Marketing Science

Desai, Preyas S.

doi: 10.1287/mksc.2013.0787pmid: N/A

No abstract available.

Toubia, Olivier; Stephen, Andrew T.

doi: 10.1287/mksc.2013.0773pmid: N/A

We empirically study the motivations of users to contribute content to social media in the context of the popular microblogging site Twitter. We focus on noncommercial users who do not benefit financially from their contributions. Previous literature suggests that there are two main types of utility that motivate these users to post content: intrinsic utility and image-related utility. We leverage the fact that these two types of utility give rise to different predictions as to whether users should increase their contributions when their number of followers increases. To address the issue that the number of followers is endogenous, we conducted a field experiment in which we exogenously added followers (or follow requests, in the case of protected accounts) to a set of users over a period of time and compared their posting activities to those of a control group. We estimated each treated user's utility function using a dynamic discrete choice model. Although our results are consistent with both types of utility being at play, our model suggests that image-related utility is larger for most users. We discuss the implications of our findings for the evolution of Twitter and the type of value firms may derive from such platforms in the future.

Narasimhan, Chakravarthi; Turut, zge

doi: 10.1287/mksc.2013.0776pmid: N/A

Laboratory and field experiments show that when choosing among a set of objects, consumers could be subjected to context-dependent preferences and evaluate options by considering both the absolute utilities and their relative standing in the choice set. Using this premise we construct a game-theoretic model of competition between two firms and investigate how a firm's decision to differentiate or imitate is affected when consumers' preferences are context-dependent. We consider two horizontally differentiated firms where some consumers own the product of one firm and the rest own the other firm's product. One firm upgrades its existing product by adding a new feature. In the absence of any cost or capability constraints, to protect its competitive position, the other firm would prefer to upgrade its product by adding a differentiated new feature. We show that if consumers' preferences are context-dependent and the new feature is of an incremental type, the second mover prefers to imitate the first mover by adding the same feature even when there is no cost disadvantage to differentiate itself. This happens because context-dependent preferences cause consumers to dislike brands that are very differentiated from one another. Thus, if the second mover mimics the first mover, both firms can charge higher prices for their upgraded products (i.e., imitation leads to higher prices). This outcome, in turn, leads the first mover to pick a new feature such that it would induce the second mover to imitate. Therefore, our analysis shows that the need for context management leads not just to imitation but also to accommodating imitation.

Guo, Liang; Iyer, Ganesh

doi: 10.1287/mksc.1120.0766pmid: N/A

We examine multilateral bargaining in vertical supply relationships that involve an upstream manufacturer who sells through two competing retailers. In these relationships the negotiations are interdependent, and bargaining externality may arise across the retailers. In addition, the timing by which the manufacturer negotiates with the retailers becomes important. In simultaneous bargaining the retailers negotiate without knowing if an agreement has been reached in the other retail channel, whereas in sequential bargaining the retailer in the second negotiation is able to observe whether an agreement was reached in the first negotiation. We show that simultaneous bargaining is optimal for the manufacturer when the retail prices (and profitability) are similar, and sequential bargaining is preferred when the dispersion in the retail prices is sufficiently large. As a result of ex post renegotiations, the manufacturer may strategically stock out the less profitable retailer who charged a relatively low retail price and exclusively supply only the retailer who charged a relatively high retail price and maintained high channel profitability. Moreover, ex post multilateral bargaining can buffer downstream competition and thus lead to positive retail profits even in markets that are close to perfect competition.

Hossain, Tanjim; Morgan, John

doi: 10.1287/mksc.1120.0770pmid: N/A

The market structure of platform competition is critically important to managers and policy makers. Network effects in these markets predict concentrated industry structures, whereas competitive effects and differentiation suggest the opposite. Standard theory offers little guidancefull rationality models have multiple equilibria with wildly varying market concentration. We relax full rationality in favor of a boundedly rational cognitive hierarchy model. Even small departures from full rationality allow sharp predictionsthere is a unique equilibrium in every case. When participants single-home and platforms are vertically differentiated, a single dominant platform emerges. Multihoming can give rise to a strongweak market structure: one platform is accessed by all, and the other is used as a backup by some agents. Horizontal differentiation, in contrast, leads to fragmentation. Differentiation, rather than competitive effects, mainly determines market structure.

Lee, Sanghak; Kim, Jaehwan; Allenby, Greg M.

doi: 10.1287/mksc.2013.0782pmid: N/A

A symmetric complements refer to goods where one good is more dependent on the other, yet consumers receive enhanced utility from consuming both. Examples include garden hoses and sprinklers, chips and dip, and routine versus personalized services where the former has a broader base for utility generation and the latter is more dependent on the other's presence. Measuring asymmetric effects is difficult when all that is observed are the purchase quantities present in a consumer's market basket. We propose a direct utility model with a latent decision sequence for measuring asymmetric effects that allows us to capture differential responses to cross-category purchases and inventories. Scanner panel data of milk and cereal purchases are used to investigate the presence of asymmetric complementarity, and implications are explored through counterfactual analyses involving cross-price elasticities and spillover effects of merchandising variables.

