Conference Sessions - Jesse H. Jones Graduate School of ...

3 - Which Link to Click – Sponsored or Organic? An Empirical
Investigation on Consumer’s ‘Clickability’
Amalesh Sharma, Teaching Associate, Indian School of Business,
Gachibowli, Hyderabad, 500032, India, amaleshsharma@gmail.com,
Sourav Borah
Sponsored search advertising has arguably become the most predominant form of
advertising in the online marketing strategy. Sponsored links are paid links and
organic links are natural or non-paid links. Prior research has studied the relation
between organic and sponsored search advertisement, click process and clicking time
(Chatterjee, Hoffman, Novak 2003), browsing behavior of customers in multi-site
context (Park and Fader 2004) and online media selection (Danahar, Lee and
Kerbache 2009). Montgomery et al (2004) model online browsing behavior to predict
buying behavior of customers. In this research we study which specific link in a webpage
is clicked on in a consumer search algorithm and why. An extended
understanding on the clickability can open up advanced research area in online
marketing literature and help to capture the dynamics in the market. We also try to
understand the drivers for such click-ability. For this, we build an integrated model
using a hierarchical Bayesian Framework to develop a relationship among factors
such as keywords findings, key-word appropriateness to the search, nature of search
(information/general), display of the link, rank of the link and previous history if any.
Our data comes from a controlled field experiments conducted in India. Our results
indicate that browsers click relatively more on the organic link (a counter finding
from the earlier researches on clickability). We also predict that our findings will
provide critical insight to the practitioners in determining where to place the name of
the organization in web page and whether to go for paid advertisements.
4 - Predicting Purchase Conversion Rates for Online Search
Advertisements Using Text Mining
Alan Montgomery, Associate Professor of Marketing, Carnegie Mellon
University, 5000 Forbes Avenue, Pittsburgh, PA, 15213, United States
of America, alan.montgomery@cmu.edu, Kinshuk Jerath, Qihang Lin
Many consumers begin their purchase process at search engines such as Google,
Yahoo, or MSN instead of traditional retailers. Consumers rely upon the search
results provided by these engines along with paid advertising to make decisions about
what sites to visit and subsequently which products to purchase. In this study we
propose a statistical model that predicts consumer search and the probability of
purchase using clickstream data collected from an online sample of consumers. A
challenge in analyzing this data is the textual nature of the search strings and the
scarcity of many search terms. We also consider how consumers will search based
upon the specificity of the search term. This model is cast in the context of a
hierarchical Bayesian model to overcome the limited information for many search
strings and consumers. We illustrate how this model can be used to aid advertisers in
making decisions about how much to bid, what phrase to bid upon, and the
appropriate landing page for the consumer once they enter the web site.
■ FD04
Legends Ballroom V
Structural Models II
Contributed Session
Chair: Yi Zhao, Georgia State University, Suite 1300, 35 Broad Street,
Atlanta, GA, 30303, United States of America, yizhao@gsu.edu
1 - The Impact of the Marketing Mix on Durable Product
Replacement Decisions
Dinakar Jayarajan, Doctoral Candidate, USC Marshall, 3660 Trousdale
Pkwy, ACC 306E, Los Angeles, CA, 90089, United States of America,
jayaraja@usc.edu, S. Siddarth, Jorge Silva-Risso
Product replacements account for more than 65% of sales in durable goods categories
(Fernandez, 2000). Therefore, buying a new durable product effectively involves two
consumer decisions: a) the decision to replace an existing product, and b) the choice
of a specific new alternative. The prior literature has analyzed these decisions
separately (e.g., Rust (1987); Berry, Levinsohn, and Pakes (1995)), but not jointly,
and has typically ignored the impact of marketing activities on these decisions. We
develop a dis-aggregate dynamic structural model of the replacement and brand
choice decisions with a forward-looking consumer who forms expectations of future
new product prices and promotions. On each purchase opportunity the consumer
trades off retaining the current product with buying a new product based on the
current and expected future utilities of the existing and new vehicles available in the
market. We estimate the model using the Nested Fixed Point (NFXP) approach on
automobile transaction data for the entry-level SUV category. We start with a sample
of consumers who purchased a new car in 2006 and also traded-in an old one. We
work backwards from this point and reconstruct the monthly marketing environment
for the new products and the monthly depreciation for the traded-in vehicle for up to
eight years. We perform counter-factual analysis to a) examine the extent to which
consumers anticipate promotions b) decompose the impact of a promotion on
replacement acceleration and brand switching and c) gain insights into the differences
in the depreciation rate of different vehicles.
