nep-mkt New Economics Papers
on Marketing
Issue of 2005‒09‒29
fifteen papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. The Media and Advertising: A Tale of Two-Sided Markets By Anderson, Simon P; Gabszewicz, Jean Jaskold
  2. Competition:an inspirational marketing tool By Waarts, E.
  3. Of Rats and Brands: A Learning-and-Memory Perspective on Consumer Decisions By Van Osselaer, S.M.J.
  4. Assessing Customer Evaluation and Revenue Consequences of Component Sharing Across Brands in the Vertical Product Line By Verhoef, P.C.; Pauwels, K.H.
  5. The European Consumer: United In Diversity? By Lemmens, A.; Croux, C.; Dekimpe, M.G.
  6. In search of an audience... By Stremersch, S.
  7. Managing Product-Harm Crises By Heerde, H.J. van; Helsen, K.; Dekimpe, M.G.
  8. A Hierarchical Bayes Error Correction Model to Explain Dynamic Effects of Price Changes By Fok, D.; Paap, R.; Horv?th, C.; Franses, Ph.H.B.F.
  9. When are CRM Systems Successful? The Perspective of the User and of the Organization By Bruggen, G.H. van; Wierenga, B.
  10. Win-Win Strategies at Discount Stores By Deleersnyder, B.; Dekimpe, M.G.; Steenkamp, J.B.E.M.; Koll, O.
  12. Relevant Market and Pricing Behavior of Regional Newspapers in the Netherlands By Kranenburg,Hans,van
  13. Measuring Consumer Preferences for Sales Promotion Schemes through Conjoint Design in FMCG Sector By Vyas Preeta H
  14. Look How Little I’m Advertising! By Kyle Bagwell; Per Baltzer Overgaard
  15. Predicting Customer Loyalty Using The Internal Transactional Database By W. BUCKINX; G. VERSTRAETEN; D. VAN DEN POEL

  1. By: Anderson, Simon P; Gabszewicz, Jean Jaskold
    Abstract: Media industries are important drivers of popular culture. A large fraction of leisure time is devoted to radio, magazines, newspapers, the Internet, and television (the illustrative example henceforth). Most advertising expenditures are incurred for these media. They are also mainly supported by advertising revenue. Early work stressed possible market failures in program duplication and catering to the Lowest Common Denominator, indicating lack of cultural diversity and quality. The business model for most media industries is underscored by advertisers’ demand to reach prospective customers. This business model has important implications for performance in the market since viewer sovereignty is indirect. Viewers are attracted by programming, though they dislike the ads it carries, and advertisers want viewers as potential consumers. The two sides are coordinated by broadcasters (or 'platforms') that choose ad levels and program types, and advertising finances the programming. Competition for viewers of the demographics most desired by advertisers implies that programming choices will be biased towards the tastes of those with such demographics. The ability to use subscription pricing may help improve performance by catering to the tastes of those otherwise under-represented, though higher full prices tend to favour broadcasters at the expense of viewers and advertisers. If advertising demand is weak, program equilibrium program selection may be too extreme as broadcasters strive to avoid ruinous subscription price competition, but strong advertising demand may lead to strong competition for viewers and hence minimum differentiation (la pensee unique). Markets (such as newspapers) with a high proportion of ad-lovers may be served only by monopoly due to a circulation spiral: advertisers want to place ads in the paper with most readers, but readers want to buy the paper with more ads.
    Keywords: advertising finance; circulation spiral; pensee unique; platform competition; two-sided markets
    JEL: D43 L13 L82 M37 Z11
    Date: 2005–09
  2. By: Waarts, E. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Competition is the engine behind innovation and dynamics in the marketplace. Sectors like public transport,water,energy and telecom are liberalized and deregulated by nationalandinternationalgovernmentsinordertoincreasecompetitionamongcompanies. The ultimate goals are to create transparent markets with ample opportunities for new firms to enter, fair prices and a varied, innovative range of consumer products and services. Competition may indeed stimulate firms to run faster, and to create better products and services by using effectivemarketing practices.This can,for example,readily be observed in the high technology sector. In that sense, competition can be an inspirational and stimulating marketing tool. At the same time, competition can have destructive effectsaswell,whenfirms’primarygoalsbecometobeat orharmtheircompetitors.Thiswas, for example, recently the case in a taxi war in Amsterdam. Constructive and destructive behaviours are partly determined by both the characteristics and rules of the market, the manager and his company. Research is required to fully understand the effects of the various factors on competitive behaviour and subsequently on the performance of the market. This is essential, both for theory development, and for governments, companies and consumers as well.
