Browsing by Author "Pauwels, Koen Hendrik"

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Open Access
Assessing consequences of component sharing across brands in the vertical product line in the automotive market
(Wiley, 2012-07) Verhoef, P. C.; Pauwels, Koen Hendrik; Tuk, M. A.; Business Administration; PAUWELS, Koen Hendrik
Component sharing may look great in the boardroom, but not in the showroom. Indeed, savings on R&D and production costs could be offset by a plunge in customer brand attractiveness. Combining experimental with econometric studies, this paper investigates the impact of component sharing on customer evaluation of luxury, volume and economy brands offered in a car manufacturer’s vertical product line. An experimental study shows that the evaluation of luxury brands sharing with a volume brand suffers more than when a volume brand shares components with an economy brand. The evaluation of an economy brand benefits more from sharing with a volume brand than a volume brand suffers from sharing with an economy brand. The magnitude of these effects depends on several factors, such as component type, the source of the component sharing and the salience of component sharing to the consumers. The explorative examination of market share effects confirms that luxury brands may suffer, while economy brands may benefit from component sharing. The first to look at the consumer impact of component sharing, this paper sets up a rich agenda for future research.
Open Access
Building with bricks and mortar: the revenue impact of opening physical stores in a multichannel environment
(Elsevier, 2015-06) Pauwels, Koen Hendrik; Neslin, S. A; Business Administration; PAUWELS, Koen Hendrik
A crucial decision firms face today is which channels they should make available to customers for transactions. We assess the revenue impact of adding bricks-and-mortar stores to a firm's already existing repertoire of catalog and Internet channels. We decompose the revenue impact into customer acquisition, frequency of orders, returns, and exchanges, and size of orders, returns, and exchanges. We use a multivariate baseline method to assess the impact of adding the physical store channel on these revenue components. As hypothesized, store introduction cannibalizes catalog sales and has much less impact on Internet sales. Also as hypothesized, returns and exchanges increase. Interestingly, transaction sizes of purchases, returns, and exchanges do not change. The “availability effect” produces a net increase in purchase frequency across channels. This more than compensates for increased returns, producing a net increase in revenues of 20% by adding the store channel. Our findings yield a deeper understanding of the revenue relation between channels, and of the dynamic cross-channel effects of marketing actions.
Open Access
Consumer attitude metrics for guiding marketing mix decisions
(Informs, 2014-08) Hanssens, D. M.; Pauwels, Koen Hendrik; Srinivasan, S.; Vanhuele, M.; Yildirim, G.; Business Administration; PAUWELS, Koen Hendrik
Marketing managers often use consumer attitude metrics such as awareness, consideration, and preference as performance indicators because they represent their brand's health and are readily connected to marketing activity. However, this does not mean that financially focused executives know how such metrics translate into sales performance, which would allow them to make beneficial marketing mix decisions. We propose four criteria-potential, responsiveness, stickiness, and sales conversion-that determine the connection between marketing actions, attitudinal metrics, and sales outcomes. We test our approach with a rich data set of four-weekly marketing actions, attitude metrics, and sales for several consumer brands in four categories over a seven-year period. The results quantify how marketing actions affect sales performance through their differential impact on attitudinal metrics, as captured by our proposed criteria. We find that marketing-attitude and attitude-sales relationships are predominantly stable over time but differ substantially across brands and product categories. We also establish that combining marketing and attitudinal metrics criteria improves the prediction of brand sales performance, often substantially so. Based on these insights, we provide specific recommendations on improving the marketing mix for different brands, and we validate them in a holdout sample. For managers and researchers alike, our criteria offer a verifiable explanation for differences in marketing elasticities and an actionable connection between marketing and financial performance metrics.
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Dashboards as a service why, what, how, and what research is needed?
(Sage, 2009-11) Pauwels, Koen Hendrik; Ambler, T.; Clark, B. H.; LaPointe, P.; Reibstein, D.; Skiera, B.; Wierenga, B.; Wiesel, T.; Business Administration; PAUWELS, Koen Hendrik
Recent years have seen the introduction of a “marketing dashboard” that brings the firm’s key marketing metrics into a single display. Service firms across industries have created such dashboards either by themselves or together with a dashboardservice provider. This article examines the reasons for this development and explains what dashboards are, how to develop them, what drives their adoption, and which academic research is needed to fully exploit their potential. Overcoming the challenges faced in dashboard development and operation provides many opportunities for marketing to exercise a stronger influence on top management decisions. The article outlines five stages of dashboard development and discusses the relationships among demand for dashboards, supply of dashboards, and the implementation process in driving adoption and use of dashboard systems. Key topics for future research include metrics selection, relationships among metrics, and the ultimate question of whether dashboards provide sufficient benefits to justify their adoption.
