Cannibalization vs. competition: An empirical study of the impact of product durability on automobile demand

Many durable product categories have well developed and organized secondary markets that make it easy for consumers to purchase used versions in lieu of new ones. Manufacturers in these categories therefore face a dilemma in deciding on how much durability to build into their new products. High durability levels increase the risk that future new product sales are lost to used versions (the cannibalization effect), but can also help the firm take sales from new and used versions produced by its rivals (the competition effect). However, there has been no empirical research to determine the relative sizes of these two effects.Our research seeks to fill this gap in the literature via an empirical study of the demand for new and used vehicles in the US automobile market. We analyze two datasets; the first from the mid-sized sedan segment in the Indianapolis DMA during 2004–2006 and the second from the Entry Sports Utility segment in the Los Angeles DMA during the period 2003–2005. We propose and implement a durability metric that is based on the over-time trajectory of used car prices and estimate a structural model of differentiated product demand with heterogeneous consumers who choose among new and used vehicles and consider durability in their choice decisions. Both datasets reveal that durability significantly impacts the demand for new and used vehicles with mean durability elasticities estimated to be about 1.7. Both datasets also show that the competition effect (85%) is significantly greater the cannibalization effect (15%). While the prior theoretical literature generally recommends that firms avoid cannibalization by reducing product durability, our findings imply that manufacturers who increase the durability of their products may see net sales gains as a result.     

Material Distortion of Economic Behaviour and Everyday Decision Quality

Misleading information and unfair commercial practices have to be viewed against the background of what consumers otherwise do, i.e., what their purchase decisions look like when no misleading information or no unfair commercial practices are in place. This article provides some of this background by studying how consumers sample information when making an in-store purchase decision. This was done by an eye-tracking study which reveals to what extent consumers succeed in purchasing the products that best meet their purchase intentions when only a representative amount of misleading information is present. The study shows that decisions were suboptimal in relation to what the consumers claimed they wanted to purchase. Only in one product category did consumers in this study actually look at products that were slightly better than average, and as a result, they mainly selected products that were just as often poor as good. If the proportion of bad purchase decisions based on misleading information is small enough, perhaps it might be better to direct the authors’ attention to other ways of improving the decision environments that consumers encounter. In addition, the eye-tracking study provides some insight into how consumers sample information when making an in-store purchase decision. The present data show that consumers invested on average of less than 1 s to look at products.     

Pre-launch Prediction of Market Performance for Short Lifecycle Products Using Online Community Data

Prediction of sales for short life-cycle products can be problematic. Generic predictive models based on past launches may provide only crude historic data which are unsuited for distinctive, innovative products. This paper investigates the role of online communities in providing pre-launch data to predict post-launch sales. We argue that levels of awareness, word-of-mouth, expectations, and adoption intention prevailing within an online community for an upcoming product have an independent direct effect on the product's future sales. Additionally, we test the complementarity effect of these community variables by introducing a higher order construct called Pre-release Community Buzz, to demonstrate the incremental explanatory power of using pre-launch community variables to predict post-launch sales. Data for community variables were collected from a movie-based online community, and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). We found strong support for both direct and complementarity effects of community variables in predicting a movie's opening week sales. We also found that community variables mediate the effects of generic predictor variables such as MPAA ratings, star cast, production budget and competition on opening week sales. Tests for robustness demonstrated the value of community variables. Models which included community variables had higher predictive power than those without. Implications for theory and practice are presented.     

A purchase decision support model considering consumer personalization about aspirations and risk attitudes

Ranking alternative products to help consumers make better purchase choices is a valuable research topic. Most previous decision support models cannot be well applied to heterogeneous consumers. This paper focuses on establishing a personalized interactive model to assist consumers make better buying decisions with less effort. For the alternative products provided by consumers, we collect online reviews and parameter configurations of alternative products and then obtain the fusing evaluative information. As consumers are dominated by bounded rationality, they only provide partially key attribute weights, based on which, we construct an optimizing model to obtain the optimal attribute weights of customers for products. Then, a satisfaction function is proposed by uniting aspiration levels and risk attitudes of consumers and a compensatory decision rules is established to rank and recommend the brands to consumers. Finally, practicability of this study is illustrated with a real car purchase case. Through the case study, it can be seen that the proposed decision support model generates a personalized list of alternatives based on consumer's own utility function about risk attitudes, aspiration levels, and preferences for product attributes, which further confirms that the proposed model can capture the personalized needs of consumers. Theoretical and managerial implications of this model as well as advantages are further illustrated.     

