Shrihari Sridhar

Social Influence Effects in Online Product Ratings

Websites prominently display consumers’ product ratings, which influence consumers’ buying decisions and willingness to pay. Few insights exist regarding whether a consumers online product rating is prone to social influence from others’ online ratings. Examining this issue, the authors hypothesize that other consumers’ online ratings moderate the effects of positive and regular negative features of product experience, product failure, and product recovery (to address product failure) on the reviewers online product rating. The results from a model using 7499 consumers’ online ratings of 114 hotels support the hypotheses. Other consumers’ online ratings weaken the effects of positive and regular negative features of product experience but can either exacerbate or overturn the negative effect of product failure, depending on the quality of product recovery. For marketing theory, the findings indicate that consumers who influence others are themselves influenced by other consumers and that this influence is contingent on their product experience. For managerial practice, the authors offer a method to estimate the effects of product experience characteristics on online product ratings and show that social influence effects make high online product ratings a double-edged sword, exacerbating the negative effect of product failure and strengthening the benefit of product recovery.

Should Firms Spend More on Research and Development and Advertising During Recessions

Whenever a recession occurs, there is a heated dialog among marketing academics and practitioners about the appropriate levels of marketing spending. In this article, the authors investigate whether firms should spend more on research and development (R&D) and advertising in recessions. They propose that the effects of changes in firms’ R&D and advertising spending in recessions on profits and stock returns are contingent on their market share, financial leverage, and product-market profile (i.e., business-to-consumer goods, business-to-business services, business-to-business goods, or business-to-consumer services). They estimate the model using a panel of more than 10,000 firm-years of publicly listed U.S. firms from 1969 to 2008, during which there were seven recessions. Their results support the contingency approach. The authors compute the marginal effects, which show how the effects of changes in R&D and advertising spending in recessions vary across firms. The marginal effects provide evidence of inadequate spending (e.g., 98% of business-to-consumer goods firms underspend on R&D), proactivity (e.g., 96% of business-to-business services firms are at approximately the right levels on advertising). and excess spending (e.g., 92% of business-to-consumer services firms overspend on advertising). Using the authors’ approach and publicly available data, managers can estimate the effects of their firms’ and competitors’ R&D and advertising spending on profits and stock returns in recessions.

Dynamic Marketing Budgeting for Platform Firms: Theory, Evidence, and Application

Few studies address the marketing budgeting problems of platform firms operating in two-sided markets with cross-market network effects, such that demand from one customer group in the platform influences the demand from the other customer group. Yet such firms (e.g., newspapers whose customers are both subscribers and advertisers) are prevalent in the marketplace and invest significantly in marketing. To enable such firms to make effective marketing decisions, the authors delineate the desired features of a platform firms marketing response model, specify a new response model, and validate it using market data from a local newspaper. The results show that the firm faces reinforcing cross-market effects, its demand from both groups depends on marketing investments, and the model exhibits good forecasting capability. The authors use the estimated response model to determine optimal marketing investments over a finite planning horizon and find that the firm should significantly increase its newsroom and sales force investments. With this model-based recommendation, the firms management increased its newsroom budget by 18%. Further normative analysis sheds light on how cross-market and carryover effects alter classical one-sided marketing budgeting rules.

Relating Online, Regional, and National Advertising to Firm Value

Firms spend billions of dollars on advertising every year but remain uncertain about allocation across various advertising vehicles. Allocation decisions are even more complex as online advertising has proliferated and consumers’ media usage patterns have become more fragmented. To determine advertising effectiveness, the authors group firms’ advertising vehicle choices into three theoretically grounded and empirically verified smaller subsets: national, regional, and online advertising. Subsequently, they assess how the three advertising vehicles independently and jointly affect firm performance. Using 12 years of data covering 662 manufacturing firms, the authors find that while national, regional, and online advertising each have a positive and significant main effect on firm performance, each advertising vehicle weakens the effectiveness of the respective other two advertising vehicles (e.g., a 1% increase in online advertising increases firm performance by .32% but also decreases national [.15%] and regional [.03%] advertising effectiveness). A battery of robustness checks triangulates this result. Although all three media vehicles contribute to net increases in performance, the authors discuss the need to strategically integrate them to maximize combined effectiveness.

