Contributions published at Marketing (Martin Natter)

In many firms, the marketing department plays a minor role in new product development (NPD). However, recent research demonstrates that marketing capabilities more strongly influence firm performance than other areas such as research and development. This finding underscores the importance of identifying relevant capabilities that can improve the position of marketing within the NPD process as part of the quest to improve innovation performance. However, thus far, it has remained unclear precisely how the marketing department can increase its influence on NPD to enhance a firm's innovation performance. The results of this study demonstrate that the relationship between marketing capabilities and innovation performance is generally mediated by the decision influence of marketing on NPD. In particular, both marketing research quality and the ability to translate customer needs into product characteristics serve to increase marketing's influence on NPD. This increased influence, in turn, positively contributes to overall firm innovation performance. Hence, these results show that in addition to having the appropriate marketing capabilities, the marketing department must achieve a status in which these capabilities can translate into performance implications.

The degree of openness in innovation, ranging from closed to multiple levels of openness, is a key strategic decision for managers. Therefore, this study aims to carefully investigate the underlying drivers of openness. A major result of this study is that the degree of openness underlies separate mechanisms for being closed in innovation and higher degrees of openness. The factors that prevent firms from being open are a lack of market and technological knowledge (knowledge gaps), ineffective intellectual property (IP) protection mechanisms, and competitor threats such as market entries and imitation. The most important factors that increase the degree of openness are a firm's need for financial funding in innovation and the effectiveness of a firm's IP protection mechanisms.

This article empirically studies consumer choice behavior with respect to store brands in the United States, the United Kingdom, and Spain. Store-brand market shares differ by country and are usually much higher in Europe than in the United States. The authors study the notion that the differential success of store brands in the United States and Europe is the higher brand equity that store brands command in Europe than in the United States. They use a framework based on consumer brand choice under uncertainty and brands as signals of product positions to conduct their analysis. More specifically, they examine whether uncertainty about quality (or the positioning of the brand in the product space); perceived quality of store brands versus national brands; consistency in store-brand offerings over time; and consumer attitudes toward risk, quality, and price underlie the differential success of store brands at least partially in the United States and Europe. The authors’ model is estimated on scanner-panel data on laundry detergent in the U.S., U.K., and Spanish markets and on toilet paper and margarine data in the U.S. and Spanish markets. The authors find that consumer learning and perceived risk (and associated brand equity), as well as consumer attitude toward risk, quality, and price, play an important role in consumers’ store-brand and national-brand choices and contribute to the differences in relative success of store brands across the countries studied.

Online price comparison sites (shopbots) like PriceGrabber.com are the most powerful tools for consumers to easily compare prices and find offers for desired products. Besides providing distributions of actual prices in price comparison tables, shopbots like NexTag.com have recently introduced price charts (line charts) displaying a product's full price history. Price charts should support consumers in forming expectations about future prices. Nevertheless, it is currently unclear how price charts influence consumer price expectations and purchase decisions. The results of this study show that the provision of past prices leads to strong adjustments of price expectations depending on price chart characteristics. In particular, the trend, variance and range of past prices in the chart strongly affect price expectations and purchase timing decisions. Furthermore, in the case of a strong downward trend and high variance in past prices, results show that nearly 50% of the total effect is caused by the visualization of the price history.

This study of the influence of the marketing department (MD), as well as its relationship with firm performance, includes seven industrialized countries and aims to generalize the conceptual model presented by Verhoef and Leeflang (2009). This investigation considers the antecedents of perceived MD influence, top management respect for the MD, and MD decision influence, as well as the relationships of these three influence variables with market orientation (MO) and business performance (BP). Meta-analytic procedures reveal initial empirical generalizations: Accountability, MD innovativeness, and the customer connection capabilities of the MD relate consistently to all three studied MD influence measures. The generalization also shows that MD influence contributes to BP indirectly through its positive relationship with MO and directly through its positive direct relationship with BP.

The image of retail stores offers an important means for differentiation in highly competitive retail markets. Storefront displays generally function to increase attention to the store or generate unplanned store visits, whereas their impact on store image remains unknown. This study therefore investigates perceived image differences between commonly used types of storefront displays and tests whether an image transfer takes place from the display to the retail store. The results show that more innovative displays achieve better image valuations and that store image benefits from the presence of a storefront display. Spillover effects from the display to the store even occur in the face of some resistance, such as in familiar stores and among consumers who have negative attitudes toward such displays.

New restaurants often do not manage to succeed within a reasonable amount of time. Exotic restaurants especially face the problem that price promotions may not attract new customers because prospective customers might associate very low prices for unfamiliar food with a high functional risk. This paper describes how Pay-What-You-Want (PWYW), a new pricing mechanism, was successfully implemented at Kish, a moderately priced Persian restaurant in downtown Frankfurt. After the initial testing phase, which had the characteristics of a promotional offer, the restaurant decided to permanently offer its buffet lunch under PWYW conditions. We report the long-term effects of this decision as well as a simulation demonstrating that profitability is mainly based on ‘trading up’ the continuous inflow of new customers to the more profitable dining offer where prices are fixed.

