For sale
Samuel Barnett & Moran Cerf
Journal of Consumer Research, forthcoming
Abstract:
Skilled advertisers often cause a diverse set of consumers to feel similarly about their product. We present a method for measuring neural data to assess the degree of similarity between multiple brains experiencing the same advertisements, and we demonstrate that this similarity can predict important marketing outcomes. Since neural data can be sampled continuously throughout an experience and without effort and conscious reporting biases, our method offers a useful complement to measures requiring active evaluations, such as subjective ratings and willingness-to-pay (WTP) scores. As a case study, we use portable electroencephalography (EEG) systems to record the brain activity of 58 moviegoers in a commercial theater and then calculate the relative levels of neural similarity, cross-brain correlation (CBC), throughout 13 movie trailers. Our initial evidence suggests that CBC predicts future free recall of the movie trailers and population-level sales of the corresponding movies. Additionally, since there are potentially other (i.e., non-neural) sources of physiological similarity (e.g., basic arousal), we illustrate how to use other passive measures, such as cardiac, respiratory, and electrodermal activity levels, to reject alternative hypotheses. Moreover, we show how CBC can be used in conjunction with empirical content analysis (e.g., levels of visual and semantic complexity).
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The ability to choose can increase satiation
Joseph Redden, Kelly Haws & Jinjie Chen
Journal of Personality and Social Psychology, February 2017, Pages 186-200
Abstract:
The ability to choose should let people create more enjoyable experiences. However, in a set of 5 studies, people who chose repeatedly during ongoing consumption exhibited a greater drop in enjoyment compared with those who received a series of random selections from the same set of liked stimuli. Process evidence indicated that choosing increased satiation because it triggered overall reflections on the repetitive nature of the ongoing consumption experience. Moderating evidence also supported our theoretical account as differences in satiation disappeared when nonchoosers were explicitly cued to think about repetition in the general sense, or when choosers made all of their choices before the onset of repeated consumption. Additional measures and analyses further established that choice set size, the difficulty of choosing, and other alternative accounts could not fully explain the pattern of effects. The paper closes with a discussion of the implications of these findings for understanding the causes of satiation, the consequences of choosing, and improving individuals’ experiences.
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The Rebound of the Forgone Alternative
Zachary Arens & Rebecca Hamilton
Journal of Consumer Psychology, forthcoming
Abstract:
Fifty years of cognitive dissonance research suggests that when consumers make a difficult choice, the alternative they forgo is devalued for an extended period of time, making it less likely to be chosen in the future. In a series of four studies, we show that completely consuming the chosen alternative moderates this effect. After the chosen alternative has been consumed, creating a sense of consumption closure, the attractiveness of forgone alternative rebounds to its original value.
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The Effects of Recommended Retail Prices on Consumer and Retailer Behaviour
Lisa Bruttel
Economica, forthcoming
Abstract:
This paper presents results from an experiment on the effects of recommended retail prices on consumer and retailer behaviour. We present evidence that recommended retail prices, despite their non-binding nature, influence consumers’ willingness to pay by setting a reference point. At a given price, consumers buy more the higher the recommended retail price is, and their demand drops at prices above the recommended retail price, even when it is entirely uninformative about the value of the product. Retailers in this study are subject to similar anchoring effects, but they do not anticipate consumers’ behaviour well and are thus not able to exploit their behavioural biases.
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The Effects of Advertised Quality Emphasis and Objective Quality on Sales
Praveen Kopalle et al.
Journal of Marketing, forthcoming
Abstract:
Given that consumers value quality, and such advertising content informs consumers' beliefs about quality, it is not surprising that high quality brands emphasize quality in their advertising content. What is less obvious is whether firms with lower quality brands should also follow suit and emphasize quality in their advertising to signal a higher quality. We examine this issue and study the effectiveness of quality-based advertising messages. Our field study relates brands' monthly sales to their advertised quality claims across 1,876 print ads in national magazines and Consumer Reports-based product quality ratings over more than two decades. Contrary to the generally held yet erroneous belief in the efficacy of low-quality products emphasizing quality in their advertising, we demonstrate that (a) it is not beneficial for a low quality firm to emphasize quality in its advertising, and (b) it is effective for a high quality firm to do so. An analysis of parameter values from a published category-agnostic simulation, and an experiment that examines consumers' responses to quality claims in a second product category yields convergent insights.
