Some customers are right
Better or Different? How Political Ideology Shapes Preferences for Differentiation in the Social Hierarchy
Nailya Ordabayeva & Daniel Fernandes
Journal of Consumer Research, forthcoming
Abstract:
As consumers' political opinions become more divided and more central to their identities, it is important to understand how political ideology shapes consumers' attempts to differentiate from others in the marketplace. Seven studies demonstrate that political ideology systematically influences consumers' preferences for differentiation. Conservative ideology leads consumers to differentiate from others vertically in the social hierarchy through products that signal that they are better than others, and liberal ideology leads consumers to differentiate from others horizontally in the social hierarchy through products that signal that they are unique from others. This happens because conservatism endorses, and liberalism opposes, the belief that the dominance-based hierarchical social structure is a legitimate mechanism to distinguish individual qualities. The effect is robust across measured and manipulated ideology, hypothetical and real product choices, and online searches in conservative and liberal U.S. states. Manipulating consumers' differentiation goals and perceptions of hierarchy legitimacy mitigates the effect. The findings advance existing research on political ideology, social hierarchy, and consumer divergence, and they contribute to marketing practice.
Are We Running Out of Trademarks? An Empirical Study of Trademark Depletion and Congestion
Barton Beebe & Jeanne Fromer
Harvard Law Review, February 2018, Pages 945-1045
Abstract:
American trademark law has long operated on the assumption that there exists an inexhaustible supply of unclaimed trademarks that are at least as competitively effective as those already claimed. This core empirical assumption underpins nearly every aspect of trademark law and policy. This Article presents empirical evidence showing that this conventional wisdom is wrong. The supply of competitively effective trademarks is, in fact, exhaustible and has already reached severe levels of what we term trademark depletion and trademark congestion. We systematically study all 6.7 million trademark applications filed at the U.S. Patent and Trademark Office (PTO) from 1985 through 2016 together with the 300,000 trademarks already registered at the PTO as of 1985. We analyze these data in light of the most frequently used words and syllables in American English, the most frequently occurring surnames in the United States, and an original dataset consisting of phonetic representations of each applied-for or registered word mark included in the PTO's Trademark Case Files Dataset. We further incorporate data consisting of all 128 million domain names registered in the .com top-level domain and an original dataset of all 2.1 million trademark office actions issued by the PTO from 2003 through 2016. These data show that rates of word-mark depletion and congestion are increasing and have reached chronic levels, particularly in certain important economic sectors. The data further show that new trademark applicants are increasingly being forced to resort to second-best, less competitively effective marks. Yet registration refusal rates continue to rise. The result is that the ecology of the trademark system is breaking down, with mounting barriers to entry, increasing consumer search costs, and an eroding public domain. In light of our empirical findings, we propose a mix of reforms to trademark law that will help to preserve the proper functioning of the trademark system and further its core purposes of promoting competition and enhancing consumer welfare.
The effect of ad blocking on website traffic and quality
Benjamin Shiller, Joel Waldfogel & Johnny Ryan
RAND Journal of Economics, Spring 2018, Pages 43-63
Abstract:
Ad blocking software allows Internet users to obtain information without generating ad revenue for site owners, potentially undermining investments in content. We explore the impact of site-level ad blocker usage on website quality, as inferred from traffic. We find that each additional percentage point of site visitors blocking ads reduces its traffic by 0.67% over 35 months. Impacted sites provide less content over time, providing corroboration for the mechanism. Effects on revenue are compounded; ad blocking reduces visits, and remaining visitors blocking ads do not generate revenue. We conclude that ad blocking poses a threat to the ad-supported web.
Minions for the Rich? Financial Status Changes How Consumers See Products with Anthropomorphic Features
Hye-Young Kim & Ann McGill
Journal of Consumer Research, forthcoming
Abstract:
The present research explores how financial status, which influences consumers' expectations about how companies will treat them, affects consumers' perceptions and assessments of products that have been given anthropomorphic features by companies. Studies 1 and 2 showed that participants with higher financial status expect more favorable treatment from a humanized entity (e.g., "a self-driving car would prioritize the well-being of the rich over others"). The results of study 3 indicate that participants with higher perceived financial status both afforded greater agency to humanized products and liked these products better than did participants with lower perceived financial status. These effects were mediated by commercial treatment expectations, controlling for perceived control and self-efficacy. Further confirming the role of treatment expectations, when participants believed people with low financial status would be treated better than those with high financial status, we observed the reverse pattern (study 4). Lastly, study 5 replicated the effect using a measured, not manipulated, variable of financial status. Findings support the view that effective anthropomorphism requires marketers to take into account consumers' motivation to interpret a target with humanlike features as having positive agency, which results from treatment expectations.
