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FA06 2 - Investigating the Relationship between R&D and Marketing in the New Product Development Process Suj Chandrasekhar, Principal, Strategic Insights Inc., 162 Collins Road NE, Cedar Rapids, IA, 52402, United States of America, suj@strategicinsights.com, Srinath Gopalakrishna In this research, the authors focus on the R&D/Marketing interface within organizations and investigate the different dimensions and levels of this relationship. Typically, the Marketing team is very concerned with new product launch deadlines and in many instances the expressed view is that meeting deadlines receive priority and resources at the expense of potential breakthrough concepts that require extended deliberation. Building on Kotler, Walcott and Chandrasekhar (2008), we explore this subject empirically by examining the quality of the working relationship between R&D and Marketing in several companies spanning several industries and countries. The data come from surveys of marketers, R&D personnel, engineers and product managers at senior and middle management levels via an online assessment questionnaire. Select executives were also interviewed. In this paper, we examine the perceived levels of contribution of Marketing to NPD as well as the type of relationship between R&D and Marketing. We account for company size, geographic region and industry variability while addressing the following questions: What are the reported levels of engagement between Marketing and R&D and how do they vary by company size and industry? What are the perceived contributions of Marketing to the stages of the new product development process? What steps can a company take to improve the working relationship between R&D and Marketing? We report on Marketing’s contribution to NPD in four areas (ideation, early stage concept refinement, development, and launch/post-launch) and the types of relationship between the two functions. 3 - Embedding Product Development Accelerations in Environmental Uncertainty Tao Wu, Professor of Marketing, California State University, Long Beach, 1250 Bellflower Boulevard, Long Beach, CA, 90840, United States of America, twu5@csulb.edu Past new product development (NPD) research suggested that in uncertain environments, contingency planning, concurrent development, early customer feedback, and iterations improve firms’ cycle time and even product performance in general. However, a review of organizational learning literature reveals contradictory demands that these practices place on organizations’ information processing: Contingency planning and concurrent development require firms to have a relative clear understanding of, and be able to accurately predict, the future of the market, while early customer feedbacks and iterations are more effective when firms are vague in their perceptions of the market behaviors. In addition, these NPD practices have been examined mostly with the concept of environmental uncertainty as onedimensional, which precludes contextual understandings of the findings. This research is set out to further explore the impact of each aforementioned practice on NPD performance under different types of environmental uncertainty. It differentiates environmental uncertainty based on the degree to which companies understand and/or can accurately predict the future of the market. Through empirical examination of 164 product development firms, it proposes a typology of combining these practices in uncertain environments to maximize NPD performance. 4 - Consumer Opinion of Product Design Dimensions Wooseong Kang, Assistant Professor, North Carolina State University, 2332 Nelson Hall, Raleigh, NC, United States of America, Wooseong_Kang@NCSU.edu, Janell Townsend, Mitzi Montoya Product design is a critical component of brand strategy. We develop a conceptual framework illustrating how two critical design factors – form and function – impact consumer opinion, and delineate brand specific effects. We further identify nonmonotonic effects, as well as the interaction effects of the individual factors among the dimensions. A longitudinal model based on objective measures of form and function is tested with a data set we developed for models available in the U.S. automotive market from 1999 – 2007. The data include information on 16 firms, 32 brands and 137 products. The results suggest form and function play a significant role in forming consumer opinions, but have diminishing returns. However, the results suggest brands may benefit from an extension of certain design factors. Trade-offs between form factors generally moderate each other, but that does not appear to be so for function factors. The relationships between factors of form and function are multifarious and complex, but generally do not support the notion of trade-offs between form and function as being a cause for changes in opinion. ■ FA06 Legends Ballroom VII Channels I: General Contributed Session Chair: Sudheer Gupta, Associate Professor, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada, sudheerg@sfu.ca 1 - Information Sharing and New Product Development in a Non-integrated Distribution Channel Shan-Yu Chou, National Taiwan University, 1 Sec. 4 Roosevelt Road, Taipei, Taiwan - ROC, chousyster@gmail.com A manufacturer, when developing new products, often faces high demand uncertainty. A