The Doctrine of Double Effect and the Question of Constraints on Business Decisions

How does the doctrine of double effect apply to business decisions to sell products which may be harmful to consumers? Lawrence Masek believes that some authors have misapplied the doctrine to this type of decision and, as a consequence, have committed themselves to placing unwarranted constraints on businesses. Seeking to correct this mistake, Masek presents his account of how the doctrine applies here, an account which is rather permissive but which, he claims, nevertheless preserves the virtues of the doctrine. It will be seen, though, that his attempt to loosen these putatively unnecessary constraints by appealing to consumer autonomy and an intuition about the morality of producing harmful products leaves the doctrine of double effect irrelevant to this type of decision. His argument that the doctrine is less restrictive in this context than others suppose leads ultimately to the conclusion that the doctrine does not constrain this kind of business decision at all.     

The role of positive emotions in experiential decisions

This research examines how consumers experience decision making for experiential products such as vacations. We combine data from 1) ethnographic interviews, 2) online community discussion forums, and 3) an introspective vacation-planning task to explore the experience of emotion in the decision process and to develop a new model of decision making that extends extant decision theories. We find that consumers experience a variety of positive emotions as they plan vacations, from facilitative feelings that guide the plan to fantasy feelings consumed for pleasure. Positive emotions are most evident in reaction to imagery and when the consumer's self identity is salient, and often precede more analytic information processing. Overall, this research offers a richer understanding of the emotional nature of consumer decision making for experiential products and services.     

Bi-sourcing in the global economy

In organizing production, many firms conduct bi-sourcing, i.e., acquiring the same set of inputs both by buying from external suppliers (outsourcing) and carrying out in-house production (insourcing). We show that, by adopting the bi-sourcing strategy, firms can use the payoff from one supplier as a backup option in negotiating with the other supplier (the cross-threat effect). When firms conduct bi-sourcing in the global economy consisting of the high-waged North and low-waged South, they need to make the location choice for both insourcing and outsourcing. We find that the low wage in the South can encourage investment by component suppliers (the cost effect). However, firms may achieve a better cross-threat effect by relocating overly strong component supplier from the cost-advantageous South to the cost-disadvantageous North (the balancing effect). The optimal bi-sourcing strategy is determined by the interplay of the cost effect and the balancing effect.     

When consumers penalize not so green products

To cash in on consumers’ willingness to pay higher prices for green products, several companies are promoting conventional products as green by highlighting a few green attributes. Through a theoretical lens, the authors investigate how consumers perceive such attempts. This research illustrates that not so green products make consumers sensitive to the monetary sacrifice associated with the purchase of such products. The current research shows that consumers have a negative attitude toward such products and they become concerned about the ethicality of the company when they encounter such products. Both implicit and explicit measures suggest that consumers notice the company's motive behind such practices which, in turn, impacts their price perceptions.     

Disentangling Effacement,Omnivore, and Distinction Effects on the Consumption of Cultural Activities: An Illustration

Recent studies of cultural activities in America have stressed the importance of three sorts of phenomena: (1) a boundary-effacement effect in which members of different classes are to some degree homogeneous in their preferences (colloquially, some things are liked or disliked by everybody); (2) an omnivore effect in which upscale people tend more than their more downscale counterparts to engage in or appreciate a broad variety of cultural activities (some people like everything); and (3) a distinction effect in which more upscale consumers use certain cultural habits as a way of marking their status-related differences from more downscale people (different people from different backgrounds like different things to different degrees). However, in arguing for one or another of these three phenomena and often favoring just one perspective over the others, various authors have tended to lose sight of how the three effects may operate simultaneously. We address the resulting confusion by proposing a simple conceptual schema that embraces all three phenomena in a manner not heretofore recognized and by providing an illustration of how we might disentangle these three effects in an empirical analysis of cultural activities.     

Exploring Postconsumption Guilt and Pride in the Context of Sustainability

This research explores the feelings of guilt and pride experienced by consumers after a purchase decision that involves issues of environmental and social sustainability. Through a multi‐method design, the authors examine key dimensions that influence the process of emotional appraisal, illustrate the characteristics of appraisals of guilt/pride and investigate the consequences that emotions have on future choices. In this exploratory research, when a purchase decision includes an ethical dilemma, consumers were found to express guilt or pride even when the purchase is not intentional, i.e. forced by circumstances. Moreover, the study explores how emotions experienced after decisions may have a positive influence on the future purchase of sustainable alternatives. Finally, the paper proposes a new model that describes the process of emotional appraisal and reports on a number of dimensions that were found to lead to guilt and pride. The insights presented extend knowledge of two key consumer emotions and present important implications for practitioners promoting ethical products.     