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Demonstrating the value of marketing
(2016-11) Hanssens, D. M.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
Marketing departments are under increased pressure to demonstrate their economic value to the firm. This challenge is exacerbated by the fact that marketing uses attitudinal (e.g., brand awareness), behavioral (e.g., brand loyalty), and financial (e.g., sales revenue) performance metrics, which do not correlate highly with each other. Thus, one metric could view marketing initiatives as successful, whereas another could interpret them as a waste of resources. The resulting ambiguity has several consequences for marketing practice. Among these are that the scope and objectives of marketing differ widely across organizations. There is confusion about the difference between marketing effectiveness and efficiency. Hard and soft metrics and offline and online metrics are typically not integrated. The two dominant tools for marketing impact assessment, response models and experiments, are rarely combined. Risk in marketing planning and execution receives little consideration, and analytic insights are not communicated effectively to drive decisions. The authors first examine how these factors affect both research and practice. They then discuss how the use of marketing analytics can improve marketing decision making at different levels of the organization. The authors identify gaps in marketing’s knowledge base that set the stage for further research and enhanced practice in demonstrating marketing’s value.
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Do display ads influence search? Attribution and dynamics in online advertising
(Elsevier, 2016-09) Kireyev, P.; Pauwels, Koen Hendrik; Gupta, S.; Business Administration; PAUWELS, Koen Hendrik
As firms increasingly rely on online media to acquire consumers, marketing managers rely on online metrics such as click-through rate (CTR) and cost per acquisition (CPA). However, these standard online advertising metrics are plagued with attribution problems and do not account for synergy or dynamics. These issues can easily lead firms to overspend on some actions and thus waste money and/or underspend in others, leaving money on the table. We develop a multivariate time series model to investigate the dynamic interaction between paid search and display ads and calibrate the model using data from a bank that uses online ads to acquire new checking account customers. The model suggests that both search and display ads exhibit dynamics that improve their effectiveness and ROI over time. Moreover, our results suggest that display ads increase search conversion. However, display ads may also increase search clicks, thereby increasing search advertising costs. After accounting for these three effects, we estimate that each $1 invested in display and search leads to a return of $1.24 for display and $1.75 for search ads. These ROI estimates are respectively 10% and 38% higher than those obtained by standard metrics, which may have led the company to under-invest. We use these results to show how optimal budget allocation may shift after accounting for attribution and dynamics. Although display benefits from synergy attribution, the strong dynamic effects of search call for an increase in search advertising budget share by up to 36% in our context.
Open Access
Does online information drive offline revenues? Only for specific products and consumer segments!
(Elsevier, 2011-03) Pauwels, Koen Hendrik; Leeflang, P. S. H.; Teerling, M. L.; Huizingh, K. R. E.; Business Administration; PAUWELS, Koen Hendrik
While many offline retailers have developed informational websites that offer information on products and prices, the key question for such informational websites is whether they can increase revenues via web-to-store shopping. The current paper draws on the information search literature to specify and test hypotheses regarding the offline revenue impact of adding an informational website. Explicitly considering marketing efforts, a latent class model distinguishes consumer segments with different short-term revenue effects, while a Vector Autoregressive model on these segments reveals different long-term marketing response.We find that the offline revenue impact of the informational website critically depends on the product category and customer segment. The lower online search costs are especially beneficial for sensory products and for customers distant from the store. Moreover, offline revenues increase most for customers with high web visit frequency. We find that customers in some segments buy more and more expensive products, suggesting that online search and offline purchases are complements. In contrast, customers in a particular segment reduce their shopping trips, suggesting their online activities partially substitute for experiential shopping in the physical store. Hence, offline retailers should use specific online activities to target specific product categories and customer segments.
