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TD03 MARKETING SCIENCE CONFERENCE – 2011 3 - Does Television Advertising Influence Online Search? Mingyu Joo, Syracuse University, 721 University Ave., Suite 311, Syracuse, NY, 13244, United States of America, mjoo@syr.edu, Kenneth Wilbur, Yi Zhu Traditional advertising influences consumer information search, and consumers increasingly use television and internet simultaneously. This paper finds a significant association between television advertising for financial services brands and consumers’ tendency to choose branded keywords (e.g. “Fidelity”) rather than generic category-related keywords (e.g. “stocks”). This effect is largest for young brands during standard business hours with an elasticity (.07) comparable to extant measurements of advertising’s impact on sales. However, television advertising is not correlated with category search incidence. These findings show that practitioners should account for cross-media synergies when planning, executing, and evaluating both television and search advertising campaigns. The results also show why and how the search advertising literature should enrich its modeling of competition among advertisers. 4 - Does Online Advertising Help or Hurt Offline Sales? A Nation-wide Field Experiment Harald van Heerde, University of Waikato, Private Bag 3105, Hamilton, 3240, New Zealand, heerde@waikato.ac.nz, Isaac Dinner, Scott Neslin Increasingly many firms sell both via physical stores and the online channel. To drive sales through both channels, many firms advertise both in the traditional media and online. One of the risks of such a dual channel advertising strategy is that while advertising in one channel may enhance sales through that channel, it may cannibalize sales from the other channel. In contrast, there is also the potential for a positive cross-channel effect. Given the strong growth in worldwide online advertising expenditures, one particularly pressing question is whether online advertising helps or hurts offline sales. We study this research question using a unique field experiment. A major upscale US retail chain with a national presence experimentally increased online (banner) advertising in a random subset of its markets, while leaving online advertising unchanged in a control group of markets. We observe sales and marketing data at the weekly level for each of the markets over a two year time period. We estimate a dynamic sales response model for the number of both online and offline customers and their average spend as a function of online and traditional advertising and a number of control variables. The model allows for a detailed understanding of the within- and across-channel dynamic effects of both types of advertising. It also helps managers to understand whether these effects manifest themselves primarily via the number of customers or the average customer spend. ■ TD03 Legends Ballroom III Internet: Car Buying Contributed Session Chair: Chen Lin, Emory University, 1300 Clifton Road NE, Atlanta, GA, 30322, United States of America, chen_lin@bus.emory.edu 1 - Modeling the Volume of Positive Online Word of Mouth for Automobiles Jie Feng, Assistant Professor of Marketing, SUNY Oneonta, 224 Netzer Administration Bldg., Economics & Business Division, Oneonta, NY, 13820, United States of America, fengj@oneonta.edu, Purushottam Papatla Online word of mouth is gaining in importance as a means of promoting automobiles to consumers. Several auto brands, such as Scion xB, Ford Fiesta, and Chevy Tahoe, were reported using online word of mouth campaigns to generate product awareness as well as sales. The literature suggests that product attributes affect positive word of mouth. Automakers, therefore, need to identify the attributes that are likely to affect positive word of mouth for automobiles and ensure that their brands excel on those attributes. In this study, we classify the generic attributes of automobiles into four broad categories: quality, design and performance, newness of the model and body style, and investigate how each category affects the volume of positive online word of mouth. In order to ensure that our findings are not an artifact of the modeling approach, we repeat our investigation using different modeling assumptions. Our results across all the analyses provide a consistent finding that design/performance plays the dominant role in stimulating positive online word of mouth. In addition, designing new models or redesigning existing models also stimulates positive online word of mouth. However, this strategy may not be as effective for luxury and large cars. 2 - External Search in Secondary Markets and Impact of Internet Search on Seller Choice Sonika Singh, PhD Student, University of Texas-Dallas, 800 W. Campbell Road, SM32, Richardson, TX, 75080-3021, United States of America, sxs067000@utd.edu This research looks at the determinants of use of Internet information sources and the impact of Internet information sources on seller choice in secondary market for cars. Unlike the new car market, used car market is characterized by multiple sellers such as dealers and individuals. The quality of used cars is different even for cars of same make and model. This market is characterized by use of some unique information sources like local websites (craigslist), auction and newspaper websites 28 that are not used to search for new cars. The presence of