Showing papers in "Marketing Letters in 2012"

Beyond nudges: Tools of a choice architecture

Abstract: The way a choice is presented influences what a decision-maker chooses. This paper outlines the tools available to choice architects, that is anyone who present people with choices. We divide these tools into two categories: those used in structuring the choice task and those used in describing the choice options. Tools for structuring the choice task address the idea of what to present to decision-makers, and tools for describing the choice options address the idea of how to present it. We discuss implementation issues in using choice architecture tools, including individual differences and errors in evaluation of choice outcomes. Finally, this paper presents a few applications that illustrate the positive effect choice architecture can have on real-world decisions.

Understanding consumers’ multichannel choices across the different stages of the buying process

Abstract: This article provides a more integrative approach toward channel choice than previous research by considering all stages of the buying process (search, purchase, and after-sales), and by taking channel attributes, experience, and spillover effects into account when examining consumers’ channel choice intentions. The authors show that such an integrative perspective is important as channel attributes, experience, and spillover matter for consumers’ channel choices in all stages of the buying process. Notably, the study stresses the importance of channel experience and spillover effects for explaining consumers’ channel choice intentions in the different stages of the buying process. Channel experience effects occur when using the channel increases the likelihood that the consumer will use the very same channel on the next occasion. Spillover effects result when the likelihood of using a channel in one stage of the buying process affects the likelihood of choosing that channel in another stage. The results show that both effects influence consumers’ channel choice intentions over and above channel attributes. Importantly, the model results strongly pledge for studying attribute, experience, and spillover effects simultaneously.

Decision neuroscience and consumer decision making

Abstract: This article proposes that neuroscience can shape future theory and models in consumer decision making and suggests ways that neuroscience methods can be used in decision-making research. The article argues that neuroscience facilitates better theory development and empirical testing by considering the physiological context and the role of constructs such as hunger, stress, and social influence on consumer choice and preferences. Neuroscience can also provide new explanations for different sources of heterogeneity within and across populations, suggest novel hypotheses with respect to choices and underlying mechanisms that accord with an understanding of biology, and allow for the use of neural data to make better predictions about consumer behavior. The article suggests that despite some challenges associated with incorporating neuroscience into research on consumer decision processes, the use of neuroscience paradigms will produce a deeper understanding of decision making that can lead to the development of more effective decision aids and interventions.

A new C-OAR-SE-based content-valid and predictively valid measure that distinguishes brand love from brand liking

Abstract: This article provides a new, C-OAR-SE-based, contrastive measure that distinguishes “brand love” from “brand liking.” The new measure is tested in an empirical study conducted among German university students about brands of products that they buy in four diverse product categories. From a consumer perspective, the incidence of consumers who have a loved brand in the category was found to be only 17 % for laundry detergent, 18 % for coffee, and 26 % for computers, peaking at 45 % in the fashion clothing category — findings that suggest that over half of young consumers do not acquire the state of brand love. Turning alternatively to a brand perspective, the findings indicate that, in general, about one in four of the brand’s customers will come to love the brand. Loving the brand, versus merely liking it, clearly pays off behaviorally — thereby demonstrating very good predictive validity for the new contrastive measure. Brand purchase or usage rate and brand recommendations were found to be approximately doubled for those who love the brand in comparison with those who merely like it.

The relationship between in-store marketing and observed sales for organic versus fair trade products

Abstract: To stimulate sales of sustainable products, such as organic and fair trade products, retailers need to know whether their in-store instruments effectively enhance market shares. This study uses sales data and a multilevel modeling approach to explain the market shares of sustainable products according to shelf layout factors, price level, price promotions, and consumer demographics. It argues that the effect of these variables differs between organic versus fair trade products, as buying motives might differ, organic buyers tend to be more loyal, and price is a more informative signal of quality for organic products. Results show that the number of facings has a positive relationship with the market share of fair trade brands, but not with the market share of organic brands. The same holds for the price difference with the leading brand, which is important for fair trade brands but not for organic brands. In contrast, an arrangement of the product category by brand is associated with higher market share for organic brands but not for fair trade brands. Additionally, placement at eye level and clustering of items benefits both types of sustainable brands, whereas they appear to be not very sensitive to price promotions. Finally, higher sales of sustainable products are found in areas where the customer base is older and has a higher education level.

