Marketing Strategy →
- 20 Nov 2007
- Working Paper Summaries
The “Fees → Savings” Link, or Purchasing Fifty Pounds of Pasta
Discount membership clubs have a large and growing presence in retail—one recent survey reported that Costco sells to 1 in every 11 people in the United States and Canada, and warehouse clubs are estimated to be a $120 billion industry today in the United States alone. As a result, many people have had the experience of entering one of these popular clubs and leaving hours later with more goods than can fit in their car. One rational reason for such behavior is that membership clubs do offer lower prices than other retailers. However, Norton and Lee offer a counterintuitive explanation for such buying behavior. They propose that the presence of membership fees alone—independent of the actual savings on any given product—can lead consumers to infer a "fees → savings" link, leading them to spend more than they otherwise would to capitalize on these perceived "great deals." Norton and Lee explore this phenomenon by setting up their own "membership clubs" and comparing profits across stores with varying membership fees. Key concepts include: Consumers behave irrationally in response to membership fees. When stores charge membership fees, consumers infer a "fees → savings" link due to their belief that stores that charge fees do so because they offer better prices. The presence of fees leads to increased spending. Consumers in the study were more likely to express a desire to shop at stores that charged fees than those that did not, even when products and savings were similar. With exceptions, there may be a curvilinear relationship between fees and savings: fees that are too low serve as a hook to make people pay more later; medium fees indicate good prices and decent quality and service; and high fees signal exclusivity and high prices. Closed for comment; 0 Comments.
- 07 Nov 2007
- Op-Ed
How Marketing Hype Hurt Boeing and Apple
In his latest blog entry, professor John Quelch looks at the examples of Boeing and Apple to investigate why shareholders have little patience for companies that hype high but deliver low. Key concepts include: The penalties for not delivering on marketing promises are fast becoming as significant as not meeting quarterly earnings targets. Do not risk marketing hype unless you are sure of both your supply curve and your demand curve. Hype can hurt stock prices and investor confidence when expectations are not met. Closed for comment; 0 Comments.
- 29 Oct 2007
- HBS Case
Marketing Maria: Managing the Athlete Endorsement
Anita Elberse discusses her research on sports marketing and a case study on tennis powerhouse Maria Sharapova. Closed for comment; 0 Comments.
- 10 Oct 2007
- Research & Ideas
“Blank” Inside: Branding Ingredients
When Intel launched the Intel Inside campaign in the 1990s, many marketers thought the chip giant was nuts. Who cared about the microprocessor inside their PC? Turns out Intel created a branding sensation and raised awareness of the importance of ingredient branding, says professor John Quelch. Today's best example: The Boeing Dreamliner. Closed for comment; 0 Comments.
- 17 Sep 2007
- Research & Ideas
Broadband: Remaking the Advertising Industry
Evolving from the Marlboro Man in the 1960s to the Subservient Chicken in a recent Web campaign, advertising is undergoing a radical transformation. Harvard Business School professor Stephen P. Bradley, who is cowriting a book on how broadband technologies are remaking many industries, discusses how advertising is responding to the challenges. Key concepts include: Traditional advertising vehicles such as television are becoming less interesting to advertisers because of fragmented viewership and inadequate user data. Broadband technology is becoming more important to advertisers because of its ability to move the consumer closer to a transaction decision and to deliver clearly segmented audiences. The advertising industry is wrestling with this transformation in part by merging with media companies and by launching creative ad alternatives. Closed for comment; 0 Comments.
- 14 Sep 2007
- Research & Ideas
How to Profit from Scarcity
This past summer's launches of the iPhone and final Harry Potter book were textbook examples of companies profiting in part by creating the illusion of scarcity. Professor John Quelch explains the advantages of this strategy when executed well, and tells how to recover from a real product shortage. Key concepts include: Marketers understand that using the illusion of scarcity can accelerate demand by encouraging us to buy sooner and perhaps to buy more than normal. Using false scarcity as a strategy also carries risk: it invites heightened scrutiny and frustrates buyers. Even if you experience a real product shortfall, take steps to mitigate potential disaster. Closed for comment; 0 Comments.
- 27 Aug 2007
- Op-Ed
Mattel: Getting a Toy Recall Right
Mattel has been criticized heavily for having to recall not once but twice in as many weeks 20 million toys manufactured in China. But Mattel also deserves praise for stepping up to its responsibilities as the leading brand in the toy industry. Harvard Business School professor John Quelch examines what Mattel did right. Key concepts include: Mattel's recall of 20 million toys made in China was handled deftly: The CEO took personal charge of the problem. Consumers are being empowered by Mattel's communications. The recall Web site is a model of excellence. Mattel's compensation program to customers may not be sufficient. Closed for comment; 0 Comments.