unique Internet information sources and multiple seller types makes search for used cars different from that for new cars. Search for used cars is modeled as a three stage process. The first stage is consumer search for information on makes and models. The second stage is search for used cars available in the secondary market and the third stage involves final choice of a used car. Results show that education, age, experience of buying used cars, price range and trust in seller are important drivers of search and seller choice in secondary car market. Search on dealer specific sources increase the possibility of buying from dealers whereas use of local websites reduces the odds of buying from a dealer. Analysis of interrelationship of use of information sources indicates that use of Internet sources reduce dealer visits. Local websites have a negative impact on use of retail websites and consumers complement dealer and print sources to search for used cars. 3 - Media, Finance and Automotive: A Latent Trait Model of Consumption in Seemingly Disparate Categories Chen Lin, Emory University, 1300 Clifton Road NE, Atlanta, GA, 30322, United States of America, chen_lin@bus.emory.edu, Douglas Bowman The rise of new media and media fragmentation not only provides new experiences for consumption in many product categories, but also imposes challenges for media buyers to target across multiple media platforms. This paper examines whether media consumption vary with non-media product preferences. For example, do customers who prefer fixed income investments consume media differently from customers who prefer equity investments? Do Internet fans drive different types of cars compared to print media audiences? We propose a theory-driven, psychologically realistic model that examines consumer preferences across seemingly disparate product categories using a latent-trait approach for parameter heterogeneity. We calibrate the model with a proprietary dataset on individual behavior and choices in media consumption, financial investments, and automotive purchases. We hypothesize and test two mechanisms to explain drivers of correlated preferences using a set of attitudinal of behavioral measures: System 1, in which hard-to-observe psychological processes governs decision making across multiple categories, and System 2, in which media characteristics and preferences contribute to information processing in other product categories. We demonstrate the power of this model by comparing performance with traditional multi-category choices models and latent-class models. Implications are drawn on media targeting and psychological process modeling. ■ TD04 Legends Ballroom V Econometric Methods II: General Contributed Session Chair: Martin Spann, Ludwig-Maximilians-University Munich, Geschwister-Scholl-Platz 1, Munich, 80539, Germany, spann@spann.de 1 - Empirical Regularity in Academic Marketing Research Productivity Patterns Vijay Ganesh Hariharan, Assistant Professor of Marketing, Erasmus University, Burgemeester Oudlaan 50, Rotterdam, 3000DR, Netherlands, hariharan@ese.eur.nl, Debabrata Talukdar, Chanil Boo In any academic discipline, published articles in respective journals represent “production units” of scientific knowledge, and bibliometric distributions reflect the patterns in such productivity across authors or “producers”. We use a comprehensive data set from 11 leading marketing journals to examine if there exists any empirical regularity in the patterns of research productivity in the marketing literature. Our results present strong evidence that there indeed exists a distinct empirical regularity. It is the so called Generalized Lotka’s Law of scientific productivity pattern: the number of authors publishing n papers is about 1/(n power c) of those publishing one paper. We find the empirically estimated value of the exponent c to be 2.05 for the overall bibliometric data across the leading marketing journals. For the individual journals, the estimated values of c range from 2.15 to 2.83, with lower values indicating higher authorship concentration levels. We also find that variations in authorship concentration levels across journals and over time are driven by a journal’s maturity, topical focus, relative attractiveness as a publication outlet and its review process characteristics. 2 - Investigating the Performance of a Dynamic Budget Allocation Heuristic: A Simulation Based Analysis Nils Wagner, University of Passau, Aberlestrasse 18, Munich, 81371, Germany, wagner.nils@gmx.de The marketing budget allocation process is one of the most important tasks a manager is being charged with. As firms in general sell a portfolio of products and can choose among various marketing activities their profit maximization problem is characterized by high complexity. However, managers prefer to use simple rules to determine the marketing budget as they find it difficult to fully understand sophisticated allocation tools provided by academics. The paper ‘Dynamic Marketing Budget Allocation across Countries, Products, and Marketing Activities’ by Fischer, Albers, Wagner, and Frie (2011, forthcoming in Marketing Science) address this problem and presents a dynamic allocation rule which is suggested to be close to optimum while being easy to understand and to implement. We test the nearoptimality as well as the convergence properties of this allocation rule by conducting a comprehensive simulation study using a large number of data conditions including all factors contained in the profit maximization function. In particular, we analyze changes in performance by imposing estimation error affecting the parameters of
