nep-mkt New Economics Papers
on Marketing
Issue of 2009‒12‒11
six papers chosen by
Joao Carlos Correia Leitao
Polytechnic Institute of Portalegre and Technical University of Lisbon

  1. Is cross-category brand loyalty determined by risk aversion? By Nadja Silberhorn; Lutz Hildebrandt
  2. 'Unserved' interpretations of service satisfaction By Sangeeta Singh; Lola C. Duque
  3. What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment By Bertrand, Marianne; Karlan, Dean; Mullainathan, Sendhil; Shafir, Eldar; Zinman, Jonathan
  4. Private label introduction: Does it benefit the supply chain? By Sachon, Marc; Martinez de Albeniz, Victor
  5. Testing Theories of Scarcity Pricing in the Airline Industry By Steven L. Puller; Anirban Sengupta; Steven N. Wiggins
  6. Price Controls and Consumer Surplus By Jeremy Bulow; Paul Klemperer

  1. By: Nadja Silberhorn; Lutz Hildebrandt
    Abstract: The need to understand and leverage consumer-brand bonds has become critical in a marketplace characterized by increasing unpredictability, diminishing product differentiation, and heightened competitive pressure. This is especially true for fast moving consumer goods (FMCG) manufacturers and retailers. Knowing why a customer stays loyal to a brand in multiple product categories is necessary for deriving suitable marketing strategies in the context of a brand extension, yet research on the motives, characteristics, life styles and attitudes of cross-category brand loyal customers has been investigated only in a limited number of studies. We will fill a gap in the literature on cross-category brand choice behavior by analyzing revealed preference data with respect to brand loyalty in several categories in which a brand competes. Provided with purchase and corresponding survey data we investigate the product portfolio of a leading nonfood FMCG brand. We segment consumers on the basis of their revealed brand preferences and, focusing on consumers’ risk aversion, identify cross-category brand loyal customers’ personality traits as determinants of their brand loyal purchase behavior.
    Keywords: cross-category brand loyalty, risk aversion, share of category requirements, customer segmentation
    JEL: M31 C51
    Date: 2009–12
  2. By: Sangeeta Singh; Lola C. Duque
    Abstract: Satisfaction with services has traditionally been explained with the help of service attributes. While these attributes have been good predictors of satisfaction, the relationship could possibly be better explained with the inclusion of additional variables. We draw on the literature in consumer behavior where situational variables in combination with product and consumer characteristics have been shown to be better predictors of consumers' behavior than consumer or product characteristics by themselves. Studies in consumer behavior have also established a direct link between affective state and consumers' behavior, the argument being that different states prime different goals, thus affecting the importance of attributes relevant under different situations. This is the basis of our study to show that situation-related affective state moderates the effects of service characteristics on satisfaction and the resulting outcomes of such satisfaction. A model incorporating the effects of situation-related affective state in the existing relationship between service characteristics and satisfaction is developed and tested to not only demonstrate the moderating role of situational emotions in the relationships but also its impact on the strength of these relationships.
    Keywords: Services marketing, Satisfaction paradigm, Consumer behavior, Situation, Affective state
    Date: 2009–12
  3. By: Bertrand, Marianne (University of Chicago and Jameel Poverty Action Lab); Karlan, Dean (Yale University and Jameel Poverty Action Lab); Mullainathan, Sendhil (University of Chicago and Jameel Poverty Action Lab); Shafir, Eldar (Princeton University and Innovations for Poverty Action); Zinman, Jonathan (Dartmouth College and Innovations for Poverty Action)
    Abstract: Firms spend billions of dollars each year advertising consumer products in order to influence demand. Much of these outlays are on the creative design of advertising content. Creative content often uses nuances of presentation and framing that have large effects on consumer decision making in laboratory studies. But there is little field evidence on the effect of advertising content as it compares in magnitude to the effect of price. We analyze a direct mail field experiment in South Africa implemented by a consumer lender that randomized creative content and loan price simultaneously. We find that content has significant effects on demand. There is also some evidence that the magnitude of content sensitivity is large relative to price sensitivity. However, it was difficult to predict which particular types of content would significantly impact demand. This fits with a central premise of psychology--context matters--and highlights the importance of testing the robustness of laboratory findings in the field.
    JEL: C93 D01 D12 D14 D21 D81 D91 M31 M37 O12
    Date: 2009–01
  4. By: Sachon, Marc (IESE Business School); Martinez de Albeniz, Victor (IESE Business School)
    Abstract: Private labels, also called store brands or distributor brands, have changed the retail industry during the last three decades. Consumer data shows strong growth of private label market share, and in countries like Germany or Spain, the penetration of private labels is above 30% of total retail sales. This paper analyzes the channel dynamics in a category where a private label is introduced. We focus on the impact of private labels on retail and wholesale equilibrium prices, as well as on the profits of each firm of the supply chain. While private label introduction helps the retailer reduce manufacturer brand's prices, we find that it does not always improve the total profits of the supply chain. Generally, the supply chain benefits from this introduction only when cross-elasticities are small, i.e., competitive interactions are weak. With our model, we formulate the general conditions under which retailers should consider introducing private labels.
    Keywords: Private label; non-cooperative game theory; supply chain efficiency;
    Date: 2009–11–03
  5. By: Steven L. Puller; Anirban Sengupta; Steven N. Wiggins
    Abstract: This paper investigates why passengers pay substantially different fares for travel on the same airline between the same two airports. We investigate questions that are fundamentally different from those in the existing literature on airline price dispersion. We use a unique new dataset to test between two broad classes of theories regarding airline pricing. The first group of theories, as advanced by Dana (1999b) and Gale and Holmes (1993), postulates that airlines practice scarcity based pricing and predicts that variation in ticket prices is driven by differences between high demand and low demand periods. The second group of theories is that airlines practice price discrimination by using ticketing restrictions to segment customers by willingness to pay. We use a unique dataset, a census of ticket transactions from one of the major computer reservation systems, to study the relationships between fares, ticket characteristics, and flight load factors. The central advantage of our dataset is that it contains variables not previously available that permit a test of these theories. We find only mixed support for the scarcity pricing theories. Flights during high demand periods have slightly higher fares but exhibit no more fare dispersion than flights where demand is low. Moreover, the fraction of discounted advance purchase seats is only slightly higher on off-peak flights. However, ticket characteristics that are associated with second-degree price discrimination drive much of the variation in ticket pricing.
    JEL: L1 L93
    Date: 2009–12
  6. By: Jeremy Bulow (Graduate School of Business, Stanford University, Stanford, USA); Paul Klemperer (Nuffield College, University of Oxford, Oxford, UK)
    Abstract: The condition for when a price control increases consumer welfare in perfect competition is tighter than often realised. When demand is linear, a small restriction on price only increases consumer surplus if the elasticity of demand exceeds the elasticity of supply; with log-linear or constant-elasticity, demand consumers are always hurt by price controls. The results are best understood - and can be related to monopoly-theory results - using the fact that consumer surplus equals the area between the demand curve and the industry marginal-revenue curve.
    Keywords: Rationing, Allocative Efficiency, Microeconomic Theory, Marginal Revenue, Minimum Wage, Rent Control, Consumer Welfare
    JEL: D45 D61 D6
    Date: 2009–07–01

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