Product line design and introduction strategies for crowdfunding in presence of social learning

Abstract

Crowdfunding has emerged as a popular and efficient digital financing method. This paper investigates the product line design and introduction strategy of crowdfunding products in the presence of social learning when consumers are uncertain about their quality preferences and are allowed to return products. The results reveal that the consumer preference level and the preference level gap between high- and low-type consumers impact the optimal introduction strategy. Specifically, under the high-quality products’ first sequential introduction strategy, the optimal quality and pricing decision of low-quality products are similar to the results of classical product line design in that the gap between optimal prices for the product line increases with the consumers’ high- and low-quality preference levels and the proportion of high-quality preference consumers in the high-segment market. However, when introducing low-quality products first, the quality gap for the product line decreases in low-quality preference levels. Besides, the introduction strategy for menu crowdfunding products mainly depends on consumers’ quality preference levels and the gap between high- and low-quality preference levels. Finally, social learning can greatly alleviate consumers’ uncertainty about product preferences, reduce return rates, and bring greater profits to creators. It has a significant positive effect on creators than without social learning. The findings of this paper have essential implications for crowdfunding product design and introduction strategy in the presence of social learning and consumer uncertainty.