On demand
Trading Dollars for Dollars: The Price of Attention Online and Offline
Matthew Gentzkow
American Economic Review, May 2014, Pages 481-488
Abstract:
Popular accounts suggest that advertising revenue per unit of consumer attention is lower online than offline, and has fallen in traditional media as the Internet has made advertising markets more competitive. I assess these claims theoretically and empirically, and compare the patterns we observe for the Internet to trends in advertising around the introduction of television and radio. The evidence suggests that the price of attention for similar consumers is actually higher online than offline, and that the growth of new media is not robustly associated with a declining price of attention.
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Archishman Chakraborty & Rick Harbaugh
Marketing Science, May-June 2014, Pages 382-400
Abstract:
Sellers often make claims about product strengths without providing evidence. Even though such claims are mere puffery, we show that they can be credible because talking up any one strength comes at the implicit trade-off of not talking up another potential strength. Puffery pulls in some buyers who value product attributes that are talked up or emphasized while pushing away other buyers who infer that the attributes they value are relative weaknesses. When the initial probability of making a sale is low, there are more potential buyers to pull in than to push away, so puffery is persuasive overall. This persuasiveness requires that buyers have some privacy about their preferences so that the seller does not completely pander to them. More generally, the results show how comparative cheap talk by an expert to a decision maker can be credible and persuasive in standard discrete choice models used throughout marketing, economics, and other disciplines.
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Eric Anderson et al.
Northwestern University Working Paper, April 2014
Abstract:
We show that some customers systematically purchase new products that flop. Their early adoption of a new product is a strong signal that a product will fail - the more they buy, the less likely the product will succeed. These customers, whom we call ‘Harbingers’ [of failure], prefer products that other customers do not want. More broadly, we document that distinguishing among the types of customers who adopt a new product can be predictive of whether a new product will succeed or fail. We discuss how these insights can be readily incorporated into the new product development process. Our findings challenge the conventional wisdom that positive customer feedback is always a signal of future success. The possibility that firms are encouraged by Harbingers’ purchases during pilot market tests may help to explain the high failure rate for new products.
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Should the Devil Sell Prada? Retail Rejection Increases Aspiring Consumers' Desire for the Brand
Morgan Ward & Darren Dahl
Journal of Consumer Research, forthcoming
Abstract:
In response to consumers’ complaints that they feel rejected in and thus avoid luxury stores, retailers have encouraged sales personnel to be more friendly. However, prior research on social rejection supports the idea that rejection encourages people to elevate their perceptions of their rejecters, and strengthens their predilection to affiliate with them. Four studies examine the circumstances in which consumers increase their regard and willingness to pay after brand rejection. In a retail context, the data reveal that after threat, consumers have more positive attitudes and higher WTP when 1) the rejection comes from an aspirational (versus non-aspirational) brand, 2) the consumer relates the brand to his/her ideal self-concept, 3) s/he is unable to self-affirm prior to rejection, 4) the salesperson delivering the threat reflects the brand, and 5) the threat occurred recently. The substantive implications of these findings for retailers are discussed and opportunities for future research are identified.
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Leveraging Market Power Through Tying and Bundling: Does Google Behave Anti-Competitively?
Benjamin Edelman
Harvard Working Paper, May 2014
Abstract:
I examine Google’s pattern and practice of tying and bundling to leverage its dominance into new sectors under antitrust law principles. In particular, I show how Google used these tactics to enter numerous markets, to compel usage of its services, and often to dominate competing offerings. I explore the technical and commercial implementations of these practices, and I identify their effects on competition. I conclude that Google’s tying and bundling tactics are suspect under antitrust law.
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Touch vs. Tech: When Technology Functions as a Barrier or a Benefit to Service Encounters
Michael Giebelhausen et al.
Journal of Marketing, forthcoming
Abstract:
Interpersonal exchanges between customers and frontline service employees increasingly involve the use of technology, such as point-of-sale terminals, tablets, and kiosks. The present research draws on role and script theories to demonstrate customer reactions to technology-infused service exchanges depend on the presence of employee rapport. When rapport is present during the exchange, technology use functions as an interpersonal barrier preventing the customer from responding in kind to employee rapport-building efforts, thereby decreasing service encounter evaluations. However, during service encounters where employees are not engaging in rapport-building, technology functions as an interpersonal barrier allowing customers to retreat from the relatively unpleasant service interaction, thereby increasing service encounter evaluations. Two analyses utilizing J.D. Power Guest Satisfaction Index data support the barrier and beneficial effects of technology use during service encounters with and without rapport, respectively. A follow-up experiment replicates this data pattern and identifies psychological discomfort as a key process that governs the effect. For managers, results demonstrate the inherent incompatibility of initiatives designed to encourage employee-customer rapport with those that introduce technology into frontline service exchanges.
