S. P. Raj

A comparative analysis of reference price models

The effect of reference price on brand choice decisions has been well documented in the literature. Researchers, however, have differed in their conceptualizations and, therefore, in their modeling of reference price. In this article, we evaluate five alternative models of reference price of which two are stimulus based (i.e., based on information available at the point-of-purchase) and three that are memory based (i.e., based on price history and/or other contextual factors). We calibrate the models using scanner panel data for peanut butter, liquid detergent, ground coffee, and tissue. To account for heterogeneity in model parameters, we employ a latent class approach and select the best segmentation scheme for each model. The best model of reference price is then selected on the basis of fit and prediction, as well as on the basis of parsimony in cases where the fits of the models are not very different. In all four categories, we find that the best reference price model is a memory-based model, namely, one that is based on the brands own price history. In the liquid detergent category, however, we find that one of the stimulus-based models, namely, the current price of a previously chosen brand, also performs fairly well. We discuss the implications of these findings.

A Survey of Major Approaches for Accelerating New Product Development

Abstract Product life-cycles are becoming shorter, leading firms to reduce the time to bring new products to market. Being early can provide a significant competitive advantage, making the acceleration of new product development (NPD) an important area for research and inquiry. Based on their review of a wide range of literatures in business strategy, marketing, new product development, manufacturing and organization management, Murray Millson, S.P. Raj and David Wilemon report a general set of techniques for reducing the developmental cycle time for new products. The article develops a hierarchy of available NPD acceleration approaches and discusses potential benefits, limitations and significant challenges to successful implementation.

Quality tier competition: How price change influences brand choice and category choice

The authors demonstrate that competition among brands in different quality tiers can be asymmetric both in brand choice (“what”) and in category choice (“whether”). They also investigate how compet...

R & D and marketing dialogue in high-tech firms

Abstract Based on an empirical study of more than 200 R & D and marketing managers from high-technology companies, we conclude that (1) there is a great deal of consensus between R & D and marketing managers on the relative importance of the areas requiring integrated efforts; (2) companies successful in their new product program achieve a significantly greater degree of R & D marketing integration; (3) company size does not affect the level of integration achieved; and (4) the companies that achieve a high degree of R & D/ marketing integration do so by concentrating on all 19 areas proposed in the article and do not merely focus on a few key areas.

Unique inter-brand effects of price on brand choice

Abstract How do price changes by one brand affect the choice of competing brands? Such inter-brand effects may depend on the specific strategy followed by a firm. For example, a firm may target a particular brand to exploit its vulnerability or to avoid direct competition with other brands. Or a firm may design its pricing strategy aimed at reducing cannibalization of its own brands. Previous studies have utilized standard logit models to investigate inter-brand effects. However, these models impose constraints on price elasticities as a consequence of independence of irrelevant alternatives (IIA) assumptions. As a result, estimated own- and cross-elasticities reflect the restrictive assumptions of the model and may not provide an accurate description of the kinds of asymmetric competition among brands noted previously. Though existing market share models at the aggregate level do capture such competitive asymmetries, most disaggregate level logit choice models do not capture such asymmetries in a satisfactory manner. In this article a generalized logit (or mother logit) model is used to estimate unique interbrand response parameters to capture asymmetry. This methodology, drawn from the econometrics literature, overcomes the necessity of making a priori assumptions of competitive patterns and instead can be used to identify competitive patterns as they exist in the market place. In analyzing brand choice data from three product classes, IIA is violated in all three cases to varying degrees. The cross-price elasticities are used to draw managerial implications for brand and product line management.

Product management and the marketing of financial services

One of the most important developments in banking is the increased emphasis on marketing a wide array of financial services. This emphasis has led to the adoption of the product management system in one form or another by many large, full‐service commercial banks. The transition to a product management system has required banks to change how they organize and manage their operations. Examines several of the major challenges and issues faced by product managers in the banking environment, namely, the identification of the product managers’ task responsibilities; the role of organizational support in facilitating product management; the influence of organizational culture; and the impact of power and conflict on product managers and the product management system. Also examines how product managers assess their job performance, work satisfaction, and the performance of the overall product management system in their bank. Develops directions for future research as well as several managerial recommendations to improve product management performance in banking.

Intervention analysis using control series and exogenous variables in a transfer function model: A case study

Abstract This paper presents a case study to show how a control group can be used to obtain more accurate estimates of the impact of interventions. Intervention analysis using the ARIMA time series method is applied in an experimental design context using multiple input transfer function analysis. The study combines the analytic rigor of time series analysis with the careful controls provided by an experiment involving a test and control series. The data are from a field experiment with test and control panels connected to a split-cable TV system.

Components of optimal price under logit demand

Demand for durables can be modeled using a logit framework in which a customer chooses one brand from several alternatives, or buys nothing at all. In this framework, optimal prices for competing brands can be expressed as a system of non-linear equations, which, however, do not have closed form solutions. Although the optimal price can be determined by numerical search, the solution offers limited understanding of its components. In this article, we develop a linear approximation of the Nash equilibrium optimal price of a brand as its marginal cost plus a weighted sum of: (1) the inverse of the price sensitivity of the market, (2) the average value added by all brands in the market, and (3) the value advantage (or disadvantage) of the brand. The weights depend primarily upon the number of competing brands, with price insensitivity having the strongest impact, followed by value advantage of the brand, and average value added by all brands. This approximation for optimal price is found to be robust under a wide range of conditions. Additionally, we demonstrate that using the approximation results in only marginal deviation of profits from the theoretical Nash optimal.

The R&D Outsourcing Decision: Environmental Factors And Strategic Considerations

We develop a framework for understanding the direct and indirect influence of various strategic considerations and environmental factors on the project-level R&D outsourcing decision. We argue that environmental factors can act as shift parameters that increase or decrease the costs of outsourcing. We further posit that it is important to consider firm-level strategic considerations in addition to the project- and transaction-level characteristics that are typically the focus of an R&D outsourcing decision, which highlights the importance of integrating the information possessed by managers from different levels of the organization. Finally, we discuss several directions for future research in this increasingly important area of innovation and technology management.