Research Interests: channel and retail management., competitive strategies, market entry, targeted pricing and other pricing strategies
Professor Z. John Zhang’s research focuses on targeted pricing and other pricing strategies, competitive strategies, market entry and channel and retail management. Recent work probed the complex, unintended pitfalls of targeted pricing – the process of targeting a competitor’s customers with lower prices – in the fast-moving Internet age. Zhang’s research suggested that while this approach isn’t for every business, it can be an effective tool under the right circumstances. Zhang also provided guidelines to help companies understand when targeted pricing might play an effective role in their marketing strategy.
Professor Zhang’s research has been published in top-tier academic journals including Marketing Science, Management Science and the Journal of Marketing Research. He also serves as Area Editor for Marketing Science, Management Scienceand Quantitative Marketing and Economics, and has won numerous academic and teaching awards.
Professor Zhang currently teaches Marketing Management to EMTM students, and Pricing Strategies to undergraduate and MBA. He also teaches pricing strategies to executives in China in Chinese.
Professor Zhang received a PhD and MA in economics from the University of Michigan , a PhD and MA in History and Sociology of Science and Technology from the University of Pennsylvania , and a BA in Engineering Automation from Huazhong University of Science and Technology in Hubei, China.
Current Projects: Targeting and channel strategies; behavior-based targeted pricing; demand collection systems.
Abstract: Firms in many industries experience protracted periods of pricing power, the ability to successfully enact price increases. In these situations, firms must decide not only whether to raise prices, but to whom. Specifically, in a competitive context, they must determine whether it is more profitable to increase prices across-the-board or to a specific segment of their customer base. While selective price decreases are ubiquitous in practice (e.g., better deals to potential new customers by phone carriers; better deals to current customers by various magazines), to our knowledge selective price increases are relatively rare. We illustrate the benefits of targeted price increases, and, as such, we expand the repertoire of firms' promotional policies. To that end, we explore a scenario where two competing firms must decide whether to increase prices to the entire market or only to a specific segment. Targeted price increases (TPI), i.e., being offered an unchanged price (selectively) when others are subject to price increases, can be offered to Loyals (those who bought from the firm in the previous period) or Switchers (those who did not). The effects of TPIs are estimated through a laboratory experiment and an associated stochastic model, each allowing for both rational (Loyalty, Switching) and behaviorist (Betrayal, Jealousy) effects. We find that TPIs can indeed yield beneficial results (greater retention for Loyals or greater attraction of Switchers) and greater profits in certain circumstances. Results for TPI are additionally benchmarked against those for targeted price decreases and are found to differ. The range of effects stemming from the experiment can be used in a competitive analysis to yield equilibrium strategies for the two firms. In this case, we find that—depending on the magnitude of the price increase, market shares of the two firms, and price knowledge across consumer segments—a firm may wish to embrace targeted price increases in some situations, to institute across-the-board price increases in others, and to not enact any price increases in still others. We show that a firm can sacrifice considerable profit if it settles on a suboptimal pricing strategy (e.g., wrongly instituting an across-the-board increase), favors the wrong segment (e.g., Switchers instead of Loyals), or ignores "behaviorist" effects (Betrayal or Jealousy).
Yuxin Chen and Z. John Zhang (Working), Targeted Pricing and Channel Management.
Z. John Zhang and Dongsheng Zhou (Working), The Art of Price War: a Perspective from China.
Yuxin Chen, Sridhar Moorthy, Z. John Zhang (Working), A Non-Price-Discrimination Theory of Rebates.
Yunchuan Liu and Z. John Zhang (Working), The Benefit of Targeted Pricing in a Channel.
Upender Subramanian, Jagmohan Raju, Z. John Zhang (Working), Customer Value Based Management: Competitive Implications.
Abstract: Many ?firms today quantify the value of individual customers and serve them differentially; providing better service, prices and other inducements to high value customers. We refer to this practice as Customer Value-based Management (CVM). While previous research and popular press has strongly advocated CVM, ?firms have often met with mixed results. One possible reason why actual outcomes differ from anticipated results could be that ?firms often implement CVM in a competitive environment. Our objective is to study CVM explicitly in a competitive setting. We find that while some recommendations and prescriptions from past research continue to apply in a competitive environment, some others do not. For example, we find that one of the benefits of CVM in a competitive setting is that it can discourage the rival from competing intensely, by increasing the rival’s chances of acquiring unprofitable customers. In this context, low-value customers can play an important strategic role by limiting the intensity of rival’s poaching. Consequently, ?firing low value customers or even increasing their value may prove counter-productive.
