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

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SB03 MARKETING SCIENCE CONFERENCE – 2011 4 - An Empirical Comparison of Seeding Strategies for Viral Marketing Christian Barrot, Kühne Logistics University, Hamburg, Germany, christian.barrot@the-klu.org Seeding strategies have a major influence on the success of viral marketing, but previous studies using computer simulations and analytical models produced conflicting recommendations about optimal seeding strategies. We therefore compare four different seeding strategies in two complementary small-scale field experiments and one real-life application during a viral marketing campaign that involved more than 200,000 customers of a telecommunications provider. Our results empirically show that seeding strategies that target either well-connected individuals (“high degreeness”) or individuals who connect different parts of the network (“high betweenness”) lead to a success rate twice as high as that of a random seeding strategy. In addition, our study reveals that well-connected individuals are attractive seeding points for viral marketing campaigns because they are more likely to participate. However, they do not exploit their higher reach potential and do not have more influence on their peers than less-connected individuals. These empirical results can help to better calibrate simulation studies and analytical models to produce more realistic results with respect to diffusion processes. ■ SB03 Legends Ballroom III Online Consumer Behavior Cluster: Internet and Interactive Marketing Invited Session Chair: Donna L. Hoffman, University of California-Riverside, Anderson Graduate School, 900 University Avenue, Riverside, CA, United States of America, donna.hoffman@ucr.edu 1 - Post-consumption Satisfaction with Movies: A Multivariate Poisson Analysis of Online Ratings Ruijiao Guo, PhD Student, University of Wisconsin -Milwaukee, 3528 N Oakland Ave, Apt 4, Milwaukee, WI, 53211, United States of America, freeland6696@gmail.com, Purushottam Papatla Post-consumption satisfaction with movies, as conveyed through ratings at sites like IMDB.com, rottentomatoes.com, boxofficemojo.com, Netflix.com or blockbuster.com, has an effect on off-theater revenue streams such as DVD sales, movie rentals and, potentially, on the performance of sequels as well. It is therefore important for movie producers to understand which factors affect consumer satisfaction with movies and the relative importance of each factor. Such insights would be useful in producing movies that are likely to lead to high customer satisfaction and, hence, better economic performance. This is the issue that we investigate in this research. Specifically, we examine the relative roles of human capital, hedonic product attributes, utilitarian product attributes and market coverage on post-consumption satisfaction with movies. We operationalize post-consumption satisfaction with a movie as the vector of counts across rating levels 1-10, for that movie, at IMDB.com. Since the counts across rating levels are likely to be correlated both due to observed as well as omitted factors, we model the counts jointly using a Multivariate Poisson Log Normal specification and calibrate the model using MCMC methods. Findings, managerial implications, limitations, and future directions are discussed. 2 - The Role of Trust in the Firm-hosted Virtual Community in Purchase Intentions Formation Illaria Dalla Pozza, Italy, dpilaria@libero.it The rapid increase in number of virtual communities on the Internet raises important questions on the influence that these communities can have on consumer purchasing intentions and behaviour. Information in virtual communities comes from anonymous and faceless individuals who can increase the perception of risk and uncertainty. In this particular situation, the exigency of trust arises, as the virtual community is an environment abounding in uncertainties and ambiguities (Ridings et al 2002). This study suggests that trust in the virtual community is a key determinant in fostering the influence virtual community can have on consumer purchasing intentions and behaviour. Differently from previous research, that has predominantly focused on trust in dyadic (one-to-one) relationships, we here focus on trust between an individual user and the entire community of participants in a firm-hosted online community (one-to-many relationship). There is a limited body of related prior research analyzing the role of trust in online consumer to consumer marketplaces and in one-to-many relationships (Pavlou and Gefen 2004, Ridings et al 2002 and Wu and Tsang 2008). In analyzing firm-hosted virtual communities, this paper adds and extends the existing literature by answering the following four key questions: what are the drivers of trust in a firm-hosted virtual community? How does the trust in the virtual community influence consumers’ intentions to act on the community advice and intentions to buy? How is trust in the virtual community interrelated with the loyalty for the firm hosting the community? How do product characteristics affect the relationships? 