nep-mkt New Economics Papers
on Marketing
Issue of 2016‒10‒09
fifteen papers chosen by
João Carlos Correia Leitão
Universidade da Beira Interior

  1. Native Advertising, Sponsorship Disclosure and Consumer Deception: Evidence from Mobile Search-Ad Experiments By Sahni, Navdeep S.; Nair, Harikesh S.
  2. Targeted Search and Platform Design By Zemin(Zachary) Zhong
  3. Does Advertising Serve as a Signal? Evidence from Field Experiments in Mobile Search By Sahni, Navdeep S.; Nair, Harikesh S.
  4. Personalization in Email Marketing: The Role of Non-informative Advertising Content By Sahni, Navdeep S.; Wheeler, S. Christian; Chintagunta, Pradeep
  5. Advertising and Competition for Market Share Between a New Good Producer and a Remanufacturer By Batabyal, Amitrajeet; Beladi, Hamid
  6. Vertical Probabilistic Selling under Competition: the Role of Consumer Anticipated Regret By Yong Chao; Lin Liu; Dongyuan Zhan
  7. Substitution and Complementarity between Fixed-line and Mobile Access By Chengsi Wang; Julian Wright
  8. Measuring the Impact of Improved Traceability Information in Seafood Markets Following a Large Scale Contamination Event By William L. Huth; O. Ashton Morgan; John C. Whitehead
  9. Effectiveness of Paid Search Advertising: Experimental Evidence By Weijia (Daisy) Dai; Michael Luca
  10. Why Customer Orientation Does not Necessarily Stimulate Complaint Management Efficiency: The Neglected Role of Orientation Towards Complaints By Daniel Ray; William Sabadie; David Gotteland
  11. Do Targeted Discount Offers Serve as Advertising? Evidence from 70 Field Experiments By Sahni, Navdeep; Zou, Dan; Chintagunta, Pradeep
  12. The Effect of Word of Mouth on Sales: New Answers from the Comprehensive Consumer Journey Data By Xiao Liu; Dokyun Lee; Kannan Srinivasan
  13. Price dispersion and consumer inattention: evidence from the market of bank accounts By Nicola Branzoli
  14. Does Online Word-of-Mouth Increase Demand? (and How?) Evidence from a Natural Experiment By Seiler, Stephan; Yao, Song; Wang, Wenbo
  15. The Seduction of the French Advertising Communication through Urban Public Space By Diana Freitas; Ricardo Azambuja

  1. By: Sahni, Navdeep S. (Stanford University); Nair, Harikesh S. (Stanford University)
    Abstract: Recent advances in advertising technology have lead to the development of "native advertising", which is a format of advertising that mimics the other non-sponsored content on the medium. While advertisers have rapidly embraced the format on a variety of digital media, regulators have expressed serious concerns about whether this format materially deceives consumers when the advertising disclosure is incomplete or inappropriate. This has reignited a longstanding debate about the distinction between advertising and content, and how it affects consumers. This paper contributes to this debate by providing empirical evidence from randomized experiments conducted on native advertising at a mobile restaurant-search platform. We experimentally vary the format of paid-search advertising, the extent to which ads are disclosed to over 200,000 users, and track their anonymized browsing behavior including clicks and conversions. Our research design uses comparisons of revealed preferences under experimentally manipulated treatment and control conditions to assess the potential for consumer confusion and deception. A design based on revealed preference is important to speaking to the "material" standard of regulators, and to assessing "confusion" while avoiding direct questioning of consumers. We find that native advertising benefits advertisers, and detect no evidence of deception under typically used formats of disclosure currently used in the paid-search marketplace. Further investigation shows that the incremental conversions due to advertising are not driven by users clicking on the native ads. Rather, the benefits from advertising are driven by users seeing the ads and later clicking on the advertiser's "organic" listings. Thus, we find little support of typical native advertising "tricking" users and driving them to advertisers. Users seem to view ads and deliberately evaluate the advertisers. Overall, our results imply the incentives of the platform, advertisers and regulators with respect to disclosure are aligned: consumers value the clear disclosure regulators demand, and it benefits advertisers and improves monetization for the platform.
