Showing papers in "Marketing Science in 2007"

Zero as a Special Price: The True Value of Free Products

Abstract: When faced with a choice of selecting one of several available products or possibly buying nothing, according to standard theoretical perspectives, people will choose the option with the highest cost--benefit difference. However, we propose that decisions about free zero price products differ, in that people do not simply subtract costs from benefits but instead they perceive the benefits associated with free products as higher. We test this proposal by contrasting demand for two products across conditions that maintain the price difference between the goods, but vary the prices such that the cheaper good in the set is priced at either a low positive or zero price. In contrast with a standard cost--benefit perspective, in the zero-price condition, dramatically more participants choose the cheaper option, whereas dramatically fewer participants choose the more expensive option. Thus, people appear to act as if zero pricing of a good not only decreases its cost, but also adds to its benefits. After documenting this basic effect, we propose and test several psychological antecedents of the effect, including social norms, mapping difficulty, and affect. Affect emerges as the most likely account for the effect.

New Product Diffusion with Influentials and Imitators

Abstract: We model the diffusion of innovations in markets with two segments: influentials who are more in touch with new developments and who affect another segment of imitators whose own adoptions do not affect the influentials. This two-segment structure with asymmetric influence is consistent with several theories in sociology and diffusion research, as well as many “viral” or “network” marketing strategies. We have four main results. 1 Diffusion in a mixture of influentials and imitators can exhibit a dip or “chasm” between the early and later parts of the diffusion curve. 2 The proportion of adoptions stemming from influentials need not decrease monotonically, but may first decrease and then increase. 3 Erroneously specifying a mixed-influence model to a mixture process where influentials act independently from each other can generate systematic changes in the parameter values reported in earlier research. 4 Empirical analysis of 33 different data series indicates that the two-segment model fits better than the standard mixed-influence, the Gamma/Shifted Gompertz, and the Weibull-Gamma models, especially in cases where a two-segment structure is likely to exist. Also, the two-segment model fits about as well as the Karmeshu-Goswami mixed-influence model, in which the coefficients of innovation and imitation vary across potential adopters in a continuous fashion.

The Bright Side of Supplier Encroachment

Abstract: The common wisdom is that a retailer suffers when its wholesale supplier encroaches on the retailer's operations by selling directly to final consumers. We demonstrate that the retailer can benefit from encroachment even when encroachment admits no synergies and does not facilitate product differentiation or price discrimination. The retailer benefits because encroachment induces the encroaching supplier to reduce the wholesale price in order not to diminish unduly the retailer's demand for the manufacturer's wholesale product. The lower wholesale price and increased downstream competition mitigate double marginalization problems and promote efficiency gains that can secure Pareto improvements.

Mean-Centering Does Not Alleviate Collinearity Problems in Moderated Multiple Regression Models

Abstract: The cross-product term in moderated regression may be collinear with its constituent parts, making it difficult to detect main, simple, and interaction effects. The literature shows that mean-centering can reduce the covariance between the linear and the interaction terms, thereby suggesting that it reduces collinearity. We analytically prove that mean-centering neither changes the computational precision of parameters, the sampling accuracy of main effects, simple effects, interaction effects, nor the R2. We also show that the determinants of the cross product matrix X' X are identical for uncentered and mean-centered data, so the collinearity problem in the moderated regression is unchanged by mean-centering. Many empirical marketing researchers commonly mean-center their moderated regression data hoping that this will improve the precision of estimates from ill conditioned, collinear data, but unfortunately, this hope is futile. Therefore, researchers using moderated regression models should not mean-center in a specious attempt to mitigate collinearity between the linear and the interaction terms. Of course, researchers may wish to mean-center for interpretive purposes and other reasons.

