Researchers from Tilburg University, Northwestern University, and Lehigh University published a new Journal of Marketing study that examines how a seller’s enjoyment in making a product influences buyers’ willingness to pay and the price the seller charges.
The study, forthcoming in the Journal of Marketing, is titled “Production Enjoyment Asymmetrically Impacts Buyers’ Willingness to Pay and Sellers’ Willingness to Charge” and is authored by Anna Paley, Robert W. Smith, Jacob D. Teeny, and Daniel M. Zane.
Peer-to-peer marketplaces like Etsy, Fiverr, and UpWork are some of the fastest growing businesses in the world. These vertically integrated markets where a single actor is responsible for both creating and selling the item are projected to be worth $355 billion by 2025, according to a study by PricewaterhouseCoopers.
Compared to more traditional marketplaces, traditional signals of quality, such as brand name, are less relevant in the peer-to-peer space. Instead, sellers in these marketplaces directly tell potential buyers about themselves and the production processes behind their goods and services.
What should these sellers say in their bios and product descriptions? This new study finds that one of the best things they can mention is that they enjoy their work.
“We suspect that many people who choose to sell things through peer-to-peer marketplaces enjoy making them. Yet, sellers rarely mention it. For example, in the profiles of 30,000 sellers across various peer-to-peer marketplaces, only about 1% of sellers mentioned production enjoyment,” says Paley. Smith adds that “over 15 experiments, we find consistent evidence that buyers are more interested in, are more likely to choose, and are willing to pay more for products or services that the seller enjoys producing.”
The research team also explores how production enjoyment influences the sellers’ decision to price products and services. Ironically, sellers are willing to accept a lower price—and do indeed charge less—for the products and services they enjoy producing. Although sellers also generally associate production enjoyment with higher quality, they do not rely on this inference in their pricing decisions.
One field study tests two ads on Facebook for a search engine optimization (SEO) specialist, one that mentioned production enjoyment (“I really enjoy SEO”) and one that was otherwise identical but did not contain these words. Small business owners were more likely to click on the ad that mentioned production enjoyment. The positive reactions that buyers have to sellers’ signals of production enjoyment occur over a broad range of jobs. Teeny says, “across our studies, we examine over 100 different jobs and, in all cases, signaling enjoyment increase buyers’ willingness to pay.”
Enjoyment vs. Quality
This positive impact occurs because buyers interpret production enjoyment as a signal of a high-quality product or service. “After all, someone who really enjoys making jewelry or loves painting probably spends more time and focus on it than others. When buyers learn of this enjoyment, they then presume the product/service is high quality and are therefore more likely to buy it,” Zane explains.
Notably, signaling production enjoyment works best when the production process requires a lot of skill. Automation has made many production processes a lot easier. In situations where buyers assume the production process is largely automated (or assume the offering does not require much skill overall), production enjoyment does not impact buyers nearly as much.
But even in high-skill contexts, why do sellers charge less for products and services they enjoy producing? Like buyers, sellers also associate production enjoyment with high quality products and services, which should increase prices. Paley says, “we think sellers instead charge lower prices because the joy that they experience during the production process already compensates them for their work. In any case, it seems that production enjoyment carries signals for sellers that lead to different pricing decisions.”
Taken together, these findings are somewhat contradictory: sellers charge less money for products and services they enjoy producing, even though buyers are willing to pay more for them.
Lessons for Sellers
- When sellers mention production enjoyment in their profiles and marketing, buyers are more interested in their products and services.
- By comparing production enjoyment to a variety of other established cues of product quality (e.g., production effort) and identifying several moderators that determine the impact of this signal (e.g., required skill), this research gives sellers a useful framework for when and how to signal production enjoyment.
- Sellers should reconsider their willingness to charge for different products/services. This knowledge can also benefit buyers, who can recognize production enjoyment as a signal of a potential discount, because sellers charge less when they enjoy the production process.
In sum, if you enjoy the work you do, make sure you tell people! They will think you do better work and should be willing to pay you more for it.
Full article and author contact information available at: https://doi.org/10.1177/00222429241257913
About the Journal of Marketing
The Journal of Marketing develops and disseminates knowledge about real-world marketing questions useful to scholars, educators, managers, policy makers, consumers, and other societal stakeholders around the world. Published by the American Marketing Association since its founding in 1936, JM has played a significant role in shaping the content and boundaries of the marketing discipline. Shrihari (Hari) Sridhar (Joe Foster ’56 Chair in Business Leadership, Professor of Marketing at Mays Business School, Texas A&M University) serves as the current Editor in Chief.
https://www.ama.org/jm
About the American Marketing Association (AMA)
As the largest chapter-based marketing association in the world, the AMA is trusted by marketing and sales professionals to help them discover what is coming next in the industry. The AMA has a community of local chapters in more than 70 cities and 350 college campuses throughout North America. The AMA is home to award-winning content, PCM® professional certification, premiere academic journals, and industry-leading training events and conferences.
https://www.ama.org
Marilyn Stone is Director, Academic Communities and Journals, American Marketing Association.