Unionization, Product Market Competition, and Strategic Disclosure
Daniel Aobdia & Lin Cheng
Journal of Accounting and Economics, forthcoming
Abstract:
We examine the disclosure policies of non-unionized firms operating in unionized industries. We test the hypothesis that non-unionized firms have an incentive to disclose more information when their unionized rivals are engaged in labor renegotiations; that is, to weaken them. We find that non-unionized firms disclose more information and more good news when renegotiations are ongoing. This behavior is stronger for larger firms, firms with fewer peers in the industry, and firms more similar to their renegotiating rivals. We also find some evidence that unionized firms are harmed by this behavior and that non-unionized firms benefit from their increased disclosures.
The tipping point: A mathematical model for the profit-driven abandonment of restaurant tipping
Sara Clifton et al.
Chaos: An Interdisciplinary Journal of Nonlinear Science, February 2018
Abstract:
The custom of voluntarily tipping for services rendered has gone in and out of fashion in America since its introduction in the 19th century. Restaurant owners that ban tipping in their establishments often claim that social justice drives their decisions, but we show that rational profit-maximization may also justify the decisions. Here, we propose a conceptual model of restaurant competition for staff and customers, and we show that there exists a critical conventional tip rate at which restaurant owners should eliminate tipping to maximize profits. Because the conventional tip rate has been increasing steadily for the last several decades, our model suggests that restaurant owners may abandon tipping en masse when that critical tip rate is reached.
(I'm) Happy to Help (You): The Impact of Personal Pronoun Use in Customer-Firm Interactions
Grant Packard, Sarah Moore & Brent McFerran
Journal of Marketing Research, forthcoming
Abstract:
In responding to customer questions or complaints, should marketing agents linguistically "put the customer first" by using certain personal pronouns? Customer orientation theory, managerial literature, and surveys of managers, customer service representatives, and consumers suggest that firm agents should emphasize how "we" (the firm) serve "you" (the customer), while deemphasizing "I" (the agent) in these customer-firm interactions. We find evidence of this language pattern in use at over 40 firms. However, we theorize and demonstrate that these personal pronoun emphases are often sub-optimal. Five studies using lab experiments and field data reveal that firm agents who refer to themselves using "I" rather than "we" pronouns increase customer perceptions that the agent feels and acts on their behalf. In turn, these positive perceptions of empathy and agency lead to increased customer satisfaction, purchase intentions, and purchase behavior. Further, we find that customer-referencing "you" pronouns have little impact on these outcomes, and can sometimes have negative consequences. These findings enhance our understanding of how, when, and why language use impacts social perception and behavior, and provide valuable insights for marketers.
Rhesus macaques form preferences for brand logos through sex and social status based advertising
Yavuz Acikalin et al.
PLoS ONE, February 2018
Abstract:
Like humans, monkeys value information about sex and status, inviting the hypothesis that our susceptibility to these factors in advertising arises from shared, ancestral biological mechanisms that prioritize social information. To test this idea, we asked whether rhesus macaques (Macaca mulatta) show choice behavior that is similar to humans in response to sex and social status in advertising. Our results show that monkeys form preferences for brand logos repeatedly paired with images of macaque genitals and high status monkeys. Moreover, monkeys sustain preferences for these brand logos even though choosing them provided no tangible rewards, a finding that cannot be explained by a decision mechanism operating solely on material outcomes. Together, our results endorse the hypothesis that the power of sex and status in advertising emerges from the spontaneous engagement of shared, ancestral neural circuits that prioritize information useful for navigating the social environment. Finally, our results show that simple associative conditioning is sufficient to explain the formation of preferences for brand logos paired with sexual or status-based images.
Speaking about a Brand Connects You to It More Than Writing Does
Hao Shen & Jaideep Sengupta
Journal of Consumer Research, forthcoming
Abstract:
This research merges insights from the communications literature with that on the self-brand connection to examine a novel question: how does speaking vs. writing about a liked brand influence the communicator's own later reactions to that brand? Our conceptualization argues that because oral communication involves a greater focus on social interaction with the communication recipient than does written communication, oral communicators are more likely to express self-related thoughts than are writers, thereby increasing their self-brand connection (SBC). We also assess the implications of this conceptualization, including the identification of theoretically-derived boundary conditions for the speech-writing difference, and the downstream effects of heightened SBC. Results from five studies provide support for our predictions, informing both the basic literature on communications, and the body of work on consumer word-of-mouth.