Schweidel, David A.; Knox, George

doi: 10.1287/mksc.2013.0781pmid: N/A

When defection is unobserved, latent attrition models provide useful insights about customer behavior and accurate forecasts of customer value. Yet extant models ignore direct marketing efforts. Response models incorporate the effects of direct marketing, but because they ignore latent attrition, they may lead firms to waste resources on inactive customers. We propose a parsimonious model that allows direct marketing to impact three relevant behaviors in latent attrition modelsthe frequency with which customers conduct transactions, the size of the transactions, and the duration for which customers remain active. Our model also accounts for how the organization targets its direct marketing across individuals and over time. Using donation data from a nonprofit organization, we find that direct marketing increases donation incidence for active donors. However, our analysis also shows that direct marketing has the potential to shorten the length of a donor's relationship. We find that our proposed model offers superior predictive performance compared with models that ignore the impact of direct marketing activity or latent attrition. We demonstrate the managerial applicability of our modeling approach by estimating the impact of direct marketing on donation behavior and identifying those donors most likely to conduct transactions in the future.

Briesch, Richard A.; Dillon, William R.; Fox, Edward J.

doi: 10.1287/mksc.2013.0775pmid: N/A

We focus on destination categories, so named because they have the greatest impact on where households choose to shop and, more generally, on how category positioning affects which store a household chooses. We propose a reduced-form model-based analytical approach to identify categories that fill the destination role. Our approach determines which categories are most important to shoppers' store choice decisions and helps determine in which categories the retailer provides superior value. In addition, our approach allows us to understand the impact of the retailer's long-run merchandising policy decisions on the value it provides. Previous store choice research considered the effects of pricing, assortment and other merchandising decisions at the store level but did not focus on the effect of specific categories on store choice. This focus leads us to formulate a model that can (1) measure and explain the differential impact that specific categories have on shoppers' store choice decisions and (2) measure the relative value of retailers' category offerings, partitioning that value into the component resulting from retailer merchandising and the component that is nonmerchandising related. The model form captures differences in category value across stores (i.e., the store's category positioning) by specifying a spatial model for the store choice and category incidence intercepts. Our spatial model recognizes that stores position their offering vis--vis the category ideal based on long-run category merchandising decisions and that not all categories have the same importance in store choice decisions. We explore these issues for five retailers in the Charlotte, North Carolina market. We find that (1) category impact on store choice is highly skewed; (2) although categories with higher sales generally have a higher impact on store choice decisions, there are exceptions; (3) impact on store choice decisions does not vary systematically by the type of category (e.g., perishable versus dry grocery); and (4) our measure of category impact on store choice, although correlated with the category development index between retailers, is superior in that it provides a basis for comparing category impact within a retailer and how relative category value, based on long-run merchandising decisions, attracts shoppers to a store.

Kim, Kilsun; Chhajed, Dilip; Liu, Yunchuan

doi: 10.1287/mksc.2013.0774pmid: N/A

The predominant perception on commonality strategy in product line design is that it entails a trade-off decision for a firm between cost savings and product differentiation. Adopting the commonality strategy may lower a firm's manufacturing costs, but it blurs the distinction between products targeting different consumer segments and makes consumer switching between products more likely such that cannibalization is always intensified. We show that this view in the literature is based on a crucial assumption that the quality valuation of one consumer segment is greater than that of another segment for all product attributes; i.e., one segment's preference structure dominates the other segment's preference structure. In this paper we consider the case of a nondominating preference structure where each segment has an attribute it values more than the other segment does. Interestingly, we show that the effect of commonality strategy is more diverse in this nondominating preference structure and that commonality can actually relieve cannibalization in the product line design. This finding gives rise to a previously unrecognized opportunity for firms to redesign their product lines to improve profits.

Bala, Ram; Bhardwaj, Pradeep; Chen, Yuxin

doi: 10.1287/mksc.1120.0743pmid: N/A

Physicians may learn about prescription drug effectiveness directly from the firm via detailing or from patient experience. Patient-mediated learning is aided by the use of free drug samples. The effective use of samples is hampered by a lack of understanding of its exact return on investment implications. We seek to fill this gap by incorporating the physician's sample allocation behavior in the firm's decision making. We uncover the following implications for firms as well as policy makers. First, we find that the optimal sampling level for a drug category is a nonmonotonic function of patient payment ability and the price of the drug. Second, an increase in the cost of samples can lead to an increase in sampling and a decrease in detailing when the physician's propensity to provide sample subsidies is high. Third, when future market growth is expected to be high (early stage product life cycle and/or chronic drugs) and sampling efficiency is low, the use of sampling is profitable for the firm but leads to lower market coverage than when sampling is disallowed.