Would You Like to be a Prosumer? Information Revelation,Personalization and Price Discrimination in Electronic Markets

Electronic commerce and flexible manufacturing allow personalization of initially standardized products at low cost. Will customers provide the information necessary for personalization? Assuming that a consumer can control the amount of information revealed, we analyze how her decision interacts with the pricing strategy of a monopolist who may abuse the information to obtain a larger share of total surplus. We consider two scenarios, one where consumers have different tastes but identical willingness to pay and another with high and low valuation customers. In both cases full revelation may only result if the monopolist can commit to a maximum price before consumers decide about disclosure.     

Intermediate Choice Lists: How Product Attributes Influence Purchase Likelihood in a Self-Imposed Delay

Many online retailers enable consumers to postpone a purchase decision by placing a desired item onto an intermediate choice list, such as a wish list or saved-for-later list. This research demonstrates that using a list in this way decreases purchase intent for the wait-listed products, relative to the same choice made without the option to delay the decision. The findings of five experiments show that purchase likelihood is affected by a shift in the importance, or weight, of product attributes. Specifically, the attributes that are weighted more heavily in the decision to place an item on an intermediate choice list are then weighted less heavily in the decision to purchase an item from that list. This shift in attribute weighting suggests that consumers may switch from more noncompensatory to more compensatory decision-making between the initial decision to use an intermediate choice list, and the later decision of whether to purchase the item from the list. This process tends to diminish the importance of the attractive attributes that encouraged consumers to put these items on lists in the first place. These findings have implications for retailers who wish to understand the risks and benefits of wish lists and related tools, and for consumers who desire to reduce impulsive purchases.     

Decision Making by Low‐Literacy Consumers in the Presence of Point‐of‐Purchase Information

Low‐literacy consumers face disadvantages when making product choices. This article presents the results of two studies designed to explore differences in decision‐making behavior across consumer literacy levels, focusing on consumers’ ability to evaluate information in print ads and product packaging. The authors demonstrate that the presence of a visual decision aid at the point of purchase can improve choice for low‐literacy consumers.     

Evaluation and Choice as a Satisficing Process

The question of whether individuals are rational or irrational in their decision‐making has long been an area of interest to academics and marketers, as the different decision styles require differing use of information sources and choice criteria by consumers during the buying process. As such, marketers would be required to adopt different communication strategies and stress different marketing mix or product features if they were to be successful in influencing the consumer’ s final choice.

The debate can be classified into whether or not consumers follow a formalised decision sequence of search and evaluation leading to final product choice. If consumers are not prepared to commit themselves to the cognitive and behavioural effort required by this formal process then they will satisfice their decision‐making, applying simplifying strategies to arrive at a satisfactory, although not the optimum, choice.

This paper reviews the common assumptions of search and choice, suggesting a three‐stage model which can be used to guide marketing strategy. Research into the decision process used by consumers in the acquisition of a video recorder is used to illustrate the operation of the satisficing model. Implications for marketing strategy are then discussed.     

Decision-Making Strategies for the Choice of Energy-friendly Products

Although energy efficiency of many products has been improving constantly, residential energy consumption is not decreasing as much as desired. Therefore, the goal of the European Union (EU) and many other countries is to promote energy-friendly product choices (i.e., choice of products with low energy consumption). In a purchase situation, consumers are confronted with a wide range of energy-related information that can influence the decision-making process. Understanding how consumers reach a decision based on the information provided and identifying decision-making strategies that are beneficial or destructive in terms of energy friendliness is crucial for the improvement of existing energy-policy measures and, consequently, for the successful achievement of target energy saving goals. This paper provides insights from an exploratory eye-tracking study (N?=?59) investigating consumers’ decision-making process. Participants were required to identify the most energy-friendly television (i.e., the television with lowest energy consumption). Cluster analysis revealed three consumer segments with different decision-making strategies: the energy-directed lexicographic, unsystematic lexicographic, and unsystematic exhaustive strategies. The energy-directed lexicographic strategy resulted in 60% optimal choices in terms of energy friendliness, unsystematic lexicographic in 33%, and unsystematic exhaustive in 38%. No decision-making strategy resulted in 100% optimal choices in terms of energy friendliness. Findings emphasize that lexicographic strategies can successfully identify energy-friendly products when the correct information (i.e., actual energy consumption) is used. However, a lexicographic strategy can be very misleading and result in non-optimal choices in terms of energy friendliness when it is based on ambiguous information (i.e., energy efficiency information) that does not enable a conclusive decision. Further, this paper discusses implications for policy-makers and marketers for the promotion of energy-friendly consumer behaviour.     

