We critically examine alternate models of the diffusion of new products and the turning points of... more We critically examine alternate models of the diffusion of new products and the turning points of the diffusion curve. On each of these topics, we focus on the drivers, specifications, and estimation methods researched in the literature. We discover important generalizations about the shape, parameters, and turning points of the diffusion curve and the characteristics of diffusion across early stages of the product life cycle. We point out directions for future research. Because new products affect every aspect of the life of individuals, communities, countries, and economies, the study of the diffusion of innovations is of vital importance. Researchers have studied this topic in various disciplines, including marketing, economics, medicine, agriculture, sociology, anthropology, geography, and technology management. We present a critical review of research on the diffusion of new products primarily in the marketing literature, but also in the economics and geography literature. We use the word product broadly to cover any good, service, idea, or person. We distinguish the term new product from the broader term innovation, which refers to both new product and new method, practice, institution, or social entity. Even though we restrict our review to the marketing literature, which focuses on the diffusion of new products, the implications of our review may hold as well as for the study of the diffusion of innovations in other disciplines. The marketing literature on this topic is vast, dating back at least as early as the publication by Fourt and Woodlock (1960). The term diffusion has been used differently in two groups of literatures. Within economics and most nonmarketing disciplines, diffusion is defined as the spread of an innovation across social groups over time (Brown, 1981; Stoneman, 2002). As such, the phenomenon is separate from the drivers, which can be consumer income, the product's price, word-of-mouth communication, and so on. In marketing and communication, diffusion typically has come to mean the communication of an innovation through the population
Online chatter can strongly affect companies by boosting or slowing down sales of commented produ... more Online chatter can strongly affect companies by boosting or slowing down sales of commented products, and user generated content even affects stock prices. An analysis of almost 350,000 consumer reviews and product ratings for 15 brands on popular websites showed some interesting effects: Having a higher volume of user comments, regardless of their assessment, was a strong indication of an increase in stock prices. The researchers also found negative reviews had a stronger impact than positive reviews. According to the results, negative chatter could erode about $1.4 million from the average market capitalization over the short term and $3.3 million over the 15 days after it appeared. To better estimate the dollar value of the findings, the researchers calculated possible profits for an initial investment of $100 million. They either sold or bought stock on a daily basis depending on the prevailing valence of the chatter from the previous day. The overall gains using this strategy y...
In many industries, new technologies represent a serious threat to established companies. If unde... more In many industries, new technologies represent a serious threat to established companies. If underestimated, they can endanger their survival. Even if the chances of being disrupted are rather low, companies are well advised to watch out for emerging trends. A large-scale study analyzed the technological evolution of seven markets over several decades and found surprising results, which were not always in line with the most common theories on the topic. The researcher observed that it was not always easy to predict which technology would ultimately prevail because old and new technologies regularly coexisted for some time and evolution was often erratic. New technologies were introduced both by incumbents and newcomers to the market. Chances of success were higher when the new technology was priced lower than the established technology, but price was less important than quality. Technologies with higher introduction prices also succeeded when they were superior. New technologies alw...
Bundling is pervasive in today's markets. However, the bundling literature contains inconsistenci... more Bundling is pervasive in today's markets. However, the bundling literature contains inconsistencies in the use of temis and ambiguity about basic principles underlying the phenomenon. The literature aiso iacits an encompassing dassification of the various strategies, dear ruies to evaiuate the legaiity of each strategy, and a unifying framework to indicate when each is optimal. Based on a review of the marketing, economics, and iaw iiterature, this artide deveiops a new synthesis of the fieki of bundiing, which provides three important benefits. First, the articie clearly and consistentiy defines bundiing terms and identifies two key dimensions that enabie a comprehensive ciassification of bundiing strategies. Second, it fbrmuiates ciear ruies for evaiuating the legaiity of each of these strategies. Third, it proposes a framework of 12 propositions that suggest whk:h bundiing strategy is optimai in various contexts. The synthesis provides managers with a framework with which to understand and choose bundiing strategies, it aiso provides researchers with promising avenues for further research.
Abstract 84-7829-047-8. Traducción de: Advertising and Sales Promotion Strategy. Publicidad y pro... more Abstract 84-7829-047-8. Traducción de: Advertising and Sales Promotion Strategy. Publicidad y promoción son elementos esenciales en la comunicación comercial. Dado la importancia de apropiarse de estos elementos, los autores desarrollan una serie de ...
