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FD12 MARKETING SCIENCE CONFERENCE – 2011 4 - Identifying the Presence and Cause of Fashion Cycles in the Choice of Given Names Hema Yoganarasimhan, Graduate School of Management, UC Davis, 3204 Gallagher Hall, Davis, 95616, United States of America, hyoganarasimhan@ucdavis.edu Fashion denotes the changing tastes in conspicuously consumed products and choices. There are two classic, but competing theories of fashion – (1) Veblen’s theory of fashion as a signal of wealth, and (2) Bourdieu’s theory of fashion as a signal of cultural capital. Theoretically, both theories can give rise to fashion cycles, and there is considerable debate in the literature as to whether fashions are driven by consumers’ desire to signal wealth or by their need to signal cultural capital. However, there exists no systematic empirical investigation of the phenomenon of fashion. So far, even the existence of fashion cycles hasn’t been empirically established. In this paper, we bridge this significant gap in the literature. We examine the presence and cause of fashion cycles in the choice of given names. Using a rigorous set of panel unit root tests, we first empirically establish the existence of fashion cycles in the choice of given names. Second, by exploiting state-level variation in measures of economic and cultural capital, we test the validity of the two competing theories of fashion. Our result support Bourdieu’s cultural capital theory. ■ FD12 Champions Center II Models of Word of Mouth Processes Contributed Session Ingmar Nolte, Assistant Professor, Warwick Business School, Gibbet Hill Road, Coventry CV4 7AL, United Kingdom, Ingmar.Nolte@wbs.ac.uk 1 - Modeling Promotional Word-of-mouth Backhun Lee, PhD Candidate, KAIST Business School, 87 Hqeiro Dongdaemoon-Gu, Seoul, 130-722, Korea, Republic of, normalsf@business.kaist.ac.kr, Minhi Hahn Internet communication websites allow consumers to share usage experiences and consumer product reviews. They promote word-of-mouth (WOM) activities of consumers overcoming geographic boundaries. However, firms may take advantage of the anonymity of the internet to disguise their promotion as consumer reviews. Even though most marketers and consumers perceive this “promotional” WOM, there are few studies regarding this issue. Mayzlin (2006) studied this phenomenon based on a game theory and found interesting results. Yet, there is no empirical evidence of promotional WOM so far. Our study contributes to the literature as the first empirical analysis to study promotional WOM and its effects. We collected online user review data from three different movie review websites for 732 movies released in South Korea during a 46-month period. The final data set includes about 2,600,000 user reviews and 950,000 user IDs for each of websites. Individual consumers post a review after they purchase a product. The valence of review depends on the product quality, consumer preference, and random errors. At the aggregate level, the volume of WOM is the number of individual reviews. The valence of WOM is the average of valences of all reviews. Therefore, the volume depends on the previous product sales and the valence depends on the product quality. On the other hand, the firms generate promotional WOM to increase both a volume and a valence of online WOM arbitrarily. Therefore the volume and valence of online WOM shares correlated error terms due to promotional WOM. We develop a mathematical model based on consumer behavior. The estimated results support our model and existence of promotional WOM. The effects of actual WOM and promotional WOM on product sales are investigated. 2 - Where Do the Joneses Go on Vacation? Social Comparison and the Weighting of Information Ingmar Nolte, Assistant Professor, Warwick Business School, Gibbet Hill Road, Coventry, CV4 7AL, United Kingdom, Ingmar.Nolte@wbs.ac.uk, Sandra Nolte, Leif Brandes Does social distance between senders and receivers of information impact social learning? This paper aims to answer this question empirically with data on hotel bookings and customer reviews. Specifically, we analyze the effect of group membership differences between reviewers and customers on customers’ preferences for hotels. The data come from the largest travel and holiday booking portal on the web for German speaking countries, and include five years of hotel bookings. Our empirical analysis uses two distinctive features of the data. First, customer reviews include information on whether the reviewer travelled as single, couple, family, or with friends. This classifies reviewers into categories. Second, the data includes full information on each booking, including timestamp, price, travel time, destination, and travelers’ characteristics. This allows us to classify bookers into the same categories, and to reconstruct a hotel’s state of reviews for the time of each booking. We use bookers’ willingness to spend to measure hotel preference. Our findings are twofold. First, we show a positive link between reviewer ratings and customers’ willingness to spend. This result extends previous literature on customer reviews and aggregate product sales. Second, customers from one group weight information from other groups’ reviewers differently leading to asymmetric effects across groups. We contribute to the literature on social distance and opinion formation in two ways: despite the existence of a wide range of theoretical models, and a number of experimental studies, this is the first empirical evidence based on microlevel data. Moreover, on the basis of the documented asymmetry in information weighting we conclude that further theoretical development is required. 