Markets →
- 08 Nov 2010
- Research & Ideas
How to Fix a Broken Marketplace
Alvin E. Roth was a co-winner of the Nobel Prize in Economic Science this week for his Harvard Business School research into market design and matching theory. This article explores his research. Key concepts include: Successful marketplaces must be "thick, uncongested, and safe." Sufficient "thickness" means there are enough participants in the market to make it thrive. "Congestion" is what can happen when markets get too thick too fast: there are heaps of potential players, but not enough time for transactions to be made, accepted, or rejected effectively. "Safety" refers to an environment in which all parties feel secure enough to make decisions based on their best interests, rather than attempts to game a flawed system. Closed for comment; 0 Comments.
- 25 Oct 2010
- HBS Case
Tesco’s Stumble into the US Market
UK retailer Tesco was very successful penetrating foreign markets—until it set its sights on the United States. Its series of mistakes and some bad luck are captured in a new case by Harvard Business School marketing professor John A. Quelch. Key concepts include: Entering the US, Tesco deserves credit for creating a neighborhood market approach—emphasizing fresh produce and meats, and good quality but value-priced prepared meals. By not partnering or hiring local executives, Tesco missed the opportunity to learn more about the habits and needs of target customers. Tesco rightly aimed to scale the concept as soon as possible so that fixed overhead investments in its own distribution centers could be spread across a larger number of stores. Perhaps Tesco's original rollout plan was too ambitious, with executives assuming that the company would get everything right on the first try. Tesco has listened to its customers, learned from its mistakes, and made appropriate midcourse corrections. Closed for comment; 0 Comments.
- 16 Aug 2010
- Lessons from the Classroom
HBS Introduces Marketing Analysis Tools for Managers
These tools can help managers make informed decisions on market analysis, breakeven analysis, customer lifetime value, profit and pricing, and analyzing the competitive environment. Interview with Tom Steenburgh. Key concepts include: Immense changes in marketing are driving an increasing need for data analysis. The five HBS-developed tools provide decision-making support for market analysis, breakeven analysis, customer lifetime value, profit and pricing, and analyzing the competitive environment. Open for comment; 0 Comments.
- 11 Aug 2010
- Working Paper Summaries
The Influence of Prior Industry Affiliation on Framing in Nascent Industries: The Evolution of Digital Cameras
Firms entering a new product market face tremendous ambiguity and competitive uncertainty, particularly when the new market is sparked by radical technological change. Potential customers have little or no experience with products, and during this period of turbulence, firms experiment with alternative product configurations, functions, and technologies. By studying the emergence of the consumer mass market for digital cameras, Carlson School of Management professor Mary J. Benner and HBS professor Mary Tripsas explore what factors influence a firm's initial introduction of product features during the nascent stage of a product market, and how the process of convergence on a standard set of features unfolds. In particular, they assess how a firm's prior industry affiliation influences its conceptualization of the product. Key concepts include: The authors used a dataset that includes the entry date and features of almost every camera in the history of the U.S. consumer digital camera industry from its inception in 1991 through 2006. Results suggest that firms from the same prior industry shared similar beliefs about what features (such as optical zoom) would be valued, as reflected in their concurrent introduction of features. Firms were likely to imitate the behavior of firms from the same prior industry, as opposed to that of firms from different prior industries, in introducing some but not all features. Finally, as a firm's experience with a particular feature increased, the influence of prior industry decreased. Closed for comment; 0 Comments.
- 05 Aug 2010
- What Do You Think?
What Is Customer Opinion Good For?
Summing Up: Are customer wishes irrelevant when creating a new product? Jim Heskett's readers say it depends on the product, on market goals, and where you are in the development cycle. (Online forum has closed; next forum opens September 2.) Closed for comment; 0 Comments.
- 21 Jun 2010
- Research & Ideas
Strategy and Execution for Emerging Markets
How can multinationals, entrepreneurs, and investors identify and respond to new challenges and opportunities around the world? In this Q&A, HBS professors and strategy experts Tarun Khanna and Krishna G. Palepu offer a practical framework for succeeding in emerging markets. Plus: Book excerpt with action items. Key concepts include: The ambition level of large, fast-growing emerging markets around the world rivals that of companies in the United States in the late 19th and early 20th centuries. Khanna and Palepu outline how to identify and respond to institutional voids in product, labor, and capital markets. Investors and entrepreneurs can respond to niches in institutional infrastructure in the private sector, such as the need for information analyzers and advisors, aggregators and distributors, transaction facilitators, and more. A useful starting point for managers is to construct an institutional map to identify institutional voids—which may themselves present business opportunities. Western multinational companies as well as local entrepreneurs are innovating products to attract the emerging middle class. Such innovations could potentially benefit consumers living in mature markets. Closed for comment; 0 Comments.