Preference maps provide a visual representation of market structure, usually depicting brand or product alternatives, product attributes, and customers in a single graphic. Using measures of consideration and attribute sets to establish criterion validity, we develop a set of metrics that can be interpreted by managers and that allow managers to evaluate maps based on their ability to accurately represent market structures for products, attributes, and consumers. Using a Monte Carlo simulation, we test the stability of the metrics for a variety of scenarios and compare them to statistical stress. Our results show that the metrics can help identify specific sources of noise and can therefore be used to interpret map fit at a more disaggregated level than stress. We apply the metrics on an empirical example and use them to develop a reweighted map for a focal product.

Brand-nonspecific retailer coupons that entitle customers to assortment-wide discounts appeal in similar ways to national brand (NB) and private label (PL) users. The latter may be considered an attractive target group because they express high levels of deal proneness. However, it is unclear how assortment-wide retailer coupons affect customers' purchase behavior. In particular, nothing is known about how PL users behave during coupon promotions. The authors deal with these issues by conducting a large-scale field experiment (N = 28,000). They find that assortment-wide coupons increase both segments' (PL vs. NB users) profitability but that the route to increased profitability is different for the two groups. In the group of PL users, segment-level profitability is mainly driven by additional customers who would not have made a purchase in the absence of the promotion. On the contrary, in the segment of NB users, individual profitability increases because customers trade up to more expensive brands and/or products. Based on the differences in response behavior, the authors derive segment-specific managerial recommendations and emphasize that different promotional aims should be associated with PL and NB users.

Data visualization aids have become popular tools to assist managerial decision making in marketing. For example, Geographical Information Systems (GIS) are often used to identify suitable retail locations, regional distributions for advertising campaigns, or targeting of direct marketing activities. GIS-based visualizations facilitate the assessment of store locations and help planners to select the most promising options. The selection of the best alternative requires a “visual optimization” which is typically supported by GIS–thematic maps. In an online experiment, we investigate the way how different GIS-based data representations influence marketing analysts’ decision making styles. Our results show that GIS-maps are a relevant part of the task environment and that the type of map visualization influences the activated decision processes. The invoked decision process is also shown to depend on the way symbol overload is handled by GIS-maps. We further find that analysts’ decision processes vary under time pressure and also relate to personal characteristics.

Issues of segmentation and positioning have always been at the heart of marketing management. In recent years, much methodological progress has been made in order to carry out these two tasks simultaneously, that is, to combine certain types of clustering algorithms with appropriate multidimensional scaling or unfolding procedures. When trying to provide managers with a tool to support marketing decision-making in segmentation and positioning, the ease of use and the visual quality of results must be emphasized. This paper provides a state-of-the-art review of alternative graphical formats designed to assist strategic management. It focuses on three aspects, namely, (I) representing competitive market structures, (II) illustrating preferences for product attributes, and (III) describing customer heterogeneity at the individual as well as segment-specific levels; this paper also explores the interrelations among these aspects. The benefits and limitations of different approaches are discussed, and graphical examples are provided. Advances in academic research are contrasted with the information requirements of marketing managers. Finally, recommendations on the applicability of these alternatives for practical use are offered, and issues for further research are specified.

Technology advances and competitive pressure have shortened the life cycles for many products (e.g., in the mobile phone industry) and drastically increase the penalty of holding obsolete finished goods inventories. Standard planning methods lead to high forecasting errors and - as a consequence - to high safety inventories. In this context, an appropriate service level is of major interest. We propose a new model for the integrated analysis of alternative pricing strategies and their effects on the service level. In particular, we show how our model supports the identification of the best service level in terms of customer satisfaction life cycle profit.

This work surveys decision support systems that use sales and shopping basket data to suggest regular and promotional price changes in order to improve profit and turnover in retailing (so-called retail revenue management [RRM] systems). Starting with a demonstration of the impact of pricing on profit, we critically assess the pricing methods currently used in retailing and from this basis show the potential for improvement using retail revenue management systems. Furthermore, we classify the different types of pricing problems and describe the methods that are used in retail revenue management. Finally, we discuss the pricing process of retail revenue management systems and report the benefits of such systems typically observed in practice.

Pay what you want (PWYW) is a new participative pricing mechanism in which consumers have maximum control over the price they pay. Previous research has suggested that participative pricing increases consumers' intent to purchase. However, sellers using PWYW face the risk that consumers will exploit their control and pay nothing at all or a price below the seller's costs. In three field studies, the authors find that prices paid are significantly greater than zero. They analyze factors that influence prices paid and show that PWYW can even lead to an increase in seller revenues.

