By popular demand

Kevin Lewis

September 05, 2017

Made by Mistake: When Mistakes Increase Product Preference
Taly Reich, Daniella Kupor & Rosanna Smith
Journal of Consumer Research, forthcoming

Significant literature has demonstrated that mistakes are undesirable and often result in negative inferences about the person or company that made the mistake. Consequently, individuals and companies tend to avoid sharing information about their mistakes with others. However, we find that consumers actually prefer products that were made by mistake to otherwise identical products that were made intentionally. This preference arises because consumers perceive that a product made by mistake is more improbable relative to a product made intentionally, and thus, view the product as more unique. We find converging evidence for this preference in a field study, six experiments, and eBay auction sales. Importantly, this preference holds regardless of whether the mistake enhances or detracts from the product. However, in domains where consumers do not value uniqueness (e.g., utilitarian goods), the preference is eliminated.

Do managers know what their customers think and why?
Tomas Hult et al.
Journal of the Academy of Marketing Science, January 2017, Pages 37–54

The ability of a firm’s managers to understand how its customers view the firm’s offerings and the drivers of those customer perceptions is fundamental in determining the success of marketing efforts. We investigate the extent to which managers’ perceptions of the levels and drivers of their customers’ satisfaction and loyalty align with that of their actual customers (along with customers’ expectations, quality, value, and complaints). From 70,000 American Customer Satisfaction Index (ACSI) customer surveys and 1068 firm (manager) responses from the ACSI-measured companies, our analyses suggest that managers generally fail to understand their firms’ customers in two important ways. First, managers systematically overestimate the levels of customer satisfaction and attitudinal loyalty, as well as the levels of key antecedent constructs such as expectations and perceived value. Second, managers’ understanding of the drivers of their customers’ satisfaction and loyalty are disconnected from those of their actual customers. Among the most significant “disconnects,” managers underestimate the importance of customer perceptions of quality in driving their satisfaction and of satisfaction in driving customers’ loyalty and complaint behavior. Our results indicate that firms must do more to ensure that managers understand how their customers perceive the firm’s products and services and why.

Facing Dominance: Anthropomorphism and the Effect of Product Face Ratio on Consumer Preference
Ahreum Maeng & Pankaj Aggarwal
Journal of Consumer Research, forthcoming

A product’s front face (e.g., a watch face or car front) is typically the first point of contact and a key determinant of a consumer’s initial impression about the product. Drawing on evolutionary accounts of human face perception suggesting that the face width-to-height ratio (fWHR: bizygomatic width divided by upper-face height) can signal dominance and affect its overall evaluation, this research is based on the premise that product faces are perceived in much the same way as human faces. Five experiments tested this premise. Results suggest that like human faces, product faces with high (versus low) fWHR are perceived as more dominant. However, while human faces with high fWHR are liked less, product faces with high fWHR are liked more as revealed by consumer preference and willingness to pay scores. The greater preference for the high fWHR product faces is motivated by the consumers’ desire to enhance and signal their own dominant status as evidenced by the moderating effects of type of goal and of usage context. Brand managers and product designers may be particularly interested in these findings since a simple design feature can have potentially significant marketplace impact, as was also confirmed by the field data obtained from secondary sources.

Seeing faces: The role of brand visual processing and social connection in brand liking
Ulrich Orth et al.
European Journal of Social Psychology, April 2017, Pages 348–361

This paper investigates how brands — through visuals — can fill a void for consumers experiencing a lack of social connection. Using psychometric measures and mock advertisements with visuals of human faces and non-faces, Study 1 shows that seeing faces relates to greater brand liking with processing fluency mediating, and individual loneliness and tendency to anthropomorphize moderating the effect. Study 2 replicates findings with other-race faces corroborating that fluency but not ethnic self-referencing underlies the effect. Study 3 complements the psychometric measures of Studies 1 and 2 with eye tracking data to demonstrate that fluency correlates with distinct patterns of attention. Study 4 uses actual brand stimuli to show that effects are robust and extend beyond advertisements. Taken together, the findings show that communicating brand names in conjunction with visuals seen by consumers as human faces can increase brand liking.

To Free, or Not to Free: The Implications of Offering Free Versions for the Performance of Paid Mobile Apps
Sandeep Arora, Frenkel ter Hofstede & Vijay Mahajan
Journal of Marketing, forthcoming

The mobile application (App) industry has grown tremendously over the past ten years, primarily fueled by small App development businesses. Lacking advertising budgets, these small and relatively unknown businesses often offer free versions of their paid Apps to get noticed in the crowded App industry and to reduce customer uncertainty about App quality and fit. In this research, we investigate the implications of offering free versions for the adoption speed of paid Apps by building on the existing marketing and information systems literatures on sampling and versioning. Using a unique dataset of 7.7 million observations from 12,315 paid Apps and accounting for endogeneity, we find that while the practice of offering free versions of paid Apps is popular, it is negatively associated with paid App adoption speed. We also find that this negative association between the presence of free version and paid App adoption speed is stronger for Apps bought for fun and pleasure (hedonic Apps) and in the later life stages of paid Apps. We hope that the results of our study will encourage App developers to reevaluate their current strategy of offering free versions of paid Apps and prompt academicians to produce more work focusing on this industry.

