The right metrics for marketing-mix decisions

This study addresses the following question: For a given managerial, firm, and industry setting, which individual metrics are effective for making marketing-mix decisions that improve perceived performance outcomes? We articulate the key managerial takeaways based on testing a multi-stage behavioral framework that links decision context, metrics selection, and performance outcomes. Our statistical model adjusts for potential endogeneity bias in estimating metric effectiveness due to selection effects and differs from past literature in that managers can strategically choose metrics based on their ex-ante expected effectiveness. The key findings of our analysis of 439 managers making 1287 decisions are that customer-mindset marketing metrics such as awareness and willingness to recommend are the most effective metrics for managers to employ while financial metrics such as target volume and net present value are the least effective. However, relative to financial metrics, managers are more uncertain about the ex-ante effectiveness of customer-mindset marketing metrics, which attenuates their use. A second study on 142 managers helps provide detailed underlying rationale for these key results. The implications of metric effectiveness for dashboards and automated decision systems based on machine learning systems are discussed.     

Choosing among alternative new product development projects: The role of heuristics

The initial screening decision that marketing managers make is critical. It requires the selection of what innovation project to invest in, which is fundamental to marketing success. However, our knowledge of how managers make these decisions and how this impacts performance is limited. By drawing upon cognitive psychology and the managerial decision-making literature, we address two critical questions. The first question focuses on identifying specific decision-making types (e.g., specific heuristics, intuition) used when making an innovation screening decision. Based on this analysis and prior research, we develop specific decision-maker profiles about how an individual manager decides. The second research question is about connecting these profiles with performance. Specifically, it addresses what the consequences of different decision-maker profiles are on the perceived accuracy and speed of decision-making? Data were collected from 122 senior managers in these industries. We find that when heuristics are used alone, or concurrently with intuition, managers make decisions that are as accurate as when they rely on analytical decision-making. However, the process is significantly faster. The findings provide an important step toward a more comprehensive understanding of decision-making at the front-end of innovation.     

See What We Want to See? The Effects of Managerial Experience on Corporate Green Investments

How impartial are managerial decisions? This question is particularly concerning when it comes to making green investment decisions in the face of stakeholder pressures. When managers respond to stakeholder pressures, their personal cognition, judgment, and past experiences play a role in determining their responses. The salience of particular stakeholder claims may be determined by deeply rooted individual preferences. This research investigates how a manager’s past experiences can influence green investments. Data are gathered from 247 managers about their past experience and their employer’s performance data. These data are combined with managerial responses to a vignette-based experiment, which required managers to make green investments based on a decision scenario where they are exposed to different types and strength of stakeholder pressure (from consumers and the community). Results suggest that managers’ years of experience, their employers’ financial performance, and their employers’ market performance influence investment decisions even when making decisions under new and different set of circumstances. While the employers’ financial performance influences managers to invest more, the employers’ market performance only influences managers’ investment in the presence of either high consumer or high community pressure. Compared to less-experienced managers, experienced managers invest more in response to consumer pressure but less in response to community pressure. Practical and theoretical implications of these findings in green management are explored.     

Wage Cuts and Managers’ Empathy: How a Positive Emotion Can Contribute to Positive Organizational Ethics in Difficult Times

Using the lens of positive organizational ethics, we theorized that empathy affects decisions in ethical dilemmas that concern the well-being of not only the organization but also other stakeholders. We hypothesized and found that empathetic managers were less likely to comply with requests by an authority figure to cut the wages of their employees than were non-empathetic managers. However, when an authority figure requested to hold wages constant, empathy did not affect wage cut decisions. These findings imply that empathy can serve as a safeguard for ethical decision making in organizations during trying times without generally undermining organizational effectiveness. We conclude by discussing the implications of our research.     

Is Decision Style Related to Moral Development Among Managers in the U.S.?

The decision making process is an important aspect of the managerial function that is becoming increasingly complex due to technological and global impacts. It is essential, therefore, to understand why various managers approach the decision making process differently. One area that is related to how managers perceive and process the information that is associated with decision making, is that of decision style.It is not enough, however, to explore decision style in isolation, as some of the decisions that managers make often entail ethical components concerning the ability to balance the interests of diverse groups. Moral reasoning is therefore important for every manager, and could impact the decision style that is employed by such managers. The relationship between managerial decision style and moral development is one that could provide unique insights into the area of decision making, yet it is an area that has remained relatively unexplored.Using Alan Rowe's Decision Style Inventory (DSI), in conjunction with James Rest's Defining Issues Test (DIT), the purpose of this study was to ascertain the relationship between decision style and moral development among U.S. managers.The findings of this study of 270 managers suggest that there is a relationship between higher directive decision style scores and lower principled reasoning scores. Since the focus of individuals who demonstrate a directive decision style is on task completion, perhaps the consideration of the many alternatives that are necessary to reason at a more ethically attuned level is neglected. Managers who exhibit a directive decision style might be responsible for the management of non-managerial populations of workers, and in such a capacity, set the ethical tones and examples for employees to follow. Since training and educational interventions in the area of ethics have been shown to increase moral development scores, those managers who are identified as displaying a directive decision style might benefit from such training.     

