Consumer Preferences for Mass Customization

Increasingly, firms allow consumers to mass customize their products. In this study, the authors investigate consumers’ evaluations of different mass customization configurations when asked to mass customize a product. For instance, mass customization configurations may differ in the number of modules that may be mass customized. The authors find – in the context of mass customization of personal computers – that mass customization configuration affects the product utility consumers can achieve in mass customization as well as their perception of mass customization complexity. In turn, product utility and complexity affect the utility consumers derive from using a certain mass customization configuration. More specifically, product utility has a positive, and complexity has a negative effect on mass customization configuration utility. The effect of complexity is direct as well as indirect, because complexity also lowers product utility. The authors also find that consumers with high product expertise find mass customization configurations less complex than consumers with low product expertise and that for more expert consumers complexity has a less negative impact on product utility. The study has important managerial implications for how companies can design their mass customization configuration to increase utility and decrease complexity.marketing ;

Sales Growth of New Pharmaceuticals Across the Globe: The Role of Regulatory Regimes

Prior marketing literature has overlooked the role of regulatory regimes in explaining international sales growth of new products. This paper addresses this gap in the context of new pharmaceuticals (15 new molecules in 34 countries) and sheds light on the effect regulatory regimes have on new drug sales across the globe. Based on a time-varying coefficient model, we find that differences in regulation substantially contribute to cross-country variation in sales. One of the regulatory constraints investigated, i.e. manufacturer price controls, has a positive effect on drug sales. The other forms of regulation such as restrictions of physician prescription budgets and the prohibition of direct-to-consumer advertising tend to hurt sales. The effect of manufacturer price controls is similar for newly launched and mature drugs. In contrast, regulations on physician prescription budget and direct-to-consumer advertising have a differential effect for newly launched and mature drugs. While the former hurts mature drugs more, the latter has a larger effect on newly launched drugs. In addition to these regulatory effects,

Consumer Preferences for Mass Customization

Increasingly, firms adopt mass customization, which allows consumers to customize products by self-selecting their most preferred composition of the product for a predefined set of modules. For example, PC vendors such as Dell allow customers to customize their PC by choosing the type of processor, memory size, monitor, etc. However, how such firms configure the mass customization process determines the utility a consumer may obtain or the complexity a consumer may face in the mass customization task. Mass customization configurations may differ in four important ways – we take the example of the personal computer industry. First, a firm may offer few or many product modules that can be mass customized (e.g., only allow consumers to customize memory and processor of a PC or allow consumers to customize any module of the PC) and few or many levels among which to choose per mass customizable module (e.g., for mass customization of the processor, only two or many more processing speeds are available). Second, a firm may offer the consumer a choice only between very similar module levels (e.g., a 17” or 18” screen) or between very different module levels (e.g., a 15” or 21” screen). Third, a firm may individually price the modules within a mass customization configuration (e.g., showing the price of the different processors the consumer may choose from) along with pricing the total product, or the firm may show only the total product price (e.g., the price of the different processors is not shown, but only the computer’s total price is shown). Fourth, the firm may show a default version (e.g., for the processor, the configuration contains a pre-selected processing speed, which may be a high-end or low-end processor), which consumers may then customize, or the firm may not show a default version and let consumers start from scratch in composing the product. The authors find that the choices that firms make in configuring the mass customization process affect the product utility consumers can achieve in mass customization. The reason is that the mass customization configuration affects how closely the consumer may approach his or her ideal product by mass customizing. Mass customization configurations also affect consumers’ perception of the complexity of mass customization as they affect how many cognitive steps a consumer needs to make in the decision process. Both product utility and complexity in the end determine the utility consumers derive from using a certain mass customization configuration, which in turn will determine main outcome variables for marketers, such as total product sales, satisfaction with the product and the firm, referral behavior and loyalty. The study offers good news for those who wish to provide many mass customization options to consumers, because we find that within the rather large range of modules and module levels we manipulated in this study, consumers did not perceive significant increases in complexity, while they were indeed able to achieve higher product utility. Second, our results imply that firms when increasing the number of module levels, should typically offer consumers more additional options in the most popular range of a module and less additional options at the extremes. Third, pricing should preferably be presented only at the total product level, rather than at the module and product level. We find that this approach reduces complexity and increases product utility. Fourth, firms should offer a default version that consumers can use as a starting point for mass customization, as doing so minimizes the complexity to consumers. The best default version to start out with is a base default version because this type of default version allows the consumer to most closely approach his or her ideal product. The reason is that consumers when presented with an advanced default may buy a product that is more advanced than they actually need. We also found that expert consumers are ideal targets for mass customization offerings. Expert consumers experience lower complexity in mass customization and complexity has a less negative influence on product utility obtained in the mass customization process, all compared to novice consumers. In general, reducing complexity in the mass customization configuration is a promising strategy for firms as it not only increases the utility of the entire process for consumers, but also allows them to compose products that more closely fit their ideal product

