Consumer Learning Research Articles

Consumer learning and heterogeneity: Dynamics of demand for prescription drugs after patent expiration

This paper introduces an empirical demand model with aggregate learning and consumer heterogeneity in price sensitivity. The model is applied to the prescription drug market after patent expiration during the 80s, when the diffusion of generic drugs is fairly slow and consumer price sensitivity is known to be heterogeneous. I also introduce a new estimation approach to take the price endogeneity problem into account for this class of models. My approach is to estimate the demand model jointly with a pseudo-pricing policy function, which is a reduced-form function of observed and unobserved state variables. My estimation and counterfactual exercises demonstrate the value of estimating such a structural demand model, e.g., it allows one to learn whether consumers have optimistic or pessimistic prior, how aggregate learning affects the product diffusion rates in different latent segments of the population, and quantify the role of learning in explaining new product diffusion. I also find evidence that the brand-name price elasticities of demand (evaluated at the observed prices) are often less than one and increase over time, suggesting that brand-name firms might set their prices lower than what they would do if they were myopic, in order to slow down the learning process for generic qualities. But such an incentive might diminish over time as the uncertainty slowly resolves.

A needs assessment for consumer learning at a higher education institution

Hierdie artikel is gebaseer op ‘n studie wat onderneem is om die behoefte vir kurrikulumontwikkeling vir verbruikersleer aan die Kaapse Skiereilandse Universiteit van Tegnologie te bepaal. Die Verenigde Nasies het reeds in 1985 ‘n beroep op opvoeders gedoen om verbruikersleer wêreldwyd te bevorder en toepaslike opvoedkundige programme te ontwikkel wat sensitief is vir kulturele tradisies. In die snelveranderende en komplekse verbruikersmark van vandag is dit veral tieners en jong volwassenes wat kennis en vaardighede benodig om ingeligte besluite te kan neem. Verbruikersbesluite waarmee hulle gekonfronteer word, sluit kwessies in soos finansies, lewenstylkeuses, bepaling van waardes, billike handelspraktyke en omgewingsbewaring. Internasionale studies toon dat daar ‘n behoefte aan verbruikersleer bestaan, veral onder tieners en jong volwassenes. Kurrikula op skool verskaf egter nie genoegsame agtergrond en inligting om individue toe te rus om ingeligte en verantwoordelike verbruikersbesluite te neem nie. ‘n Gebrekkige kennis van verbruikersregte en -verantwoordelikhede blyk ook ‘n ernstige tekortkoming te wees. In Suid-Afrika speel historiese faktore inmiddels ‘n groot rol in die gebrek aan kennis van en ervaring in verbruikerswese. Die artikel fokus op ‘n studie wat onderneem is met die oog op ’n behoeftebepaling vir verbruikersleer aan ‘n spesifieke hoëronderwysinstelling as ’n Suid-Afrikaanse gevallestudie. Die studie het insigte oor die behoefte aan verbruikersleer binne die bepaalde instelling verbreed en terselfdertyd bygedra tot die ontwikkeling van ’n kurrikulumraamwerk wat kan dien as ‘n basis vir kurrikulumontwikkeling vir verbruikersleer in hoër onderwys. Empiriese gegewens is verkry vanuit ‘n self-geadministreerde opnamevraelys wat deur middel van ‘n dendrogram saamgestel is. Die dendrogram wat as basis vir die konsepsuele raamwerk gedien het, is na ‘n deeglike literatuuroorsig ontwikkel. Die vraelys het vrae ingesluit om die kennis, gebruike en persepsies van respondente ten opsigte van verbruikersregte en -verantwoordelikhede te bepaal. Tydens die ontwikkeling van die vraelys is tien vakdeskundiges betrek om die inhoud- en gesigsgeldigheid daarvan te toets. Nadat voorgestelde veranderinge aangebring is, is die opname-instrument deur 45 eerstejaar- Somatologiestudente in die Fakulteit vir Toegepaste Wetenskappe aan die Kaapse Skiereilandse Universiteit van Tegnologie (KSUT) in ’n loodsfase voltooi. Geen verdere wysigings was nodig nie. Doelbewuste steekproefneming is toegepas en 474 uit ‘n getal van 5 850 geregistreerde eerstejaarstudente is gekies om die vrae-lys te voltooi. Studente is uit die Fakulteite van Toegepaste Wetenskappe, Bestuurswese, Ingenieurswese en Opvoedkunde gekies sodat vergelykings tussen fakulteite gemaak kon word. (Article text in English)