Z. John Zhang (Working), Dominant Retailer and Channel Coordination.
Abstract: This research analyzes the strategic use of targeted promotions for customer retention and acquisition in a dynamic and competitive environment. We develop suitable differential games for both finite- and infinite-time problems and provide analytical solutions in each case for defensive and offensive Nash equilibrium closed-loop strategies. Our analysis shows that a firm's optimal targeting strategies, both offensive and defensive, in a dynamic setting depend on its actual market share, the relevant redemption rate of its targeted promotions, the value of its market share increase, and the effectiveness of its targeted promotions. Optimal targeting strategies call for a firm to increase its expenditure on defensive (offensive) targeting relative to offensive (defensive) targeting, thus focusing more on customer retention (customer switching), when its market share becomes larger (smaller). These optimal strategies have the attractive feature of being an adaptive control rule. A firm can operationalize these strategies by adjusting its planned promotional incentives on the basis of the observed differences between actual and planned market shares and between actual and planned redemption rates. In the long run, a focus on customer retention is not an optimal strategy for all firms. A firm with a sufficiently large market share should stress customer retention, whereas a firm with a small market share should stress customer acquisition. When market shares are more evenly divided in a market, firms are better off in the long run if they all focus on customer acquisition. Our analysis also suggests that to build a long-run market share advantage in the age of information-intensive marketing, a firm must strive to improve its targeting effectiveness and increase its unit profit margin. We illustrate the results through a numerical example and show the trajectories of a firm's market share, promotional expenditures, and profits as competing firms use targeted promotions optimally over time.
Vibhanshu Abhishek, Kinshuk Jerath, Z. John Zhang (Under Review), Platform Selling or Reselling? Channel Structures in Electronic Retailing (under review).
The pricing decision process including economic, marketing, and behavioral phenomena which constitute the environment for pricing decisions and the information and analytic tools useful to the decision maker.
This course is designed to equip students with the concepts, techniques, and latest thinking on pricing issues, with an emphasis on ways in which to help a firm improve its pricing. The orientation of the course is about practice of pricing, not theory. We will focus on how firms can improve profitability through pricing, look at how firms set their prices and how to improve current practices to increase profitability. The first part of the course focuses on how to analyze costs, customers, and competitors in order to formulate proactive pricing strategies. The second part focuses on price promotions, price bundling, price discrimination, versioning, nonlinear pricing, pricing through a distribution channel, dynamic pricing, etc.
The course provides a systematic presentation of the factors to be considered when setting price, and shows how pricing alternatives are developed. Analytical methods are developed and new approaches are explored for solving pricing decisions.
This course is a two part series. The first part concentrates on the Indian Consumer and the second part concentrates on the Chinese Consumer. India and China add up to half of the world's population. Each presents its own challenges and opportunities. US and European MNCs have been in both countries for many years, but emerging market MNC's are becoming stronger and in many cases overtaking US and European companies despite their strong brands and know-how. Marketing to the Indian Consumer will provide a careful understanding of: The opportunity and challenges in the Indian consumer market 2) Various segments within the Indian consumer market. 3) Consumer psychology and decision making processes in each segment 4) Distribution channels in Indi Media in India: Mass, Local and non-traditional. 6) Bottom of the pyramid consumers and rural markets. 7) Product design and development decisions. The course will focus on the following industries: consumer packaged goods, mobile phones, financial services (insurance and banking), healthcare, sports and entertainment, and transportation. The course will involve case studies from local and international companies, guest lecturers, and visits to consumer homes to observe their tastes, habits, and preferences. Marketing to the Chinese Consumer will provide students with a critical understanding of the Chinese consumer, distribution channels, pricing environment, branding and competitive dynamics so as to enhance their ability to market to the Chinese consumer successfully. The course will consist of a combination of lectures, case studies, presentations by industry experts, and a short evening field trip.
A student contemplating an independent study project must first find a faculty member who agrees to supervise and approve the student's written proposal as an independent study (MKTG 899). If a student wishes the proposed work to be used to meet the ASP requirement, he/she should then submit the approved proposal to the MBA adviser who will determine if it is an appropriate substitute. Such substitutions will only be approved prior to the beginning of the semester.
Requires written permission of instructor and the department graduate adviser.
Conspicuous consumption is giving way to a new ethos called "minimalist luxury." Wharton’s Pinar Yildirim and Z. John Zhang explain how the makers of high-end goods can respond to this market trend.Knowledge @ Wharton - 4/6/2021
Elegantly designed and loaded with technology, the Penn Wharton China Center is the University’s calling card for the entire region.Wharton Magazine - 02/10/2016
The student-run Penn Wharton China Summit welcomes global innovators while providing a platform for an emerging generation of leaders….Wharton Stories - 04/13/2018