How Does Advertising Depend on Competition? Evidence from U.S. Brewing
Ambarish Chandra & Matthew Weinberg
Management Science, forthcoming
Abstract:
The relationship between market structure and advertising has been extensively studied, but has generated sharply opposing theoretical predictions, as well as inconclusive empirical findings, likely because of severe endogeneity concerns. We exploit the 2008 merger of Miller and Coors in the U.S. brewing industry to examine how changes in local concentration affect firms' advertising behavior. Well-established regional preferences over beer brands, and the sharp increase in concentration from the merger, make this an excellent setting to analyze this question. We find a significant positive effect of local market concentration on advertising expenditures: a 100-point increase in the Herfindahl-Hirschmann Index measure of concentration increases advertising per capita by about 5%. Our findings shed light on how and when firms choose to deploy advertising.
Buying Beauty for the Long Run: (Mis)predicting Liking of Product Aesthetics
Eva Buechel & Claudia Townsend
Journal of Consumer Research, forthcoming
Abstract:
How well can consumers predict future liking of different product designs? The present research identifies a systematic error in consumers' preferences and predicted liking for product aesthetics. Consumers predict a faster decrease in liking for high (vs. low) arousal potential product designs (i.e., intense colors or intense patterns) over repeat exposure because high-arousal-potential designs are expected to become increasingly irritating. These predictions are misguided, however, falsely leading consumers to avoid products with high-arousal-potential designs when making a decision for extended product use. Seven studies test this conceptualization in the lab and in the field. The first five studies examine predicted liking for product designs of varying arousal potential levels over repeat exposure and how these intuitions influence product design preferences for long- (versus short-) term use. The last two studies then investigate the accuracy of these intuitions by directly comparing predicted versus experienced liking for product designs of varying arousal potential levels over repeat exposure. The studies reveal a systematic error in prediction whereby consumers overestimate satiation from high-arousal-potential product designs. Managerial and theoretical applications are discussed.
Competitive vs. Complementary Effects in Online Social Networks and News Consumption: A Natural Experiment
Catarina Sismeiro & Ammara Mahmood
Management Science, forthcoming
Abstract:
Using hourly traffic and readership data from a major news website, and taking advantage of a global Facebook outage, we study the relationship between social networks and online news consumption. More specifically, we test if online social networks compete with content providers or instead play a complementary role by promoting and attracting traffic to external websites. During the outage, consistent with a promotional effect, we observe a significant decrease in traffic and unique visitors to the news website lasting beyond the outage hours. We further find that direct referrals from Facebook links grossly underestimated the actual impact of Facebook in generating traffic. Instead, during the outage, we observe a more significant reduction in visitors arriving at the news website from search engines or directly typing the website URL or using bookmarks. Additionally, readership of articles and types of pages viewed also changed during the outage. Although we observe a drop in news consumption during the outage hours for all news categories, the subsequent news consumption differs across categories. Time sensitive categories like sports and local news see an increase in consumption, whereas news on women issues or health topics see a decrease. Analysis of individual-level visit and readership behavior during the outage also reveals that Facebook not only introduces selectivity bias by attracting shallower readers but also changes readership patterns (in the absence of Facebook, visitors engage in more in-depth reading). To test the generalizability of our results, we study the impact of the outage on referrals from other social media outlets, on other news sites, and on other content and e-commerce sites. We find similar effects on other news providers, whereas data from nonnews sites, including e-commerce, show no major outage effects. Overall, our results have important managerial implications. We highlight how our results unearth the importance of search engine optimization and of strong branding for news websites, if providers want to harness fully the power of their social media presence.
In-Store Spending Dynamics: How Budgets Invert Relative Spending Patterns
Daniel Sheehan & Koert Van Ittersum
Journal of Consumer Research, forthcoming
Abstract:
The authors conduct four controlled lab experiments and one field study in a brick-and-mortar grocery store to demonstrate that relative spending - the price of the purchased item relative to the mean price of the product category - evolves nonlinearly and distinctly for budget and nonbudget shoppers. While the relative spending of budget shoppers evolves in a concave manner, the relative spending of nonbudget shoppers evolves inversely in a convex manner. As such, budget (nonbudget) shoppers spend relatively more (less) in the middle than at the beginning and towards the end of their shopping trip. Mediation analyses confirm that the pain of paying experienced while shopping drives price salience which then drives relative spending. Moreover, manipulating shoppers' pain of paying, by altering the opportunity costs associated with their spending or drawing shoppers' attention to their spending via real-time spending feedback, is shown to influence these spending patterns. The research offers theoretical contributions to the in-store decision-making, budgeting, and pain of paying literature and has important implications for marketing and promotion strategies in retail and mobile technology environments, as it suggests when a shopper may be more sensitive to price-related factors.
