Common Market Practice Research Articles

Identities without Products: When the Preference for Self-Linked Products Weakens

Abstract Extant literature and common marketing practices converge around the idea that stronger self-links to a brand and its products lead to increased brand loyalty. In this article, we challenge this conventional notion by revealing situations where the preference for self-linked brands diminishes, despite the self-links remaining unchanged. We introduce a key distinction between two types of consumer identities based on whether identity expression relies on specific products: product-dependent (e.g., chef) and product-independent (e.g., foodie). Our theory posits that self-links to products exert less influence on preference when a product-independent identity is prominent. Across five studies examining consumer leisure identities, we find that priming a product-independent (vs. product-dependent) identity reduces preference for self-linked products/brands. Interestingly, it can also enhance preference for negatively self-linked (dissociative) products/brands among materialistic consumers. In a sixth experiment and a real-world Facebook study, we illustrate that the extent to which consumers’ identity is chronically product-independent can be assessed either directly or indirectly from social media interests, allowing for more effective targeting of brand-switching appeals. Adding to the literature on the symbolic role of products in identity expression, our research uniquely investigates the functional role of products in identity expression and its profound impact on product/brand preference.

Health advertising on Facebook: Privacy and policy considerations

SummaryIn this study, we analyzed health-advertising tactics of digital medicine companies (n = 5) to evaluate varying types of cross-site-tracking middleware (n = 32) used to extract health information from users. More specifically, we examine how browsing data can be exchanged between digital medicine companies and Facebook for advertising and lead generation and advertising purposes. Our analysis focused on companies offering services to patient advocates in the cancer community who frequently engage on social media. We co-produced this study with public cancer advocates leading or participating in breast cancer groups on Facebook.Following our analysis, we raise policy questions about what constitutes a health privacy breach based on existing federal laws such as the Health Breach Notification Rule and The HIPAA Privacy Rule. We discuss how these common marketing practices enable surveillance and targeting of medical ads to vulnerable patient populations without consent.

Cumulative Market Impact of Consecutive Orders Over One and Two Days: How Long Does the Market Remember Past Trades?

In this paper, we want to address the question of market impact of consecutive orders over the same day and across two consecutive days. This question is key for traders who need to determine the best way to schedule their executions. This question is answered using a unique database of more than 260,000 trades with an amount of more than EUR250bn. Our main findings are the following: On the same day, the market impact of consecutive orders is not independent. The subsequent market impact for a given trade size is much smaller than the one of the initial order. Trading a larger order continuously or splitting this large order into two subsequent orders will lead to almost the same market impact over the same day. In other words, the market remembers earlier trades on the same day. Over two consecutive days, the market impacts are independent. The market impact on the second day and the market impact on the first day display identical results for different trades. Trading on the same day reduces the overall market impact for overall order sizes below 12% (in Average daily volume). This strong result backs the common market practice of spreading orders over two days only for larger order sizes that cannot be executed over one day. In other words, the market forgets standard trades that took place on the previous day.

The effects of packaging localisation of Western brands in non-Western emerging markets

PurposeThe common market practice by foreign marketers is to sell their brands in standard or localised packaging or sometimes both in the context of Pakistan. By examining the differential influence of standard (Western) and local (Urdu) packaging on Pakistani consumers’ perceptions and choice under conspicuous and inconspicuous situations, this study aims to examine whether the localisation strategy is effective or even necessary.Design/methodology/approachA pre-test first identified suitable products and brands. The main survey was conducted using convenience sampling in popular shopping precincts of the Lahore district in 2015. Participants first rated the packaging of hedonic and utilitarian products. After rating the packaging likeability, the respondents were asked to assume the two consumption situations. Their choice of standard versus local packaging under conspicuous and inconspicuous consumption situations for the same brand was recorded.FindingsOverall, findings suggest that for hedonic products, localisation is not an effective strategy particularly for well-known Western brands such as M&M’s. For utilitarian products, packaging localisation does not render a Western brand more competitive as consumers did not like one packaging type over the other. Mode of consumption did not change the preference for standard packaging in case of hedonic products, whereas in case of utilitarian products, the mode of consumption did moderate the results for the choice of packaging; standard packaging is chosen more often under conspicuous a situation but not under an inconspicuous situation.Research limitations/implicationsThe findings of this research show that indiscriminately localising the packaging of any products as they enter foreign markets may not be the most effective strategy for international marketers.Originality/valueThis is first study to question the common market practice of packaging localisation and investigate the differential effects of standard versus local packaging of foreign products on consumers’ perceptions and choice under varying consumption modes.

