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Saturday, December 12, 2009

Customizing Promotions in Online Stores

ABSTRACT


The main objective of this paper is to provide a decision-support system of micro-level customized promotions, primarily for use in online stores. Our proposed approach utilizes the one-on-one and interactive nature of the Internet shopping environment and provides recommendations on when to promote how much to whom. We address the issue by first constructing a joint purchase incidence-brand choice-purchase quantity model that incorporates how variety-seeking/inertia tendency differs among households and change over time for the same household. Based on the model, we develop an optimization procedure to derive the optimal amount of price discount for each household on each shopping trip. We demonstrate that the proposed customization method could greatly improve the effectiveness of current promotion practices, and discuss the implications for retailers and consumer packaged goods companies in the age of Internet technology.

About authors
Jie Zhang and Lakshman Krishnamurthi (2004)

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Modeling the Click stream: Implications for Web-Based Advertising Efforts

ABSTRACT


In this paper, we develop an analytical approach to modeling consumer response to banner ad exposures at a sponsored content Web site that reveals significant heterogeneity in (unobservable) click proneness across consumers. The effect of repeated exposures to banner ads is negative and nonlinear, and the differential effect of each successive ad exposure is initially negative, though nonlinear, and levels off at higher levels of passive ad exposures. Further, significant correlations between session and consumer click proneness and banner exposure sensitivity suggest gains from repeated banner exposures when consumers are less click prone. For a particular number of sessions, more clicks are generated from consumers who revisit over a longer period of time, than for those with the same number of sessions in a relatively shorter timeframe. We also find that consumers are equally likely to click on banner ads placed early or late in navigation path and that exposures have a positive cumulative effect in inducing click-through in future sessions. Our results have implications for online advertising response measurement and dynamic ad placement, and may help guide advertising media placement decisions.

About authors
 Patrali Chatterjee, Donna L. Hoffman, Thomas P. Novak (2003)

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A Comparison of Online and Offline Consumer Brand Loyalty

ABSTRACT


In this study we compare consumer brand loyalty in online and traditional shopping envi- ronments for over 100 brands in 19 grocery product categories. The online purchase data come from a large traditional grocery retailer that also operates an online store for its prod- ucts. The offline data corresponds to the exact same brands and categories bought in tradi- tional stores by a panel of homes operated by ACNielsen for purchases made in the same city and over the same time period. We compare the observed loyalty with a baseline model, a new segmented Dirichlet model, which has latent classes for brand choice and provides a very accurate model for purchase behavior. The results show that observed brand loyalty for high market share brands bought online is significantly greater than expected, with the reverse result for small share brands. In contrast, in the traditional shopping environment, the difference between observed and predicted brand loyalty is not related to brand share.

About authors
Peter J. Danaher, Isaac W. Wilson, Robert A. Davis (2003)

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The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms

ABSTRACT


Online feedback mechanisms harness the bidirectional communication capabilities of the Internet to engineer large-scale, word-of-mouth networks. Best known so far as a tech- nology for building trust and fostering cooperation in online marketplaces, such as eBay, these mechanisms are poised to have a much wider impact on organizations. Their growing popularity has potentially important implications for a wide range of management activities such as brand building, customer acquisition and retention, product development, and quality assurance. This paper surveys our progress in understanding the new possibilities and challenges that these mechanisms represent. It discusses some important dimensions in which Internet-based feedback mechanisms differ from traditional word-of-mouth networks and surveys the most important issues related to their design, evaluation, and use. It pro- vides an overview of relevant work in game theory and economics on the topic of reputation. It discusses how this body of work is being extended and combined with insights from computer science, management science, sociology, and psychology to take into consideration the special properties of online environments. Finally, it identifies opportunities that this new area presents for operations research/management science (OR/MS) research.

About authors
Chrysanthos Dellarocas (2003)

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http://ccs.mit.edu/dell/digitization%20of%20word-of-mouth.pdf

Measuring the Customer Experience in Online Environments: A Structural Modeling Approach

ABSTRACT


Intuition and previous research suggest that creating a compelling online environment for Web consumers will have numerous positive consequences for commercial Web providers. Online executives note that creating a compelling online experience for cyber customers is critical to creating competitive advantage on the Internet. Yet, very little is known about the factors that make using the Web a compelling experience for its users, and of the key consumer behavior out- comes of this compelling experience. Recently, the flow construct has been proposed as important for understanding consumer behavior on the World Wide Web, and as a way of defining the nature of compelling online experience. Although widely studied over the past 20 years, quantitative modeling efforts of the flow construct have been neither systematic nor comprehensive. In large parts, these efforts have been hampered by considerable con- fusion regarding the exact conceptual definition of flow. Lacking precise definition, it has been difficult to measure flow empirically, let alone apply the concept in practice. Following the conceptual model of flow proposed by Hoffman and Novak (1996), we conceptualize flow on the Web as a cognitive state experienced during navigation that is determined by (1) high levels of skill and control; (2) high levels of challenge and arousal; and (3) focused attention; and (4) is enhanced by interactivity and telepresence. Consumers who achieve flow on the Web are so acutely involved in the act of online navigation that thoughts and perceptions not relevant to navigation are screened out, and the consumer focuses entirely on the interaction. Concentration on the navigation experience is so intense that there is little attention left to consider anything else, and consequently other events occurring in the consumer's surrounding physical environment lose significance. Self-consciousness disappears, the consumer's sense of time becomes distorted, and the state of mind arising as a result of achieving flow on the Web is extremely gratifying. In a quantitative modeling framework, we develop a structural model based on our previous conceptual model of flow that embodies the components of what makes for a compelling online experience. We use data collected from a large- sample, Web-based consumer survey to measure these constructs, and we fit a series of structural equation models that test related prior theory. The conceptual model is largely supported, and the improved fit offered by the revised model provides additional insights into the direct and indirect influences of flow, as well as into the relationship of flow to key consumer behavior and Web usage variables. Our formulation provides marketing scientists with operational definitions of key model constructs and establishes reliability and validity in a comprehensive measurement framework. A key insight from the paper is that the degree to which the online experience is compelling can be defined, measured, and related well to important marketing variables. Our model constructs relate in significant ways to key consumer behavior variables, including online shopping and Web use applications such as the extent to which consumers search for product information and participate in chat rooms. As such, our model may be useful both theoretically and in practice as marketers strive to decipher the secrets of commercial success in interactive online environments.

About authors
Thomas P. Novak, Donna L. Hoffman, Yiu-Fai Yung (2000)

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http://www.jstor.org/stable/193257

Factors Driving Consumer Intention to Shop Online: An Empirical Investigation

ABSTRACT


This article examines consumers' intention to shop online during the information acquisition stage. Specifically, the study incorporates 3 essential variables, which are likely to influence consumer intentions: (a) convenience characteristic of shopping channels, (b) product type characteristics, and (c) perceived price of the product. Results indicate that convenience and product type influence consumer intention to engage in online shopping. When consumers perceive offline shopping as inconvenient, their intention to shop online is greater. Also, online shopping intention is higher when consumers perceive the product to be search goods than experience goods.

About authors
Kuan-Pin Chiang and Ruby Roy Dholakia (2003)

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http://www.jstor.org/stable/1480436