An easy sell
Joseph Nunes, Andrea Ordanini & Francesca Valsesia
Journal of Consumer Psychology, forthcoming
Abstract:
The majority of music people listen to in their daily lives includes lyrics. This research documents how more repetitive songs lyrically are processed more fluently and thus adopted more broadly and quickly in the marketplace. Study 1 is a controlled laboratory experiment demonstrating how lexical repetition, a feature of the stimulus and not the consequence of repeated exposures, results in greater processing fluency. Study 2 replicates the effect utilizing custom-produced song excerpts holding everything constant except the lyrics. Utilizing data from Billboard’s Hot 100 singles chart from 1958-2012, Study 3 documents how more repetitive songs stand a greater chance of reaching #1 as opposed to lingering at the bottom of the chart. An analysis of #1 hits reveals increased repetition decreases the time it takes to reach #1 and increases the odds of debuting in the Top 40. This research chronicles the impact of processing fluency on consumer choice in the real world while demonstrating repetition as a stimulus feature matters. It also introduces a new variable to the processing fluency literature: lexical repetition.
---------------------
Computer-based personality judgments are more accurate than those made by humans
Wu Youyou, Michal Kosinski & David Stillwell
Proceedings of the National Academy of Sciences, 27 January 2015, Pages 1036–1040
Abstract:
Judging others’ personalities is an essential skill in successful social living, as personality is a key driver behind people’s interactions, behaviors, and emotions. Although accurate personality judgments stem from social-cognitive skills, developments in machine learning show that computer models can also make valid judgments. This study compares the accuracy of human and computer-based personality judgments, using a sample of 86,220 volunteers who completed a 100-item personality questionnaire. We show that (i) computer predictions based on a generic digital footprint (Facebook Likes) are more accurate (r = 0.56) than those made by the participants’ Facebook friends using a personality questionnaire (r = 0.49); (ii) computer models show higher interjudge agreement; and (iii) computer personality judgments have higher external validity when predicting life outcomes such as substance use, political attitudes, and physical health; for some outcomes, they even outperform the self-rated personality scores. Computers outpacing humans in personality judgment presents significant opportunities and challenges in the areas of psychological assessment, marketing, and privacy.
---------------------
How images and color in business plans influence venture investment screening decisions
Richard Chan & Haemin Dennis Park
Journal of Business Venturing, forthcoming
Abstract:
We explore how product images and color in business plans influence venture investment screening decisions. Because images are accessible, memorable, and influential, we argue that product images in a business plan will increase the likelihood of favorable judgments during screening decisions. Moreover, because red and blue automatically affect an individual's cognition in different manners such that red elicits negative associations and blue elicits positive ones from the evaluators, we predict that the use of red in a business plan will decrease the favorability of judgments during screening decisions, while the use of blue will increase their favorability. Using a quasi-experimental field study and a series of controlled experiments, we find partial support for a positive effect of product images on favorable screening decisions and a consistent negative effect of red on favorable screening decisions.
---------------------
Backlash against the “Big Box”: Local Small Business and Public Opinion toward Business Corporations
Benjamin Newman & John Kane
Public Opinion Quarterly, Winter 2014, Pages 984-1002
Abstract:
Political discourse often distinguishes “big” from “small” business, with the former cast as the insidious monolith of the present era and the latter as the virtuous incarnation of the average citizen’s participation in the American dream. Throughout the nation, this abstract juxtaposition of big and small business takes concrete form in the emerging dominance of large-scale corporate retail chain stores over locally owned small retail businesses. While studies have analyzed the economic and civic impact of corporate “big-box” store development, social scientists have yet to address the basic public opinion question of whether residing in local areas where retail commerce is dominated by big-box corporations activates hostility among citizens toward business corporations. Drawing upon two national surveys combined with Census data, this article demonstrates that citizens’ attitudes toward large corporate retailers, and business corporations more generally, are strongly linked to the vitality of small local retail business.
