nep-mkt New Economics Papers
on Marketing
Issue of 2010‒06‒04
thirteen papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Does Shelf-Labeling of Organic Foods Increase Sales? Results from a Natural Experiment By Daunfeldt, Sven-Olov; Rudholm, Niklas
  2. Nonparametric Estimation of Marketing-Mix Effects Using a Regression Discontinuity Design By Hartmann, Wesley; Nair, Harikesh; Narayanan, Sridhar
  3. An Improved Method for the Quantitative Assessment of Customer Priorities By Srinivasan, V.; Wyner, Gordon A.
  4. Factors Affecting Pure Orange Juice Purchasing Decisions of Consumers By Wanvisa Sriratana; Visit Limsombunchai
  5. Analysis of socio-economic aspects of local and national organic farming markets By Lobley, Matt; Butler, Allan; Courtney, Paul; Ilbery, Brian; Kirwan, James; Maye, Damian; Potter, Clive; Winter, Michael
  6. Loyalty Rewards and Monopoly Pricing By Philipp Ackermann
  7. Consumer Learning and Hybrid Vehicle Adoption By Heutel, Garth; Muehlegger, Erich
  8. Keynesian substantiation of the marketing policies in local development By Matei, Lucica; Anghelescu, Stoica
  9. Mobile payments in the United States at retail point of sale: current market and future prospects By Marianne Crowe; Marc Rysman; Joanna Stavins
  10. The Stock Market's Pricing of Customer Satisfaction By Ittner, Christopher D.; Larcker, David F.; Taylor, Daniel J.
  11. Reserve Prices in Internet Advertising Auctions: A Field Experiment By Ostrovsky, Michael; Schwarz, Michael
  12. An Analysis of Bundle Pricing in Horizontal and Vertical Markets: The Case of the U.S. Cottonseed Market By Shi, Guanming; Stiegert, Kyle; Chavas, Jean-Paul
  13. Do Google Searches Help in Nowcasting Private Consumption? A Real-Time Evidence for the US By Konstantin A. Kholodilin; Maximilian Podstawski; Boriss Siliverstovs

  1. By: Daunfeldt, Sven-Olov (The Ratio Institute and Dalarna University); Rudholm, Niklas (The Swedish Retail Institute (HUI) and Dalarna University)
    Abstract: Can a simple point-of-purchase (POP) shelf-label increase sales of organic foods? We use a random-effects, random-coefficients model, including a time adjustment variable, to test data from a natural experiment in a hypermarket in Gävle, Sweden. Our model incorporates both product specific heterogeneity in the effects of labeling and consumer adjustment to the labels over time. The introduction of POP displays was found to lead to an increase in sales of organic coffee and olive oil, but a reduction in sales of organic flour. All targeted products became less price-sensitive. The results reveal that product specific heterogeneity has to be accounted for, and in some cases consumers adjusted to labeling over time.
    Keywords: Product labeling; random coefficient models; ecological products; experimental economics
    JEL: L66 L81 M31 M37
    Date: 2010–05–26
  2. By: Hartmann, Wesley (Stanford University); Nair, Harikesh (Stanford University); Narayanan, Sridhar (Stanford University)
    Abstract: We discuss how regression discontinuity designs arise naturally in settings where firms target marketing activity at consumers, and discuss how this aspect may be exploited for econometric inference of causal effects of marketing effort. Our main insight is to use commonly observed discreteness and kinks in the heuristics by which firms target such marketing activity to consumers for nonparametric identification. Such kinks, along with continuity restrictions that are typically satisfied in marketing and industrial organization applications, are sufficient for identification of local treatment effects. We review the theory of regression discontinuity estimation in the context of targeting, and explore its applicability to several marketing settings. We discuss identifiability of causal marketing effects using the design, and illustrate theoretically the conditions under which the RD estimator may be valid. Specifically, we argue that consideration of an underlying model of strategic consumer behavior reveals how identification hinges on model features such as the specification and value of structural parameters as well as belief structures. We present two empirical applications: the first, to measuring the effect of casino e-mail promotions targeted to customers based on ranges of their expected profitability; and the second, to measuring the effect of direct mail targeted by a B2C company to zip-codes based on thresholds of expected response. In both cases, we illustrate that exploiting the regression discontinuity design reveals negative effects of the marketing campaigns that would not have been uncovered using other approaches. Our results are nonparameteric, easy to compute, and fully control for the endogeneity induced by the targeting rule.