- 16 Jul 2007
- Research & Ideas
Understanding the ‘Want’ vs. ’Should’ Decision
Pizza or salad? Consumers use different approaches to buying things they want (pizza) versus items they should buy (salad). In their research on online grocery-buying habits and DVD rentals, Harvard Business School's Katy Milkman and Todd Rogers, along with Professor Max Bazerman, provide insights on the want-should conflict and the implications for managers in areas such as demand forecasting, consumer spending habits, and effective store layout. Key concepts include: People often behave as if they possess multiple selves with different, competing interests—the "want-self" versus the "should-self." The want-self demands instant gratification while the should-self looks to longer-term interest. Online grocery shoppers order healthier groceries when ordering for delivery in the distant future (i.e., 5 days from now) than when ordering for delivery tomorrow. Grocery stores that locate the produce section ("should" buy) near the entrance have this figured out. Online and catalogue retailers should anticipate that the further in advance of delivery an order is placed, the less a customer is likely to spend. Closed for comment; 0 Comments.
- 31 May 2007
- Working Paper Summaries
Extremeness Seeking: When and Why Consumers Prefer the Extremes
When can variety be helpful and when can it be harmful? Conventional wisdom suggests that a product provider enhances the overall attractiveness of a set of options by adding more alternatives to the mix. By contrast, Gourville and Soman’s research indicates that in certain, predictable cases, adding more alternatives to an assortment leads consumers to choose either the most basic or the most "fully loaded" product or service, be it a camera, car, cable TV service, laptop, or vacation package in Italy. Key concepts include: As the variety of choices available to consumers grows in size and those choices vary in their distinct features, consumers often prefer the options at either extreme—either the basic model or the fully loaded model. While getting some consumers to trade up to the "fully loaded" model may seem desirable for a seller, it is not clear that the overall effect of such polarization will be positive. Rather than encourage consumers to choose a basic or fully loaded product, product providers may wish to turn an uncertain customer into a certain customer by offering an alternative that best meets the customer's needs. Understanding how additional choices have an impact on demand for specific models in a product portfolio is essential for efficient inventory and product line management. Closed for comment; 0 Comments.
- 21 May 2007
- Research & Ideas
Fixing the Marketing-CEO Disconnect
In many companies, the marketing function has wandered far from the company's overall strategy. The result: lower margins and declining productivity, says Professor Gail McGovern. She discusses what executives can do to repair the split and introduces a new diagnostic tool for measuring marketing performance used in HBS executive education programs. Key concepts include: In many companies a wall has grown between the marketing function and the C-suite. Reasons for this are varied, but may include CEO and board priorities taken up by other issues or too much delegation of responsibility to the chief marketing officer. When a firm's marketing activities are not supportive of its greater strategic goals, the result can be low growth and declining margins. The key challenge in aligning marketing activities with corporate strategy is to develop a set of metrics to be used by top executives and the board that measure the impact of marketing activities against the goals of the corporation. Closed for comment; 0 Comments.
- 05 Feb 2007
- Research & Ideas
Business and the Global Poor
Companies have more or less ignored 80 percent of the world's population—the global poor. The new book Business Solutions for the Global Poor, created from research and a conference at Harvard Business School, shows how both business and societal interests can be served at the base of the economic pyramid. A Q&A with co-editor V. Kasturi Rangan. Key concepts include: The goals of poverty reduction and economic profit begin to align to the degree that these ventures empower the poor, either by improving their quality of life, providing them with productivity tools and services, or by creating jobs. The productive capacity of the poor can be leveraged in creating products and services. To succeed in low-income markets, companies must strengthen their bottom-up market intelligence; utilize local leaders and community agents to bring people together; and educate investors that bringing BOP initiatives to scale and sustainability may happen more slowly than the time frames dictated by traditional corporate targets. Companies must strike a delicate balance, keeping in mind both their legal obligations to return profits to their investors as well as their social responsibilities. Companies cannot afford to treat their social license callously. Closed for comment; 0 Comments.
- 11 Dec 2006
- Research & Ideas
Fixing Price Tag Confusion
"Partitioned" price tags that include a main price plus additional charges (Lamp: $70, Bulb, $5, Shipping: $15) may be confusing your customers. When is an all-inclusive price the best bet? Open for comment; 0 Comments.
- 23 Oct 2006
- Research & Ideas
Will the “Long Tail” Work for Hollywood?
The "long-tail phenomenon" is well documented: Amazon.com makes significant profits selling many low-volume books. But can the long tail work for video sales as well? A new working paper by professors Anita Elberse and Felix Oberholzer-Gee suggests that it may not bring the same benefits to Hollywood. Key concepts include: For video sales, the long-tail phenomenon is not as pronounced at it is for books. There is evidence of a shift in sales to the tail for video, but an increasing number of titles do not sell at all. Hollywood strategists have no easy answers for pumping up revenue, given a decline in the number of blockbuster hits. This new research suggests that the long-tail phenomenon might not be a panacea for video sales. The music industry may be more of a long-tail beneficiary than the movie industry. Closed for comment; 0 Comments.