retailer, closer to consumers, may possess superior information relative MARKETING SCIENCE CONFERENCE – 2011 38 to the manufacturer about final demands of a new product. In this paper, we attempt to analyze how information sharing influences new product development in a nonintegrated channel. We build a game-theoretic model where the retailer facing two segments of consumers, has private information about the final demand of the new product, while it is the manufacturer that makes the new product investment before demand realization. We obtain the following results. (i)The value of information sharing depends on the positioning of the new product item relative to the manufacturer’s current product item. Under some regularity conditions, when the new product that the manufacturer is considering to develop is a high-end item, the manufacturer cannot benefit from information sharing from the retailer. (ii) On the other hand, when the new product that the manufacturer is considering to develop is a low-end item and when it is sufficiently costly to increase the success rate of the new product, information sharing helps both the manufacturer and the retailer. (iii) However, when it is not very costly to increase the success rate for the new product, information sharing from the retailer to the manufacturer reduces the retailer’s profit more than it increases the manufacturer’s profit. In the absence of information sharing, the manufacturer in a non-integrated channel will still develop the new product and make an efficient investment that maximizes channel profits. 2 - Distributor Support in New Product Launch Wei Guan, Linköping University, IEI 581 83, Linköping, Sweden, wei.guan@liu.se, Jakob Rehme Many companies usually commit to develop and produce new products and delegate the selling aspects to distributors. It is recognized that distributors play an important role in bringing products to customers and that distributors have their own business objectives. Despite its importance, research regarding distributor support in the new product launch is few in number. This paper seeks to fill the gaps by empirically analyzing how distributors support is obtained for new products. The first purpose of this paper is to investigate how distributors’ selling effort, advertising and technical support are organized for new products and how these differ from more established items. The second objective is to examine the consequent demands and requirements posed to suppliers. The third objective is to explore insights into potential areas for future product or service innovation. This study takes an exploratory, case study research approach. Multiple cases regarding innovative products or solutions recently came out to the British building material market were studied. Data is collected through in depth interviews using an open-ended format. Findings Distributors are starting to understand that they can not make successful new product launch at the store level without a well functioning supplier operations. New product sales of distributors is more and more relying on suppliers in aspects of logistics, commercial and technology. Marketing support regarding pricing, promotion and merchandising from suppliers is extremely important for distributors in selling new products. Previous new product launch studies focus primarily on strategic and tactical decisions made by suppliers, this paper emphasize the importance of distributor support. 3 - Long-term Asymmetric Buyer-seller Relationship: An Empirical Study Yuying Shi, PhD Student, University of Florida, Warrington College of Business, 211 Bry, Gainesville, FL, 32606, United States of America, sunnyshi@ufl.edu, Qiong Wang, Bart Weitz Long-term relationships between buyers and suppliers have obtained substantial attention in the past decades. Although much as been written about the benefits of such relationships to firms, little is known about the nature of such relationships. In this study, we empirically assess one type of long-term relationships composed of suppliers and their major buyers, in particular those retailers who purchase at least 10 percent of the total sales of these suppliers. Using cross-sectional and longitudinal data over a 20-year period, we find that suppliers may benefit from having major retailers in terms of their financial performance despite of the power asymmetry. Specifically, the retailers’ relative sizes, R&D and advertising investments, and the lengths of relationships with suppliers may moderate the influence of major retailers onto suppliers. Our study sheds lights on why and how a firm develops long-term relationships with major buyers. We conclude this study with a discussion of implications and future research, specifically the demonstrated importance of investigating asymmetric buyer-seller relationships. 4 - Inventories, Incentives, and Channel Structure Sudheer Gupta, Associate Professor, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada, sudheerg@sfu.ca A well-known result in channels literature states that competing manufacturers may have an incentive to decentralize downstream retailing to buffer from intense price competition when products are substitutable. We explore this effect in a dynamic setting where retailers can carry inventories forward. We show that retailers will always carry inventories as a credible source of competition for the manufacturers, even in the absence of traditional reasons for inventories. The presence of strategic inventories in dynamic intra-channel relations counters the benefits of strategic decentralization as a buffer against competition. We establish equilibrium outcomes for competing manufacturers selling differentiated products over two periods, and show how degree of product differentiation and the ease of carrying inventories forward affect prices, profits and equilibrium channel structure.