When is it necessary to localise product packaging?

PurposeThe common market practice by global consumer brands to create localised packaging for foreign markets conflicts with findings that cast doubt on this strategy. By examining the differential influence of standard (Western) and local (Chinese) packaging on Chinese consumers’ perceptions and choice behaviour, this study aims to examine whether this strategy is effective or even necessary.Design/methodology/approachA pre-test first identified suitable products and brands. Using a multiple methods approach, online participants in China first rated the brands and packaging of hedonic and utilitarian products. The ratings were then validated by triangulating with the results of a discrete choice experiment that captured participants’ choice behaviour.FindingsFor hedonic products, standard packaging is rated more positively and chosen more often than local packaging. For utilitarian products, there are no differences in ratings and choice. For hedonic products, brand likeability is higher for standard packaging than for local packaging. For utilitarian products, brand likeability does not differ between the two packaging types.Research limitations/implicationsThese findings cast doubt on the effectiveness of indiscriminate packaging localisation. International marketers need to rethink their approach, particularly in non-Western markets. Interviews with five brand managers in charge of major consumer brands in China revealed their actual market practice and further illuminate this study’s findings.Originality/valueThis is first study to question the common market practice of packaging localisation and investigate the differential effects of standard versus local packaging of foreign products on consumers’ perceptions and choice behaviour.

Closer to the Creator: Temporal Contagion Explains the Preference for Earlier Serial Numbers

Consumers demonstrate a robust preference for items with earlier serial numbers (e.g., No. 3/100) over otherwise identical items with later serial numbers (e.g., No. 97/100) in a limited edition set. This preference arises from the perception that items with earlier serial numbers are temporally closer to the origin (e.g., the designer or artist who produced it). In turn, beliefs in contagion (the notion that objects may acquire a special essence from their past) lead consumers to view these items as possessing more of a valued essence. Using an archival data set and five lab experiments, the authors find the preference for items with earlier serial numbers holds across multiple consumer domains including recorded music, art, and apparel. Further, this preference appears to be independent from inferences about the quality of the item, salience of the number, or beliefs about market value. Finally, when serial numbers no longer reflect beliefs about proximity to the origin, the preference for items with earlier serial numbers is attenuated. The authors conclude by demonstrating boundary conditions of this preference in the context of common marketing practices.

When to Offer Lower Quality or Remanufactured Versions of a Product

ABSTRACTWe investigate the profitability of adding a lower quality or remanufactured product to the product portfolio of a monopoly firm, both in single‐period and steady‐state settings. Consumer behavior is characterized by a deterministic utility function for the original product and a nonlinear relative utility function for the lower quality product. We find a threshold for the cost of the low‐quality product below which it is optimal to add it to the firm's portfolio, and show that while a cost advantage is necessary to make the lower quality offering profitable under linear or convex relative utility functions, market segmentation alone can justify the addition of the lower quality product under concave relative utility functions. In particular, we characterize (i) the new product cost under which it is optimal to offer a lower quality version of the product even if it is as costly to produce as the original product; and (ii) the weighted average of new and remanufactured product costs in the steady state under which it becomes cost effective to offer new products under the remanufactured label. Finally, we also identify the maximum possible profits from customer segmentation and the form of the relative utility function that achieves them. We discuss the implications for the common marketing practices of branding and generics.

An examination of product packaging marketing strategies used to promote pediatric multivitamins.