The Impact of a Product-Harm Crisis on Marketing Effectiveness

Abstract: Product-harm crises are among a firm's worst nightmares. A firm may experience (i) a loss in baseline sales, (ii) a reduced own effectiveness for its marketing instruments, (iii) an increased cross sensitivity to rival firms' marketing-mix activities, and (iv) a decreased cross impact of its marketing-mix instruments on the sales of competing, unaffected brands. We find that this quadruple jeopardy materialized in a case study of an Australian product-harm crisis faced by Kraft peanut butter. We arrive at this conclusion by using a time-varying error-correction model that quantifies the consequences of this crisis on base sales, and on own-and cross-brand short-and long-term effectiveness. The proposed modeling approach allows managers to make more informed decisions on how to regain the brands' pre-crisis performance levels.

Embedded Premium Promotion: Why It Works and How to Make It More Effective

Abstract: In this paper we define an embedded premium EP as an enhancement that involves a social cause added on to a product or service. We characterize EP as a sales promotion strategy and juxtapose it with traditional approaches, such as discounts and rebates. Across three experiments, using a nationwide Internet panel and employing stated measures and model-based inference, we find that at low denominations EP is more effective than an equivalent price discount. We describe how an EP's social association may influence consumer choice quite differently than price promotions and, contrary to the asymmetric price promotion effect documented in the promotions literature, we find that EP benefits an unknown brand more than a known brand. Our hierarchical Bayes approach uncovers heterogeneity in EP effectiveness that can be explained by affinity toward the focal charity, personal motivations, and demographic markers. An identifiable segment of individuals prefer the “other” over “self,” suggesting possible EP optimization and segmentation strategies. Two such strategies, customization and coverage, are empirically tested, and the former is shown to be very effective. Our findings have broad implications for brand managers with regard to resource allocation and EP program return on investment ROI, as well as important social welfare implications.

Myopic Marketing Management: Evidence of the Phenomenon and Its Long-Term Performance Consequences in the SEO Context

Abstract: Managers often have incentives to artificially inflate current-term earnings by cutting marketing expenditures, even if it comes at the expense of long-term profits. Because investors rely on current-term accounting measures to form expectations of future-term profits, inflating current-term results can lead to enhanced current-term stock price. We present evidence that some firms engage in this type of “myopic marketing management” at the time of a seasoned equity offering (SEO). In particular, a greater proportion of firms than is typical report earnings higher than normal and marketing expenditures lower than normal at the time of their SEO. Although they realize that firms might be undertaking strategies to artificially inflate current-term earnings, the financial markets are not adequately identifying and properly valuing the firms doing so. Our results indicate that myopic firms are able to temporarily inflate their stock market valuation, but in the long run, as the consequences of cutting marketing spending become manifest, they have inferior stock market performance. We propose some actions that might reduce the incentives for myopic behavior.

The Influence of Product Variety on Brand Perception and Choice

Abstract: We propose that the variety a brand offers often serves as a quality cue and thus influences which brand consumers choose. Specifically, brands that offer a greater variety of options that appear compatible and require similar skills tend to be perceived as having greater category expertise or core competency in the category, which, in turn, enhances their perceived quality and purchase likelihood. Six studies support this proposition and demonstrate that compared to brands which offer fewer products, a brands which offer increased compatible variety are perceived as having higher quality; b this effect is mediated by product variety's impact on perceived expertise; c the higher perceived quality produces a greater choice share of the higher variety brand, even among consumers who select options that multiple brands offer and d product variety also impacts post-experience perceptions of taste. The findings suggest that in addition to directly affecting brand choice share through influencing the fit with consumer preferences, product line length can also indirectly affect brand choice through influencing perceived brand quality.

Wearout Effects of Different Advertising Themes: A Dynamic Bayesian Model of the Advertising-Sales Relationship

Abstract: Models of advertising response implicitly assume that the entire advertising budget is spent on disseminating one message. In practice, managers use different themes of advertising (for example, price advertisements versus product advertisements) and within each theme they employ different versions of an advertisement. In this study, we evaluate the dynamic effects of different themes of advertising that have been employed in a campaign. We develop a model that jointly considers the effects of wearout as well as that of forgetting in the context of an advertising campaign that employs five different advertising themes. We quantify the differential wearout effects across the different themes of advertising and examine the interaction effects between the different themes using a Bayesian dynamic linear model (DLM). Such a response model can help managers decide on the optimal allocation of resources across the portfolio of ads as well as better manage their scheduling. We develop a model to show how our response model parameters can be used to improve the effectiveness of advertising budget allocation across different themes. We find that a reallocation of resources across different themes according to our model results in a significant improvement in demand.