A bstract The authors decompose repeat buying for frequently purchased nondurables. The results a... more A bstract The authors decompose repeat buying for frequently purchased nondurables. The results are very similar for two categories each over a different city and time period. A factor anatysis of 18 measures of repeat buying obtains four principal factors that explain 79-85% of the variance: Preference, Inertia, Coupon Proneness and Impulse Buying. A cluster analysis of factors on these dimensions yields four segments, with distinct behavioral characteristics. Studies in many areas of marketing suggest that brand loyalty is an important dimension of repetitive buying of low-involvement, low-cost, frequently-purchased products. Thus, a better understanding of brand loyaIty would greatly promote our understanding of consumer behavior for such products. This goal has led to at least 80 studies on brand loyalty (Jacoby and Chestnut 1978; Elrod 1987). Kim, Batra and Lehmann (1991) recently presented a study which attempts to review past measures of brand loyalty and test them for reliability and validity using a single-source scanner data. Nevertheless, several difficulties with past research binder a complete description of repetitive buying. First, no single definition or measure of loyalty is completely satisfactory. In particular, attitudinal measures suffer from problems with reliability or self report bias, especially for single period surveys. Behavioral measures suffer from an inability to separate loyalty from response to marketing variables and either of them from random events. In addition, loyalty itself may be multi-dimensional consisting of true preference for brands and inertia to switch brands. Similarly, brand switching needs *The authors thank IRI for the data.
Journal of the Academy of Marketing Science, Oct 1, 2005
Ads of stocks and mutual funds typically tout their past performance, despite a disclosure that p... more Ads of stocks and mutual funds typically tout their past performance, despite a disclosure that past performance does not guarantee future returns. Are consumers motivated to buy or sell based on past performance of assets ? More generally, do consumers (wrongly) use sequential information about past performance of assets to make suboptimal decisions? Use of this heuristic leads to two well-known biases: the hot hand and the gambler's fallacy. This study proposes a theory of hype that integrates these two biases; that a positive run could inflate prices, while a negative run could depress them, although the pattern could reverse on extended runs. Tests on two experiments and one event study of stock purchases strongly suggest that consumers dump "losers" and buy "winners." The latter phenomenon could lead to hyped-up prices on the stock market for winning stocks. The authors discuss the managerial, public policy, and research implications of the results.
P roduct quality is probably undervalued by firms because there is little consensus about appropr... more P roduct quality is probably undervalued by firms because there is little consensus about appropriate measures and methods to research quality. We suggest that published ratings of a product's quality are a valid source of quality information with important strategic and financial impact. We test this thesis by an event analysis of abnormal returns to stock prices of firms whose new products are evaluated in The Wall Street Journal. Quality has a strong immediate effect on abnormal returns, which is substantially higher than that for other marketing events assessed in prior studies. Moreover, there are some important asymmetries in the effect. We discuss the research, managerial, investing, and policy implications.
Erim Report Series Research in Management Erasmus Research Institute of Management, Aug 30, 2011
User-Generated Content in online platforms or chatter for short provides a valuable source of con... more User-Generated Content in online platforms or chatter for short provides a valuable source of consumer feedback on market performance of firms. This study examines whether chatter can predict stock market performance, which metric of chatter has the strongest relationship, and what the dynamics of the relationship are. The authors aggregate chatter (in the form of product reviews) from multiple websites over a four year period across six markets and fifteen firms. They derive multiple metrics of chatter (volume, positive chatter, negative chatter, and 5-start ratings) and use multivariate time series models to assess the short and long term relationship between chatter and stock market performance. They use three measures of stock market performance: abnormal returns, risk, and trading volume. The findings reveal that two metrics of chatter can predict abnormal returns with a lead of a few days. Of four metrics of chatter, volume shows the strongest relationship with returns and trading volume, followed by negative chatter. Whereas negative chatter has a strong effect on returns and trading volume with a short "wearin" and long "wearout," positive chatter has no effect on these metrics. Negative chatter also increases volatility (risk) in returns. A portfolio analysis of trading stocks based on their chatter provides a return of 8% over and above normal market returns. In addition to the investing opportunities, the results show managers that chatter is an important metric to follow to gauge the performance of their brands and products. Because chatter is available daily and hourly, it 2 can provide an immediate pulse of performance that is not possible with infrequent sales and earnings reports. The fact that negative chatter is more important than positive, indicates that negatives are more diagnostic than positives. The negatives suggest what aspects of the products managers should focus on.