80 3 - Modeling Unobserved Drop-out Rate to Optimize e-Panelist Lifetime Value Arnaud De Bruyn, ESSEC Business School, Cergy, 95000, France, debruyn@essec.edu Online access panels are becoming of paramount importance in marketing research, and constitutes a great asset for market research firms. In this paper, we show that traditional models fail to quantify the true “cost” of an electronic solicitation, and we demonstrate that each additional solicitation not only decreases the likelihood of future participation, but might even increase the drop-out rate (a mostly unobserved phenomenon that has a dramatic impact on the lifetime value of an e-panelist). Our model estimates the likelihood that an e-panelist will respond positively to a new solicitation, as a function of his past behavior and how many times he has been solicited so far, and integrates a latent “wear out” effect. We fit the model on a sample of more than 700,000 e-mail solicitations sent over a period of 3 years, and demonstrate that each additional solicitation contributes to a long-lasting wear-out effect; the unobserved drop-out rate can reach up to 10% at each additional solicitation. 4 - Why People Use Social Media: How Motivations Influence Goal Pursuit Donna L. Hoffman, University of California-Riverside, Anderson Graduate School, 900 University Avenue, Riverside, CA, United States of America, donna.hoffman@ucr.edu As social media applications proliferate and the dynamics of online social interaction continue to evolve, researchers are seeking deeper understanding of how and why people use social media so that theoretically consistent models linking user motivations, social media goals, and consumer behavior outcomes can be constructed. In this research we use a multi-level modeling framework to test a conceptual model of the relationship between social media goal pursuit and subjective well-being that is grounded in motivational theory. In the theoretical framework, the broad range of goals people have for using social media is uniquely determined by two broad dimensions that specify the primary focus of the 1) content interaction and the 2) person interaction. The social media goals corresponding to these dimensions are hypothesized to be pursued according to the basic needs that social media satisfy for its users and the motivational orientations supported by those needs. The model states goals, in turn, lead to different subjective outcomes with the relationship between social media goal pursuit and well-being moderated by perceptions of overall well-being in specific life domains, along with constructs related to social identity. Two large-sample studies support the model hypotheses. Researchers may use these results to build upon a common set of constructs for understanding why people use social media and marketing managers may use the results to help focus social media strategic efforts. The results may also assist marketers seeking to incorporate into their content applications those social components that best satisfy consumers’ basic needs and lead to the most positive outcomes. ■ SB04 Legends Ballroom V Product Management: General Contributed Session Chair: Yeong Seon Kang, Doctoral Student, University of California, Irvine, CA, The Paul Merage School of Business, Irvine, CA, 92697-3125, United States of America, yskang@uci.edu 1 - Voice Banking: An Exploratory Study of the Access to Banking Services Using Natural Speech Mauro Arancibia, CEO, Merlìn Telecommunications, Matilde Salamanca 736. Ofic 301, Providencia, Santiago, 7500657, Chile, mauro@merlin.com, Claudio Villar, Jorge Marshall, Natalia Arancibia, Sergio Meza One of the factors associated with a country’s economic development is the penetration level of the banking system in the population (Chaia A. et al 2009). In Latin America the average of people without access to banking services is above 65% (McKinsey, 2008). Although in Chile this value is considerably smaller, there is a sizable population ready to take advantage of a variety of traditional and new banking services. Penetration of cell phones in the region (e.g Chile, near 100%) can exhibit levels that are comparable to those of developed countries. This fact has opened the possibility of using wireless devices as primary channels of access to banking services. Some pioneer institutions are already offering basic applications. Since the penetration of smart phones is still low in the focal population, banking applications based on natural speech become interesting. Some key questions are raised: who would be willing to adopt the use of banking services through their wireless devices? What are the main challenges of the adoption? In this study we explore these questions in a field experiment conducted in Chile with 50 potential customers in a pilot product using their own cell phones. The main results of the study are: 92% of the individuals were able to complete the transaction on first trial. 64% of the individuals believed they would adopt the product when available. Perception of security, complexity and transaction length emerged as the three main factors that challenge the adoption of the service. No gender or age effect to explain differences was found, across the pilot sample. The paper concludes with new insights, further elements to research and implications for CRM.
