Knowledge that Transforms

Consumers curate collections of items for various reasons and categorize them into subsets or categories based on different criteria as their collections grow. The items in a collection reflect a consumer's preferences, and the categories provide insights into the different contexts in which items are consumed. The authors develop a novel deep generative modeling framework that captures the network structure of consumer collections using multiple interlocked hypergraphs. This model employs message-passing variational autoencoders that leverage hypergraph structures and entity-specific covariates to generate probabilistic deep embeddings for consumers, items, and item categories. Applying this framework to digital music collections and playlists of music consumers, the authors demonstrate that the model outperforms several sophisticated benchmarks in predicting linkages within these collections. They then illustrate how this approach enables firms to generate novel personalized product bundles, recommend relevant items and bundles, and dynamically expand existing bundles with new items. Beyond the music application, this method is broadly applicable to other consumer collections, such as food recipes and content collections on social curation platforms like Pinterest.

Many high-end retailers operate off-price or discount versions of their full-line stores to engage value-conscious customers. In this study, the authors empirically examine the effects of a high-end retailer's opening of off-price stores on customer behavior. Leveraging a unique customer-level dataset spanning pre- and postopening periods of off-price stores in the United States by a multichannel retailer, the authors disentangle the effects of physical off-price store opening on the incumbent channels (full-line physical stores and online store) and document the underlying mechanisms. The authors employ the group-time treatment effects doubly robust estimator that exploits the staggered opening of multiple off-price stores. The authors find that off-price store opening decreases customer spending (substitution effect or value customer effect) at the full-line store and increases spending at the online store (complementarity effect or option-to-return-products effect). The authors report that the retailer's new customers (i.e., those acquired via the retailer's off-price stores) tend to spend less, return products at a higher rate, purchase lower-priced items, and are in the lower-income group. Furthermore, the regular customers who shop at the full-line stores of the upscale retailer spend less at and return their online purchases at a higher rate to the off-price stores than the value-conscious customers. The authors perform a battery of robustness checks to rule out effects of confounding factors. Based on the results, the authors offer new insights and implications for high-end multichannel retailers that adopt an off-price store opening strategy.

Many brands use slang in their marketing communications to connect with consumers. However, through analyses of two Twitter datasets and seven experiments (four in the Web Appendix), the authors find that the use of slang in marketing communications could have unintended negative consequences for brands. They theorize and demonstrate that slang use in marketing communications can be perceived as inauthentic because such messages violate consumer expectations, leading to less favorable brand perceptions. To refine this understanding, the authors test conditions under which slang use aligns more with consumer expectations and is therefore perceived as less inauthentic. Specifically, they find that source characteristics play an important role. First, they show that brand personality impacts this process: Consumers have less favorable attitudes when sincere brands use slang, but not when exciting brands use slang. Second, when influencers (instead of brands themselves) publish brand messages, the negative effect of slang disappears. In addition to contributing new theoretical insights, this research provides practical guidance on effective social media engagement strategies by identifying conditions when slang use is perceived as inappropriate or not in marketing communications.

The authors present a model of product returns and assortment decisions in the context of online–offline retail competition. In equilibrium, the online store optimally offers easy-to-fit products to reduce costly returns. The competing brick-and-mortar retailer (BMR) faces a subtle trade-off between generating higher sales and attracting more foot traffic, and thus it might use its limited store size to stock harder-to-fit products. The authors’ model provides a rationale for the prevalence of relatively lower-quality products sold online and the steady growth of specialty stores within the changing footprint of traditional retailing. The model is extended to include possibilities such as a physical store opening an online channel to compete with the online store. The authors apply this framework to investigate the possibility and consequences of retailers collaborating to handle returns. Specifically, a recent “buy online and return in store” (BORS) return policy allows consumers to return online purchases directly to a competing BMR. In the short run, BORS increases the BMR's foot traffic and the volume of returns. In the long run, BORS expands the online retailer's assortment and increases the BMR's foot traffic. BORS can be sustained in the long run if the BMR is small or if the cost-saving effect is large.

The current research identifies perceived romantic relationship status stability (RSS)—the degree to which one anticipates their current relationship status to remain unchanged in the foreseeable future—as a significant factor that impacts consumers’ likelihood of renting products. Analyses of field data and experimental studies reveal that low (vs. high) RSS increases consumers’ preference for renting, but not purchasing, products. The effect holds both for low-risk products consumed individually (i.e., when a romantic partner or relationship status is less likely to matter in the acquisition decision) and for high-risk acquisitions such as owning versus renting a home across representative samples of the U.S. population. The effect occurs because low RSS, an indicator of lower perceived self-concept continuity, heightens the motivation for self-expansion. In contrast to purchasing, renting is a flexible and low-commitment acquisition method that helps consumers self-expand by exploring new products while not inhibiting future explorations. As such, the heightened motivation for self-expansion caused by low RSS increases consumers’ preference for renting but does not influence their preference for purchasing. Managerially, the findings present marketers with insights on to whom and/or when to provide rental versus purchase options, and how to communicate these options to different consumer segments.