    Keywords: Marketing Research;Marketing Strategy;Competition;Innovation;Competitive Interaction;Industry;Drivers;Company Performance;
    Date: 2004–08–26
  3. By: Van Osselaer, S.M.J. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: When consumers evaluate or choose products, they rely on what they have learned and can remember about those products’ characteristics, such as brand names, ingredients, orfeatures. Severalexperimentssuggest that evenrathersophisticatedpatternsofproduct evaluation and choice can be explained by simple associative learning-and-memory processes,which show similarities to those found in rats,dogs,and other animals.Strategic implications for brand management and public policy, theoretical implications for the study of human learning and memory, and directions for future research are outlined.
    Keywords: Brand Management;Brand Equity;Co-branding;Ingredient Branding;Brand Extension;Consumer Decision Making;Learning;Memory;Consumer Behavior;Consumer Psychology;
    Date: 2004–10–29
  4. By: Verhoef, P.C.; Pauwels, K.H. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Component sharing may look great in the boardroom, but not in the showroom. Indeed, savings on R&D and production costs could be offset by a plunge in customer brand attractiveness and willingness to pay. This paper investigates the impact of component sharing on customer evaluation of luxury, volume and economy brands offered in a car manufacturer’s vertical product line and its subsequent revenue consequences. The authors consider both the harm to the higher-end brand and the benefits for the lower end brand, and analyze with a random effects model how the size of these effects depends on the brand combination, the type of component, the source of the components sharing, and customer characteristics. An experimental study shows that the harm for the higher-end brand is largest, when (1) a luxury brand shares components with a volume brand, (2) the source of the components is the higherend brand, and when (3) the customer has a high initial evaluation of the higher-end brand. For the lower-end brand, the positive effect is largest, when (1) a volume brand shares with an economy brand, (2) the lower-end brand is the source of the components, and (3) customers have a high initial evaluation of the higher-end brand. Components that have a strong impact on evaluation are interior, wheels, chassis and the engine. Simulations show that sharing components typically translates in negative revenue consequences for both analyzed manufacturers. An interesting exception emerges for the Japanese manufacturer, which obtains a boost in total revenue when its small luxury brand shares components with its large volume brand.
    Keywords: Component sharing;branding;interface marketing and production;customer evaluation;firm;
    Date: 2005–04–03
  5. By: Lemmens, A.; Croux, C.; Dekimpe, M.G. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The ongoing unification which takes place on the European political scene, along with recent advances in consumer mobility and communication technology, raises the question whether the European Union can be treated as a single market to fully exploit the potential synergy effects from pan-European marketing strategies. Previous research, which mostly used domain-specific segmentation bases, has resulted in mixed conclusions. In this paper, a more general segmentation base is adopted, as we consider the homogeneity in the European countries’ Consumer Confidence Indicators. Moreover, rather than analyzing more traditional static similarity measures, we adopt the concepts of dynamic correlation and cohesion between countries. The short-run fluctuations in consumer confidence are found to be largely country specific. However, a myopic focus on these fluctuations may inspire management to adopt multicountry strategies, foregoing the potential longer-run benefits from more standardized marketing strategies. Indeed, the Consumer Confidence Indicators become much more homogeneous as the planning horizon is extended. However, this homogeneity is found to remain inversely related to the cultural, economic and geographic distances among the various Member States. Hence, pan-regional rather pan-European strategies are called for.
    Keywords: Consumer Confidence;Dynamic Correlation;European Unification;
    Date: 2005–04–07
  6. By: Stremersch, S. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: For an academic, finding an audience is critical. However, finding an audience is not always easy for most marketing academics. This inaugural address explores what the challenges are in finding an audience, among fellow scholars, students, public policy, industry, or society in general. It finds that the academic audience for marketing research is: (1) often small; (2) constrained to the own discipline; and (3) mostly located in the United States. The student audience is also under pressure, due to: (1) the difficult translation of academic marketing research to marketing education; (2) shifting student preferences; and (3) lack of involvement of students. The audience in society is too small due to a lack of relevance of marketing research in three ways: (1) lack of a public policy perspective; (2) too incremental insights to be useful to practice; and (3) too much focus on rigor to be interesting for the press. This address cites three ways to grow towards a larger and more loyal audience by evolving towards: (1) a truly globalized community of marketing academics; (2) living together with our source disciplines; and (3) a stronger focus on the knowledge economy and the life sciences.
