial period and sets a higher price, and is rewarded with a higher profit relative to its low-quality counterpart." Their definition of "quality" in this instance, they note, means "measurable and verifiable superiority on some predetermined ideal standard or standards."
Their inquiry was inspired in part by a commenter on an Adobe discussion forum frustrated over a product's lack of trial period: "The only time it doesn't is if the software is awful and the only way they can sell it is if people buy it without trying it first."
The finding, they write, could be helpful to those in marketing and operations aspects of the software industry.
The research could be of help to average consumers as well, Özkan-Seely added: "In the case where they are unsure of the quality of the product, they can get an understanding though the length of the trail period and the price."
To learn more, contact Özkan-Seely at 425-352-3382 or [email protected].