Multi-Dimensional Observational Learning in Social Networks: Theory and Experimental Evidence

Over the last decade, there has been an unprecedented growth of social media platforms (e.g., Instagram, and Pinterest). This growth has resulted in significant increases in the availability of individual-specific information such as holiday pictures, mobile check-ins at restaurants, to everyday purchases. Besides sharing their data, about 72% of Instagram users also made purchase decisions after seeing something on Instagram, with the most common categories being clothing, makeup, shoes, and jewelry . In a similar vein, Pinterest, an image-based social platform, has product rich pins that facilitate users to discover new products: In 2016, 55% of U.S. online users shared that their primary use of Pinterest was to find and shop for products . The prevalence of consumers sharing their purchases on social media platforms (e.g., Instagram, and Pinterest) and the use of this information by potential future consumers have substantial implications for online retailing. Consumers can observe the purchase information shared by their “friends” or “strangers.” The product offerings on a social network are diverse and led us to integrate products with different attributes. One approach to classify product types by distinct characteristics is to consider how these attributes drive consumer choice, i.e., classification of products with vertically and horizontally differentiated attributes. In this study, we examine how product characteristics and the type of information provider jointly moderate the purchase decision in a social network setting. We first propose an analytical observational learning framework integrating the impact of product differentiation and social ties. Then, we use two experimental studies to validate our analytical results and provide additional insights. Our key findings are that the effect of learning from strangers is stronger for vertically differentiated products than for the horizontally differentiated product. However, the impact of learning from friends does not depend on whether the underlying product is horizontally or vertically differentiated. What is more interesting is the nuanced role of social ties: For horizontally differentiated products, the effect of learning increases with the strength of social ties. In addition, “contact-based” tie strength is more important than “structure-based” tie strength in accelerating observational learning. These findings can motivate online retailers to generate alternative strategies for increasing product sales through social networks. For example, online retailers offering horizontally differentiated products have strong incentives to cooperate with social media platforms (e.g., Instagram and Pinterest) in encouraging customers to share their purchase information

Fusion Product Planning: A Market Offering Perspective

Devices that integrate multiple functions together are popular in consumer electronic markets. We describe these multifunction devices as fusion products as they fuse together products that traditionally stand alone in the marketplace. In this article, we investigate the manufacturer\u27s fusion product planning decision, adopting a market offering perspective that allows us to address the design and product portfolio decisions simultaneously. The general approach adopted is to develop and analyze a profit-maximizing model for a single firm that integrates product substitution effects in identifying an optimal market offering. In the general model, we demonstrate that the product design and portfolio decisions are analytically difficult to characterize because the number of possible portfolios can be extremely large. The managerial insight from a stylized all-in-one model and numerical analysis is that the manufacturer should, in most cases, select only a subset of fusion and single-function products to satisfy the market\u27s multidimension needs. This may explain why the function compositions available in certain product markets are limited. In particular, one of the key factors driving the product portfolio decision is the margin associated with the fusion products. If a single all-in-one fusion product has relatively high margins, then this product likely dominates the product portfolio. Also, the congruency of the constituent single-function products is an important factor. When substitution effects are relatively high (i.e., the product set is more congruent), a portfolio containing a smaller number of products is more likely to be optimal

The Newsvendor Problem: Review and Directions for Future Research

In this paper, we review the contributions to date for analyzing the newsvendor problem. Our focus is on examining the specific extensions for analyzing this problem in the context of modeling customer demand, supplier costs, and the buyer risk profile. More specifically, we analyze the impact of market price, marketing effort, and stocking quantity on customer demand; how supplier prices can serve as a coordination mechanism in a supply chain setting; integrating alternative supplier pricing policies within the newsvendor framework; and how the buyer’s risk profile moderates the newsvendor order quantity decision. For each of these areas,we summarize the current literature and develop extensions. Finally, we also propose directions for future research

Green, Greener or Brown: Choosing the Right Color of the Product

There does not exist a one-size-fits-all green product strategy in green market, and formulating a strategy that aligns a company’s economic and environmental goals is no small feat. In this paper we provide insights into a firm’s green product strategy choice with a focus on two alternative strategies: Greening-Up and Greening-Out. In doing so, we incorporate two important characteristics of the customer market where there are substantial numbers of customers who are potentially receptive to a green appeal: (1) Customer market is divided into three distinct and mutually exclusive segments based on large-scale surveys and interviews conducted to measure both customers’ willingness-to-pay for products with environmental attribute(s) and their propensity to buy these products; and (2) We factor in the findings of the most recent market behavior studies that even the customers that demonstrate the least environmental responsibility of all the segments can buy green products for non-environmental reasons. The contributions and findings of our work are as follows. First, we characterize the market- and product-related factors a firm should act on for a successful execution of green product strategies. Second, on the basis of customer choice data available, we assess the strategic fit of distinct pricing options under each strategy choice with the objective(s) of a firm. Third, we explore the extent to which a green product strategy creates higher environmental benefits while providing economic payoffs to a firm. In contrast to prevailing view, we show that greening up an existing brown product is not necessarily better at reducing the environmental impact of a firm than designing a new green product. We observe that responsiveness of the least environmentally conscious customers to environmental attributes added into a brown product sets one of the two major constraints on the environmental performance of Greening-Up strategy. We also observe that there does not exist a strict dichotomy between having a better economic performance and achieving a higher environmental performance, and a firm can achieve both goals simultaneously, even if it means leaving out serving some of the customers targeted by the firm’s existing brown product