The Debate on Influencing Doctors’ Decisions: Are Drug Characteristics the Missing Link?

Decision-making by physicians on patients’ treatment has come under increased public scrutiny. In fact, there is a fair amount of debate on the effects of marketing actions of pharmaceutical firms toward physicians and their impact on physician prescription behavior. While some scholars find a strong and positive influence of marketing actions, some find only moderate effects, and others even find negative effects. Debate is also mounting on the role of other influencers (such as patient requests) in physician decision-making, both on prescriptions and sample-dispensing. The authors argue that one factor that may tip the balance in this debate is the role of drug characteristics, such as a drug’s effectiveness and a drug’s side effects. Using a unique data set, they show that marketing efforts – operationalized as detailing and symposium meetings of firms to physicians – and patient requests do affect physician decision-making differentially across brands. Moreover they find that the responsiveness of physicians’ decision-making to marketing efforts and patient requests depends upon the drug’s effectiveness and side effects. The paper presents clear guidelines for public policy and managerial practice and envisions that the study of the role of drug characteristics – such as effectiveness and side effects – may lead to valuable insights in this surging public debate

Deviation Among Technology Reviews: An Informative Enrichment of Technology Evolution Theory for Marketing

Understanding technological change is of critical importance to marketers, as it bears new markets, new brands, new customers, and new market leaders. This paper examines the deviation among reviews of a technology’s performance and its consequences for inferences on technology evolution patterns. The basic premise of the current paper is that technology evolution literature, while highly relevant, is misguided in that it ignores potential deviation among technology reviews. Using a comprehensive dataset of all published reviews, both before and after FDA approval, of 7 statins for cholesterol reduction (LDL) from 1982 to 2007, the authors find that: (1) there exists vast deviation among reviews of technology performance leading to systematic bias in the portrayal of the path of technology evolution, especially if one relies only on manufacturer’s claims, (2) such deviation does not fade over time, (3) technology review (study design) characteristics affect the stated performance and, (4) both higher technology performance and a higher deviation affect sales positively, also when one controls for a firm’s marketing expenditures. We discuss the implications of these findings for technology evolution theory, managerial practice and public policy

The Detailing Response of Branded Drug Firms to Generic Entry

The literature on pharmaceutical marketing devotes little attention to the promotion of branded drugs after generic competitors enter the market. This paper addresses this gap in the literature and explores how the sales of branded drugs respond to specific promotional strategies following generic entry. We focus on physician detailing, and specifically, firms' post-generic-entry decisions regarding overall detailing spending and physician-level allocation (i.e., whichphysicians to visit). We utilize a novel, custom-built dataset containing information on aggregate-level sales, prescriptions, and promotional budget for 72 brands and their competitors; our dataset further includes detailed physician-level data on detailing visits and prescription behavior for 25 of these brands. We first describe the detailing strategies that brands use in practice, and then analyze the outcomes associated with changes in detailing spending andallocation. Our analyses reveal that, on average, brands' detailing spending decreases after generic entry, yet the ROI on such spending increases compared to before generic entry. Refocusing of detailing efforts after generic entry such that physicians with higher brand preference are targeted is more likely to lead to an increase in detailing ROI than other allocation strategies post entry. However, in practice, many brands do not undertake such reallocation and do not enhance their ROIs. Our findings are of clear practical relevance to manufacturers ofbranded drugs, as well as to policy makers who wish to curb detailing efforts for branded drugs when generic alternatives are available, so as to lower healthcare costs