- 05 Sep 2006
- Research & Ideas
HBS Cases: Porsche’s Risky Roll on an SUV
Why would a company want to locate in a high-cost, high-wage economy like Germany? Porsche's unusual answer has framed two case studies by HBS professor Jeffrey Fear and colleague Carin-Isabel Knoop. Closed for comment; 0 Comments.
- 26 Jul 2006
- Research & Ideas
The Strategic Way to Go to Market
Too often channel strategies develop at the last minute--when a product is ready to go to market. But this haphazard approach leaves a lot of efficiencies and synergies by the wayside, says V. Kasturi Rangan. Enter the concept of the "channel steward." Key concepts include: Distribution strategies are often supplier-conceived methods to get a product to market, but these strategies fail to capitalize fully on channel partners or customers. A "channel steward" is a player in the chain who is best positioned to look out for the interests of all involved and devise a win-win strategy. Distribution strategy needs the attention of high-level executives—not just a product manager. Think of the Internet as a complementary go-to-market tool, not a total solution. Closed for comment; 0 Comments.
- 05 Jul 2006
- Working Paper Summaries
The Framing Effect of Price Format
How do consumers evaluate different pricing scenarios? This study looks at different pricing models to see which is more likely to result in positive customer perception. Specifically, the authors look at all-inclusive pricing (e.g., the price of a chair is $85.95 including shipping) versus partitioned pricing (e.g., the price of a chair is $81 and shipping is $4.95). When consumers are presented with a partitioned price, they place an exaggerated weight on their evaluation of each individual component. Key concepts include: Price format can be an effective way to shift attention from one type of component (e.g., the actual price of a chair) to another (e.g., a great deal on shipping). If a component might be seen as a negative (e.g., costly shipping), all-inclusive pricing could be best. Consumers may form an opinion about a firm based on the firm's price format. When there is one focal attribute, post an all-inclusive price. When products are commodities, consider partitioning prices. Closed for comment; 0 Comments.
- 05 Jul 2006
- Working Paper Summaries
The Motion Picture Industry: Critical Issues in Practice, Current Research & New Research Directions
This paper reviews research and trends in three key areas of movie making: production, distribution, and exhibition. In the production process, the authors recommend risk management and portfolio management for studios, and explore talent compensation issues. Distribution trends show that box-office performance will increasingly depend on a small number of blockbusters, advertising spending will rise (but will cross different types of media), and the timing of releases (and DVDs) will become a bigger issue. As for exhibiting movies, trends show that more sophisticated exhibitors will emerge, contractual changes between distributor and exhibitors will change, and strategies for tickets prices may be reevaluated. Key concepts include: Business tools such as quantitative and qualitative research and market research should be applied to the decision-making process at earlier stages of development. Technological developments will continue to have unknown effects on every stage of the movie-making value chain (production, distribution, exhibition, consumption). Closed for comment; 0 Comments.
- 05 Jul 2006
- Working Paper Summaries
The Power of Stars: Do Stars Drive Success in Creative Industries?
The importance of star power is evident in creative industries from music and film to fashion and architecture. Star actors are paid millions of dollars, but is star talent critical to product success? What determines the value of stars? In the context of the movie business, Elberse calculated the returns in a study comparing 1,200 casting announcements on trading behavior in a simulated and real stock market setting. In a separate study, she also looked at the stars' impact on expected revenues. Key concepts include: Star participation positively impacts movie revenue. Do not just bet on an A-list star: Combine the right star with the right cast. These interdependencies complicate talent recruitment and compensation decisions. Star participation may not add to firm studios' valuation. If profitability or shareholder value is a key objective, studio executives could alter their talent compensation schemes. Closed for comment; 0 Comments.
- 12 Jun 2006
- Research & Ideas
The Promise of Channel Stewardship
For many companies, distribution channels serve neither customers nor channel partners well. In a new book, Harvard Business School professor V. Kasturi Rangan outlines the concept of channel stewardship. An excerpt from Transforming Your Go-to-Market Strategy. Closed for comment; 0 Comments.
B2B Branding: Does it Work?
Does it make sense for B2B companies to take a cue from consumer companies and invest in brand awareness? Many B2B CEOs say no, but HBS marketing professor John Quelch disagrees in his latest blog entry. Key concepts include: Most B2B marketers cannot economically address thousands of small businesses using the traditional direct sales force. If left unattended, individual managers will each do their own ad hoc marketing. B2B marketers are realizing that developing brand awareness among their customers' customers can capture a larger share of channel margins and build loyalty that can protect them against lower-priced competitors. Closed for comment; 0 Comments.