Worth the Price
Mass-scale emotionality reveals human behaviour and marketplace success
Matthew Rocklage, Derek Rucker & Loran Nordgren
Nature Human Behaviour, forthcoming
Abstract:
Online reviews promise to provide people with immediate access to the wisdom of the crowds. Yet, half of all reviews on Amazon and Yelp provide the most positive rating possible, despite human behaviour being substantially more varied in nature. We term the challenge of discerning success within this sea of positive ratings the ‘positivity problem’. Positivity, however, is only one facet of individuals’ opinions. We propose that one solution to the positivity problem lies with the emotionality of people’s opinions. Using computational linguistics, we predict the box office revenue of nearly 2,400 movies, sales of 1.6 million books, new brand followers across two years of Super Bowl commercials, and real-world reservations at over 1,000 restaurants. Whereas star ratings are an unreliable predictor of success, emotionality from the very same reviews offers a consistent diagnostic signal. More emotional language was associated with more subsequent success.
When to Use Markets, Lines, and Lotteries: How Beliefs About Preferences Shape Beliefs About Allocation
Franklin Shaddy & Anuj Shah
Journal of Marketing, forthcoming
Abstract:
When allocating scarce goods and services, firms often either prioritize those willing to spend the most resources (e.g., money, in the case of markets; time, in the case of lines), or they simply ignore such differences and allocate randomly (e.g., through lotteries). When do these resource-based allocation rules seem most appropriate, and why? Here, we propose people are more likely to endorse markets and lines when these systems increase the likelihood that scarce goods and services go to those who have the strongest preferences — that is, when they help sort preferences. And this is most feasible when preferences are dissimilar (i.e., some consumers want something much more than others). Consequently, people are naturally attuned to preference variance: When preferences for something are similar, markets and lines seem less appropriate, because it is unlikely that the highest bidders or those who have waited the longest actually have the strongest preferences. However, when preferences are dissimilar, markets and lines seem more appropriate, because they can more easily sort preferences. Consumers thus react negatively when firms use resource-based allocation rules in situations where preferences cannot be easily sorted (e.g., when preferences are similar).
Syntax and the Illusion of Fit: How Grammatical Subject Influences Persuasion
Massimiliano Ostinelli & David Luna
Journal of Consumer Research, forthcoming
Abstract:
We examine how the grammatical subject of a marketing claim affects persuasion. We refer to this phenomenon as the subject bias and introduce the distinction between users subjects (where product users are the grammatical subject of a sentence) and product subjects (where the product is the grammatical subject of the sentence). We find that users subjects can lead to an illusion of fit, where a reader believes that an offer provides a better fit for oneself than for other consumers, which, in turn, affects persuasion. Eight experiments, including a field study, provide support for the subject bias in different domains, ranging from online dating services to medical products, and uncover the underlying process along with its boundary conditions while ruling out alternative explanations. These findings advance the understanding of the antecedents and consequences of idiosyncratic fit and introduce a novel language effect in consumer research that has theoretical, methodological, and practical implications.
An Empirical Bargaining Model with Left-Digit Bias: A Study on Auto Loan Monthly Payments
Zhenling Jiang
Management Science, forthcoming
Abstract:
This paper studies price bargaining when both parties have left-digit bias when processing numbers. The empirical analysis focuses on the auto finance market in the United States, using a large data set of 35 million auto loans. Incorporating left-digit bias in bargaining is motivated by several intriguing observations. The scheduled monthly payments of auto loans bunch at both $9- and $0-ending digits, especially over $100 marks. In addition, $9-ending loans carry a higher interest rate, and $0-ending loans have a lower interest rate. We develop a Nash bargaining model that allows for left-digit bias from both consumers and finance managers of auto dealers. Results suggest that both parties are subject to this basic human bias: the perceived difference between $9- and the next $0-ending payments is larger than $1, especially between $99- and $00-ending payments. The proposed model can explain the phenomena of payments bunching and differential interest rates for loans with different ending digits. We use counterfactuals to show a nuanced impact of left-digit bias, which can both increase and decrease the payments. Overall, bias from both sides leads to a $33 increase in average payment per loan compared with a benchmark case with no bias.
The Control–Effort Trade-Off in Participative Pricing: How Easing Pricing Decisions Enhances Purchase Outcomes
Cindy Xin Wang, Joshua Beck & Hong Yuan
Journal of Marketing, forthcoming
Abstract:
Participative pricing strategies may influence consumer purchase decisions; this research proposes specifically that firms’ delegation of pricing decisions to consumers can create a control–effort trade-off. Consumers favor greater pricing control but are deterred by the effort involved in deciding what to pay. Strategies such as pay what you want in turn might reduce purchase intentions due to the effort involved. In contrast, strategies that increase feelings of control but not perceived effort, such as pick your price options that let consumers choose from a limited set of prices, could enhance pricing outcomes. A field study and four laboratory experiments confirm these propositions. The findings demonstrate the mixed effects of participative pricing, identify mediating mechanisms that explain these effects, and specify common moderating conditions that shape the outcomes of participative pricing. These results have notable implications for pricing theory and practice.
Consumer Stigma and the Reputation Trap Hypothesis: An In-Store Experiment with Colorado Wines
Marco Costanigro & Becca Jablonski
Journal of Wine Economics, forthcoming
Abstract:
We conducted an in-store experiment to test the hypothesis that Colorado wines may suffer from reputational stigma. The context relates to marketing challenges faced by novel wine regions entering the competitive retail environment, even in a local context, and the possibility of being stuck in a “bad reputation trap.” Adopting a 2×2 design where we varied region of production (Colorado vs. California) and grape variety (familiar vs. unfamiliar), we administered a between-subject information treatment that revealed the origin of production to only half of the participants. We measured taste perceptions using Likert scales, and we elicited valuation via a multiple price listing. Our results are consistent with the presence of stigma against wines produced in Colorado. In the discussion, we draw from the literature on stigmatized markets to suggest plausible strategies to remove or avoid stigma.