Knowledge that Transforms

Decisions often involve trade-offs between a more normative option and a less normative but more tempting one. The authors propose that the intrapersonal conflict that is evoked by choices involving incompatible goals can be resolved through scope-insensitive justifications. The authors describe one such mechanism, the “mere token” effect, a new phenomenon in decision making. They demonstrate that adding a certain and immediate mere token amount to both options increases choices of the later-larger option in intertemporal choice and of the riskier-larger option in risky choice. The authors find this effect to be scope insensitive, such that the size of the token amount does not moderate the effect. They show that intrapersonal choice conflict underlies the mere token effect and that reducing the degree of conflict by increasing the psychological distance to the choice outcomes debiases the effect. Moreover, they show that the mere token effect is enhanced when (1) opposing goals in choice are made salient and (2) the choice options represent a starker contrast that generates greater conflict. The authors empirically rule out alternative explanations, including diminishing marginal utility, normative and descriptive utility-based models, liquidity constraints, and naive diversification. They discuss the direct implications of the mere token effect for the marketing of financial services and, more generally, for consumer preference toward bundles and multiattribute products.

Identifying winning new product concepts can be a challenging process that requires insight into private consumer preferences. To measure consumer preferences for new product concepts, the authors apply a “securities trading of concepts,” or STOC, approach, in which new product concepts are traded as financial securities. The authors apply this method because market prices are known to efficiently collect and aggregate private information regarding the economic value of goods, services, and firms, particularly when trading financial securities. This research compares the STOC approach against stated-choice, conjoint, constant-sum, and longitudinal revealed-preference data. The authors also place STOC in the context of previous research on prediction markets and experimental economics. Across multiple product categories, the authors test whether STOC (1) is more cost efficient than other methods, (2) passes validity tests, (3) measures expectations of others, and (4) reveals individual preferences, not just those of the crowd. The results show that traders exhibit a self-preference bias when trading. Ultimately, STOC offers two key advantages over traditional market research methods: cost efficiency and scalability. For new product development teams deciding how to invest resources, this scalability may be especially important in the Web 2.0 world.

In this article, the authors present an information-processing model of self-regulation. The model predicts that consumers with an active self-regulatory goal will tend to focus on the cost (rather than the pleasure) of consumption, and as a result, they are better able to control their behavior. In contrast to prior research, the authors find that consumers with an active goal are most vulnerable to self-regulatory failure when the object of desire is farther away from them (in either time or space) because as the distance increases they focus less on the costs of consumption. Finally, results indicate that if product information is not externally available (i.e., it must be recalled from memory), people are more likely to focus on pleasure and fail at self-regulation. The results are robust across four experiments using a variety of stimuli, goal primes, and information-processing measures.

This study measures the degree of contagion or interpersonal influence in the diffusion of new consumer packaged goods (CPGs). The authors demonstrate that when an individual-level trial hazard model is properly specified to account for potential sources of biases, substantial contagion effects may be detected in the diffusion of many CPGs. Using longitudinal panel data on individual-level trial and repeat purchases of 67 newly introduced CPGs, they show that standard diffusion models fail to detect contagion. However, after extending the model to allow for spatial and temporal heterogeneity in contagion and controlling for various cross-sectional and temporal confounds, they find statistically significant contagion effects in 33 to 40 of the 67 sample products. The empirical evidence of contagion in the diffusion of many CPGs has important implications because most new product trial models for CPGs have assumed a priori that there is no contagion in the diffusion of these products. Moreover, the individual-level simultaneous analysis of the diffusion of 67 newly introduced CPGs provides useful insights into the unobservable network of influences among consumers. Such analysis allows a vendor to identify the most influential early adopters among its customers, who could help diffuse a new product more effectively in the market.

It is well established that consumers' evaluations of brand extensions depend on the quality of the parent brand and the fit between that brand and the extension category. The authors propose that the relative importance of these two factors is influenced by two key features of a typical shopping environment: the presence of visual information and the availability of comparison brands. In particular, the authors demonstrate that adding pictures and enabling brand comparisons shift consumers' preference from extensions of better-fitting brands to extensions of higher-quality brands. The authors propose that this occurs because pictures and brand comparisons create a more concrete representation of the extension, which in turn increases the importance of parent brand quality relative to brand–extension fit. They provide support for this underlying mechanism and discuss the practical implications of their findings.

Product line design for consumer durables often relies on close coordination between marketing and engineering domains. Product lines that evolve as optimal from marketers’ perspective may not be optimal from an engineering viewpoint, and vice versa. Although extant research has proposed sophisticated techniques to handle problems that characterize each individual domain, the majority of these developments have not addressed the interdependent issues across marketing and engineering. The author presents a product line optimization method that enables managers to simultaneously consider factors deemed important from both marketing and engineering domains. One major advantage of this method is that it takes into account the strategic reactions from the incumbent manufacturers and the retailer in the design of the product line. The author demonstrates in a simulation study that this method is applicable to problems with a reasonably large scale. Using data collected in a power tool development project undertaken by a major U.S. manufacturer, the study illustrates that the proposed method leads to a more profitable product line than alternative approaches that consider requirements from these two domains separately.

This article studies how to endogenously assess the value of a “superior” advertising position in the price competition and examines the resulting location competition outcomes and price dispersion patterns. The authors consider a game-theoretic model in which firms compete for advertising positions and then compete in price for customers in a product market. Firms differ in their competence, and positions are differentiated in their prominence, which reflects consumers' online search behavior. They find that when endogenously evaluated within the product market competition, a prominent advertising position might not always be desirable for a firm with competitive advantage, even if it is cost-free. The profitability of a prominent advertising position depends on the trade-off between the extra demand from winning the position and the higher equilibrium prices when the weaker competitor wins it. Furthermore, the authors show that the bidding outcome might not align with the relative competitive strength, and an advantaged firm might not be able to win the prominent position even when it values that position. They derive two-dimensional equilibrium price dispersion with the realized prices at the same position varying and the expected prices differing across different positions. They find that the expected price in the prominent position might not always be higher, implying that an expensive location does not necessarily lead to expensive products.