bluuebunny/crossref_metadata_2025 huggingface dataset:
Diffusion of New Products: Empirical Generalizations and Managerial Uses
Authors: Mahajan Vijay , Muller Eitan , Bass Frank M.
Published: October 2008

The diffusion model developed by Bass (Bass, F. M. 1969. A new product growth model for consumer durables. Management Sci. 15(January) 215–227.) constitutes an empirical generalization. It represents a pattern or regularity that has been shown to repeat over many new products and services in many countries and over a variety circumstances. Numerous and various applications of the model have lead to further generalizations. Modifications and extensions of the model have lead to further generalizations. In addition to the empirical generalizations that stem from the model, we discuss here some of the managerial applications of the model.
Channel Coordination Mechanisms for Customer Satisfaction
Authors: Chu Wujin , Desai Preyas S.
Published: October 2008

We consider two broad categories of incentives by which a manufacturer can motivate its retailers to provide high customer satisfaction: (1) manufacturer assistance that reduces the retailer's cost of providing customer satisfaction (CS assistance); and (2) customer satisfaction index (CSI) bonus. We show that if a retailer has a long-term orientation, CS assistance is a more effective coordination mechanism that induces the retailer to expend more effort at customer satisfaction. However, if the retailer has a short-term orientation, CSI bonus is a more effective coordination mechanism. We then show that a long-term oriented retailer is more valuable to a manufacturer than a short-term oriented one. Finally, we show that the use of CS incentives results in greater profits for both the manufacturer and the retailer.
Optimal Selection for Direct Mail
Authors: Bult Jan Roelf , Wansbeek Tom
Published: October 2008

Direct marketing (mail) is a growing area of marketing practice, yet the academic journals contain very little research on this topic. The most important issue for direct marketers is how to sample targets from a population for a direct mail campaign. Although some selection methods are described in the literature, there seems to be not a single paper discussing the analytical and statistical aspects involved. The objective of this paper is to introduce a comprehensive methodology for the selection of targets from a mailing list for direct mail. At least theoretically, this methodology leads to more efficient selection procedures than the existing ones. The latter are not based on an optimal selection strategy, whereas we explicitly take the profit function into account. By equating marginal costs and marginal returns we determine which households should receive a mailing in order to maximize expected profit. In the empirical part we show that our methodology has great predictive accuracy and generates higher net returns than traditional approaches.
Competitive Coupon Targeting
Authors: Shaffer Greg , Zhang Z. John
Published: October 2008

With the advent of panel data on household purchase behavior, and the development of statistical procedures to utilize this data, firms can now target coupons to selected households with considerable accuracy and cost effectiveness. In this article, we develop an analytical framework to examine the effect of such targeting on firm profits, prices, and coupon face values. We also derive comparative statics on firms' optimal mix of offensive and defensive couponing, the number of coupons distributed, redemption rates, face values, and incremental sales per redemption. Among our findings: when rival firms can target their coupon promotions at brand switchers, the outcome will be a prisoner's dilemma in which the net effect of targeting is simply the cost of distribution plus the discount given to redeemers.
The Effect of Package Coupons on Brand Choice: An Epilogue on Profits
Authors: Dhar Sanjay K. , Morrison Donald G. , Raju Jagmohan S.
Published: October 2008

In Raju, Dhar, and Morrison (1994), a paper that appeared earlier in this journal, we developed an analytical model and conducted empirical analyses to examine the effect of package coupons on market share. In this epilogue, we extend the analytical framework in our earlier paper to study the relative impact of package coupons on profits. We also report findings from five quasi-experiments (including two new quasi-experiments) that provide empirical validity to our model-based predictions.

Our results have significance for brand managers in packaged goods firms. Our analysis suggest that while selecting among package coupons, brand managers should carefully define which performance criterion to use: market share impact, redemption rate, or profit impact. Package coupons that lead to the highest market share impact (or redemptions) may not lead to the highest profit impact.

We compare the relative profit impact of the following package coupons: peel-off, on-pack, and in-pack. Peel-off coupons must be redeemed on the same purchase occasion on which they are obtained. On-pack coupons are obtained at one purchase occasion but can only be redeemed for a discount on the couponed brand at a future purchase occasion. In-pack coupons are similar to on-pack coupons except that the consumer is unaware of the presence of these coupons when the product is purchased (in-pack coupons are printed or placed inside the package). Consumers with an in-pack or on-pack coupon from a previous purchase occasion will have a higher probability of purchasing the couponed brand even if the brand was not currently offering coupons. Consequently, to understand choice behavior, it is not enough to take into consideration the current choice environment; our model therefore must also keep track of whether or not a consumer has a package coupon that was obtained on an earlier purchase occasion. In other words, since choice is dependent on the purchase environment as well as the state of the consumer, we use a Markov model to represent the choice process. Analytical results are derived based on the long run probabilities of the Markov transition matrix.

