Initial Sales Research Articles

Buyback Pricing of Durable Goods in Dual Distribution Channels

In the U.S. automobile industry, manufacturers distribute products to consumers through dealers and rental agencies. By selling slightly used rental cars to consumers, rental agencies can compete directly against dealers in the sales market. To mediate this conflict between the two intermediaries, manufacturers launched buyback programs to repurchase used rental cars from rental agencies and redistribute them through dealers. Manufacturers have the option to precommit a buyback price to rental agencies at the time of initial sales or postpone the pricing decision to the time of repurchase. Using a two-period model with and without manufacturer competition in the rental market, we seek to understand how to manage buyback pricing to maximize manufacturers' profits in such dual distribution channels. Under precommitted buyback pricing, we show that the monopolist manufacturer's pricing decisions have a submodular property -- when she increases the buyback price in the rental market, she would have to decrease the wholesale price in the sales market. This tradeoff is eliminated under postponed buyback pricing. We find that precommitted buyback pricing not only leads to zero buyback quantity in equilibrium due to a low buyback price but also yields a lower manufacturer profit than postponed buyback pricing. When manufacturers compete in the rental market, however, they may prefer precommitting their buyback prices in equilibrium if the competition is sufficiently intense. This is due to a strategic complementarity between manufacturers' buyback prices.

Exhaustion v. Non-Exhaustion Deciphering the Federal Circuit's Lexmark Decision and Its Implication on Technology Transactions

On February 12, 2016, the United States Court of Appeals for the Federal Circuit issued its en banc (where a case is heard before all the judges of a court) decision Lexmark International, Inc. v. Impression Products, Inc., which confirmed that, despite recent decisions of the United States Supreme Court supporting exhaustion of intellectual property rights after the initial sale, the Federal Circuit’s patent exhaustion jurisprudence enumerated in its prior rulings, remains good law. This long-awaited decision has a significant impact on licensees and licensors and acquirers and sellers of intellectual property rights and creates traps for the unwary when structuring and negotiating technology transactions. This article intends to reconcile the holdings of the Lexmark decision and prior Supreme Court cases, taking into account the overarching legislative framework, and provide guidance on how to draft license, distribution, services or sales agreements to avoid unintended exhaustion or non-exhaustion of involved intellectual property rights.

Determinants of Initial Sale of Public Housing

Determinants of Initial Sale of Public Housing

Customers' choice of a salesperson during the initial sales encounter

In retailing, the initial encounter of a customer with a salesperson (SP) is crucial. Easily accessible cues, such as physical, task, or social attractiveness, may help in the choice process of an SP. Another cue is SP gender. Enhancing the current literature about brand gender, this research analyzes a possible match between brand and SP gender including aspects of physical, task, and social attractiveness characteristics, as well as the customers' requirements of rather core or relational aspects for the specific brand. Androgynous brands that attracted attention in recent publications are included in the analyses as well.

Influence of subjective interpretation, causation, and effectuation on initial venture sale

This study investigates the influence of subjective interpretations of strategy-relevant cues, specifically, perceived control/uncontrol and perceived gain/loss, on the relationship between causation or effectuation approach and the likelihood of initial venture sales. The results support the greater likelihood of initial sales when the entrepreneur increasingly relies on causation (albeit at low to medium levels) and has a greater perception of control. Similarly, perceived gains (instead of losses) strengthen the positive relationship between effectuation and initial sales. These results extend previous research on influence of the perceptions of control/uncontrol and gain/loss by supporting the influence of such subjective interpretations for strategic decision making. Furthermore, this study responds to recent calls for research on the different interpretations of the same environmental conditions and the resulting consequences for entrepreneurs.

Design of Consumer Review Systems and Product Pricing

Consumer review systems have become an important marketing communication tool through which consumers share and learn product information. Although there is abundant evidence that consumer reviews have a significant impact on product sales, the design of consumer review systems and its impact on review outcomes and product sales have not yet been well examined. This paper analyzes firms’ review system design and product pricing strategies. We formally model two review system design decisions—what rating scale cardinality to use and whether to offer granular review reports. We show that firms’ optimal design and pricing strategies critically depend on contextual characteristics such as product valuation, product mainstream level, and consumer misfit cost. Our results suggest that it is beneficial to host a review system only when the product valuation is higher than a threshold. Furthermore, firms should choose low rating scale cardinality for niche products and high rating scale cardinality for mainstream products. When consumers’ misfit cost is relatively high, including granular reports in the review system enables firms to attract the favorable consumer segment. Different pricing strategies should be deployed during the initial sale period for different product types. For niche products, firms are advised to adopt lower-bound pricing for high-quality products to take advantage of the positive word of mouth. For mainstream products, firms are advised to adopt upper-bound pricing for high-quality products to enjoy the direct profit from the initial sale period, even after taking into account the negative impact of high price on consumer reviews.

민간 아파트 사업의 초기계약률 예측에 관한 연구

Apartment developers consider the initial sales rate as an important indicator for their success of apartment development projects. They tried to achieve a secure level of initial sales rate. In spite of its importance, there is little research on the initial sales rate because of the difficulties in gathering proper data for analysis. This study, however, collects the data in initial sales rates in Su-won from various sources such as construction companies, marketing companies, sales companies and so on. By using this rare data, this study analyses the initial contract rate of apartment and estimates the initial contract rate by sales price. The result of this study shows that important of land area ratio, brand, and distance to park. It is expected that the proposed model will be used for apartment developers in sales planning phase.

