nep-mkt New Economics Papers
on Marketing
Issue of 2015‒03‒05
thirteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Private Label Brands: Benefits and Challenges Pingo Doce Case Study By José Cevada; Joana César Machado
  2. The Effect of Social Media Marketing Content on Consumer Engagement: Evidence from Facebook By Lee, Dokyun; Hosanagar, Kartik; Nair, Harikesh S.
  3. Power to Choose? An Analysis of Consumer Inertia in the Residential Electricity Market By Ali Hortaçsu; Seyed Ali Madanizadeh; Steven L. Puller
  4. Consumer Search: Evidence from Path-Tracking Data By Pinna, Fabio; Seiler, Stephan
  5. Asymmetric Price Effects of Competition By Lach, Saul; Moraga-González, José-Luis
  6. Big Data and Marketing Analytics in Gaming: Combining Empirical Models and Field Experimentation By Nair, Harikesh S.; Misra, Sanjog; Hornbuckle, William J., IV; Mishra, Ranjan; Acharya, Anand
  7. Personalized Pricing and Advertising: An Asymmetric Equilibrium Analysis By Anderson, Simon P; Baik, Alicia; Larson, Nathan
  8. As They Sow, so Shall They Reap: Customers’ Influence on Customer Satisfaction at the Customer Interface By Stock, Ruth; Bednarek, Marei
  9. Superbowl Ads By Hartmann, Wesley R.; Klapper, Daniel
  10. Effect of Temporal Spacing between Advertising Exposures: Evidence from Online Field Experiments By Sahni, Navdeep
  11. Understanding Social Effects in the In-Flight Marketplace: Characterization and Managerial Implications By Gardete, Pedro M.
  12. Effects of Targeted Promotions: Evidence from Field Experiments By Sahni, Navdeep; Zou, Dan; Chintagunta, Pradeep
  13. Consumers' Activism: the Facebook boycott of Cottage Cheese By Hendel, Igal E; Lach, Saul; Spiegel, Yossi

  1. By: José Cevada (Faculdade de Economia e Gestão, Universidade Católica Portuguesa - Porto); Joana César Machado (Faculdade de Economia e Gestão and CEGE, Universidade Católica Portuguesa - Porto)
    Abstract: This working paper analyzes the growing importance of private labels in today’s modern distribution, and the main opportunities and threats they raise for retailers and national brands. Our main purpose was to: (1) analyze consumer´s perceptions of private label brands, (2) identify their critical relevance for retailers; (3) understand how national brands can benefit from private labels’ sustainable growth and (4) identify the major challenges they bring for different types of national brands (namely, A Brands and B Brands). We used a case study approach and analyzed the strategy of Pingo Doce brand, a private label that belongs to Jerónimo Martins group. Among other relevant findings, we found evidence that the drop in Pingo Doce’s market share, in 2013, was the result of a strategic move to significantly improve consumers’ quality perceptions, and, simultaneously, keep a profitable balance between the private label and national brands.
    Keywords: Corporate brand; private label brands; retailers; national brands; benefits of private label brands
    Date: 2015–01
  2. By: Lee, Dokyun (University of PA); Hosanagar, Kartik (University of PA); Nair, Harikesh S. (Stanford University)
    Abstract: We investigate the effect of social media content on customer engagement using a large-scale field study on Facebook. We content-code more than 100,000 unique messages across 800 companies engaging with users on Facebook using a combination of Amazon Mechanical Turk and state-of-the-art Natural Language Processing algorithms. We use this large-scale database of content attributes to test the effect of social media marketing content on subsequent user engagement--defined as Likes and comments--with the messages. We develop methods to account for potential selection biases that arise from Facebook's filtering algorithm, EdgeRank, that assigns messages non-randomly to users. We find that inclusion of persuasive content--like emotional and philanthropic content--increases engagement with a message. We find that informative content--like mentions of prices, availability, and product features--reduce engagement when included in messages in isolation, but increase engagement when provided in combination with persuasive attributes. Persuasive content thus seems to be the key to effective engagement. Our results inform content design strategies in social media, and the methodology we develop to content-code large-scale textual data provides a framework for future studies on unstructured natural language data such as advertising content or product reviews.
    Date: 2014–05
  3. By: Ali Hortaçsu; Seyed Ali Madanizadeh; Steven L. Puller
    Abstract: Many jurisdictions around the world have deregulated utilities and opened retail markets to competition. However, inertial decisionmaking can diminish consumer benefits of retail competition. Using household-level data from the Texas residential electricity market, we document evidence of consumer inertia. We estimate an econometric model of retail choice to measure two sources of inertia: (1) search frictions/inattention, and (2) a brand advantage that consumers afford the incumbent. We find that households rarely search for alternative retailers, and when they do search, households attach a brand advantage to the incumbent. Counterfactual experiments show that low-cost information interventions can notably increase consumer surplus.
