nep-mkt New Economics Papers
on Marketing
Issue of 2007‒06‒23
three papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. The Causes and Consequences of Wal-Mart's Growth By Emek Basker
  2. The Evolving Food Chain: Competitive Effects of Wal-Marts Entry into the Supermarket Industry By Emek Basker; Michael Noel
  3. Formulating an open source business model requires community segmentation and targeted marketing By Alberto Onetti; Hal Steger

  1. By: Emek Basker (Department of Economics, University of Missouri-Columbia)
    Abstract: Wal-Mart is the largest company in the world, yet little is known about its economic impact. This essay discusses what is known about Wal-Mart's competitive advantage and its economic impact on local communities, as well as the national and global economy, and highlights the open questions to be addressed by future research.
    Keywords: Wal-Mart, Retail
    JEL: L11 L25 L81
    Date: 2006–11–16
  2. By: Emek Basker (Department of Economics, University of Missouri-Columbia); Michael Noel
    Abstract: We analyze the effect of Wal-Marts entry into the grocery market using a unique store-level price panel data set. We use OLS and two IV specifications to estimate the effect of Wal-Marts entry on competitors prices of 24 grocery items across several categories. Wal-Marts price advantage over competitors for these products averages approximately 10%. On average, competitors response to Wal-Marts entry is a price reduction of 11.2%, mostly due to smaller-scale competitors: the response of the big three supermarket chains (Albertsons, Safeway, and Kroger) is less than half that size. We confirm our results using a falsification exercises, in which we test for Wal-Marts effect on prices of services that it does not provide, such as movie tickets and dry cleaning services.
    Keywords: Wal-Mart, Retail Prices, Supermarkets, Price Competition
    JEL: L11 L13 L81
    Date: 2007–06–15
  3. By: Alberto Onetti (Department of Economics, University of Insubria, Italy); Hal Steger (VP Marketing, Funambol Inc. (Redwood City, CA, USA))
    Abstract: From a commercial open source company's point of view, open source is ideally the ultimate in “grass roots" marketing where people learn by word-of-mouth about the project and where they volunteer their time and effort, resulting in a vibrant community that benefits the company in many ways. This enables an open source company to enjoy major advantages that do not normally accrue to proprietary software companies e.g. they do not need to spend resources on traditional marketing activities and furthermore, having this community support can help ensure the longevity of the project and company. While this ideal may apply to a handful of open source projects, where they achieve a large critical mass of a community which lends itself to a natural form of monetization, for the vast majority of open source companies, it is not the case of “build it and they will come”. Instead, most open source companies need to understand who comprises their community so they can formulate a viable business model. In particular, they need to understand that communities are comprised of heterogeneous types of people, each of which have their own interests, motivation, needs and ability to be monetized. Open source companies need to identify the subgroups in their community, decide which ones to deliberately focus on, and choose the best way to leverage them. This is indispensable for determining how best to monetize the interest in their software, ideally without ruffling the community spirit that differentiates their software from proprietary offerings. And this is where “old fashioned” marketing can help. This means understanding your user base and what makes them tick, determining their needs, and formulating products and services that people are willing to pay for. The sooner an open source company understands that it needs to practice traditional marketing techniques such as segmentation and target marketing, the faster they will hit on the business model formula that enables their company to succeed. These techniques need to be adapted for the open source world, which requires the blending of traditional marketing techniques and community relations. The risk of treating one's community in an undifferentiated manner and applying a generic, formulaic business model is that a company will fail to generate significant revenue as well as alienate a community that could abandon them. As a community is perhaps the most distinctive asset of an open source company, losing its community is tantamount to death. If the community is not properly nurtured and leveraged, an open source company's potential will not be realized. This paper aims at describing, through case study research, a generic approach for how commercial open source companies can segment their community to aid in their formulation of a business model and marketing plans to reach their potential. It is for anyone who works in an open source company or project who is trying to determine a viable business model. The paper is structured in three parts: the first part outlines the research question and methodology. The second part proposes a way that an open source company can segment its community. The final part analyzes the Funambol experience, describing how the company segmented its community and created open source programs to nurture and leverage it.
    Date: 2007–06

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