Modeling the Determinants and Effects of Creativity in Advertising

Abstract: Consumer perceptions of advertising creativity are investigated in a series of studies beginning with scale development and ending with comprehensive model testing. Results demonstrate that perceptions of ad creativity are determined by the interaction between divergence and relevance, and that overall creativity mediates their effects on consumer processing and response.

Product Line Design and Production Technology

Abstract: In this paper we characterize the impact of production technology on the optimal product line design. We analyze a problem in which a manufacturer segments the market on quality attributes and offers products that are partial substitutes. Because consumers self-select from the product line, product cannibalization is an issue. In addition, the manufacturer sets a production schedule in order to balance production setups with accumulation of inventories in the presence of economies of scale. We show that simultaneous optimization of the product line design and production schedule leads to insights that differ significantly from the common intuition and assertions in the literature, which omits either the demand side or the supply side of the equation. In particular, we demonstrate that more expensive production technology always leads to lower product prices and may at the same time lead to higher quality products. Further, a less efficient production technology does not necessarily increase total production costs or reduce consumer welfare. We also demonstrate that in the presence of production technology, the demand cannibalization problem may distort product quality upward or the number of products upward, which is contrary to the standard result.

The Value of Quality

Abstract: Product quality is probably undervalued by firms because there is little consensus about appropriate measures and methods to research quality. We suggest that published ratings of a product's quality are a valid source of quality information with important strategic and financial impact. We test this thesis by an event analysis of abnormal returns to stock prices of firms whose new products are evaluated in The Wall Street Journal. Quality has a strong immediate effect on abnormal returns, which is substantially higher than that for other marketing events assessed in prior studies. Moreover, there are some important asymmetries in the effect. We discuss the research, managerial, investing, and policy implications.

Strategic Manufacturer Response to a Dominant Retailer

Abstract: The growing dominance of large retailers has altered traditional channel incentives for manufacturers. In this paper, we present a theoretical model to illustrate a strategic manufacturer response to a dominant retailer. In our model, a dominant and a weak retailer compete for the sale of a single product supplied by a single manufacturer. The dominant retailer has the power to dictate the wholesale price, but the manufacturer sets the wholesale price for the weak retailer. The manufacturer also has partial ability to transfer demand between retailers. In the strategic manufacturer response, the manufacturer begins by raising the wholesale price for the weak retailer over that for the dominant retailer. This makes the weak retailer the high-margin channel. The manufacturer then transfers demand to the weak retailer by engaging in joint promotions and advertising. We then use this strategic response model to derive a testable hypothesis that may guide future research in determining the source of dominant retailers' low prices.

Product Positioning and Competition: The Role of Location in the Fast Food Industry

Abstract: This paper examines optimal product positioning strategies of asymmetric firms in the context of retail outlet locations in the fast food industry. The relationships between profits and product differentiation reveal that both McDonald's and Burger King are better off avoiding close competition if the market area is large enough. However, in small market areas, McDonald's would prefer to be located together with Burger King rather than have the two outlets be only a slight distance apart. In contrast, Burger King's profits always increase with greater differentiation. Offsetting these incentives is the desirability of locating centrally to appeal to the most customers. The equilibrium depends on the market's size. In small markets, McDonald's locates near the center of the market, and Burger King locates to the side of the market. In larger markets, McDonald's and Burger King choose locations on opposite sides of the market, although McDonald's locates closer to the optimal central location than Burger King. I also show that the role of price competition on product positioning is fundamentally different under asymmetric competition than under symmetric competition. Price competition unambiguously induces symmetric firms toward differentiation. In contrast, with asymmetric firms, price competition shifts Burger King's incentives toward locating closer to McDonald's, even while price competition increases McDonald's desire for differentiation. As a result, equilibrium locations with asymmetric firms are approximately the same, regardless of whether prices adjust with location.

