Winning
Manuel Ammann, Philipp Horsch & David Oesch
Management Science, forthcoming
Abstract:
This paper investigates the effect of superstar chief executive officers (CEOs) on their competitors. Exploiting shocks to CEO status due to prestigious media awards, we document a significant positive stock market performance of competitors of superstar CEOs subsequent to the award. The effect is more pronounced for competitors who have not received an award themselves, who are geographically close to an award winner, and who are not entrenched. We observe an increase in risk taking, operating performance, and innovation activity of superstars' competitors as potential channels for this positive performance. Our results suggest a positive overall welfare impact of corporate superstar systems due to the incentivizing effect on superstars' competitors.
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Saim Kashmiri & Vijay Mahajan
Journal of Marketing Research, forthcoming
Abstract:
This research examines the influence of CEOs' political ideologies, specifically their degree of political liberalism (i.e., support for the Democratic Party relative to the Republican Party), on firms' innovation propensity (i.e., rate of new product introductions).The authors propose that CEOs' degree of political liberalism positively impacts their firms' rate of new product introductions (NPIs). This impact is weakened, however, when CEOs have low power, when a high proportion of their compensation comes from equity, when the marketing department has high influence in the top management team, and when the economy is growing. Liberal CEOs' greater rate of NPIs is associated with superior Tobin's q, but also higher stock return volatility. Findings based on observing 421 publicly listed U.S. firms between 2006-2010 provide considerable support for the authors' hypotheses. The authors also examine changes in firms' rate of NPIs and performance around CEO turnovers and find corroborating evidence for their thesis. These results highlight the role of executives' personal values in shaping firms' innovation strategy, and the risks and rewards associated with aggressive new product introductions.
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Red, Blue, and Purple Firms: Organizational Political Ideology and Corporate Social Responsibility
Abhinav Gupta, Forrest Briscoe & Donald Hambrick
Strategic Management Journal, forthcoming
Abstract:
Why do firms vary so much in their stances toward corporate social responsibility (CSR)? Prior research has emphasized the role of external pressures, as well as CEO preferences, while little attention has been paid to the possibility that CSR may also stem from prevailing beliefs among the body politic of the firm. We introduce the concept of organizational political ideology to explain how political beliefs of organizational members shape corporate advances in CSR. Using a novel measure based on the political contributions by employees of Fortune 500 firms, we find that ideology predicts advances in CSR. This effect appears stronger when CSR is rare in the firm's industry, when firms are high in human capital intensity, and when the CEO has had long organizational tenure.
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How Targeting Affects Customer Search: A Field Experiment
Nathan Fong
Management Science, forthcoming
Abstract:
It has become common practice for retailers to personalize direct marketing efforts based on customer transaction histories as a tactic to increase sales. Targeted email offers featuring products in the same category as a customer's previous purchases generate higher purchase rates. However, a targeted offer emphasizing familiar products could result in curtailed search for unadvertised products, as a closely matched offer weakens a customer's incentives to search beyond the targeted items. In a field experiment using email offers sent by an online wine retailer, targeted offers resulted in decreased search activity on the retailer's website. This effect is driven by a lower rate of search by customers who visit the site, rather than a lower incidence of search. There are several ways this could potentially hurt retailers and consumers, such as reduced cross-selling and fewer opportunities for customers to explore new products.
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Tatiana Fajardo & Claudia Townsend
Journal of Consumer Psychology, July 2016, Pages 426-434
Abstract:
This research demonstrates that a marketing claim placed on a package is more believable than a marketing claim placed in an advertisement. In three studies, we show that the benefit of greater believability for packages is driven by perceptions of proximity. In general, consumers perceive packages, and thus the claims they offer, as closer to the product than ads and their respective claims. This perception of greater claim-to-product proximity is likely to make a claim seem more verifiable. Therefore, claim-to-product proximity is taken as a signal of the marketers' credibility, decreasing inferences of manipulative intent and thereby increasing claim believability and purchase likelihood.
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Fee or Free: When Should Firms Charge for Online Content?
Anja Lambrecht & Kanishka Misra
Management Science, forthcoming
Abstract:
Many online content providers aim to compensate for a loss in advertising revenues by charging consumers for access to content. However, such a choice is not straightforward because subscription fees typically deter customers, and a resulting decline in viewership further reduces advertising revenues. This research examines whether firms that offer both free and paid content can benefit from adjusting the amount of content offered for free. We find that firms should offer more free - and not paid - content in periods of high demand. We motivate theoretically that this policy, which we term "countercyclical offering," may be optimal for firms when consumers are heterogeneous in their valuation of online content and this heterogeneity varies over time. Using unique data from an online content provider, we then provide empirical evidence that firms indeed engage in countercyclical offering and increase the share of free content in periods of high demand.
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The effects of promotions on hedonic versus utilitarian purchases
Ran Kivetz & Yuhuang Zheng
Journal of Consumer Psychology, forthcoming
Abstract:
Because it is harder to justify hedonic purchases than utilitarian purchases, it is proposed that promotions will have a stronger positive effect on the purchase likelihood of hedonic than utilitarian products. This and related propositions are tested in multiple studies using a variety of product categories and promotions. The results demonstrate that promotions are more effective in driving purchase decisions when: (a) the product is hedonic rather than utilitarian; (b) the product is framed as more hedonic; and (c) the consumer has a hedonic rather than utilitarian consumption goal. Consistent with our conceptualization, the enhanced impact of promotions on hedonic purchases is attenuated when: (a) the hedonic product is intended as a gift for others; (b) consumers can construct justifications for their purchase ahead of time; (c) consumers are not accountable for their decisions; and (d) the promotion is contingent on purchasing additional product units (i.e., a quantity discount like "Buy 10, get 50% off"). Importantly, the present research reconciles and explains the seemingly inconsistent prior findings regarding the effects of price versus quantity promotions.
