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FB12 MARKETING SCIENCE CONFERENCE – 2011 3 - Sales Contests and Quotas with Imbalanced Territories - A Model and Experiments James Hess, Professor, University of Houston, 4800 Calhoun Road, Houston, TX, 77204, United States of America, jhess@uh.edu, Niladri Syam, Ying Yang This paper studies the design of sales contests and quota-based compensation systems when territories have imbalanced sales potential. We ask, (1) how do the optimal sales, efforts of salespeople, and profits vary with territory imbalance in an optimal sales contest? (2) How do these factors vary with territory imbalance in a quota system? (3) Are sales, efforts and profits larger under a contest than a quota system when territories have different sales potential? The main managerial insight that we offer in this paper is that with imbalanced territories, the firm’s profit with the quota system is higher than its profit with a contest. Furthermore, the advantage of the quota system increases with degree of imbalance. We also find that for a sales contest, the agents in the strong and weak territories exert the same effort which decreases with the degree of imbalance in sales potential to the point of complete shirking. In a quota system the firm’s profit and agents’ efforts also decrease when there is imbalance, but not as much as in a contest. Further, unlike the contest, with a quota system the salesperson in the territory with weaker sales potential works harder than the salesperson in the stronger territory. Three laboratory experiments support the findings of the analytical model. ■ FB12 Champions Center II Internet: Unique Topics Contributed Session Chair: Agustí Casas-Romeo, Professor, Department of Economics and Business Organization. Universitat de Barcelona, Main Building,Tower 2, 3rd fl. Diagonal 690, Barcelona, 08034, Spain, acasas@ub.edu 1 - Quantifying Transaction Costs in Online/Offline Grocery Channel Choice Junhong Chu, Assistant Professor, NUS Business School, 15 Kent Ridge Drive, Singapore, 119245, Singapore, bizcj@nus.edu.sg, Pradeep Chintagunta, Javier Cebollada Households incur a number of transaction costs when choosing stores to make grocery purchases. When the online channel is available as an alternative to physicalstore shopping, they may need to incur additional transaction costs. In this paper, we empirically quantify relative transaction costs when households choose between the online and offline channels of the same grocery chain. A key challenge to quantifying these costs is that several of them, such as picking items from the store & carrying them home, depend upon the items the household expects to buy in the store; and unobserved factors that influence channel choice also likely influence the items bought. Our econometric specification for channel choice accounts for observed and unobserved household heterogeneity, and the endogeneity of the items bought via the “plausibly exogenous” approach in an HB framework. We find the average value to a household of avoiding 1km of travel and ordering online instead is €.47; the relative value of shopping online vis-á-vis offline on a weekday (in bad weather) compared to a weekend (good weather day) is €1.26 (€1.06). For every 10 items bought, the time savings in the online channel over the offline channel are equivalent to €.55; the costs of picking and putting 10 heavy/ bulky items into the shopping cart are €.42; and the costs of carrying 10 heavy/ bulky items 1km are about €.83. On their online visits, households value the net transaction costs avoided by online shopping at €10.92, which exceeds the retailer’s delivery fees. We find considerable heterogeneity in these costs across households and characterize their distributions. We discuss the implications of our findings for the retailer in terms of product offerings, promotion and positioning for the two channels. 2 - The Effect of Banner Exposures on Memory for Established Brands Titah Yudhistira, University of Groningen, Department of Marketing, Nettelbosje 2, Groningen, 9747AE, Netherlands, t.yudhistira@rug.nl, Eelko Huizingh, Tammo Bijmolt Although the focus of banner advertising has moved from click-through to brand building, there is little evidence of the effectiveness of banner advertising on brand memory for established brands. The purpose of our study is to provide new evidence on how banner exposures affect ad and brand memory as well as to propose and test a mechanism on how online exposures benefit established brands. Our study is unique since we (i) focus on established brands, (ii) emphasize the difference between ad memory and brand memory, and (iii) study the differential effects of three exposure variables, i.e frequency of exposures, time difference between the last exposure and measurement, and average time between exposures (spacing). We base our analyses on massive empirical data, i.e surveys and exposure data from 59.370 individuals in ten countries that were exposed to actual internet campaigns of 26 well-known brands. We find that exposure frequency and spacing have a beneficial effect and that time difference between the last exposure and measurement has a detrimental effect on ad memory. On the contrary, no effect of the three exposure variables on brand memory is found. However, the same effects of exposure frequency and time difference on brand memory are found by including mediating effects of ad recall and recognition. As a practical implication, this study shows that established brands can benefit from banner advertising by advertising more continuously, while assuring enough space between subsequent exposures. 