How consumers use product reviews in the purchase decision process

Abstract: This paper uses individual level data to examine the influence of product reviews in different stages of the consumer’s purchase decision process. Specifically, a two-stage model consisting of consideration set formation and choice is posited, where the consumer can incorporate information from product reviews in each stage. The model is estimated using an online panel survey about hotel choice. We find that (1) consumers use product reviews more in the consideration set stage and less in the choice stage, (2) Bayesian updating of prior perceived quality better explains how consumers use product reviews compared to two competing updating methods, and (3) the monetary value of a unit increase in the mean of product reviews is computed. Our results suggest that managers should make product review information (their number, average, and variance) available from the beginning of the search process and encourage satisfied customers to write reviews.

Creating brand personality with brand names

Abstract: As the elemental building block of the brand, the brand name represents a potential starting point for creating brand personality. Drawing on theory and research from sound symbolism, this study investigates how brand names can be formed to create brand personality, as defined by Aaker's (1997) Brand Personality Scale. Results indicate that brand names with back vowels better create a Ruggedness personality, while brand names with front vowels better create Sophistication and Sincerity personalities.

It is all in the mix: The interactive effect of music tempo and mode on in-store sales

Abstract: Though practitioners have relied on tempo as a criterion to design in-store music, scant attention has been devoted to the mode of musical selections, and no consideration has been given to the potential for the interactive effects of low-level structural elements of music on actual retail sales. The current research reports a field experiment wherein the positive main effect of slow tempo on actual sales reported by Milliman (J Marketing 46 (3):86–91, 1982, J Cons Res 13 (2):286–289, 1986) is qualified by musical mode. A significant interaction between tempo and mode was evidenced, such that music in a major mode did not vary in effectiveness by tempo while music in a minor mode was significantly more effective when accompanied by a slow tempo. That is, the Milliman effect was eliminated for music in a major mode. Implications of our findings and directions for further research are discussed.

Price–quality relationship in the presence of asymmetric dynamic reference quality effects

Abstract: The purpose of this study is to examine the relationship between price and reference quality and their combined effect on profits. An analytical modeling approach aimed at solving the optimal solution for the profit maximization problem under these conditions is developed, enabling the exact path of the optimal price and quality over time to be depicted. Based on separating the effects of price and reference quality on demand, this analysis also provides insight into the contribution of these two effects to the steady-state solution through elasticities. Our results show that a monotonic inverse relationship exists between price and quality, such that a steady-state level is obtained where the quality–price ratio is lower when reference quality effects exist than when such effects do not exist. In other words, consumers obtain higher quality for a higher price but with a lower price per unit of quality. Overall, accounting for reference quality effects will increase a firm’s profits.

Process and context in choice models

Abstract: We develop a general framework that extends choice models by including an explicit representation of the process and context of decision making. Process refers to the steps involved in decision making. Context refers to factors affecting the process, focusing in this paper on social networks. The extended choice framework includes more behavioral richness through the explicit representation of the planning process preceding an action and its dynamics and the effects of context (family, friends, and market) on the process leading to a choice, as well as the inclusion of new types of subjective data in choice models. We discuss the key issues involved in applying the extended framework, focusing on richer data requirements, theories, and models, and present three partial demonstrations of the proposed framework. Future research challenges include the development of more comprehensive empirical tests of the extended modeling framework.

Building consumer self-control: The effect of self-control exercises on impulse buying urges

Abstract: In this research, the effects of self-control exercises on impulse buying urges are examined. Drawing on the strength model of self-control (Baumeister and Heatherton 1996, Psychological Inquiry 7:1–15), the present paper aims to shed light on impulsive buying by exploring the impact of enhancement of self-control as a result of repeated physical and cognitive self-control exercises over time. The findings showed that these self-control exercises reduced impulse buying urges. Directions for future research are discussed.

When counterfeits raise the appeal of luxury brands

Abstract: Counterfeiting is a widespread practice throughout the world. The conventional wisdom is that it affects branded goods negatively. In this paper, however, we suggest that counterfeiting may actually benefit certain luxury brands. By means of two studies, we show how the market presence of luxury counterfeit items can increase consumers’ willingness to pay for original brands. In Study 1, we show that the presence of luxury counterfeits can increase consumers’ willingness to pay for well-known original brands, but not for lesser-known ones. Brand awareness plays a moderating role in the positive relationship between counterfeiting and willingness to pay (WTP). In Study 2, we address the psychological mechanisms that explain this increased willingness to pay. The results show that consumers’ (a) pleasure at being envied, (b) pleasure in distinguishing themselves, and (c) perception of the quality of the original goods fully mediate the relation between the presence of counterfeit in the market and consumers’ WTP for originals. We subsequently discuss the theoretical and managerial implications of the two study results.