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“Selling Out” and the Impact of Music Piracy on Artist Entry
Joshua Gans
NBER Working Paper, May 2014
Abstract:
There is a puzzle arising from empirical analyses of the impact of music piracy that this has caused declines in music revenue without a consequential decline, and perhaps even an increase, in the entry of artists and the supply of high quality music. There have been numerous explanations posited and this paper adds a novel one: that artists are time inconsistent and hence, tend to underweight fame over fortune when making future choices; i.e., the degree to which they will ‘sell out.’ Regardless of whether selling out is anticipated or not, the puzzle is resolved. When selling out is not anticipated, future expectations of piracy are not a concern as these impact on monetary awards that are not driving entry. When selling out is anticipated, piracy actually constrains the degree to which artists sell out, and assured of that, raises entry returns. Implications and the role of publisher contracts are also explored.
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Internet vs. TV Advertising: A Brand-Building Comparison
Michaela Draganska, Wesley Hartmann & Gena Stanglein
Journal of Marketing Research, forthcoming
Abstract:
Many advertisers are reluctant to shift a large proportion of their advertising budgets to the Internet because they still view television advertising as the main vehicle for building a brand. Using a unique and rich data set comprising 20 campaigns across a variety of industries, we demonstrate that Internet ads perform on par with TV ads on the brand-building metrics that advertisers use and trust. We extend traditional brand-message recall measurement to facilitate comparisons between Internet formats and television by supplementing brand-message surveys conducted during the campaign with a set of pre-campaign surveys to control for pre-existing brand knowledge. A matching procedure ensures the pre-campaign sample is comparable to the in-flight one. We find that accounting for differences in pre-existing brand knowledge is paramount in obtaining valid comparisons across advertising formats, as individuals exposed to Internet display ads have significantly lower levels of pre-existing brand knowledge than television viewers. Without considering the differences in these “initial conditions”, TV advertising appears to be more effective than advertising on the Internet, but once the pre-existing differences among media formats are taken into account, the brand recall lift measures for Internet ads are statistically indistinguishable from comparable television lift measures.
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Drive for Show and Putt for Dough? Not Anymore
Carson Baugher, Jonathan Day & Elvin Burford
Journal of Sports Economics, forthcoming
Abstract:
Ten years ago, some golf analysts believed that “drive for show and putt for dough” may no longer be true on the Professional Golfers’ Association Tour. Scholars analyzed data from 1991 to 2002 and found that the old adage was still true since putting remained the number one skill determining earnings. We updated their models with data from 2006 to 2013 and found that driving replaced putting as the number one skill determining earnings starting in 2011. The most likely reasons for this return to skill are the lengthening of the courses and the shortening of the rough.
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David Lehman, Balázs Kovács & Glenn Carroll
Management Science, forthcoming
Abstract:
Organization theory highlights the spread of norms of rationality in contemporary life. Yet rationality does not always spread without friction; individuals often act based on other beliefs and norms. We explore this problem in the context of restaurants and diners. We argue that consumers potentially apply either of two social codes when forming value judgments about restaurants: (1) an apparently rational science-based code of hygiene involving compliance with local health regulations or (2) a context-activated code of authenticity involving conformity to cultural norms. We propose that violations of the hygiene code recede in importance when the authenticity code is activated. This claim is supported by empirical analyses of 442,086 online consumer reviews and 52,740 governmental health inspections conducted from 2004 to 2011.
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Social Networks, Personalized Advertising and Privacy Controls
Catherine Tucker
Journal of Marketing Research, forthcoming
Abstract:
This paper investigates how internet users' perception of control over their personal information affects how likely they are to click on online advertising on a social networking website. The paper uses data from a randomized field experiment that examined the effectiveness of personalizing ad text with user-posted personal information relative to generic text. The website gave users more control over their personally identifiable information in the middle of the field test. However, the website did not change how advertisers used data to target and personalize ads. Before the policy change, personalized ads did not perform particularly well. However, after this enhancement of perceived control over privacy, users were nearly twice as likely to click on personalized ads. Ads that targeted but did not use personalized text remained unchanged in effectiveness. The increase in effectiveness was larger for ads that used more unique private information to personalize their message and for target groups who were more likely to use opt-out privacy settings.