Consumer learning for university students: a case for a curriculum

This article indicates how the application of a simplified version of the analytical abstraction method (AAM) was used in curriculum development for consumer learning at one higher education institution in South Africa. We used a case study design and qualitative research methodology to generate data through semi‐structured interviews with eight learning facilitators at the Cape Peninsula University of Technology. This data set forms the basis of the reported research. Application of basic‐ and higher‐level analysis resulted in the identification of patterns that confirmed the need for consumer learning and informed the situation analysis with regard to a ‘readiness climate’ at the institution. We also gained insight into aspects that need to be considered during curriculum development for consumer learning as the AAM has proved to be a useful guiding tool in developing a structured explanatory framework for curriculum development. The article concludes with the view that the promotion of consumer learning in university curricula has been under‐researched and that, despite current efforts, university curricula are slow to adopt consumer learning as a critical learning outcome. We suggest several possibilities that might assist in overcoming this inertia.

Conceptualizing and Testing Brand Personality in British Politics

This paper considers whether branding is an appropriate concept to be applied (and thus researched) in politics. It identifies the problems entailed in a managerial approach to branding in politics and forwards a consumer learning perspective as an alternative. The latter approach is then used to explain how and why brand personality forms in politics. Next, a conceptual model of party political personality (PPP) formation is developed. Key antecedent influences on political personality are discussed (namely, politicians, political parties, events, advertising, current users, and endorsers of the brand) and their likely effect on consumer learning of PPP developed. Having conceptualized PPP, the paper then focuses on whether the currently available brand personality scale is appropriate in the context of British politics. Empirical research reveals that a different personality structure operates in the context of British political parties than for brands generally. Using this modified measure, the effect of partisanship reveals a difference between high and low levels of allegiance and perceived PPP. The research also identifies unexpected differences between the personality profiles of the government and the main opposition party. The differences between politics and commercial markets are then used to help interpret the findings. The paper concludes by identifying its limitations and the main opportunities for future research in the area.

Capacity Expansion in Markets with Intertemporal Consumption Externalities

This paper analyzes market capacity expansion in the presence of intertemporal consumption externalities such as consumer learning, networks, and bandwagon effects. An externality leads to an endogenous shift of market demand that responds to past market capacity. Whereas market capacity grows in waves, its magnitude depends on the degree of market concentration. The competitive environment contributes to S-shaped time patterns of market capacity expansion. On the other hand, using a low introductory price, a monopolist plans an initially larger amount of market cultivation than a competitive market capacity expansion.

Try It, You Will Like It—Does Consumer Learning Lead to Competitive Price Promotions?

There is strong evidence that consumers learn from their brand consumption experiences and continuously update their brand purchase probabilities. However, in explaining why established competitive brands continuously compete through periodic price promotions, most of the existing theories do not attribute this phenomenon to underlying consumer learning. Yet, “try it, you will like it” is often the stated rationale of the practicing marketing manager in offering consumers a price promotion on a brand. This paper examines the connection between consumer learning and the offering of price promotions. The consumer model specified is Markovian in nature and encompasses in addition to consumer learning other empirical findings such as the increase in product class consumption in response to price reductions. The consumer models used in the existing game theoretic approaches to this problem are shown to be mostly special cases of the proposed model. It is demonstrated that for the commonly used price response functions the existence of consumer learning, at a level of intensity consistent with that identified in empirical works, makes it optimal for competing brands to periodically offer price promotions. Moreover, it is shown that the competing brands should promote in different periods as opposed to head to head.

Consumer learning and the effects of virtual experience relative to indirect and direct product experience

AbstractThe Internet has the ability to serve as a more powerful medium than traditional print or broadcast media because consumers are able to interact with products in 3D multimedia environments, thus simulating a new form of experience—a virtual experience. However, very little research has explored the impact of this new type of experience, especially in combination with indirect (advertising) and direct (product trial) experience. Therefore, this study presents the findings from two laboratory experiments designed to empirically test both the single and sequential impact of consumer exposure to indirect, direct, and virtual experiences on brand attitude, product knowledge, and purchase intention when evaluating a digital video camcorder. The results indicate that exposure to a virtual experience preceding both indirect and direct product experience is more effective at influencing brand attitudes. The research proposition is that virtual experience from 3D product visualization is more similar to direct experience than to indirect experience in terms of consumer learning. Implications for business‐to‐consumer Internet marketing and e‐commerce are discussed. © 2008 Wiley Periodicals, Inc.

