Marketing Research Seminar Series - Spring 2012

The results of four studies show that the extent to which people's judgment and behaviors are influenced by environment cues are moderated by their perspective taking. We show that high perspective taking participants exposed to weight loss strategies (study 1) and marathon runners (study 2) versus those in the control condition evaluated products that facilitate a weight loss goal or a running goal more favorably and products that impede a weight loss goal or running goal less favorably. These effects were not observed among the low perspective takers. Study 3 provides evidence that the effect of perspective taking on judgment is mediated by people's propensity to embody cognition; in particular, we show that high perspective takers exposed to marathon runners were less able to squeeze a handgrip relative to their low perspective taking counterparts. In Study 4, we provide further evidence that embodiment influences persuasion by showing that high perspective takers responded more favorably to high imagery appeals than low perspective takers; perspective taking had no effect on participants' response to low imagery ads.

In the last ten years we have witnessed the proliferation of online consumer reviews of products and services. While reviews are clearly popular and have been shown to be impactful, there have always been concerns about the authenticity of online user reviews since firms can manufacture positive reviews for their own products and negative reviews for their rivals. The presence of undetectable fake reviews may have at least two deleterious effects on firms and consumers. First, consumers who are "fooled" by the manufactured reviews may make suboptimal choices. Second, the presence or potential presence of biased reviews may lead consumers to mistrust reviews. This results in consumers relying on review opinions less than they would if they could be assured that the reviews were unbiased. In order to examine the potential importance of these issues, we undertake an empirical analysis of the extent to which fakery occurs and the market conditions that encourage or discourage promotional reviewing activity. Specifically, we examine hotel reviews, exploiting the organizational differences between two travel websites: Orbitz and TripAdvisor. That is, while anyone can post a review on TripAdvisor, a consumer could only post a review of a hotel on Orbitz.com if she consumer actually booked at least one night at the hotel through the website. Thus, the cost of posting a fake review on Orbitz.com is quite high relative to the cost of posting a fake review on TripAdvisor. We examine differences in the distribution of reviews for a given hotel between TripAdvisor and Orbitz. We examine three hypotheses. First, drawing from the literature on organizational form, we show in a simple model that the costs of posting fake reviews is likely to be higher and the benefits lower for the manager of a hotel that is part of a chain than it is for an independent hotel. Second, we present a simple model that shows that the benefits from fakery are higher in situations in which the market is more competitive. Third, following Mayzlin (2006), we hypothesize that lower quality hotels have more incentive to engage in promotional reviews. Our empirical results are consistent with review manipulation.

Online social networks are used by hundreds of millions of people every day, but little is known about their effect on behavior. In six studies, we demonstrate that social network use leads people to adopt a narcissistic mindset. This mindset remains active after social network use such that people show narcissistic tendencies after they have logged-off the social network. Specifically, we show that having people browse a social network leads them to subsequently display poor self-control and defensive self-enhancement, behaviors associated with narcissism. Additionally, we present evidence suggesting that social network use may have a negative effect on well-being. In particular, our research shows that greater social network use is associated with a higher body-mass index, increased binge eating, a lower credit score and higher levels of credit card debt for individuals with strong ties to their social network.

Many firms today manage their existing customers differentially based on the profit potential, providing fewer incentives to less profitable customers. While researchers and industry experts advocate this practice, firms have met with mixed results. In this paper, we examine this practice explicitly accounting for competitive customer poaching, and find that some conventional prescriptions may not hold under certain conditions. We analyze a setting where customers differ in their cost-to-serve and a customerís cost-to-serve may be known only to her current firm. We find that while high-cost customers are less profitable when viewed in isolation, they may be strategically valuable; they enable a firm to earn higher profits from its other customers by creating an adverse selection problem for the rival, which discourages customer poaching. Consequently, under certain conditions, we find that some customers may be more valuable when they are less profitable, and it may be optimal to offer better incentives to less profitable customers than to more profitable customers and even retain unprofitable customers. Our results suggest that, in competitive settings, traditional customer lifetime value metrics may need to be modified to account for the competitive externality that actions towards some customers may impose on the cash áows from other customers. Our findings further suggest that firms may need to shift from a segmentation mindset, that views each customer in isolation, to a portfolio management mindset, that recognizes that the value of customers is interlinked.

Consumers share word-of-mouth face-to-face, online, and through various other channels. But do these channels shape what people talk about, and if so, how? Analysis over of 21,000 conversations as well as a laboratory experiment demonstrates that norms of conversation channel continuity impacts what gets discussed. While one might expect that more interesting products are talked about more than boring ones, this is only true in discontinuous conversation channels (e.g., online posts or text). In these channels, pauses between conversational turns are expected, so people have time to select and craft what they say. In channels where conversations are expected to occur more continuously (e.g., face-to-face or on the phone), however, there is less time to selectively pick what one talks about. Consequently, more interesting products are not talked about more frequently than less interesting ones. These findings shed light on what drives word-of-mouth and how companies can design effective word-of-mouth campaigns.

Existing research suggests that concerns for fairness may significantly affect the interactions between firms in a distribution channel. We analytically and experimentally evaluate how firms make decisions in a two-stage dyadic channel, in which firms decide on investments in the first stage and then on prices in the second stage. We find that firms' behaviors differ significantly from the predictions of the standard economic model. We explain the results by allowing the retailer to concern distributive fairness with the manufacturer. Using a Quantal Response Equilibrium (QRE) model, in which both the manufacturer and retailer make noisy best responses, we show significant concerns exist regarding fairness between channel members. Additionally, we propose a new principle of distributive fairness?the sequence-aligned ideal, that is studied first time in literature, and compare the new fairness ideal with several existing ideals in literature. Surprisingly, the new ideal, according to which the sequence of moving determines the formation of equitable payoff for players, significantly outperforms other fairness ideals, including strict egalitarianism, liberal egalitarianism, and libertarianism.

We estimate a dynamic structural model of sales force response to a bonus based compensation plan. The paper has two main methodological innovations: First, we implement empirically the method proposed by Arcidiacono and Miller (2011) to accommodate unobserved latent class heterogeneity with a computationally light two-step estimator. Second, we estimate discount factors in a dynamic structural model using field data. The key to identification of discount factors is that bonuses affect only future payoff in non-bonus periods providing exclusion restrictions on current payoffs. Further, we exploit differences in predicted effort (and thus sales) over time from the exponential and hyperbolic discounting models to identify present bias in a hyperbolic discounting model. Substantively, the paper sheds insights on how different elements of the compensation plan enhance productivity. We find evidence that: (1) bonuses enhance productivity across all segments; (2) overachievement commissions help sustain the high productivity of the best performers even after attaining quotas; and (3) quarterly bonuses help improve performance of the weak performers by serving as pacers to keep the sales force on track to achieve their annual sales quotas. We also find clear evidence of hyperbolic discounting by salespeople.