Designing Price Contracts for Boundedly Rational Customers: Does the Number of Blocks Matter?

Abstract: When designing price contracts, one of the major questions confronting managers is how many blocks there should be in the contract. We investigate this question in the setting of a manufacturer-retailer dyad facing a linear deterministic consumer demand. Theoretical marketing models predict that the manufacturer's profits rise dramatically when the number of blocks in the contract is increased from one to two because both channel efficiency and its share of channel profits increase. However, increasing the number of blocks to three yields no incremental profits. We test these predictions experimentally and find that increasing the number of blocks from one to two raises channel efficiency but not the manufacturer's share of profits. Surprisingly, having three blocks in the contract increases channel efficiency even further and also gives the manufacturer a slightly higher share of profits. We show that these results can be explained by a quantal response equilibrium model in which the manufacturer accounts for noisy best response due to nonpecuniary payoff components in the retailer's utility. We also show that the retailer is sensitive to the counterfactual profits it could have earned if it were charged a lower marginal price for earlier blocks in the multiple-block contract.

Research Note: User Design of Customized Products

Abstract: User design offers tantalizing potential benefits to manufacturers and consumers, including a closer match of products to user preferences, which should result in a higher willingness to pay for goods and services. There are two fundamental approaches that can be taken to user design: parameter-based systems and needs-based systems. With parameter-based systems, users directly specify the values of design parameters of the product. With needs-based systems, users specify the relative importance of their needs, and an optimization algorithm recommends the combination of design parameters that is likely to maximize user utility. Through an experiment in the domain of consumer laptop computers, we show that for parameter-based systems, outcomes, including measures for comfort and fit, increase with the expertise of the user. We also show that for novices, the needs-based interface results in better outcomes than the parameter-based interface.

Does Uncertainty Matter? Consumer Behavior Under Three-Part Tariffs

Abstract: In communication, information, and other industries, three-part tariffs are increasingly popular A three-part tariff is defined by an access price, an allowance, and a marginal price for any usage in excess of the allowance Empirical nonlinear pricing studies have focused on consumer choice under two-part tariffs We show that consumer behavior differs under three-part tariffs and assess how consumer demand uncertainty impacts tariff choice We develop a discrete/continuous model of choice among three-part tariffs and estimate it using consumer-level data on Internet usage Our model extends prior work in accommodating consumer switching to competitors, thereby capturing behavior in competitive industries more accurately Our empirical work shows that demand uncertainty is a key driver of choice among three-part tariffs Consumers' expected bill increases with the variation in their usage, steering them toward tariffs with high allowances Consequently, demand uncertainty decreases consumer surplus and increases provider revenue A further analysis of consumers' responsiveness to the different elements of a three-part tariff under the provider's current pricing structure reveals that prices affect a consumer's tariff choice more than her usage quantity and that the allowance plays a strong role in consumer tariff choice Based on our results, we derive implications for pricing with three-part tariffs

Greedoid-Based Noncompensatory Inference

Abstract: Greedoid languages provide a basis to infer best-fitting noncompensatory decision rules from full-rank conjoint data or partial-rank data such as consider-then-rank, consider-only, or choice data. Potential decision rules include elimination by aspects, acceptance by aspects, lexicographic by features, and a mixed-rule lexicographic by aspects (LBA) that nests the other rules. We provide a dynamic program that makes estimation practical for a moderately large numbers of aspects. We test greedoid methods with applications to SmartPhones (339 respondents, both full-rank and consider-then-rank data) and computers (201 respondents from Lenk et al. 1996). We compare LBA to two compensatory benchmarks: hierarchical Bayes ranked logit (HBRL) and LINMAP. For each benchmark, we consider an unconstrained model and a model constrained so that aspects are truly compensatory. For both data sets, LBA predicts (new task) holdouts at least as well as compensatory methods for the majority of the respondents. LBA's relative predictive ability increases (ranks and choices) if the task is full rank rather than consider then rank. LBA's relative predictive ability does not change if (1) we allow respondents to presort profiles, or (2) we increase the number of profiles in a consider-then-rank task from 16 to 32. We examine trade-offs between effort and accuracy for the type of task and the number of profiles.

