nep-mkt New Economics Papers
on Marketing
Issue of 2007‒08‒08
eleven papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Testing the Double Jeopardy Loyalty Effect Using Discrete Choice Models By José M. Labeaga; Mercedes Martos-Partal; Nora Lado
  2. So You Want To Buy A Brand? By Swaminathan Vanitha; Dawar Niraj; Hulland John
  3. In-Store Media and Channel Management By Anthony Dukes; Yunchuan Liu
  4. Do Media Consumers Really Dislike Advertising? An Empirical Assessment of a Popular Assumption in Economic Theory By Ulrich Kaiser
  5. An Analysis on Market Structure of Broadcast Service – Issues on Optimal Level of Channel Variety – By Shishikura, Manabu; Kasuga, Norihiro
  6. Loyalty Programme Applications in Indian Service Industry By Sahoo Debajani; Vyas Preeta H.
  7. Marketing Strategies for Freight Traffic on Indian Railways - A Systems Perspective By Raghuram G.; Gangwar Rachna
  8. Implications of Web 2.0 for financial institutions: Be a driver, not a passenger By Heng, Stefan; Meyer, Thomas; Stobbe, Antje
  9. When Pricing Below Marginal Cost Pays Off: Optimal Price Choice in a Media Market with Upfront Pricing By Ulrich Kaiser
  10. Does Globalization Create Superstars? By Hans Gersbach; Armin Schmutzler
  11. Seller strategies on eBay: Does size matter? By Anderson, Steven; Friedman, Daniel; Milam, Garrett; Singh, Nirvikar

  1. By: José M. Labeaga; Mercedes Martos-Partal; Nora Lado
    Abstract: This paper attempts to validate the double jeopardy loyalty effect in a utility framework using a discrete choice approach instead of the Dirichlet model. We specify brand choice and allow for differences in brand loyalty measures across brands in two different product categories. The discrete choice model formulations include a multinomial and a latent class multinomial logit model. Using ACNielsen household scanner panel data to estimate the models, we find that market share leaders enjoy higher purchasing loyalty than do lower market share brands. The results have relevant implications in terms of marketing mix decisions for brand managers.
  2. By: Swaminathan Vanitha; Dawar Niraj; Hulland John (METEOR)
    Abstract: A company’s brand portfolio serves as its link to customers and markets, protects it from competitors, and provides it with a degree of channel power. Historically, brand portfolios were built, brand by brand. But in today’s fast-paced and highly competitive marketplace, companies cannot afford to rely solely on brands built from scratch. Consumer preferences change, yesterday’s star brands are today’s dogs, new segments emerge, and established competitors and nimble start-ups are quick to spot and respond to new opportunities. A brand portfolio that does not continually evolve to meet the changing strategic needs of the market risks becoming obsolete. At the same time, building brands has never been more costly, nor more fraught with risk. In response to these challenges, firms are increasingly choosing to acquire brands from other companies. Acquisitions of brands allow firms to respond far more quickly to the needs of an emerging market segment or to a competitive move. Furthermore, buying an established brand is considerably less risky than undertaking the launch of an entirely new brand. But acquiring brands presents its own set of challenges. Not only must the purchased brand have the potential to fulfill the strategic objectives for which it is purchased, but it must also be integrated into the existing portfolio of brands and brand management structures of the acquiring company, and be properly deployed to capture market opportunities. Strategic match, portfolio fit, and effective deployment can mean the difference between success and failure of a brand acquisition. Yet managers tend to underestimate the effort and risk associated with brand acquisition. Brand acquisitions may have a lower rate of failure than new products, but they are not risk- free. We develop a framework to guide managers in assessing potential acquisitions against key success factors. To develop the framework, we have assembled and examined a comprehensive set of brand acquisitions in the food and health and beauty sectors that took place over the past 25 years. We studied key variables that helped us understand how and why brands change hands, as well as the financial consequences of acquisitions that were ultimately deemed to be either successes or failures. We supplement the statistical results with in-depth case studies of brand acquisitions that help illustrate the key lessons.
