2014 RESEARCH AWARDS
P.K. Kannan Receives the Journal of Retailing’s 2014 Davidson Award
P.K. Kannan, Chair of the Department of Marketing and Ralph J. Tyser Professor of Marketing Science at the Smith School, received the 2014 Davidson Award from the Journal of Retailing(JR). JR presents the Davidson Award to the best paper published in the journal each year. In Professor Kannan’s 2012 article, “The Impact of Household Level Heterogeneity in Reference Price Effects on Optimal Retailer Pricing Policies,” he and his co-authors discuss a new model that calculates optimal prices for store managers to help maximize profitability.
Members of the JR Editorial Review Board and Associate Editors judged 41 articles in the journal’s 2012 issues on the following criteria: originality, technical competence, and a strong contribution to the theory and practice of retailing. Professor Kannan received the award this past February at the AMA Winter Conference in Orlando, Florida. Read the article.
2013 SUMMER RESEARCH AWARDS
The American Marketing Association’s 2013 Gilbert A. Churchill Award
A. Parasuraman, distinguished faculty fellow of the CES and James W. McLamore Chair in Marketing at the University of Miami has been named the recipient of the 2013 Gilbert A. Churchill Award by the American Marketing Association (AMA). This award recognizes lifetime achievement in the academic study of marketing research. In announcing the award, the AMA noted Professor Parasuraman is a pioneer in the area of conceptualizing, measuring and improving quality of service. Professor Parasuraman, with co-researchers Len Berry and Valarie Zeithaml, developed the SERVQUAL scale to measure service quality. SERVQUAL has been influential in the emergence of services marketing as a distinct sub-discipline in marketing. Professor Parasuraman received this award in August of this year at the AMA Summer Educators’ Conference in Boston, Massachusetts.
The American Marketing Association’s 2012 Innovation, Technology and Interactivity SIG Article of the Year Award
P.K. Kannan, distinguished faculty fellow of the CES and Chair of the Department of Marketing won the American Marketing Association’s (AMA) 2012 SIG Article of the Year Award. This award recognizes research in marketing high technology products and innovations. The paper was co-written by ex-Smith doctoral student Nevena Koukova and marketing professor Amna Kirmani. In the paper, titled "Multi-Format Digital Products: How Design Attributes Interact with Usage Situations to Determine Choices" the authors analyze consumers’ evaluations of bundles of multiformat digital products. Their results highlight the unique role of design in the context of developing products. Read the full paper here.
For 2013, three Summer Research Grants were awarded to professors associate with the Center for Excellence in Service.
Rebecca Hamilton, Associate Professor of Marketing at the Smith School, received a grant for her paper "Naïve or Savvy: How Credible Are Online Reviews for Credence Services?" Consumers are not able to assess the quality of credence attributes (e.g., a doctor’s skill in diagnosis) and therefore other consumers should discount reviews of these attributes. This paper examines the claims made in reviews of credence vs. experience services (e.g., doctors vs. hair stylists) and how consumers interpret these claims.
Naïve or Savvy: How Credible Are Online Reviews for Credence Services?
Abstract: Online reviews allow consumers to share information about their service experiences with other consumers. Theoretically, sharing this information should reduce market information asymmetries between potential consumers and service providers because many attributes of a service experience cannot be evaluated prior to consumption (i.e., they are credence or experience attributes rather than search attributes; Huang, Lurie, & Mitra, 2009). For example, although a consumer might be able to evaluate the prices of entrees (a search attribute) prior to eating at a restaurant, it is very difficult to evaluate their tastiness (an experience attribute) without having consumed a meal, and even after eating them, a consumer cannot verify the claim that they are made with organic ingredients (a credence attribute). Because consumers cannot assess the quality of credence attributes, consumer reviews of services that are dominated by credence attributes (e.g., doctors, auto mechanics) are of dubious credibility. Indeed, many doctors have strongly resisted the legitimacy of consumer reviews (Andrews, 2008; Jain, 2010), in some cases even requiring patients to sign documents promising never to review their doctors (ElBoghdady, 2012).