    Date: 2016–02
  2. By: Zemin(Zachary) Zhong (Haas School of Business, UC Berkeley, Berkeley, CA 94720, USA)
    Abstract: Major online platforms such as Amazon and eBay have invested significantly in search technologies to direct consumer searches to relevant products. These technologies lead to targeted search, implying consumers are visiting more relevant sellers first. For example, consumers may directly enter their desirable attributes into search queries, and the platform will retrieve relevant sellers accordingly. The platform may also let consumers refine the search outcomes by various criteria. This study characterizes the role of targeted search, and examines how targeted search affects market equilibrium and platform design. I model targeted search in a differentiated market with many firms where consumers search sequentially for the best product match. Within this setup, I endogenize the search design by allowing the platform to choose the precision of targeted search and the revenue model contract. One of the central results of the analysis is how targeted search affects equilibrium prices. I find its impact on price is not monotonic. When targeting is not too precise, targeted search lowers the equilibrium price. It makes sellers more similar and intensifies price competition, despite the fact that all consumers face sellers with better fit. However, once the targeting becomes sufficiently precise, the equilibrium price increases, because highly targeted search discourages active consumer search and gives sellers monopoly power. Furthermore, I consider two major platform revenue models, commission and promoted slots, with consumer search. The platform, by providing targeted search with precision up to the aforementioned limit, can extract more consumer surplus through higher commission rates, because targeted search improves consumer surplus by lowering search cost, increasing fit, and lowering price. With targeted search up to the limit, the platform can also extract more surplus from sellers by offering promoted slots, because sellers can use promoted slots to better target consumers. However, once targeted search becomes too precise, the market will face a price hike, hurting the platform revenue in both models. Therefore, I find that in both revenue models, the platform may want to limit the precision of targeted search even if improving it is costless, with or without consumer entry. Using a unique dataset from Taobao, I find suggestive evidences that are consistent with the model predictions.
    Keywords: Consumer Search; Platform; e-Commerce
    JEL: D22 L81 M31
    Date: 2016–09
  3. By: Sahni, Navdeep S. (Stanford University); Nair, Harikesh S. (Stanford University)
    Abstract: In a large-scale field experiment, we demonstrate that advertising can serve as a signal that enhances consumers' evaluations of advertised goods. We implement the experiment on a mobile search platform that provides listings and reviews for an archetypal experience good, restaurants. In collaboration with the platform, we randomize more than 200,000 consumers into exposure or no exposure of ads for about 600+ local restaurants. In conditions in which consumers are exposed to advertising, we also randomly vary the disclosure to the consumer of whether a restaurant's listing is an ad. This enables us to isolate the effect on outcomes of a consumer knowing that a listing is sponsored--a pure signaling effect. We find that this disclosure alone increases calls to the restaurant by 77%, holding fixed all other attributes of the ad. This effect is higher when the consumer uses the platform away from his typical city of search, when the uncertainly about restaurant quality is larger, and for restaurants that have received fewer ratings in the past. Further, on the supply side, newer, higher rated and more popular restaurants advertise more on the platform. Taken together, we interpret these results as consistent with a signaling equilibrium in which ads serve as implicit signals that enhance the appeal of the advertised restaurants. Both consumers and firms seem to benefit from the signaling. Consumers shift choices systematically towards restaurants that are better rated (at baseline) in the disclosure condition compared to the no disclosure condition, and advertisers gain from the improved conversion induced by disclosure. Further, our results imply that search-platforms would gain from clear sponsorship disclosure, and thus holds implications for platform design.
    Date: 2016–02
  4. By: Sahni, Navdeep S. (Stanford University); Wheeler, S. Christian (Stanford University); Chintagunta, Pradeep (University of Chicago)
    Abstract: In collaboration with three companies selling a diverse set of products, we conduct randomized field experiments in which experimentally tailored email messages are sent to millions of individuals. We find consistently that personalizing the emails, while adding no informative content about the product or the company, benefits the advertisers. In our main experiment, we find that adding the name of the message recipient to the email's subject-line increases the probability of the recipient opening it by 20%, which translates to an increase in sales leads by 31% and a reduction in the number of individuals unsubscribing from the email campaign by 17%. We present similar experiments conducted with other companies, which show that the effects we document extend from objectives ranging from acquiring new customers to retaining customers who have purchased from the company in the past. The effects also extend to other content of similar nature. Our investigation of several possible mechanisms suggests that such content increases the attention consumers pay to the other content in the rest of the advertising message. Our paper quantifies the benefits from personalization, and contributes to understanding the role of advertising content. It contributes to the psychology-based research in marketing by establishing the robustness of lab findings in field settings. It has clear implications for the firms that are designing their advertising campaigns.