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The effectiveness of different forms of online advertising for purchase conversion in a multiple-channel attribution framework
(Elsevier, 2016-09) Haan, E. de; Wiesel, T.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
The Internet has given rise to many new forms of advertising. Scientific studies have focused on individual reactions to specific advertising forms in isolation and have offered little guidance for aggregate-level budget allocation decisions, which are typically based on simple rules. This article compares the long-term effectiveness of nine forms of advertising—seven online and two offline—by means of a structural vector autoregressive model and restricted impulse responses. For five product categories, we investigate how these forms of advertising generate traffic, affect conversion, and contribute to revenue. We find that content-integrated advertising is the most effective form, followed by content-separated advertising and firm-initiated advertising. Although online advertising forms have similar power to drive traffic, content integration dominates content separation in the area of progression toward purchase. Last-click attribution underestimates content-integrated activities and suggests online advertising budget allocations that yield 10%–12% less revenue than the status quo, whereas the model's proposed online advertising budget allocation yields a 21% revenue increase over the status quo. These results highlight the payoffs for companies that integrate content into online media.
Open Access
Effects of word-of-mouth versus traditional marketing: findings from an internet social networking site
(American Marketing Association, 2009-09) Trusov, M.; Bucklin, R. E.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
The authors study the effect of word-of-mouth (WOM) marketing on member growth at an Internet social networking site and compare it with traditional marketing vehicles. Because social network sites record the electronic invitations from existing members, outbound WOM can be precisely tracked. Along with traditional marketing, WOM can then be linked to the number of new members subsequently joining the site (sign-ups). Because of the endogeneity among WOM, new sign-ups, and traditional marketing activity, the authors employ a vector autoregression (VAR) modeling approach. Estimates from the VAR model show that WOM referrals have substantially longer carryover effects than traditional marketing actions and produce substantially higher response elasticises. Based on revenue from advertising impressions served to a new member, the monetary value of a WOM referral can be calculated; this yields an upper-bound estimate for the financial incentives the firm might offer to stimulate WOM.
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Fanning the flames? How media coverage of a price war affects retailers, consumers, and investors
(American Marketing Association, 2015-10) Heerde, H. J. van; Gijsbrechts, E.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
This article explores how media coverage of a price war affects customer, retailer, and investor reactions over time. Using data covering a Dutch supermarket price war (2003–2005), the authors find that price reductions, especially deep reductions, trigger media coverage of the price conflict. This sets off a chain of reactions. Press messages have a significant effect on market share and abnormal stock returns, beyond retailers' own price and advertising. Importantly, this study uncovers striking asymmetries regarding the kind of coverage to which stakeholders react: whereas consumers only respond to the tone of price-related press coverage, retailers and investors only react to its quantity. Next, media coverage feeds back into the retailers' pricing actions: more media coverage triggers new price cuts in addition to those dictated by competitive reactions. As such, media coverage triggers a deeper spiral of price cuts, intensifying the competitive price battle. However, as the price war progresses, media coverage becomes less frequent and less favorable, which decelerates the downward price spiral.
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The formation, evolution and replacement of price-quality relationships
(Springer Science+Business Media, 2016-01) Pauwels, Koen Hendrik; D’Aveni, R.; Business Administration; PAUWELS, Koen Hendrik
This paper develops a theoretical framework to address how dynamic competitive interactions and customer preferences change the observed relationship between market price and quality, and it offers an empirical framework to study these phenomena. Our framework proposes that price–quality relationships in a market (the fair value line) evolve according to several processes. We define and discuss these processes, including: (1) line formation, (2) line evolution (comprised of line elevation, erosion, steepening, flattening, blurring, tightening, extension and contraction), and (3) line replacement, which involves redefining price or quality in the marketplace. Instead of assuming that prices are a stable function of observable product attributes only (the static equilibrium view), our framework generalizes to dynamic disequilibrium patterns observed in many industries. These patterns are empirically assessed and explained by customer, competitive, and technology forces analyzed in marketing and strategy literatures. For managers, we discuss how they should react to these processes or, even better, set them in motion. For marketing researchers, we specify several hypotheses on the processes’ antecedents and consequences, testable with readily available datasets.
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The hare and the tortoise: do earlier adopters of online channels purchase more?
(Elsevier, 2015-06) Li, J.; Konuş, U.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
Earlier adopters of a product or service tend to be more valuable than later adopters. Does this empirical generalization equally apply to earlier adopters of a multichannel retailer's new online channel too? This study segments customers on the basis of their responses to a new online channel and investigates the effects of their online channel adoption on purchase volumes across segments. The data cover 12.5 years of purchase history and individual transactions at a large multichannel French retailer of natural health products. Contrary to conventional wisdom, it is not innovators or early adopters, but rather the late majority segment that purchases more than the other segments, both before and after online adoption. Adoption of the firm's new online channel does not influence purchase volumes of heavy shopper segments (late majority and innovators), whereas light shopper segments tend to increase their purchases after adopting this new channel.
