Ambar G. Rao

Truth or Consequences: An Analysis of Vaporware and New Product Announcements

The software industry practice of announcing new products well in advance of actual market availability has led to allegations that firms are intentionally engaging in vaporware. The possible predatory and anti-competitive implications of this behavior recently surfaced in the antitrust case United States v. Microsoft Corporation. Taking the perspective that a new product announcement is a strategic signal between firms, we consider the possibility that intentional vaporware is a way to dissuade competitors from developing their own competing new products. An examination of empirical data for the software industry suggests that some firms may use vaporware in a strategic manner. We then formulate and analyze the preannouncement and introduction timing decisions in a game theoretic model of two competing firms. We find that vaporware can be a way for a dominant firm to signal its product development costs, and that intentional vaporware can deter entry. We also show that there is a curvilinear relationship between development costs and announcement accuracy, i.e., firms with high or very low product development costs make accurate product announcements, while firms with intermediate product development costs intentionally engage in vaporware. Empirical support for these theoretical results is also found in the software industry data. Finally, we discuss the beneficial and harmful consequences of vaporware, and the associated implications.

Assessing When Increased Media Weight of Real-World Advertisements Helps Sales

A prevailing view is that increased media weight for frequently purchased brands in mature product categories usually does not lead to increases in sales. However, the role of advertising executional cues and viewer responses on media weight-induced sales has not yet been examined. The authors find that whether weight helps or has no sales impact depends on the creative characteristics of the advertisements and the responses they evoke in viewers. Study 1 showed that real-world advertisements for frequently purchased brands in mature categories were likely to create greater media weight-induced sales when they used affectively based executional cues. Study 2 found that greater media weight was related to the sales impact of advertisements that evoked positive feelings and failed to evoke negative feelings in viewers. The authors develop hypotheses related to these results within the context of prior work on consumer persuasion (including the elaboration likelihood model), memory processes, and advertising wearout.

Optimal budget allocation when response is S-shaped

We consider the profit maximizing allocation of a budget among n activities when the revenue from each activity is an S-shaped function of the budget allocated to it. Results are obtained for functions that cross only in the convex part. A simple computational procedure based on these results is presented. The results are specialized to cases where the functions do not cross, are multiples of the same function, are identical, and are piecewise linear.

Optimal pricing of a product diffusing in rich and poor populations

We consider a market consisting of two populations, termed rich and poor for convenience. If a product is priced such that it is very expensive for the poor, but affordable to the rich, then it becomes a status symbol for the poor and this makes it more desirable for the poor. At a lower price, the product is affordable by both populations. However, as more of the poor buy the product, it ceases to be a status symbol and becomes less appealing to the rich. We present a two-state nonlinear optimal control problem that aims to obtain profit-maximizing prices over time in this environment. We find that there are three categories of optimal price paths. One is status-symbol pricing with high initial price, declining over time. The other two are mass-market pricing, with price declining in one, and price increasing and then decreasing in the other.

Optimal evaluation policies for workforce: a Bayesian stochastic model

Models the situation where the productivity of members of a group, such as a salesforce, is periodically evaluated; those whose performance is sub-par are dismissed and replaced by new members. Individual productivity is modeled as a random variable, the distribution of which is a function of an unknown parameter. This parameter varies across the members of the group and is specified by a prior distribution. In this manner, the heterogeneity in the group is explicitly accounted for. The authors model the situation as a partially observable (Bayesian) stochastic control problem, and use dynamic programming techniques and the appropriate optimality equations to obtain solutions. The authors prove the existence of an optimal policy in the general case. Further, for the case when the sales process can be characterized by a beta-binomial or a gamma-poisson distribution, it is shown that the optimal policy is of the threshold type at each evaluation period, depending only on the accumulated performance up to a given period.<<ETX>>

Market Segment Response Through Field Experimentation

A key assumption underlying segmentation studies is that marketing efforts have differential effects on market segments. This question was investigated in the context of a field experiment involving enlistment in the armed forces. Approximately 8000 completed questionnaires administered at various stages in the US Navy enlistment recruiting process were collected at two points in time, corresponding to a pre- and post-experimental intervention. Attitudinal data were analysed to identify meaningful segments. Differential responses of market segments to advertising and recruiter changes were found, providing direction for evaluation of, and changes in, the creative component of advertising.