Is Online Newspaper Advertising Cannibalizing Print Advertising

During the past decade, the newspaper industry experienced significant erosion of revenues, predominantly in print advertising. The concomitant increase in the less rewarding online advertising has been unable to make up for this loss. As a result, for every

Leveraging Frontline Employees’ Small Data and Firm-Level Big Data in Frontline Management: An Absorptive Capacity Perspective

1 increase in online advertising between 2005 and 2011, newspapers lost

Return on Engagement Initiatives: A Study of a Business-to-Business Mobile App

22 in print advertising. While it is conceivable that the overall change in the advertising landscape (such as the growth of targeted search advertising), contributed to the decline in print advertising, it is not clear whether the growth in online newspaper advertising aggravated or alleviated this global trend. We investigate this concern by studying how advertisers reallocate their media budgets over time between the online and print media within a newspaper. We perform our empirical analysis using unique panel data on account-level advertising expenditures in a Top 50 US newspaper from 2005 through 2011. After accounting for cross-sectional heterogeneity among advertisers and some factors that possibly drove both print and online newspaper advertising, we find a negative relationship between the ad spending in these two media options. Therefore, advertisers exhibit a higher propensity to decrease print spending when they increase their online spending compared to the scenario when online spending either remains unchanged or even decreases. Since we do not rely on exclusion restrictions, we cannot rule out residual factors that drove both print and online advertising and thus contaminated this relationship. However, such potentially confounding factors (e.g., change in total media budget) are likely to have induced a positive correlation between print and online advertising. Therefore, the negative relationship that we recover is suggestive of advertisers perceiving print and online newspaper advertising as substitutes. This, in turn, implies that the growth in online newspaper advertising exacerbated the overall decline in print advertising. Overall, we attribute 7-17 % of the decline in print newspaper advertising revenues between 2005 and 2011 to the growth of online newspaper advertising. We conclude that cannibalization should be a credible consideration in the marketing decisions of the newspaper. However, since a large portion of print advertising revenue decline also occured for advertisers who never purchased online advertising from the newspaper, cannibalization within the newspaper is not solely responsible for the downward trajectory of print advertising. Copyright Springer Science+Business Media New York 2015

Sales Representative Departures and Customer Reassignment Strategies in Business-to-Business Markets

The advent of new forms of data, modern technology, and advanced data analytics offer service providers both opportunities and risks. This article builds on the phenomenon of big data and offers an integrative conceptual framework that captures not only the benefits but also the costs of big data for managing the frontline employee (FLE)-customer interaction. Along the positive path, the framework explains how the “3Vs” of big data (volume, velocity, and variety) have the potential to improve service quality and reduce service costs by influencing big data value and organizational change at the firm and FLE levels. However, the 3Vs of big data also increase big data veracity, which casts doubt about the value of big data. The authors further propose that because of heterogeneity in big data absorptive capacities at the firm level, the costs of adopting big data in FLE management may outweigh the benefits. Finally, while FLEs can benefit from big data, extracting knowledge from such data does not discount knowledge derived from FLEs’ small data. Rather, combining and integrating the firm’s big data with FLEs’ small data are crucial to absorbing and applying big data knowledge. An agenda for future research concludes.

Pharmaceutical Detailing Elasticities: A Meta-Analysis

Firms are increasingly offering engagement initiatives to facilitate firm–customer interactions or interactions among customers, with the primary goal of fostering emotional and psychological bonds between customers and the firm. Unlike traditional marketing interventions, which are designed to prompt sales, assessing returns on engagement initiatives (RoEI) is more complex because sales are not the primary goal and, often, direct sales are not associated with such initiatives. To assess RoEI across varying institutional contexts, the authors propose and empirically implement a methodological framework to investigate a business-to-business mobile app that a tool manufacturer provides for free to engage its buyers. The data include sales by buyer firms that adopted the app over 15 months, as well as a control group of buyers that did not adopt. The results from a difference-in-differences specification, together with selection on observables and unobservables, show that the app increased the manufacturers annual sales revenues by 19.11%–22.79%; even after accounting for development costs, it resulted in positive RoEI. This RoEI was higher when buyers created more projects using the app, so customer participation intensity appears to underlie RoEI. This article contributes to engagement literature by providing a methodological framework and empirical evidence on how the benefits of engagement initiatives materialize.

Safety in Numbers? An Analysis of Market Concentration and Safety in the Commercial Railroad Industry

When a sales representative (rep) leaves a business-to-business firm, a crucial link with the reps customers becomes severed. The firm reassigns those customers to different sales reps (either existing reps or new hires) in a manner that mitigates potential sales losses. What causal effect do sales rep departures have on customer-level revenue, and which sales rep replacement strategies are more effective? Using data from a Fortune 500 firm and a difference-in-differences analysis with correction for selection bias, the authors show that sales rep transitions lead to 13.2%–17.6% losses in annual sales. New hires are less effective than existing sales reps in mitigating sales losses. Existing sales reps who are similar (vs. dissimilar) to the departing reps (in terms of past industry experience) are more effective in mitigating sales losses; however, reps with high past performance do not exhibit greater efficacy for mitigating sales losses than reps with average or low past performance. The analysis presents means to quantify the economic consequences of losing a sales rep and to determine how to reassign customers to sales reps according to the resulting economic impact.