Decision making behavior in smaller entrepreneurial and larger professionally managed firms

The main findings in this study are that: • Entrepreneurs from smaller firms are less comprehensive in their decision behavior than professional managers from larger firms, with comprehensiveness defined as the degree to which an individual follows a formal rational decision process; • As decision comprehensiveness declines, so too does organizational performance, both among entrepreneurs and professional managers.The present study was based on the responses of 15 entrepreneurs from smaller firms averaging 25 employees and 13 CEOs and other top level corporate executives from larger, more professionally managed firms averaging 740 employees. The firms were randomly selected from a list of mid-Atlantic electronic manufacturing firms. Field interviews and questionnaires were employed, as well as a decision scenario involving a series of questions to which the entrepreneur or professional manager responded.After reviewing the literature on entrepreneurship, the researchers noted that most of it focused on developing profiles of entrepreneurs—for example, that they were high achievers, impatient and made decisions quickly. However, little—if any—research has focused on the behavior of entrepreneurs, particularly when compared to that of professional managers. Given this gap in the research, a field study was designed to compare the decision behavior of entrepreneurs and professional managers. It was expected that entrepreneurs would be less comprehensive than professional managers, but given previous research on comprehensiveness, it was difficult to predict the consequences of this less comprehensive model for performance.The researchers note in the discussion and conclusion that the results of the study have major implications for entrepreneurs and professional managers. Granted that decision comprehensiveness should be emphasized, they question the ability of entrepreneurs to change their decision behavior. It is argued that many of the drawbacks of comprehensiveness can be overcome by more sophisticated planning techniques and information processing systems. The paper concludes by stressing the need for research on techniques and ways to train entrepreneurs and managers to be more comprehensive.In summary, the present study has produced some important preliminary findings. It confirmed in larger scale studies, they could have major implications for the manner in which entrepreneurs and professional managers are trained and developed.     

New product decision making: How chance and size of loss influence what marketing managers see and do

This article empirically examines, in a new‐product decision context, the relationships among risk propensity, perceived risk, and risky choice decisions, when risk is operationalized as the chance of loss and the size of loss. The results indicate that perceptions of chance of loss directly influence choice among alternatives possessing different chances of loss and gain, whereas risk propensity directly influences choice among alternatives that differ in their size of loss and gain. The findings extend previous research by identifying dimension‐specific effects (a) between who the decision maker is and the size of an investment's potential loss, and (b) between what the decision maker sees and the chance that an investment will experience a loss. These results not only contribute to theory, but also provide marketing managers with guidance for their risky choice decisions. The composition of a new product's risk has implications for the decisions marketing managers make, for the placement of managers in risk‐sensitive positions, and for the presentation of information to individuals with oversight responsibility for the firm's product strategy decisions. © 2002 Wiley Periodicals, Inc.     

Considerations in Ethical Decision-Making and Software Piracy

Individuals are faced with the many opportunities to pirate. The decision to pirate or not may be related to an individual's attitudes toward other ethical issues. A person's ethical and moral predispositions and the judgments that they use to make decisions may be consistent across various ethical dilemmas and may indicate their likelihood to pirate software. This paper investigates the relationship between religion and a theoretical ethical decision making process that an individual uses when evaluating ethical or unethical situations. An ethical decision making model was studied for general unethical scenarios and for the unethical behavior of software piracy. The research model was tested via path analysis using structural equation modeling and was found to be appropriate for the sample data. The results suggest that there is a relationship between religion and the stages of an ethical decision making process regarding general ethical situations and software piracy.     

Optimal Duration of Magazine Promotions

The planning of promotions and other marketing events frequently requires manufacturers to make decisions about the optimal duration of these activities. Yet manufacturers often lack the support tools for decision making. We assume that customer decisions at the aggregated level follow a state-dependent Markov process. On the basis of the expected economic return associated with dynamic response to stimuli, we determine the ideal length of marketing events using dynamic programming optimization and apply the model to a complex promotion event. Results suggest that this methodology could help managers in the publishing industry to plan the optimal duration of promotion events.     

