Joseph C. Nunes

Reducing Assortment: An Attribute-Based Approach

Most supermarket categories are cluttered with items, or stockkeeping units (SKUs), that differ very little at the attribute level. Previous research has found that reductions (up to 54%) in the number of low-selling SKUs need not affect perceptions of variety and therefore sales, significantly. In this research, the authors analyze data from a natural experiment conducted by an online grocer, in which 94% of the categories experienced dramatic cuts in the number of SKUs offered, particularly low-selling SKUs. Sales were indeed affected dramatically, increasing an average of 11% across the 42 categories examined. Sales rose in more than two-thirds of these categories, nearly half of which experienced an increase of 10% or more; 75% of households increased their overall expenditures after the cut in SKUs. In turn, the authors examine how different types of SKU reductions—defined by how the cuts affect the available attributes or features of a category (e.g., the number of brands)—affected purchase behavior differently. The results indicate that consumers experienced divergent reactions to the reduction in sizes, but they uniformly welcomed the elimination of clutter brought on by the reduction in redundant items. In addition, of households that were loyal to a single brand, size, or brand–size combination that was eliminated, nearly half continued purchasing within the category. Also, contrary to previous research on SKU reductions, the authors find that category sales depend on the total number of SKUs offered. The authors extend the previous research by showing that (1) category sales depend on the availability of key product and category attributes and (2) two particularly important attributes to consumers in an assortment are brand and flavor.

Incidental Prices and Their Effect on Willingness to Pay

Previous research has explored how both internal and external references prices affect consumer perceptions and consequently the price that consumers are willing to pay for a product or service. Historically researchers have examined the effects of exposure to prices for the same product, the same brand, or products in the same category. This research explores the effect of incidental prices on the consumers willingness to pay. The authors define incidental prices as prices advertised, offered, or paid for unrelated products or goods that neither sellers nor buyers regard as relevant to the price of an item that they are engaged in selling or buying. More specifically, the authors examine how prices for products that buyers encounter unintentionally can serve as anchors, thus affecting willingness to pay for the product that they intend to buy. The findings have important implications for auction houses and online vendors as well as for conventional retailers.

The Endowed Progress Effect: How Artificial Advancement Increases Effort

This research documents a phenomenon we call the endowed progress effect, whereby people provided with artificial advancement toward a goal exhibit greater persistence toward reaching the goal. By converting a task requiring eight steps into a task requiring 10 steps but with two steps already complete, the task is reframed as one that has been undertaken and incomplete rather than not yet begun. This increases the likelihood of task completion and decreases completion time. The effect appears to depend on perceptions of task completion rather than a desire to avoid wasting the endowed progress. Moderators include the reason, if any, offered for the endowment and the currency in which progress is recorded.

A Cognitive Model of People’s Usage Estimations

The author explores how consumers anticipate product or service usage during the purchase deliberation and develops a descriptive model of the decision process in which consumers integrate their usage expectations into the choice between paying a flat fee for unlimited access or paying per use. The model helps explain why consumers habitually overestimate the likelihood of using enough to justify the flat fee and how this misperception depends on the perceived range of usage anticipated by the user.

The Malleable Brand: The Role of Implicit Theories in Evaluating Brand Extensions.

This research documents how implicit theories regarding personality traits (whether they are deemed to be fixed or malleable) affect consumer inferences about the malleability of a brands personality traits and, thus, its ability to extend into new categories. Study 1 documents that consumers who believe that traits are malleable (incremental theorists) are more accepting of brand extensions than consumers who believe that traits are fixed (entity theorists). These results hold whether implicit theories are measured or manipulated. Study 2 reveals how implicit theories affect consumers’ perceptions regarding the flexibility of a brands personality traits and not its physical traits. Study 3 demonstrates that consumers primed with different implicit theory orientations respond differently to varying degrees of change within a single trait. This study tests the limits of the effect and demonstrates the impact of using primes embedded within standard marketing communication.