Our analytical and empirical results suggest that by and large, of the various package coupons examined in our research, on-pack coupons lead to the highest impact on profits. Furthermore, while peel-offs lead to a higher market share than in-packs, because in-packs stimulate repurchase among previous buyers, they lead to higher profits than peel-offs; though only for stronger brands.
The Value of Purchase History Data in Target Marketing
Authors: Rossi Peter E. , McCulloch Robert E. , Allenby Greg M.
Published: October 2008

An important aspect of marketing practice is the targeting of consumer segments for differential promotional activity. The premise of this activity is that there exist distinct segments of homogeneous consumers who can be identified by readily available demographic information. The increased availability of individual consumer panel data open the possibility of direct targeting of individual households. The goal of this paper is to assess the information content of various information sets available for direct marketing purposes. Information on the consumer is obtained from the current and past purchase history as well as demographic characteristics. We consider the situation in which the marketer may have access to a reasonably long purchase history which includes both the products purchased and information on the causal environment. Short of this complete purchase history, we also consider more limited information sets which consist of only the current purchase occasion or only information on past product choice without causal variables.

Proper evaluation of this information requires a flexible model of heterogeneity which can accommodate observable and unobservable heterogeneity as well as produce household level inferences for targeting purposes. We develop new econometric methods to implement a random coefficient choice model in which the heterogeneity distribution is related to observable demographics. We couple this approach to modeling heterogeneity with a target couponing problem in which coupons are customized to specific households on the basis of various information sets. The couponing problem allows us to place a monetary value on the information sets.

Our results indicate there exists a tremendous potential for improving the profitability of direct marketing efforts by more fully utilizing household purchase histories. Even rather short purchase histories can produce a net gain in revenue from target couponing which is 2.5 times the gain from blanket couponing. The most popular current electronic couponing trigger strategy uses only one observation to customize the delivery of coupons. Surprisingly, even the information contained in observing one purchase occasion boasts net couponing revenue by 50% more than that which would be gained by the blanket strategy. This result, coupled with increased competitive pressures, will force targeted marketing strategies to become much more prevalent in the future than they are today.
Editorial: A Discussion of Bait and Switch
Authors: Staelin Richard
Published: October 2008

One of the major responsibilities of the Editor and the Area Editor is to decide on the appropriateness of a submitted paper. As stated in prior editorials (Staelin 1996, 1997), four major criteria are used in making this determination:

(1) Will the paper be of interest to our readers?

(2) Is it readable?

(3) Is it not wrong?

(4) Does it make a contribution to the field?

Assuming the determination is positive, it is the job of the Editor, with the help of the review team, to specify a course of action that he believes will lead to a publishable paper. What then leads the review team to encourage the publishing of three papers that directly comment on each other's work and, in the process, alter the existing practice of this journal?
Does “Bait and Switch” Really Benefit Consumers? Advancing the Discussion …
Authors: Wilkie William L. , Mela Carl F. , Gundlach Gregory T.
Published: October 2008

We applaud the advances in this colloquy and the areas of convergence that are emerging. However, this reply points out that the purported benefits of “bait and switch” found in Hess and Gerstner (1998) are predicated upon (i) only a single component (availability) within the broader domain of bait and switch; (ii) the assumption that one of the parameters in the consumer utility function differs with the availability of advertised brands; and (iii) a further assumption that no other parameters in the model will change when the availability condition changes. After assessing these developments, we conclude that (i) the legal status of bait-and-switch schemes is fine as it stands; (ii) when understood in their true complexity, parameters in the consumer utility functions likely will not differ with regard to availability, thus obviating the finding of increased consumer welfare; and (iii) even if it is believed that utility functions would differ, effects on other model parameters clearly suggest that consumers will be worse off with bait and switch. Despite these differences, however, we are pleased with the developments the dialogue has produced.
Last Reflections of the Editor
Authors: Staelin Richard
Published: October 2008

Reflection of the editor-in-chief of Marketing Science about the complexity of the editorial and reviewing process.
Monopolist Pricing with Dynamic Demand and Production Cost
Authors: Kalish Shlomo
Published: October 2008

This paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream. The interdependency of cost and demand on cumulative production makes the problem inherently dynamic. Cost is assumed to be declining with cumulative production (learning curve effect), while demand is a function of price and cumulative sales, representing word-of-mouth and saturation effects.