Designing the content of advertising in a differentiated market

In many markets, consumers use attribute information to assess the value they expect from purchasing a product or service. This includes many low involvement experience goods including take-out food, many packaged good categories and restaurants. In these markets, quality differences exist but many differences are horizontal in nature: the consumer is interested in finding a product that meets her unique tastes. Beyond ensuring that consumers know the brand, the category and the price; it seems advertising should provide consumers with attribute information. However, a significant proportion of advertising does not provide it. In fact, within the same category, competitors respond to messages that emphasize detailed attribute information with messages that are devoid of attribute information. These messages are uninformative about product attributes. We explore how competition in a differentiated market is affected by the ability of a firm has to choose uninformative messages. We construct a model to investigate the factors that affect a firm’s decision to use advertising with detailed attribute information or advertising that does not provide it. The model demonstrates that content decisions about advertising are affected by the differences between products, the range of heterogeneity in consumer tastes and the degree to which costs increase as a function of the quantity of information in advertising. Surprisingly, even when the cost to increase the quantity of information in advertising is low, uninformative campaigns can be more profitable than campaigns with attribute information. The analysis also demonstrates that firms can be more likely to provide attribute information when there are less consumers that are attribute-sensitive. Finally, the model shows that uninformative messages can create “artificial differentiation” in some situations.     

The effect of a Halal label and label size on purchasing intent for non-Muslim consumers

This study examined whether the purchasing intent of non-Muslim consumers in Taiwan was negatively affected by Halal labeling on meat products. Specifically, does a Halal label or the size of the Halal label have an impact on purchasing intention? A multinomial logit model with a random utility theory was utilized to determine the probability of purchasing Halal labeled meat products in Taiwanese traditional markets. The survey was distributed via Survey Monkey and 907 responses were collected. Results showed that a vast majority of non-Muslim Taiwanese consumers would still buy (33%) or try to buy (55%) Halal labeled meat products. Further, larger sized Halal labels did not keep non-Muslim consumers from purchasing the meat products. Rather, consumers showed higher purchasing intent with a larger Halal label, as long as the butchers adopted cold storage techniques to help keep the meat fresh. Therefore, governments, companies, and traditional market butchers should be less concerned about adopting Halal labels in traditional markets. The results of this study supports prior studies and confirms that non-Muslim consumers in Taiwan do not appear to be negatively influenced by a Halal label, regardless of the label size.     

Reversing the Similarity Effect in Stock‐Outs: A New Look at a Renowned Phenomenon in Consumers’ Brand Switching Behavior

Over 40 years of research has established the robustness of the similarity effect (SE; Tversky, 1972 ), which states that the introduction of new options into choice sets predominantly reduces the choice share of similar options. The present work examines whether the SE systematically reverses when real brands are excluded from assortment subsets, as is the case with stock‐outs in real purchase decisions. To this end, within‐subject decisions are examined under certain out‐of‐stock (OOS) conditions in an enhanced experimental design that resembles real shopping environments. Specifically, unforced choices of experienced consumers, inclusive of real payments, are observed for products in online transactions. The results of two studies corroborate the existence of a reserved SE. Specifically, the OOS‐induced switching patterns systematically refute the assumptions of classic economic theory, since consumers disproportionately switch to alternatives which are similar to the unavailable item in contrast to dissimilar substitutes. Finally, managerial implications and potential directions for follow‐up research in the general domain of marketing are deduced.     

Antecedents and Implications of Expiration Date Search Effort

When consumers search for and check expiration dates, the risk of purchasing and consuming a stale and denigrated quality product reduces. Since checking expiration dates has a significant impact on consumers' purchase and consumption decision making, the authors investigate what motivates consumers to search for expiration dates while shopping for and before consuming perishable grocery products. This research adapts and extends the information search model (Schmidt and Spreng 1996) by providing new insight on information search as not only a prepurchase but also a consumption stage activity. Findings suggest that expiration date search effort is influenced by perceived risk, time pressure while grocery shopping, and the motivation of checking expiration dates. These findings provide several implications for consumers and policymakers.