FALL 2007
VOL. 8 NO. 2

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Knowledge Transfer

Breaking into the Big Box ♦ Eye on Ads ♦ Managing Your Money
A Lesson from Hollywood ♦ Web Shopping Wisdom
Smith School Ranked Top Five in Research Worldwide ♦ Faculty Awards and Honors

PODCAST: The Secret to Success at the Box Office

It is common wisdom that to be successful in Hollywood, “it’s not what you know, it’s who you know.” And film distributors choose to work with production teams that they have had prior relationships more often than not. But according to recent research by David Waguespack, assistant professor of management and organization, this may be keeping the film industry from reaping the most potential profits.

He found that when distributors worked with friends, their friends’ films stayed in theaters longer and sold four times as many tickets as much as other films. So it seems like distributors benefit from working with production teams they know. But Waguespack argues that this is actually a self-confirming dynamic—an effect that occurs because the distributors give those films better release dates, larger budgets, and more promotion, creating the right circumstances for a film’s success. After accounting for the effect of those factors, films in which the principals have prior relations with the distributor actually performed worse at the box office than other films.

Because distributors give preferential treatment to their friends, they may be forgoing a more beneficial relationship that would result in greater success, and thus greater profits. In the end, the problem is not that the films of prior partners don’t do well in the box office—it’s that another project might do even better.

This may be true in other industries as well, says Waguespack. Perhaps venture capitalists are also creating or limiting the successes of businesses presented to them based on their own expectations. “What is really driving performance?” says Waguespack. “Is it that venture capitalists are really good at picking the best new businesses? Or is that success based on the effort that the investor puts into the company afterward?”

An expanded version of this article is available at the Research@Smith Web site.

PODCAST: A New Way to Get Inside Consumer Minds to Predict Buying Behavior

How can you get, and keep, your customers’ attention when they are cruising your Web site? The answer depends on what stage a customer is at in the purchasing process. In the first stage, consumers are just weeding down their choices. But in the second stage, they are actually choosing which item to purchase. Wendy Moe, assistant professor of marketing at the Smith School, has examined both these stages using data from online purchases of weight loss aids and meal replacements.

Moe found that in stage 1, where consumers are screening the wide choices available to them, they tend to use simpler mental decision rules than in stage 2, where they are making purchase decisions on the narrowed-down choices from stage 1. Price and size tended to be important in the first stage, but flavor tended to be more important in the second stage.

The research findings have strong implications for promotional design and targeting. From a managerial standpoint, it is important to identify which product attributes are being used for screening decisions, for purchasing decisions and for both. This information combined with the knowledge of how a product is performing in the two stages can enable managers to devise better targeting strategies. Also, if consumers show a high preference for variety in stage 1, it possibly indicates greater consumer uncertainty and therefore perhaps a need for more education in the form of product information.

Although these results may be applicable to other products, Moe is quick to point out that her analysis was done on weight loss aids and meal replacements. Thus, it is not entirely certain that analysis of other products will reveal similar results.

An expanded version of this article may be found on the Research@Smith Web site.