How does the monetary value of customer purchases vary by customer preference for purchase channels (e.g., traditional, electronic, multichannel) and product category? The authors develop a ...conceptual model and hypotheses on the moderating effects of two key product category characteristics—the utilitarian versus hedonic nature of the product category and perceived risk—on the channel preference—monetary value relationship. They test the hypotheses on a unique large-scale, empirically generalizable data set in the retailing context. Contrary to conventional wisdom that all multichannel customers are more valuable than single-channel customers, the results show that multichannel customers are the most valuable segment only for hedonic product categories. The findings reveal that traditional channel customers of low-risk categories provide higher monetary value than other customers. Moreover, for utilitarian product categories perceived as high (low) risk, web-only (catalog- or store-only) shoppers constitute the most valuable segment. The findings offer managers guidelines for targeting and migrating different types of customers for different product categories through different channels.
Changes in the way customers shop, accompanied by an explosion of customer touchpoints and fast-changing competitive and technological dynamics, have led to an increased emphasis on agile marketing. ...The objective of this article is to conceptualize and investigate the emerging concept of marketing agility. The authors synthesize the literature from marketing and allied disciplines and insights from in-depth interviews with 22 senior managers. Marketing agility is defined as the extent to which an entity rapidly iterates between making sense of the market and executing marketing decisions to adapt to the market. It is conceptualized as occurring across different organizational levels and shown to be distinct from related concepts in marketing and allied fields. The authors highlight the firm challenges in executing marketing agility, including ensuring brand consistency, scaling agility across the marketing ecosystem, managing data privacy concerns, pursuing marketing agility as a fad, and hiring marketing leaders. The authors identify the antecedents of marketing agility at the organizational, team, marketing leadership, and employee levels and provide a roadmap for future research. The authors caution that marketing agility may not be well-suited for all firms and all marketing activities.
Although the goal of a product recall program is to enhance safety, little is known about whether firms learn from product recalls. This study tests the direct effect of product recalls on future ...accidents and future recall frequency and their indirect effect through future product reliability in the automobile industry. The authors test the hypotheses on 459 make/year observations involving 27 automobile makers between 1995 and 2011. The findings suggest that increases in recall magnitude lead to decreases in future number of injuries and recalls. This effect, in turn, is partially mediated by future changes in product reliability. The results also suggest that the positive relationship between recall magnitude and future product reliability is (1) stronger for firms with higher shared product assets and (2) weaker for brands of higher prior quality. The findings are robust across alternate measures and alternate model specifications and offer valuable insights for managerial practice and public policy.
New product preannouncements are strategic signals that firms direct at their customers, competitors, channel members, and investors. They have been touted as effective means of deterring competitor ...entry, informing potential customers, and even tipping the balance of technological standard battles in favor of the preannouncing firms. However, preannouncements also carry the risks of unwanted competitive reaction and the negative consequences of undelivered promises. From a shareholder value standpoint, do the benefits outweigh the risks of preannouncing? To address this question, the authors build on agency and signaling theories to develop hypotheses about the effects of preannouncements on shareholder value, and they empirically test these hypotheses on a sample of software and hardware new product preannouncements. The findings indicate that the financial returns from preannouncements are significantly positive in the long run. The authors show that preannouncements generate positive short-term abnormal returns only for firms that offer specific information about the preannounced product. They also show that firms earn positive long-term abnormal returns after a preannouncement if they continue to update the market on the progress of the new product. Both the short-term and the long-term returns are further magnified if the reliability of the preannouncement (i.e., the credibility of the preannouncing firm) is high. The findings offer executives of preannouncing firms clear guidelines on how to manage communications in the market to extract financial value from new product preannouncements.
This article examines why some brands are able to ride the wave of macroeconomic expansions, whereas other brands are better able to successfully weather contractions. Using a utility-based ...framework, the authors develop hypotheses on how the impact of these shocks on brand equity is moderated by six strategic brand factors: price positioning, advertising spending, product line length, distribution breadth, brand architecture, and market position. The authors utilize monthly data on 325 national consumer packaged goods brands in 35 categories across 17 years from the United Kingdom to obtain quarterly sales-based brand equity estimates. The two preeminent brand factors are distribution and assortment. Distribution is by far the most important factor in contractions. It is also the most important factor in expansions. In short, in good times and bad times, extensively distributed brands win. A wide assortment is also a strong contributor to brand equity in expansions, while it does not destroy brand equity in contractions. The authors further find that advertising spending, premium price positioning, umbrella branding structure, and market leadership matter in expansions and/or contractions, and the magnitude of their effects on brand equity is relatively modest. The discussion concludes with managerial implications.
This paper examines the differences in the behaviors of high (HIT) and low inventory turnover (LIT) retailers in responding to demand shocks. We identify quantity and price responsiveness as two ...mediating mechanisms that distinguish how high and low inventory turnover retailers manage demand shocks. Using quarterly firm-level data of 183 U.S. retailers between 1985 and 2012, we find that HIT retailers are able to respond quickly by changing their purchase quantities in response to demand shocks, whereas LIT retailers primarily rely on price changes to manage demand shocks. In addition, we examine the differential implications of these mechanisms on the financial performance of HIT and LIT retailers. We find price responsiveness to be a less effective strategy, compared to quantity responsiveness, in reducing excesses and shortages of inventory. Finally, the negative financial impact of a given amount of excess and shortage of inventory is eight times more severe for LIT retailers compared to HIT retailers.
Multichannel retailing is the set of activities involved in selling merchandise or services to consumers through more than one channel. Multichannel retailers dominate today's retail landscape. While ...there are many benefits of operating multiple channels, these retailers also face many challenges. In this article, we discuss the key issues concerning multichannel retailing, including the motivations and constraints of going multichannel, the challenges of crafting multichannel retailing strategies and opportunities for creating synergies across channels, key retail mix decisions facing multichannel retailers, and the dynamics of multichannel retailing. We synthesize current knowledge drawn from the academic literature and industry practice, and discuss potential directions for future research.
Data-driven decision-making (DDD) is rapidly transforming modern operations. The availability of big data, advances in data analytics tools, and rapid gains in processing power enable firms to make ...decisions based on data rather than intuition. Yet, most firms still allow managers to override decisions from DDD tools, as managers might possess private information not present in the DDD tool. We report on a field-experiment conducted by an automobile replacement parts retailer that examines the profit implications of providing discretionary power to merchants. We find that merchants’ overrides of the DDD tool reduce profitability by 5.77%. However, our analysis over product life cycle (PLC) reveals that merchants increase (decrease) profitability for growth- (mature- & decline-) stage products.
This paper was accepted by Charles Corbett, operations management.
Myopic marketing spending—curtailing marketing and research and development expenses to boost earnings—damages firms’ long-term value. Despite this, top management teams are often myopic, and by the ...time investors or boards detect such short-termism, it is too late to react or intervene. This research introduces a novel prediction method by analyzing the language top management teams use in earnings calls, specifically focusing on marketing and earnings emphasis, to predict future instances of myopic marketing spending. Through linguistic dependency parsing of almost 11 million sentences extracted from nearly 25,000 quarterly earnings call transcripts of 1,197 firms between 2008 and 2019, the authors demonstrate that the proposed approach can predict myopic marketing spending at a quarterly frequency for up to one year in advance. They find that an increase of one standard deviation in earnings emphasis is associated with a 23.68% increase in the likelihood of future myopic marketing spending. Investments based on the proposed approach produce 1.61% additional annual abnormal returns compared with models that exclusively use known predictors of myopic marketing spending, while offering earlier foresight and more frequent opportunities for intervention. This reduces information asymmetry for investors and boards of directors.