Http Dx Doi Org 10 1509 Jmkg 64 3 1 18033, May 29, 2013
A common perception in the field of innovation is that large, incumbent firms rarely introduce ra... more A common perception in the field of innovation is that large, incumbent firms rarely introduce radical product innovations. Such firms tend to solidify their market positions with relatively incremental innovations. They may even turn away entrepreneurs who come up with radical innovations, though they themselves had such entrepreneurial roots. As a result, radical innovations tend to come from small firms, the outsiders. This thesis, which we term the “incumbent's curse,” is commonly accepted in academic and popular accounts of radical innovation. This topic is important, because radical product innovation is an engine of economic growth that has created entire industries and brought down giants while catapulting small firms to market leadership. Yet a review of the literature suggests that the evidence for the incumbent's curse is based on anecdotes and scattered case studies of highly specialized innovations. It is not clear if it applies widely across several product categories. The authors reexamine the incumbent's curse using a historical analysis of a relatively large number of radical innovations in the consumer durables and office products categories. In particular, the authors seek to answer the following questions: (1) How prevalent is this phenomenon? What percentage of radical innovations do incumbents versus nonincumbents introduce? What percentage of radical innovations do small firms versus large firms introduce? (2) Is the phenomenon a curse that invariably afflicts large incumbents in current industries? Is it driven by incumbency or size? and (3) How consistent is the phenomenon? Has the increasing size and complexity of firms over time accentuated it? Does it vary across national boundaries? Results from the study suggest that conventional wisdom about the incumbent's curse may not always be valid.
I nnovation is one of the most important issues in business research today. It has been studied i... more I nnovation is one of the most important issues in business research today. It has been studied in many independent research traditions. Our understanding and study of innovation can benefit from an integrative review of these research traditions. In so doing, we identify 16 topics relevant to marketing science, which we classify under five research fields: • Consumer response to innovation, including attempts to measure consumer innovativeness, models of new product growth, and recent ideas on network externalities; • Organizations and innovation, which are increasingly important as product development becomes more complex and tools more effective but demanding; • Market entry strategies, which includes recent research on technology revolution, extensive marketing science research on strategies for entry, and issues of portfolio management; • Prescriptive techniques for product development processes, which have been transformed through global pressures, increasingly accurate customer input, Web-based communication for dispersed and global product design, and new tools for dealing with complexity over time and across product lines; • Defending against market entry and capturing the rewards of innovating, which includes extensive marketing science research on strategies of defense, managing through metrics, and rewards to entrants. For each topic, we summarize key concepts and highlight research challenges. For prescriptive research topics, we also review current thinking and applications. For descriptive topics, we review key findings.
We critically examine alternate models of the diffusion of new products and the turning points of... more We critically examine alternate models of the diffusion of new products and the turning points of the diffusion curve. On each of these topics, we focus on the drivers, specifications, and estimation methods researched in the literature. We discover important generalizations about the shape, parameters, and turning points of the diffusion curve and the characteristics of diffusion across early stages of the product life cycle. We point out directions for future research. Because new products affect every aspect of the life of individuals, communities, countries, and economies, the study of the diffusion of innovations is of vital importance. Researchers have studied this topic in various disciplines, including marketing, economics, medicine, agriculture, sociology, anthropology, geography, and technology management. We present a critical review of research on the diffusion of new products primarily in the marketing literature, but also in the economics and geography literature. We use the word product broadly to cover any good, service, idea, or person. We distinguish the term new product from the broader term innovation, which refers to both new product and new method, practice, institution, or social entity. Even though we restrict our review to the marketing literature, which focuses on the diffusion of new products, the implications of our review may hold as well as for the study of the diffusion of innovations in other disciplines. The marketing literature on this topic is vast, dating back at least as early as the publication by Fourt and Woodlock (1960). The term diffusion has been used differently in two groups of literatures. Within economics and most nonmarketing disciplines, diffusion is defined as the spread of an innovation across social groups over time (Brown, 1981; Stoneman, 2002). As such, the phenomenon is separate from the drivers, which can be consumer income, the product's price, word-of-mouth communication, and so on. In marketing and communication, diffusion typically has come to mean the communication of an innovation through the population
Online chatter can strongly affect companies by boosting or slowing down sales of commented produ... more Online chatter can strongly affect companies by boosting or slowing down sales of commented products, and user generated content even affects stock prices. An analysis of almost 350,000 consumer reviews and product ratings for 15 brands on popular websites showed some interesting effects: Having a higher volume of user comments, regardless of their assessment, was a strong indication of an increase in stock prices. The researchers also found negative reviews had a stronger impact than positive reviews. According to the results, negative chatter could erode about $1.4 million from the average market capitalization over the short term and $3.3 million over the 15 days after it appeared. To better estimate the dollar value of the findings, the researchers calculated possible profits for an initial investment of $100 million. They either sold or bought stock on a daily basis depending on the prevailing valence of the chatter from the previous day. The overall gains using this strategy y...