The purpose of this study was to describe the nature of marketing strategies for multivitamin and multimineral (MVM) supplement packaging and to assess the extent to which these supplements are marketed as food products. A cross-sectional study of children's supplement packaging was conducted. Descriptive statistics identified common marketing practices. Websites of the three largest retail chain pharmacies in the United States and MVM manufacturers were accessed. The study's sample consisted of packaging for 52 children's MVM supplements. Child-targeted marketing included reference to trademarked characters on 42.3% of MVM packaging (n = 22). More than 80% of the sample (n = 42) listed fruity flavors and almost all packaging included descriptive words related to the MVMs' shape and/or flavor (88.5%, n = 46). Nearly one-fifth of the packaging (n = 10) pictured a food item. With respect to parent-targeted promotional language, almost 83% of the supplement packages (n = 43) included text on the support of bodily structure/function. More than half of the sample (53.8%, n = 28) had promotional language related to dietary practice (e.g. organic, gluten-free). Pediatricians can play a role in ensuring that parents are aware of (1) possible risks associated with MVM overconsumption, and (2) the importance of deriving vitamins and minerals from a balanced diet. Given the high number of exposures to pediatric MVMs among youth and established influence of food marketing on shaping children's perceptions and behaviors, further research is necessary to determine the extent to which children's MVMs are marketed as a food product and perceived as such by children.

No-Arbitrage Condition of Option Implied Volatility and Bandwidth Selection

A standard approach to option pricing is based on Black-Scholes type (BS hereafter) models utilizing the no-arbitrage argument of complete markets. However, there are several crucial assumptions, such as that the option underlying log-returns follow normal distribution, there is unique and deterministic riskless rate as well as the volatility of underlying log-returns. Since the assumptions are generally not fulfilled, the BS-type models mostly provide false results. A common market practice is therefore to invert option pricing model and using market prices of highly liquid options to get a so called implied volatility (IV). The BS model at one time moment can be related to the whole set of IVs as given by maturity/moneyness relation of tradable options. One can therefore get IV curve or surface (a so called smirk or smile). Since the moneyness and maturity of IV often do not match the data of valuated options, some sort of estimating and local smoothing is necessary. However, it can lead to arbitrage opportunity, if no-arbitrage conditions on state price density (SPD) are ignored. In this paper, using option data on DAX index, we analyze the behavior of IV and SPD with respect to different choices of bandwidth parameter h and a set of bandwidths, which violates no-arbitrage conditions, are identified. Moreover, it is documented that the change of h implies interesting changes in the violation interval of moneyness. We also show the impact of h on the total area of SPD under zero, which can be seen as a degree of no-arbitrage violation.

Does size matter? The dynamics of housing sizes and prices in Hong Kong

Conventional analyses on real estate pricing strategy concentrate on the impact brought about by the existence of various physical and environmental attributes such as location, view and amenity effects. For each of these variables, the extent of impact across different property types seems to be rather constant. This, however, may not hold when it comes to a specific variable—size, especially in terms of per-square-foot price of the subject property. While it is a general perception that larger real estate should command a higher total price because of the simple logic of aggregating the unit price from a larger floor area, in some sub-sectors of the property market such as the retail property sector, it is not uncommon to find that larger shops tend to have relatively smaller unit price/rent compared to smaller shops, other things being equal. In this paper, the authors would like to show that in the residential sector in Hong Kong, this common market practice is being reverted when we find that larger residential flats command relatively higher per-unit price (and hence also the overall price of the subject property), making larger residential flat proportionately more expensive.

Bootstrapping Credit Curves from CDS Spread Curves

We present a simple procedure to construct credit curves by bootstrapping a hazard rate curve from observed CDS spreads. The hazard rate is assumed constant between subsequent CDS maturities. In order to link survival probabilities to market spreads, we use the JP Morgan model, a common market practice. We also derive approximate closed formulas for cumulative or average hazard rates and illustrate the procedure with examples from observed credit curves.

