Promotions
The Consumer Welfare Effects of Online Ads: Evidence from a 9-Year Experiment
Erik Brynjolfsson et al.
NBER Working Paper, August 2024
Abstract:
Research on the causal effects of online advertising on consumer welfare is limited due to challenges in running large-scale field experiments and tracking effects over extended periods. We analyze a long-running field experiment of online advertising in which a random 0.5% subset of all users are assigned to a group that does not ever see ever ads. We recruit a representative sample of Facebook users in the ads and no-ads groups and estimate their welfare gains from using Facebook using a series of incentive-compatible choice experiments. We find no significant differences in welfare gains from Facebook. Our estimates are relatively precisely estimated reflecting our large sample size (53,166 participants). Specifically, the minimum detectable difference in median valuations at standard thresholds is $3.18/month compared to a baseline valuation of $31.95/month for giving up access to Facebook. That is, we can reject the hypothesis that the median disutility from advertising exceeds 10% of the median baseline valuation. Our findings suggest that either the disutility of ads for consumers is relatively small, or that there are offsetting benefits, such as helping consumers find products and services of interest.
Double-edged stars: Michelin stars, reactivity, and restaurant exits in New York City
Daniel Sands
Strategic Management Journal, forthcoming
Abstract:
This article develops a theoretical framework to explicate how third parties, who are not transactionally involved in a given exchange relationship, can promote or impede the creation and capture of value by influencing market actor beliefs and behaviors. I investigate these issues empirically through an abductive mixed-method case study of the Michelin Guide's entry into New York City. An examination of two decades of the openings and closings of New York City's elite restaurants indicates that receiving a Michelin star corresponded to an increased likelihood of restaurant exit. Michelin stars appear to have fostered disruptions at recipients' upstream and downstream interfaces, which inhibited their ability to capture value. This ultimately underscores how value network reactivity to third-party evaluations may lead to unintended consequences for firms.
Separating the Artist from the Art: Social Media Boycotts, Platform Sanctions, and Music Consumption
Daniel Winkler, Nils Wlömert & Jura Liaukonyte
Cornell University Working Paper, August 2024
Abstract:
This paper investigates how the consumption of an artist's creative work is impacted when there's a movement to "cancel" the artist on social media due to their misconduct. Unlike product brands, human brands are particularly vulnerable to reputation risks, yet how misconduct affects their consumption remains poorly understood. Using R. Kelly's case, we examine the demand for his music following interrelated publicity and platform sanction shocks-specifically, the removal of his songs from major playlists on the largest global streaming platform. A cursory examination of music consumption after these scandals would lead to the erroneous conclusion that consumers are intentionally boycotting the disgraced artist. We propose an identification strategy to disentangle platform curation and intentional listening effects, leveraging variation in song removal status and geographic demand. Our findings show that the decrease in music consumption is primarily driven by supply-side factors due to playlist removals rather than changes in intentional listening. Media coverage and calls for boycott have promotional effects, suggesting that social media boycotts can inadvertently increase music demand. The analysis of other cancellation cases involving Morgan Wallen and Rammstein shows no long-term decline in music demand, reinforcing the potential promotional effects of scandals in the absence of supply-side sanctions.
BMW is POWERFUL, Beemer is Not: Nickname Branding IMPAIRS Brand Performance
Zhe Zhang, Ning Ye & Matthew Thomson
Journal of Marketing, forthcoming
Abstract:
This research investigates nickname branding, a novel phenomenon whereby firms incorporate the ‘street’ names consumers give brands into their own marketing (e.g., Bloomingdale’s opening a Bloomie’s store). While practitioners anticipate positive results from deploying this tactic, the current research serves as the first empirical investigation of its likely effectiveness. Drawing on speech act theory, we theorize that using a nickname in place of a formal name serves as an act of power redistribution, effectively signaling submission to consumers, thereby reducing the perception of a brand’s power and weakening its performance. Using a multi-method approach that incorporates secondary data analyses, field studies, and pre-registered experiments, the results support this view across a range of performance metrics. In addition, we show this effect is contingent on two factors, such that nickname branding (1) harms performance more for competent brands than warm brands; and (2) is less pronounced when nicknames are used in messages that are communal-oriented (vs. transactional-oriented). Our research introduces a new theoretical perspective centering on the illocutionary meanings embedded in the process of naming brands and highlights actionable insights on how marketers should approach or avoid consumer-based slang in their marketing.
Are Goodwill Ambassadors Good for Business? The Impact of Celebrities on International Organization Fundraising
Rabia Malik & Svanhildur Thorvaldsdottir
Journal of Experimental Political Science, forthcoming
Abstract:
Many international organizations (IOs) rely on voluntary contributions from member states and private actors to fund their operations. Donations from individuals are a significant and increasing income source for these IOs, who rely on marketing strategies such as celebrity endorsement, in the form of Goodwill Ambassadors, to help raise funds. Little is known, however, about the effectiveness of this strategy in the context of IOs although intuition from literatures in marketing and psychology suggests that celebrity endorsement should be effective. We conduct a survey experiment to investigate the effectiveness of Goodwill Ambassadors and, contrary to expectations, find no average effect of celebrity endorsement on donations to, and interest in, IOs and only limited effects among certain sub-groups. We speculate that the context of IOs makes it harder to generate the type of connection between celebrity and cause necessary to make endorsement effective and suggest that further investigation is needed.
The Value of Competitor Information: Evidence from a Field Experiment
Hyunjin Kim
Management Science, forthcoming
Abstract:
To what extent do firms know available information on key competitor decisions, and how does competitor information change their own strategic choices? These questions are fundamental to understanding how firms compete and make strategic decisions, yet systematic evidence on them remains limited. I designed a field experiment across 3,218 differentiated firms in the personal care industry, where firms randomly assigned to treatment received easily accessible information on competitor prices. At baseline, nearly half of treatment firms appeared to lack knowledge of competitor prices. Once treatment firms received competitor information, they were more likely to change their own decisions, aligning them with competitors rather than differentiating. These changes were driven by firms that were more misaligned in their price and quality decisions, and appear to have been performance enhancing. If competitor information was both easily accessible and decision relevant, why did firms not use this information on their own? Results from a follow-up experiment suggest that this lack of knowledge may have been driven by managerial inattention. These findings highlight that limited information processing is a key problem for firms and a central issue in strategy, and raise the possibility that growing availability of competitor data may lead firms to align their decisions more with their competitors.
Serving with a Smile on Airbnb: Analyzing the Economic Returns and Behavioral Underpinnings of the Host’s Smile
Shunyuan Zhang et al.
Journal of Consumer Research, forthcoming
Abstract:
Non-informational cues, such as facial expressions, can significantly influence judgments and interpersonal impressions. While past research has explored how smiling affects business outcomes in offline or in-store contexts, relatively less is known about how smiling influences consumer choice in e-commerce settings even when there is no face-to-face interaction. In this paper, we use a longitudinal Airbnb dataset and a facial attribute classifier to quantify the effect of a smile in the host’s profile photo on property demand and identify factors that influence when a host smile is likely to have the biggest effect. A smile in the host’s profile photo increases property demand by 3.5% on average. This effect is moderated by a variety of host and property characteristics that provide evidence for the role of uncertainty underlying why smiling increases demand. Specifically, when there is greater uncertainty regarding either the quality of the accommodations or the interaction with the host, a host smile will have a greater effect on demand. Online experiments confirm this pattern, offering further support for uncertainty perceptions driving the effect of smiling on increased Airbnb demand, and show that the effect of smiling on demand generalizes beyond Airbnb.