How Does Free Riding on Customer Service Affect Competition

Abstract: The free-riding problem occurs if the presales activities needed to sell a product can be conducted separately from the actual sale of the product. Intuitively, free riding should hurt the retailer that provides that service, but the author shows analytically that free riding benefits not only the free-riding retailer, but also the retailer that provides the service when customers are heterogeneous in terms of their opportunity costs for shopping. The service-providing retailer has a postservice advantage, because customers who have resolved their matching uncertainty through sales service incur zero marginal shopping cost if they purchase from the service-providing retailer rather than the free-riding retailer. Moreover, allowing free riding gives the free rider less incentive to compete with the service provider on price, because many customers eventually will switch to it due to their own free riding. In turn, this induced soft strategic response enables the service provider to charge a higher price and enjoy the strictly positive profit that otherwise would have been wiped away by head-to-head price competition. Therefore, allowing free riding can be regarded as a necessary mechanism that prevents an aggressive response from another retailer and reduces the intensity of price competition.

A Convex Optimization Approach to Modeling Consumer Heterogeneity in Conjoint Estimation

Abstract: We propose and test a new approach for modeling consumer heterogeneity in conjoint estimation based on convex optimization and statistical machine learning. We develop methods both for metric and choice data. Like hierarchical Bayes (HB), our methods shrink individual-level partworth estimates towards a population mean. However, while HB samples from a posterior distribution that is influenced by exogenous parameters (the parameters of the second-stage priors), we minimize a convex loss function that depends only on endogenous parameters. As a result, the amounts of shrinkage differ between the two approaches, leading to different estimation accuracies. In our comparisons, based on simulations as well as empirical data sets, the new approach overall outperforms standard HB (i.e., with relatively diffuse second-stage priors) both with metric and choice data.

Brand Effects on Choice and Choice Set Formation Under Uncertainty

Abstract: This paper examines the effects of brand credibility, a central concept in information economics--based approaches to brand effects and brand equity, on consumer choice and choice set formation. We investigate the mechanisms through which credibility effects materialize, namely, through perceived quality, perceived risk, and information costs saved. The credibility of a brand as a signal is defined as the believability of the product position information contained in a brand, which depends on consumer perceptions of the willingness and ability of firms to deliver what they have promised. The choice set is defined as the collection of brands that have a nonzero probability of being chosen among those actually available for choice in a given context. Furthermore, we study the impact of brand credibility on the variance of the stochastic component of utility. Not only do choice model parameters capture the impact of systematic utility differences on choice probabilities, but also the magnitude of this systematic impact is moderated by the relative importance of the stochastic utility component in preference. We term this moderation phenomenon preference discrimination, which we conceptualize as the decision makers' capacity to effectively discriminate between products' utilities in choice situations. We estimate a discrete choice model of brand choice set formation and preference discrimination on experimental data in two categories---juice and personal computers---and find strong evidence for brand credibility effects and differential mechanisms through which brand credibility's impact materializes on brand choice conditional on choice set, choice set formation, and preference discrimination.

Representation and Inference of Lexicographic Preference Models and Their Variants

Abstract: The authors propose two variants of lexicographic preference rules. They obtain the necessary and sufficient conditions under which a linear utility function represents a standard lexicographic rule, and each of the proposed variants, over a set of discrete attributes. They then: (i) characterize the measurement properties of the parameters in the representations; (ii) propose a nonmetric procedure for inferring each lexicographic rule from pairwise comparisons of multiattribute alternatives; (iii) describe a method for distinguishing among different lexicographic rules, and between lexicographic and linear preference models; and (iv) suggest how individual lexicographic rules can be combined to describe hierarchical market structures. The authors illustrate each of these aspects using data on personal-computer preferences. They find that two-thirds of the subjects in the sample use some kind of lexicographic rule. In contrast, only one in five subjects use a standard lexicographic rule. This suggests that lexicographic rules are more widely used by consumers than one might have thought in the absence of the lexicographic variants described in the paper. The authors report a simulation assessing the ability of the proposed inference procedure to distinguish among alternative lexicographic models, and between linear-compensatory and lexicographic models.