Tele.ring is a mobile phone organization selling contracts and cell phones in the Austrian market. The market situation in 2005 was highly competitive and dynamic, resulting in relatively short tariff life cycles. Excessively long lead times made tele.ring’s management feel dissatisfied with their new tariff development process. Furthermore, a new competitor had entered the market, posing a major threat, and it was unclear how to effectively safeguard tele.ring’s position in the market. In cooperation with the management, we implemented and tested a new segmentation, targeting, and positioning tool, which provides managers with information on their target markets, customer preferences, competitors’ strengths, and customer segments. It allows for the simultaneous visualization of these data on a single map and facilitates timely and accurate decision making. In particular, we report on the design and the implementation of a new pricing scheme, “Formel 10,” which became the most successful new tariff introduction in this competitive market. tele.ring’s managers were very much impressed with our tool’s ability to represent the market on a single map and with its capacity to allow for intuitive interpretation. In addition, the tool enhanced internal communication between its users and different stakeholders during the new tariff development process.

Fierce competition and rapid technological progress have considerably reduced the life cycle length for mobile phones in the last decade. Once a new mobile phone is launched, providers on the market under consideration practice a markdown strategy. Profits of the providers are generated mainly via the monthly (base plus variable) fees accruing during contract duration whereas the mobile phones are over large parts of their life cycle sold below the constant purchase price charged by the OEM supplier. The problem of applying such markdown strategies has recently been further emphasized by an increased competition among the providers cutting back revenues generated by the contracts. Although providers frequently complain about this situation of pre- and cross financing the mobile phones, none of them has yet risked stopping the practiced markdown pricing strategies. In our contribution, we investigate a new model for the analysis of the effects of alternative (markdown) pricing strategies. Building on previous research that has investigated the dynamics and feedbacks between pricing and inventory decisions caused by delays and inaccurate forecasts, we develop a more encompassing view on the market considering the dependency and dynamics between customer satisfaction, loyalty, and repeat purchase rates. Furthermore, we explicitly model price and reference price effects and their impact on the attraction of new customers. Various data sources are employed to calibrate a system dynamics model for one of the providers and its interrelation with a typical supplier and the customers. Our model indicates that a reduction of the currently practiced markdown strategy would reduce the provider’s overall profit for contract customers. In contrast, the results for prepaid customers could be improved by a careful reduction of markdowns.

The main objective of this report is to describe a decision-support system for dynamic retail pricing and pro-motion planning. Our weekly demand model incorporates price, reference price effects, seasonality, article availability information, features, and discounts. Building on previous research, we quantify demand interdependencies and integrate the resulting profit-lifting effects into the optimal pricing model. The methodology was developed and implemented at bauMax, an Austrian do-it-yourself retailer. Along with the practical requirements, an objective function was employed that can be used as a vehicle for implementing a retailer’s strategy. Eight pricing rounds with thousands of different stock-keeping units have each served as a testing ground for our approach. Based on various benchmarking methods, a positive impact on profit was reported. The currently implemented marketing decision-support system increased gross profit on average by 8.1 and sales by 2.1%.

An important aspect of customer relationship management is the targeting of customer segments with tailored promotional activities. While most contributions focus on the selection of promising customers for targeting, only few authors address the question of which specific differential offers to direct to the selected target groups. We focus on both issues and propose a flexible, two-stage approach for dynamically deriving behaviorally persistent segments and subsequent target marketing selection using retail-purchase histories from loyalty-program members. The underlying concept of behavioral persistence entails an in-depth analysis of complementary cross-category purchase interdependencies at a segment level. The effectiveness and efficiency of the proposed procedure are demonstrated in a controlled field experiment involving the targeting of several thousands of customers enrolled in the loyalty program of a “do-it-yourself” retailer. Our empirical findings provide evidence of significant positive impacts on both profitability and sales for segment-specific tailored direct marketing campaigns.

In this paper, we describe DELI ("Development Interactive"), a method and software system that supports the product concept development phase by multi-functional product development teams using Marketing Engineering methods. After motivating our research, we present core concepts underlying DELI: a data model encompassing customer and product attributes and preferences as well as a questionnaire generating tool based thereon, a novel integrated clustering and attribute/product positioning algorithm for market map generation and a conjoint-based market simulation component. All concepts are explained using a real-world mobile phone case study.

This paper presents DELI, a new interactive tool for supporting new product development decisions. DELI addresses the `chicken and egg` problem in new product development: a product's features shape the way that the market is segmented and targeted, but that very segmentation/targeting itself determines which features the product needs to incorporate. It is very useful, therefore, to be able to look at attributes, product positions and segments in a `single hit' to measure the key trade-offs available. DELI integrates segmentation, visualisation of competitive structures and the segment-specific identification of new product functionality. Several interactive features support the search for new products. Furthermore, the authors introduce a novel conditional segmentation, mapping and positioning approach for an improved representation of products and customers within one map, supporting interpretation and segment-specific new product development.