Author: Tanmay Lonkar

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Why and when to launch new products during a recession

Do new products launched during a recession perform better? Does the severity of the recession matter? Are products more successful when launched earlier or later in a recession? These are all questions of managerial importance that as yet remain unanswered in the extant marketing literature. The authors analyze two datasets: 1) 8,981 product launches in 20 United Kingdom fast-moving consumer goods categories over 18 years and 2) 1,071 product launches in the United States automotive market over 63 years. The results reveal products launched (a) during a recession and (b) later rather than earlier in the recession survive longer, while more severe recessions are associated with shorter survival. The same findings emerge for the dependent variables of sales and market share. This paper thus enriches marketing theory on recessions by conceptualizing and quantifying timing effects on new product launch success. For managers, the results demonstrate the benefits of countercyclical launching of new products during recessions and of marketing proactively in such economic conditions.

Talay, Pauwels and Seggie, Journal of the Academy of Marketing Science, 2023

 

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Why Brands Grow: The Power of Differentiation and Penetration

Oliver Koll and I xamine the complex relationship between consumers’ attitudes toward a brand and its market outcomes. An analysis of more than 150 brands in five countries reveals the intricate reciprocal connections between customer perceptions and behaviors, brand differentiation, and market penetration in both stable and emerging markets.

WhyBrandsGrow The Power of Differentiation and Penetration Pauwels Koen

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Practice Prize Winner: Direct mail to prospects and email to current customers? Modeling and field-testing multichannel marketing 

Multichannel retailers need to understand how to allocate marketing budgets to customer segments and online and offline sales channels.  We propose an integrated methodological approach to assess how email and direct mail effectiveness vary by channel and customer value segment. We apply this approach to an international beauty retailer in six countries and to an apparel retailer in the United States. We estimate multi-equation hierarchical linear models and find that sales responsiveness to email and direct mail varies by customer value segment. Specifically, direct mail drives customer acquisition in the offline channel, while email drives sales for both online and offline channels for current customer segments. A randomized field experiment with the beauty retailer provides causal support for the findings. The proposed reallocation of marketing resources would yield a revenue lift of 13.5% for the beauty retailer and 9.3% for the apparel retailer, compared with the 6.5% actual increase in the field experiment.

Cite as: Valenti, A., Srinivasan, S., Yildirim, G., & Pauwels, K. (2023). Direct mail to prospects and email to current customers? Modeling and field-testing multichannel marketing. Journal of the Academy of Marketing Science, 1-20.

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How much does digital advertising accelerate new product success?

Many new products are launched in e-commerce. While advertising is believed to enhance new product success, managers often lack the numbers to quantify this benefit to the company. Retail websites offer specific success benchmarks, such as pre-purchase product views, purchase conversion and post-purchase reviews. This paper’s main thesis is that while new products can succeed with or without advertising, digital advertising can help products achieve success faster. Across five categories, this research shows that digital advertising on Amazon.com can cut the time needed to reach success levels by more than half, compared to products that reach these same benchmarks without such advertising.

Bertozzi, Giacomo, et al. “How much does digital advertising accelerate new product success?.” Applied Marketing Analytics 7.4 (2022): 318-328.

Please access the preprint version here: How much does digital advertising accelerate new product success_pauwelspreprint

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Bias from Voluntary Disclosure of Advertising Spending: Consequences and Remedies

While advertising is a crucial marketing component, publicly listed companies possess considerable latitude in disclosing their advertising spending in financial statements. This research shows that firms opting to voluntarily disclose advertising spending differ systematically from those that do not in multiple ways. To explore the ramifications of these disparities, we use machine learning techniques to estimate undisclosed advertising spending and examine whether advertising effectiveness differs between firms with and without voluntary advertising disclosure. The results indicate that firms opting not to disclose their advertising spending realize a significantly reduced effect of advertising on customer-based brand equity. Moreover, for these firms, advertising is associated with higher systematic risk, lower firm value, and lower advertising sales elasticity. These findings suggest that advertising is less effective in product and financial markets for firms electing to keep advertising information private. Consequently, research using only voluntarily disclosed advertising likely overestimates the impact of advertising on firm value and advertising’s sales elasticity and underestimates the impact of advertising on systematic risk for the full population of advertising firms. Correcting for this bias reduces advertising’s sales elasticity and reveals that advertising does not significantly affect firms’ systematic risk.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4462446

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Bias from Voluntary Disclosure of Advertising Spending: Consequences and Remedies