    Keywords: marketing ;
    Date: 2007
  3. By: Anthony Dukes (University of Aarhus); Yunchuan Liu (University of Illinois at Urbana-Champaign)
    Abstract: In this paper, we study the interesting and complicated effects of retailer in-store media on distribution channel relationships. With the help of advanced technology, retailers can open in-store media in their stores and allow manufacturers to advertise through the instore media. We show that opening in-store media is a strategic decision for a retailer, and a retailer may strategically subsidize manufacturers on their advertising through instore media to better coordinate the channel. Even when in-store media is more effective than commercial media (i.e., radio, TV, newspaper, etc.), a retailer may still charge an advertising rate lower than commercial media does. We also show that the benefit of instore media to a retailer can be a U-shaped curve of manufacturer bargaining power, and a retailer may introduce in-store media only when manufacturer bargaining power is either very high or very low, but not intermediate. With manufacturer competition, a retailer can strategically use in-store media to ration excessive advertising between manufacturers, achieving better channel coordination. When manufacturers are asymmetric with pre-advertising brand awareness, a retailer has incentive to subsidize manufacturers whose brand awareness is higher. We also find that retailer in-store media can benefit social welfare even when in-store media is less effective than commercial media. However, if in-store media effectiveness is very low, a retailer may introduce instore media for its own benefit with the sacrifice on social welfare.
    Keywords: in-store media; advertising; distribution channel; channel coordination; retailing
    Date: 2007–06
  4. By: Ulrich Kaiser (University of Southern Denmark)
    Abstract: This paper uses data on the population of German magazines for the period 1973 to 2004 to show that, contrary to conventional wisdom, there is little evidence for magazine readers disliking advertising. Many magazines in fact have readers who appreciate advertising. The degree of appreciation increases in reader age and decreases with income as well as with education.
    Keywords: two-sided markets; advertising; Mean Group Estimation; media markets; nuisance
    JEL: C23 L11
    Date: 2007–05
  5. By: Shishikura, Manabu; Kasuga, Norihiro
    Abstract: Unlike general goods, broadcasting service is financed not only by consumer’s direct payment but also by advertisement revenue. In other words, broadcasting service is supported by direct and indirect financial sources. However, rate of dependence on those financial sources are different by each media type; Terrestrial broadcasting carrier primarily depends on advertisement revenue while cable TV carrier and satellite carrier, which is called as pay-TV primarily depend on payment from audience in addition to small amount of advertisement revenue. In this paper, we examine broadcast market, where carriers with different financial sources compete in the market, and analyze market performance as a result of competition. Especially, we focus on the effect of competition in the mixed market which includes advertising supported media and subscription fee supported media. We made economic model and analyze the difference on several types of market. Our principle results of Case III, the market that an advertisement supported carrier and a subscription supported carrier compete in the market, are as follows;. (1) The greater the substitutability is, the number of channels supplied by advertisement supported media increases while those supplied by subscription fee supported carrier decreases. (2) Total number of channels supplied by advertisement supported carrier and subscription fee supported carrier is equal to the number of channels supplied by an advertisement supported carrier (Case II). (3) Total TV watching time of Case III is equal to Case II. (4) Because the amount of payment by consumer increases compared to Case II, consumer surplus decreases. General economic model predicts that the increase of the number of entrants brings the increase of consumer surplus. However, in our model, we show here that the increase of the number of entrants does not necessarily bring the increase of consumer surplus.
    Keywords: broadcast service; market performance; consumer welfare; advertisement supported /subscription fee supported media.
    JEL: D40 L50 L82 D60
    Date: 2007–08–02
  6. By: Sahoo Debajani; Vyas Preeta H.
    Abstract: Retaining all customers would not be a good idea for any business. In contrast, allowing the profitable customers to leave would be an even worse idea. Consequently the real solution rests in knowing the value of each customer and then focusing loyalty efforts on those customers. Customers are more likely to be loyal to a group of brands than to a single brand. This is particularly true if the chosen brand is the category leader and costs more. In contrast to the one – brand- for – life mentality of the past, today’s consumers are blatant in their divided loyalties, for their own safety and pleasure. The conceptual framework presented helps to understand the evolving logic of loyalty programs and process of implementing the same. Applications in different service industry for building and sustaining loyalty provide an overview of the status of such programmes.