    Date: 2016–01
  5. By: Batabyal, Amitrajeet; Beladi, Hamid
    Abstract: We study the strategic interaction between a new good producer and a remanufacturer who use advertising campaigns to compete for a dominant share of the market for a certain good. Each firm chooses one of three possible strategies for running its advertising campaign. The two rival firms care only about capturing a dominant share of the relevant market. Hence, if a firm expects to capture dominant market share with probability p ∈ [0,1] then its payoff in the game we study is also p. Our analysis leads to four results. First, we provide the normal form representation of the game between the new good producer and the remanufacturer. Second, we specify the game in matrix form. Third, we indicate what happens at each stage of the elimination of strictly dominated strategies. Finally, we show that the iterated elimination of strictly dominated strategies yields a clear and unique prediction about the outcome of the advertising game.
    Keywords: Advertising, Duopoly, New Good Producer, Remanufacturer, Dominated Strategy
    JEL: D21 L21 M37
    Date: 2016–04–26
  6. By: Yong Chao (College of Business, University of Louisville, Louisville, KY USA 40292); Lin Liu (College of Business Administration, University of Central Florida, Orlando, FL USA 32816); Dongyuan Zhan (School of Management, University College London, London, UK E14 5AA)
    Abstract: This paper studies probabilistic selling with vertically differentiated products when firms compete and consumers anticipate the potential post-purchase regret raised by possibly obtaining the inferior products. Intuitively, anticipated regret hurts the attractiveness of probabilistic selling. However, we find that probabilistic selling can be more profitable, and more likely to arise with anticipated regret than without it. This is due to the ¡°reverse quality discrimination¡± (perceived quality of the random product becomes decreasing in consumer type at the competition margin), which increases the perceived differentiation, and may still maintain sufficient attractiveness of the random product for infra-marginal consumers. Meanwhile, it may hurt the competitor.
    Keywords: reverse quality discrimination, probabilistic selling, vertical differentiation, anticipated regret, competition
    JEL: L13 L15 M31 D03 D43
    Date: 2016–09
  7. By: Chengsi Wang (Department of Economics, University of Mannheim, L7 3-5, Mannheim, 68131, Germany); Julian Wright (Department of Economics, National University of Singapore, 10 Kent Ridge Crescent, 119260, Singapore)
    Abstract: Platforms use price parity clauses to prevent sellers charging lower prices when selling through other channels. Platforms justify these restraints by noting they are needed to prevent free-riding, which would undermine their incentives to invest in their platform. In this paper, we study the effect of price parity clauses on three different types of platform investment, and evaluate these restraints taking into account these investment effects. We find, that wide price parity clauses lead to excessive platform investment while without such price parity clauses there is insufficient platform investment. Even taking these investment effects into account, wide price parity clauses always lower consumer surplus and often lowers total welfare.
    Keywords: search, vertical restraints, intermediation, investment
    JEL: D40 L11 L14 L42
    Date: 2016–10
  8. By: William L. Huth; O. Ashton Morgan; John C. Whitehead
    Abstract: We fuse and jointly estimate revealed and stated preference data over the BP Deepwater Horizon oil spill time horizon to analyze the potential for a new seafood traceability system to mitigate long-run decreases in product demand following a major contamination event. Findings indicate that traceability information flows that provide more precise information to oyster consumers regarding the location of harvest ameliorate consumers’ perceived risk of eating oyster meals after the spill, leading to a significant increase in demand. Further, the magnitude of the increase is greater than the negative long-term post-spill effects, leading to overall welfare gains. However, any price increase associated with the information will mitigate the initial welfare gains. Overall, our findings suggest that the potential success of a new seafood traceability system depends on the implementation costs and the extent to which price increases are passed onto consumers. Key Words: Traceability, oyster consumers, consumer surplus, contamination event, risk preferences
    Date: 2016
  9. By: Weijia (Daisy) Dai (Lehigh University); Michael Luca (Harvard Business School, Negotiation, Organizations & Markets Unit)
    Abstract: Paid search has become an increasingly common form of advertising, comprising about half of all online advertising expenditures. To shed light on the effectiveness of paid search, we design and analyze a large-scale field experiment on the review platform The experiment consists of roughly 18,000 restaurants and 24 million advertising exposures - randomly assigning paid search advertising packages to more than 7,000 restaurants for a three-month period, with randomization done at the restaurant level to assess the overall impact of advertisements. We find that advertising increases a restaurant's Yelp page views by 25% on average. Advertising also increases the number of purchase intentions - including getting directions, browsing the restaurant's website, and calling the restaurant - by 18%, 9%, and 13% respectively, and raises the number of reviews by 5%, suggesting that advertising also affects the number of restaurant-goers. All advertising effects drop to zero immediately after the advertising period. A back of the envelope calculation suggests that advertising would produce a positive return on average for restaurants in our sample.