Cross-Market Network Effect with Asymmetric Customer Loyalty: Implications for Competitive Advantage

Abstract: A cross-market network effect exists in many industries (e.g., newspaper publishing, media, software) in which a seller sells both a primary and a secondary product (e.g., a newspaper publisher sells newspapers to readers and advertising space to advertisers), and the value of the secondary product depends on the size of the user base of the primary product. This paper examines the competitive implications of asymmetric customer loyalty in such markets. In traditional markets, an advantage in customer loyalty generates a profit advantage. We show here, however, that in the presence of a cross-market network effect, a midlevel of loyalty advantage in the primary product market can lead to an overall profit disadvantage. This surprising result is derived from the interdependence of the two markets, whereby a profit in one market may be gained at the cost of the other, and by the positive relationship between a larger loyalty segment and a higher opportunity cost of price competition in the product of the primary market. Extending our model to a two-period entry game also shows that under certain conditions, the entrant with disadvantage in customer loyalty can outperform the incumbent in profit and market share. This result suggests that asymmetry in customer loyalty can be a source of “first-mover” advantage or disadvantage.

A Comparison of Buyer-Determined and Price-Based Multiattribute Mechanisms

Abstract: Reverse auctions are fast becoming the standard for many procurement activities. In the past, the majority of such auctions have been solely price based, but increasingly attributes other than price affect the auction outcome. Specifically, the buyer uses a scoring function to compare bids and the bid with the highest score wins. We investigate two mechanisms commonly used for procurement in business-to-business markets, in a setting in which buyers' welfare is affected by exogenous nonprice attributes such as the quality, service, and past relationships. Under both mechanisms, bidders bid based on price, but in the “buyer-determined” mechanism, the buyer is free to select the bid that maximizes her surplus while in the “price-based” mechanism, the buyer commits to awarding the contract to the low price bidder. We find, both in theory and in the laboratory, that the “buyer-determined” mechanism increases the buyer's welfare only as long as enough suppliers compete. If the number of suppliers is small and the correlation between cost and quality is low, the buyer is better off with the “price-based” mechanism. These findings are intended to help procurement managers make better decisions in designing procurement mechanisms for a variety of settings.

Coupons Versus Rebates

Abstract: This paper examines a key difference between two promotional vehicles, coupons and rebates. Whereas coupons offer deals up front, with the purchase of the product, rebates can be redeemed only after purchase. When consumers experience uncertain redemption costs, this difference translates to a difference in when uncertainty is resolved. With coupons the uncertainty is resolved before purchase; with rebates the uncertainty is resolved after purchase. As a result, we show that rebates are more efficient in surplus extraction but coupons offer more finetuned control over whom to serve. We identify the conditions under which each is optimal, and these conditions turn on the gap between “low” reservation price consumers' valuations and their highest redemption costs. Rebates are optimal when this gap is large; coupons tend to be optimal otherwise. Risk aversity on the part of consumers reduces the attractiveness of rebates, as does the delay between rebate redemption and rebate payment, but the latter if and only if consumers are more impatient than the seller. These observations match up well with what we know about the use of these promotional vehicles in the real world.