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David Harrington & Jaret Treber
Journal of Sports Economics, forthcoming
Abstract:
A couple of weeks before the 2012 Super Bowl, Andrew Lehren of The New York Times advised fans wanting tickets to be “patient,” because prices in secondary ticket markets tend to fall “precipitously” as the time to kickoff nears. Using data compiled from SeatGeek.com on more than 46,000 ticket postings in the two weeks prior to the 2013 Super Bowl and more than 18,000 ticket postings prior to the 2012 NCAA Final Four, we find that average prices decreased in the last few days prior to these events, reaching their lowest levels on the mornings before kickoff and first tipoff. This evidence seems to support Lehren’s recommendation that savvy fans should wait until the last minute to buy their tickets. But, we also show that savvy fans can often find similar or better bargains much earlier in the week by searching the available inventory. The greater variation in posted prices earlier in the week implies that fans can often find better bargains by searching than by being patient, especially for super-premium seats. We discuss how changes in technology have made it easier to search for bargains, while also insuring against being left ticketless if fans decide to patiently wait until the day of the game. Both strategies — patiently waiting until close to game time versus searching early and often — can produce bargains, although we suspect that changes in technology have increased the relative rewards to searching.
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Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment
Tom Blake, Steven Tadelis & Chris Nosko
NBER Working Paper, May 2014
Abstract:
Internet advertising has been the fastest growing advertising channel in recent years with paid search ads comprising the bulk of this revenue. We present results from a series of large scale field experiments done at eBay that were designed to measure the causal effectiveness of paid search ads. Because search clicks and purchase behavior are correlated, we show that returns from paid search are a fraction of conventional non-experimental estimates. As an extreme case, we show that brand-keyword ads have no measurable short-term benefits. For non-brand keywords we find that new and infrequent users are positively influenced by ads but that more frequent users whose purchasing behavior is not influenced by ads account for most of the advertising expenses, resulting in average returns that are negative.
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Substituting piracy with a pay-what-you-want option: Does it make sense?
Sana El Harbi, Gilles Grolleau & Insaf Bekir
European Journal of Law and Economics, April 2014, Pages 277-297
Abstract:
Rather than tolerating piracy or increasing sanctions, an artist can release his product directly to consumers by allowing them to download it under a ‘pay-what-you-want’ online strategy. We show analytically that this strategy can (1) be more profitable than a strategy with perfect or imperfect intellectual property rights enforcement for the artist and (2) change the organization and allocation of added value between artists and publishers along the supply chain. This higher profit result is achieved through an increased demand for live performance and positive voluntary contributions of downloaders directly pocketed by the artist. Indeed, a ‘pay-what-you-want’ strategy allows artists to reduce piracy without using sanctions while benefiting from a strategic negotiation ‘weapon’ in the relationship with record labels. Moreover, consumers draw procedural utility from the way the product is delivered. Counter-intuitively, rather than advocating for elimination of conventional releases at posted prices, pay-what-you-want strategies may need them to remain successful. A brief case study of Radiohead’s experiment and anecdotal evidence are developed to support these theoretical insights. Some implications regarding the re-organization of the supply chain and property rights regime are drawn.
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Unlikely allies: Credibility transfer during a corporate crisis
Justin Heinze, Eric Luis Uhlmann & Daniel Diermeier
Journal of Applied Social Psychology, May 2014, Pages 392–397
Abstract:
A company that faces a crisis can reestablish trust with stakeholders by announcing an independent investigation by a third party. Announcing an independent investigation, without knowing its outcome, significantly restored attitudes toward the company while an internal investigation was ineffective. Liberals responded most positively to a company that invited an independent investigation by a consumer advocacy group (Study 1). Experimentally activating liberal values using an implicit priming procedure likewise enhanced credibility transfer from a consumer advocacy group's investigation to a company in crisis (Study 2).
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Stacy Wood & Steve Hoeffler
Journal of Product Innovation Management, November 2013, Pages 1254–1270
Abstract:
Although consumer adoption of high-tech innovations is certainly influenced by the product's functional benefits, can the use of a new product confer social benefits as well? Specifically, can the mere use of an innovative product convey the impression that the user is an innovative person? Impression management (IM) is a well-established phenomenon in social psychology that refers to the human tendency to monitor, consciously or unconsciously, the efficacy of his or her communication of self to others. This research explores the role that IM motivations, or “looking innovative,” play in consumers' use of new high-tech products, especially in the workplace — an environment in which innovativeness is clearly valued by employers and, thus, individuals have strong motivations to convey innovativeness as a personal characteristic. Data from both ethnographic and experimental methods demonstrate that (1) the use of new high-tech products can be a surprisingly effective social signal of one's “tech savvy” and personal innovativeness; (2) this impression even significantly increases positive evaluations of secondary traits such as leadership and professional success; and (3) this effect differs by gender. Intriguingly, stronger benefits accrue for women than for men — a finding that runs counter to the backlash effect typically found in IM research in business settings (i.e., female job evaluations typically suffer after engaging in the same self-promoting IM strategies that benefit their male counterparts). Further, the data show that, even for professional recruiters, a momentary observation of a job candidate using a new high-tech product versus a low-tech equivalent significantly increases the candidate's evaluation and likelihood of being hired.
