Marketing perspectives on digital business models: A framework and overview of the special issue

Strong digital developments are changing markets, and firms may adopt a digital business model to deal with these developments. This special issue focuses on such digital business models. In this editorial, we discuss the relevance of digital business models, propose a conceptual framework, and discuss how digital business models affect firms, firm performance, and markets. We introduce the papers in this issue and show how they each fit within the conceptual framework. We discuss four important areas for future research.     

Online marketing: When to offer a refund for advanced sales

Advance selling is a marketing strategy commonly used by online retailers to increase sales by exploiting consumer valuation uncertainty. Recently, some online retailers have started to allow refunds on products sold in advance. On the one hand this reduces the net advance sales, but on the other hand it allows a higher advance sales price. This research is the first to explore the overall effect of allowing a refund on profits from advance sales, identifying conditions where advance selling with or without refunds (or no advance selling at all) is best. We analytically compare the profits of three advance selling strategies: none, without refund, and with refund. We show that selling in advance and allowing a refund is optimal for products with a relatively small profit margin and small strategic market size, and that the added profit can be considerable. Our results guide managers in selecting the right advance selling strategy. To facilitate this, we graphically display, based on the two dimensions of regular profit margin and strategic market size, under what conditions the different strategies are optimal.     

The impact on stock prices of deferral and elimination of internal control audit requirement for small firms

This paper examines the cumulative market reaction to the events related to deferral of internal control audit requirement under the Sarbanes-Oxley Act of 2002 and its elimination under the Dodd-Frank Act of 2010 for nonaccelerated filers (small firms). We document that small firms experienced negative cumulative abnormal returns around these events; and the differences between the cumulative abnormal returns for small firms and the two control groups (accelerated and large accelerated filers) were negative and significant at the 1% level. These results support the notion that market participants value the reliability of financial information irrespective of the firm size. Within the small firms, we find no firm characteristic significantly explains the market reaction to the events considered. That is, all small firms lost market value in reaction to the events that delayed and eliminated their internal control audit requirement.     

Measuring and forecasting mobile game app engagement

Monetization strategies in the large and strongly growing mobile app space must go beyond traditional purchase revenue as most mobile apps are now free to download. One key marketing innovation allows mobile app publishers to monetize ongoing engagement — in-app advertising.We study ongoing user engagement with a mobile app after the initial download decision using the $40 billion mobile gaming industry as an example. Our study investigates and forecasts user engagement after the initial download aiming to help publishers to monetize their engagement via in-app advertising. We leverage a novel dataset containing user-level engagement for 193 mobile games and propose a hierarchical Poisson model on a mobile-game level. We find significant usage heterogeneity across the mobile games studied and generate forecasts publishers can use when trying to monetize engagement via pre-sold contracts.     

Reward meritocracy or nepotism: The case of independent financial advisors appointed by Chinese listed companies

As independent financial advisors, securities firms are the core intermediaries in major asset reorganization (MAR) of listed companies. Furthermore, they play the dual roles of transaction and authentication. Based on this institutional background, this paper studies how listed companies choose between industry experience (“meritocracy”) and relationships (“nepotism”). Using the MAR of A-share listed companies from 2008 to 2013 as the sample, this paper shows that higher transaction costs (i.e., greater demand for the transaction function of advisors) are related to the higher possibility of advisors with weaker relationships and more industry experience being hired. It also shows that higher suspicion of tunneling (i.e., greater demand for the signal of fairness associated with advisors’ authentication function) is related to the higher possibility of advisors with weaker relationships being hired, but it is not significantly related to whether advisors have more or less industry experience. This paper also shows that reputation has a certain governance effect on the negative consequences of relationship. For the most part, listed companies reward meritocracy but not nepotism when appointing independent financial advisors.     