Beyond trial: Consumer assimilation of electronic channels

This paper explores the assimilation of electronic channels into consumers'routines. It proposes that consumer learning orientation for the product/service and the efficiency realized from channel use are essential determinants of post-trial assimilation and that assimilation reduces information ambiguity and improves consumers’ sense of identity with the firm. These relationships are tested using data from a survey of online banking customers. The study reveals that consumer efficiency and learning orientation influence assimilation more strongly than some other determinants of consumer trial and that assimilation improves consumers’ understanding of the service and facilitates a greater sense of identity with the firm. Theoretical implications are discussed and suggestions are presented on how managers can increase the rate of customer electronic channel assimilation and how to take strategic advantage of this.

Protection of Prior Learning in Complex Consumer Learning Environments

As a product category evolves, consumers have the opportunity to learn a series of feature-benefit associations. Initially, consumers learn that some features predict a critical benefit, whereas other features do not. Subsequently, consumers have the opportunity to assess if previously predictive features, or novel features, predict new product benefits. Surprisingly, later learning is characterized by attenuated learning about previously predictive features relative to novel features. This tendency to ignore previously predictive features is consistent with a desire to protect prior learning.

The Influence of eWOM on Virtual Consumer Communities: Social Capital, Consumer Learning, and Behavioral Outcomes

<h3>Summary</h3> Selective breeding of domestic dogs has generated diverse breeds often optimized for performing specialized tasks. Despite the heritability of breed-typical behavioral traits, identification of causal loci has proven challenging due to the complexity of canine population structure. We overcome longstanding difficulties in identifying genetic drivers of canine behavior by developing an innovative framework for understanding relationships between breeds and the behaviors that define them, utilizing genetic data for over 4,000 domestic, semi-feral and wild canids and behavioral survey data for over 46,000 dogs. We identify ten major canine genetic lineages and their behavioral correlates, and show that breed diversification is predominantly driven by non-coding regulatory variation. We determine that lineage-associated genes converge in neurodevelopmental co-expression networks, identifying a sheepdog-associated enrichment for interrelated axon guidance functions. This work presents a scaffold for canine diversification that positions the domestic dog as an unparalleled system for revealing the genetic origins of behavioral diversity.

A Model of Consumer Learning for Service Quality and Usage

In many services (e.g., the wireless service industry), consumers choose a service plan according to their expected consumption. In such situations, consumers experience two forms of uncertainty. First, they may be uncertain about the quality of their service provider and can learn about it after repeated use of the service. Second, they may be uncertain about their own usage of minutes and learn about it after observing their actual consumption. The authors propose a model to capture this dual learning process while accounting for the nonlinearity of the pricing scheme used in wireless services. The results show that both quality learning and quantity learning are important. The authors conduct several policy experiments to capture the effects of consumer learning, pricing, and service quality on customer lifetime value (CLV). They find that consumer learning can result in a win–win situation for both consumers and firm; consumers leave less minutes on the table, and the firm experiences an increase in overall CLV. For example, the authors find that there is a 35% increase (approximately $75) in overall CLV with consumer learning than without. The key driver of this result is the change in the retention rate with and without learning.

Parental consumer learning or ‘keeping up with the children’

AbstractChildren are socialized as consumers earlier now than any other time in history. The rapidly changing pace of society especially with regards to technology, information processing, transportation, etc. makes it possible for them to experience purchasing and consumption at a much faster rate than that of their parents. Children may possess knowledge which their parents lack and they may share their experience and knowledge and in so doing influence their parents. It can result in parents learning about consumption from their children, something which has not been sufficiently acknowledged by previous research. The purpose of this paper is to further the understanding of how consumption patterns and knowledge are transferred from children to parents. In‐depth interviews carried out with ‘children’ of age group 13–30 show that they contributed information prior to and during the purchase, but also afterwards by helping to instal or showing parents how to use a product. The adolescents and adult children had often introduced new products to their parents and made them aware of recent trends. Often they also seemed to deal more easily with new technology than their parents.Copyright © 2007 John Wiley &amp; Sons, Ltd.