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What is in a Name: Drug Names Convey Implicit Information about Their Riskiness and Efficacy
Alessandra Tasso, Teresa Gavaruzzi & Lorella Lotto
Applied Cognitive Psychology, forthcoming
Abstract:
The present research provides empirical evidence that drug names may entail implicit promises about their therapeutic power. We asked people to evaluate the perceived efficacy and risk associated with hypothetical drug names and other secondary related measures. We compared opaque (without meaning), functional (targeting the health issue that the drug is meant to solve) and persuasive (targeting the expected outcome of the treatment) names. Persuasive names were perceived as more efficacious and less risky than both opaque and functional names, suggesting that names that target the expected outcome of the drug may bias the perception of risk and efficacy. Implications for health-related communication are discussed in light of both the increasing use of over-the-counter drugs and the concern about people's low health literacy.
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An Examination of Social Influence on Shopper Behavior Using Video Tracking Data
Xiaoling Zhang et al.
Journal of Marketing, forthcoming
Abstract:
This research investigates how the social elements of a retail store visit affect shoppers' product interaction and purchase likelihood. The research uses a bivariate model of the shopping process, implemented in a hierarchical Bayes framework, which models the customer and contextual factors driving product touch and purchase simultaneously. A unique video tracking database captures each shopper's path and activities during the store visit. The findings reveal that interactive social influences (salesperson contact, shopper conversations) tend to slow down the shopper, encourage a longer store visit, and increase product interaction and purchase. When shoppers are part of a larger group, they are influenced more by discussions with companions and less by third parties. Stores with customers present encourage product interaction up to a point, beyond which the density of shoppers interferes with the shopping process. The effects of social influence vary by the salesperson's demographic similarity to the shopper and the type of product category being shopped. Several behavioral cues signal when shoppers are in a potentially high need state and may be good sales prospects.
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Cannibalization and Option Value Effects of Secondary Markets: Evidence from the US Concert Industry
Victor Manuel Bennett, Robert Seamans & Feng Zhu
Strategic Management Journal, forthcoming
Abstract:
We examine how reducing search frictions in secondary markets affects the value appropriated by firms in primary markets. We characterize two effects on primary market firms caused by intermediaries entering secondary markets: the ‘cannibalization’ and ‘option value’ effects. Separation between primary and secondary markets can drive which of the two effects dominates. Firms selling valuable and scarce products are more likely to have separate primary and secondary markets, and will therefore appropriate more value when secondary markets thicken. Firms selling products that are not valuable and scarce will be hurt. Further, we hypothesize that firms have incentives to engineer scarcity by limiting supply when secondary markets thicken to separate primary and secondary markets. We find support for these hypotheses in the U.S. concert ticket industry.
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Informational Value of Social Tagging Networks
Hyoryung Nam & P.K. Kannan
Journal of Marketing, forthcoming
Abstract:
Social tagging is a new way to share and categorize online content, allowing users to express their thoughts, perceptions, and feelings with respect to diverse concepts such as brands, firms, music, politics, and more. In social tagging, content is connected through user-generated keywords known as “tags” and is readily searchable through these tags. The rich associative information provided by social tagging offers marketers new opportunities to infer brand associative networks. This paper investigates how the information contained in social tags can act as a proxy measure for brand performance and can predict the financial valuation of a firm. Using the data collected from a social tagging and bookmarking website, delicious.com, we examined social tagging data for 44 firms across 14 markets. After controlling for accounting metrics, media citations, and other user-generated content, we found that social tag-based brand management metrics capturing brand familiarity, favorability of associations, and competitive overlaps of brand associations can explain unanticipated stock returns. In addition, we found that in managing brand equity, it is more important for strong brands to enhance category dominance (that is, strongly relate to primary associations in the category) while for weak brands it is more critical to enhance connectedness (that is, become more connected to competitors’ associations). These findings suggest a new way for practitioners to track, measure, and manage intangible brand equity, proactively improve brand performance, and have an impact on a firm’s financial performance.