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Academic Trustees Reading List

Kusum Ailawadi’s Journal Must-Reads from 2014

Kusum Ailawadi is the Charles Jordan 1911 TU’12 Professor of Marketing at the Tuck School of Business at Dartmouth College. Her expertise is in the strategic interaction and distribution of power between manufacturers and their channel customers.

Of her 2014 journal must-reads, she noted:  “In these three very different recommendations, the common theme is an interesting question, fairly straightforward but still correct analysis, and concrete findings that managers can actually do something with.”

“Managing Customer Profits: The Power of Habits” by Denish Shah, V. Kumar, and Kihyun Kim, Journal of Marketing Research, December 2014

Ailawadi: This is a nice empirical analysis of almost a million customers of an U.S. home improvement retail chain. Denish and his co-authors delve into their purchase histories over a four-year period and identify several “habits”, or behaviors that the customers engage in repeatedly over time. They then focus on four habits – purchasing at the same store, buying on promotion, buying extremely reduced “specials” that are low-margin, and returning products. They document the incidence of these four habits, how much they are correlated with one another, how they evolve over time both as a function of past behavior and the retailer’s own marketing actions, and how they influence customer profitability.

The paper does a great job of laying out its objectives, working through them in a series of three “studies”, and writing in a transparent, reader-friendly style. A great read for anyone in the retailing business on an important issue – retailers need to understand which habits lead customers to be less or more profitable, and what they themselves might be doing to encourage or discourage these habits. I wish the article had a little more to say about how to predict these habits from easily observable customer characteristics and early purchase behavior. Maybe in their next paper!

 Free access to journal article until February 27, 2015

“Social Networks, Personalized Advertising, and Privacy Controls” by Catherine Tucker, Journal of Marketing Research, October 2014

Ailawadi: We hear so much every day about the tension between privacy concerns and relevance in targeted and personalized advertising. Catherine lays out a nice, relatively clean, field experiment to show that the perception of easy control over one’s private data improves response to advertising even though there is no change in the degree of targeting and personalization of the ads.

She makes use of a change in Facebook’s privacy policy that happened to occur in the middle of a field experiment being conducted by a non-profit to see whether personalization affects advertising response. The policy change basically introduced an easy to use privacy control interface. The cool thing is that two simple figures in the paper (figures 1 and 2) illustrate her main finding, though she subsequently convinces the reader of the robustness of those findings in many ways. Basically, ads that are targeted and personalized work better (two times better!) after the policy change. Furthermore, the effect is bigger for ads that use more unique information, and for groups of consumers who actually used the privacy controls to restrict their information.

So, once consumers believe they have the choice of restricting access to their data, they actually respond better to personalized advertising. Lots in this article for advertisers, advertising platforms, policy makers, and consumers to chew on!

 Free access to journal article until February 27, 2015

“Employee Based Brand Equity: Why Firms with Strong Brand Equity Pay Their Executives Less” by Nader Tavassoli, Alina Sorescu, and Rajesh Chandy, Journal of Marketing Research, December 2014

Ailawadi: The title says it all for this paper. It’s a fun read with a simple message. The impact of a brand’s equity goes far beyond its customers. It also brings value from its effect on the attitudes and behaviors of its employees. Nader Tavassoli and his co-authors provide a strong basis in identity theory for why employees in senior management positions, particularly young executives and CEOs, would be willing to accept lower compensation in exchange for being associated with a strong brand. Their analysis of a little over 2,700 executives (almost 500 of whom are CEOs), using brand equity data from BAV Consulting, compensation data from ExecuComp, and control variables form other sources including Compustat, documents a significantly negative effect of brand equity on executive pay, and a bigger negative effect especially for CEO pay. The authors do a nice job of controlling for many other variables that drive compensation so the effect is believable. I enjoyed reading the article – a refreshing change from the usual topics, and a nice blend of theory and empirics. 

 Free access to journal article until February 27, 2015

Back to Academic Trustees Reading List 2014

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