Using advanced tools to see the human brain at work, a new generation of marketing experts may be able to test a product’s appeal while it is still being designed, according to a new analysis by two researchers at Duke University and Emory University.

So-called “neuromarketing” takes the tools of modern brain science, like the functional MRI, and applies them to the somewhat abstract likes and dislikes of customer decision-making.

Though this raises the specter of marketers being able to read people’s minds (more than they already do), neuromarketing may prove to be an affordable way for marketers to gather information that was previously unobtainable, or that consumers themselves may not even be fully aware of, says Dan Ariely, the James B. Duke professor of psychology and behavioral economics at Duke.

In a perspective piece appearing online in the journal Nature Reviews Neuroscience , Ariely and Gregory S. Berns of Emory’s departments of psychiatry, economics and neuropolicy, offer tips on what to look for when hiring a neuromarketing firm, and what ethical considerations there might be for the new field. They also point to some words of caution in interpreting such data to form marketing decisions.

Neuromarketing may never be cheap enough to replace focus groups and other methods used to assess existing products and advertising, but it could have real promise in gauging the conscious and unconscious reactions of consumers in the design phase of such varied products as “food, entertainment, buildings and political candidates,” Ariely says.

“Neuromarketing: the hope and hype of neuroimaging in business,” Dan Ariely and Gregory S. Berns. Nature Reviews Neuroscience.

Thin friends who eat a lot could put your waistline in danger. That’s the warning from researchers studying how other people’s weight and food choices influence how much we eat.

Researchers from Duke University, the University of British Columbia and Arizona State University used snack foods, an obesity prosthesis, and the ruse of a study related to movies to track how students’ food consumption was influenced by a companion. Their findings will appear online this week in the Journal of Consumer Research.

“Obesity is obviously a tremendous public health concern,” said Gavan Fitzsimons, F.M. Kirby Research Fellow and professor of marketing and psychology at Duke University’s Fuqua School of Business. “Because people often dine in social settings, we decided to investigate how someone’s size and food choices could influence how much the people around them order and eat.”

The research team recruited 210 college students to participate in a study ostensibly about movie watching. Upon arriving at a research lab, each student was informed that he or she would be paired with another student taking part in the same study. The other student was in fact a member of the research team whose size was manipulated to make her appear to be either size 0 and 105 pounds (her natural build), or size 16 and 180 pounds (when wearing the obesity prosthesis, a rubber suit that made her look much larger).

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For at least 50 years, television advertisements have been ordered randomly within commercial breaks. But given the spread of digital video recorders (DVR) that allow users to blip-blip past the ads in fast-forward, it’s time to change this business model to maximize ads’ effectiveness, according to a new study.

The research, by Kenneth C. Wilbur of Duke University’s Fuqua School of Business and David Kempe of the University of Southern California’s Viterbi School of Engineering, was presented by Wilbur on June 23 at the Advertising Research Foundation Audience Measurement 4.0 conference in New York City.

“Think of two very different ads: the iconic Coca-Cola polar bears commercial, and a commercial for ‘natural male enhancement,’” said Wilbur. “The Coke ad will keep the audience glued to its screen, but the other ad will annoy some viewers, causing them to fast-forward or switch the channel. If the Coke ad is placed first during the commercial break, it still delivers most of the audience to the second ad. But if the Coke ad is placed second, it gets a significantly smaller audience.”

To account for these types of ad sequencing issues, the researchers have developed the Audience Value Maximization model. This new algorithm shows how to optimally select, order, and price ads based on a mathematical formula that considers advertisers’ willingness to pay and viewers’ propensity to switch channels during commercial breaks.
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Just seeing a salad on the menu seems to push some consumers to make a less healthy meal choice, according a Duke University researcher.

It’s an effect called “vicarious goal fulfillment,” in which a person can feel a goal has been met if they have taken some small action, like considering the salad without ordering it, said Gavan Fitzsimons, professor of marketing and psychology at Duke’s Fuqua School of Business, who led the research.

In a lab experiment, participants possessing high levels of self-control related to food choices (as assessed by a pre-test) avoided french fries, the least healthy item on a menu, when presented with only unhealthy choices. But when a side salad was added to this menu, they became much more likely to take the fries.
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With all the hype before product launch, why were the sales of the Segway scooter so disappointing?  According to research by Duke alumnus David Alexander of the University of St. Thomas, John Lynch of Duke University, and Qing Wang of Warwick University, the highly-touted, innovative product may have been just too new and unfamiliar.

While novelty may create advertising buzz, when it comes time to part with their money, consumers prefer the familiar over the really new—especially when using the new product requires a behavior change.

The research, reported in “As Time Goes By: Warm Intentions and Cold Feet for Really New versus Incrementally New Products,” was funded by the Marketing Science Institute (MSI).  It was recently awarded the Robert D. Buzzell MSI Best Paper Award, chosen by MSI trustees for its lasting value to marketing executives.
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The next time a contractor tells you the kitchen remodeling will be done in six weeks, you might ask him to get real and reconsider his estimate.

