Ron Shachar

On Brands and Word-of-Mouth

Brands and word of mouth (WOM) are cornerstones of the marketing field, and yet their relationship has received relatively little attention. This study aims to enhance understanding of brand characteristics as antecedents of WOM by executing a comprehensive empirical analysis. For this purpose, the authors constructed a unique data set on online and offline WOM and characteristics for more than 600 of the most talked-about U.S. brands. To guide this empirical analysis, they present a theoretical framework arguing that consumers spread WOM on brands as a result of social, emotional, and functional drivers. Using these drivers, the authors identify a set of 13 brand characteristics that stimulate WOM, including three (level of differentiation, excitement, and complexity) that have not been studied to date as WOM antecedents. The authors find that whereas the social and functional drivers are the most important for online WOM, the emotional driver is the most important for offline WOM. These results provide an insightful perspective on WOM and have meaningful managerial implications for brand management and investment in WOM campaigns.

Habit-Formation and Political Behaviour: Evidence of Consuetude in Voter Turnout

The extensive literature on voter turnout has devoted relatively little attention to the hypothesis that casting a ballot in one election increases ones propensity to go to the polls in the future. This hypothesis is supported by voter turnout patterns in the 1972-4-6 and 1992-4-6 American National Election Studies panel surveys as well as published experimental research. The effects of past voter turnout on current voting propensities are sizeable and robust across a wide range of model specifications, including those that take into account the possibility of stable unobserved factors affecting both past and current turnout. We conclude by discussing the implications of consuetude for political and social behavior.

Cast Demographics, Unobserved Segments, and Heterogeneous Switching Costs in a Television Viewing Choice Model

An accurate television viewing choice model is an important tool for television executives and advertisers. The authors present a new viewing choice model, which differs from the traditional Rust-Alpert model in three ways: (1) It introduces a new show characteristic—the demographic characteristics of a shows cast; (2) it allows the preferences over the traditional show categories to be a function of both observable and unobservable individual characteristics; and (3) it allows the cost of switching among the viewing alternatives to vary across show types and individual characteristics. Cross-validated predictive testing shows that this model fits the data better than the Rust–Alpert model does. Furthermore, the authors demonstrate that network executives can improve ratings by using this model. The authors predict that by following their scheduling strategies (in particular, by broadcasting comedies after 10:00 P.M.), ABC, CBS, and NBC could have increased their average ratings by 12.9%, 7.5%, and 6.7%, respectively, on selected evenings.

The Risk Reduction Role of Advertising

This study shows theoretically and empirically that exposure to advertising increases consumers’ tendency to purchase the promoted product because the informative content of advertising resolves some of the uncertainty that the risk averse consumers face and thus reduces the risk associated with the product. We call this effect the “risk-reduction” role of advertising. The risk-reduction model implies that advertising effectiveness depends on (a) the risk preference parameter, (b) the precision of the advertising message, (c) the familiarity of the consumer with the product, (d) the consumer’s sensitivity to products’ attributes (and thus, her involvement level with the product), and (e) the diversity of products offered by multiproduct firms. These findings suggest that ads spending should be higher (a) for new and relatively unknown products, (b) for high-involvement products, (c) when ads can be quite precise, and (d) when the firm offers a diverse product-line. It also implies that ads should target consumers (a) who are more sensitive to risk, (b) who are more involved, and (c) those who are not familiar with the promoted product. The model allows ads to affect choices also through a direct effect on the utility (i.e., the standard approach to formulate the effect of advertising). In our empirical example (where the products are television shows) the risk-reduction effect is significant and strong and the direct effect is negligible behaviorally. We discuss the welfare implications of these findings, and illustrate the quantitative differences in managerial implications between our model and the traditional one. Copyright Springer Science+Business Media, Inc. 2004

Brands as Beacons: A New Source of Loyalty to Multiproduct Firms

This study provides evidence that a multiproduct firms portfolio of products affects consumer purchase decisions about each of the firms products. The authors present a theory that explains this empirical regularity. The theory involves revising the information set of consumers to include the profile of multiproduct firms. The authors show that revision of the information set in this way introduces a new source of consumer loyalty and explains interesting empirical regularities in consumer behavior. For example, consumers are loyal to a multiproduct firm even when it does not offer a product that matches their preferences better than a product of competing firms. The authors estimate the model and test its implications using panel data on television viewing choices. The estimated model also allows for state-dependence parameters and unobserved heterogeneity. The empirical results support the model and its implications. The model offers a parsimonious framework for brand-extension strategies and maps new channels of spillovers in a multiproduct firm.

Brands: The Opiate of the Nonreligious Masses?

Are brands the “new religion”? Practitioners and scholars have been intrigued by the possibility, but strong theory and empirical evidence supporting the existence of a relationship between brands and religion is scarce. In what follows, we argue and demonstrate that religiosity is indeed related to “brand reliance,” i.e., the degree to which consumers prefer branded goods over unbranded goods or goods without a well-known national brand. We theorize that brands and religiosity may serve as substitutes for one another because both allow individuals to express their feelings of self-worth. We provide support for this substitution hypothesis with U.S. state-level data (field study) as well as individual-level data where religiosity is experimentally primed (study 1) or measured as a chronic individual difference (study 2). Importantly, studies 1 and 2 demonstrate that the relationship between religiosity and brand reliance only exists in product categories in which brands enable consumers to express themselves (e.g., clothes). Moreover, studies 3 and 4 demonstrate that the expression of self-worth is an important factor underlying the negative relationship.

Verifying the Solution from a Nonlinear Solver: A Case Study: Comment

This paper presents the tale of a replication experiment. The main characters are operating systems, Hessians, scaling, double-peaked likelihoods, and the limits of PC computing. Some of these characters, especially the Hessians, looked scary at first, but turned out to be sheep in wolves’ clothing. In other words, the story has a happy ending. To appreciate the twists and turns, we go back and start at the beginning. Once upon a time, indeed, in the June 2003 issue of the AER, B. D. McCullough and H. D. Vinod (2003; “MV” hereafter) set out to test the AER replication policy. While many AER authors were invited to participate in this replication event, few answered the call. We did. MV singled out our cooperation and honoring of the AER replication policy. MV replicated the results in our 1999 AER paper (Shachar and Nalebuff, 1999). You might have expected that we would be happy. But we were not. MV were concerned not only with replication but also with reliability of nonlinear estimation procedures. Specifically, they were concerned that nonlinear solvers can produce inaccurate answers. They believe that this is a systemic problem with empirical research in economics. Thus, they proposed a four-step method to verify the solution from a nonlinear solver. Using data from our paper to illustrate their point they conclude (referring to our 1999 article as “SN”):

Switching Costs or Search Costs

One of the most significant and robust characteristics of decision making is persistence. An example of this is brand loyalty -- the repeat purchase of new products of the same brand. This paper attempts to show that previous explanations of this phenomenon (switching costs, habit and unobserved heterogeneity) are incomplete, and presents another explanation, namely that individuals possess asymmetric information about their alternatives and are faced with search costs.