Behavioral models of managerial decision-making

Abstract: This paper reviews the literature that applies behavioral economic models to managerial decisions. It organizes the literature into research that focuses on alternative utility functions and research that focuses on non-equilibrium models. Generally, behavioral models have seen less application to manager decisions than to consumer decisions and therefore there are many opportunities to develop new theoretical models, new laboratory experiments, and new field applications. The application of these models to field data is particularly underdeveloped.

Visual art in advertising: The effects of utilitarian vs. hedonic product positioning and price information

Abstract: Recent research has reported that visual artwork used in advertisements or on product packaging affects perceptions of luxury and contributes positively to attitudes toward products. Thus, the use of visual artwork has been recommended to promote products. We investigated the effect of artwork on purchase intentions and identified a co-occurring negative effect via perceptions of expensiveness. Our research indicates that the sign of the overall effect of artwork depends on two moderators. The positive effect via perceptions of luxury exists only for hedonic products but not for utilitarian ones. The negative effect via perceptions of expensiveness only appears when information about the product’s price is not provided to the consumer. Based on our findings, we recommend using art only for hedonic products for which the prices are known.

Make me special: Gender differences in consumers’ responses to loyalty programs

Abstract: Current literature on loyalty programs emphasizes the importance of psychological rewards and special treatment. However, it is not clear if male and female customers respond to these incentives in a similar way. We explore the differential effect for female versus male consumers of two psychological rewards that are provided through a loyalty program (a) high status (e.g., Gold membership), and (b) personalization, at different levels of visibility to other consumers. Across three experiments and a field study, we find a coherent pattern of gender differences in the way customers respond to different types of psychological rewards in the context of loyalty programs. The results show that men respond more positively than women to loyalty programs that emphasize status, but only when their higher status is highly visible to others. In contrast, women respond more positively than men to loyalty programs that emphasize personalization, but only for personalization in private settings. We discuss managerial implications for the design of loyalty programs.

Consumer Acceptance of the Mobile Internet

Abstract: Technological innovations are often designed to help consumers save time. However, some consumers refuse to use innovations and downgrade their usability with increasing usage time. The purpose of this research is to find out how consumers’ personality in younger (vs. older) men (vs. women) affects behavioral choices of the mobile Internet, as an example of new technology, and how usage time affects perceived ease of use of innovative (vs. established) media. The study shows that innovativeness, low desire for social contact, and technology optimism, in interaction with demographics, determine whether consumers choose mobile Internet services over substitutes. Job-related dependency on technology and gender directly affect choice behavior. The study reveals that ease of use is downgraded as more time is spent using the mobile Internet, whereas there is no such relation for established media. The results help explain overoptimistic forecasts that were made in the field of technology acceptance.

Spillover effects of ingredient branded strategies on brand choice: A field study

Abstract: Ingredient branding, or the use of two or more brand names on a single product, is widely seen as providing significant benefits in terms of increased product differentiation and greater market share. The association between two brand names can both enhance and dilute the brand equity of the host brand name and the ingredient brand name. This research examines the behavioral spillover effects associated with cobranded strategies across segments of consumers that vary in their prior brand commitment or loyalty. Different from previous research, this paper uses A.C. Nielsen scanner panel data to investigate the behavioral spillover effects of ingredient branded products on choice of the host and ingredient brands in a field setting. The results suggest that there is a significant behavioral spillover impact of trial of the cobranded product on the purchase probability of both the host and ingredient brands. This effect is greater among prior non-loyal users and prior non-users of the host and ingredient brands and when there is a higher degree of perceived fit between the host and ingredient brands.

The power of plain: Intensifying product experience with neutral aesthetic context

Abstract: Product packaging aesthetics can be the first observable signal of a product’s underlying traits. Two experimental studies examine the impact of package aesthetics on consumers’ evaluations of sensory hedonic products. The studies show that when paired with inferior or superior product quality, neutral package aesthetics can serve to intensify the negativity or positivity of product experience. Results indicate that surprise and disappointment mediate the relationship between package aesthetics and product evaluation. These findings provide evidence that an aesthetic, which serves to neutralize expectation states and in turn intensifies experience through contrast, may be as important of a contextual factor to consider as aesthetics that bias perceptions via a halo effect.