When Do Price Thresholds Matter in Retail Categories

Abstract: Marketing literature has long recognized that brand price elasticity need not be monotonic and symmetric, but has yet to provide generalizable market-level insights on threshold-based price elasticity, asymmetric thresholds, and the sign and magnitude of elasticity transitions. This paper introduces smooth transition regression models to study threshold-based price elasticity of the top 4 brands across 20 fast-moving consumer good categories. Threshold-based price elasticity is found for 76% of all brands: 29% reflect historical benchmark prices, 16% reflect competitive benchmark prices, and 31% reflect both types of benchmarks. The authors demonstrate asymmetry for gains versus losses on three levels: the threshold size and the sign and the magnitude of the elasticity difference. Interestingly, they observe latitude of acceptance for gains compared to the historical benchmark, but saturation effects in most other cases. Moreover, category characteristics influence the extent and the nature of threshold-based price elasticity, while individual brand characteristics impact the size of the price thresholds. From a managerial perspective, the paper illustrates the sales, revenue, and margin implications for price changes typically observed in consumer markets.

Adaptive Idea Screening Using Consumers

Abstract: Following a successful idea generation exercise, a company might easily be left with hundreds of ideas generated by experts, employees, or consumers. The next step is to screen these ideas and identify those with the highest potential. In this paper we propose a practical approach to involving consumers in idea screening. Although the number of ideas may potentially be very large, it would be unreasonable to ask each consumer to evaluate more than a few ideas. This raises the challenge of efficiently selecting the ideas to be evaluated by each consumer. We describe several idea-screening algorithms that perform this selection adaptively based on the evaluations made by previous consumers. We use simulations to compare and analyze the performance of the algorithms as well as to understand their behavior. The best-performing algorithm focuses on the ideas that are the most likely to have been misclassified as “top” or “bottom” ideas based on the previous evaluations, and avoids discarding ideas too fast by adding random perturbations to the misclassification probabilities. We demonstrate the convergent validity of this algorithm using a field experiment, which also confirms the convergence pattern predicted by simulations.

Modeling Page Views Across Multiple Websites with an Application to Internet Reach and Frequency Prediction

Abstract: In this study, we develop a multivariate generalization of the negative binomial distribution NBD. This new model has potential application to situations where separate NBDs are correlated, such as for page views across multiple websites. In turn, our page view model is used to predict the audience for Internet advertising campaigns. For very large Internet advertising schedules, a simple approximation to the multivariate model is also derived. In a test of nearly 3,000 Internet advertising schedules, the two new models are compared with some proprietary and nonproprietary models previously used for Internet advertising and are shown to be significantly more accurate.

Price as a Stimulus to Think: The Case for Willful Overpricing

Abstract: Consumers aware of a new benefit will often experience uncertainty about its personal relevance or usage value. This paper shows that the decision to deliberate further to resolve this uncertainty and reach a polarized judgment of personal relevance critically depends on the posted price. In particular, a price above the consumer's initial willingness to pay might be thought provoking and enhance the perception of relevance with a certain probability. This behavioral mechanism is introduced formally and by way of an experiment with reference to the purchase of organic lettuce and fair-trade coffee. Accounting for the effect of price as a stimulus to think, a monopolistic firm should either over price (“transgressive pricing”) or under price (“regressive pricing”) in comparison to the consumer's willingness to pay. Under certain circumstances, the firm should also empower consumers with means that reduce the effort of deliberation.

Performance Regimes and Marketing Policy Shifts

Abstract: Even in mature markets, managers are expected to improve their brands' performance year after year. When successful, they can expect to continue executing on an established marketing strategy. However, when the results are disappointing, a change or turnaround strategy may be called for to help performance get back on track. In such cases, performance diagnostics are needed to identify turnarounds and to quantify the role of marketing policy shifts in this process. This paper proposes a framework for such a diagnosis and applies several methods to provide converging evidence for two main findings. First, contrary to prevailing beliefs, the performance of brands in mature markets is not always stable. Instead, brands systematically improve or deteriorate their performance outlook in clearly identifiable time windows that are relatively short compared to windows of stability. Second, these shifts in performance regimes are associated with the brand's marketing actions and policy shifts, as opposed to competitive marketing. Promotion-oriented marketing policy shifts are particularly potent in improving a brand's performance outlook.