Investor Behavior and the Benefits of Direct Stock Ownership
Darren Bernard, Nicole Cade & Frank Hodge
Journal of Accounting Research, forthcoming
Abstract:
Using an experiment to rule out reverse causality, we examine whether a small investment in a company's stock leads investors to purchase more of the company's products and adopt other views and preferences that benefit the company. We pre-register our research methods, hypotheses, and supplemental analyses via the Journal of Accounting Research's registration based editorial process. We find little evidence consistent with these hypotheses for the average investor in our sample using our planned univariate hypothesis tests, and planned Bayesian parameter estimation shows substantial downward belief revision for more optimistic ex ante expectations of the treatment effects. In planned supplemental analyses, however, we do find that the effects of ownership on product purchase behavior and on regulatory preferences are intuitively stronger for certain subgroups of investors - namely, for investors who are most likely to purchase the types of products offered by the company and for investors who are most likely to vote on political matters. The results contribute to our understanding of the benefits of direct stock ownership and are informative to public company managers and directors.
The Effects of Autoscaling in Cloud Computing
Amir Fazli, Amin Sayedi & Jeffrey Shulman
Management Science, forthcoming
Abstract:
Web-based firms often rely on cloud-based computational resources to serve customers, but the number of customers they will serve is rarely known at the time of product launch. A recent innovation in cloud computing, known as autoscaling, allows companies to automatically scale their computational load up or down to match customer demand. We build a game theory model to examine how autoscaling will affect firms' decisions to enter a new market and the resulting equilibrium prices, profitability, and consumer surplus. The model produces novel results depending on the likelihood of a firm's success in the new market, differentiation among potential entrants, and the cost of computational capacity. For instance, in contrast to previous capacity commitment models with demand certainty, we show that autoscaling can mitigate price competition if the likelihood of a firm's success in the market is moderate and the cost of capacity is sufficiently low. This is because without autoscaling, the firms' uncertainty about demand would lead to excessive computational capacities and thus aggressive price competition. We also find that when the likelihood of success is sufficiently high, autoscaling facilitates entry for one firm yet deters a second firm from simultaneously entering the market.
Implications of Market Spillovers
Amir Fazli & Jeffrey Shulman
Management Science, forthcoming
Abstract:
In recent years, several firms have decided to withdraw from profitable markets, believing the move will be beneficial for their overall business. For instance, CVS dropped tobacco products from its shelves in 2014, while Aldi dropped confectionery from its checkout lines in 2016. Findings from consumers' evaluation of such moves suggest there exists a negative market spillover from selling in a market, such that a firm's participation in one market reduces consumers' willingness to pay for the firm's products in other markets. On the other hand, certain socially favorable markets, such as markets for environment-friendly products, have been shown to create a positive market spillover for their sellers, increasing consumers' willingness to pay in other markets the sellers participate in. We build an analytical model of two competing firms to examine how firms react to a market spillover and find the conditions under which different firms would sell in the spillover-producing market. Our analysis of how firms' profits are affected by market spillovers identifies the consumers' reservation value in the spillover-producing market, the relative size of the two markets, and the extent of the market spillover as key factors determining which firms benefit from a market spillover. Interestingly, we find it is possible for both firms to make more profit with a negative market spillover compared to when there is no market spillover, while a positive market spillover can actually result in lower profits for both firms compared to no market spillover.
Advertising Content and Consumer Engagement on Social Media: Evidence from Facebook
Dokyun Lee, Kartik Hosanagar & Harikesh Nair
Management Science, forthcoming
Abstract:
We describe the effect of social media advertising content on customer engagement using data from Facebook. We content-code 106,316 Facebook messages across 782 companies, using a combination of Amazon Mechanical Turk and natural language processing algorithms. We use this data set to study the association of various kinds of social media marketing content with user engagement-defined as Likes, comments, shares, and click-throughs-with the messages. We find that inclusion of widely used content related to brand personality - like humor and emotion - is associated with higher levels of consumer engagement (Likes, comments, shares) with a message. We find that directly informative content - like mentions of price and deals - is associated with lower levels of engagement when included in messages in isolation, but higher engagement levels when provided in combination with brand personality-related attributes. Also, certain directly informative content, such as deals and promotions, drive consumers' path to conversion (click-throughs). These results persist after incorporating corrections for the nonrandom targeting of Facebook's EdgeRank (News Feed) algorithm and so reflect more closely user reaction to content than Facebook's behavioral targeting. Our results suggest that there are benefits to content engineering that combines informative characteristics that help in obtaining immediate leads (via improved click-throughs) with brand personality-related content that helps in maintaining future reach and branding on the social media site (via improved engagement). These results inform content design strategies. Separately, the methodology we apply to content-code text is useful for future studies utilizing unstructured data such as advertising content or product reviews.