Rosellina Ferraro, Associate Professor of Marketing at the Smith School, was awarded a grant for her paper "Customer Misbehavior in Access-Based Consumption." In her paper, she examines customer misbehavior, it’s affects and managerial strategies for reducing the affects. Professor Ferraro’s co-authors on this research are Sabine Moeller, Lekkerland Endowed Chair of Convenience and Marketing at the EBS Business School and CES Faculty Fellow, and Tobias Schaefers, Assistant Professorship for Dialog Marketing at the EBS Business School.
Customer Misbehavior in Access-Based Consumption
Abstract: Marketers frequently come to realize that not every customer behaves in a constructive manner. Quite the contrary—customers who misbehave by deliberately disobeying commonly accepted codes of conduct constitute an element of the daily business of firms in many sectors and industries. The consequences of customer misbehavior can be severe, ranging from additional costs for handling and recovery to deleterious effects on employees to deterioration of other customers’ satisfaction. Moreover, misbehavior by one customer may give implicit encouragement to other customers that they should misbehave in a similar fashion. Our research examines customer misbehavior in the access-based services consumption context, which refer to transactions where multiple consumers successively use a product through temporal, short-term access. Such settings offer increased opportunity to misbehave. This research seeks to provide evidence of the contagious effect of misbehavior and its negative impact on repeat patronage and recommendation behavior. Moreover, we explore managerial strategies for reducing such negative consequences.
Rebecca Hamilton, Associate Professor of Marketing at the Smith School was awarded a grant for her paper "Return on Service Amenities." Professor Hamilton’s co-authors on this research were Roland T. Rust, Distinguished University Professor and David Bruce Smith Chair in Marketing and Executive Director of the Center for Excellence in Service and the Center for Complexity in Business at the Smith School, Michel Wedel, PepsiCo Professor of Consumer Science at the Smith School, and Chekitan Dev, Associate Professor of Strategic Marketing and Brand Management at the School of Hotel Administration, Cornell University.
Return on Service Amenities
Abstract: Firms often vie for competitive advantage by providing additional services (amenities) to their customers. In the hotel industry, for example, analysts use the term "amenity creep" to describe the constant pressure for brands to differentiate by adding services such as fitness centers and high-speed Internet access to their offerings. We build a model of how service amenities produce financial return. The profits from service amenities arise from two sources: increasing initial choice and increasing revenues from repurchase. The repurchase effect can itself be split into incidence of future purchase (yes or no) and additional revenue conditional on repurchase. We apply the model in the context of hotel amenities, using a large-scale customer database provided by a major hotel chain, employing hierarchical Bayesian estimation to estimate the model. The estimation results are then used to evaluate return on investment for two service amenities, for each of several hotel brands. We find that return varies across amenities and that the return on a single amenity can vary substantially across different brands. These empirical results show that the pattern of return on amenities can be complex, and that each brand needs to carefully evaluate the profitability of each service amenity. We conclude that the model can serve as a useful decision tool for managers deciding which service amenities to provide to their customers.
This research was supported by grants from the Center for Excellence in Service at the University of Maryland. The authors thank seminar participants at the Wharton School for their helpful comments. Thanks also to Jess Pettit and James Kim for their help with data analysis and preparation of the figures.
2011 SMITH SUMMER RESEARCH GRANTS
This year, Smith Summer Research Grants were awarded to five professors associated with the Center for Excellence in Service.
Dr. Roland Rust, Distinguished University Professor, David Bruce Smith Chair in Marketing and Executive Director of the Center for Excellence in Service, received a grant for his paper "Optimizing Service Productivity." Dr. Rust presents a theory of the optimal service productivity level that explains when higher or lower service productivity will be profitable, and distinguishes between short and long-term effects of service productivity.