In many industries, new technologies represent a serious threat to established companies. If unde... more In many industries, new technologies represent a serious threat to established companies. If underestimated, they can endanger their survival. Even if the chances of being disrupted are rather low, companies are well advised to watch out for emerging trends. A large-scale study analyzed the technological evolution of seven markets over several decades and found surprising results, which were not always in line with the most common theories on the topic. The researcher observed that it was not always easy to predict which technology would ultimately prevail because old and new technologies regularly coexisted for some time and evolution was often erratic. New technologies were introduced both by incumbents and newcomers to the market. Chances of success were higher when the new technology was priced lower than the established technology, but price was less important than quality. Technologies with higher introduction prices also succeeded when they were superior. New technologies alw...
Bundling is pervasive in today's markets. However, the bundling literature contains inconsistenci... more Bundling is pervasive in today's markets. However, the bundling literature contains inconsistencies in the use of temis and ambiguity about basic principles underlying the phenomenon. The literature aiso iacits an encompassing dassification of the various strategies, dear ruies to evaiuate the legaiity of each strategy, and a unifying framework to indicate when each is optimal. Based on a review of the marketing, economics, and iaw iiterature, this artide deveiops a new synthesis of the fieki of bundiing, which provides three important benefits. First, the articie clearly and consistentiy defines bundiing terms and identifies two key dimensions that enabie a comprehensive ciassification of bundiing strategies. Second, it fbrmuiates ciear ruies for evaiuating the legaiity of each of these strategies. Third, it proposes a framework of 12 propositions that suggest whk:h bundiing strategy is optimai in various contexts. The synthesis provides managers with a framework with which to understand and choose bundiing strategies, it aiso provides researchers with promising avenues for further research.
Abstract 84-7829-047-8. Traducción de: Advertising and Sales Promotion Strategy. Publicidad y pro... more Abstract 84-7829-047-8. Traducción de: Advertising and Sales Promotion Strategy. Publicidad y promoción son elementos esenciales en la comunicación comercial. Dado la importancia de apropiarse de estos elementos, los autores desarrollan una serie de ...
A bstract The authors decompose repeat buying for frequently purchased nondurables. The results a... more A bstract The authors decompose repeat buying for frequently purchased nondurables. The results are very similar for two categories each over a different city and time period. A factor anatysis of 18 measures of repeat buying obtains four principal factors that explain 79-85% of the variance: Preference, Inertia, Coupon Proneness and Impulse Buying. A cluster analysis of factors on these dimensions yields four segments, with distinct behavioral characteristics. Studies in many areas of marketing suggest that brand loyalty is an important dimension of repetitive buying of low-involvement, low-cost, frequently-purchased products. Thus, a better understanding of brand loyaIty would greatly promote our understanding of consumer behavior for such products. This goal has led to at least 80 studies on brand loyalty (Jacoby and Chestnut 1978; Elrod 1987). Kim, Batra and Lehmann (1991) recently presented a study which attempts to review past measures of brand loyalty and test them for reliability and validity using a single-source scanner data. Nevertheless, several difficulties with past research binder a complete description of repetitive buying. First, no single definition or measure of loyalty is completely satisfactory. In particular, attitudinal measures suffer from problems with reliability or self report bias, especially for single period surveys. Behavioral measures suffer from an inability to separate loyalty from response to marketing variables and either of them from random events. In addition, loyalty itself may be multi-dimensional consisting of true preference for brands and inertia to switch brands. Similarly, brand switching needs *The authors thank IRI for the data.
Journal of the Academy of Marketing Science, Oct 1, 2005
Ads of stocks and mutual funds typically tout their past performance, despite a disclosure that p... more Ads of stocks and mutual funds typically tout their past performance, despite a disclosure that past performance does not guarantee future returns. Are consumers motivated to buy or sell based on past performance of assets ? More generally, do consumers (wrongly) use sequential information about past performance of assets to make suboptimal decisions? Use of this heuristic leads to two well-known biases: the hot hand and the gambler's fallacy. This study proposes a theory of hype that integrates these two biases; that a positive run could inflate prices, while a negative run could depress them, although the pattern could reverse on extended runs. Tests on two experiments and one event study of stock purchases strongly suggest that consumers dump "losers" and buy "winners." The latter phenomenon could lead to hyped-up prices on the stock market for winning stocks. The authors discuss the managerial, public policy, and research implications of the results.