Supply Chain Management

Supply chain management (SCM) facilitates delivery of the right products or services to the right place in the right quantity for the right price. It also uncovers dormant synergies or enhances existing synergies among trading partners. This chapter outlines the fundamental strategies, members, and activities of a supply chain, and how information technologies enable better management of the supply chain. Currently, basic challenges in improving supply chain performance are embedded in the adversarial tension of competitive markets. Overcoming inherent distrust and fostering collaboration among decentralized supply chain members is a major challenge faced by today\u27s supply chain managers. The capability to provide visibility of the entire supply chain\u27s status to each supply chain member through SCM software fosters cooperation, and thus information technology can be viewed as a critical enabler of supply chain coordination

Green, Greener or Brown: Choosing the Right Color of the Product

There does not exist a one-size-fits-all green product strategy in green market, and formulating a strategy that aligns a company’s economic and environmental goals is no small feat. In this paper we provide insights into a firm’s green product strategy choice with a focus on two alternative strategies: Greening-Up and Greening-Out. In doing so, we incorporate two important characteristics of the customer market where there are substantial numbers of customers who are potentially receptive to a green appeal: (1) Customer market is divided into three distinct and mutually exclusive segments based on large-scale surveys and interviews conducted to measure both customers’ willingness-to-pay for products with environmental attribute(s) and their propensity to buy these products; and (2) We factor in the findings of the most recent market behavior studies that even the customers that demonstrate the least environmental responsibility of all the segments can buy green products for non-environmental reasons. The contributions and findings of our work are as follows. First, we characterize the market- and product-related factors a firm should act on for a successful execution of green product strategies. Second, on the basis of customer choice data available, we assess the strategic fit of distinct pricing options under each strategy choice with the objective(s) of a firm. Third, we explore the extent to which a green product strategy creates higher environmental benefits while providing economic payoffs to a firm. In contrast to prevailing view, we show that greening up an existing brown product is not necessarily better at reducing the environmental impact of a firm than designing a new green product. We observe that responsiveness of the least environmentally conscious customers to environmental attributes added into a brown product sets one of the two major constraints on the environmental performance of Greening-Up strategy. We also observe that there does not exist a strict dichotomy between having a better economic performance and achieving a higher environmental performance, and a firm can achieve both goals simultaneously, even if it means leaving out serving some of the customers targeted by the firm’s existing brown product

Competing on Capacity: Can Brown and Green Products Co-Exist?

This paper attempts to enrich the product variety management problem by providing an operations and a marketing perspective through a focus on green products and on factors related to the demand of a segmented consumer market (by their involvement in green values and purchasing) faced by a firm with limited production capacity. We identify the profitability conditions for expanding the product line with a green product by considering the distinctive characteristics of green products

Pricing, Market Coverage and Capacity: Can Green and Brown Products Co-exist?

Environmental strains are causing consumers to trade up to greener alternatives and many brown products are losing market coverage to premium-priced green rivals. In order to tackle this threat, many companies currently offering only brown products are contemplating the launch of a green product to complement their product portfolio. This paper provides strategic insights into and tactical ramifications of expanding a brown product line with a new green product. Our analysis explicitly incorporates a segmented consumer market where individual consumers may value the same product differently, the economies of scale and the learning effects associated with new green products, and capacity constraints for the current production system. It is shown that a single pricing scheme for the new green product limits a firm’s ability to appropriate the value different customers will relinquish in a segmented market and/or to avoid cannibalization. A two-level pricing structure can diminish and even completely avoid the salience of cannibalization. However, when resources are scarce, a firm can never protect his products from the threat of cannibalization by just revising the pricing structure which can spell the end of his brown product’s presence in the market or preclude the firm from launching the green product. At this point, the degree of cannibalization is higher for the brown product when the green product offers a sufficiently differentiated proposition to green segment consumers

Green Attributes and Product Design/Introduction Decisions

In this research, we focus on the whether a firm should choose to expand its current portfolio of product offerings to include an environmentally “friendly” product which integrates multiple green attributes