interest. To evaluate the performance of the allocation rule we compare the profit measures gained by the allocation rule with the optimal solution as well as simple practitioner rules. Further, the impact of the various factors on the performance of the allocation rule in terms of robustness and convergence properties is investigated by following the concept of a surface regression. The authors find that the allocation rule is quite robust to all types of data manipulation and even performs very well in case of estimation error. 3 - Social Network Based Judgmental Forecasting Martin Spann, Ludwig-Maximilians-University Munich, Geschwister- Scholl-Platz 1, Munich, 80539, Germany, spann@spann.de, Christian Pescher, Gary Lilien, Gerrit Van Bruggen Forecasting is especially challenging in high-uncertainty environments, e.g., due to unstable market conditions. A popular method to generate reliable forecasts in conditions of high uncertainty is judgmental forecasting, in which a number of informants is asked for their estimates. Improvements in forecasting accuracy can be gained by assigning weights to those forecasts that are likely to be more accurate. The structural position of each informant in a social network can be a good indicator for the informant’s access to information, which has not been analyzed in literature yet. The authors conduct two experiments, one laboratory experiment using the markstrat game and one field experiment, in which they show that in conditions of high uncertainty social network based weights can improve forecasting accuracy compared to weighting approaches discussed in recent literature. ■ TD05 Legends Ballroom VI New Product IV: Strategy Contributed Session Chair: Dinah Vernik, Assistant Professor of Marketing, Rice University, 6400 Main Street, Houston, TX, United States of America, dv6@rice.edu 1 - Strategic Product Line Design with Product Concept Demonstration Taewan Kim, PhD Candidate, Syracuse University, 721 University Ave., Syracuse, NY, 13244, United States of America, tkim21@syr.edu, Eunkyu Lee Trade shows are a popular venue for firms to showcase their innovative activities to their industry cohorts and to the general public. Product concept demonstrations at trade shows can contribute to the long-term success of the new product by influencing awareness and perception of the new product as well as by encouraging buyers to wait for the new model launch instead of purchasing a currently available model without a delay. However, if the perception created by the product concept demonstration turns out to be not consistent with the quality delivered by the launched model, the company might suffer negative effects on its reputation and the demand for the new product. This paper develops and analyzes a game-theoretic model to examine how a firm’s product positioning strategy interacts with its product concept demonstration strategy in duopoly. Each firm develops and launches a line of two products with the option of demonstrating each product concept at a trade show before the completion of its development. The market characterized by consumer heterogeneity in design taste and willingness-to-pay for technical quality provides an opportunity for each firm to strategically choose the horizontal and vertical product positions for profit maximization. Our analysis of the Nash equilibrium solution provides new insights into the strategic inter-dependence of product positioning and product concept demonstration. We also show that the equilibrium product demonstration strategies may follow the prisoner’s dilemma under certain conditions. 2 - The Strategic Role of Exchange Programs Bo Zhou, Fuqua School of Business, 100 Fuqua Drive, Box 90120, Durham, NC, 27708, United States of America, bo.zhou@duke.edu, Debu Purohit, Preyas Desai In an exchange program, consumers turn in an old item and get store credit or a gift card toward another purchase in the store. To analyze the impact of exchange programs in a competitive setting, we assume that two firms first decide its policy on whether or not to offer an exchange program. If a firm does not offer an exchange program, it simply chooses a retail price for the new good. If it offers an exchange program, it chooses not only the retail price for the new good but also the price compensation for the exchange. In terms of consumers, based on their valuations of the old and new goods, there are two types of consumers: low valuation and high valuation. Each consumer has an old good that can potentially be used in an exchange program. Based on the prices, consumers decide whether to purchase and, if it is offered, whether to participate in the exchange program. In deciding whether to participate in the exchange program, consumers evaluate the costs and benefits of turning in the old product and getting a new one. For the new product, consumers consider the quality and the price. On the other hand, consistent with behavioral decision theory, we assume that consumers view their old product as a part of their endowment. As a result, consumers’ incur a loss that is equivalent to their mental book value when they turn in their old product. We find that whether the retailers offer an exchange program