    Keywords: Marketing;Marketing Research;Philosophy of Science;Takeoff;Globalization;Pharmaceuticals;Biotechnology;Knowledge economy;
    Date: 2005–04–15
  7. By: Heerde, H.J. van; Helsen, K.; Dekimpe, M.G. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Product-harm crises are among a firm’s worst nightmares. Since marketing investments may be instrumental to convince consumers to purchase the firm's products again, it is important to provide an adequate measurement of the effectiveness of these investments, especially after the crisis. We provide a methodology through which firms can assess the impact of product crises in a quantitative way. Based on the model estimates, firms can estimate the required level of investment to recoup from the crisis. A key finding of this paper is that it is not only important to assess the extent to which business is lost as a result of the crisis, but also to find the new, postcrisis response parameters to marketing activities. The study of an Australian product-harm crisis for peanut butter reveals that a product crisis may represent a quadruple jeopardy for a firm: (i) loss of baseline sales, (ii) a reduced own effectiveness for its marketing instruments, (iii) increased vulnerability, and (iv) decreased clout. We arrive at this conclusion by using a time-varying error-correction model that allows for (i) shortand long-term marketing mix effects, (ii) intercepts and response parameters that change over time as a result of the crisis, and (iii) missing observations, which result from the absence of the impacted brands during the product-recall period. The time-varying error-correction model is applicable to other marketing-research areas in which these three requirements (or any subset thereof) apply.
    Keywords: Brand Management;Error-Correction Models;Time-Varying Parameters;Missing-Data Problems;Gibbs Sampling Methods;Time-Series Models;
    Date: 2005–09–06
  8. By: Fok, D.; Paap, R.; Horv?th, C.; Franses, Ph.H.B.F. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The authors put forward a sales response model to explain the differences in immediate and dynamic effects of promotional prices and regular prices on sales. The model consists of a vector autoregression rewritten in error-correction format which allows to disentangle the immediate effects from the dynamic effects. In a second level of the model, the immediate price elasticities, the cumulative promotional price elasticity and the long-run regular price elasticity are correlated with various brand-speciffic and category-speciffic characteristics. The model is applied to seven years of data on weekly sales of 100 different brands in 25 product categories. We find many significant moderating effects on the elasticity of price promotions. Brands in categories that are characterized by high price differentiation and that constitute a lower share of budget are less sensitive to price discounts. Deep price discounts turn out to increase the immediate price sensitivity of customers. We also find significant effects for the cumulative elasticity. The immediate effect of a regular price change is often close to zero. The long-run effect of such a decrease usually amounts to an increase in sales. This is especially true in categories characterized by a large price dispersion, frequent price promotions and hedonic, non-perishable products.
    Keywords: Sales;Vector Autoregression;Marketing Mix;Promotional and Regular Price;Short and Long-term Effects;Hierarchical Bayes;
    Date: 2005–09–08
  9. By: Bruggen, G.H. van; Wierenga, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The individual impact of CRM systems is strongly related to impact at the organizational level. Fit with the task of the user is key. CRM systems are successful in organizations that reward customer-centric behavior and that have an analytical decision style. Acceptance of a CRM system should be monitored over time.
    Keywords: Customer Relationship Management;Marketing Management Support Systems;Survey Research;
    Date: 2005–09–08
  10. By: Deleersnyder, B.; Dekimpe, M.G.; Steenkamp, J.B.E.M.; Koll, O. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: An important development that contributes to store brands? growing success in the grocery market is the increasing number of discount stores that sell predominantly own, private-label, brands. To fight private labels, manufacturers of national brands feel increasingly compelled to develop better trade relations with discounters. Some discounters, from their part, are looking for opportunities to differentiate themselves, and to move beyond a pure price-based competition, by extending their assortment with attractive national brands. In this study, we determine what factors drive national-brand success at discount stores, and lead to positive outcomes for both the manufacturer and the discounter.
