• Service Innovativeness and Firm Value

    Service innovativeness and firm value JMR 2013

    by Thomas Dotzel, Venkatesh Shankar, and Leonard L. Berry

    This article was published in Journal of Marketing Research.

    Service innovativeness, or the propensity to introduce service innovations to satisfy customers and improve firm value at acceptable risk, has become a critical organizational capability. Service innovations are enabled primarily by the Internet or people, corresponding to two types of innovativeness, e- and p-innovativeness. The authors examine the determinants of service innovativeness and its interrelationships with firm-level customer satisfaction, firm value, and firm risk and investigate the differences between e- and p-innovativeness in these relationships. They develop a conceptual model and estimate a system of equations on a unique panel data set of 1,049 innovations over five years, using zero-inflated negative binomial regression and seemingly unrelated regression approaches. The results reveal important asymmetries between e- and p-innovativeness. While e-innovativeness has a positive and significant direct effect on firm value, p-innovativeness does not. P-innovativeness has an overall significantly positive effect on firm value through its positive effect on customer satisfaction, but only in human-dominated industries. Both e- and p-innovativeness are positively associated with idiosyncratic risk, but customer satisfaction partially mediates this relationship for p-innovativeness to lower this risk in human-dominated industries. The findings suggest that firms should nurture e-innovativeness in most industries and p-innovativeness in human-dominated industries.

  • Symbian: Customer Interaction through Collaboration and Competition in a Convergent Industry


    by Fabio Ancarani and Venkatesh Shankar

    This article was published in Journal of Interactive Marketing, 17 (Winter 2003), 56-76.

    In a convergent industry, the boundaries between traditional industries are blurred and, as new competitors emerge, traditional rules of competition are challenged. Firms need to effectively compete and collaborate with one another simultaneously by focusing on customer needs.  In this paper, we argue that integration of customer needs and strategic alliances is a critical aspect of competing in the convergent industry. We propose a framework for analyzing competition in convergent industry, comprising five critical factors: customer intimacy, degree of competition among different players in focal markets, alliance formation, brand equity, and execution.  We apply this framework to the case of Symbian, a joint venture among Nokia, Sony-Ericsson, Motorola, Matsushita, Siemens and Psion that licenses an open operating system for third generation mobile information and communication services in hybrid mobile devices.  We derive insights into the ongoing competition between Symbian OS, the first mover in this emerging market and Microsoft’s Smartphone, the late mover.

  • Price Levels and Price Dispersion Within and Across Multiple Retailer Types: Further Evidence and Extension


    by Fabio Ancarani and Venkatesh Shankar

    This article was published in the Journal of Academy of Marketing Science, 32 (Spring 2004), 176-187.

    In this paper, we develop hypotheses on how prices and price dispersion compare among three types of retailers, pure-play Internet, bricks-and-mortar (traditional), and bricks-and-clicks (multichannel) retailers and test them through an empirical analysis of data on the book and compact disc categories inItalyduring 2002. Our results, based on an analysis of 13720 price quotes, show that when posted prices are considered, traditional retailers have the highest prices, followed by multichannel retailers and pure-play e-tailers, in that order. However, when shipping costs are included, multichannel retailers have the highest prices, followed by pure-play e-tailers and traditional retailers, in that order.  With regard to price dispersion, pure-play e-tailers have the highest range of prices, but the lowest standard deviation.  Multichannel retailers have the highest standard deviation in prices with or without shipping costs.  These findings suggest that online markets offer opportunities for retailers to differentiate within and across the retailer types.

  • Strategic Allocation of Marketing Resources: Methods and Managerial Insights


    by Venkatesh Shankar

    This artcle was published as MSI Report, 08-207.

    This article discusses how firms strategically allocate their resources between marketing and non-marketing variables, across products, markets, channels, customers and over the product life cycle.  It presents resource allocation processes, models, and insights with examples drawn from different companies and industries.  It highlights emerging methods and research directions in strategic resource allocation and planning for both executives and researchers.

  • Pioneers’ Marketing Mix Reactions to Entry in Different Competitive Game Structures: Theoretical Analysis and Empirical Illustration


    by Venkatesh Shankar

    This article was published in Marketing Science, 16 (3, 1997), 271-293.