- 07 Jun 2010
- Research & Ideas
Improving Brand Recognition in TV Ads
Advertisers pay millions of dollars to air TV ads that are subsequently ignored by a third of viewers. New research by HBS professor Thales S. Teixeira offers a simple, inexpensive solution for marketers to retain brand recognition. Key concepts include: Repeating or "pulsing" brief images of a brand can significantly reduce the likelihood that viewers will zap it. Altering commercials to mimic a pulsing strategy is a virtually cost-free fix for a significant payoff. Viewers' attention should be managed as any other scarce resource. Closed for comment; 0 Comments.
- 03 Jun 2010
- Working Paper Summaries
Platforms and Limits to Network Effects
Why do platforms that restrict choice and charge higher prices seem to prosper alongside platforms offering cheap or free unlimited choice? In the online dating market, for example, eHarmony deliberately limits the number of candidates available to its customers. Headhunters show only a few candidates to the companies, and even fewer companies to the candidates. In the housing market, brokers limit the number of houses they show to potential buyers and sellers. In this paper, HBS professors Hanna Halaburda and Mikolaj Jan Piskorski challenge conventional understanding of platform competition and network effects by describing a two-sided matching environment and studying the indirect network effects in this environment. They show that the interplay between more choice and more competition influences the strength of network effects and attractiveness of a platform. Some agents may opt for a platform with few choices to avoid higher levels of competition. The researchers' model helps explain why platforms that limit their choice set coexist (and thrive) alongside platforms that offer greater choice. Key concepts include: Excessive increases in the number of candidates decrease agents' expected payoffs, due to increased competition. Some agents rationally opt for platforms that constrain choice even if they do not receive any additional service from such platforms, to avoid higher levels of competition. The strength of network effects depends on the type of the agent and on the number of available candidates on both sides of the market. A platform could use these factors to its advantage by offering fewer candidates to its members on both sides of the market. Agents may be willing to pay for participation in such a platform (and hence rationally decide to limit their choices) because they would face less competition. Closed for comment; 0 Comments.
- 19 May 2010
- Working Paper Summaries
The Job Market for New Economists: A Market Design Perspective
How should the most appropriate employers and job candidates find each other? Newly minted economists typically send applications to an average of 80 potential employers, and as a result, many employers receive hundreds of applications. It is extremely time-consuming to sort through all the applications, and as the process unfolds, there is a risk of coordination failure, in which employers and candidates who would be well-suited do not manage to create a match. In this paper, HBS professors Peter A. Coles and Alvin E. Roth and colleagues provide an overview of the market for new PhD economists and describe new mechanisms to improve the matching process. They conclude by discussing the emergence of platforms for transmitting job market information, and other design issues that may arise in the market for new economists. Key concepts include: Practical market design is often a response to particular problems. A new market design often leads the way to developing new knowledge. Two new mechanisms have facilitated matches. The first, a signaling service, allows job candidates to express interest to a limited number to potential employers prior to interviews at association meetings. The second mechanism, a web-based "scramble," reduces search costs and "thickens" the late part of the job market for candidates and employers still seeking a match. Closed for comment; 0 Comments.
- 11 Jan 2010
- Research & Ideas
Mixing Open Source and Proprietary Software Strategies
Open source and proprietary software development used to be competing strategies. Now software firms are experimenting with strategies that mix the two models. Researcher Gaston Llanes discusses recent research into these "mixed source" strategies. Key concepts include: Software companies are taking a "best of both worlds" approach by creating products that use a combination of OS and proprietary software code. The researchers wanted to get a clearer sense of when a profit-maximizing firm should adopt a mixed-source business model and what that model might look like under different circumstances. Results indicate recurring patterns and strategies that managers can take into consideration when setting strategy. Closed for comment; 0 Comments.
- 30 Nov 2009
- Research & Ideas
Tracks of My Tears: Reconstructing Digital Music
Record labels have depended on album sales to boost profits. But in the digital music era, consumers prefer single songs over music "bundles." The result? Harvard Business School professor Anita Elberse says it is time for the industry to rethink its products and prices. Key concepts include: The unbundling of albums into a series of separately sold songs on digital music stores is hurting record label profits. Labels are less likely to get away with selling a bundle based on the strength of one or two tracks if the other songs are far less appealing. A strong artist reputation helps to curb the negative impact of unbundling. Labels might consider pushing for higher prices online and generally more flexibility in setting prices. Giving preference to quality over quantity and designing smaller, more consistent bundles may be beneficial. Closed for comment; 0 Comments.
- 26 Oct 2009
- Lessons from the Classroom
The New Deal: Negotiauctions
Whether negotiating to purchase a company or a house, dealmaking is becoming more complex. Harvard Business School professor Guhan Subramanian sees a new form arising, part negotiation, part auction. Call it the negotiauction. Here's how to play the game. Key concepts include: In a negotiauction, the rules are never perfectly pinned down, which creates both opportunities and challenges. The three common negotiauction moves are set-up, rearranging, and shut-down. Negotiauctions help in the current economic downturn by providing a more nuanced mechanism and better outcome for both parties. Closed for comment; 0 Comments.
- 27 Jul 2009
- Research & Ideas
Social Network Marketing: What Works?
