Markets →
- 26 Feb 2007
- Research & Ideas
The Power of the Noncompete Clause
Noncompete clauses seem nearly universal—and not just in technology companies. But the effect is especially strong on specialist and "star" inventors, according to new research by Harvard Business School's Matt Marx, Deborah Strumsky, and Lee Fleming. Marx reflects on the business and career implications in this Q&A. Key concepts include: Noncompete clauses may be ubiquitous or nearly so, particularly in venture-funded companies, but not everyone is affected identically by noncompetes. Fundamentally, noncompetes are a form of monopoly. Just as a patent allows a monopoly on a technique or tool for a limited amount of time, a noncompete (if enforced) affords a temporary monopoly of sorts on a person. In Michigan, inventors whose patents are highly cited in other patent applications were less likely to change jobs following a change in the state law. The effect for "specialist" inventors was even stronger. Star or specialist inventors wishing to explore career opportunities may need to look outside a state that enforces noncompetes. From an employer's perspective, keep in mind that noncompetes are far from ironclad. Closed for comment; 0 Comments.
- 12 Feb 2007
- Working Paper Summaries
Adding Bricks to Clicks: The Effects of Store Openings on Sales through Direct Channels
Consider a retailer who operates both brick-and-mortar stores and direct channels such as direct mail catalogs and an Internet Web site. What effect does the opening of a new retail store have on direct channel sales in the retail trading area surrounding the store? Does the existence of more opportunities for consumer contact with the brand increase the retailer's direct sales, or does intra-brand, inter-channel competition erode the retailer's direct sales? Does consumer response to the retailer's brand evolve over time, perhaps as consumers go through some process of trial-and-error learning about the relative merits of stores and direct channels, or is the impact of the new store relatively discrete? Does the answer depend on whether consumers in the retail trading area have had the opportunity for previous experience with the brand's stores? This research used a proprietary longitudinal dataset from a multichannel retailer to understand what happens and to probe the implications for channel management strategy. Key concepts include: Adding a physical retail store to existing direct sales channels increases firm sales in the long run, as sales from the new store are incremental to sales from direct channels, which show little long term damage from channel competition. Adding channels produces both cannibalizing and complementary effects which operate in tandem and vary over time. Cannibalization occurs in the short term following the addition of a new channel, while complementarity takes time to manifest itself. Retail store openings cannibalize direct channel sales in the short term if physical stores do not already exist in the retail trading area, but produce complementary effects which overcome the losses from cannibalization in the long run. Our results suggest the underlying consumer shopping behavior driving this result. The opening of a retail store may induce some existing direct channel customers to switch their purchases to the retail store; simultaneously, new customers are attracted to the direct channels, perhaps due to a branding effect stemming from the publicity surrounding the new store which makes customers more aware of and more comfortable with the firm's direct channel operations. Use caution extrapolating these results to other retailers. This study involved only store openings by a single retailer with a well established and respected brand into markets where the retailer did not previously have stores. Direct retailers with less established brands may benefit even more than this retailer from branding effects by opening a new store. Closed for comment; 0 Comments.
- 08 Jan 2007
- What Do You Think?
Neuro Economics: Science or Science Fiction?
The growing use of MRI (magnetic resonance imaging) devices for studying decision making means that in 2007 we may hear a number of striking conclusions based on studies involving a small number of brain scans, says Jim Heskett. What are the more general implications of this trend? Will it have strong explanatory as well as manipulative potential for us as consumers, managers, and citizens? 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.
- 04 Aug 2006
- What Do You Think?
What Happens When the Economics of Scarcity Meets the Economics of Abundance?
The "Long Tail," a term coined by Chris Anderson—and the title of his new book—describes the item popularity curve. Does the Long Tail represent a paradigm shift for business and consumer behavior? What are its implications for management going forward? Key concepts include: Chris Anderson first coined the term "the Long Tail" in Wired magazine. In a long-tail world, everything digital is available at all times. Anderson describes three conditions critical to potential long-tail profits, all of which are provided by the Internet combined with creative new software and hardware. Closed for comment; 0 Comments.
- 05 Jul 2006
- Working Paper Summaries
The Presentation of Self in the Information Age
In the past, we knew a lot about the seller of a product (through ads, marketing, or reputation) but little about the individual buyer. Times have changed. From the Internet to store loyalty cards, technology has made the marketplace into an interactive exchange where the buyer is no longer anonymous. The future market will likely be one in which personal information is shared and leveraged. Consumers who are willing to share their information will be more attractive to sellers and more sought-after than those who have bad reputations or refuse to participate. Key concepts include: Consumers will play an increasingly leveraged role in the marketplace by "branding" themselves and sharing personal information with sellers. Technology is making the idea of consumer branding a reality, but it is unclear how personal information will be used in the marketplace, or which uses will be the most beneficial to both buyers and sellers. Look deeper into loyalty programs for the societal and commercial, and positive and negative effects of sharing personal information in the marketplace. 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 IPS Property
This paper is about discrete-choice and econometric models. The "invariant proportion of substitution," or IPS, property comes into play when, for example, a consumer faces a choice among three laptop computers with slightly different attributes. How will improvements to one laptop's attributes affect how the consumer chooses to substitute one alternative for another? Steenburgh looked at probabilities based on assumptions about consumers' utility-maximizing behavior. Key concepts include: The IPS property can be interpreted as an implicit assumption that is made to attain parsimony at the expense of flexibility. Idiosyncratic variation in the consumer's taste parameters can eliminate the IPS restriction. Closed for comment; 0 Comments.
