Prior research comes to different conclusions as to what country characteristics drive diffusion patterns. One prime difficulty that may partially explain this divergence between studies is the sparseness of the data, in terms of the periodicity as well as the number of products and countries, in combination with the large number of potentially influential country characteristics. In face of such sparse data, scholars have used nested models, bivariate models and factor models to explore the role of country covariates. This paper uses Bayesian Lasso and Bayesian Elastic Net variable selection procedures as powerful approaches to identify the most important drivers of differences in Bass diffusion parameters across countries. We find that socio-economic and demographic country covariates (most pronouncedly so, economic wealth and education) have the strongest effect on all diffusion metrics we study. Our findings are a call for marketing scientists to devote greater attention to country covariate selection in international diffusion models, as well as to variable selection in marketing models at large.
Aggregate Impact of Different Brand Development Strategies
Current branding literature investigates the spillover effects and extension effects due to the introduction of product extensions. However, no study so far has evaluated the aggregate market impact of these effects across different brand development strategies or accounted for the strategic decision to introduce the extension. It is important to examine the above given the significant investments and the high failure rates associated with the introduction of new product extensions. In this study, we develop an analytical framework that derives revenue outcome due to an extension introduction as a function of spillover and extension effects. We empirically estimate the above effects through a Bayesian endogenous switching model that jointly models market shares of the extension and its parent brand along with the strategic decision to introduce the extension and the endogeneity in prices. By using a data set that covers 155 extensions introduced across 20 U.S. geographic markets, we obtain several new generalizable empirical insights. Our results show that spillover effects are higher for brand extensions, whereas line extensions benefit through larger extension effects. We find that vertically differentiating a line extension in terms of increased quality mitigates its negative spillover effects. The addition of a new brand name (i.e., sub-branding) lowers spillover effects for line extensions, whereas it increases the market performance for brand extensions. Our findings provide several strategic implications for manufacturers to successfully introduce and manage product extensions.
Incorporating Mental Representations in Discrete Choice Models of Travel Behaviour: Modelling Approach and Empirical Application
We introduce an extension of the discrete choice model to take into account individuals’ mental representation of a choice problem. We argue that, especially in daily activity and travel choices, the needs of an individual have an influence on the benefits he or she pursues in the choice of an alternative. Activated benefits and mental costs determine which attributes are considered in evaluating alternatives. The extended model considers the formation of a mental representation of a choice problem as an integral part of the choice process. We show how formation of a mental representation and making a choice can be modeled jointly in an integrated random utility maximization framework. We further show how the integrated model can be estimated based on combined observations of mental representations and choice outcomes using maximum likelihood estimation. A comparative analysis shows that observations of the mental representations may significantly improve predictions and enhance insights into situation-dependent motivations underlying preferences. We illustrate the approach using a data set that involves measurements of mental representations and choice behavior in the area of transport mode choice.
The effect of customer empowerment on adherence to expert advice
Customers often receive expert advice related to their health, finances, taxes or legal procedures, to name just a few. A noble stance taken by some is that experts should empower customers to make their own decisions. In this article, we distinguish informational from decisional empowerment and study whether empowerment leads customers to adhere more or less to expert advice. We empirically test our model by using a unique dataset involving 11,735 respondents in 17 countries on four continents. In the context of consumer adherence to doctors’ therapy advice (patient non-adherence to doctor advice may cost about $564 billion globally to the pharmaceutical industry every year), we find that decisional empowerment lowers adherence to expert advice. The effect of informational empowerment varies predictably across cultures and is only universally beneficial when initiated by the customer. These findings have important implications for professional service providers.
Does direct-to-consumer advertising of pharmaceutical drugs deliver results?
Does direct-to-consumer advertising (DTCA) of pharmaceutical drugs lead to an increase in the number of prescription requests of those drugs by patients? Considering that pharmaceutical manufacturers spent US$4.3 billion on DTCA in 2010, the answer is of great significance.
The commercial contribution of clinical studies for pharmaceutical drugs
Pharmaceutical drugs are rigorously evaluated through clinical studies. The commercial consequences of such clinical studies, both to the promotion for and sales of drugs, are largely under-researched. The present study answers the following research questions: 1) How does the evolution of clinical study outcomes affect product sales? 2) How does the evolution of clinical study outcomes affect a firm’s promotion expenditures to physicians and consumers? 3) Is the assessment of the responsiveness of sales to promotion expenditures biased when the analyst omits the role of clinical studies? We summarize a comprehensive body of clinical studies in three metrics: valence, dispersion, and volume. We extend the literature with the following findings. A higher valence and volume of clinical studies (i.e., more positive and larger number of studies) increase sales. A higher valence of clinical studies increases spending on both direct-to-consumer advertising and direct-to-physician promotion. A higher dispersion among clinical studies decreases spending on direct-to-consumer advertising. A higher volume of clinical studies has no effect on direct-to-physician promotion, but decreases direct-to-consumer advertising. Furthermore, the results show that omitting these metrics from a market response model leads to an overestimation of the responsiveness of sales to promotion expenditures.
The role of trust in consumers’ brand considerations
Gaining the trust of consumers is crucial to the success of many brands. Increased trust leads to greater brand consideration, which in turn should lead to more sales.
Research suggests that one way of engendering trust is by providing consumers with competitive information in a way that is seen as altruistic by being geared towards customers’ needs. However, while much theory has been written on the subject, no field experiments have been conducted to support this belief – until now.
Consumer informedness and firm information strategy
Consumer informedness plays a critical role in determining consumer choice in the presence of information technology deployed by competing firms in the marketplace. This paper develops a new theory of consumer informedness. Using data collected through a series of stated choice experiments in two different research contexts, we examine how consumer characteristics and observed behaviors moderate the influence of price and product informedness on consumer choice. The results indicate that different types of consumer informedness amplify different consumer behaviors in specific consumer segments. In particular, we found that price informedness is more influential among consumers in the commodity segment. They exhibit greater trading down behavior, which represents stronger preferences for choosing the products that provide the best price. In contrast, product informedness is more influential among consumers in the differentiated segment. This group exhibits greater trading out behavior, involving stronger preferences for choosing products that best suit their specific needs. These results suggest that firm information strategy should take into account consumers’ characteristics, their past observed behaviors, and the impact of consumer informedness. We also discuss the theoretical contributions of this research and its broader implications for firm-level information strategy.
New research suggests that a specific type of customer experience can systematically lead to worse, not better, choices by consumers.
Most evidence from economic theory suggests that experienced consumers make better choices. Even when we display the behavioural biases that lead us to less optimal economic outcomes, studies show that experience can ameliorate these initial biases and steer us back towards better choices. But does this principle hold true of all experiences?
Customer Designs Not in Vogue for Luxury Fashion Brands
Firms such as Muji, LEGO, Threadless, Oscar de la Renta and many others are harnessing the creative potential of their customers. In actively encouraging users to design new products companies seek to enhance their competitive advantage by reducing new product development costs, improving time-to-market, and offering user-inspired innovations that satisfy market needs.