    Pioneers’ marketing mix reactions to new entries are recognized as important determinants of the outcome of pioneer-late mover competition, particularly in price-inelastic markets such as those for pharmacueticals, cigarettes and luxury goods.  Managers in such markets are interested in better understanding when to accommodate (i.e., decrease marketing spending) or retaliate (i.e., increase spending) in non-price marketing variables such as advertising and salesforce.  In addition, the reallocation of marketing resources toward advertising (indicated by a pull strategy) or salesforce (indicated by a push strategy) upon entry is strategically important to managers. Previous theoretical research shows that pioneers should retaliate rather than accommodate in both static and growing markets.  Results from empirical research are mixed in that they support both accommodation and retaliation in growing markets.  Empirical research also shows that a pioneer accommodates (retaliates) with its low (high) elasticity marketing mix variable. Contrary to prior research, however, some pioneers have successfully accommodated late movers in growing markets, and in some cases, have accommodated with their stronger marketing mix variables and also retaliated with their weaker marketing mix variables.  For example, Bristol Myers Squibb’s Capoten accommodated the entry of Merck’s Vasotec in the growing ace-inhibitors market with its more powerful variable, salesforce, but also retaliated with its less potent variable, advertising, and has been very successful.  Moreover, not much is known about how the pioneer’s marketing mix allocation should change (i.e., toward pull vs. push strategies) in response to new entries.  We seek to better explain the pioneer’s reactions to new entries and predict its shift in marketing mix allocation upon new entry. We note that prior research’s predictions on the pioneer’s marketing mix reactions are based on a limited number of key factors such as product-market characteristics and the pioneer’s elasticities prior to a new entry.  In this paper, we extend previous research by adding two other critical factors, namely, the impact of new entry on the pioneer’s elasticities and margin, and different competitive game structures (e.g., leader-follower competition) to better predict and explain the pioneer’s marketing mix reactions. We develop analytical results on the pioneer’s reactions in price, advertising and salesforce in different competitive games (both Nash and different leader-follower games) between the pioneer and a late mover.  In these results we identify the conditions under which the pioneer should accommodate, or retaliate, or not react to a late mover’s entry, and shift its marketing mix allocation toward pull vs. push strategies.  We empirically illustrate some of the analytical results using data from a pharmaceutical category.

  • Proactive and Reactive Product Line Strategies: Asymmetries between Market Leaders and Followers


    by Venkatesh Shankar

    This article was published in Management Science, 52 (February 2006), 276-292.

    To what extent do firms increase (product proliferation strategy) or decrease (product pruning strategy) their product line? Do they change their product line simultaneously with changes to their prices and distribution levels? What drives these changes to product line? To what extent are they proactive versus reactive? Are product line changes similar for market leaders and followers? The answers to these questions can help managers develop more effective product line strategies.  We present a framework and model to answer these questions and analyze product line strategies of firms using data from the computer printer market comprising the market leader, Hewlett Packard (HP) and followers, Epson, Canon and Lexmark.  The results show that the market leader practices a product proliferation strategy and rarely fights on price. In contrast, market followers adopt a price fighting strategy.  A firm is more likely to engage in product line actions when its competitors changed their product lines in the past, when the firm is large, and when its price is high.  Product line reaction elasticities (percentage change in product line length with respect to percentage past change in competitor’s marketing variable) are different from product line anticipation elasticities (percentage change with respect to percentage anticipated future change).  They are also different for market leaders and followers.  For the market leader (followers), product line reaction elasticity is higher (lower) than product line anticipation elasticity.  These differences are related to product line demand elasticities, which are higher for the market leader than they are for the followers.  Managers of market leaders (followers) can formulate better product line strategies based on these likely proactive and reactive actions of market followers (leaders).  They can use our model to estimate reaction, anticipation and demand elasticities of the different firms in their markets and develop a decision support system for effective product line decisions.

  • Relating Price Sensitivity to Retailer Promotional Variables and Pricing Policy: An Empirical Analysis


    by Venkatesh Shankar and Lakshman Krishnamurthi

    This article was published in the Journal of Retailing, 72 (3, 1996), 249-272.

    There is substantial evidence for variation in price sensitivity of products across stores and chains.  Understanding the relationships between price sensitivity and promotional variables (such as price cut, feature advertising, and display), and between price sensitivity and pricing policy (Everyday Low Pricing [EDLP] and High Low Pricing [HLP]) is particularly important to retailers.  We develop hypotheses on the relationships between regular price elasticity and retailer promotional variables, and between regular price elasticity and retailer pricing policy.  We test these hypotheses by analyzing the variation of regular price elasticity of a frequently purchased consumer packaged brand across stores, both within and across chains, through a multistage regression analysis.  In the first stage of our analysis, we use a mixed double-log model to estimate the sales response function for the brand in each store using time series data.  In the second stage, we explain the differences in the estimated regular price elasticities across stores within a chain by a process function model.  In the final stage, the differences across all stores and chains are explained through an aggregate process function model.  We extend the literature by separating regular (long-run) price elasticity from promotional (short-run) elasticity, and by studying the influence of both strategic and tactical retailer variables on regular price elasticity in a single framework within and across chains.  Our results for the brand analyzed show that a higher level of display and feature advertising together is associated with a lower level of regular price elasticity in EDLP stores and that an EDLP policy is associated with a higher level of regular price elasticity, whereas an HLP policy is related to a lower level of regular price elasticity.