    Date: 2016–10
  10. By: Daniel Ray (ESC Grenoble - Ecole Supérieure de Commerce de Grenoble - Grenoble École de Management (GEM)); William Sabadie (Centre de Recherche Magellan - Université Jean Moulin - Lyon III - Institut d'Administration des Entreprises (IAE) - Lyon); David Gotteland (ESC Grenoble - Ecole Supérieure de Commerce de Grenoble - Grenoble École de Management (GEM))
    Abstract: This communication addresses how customer orientation can prevent defensive organizational behaviors towards complaints. We argue that prospect theory offers a relevant theoretical framework to address that question. When managers and employees view complaints nega-tively, they are likely to exhibit defensive behaviors towards complaints, which results in an ineffective complaint management. A study conducted with 137 complaint managers show that investments into complaint management do not yield returns if customer orientation does not result in a firm’s orientation toward complaints. Senior management as a critical to play in implementing a complaint orientation of corporate culture.
    Abstract: Nous avons recours à la théorie des perspectives pour expliquer comment l’orientation client peut éviter les comportements organisationnels défensifs vis-à-vis des réclamations. Lorsque les managers et les employés ont une conception négative des réclamations, ils développent des comportements défensifs, et cela se traduit par un management inefficace des réclama-tions. Les résultats d’une étude menée auprès de 137 responsables marketing montrent que des efforts en termes de gestion des réclamations sont efficaces si l’orientation client se traduit par une orientation envers les réclamations. Le rôle des managers est important pour favoriser une orientation réclamation dans la culture organisationnelle.
    Keywords: customer orientation,complaint,orientation client,réclamation,orientation réclamation
    Date: 2015–05–13
  11. 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 discount offers. While these discounts are expected to increase the demand for the promoted products, are they 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 estimate the redemption rates of the offers and also measure the broader 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 significantly, by $3.03 (a 37.2% increase) during the promotion window. However, the redemption rate of these offers is low. Importantly, ninety percent of these gains are not through redemption of the offers. The individuals who spent more on the platform in the past are more responsive to the offers; and the effect of the offers is significantly higher among individuals who did not transact on the platform in the year before the offer was given. 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 offers can serve as a form of "advertising" for the firm's products rather than tools of price discrimination.
    Date: 2015–11
  12. By: Xiao Liu (New York University, 40 W 4th Street, New York, NY 10012); Dokyun Lee (Carnegie Mellon University, 5000 Forbes Ave, Pittsburgh, PA 15213); Kannan Srinivasan (Carnegie Mellon University, 5000 Forbes Ave, Pittsburgh, PA 15213)
    Abstract: Online Word-of-Mouth has great impact on product sales. Although aggregate data suggests that customers read review text rather than relying only on summary statistics, little is known about consumers’ review reading behavior and its impact on conversion at the granular level. To fill this research gap, we analyze a comprehensive dataset that tracks individual-level search, review reading, as well as purchase behaviors and achieve two objectives. First, we describe consumers’ review reading behaviors. In contrast to what has been found with aggregate data, individual level consumer journey data shows that around 70% of the time, consumers do not read reviews in their online journeys; they are less likely to read reviews for products that are inexpensive and have many reviews. Second, we quantify the causal impact of quantity and content information of reviews read on sales. The identification relies on the variation in the reviews seen by consumers due to newly added reviews. To extract content information, we apply Deep Learning natural language processing models and identify six dimensions of content in the reviews. We find that aesthetics and price content in the reviews significantly affect conversion. Counterfactual simulation suggests that re-ordering review content can have the same effect as a 1.6% price cut for boosting conversion.