The paper addresses this problem in a general framework that includes several previous results as special cases, and provides new insights in other situations. While the learning curve and word-of-mouth effect cause prices to be lower than the price that maximizes immediate revenues, the saturation factor has the opposite effect. The price path over time is affected by these factors and the interest rate. We characterize the price path under several different situations and interpret the results for policy guidelines.
Probabilistic Measurement of Attributes: A Logit Analysis by Generalized Least Squares
Authors: Bechtel Gordon G. , Wiley James B.
Published: October 2008

The Rasch latent trait model is derived from a double exponential error theory similar to that utilized for random utility models in choice theory. This formulation imbues multi-attribute measurements with an important probabilistic interpretation; namely, that the brand measurement is the log odds for the brand being rated above the mid-point on a particular attribute scale. Hence, one may compare brand measurements across attributes and construct multi-attribute configurations such as that illustrated. In addition to this theoretical underpinning for rating scale theory, the present paper establishes a statistical inference for survey rating scales based upon generalized least squares. An important advantage of the present GLS analysis stems from its capability of testing various hypotheses concerning brand configurations in multi-attribute spaces.
Assessing Validity and Test-Retest Reliability for “Pick K of N” Data
Authors: Schmittlein David C.
Published: October 2008

A mixed binomial error model is proposed which permits the evaluation of validity and test-retest reliability when individuals are asked to pick K of N objects. The approach explicitly incorporates the effect of guessing as well as the respondent's true discrimination ability, and recognizes that that ability will vary across respondents. So, given the choices made by a set of individuals, we are interested in estimating the distribution of true ability over the population.

To evaluate the criterion-related validity each person's K choices (of N objects) are compared to an objective standard—the K “correct” choices. For the primary model considered here these data can be summarized by the distribution, over individuals, of the number of “matches” or agreements between a person's choices and the objective criterion. A similar procedure is used for evaluating test-retest reliability. The distribution for the number of matches is again used; but here the matches will refer to agreement between the individual's K choices on this occasion, and the K choices made by that individual on a previous occasion. The use of these reliability and validity results to address specific marketing questions, such as the segmentability of a market or the effect of advertising on perception and attitudes, is also discussed.
An Audience Flow Model of Television Viewing Choice
Authors: Rust Roland T. , Alpert Mark I.
Published: October 2008

A model for the prediction and explanation of individual television viewing choice is presented, incorporating considerations of utility, audience flow, and audience segmentation. The proposed model provides a quantifiably explicit theoretical explanation of television viewing choice, and its validation on large-sample network viewing data provides a baseline degree of accuracy against which the performance of future television viewing models may be compared. Of direct relevance to advertising agencies and the television networks is the suitability of the model for estimating the comparative impact of alternative programs on the audience size and composition of competing programs in the immediate and subsequent time slots.
Optimal Pricing and Advertising Policies for New Product Oligopoly Models
Authors: Thompson Gerald L. , Teng Jinn-Tsair
Published: October 2008

In this paper our previous work on monopoly and oligopoly new product models is extended by the addition of pricing as well as advertising control variables. These models contain Bass's demand growth model, and the Vidale-Wolfe and Ozga advertising models, as well as the production learning curve model and an exponential demand function.

The problem of characterizing an optimal pricing and advertising policy over time is an important question in the field of marketing as well as in the areas of business policy and competitive economics. These questions are particularly important during the introductory period of a new product, when the effects of the learning curve phenomenon and market saturation are most pronounced.

We consider first the monopoly case with linear advertising cost, exponential demand, and three different pricing rules: the optimal variable pricing, the instantaneous marginal pricing, and the optimal constant pricing rules. Several theoretical results are established for these rules including the facts that the instantaneous marginal pricing rule is a myopic version of the optimal pricing rule and the optimal constant pricing rule is a weighted average over time of the instantaneous marginal pricing rule. Another surprising result is that, after the market is at least half saturated, a pulse of advertising must be preceded by a significant drop in price. Numerical solutions of a number of examples are discussed.

Oligopolistic models are analyzed as nonzero-sum differential games in the rest of the paper. The state and adjoint equations are easy to write down, but impossible to solve in closed form. Hence we describe how to reformulate these models as discrete differential games, and give a numerical algorithm for finding open loop Nash solutions. The latter was used to solve three triopoly models. In each case it was found that optimal prices and advertising rates start high and steadily decline.
Testing Competitive Market Structures
Authors: Urban Glen L. , Johnson Philip L. , Hauser John R.
Published: October 2008

An accurate understanding of the structure of competition is important in the formulation of many marketing strategies. For example, in new product launch, product reformulation, or positioning decisions, the strategist wants to know which of his competitors will be most affected and hence most likely to respond. Many marketing science models have been proposed to identify market structure.

In this paper we examine the managerial problem and propose a criterion by which to judge an identified market structure. Basically, our criterion is a quantification of the intuitive managerial criterion that a “submarket” is a useful conceptualization if it identifies which products are most likely to be affected by “our” marketing strategies. We formalize this criterion within the structure of classical hypothesis testing so that a marketing scientist can use statistical statements to evaluate a market structure identified by: (1) behavioral hypotheses, (2) managerial intuition, or (3) market structure identification algorithms.