68 ■ FD13 Champions Center III Network Effects Contributed Session Chair: Harikesh Nair, Associate Professor, Stanford University, 518 Memorial Way, Stanford, CA, 94305, Uganda, harikesh.nair@stanford.edu 1 - Online Consumer-to-consumer Communication and Marketing Strategy Ganesh Iyer, University of California-Berkeley, Haas School of Business, Berkeley, CA, 94720, United States of America, giyer@haas.berkeley.edu, Zsolt Katona We investigate consumers’ incentives to communicate with their peers in the context of the emergence of Internet social media technologies. In particular, we examine the effects of different types of communication cost structures through which new technologies change the way consumers send - potentially product related - messages. These new social networking technologies make it possible to send the same message to many receivers for the same fixed cost and for negligible (often zero) marginal cost. This is distinct from traditional word-of-mouth which involves additional marginal cost for each intended recipient. Our results show that the new social networking technologies may reduce incentives of some individuals to send messages leading to less diverse communication. The number of senders may shrink but each sender may potentially send messages to the entire network of receivers. Our results also suggest that the online social communication phenomenon could lead to reduced consumer heterogeneity if the source of messages is a small homogeneous group. We also study the interaction of the decision to send messages and the choice of quality. 2 - Identifying High Value Customers in a Network: Individual Characteristics Versus Social Influence Sang-Uk Jung, Doctoral Candidate, University of Iowa, 108 Pappajohn Business Building, Iowa City, IA, 52242, United States of America, sanguk-jung@uiowa.edu, Qin Zhang, Gary J. Russell Firms are interested in identifying customers who generate the highest revenues. Typically, customers are regarded as isolated individuals whose buying behavior depends solely on their own characteristics (e.g., previous purchase behavior, demographics etc.). In a social network setting, however, customer interactions can play an important role in purchase behavior. Previous work on social networks has focused most attention on modeling the interaction between individuals and understanding the positions of individuals in a network (e.g., measuring the influence of an individual based on his/her degree of network centrality). Little is known about how network influence directly translates into the benefits to the firm. In this paper, we argue that it is important to take into account both individual and network effects when measuring customer value. Drawing upon the statistics literature, we construct a conditional autoregressive (CAR) spatial model that explicitly shows how these effects interact in generating firm revenue. We apply our model to a unique userlevel dataset from a popular online gaming company in Korea. The data contain information about individual gamer demographics, interaction between gamers, behavior within the game environment, and revenues generated by each individual. Our model outperforms benchmark models in predicting revenues that gamers generate. It also allows us to quantify the relative impact of individual and network effects on revenues. We show that individuals who are most influential in a network sense may not necessarily be individuals who have the highest customer value. Implications of the model for targeted marketing policies are discussed. 3 - Brand Value and Indirect Network Effects in a Two-sided Platform Yutec Sun, University of Toronto, 105 St. George St, Toronto, ON, M4V 1W1, Canada, yutec.sun07@rotman.utoronto.ca This proposal aims to evaluate the impact of endogenous software supply on brand value in the U.S. smartphone market during 2007-2009. With the introduction of Apple’s App Store, the smartphone was transformed to a two-sided software platform, where consumers and third-party software developers buy and sell smartphone applications, creating positive indirect network effects to the other sides. The indirect network effects are found in many studies as a critical factor in marketing tipping toward one dominant platform, regardless of the intrinsic qualities of the platforms. Yet the increasing reliance of the smartphones on software attributes implies a bigger role for brands, since software qualities are essentially experience attributes. While the relative strength of indirect network effects and brand values can determine the eventual market structure, their strategic relation has remained unclear in the relevant empirical literature. I propose to fill this gap by measuring the contributions of software and brands to the equilibrium profits, combining the approaches of Goldfarb, Lu, and Moorthy (2009), and Nair, Chintagunta, and DubÈ (2004). The preliminary results suggest that without the indirect network effects, iPhone and Anroid’s brand values will decrease by more than 60%.