This research examines how consumers judge a product's effectiveness based on its legal status. Across eight preregistered experiments, the authors find that consumers tend to believe legal products are less effective than illegal ones. Even when observing identical, objective product outcomes (e.g., equal weight loss from a drug), consumers perceive reduced product benefits from a product described as legal (vs. illegal). The authors test an account of why this belief occurs. When a product is legal, consumers infer that the government allows broad access to it, which they associate with lower product strength. In contrast, illegal products, which consumers presume are harder to access, are viewed as higher in product strength. This strength inference leads consumers to believe a legal product produces both smaller positive effects (lower efficacy) and smaller negative effects (lower harm) than an illegal product. Supporting this theory, the impact of legality on perceived efficacy is eliminated if legal and illegal products are described as equally accessible or equally strong. The authors further demonstrate that these beliefs influence consumer choice. Given the significant health and economic consequences of illegal product consumption, this research has important implications for consumers, marketers, public health professionals, and policy makers.

Customers would frequently benefit from changes to an existing purchase contract with a supplier (e.g., due to a wrong order). Salespeople can voluntarily make such a change, which the authors label a “customer-centric contract change.” Formally, the authors define a customer-centric contract change as a salesperson's act of amending the purchase contract in the customer's favor without a legal obligation to do so. Since the literature has neglected this prevalent and important phenomenon, they draw on social exchange theory to study the impact of such contract changes on relationship performance. Toward this end, the authors leverage panel data on over 57,000 customers, four experiments, and a survey study. Results suggest that customer-centric contract changes increase relationship performance because customers are grateful for a salesperson's relinquishing of power. Interestingly, this effect is less pronounced in close exchange relationships where a norm of solidarity between customers and salespeople exists. These findings add to emergent work that shows that business partners in close exchange relationships expect to alleviate each other's hardships and are willing to forgo power advantages to do so; the authors integrate these findings into what they term “power-solidarity theory.” For practitioners, the findings offer guidance on whether and how to approve contract change requests.

Blockchain technology can generate decentralized consensus , thereby enhancing the verifiability and contractability of payoff-relevant states in a distribution channel or supply chain (e.g., seller cost and/or buyer value). Therefore, smart contracts can be written between supply chain partners such that transactions are automatically executed at state-dependent prices. The author examines the economic impacts of blockchain-enabled smart contracts on the equilibrium generation and allocation of surplus in a three-level supply chain. The model highlights the role of smart contracts in removing ex post asymmetric decision rights, which are otherwise inherently present under regular contracts where trade decisions are made based on constant transfer prices. As a result, the seller (under cost uncertainty) or the buyer (under value uncertainty) may hurt itself by signing a smart contract with the middleman, despite the improvement in the supply chain's total efficiency and surplus. Therefore, the equilibrium choice of a smart contract can be socially insufficient. Moreover, interestingly, a prisoner's dilemma may arise: The seller's and the buyer's dominant choice is the regular contract, whereas everyone would be better off if the smart contract is jointly adopted by all parties.

Prosocial behavior research has historically considered altruistic or self-interested motives as the primary drivers for charitable giving. Recently, however, there have been many high-profile cases wherein consumers use their donations to harm others. The authors define this behavior, characterized by a desire for retribution resulting from witnessing or experiencing volitional wrongdoing, as "retributive philanthropy" and examine this phenomenon using a multimethod approach. Qualitative interviews with perpetrators and targets of retributive philanthropy reveal key themes of blameworthiness judgments, strong negative affect, and a desire to harm as a terminal goal of donation-none which are typically associated with prosocial behaviors. Analysis of real-world antivaccine protestor donation data finds similar themes of perceived wrongdoing and outrage related to retributive donations in a large-scale context. Five lab studies and five supplementary studies then demonstrate the effects of perceived volitional wrongdoing, harm, efficacy, and authoritarianism on willingness to make retributive donations. Together, these findings offer critical insight into an emerging mode of donation that is emotionally, motivationally, and behaviorally distinct from traditional prosocial behavior and has important implications for consumers and charitable marketers.

Some retailers use stars while others use Arabic numerals to present product ratings. Do consumers evaluate product ratings differently depending on the format? Which format more accurately represents the true magnitude of ratings? Across 12 experiments, we find that neither format is veridical. Consumers overestimate fractional star ratings (e.g., ) and underestimate fractional Arabic numerals (e.g., 3.5). The overestimation of graphical ratings arises from the visual-completion effect: When the visual system perceives an incomplete image of a star, it instinctively activates the complete image, causing consumers to anchor their magnitude judgments on rounded-up numbers (i.e., evaluation of is anchored on ). Importantly, our results show that this overestimation of star ratings can be mitigated by using visually complete stars (e.g., ). Conversely, the underestimation of Arabic numeral ratings stems from the left-digit effect, which leads consumers to anchor magnitude judgments on rounded-down numbers (i.e., evaluation of 3.5 is anchored on digit 3). Thus, both star and Arabic numeral ratings are systematically misestimated by consumers, with the extent of misestimation varying based on the fractional value and the star-filling technique employed. These findings demonstrate that prevalent rating formats are misleading, highlighting the need for new industry standards.