Mathematically, our criterion is based on probabilities of switching to products in the situation where an individual's most preferred product is not available. ‘Submarkets’ are said to exist when consumers are statistically more likely to buy again in that ‘submarket’ than would be predicted based on an aggregate “constant ratio” model. For example, product attributes (e.g., brand, form, size), use situations (e.g., coffee in the morning versus coffee at dinner), and user characteristics (e.g., heavy versus light users) are specified as hypotheses for testing alternate competitive structures.

Measurement and estimation procedures are described and a convergent approach is illustrated. An application of the methodology to the coffee market is presented and managerial implications of six other applications are described briefly.
Toward a Methodology for Measuring Advertising Copy Effects
Authors: Gatignon Hubert
Published: October 2008

A model is proposed to estimate the impact of advertising copies on the relationship between the frequency of exposure to an advertisement and the criterion measures of attitude or behavioral intentions. The model is used in the context of copy testing. It is different from existing copy testing methods on several aspects, the most important of which are that various constructs known to be important are integrated, and the model offers diagnostic information as to areas where the copy can be improved.
Application of the “Defender” Consumer Model
Authors: Hauser John R. , Gaskin Steven P.
Published: October 2008

This paper examines the feasibility, practicality, and predictive ability of the consumer model which was proposed by Hauser and Shugan (Hauser, J. R., S. M. Shugan. 1983. Defensive marketing strategies. Marketing Sci. 2 (4, Fall) 319–360). We report results in two product categories, each representing over $100 million in annual sales. We develop “per dollar” perceptual maps and empirical consumer “taste” distributions. As a first test of the model, we compare the predictive ability of the consumer model in one category to (1) pretest market laboratory measurement models, (2) traditional perceptual mapping procedures, (3) a hybrid model using price as an attribute, and (4) actual market shares in test market cities. In the second product category, we illustrate the application of the quantitative model to augment managerial judgment. Besides developing an empirical version of the “Defender” consumer model, our analyses raise a number of behavioral hypotheses worth further investigation.
A Bayesian Cross-Validated Likelihood Method for Comparing Alternative Specifications of Quantitative Models
Authors: Rust Roland T. , Schmittlein David C.
Published: October 2008

There are many situations in marketing in which several alternative quantitative models may be built to model a particular marketing phenomenon or system. Few methods exist for comparing the fit of such models if the models are not nested, especially if their performance on each of several criteria is important.

This paper proposes a Bayesian cross-validated likelihood (BCVL) method for comparing quantitative models. It can be used when the models are either nested or nonnested, and is especially useful for nonnested models. A simulation based upon a typical marketing modeling situation shows the incremental benefit of using the BCVL method rather than existing techniques, and explores the circumstances under which BCVL works best. The applicability of the BCVL method is demonstrated using several typical marketing modeling situations.
Generalizing the Rasch Model for Consumer Rating Scales
Authors: Bechtel Gordon G.
Published: October 2008

A probabilistic Rasch model is advocated for brand-attribute measurements which replace ubiquitous mean ratings. The usefulness of this model is then extended by showing that distinct latent processes, one extreme value and the other logistic, imply common probability structures for both its classical form and the generalization developed here. If given data reject the classical structure, an extended analysis is carried out in which logistic coefficients are estimated for the general model. These values are then used in a generalized-least-squares (GLS) procedure for estimating and testing the brand-attribute locations. An illustrative multiattribute analysis is given in which logistic coefficients and locations are found for 16 soft drinks on the continua of preference, sweetness, and fizziness.
Consumer Promotions and the Acceleration of Product Purchases
Authors: Neslin Scott A. , Henderson Caroline , Quelch John
Published: October 2008

One potential consequence of consumer promotions is the acceleration of consumer category purchases. Purchase acceleration can assume two forms: purchasing of a larger quantity or shortening of interpurchase time. This research presents an analytical framework for measuring purchase acceleration, and applies that framework to the analysis of two product classes. The effects of coupons, manufacturer and retailer advertising, and price cuts are examined. Different market segments and loyalty groups are also compared in terms of the degree of purchase acceleration exhibited.
The Impact of Competitive Entry in a Developing Market Upon Dynamic Pricing Strategies
Authors: Eliashberg Jehoshua , Jeuland Abel P.
Published: October 2008

This paper analyzes dynamic pricing strategies for new durable goods in a two-period context. The first period is characterized as a monopoly market structure for a new product having dynamic demand. The second period begins when a new firm enters the market, and thereby changes the market structure to a duopolistic one.

We begin by analyzing the pricing strategies of three types of monopolists: nonmyopic, myopic and “surprised.” A nonmyopic monopolist is a first entrant who perfectly predicts the competitive entry. A myopic monopolist totally discounts the duopolistic period, and a “surprised” monopolist is a first entrant who has the longer time horizon of the nonmyopic monopolist, but who does not foresee the competitive entry. Our results indicate that the nature of these pricing strategies may be quite different. It is optimal for the nonmyopic firm to price its product at a higher level than the myopic monopolist. Additional results indicate under what circumstances the “surprised” monopolist will price too high during the monopoly period. The intuition behind these results is the fact that the myopic monopolist overestimates competition while the surprised monopolist underestimates it.