P roduct quality is probably undervalued by firms because there is little consensus about appropr... more P roduct quality is probably undervalued by firms because there is little consensus about appropriate measures and methods to research quality. We suggest that published ratings of a product's quality are a valid source of quality information with important strategic and financial impact. We test this thesis by an event analysis of abnormal returns to stock prices of firms whose new products are evaluated in The Wall Street Journal. Quality has a strong immediate effect on abnormal returns, which is substantially higher than that for other marketing events assessed in prior studies. Moreover, there are some important asymmetries in the effect. We discuss the research, managerial, investing, and policy implications.
Erim Report Series Research in Management Erasmus Research Institute of Management, Aug 30, 2011
User-Generated Content in online platforms or chatter for short provides a valuable source of con... more User-Generated Content in online platforms or chatter for short provides a valuable source of consumer feedback on market performance of firms. This study examines whether chatter can predict stock market performance, which metric of chatter has the strongest relationship, and what the dynamics of the relationship are. The authors aggregate chatter (in the form of product reviews) from multiple websites over a four year period across six markets and fifteen firms. They derive multiple metrics of chatter (volume, positive chatter, negative chatter, and 5-start ratings) and use multivariate time series models to assess the short and long term relationship between chatter and stock market performance. They use three measures of stock market performance: abnormal returns, risk, and trading volume. The findings reveal that two metrics of chatter can predict abnormal returns with a lead of a few days. Of four metrics of chatter, volume shows the strongest relationship with returns and trading volume, followed by negative chatter. Whereas negative chatter has a strong effect on returns and trading volume with a short "wearin" and long "wearout," positive chatter has no effect on these metrics. Negative chatter also increases volatility (risk) in returns. A portfolio analysis of trading stocks based on their chatter provides a return of 8% over and above normal market returns. In addition to the investing opportunities, the results show managers that chatter is an important metric to follow to gauge the performance of their brands and products. Because chatter is available daily and hourly, it 2 can provide an immediate pulse of performance that is not possible with infrequent sales and earnings reports. The fact that negative chatter is more important than positive, indicates that negatives are more diagnostic than positives. The negatives suggest what aspects of the products managers should focus on.
Http Dx Doi Org 10 1509 Jmkg 64 3 1 18033, May 29, 2013
A common perception in the field of innovation is that large, incumbent firms rarely introduce ra... more A common perception in the field of innovation is that large, incumbent firms rarely introduce radical product innovations. Such firms tend to solidify their market positions with relatively incremental innovations. They may even turn away entrepreneurs who come up with radical innovations, though they themselves had such entrepreneurial roots. As a result, radical innovations tend to come from small firms, the outsiders. This thesis, which we term the “incumbent's curse,” is commonly accepted in academic and popular accounts of radical innovation. This topic is important, because radical product innovation is an engine of economic growth that has created entire industries and brought down giants while catapulting small firms to market leadership. Yet a review of the literature suggests that the evidence for the incumbent's curse is based on anecdotes and scattered case studies of highly specialized innovations. It is not clear if it applies widely across several product categories. The authors reexamine the incumbent's curse using a historical analysis of a relatively large number of radical innovations in the consumer durables and office products categories. In particular, the authors seek to answer the following questions: (1) How prevalent is this phenomenon? What percentage of radical innovations do incumbents versus nonincumbents introduce? What percentage of radical innovations do small firms versus large firms introduce? (2) Is the phenomenon a curse that invariably afflicts large incumbents in current industries? Is it driven by incumbency or size? and (3) How consistent is the phenomenon? Has the increasing size and complexity of firms over time accentuated it? Does it vary across national boundaries? Results from the study suggest that conventional wisdom about the incumbent's curse may not always be valid.
I nnovation is one of the most important issues in business research today. It has been studied i... more I nnovation is one of the most important issues in business research today. It has been studied in many independent research traditions. Our understanding and study of innovation can benefit from an integrative review of these research traditions. In so doing, we identify 16 topics relevant to marketing science, which we classify under five research fields: • Consumer response to innovation, including attempts to measure consumer innovativeness, models of new product growth, and recent ideas on network externalities; • Organizations and innovation, which are increasingly important as product development becomes more complex and tools more effective but demanding; • Market entry strategies, which includes recent research on technology revolution, extensive marketing science research on strategies for entry, and issues of portfolio management; • Prescriptive techniques for product development processes, which have been transformed through global pressures, increasingly accurate customer input, Web-based communication for dispersed and global product design, and new tools for dealing with complexity over time and across product lines; • Defending against market entry and capturing the rewards of innovating, which includes extensive marketing science research on strategies of defense, managing through metrics, and rewards to entrants. For each topic, we summarize key concepts and highlight research challenges. For prescriptive research topics, we also review current thinking and applications. For descriptive topics, we review key findings.
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Papers by Gerard Tellis