---------------------
Nancy Puccinelli, Keith Wilcox & Dhruv Grewal
Journal of Marketing, forthcoming
Abstract:
This research examines how media-induced consumer activation level impacts consumer response to highly energetic commercials. Over six studies, including a Hulu field experiment, consumers experiencing a deactivating emotion (e.g., sadness induced by a movie) find it more difficult to watch highly energetic commercials compared to consumers who are not experiencing a deactivating emotion. As a result, consumers experiencing a deactivating emotion are less likely to watch highly energetic commercials and recall the advertiser compared to consumers who are not experiencing a deactivating emotion. These same effects are not observed when consumers experiencing a deactivating emotion watch commercials that are moderately energetic or when consumers do not experience a deactivating emotion. These findings suggest that when advertisers run commercials in media that induces a deactivating emotion (e.g., sadness, relaxed, contentment) they should avoid running highly energetic commercials (e.g., with upbeat, enthusiastic spokespeople). Additionally, this research recommends that when advertisers are unable to determine the emotions induced by the media context they should run commercials that are moderate in energy. The results of a meta-analysis across the present studies shows that consumers experiencing a deactivating emotion will respond as much as 50% more favorably to moderately energetic commercials compared to highly energetic ones.
---------------------
Lifting the Veil: The Benefits of Cost Transparency
Bhavya Mohan, Ryan Buell & Leslie John
Harvard Working Paper, December 2014
Abstract:
A firm's costs are typically tightly-guarded secrets. However, across six laboratory experiments and a field study we identify when and why firms benefit from revealing cost information to consumers. Disclosing the variable costs associated with a product's production heightens consumers' attraction to the firm, which in turn increases purchase interest (Experiments 1-3). In fact, cost transparency has a stronger impact on purchase interest than emphasizing the firm's personal relationship with the consumer - a much more involved marketing tactic (Experiment 4). Further experiments explore boundary conditions and suggest that the benefit of cost transparency weakens as firms increase price relative to costs, and when markups are made salient (Experiments 5-6). Consistent with our lab findings, a natural experiment with an online retailer demonstrates that cost transparency improves sales. In particular, cost transparency led to a 44.0% increase in daily unit sales. This research implies that by revealing costs - typically tightly-guarded secrets - managers can potentially improve both brand attraction and sales.
---------------------
The Role and Growth of New-Car Leasing: Theory and Evidence
Justin Johnson, Henry Schneider & Michael Waldman
Journal of Law and Economics, August 2014, Pages 665-698
Abstract:
There has been substantial growth in rates of new-car leasing over the last few decades. Building on recent theoretical research, we construct a model of the leasing decision in which leasing mitigates adverse selection and reduces transaction costs, but moral hazard limits its use. In our model, the prevalence of leasing is related to new-car reliability, which suggests that the recent growth in leasing is at least partly due to improvements in new-car reliability. We use this model to derive testable implications and then conduct an empirical analysis to investigate whether the operation of the new- and used-car markets is consistent with the predictions of this theoretical approach. Our empirical results support the theoretical predictions of our model. In particular, we provide direct evidence that leasing mitigates adverse selection and that an important factor in the growth in new-car leasing rates has indeed been the growth of new-car reliability.
---------------------
Expert Opinion and Product Quality: Evidence from New York City Restaurants
Olivier Gergaud, Karl Storchmann & Vincenzo Verardi
Economic Inquiry, April 2015, Pages 812–835
Abstract:
We analyze whether consumers' quality perception and/or producer investment of New York City restaurants, measured by Zagat scores, responds to newly appearing expert opinion, measured by Michelin scores. Answering this question is of general economic interest as it applies to all markets with information asymmetries. Employing a difference-in-differences approach as well as a propensity score matching approach we find significant Michelin treatment effects on food and décor quality. Based on these changes, we find a Michelin-induced price increase of approximately 30% per Michelin star. To examine whether the improved food and nonfood quality is based on restaurant investments or is merely imagined, we analyze nonfood investments by referring to Wine Spectator wine list awards. Our analysis suggests that Michelin-reviewed restaurants are significantly more likely to invest in their wine list than others. As a result, Michelin reviewed restaurants are more likely to improve food and nonfood (esp. décor) quality leading to significant price increases. However, while restaurants that increase prices only due to décor and service improvements are more likely to go out of business, food improvements appear to secure a restaurant's survival.