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When Retailing and Las Vegas Meet: Probabilistic Free Price Promotions
Nina Mazar, Kristina Shampanier & Dan Ariely
Management Science, January 2017, Pages 250-266
Abstract:
A number of retailers offer gambling- or lottery-type price promotions with a chance to receive one’s entire purchase for free. Although these retailers seem to share the intuition that probabilistic free price promotions are attractive to consumers, it is unclear how they compare to traditional sure price promotions of equal expected monetary value. We compared these two risky and sure price promotions for planned purchases across six experiments in the field and in the laboratory. Together, we found that consumers are not only more likely to purchase a product promoted with a probabilistic free discount over the same product promoted with a sure discount but that they are also likely to purchase more of it. This preference seems to be primarily due to a diminishing sensitivity to the prices. In addition, we find that the zero price effect, transaction cost, and novelty considerations are likely not implicated.
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Rising Prices under Declining Preferences: The Case of the U.S. Print Newspaper Industry
Adithya Pattabhiramaiah, S. Sriram & Shrihari Sridhar
Marketing Science, forthcoming
Abstract:
Between 2006 and 2011, daily print newspapers in the U.S. lost 20% of their paid subscribers, partly due to increasing availability of alternative sources of news, such as free content provided on newspaper websites and by news aggregators such as Yahoo. However, contrary to the expectation that firms respond to softening demand by lowering prices, newspapers increased subscription prices by 40-60% during this period. In this paper, we explain and quantify the factors responsible for these price increases. We calibrate models of readership and advertising demand using data from a top-50 U.S. regional print newspaper. Conditional on these demand models, we calibrate the newspaper’s optimal pricing equations, and assess whether the increase in subscription prices are mainly rationalized by: a) the decline in readers’ willingness to pay (WTP) in the presence of heterogeneity among subscribers, or b) the newspaper’s reduced incentive to subsidize readers at the expense of advertisers, due to softening demand for newspaper advertising. We find that the decline in the ability of the newspaper to subsidize readers by extracting surplus from advertisers explains most of the increase in subscription prices. Of the three available subscription options (Daily, Weekend, and Sunday only), subscription prices increased more steeply for the Daily option, a pattern consistent with the view that newspapers are driving away low valuation weekday readers while preserving Sunday readership and the corresponding ad revenues. Thus, our research augments theoretical propositions in two-sided markets by providing a formal empirical approach to unraveling the relative importance of the role played by agents on the subsidy and demand side in determining prices.
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Lelia Samson
Journal of Media Psychology, forthcoming
Abstract:
This study empirically investigates the effectiveness of using visual sexual appeals on the memory of men and women. It examines memory for the commercials activated by sexual versus nonsexual visual appeals. A mixed-factorial experiment was conducted. Visual recognition and free recall were recorded in 146 participants (males = 71 and females = 75). The results substantiate the evolutionary psychology claims. Support for the motivational information-processing and the distraction hypothesis was found in male viewers. The results indicate that sexual appeals enhance memory for the advertisements themselves, but they distract men from processing brand-related information. Male participants encoded and recalled less brand-related information from advertisements with sexual appeals. The study offers guidelines for advertisers and marketing producers while also providing insight into gender/sex differences in processing sexual stimuli. It also makes a key theoretical contribution to the field by parsing out the influence of sexual versus nonsexual visual content from the confounding impact of visual sexual versus verbal nonsexual memory.