    JEL: D8 L0 L5
    Date: 2015–02
  4. By: Pinna, Fabio (London School of Economics and Political Science); Seiler, Stephan (Centre for Economic Performance, Stanford University)
    Abstract: We estimate the effect of consumer search on the price of the purchased product in a physical store environment. We implement the analysis using a unique data set obtained from radio frequency identification tags, which are attached to supermarket shopping carts. This technology allows us to record consumers' purchases as well as the time they spent in front of the shelf when contemplating which product to buy, giving us a direct measure of search effort. Controlling for a host of confounding factors, we estimate that an additional minute spent searching lowers price paid by $2.10.
    Date: 2014–08
  5. By: Lach, Saul; Moraga-González, José-Luis
    Abstract: In markets where price dispersion is prevalent the relevant question is not what happens to the price when the number of firms changes but, instead, what happens to the whole distribution of equilibrium prices. Using data from the gasoline market in the Netherlands, we find, first, that markets with a given number of competitors have price distributions that first-order stochastically dominate the corresponding price distributions in markets with one more firm. Second, the competitive response varies along the price distribution and is stronger at prices in the medium to upper part of the distribution. Finally, consumer gains from competition depend on how well informed they are and turn out to be larger for relatively attentive consumers. To account for these empirical results, we propose a generalisation of Varian's (1980) well-known model of sales that allows for richer heterogeneity in consumer price information.
    Keywords: distribution of price information; number of competitors; price dispersion
    JEL: D43 D83 L13
    Date: 2015–03
  6. By: Nair, Harikesh S. (Stanford University); Misra, Sanjog (UCLA); Hornbuckle, William J., IV (MGM Resorts International); Mishra, Ranjan (ESS Analysis); Acharya, Anand (ESS Analysis)
    Abstract: This paper reports on the development and implementation of a large-scale, marketing analytics framework for improving the segmentation, targeting and optimization of a consumer-facing firm's marketing activities. The framework leverages detailed transaction data of the type increasingly becoming available in such industries. The models are customized to facilitate casino operations and were implemented at the MGM Resorts International's group of companies. The core of the framework consists of empirical models of consumer casino visitation and play behavior and its relationship to targeted marketing effort. Important aspects of the models include incorporation of rich dimensions of heterogeneity in consumer response, accommodation of state-dependence in consumer behavior, and controls for the endogeneity of targeted marketing in inference, all issues that are salient in modern empirical marketing research. As part of the framework, we also develop a new approach that accommodates the endogeneity of targeted marketing. Our strategy is to conduct inference separately across fixed partitions of the score variable that targeting is based on, and may be useful in other behavioral targeting settings. A novel aspect of the paper is an analysis of a randomized trial implemented at the firm involving about 1.5M consumers comparing the performance of the proposed marketing-science based models to the existing status quo. We find the impact of the solution is to produce about $1M to $5M incremental profits per campaign, and about an 8% improvement in the Return on Investment of marketing dollars. At current levels of marketing spending, this translates to between $10M and $15M in incremental annual profit in this setting. More generally, we believe the results showcase the value of combining large, disaggregate, individual-level datasets with marketing analytics solutions for improving outcomes for firms in real-world settings. We hope our demonstrated improvement from analytics adoption helps accelerate faster diffusion of marketing science into practice.
    Date: 2014–09
  7. By: Anderson, Simon P; Baik, Alicia; Larson, Nathan
    Abstract: We study personalized price competition with costly advertising among n quality-cost differentiated firms. Strategies involve mixing over both prices and whether to advertise. In equilibrium, only the top two firms advertise, earning “Bertrand-like" profits. Welfare losses initially rise then fall with the ad cost, with losses due to excessive advertising and sales by the “wrong " firm. When firms are symmetric, the symmetric equilibrium yields perverse comparative statics and is unstable. Our key results apply when demand is elastic, when ad costs are heterogeneous, and with noise in consumer tastes.
