Vithala R. Rao

How Is Manifest Branding Strategy Related to the Intangible Value of a Corporation

Firms exhibit or “manifest” three types of branding strategies: corporate branding, house of brands, or mixed branding. These strategies differ in their essential structure and in their potential costs and benefits to the firm. Prior research has failed to understand how these branding strategies are related to the intangible value of the firm. The authors investigate this relationship using five-year data for a sample of 113 U.S. firms. They find that corporate branding strategy is associated with higher values of Tobins q, and mixed branding strategy is associated with lower values of Tobins q, after controlling for the effects of several important and relevant factors. The relationships of the control variables are consistent with prior expectations. In addition, most of the firms would have been able to improve their Tobins q had they adopted a branding strategy different from the one their brand portfolios revealed. The authors also discuss implications and future research directions.

An Empirical Comparison of Consumer-Based Measures of Brand Equity

This article compares eleven different consumer-based brand equity measures and evaluates their convergence. Predictive validity at the individual and aggregate levels is also investigated. Measures based on the dollar metric method and discrete choice methodology predict choices extremely well in a simulated shopping environment, as well as purchase-intention and brand-quality scales.

Extended Framework for Modeling Choice Behavior

We review the case against the standard model of rational behavior and discuss the consequences of various ‘anomalies’ of preference elicitation. A general theoretical framework that attempts to disentangle the various psychological elements in the decision-making process is presented. We then present a rigorous and general methodology to model the theoretical framework, explicitly incorporating psychological factors and their influences on choices. This theme has long been deemed necessary by behavioral researchers, but is often ignored in demand models. The methodology requires the estimation of an integrated multi-equation model consisting of a discrete choice model and the latent variable model system. We conclude with a research agenda to bring the theoretical framework into fruition.

Linking Brand Equity to Customer Equity

Customer equity and brand equity are two of the most important topics to academic researchers and practitioners. As part of the 2005 Thought Leaders Conference held at the University of Connecticut, the authors were asked to review what was known and not known about the relationship between brand equity and customer equity. During their discussions, it became clear that whereas two distinct research streams have emerged and there are distinct differences, the concepts are also highly related. It also became clear that whereas the focus of both brand equity and customer equity research has been on the end consumer, there is a need for research to understand the intermediary’s perspective (e.g., the value of the brand to the retailer and the value of a customer to a retailer) and the consumer’s perspective (e.g., the value of the brand versus the value of the retailer). This article represents general conclusions from the authors’ discussion and suggests a modeling approach that could be used to investigate linkages between brand equity and customer equity as well as a modeling approach to determine the value of the manufacturer to a retailer.

Pricing Research in Marketing: The State of the Art

Price is the only marketing mix variable that generates revenues; all others involve expenditures (or possibly investments) of funds. The effects of price changes are more immediate and direct, and appeals based on price are the easiest to communicate to prospective buyers. However, competitors can react more easily to appeals based on price than to those based on product benefits and imagery. It can be argued that the price decision is perhaps the most significant among the decisions of the marketing mix (strategy) for a branded product. Conventional wisdom suggests that the price decision should be made in consonance with those of other elements of marketing strategy. Despite the high importance of price, academic research on pricing issues in marketing has been modest at best. This has been true for various reasons: researchers have emphasized financial and cost analyses used to reach price decisions within a corporation, there has been greater support for and growth of advertising and product research, research in marketing has relied on behavioral science methodologies, data This paper is an attempt to synthesize the recently published research on pricing issues from the viewpoint of marketing science. The review will consider the relevance of selected trends such as the experience curve, individual choice models, and dynamics of evolution of demand over time on the issues of pricing decisions for products. The focus will be on such issues as the static and dynamic models of pricing (particularly for new products over the life cycle), price discounts, behavioral considerations for pricing strategies, interactions of price and other marketing mix variables, product line pricing, and pricing across a marketing channel. The paper will identify some directions for future research in this important area. * I thank Sharon McCarthy for her assistance in this research and Darius Sabavala, Subrata Sen, and an anonymous reviewer for their comments on an earlier draft of this paper. This work was partially supported by the Summer Research Fund of the Graduate School of Business and Public Administration, Cornell University.

Research for product positioning and design decisions: An integrative review☆

Abstract This paper reviews recent research in marketing on product positioning and product design. Although the literature generally treats these two decisions independently, we propose a framework that integrates them into a single decision. Consumers make choices in the marketplace on the basis of perceptual product attributes that can be influenced by various factors under the firms control such as product design and marketing mix of the product. This review suggests that a firm should optimize its goals with respect to product attributes and then translate these attributes into product characteristics and levels of marketing mix variables. The proposed framework is used to integrate the present literature in marketing and to suggest how the two problems should be approached. We also suggest directions for future research.

Combining Revealed and Stated Preferences Data

Our objective is to develop a unifying framework for the incorporation of different types of survey data in individual choice models. We describe statistical methodologies that combine multiple sources of data in the estimation of individual choice models and summarize the current state of the art of data combination methods that have been used with market research data. The most successful applications so far have combined revealed and stated preference data. We discuss different types of market and survey data and provide examples of research contexts in which one might wish to combine them. Although these methods show a great deal of promise and have already been used successfully in a number of applications, several important research issues remain. A discussion of these issues and directions for further research conclude the paper.

An Approach to Assess the Importance of Brand Equity in Acquisition Decisions

Many firms acquire other firms with well-known and proven brands to hedge against the high costs and risks of new product development. A critical question in these acquisition decisions involves the assessment of the importance of brand equity to the acquiring firm. Since the brand equity benefits can vary by firm (and also by the decision maker within a firm) a critical question is how can one systematically decipher the effect of brand equity in acquisition decisions. Using the balance model [8,15], Vijay Mahajan, Vithala Rao, and Rajendra Srivastava present a methodology to determine the importance of brand equity in acquisition decisions. By capturing the idiosyncratic perceived importance of brand equity of every decision maker involved in acquisition decisions, the methodology enables members of a committee within a firm to understand and reconcile their differences in evaluating potential acquisitions. This methodology is applied in a pilot study for the all-suites segment of the hotel industry with data collected from senior executives of five major hotel chains. The authors also discuss benefits, limitations, and further extensions of the suggested approach.

A General Choice Model for Bundles with Multiple-Category Products: Application to Market Segmentation and Optimal Pricing for Bundles

The attribute-based approach to study customer choices cannot deal with bundles of heterogeneous components, which are usually drawn from different product categories. The authors develop the comparability-based balance model, which is a unified framework for modeling bundle choices. The model can be employed for any bundle, regardless of the heterogeneity of bundle components, under a pure bundling strategy. The conjoint model and balance model are special cases of the general model. The authors use mixture distributions in a hierarchical Bayesian framework to incorporate consumer heterogeneity in a more flexible manner than the extant approaches such as latent-class and random-coefficient models. The empirical tests of the model show that most attribute effects are significant and consistent with the models predictions. The model is superior to those that do not consider the issues of comparability of attributes, latent-class structure, and heterogeneity among respondents. The authors show how the model can be used to find market segments for bundles with heterogeneous products in multiple product categories, to estimate individual reservation prices for bundles, and to determine the optimal bundle prices for different market segments.

Inference of Hierarchical Choice Processes from Panel Data

This paper proposes a methodology based on clustering methods for inferring hierarchical choice processes from panel data for a homogeneous group of consumers. Details of the methodology are presented and implemented for one product category.