    Keywords: Discount Retailing;Branded Goods;Performance;
    Date: 2005–09–14
  11. By: Oppen,Claudia,van; Odekerken-Schröder,Gaby; Wetzels,Martin (METEOR)
    Abstract: The main objective of this study is to empirically test a fourth-order hierarchical model of experiential value in an online book and CD setting. In addition, we provide empirical evidence for the role of hedonic and utilitarian value components in creating attitudinal and behavioral loyalty. Finally, we develop an online customer typology, based on the underlying value sources. Based on a sample of 190 visitors of online book and CD retailers, we used PLS to test a third and fourth order hierarchical model of experiential value, emphasizing a hedonic (intrinsic) and utilitarian (extrinsic) value component and the existence of the holistic concept of experiential value. Our results demonstrate that experiential value consists of the third order components hedonic (intrinsic) and utilitarian (extrinsic) value. Both value aspects impact attitudinal loyalty ultimately leading to behavioral loyalty which is also directly affected by utilitarian value. Finally, a nonhierarchical (k-means) cluster analysis identified four segments of online visitors: hedonists, utilitarians, active negativists, and reactive positivists.
    Keywords: marketing ;
    Date: 2005
  12. By: Kranenburg,Hans,van (METEOR)
    Abstract: The aim of this study is to investigate the effect of market structure and area characteristics on the subscription prices and advertising rates for regional newspapers in the Netherlands. The price-market structure analysis in this study shows that there exists a negative relationship between market structure and prices. The results also show that advertising rates, differently to subscription prices, are significantly influenced by regional income and particularly by population density in the specific area. Furthermore, the evidence indicates that the relevant market for regional newspapers in the Netherlands is a market which encompasses regional newspapers, national newspapers and other media sources.
    Keywords: Strategy;
    Date: 2005
  13. By: Vyas Preeta H
    Abstract: Fast moving consumer goods in India is characterized by intense competition leading to brand proliferation in various categories. Using consumer sales promotion to differentiate one's offer has been a common practice in matured urban markets. More and more budget is allocated to these activities in order to lure the consumers. In such a scenario, it is very essential to study how consumers make their choices in FMCG category where there are several brands in the consideration set of a consumer. The financial risk being low consumers do not mind switching from one brand to another due to sales promotion offer. Hence it would be of interest to a marketer to learn about consumer preferences with respect to sales promotion offers; what schemes do consumers prefer for what kind of brands, which media they prefer to learn about the schemes, whether they prefer incentive immediately or at a later date. It was found that deal proneness prevailed across different demographic segments. Price cut nature of promotions was found to be preferred. Out of the nine concepts presented to the respondents; they preferred a price cut nature of promotion on a national brand with an immediate incentive and awareness created at point of purchase. The study would provide insights to a brand manager in designing a scheme.
    Date: 2005–09–23
  14. By: Kyle Bagwell (Department of Economics, Columbia University); Per Baltzer Overgaard (School of Economics and Management, University of Aarhus)
    Abstract: This paper studies the role of advertising and prices as signals of quality in a purely static setting, where repeat purchases are suppressed altogether, but where advertising affects demand directly. We first show, under standard regularity assumptions, that the high-quality firm will distort its price upwards and its level of advertising downwards compared to the complete-information case. We then show, under relatively mild additional conditions, that the high-quality firm will choose a level of advertising below that of the low-quality firm, even if the high-quality firm advertises most under complete information. Hence, empirically, a high price and a modest advertising budget may well signal high quality.
    Keywords: quality; signaling; pricing; advertising
    JEL: D82 L15 M37
    Date: 2005–09
    Abstract: Loyalty and targeting are central topics in Customer Relationship Management. Yet, the information that resides in customer databases only records transactions at a single company, whereby customer loyalty is generally unavailable. In this study, we enrich the customer database with a prediction of a customer's behavioral loyalty such that it can be deployed for targeted marketing actions without the necessity to measure the loyalty of every single customer. To this end, we compare multiple linear regression with two state-of-the-art machine learning techniques (random forests and automatic relevance determination neural networks), and we show that (i) a customer’s behavioral loyalty can be predicted to a reasonable degree using the transactional database, (ii) given that overfitting is controlled for by the variable-selection procedure we propose in this study, a multiple linear regression model significantly outperforms the other models, (iii) the proposed variable-selection procedure has a beneficial impact on the reduction of multicollinearity, and (iv) the most important indicator of behavioral loyalty consists of the variety of products previously purchased.
    Keywords: Predictive modeling; customer relationship management; behavioral loyalty; overfitting; multicollinearity; data enrichment
    Date: 2005–08

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