Deciding on the robotic process automation operating model: A checklist for RPA managers

Robotic process automation (RPA) has emerged as a technology promising various quick wins: fast deployment, immediate efficiency gains, and low investment requirements. While these promises have resulted in large-scale deployment of RPA in diverse industries, the choice of operating model remains tricky. This article identifies three key decisions for RPA managers: (1) the who decision, pertaining to selection of internal versus external resources for RPA development; (2) the how decision, on whether the organization will pursue RPA deployment on-premises or through the cloud; and (3) the what decision, on whether to employ proprietary RPA tools or an open-source solution. To shed light on how these decisions are made and to pinpoint their interdependencies, seven organizations’ choices connected with these three decisions are presented. The study’s main contribution is a decision checklist that can facilitate RPA managers’ navigation of the decision-making process, their gathering of relevant information, and their choice of the model best matching the organization’s needs.     

Uniform or spatially differentiated? Pricing Strategies for Information Goods under simultaneous and sequential decision-making in multi-market context

Product pricing has been one of the central issues in the field of marketing and consumer services for managers and researchers alike. However, pricing of information goods has not been paid much attention in literature. For information goods the marginal costs of production and transportation of information goods (online movies, video games, etc.) is almost zero. Hence, the pricing decisions need to be thought of purely in competitive profit maximizing terms. This paper proposes mechanisms for managers to evaluate and base their pricing decisions on rational frameworks that takes into account various situations when they enter a new market and when they are incumbent in a new market. This paper addresses the research gap of spatially differentiated pricing strategy for information goods that has not been studied in literature so far. We create stylized theoretical models under both, sequential and simultaneous decision-making conditions. We determine the equilibrium price and the equilibrium profit for the two firms for each of the four possible scenarios based on their pricing strategies. Our analysis reveals that the dominance of one pricing strategy over the other depends on product differentiation factor capturing joint effect of the product substitutability and consumer's price sensitivity under sequential decision making and the market size along with consumer's price sensitivity for simultaneous decision making. As an extension, we propose a generalized model demonstrating the uniform and spatially differentiated pricing strategies of the firms under simultaneous and sequential selection for multiple domestic and international markets.     

Ethical Decision Making: Special or No Different?

Theories of ethical decision making assume it is a process that is special, or different in some regard, from typical individual decision making. Empirical results of the most widely known theories in the field of business ethics contain numerous inconsistencies and contradictions. In an attempt to assess why we continue to lack understanding of how individuals make ethical decisions at work, an inductive study of ethical decision making was conducted. The results of this preliminary study suggest that ethical decision making might not be meaningfully “special” or different from other decision making processes. The implications of this research are potentially significant in that they challenge the fundamental assumption of existing ethical decision making research. This research could serve as an impetus for further examination of whether ethical decision making is meaningfully different from other decision making processes. Such studies could create new directions for the field of business ethics.     

The Effect of Firm Profit versus Personal Economic Well Being on the Level of Ethical Responses Given by Managers

Members of organizations are continually making decisions that have important consequences for themselves and the firms for which they work. In some cases these decisions affect human well being and social welfare and thus have important ethical impacts for those affected by the decisions.This study examines if certain strategic situations (enhancement of firm profits versus personal economic well being) cause decision makers to act more or less ethically. A questionnaire consisting of two vignettes which depicted actual business situations was used to collect data from 171 managers of a large Southeastern financial and communication conglomerate. Results from multivariate repeated measures tests suggest that managers will vary their level of ethical response when faced with a situation where their own economic well being is at stake.     

The company, product and market dimensions of new product decision scenarios

Studies show that managers synthesize information and make strategic decisions in a situation-specific mode. Making effective new product decisions is a critical problem and managers are urged to improve their performance by adjusting their decision approach to fit the type of situation. Identifying situation-specific new product scenarios is, therefore, an important prerequisite. This article identifies five basic new product decision scenarios using a cluster analysis of factor scored company, product and market data. These provide insights about the situations managers typically face when evaluating new products.     

Risk Perception in the Short Run and in the Long Run

There is an ongoing controversy in financial economics regarding the role of time horizon in portfolio selection. This problem is relevant in a broader context, wherever consumers or managers make decisions that involve both time and risk. The purpose of this paper is to review recent findings from the decision making literature so as to shed new light on how the short run vs. long run contingency may determine risk taking and perception.     

A lack of insight: do venture capitalists really understand their own decision process?