4 - Social Ties and User Generated Content: Evidence from an Online Social Network Harikesh Nair, Associate Professor, Stanford University, 518 Memorial Way, Stanford, CA, 94305, Uganda, harikesh.nair@stanford.edu, Reto Hofstetter, Scott Shriver We use variation in wind speeds at surfing locations in Switzerland as exogenous shifters of usersÌpropensity to post content about their surfing activity onto an online social network. We exploit this variation to test whether users social ties on the network have a causal effect on their content generation, and whether content generation in turn has a causal effect on the users’ ability to form social ties. Economically significant causal effects of this kind can produce positive feedback that generate multiplier effects to interventions that subsidize tie formation. We argue these interventions can therefore be the basis of a strategy by the from to indirectly facilitate content generation on the site. The exogenous variation provided by wind speeds enable us to measure this feedback empirically and to assess the return on investment from such policies. We use a detailed dataset from an online social network that comprises the complete history of social tie formation and content generation on the site. The richness of the data enable us to control for several spurious confounds that have typically plagued empirical analysis of social interactions. Our results show evidence of significant positive feedback in user content generation. We discuss the implications of the estimates for the management of the content and the growth of the network. Finally, we also provide bounds for robust identification of causal social effects under weak identification conditions. ■ FD14 Champions Center VI Marketing Strategy I: General Contributed Session Chair: Neil Bendle, Assistant Professor, University of Western Ontario, Ivey School of Business, 1151 Richmond Street N, London, ON, N6A 3K7, Canada, nbendle@ivey.uwo.ca 1 - Does Market Potential Always Attract New Market Entry? A Contingency View Namwoon Kim, Professor, Hong Kong Polytechnic University, Department of Management and Marketing, Hung Hom, Kowloon, Hong Kong, Hong Kong - PRC, msnam@polyu.edu.hk, Ge Zhan, Sungwook Min Market potential, defined as the anticipated industry sales/customer population in the marketplace, has long been viewed in the literature as being related to market entry motivation (Fuentelsaz and Gomez 2006; Pennings 1982). While numerous findings identify market potential as the main incentive driving firms’ decisions to enter new markets (e.g., Baum and Korn 1996; Swaminathan 1998; Damar 2009), more than a few studies report a weak or even negative impact of market potential on such decisions (e.g., Bronnenberg and Mela 2004; Chesbrough 2003). In this regard, the emerging literature notes that entry into a new market is a complicated and multifaceted event that may be more influenced by other contextual factors such as industry background and the firm’s industry experience, as well as choice of targetmarket strategy (niche versus mass marketing). Based on a theoretical and integrative review of the existing literature on the relationship between market potential and market entry, this study provides a contingency framework to explain the conditions that strengthen or weaken this relationship. Using 187 parameter estimates from 38 previous studies, our meta-analytic regression models have validated significant moderating effects for the market potential – market entry relationship. The moderating contexts are whether: (1) the new market is categorized as a high-tech or non-high-tech industry; (2) the entry is made by an established industry-incumbent or by a start-up; (3) the new market is a new-product market for the firm or a new geographic market; and (4) the new market entry targets a niche market or a mass market. 