Consumer learning and its impact on store format selection

Although there has been a lot of research on learning and product/brand choice, there is a remarkable lack of linking this to store format selection. As both learning types may occur simultaneously, studying their similarity and interaction is called for. An embracing conceptual 3×3 grid is proposed, resulting from the combination of the classic stage model of Howard & Sheth with Bucklin's brand-store matrix. A set of generic hypotheses was tested empirically through an exploratory experiment involving storyboards, covering nine cognitive learning situations for a high involvement purchase. The results basically indicate that the typical product learning Howard & Sheth based hypotheses concerning cognitive effort and corresponding emotions, may also apply to store learning as well as to mixed store and product learning situations.

CAPACITY EXPANSION IN MARKETS WITH INTER-TEMPORAL CONSUMPTION EXTERNALITIES

This paper analyses market capacity expansion in the presence of inter-temporal consumption externalities such as consumer learning, networks and bandwagon effects. An externality leads to an endogenous shift of market demand that responds to past market capacity. Whereas market capacity grows in waves, its magnitude depends on the degree of market concentration. The competitive environment contributes to S-shaped time patterns of market capacity expansion. On the other hand, using a low introductory price, a monopolist plans an initially larger amount of market cultivation than a competitive market capacity expansion.

Designing free software samples: a game theoretic approach

We develop a vertical differentiation game-theoretic model that addresses the issue of designing free software samples (shareware) for attaining follow-on sales. When shareware can be reinstalled, cannibalization of sales of the commercial product may ensue. We analyze the optimal design of free software according to two characteristics: the evaluation period allotted for sampling (potentially renewable) and the proportion of features included in the sample. We introduce a new software classification scheme based on the characteristics of the sample that aid consumer learning. We find that the optimal combination of features and trial time greatly depends on the category of software within the classification scheme. Under alternative learning scenarios, we show that the monopolist may be better off not suppressing potential shareware reinstallation.

The role of self selection, usage uncertainty and learning in the demand for local telephone service

Telephone services are often characterized by the presence of ‘fixed’ plans, involving only a fixed monthly fee, as well as ‘measured’ plans, with both fixed fees and per-unit charges for usage. Consumers are faced with the decisions of which plan to choose and how much to use the phone and these decisions are not, in general, independent. Due to the presence of a time lag between plan choice and usage decisions, consumers are uncertain about usage at the plan-choice stage. We develop a structural discrete/continuous model of plan choice and usage decisions of consumers that accounts for such uncertainty. Prior research has also found that consumers switch less often from fixed plans to measured plans to gain from potential savings than vice versa. Consumer uncertainty regarding their mean usage levels and different rates of learning by consumers in the two plans is a potential explanation for this phenomenon. We extend our discrete/continuous model to account for consumer learning about their mean usage and estimate different rates of learning for the two types of plans.

Agent-based consumer learning in e-commerce

In the age of information and knowledge, the role of business companies is not only just to sell products and services, but also to educate their consumers. Educating consumers with extremely diversified backgrounds about technical knowledge is an important part of competitive advantage. To succeed, modern companies need to develop the best education technologies and teaching philosophies. Intelligent agents can play the right role in the personalised education of online consumers, because intelligent agents can learn the consumers' learning preferences and styles and recommend the best learning strategies. Educated and informed consumers are smarter and more confident in their buying decisions. This paper investigates using intelligent agents to support consumer learning and proposes an agent-based consumer learning support framework.

Heterogeneous Learning and the Targeting of Marketing Communication for New Products

New product launches are often accompanied by extensive marketing communication campaigns. Firms' allocation decisions for these marketing communication expenditures have two dimensions - across consumers and over time. This allocation problem is different relative to the problem of allocation of resources for existing products. This is because in the case of new products, consumers are uncertain about the quality of new products and learn about them through marketing communication. Further, different consumers may have different rates of learning about product quality, i.e. there may be heterogeneous learning. Thus, consumer responsiveness to marketing communication could vary along two dimensions. For each consumer, this responsiveness would vary over time, as she learns about product quality. Across consumers, there would be differences in responsiveness in each time period. For optimal allocation of marketing communication across both consumers and time, firms would need estimates of how responsiveness to marketing communication varies across consumers and over time. Past studies in this area have typically studied one of these two dimensions in which responsiveness varies. They have either looked at heterogeneity in responsiveness across agents or the variation in responsiveness over time. In the context of new products, past research has looked at how consumer learning about product quality causes responsiveness to vary over time. In this study, we build a model that allows for heterogeneous learning rates and obtain individual-level learning parameters for each consumer. We use a novel and rich panel dataset that allows us to estimate these parameters of the model. To obtain individual-level estimates of learning, we add a hierarchical Bayesian structure to the Bayesian learning model. We exploit the natural hierarchy in the Bayesian learning process to incorporate it within the hierarchical Bayesian model. We use data augmentation, coupled with the Metropolis Hastings algorithm to make inferences about individual-level parameters of learning. We conduct this analysis on a unique panel dataset of physicians, where we observe prescription decisions and detailing (sales force effort) at the individual physician-level for a new prescription drug category. Our results show that there is significant heterogeneity across physicians in their rates of learning about the quality of new drugs. We also find that there are asymmetries in the temporal evolution of responsiveness of physicians to detailing - physicians who are more responsive to detailing in early periods are less responsive later on and vice versa. These finding have interesting implications for targeting of detailing across physicians and over time. We find that firms could increase their revenues if they took these temporal and cross-sectional differences in responsiveness into account while deciding their allocations of detailing.