    Date: 2009–11
  3. By: Srinivasan, V. (Stanford University); Wyner, Gordon A. (Millward Brown Inc)
    Abstract: Companies constantly seek to enhance customer satisfaction by improving product or service features. Two methods are commonly used to assess customer priorities for product or service features from individual customers: ratings and constant-sum allocation. A common problem with the ratings approach is that it does not explicitly capture priorities; it is easy for the respondent to say that every feature is important. The traditional constant-sum approach overcomes this limitation, but with a large number of (ten or more) features, it becomes difficult for the respondent to divide a constant sum among all of them. ASEMAP (pronounced Ace-Map, Adaptive Self-Explication of Multi-Attribute Preferences) is a new web-based interactive method for assessing customer priorities. It consists of the respondent first grouping the features into two or more categories of importance (e.g., more important, less important). The respondent then ranks the features in each of the categories from the most important to least important thereby resulting in an overall rank order of the features. In order to estimate quantitative values for the priorities, the computer-based approach breaks down the feature importance question into a sequence of constant-sum paired comparison questions. The paired comparisons are chosen adaptively for each respondent to maximize the information elicited from each paired comparison question. The respondent needs to be questioned only on a small subset of all possible paired comparisons. Importances for the features are estimated from the constant-sum paired comparisons by log-linear multiple regression. The empirical context was that of assessing research priorities among fifteen topics from managers of Marketing Science Institute's member companies. The ASEMAP method provided a statistically significant and substantially better validity than the traditional constant sum method.
    Date: 2009–06
  4. By: Wanvisa Sriratana; Visit Limsombunchai (Department of Agricultural and Resource Department, Kasetsart University)
    Abstract: This paper analyzes factors affecting pure orange juice purchasing decisions of consumers in Bangkok Metropolitan area. The data used in this research were from interviewing 400 consumers in Bangkok Metropolitan area who used to buy pure orange juice. The data were collected during September to October 2008. The descriptive analysis techniques and Conjoint Analysis were applied. The results showed that certificate of standard and quality assurance was the most important factor which influences pure orange juice purchasing decisions of consumers followed by nutrition and price factors, respectively. Types of oranges and packaging were relatively insignificant factors affecting the consumer’s decisions.
    Keywords: Orange Juice, Conjoint Analysis, Consumers’ Preferences
    JEL: C10 Q13
    Date: 2010–05
  5. By: Lobley, Matt; Butler, Allan; Courtney, Paul; Ilbery, Brian; Kirwan, James; Maye, Damian; Potter, Clive; Winter, Michael
    Abstract: The purpose of this study was to take a fresh look at the nature of organic production, consumption and marketing in England and Wales in order to better assess its current and likely contribution to rural development and its ability to meet consumer expectations. Based on a mixed methodological approach the study consulted with 2,300 individuals to reveal a complex and multi-dimensional sector with a highly committed consumer base. The research aimed to describe and account for: (1)The socio-economic impacts of the organic farm supply chains on rural development; (2)The extent to which organic food delivers consumer expectations; and (3) The barriers affecting conversion to organic farming and expansion of existing organic farms. The research reported here is arguably one of the most integrated studies of organic consumption, production and marketing conducted to date. It throws new light on the nature of organic consumption, underlining both the on-going commitment of the majority of committed organic consumers and the gap in perceptions, degrees of âbrand trustâ and price sensitivity between this group and the majority of consumers who rarely or never buy organic. While this degree of commitment suggests that recent declines in organic consumption may not be sustained and will soon hit a floor, this finding also points to difficulties, particularly in a time of recession, in enrolling new consumers into organic networks, particularly via the direct marketing channels that smaller producers are more likely to depend on. This group of producers, locally embedded and linked to consumers via short supply chains, fulfil the expectations of many organic consumers and exemplify the idea of alternative food producers. Managed by self selecting, entrepreneurial farmers, these organic producers make a valuable contribution towards employment and income generation within the local rural economy. As our broader analysis of food chains and multiplier effects across the regional and national rural economy shows, however, it is the large scale producers, concerned with the production of bulk commodities and integrated into long supply chains, that inevitably account for the main rural employment and income benefits of the organic sector, if measured in aggregate terms. While there is a good case to be made for the rural development benefits of organic farming, it is important to recognise these scale effects and their geographically uneven distribution in any policy assessment.
