Free your users (at least their creativity)

Schreier, Fuchs and Dahl have investigated wether companies that let consumers contribute to innovation are also seen as more innovative. In short, they conclude: yes.  Further, they propose four beacons for companies that apply user-driven innovation.

1.  Let more users contribute, for more good ideas
2. Include diverse people, for more diverse ideas
3. Focus on actual users, for more applicable ideas
4. Don't constrain contributers, for more freedom in ideas

Is user innovation a foundational strategy, or a marketing tactic? You decide.
 

Schreier M, Fuchs C, Dahl DW, 2012. The Innovation Effect of User Design: Exploring Consumers' Innovation Perceptions of Firms Selling Products Designed by Users. Journal of Marketing. Vol. 76 Issue 5.

 

Stimulate unplanned purchases in-store

Inman et al have tested the relationship between product category, consumer, consumer activities, in-store stimuli and purchase rationality. To drive unplanned purchases, they conclude:

• Expose the consumer to as many categories, in-store displays. and aisles as possible – this can be done by placing destination categories (such as milk) in strategic locations
• Maximize time spent in store by making the shopping experience pleasant
• Focus on returning consumers, who have higher store familiarity, through loyalty programs
• Focus on female shoppers

Inman J, et al. 2009. The Interplay Among Category Characteristics, Customer Characteristics, and Customer Activities on In-Store Decision Making. JoM, Vol 73, Issue 6.

The best marketing metric (so far)

Marketers are constantly struggling with the fact that ROI of marketing activities is difficult to track. Seggie et al have evaluated 6 types of metrics common in market academia on 7 dimensions that are relevant for determining ROI and its source.

The assessment shows that customer equity is a promising candidate for most valuable metric, being able to cover 5 of the 7 dimensions. A system for evaluating customer equity can provide insights about marketing returns on the dimensions: financial, forward-looking, long-term, micro and causal. Objectivity and relativity are the missing dimensions, whereof only the last can be handled by other types of metrics.

Rust et al offer a way of implementing customer equity tracking, based on 20 questions in a customer survey. The system estimates every respondent’s Customer Lifetime Value to the company and links it to 3 major equity drivers: perceived value, brand equity, and relationship characteristics.

The area of marketing metrics has seen an up-trend in academic research, and results begin to show. Customer equity gives at least a partial answer to the old problem of determining pay-back of marketing activities.

Sources: Seggie S H, et al. 2007. Measurement of return on marketing investment: A conceptual framework and the future of marketing metrics. Industrial Marketing Management, 36.

Rust R T, et al. 2004. Return on Marketing: Using Customer Equity to Focus Marketing. JoM, Vol 68, Issue 1.

5 steps to a more effective brand portfolio

Morgan and Rego have studied how different brand portfolio characteristics influence the firm’s financial performance. Three dependent variables were used in the analysis*.

5 actions to maximize firm’s financial performance, ordered by relevance**:

1. Market portfolio to a limited number of consumer segments (demographical)
2. Optimize portfolio for high perceived quality
3. Optimize portfolio for low perceived price (relative to quality)
4. Increase the number of brands in portfolio
5. Position the brands differently on perceived quality x perceived price (x target group)

The authors also tested the complex dependencies between brand portfolio characteristics and several measures of marketing effectiveness. However, depending on the market goals to aim for (advertising efficiency, market share, etc) the preferred portfolio strategy varies considerably.

(*) Tobin’s q; cash flow; cash flow variability
(**) Number of significantly dependant financial metrics
Source: Morgan N A, Rego L L. 2009. Brand Portfolio Strategy and Firm Performance. JoM, Vol 73, Issue 1.

How to create a simple brand

A book recommendation from BrandLens is BrandSimple: How the Best Brands Keep it Simple and Succeed. It is an inspiring book with guidelines for anyone who wants to develop the next great brand idea. Most of the key points in it are covered in a summary at Squeezed Books, but the book comes with many examples, so consider a purchase.

• BrandSimple summary
• Squeezed Books

Note: Squeezed Books is "a collaborative environment where everyone can read summaries, write new ones, and talk about the books in question".