■ FA07 Founders I Panel Session: Cases? Projects? Simulations? Problem Sets? What’s the Best Way to Teach Marketing Science? Cluster: Special Sessions Invited Session Chair: Gary Lilien, Pennsylvania State University, 484 Business Building, University Park, PA, United States of America, GLilien@psu.edu Co-Chair: Arvind Rangaswamy, Pennsylvania State University, University Park, PA, United States of America, arvindr@psu.edu 1 - Cases? Projects? Simulations? Problem Sets? What’s the Best Way to Teach Marketing Science? Moderators: Gary Lilien and Arvind Rangaswamy, Panelists: Dominique Hanssens, Ujwal Kayande, Charlotte Mason, Arnaud De Bruyn, Many of us have struggled to find the best way to teach our specialty, marketing science. Should we use traditional lectures and problem sets? What about cases? What about simulations? What about projects? And what role should generalized or specialized software play? In this special session, each panelist will provide an brief overview of what he or she has been doing in the MBA/EMBA classroom, sharing what has worked, what has not and what developments he or she sees that the marketing science community should be aware of. We will then open the discussion up to the audience to share their experiences and ask questions of the panelists. ■ FA08 Founders II The Long Run Consequences of Short Run Decisions I Cluster: Special Sessions Invited Session Chair: K. Sudhir, Yale School of Management, Yale School of Management, New Haven, CT, United States of America, k.sudhir@yale.edu Chair: Ahmed Khwaja, Assistant Professor, Yale University, New Haven, CT, United States of America, ahmed.khwaja@yale.edu 1 - Taste and Health: Balancing and Highlighting in Choices Across Complementary Categories Hai Che, University of Southern California, Los Angeles, CA, United States of America, haiche@marshall.usc.edu, Botao Yang, K. Sudhir Behavioral research using laboratory experiments suggests that some consumers “balance” healthy versus tasty choices across complementary categories when having a meal, while others “highlight” one attribute such as taste or health across both categories. To-date, there has been little empirical research using field data. We therefore examine consumers’ choices of tasty versus healthy foods across complementary food categories in grocery stores to identify evidence of such behavior in a field setting. Given only purchase data, we impute household inventory based on past purchases and study how the inventory of “tasty” or “healthy” foods in one category affects the choice of tasty or healthy foods in a complementary category. We find evidence of both highlighting and balancing consumer segments. Thus far the literature on cross-category choices has found that customers tend to have positive correlation in preferences for attributes across categories (i.e., a price or feature sensitive customer tends to be price or feature sensitive across categories). This is because existing models do not allow for heterogeneity in correlations for preferences across categories. Our modeling approach allows for heterogeneity in correlations for attribute preferences; thus allowing us to uncover evidence of balancing between attributes across categories using field data. 2 - Information Acquisition and Ex-ante Moral Hazard Jian Ni, Johns Hopkins University, Baltimore, MD, United States of America, jni@jhu.edu, Nitin Mehta In contractual markets like insurance or credit, it is the firm’s interest that the consumer engages frequently in information acquisition, but the consumer may not have the incentive to do so. We use the health insurance market as the example, more particularly chronic illnesses (e.g., prostate cancer). For such illnesses, the cost of treatments increases significantly with the severity of the illness. Thus it is in the insurer’s interest that consumers get regular diagnostic checkups before and after they are diagnosed with the illness (regular checkups from early detection of the illness result in low treatment costs in the future; and regular checkups after the diagnosis of the illness result in the consumer to consume the ‘right’ treatment that is specific to the stage of his illness, which consequently leads to lower cost of treatments in the future). However, consumers may not have the incentive to go for regular checkups if their monetary (out of pocket expenses for getting checkups) or non monetary costs (time and effort) are high. The questions that we address are: (i) what is the impact of consumer’ information acquisition behavior (how regularly they go for checkups) on the firm’s (insurance company’s) long term profits? (ii) What are the magnitudes of monetary and non-monetary costs of information acquisition, and how do they vary over types of contracts (insurance plans) and consumer demographics? (iii) What strategies can firms employ in terms of communication tactics and contract design to reduce consumers’ monetary and non-monetary costs, so that they engage in information acquisition on a more frequent basis? 