Incommensurate Resources: Not Just More of the Same

The pricing literature is replete with research that focuses on how consumers respond to sales promotions when both the reference level and the change are expressed in dollar terms (i.e., discounts). The psychophysics of pricing suggests that changes in monetary magnitude are not based on their absolute level, but rather on their deviation from some reference level, or how the change is “framed.” Often, however, a promotion is presented in nonmonetary terms (e.g., a premium). When two resources are delivered simultaneously, but in different currencies (e.g., receive a free razor with the purchase of a can of shaving cream), the marginal value of the nonmonetary, incremental benefit may be difficult to evaluate in relation to the focal product or its price. Therefore, the value of the premium may be less likely than a comparable discount to be viewed in a relative sense and thus less likely to suffer from diminishing marginal returns. This research explores how people often fail to exhibit the same diminishing sensitivity to an incremental benefit, or cost, when it is accrued in a currency other than the referent currency. The authors define two different carriers of wealth or welfare (i.e., resources) that are difficult to convert into any meaningful common unit of measurement as “incommensurate.” This research introduces a novel mechanism for influencing whether people attend to absolute rather than relative differences. This work also offers guidance to managers who might benefit from the strategic use of nonmonetary promotions.

Using Combined-Currency Prices to Lower Consumers' Perceived Cost

The increasing popularity of loyalty programs and related marketing promotions has resulted in the introduction of several new currencies (e.g., frequent flier miles, Diners Club “Club Rewards”) that consumers accumulate, budget, save, and spend much as they do traditional paper money. As consumers are increasingly able to pay for goods and services such as airline travel, hotel stays, and groceries in various combinations of currencies, an understanding of how shoppers respond to “combined-currency pricing” is important for marketers. This research is the first to explore how consumers evaluate transactions that involve combined-currency prices, or prices issued in multiple currencies (e.g.,

Recurring Goals and Learning: The Impact of Successful Reward Attainment on Purchase Behavior

39 and 16,000 miles). The authors present a formal mathematical proof that outlines the conditions under which a price that comprises payments delivered in different currencies can be superior to a standard, single-currency price, either by lowering the psychological or perceived cost associated with a particular revenue objective (i.e., price) or by raising the amount of revenue collected given a particular perceived cost. Three studies, in which respondents evaluate and choose among prices issued in single and combined currencies, offer both experimental and empirical support.

Why are People so Prone to Steal Software? The Effect of Cost Structure on Consumer Purchase and Payment Intentions

The authors examine the impact of successfully attaining a goal on future effort directed at attaining the same goal. Using data from a major frequent-flier program, they demonstrate empirically how success contributes to an increase in effort exhibited in consecutive attempts to reach a goal. They replicate the effects in a laboratory study that shows that the impact of success is significant only when the goal is challenging. They also show how progress enhances perceptions of self-efficacy and how successfully completing the task provides an added boost, supporting the notion that self-learning is the principle mechanism driving their results.

Status, Race, and Money The Impact of Racial Hierarchy on Willingness to Pay

Intellectual property piracy is a significant global problem and an enormous problem for U.S. companies and policymakers. This article examines why typically law-abiding people are more inclined to steal intellectual property products than more tangible, material products. The authors propose that the inclination to pay for certain types of goods and services is greater than for other types, and what distinguishes the two classes is their cost structure. They document how consumers are more or less inclined to pay for goods and services as a function of whether the products cost is principally attributable to variable cost (VC) or fixed cost (FC). The authors’ central thesis is that consumers (1) believe that they cause less harm if their failure to pay prevents a seller from recovering FC than if their failure to pay helps a seller recoup VC; (2) are more likely to risk not paying for a product the less harm they perceive that not paying would cause; and (3) therefore feel less obligated and are less likely to pay voluntarily for a high-FC, low-VC product than for a high-VC, low-FC product, when total cost and average cost are held constant. This research is particularly relevant in the information age, because it helps explain why consumers appear to be more inclined to risk stealing software and other intellectual property products with relatively high FC and little or no VC. It also allows for the creation of marketing remedies that do not involve further legal enforcement.