    Keywords: Bertrand equilibrium; consumer targeting; mixed strategy equilibrium; price advertising; price dispersion
    JEL: D43 L13
    Date: 2015–03
  8. By: Stock, Ruth; Bednarek, Marei
    Date: 2014
  9. By: Hartmann, Wesley R. (Stanford University); Klapper, Daniel (Humboldt University Berlin)
    Abstract: We explore the effects of television advertising in the setting of the NFL's Super Bowl telecast. The Super Bowl is the largest advertising event of the year and is well suited for measurement. The event has the potential to create significant increases in "brand capital" because ratings average over 40 percent of households and ads are a focal point of the broadcast. Furthermore, variation in exposures is exogenous because a brand cannot choose how many impressions it receives in each market. Viewership is determined based on local preferences for watching the two competing teams. With this significant and exogenous variation in Super Bowl advertising exposures we test whether advertisers' sales are affected accordingly. We run our analysis using Nielsen ratings and store level sales data in the beer and soda categories. We find that Super Bowl ads generate significant increases in revenue and volume per household. However, when two major brands both advertise, they erode most of the gain. The largest effects occur during weeks with spikes in other sports events suggesting that placing an advertisement in the most watched sporting event of the year generates associations with sports more broadly. We test this using local viewership data of NCAA basketball in the second month after the Super Bowl and find strong evidence that advertising can generate or augment complementarities between a brand and the ways potential consumers spend their time.
    Date: 2014–06
  10. By: Sahni, Navdeep (Stanford University)
    Abstract: This paper aims to understand the impact of temporal spacing between ad exposures on the likelihood of a consumer purchasing the advertised product. I create an individual-level data set with exogenous variation in the spacing and intensity of ads by running online field experiments. Using this data set, I first show that (1) ads significantly increase the likelihood of the consumers purchasing from the advertiser and (2) this increase carries over to future purchase occasions. Importantly, I find evidence for the spacing effect: the likelihood of a product's purchase increases if the product's past ads are spread apart rather than bunched together, even if the spreading apart of ads involves shifting some ads away from the purchase occasion. Because the traditional models of advertising do not explain the data patterns, I build a new memory-based model of how advertising influences consumer behavior. Using a nested test, I reject the restrictions imposed by the canonical goodwill stock model based on the Nerlove and Arrow [1962] approach, in favor of the more general memory-based model. Counterfactual simulations using the parameter estimates show that not accounting for the features of the memory model might lead to significantly lower profits for the advertisers.
    Date: 2013–12
  11. By: Gardete, Pedro M. (Stanford University)
    Abstract: This paper investigates the in-flight marketplace. It uses detailed data of inflight purchases to understand social effects in purchase behavior, and determine their potential for designing marketing promotions. We find that on average a passenger is approximately 30% more likely to buy after being exposed to a lateral purchase. Analyses on the underlying mechanisms reveal that the classical social influence theories do not suffice to explain all the patterns in the data. Omission neglect, product contagion and goal balancing are proposed as complementary theories. Finally, we find that consumers' willingness-to-buy is positively correlated with responsiveness to social influence. Because of this homophily and social feedback effects, classically seen as nuisances, can provide targeting value for the firm. Taking them into account in behavioral-based targeting can up to double the social spillovers of marketing actions.
    Date: 2014–10
  12. By: Sahni, Navdeep (Stanford University); Zou, Dan (University of Chicago); Chintagunta, Pradeep (University of Chicago)
    Abstract: The prevalence and widespread usage of email has given businesses a direct and cost effective way of providing consumers with targeted promotional offers. While targeted promotions are expected to increase the demand for the promoted products, are these promotions effective in increasing revenues? Do they have effects beyond acting as price reductions? We study these questions using individual-level data from 70 randomized experiments run by a large online ticket resale platform. We measure the impact of emailed promotions by comparing purchases by individuals who received the experimental promotions with purchases by those who did not receive the offers because of the experimental randomization. We find that the offers cause the average expenditure to increase by $3.03 (a 37.2% increase) during the promotion window. However, ninety percent of these gains are not through redemption of the offers. Interestingly, the promotion causes carryover to the week after the promotion expires; we find that spending increases by $1.55 in the week after the offer expires. Additionally, we find evidence for cross category spillovers to non-promoted products--offers not applicable to a ticket genre cause an increase in spending in that genre. We conclude that emailed promotions can serve as a form of "advertising" for the firm's products.
    Date: 2014–11
  13. By: Hendel, Igal E; Lach, Saul; Spiegel, Yossi
    Abstract: We study a consumer boycott on cottage cheese that was organized in Israel on Facebook in the summer of 2011 following a steep increase in prices after price controls were lifted in 2006. The boycott led to an immediate decline in prices which stayed low more than three years after the boycott. We find that (i) demand at the start of the boycott, at the new low prices, would have been 30% higher but for the boycott, (ii) own price elasticities and especially cross price elasticities increased substantially after the boycott, and (iii) post-boycott prices are substantially below the levels implied by the post-boycott elasticities of demand, suggesting that firms lowered prices due to fears of the boycott spreading to other products, of new price controls, and of possibly class action law suits.
    Keywords: consumer boycott; price elasticities; social media
    JEL: D12 L1
    Date: 2015–03

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