TRACKING ERRORS FROM DISCRETE HEDGING IN EXPONENTIAL LÉVY MODELS

We analyze the errors arising from discrete readjustment of the hedging portfolio when hedging options in exponential Lévy models, and establish the rate at which the expected squared error goes to zero when the readjustment frequency increases. We compare the quadratic hedging strategy with the common market practice of delta hedging, and show that for discontinuous option pay-offs the latter strategy may suffer from very large discretization errors. For options with discontinuous pay-offs, the convergence rate depends on the underlying Lévy process, and we give an explicit relation between the rate and the Blumenthal-Getoor index of the process.

A model for optimal execution of atomic orders

Atomic Orders are the basic elements of any algorithm for automated trading in electronic stock exchanges. The main concern in their execution is achieving the most efficient price. We propose two optimal strategies for the execution of atomic orders based on minimization of impact and volatility costs. The first considered strategy is based on a relatively simple nonlinear optimization model while the second allows re-optimization at some time point within a given execution time. In both cases a combination of market and limit orders is used. The key innovation in our approach is the introduction of a Fill Probability function which allows a combination of market and limit orders in the two optimization models we are discussing in this paper. Under certain conditions the objective functions of both considered problems are convex and therefore standard optimization tools can be applied. The efficiency of the resulting strategies is tested against two benchmarks representing common market practice on a representative sample of real trading data.

US DOL regulations may challenge private investment funds

PurposeThe purpose of this paper is to analyze recent regulations and proposed regulations issued by the US Department of Labor (DOL) that relate to the reporting of compensation paid to service providers to employee benefit plans.Design/methodology/approachThe paper reviews the statutory provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA), applicable DOL regulations as available in the Federal Register and certain public comments and a DOL FAQs document regarding the applicable regulations available on the DOL's web site. The paper also relies on observations of common market practice based on actual experience.FindingsRecent DOL regulations – in particular those related to Form 5500 reporting and the “Necessary Services Exemption” – may significantly affect the reporting obligations of certain private investment fund sponsors with respect to their employee benefit plan investors. It shows that, although the scope of these regulations is understandable in the context of participant‐directed defined contribution plans, they may be less so in the context of defined benefit plans, which invest more frequently in private investment funds. There are some potential exceptions, on which private investment fund sponsors may be able to rely. Achieving compliance with the rules as drafted, however, may be time‐consuming and costly.Practical implicationsPrivate investment fund sponsors may wish to begin looking at their compensation and service provider arrangements in light of these regulations and consider how best to respond.Originality/valueThe paper contains two experienced ERISA practitioners' analysis of recent regulations on which relatively few stakeholders have seemed to focus to date.

Relationship between Organizational Sizes and Contractors’ Risk Pricing Behaviors for Weather Risk under Different Project Values and Durations

A problem that always annoys building employers and their consultants when drafting building contracts is whether it is more cost efficient to retain certain risks with themselves or to transfer the same to contractors, and it has long been a difficulty to accurately estimate the cost for transferring risks to the other contract party. It is a very common market practice to remove contractors' entitlement to extension of time due to inclement weather, and in view of the significant impacts that inclement weather posed on construction progress, it would be helpful to assess the associated costs for such risk allocation exercises in order to ensure that it is a cost-effective transaction. The costs for these potential weather-caused delays are priced by contractors in their returned tenders. This risk-pricing behavior is affected by the contractor's risk perception and risk attitude. However, merely working out contractors' risk perception and risk attitude patterns is inadequate, as they may vary in accordance with different organizational sizes and project backgrounds. Therefore, further studies should be carried out on the implications of project information, such as project value and contract period, on different-sized contractors' risk behaviors. In this research, a questionnaire survey was conducted to investigate the weather-risk-pricing behavioral patterns of various-sized contractors under different given project scenarios. The survey revealed that the impacts of project value and contract period (and, thus, the intensity of work and scale of exposure to weather risk) were significant on contractors' risk behaviors, and these impacts varied in accordance with different organizational sizes. The medium-sized contractors' pricing behaviors were rather constant under different project values and contract periods, while both small and large contractors behaved differently when the intensity of work and scale of risk exposure varied. Despite the fact that contractors of various sizes behaved differently in some given scenarios, the number of days of delaying cost allowed by them in returned tenders were generally less than the actual number of days of inclement weather affecting work.