Common Method Variance in Advertising Research: When to Be Concerned and How to Control for It

In this article we discuss and analyze the critical issues related to common method variance (CMV) that are particularly relevant to advertising research and recommend best practices for assessing the effects of CMV in this domain. Specifically, we cover the development of CMV as a domain-specific methodological concern and the underlying sources of CMV that are likely to operate in cross-sectional survey-based studies in the field of advertising. We discuss in detail the available procedural and statistical techniques that can be applied to control for and/or measure the effects of sources of CMV in a single study and across research domains. In addition, we provide a critical look at how these techniques have been employed in past research and make recommendations for future examinations of CMV in advertising research.     

Internal Marketing at Continental Airlines: Convincing Employees that Management Knows Best

Maintaining a high level of customer service quality is necessary for success, particularly for firms in service industries, but employees need to be motivated to provide it. Management can provide the motivation through the use of compensation schemes and internal marketing. In this paper we examine profit sharing compensation schemes that reward employees for achieving customer service objectives. We discuss how such schemes should be implemented, and explain why management needs to convince employees through internal marketing programs about the benefits of its scheme. We obtain the optimal amount of profit that the firm should share with employees, and the optimal effort it should spend on internal marketing. Finally, we relate the analysis to a successful scheme implemented by Continental Airlines.     

Customer-centric pricing: The surprising secret for profitability

Companies spend enormous amounts of energy and capital in creating value for customers, but less regard is given to actually capturing the value they have created. Segmentation based on buying behavior uncovers a tremendous differential in willingness to pay for subjective product attributes such as convenience, status, and quality. Purchase decisions are made through an assessment of a myriad of factors balancing perceptions of value components against price in a subtle, complex, and often sub-conscious decision matrix. Customer-centric pricing requires the simultaneous and continuous assessment of product attributes, customer perceptions, and the circumstances of time and place by listening to customers' actions. It is a means of assuring that companies assess the value they create for customers and extract that value from the marketplace.     

How many pirates should a software firm tolerate?: An analysis of piracy protection on the diffusion of software

This paper examines the relationship between the rate of software diffusion and piracy. Literature suggests that tolerating some piracy can be justified since it speeds up software diffusion. The question is, how much should be tolerated? Using innovation diffusion models of software adoption by legal buyers and pirates, answers to this question are obtained for the three scenarios of monopoly, multiple generations of software and competitive markets. Results include, for example, that a monopoly should start with minimum protection of its software but well before the product has diffused half way, impose maximum protection and maintain it thereafter. The results provide important strategic guidelines for firms in the software industry for managing piracy.     

Author Order and Research Quality

We observe a great deal of heterogeneity in the manner in which author orderings are assigned both across and within academic markets. To better understand this phenomenon, we develop and analyze a stochastic model of author orderings. In our model, authors work equally hard to obtain priority in listings but final contributions are stochastic. Further, research outlets differ in their quality hurdles. In this setting, our simulation results are consistent with two empirical regularities. First, we find that the rate of alphabetization increases with the stringency with which papers are accepted for publication. Second, conditional on clearing the publication hurdle, quality increases with alphabetization. These findings arise because increases in the publication hurdle make it more likely that authors will exceed this threshold only when both contribute a high amount. This, in turn, leads to roughly equal contributions (alphabetization) and also generates a positive correlation between alphabetization and quality.     

A taxonomy of information technology-enhanced pricing strategies

As a result of evolving technology, opportunities for innovative pricing strategies continuously emerge. The authors provide an updated taxonomy to show how such emerging strategies relate to recent technological advances. Specifically, they cite increased availability of information, enhanced reach, and expanded interactivity as three technological advancements and identify six pricing strategies enhanced by these factors. They also discuss the role of utility, prospect, range, and signaling theories for emerging pricing strategies, along with several applications and managerial implications.     

Optimal product strategies in the presence of network externalities

A network externality exists when a user’s benefit from a product increases with the number of other users in the same network. We examine the possibility that a software firm may exploit network externalities by introducing a limited feature version of its commercially available software into the market. The two versions need not be perfectly compatible and network externalities are allowed to decline as the difference between the versions increases. We obtain conditions under which introducing a limited feature version is optimal.     

How consumers use product reviews in the purchase decision process

This paper uses individual level data to examine the influence of product reviews in different stages of the consumer’s purchase decision process. Specifically, a two-stage model consisting of consideration set formation and choice is posited, where the consumer can incorporate information from product reviews in each stage. The model is estimated using an online panel survey about hotel choice. We find that (1) consumers use product reviews more in the consideration set stage and less in the choice stage, (2) Bayesian updating of prior perceived quality better explains how consumers use product reviews compared to two competing updating methods, and (3) the monetary value of a unit increase in the mean of product reviews is computed. Our results suggest that managers should make product review information (their number, average, and variance) available from the beginning of the search process and encourage satisfied customers to write reviews.     

Efficient theory development and factor retention criteria: Abandon the ‘eigenvalue greater than one’ criterion

Other things being equal, a theory with fewer constructs is preferable over others. In exploratory factor analysis, a common method used in theory development, the most popular factor retention criterion used in marketing is the eigenvalue greater than one rule. Its use often results in over extraction, which leads to the development of less than parsimonious theories. Even the use of confirmatory factor analysis fails to detect the presence of these superfluous constructs. Although several more accurate criteria exist, they are not discussed in major marketing research texts, journals, and popular statistical software packages. In this paper, we appraise popular factor retention practices in marketing, demonstrate how they may lead to the development of inefficient theories, draw attention to a number of resources for choosing appropriate retention criteria, and develop an easy-to-use Web-based engine to effortlessly implement one such method, parallel analysis.