We also characterize the nature of the dynamic equilibrium prices that will prevail during the competitive period. For example, we show that products having higher prices (because of cost differences) will exhibit a more rapid rate of price decline. Moreover, a discontinuity in the first entrant's pricing strategy, as a response to a second entry—which is often observed in the market place—is also captured by our model.

Because these analyses are limited to situations where the time of second entry is predictable, a scenario that fits our model better would be the health-care equipment industry where a specified period of government observation and/or testing is required. Immediate extensions of our model should include a discount factor and learning effects on both costs and demand.
Modeling Choice Strategies for Noncomparable Alternatives
Authors: Johnson Michael D.
Published: October 2008

Theoretical models are developed for two strategies consumers use to choose among “noncomparable” alternatives. The models view consumers as trading off decision error and processing effort when selecting a decision strategy. The models predict the use of choice strategies, and implicit abstraction processes, for noncomparable alternatives in a number of different circumstances.
Comments
Authors: Little John D. C.
Published: October 2008

Mahajan and Muller (Mahajan, V., E. Muller. 1986. Advertising pulsing policies for generating awareness for new products. Marketing Sci. 5 89–106.) have written a valuable paper that analyzes a particular class of advertising policies under the assumption of an S-shaped response function. As we shall discuss, their results highlight the need for new empirical research to answer crucial questions about what constitutes a pulse and the extent to which S-shaped responses exist.
Arts Plan: Implementation, Evolution, and Usage
Authors: Weinberg Charles B.
Published: October 2008

This paper discusses the evolutionary development of an implemented, regression-based forecasting system used in planning and managing a schedule of performing arts events. In particular, the changing usage and refinement of this system is examined over a five-year period. One issue addressed is whether the manager, who can accept a regression forecast or revise it, is more accurate than the estimates produced by the regression model alone. The literature on bootstrapping and behavioral decision theory is used in examining the impact of managerial judgment on forecast accuracy. In addition, the paper presents a detailed review of the approaches used over time to revise the original forecasting system and an evaluation of their accuracy.
Technical Note—Nonlinear Least Squares Estimation of New Product Diffusion Models
Authors: Srinivasan V. , Mason Charlotte H.
Published: October 2008

Schmittlein and Mahajan (Schmittlein, D. C., V. Mahajan. 1982. Maximum likelihood estimation for an innovation diffusion model of new product acceptance. Marketing Sci. 1 (Winter) 57–78.) made an important improvement in the estimation of the Bass (Bass, F. M. 1969. A new product growth model for consumer durables. Management Sci. 15 (January) 215–227.) diffusion model by appropriately aggregating the continuous time model over the time intervals represented by the data. However, by restricting consideration to only sampling errors and ignoring all other errors (such as the effects of excluded marketing variables), their Maximum Likelihood Estimation (MLE) seriously underestimates the standard errors of the estimated parameters. This note uses an additive error term to model sampling and other errors in the Schmittlein and Mahajan formulation. The proposed Nonlinear Least Squares (NLS) approach produces valid standard error estimates. The fit and the predictive validity are roughly comparable for the two approaches. Although the empirical applications reported in this paper are in the context of the Bass diffusion model, the NLS approach is also applicable to other diffusion models for which cumulative adoption can be expressed as an explicit function of time.
Salesforce Compensation Plans in Environments with Asymmetric Information
Authors: Lal Rajiv , Staelin Richard
Published: October 2008

In this paper, we present a theory of salesforce compensation plans to provide insights into why it may be advantageous for a profit maximizing firm to offer members of its salesforce the opportunity to choose from a menu of compensation plans. Although such contractual arrangements are not commonly used in the industry, they have been introduced and implemented by firms such as IBM and St. Regis Paper. As in our previous work on salesforce compensation plans (Basu, Lal, Srinivasan, and Staelin [Basu, A. K., R. Lal, V. Srinivasan, R. Staelin. 1985. Salesforce compensation plans: An agency theoretic perspective. Marketing Sci. 4 (Fall) 267–291.]) we use an agency-theory framework. In this paper, we relax the assumptions of information symmetry and salesforce homogeneity and show the conditions under which it is optimal to offer a menu of compensation plans. We also show that even when these assumptions are relaxed there are situations where offering a single plan characterized by Basu, Lal, Srinivasan, and Staelin (Basu, A. K., R. Lal, V. Srinivasan, R. Staelin. 1985. Salesforce compensation plans: An agency theoretic perspective. Marketing Sci. 4 (Fall) 267–291.) is still optimal. Insights gained from the analyses are discussed in the context of an existing compensation scheme.
Commentary
Authors: Windal Pierre
Published: October 2008

