Hard sell
The Satiating Effect of Pricing: The Influence of Price on Enjoyment over Time
Kelly Haws, Brent McFerran & Joseph Redden
Journal of Consumer Psychology, forthcoming
Abstract:
Prices are typically critical to consumption decisions, but can the presence of price impact enjoyment over the course of an experience? We examine the effect of price on consumers' satisfaction over the course of consumption. We find that, compared to when no pricing information is available, the presence of prices accelerates satiation (i.e., enjoyment declines faster). Preliminary evidence suggests price increases satiation by making the experience seem like less of a relaxing break and something to financially monitor. We rule out several alternative explanations for this effect and discuss important implications for marketers and consumer researchers.
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Motivation of User-Generated Content: Social Connectedness Moderates the Effects of Monetary Rewards
Yacheng Sun, Xiaojing Dong & Shelby McIntyre
Marketing Science, forthcoming
Abstract:
The creation and sharing of user-generated content such as product reviews has become increasingly "social," particularly in online communities where members are connected. While some online communities have used monetary rewards to motivate product review contributions, empirical evidence regarding the effectiveness of such rewards remains limited. We examine the possible moderating effect of social connectedness (measured as the number of friends) on publicly offered monetary rewards using field data from an online review community. This community saw an (unexpected) overall decrease in total contributions after introducing monetary rewards for posting reviews. Further examination across members finds a strong moderating effect of social connectedness. Specifically, contributions from less-connected members increased by 1,400%, while contributions from more-connected members declined by 90%. To corroborate this effect, we rule out multiple alternative explanations and conduct robustness checks. Our findings suggest that token-sized monetary rewards, when offered publicly, can undermine contribution rates among the most connected community members.
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When More Is Less: Field Evidence on Unintended Consequences of Multitasking
Paulo Goes et al.
Management Science, forthcoming
Abstract:
Online customer service chats provide new opportunities for firms to interact with their customers and have become increasingly popular in recent years for firms of all sizes. One reason for their popularity is the ability for customer service agents to multitask, i.e., interact with multiple customers at a time, thereby increasing the system "throughput" and agent productivity. Yet, little is known about how multitasking impacts customer satisfaction, the ultimate goal of customer engagements. We address this question using a proprietary dataset from an S&P 500 service firm that documents agent multitasking activities (unobservable to customers) in the form of server logs, customer service chat transcripts and post-service customer surveys. We find that agent multitasking leads to longer in-service delays for customers, and also lower problem resolution rates. Both lead to lower customer satisfaction, although the impact varies for different customers. Our study is among the first to document the link between multitasking and customer satisfaction, and has implications for the design of agent time allocation in contact centers, and more broadly for how firms can best manage customer relations in new service channels enabled by IT.
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Just Do It! Why Committed Consumers React Negatively to Assertive Ads
Yael Zemack-Rugar, Sarah Moore & Gavan Fitzsimons
Journal of Consumer Psychology, forthcoming
Abstract:
Research shows that assertive ads, which direct consumers to take specific actions (e.g., Visit us; Just do it!), are ineffective due to reactance. However, such ads remain prevalent. We reexamine assertive ads, showing that their effectiveness depends on consumers' relationship with the advertising brand. Across studies, we compare committed and uncommitted consumers' reactions to assertive ads. We find that because committed (vs. uncommitted) brand relationships involve stronger compliance norms, assertive ads create greater pressure to comply for committed consumers. Specifically, we propose and show that committed consumers anticipate feeling guilty if they ignore an assertive message, creating pressure to comply. Pressure to comply increases reactance, which paradoxically reduces compliance, ultimately leading to decreased ad and brand liking as well as decreased monetary allocations to the brand. Our results show the perils that assertive ads pose for marketers and their most valuable customers.