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How online consumer segments differ in long-term marketing effectiveness
(Elsevier, 2014-11) Reimer, K.; Rutz, O. J.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
Online commerce gives companies not only a growing global sales platform, but also powerful consumers enjoying 24/7 availability, choice proliferation and the power to opt in and out permission-based communication. Unfortunately, our knowledge is limited on long-term marketing effectiveness in this space and on how it differs across customer segments. Managers appear overwhelmed by the combination of rich online data on hundreds of thousands of customers and the typical aggregate-level data on offline marketing spending. This paper is the first to investigate the long-term impact of coupon promotions, TV, radio, print, and Internet advertising across customer segments for a major digital music provider with over 500,000 customers. We first segment customers and subsequently analyze how these segments respond in the long run to different marketing activities when purchasing music downloads. Our findings reveal that the effectiveness of marketing differs across segments, while standard segmentation approaches fail to identify the most valuable catches in a sea of consumers. In contrast to empirical generalizations on consumer packaged goods, heavy users of digital music products are least sensitive to price and most sensitive to TV advertising and to multiple touch points. Light users, the majority of consumers, are price sensitive and tend to opt out of targeted communication. Our research enables managers in the digital media space to target high-value customer segments with the most effective actions.
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The impact of brand familiarity on online and offline media synergy
(Elsevier, 2016) Pauwels, Koen Hendrik; Demirci, Ceren; Yıldırım, G.; Srinivasan, S.; Business Administration; PAUWELS, Koen Hendrik; Demirci, Ceren
Rooted in the integrated marketing communication framework, this paper conceptualizes how brand familiarity affects online and cross-channel synergies. The empirical analysis uses Bayesian vector autoregressive models to estimate long-term elasticities for four brands. The authors distinguish customer-initiated communication (typically online) from firm-initiated communication (typically offline). Their results indicate that within-online synergy is higher than online–offline synergy for both familiar brands but not for both unfamiliar brands. Managers of unfamiliar brands may obtain substantial synergy from offline marketing spending, even though its direct elasticity pales in comparison with that of online media while managers of familiar brands can generate more synergy by investing in different online media.
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Like the ad or the brand? Marketing stimulates different electronic word-of-mouth content to drive online and offline performance
(Elsevier, 2016-09) Pauwels, Koen Hendrik; Akşehirli, Zeynep; Lackman, A.; Business Administration; PAUWELS, Koen Hendrik; AKŞEHİRLİ, Zeynep
Electronic word-of-mouth (eWOM) is often tracked in volume and valence metrics, but the topic of conversation may vary from the brand to its advertising to purchase statements. How do these different topics affect company performance? And which specific marketing communication (online, TV, radio, print) obtains most of its performance impact by stimulating eWOM topics? This paper quantifies the dynamic interactions among marketing, eWOM content, search, and online and offline store traffic for an apparel retailer. While it yields a similar online store traffic lift, advertising-related eWOM yields only half the offline store traffic lift of brand-related eWOM and of neutral eWOM about purchasing at the retailer. Paid search shows the highest elasticity in stimulating online conversations, but drives less business than offline marketing actions. While TV is the main paid driver of online store traffic, print is the main paid driver of offline store traffic for the studied retailer. Over a third of the offline store traffic effects materialize indirectly through eWOM and organic search. To avoid undercounting the benefits of paid marketing, managers should therefore track how their actions induce specific eWOM content metrics and how much these in turn drive performance.
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Marketing's profit impact: quantifying online and off-line funnel progression
(Informs, 2011) Wiesel, T.; Pauwels, Koen Hendrik; Arts, J.; Business Administration; PAUWELS, Koen Hendrik
Inofec, a small- to medium-sized enterprise in the business-to-business sector, desired a more analytic approach to allocate marketing resources across communication activities and channels. We developed a conceptual framework and econometric model to empirically investigate (1) the marketing communication effects on offline and online purchase funnel metrics and (2) the magnitude and timing of the profit impact of firm-initiated and customer-initiated contacts. We find evidence of many cross-channel effects, in particular, off-line marketing effects on online funnel metrics and online funnel metrics on off-line purchases. Moreover, marketing communication activities directly affect both early and later purchase funnel stages (website visits, online and off-line information, and quote requests). Finally, we find that online customer-initiated contacts have substantially higher profit impact than off-line firm-initiated contacts. Shifting marketing budgets toward these activities in a field experiment yielded net profit increases 14 times larger than those for the status quo allocation.