Comment to MacKay and Zinnes paper (MacKay, D. B., J. L. Zinnes. 1986. A probabilistic model for the multidimensional scaling of proximity and preference data. Marketing Sci. 5 325–344.).
Reply—Considerations in the Use of Probabilistic Multidimensional Scaling Models
Authors: MacKay David B. , Zinnes Joseph L.
Published: October 2008

Authors' reply to comments (McMennamin, J. L. 1986. Commentary. Marketing Sci. 5 345 and Windal, P. 1986. Commentary. Marketing Sci. 5 346–347.) about their paper (MacKay, D. B., J. L. Zinnes. 1986. A probabilistic model for the multidimensional scaling of proximity and preference data. Marketing Sci. 5 325–344.).
Forecasting New Product Sales from Likelihood of Purchase Ratings
Authors: Infosino William J.
Published: October 2008

This paper compares consumer likelihood of purchase ratings for a proposed new product to their actual purchase behavior after the product was introduced. The ratings were obtained from a mail survey a few weeks before the product was introduced. The analysis leads to a model for forecasting new product sales. The model is supported by both empirical evidence and a reasonable theoretical foundation. In addition to calibrating the relationship between questionnaire ratings and actual purchases, the empirical evidence demonstrates the significant effect of alternative promotion/distribution vehicles on new product sales. The model uses questionnaire data to extend the results of a limited market trial to alternative target markets, product specifications, and prices.
Commentary
Authors: Morrison Donald G.
Published: October 2008

Commentary to Infosino's paper (Infosino, W. J. 1986. Forecasting New Product Sales from Likelihood of Purchase Ratings. Marketing Sci. 5 372–384.).
Commentary
Authors: Pratt Robert W.
Published: October 2008

Commentary to Infosino's paper (Infosino, W. J. 1986. Forecasting New Product Sales from Likelihood of Purchase Ratings. Marketing Sci. 5 372–384.).
Reply
Authors: Moore William L. , Winer Russell S.
Published: October 2008

Reply to the commentary (Ries, P. N. 1987. Commentary. Marketing Sci. 6 44–45.) to authors' paper Moore, W. L., R. S. Winer. 1987. A panel-data based method for merging joint space and market response function estimation. Marketing Sci. 6 25–42.
Promoter: An Automated Promotion Evaluation System
Authors: Abraham Magid M. , Lodish Leonard M.
Published: October 2008

A system and methodology for evaluating manufacturers' trade promotions which may be combined with consumer promotions is described. The methodology incorporates concepts from expert systems in order to evaluate promotions on a mass scale (i.e., by geographical area and size or flavor) with a minimum of analyst intervention. The system uses available data (shipments, warehouse withdrawal or store level scanner data) and contains a knowledge base to recognize and adjust for data irregularities. The system estimates a baseline of what sales would have been had a promotion not been run. The three available real cases where promotions were discontinued are shown as partial validation for the procedure. The large potential biases in using only factory shipment data for evaluating promotions are also explored.
Commentary—Steps Toward Mastering Trade Promotions
Authors: Kruger Michael W.
Published: October 2008

The papers by Abraham and Lodish (Abraham, M. M., L. M. Lodish. 1987. Promoter: An automated promotion evaluation system. Marketing Sci. 6 101–123.) and Blattberg and Levin (Blattberg, R. C., A. Levin. 1987. Modelling the effectiveness and profitability of trade promotions. Marketing Sci. 6 124–146.) represent steps toward developing sufficient theory, sufficient algorithms, and sufficient data to manage the large expenditures trade promotions represent. In this comment, I'll focus on the stylistic differences in the two approaches, discuss the barriers to implementation within manufacturers, and comment on enhancements.
Reply
Authors: Abraham Magid , Lodish Leonard
Published: October 2008

The comments by Kruger (Kruger, M. W. 1987. Commentary—Steps toward mastering trade promotions. Marketing Sci. 6 147–149.) and Struse (Struse, III, R. W. 1987. Commentary—Approaches to promotion evaluation: A practitioner's viewpoint. Marketing Sci. 6 150–151.) describe some important concepts and issues involved in improving trade promotion effectiveness. In this response we comment on some of our work that addresses those issues, and some areas where we may differ in emphasis.
The Channel Design Decision: A Model and an Application
Authors: Rangan V. Kasturi
Published: October 2008

This paper proposes a channel design model based on the notion that distribution functions are the basic determinants of channel structure. The purpose of the model is to assist manufacturers in making effective channel decisions. The model evaluates what distribution structure the firm should adopt, how many intermediaries it should use, and what levels of service it should offer its customers.