---------------------
The Truth Hurts: How Customers May Lose From Honest Advertising
Praveen Kopalle & Donald Lehmann
International Journal of Research in Marketing, forthcoming
Abstract:
This paper examines the impact of competition, brand equity, and the cost of overstating quality on optimal quality and quality claims of new products. We consider two firms simultaneously introducing a new product and making one-time decisions about its quality, price, and advertised quality. Using a two period model which allows for larger weight on future period sales, we find competition often leads firms to overstate quality unless they are constrained by high legal costs imposed by regulations or third-party legal action. More interesting, when competitors are constrained to be truthful in their advertising due to legal or other costs, optimal product quality can be lower and profits can be higher.
---------------------
James King, Alastair McClelland & Adrian Furnham
Applied Cognitive Psychology, forthcoming
Abstract:
The present study examined memory for advertisements as a function of both advertisement content and the contextual programme content. Participants were randomly assigned to one of two conditions: in one condition, they watched a sexual programme and in the other a non-sexual programme. Embedded within each programme were the same highly sexual and non-sexual advertisements that had been matched in pairs for five products. Memory for the advertisements and involvement in the programmes was measured. It was found that on three indices (free recall, brand recognition and prompted recall), memory for the sexual advertisements was superior to that for non-sexual advertisements. There was no effect of the programme content on advertisement recall and no relationship between programme involvement and advertisement recall. The results are discussed with reference to extant literature on memory for advertisements.
---------------------
Merchant steering of consumer payment choice: Evidence from a 2012 diary survey
Joanna Stavins & Oz Shy
Journal of Behavioral and Experimental Economics, April 2015, Pages 1–9
Abstract:
This paper seeks to discover whether U.S. merchants are using their recently granted freedom to offer price discounts and other incentives to steer customers to pay with methods that are less costly to merchants. Using evidence of merchant steering based on the 2012 Diary of Consumer Payment Choice, we find that only a very small fraction of transactions received a cash or debit card discount, and even fewer were subjected to a credit card surcharge. We attribute this finding in part to the merchants’ fear of alienating consumers, who may not view the steering attempts as an “acceptable norm.” Transactions at gasoline stations were more likely to receive either cash discounts or credit card surcharges than transactions in other sectors. Transactions over $20 were significantly more likely to receive a cash discount.
---------------------
Maarten Boksem & Ale Smidts
Journal of Marketing Research, forthcoming
Abstract:
Although much progress has been made in relating brain activations to choice behaviour, evidence that neural measures could actually be useful for predicting the successfulness of marketing actions remains limited. To be of added value, neural measures should significantly increase predictive power, above and beyond conventional measures. In the present study, the authors obtained both stated preference measures and neural measures (electroencephalography; EEG) in response to advertisements for commercially released movies (i.e. movie-trailers), to probe its potential to provide insight into individual preferences in our subjects, as well as movie sales in the population at large. The results show that EEG measures (beta and gamma oscillations) provide unique information regarding individual and population-wide preference, above and beyond stated preference measures, and can thus in principle be used as a neural marker for commercial success. As such, these results provide the first evidence that EEG measures are related to real-world outcomes, and that these neural measures can significantly add to models predicting choice behaviour compared to models that include only stated preference measures.
---------------------
Benjamin Johnson & Judith Rosenbaum
Communication Research, forthcoming
Abstract:
As suggested by the common phrase “spoiler alert!” many people avoid spoilers for narrative entertainment. However, recent research has found that exposure to spoilers may actually enhance enjoyment. The present study sought to replicate and extend those findings with a multidimensional approach to enjoyment and by examining choice of spoiled versus unspoiled narratives. Comprehension theories suggest that spoilers should improve media appreciation, whereas excitation-transfer theory suggests that spoilers harm arousal and suspense. Additionally, media users’ conventionally held beliefs imply that respondents should choose unspoiled stories. A within-subjects experiment (N = 412) tested these hypotheses. As expected, unspoiled stories were more fun and suspenseful. Surprisingly, unspoiled stories were also more moving and enjoyable in general. No effect of media choice emerged.