Optimizing Service Productivity
Abstract: As service becomes an ever-larger part of every developed economy, service productivity is increasingly the focus of attention. To increase service productivity, many companies utilize automation more extensively, to reduce the use of labor. The variability of service, however, means that decisions about service productivity must take not just efficiency but also effectiveness into account. Greater labor intensiveness, all other things being equal, usually results in higher service quality. This implies, and prior research confirms, a tradeoff between service productivity (efficiency) and service quality (effectiveness). Based on this tradeoff, we propose service productivity as a strategic decision variable—that is, the company manages the service productivity level to maximize profits. We develop a theory of the optimal service productivity level that explains when higher or lower service productivity will be profitable, and distinguishes between short-term effects of service productivity, due to labor-automation tradeoffs, and long-term effects, due to the advance of technology. The theory and literature review result in testable hypotheses, which are tested using data from more than 700 service companies in two time periods. Preliminary results show that service productivity should be higher when 1) profit margin is lower, 2) price is lower, 3) the market is more concentrated, 4) wages are higher, and 5) factors other than service quality have a larger impact on sales. Our empirical results also provide preliminary evidence that large service companies may tend to be too productive, relative to the optimal level, and if so, should place less emphasis (in the short run) on cost reduction through automation and more emphasis on service quality. Phase two of the project, currently in the beginning stages, researches the impact of service productivity and customer satisfaction on executive compensation. We develop a series of hypotheses about how executive compensation should be affected over time, and test it using a variety of secondary data sources.
Dr. Rebecca Hamilton, Associate Professor of Marketing, received a grant for her paper "Return on Amenities: Calculating Return on Investment in Services Provided to Customers". Dr. Hamilton examines how adding amenities to a service experience affects guest satisfaction and customer lifetime value in the hospitality industry.
Return on Amenities: Calculating Return on Investment in Services Provided to Customers
Abstract: Customers often choose hotels and resorts on the basis of service innovations that differentiate them from competitors, which encourages managers to add more and more features to their offerings (Victorino, Verma, Plaschka and Dev 2005). However, academic research has shown that consumers often experience "feature fatigue," choosing to buy too many features when they are purchasing a product but regretting their decision later when the product proves to be too complex to use easily (Thompson, Hamilton and Rust 2005; Rust, Thompson and Hamilton 2006). If the feature fatigue effect extends to hotel amenities, adding new services may not always have a positive effect on customer satisfaction and repurchase intentions.
In this joint research with Chekitan Dev of Cornell University’s School of Hotel Management, Roland Rust of the Robert H. Smith School of Business, we extend our earlier work on feature fatigue with products to examine how adding amenities to a service experience affects guest satisfaction and customer lifetime value in the hospitality industry.
Our full dataset includes over 2,700 complete responses to the pre-stay survey, over 2,700 complete responses to the post-stay survey, and over 700 matched responses to the pre-stay and post-stay surveys.
This data will allow us to examine how well anticipated use of amenities predicts actual use of amenities and which amenities have the strongest effect on both anticipated satisfaction and retrospective satisfaction. Most importantly, we plan to create a model of "return on amenities" that service businesses can use to determine which of their amenities have the strongest effect on customer lifetime value and deserve the most investment.
Dr. Hui Liao, Associate Professor of Management and Organization and Research Director of the Center for Excellence in Service, received a grant for her paper "Getting Out of the Wrong Side of Bed? Employee Rumination after Customer Mistreatment and Negative Mood in the Next Morning". This paper sheds light on what service organizations can do to help front-line service employees better cope with negative encounters with customers and improve their psychological wellbeing, leading to better service quality.
Getting Out of the Wrong Side of Bed? Employee Rumination after Customer Mistreatment and Negative Mood the Next Morning
Abstract: Employees striving to maintain positive interactions with customers may undertake excessive emotional burdens and experience emotional exhaustion, negative health symptoms, absenteeism and other consequences. Customer mistreatment, defined as the low-quality interpersonal treatment that employees receive from their customers, may be particularly demanding for service employees during service interactions. From a perspective of resource conservation, unpleasant interactions with customers may deplete employees’ emotional resources, thus compromising service employees’ short-term and long-term emotional wellbeing. Prior research has mainly focused on examining either the negative effect of chronic exposure to customer mistreatment on the emotional well-being of employees or their immediate emotional reactions to customer mistreatment. However, little is known about the potential mechanism thru which the negative effect of customer mistreatment goes beyond the service episode and persists to influence employees’ emotions at a later time. Drawing on the cognitive rumination theory and using a unique daily research method with longitudinal data collected from a large sample of call center employees, the current study examines the mediating role of rumination at night in explaining the lagged effect of the current day’s customer mistreatment on the employees’ negative mood next morning. In addition, the study examines the moderating role of perceived organizational support in mitigating the negative effect of customer mistreatment on rumination at night. The results will shed light on what service organizations can do to help front-line service employees to better cope with negative encounters with customers and improve their psychological wellbeing as well as service quality.