50 3 - A Study of Consumer Interest in Innovative Products Across Developed and Emerging Markets Gauri Kulkarni, Assistant Professor of Marketing, Loyola University Maryland, 4501 N Charles St, Baltimore, MD, 21210, United States of America, gmkulkarni@loyola.edu The diffusion of new product sales in both domestic and foreign markets has been a widely researched area in marketing for quite some time. Recent technological advancements have allowed for the measurement of consumer interest in new products prior to the availability of sales data. One example of such measures is the volume of terms submitted to search engines. In other words, the search volume of a particular term can serve as an aggregate indicator of consumer interest in that particular term. This measure is available prior to the launch of a product, since a product need not be available to consumers for them to search for it. Since this online measure of consumer interest is not restricted by geographic boundaries, the levels and patterns of consumer interest across international markets can also be investigated. Therefore, this research aims to study the levels and patterns of consumer interest, as measured by online search term volume, in innovative products across developed and emerging markets. Findings from the study can offer insight on the future diffusion of product sales in these markets and can also aid in managerial decision-making on the timing of international product launches. 4 - Application of Case Study on the Quality of Public Transport in European Cities with a Tool for Digital Ethnography Agustí Casas-Romeo, Professor, Department of Economics and Business Organization. Universitat de Barcelona, Main Building, Tower 2,3rd fl.Diagonal690, Barcelona, 08034, Spain, acasas@ub.edu, Rubén Huertas-García, Juan Carlos Gázquez-Abad The architecture of online communities and social networks provide a constant flow of information, some redundant, some significant, but all of them fed by individual users in the online community. We can use digital ethnography to investigate the ways in which social media get significant results. A key consideration of virtual ethnographic approach is portability ahead of the generalization and this is an important evaluation criterion. Shadish (1995: 419). There is still no complete scientific method for absolute filtering of the sources that the virtual environment offers, however the mass of information has found a way scales that discriminate in a revealing way information “noisy” leading researchers at a similar stage virtual traditional investigators in terms of credibility and reliability, Kozinets (2000:61) leading to comparable results of research. Through Epsilon technology and methodology we present an exploratory ethnographic case study of the quality of service of public transport (Metro, Bus, Commuter Car, Tram, etc...). In various European cities (London, Rome, Paris, Berlin, Madrid, Lisbon). The degree of reliability and speed with which it has conducted an exploratory analysis revealed the severity and cost reduction makes this technique is effective and efficient consolidation. ■ FB13 Champions Center III Marketing Finance Interface II Contributed Session Chair: Michael Sorell, Research Associate, IMD, Chemin de Bellerive 23, P.O. Box 915, Lausanne, Switzerland, michael.sorell@imd.ch 1 - Preventing Raised Voices from Echoing: Advertising as Response to Shareholder Activism Simone Wies, Maastricht University, Tongersestraat 53, Maastricht, 6211 LM, Netherlands, s.wies@maastrichtuniversity.nl, Arvid O. I. Hoffmann, Jaakko Aspara, Joost M. E. Pennings Research in marketing as well as finance shows that advertising can positively influence both consumer and investor behavior. However, the inverse logic of investor behavior impacting firms’ advertising expenditures has not yet been studied to date. We examine the extent to which firms exploit spillover mechanisms between consumer and financial markets and decide on product advertising as a strategic marketing instrument targeted at both consumers and investors. In doing so, we focus on an important aspect of investor behavior that governs investment practice but has so far been neglected in marketing research: shareholder activism. We rely on a unique database on shareholder activism proposals in the United States for the period from 1997 until 2009, and show that firms exposed to increased shareholder activism boost their advertising spending in the subsequent year. Individually examining the proposal data rules out the alternative explanation of shareholders explicitly demanding a change in advertising expenditure. Instead, managers appear to strategically use advertising as a reputation management tool to influence stakeholder perceptions. In addition, we find that this relationship is negatively moderated by the firm’s recent stock market performance, implying that firms intensify their advertising reaction to shareholder activism when they are under increased financial market pressure. Overall, this study’s results offer new insights into the marketing-finance interface, and in particular the strategic value of marketbased assets like advertising.