  • New Product Introduction and Incumbent Response Strategies: Their Interrelationship and the Role of Multimarket Contact


    by Venkatesh Shankar

    This article was published in Journal of Marketing Research, 36 (August 1999), 327-344.

    In this paper, we study the determinants of both new product introduction and incumbent response strategies in a single integrated framework.  Building on previous research in strategic management, industrial organization, and marketing, we first conceptually identify the factors that potentially influence these strategies.  We develop hypotheses on the impact of the key factors on these strategies. We focus on the interrelationship between new product introduction and incumbent response strategies and on the role of multimarket contact in these strategies.  To test these hypotheses, we formulate models of introduction and response strategies, which include an anticipated incumbent reaction formation model.  We estimate the models using cross-sectional and time-series data comprising 23 new product entries and responses of 59 incumbents to these entries in six leading pharmaceutical markets. Our results significantly extend previous research.  They show that new product introduction strategy is significantly influenced by incumbent reaction strategy and vice-versa. The relationship of a new product’s marketing spending with the anticipated incumbent reaction is different for incumbents of different sizes.  A new product’s spending is negatively related to the anticipated reactions of large incumbents, but is unrelated to those of small incumbents.  Our analysis shows that higher spending by a new brand results in incumbent response that is significantly lower in magnitude. Our results also show that multimarket contact results in both lower introduction spending and incumbent response.  We discuss the managerial implications of these results.


  • First Mover Advantage in an Internet-enabled Environment: Conceptual Framework and Propositions

    Varadarajan Yadav Shankar JAMS 2008

    by Rajan Varadarajan, Manjit Yadav, and Venkatesh Shankar

    This article was published in the Journal of Academy of Marketing Science, 36 (2008), 293-308.

    The competitive market environment has evolved from a physical market environment (PME) to an Internet-enabled market environment (IME) encompassing the physical and electronic marketplaces. At the same time, an increasing number of information products are available in both analog and digital forms. For information products in digital form, the IME also serves as a distribution channel. Such developments raise questions concerning the extent to which extant perspectives on first-mover advantage developed in the context of the PME hold in the IME, generally, and for information products specifically. We address this issue by developing a conceptual framework that focuses on selected sources of first-mover advantage delineated in the extant literature and advance propositions concerning sources that will have a greater or lower effect in the IME relative to the PME. A central message for first-movers in the IME that emerges from our conceptual analysis is to focus on achieving superior positions in resources that would enable them to get close to the customers fast, create switching costs, and retain them though ongoing investments in multi-faceted innovations. A second message that emerges for first-movers in the IME is they must take note of and make strategic adjustments for the potentially diminished significance of some traditional sources of first-mover advantage. These sources include spatial preemption, preemptive investment in capacity, and consumers’ choice behavior under conditions of uncertainty about product quality. We discuss the implications for further conceptual and empirical work in this area of increasing significance.

  • New Product Preannouncements and Shareholder Value: Don’t Make Promises You Can’t Keep


    by Alina Sorescu, Venkatesh Shankar, and Tarun Kushwaha

    This article was published in Journal of Marketing Research, 44 (August 2007), 464-489.

    New product preannouncements are strategic signals that firms direct at their customers, competitors, channel members, and investors. They have been touted as effective means of deterring competitor entry, informing potential customers, and even tipping the balance of technological standard battles in favor of the preannouncing firms. However, preannouncements also carry the risks of unwanted competitive reaction and the negative consequences of undelivered promises. From a shareholder value standpoint, do the benefits outweigh the risks of preannouncing? To address this question, the authors build on agency and signaling theories to develop hypotheses about the effects of preannouncements on shareholder value, and they empirically test these hypotheses on a sample of software and hardware new product preannouncements. The findings indicate that the financial returns from preannouncements are significantly positive in the long run. They show that preannouncements generate positive short-term abnormal returns only for firms that offer specific information about the preannounced product. The authors also show that firms earn positive long-term abnormal returns after a preannouncement if they continue to update the market on the progress of the new product. Both the short-term and the long-term returns are further magnified if the reliability of the preannouncement (i.e., the credibility of the preannouncing firm) is high. The findings offer executives of preannouncing firms clear guidelines on how to manage communications in the market to extract financial value from new product preannouncements.