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Seller Beware: How Bundling Affects Valuation
Franklin Shaddy & Ayelet Fishbach
Journal of Marketing Research, forthcoming
Abstract:
How does bundling affect valuation? This research proposes the asymmetry hypothesis in the valuation of bundles: Consumers demand more compensation for the loss of items from bundles, compared to the loss of the same items in isolation, yet offer lower willingness-to-pay for items added to bundles, compared to the same items purchased separately. This asymmetry persists because bundling causes consumers to perceive multiple items as a single, inseparable “gestalt” unit. Thus, consumers resist altering the “whole” of the bundle by removing or adding items. Six studies demonstrate this asymmetry across judgments of monetary value (Studies 1 and 2) and (dis)satisfaction (Study 3). Moreover, bundle composition — the ability of different items to create the impression of a “whole” — moderates the effect of bundling on valuation (Study 4), and the need to replace missing items (i.e., restoring the “whole”) mediates the effect of bundling on compensation demanded for losses (Study 5). Finally, we explore a boundary condition: The effect is attenuated for items that complete a set (Study 6).
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Juan Ma, Zhaoning Wang & Tarun Khanna
Harvard Working Paper, January 2017
Abstract:
Many countries regulate the quality of food and drugs, yet it remains unclear whether markets can be relied upon to deliver high quality in the absence of regulation, notably where companies can advertise the superior quality of their products. We present evidence from two field experiments in China's infant formula industry, which has seen a trust crisis after several safety scandals. We show that disclosure of information about product quality can have a negative impact on consumers' purchase decisions and self-reported trust in the industry, as information reminds consumers of past scandals and draws their attention to safety risks.
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Costly Curves: How Human-Like Shapes Can Increase Spending
Marisabel Romero & Adam Craig
Journal of Consumer Research, forthcoming
Abstract:
Can exposure to body shapes affect spending preferences? Because Western society associates thinness with economic value, we argue that a shape resembling thin human body types activates concepts related to positive financial outcomes, such as responsibility and hard work. The results of five experiments show that exposure to thin, human-like shapes influences consumer self-efficacy judgments and spending outcomes, depending on the perceiver’s weight. In line with social comparison, we demonstrate that seeing a thin (vs. wide) human-like shape leads high-body-mass-index consumers to make more indulgent decisions. Financial self-efficacy is highlighted as the underlying mechanism, and high resemblance to the human-form is identified as a critical moderator. The findings of this research acknowledge visual similarity’s role in stereotype knowledge activation and weight stereotypes’ broad scope of influence.
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Echo Wen Wan, Rocky Peng Chen & Liyin Jin
Journal of Consumer Research, forthcoming
Abstract:
The present research finds that anthropomorphism, or attributing human characteristics to non-human objects, increases consumers’ preference for products with superior appearance. This effect occurs because consumers apply the belief of beautiful-is-good, a pervasive stereotype in person perception, to the judgment of anthropomorphized products. Seven experiments test the propositions. The results show that product anthropomorphism (vs. non-anthropomorphism) leads consumers to spend more time and money searching for information about appearance attributes (experiments 1 and 2), to indicate greater preference for products with superior appearance (experiments 4, 6, and 7), and to purchase products with superior appearance (experiments 3 and 5). The experiments also show that the effect of anthropomorphism on consumer preference is mediated by consumers’ conviction of “beautiful-is-good” in person perception. This effect is alleviated when consumers’ beliefs about the association between the attractive physical appearance of a person and the positive personal traits of this person are challenged. These results are robust across a wide range of product categories and consumers. Theoretical contributions and marketing implications are discussed.
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Product Line Bundling: Why Airlines Bundle High-End While Hotels Bundle Low-End
Steven Shugan et al.