2 - The Impact of Consulting on Buying Behavior - The Case of Attention Behavior Nicolas Bourbonus, Frankfurt School of Finance & Management, Sonnemannstrafle 9-11, Frankfurt am Main, 60314, Germany, n.bourbonus@frankfurt-school.de, Dominik Georgi, Olaf Stotz For many customers, the service of consulting is a main criterion for selecting the right bank and the optimization of its investment decisions. By employing a consulting service, private investors hope to be able to make decisions on a more rational basis and to cut down on behavioral inefficiencies, such as ‘attention’. The attention simplifies the buying behavior of the investor such that the investor doesn’t have to select the right share from thousands, but rather takes a targeted look at shares for purchases that have earned his attention shortly before the purchase. For the shares that have earned his attention, the investor then selects those that are fitting for him. From an economical standpoint, these are attention-conducted buying decisions for the investor and are not generally of advantage and have often a negative effect on the performance. The goal of this study is to enhance the previous state of research systematically by first examining for which of the three private investors groups (“without consulting influence,” “mid-range consulting influence” and “strong consulting influence”) the behavior inefficiency attention occurs and by then determining for which of these three investor groups the attention behavior is especially strong. We empirically examine our hypotheses with regressions. Our examination is based on customer and transaction and market data. The research contribution of the study is as follows: The study confirms the influence of attention for the three investor groups “without consulting influence,” “mid-range consulting influence” and “strong consulting influence”. The study present that the attention behavior increases as the consulting influence increases. 3 - Wedded Bliss or Tainted Love?: Stock Market Reactions to the Introduction of Co-branded Products Zixia(Summer) Cao, Doctoral Student, Texas A&M University, 220 Wehner Building, Department of Marketing, College Station, TX, 77840-4112, United States of America, czixia@mays.tamu.edu, Alina Sorescu Co-branding, or the practice of using two established brand names on the same product, is a commonly used marketing tool. However, there is little, if any evidence in academic research supporting the view that co-branded products are wise investments for their parent firms. Whether financial rewards accrue to the manufacturer of co-branded products (e.g., the primary brand parent) or to the partner firm that lends its brand to the co-branded product (e.g., the secondary brand parent), and how these rewards may differ depending on the characteristics of the cobranded product itself are yet unanswered questions. Using a large dataset of cobranded products from the consumer packaged goods industry, we find that announcements of co-branding products are indeed greeted, on average, with positive abnormal returns, above and beyond what the same firms garner from non cobranded innovations, but the magnitude of these returns does vary by the position of the firm in the alliance as well as the characteristics of the co-branded products. We also find that in the short term, the manufacturer of the primary brand gains significantly more from endorsement than from other types of co-branding, but the parent firm of the secondary brand gains most from composite branding. Both partner firms benefit from prior co-branding experience and co-branding with complementary brands. In contrast, innovative co-branded products and products relying on exclusive provisions of secondary brands only benefit the parent firms of the primary brand. The insights from this research offer clear and actionable managerial guidelines for selecting co-branding partnerships that can lead to positive financial returns in both the short and long term. 4 - The Value of a Global Brand: Is Perception Reality? Michael Sorell, Research Associate, IMD, Chemin de Bellerive 23, P.O.Box 915, Lausanne, Switzerland, michael.sorell@imd.ch, Arturo Bris, Willem Smit The Global Brand possesses an aura of excellence and is perceived as superior in the eyes of many consumers. Does the Global Brand uphold that promise in financial terms to firms as well? This paper analyzes the operating, financial, and market performance of firms included in Interbrand’s 100 Global Brands during the period 2000-2008. The market valuation of intangibles – in particular of brands – has been extensively studied in the literature. These intangibles (brand, intellectual property, employee satisfaction) are inherently valuable. However, only certain firms in an industry implement a Global Brand strategy, so our hypothesis is that any advantage of such strategy has to be eliminated in equilibrium. Our results, based on pairs of Global Brand firms matched with non-global brand peers, confirm that Global Brands do not earn significantly higher stock returns. They have larger marketing and R&D expenses. However, their EBIT margins are overall