2 - R&D Spillover and Product Differentiation in Fully Covered Market Xin Wang, University of Cincinnati, 402 Carl H. Lindner Hall, 2925 Campus Green Drive, Cincinnati, OH, 45221, United States of America, wang2x5@mail.uc.edu, Yuying Xie The literature is limited on the effect of R&D spillover on the strategic choice of product quality. A recent study finds that the externality of R&D spillover unambiguously enhances the strategic development of quality for both the high-end producer and the low-end producer, which is contrary to the traditional viewpoint that spillovers decrease the spillover supplier’s incentive to improve. This paper explores the spillover effects on quality when markets are fully covered. Three scenarios are analyzed by using a popular setting of duopolistic competition in a quality-price two-stage game. Scenario 1 is a simultaneous game without production cost. We find that the firm producing at the low-end has a corner solution, and technology spillovers have no effect on either firm due to the corner solution. Scenario 2 considers asymmetric production cost by assuming a unit cost to the highend producer. We find that the spillovers improve quality of the low-end firm but discourage the high-end firm to innovate. Scenario 3 considers the combination of market leadership and two-way spillovers. Specifically, we assume the low-end firm to be the leader in stage 2. We find that both qualities are improved due to technology spillovers. Overall, these results show that R&D spillovers have diverse effects on product qualities in various circumstances. The question of how technology spillovers influence foreign investments in product quality requires careful examinations of consumer preferences, the nature of products, and the competitiveness of firms. 3 - Downsizing or Price Competition Responding to Increasing Input Cost Yeong Seon Kang, Doctoral Student, University of California, Irvine, The Paul Merage School of Business, Irvine, CA, 92697-3125, United States of America, yskang@uci.edu This study is to determine the firm’s optimal strategy in choosing between a price increase or downsizing the package size under conditions of a spatially differentiated market and each consumer’s diminishing marginal utility as product size increases. When a manufacturing firm faces a steep increase in its variable input cost, the firm usually increases the price of its product to share the loss in its profits with consumers. Downsizing can be an alternative strategy for the firm instead of a price increase. We assume that a firm downsizes the product package while maintaining its price. We find that the degree of competition and the amount of input cost increase affect a firm’s optimal strategy. If the rival firm chooses to increase the price when responding to an input cost increase, then the firm’s increasing price is always a dominant strategy. When the degree of competition is sufficiently large and the amount of input cost increase is sufficiently small, both firms choose a price increase in a unique Nash equilibrium. When the degree of competition is sufficiently small or when the amount of the input cost increase is sufficiently large, then both firms choose a price increase or both firms choose downsizing in equilibrium. Both cases are Nash equilibria and the former has higher profits than the latter because both firms pass through the entire amount of the input cost increase to the end consumers by the price increase. Therefore, both firms’ profits can maintain the same value as the benchmark case before the input cost increases. We also show that the asymmetric pairs of a price increase by one firm and downsizing by the other are never Nash equilibra in our framework, and both firms symmetrically choose the same strategy in equilibrium. ■ SB05 Legends Ballroom VI Game Theory V: General Contributed Session Chair: Ruhai Wu, Assistant Professor, McMaster University, 1280 Main Street West, Hamilton, ON, L9G5C5, Canada, wuruhai@mcmaster.ca 1 - Within-firm and Across-firm Search: The Impact on Firms’ Product Lines and Prices Anthony Dukes, University of Southern California, Marshall School of Business, Los Angeles, CA, 90089, United States of America, dukes@marshall.usc.edu, Lin Liu Many firms offer a related set of products, all of which are intended to satisfy a specific consumer need, but each differing on feature, color, or styling. Furthermore, comparing alternatives within a firm’s product line may be non-trivial for consumers. But most models of consumer search assume that consumers incur search costs only when comparing products of different firms. In this research, we examine the implications when consumers incur costs searching within a firm. Specifically, we decompose consumer search into within-firm and across-firm components and examine a model in which firms compete on prices and product line length. We show that the consideration of within-firm search costs leads to insights not seen in the prior literature on consumer search. Under certain conditions, as firms’ products become closer substitutes, consumers search less across