    Keywords: Consumer Purchase Journey, Product Reviews, Review Content, Deep Learning
    JEL: M31 D12 C45
    Date: 2016–09
  13. By: Nicola Branzoli (Banca d'Italia)
    Abstract: This paper analyzes consumer inattention in the market of checking accounts. I examine the behavior of consumers who keep account tariffs that are dominated, i.e. that charge higher costs for any amount of bank services consumed through the account, by tariffs available at the same bank and introduced after the account was opened. I show that the probability of observing an inattentive consumer decreases with the dispersion of prices across tariffs of her bank. Moreover, consumers using services with the most dispersed prices across tariffs of their bank are less likely to be inattentive, while consumers using only services with the least dispersed prices are more likely to be inattentive. These results are consistent with decision-theoretic models in which consumers focus their attention on attributes which differ more across options and can be useful to improve consumer choice in this market.
    Keywords: dominated tariffs, consumer inattention, price dispersion
    JEL: D4 D8 D12 L11
    Date: 2016–09
  14. By: Seiler, Stephan (Stanford University); Yao, Song (Northwestern University); Wang, Wenbo (Hong Kong University of Science and Technology)
    Abstract: We leverage a temporary block of the Chinese microblogging platform Sina Weibo due to political events, to estimate the causal effect of online word-of-mouth content on product demand in the context of TV show viewership. Based on this source of exogenous variation, we estimate an elasticity of TV show ratings (market share in terms of viewership) with respect to the number of relevant comments (comments were disabled during the block) of 0.016. In terms of the behavioral mechanism, we find more post-show microblogging activity increases demand, whereas comments posted prior to the show airing do not affect viewership. These patterns are inconsistent with informative or persuasive advertising effects and suggest a complementarity between TV consumption and anticipated post-show microblogging activity.
    Date: 2015–11
  15. By: Diana Freitas (ENSA PVDS - École nationale supérieure d'architecture de Paris Val-de-Seine); Ricardo Azambuja (ESSEC Business School - Essec Business School)
    Abstract: in this article, the use of Parisian urban furniture as a medium for communicating advertising is analyzed drawing from the perspectives of the audrillardian consumerism and the concept of Junkspace introduced by Rem Koolhaas. Three examples of advertising integrated into the city are presented and analyzed via-à-vis these theoretical frameworks. Three extensions of the Baudrillardian concept of seduction are proposed: i) the seduction through the sign of the familial, offered by the Grands Magasins’ shop-windows, ii) the seduction by integration, reached by the Morris column, and iii) the seduction by the ambition of belonging to a reference-group, incited by a panel-siding. The characterization of the embodiments of Junkspace into contemporary Paris, as well as a reflection on the subtle and spectacular seduction of consumption through the inevitability of everyday in this city, are then advocated.
    Abstract: A utilização do mobiliário urbano parisience como veículo para comunicar a publicidade é analisada sob a ótica do consumerismo baudrillardiano e da concepção de Junkspace de Rem Koolhaas. Três exemplos de peças publicitárias integradas ao urbano são apresentados e analisados via-à-vis estes referenciais teóricos. Três extensões do conceito baudrillardiano de sedução são propostos: i) a sedução através do signo familial, proporcionada pelas vitrines dos Grands Magasins, ii) a sedução pela integração, alcançada pela coluna Morris, e iii) a sedução pela ambição de pertencimento a um grupo de referência, incitado por um tapume-painel. A caracterização da corporificação do Junkspace na Paris contemporânea, bem como uma reflexão sobre a sutileza da sedução espetacular do consumo através da inevitabilidade do cotidiano nesta cidade são, por fim, argüidos. Abstract: in this article, the use of Parisian urban furniture as a medium for communicating advertising is analyzed drawing from the perspectives of the Baudrillardian consumerism and the concept of Junkspace introduced by Rem Koolhaas. Three examples of advertising integrated into the city are presented and analyzed via-à-vis these theoretical frameworks. Three extensions of the Baudrillardian concept of seduction are proposed: i) the seduction through the sign of the familial, offered by the Grands Magasins' shop-windows, ii) the seduction by integration, reached by the Morris column, and iii) the seduction by the
    Keywords: Urban Public Space,French Advertising Communication
    Date: 2015

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