Knowledge that Transforms

How decision makers invest their effort among various issues is critical to organizational success ( Ocasio 1997 ). The authors investigate the effects of issue valence and issue capability on how decision makers allocate effort to an issue. They develop hypotheses regarding these constructs and test them in three studies. Results show that in the condition of high capability, decision makers are more likely to invest effort in an issue that is negatively, rather than positively, framed. Conversely, with low capability, they are more likely to invest effort in an issue that is positively, rather than negatively, framed. Results also clarify the variable focus on upside potential and risk taking as two mechanisms that underlie this preference reversal.

When people stockpile products, how do they decide when and how much they will consume? To answer this question, the authors develop a framework that shows how the salience and convenience of products influence postpurchase consumption incidence and quantity. Multiple research methods—including scanner data analysis, a field study, and two laboratory studies—show that stockpiling increases product salience and triggers consumption incidence among high-convenience products. However, when the decision is made to consume a product, stockpiling increases the consumption quantity for both high- and low-convenience products. In addition to providing new insights on how consumers make postpurchase consumption decisions, these results have implications for the debate on the value of promotions that induce stockpiling.

Increased access to individual customers and their purchase histories has led to a growth in targeted promotions, including the practice of offering different pricing policies to prospective, as opposed to current, customers. Prior research on targeted promotions has adopted a tenet of the standard economic theory of choice, whereby what a consumer chooses depends exclusively on the prices available to that consumer. In this article, the authors propose that consumer preference for firms is affected not just by prices the consumers themselves are offered but also by prices available to others. This departure from the conventional strong-rationality approach to targeted promotion results in a decidedly different optimal policy. Through a laboratory experiment, calibration of a stochastic model, and game-theoretic analysis, the authors demonstrate that ignoring behaviorist effects exaggerates the importance of targeting switchers as opposed to loyals. This occurs, though with intriguing differences, even when only part of the market is aware of firms’ differing promotional policies. The authors show that both the deal percentage and the proportion of aware consumers affect the optimal strategy of the firm. Furthermore, the authors find that offering lower prices to switchers may not be a sustainable practice in the long run, as information spreads and the proportion of aware consumers grows. The model cautions practitioners against overpromoting and/or promoting to the wrong segment and suggests avenues for improving the effectiveness of targeted promotional policies.