The Effect of Superstar Software on Hardware Sales in System Markets

Systems are composed of complementary products (e.g., video game systems are composed of the video game console and video games). Prior literature on indirect network effects argues that, in system markets, sales of the primary product (often referred to as "hardware") largely depend on the availability of complementary products (often referred to as "software"). Mathematical and empirical analyses have almost exclusively operationalized software availability as software quantity. However, while not substantiated with empirical evidence, case illustrations show that certain “superstar” software titles of very high quality (e.g., Super Mario 64) may have had disproportionately large effects on hardware unit sales (e.g., Nintendo N64 console sales). In the context of the U.S. home video game console market, we show that the introduction of a superstar increases video game console sales on average by 14%, over a period of 5 months. Software type does not consistently alter this effect. Our findings imply that scholars who study the relationship between software availability and hardware sales, need to account for superstar returns, and their decaying effect over time, over and above a mere software quantity effect. Hardware firms should maintain a steady flow of superstar introductions, as the positive effect of a superstar only lasts for 5 months, and make, if need be, side-payments to software firms, as superstars dramatically increase hardware sales. Obtaining exclusivity over superstars, by hardware firms, does not provide an extra boost to their own sales, but it does take away an opportunity for competing systems to increase their sales

Buying High Tech Products

Prior research on technology-intensive (TI) markets makes abstraction of the social context in which transactions take place. In contrast with this prior literature, the authors show that buyer-vendor transactions in TI markets are relationally and structurally embedded in an interfirm network. Their main premise is that buyers in TI markets prefer vendors with whom they can share a strong tie, and that in turn buyers want these vendors to share strong ties with their component manufacturers. This is an important addition to TI literature and to the on-going debate on the strength of ties in the sociology, management and marketing literatures. The authors also specifically consider how characteristics focal to TI markets, such as the know-how buyers possess or the pace of technological change they perceive, affect the extent to which buying behavior is relationally and structurally embedded. An empirical test in the computer network market shows good support for the developed theory

Branded response to generic entry:Detailing beyond the patent cliff

The literature on pharmaceutical marketing devotes little attention to the promotion of branded drugs after generic competitors enter the market. This paper addresses this gap in the literature and explores how the sales of branded drugs respond to specific promotional strategies following generic entry. We focus on physician detailing, and specifically, firms’ post-generic-entry decisions regarding overall detailing spending and physician-level allocation (i.e., which physicians to visit). We utilize a novel, custom-built dataset containing information on aggregate-level sales, prescriptions, and promotional budget for 72 brands and their competitors; our dataset further includes detailed physician-level data on detailing visits and prescription behavior for 25 of these brands. We first describe the detailing strategies that brands use in practice, and then analyze the outcomes associated with changes in detailing spending and allocation. Our analyses reveal that, on average, brands’ detailing spending decreases after generic entry, yet the ROI on such spending increases compared to before generic entry. Refocusing of detailing efforts after generic entry such that physicians with higher brand preference are targeted is more likely to lead to an increase in detailing ROI than other allocation strategies post entry. However, in practice, many brands do not undertake such reallocation and do not enhance their ROIs. Our findings are of clear practical relevance to manufacturers of branded drugs, as well as to policy makers who wish to curb detailing efforts for branded drugs when generic alternatives are available, so as to lower healthcare costs.</p