nep-mkt New Economics Papers
on Marketing
Issue of 2008‒02‒16
six papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. MARKET SEGMENTATION PRACTICES OF RETAIL CROP INPUT FIRMS By Jay Akridge; Mike Boehlje; Allan Gray; Aaron Reimer
  2. Market Segmentation: The Role of Opaque Travel Agencies By Dmitry Shapiro; Xianwen Shi
  3. Choice, Price Competition and Complexity in Markets for Health Insurance By Richard Frank; Karine Lamiraud
  4. Knowledge base, information search and intention to adopt innovation By Frank J. van Rijnsoever; Carolina Castaldi
  5. Reference Pricing Versus Co-Payment in the Pharmaceutical Industry: Price, Quality and Market Coverage By Marisa Miraldo
  6. Product Innovation and Growth: The Case of Integrated Circuits By Marco Corsino

  1. By: Jay Akridge; Mike Boehlje; Allan Gray; Aaron Reimer (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: While market segmentation and the associated idea of target marketing are not new, there are questions about how the strategy of market segmentation and target marketing is being used in retail agribusiness firms. Previous research has demonstrated that distinct groups of farmers/customers exist (Alexander). However, retail crop input firms tend to be of modest size and are geographically bound. Both lack of resources and confinement to a specific geographic market present challenges for successful implementation of a market segmentation/target marketing strategy (Stolp). In this study, market segmentation/target marketing practices were explored in two types of crop input retailers: independently owned and operated firms (9 firms) and agricultural cooperatives (11 firms). A number of questions related to market segmentation/target marketing strategy were assessed via a web-based survey and telephone interviews. Referencing Best's seven-step framework, market segmentation is compared and contrasted by firm type; gaps in market segmentation strategy execution are identified; and challenges to implementing a market segmentation strategy are considered. Results show that market segmentation/target marketing was employed by 85% of the crop input retailers in the sample. Key gaps identified in market segmentation strategy execution include measuring market segment attractiveness; evaluating market segment profitability; developing a product-price positioning strategy for a tailored offering; expanding the positioning strategy to include promotional and sales elements of the marketing-mix; and evaluating the progress/success with each target market segment. Addressing these key gaps will aid industry professionals as they work to serve the needs of a continuously evolving farmer/customer base.
    Keywords: market segmentation, target marketing, crop inputs, distribution channel, retailer
    Date: 2007
  2. By: Dmitry Shapiro; Xianwen Shi
    Abstract: This paper investigates the role of discount travel agencies such as Priceline and Hotwire in the market segmentation of the hotel and airline industries. These agencies conceal important characteristics of the offered services, such as hotel locations or flight schedules. We explicitly model this opaque feature and show that it enables service providers to price discriminate between those customers who are sensitive to service characteristics and those who are not. Service providers can profit from such discrimination despite the fact that the opaque feature virtually erases product differentiation and thus intensifies competition. The reason is that the intensified competition for less sensitive customers enables service providers to commit to a higher price for more sensitive customers, which leads to higher profits overall. This explains why airlines or hotels are willing to lose the advantage of product differentiation and offer services through discount travel agencies.
    Keywords: market segmentation, opaque travel agency, separation equilibrium, price discrimination
    JEL: D43 D82 L11 M31
    Date: 2008–02–05
  3. By: Richard Frank; Karine Lamiraud
    Abstract: The United States and other nations rely on consumer choice and price competition among competing health plans to allocate resources in the health sector. A great deal of research has examined the efficiency consequences of adverse selection in health insurance markets, less attention has been devoted to other aspects of consumer choice. The nation of Switzerland offers a unique opportunity to study price competition in health insurance markets. Switzerland regulates health insurance markets with the aim of minimizing adverse selection and encouraging strong price competition. We examine consumer responses to price differences in local markets and the degree of price variation in local markets. Using both survey data and observations on local markets we obtain evidence suggesting that as the number of choices offered to individuals grow their willingness to switch plans given a set of price dispersion differences declines allowing large price differences for relatively homogeneous products to persist. We consider explanations for this phenomenon from economics and psychology.
    JEL: I11
    Date: 2008–02
  4. By: Frank J. van Rijnsoever; Carolina Castaldi
    Abstract: Innovation is a process that involves searching for new information. This paper builds upon theoretical insights on individual and organizational learning and proposes a knowledge based model of how actors search for information when confronted with innovation. The model takes into account different search channels, both local and non local, and relates their use to the knowledge base of actors. The paper also provides an empirical validation of our model based on a study on the search channels used by a sample of Dutch consumers when buying new consumer electronic products.
    Keywords: knowledge base, learning, information search, innovation, consumer behaviour
    Date: 2008–02
  5. By: Marisa Miraldo (Centre for Health Economics, University of York)
    Abstract: Within a horizontally differentiation model, we analyse the relative effects of reference pricing and copayment reimbursement on firms pricing and quality strategies as well as on market coverage under different market structures: competitive market, local monopolies and exogenous full market coverage. Results allow us to shed some light on the welfare and total drug expenditure implications of different drug reimbursement policies.
    Keywords: Reference Pricing; Co-payment; Product Differentiation
    JEL: D40 I11 O33
    Date: 2007–04
  6. By: Marco Corsino
    Abstract: A puzzling evidence stemming from the applied research on growth and innovation is that successful innovations do not appear to have a significant effect on sales growth rates, at odds with the expectation that successful innovators will prosper at the expenses of their less able competitors. The present paper tests a research hypothesis claiming that the level of observation at which applied research is typically conducted hampers the identification of a significant association between innovation and sales growth rates. Exploiting a unique and original database comprising detailed information on product innovations by leading semiconductor companies, we find components commercialized in the nearest past to positively affect the stream of corporate revenues.
    Keywords: Firm Growth; Product Innovation; Semiconductor industry
    Date: 2008–02–07

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