The proposed model-based decision approach is illustrated with an industrial marketing application. First, parameters were established for the model, using a combination of field data and managerial judgment. Next, the model was used to optimize profits over several channel alternatives. The profit-maximizing alternative determined the optimal channel structure, distribution intensity, and channel service. The implications of the model results for the manufacturer are discussed.
Modeling Competitive Marketing Strategies: The Impact of Marketing-Mix Relationships and Industry Structure
Authors: Carpenter Gregory S.
Published: October 2008

This paper empirically analyzes the formulation of competitive marketing strategies consisting of product quality levels, promotional expenditures and prices. Using a simultaneous-equation model, we examine the use of prices and promotional spending as signals or indications of product quality, the impact of promotional spending on prices, and the impact of industry structure on the formulation of the complete marketing mix. The structural equations are developed using a theoretical model of optimal competitive marketing mix, and are estimated using business-level PIMS data, which consists largely of industrial, durable goods producers. For a cross-section of 1,100 of these businesses, three results of the estimation are especially interesting:

• Price-cost margins are high for high quality products, suggesting that high prices indicate or signal high quality.

• Promotional intensity is unrelated to product quality, suggesting that promotional effort provides no reliable signals of quality. Intensely promoted products earn low price-cost margins, however, indicating that promotional spending is associated with high price sensitivity.

• Quality levels, promotional intensity, and price-cost margins vary significantly with competitive and market conditions such as the concentration of competitors and the stability of market shares, although these relationships are generally weaker than relationships between quality, promotion, and price-cost margins. Quality levels are high and margins low in markets with unstable shares or unconcentrated competitors.
The Coase Theorem and Suboptimization in Marketing Channels
Authors: Norton Seth W.
Published: October 2008

Analytic and institutional approaches to channel coordination have developed independent of each other. This paper attempts to integrate both approaches by using the Coase Theorem, which has had wide application in the economics of natural resources and the law. Suboptimization means that total channel profits are lower than maximum attainable channel profits. Applying the Coase Theorem suggests that total channel profits can be maximized if property rights in the channel are well defined. Channel coordination is viewed in terms of defining rights, and several hypotheses regarding channel behavior are developed.
Note—Sampling Properties of Rate Questions with Implications for Survey Research
Authors: Buchanan Bruce , Morrison Donald G.
Published: October 2008

Frequency questions (“How many times did you do X in the last month?”) are often used to measure respondents' behavior rates. Under suitable assumptions, frequency data can be analyzed in the context of the Negative Binomial Distribution model. Recency questions (“How long ago did you last do X?”) can also be used to assess usage rates, but have not been studied as much. In this study we compare the reliability and statistical efficiency of frequency and recency questions. We show that the relative performance of these two formats can be summarized succinctly. Validity issues are also considered. Our findings suggest that recency questions tend to perform better for low usage, low salience events.
A Friction Model for Describing and Forecasting Price Changes
Authors: DeSarbo Wayne S. , Rao Vithala R. , Steckel Joel H. , Wind Jerry , Colombo Richard
Published: October 2008

This paper presents a new friction model for describing the price changes of a product or brand over time and for forecasting both the timing and magnitude of such changes from one period to the next. After a review of the related pricing literature, we present our model and a modified controlled random search procedure for estimating its parameters. The model is applied to describe and forecast the weekly mortgage interest rates for a local bank in the Philadelphia area. Finally, limitations and several potential applications of this methodology are discussed.
Reply To: Managing Channel Profits: Comment
Authors: Jeuland Abel P. , Shugan Steven M.
Published: October 2008

We welcome Moorthy's Comment (Moorthy, K. S. 1987. Managing channel profits: Comment. Marketing Sci. 6 (Fall) 375–379.). It provides an opportunity to clarify several issues raised in our 1983 paper. That paper was motivated by one concern—channel coordination. We believed that channel members benefit from coordination and that many institutional arrangements, such as quantity discounts, are actually coordinating mechanisms. We developed a simple model to demonstrate our belief. For historical accuracy, McGuire and Staelin (cited by Moorthy) had already independently developed a useful model of duopolistic channel competition. Being unaware of their working paper, our model not surprisingly differed from theirs. Both papers provide important but different insights into channel management.
Note—Competitive Price and Positioning Strategies
Authors: Hauser John R.
Published: October 2008

Brand positioning and brand pricing are important strategic decisions for marketing managers. Such decisions are interrelated and depend upon competitive brand positions and prices. However, any unilateral decisions may encourage repositioning and price adjustment by competitors thus leading to either new market equilibria or a price/positioning “war.” This paper examines such price and positioning decisions in a competitive environment by extending the ‘Defender’ consumer model to more complex equilibria. We assume that the brands are already in the market and that positions are “sticky” in the sense that brands cannot leapfrog one another.