---------------------
Touch and Go: Merely Grasping a Product Facilitates Brand Perception and Choice
Mathias Streicher & Zachary Estes
Applied Cognitive Psychology, forthcoming
Abstract:
Consumers often touch products, and such haptic exploration can improve consumers' evaluations of the product. We tested whether cross-modal priming might contribute to this effect. Under the guise of a weight judgment task, which served as a haptic prime, we had blindfolded participants grasp familiar products (e.g., a Coca Cola bottle). We then had participants visually identify the brand name as quickly as possible (Experiments 1 and 2), list the first beverage brands that come to mind (Experiment 3), or choose between beverage brands as reward for participation (Experiment 4). Haptic exposure facilitated visual recognition of the given brand and increased participants' consideration and choice of that brand. Moreover, this haptic priming was brand specific and occurred even among participants who did not consciously identify the prime brand. These results demonstrate that haptic brand identities can facilitate recognition, consideration, and brand choice, regardless of consumers' conscious awareness of this haptic priming.
---------------------
Substitutes or Complements? Consumer Preference for Local and Organic Food Attributes
Thong Meas et al.
American Journal of Agricultural Economics, forthcoming
Abstract:
This research examines consumer preference and compares their willingness-to-pay for a host of value-added attributes of processed blackberry jam, and focuses on various organic and local production location designations. Instead of being treated as a binary attribute, three levels of USDA organic are considered: 100% organic, at least 95% organic, and made with organic ingredients (at least 70% organic). For local production, three levels are also included in the analysis: cross-state region (the Ohio Valley), state boundary (state-proud logos), as well as sub-state regions. Stated-preference data collected from a choice experiment in a mail survey in Kentucky and Ohio are used. Results from the study confirm positive willingness-to-pay for both organic and local attributes. However, consumers were willing to pay comparatively more for jam produced locally in regions smaller than the border of a state compared to organic jam. Furthermore, substitution and complementary effects between food attributes were investigated. The study found strong substitution effects between organic and local production claims, an issue that has thus far received minimal treatment in the existing literature on organic and local food willingness-to-pay studies. The results indicate a large degree of overlapping values in the willingness-to-pay for these two food attributes. In addition, the “small farm” attribute considered in the study also appears to be a substitute for organic and local attributes, which confirms the previous belief that one of the many reasons consumers purchase organic or local products is to support small or family-owned farms.
---------------------
Bowling for Dollars: Title Sponsorship of College Football Bowls
John Fizel & Chris McNeil
Journal of Sports Economics, forthcoming
Abstract:
Corporate title sponsorship of college football bowl games has proliferated over the past two decades, yet little analysis has been made concerning the returns to these investments. This article examines the impact that title sponsorships have had on the stock value of the corporate sponsors. Using event study analysis, we find that there was no significant change, on average, in the stock prices following the sponsorship announcements. However, a cross-sectional analysis of changes in firm stock prices relative to corporate and bowl characteristics reveals that markets view sponsorships by large and high-tech firms negatively and major bowls positively.
---------------------
Greta Hsu & Stine Grodal
American Sociological Review, February 2015, Pages 28-62
Abstract:
Theories within organizational and economic sociology that center on market categories often equate taken-for-grantedness with increased constraint on category members’ features. In contrast, we develop a novel perspective that considers how market participants’ changing category-related attributions decrease the scrutiny of category offerings, opening up strategic opportunities for firms. We further argue that whether producers should be expected to take advantage of these opportunities depends on the extent to which they are incentivized to do so. We use the case of the light cigarette category to test this thesis. We argue and find evidence that increasing taken-for-grantedness of the light cigarette category created greater opportunity for tobacco firms to strategically manipulate category features.
---------------------
The Handmade Effect: What's Love Got to Do with It?
Christoph Fuchs, Martin Schreier & Stijn Van Osselaer
Journal of Marketing, forthcoming
Abstract:
Despite the popularity and high quality of machine-made products, handmade products have not disappeared even in many product categories where machinal production is common. We present the first systematic set of studies exploring whether and how stated production mode (handmade vs. machine-made) affects product attractiveness. Four studies provide evidence for the existence of a positive handmade effect on product attractiveness. This effect is to an important extent driven by perceptions that handmade products symbolically “contain love”. This love account is validated controlling for alternative value drivers of handmade production (mere effort, product quality, uniqueness, authenticity, pride). The handmade effect is moderated by two factors that affect the value of love. Specifically, consumers indicate stronger purchase intentions for handmade than machine-made products when buying gifts for their loved ones, but not for more distant gift recipients and pay more for handmade gifts when they are bought to convey love than when buying the best-performing product.