The Dynamic Impact of Product-Harm Crises on Brand Preference and Advertising Effectiveness: An Empirical Analysis of the Automobile Industry
by Yan Liu and Venky Shankar
This article is forthcoming in Management Science.
Product-harm crises (recalls) carry negative product information which adversely affects brand preference and advertising effectiveness. This negative impact of product-harm crises may differ across recall events depending on media coverage of the event, crisis severity, and consumers’ prior beliefs about product quality. We develop a state space model to capture the dynamics in brand preference, advertising effectiveness and consumer response to product recalls, integrate it with a random coefficient demand model, and estimate it using a unique dataset containing 35 automobile brands, 193 auto sub-brands, and 359 recalls during 1997-2002. Our results reveal that consumers respond more negatively to product recalls with greater media attention, more severe consequences, and higher perceived product quality. Furthermore, they show that sub-brand advertising effectiveness declines by a greater amount than parent-brand advertising and the decline in effectiveness of the recalled sub-brand’s advertising spills over to other sub-brands under the same parent-brand.
by Venky Shankar
Marketers are faced with the challenge of transforming “Big Data” into insights and action. What is Big Data? What is the big deal about it? What are they typical marketing problems that can be solved by Big Data? What models are being used to analyze Big Data? What are some successful Big Data applications in marketing? What research projects relating to Big Data am I working on? What is the future of Big Data for marketers? This presentation addresses these questions.
by Venkatesh Shankar and P.K. Kannan
This article appeared in Customer Needs and Solutions.
An important part of the rapidly growing shopper marketing practice is cross-category retail management. In managing two related product categories,
retailers face some important questions: which category should be stocked more? How close to each other should they be stocked in the store (aisle adjacency)? which category should be promoted more often? and when should the two categories be sold as a bundle? To address these questions, we examine how purchases of related product and sub-product categories influence one another, and how the relative aisle locations of two related product categories influence their respective purchases. We consider both extrinsic (aisle location based) and intrinsic (affinity based) cross-category effects. Using aggregate store-level data together with store descriptor and store shopper demographic data, we estimate a simultaneous system of models for two related product categories, soft drinks and salty snacks. We also estimate a system of salty snack sub-category purchase models. We find that both extrinsic and intrinsic cross-category effects are asymmetric, that is, different categories and sub-categories have different effects on one another. We discuss the theoretical and managerial implications of these findings.