Product survival analysis for the App Store

Abstract: We empirically analyze both free and paid products on the top 100 Free and Grossing charts in the Korea App Store using Weibull parametric survival analysis on the product level. The findings are as follows: First, influences of ranking, customer ratings, and contents size on product survival are different for free and paid products. Customer ratings and contents size critically affect product survival when the price is zero. Second, the early entrant advantage exists in App Store, which results from a ranking system in the App Store and consumer learning. However, the effect of early entrant advantage differs between the Free and Grossing charts; the benefit of early entrant advantage is greater on the Free chart than that on the Grossing chart. Finally, we provide a competitive profit model that is related to free products.

The long-term box office performance of sequel movies

Abstract: With a 26-year-long database of nationally distributed movies, we estimate the prevalence and effectiveness of sequels over time, while controlling for other factors that might influence demand. In particular, we examine whether the effectiveness of a strategy increases over time (possibly due to managerial learning) or decreases (possibly because its effectiveness is competed away or because of consumer satiation). After taking into account both supply side and demand side effects by using simultaneous equations, we find that sequels have a positive effect indirectly (i.e., supply side effect) through a significantly larger number of theaters showing such movies compared to non-sequel movies. In terms of direct effect (i.e., demand side effect), sequels do better than non-sequels in generating more attendance in the first week and in total. Parent movies, the movies from which sequels originate, also do better than non-sequels in terms of total attendance and first-week attendance. Interestingly, sequel movies generate less total attendance than parent movies. On the other hand, sequels generate more revenues upfront than parents. We also find that the impact of sequels on first-week attendance has been increasing over time, but the number of sequels released has not. Our follow-up analysis suggests that one reason can be due to the higher (inflation-adjusted) production budget of a sequel than of the original (i.e., the parent) movie possibly leading to a decreasing gross margin for sequels within a movie franchise.

A tale of two marketplaces: Consumption restriction, social comparison, and life satisfaction

Abstract: Analysis with reports from more than 56,000 consumers across 38 countries reveals that social comparison (upward/downward) moderates the relationship between consumption restriction and life satisfaction. Specifically, insufficient access to goods and services combined with the likelihood of making upward social comparisons lowers life satisfaction—this negative consequence also is exacerbated by poverty. Most studies focus on wealthier consumers given importance of material abundance to affluent lifestyles; this investigation suggests that materialism also influences lives of impoverished consumers. Challenging our conventional wisdom, these results reveal that social comparisons are significantly more powerful determinants of life satisfaction for people in much poorer, developing societies than for people in more affluent societies. Specifically, compared to their affluent counterparts, impoverished consumers experience greater decreases in life satisfaction when their access to goods and services is lower than others within their societies.

Construal-level mind-sets and the perceived validity of marketing claims

Abstract: Prior research shows that the repetition of unfamiliar statements increases their subjective truthfulness. The present research shows that truth ratings can also be increased without repetition. Several different manipulations of low-construal-level mind-sets increased the perceived validity of a wide variety of marketing claims across a broad spectrum of products and industries. Mismatched construals reduced this effect. The results suggest that concrete construals enhance truth ratings when consumers focus on their intuitive feelings and impressions but not when they process marketing claims analytically.

Network-based market knowledge and product innovativeness

Abstract: An ongoing debate in marketing literature is whether market knowledge facilitates or impedes new product innovativeness. To reconcile inconsistent findings, this study disaggregates market knowledge into breadth and depth dimensions and uncovers their divergent effects on new product innovativeness. Given organizations’ increasing reliance on network contacts for access to market knowledge, we focus on market knowledge derived from external ties. Based on an empirical test of 244 firms in China, this study finds that market knowledge breadth has a U-shaped relationship, whereas market knowledge depth has an inverted U-shaped relationship, with product innovativeness. These findings carry important theoretical and managerial implications.

The boomerang effect of mandatory sanitary messages to prevent obesity

Abstract: A variety of prevention measures are being adopted to counter obesity. One of them is to include health sanitary messages on advertisements for food products. We tested the efficacy of this type of measure in an experimental study with 131 participants who were randomly exposed to an advertisement for a hedonic product containing or not a sanitary message. Implicit memory representations (priming protocol), explicit attitudes (questionnaire) and a behavioral measure of food choice (healthy versus unhealthy snack) were collected. Results showed that participants associated negative concepts more easily to the product when the advertisement was presented without the sanitary message, while there were no differences in the explicit attitudes. Moreover, the choice of a healthy snack doubled in the absence of sanitary message. Contrary to its objectives, the obesity prevention sanitary message fills in consumers’ need for justification leading to a greater acceptability of the advertised product and increased choice of an unhealthy snack.