The aesthetic fidelity effect

Product aesthetics is a powerful means for achieving competitive advantage. Yet most studies to date have focused on the role of aesthetics in shaping pre-purchase preferences and have failed to consider how product aesthetics affects post-purchase processes and consumers' usage behavior. This research focuses on the relationship between aesthetics and usage behavior in the context of durable products. Studies 1A to 1C provide evidence of a positive effect of product aesthetics on usage intensity using market data from the car and the fashion industries. Study 2 corroborates these findings and shows that the more intensive use of highly aesthetic products may lead to the acquisition of product-specific usage skills that form the basis for a cognitive lock-in. Hence, consumers are less likely to switch away from products with appealing designs, an effect that is labeled as the ‘aesthetic fidelity’ effect. Study 3 addresses an alternative explanation for the ‘aesthetic fidelity effect’ based on mood and motivation but finds that the ‘aesthetic fidelity’ effect is indeed determined by usage intensity. Finally, Study 4 identifies a boundary condition of the positive effect of product aesthetics on product usage, showing that it is limited to durable products. In sum, this research demonstrates that the effects of product aesthetics extend beyond the pre-consumption stage and have an enduring impact on people's consumption experiences.     

Power and publications in Chinese academia

In power-oriented societies, academia may not be immune to the influence of power. This paper studies the power-publication link by applying an event-study strategy to a panel dataset of the publication and biographical information of deans of economics schools in Chinese universities. We find that (i) deanship increases an individual's publication by 0.7 articles per year; (ii) the increased publications stem from work coauthored with other researchers within the same university; (iii) the topics of the increased publications are more likely to deviate from the deans’ research area prior to becoming deans; and (iv) the power effect is smaller for top universities and leading journals, and for scholars with more pre-dean publications. These patterns appear consistent with the role of power in resource allocation rather than the impact of ability or reputation of the deans and thus have implications on distortions in knowledge production.     

Video mining: Measuring visual information using automatic methods

Marketers are becoming increasingly reliant on videos to market their products and services. However, there is no standard set of measures of visual information that can be applied to large datasets. This paper proposes two standard measures that can be automatically obtained from videos: visual variation and video content. The paper tests the measures on crowdfunding videos from a leading online crowdfunding website, and shows that the proposed measures have explanatory power on the funding outcomes of the projects. These measures can be effectively implemented and used for large datasets. Further, researchers can apply these measures to other sets of visual information, and marketers could use the research to guide their video design and improve their video marketing effectiveness.     

International heterogeneity in the associations of new business models and broadband Internet with music revenue and piracy

Broadband Internet has fundamentally changed business models in many industries. In the music industry, for instance, old business models were challenged by illegal competitors, and broadband Internet has enabled value creation through new business models. The changes that established business models experienced in the wake of broadband Internet, however, differed vastly across national markets, and these differences are not well understood. We build a conceptual framework and study the extent to which differences in economic and cultural factors are associated with different market outcomes in the wake of the proliferation of broadband Internet. Thus, we compile two unique data sets from the music industry, comprising (1) revenue data for 36 countries and 22 years and (2) piracy data for 47 countries and >2 years. We use a Bayesian multilevel model to explore between-country heterogeneity in the associations between these variables and broadband Internet adoption and business model innovations. Our results show that the negative association between broadband Internet penetration and music revenue is weaker in high-income countries, where income restrictions are less likely to drive demand towards illegitimate piracy services. In terms of cultural factors, we find that a market's response to the introduction of broadband Internet is less negative in countries scoring high on Hofstede's individualism and uncertainty avoidance dimensions. Furthermore, we find that overall revenues only recover after the latest generation of streaming services (e.g., Spotify) has been introduced, and the adoption of these services is associated with lower levels of online music piracy.     

The distinct influence of power distance perception and power distance values on customer satisfaction in response to loyalty programs

In today's fiercely competitive environment, firms are increasingly relying on loyalty programs to influence customers' repeat purchase behavior. However, little is known about how customers' cultural values shape their satisfaction in response to loyalty programs. Such knowledge is important because it allows marketers to identify cultural segments that may be more or less likely to respond favorably to loyalty programs, and hence increase the effectiveness of such programs. In the current research, we propose that power distance perception — defined as the extent to which people observe power disparities in society — positively influences satisfaction of customers who hold loyalty status, but negatively influences satisfaction of customers who do not hold loyalty status with a firm. In contrast, power distance values — defined as the extent to which people endorse power disparities in society — negatively influences satisfaction of customers who hold loyalty status, but positively influences satisfaction of customers who do not hold loyalty status with a firm. A quasi-field study and several lab experiments support these propositions, shed light on the underlying mechanisms, and rule out alternative explanations. Our findings also uncover several distinct tools that marketers could use to influence non-loyalty status and loyalty status customers' satisfaction with businesses.