Consumer Learning, Switching Costs, and Heterogeneity: A Structural Examination

I formulate an econometric model of consumer learning and experimentation about new products in markets for packaged goods that nests alternative sources of dynamics. The model is estimated on household level scanner data of laundry detergent purchases, and the results suggest that consumers have very similar expectations of their match value with new products before consumption experience with the good, but once consumers have learned their true match values they are very heterogeneous. I demonstrate that resolving consumer uncertainty about the new products increases market shares by 24 to 58%. The estimation results also suggest significant switching costs: removing switching costs increases new product market shares by 12 to 23%. Using counterfactual computations derived from the estimates of the structural demand model, I demonstrate that the presence of switching costs with learning changes the implications of the standard empirical learning model: the intermediate run impact of an introductory price cut on a new product's market share is significantly greater when the only source of dynamics is switching costs as opposed to when both learning and switching costs are present, which suggests that firms should combine price cuts with introductory advertising or free samples to increase their impact. Because my model includes two different types of dynamics, I am able to assess the impact of ignoring learning or switching costs on the model's imputed long run price elasticities by re-estimating the model assuming that one of these dynamics is not present. I find that ignoring learning will i) lead to underestimates of the own price elasticities of new products by 30%, ii) will underestimate the cross-price elasticities between new and established products by up to 90%, iii) will overestimate the cross-price elasticities of established products by up to 15%. Ignoring switching costs will lead to underestimates of own price elasticities of up to 60%, and underestimates of cross-price elasticities of up to 90%.

Heterogeneous Learning and the Targeting of Marketing Communication for New Products

New product launches are often accompanied by extensive marketing communication campaigns. Firms' allocation decisions for these marketing communication expenditures have two dimensions—across consumers and over time. This allocation problem is different relative to the problem of allocation of resources for existing products. In the case of new products, consumers are uncertain about their quality and learn about the products through marketing communication. Furthermore, different consumers may have different rates of learning about product quality; i.e., there may be heterogeneous learning. Thus, consumer responsiveness to marketing communication could vary along two dimensions. For each consumer, this responsiveness would vary over time, as she learns about product quality. Across consumers, there would be differences in responsiveness in each time period. For optimal allocation of marketing communication across both consumers and time, firms would need estimates of how consumer responsiveness varies across consumers and over time. Past studies have typically focused on one of these two dimensions in which responsiveness varies. They have either looked at heterogeneity in responsiveness across agents or the variation in responsiveness over time. In the context of new products, past research has looked at how consumer learning about product quality causes responsiveness to vary over time. In this study, we build a model that allows for heterogeneous learning rates and obtain individual-level learning parameters for each consumer. We use a novel and rich panel data set that allows us to estimate these model parameters.To obtain individual-level estimates of learning, we add a hierarchical Bayesian structure to the Bayesian learning model. We exploit the natural hierarchy in the Bayesian learning process to incorporate it in the hierarchical Bayesian model. We use data augmentation, coupled with the Metropolis-Hastings algorithm, to make inferences about individual-level parameters of learning. We conduct this analysis on a unique panel data set of physicians where we observe prescription decisions and detailing (i.e., sales-force effort) at the individual physician level for a new prescription drug category.Our results show that there is significant heterogeneity across physicians in their rates of learning about the quality of new drugs. We also find that there are asymmetries in the temporal evolution of responsiveness of physicians to detailing—physicians who are more responsive to detailing in early periods are less responsive later on and vice versa. These findings have interesting implications for the targeting of detailing across physicians and over time. We find that firms could increase their revenue if they took these temporal and cross-sectional differences in responsiveness into account while deciding on allocations of detailing.