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Is Top 10 Better than Top 9? The Role of Expectations in Consumer Response to Imprecise Rank Claims
Mathew Isaac, Aaron Brough & Kent Grayson
Journal of Marketing Research, June 2016, Pages 338-353
Abstract:
Many marketing communications are carefully designed to cast a brand in its most favorable light. For example, marketers may prefer to highlight a brand's membership in the top 10 tier of a third-party list instead of disclosing the brand's exact rank. The authors propose that when marketers use these types of imprecise advertising claims, subtle differences in the selection of a tier boundary (e.g., top 9 vs. top 10) can influence consumers' evaluations and willingness to pay. Specifically, the authors find a comfort tier effect in which a weaker claim that references a less exclusive but commonly used tier boundary can actually lead to higher brand evaluations than a stronger claim that references a more exclusive but less common tier boundary. This effect is attributed to a two-stage process by which consumers evaluate imprecise rank claims. The results demonstrate that consumers have specific expectations for how messages are constructed in marketing communications and may make negative inferences about a brand when these expectations are violated, thus attenuating the positive effect such claims might otherwise have on consumer responses.
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Returns to Consumer Search: Evidence from eBay
Thomas Blake, Chris Nosko & Steven Tadelis
NBER Working Paper, June 2016
Abstract:
A growing body of empirical literature finds that consumers are relatively limited in how much they search over product characteristics. We assemble a dataset of search and purchase behavior from eBay to quantify the returns, and thus implied costs, to consumer search on the internet. The extensive nature of the eBay data allows us to examine a rich and detailed set of questions related to search in a way that previous structural models cannot. In contrast to the literature, we find that consumers search a lot: on average 36 times per purchase over 3 (distinct) days, with most sessions ending in no purchase. We find that search costs are relatively low, in the region of 25 cents per search page. We pursue the analysis further by, i) examining how users refine their search, ii) how search behavior spans multiple search sessions, and iii) how the amount of search relates to finding lower prices.
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What are likes worth? A Facebook page field experiment
Daniel Mochon et al.
Journal of Marketing Research, forthcoming
Abstract:
Despite the tremendous resources devoted to marketing on Facebook, little is known about its actual effect on customers. Specifically, can Facebook page likes affect offline customer behavior, and if so how? To answer these questions, the authors conducted a field experiment on acquired Facebook page likes and found them to have a positive causal effect on offline customer behavior. Importantly, these likes were most effective when the Facebook page was used as a platform for firm initiated promotional communications. There was no effect of acquired page likes when customers interacted organically with the firm's page, but a significant effect when the firm paid to boost its page posts, and thus used its Facebook page as a platform for paid advertising. These results demonstrate the value of likes beyond Facebook activity itself and highlight the conditions under which acquiring likes is most valuable for firms.
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Sunny Jung Kim & Jeffrey Hancock
Communication Research, forthcoming
Abstract:
Advertorials - advertisements camouflaged as editorial material - are a pervasive advertising strategy. Presentational features of advertorials, such as a small or omitted advertisement label and useful information presented in an editorial format prior to promoting a product, are likely to give impressions to readers that the reading material is a useful resource rather than advertising material. We examined the cognitive and persuasive effects of health product-related advertorials based on a schema-laden information processing model framework. Study 1 (n = 337) found that advertorials were less likely to trigger advertising schema, especially consumer awareness of persuasive intent. Study 2 (n = 336) found that the structure presenting useful information before advertising a related product decreased consumer skepticism. Overall, readers exhibited more positive attitudes toward advertorials than they did toward traditional advertisements due to decreased awareness of persuasive intent (Study 1) and advertorials' structure (Study 2), which, in turn, increased willingness to purchase advertised products.
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Keeping Your Enemies Closer: When Market Entry as an Alliance with Your Competitor Makes Sense
Jeffrey Cai & Jagmohan Raju
Marketing Science, forthcoming
Abstract:
We present an analytical framework of multimarket competition and supporting empirical analysis to explain why and when competing firms in an existing market may prefer an alliance entry over independent entry into a new market. Our findings suggest that an alliance entry is more profitable than an independent entry (i) when the new market is larger relative to the existing market, and (ii) when the competition in the existing market is stronger relative to the new market. We compare these key predictions with archival data from the regional shopping center industry in the United States and find that instances of alliance formation in this industry are consistent with our model-based predictions.
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Designed to Succeed: Dimensions of Product Design and Their Impact on Market Share
Rupinder Jindal et al.
Journal of Marketing, forthcoming
Abstract:
This research examines the relationship between product design and market share: a topic of considerable significance that has not been addressed in the published literature. Drawing from diverse disciplines such as marketing, industrial design, and engineering, authors conceptualize design as being composed of three distinct product-level dimensions - function, form, and ergonomics. Furthermore, the authors examine the interplay among these design dimensions and their impact on the market share of a product. Empirical results using integrated repeated cross-sectional data obtained from several different sources in the U.S. light vehicle industry reveal an important strategic trade-off concerning design capabilities. Firms can either design for satisfaction by investing in both function and ergonomics, or design for delight by investing in form design capabilities so as to reap share rewards. Authors also show that older generation vehicles with superior form designs do much better in terms of share than corresponding generation vehicles with higher levels of either function or ergonomics. Implications of these results for academic researchers and managers are discussed.