While advertising is a crucial marketing component, publicly listed companies possess considerable latitude in disclosing their advertising spending in financial statements. This research shows that firms opting to voluntarily disclose advertising spending differ systematically from those that do not in multiple ways. To explore the ramifications of these disparities, we use machine learning techniques to estimate undisclosed advertising spending and examine whether advertising effectiveness differs between firms with and without voluntary advertising disclosure. The results indicate that firms opting not to disclose their advertising spending realize a significantly reduced effect of advertising on customer-based brand equity. Moreover, for these firms, advertising is associated with higher systematic risk, lower firm value, and lower advertising sales elasticity. These findings suggest that advertising is less effective in product and financial markets for firms electing to keep advertising information private. Consequently, research using only voluntarily disclosed advertising likely overestimates the impact of advertising on firm value and advertising’s sales elasticity and underestimates the impact of advertising on systematic risk for the full population of advertising firms. Correcting for this bias reduces advertising’s sales elasticity and reveals that advertising does not significantly affect firms’ systematic risk.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4462446

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Promoting Data Richness in Consumer Research: How to Develop and Evaluate Articles with Multiple Data Sources

As stated in the mission of the Journal of Consumer Research (JCR) (2022) and a recent editorial (Schmitt et al. 2022), JCR is a multi-disciplinary journal where consumer research provides insights about consumers and consumption in the marketplace in a way that meaningfully extends the knowledge from one of our core disciplines (e.g., psychology, sociology, economics) about a consumer-oriented construct. Unfortunately, the labels “consumer research” and “consumer behavior” have come to connote far more than the focus of the work—just as, somewhere along the way, “consumer behavior” and “quant” came to imply a particular type of data source (and associated analysis methods) that is primarily used to study theory and phenomena of interest (experiments vs. “field data”). Why this strong association between consumer-relevant questions, data, and methodology? One reason may be that the field rewards specialization. Another may be due to the incentive structure in business schools (Stremersch, Winer, and Camacho 2021). Nevertheless, the rigid lines dividing the artificially created sub-disciplines are our own making, for better and worse. One way to address this divide and consequently expand the reach of our research beyond those who specialize in our particular sub-disciplines is to use more than one type of data source when addressing a consumer research question. Such data richness is the key theme of this article.

Simon J Blanchard, Jacob Goldenberg, Koen Pauwels, David A Schweidel
Journal of Consumer Research,
Download jcr2022
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The asymmetric effect of warranty payments on firm value: The moderating role of advertising, R&D, and industry concentration

Changes in firms’ warranty payments are informative signals that enable investors to form timely expectations about potential changes in product quality. The authors’ survey shows that warranty payments affect potential investors’ product quality assessments and stock investment likelihood. Their quantitative analysis reveals an asymmetric stock market reaction: unanticipated increases in warranty payments (which signal quality “losses”) lower stock returns but unanticipated decreases do not affect stock returns. Two important factors moderate this relationship. First, boosting advertising spending attenuates the negative stock return effect of unanticipated increases in warranty payments. Second, unanticipated decreases in warranty payments, which signal quality “gains”, translate into higher stock returns when the industry has become less concentrated. Interestingly, changes in R&D spending do not moderate investors’ response to unanticipated increases or decreases in warranty payments. The authors advise firms to use advertising to lessen the harm from warranty payment increases and to strongly communicate warranty payment decreases in the face of intensified competition. The authors also caution that offering warranties in general does not ensure greater firm value as declining quality firms that myopically offer warranty programs experience lower firm value than those that do not provide warranties.

D Kurt, K Pauwels, AC Kurt, S Srinivasan – International Journal of Research in Marketing, 2021

Please download the paper kurtetalijrm

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How much does digital advertising accelerate new product success?

Many new products are launched in e-commerce. While advertising is believed to enhance new product success, managers often lack the numbers to quantify this benefit to the company. Retail websites offer specific success benchmarks, such as pre-purchase product views, purchase conversion and post-purchase reviews. This paper’s main thesis is that while new products can succeed with or without advertising, digital advertising can help products achieve success faster. Across five categories, this research shows that digital advertising on Amazon.com can cut the time needed to reach success levels by more than half, compared to products that reach these same benchmarks without such advertising.

Bertozzi, Giacomo, et al. “How much does digital advertising accelerate new product success?.” Applied Marketing Analytics 7.4 (2022): 318-328.

Please access the preprint version here: How much does digital advertising accelerate new product success_pauwelspreprint