Dr. Wendy Moe, Associate Professor of Marketing, received a grant for her study on the "Direct and Indirect Effects of Online Advertising Campaigns." This study will provide important insights into the future behavior of an individual as a function of the series of ad impressions to which he or she is exposed. It will examine the effectiveness of individual ads as well as the collection of ad impressions as a whole.
Direct and Indirect Effects of Online Advertising Campaigns
Abstract: In traditional advertising, the effects of different advertising schedules (e.g., flighting, pulsing, blitz, etc.) have been thoroughly studied by marketers with the focus being on modeling advertising response curves and decay patterns. However, much of what we have learned about traditional advertising does not directly translate to the online medium. Where traditional advertising is passively consumed by the audience at a predetermined time and place, online advertising can be more customized to and integrated with the individual’s media consumption behavior. As a result, online advertising campaigns are not set according to a schedule defined by a timeline of expenditures but rather by a set of rules defining when in the individual’s browsing behavior to serve the ad (e.g., during a related search, when viewing a news article pertaining to the product category, etc.).
For this project, our objective is to develop a model that would measure the effect of each ad on the individual’s future conversion behavior. We differentiate between direct and indirect effects. We refer to direct effects as the impact advertising has on immediate click-through behavior. Understanding this effect is critical since advertising is often priced on this basis. This effect has also been the subject of several academic articles and industry white papers.
What has been understudied is the indirect effect of advertising impressions on future behavior. As marketers, we understand the value of advertising in building a brand. However, when we measure the effectiveness of online advertising, we focus almost exclusively on the immediate effects seen in click-through behavior without any acknowledge of the impact that the ad may have had on the brand and longer term behavior. In this project, our goal will be to measure this longer-term effect by modeling the impact of advertising on not only click-through behavior but also future conversion behavior.
Furthermore, studies of online advertising have focused on the impact of one advertising impression at a time. Our goal will be to model the effects of the entire portfolio of advertising impressions on a given individual. The objective will be to quantify the decay patterns of each ad, the synergistic effects between ads and the actionable characteristics of a successful campaign. Our methodological approach will be to develop a parsimonious (and therefore easy to implement) model that predicts an individual’s click-through and future conversion behavior. Each ad impression that the individual is exposed to will have an impact on this predicted conversion probability. This impact will vary across ad impressions depending on the ad itself, its interaction with previously seen ads and context.
Dr. Sunil Mithas, Associate Professor of Decision, Operations & Information Technologies, received a grant for his research on "Information Technology, Foreign Revenues and Foreign Profits: Theory and Evidence." In this study, he identifies and elaborates on theoretical mechanisms that explain why IT helps firms achieve higher foreign revenues and foreign profits, two key measures of a firm’s globalization.
Information Technology, Foreign Revenues and Foreign Profits: Theory and Evidence
Abstract: Does information technology (IT) enable firms to globalize their operations and achieve higher foreign revenues and foreign profits? Although several studies have argued that IT can help firms globalize their operations, few studies have empirically tested this research question. We identify and discuss three mechanisms that explain why IT investments enable firms to globalize their operations – value chain coordination, value chain configuration, and local responsiveness. Using data on 231 multinational firms for the years 1999 – 2006, we find that aggregate IT investments are positively associated with higher levels of revenues and profits from foreign operations. From a research perspective, this study identifies and elaborates on theoretical mechanisms that explain why IT helps firms achieve higher foreign revenues and foreign profits, two key measures of a firm’s globalization. By documenting how IT creates value for firms through enabling globalization, we extend the business value of IT literature that has so far touched on firm-level globalization benefits from IT investments only in passing. This study is also important from a managerial perspective, because an understanding of how IT influences foreign revenues and foreign profits can help firms make appropriate changes in their IT strategies and IT investments to improve competitiveness.