firms but more within each firm, causing firms to expand their product lines. And, unlike across-firm search costs, an increase in within-firm search cost does not necessarily lead to higher prices. MARKETING SCIENCE CONFERENCE – 2011 SB05 81 2 - Bounded Rationality in Dynamic Games: Insights into Strategy Optimization Amid Player Uncertainty Jennifer Cutler, Duke University, Durham, NC, United States of America, jennifer.cutler@duke.edu In boundedly rational paradigms, players of lengthy dynamic games are limited in how many levels ahead they can think. When selecting a strategy, players must make several decisions: how far ahead they will choose to think (subject to their cognitive constraints), how far ahead they believe other players will think, and how to define higher order beliefs (e.g. player 1’s beliefs about player 2’s beliefs about player 1). We use analytical and numerical analyses to explore the main effects and interactions of these decisions on payoff in generalizable dynamic game contexts that are independent of payoff structure. First, we demonstrate asymmetry in opponent estimation errors that are too high versus too low, and provide contextual parameters that moderate and reverse the differences. Second, we explore the effects of increasing levels of thinking, and show how they interact with opponent estimation errors. Third, we introduce costly effort, and reevaluate the outcomes for net payoff. The theoretical results are then demonstrated in several well-known dynamic marketing games. The results provide new strategic insights for optimizing payoff amid uncertainty in other players’ abilities. First, contexts in which it is advantageous to underestimate opponents’ abilities are delineated from contexts in which the reverse is true. Second, situations in which it is advantageous to restrict one’s own level of thinking are defined. 3 - Firm Strategies in the “Mid Tail” of Platform-based Retailing Baojun Jiang, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA, 15213, United States of America, baojun@cmu.edu, Kinshuk Jerath, Kannan Srinivasan While millions of products are sold on its retail platform, Amazon.com itself stocks and sells only a small fraction of them. Most of these products are sold by third-party sellers, who pay Amazon a fee for each unit sold. Empirical evidence clearly suggests that Amazon tends to sell high-demand products and leave long-tail products for independent sellers to offer. We investigate how a platform owner such as Amazon, facing ex ante demand uncertainty, may strategically learn from these sellers’ early sales which of the “mid-tail” products are worthwhile for its direct selling and which are best left for others to sell. The platform owner’s “cherry-picking” of the successful products, however, gives an independent seller the incentive to mask any high demand by lowering his sales with a reduced service level (unobserved by the platform owner). We analyze this strategic interaction between the platform owner and the independent seller using a game-theoretic model with two types of sellers – one with high demand and one with low demand. We show that it may not always be optimal for the platform owner to identify the seller’s demand. Interestingly, the platform owner may be worse off by retaining its option to sell the independent seller’s product whereas both types of sellers may benefit from the platform owner’s threat of entry. The platform owner’s entry option may reduce the consumer surplus in the early period though it increases the consumer surplus in the later period. We also investigate how consumer reviews influence the market outcome. 4 - Repeated Consumption Pattern under Different Pricing Schemes Ruhai Wu, Assistant Professor, McMaster University, 1280 Main Street West, Hamilton, ON, L9G5C5, Canada, wuruhai@mcmaster.ca, Suman Basuroy Consumers with repeated consumptions often sign in long-term pricing contracts, such as monthly membership, prepaid plan, etc. They estimate their future consumptions when choosing among different pricing schemes. Their contractual choices subsequently influence their realized consumptions. In this paper, we develop a repeated game model studying the consumers’ decisions on pricing schemes and on repeated consumption. We study the three pricing schemes, namely, pay per visit, Tperiod (monthly) membership and prepaid K-visit (10-visit) pass. The model shows that the consumers realize different consumption patterns under different pricing schemes, and illustrate the consumers’ optimal choices among the pricing schemes. Interestingly, under certain condition, consumers choose T-period membership even though it is expected to result a “per-usage” cost higher than that under other pricing schemes. This outcome is consistent with the finding in Della Vigna and Malmendier (2006), where the authors explained it as consumers’ overestimation of future consumption. We also show the firm’s price discrimination solution in context of design of pricing schemes, given consumers’ contractual and consumption decisions.
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