Among the insights for such incumbent brands are:

• if prices are symmetric and held constant, firms seek to reposition toward the center of the market,

• but price advantages by central firms can mediate that central tendency such that an equilibrium exists with positive profits;

• if brand positions are held constant, the Nash equilibria for prices exist and are unique, and

• category profits, the sum of brand profits, are maximized for maximum brand differentiation;

• for two and three brand markets the (subgame perfect Nash) equilibrium, where positioning decisions are made with foresight on the price equilibria, causes firms to unilaterally seek maximum brand differentiation; but

• for four or more brands greater foresight and/or cooperation appears necessary to reach the point of maximum brand differentiation.

These results apply where the Defender consumer model is an exact description of consumer response and where the competitive reaction assumptions hold. In any empirical situation such forces might be softened resulting in differentiated, but not maximally differentiated, brands.
Reply
Authors: Bagozzi Richard P. , Silk Alvin J.
Published: October 2008

Howard and Sawyer (Howard, D. J., A. G. Sawyer. 1988. Recall, recognition, and the dimensionality of memory for print advertisements: An interpretative reappraisal. Marketing Sci. in press.), hereafter H & S, raise two “conceptual” and four “methodological” issues with respect to our earlier article (Bagozzi and Silk [Bagozzi, R. P., A. J. Silk. 1983. Recall, recognition, and the measurement of memory for print advertisements. Marketing Sci. 2 (Spring) 95–134.]). In this reply, we attempt to show that H & S's conceptual issues are based upon false premises about the purpose and substance of our paper and that the methodological criticisms are in three instances groundless and in the fourth unresolved and debatable.
Invariant Estimators for Market Share Systems and their Finite Sample Behavior
Authors: Gaver Kenneth M. , Horsky Dan , Narasimhan Chakravarthi
Published: October 2008

The sales-marketing mix relationships for brands of a product class are often modelled as a multiple equation system. Whenever sales are expressed as shares, such systems are sum-constrained and therefore singular. Singular systems can be calibrated by deleting one equation from the model and estimating the remaining equations using the seemingly unrelated regressions (SUR) technique. A two-step procedure is typically adopted whenever the disturbance covariance structure is unknown.

This study highlights an issue often overlooked by marketing researchers. Traditional two-step estimators that delete one equation at the initial step usually lack invariance to the equation deleted. Invariant estimates are available using maximum likelihood estimation (MLE) or iterated least squares. However, relative to simple, two-step procedures, these approaches require more computation and are often less accurate in small samples. We describe several ways to obtain invariant, two-step estimators and conduct a sampling experiment to compare the finite sample behavior of these and other estimators to an iterated solution. Our results show that a “balanced” two-step estimator which deletes no equations initially outperforms the iterated solution over a wide range of conditions. Our results also show that a constrained, single-step estimator which deletes no equations from the system frequently outperforms all two-step methods examined. Further, the results of our study also apply to nonlinear specifications of market share models since the invariance issue arises in this context as well.
Note—Channel of Distribution Profits When Channel Members Form Conjectures
Authors: Jeuland Abel P. , Shugan Steven M.
Published: October 2008

It is well known that lower channel profits are achieved in the bilateral (manufacturer-reseller) monopoly if manufacturer and reseller independently optimize their respective profits: They take each other's decisions as given i.e., adopt decision rules that ignore their influence on the other channel member. Higher profits are achieved if they coordinate their profit maximizing decisions. Consequently, there is an economic justification for (1) vertical integration that by definition prevents conflicting profit objectives or (2) contracts that change channel members' incentives to the compatible objectives of shares of total channel profits. This paper investigates the possibility that coordination might take place without formal arrangements like vertical integration or contracts. The reason for this contention is the casual observation that channel members are often acutely aware of the interdependencies between channel participants. We might thus expect that they will form conjectures about other channel members' reactions to their own actions. We show that rational conjectures lead profit maximizing channel members to adopt modified decisions rules. Can such conjectural decision-making create, at least partially, channel coordination or cooperation? In other words, can channel members deviate from the Nash equilibrium and thus achieve greater profits? The answer given in this paper is a conditional yes.
Commentary on “Marketing Mix Reactions to Entry”
Authors: Frey John B.
Published: October 2008

Commentary on Robinson, W. T. 1988. Marketing mix reactions to entry. Marketing Sci. 7 368–385.
Commentary on “Marketing Mix Reactions to Entry”
Authors: Gaskin Steven P.
Published: October 2008

Commentary on Robinson, W. T. 1988. Marketing mix reactions to entry. Marketing Sci. 7 368–385.
Reply
Authors: Robinson William T.
Published: October 2008

Author's reply to commentaries (Frey, J. B. 1988. Commentary on “Marketing mix reactions to entry.” Marketing Sci. 7 386–387, Gaskin, S. P. 1988. Commentary on “Marketing mix reactions to entry.” Marketing Sci. 7 388–389, and Mehrotra, S. 1988. Commentary on “Marketing mix reactions to entry.” Marketing Sci. 7 390.) on his paper (Robinson, W. T. 1988. Marketing mix reactions to entry. Marketing Sci. 7 368–385.).