Tempting Fate: Social Media Posts by Firms, Customer Purchases, and the Loss of Followers
Shuting Wang, Brad Greenwood & Paul Pavlou
Temple University Working Paper, July 2017

Although firms actively post messages on social media to strategically promote their products, limited empirical work has examined the long-term benefits and risks of pursuing such social media strategies. In this study, we examine how a firm’s social media posts influence the propensity of its followers to purchase a product in response to the post or to unfollow the firm, both in the short and in the long term. Using a unique dataset from a fashion retailer, we find that while social media posts do increase the retailer’s sales by 5% in the short-term, they also increase the followers’ propensity to unfollow the firm by 300%. Strikingly, results also indicate that social media posts cannibalize long-term cumulative sales (despite the boost in short-term sales). Finally, we find that the role of social media posts in unfollowing and sales is moderated by the environment in which the follower receives the social media post. Notably, the negative effects of posts on unfollowing and sales are exacerbated in more crowded cities and during peak traffic hours. The study contributes to the IS literature on social media and informs managerial practice on how to leverage social media posts for enhancing sales and preventing the loss of followers.

Does IT Lead to More Equal Treatment? An Empirical Study of the Effect of Smartphone Use on Customer Complaint Resolution
Catherine Tucker & Shuyi Yu
MIT Working Paper, July 2017

Customers with more education and communication skills may attract more attention from firms and get better service because they are better placed to advocate for themselves. Digitization and automation of communication may mitigate this inequality in customer complaint resolution. To investigate this, we use rich data on customer complaints to the city of Boston. We analyze 375,629 complaints from 2011-2015. We find empirically that cases opened in areas with high levels of average education are more likely to be solved quickly. However, we also find that dedicated mobile app technologies that automate the complaint process can help mitigate the advantage conferred by education. Since the use of digital devices is endogenous to wealth and education, we instrument their usage using granular geographic data on two proxies for cellular signal strength. This again suggests that mobile applications can partially eliminate the disparity between rich and poor. We present suggestive evidence that this is because mobile devices and the standardization of communication they require, eliminate potential differences in treatment of cases that arise due to differences in communication skills. This result suggests that using newer forms of automated digital communication tools enhances equality in customer service.

Online Reputation Management: Estimating the Impact of Management Responses on Consumer Reviews
Davide Proserpio & Georgios Zervas
Marketing Science, forthcoming

We investigate the relationship between a firm’s use of management responses and its online reputation. We focus on the hotel industry and present several findings. First, hotels are likely to start responding following a negative shock to their ratings. Second, hotels respond to positive, negative, and neutral reviews at roughly the same rate. Third, by exploiting variation in the rate with which hotels respond on different review platforms and variation in the likelihood with which consumers are exposed to management responses, we find a 0.12-star increase in ratings and a 12% increase in review volume for responding hotels. Interestingly, when hotels start responding, they receive fewer but longer negative reviews. To explain this finding, we argue that unsatisfied consumers become less likely to leave short indefensible reviews when hotels are likely to scrutinize them. Our results highlight an interesting trade-off for managers considering responding: fewer negative ratings at the cost of longer and more detailed negative feedback.

Bad Company: The Reputational Implications of Cross-Sector Interactions with a Stigmatized Firm
Mary-Hunter McDonnell & Elizabeth Pontikes
University of Chicago Working Paper, July 2017

Previous literature documents adverse effects of stigma by association. But it is an open question whether and how stigma might spread through cross-sector alliances. This is especially important to public sector organizations like NGOs who associate with private firms using either collaborative or contentious tactics. We theorize that stigma will spread through cross-sector alliances. This results in negative spillovers for NGOs that had previously collaborated with a private firm that becomes embroiled in scandal. We also propose an important boundary condition based on the affective valence of the previous tie. NGOs that had contentiously targeted a firm that becomes stigmatized can positively benefit through a process we call contentious disassociation. We find empirical support for these ideas in an analysis of public support of environmental NGOs in the wake of the Deepwater Horizon oil spill in 2010, an exogenous shock that stigmatized British Petroleum (BP). Results show that NGOs that had collaborated with BP before the spill suffered a relative decrease in contributions, whereas those that contentiously targeted BP saw an increase in contributions. Findings suggest that the tactic of collaboration creates reputational risk for NGOs, who stand to suffer if the firm unexpectedly turns out to be a “bad actor.”

Of Bricks and Bats: New Stadiums, Talent Supply, and Team Performance in Major League Baseball
Duane Rockerbie & Stephen Easton
Journal of Sports Economics, forthcoming

This article considers whether publicly financed new facility investments encourage professional sports team owners to increase their investments in costly talent. We develop a model of a sports league that incorporates publicly financed facility investments, the unique characteristics of the talent market, and revenue sharing to explore the complementarity between new facility amenities, the team budget decision, and team performance. Our empirical results suggest that publicly financed new stadiums do little to improve team performance, not due to restrictions in the talent market, but rather due to a lack of fan response.

Does a presentation’s medium affect its message? PowerPoint, Prezi, and oral presentations
Samuel Moulton, Selen Türkay & Stephen Kosslyn
PLoS ONE, July 2017

Despite the prevalence of PowerPoint in professional and educational presentations, surprisingly little is known about how effective such presentations are. All else being equal, are PowerPoint presentations better than purely oral presentations or those that use alternative software tools? To address this question we recreated a real-world business scenario in which individuals presented to a corporate board. Participants (playing the role of the presenter) were randomly assigned to create PowerPoint, Prezi, or oral presentations, and then actually delivered the presentation live to other participants (playing the role of corporate executives). Across two experiments and on a variety of dimensions, participants evaluated PowerPoint presentations comparably to oral presentations, but evaluated Prezi presentations more favorably than both PowerPoint and oral presentations. There was some evidence that participants who viewed different types of presentations came to different conclusions about the business scenario, but no evidence that they remembered or comprehended the scenario differently. We conclude that the observed effects of presentation format are not merely the result of novelty, bias, experimenter-, or software-specific characteristics, but instead reveal a communication preference for using the panning-and-zooming animations that characterize Prezi presentations.

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