Previous research has shown that consumers’ perceptions of quality and value are the primary drivers of purchase behavior. A new SAS Institute and Penn State University study designed a scenario based on the online purchase of a four-star hotel for a weekend leisure break. The study presented a hotel where the price varied low to high (relative to a reference price), the reviews were either mostly positive or mostly negative, and the ratings were low (2.8) or high (4.8). Consumers were then asked to report their perceptions of the quality and value of that hotel. The main takeaways from this study were: - In the presence of ratings and reviews, consumers do not use price as an indication of quality. Hotels can lower price (within reasonable bounds) to generate short term demand, without impacting consumers long term quality perceptions. - Reviews are the most powerful value indicator for consumers: Consumers look to the reviews over aggregate ratings to form quality and value perceptions. We hypothesize that the uncertainty associated with the hotel experience leads consumers to gather as much information as they can before purchase. Reviews provide this, ratings do not. - Competing on price alone is not a winning strategy. Consumers will look closely at UGC and price. This means you must understand your price position and your reputation position versus the competition. Get the full story at the SAS Institute