depends on the proportion of low valuation consumers in the market and their valuations of the old and new goods. The equilibrium outcome can be both offering or not offering exchange, neither offering exchange as a Prisoners’ Dilemma, and coordination equilibria. MARKETING SCIENCE CONFERENCE – 2011 TD06 29 3 - Merging in Spatial Competition Tieshan Li, Concordia University, 1450 Guy Street, Montreal, QC, Canada, tieshli@jmsb.concordia.ca Merging is an important business action in the market and it has attracted attention from researchers. Given the existing research on merging focusing more on the supply side, this work investigates the merging effect from the demand side. In the spatial competition with the circle market set-up, we study the effects of merging with direct competitor and merging with indirect competitor. In the case of merging with indirect competitor, the firm does not have motivation to do so unless the merging action can bring efficiency gain on the merging firms. However, in the case of merging with direct competitors, the firm always has motivation to do so no matter the existence of efficiency gain. With efficiency gain from the merging action, the merging firms are always better off while the profits of the other firms depend on the degree of efficiency gain of the merging firms and are not monotonic. Without efficiency gain, all the firms in the market are better off. However, the merging firms are not the ones which benefit most from the merging action. 4 - Price and Inventory Competition between New and Old Technologies Dinah Vernik, Assistant Professor of Marketing, Rice University, 6400 Main Street, Houston, TX, United States of America, dv6@rice.edu, Preyas Desai, Fernando Bernstein In this paper we investigate production/ordering decisions across multiple generations of a product. In many consumer durables product categories manufacturer typically needs to innovate and introduce new versions of the product. However, considerable uncertainty exists about the consumers’ reaction to the new product. The consumers might or might not like the new version of the product more than the old one, while the manufacturing costs associated with the new technology are usually higher. The problem is made more complex by the fact that the quality of the new product as perceived by consumers (through reviews, consumer reports, etc.) cannot be realized until the product enters the market while the manufacturing decisions must be made in advance. This uncertainty about new product quality at the time when ordering/manufacturing decisions are made creates some interesting issues of channel conflict. We consider a setup where manufacturer sells both products via a retailer using a price-only contract. Two systems are compared: a centralized system, where the manufacturer makes both production and retail pricing decisions for both products. And a decentralized one, where the manufacturer moves first by offering the wholesale price and the retailer follows by placing an order for both products and determining the retail price. Several interesting results about product inventories and pricing of the two generations of the product are presented and discussed. ■ TD06 Legends Ballroom VII Competition IV: Quality Contributed Session Chair: S. Chan Choi, Professor, Rutgers Business School, 1 Washington Park, Newark, NJ, 07102, United States of America, chanchoi@rci.rutgers.edu 1 - The Impact of Competition and the Cost of Overstating Quality on the Optimal Quality, Quality Claims Praveen Kopalle, Professor, Dartmouth College, Tuck School, Dartmouth, NH, United States of America, Praveen.K.Kopalle@tuck.dartmouth.edu, Don Lehmann This paper examines the impact of strategic competition and cost of overstating quality on equilibrium quality and quality claims. We model the situation where two firms simultaneously introduce a new product or add a major new feature to an existing product. Potential customers have an initial quality expectation for the new good based on a combination of public and company provided information. These expectations get updated based on both their actual experience when they buy a product and word of mouth from those who have bought it. The companies make one-time decisions about average quality (which is costly to produce), price, and advertised quality. We formally develop a two period model which allows for a large weight on results in the second period to capture the impact of future period sales. To provide support for our model assumptions and results we (i) conducted a survey of consumers and (ii) analyzed data from the U.S. Federal Trade Commission (FTC) on deceptive advertising cases decided between August 1996 and December 2002. In addition, to evaluate the extent to which managers would behave in line with our model prescriptions in different competitive and legal cost contexts, we conducted a conjoint style study with future managers at a top business school. In the main, managerial intuition is directionally consistent with the model. Competition leads to higher quality, lower price, and higher advertised quality. Heightened costs of overstating quality led to lower advertised quality. Most interesting, it appears that when competitors are constrained to be truthful in their advertising due to legal costs, optimal product quality, and hence potentially consumer welfare, is lower.
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