2 - Repositioning via Abstraction Using Categorical Data Jonathan Lee, Associate Professor of Marketing, California State University-Long Beach, CBA 351 Dept of Marketing, 1250 Bellflower Blvd, Long Beach, CA, 90840-8501, United States of America, jlee6@csulb.edu, Heungsun Hwang Positioning is an essential strategic decision that represents a unique challenge for many marketers. While previous empirical models for positioning focus primarily on product features/attributes, we propose an abstraction framework (attributes-benefitsvalues) for the repositioning problem, arguing that consumer benefits and values can offer more effective strategic options compared to an attribute-based perspective. We present a simultaneous two-way clustering approach using a mixture of Bayesian multiple correspondence analysis for repositioning to account for cluster-level MARKETING SCIENCE CONFERENCE – 2011 FD14 69 heterogeneity of both consumers and variable categories using categorical data. The main objective is to obtain a positioning map that also accounts for the heterogeneity in consumer perceptions by identifying joint clusters, each consisting of a distinct subset of consumers and variable categories. A comprehensive view of repositioning through a joint mapping of consumers and attribute categories at each abstraction level adds row-dimension projections. Thus, repositioning strategy can be evaluated based on consumer demographic and/or psychographic characteristics in addition to attribute-level changes. We illustrate the efficacy of the proposed theoretical framework and empirical model with consumer panel data for mid-sized sedan automobiles. 3 - Business is in My Blood: Do Family Firms Outperform Non-family Firms During Economic Recessions? Saim Kashmiri, PhD Candidate, University of Texas at Austin, 1 University Station B6200, Austin, TX, 78712, United States of America, saim.kashmiri@phd.mccombs.utexas.edu, Vijay Mahajan Family firms – firms owned and/or managed by founders or their families – play a critical role in the U.S. economy, making up about 35 percent of firms listed on the S&P 500 or Fortune 500 indices and contributing about 65 percent to the U.S. GDP. This research explores whether family firms exhibit unique strategic behavior during economic recessions and whether this behavior in turn helps them outperform nonfamily firms. Findings based on a sample of 428 U.S. publicly listed firms, over seven U.S. recessions between the years 1970 and 2008, reveals that family firms consistently outperform non-family firms during recessions. This superior performance is partially driven by founding families’ longer horizons while investing in such market-based assets as brand capital, social capital and human capital. Family firms do not decrease advertising as much as non-family firms do during recessions, thereby exhibiting higher levels of advertising intensity. Family firms also get involved in fewer social and employee-related unethical actions. Furthermore, family firms’ lower financial leverage helps minimize bankruptcy threat, also boosting these firms’ performance during recessions. These results underscore the benefits of a maintaining a conservative capital structure, and making consistent investments in market-based assets. These results also add to the scant family-firm literature, demonstrating family firm ownership to be an effective organizational structure during recessions. 4 - Are Your Customers Crazy? Neil Bendle, Assistant Professor, University of Western Ontario, Ivey School of Business, 1151 Richmond Street N, London, ON, N6A 3K7, Canada, nbendle@ivey.uwo.ca Contrary to Drucker’s (2007) advice marketing has enthusiastically embraced irrationality (Godin 2009, Cusick 2009). Writers draw upon behavioral economics (Kahneman 1994, Ariely 2008, 2010) where academics argue persuasively against Homo Economicus. Shugan (2006) however notes that conflating Homo Economicus - “adept optimizers” with “perfect foresight” who “never tire” - with rational is a marketing ploy by certain economists. Homo Economicus is but one, rather limited, view of rationality (Binmore 2009). Marketers can question the premise that Homo Economicus equals rational. Irrational is a pejorative term for customers while Homo Economicus diminishes our discipline by implying that marketing to “rational” customers is pointless. Furthermore given it is a reaction to the confused notion of Homo Economicus irrational is itself ill defined. Instead of adopting Homo Economicus or embracing irrationality I recommend marketers articulate their own view of consumer rationality accepting consumers have, sometimes surprising, reasons for their actions. A marketer’s view of consumer rationality should answer simple questions such as: Are mistakes irrational? Choices based upon social preferences? I examine the connection between rationality assumptions and marketing strategy to show that a view of rationality should be the basis of a behavioral marketing strategy. For instance if needs are inherently unpredictable seeking to find and satisfy consumers’ current and future needs – a central pillar of market orientation (Kohli & Jaworski 1990) – becomes a futile endeavor. Similarly advertising (including informative advertising) is pointless for those who accept Homo Economicus. A marketer’s conception of customer rationality is critical to determining marketing strategy.
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