- 05 Jul 2006
- Working Paper Summaries
A Survey-Based Procedure for Measuring Uncertainty or Heterogeneous Preferences in Markets
People who buy retail prescription drugs, invest funds, or participate in auctions rarely have complete information about the product they are buying. Often the only auction information participants have is the number of bidders, observed bids, and product characteristics. If data from an auction, for instance, is a function of bidder behavior, then external survey data may help in testing hypotheses about bidding behavior. Researchers often avoid using surveys because they consume time and effort, but Yin presents a survey design technique and econometric tool to deal with a general population of survey respondents. Her application tested eBay online auctions selling personal computers. Key concepts include: Survey data may be a good complement for market data, especially for auctions, as a measure of uncertainty or different preferences. Survey data may be more valuable than other methods of evaluation because it exploits the human ability to assess complex sets of information. A survey may be implemented more quickly with a larger number of respondents, even if they are inexperienced, than with a smaller number of experienced respondents, by correcting for survey bias. Closed for comment; 0 Comments.
- 05 Jul 2006
- Working Paper Summaries
Information Dispersion and Auction Prices
How can auctions be used most effectively? Government and industry traditionally use auctions to price and allocate assets and contracts with high but unknown value. Millions of people use Internet auctions for goods that are often of unknown value (e.g., used goods, unknown brands). This paper asks: Do bidders behave in the way auction theory predicts they should? And, what are the effects of different types of information on prices? To answer these questions, Yin combined theory, econometric modeling, and survey data. Key concepts include: Reputation lends credibility to the information about the product; both are important when analyzing auction prices. Information in auctions is dispersed among many participants. In analysis, this dispersion is a more important source of uncertainty than any information asymmetry between buyer and seller. Closed for comment; 0 Comments.
- 05 Jul 2006
- Working Paper Summaries
Empirical Tests of Information Aggregation
While neither buyers nor sellers may be certain of the worth of used goods, both may possess private information about the value. Do prices become more informative as the number of bidders grows? Using data from a sample of eBay auctions for computers, Yin looked at how and under what conditions auction prices converge to the common value of a given item. Key concepts include: Ebay prices do become more meaningful as the number of bidders increases; however, there is insufficient evidence to conclude that they aggregate information as fully as they could, given the number of bidders. Even partial information aggregation by eBay auction prices suggests a potential efficiency gain over one-to-one trade of used goods with uncertain common values Closed for comment; 0 Comments.
- 16 Jan 2006
- Research & Ideas
What Customers Want from Your Products
Marketers should think less about market segments and more about the jobs customers want to do. A Harvard Business Review excerpt by HBS professor Clayton M. Christensen, Intuit’s Scott Cook, and Advertising Research Foundation’s Taddy Hall. Closed for comment; 0 Comments.
- 07 Nov 2005
- What Do You Think?
Is Less Becoming More?
Americans these days have a lot more choices in products and services. But do consumers and suppliers suffer from choice overload? If so, what does this abundance mean for companies? Closed for comment; 0 Comments.
- 03 Oct 2005
- Research & Ideas
The Box Office Power of Stars
Just how much do movie stars contribute to box office success? HBS professor Anita Elberse researched the notion of "star power" to better understand how A-list players contribute to Hollywood's bottom line. Closed for comment; 0 Comments.
- 06 Sep 2005
- Research & Ideas
When Product Variety Backfires
Consumers like choice—but not too much of it. Presented with too many options, buyers may run to a competitor, says professor John Gourville. Here's what new research says about "overchoice." Closed for comment; 0 Comments.
- 08 Aug 2005
- Research & Ideas
A Balanced Scorecard Approach To Measure Customer Profitability
Happy customers are good, but profitable customers are much better. In this article, professor and Balanced Scorecard guru Robert S. Kaplan introduces BSC Customer Profitability Metrics. From Balanced Scorecard Report. Closed for comment; 0 Comments.
- 02 May 2005
- What Do You Think?
Where is Consumer Generated Marketing Taking Us?
There is a kind of "always on" communication system shaping up between the most committed of tech-minded users and those who supply them. Is the close monitoring of developing trends always in our best interests as marketers and customers? Closed for comment; 0 Comments.
- 19 Jul 2004
- Research & Ideas
Your Customers: Use Them or Lose Them
Companies can differentiate on service profitably, says HBS professor Frances X. Frei. Here's how a new-thinking bank, insurance provider, and software company are using customer power to win. Closed for comment; 0 Comments.
How Do You Value a “Free” Customer?
Sometimes a valuable customer may be the person who never buys a thing. In a new research paper, Professor Sunil Gupta discusses how to assess the profitability of a customer in a networked setting—a "free" customer who nevertheless influences your bottom line. Key concepts include: In multi-sided markets, some customers contribute to a company's bottom line directly while others contribute indirect benefits, which are more difficult to calculate. Businesses must be able to assess the value of these "free" customers in order to efficiently allocate marketing and other expenses to grow the business, and to develop a more accurate estimate of firm value. Using a model for valuing networked customers, Gupta found that in an auction scenario, buyers and sellers had almost equal value even though sellers outnumbered buyers 4.6-to-1. Closed for comment; 0 Comments.