    Keywords: Organic markets, Organic farming, Organic consumers, Rural Economy, Multiplier Analysis, Simple Value Chains, Agricultural and Food Policy, Consumer/Household Economics, Farm Management, Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2009–07
  6. By: Philipp Ackermann
    Abstract: This article examines the impact of customer reward programs on the competitive outcome in duopolistic markets. We argue that loyalty discounts for repeat customers constitute a commitment device beneficial to suppliers rather than customers. Analyzing a two-period Bertrand model we show that the use of loyalty discounts makes it possible for duopolists to attain the fully collusive outcome in both periods. By offering generous loyalty discounts, the firms can credibly commit to refrain from second period poaching given that they attract enough customers in period one. Loyalty discounts invite firms to collude in the first period.
    Keywords: switching costs; customer reward programs; loyalty discounts; repeat purchases; coupons; mixed equilibria
    JEL: C72 D43 L13 L14 L41
    Date: 2010–02
  7. By: Heutel, Garth (University of North Carolina, Greensboro); Muehlegger, Erich (Harvard University)
    Abstract: We study the diffusion of hybrid vehicles among consumers. Using data on sales of 11 different models over seven years, we identify the effect of the penetration rate--total cumulative hybrid sales per capita--on new hybrid purchases. The penetration rate significantly affects new purchases, and the effect differs by hybrid model. In particular, we find a positive diffusion effect from the Toyota Prius and a negative diffusion effect from the Honda Insight, with elasticities of 0.23 to 0.85 for the Prius and -0.08 to -0.32 for the Insight. This finding is consistent with our model of model-specific learning along with anecdotal evidence that early Insight models were perceived to be of lower quality than Prius models. Higher Insight penetration rates gave a negative signal about hybrid quality and inhibited rather than promoted hybrid adoption. The findings are relevant for policy designed to promote new technologies.
    JEL: D83 O33 Q55
    Date: 2010–04
  8. By: Matei, Lucica; Anghelescu, Stoica
    Abstract: The local development means the existence of several goods and services and their performance, expressed through adequate marketing policies, thus determining the overall development performance. The paper approaches the economic fundamental issues of local development and in this context it determines the basic components of public service marketing, relevant for local development: price, multiplier of revenues/expenditures, respectively the export multiplier. Those elements will express the ratios between resources and outcomes and their balance is based on a Keynesian model in an open economy
    Keywords: local development; public marketing; Keynesian approach
    JEL: L32 E12 A13 B23 H71
    Date: 2010–06–15
  9. By: Marianne Crowe; Marc Rysman; Joanna Stavins
    Abstract: Although mobile payments are increasingly used in some countries, they have not been adopted widely in the United States so far, despite their potential to add value for consumers and streamline the payments system. After describing a few countries’ experiences, we analyze the prospects for the U.S. market for mobile payments in retail payments, particularly the use of contactless and near-field communication technologies. We identify conditions that have facilitated some success in other countries and barriers to the adoption of mobile payments in the United States. On the demand side, consumers and merchants are well served by the current card system, and face a low expected benefit-cost ratio, at least in the short run. On the supply side, low market concentration and strong competitive forces of banks and mobile carriers make coordination of standards difficult. Furthermore, mobile payments are characterized by a network effects problem: consumers will not demand them until they know that enough merchants accept them, and merchants will not implement the technology until a critical mass of consumers justifies the cost of doing so. We present some policy recommendations that the Federal Reserve should consider.