People often fail to remember that the world is not ideal when they predict when they will complete a project, how frequently they will exercise, or how much money they will save.  However, a subtle reminder of the difference between ideal and realistic predictions can yield a more accurate estimate, according to new research from Duke University’s Fuqua School of Business and the Wisconsin School of Business.
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In these difficult economic times, top marketing officers are turning to new and often unproven strategies that focus on the Internet, partnerships, new markets, new products and services to help their companies.

These are some of the results of The CMO Survey, a poll of 581 U.S. marketing executives conducted in February 2009. The survey was conducted by professor Christine Moorman of Duke University’s Fuqua School of Business in conjunction with the American Marketing Association.

Overall, the survey indicates that 59 percent of marketers are less optimistic about the economy than they were one quarter ago, a reduction from the 77 percent of respondents who reported a decrease in optimism during the August 2008 CMO survey.

“While marketers in general remain unexcited about the economic situation, it is encouraging to at least see that pessimism is not increasing among the marketing community,” Moorman said. “This could either indicate that marketers think the worst times are behind us, or they have simply adjusted to operating in an adverse environment.” Read the rest of this entry »

The following analysis by Fuqua Marketing Professor Andres Musalem and Professor Ricardo Montoya of the University of Chile was recently published in the Chilean newspaper La Tercera.

With annual sales of 324 billion dollars, Wal-Mart is within a select group of companies that has successfully weathered the economic crisis. In Chile, the arrival of the largest retail chain in the world raises alarms among their local rivals and also among the workers of D&S, the Chilean supermarket chain just acquired by Wal-Mart. Nevertheless and beyond any controversy, consumers’ interest in Wal-Mart’s entry is built upon expectations of more competitive prices.

In this regard, the question that many would like to answer is how much prices will drop once Wal-Mart lands on Chilean soil. The arguments of those who argue that prices will actually fall are based on Wal-Mart’s increased efficiency, which might lead to lower operation costs as suggested by Máximo Bosch and Claudio Pizarro from the Retail Center at the University of Chile. Furthermore, its substantial bargaining power would help the retailer obtain lower wholesale prices when purchasing merchandise from its vendors. Part of these savings would be transferred directly to consumers through lower prices. Indeed, a study published in 2005 in the Journal of Applied Econometrics notes that Wal-Mart prices are on average between 5% and 25% cheaper than other supermarkets in the United States.

Another related argument is that Wal-Mart’s low prices might force local competitors to adjust their own prices to remain competitive. However, there are multiple studies showing that the real impact of the arrival of Wal-Mart in various U.S. markets does not generate large changes in the prices charged by its competitors. Therefore, when considering Wal-Mart’s effect on competitors, the results are in fact counterintuitive.

This evidence begs the question of why the local competition does not lower prices after Wal-Mart’s entry. Read the rest of this entry »

Image Courtesy of flickr/Karen Rustad

Apple and the recording industry made the right move in announcing recently that they will suspend digital rights management (DRM) and change pricing for iTunes downloads, say Fuqua Marketing Professors Preyas Desai and Debu Purohit, who recently completed an analysis of DRM and the digital music marketplace with Fuqua PhD student Dinah Vernik.

While the music industry previously stood by DRM in order to protect profits, Desai, Purohit and Vernik predict that online music retailers and consumers will both benefit from the elimination of DRM. Their rationale is straightforward: the music industry had ignored consumer resentment of restrictions  imposed by DRM protection, as well as consumer preference for purchasing DRM-free music.

The disappearance of DRM provides consumers with a product they prefer, as they can now download higher quality music than was available under DRM, and can use that music in a variety of formats.The researchers predict that these improvements will cause consumers to purchase more music online and reduce illegal downloading and copying.

The losers in this environment will be traditional CD retailers, whose customers will be attracted to the increased quality and ease of use of DRM-free music.   The Duke team predicts that traditional retailers will be forced to lower  prices in order to be competitive as more consumers shift to digital DRM-free downloads.

Allowing joint bidding (where consumers can bid on a number of products together as a package) helps reduce potential mismatch between an e-tailer’s costs and the consumer’s bids on name-your-own-price websites like Priceline, according to new research by Duke Professor Wilfred Amaldoss and Sanjay Jain of the Mays Business School, Texas A&M University.

Their study, featured in the current issue of Management Science, examines joint bidding on sites such as Priceline where, for example, a consumer might bid on all elements of a vacation (airplane travel, rental car, and hotel) as a package. Amaldoss and Jain studied whether it would be better for consumers if they could place joint bids for all these separate items at a name-your-own-price (NYOP) retailer like Priceline, and if it would be profitable for the e-tailer to allow such joint bids.

The authors considered two possible outcomes: consumers seeking savings could drive down prices when bidding on packages, giving them a bargain but costing the retailer. Alternately, consumers might hope that by bidding on a package, they could obtain all the items in the package and offer more.

Amaldoss and Jain conclude that in many cases, joint bidding benefits both consumer and retailer, even though consumers may indeed bid more for the very same products when asked to place a joint bid rather than a separate bid for each product.