Marketing Science, January-February 2017, Pages 124-139
Abstract:
Product lines are ubiquitous. For example, Marriott International manages high-end ultra-luxury hotels (e.g., Ritz-Carlton) and low-end economy hotels (e.g., Fairfield Inn). Firms often bundle core products with ancillary services (or add-ons). Interestingly, empirical observations reveal that industries with ostensibly similar characteristics (e.g., customer types, costs, competition, distribution channels, etc.) employ different bundling strategies. For example, airlines bundle high-end first class with ancillary services (e.g., breakfast, entertainment) while hotel chains bundle ancillary services (e.g., breakfast, entertainment) at the low-end. We observe, unlike hotel lines that are highly differentiated at different geographic locations, airlines suffer low core differentiation because all passengers (first-class and economy) are at the same location (i.e., same plane, weather, delays, cancellations, etc.). In general, we find product lines with low core differentiation (e.g., airlines, amusement parks) routinely bundle high-end while product lines with highly differentiated cores (e.g., hotels, restaurants) routinely bundle low-end. High-end bundling makes the high-end more attractive, increasing line differentiation (less intraline competition) while low-end bundling decreases line differentiation. Therefore, bundling allows optimal differentiation given a differentiation constraint (complex costs). Last, firms may use strategic bundling for targeting in their core products; e.g., low-end hotels bundle targeted add-ons unattractive to high-end consumers such as lower-quality breakfasts and slower Internet.
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Kirsten Martin
Journal of Legal Studies, June 2016, Pages S191-S215
Abstract:
While privacy online is governed through formal privacy notices, little is known about the impact of privacy notices on trust online. I use a factorial vignette study to examine how the introduction of formal privacy governance (privacy notices) impacts consumer trust and compare the importance of respecting informal privacy norms versus formal privacy notices on consumer trust. The results show that invoking formal privacy notices decreases trust in a website. Further, violating informal privacy norms negatively impacts trust in the website even when the information exchange conforms to or is not mentioned in the privacy notice. The results suggest that respecting privacy norms is key to trust online and challenge the reliance on privacy notices to maintain consumer trust. The consumer, who is the exchange partner most vulnerable to information asymmetries and uncertainty, is not a party to the development of the formal privacy contract and instead relies on informal privacy norms.
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Gamified Information Presentation and Consumer Adoption of Product Innovations
Jessica Müller-Stewens et al.
Journal of Marketing, forthcoming
Abstract:
This research examines the effect of gamified information presentation — conveying information about a product innovation in the form of a game — on consumer adoption of that innovation. The key hypothesis is that gamified information presentation promotes consumer innovation adoption and that it does so through two parallel psychological processes—by increasing consumer playfulness, which stimulates curiosity about the innovation, and by enhancing the perceived vividness of information presentation, which increases the perceived advantage of the innovation relative to (less innovative) competing products. Evidence from seven studies, including two field experiments, supports this theorizing. The results also show that for gamified information presentation to increase innovation adoption, it is essential that the information is integrated into the game. These findings advance the understanding of the psychological forces that govern how consumers respond to receiving product information in the form of games, and they have important practical implications for how firms might use gamified information presentation to promote sales of new products.
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Leverage and strategic preemption: Lessons from entry plans and incumbent investments
Anthony Cookson
Journal of Financial Economics, February 2017, Pages 292–312
Abstract:
This paper empirically investigates the effect of leverage on strategic preemption. Using new data on entry plans and incumbent investments from the American casino industry, I find that high leverage prevents incumbents from responding to entry threats. Facing the same set of entry plans, low-leverage incumbents expand physical capacity (by 30%), whereas high-leverage incumbents do not. This difference in investment matters because capacity installations preempt eventual entry. Stock market reactions to withdrawn plans imply that effective preemption increases incumbent firm value by 5%. My findings suggest that leverage matters for industry composition, not just firm-level investment.
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Social Exclusion and Consumer Switching Behavior: A Control Restoration Mechanism
Lei Su et al.
Journal of Consumer Research, forthcoming
Abstract:
This study examines the effects of social exclusion on consumers’ brand and product switching behavior. Five studies were conducted, which revealed that consumers who perceive themselves as being chronically or temporarily excluded exhibit more switching behavior than their peers who do not feel socially excluded. This effect is mediated by a decreased sense of control after social exclusion. The effect disappears when the incumbent option possesses the function of maintaining social belongingness (e.g., when the incumbent option is socially conformed or symbolizes social connection).