Top 5 marketing journals

Journal of Marketing Education published a list of the most influencial marketing journals in 1997. Many of the listed publications are still prominent. The top 5 voted journals were:

1. Journal of Marketing
2. Journal of Marketing Research
3. Journal of Consumer Research
4. Journal of Retailing
5. Journal of the Academy of Marketing Science

See the full list at:

academy of marketing science

Product introduction effect x 7

Srinivasan et al have tested the relationship between innovations, advertising and stock returns. Their study concludes:

• Regular product introductions can impact stock returns by 0,3%-1%, depending on the innovation level of the product
• In contrast, pioneering innovations (such as the first electric hybrid car) rejoice a stock impact of 4,3%
• Advertising product introductions increase the impact on stock return by 0,1%, while advertising pioneering innovations has an incremental effect of 0,9%
• The perceived quality of the brand has a major effect on financial return of product introductions, where an increased quality results in an additional 2,1% increase in stock returns
• On the contrary, increased promotional expenditures during product introductions actually has a negative impact on stock returns – probably due to price promotions that damage the perceived quality of the product

The study results indicate that managers might consider spending at least 5 times more on innovation as long as the results are ground-breaking to the category and the perceived quality of the brand is sufficient to support the launch. Pioneering innovations in combination with advertising and high brand quality actually increase the pay-off in stock returns by at least a factor 7, compared to basic product introductions.

Source: Srinivasan S, et al. 2009. Product Innovations, Advertising, and Stock Returns. JoM, Vol 73, Issue 1.

Why hierarchical loyalty programs do not pay off

Hierarchical loyalty programs are designed to elevate consumers that meet certain spending criteria. It has been shown that such programs can stimulate purchase intention and firm satisfaction. However, Wagner et al show that it is difficult to justify hierarchical loyalty programs from an ROI-perspective.

The problem demonstrated by the authors is that the negative effect of consumer demotions actually exceeds the positive effect of elevating them. Consumers that previously benefitted from services associated with their membership status experience a profound negative dissonance when informed that they no longer receive special treatment.

Good news is there are at least two ways to limit the negative effects of demoting consumers who fail to meet the required levels of spending:

1. Inform the consumers about their decline in spending and provide the terms of elevated-status membership
2. On demotion, provide the consumers with a personal apology

In contrast, the authors found no impact of the demoting firm offering (1) monetary compensation or (2) an explanation about competitive pressure, on consumer affect or loyalty intentions.

Source: Wagner T, et al. 2009. Does Customer Demotion Jeopardize Loyalty? JoM, Vol 73.

Drive stock value through product placement in blockbusters

Wiles and Danielova studied the effect of product placement in movies on firm market value. 126 movies with the largest opening audience of 2002 were included in the test.

Some of the key findings were:

• On average, the total stock value of firms investing in product placement increased by 0,89% (the authors’ model explained 41% of the value variance)
• Firms should invest in tie-in advertising to increase results of the promotion. Tie-in is preannouncement of the product promotion in the film.
• Avoid placements in movies that absorb the audience while watching (e.g. complex dialogue) - the promotion is then less likely to be noticed.
• Of minor influence are also (1) brand equity - higher yields better result (2) movie violence - promotions in violent movies perform worse (3) critical acclaims - audiences find promotions to be more disruptive in artistic films.
• When it comes to execution, beware of placement with little connection to the plot and blatant exposure, which has proven to offend the audience and critics.

The authors findings suggest that product placement in movies with major audiences can have positive effect on firm market value. If your company is considering an investment: make sure the movie has potential of becoming a blockbuster (sequels are safer bets), and follow the guidelines above.

Source: Wiles M A, Danielova A. 2009. The Worth of Product Placement in Successful Films: An Event Study Analysis. JoM, Vol 73

Welcome to BrandLens!

Do you know what is hot right now in the academic world of marketing? If not - you have come to the right place. This blog highlights recent published work in the field of marketing and brand management.

The vision is simple: become the most accessible source of new truths and facts for anyone interested in the field.

As such, posts may range from revolutionary to confirmatory, from highly strategic to strictly operational. Since researched issues are often narrow, not every post will be relevant to everyone. Together, however, they strive to increase our understanding of marketing and brand management as a whole. Hopefully, they also raise new questions to be discussed, and curiosity that plants a seed for future investigation.