Open Access
Mind-set metrics in market response models: an integrative approach
(American Marketing Association, 2010-08) Srinivasan, S.; Vanhuele, M.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
Demonstrations of marketing effectiveness currently proceed along two parallel tracks: Quantitative researchers model the direct sales effects of the marketing mix, and advertising and branding experts trace customer mind-set metrics (e.g., awareness, affect). The authors merge the two tracks and analyze the added explanatory value of including customer mind-set metrics in a sales response model that already accounts for short- and long-term effects of advertising, price, distribution, and promotion. Vector autoregressive modeling of the metrics for more than 60 brands of four consumer goods shows that advertising awareness, brand consideration, and brand liking account for almost one-third of explained sales variance. Competitive and own mind-set metrics make a similar contribution. Wear-in times reveal that mind-set metrics can be used as advance warning signals that allow enough time for managerial action before market performance itself is affected. Specific marketing actions affect specific mind-set metrics, with the strongest overall impact for distribution. The findings suggest that modelers should include mind-set metrics in sales response models and branding experts should include competition in their tracking research.
Open Access
No comment?! The drivers of reactions to online posts in professional groups
(Elsevier, 2016-08) Rooderkerk, R. P.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
Social media has moved beyond personal friendships to professional interactions in high-knowledge industries. In particular, online discussion forums are sponsored by firms aiming to position themselves as thought-leaders, to gain more insight in their customer base and to generate sales leads. However, while firms can seed discussion by posts, they depend on the forum members to continue the discussion in the form of reactions to these posts. The goal of the current study is to investigate what features and characteristics drive the number of comments that a post receives on an online discussion forum. The empirical setting involves a global manufacturer connecting with health care professionals through a LinkedIn discussion forum. We project that (i) content characteristics, (ii) post characteristics, (iii) author characteristics, and (iv) timing characteristics jointly determine the number of comments a post receives. We show that the readability of the post, the controversiality of the content and the status of the post author have the highest elasticity on the number of comments. These results provide valuable insights for firms on how to build and maintain an attractive online forum through ongoing discussions.
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Paths to and off purchase: quantifying the impact of traditional marketing and online consumer activity
(Springer International Publishing, 2016-07) Srinivasan, S.; Rutz, O. J.; Pauwels, Koen Hendrik; Business Administration; PAUWELS, Koen Hendrik
This study investigates the effects of consumer activity in online media (paid, owned, and earned) on sales and their interdependencies with the traditional marketing mix elements of price, advertising and distribution. We develop an integrative conceptual framework that links marketing actions to online consumer activity metrics along the consumer’s path to purchase (P2P). Our framework proposes that the path to purchase has three basic stages–learning (cognitive), feeling (affective), behavior (conative)—and that these can be measured with novel online consumer activity metrics such as clicking on a paid search ads (cognitive) or Facebook likes and unlikes of the brand (affective). Our empirical analysis of a fast moving consumer good supports a know–feel–do pathway for the low–involvement product studied. We find, for example, that earned media can drive sales. However, we find that the news is not all good as it relates to online consumer activity: higher consumer activity on earned and owned media can lead to consumer disengagement in the form of unlikes. While traditional marketing such as distribution (60%) and price (20%) are the main drivers of sales variation for the studied brand, online owned (10%), (un)earned (3%), and paid (2%) media explain a substantial part of the path to purchase. It is noteworthy that TV advertising (5%) explains significantly less than online media in our case. Overall, our study should help strengthen marketers’ case for building share in consumers’ hearts and minds, as measured through consumer online activity and engagement.
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Pricing of national brands versus store brands: market power components, findings and research opportunities
(Edward Elgar Publishing, 2009) Pauwels, Koen Hendrik; Srinivasan, S.; Business Administration; Rao, V. R.; PAUWELS, Koen Hendrik
Among the most important activities for supermarket retailers is the creation and marketing of store brands, also known as private label brands. Given the increasing quality-equivalence between national brands and store brands, they have become direct competitors, and pricing decisions should take this into account. In most cases, national brands still possess some degree of pricing and market power over store brands. In this chapter, we define three components of market power for national brands versus store brands: (1) price premium; (2) volume premium; and (3) margin premium. Our chapter proceeds along the following lines. First, we delineate the factors that are the most important drivers of the three components of premium. Second, we discuss managerial implications about key success factors in the pricing of national brands and store brands. A key contribution of this chapter is that we incorporate emerging insights from the marketing literature on the pricing and market power of national brands versus store brands. Finally, we conclude by offering important future research directions.