Do real payments really matter? A re-examination of the compromise effect in hypothetical and binding choice settings

Abstract: Numerous empirical studies have confirmed the existence of the compromise effect, which stipulates that options positioned between extreme alternatives in a product space are perceived as more attractive, hence becoming more likely to be chosen by consumers. However, literature on the topic frequently addresses the limited realism of prior work due to the artificial designs that were used. In a laboratory-based replication study, we examine the compromise effect across several categories in a more market-like scenario, in which experienced consumers make unforced decisions between real brands. In particular, we investigate whether the compromise effect varies in strength across the choice settings, depending on whether a hypothetical choice setting or a binding setting (in which subjects face buying obligations in terms of real payments for products) has been applied. While our results prove the robustness of the compromise effect for both choice frames, its strength differs significantly. Specifically, the compromise effect is evidently not as strong when real payments are introduced in binding choice settings. In addition, analysis of moderating factors confirms that compromise effects are stronger for categories where subjects are more in agreement about the relative quality of the options.

The attraction effect is more pronounced for consumers who rely on intuitive reasoning

Abstract: According to the attraction effect, the addition of a decoy, or dominated, option to a choice set increases the relative choice share of the dominating option. This study shows that the attraction effect is more pronounced for consumers who rely heavily on intuitive reasoning in judgment and decision making. In contrast, the attraction effect is equally pronounced for consumers who rely more and those who rely less on rational thinking. Over 600 members of a national online consumer panel participated. The results highlight the importance of understanding individual differences in relation to context effects and choice behavior.

Novel versus familiar brands: An analysis of neurophysiology, response latency, and choice

Abstract: Two experiments were conducted to analyze neurophysiological activation, response latency, and actual brand choice concerning novel and familiar brands. The results show that (1) the choice of novel brands (compared to the choice of familiar brands) is preceded by increased activation of both the cingulate gyrus and the ventromedial prefrontal cortex, as measured by a functional magnetic resonance imaging (fMRI) study; (2) novel brands are associated with longer choice response latency than familiar brands; and (3) positive mood enhances response latency of choosing novel brands compared to familiar brands.

The relationship between online chatter and firm value

Abstract: The visible trace of online communications has given rise to research on their effect on firm outcomes. The literature has established a link between online communication about a product and the product’s sales and price performance. On the assumption that financial markets understand this link, we conjecture financial markets consider the amount of online communication, or chatter, about a firm to be an indication of the firm’s performance in the marketplace. Our results confirm this conjecture. The relationship between stock returns and chatter are robust to alternative specifications of the model and to alternative measures of stock returns. We also investigate the issues of reverse causality and omitted variable bias driving a spurious relationship between stock returns and chatter. The data are not consistent with any of these alternative explanations for our results.

Price discrimination in service industries

Abstract: This article outlines recent methods and applications directed at understanding the profit and consumer welfare implications of increasingly prevalent price discrimination strategies in the service sector. These industries are typically characterized by heterogeneity in consumers’ valuation and usage of the service, resale constraints, and a focus on price as the service’s key attribute. The article focuses on how firms use nonlinear pricing or bundling strategies to benefit from the heterogeneity in consumer demand. We describe the basic economic model commonly used in the literature to analyze such strategic choices and present recent methodological improvements to this benchmark. A discussion of existing applications and future research opportunities concludes the article.

Using discrete choice experiments to estimate willingness-to-pay intervals

Abstract: Willingness-to-pay has always been conceptualized as a point estimate, frequently as the price that makes the consumer indifferent between buying and not buying the product. In contrast, this article estimates willingness-to-pay (WTP) as an interval based on discrete choice experiments and a scale-adjusted latent-class model. The middle value of this interval corresponds to the traditional WTP point estimate and depends on the deterministic utility; the range of the interval depends on price sensitivity and the utility’s error variance (scale). With this conceptualization of WTP, we propose a new measure, the attractiveness index, which serves to identify attractive consumers by combining knowledge about their price sensitivities and error variances. An empirical study demonstrates that the attractiveness index identifies the most attractive consumers, who do not necessarily have the largest WTP point estimates. Furthermore, consumers with comparable preferences can differ in their purchase probability by an average of 16%, as reflected in differences in their WTP intervals, which yields implications for more customized target marketing.