Purchase decisions are influenced differently in social networks than in the brick-and-mortar world, says Harvard Business School professor Sunil Gupta. The key: Marketers should tap into the networking aspect of sites such as Facebook. Key concepts include: Some social network users are influenced by the purchases of their friends. Of these users, 40 percent show a strong "keeping up with the Joneses" behavior, increasing sales by 5 percent. "High-status" users are more likely to not purchase something that others have bought. On social networks, viral campaigns may work better than advertising. Closed for comment; 0 Comments.
- 25 Jun 2009
- Working Paper Summaries
Why Do Countries Adopt International Financial Reporting Standards?
Why do some countries adopt the European Union (EU)-based International Financial Reporting Standards (IFRS) when others do not? To expand our understanding of the determinants and consequences of IFRS adoption on a global sample, HBS professor Karthik Ramanna and MIT Sloan School of Management coauthor Ewa Sletten studied variations over time in the decision to adopt these standards in more than a hundred non-EU countries. Understanding countries' adoption decisions can provide insights into the benefits and costs of IFRS adoption. Key concepts include: Countries with high quality corporate governance systems and more powerful countries are less likely to adopt IFRS. There are network benefits to IFRS adoption, i.e., the likelihood of IFRS adoption for a given country increases with the number of IFRS adopters in its geographical region and with IFRS adoption among its trade partners. As more countries adopt the international standards, the relative import of network benefits from IFRS adoption (over direct economic benefits) are likely to increase. Similar effects might be seen in the adoption of accounting methods and standards, and of corporate governance best practices by firms and jurisdictions. Closed for comment; 0 Comments.
- 26 May 2009
- Research & Ideas
Improving Market Research in a Recession
At the same time that marketers must pare research expenditures, they face added pressure to secure high-quality data and insights. What's a CMO to do? Ask HBS marketing professor John Quelch. Key concepts include: The degree of uncertainty in business and consumer markets has soared. Most big consumer marketers are seeking to shave 10 to 20 percent off research budgets. CMOs must make every remaining market research dollar count. Closed for comment; 0 Comments.
- 21 May 2009
- Working Paper Summaries
Do Friends Influence Purchases in a Social Network?
In spite of the cultural and social revolution in the rise of social networking sites such as Facebook and MySpace (and in South Korea, Cyworld), the business viability of these sites remains in question. While many sites are attempting to follow Google and generate revenues from advertising, will advertising be effective? If friends influence the purchases of a user in a social network, it could potentially be a significant source of revenue for the sites and their corporate sponsors. Using a unique data set from Cyworld, this study empirically assesses if friends indeed influence purchases. The answer: It depends. Findings are relevant for social networking sites and large advertisers. Key concepts include: There is a significant and positive impact of friends' purchases on the purchase probability of a user. However, there are significant differences across users. Specifically, this social effect is zero for 48 percent of the users, negative for 12 percent of the users, and positive for 40 percent of the users. "Moderately connected" users exhibit "keeping up with the Joneses" behavior. On average, this social influence translates into a 5 percent increase in revenues. Highly connected users tend to reduce their purchases of items when they see their friends buying them. This negative social effect reduces the revenue for this group by more than 14 percent. This finding is consistent with the typical fashion cycle wherein opinion leaders or the elite in the fashion industry tend to abandon one type of fashion and adopt the next in order to differentiate themselves from the masses. Closed for comment; 0 Comments.
- 04 May 2009
- Research & Ideas
What’s Next for the Big Financial Brands
Some of the great financial brands such as Merrill Lynch built trust with customers over decades—but lost it in a matter of months. Harvard Business School marketing professor John Quelch explains where they went wrong, and what comes next. Key concepts include: Turmoil and distrust in the financial services sector is an open invitation to non-financial companies to exploit the brand vacuum created by the demise of the likes of Merrill Lynch and the Royal Bank of Scotland. Financial brands today must address the most basic of consumer concerns: Will my money be safe with this company? Financial brands should continue to advertise but with messages that help customers with recession-relevant product and service offerings. Closed for comment; 0 Comments.
- 06 Apr 2009
- Research & Ideas
Cheers to the American Consumer
The willingness by American consumers to adopt new products, processes, and services more rapidly than those in other countries may be the most important enabler of entrepreneurship and innovation in America, says marketing professor John Quelch. Key concepts include: America's "venturesome consumer" may be the most important enabler of entrepreneurship and innovation in the United States. Six characteristics separate consumers and entrepreneurs in America from those in other countries. Closed for comment; 0 Comments.
- 18 Mar 2009
- Research & Ideas
Marketing After the Recession
This downturn has likely changed people's buying habits in fundamental ways. Professor John Quelch discusses why marketers must start planning today to reach consumers after the recession. Key concepts include: Marketers must think through how the recession has changed consumer preferences and what they think of your brand. Start preparing today by, among other steps, focusing on high-potential customers, assessing your brands, and developing scenarios. Closed for comment; 0 Comments.
United Breaks Guitars
A new case coauthored by HBS marketing professor John Deighton and research associate Leora Kornfeld offers an object lesson in the dangers social media can bring for big, recognizable companies and their brands. From the HBS Alumni Bulletin. Open for comment; 0 Comments.