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Piracy and Box Office Movie Revenues: Evidence from Megaupload
Christian Peukert, Jörg Claussen & Tobias Kretschmer
International Journal of Industrial Organization, forthcoming
Abstract:
In this paper we evaluate the heterogeneous effects of online copyright enforcement. We ask whether the unexpected shutdown of the popular file hosting platform Megaupload had a differential effect on box office revenues of wide-release vs. niche movies. Identification comes from a comparison of movies that were available on Megaupload to those that were not. We show that only movies that premiere in a relatively large number of theaters benefitted from the shutdown of Megaupload. The average effect, however, is negative. We provide suggestive evidence that this result is driven by information externalities. The idea is that online piracy acts as a mechanism to spread information about product characteristics across consumers with different valuations for the product. Our results question the effectiveness of blanket public anti-piracy policy, not only from a consumer perspective, but also from a producer perspective.
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Throwing the Books at Them: Amazon's Puzzling Long Run Pricing Strategy
Imke Reimers & Joel Waldfogel
Southern Economic Journal, forthcoming
Abstract:
Firms competing for consumers to adopt new platforms have incentives to charge low prices to promote adoption, followed by higher prices later on. This study explores Amazon's dynamic pricing strategy by comparing its contemporary pricing on e-books, a relatively new product with complementary hardware and switching costs, with its pricing on physical books, a now-mature product without complementary hardware or switching costs. Using over 150,000 hourly observations on prices and sales ranks for electronic and physical bestseller books between 2012 and 2013, in conjunction with actual quantity data, we estimate the price elasticities of demand for books at Amazon. Despite inherent challenges in data availability and measurement, we find it surprising that both electronic and physical book prices fall substantially short of the static profit maximizing level two decades after Amazon's launch. These findings raise questions for both policymakers and shareholders.
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Multiattribute Loss Aversion and Reference Dependence: Evidence from the Performing Arts Industry
Necati Tereyağoğlu, Peter Fader & Senthil Veeraraghavan
Management Science, forthcoming
Abstract:
We study the prevalence of multiattribute loss aversion and reference effects in a revenue management setting based on data of individual-level purchases over a series of concert performances. The reference dependence that drives consumer choice is not only based on the price but also on observed sales (as a fraction of the seating capacity) during their past visits. We find that consumers suffer from loss aversion on both prices and seats sold: consumers incur significant utility loss when prices are above their references or when the actual seat sales are lower than their references. We suggest pricing policies that can address consumer decisions driven by such reference dependence and loss aversion.
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Arthur Campbell, Dina Mayzlin & Jiwoong Shin
RAND Journal of Economics, Spring 2017, Pages 203-229
Abstract:
We model the incentives of individuals to engage in word of mouth (or buzz) about a product, and how a firm may strategically influence this process through its information release and advertising strategies. Individuals receive utility by improving how others perceive them. A firm restricts access to information, advertising may crowd out word of mouth, and a credible commitment not to engage in advertising is valuable for a firm.
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Language and Competition: Communication Vagueness, Interpretation Difficulty, and Market Entry
Wei Guo, Tieying Yu & Javier Gimeno
Academy of Management Journal, forthcoming
Abstract:
Firms have a lot to lose from the entry of competitors into their markets. Grounded in the research on interfirm rivalry and strategic communication, we proposed and tested hypotheses suggesting that when the managers of incumbent firms perceive a high threat of entry, they are more likely to use vagueness in their corporate communications to make their strategies and actions harder to discern. This lessened interpretation results in fewer competitive entries by potential entrants. We used computerized content analysis to quantify the use of vague language in incumbent firms' annual reports and empirically tested our hypotheses through data from the U.S. domestic airline industry. We found robust support for our hypotheses. By revealing that strategic use of language shapes competitive interactions, our research sheds new light on the process through which information is delivered, received, and interpreted by rivals. This process is at the heart of competitive dynamics and strategy research.
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Sehoon Kim
Ohio State University Working Paper, February 2017
Abstract:
Corporate cash holdings impact firms' product pricing strategies. Exploiting the Aviation Investment and Reform Act of the 21st Century as a quasi-natural experiment to identify exogenous shocks to competition in the airline industry, I find that firms with more cash than their rivals respond to intensified competition by pricing more aggressively, especially when there is less concern of rival retaliation. Financially flexible firms based on alternative measures respond similarly. Moreover, cash-rich firms experience greater market share gains and long-term profitability growth. The results highlight the importance of strategic interdependencies across firms in the effective use of flexibility provided by cash.