    Date: 2007–07–25
  7. By: Raghuram G.; Gangwar Rachna
    Abstract: Indian Railways (IR) had lost its market share in high rated freight commodities especially cement, POL, and iron and steel. IR was missing an overall strategy for freight business, which was overcharged without sensitivity to competition. Over time, other transport modes, especially road (and pipeline in the case of POL) captured a very significant share of freight due to their faster and door-to-door deliveries. Several initiatives have been taken in the recent past to make IRs’ strategies market oriented like increased axle loading, better pricing strategy, and improved services. In 2005-06, IR loaded 667 mt of revenue earning freight traffic, marking an increase of 110 mt over 2003-04. Additional freight revenue was Rs 9172 crore during the same period. IR still has a tremendous potential in the freight business, but it needs to be examined with an appropriate framework for segmentation of the market. Like in any other transport business, an origin-destination (OD) based systems perspective could be used. The primary categorization of origins would be industry/collection centre, mine and port. The primary categorization of destinations would be industry, port and distribution center. An attempt was made by the authors to do an OD analysis on the 666.5mt (602.1 mt) of freight traffic of 2005-06 (2004-05). The above analysis has implications for leveraging the four Ps of marketing; product (service attributes), price, promotion, and place (logistics). This paper attempts to evolve marketing strategies for freight traffic, based on the OD market analysis specified above.
    Date: 2007–07–18
  8. By: Heng, Stefan; Meyer, Thomas; Stobbe, Antje
    Abstract: Web 2.0 heralds a new era of communication with a massive increase in information supply and where news, opinion and services flow directly from user to user. Financial institutions can take advantage if they stay abreast of this development. However, any Web 2.0 presence of a financial institution must be authentic and consistent with the institution’s brand and corporate culture. To leverage the potential, the need for an immaculate reputation and the right type of brand is becoming ever more important.
    Keywords: information- and communication technology; ICT technology; P2P; Web 2.0; banking; blog; virtual worlds; wiki; lending; e-business; e-commerce; B2C-e-commerce; internet; e-payments
    JEL: G29 E42 O33 E51 O14
    Date: 2007–07–31
  9. By: Ulrich Kaiser (University of Southern Denmark)
    Abstract: I derive a model of profit maximization for a print media firm with upfront advertising pricing. The model is estimated using detailed quarterly data on German women's magazines observed between I/1994 and IV/2004. Main empirical results are that (i) cover price increases lead to substantial reductions in advertising revenue, thereby offsetting possible corresponding gains in magazine sales revenue, (ii) magazines with particularly large advertising revenues per copy set cover prices well below marginal cost and (iii) marginal production cost are decreasing in a magazine's own circulation but are unaffected by the own publishers' total printing volume which does not provide evidence for an efficiency defense in print media mergers.
    Keywords: magazines; cost estimation; twosided markets
    JEL: L11 C33
    Date: 2007–04
  10. By: Hans Gersbach (CER-ETH - Center of Economic Research, ETH Zurich); Armin Schmutzler (Socioeconomic Institute, University of Zurich)
    Abstract: To examine the impact of globalization on managerial compensation, we consider a matching model where a number of firms compete both in the product market and in the managerial market. We show that globalization, i.e. the simultaneous integration of product markets and managerial pools, leads to an increase in the heterogeneity of managerial salaries. Typically, while the most able managers obtain a wage increase, less able managers are faced with a reduction in wages. Hence our model can explain the increasing heterogeneity of CEO compensation that has been observed in the last few decades.
    Keywords: Globalization, manager remuneration, superstars
    JEL: D43 F15 J31 L13
    Date: 2007–04
  11. By: Anderson, Steven; Friedman, Daniel; Milam, Garrett; Singh, Nirvikar
    Abstract: We examine seller strategies in 1177 Internet auctions on eBay, to understand the diversity of strategies used, and their impacts. Dimensions of strategic choice include the use of a ‘Buy it Now’ option, the level of the starting price, and the use of a secret reserve price. A major focus of our analysis is on differences across sellers with different volumes of sales. The largest volume sellers (termed “retailers”) in our sample employ uniform selling strategies, but lower volume sellers exhibit a wide variety of strategic choices. While some components of sellers’ strategies appear important in raising seller revenue, including starting the auction with a ‘Buy it Now’ offer, the overall impact of seller strategy choices on the outcome appears to be quite small. We interpret this as evidence for the competitiveness of the online auction market for frequently traded items with conventional retail alternatives. An exception is provided by the use of a secret reserve price, which raises the winning bid conditional on a sale, but reduces the probability of a sale. Depending on sellers’ risk aversion and impatience, this may also be an efficient outcome.
    Keywords: Internet auctions; posted prices; market institutions
    JEL: M0 L81 L11 L86
    Date: 2007–05

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