What decision criteria do venture capitalists (VCs) use to make their investment decisions? This question has received much attention within entrepreneurship literature (i.e.,Wells 1974; Poindexter 1976; Tyebjee and Bruno 1984; MacMillan, Seigel, and Subba Narasimha 1985; MacMillan, Zeman, and Subba Narasimha 1987; Robinson 1987; Timmons et al. 1987; Sandberg, Schweiger, and Hofer 1988; Hall and Hofer 1993; Zacharakis and Meyer 1995) for a number of reasons. First, VC-backed ventures achieve a higher survival rate than non-VC-backed businesses (Kunkel and Hofer 1990; Sandberg 1986; Timmons 1994). Second, a better understanding of the decision process may lead to even better survival rates. Finally, entrepreneurs seeking venture funding benefit if they understand what factors are most important to the VC.Although past research has greatly contributed to our understanding of the decision, it may be biased and somewhat misleading. The majority of past studies rely on post hoc methodologies (e.g., interviews and surveys) to capture the decision process. Post hoc methods assume that VCs can accurately relate their own decision processes, but studies from cognitive psychology suggest that people, in particular experts, are poor at introspecting. Introspection is subject to rationalization and post hoc recall biases. Using social judgment theory and the associated lens model as a framework, the current study investigates how well VCs introspect about their own decision process and, by extension, whether the past research efforts are biased.The current research uses policy capturing, a real-time method common in cognitive psychology, to capture the VC's “actual theories in use” versus their “espoused theories” (Hitt and Tyler 1991). Policy capturing requires that VCs make a series of real-time decisions based on various information factors. Regression analysis of each VCs' decision captures how important each of the information factors is to her/his actual decision process. After the VCs make their decisions, they provided a weighting of how they believe they used the information factors. Comparing the captured decision policies to stated decision policies provides a measure of VC insight.The findings suggest that VCs are not good at introspecting about their own decision process. Even within the confines of a controlled experiment, which greatly reduces the amount of information considered, VCs lacked strong understanding of how they made decisions. Most decision-makers would like to have all relevant information available for their decision. However, as more information becomes available, insight diminishes. Finally, this study finds that VCs are very consistent in their decision process, even though they do not necessarily understand how they make their decisions.VCs face a plethora of information when making an investment decision (i.e., business plan, outside consultants, due diligence, etc.). It may be difficult for VCs to truly understand their intuitive decision process because of all the noise caused by this information overload. This lack of systematic understanding impedes learning. VCs cannot make accurate adjustments to their evaluation process if they do not truly understand it. Therefore, VCs may suffer from a systematic bias that impedes the performance of their investment portfolio. The methodology used in this experiment can be modified and used as a training tool for active VCs. In addition, the consistent nature of VC decision-making (even if they do not have a strong understanding of that process) is favorable to the development of decision aides. Decision aides can minimize the danger of salient information (e.g., the lead entrepreneur is a winner) clouding the VC's judgment.Past research also needs to be interpreted in a new light. Although VCs undoubtedly use some of the information cited in past studies, the relative importance of that information needs to be reevaluated. VCs may not, for instance, rely most on the background of the entrepreneurial team. In addition, it is likely that the past studies provide more information factors than VCs actually use. People have a tendency to overstate the information they believe they relied upon and to use far less information (typically three to seven factors) to make a decision than they actually think they use. The methodology used in this experiment has the potential to identify the more relevant information factors cited in previous work.Even though VCs are experts in the new venture funding realm, their decision process has room for improvement. Almost 40% of all backed ventures fail to provide a return to the VC. Considering the billions invested each year, a modest improvement in the failure rate can have a substantial impact on venture portfolio returns. That improvement starts by better understanding the decision process. This study is a step in that direction.     

From Decision Support to Decision Automation: A 2020 Vision

The authors discuss the long-run future of decision support systems in marketing. They argue that a growing proportion of marketing decisions can not only be supported but may also be automated. From a standpoint of both efficiency (e.g., management productivity) and effectiveness (e.g., resource allocation decisions), such automation is highly desirable. The authors describe how model-based automated decision-making is likely to penetrate various marketing decision-making environments and how such models can incorporate competitive dynamics. For example, the authors foresee that close to full automation can ultimately take place for many decisions about existing products in stable markets. Partial automation could characterize decision making for new products in stable markets and existing products in unstable markets.     

A Model for Ethical Decision Making in Business: Reasoning, Intuition, and Rational Moral Principles

How do business leaders make ethical decisions? Given the significant and wide-spread impact of business people??s decisions on multiple constituents (e.g., customers, employees, shareholders, competitors, and suppliers), how they make decisions matters. Unethical decisions harm the decision makers themselves as well as others, whereas ethical decisions have the opposite effect. Based on data from a study on strategic decision making by 16 effective chief executive officers (and three not-so-effective ones as contrast), I propose a model for ethical decision making in business in which reasoning (conscious processing) and intuition (subconscious processing) interact through forming, recalling, and applying moral principles necessary for long-term success in business. Following the CEOs in the study, I employ a relatively new theory, rational egoism, as the substantive content of the model and argue it to be consistent with the requirements of long-term business success. Besides explaining the processes of forming and applying principles (integration by essentials and spiraling), I briefly describe rational egoism and illustrate the model with a contemporary moral dilemma of downsizing. I conclude with implications for further research and ethical decision making in business.