MARKETING SCIENCE CONFERENCE – 2011 FD04
63
2 - Economic Value of Celebrity Endorsement: Tiger Woods’ Impact on
Sales of Nike Golf Balls
Kevin Chung, Doctoral Student, Carnegie Mellon University Tepper,
5000 Forbes Avenue, Office 317B GSIA, Pittsburgh, PA, 15221, United
States of America, kevinchung@cmu.edu, Timothy Derdenger,
Kannan Srinivasan
In this paper, we study the economic value of celebrity endorsements. Despite the
size and the long history of the industry, few have attempted to quantify the
economic worth of celebrity endorsers because it is terribly difficult to identify an
endorser’s effect on a firm’s profit. By developing and estimating the consumer
demand model for the golf ball market, we find that after controlling for brand
advertisement level and taking into account the inherent quality of the endorser,
there is a significant endorsement effect as a result of the extra utility attached to the
endorsed product. This extra utility leads not only to a significant number of existing
customers switching toward the endorsed products but also has a primary demand
effect where there is an overall increase in the number of consumers in the market.
By sponsoring Tiger Woods for 10 years, we find that the Nike golf ball division
reaped additional profit of $60 million through the acquisition of 4.5 million
customers who switched as a result of the endorsement. We also find that the recent
scandal regarding Tiger Woods’ infidelity had a negative impact which resulted in
Nike losing approximately $1.3 million in profit with a loss of 105,000 customers.
However, we conclude that Nike’s decision to stand by Tiger Woods was the right
decision because even in the midst of the negative impact of the scandal, had they
terminated its contract with the golfer, Nike would have lost an additional $1.6
million in profit.
3 - Determination of Brand Assortment: An Empirical Entry Game with
Post-choice Outcome
Li Wang, PhD Student, Washington University in St Louis, Olin
Business School, Campus Box 1133, Saint Louis, MO, 63130, United
States of America, wangli1@wustl.edu, Tat Y. Chan, Alvin Murphy
This paper studies the two-sided decision of brands’ entry into a large department
store. This is a two-sided decision process because an observed brand entry has to be
agreed by both department store and the brand. By contrast, in standard entry model
the entry decision is only one-sided as each agent can make such decision alone. We
assume that the store offers each potential entering brand an optimal contract
(represented by a transfer from store to brand) to maximize its expected category
value. Given the contract, each potential brand makes a take-it-or-leave-it decision.
With post-entry sales and transfer data available, we propose a structural model to
incorporate post-entry outcome data into a static entry game of incomplete
information where the outcome regression is selection-corrected by the inclusion of
entry game. This model is estimated using a direct constrained optimization approach
which is robust to multiple equilibria and circumvents the heavy computation burden
from traditional nested fixed-point algorithm. The model is applied to women’s
clothing category, the largest category of department store, and capable of quantifying
the magnitude of inter-brand spillovers. We find evidence of significant competition
and complementarity (within and out of category) across different brand types and
the selection bias from ignoring the entry decision. The estimation result helps to
understand how inter-brand spillovers, brand selling cost and brand demand are
interwined to yield observed category brand assortment and shed lights on retail
category management.
4 - An Empirical Model of Dynamic Re-entry, Advertising and Pricing
Strategies in the Wake of Product
Yi Zhao, Georgia State University, Suite 1300, 35 Broad Street,
Atlanta, GA, 30303, United States of America, yizhao@gsu.edu,
Ying Zhao, Yuxin Chen
Product harm-crisis may become the worst nightmare for any firm at some point in
time. It may affect both the demand side, such as consumer’s intrinsic preference and
sensitivities to marketing mix, and the supply side such as costs and competition
structures. Product-harm crisis always triggers a product recall, and in most cases the
affected brand will return to store shelf after the crisis is solved. The timing of reentry
can be a strategic decision for the firms. In this paper, we empirically study
firms’ re-entry strategy after a major product-harm crisis, taking into account the
demand side of market. Two other interactive strategies, pricing and advertising, are
also modeled through Markov perfect equilibrium framework. The model is applied
to product-harm crisis event that hits the peanut butter division of Kraft Food
Australia in June 1996. Substantively we find that (1) the observed “large advertising
expenditure” strategy for the unaffected brand before the affected brand re-enters the
market is optimal, since a “large advertising expenditure” in this period plays an
important role in postponing the time of re-entry for the affected brand; (2) the
competition after the occurrence of the product-harm crisis becomes more intensive.
The direct consequence of this is that both the affected and unaffected firms are
forced to adopt “low margin” and “large advertising expenditure” (comparing with
the pre-crisis advertising expenditure) strategies. As a result, the long-term
profitabilities decrease, especially for the affected brand whose profitability decreases
by 38%. Finally, the counterfactual experiments show that the increase in the effects
of the state dependence is one of the major reasons for a more intensive competition
after the product harm crisis.