higher, suggesting that global brand firms are priced higher because of their better acceptance among consumers. Additionally, Global Brands sell more per unit of capital (asset turnover), thus resulting in significantly higher return on operating assets. Global Brands take on less debt than other firms because they base their performance on a highly valuable, yet intangible asset, and we indeed confirm that the market-to-book ratio of GB is significantly higher. However, we also show that GB do not display significant riskadjusted excess returns. MARKETING SCIENCE CONFERENCE – 2011 FB14 51 ■ FB14 Champions Center VI Pricing Research Contributed Session Chair: R. Mohan Pisharodi, Associate Professor of Marketing, Oakland University, 414 Elliott Hall, School of Business Administration, Rochester, MI, 48309, United States of America, pisharod@oakland.edu 1 - Service Refund as a Price Discrimination Mechanism Zelin Zhang, PhD, University of Kansas, Lawrence, KS, 66045, United States of America, zelinzh@ku.edu, Weishi Lim The refund policy is commonly used in the service industry (such as airline, hotel and ticket reservation) where the service provider adopts advance selling strategy. Consumers can reserve the service during the advance selling period or make a purchase during the spot selling period. For the consumers who reserve the service in advance but finally cannot redeem it, the service provider may offer them an opportunity to return the service by paying a refund charge. In this paper, we show that in addition to the commonly perceived function of the return policy as a profit driver, the return policy also serves as a price discrimination mechanism. More specifically, we show that when there is no capacity constraint, an appropriately chosen refund policy can help the seller maximize the profit by serving the dual functions as a profit driver and as a price discrimination mechanism. However, as the seller faces a more rigid capacity constraint, the role of the refund policy as a price discrimination mechanism diminishes. 2 - Determinants of Gain and Loss Parameters in Store-level Data: A Cross-category Analysis Sebastian Oetzel, Goethe-University Frankfurt, Grüneburgplatz 1, Frankfurt, 60323, Germany, oetzel@wiwi.uni-frankfurt.de, Daniel Klapper Reference price models have experienced broad empirical support, and researchers have proposed many methods to infer the unobserved reference price. Their results indicate that demand for a brand does not only depend on the brand’s price, but also depends on the consumers’ behavior if they do more respond to losses (reference price < price) or to gains (reference price > price). Typically the responses to gains and losses are asymmetric. Under certain conditions researchers have found out, if the effect of gains is higher than that of corresponding losses, the optimal pricing policy is cyclical. In contrast, if the gain parameter is less than or equal to the loss parameter, a constant price is optimal. Furthermore empirical results indicate that gain and loss parameters seem to differ across brands, product categories, and retail outlets. However, there is little research which examines the factors associated with these observed differences. Using weekly store-level scanner data representing 34 product categories, the authors estimate store-specific gain and loss effects on the basis of a structural sales response model and relate these parameters to a broad set of category characteristics and store environment moderators (e. g. promotion depth and frequency, number of brand varieties or private-label share). The results add additional insights into the nature and structure of reference price effects and also offer guidelines to retail and brand managers for the planning and evaluation of optimal pricing policies. 3 - The Timing and Speed of New Product Price Landings Carlos Hernandez Mireles, Erasmus University, Burg. Oudlaan 50, Rotterdam, Netherlands, mireles@ese.eur.nl, Dennis Fok, Philip Hans Franses Many high-tech products and durable goods exhibit exactly one significant price cut some time after their launch. We call this sudden transition from high to low prices the price landing. In this chapter we present a new model that describes two important features of price landings: their timing and their speed. Prior literature suggests that prices might be driven by sales, product line pricing, competitor’s sales or simply by time. We propose a model using mixture components that identifies which of these explanations is the most likely trigger of price landings. We define triggers as thresholds after which prices are significantly cut. In addition, price landings might differ across products and therefore we model their heterogeneity with a hierarchical structure that depends mainly on firm, product type and seasonal effects. We estimate our model parameters applying Bayesian methodology and we use a rich data containing the sales and prices of 1195 newly released video games. In contrast with previous literature, we find that competition and time itself are the main triggers of price landings while past sales and product line are less likely triggers. Moreover, we find substantial heterogeneity in the timing and speed of price landing across firms and product types.
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