39 MARKETING SCIENCE CONFERENCE – 2011 FA09 3 - Changing the Tone: The Dynamics of Political Advertising over the Election Cycle Ron Shachar, Arison School of Business, The Interdisciplinary Center, Herzliya, Israel, shachar@duke.edu, Paul Ellickson, Mitch Lovett This paper empirically investigates the dynamic incentives determining when and how much to advertise, along with the optimal choice of tone. We focus on political advertising in closely contested U.S. congressional races. In particular, we investigate the tendency for close races to become more negative as election day gets closer and establish that candidates generally match on the tone of their advertising with a tendency to match more on the negative than positive. We offer an explanation for the tendency to go negative that suggests negativity in close races is not a foregone conclusion. We examine empirically the dynamic implications associated with changing the volume and tone of advertising over an election cycle. To do so, we propose and estimate a strategic model of sequential decision-making in which candidates react to the arrival of new information as well as the strategic actions of their rivals in forming an optimal advertising policy. We estimate the structural parameters of the model using a full solution approach, characterized by a system of sequential decision problems with mixed controls. We use the structural estimates from the model to investigate the degree to which government policy can impact the equilibrium tone of the race, thereby altering the tone of political discourse. 4 - A Dynamic Model of Thirst and Beverage Consumption Ahmed Khwaja, Assistant Professor, Yale University, New Haven, CT, United States of America, ahmed.khwaja@yale.edu, K. Sudhir, Guofang Huang The physical need to consume beverages due to thirst occurs several times a day. Apart from satisfying the physical thirst need, beverages also satisfy a variety of other short term needs such as “quick pickup,” “refreshing fun” etc. Given the frequency with which beverages are consumed, they also have significant long-term health consequences. The goal of the paper is to build and estimate an “as-if” model of thirst and beverage consumption that helps understand the consumer tradeoff between the short-run needs and their long-term consequences. Researchers rarely have consumption data, hence they make inferences about consumer’s utility from consumption thorough purchase data. Here we exploit a rare dataset with information not only what a consumer consumed in every two hour period, but also the context, moods and stated objectives captured in real time over a period of two weeks. This allows us to understand how consumers trade-off long-term and shortterm needs in routine consumption. Our modeling framework can be useful in studying a variety of health-related issues such as obesity, cancer etc., which are significantly affected by routine consumer short-run choices of food, beverages and cigarettes etc. ■ FA09 Founders III Retailing II: General Contributed Session Chair: Manish Gangwar, Assistant Professor, Indian School of Business, ISB Campus, AC2-L1-2113, Gachibowli, Hyderabad, AP, 500032, India, manish_gangwar@isb.edu 1 - The Impact of Retailers’ Corporate Social Responsibility on Price Fairness Perceptions and Loyalty Kusum Ailawadi, Charles Jordan 1911 TU’12 Professor of Marketing, Tuck School at Dartmouth, Dartmouth College, 100 Tuck Hall, Hanover, NH, 03755, United States of America, kusum.ailawadi@dartmouth.edu, Jackie Luan, Scott Neslin, Gail Taylor We study the effect of four key dimensions of Corporate Social Responsibility in the grocery retail industry on consumers’ perceptions of the fairness of retailers’ prices and their attitudinal and behavioral loyalty towards those retailers. Our model controls for other key drivers of retail store patronage and for heterogeneity in CSR response, and we estimate it using data on consumers’ shopping behavior and their perceptions of the retailers they patronize. We model price fairness as a (partial) mediator of the CSR-loyalty relationship. CSR may affect price fairness directly whereby a high price is perceived as more acceptable if part of the value from the consumer-firm exchange is seen as benefiting society. It may also affect price fairness indirectly through cost and profit judgments whereby consumers associate CSR with higher costs or/and lower profit for the retailer. We estimate these direct and indirect effects and quantify the net impact of retailers’ CSR on consumer loyalty. Among the four CSR dimensions in our study, we find that environmental friendliness has the weakest effect on both price fairness and behavioral loyalty. Local product sourcing, from which consumers personally benefit in their exchange with the retailer, has the strongest direct effect on behavioral loyalty, though it delivers no added boost through price fairness. The remaining two CSR dimensions, fair treatment of employees and community support, have intermediate direct effects on behavioral loyalty and the indirect effects through price fairness account for approximately 10% of the total effect.
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