    Keywords: Mobile commerce - United States ; Payment systems
    Date: 2010
  10. By: Ittner, Christopher D. (University of Pennsylvania); Larcker, David F. (Stanford University); Taylor, Daniel J. (Stanford University)
    Abstract: A number of recent marketing studies examine the stock market's response to the release of American Customer Satisfaction Index (ACSI) scores. The broad purpose of these studies is to investigate the stock market's valuation of customer satisfaction. However, a key focus is on whether customer satisfaction information predicts long-run returns. We provide evidence on the market's pricing of ACSI information using a more comprehensive set of well-established tests from the accounting and finance literatures. We find that ACSI scores provide some incremental information on future operating income and that the market quickly responds to the release of information on large increases in satisfaction. However, we find no evidence that ACSI predicts long-run returns. These results suggest that customer satisfaction information is value-relevant, but are also consistent with Jacobson and Mizik's (2009) conclusion that mispricing of ACSI information, if present at all, is limited.
    Date: 2009–06
  11. By: Ostrovsky, Michael (Stanford University); Schwarz, Michael (Yahoo! Labs)
    Abstract: We present the results of a large field experiment on setting reserve prices in auctions for online advertisements, guided by the theory of optimal auction design suitably adapted to the sponsored search setting. Consistent with the theory, following the introduction of new reserve prices revenues in these auctions have increased substantially.
    Date: 2009–12
  12. By: Shi, Guanming (University of Wisconsin); Stiegert, Kyle (University of Wisconsin); Chavas, Jean-Paul (University of Wisconsin)
    Abstract: In this paper, we investigate substitution/complementarity relationships among products sold with different bundled characteristics and under different vertical arrangements. Our conceptual model demonstrates the interactive price impacts emanating from product differentiation, market concentration and market size. The model is applied to the U.S. cottonseed market using transaction level data from 2002 to 2007. This market has been impacted structurally in numerous ways due to the advances and the rapid adoption of seeds with differing bundles of biotechnology traits and vertical penetration emanating from the biotechnology seed industry. Several interesting findings are reported. The econometric investigation finds evidence of sub-additive pricing in the bundling of patented biotech traits. Vertical organization is found to affect pricing and the exercise of market power. While higher market concentration is associated with higher prices, there is also evidence of cross-product complementarity effects that lead to lower prices. Simulation methods are developed to measure the net price effects. These simulations are applicable for use in pre-merger analysis of industries producing differentiated products and exhibiting similar market complexities.
    JEL: L13 L40 L65
    Date: 2009–12
  13. By: Konstantin A. Kholodilin (DIW Berlin, Germany); Maximilian Podstawski (Universität Potsdam, Wirtschafts- und Sozialwissen- schaftliche Fakultät, Potsdam, Germany); Boriss Siliverstovs (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: In this paper, we investigate whether the Google search activity can help in nowcasting the year-on-year growth rates of monthly US private consumption using a real-time data set. The Google-based forecasts are compared to those based on a benchmark AR(1) model and the models including the consumer surveys and financial indicators. According to the Diebold-Mariano test of equal predictive ability, the null hypothesis can be rejected suggesting that Google-based forecasts are significantly more accurate than those of the benchmark model. At the same time, the corresponding null hypothesis cannot be rejected for models with consumer surveys and financial variables. Moreover, when we apply the test of superior predictive ability (Hansen, 2005) that controls for possible data-snooping biases, we are able to reject the null hypothesis that the benchmark model is not inferior to any alternative model forecasts. Furthermore, the results of the model confidence set (MCS) procedure (Hansen et al., 2005) suggest that the autoregressive benchmark is not selected into a set of the best forecasting models. Apart from several Google-based models, the MCS contains also some models including survey-based indicators and financial variables. We conclude that Google searches do help improving the nowcasts of the private consumption in US.
    Keywords: Google indicators, real-time nowcasting, principal components, US private consumption.
    JEL: C22 C53 C82
    Date: 2010–04

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