Alleviating feature fatigue in product development based on the bass model

Purpose – This paper aims to propose a novel method to predict and alleviate feature fatigue. Many products now are loaded with an extensive number of features. Adding more features to one product generally makes the product more attractive on the one hand but, on the other hand, may result in increasing difficulty to use the product. This phenomenon is called “feature fatigue”, which will lead to dissatisfaction and negative word-of-mouth (WOM). Feature fatigue will damage the brand’s long-term profit, and ultimately decrease the manufacturer’s customer equity. Thus, a problem of balancing the benefit of increasing “attractiveness” with the cost of decreasing “usability” exists. Design/methodology/approach – A novel method based on the Bass model is proposed to predict and alleviate feature fatigue. Product capability, usability and WOM effects are integrated into the Bass model to predict the impacts of adding features on customer equity in product development, thus helping designers alleviate feature fatigue. A case study of mobile phone development based on survey data is presented to illustrate and validate the proposed method. Findings – The results of the case study demonstrate that adding more features indeed increases initial sales; however, adding too many features ultimately decreases customer equity due to usability problems. There is an optimal feature combination a product should include to balance product capability with usability. The proposed method makes a trade-off between initial sales and long-term profits to maximize customer equity. Originality/value – The proposed method can help designers predict the impacts of adding features on customer equity in the early stages of product development. It can provide decision supports for designers to decide what features should be added to maximize customer equity, thus alleviating feature fatigue.

Introductory pricing, market development and profit sharing

This article investigates how channel members collaboratively implement introductory pricing strategy to develop a market for an innovative product. The overall market demand of the innovative product depends on the initial sales to pioneer consumers. When the potential market size is large, the manufacturer sets a high wholesale price and shares no profit with the retailer. The retailer is motivated by the large market potential, and therefore, is willing to develop the market by charging pioneers a low retail price. The retailer subsequently benefits from market development by increasing its price selling to the rest of the market. When the potential market size is moderate, the manufacturer lowers the wholesale price and shares a positive profit with the retailer. Hence, the manufacturer provides incentives for the retailer to charge a low retail price to develop the market, rather than a high retail price to capitalize on pioneer consumers only. Further, this article shows that, when the retailer is myopic, the manufacturer has to yield more profits in order to development the market to the retailer than in the case when the retailer is forward-looking.

The Importance of Starting Right: The Influence of Accurate Intuition on Performance in Salesperson–Customer Interactions

Salespeople make two types of judgments about customers in face-to-face interactions: those that are more intuitive and those that are more deliberative. The authors evaluate the influence of accurate intuitive and deliberative judgments on the performance of salespeople. To evaluate this influence, the authors employ matched survey, observational, and objective field data obtained before, during, and after salesperson–customer interactions. The results reveal that accurate intuitive judgments improve selling performance by enabling more appropriate initial sales strategies. These judgments not only help increase the effectiveness of salespeople's selling efforts but also reduce the amount of selling time, resulting in improved selling efficiency. However, performance is compromised when inaccurate deliberative judgments follow accurate intuitive judgments. The findings also identify different antecedents to judgment accuracy. Intuitive accuracy is influenced by domain-specific experience, similarity to the customer, and empathy for the customer, whereas listening skills and customer orientation influence deliberative accuracy.

Initial Shipment Decisions for New Products at Zara

Given uncertain popularity of new products by location, fast fashion retailer Zara faces a trade-off. Large initial shipments to stores reduce lost sales in the critical first days of the product life cycle, but maintaining stock at the warehouse allows restocking flexibility once initial sales are observed. In collaboration with Zara, we develop and test a decision support system featuring a data-driven model of forecast updating and a dynamic optimization formulation for allocating limited stock by location over time. A controlled field experiment run worldwide with 34 articles during the 2012 season showed an increase in total average season sales by approximately 2% and a reduction in the number of unsold units at the end of the regular selling season by approximately 4%.

Design Innovativeness and Product Sales' Evolution

In the last decade, design innovation has gained increasing prominence in the marketplace, with a growing number of firms innovating not only through technology but also through novel product forms (i.e., design). However, while the effect of technological innovation on product sales is a heavily studied topic, a defining theory of how design innovation influences product sales is still missing. This paper provides demand- and supply-side theories to formulate a set of coherent hypotheses about the effect of design innovativeness, i.e., the degree of novelty in a product’s design, on sales' evolution over time. The hypotheses are tested in two different samples. In the first, car models introduced in the United States from 1978 to 2006 (for a total of 2,757 model-year data) are analyzed. In the second, motorcycle models introduced in the United States from 1980 to 2008 (for a total of 2,847 model-year observations) are analyzed. I find that design innovativeness diminishes initial sales' status but increases sales' growth rates. Furthermore, design and technological innovativeness have a negative interaction effect on sales' initial status, but a positive effect on sales' growth rates. Finally, brand strength and brand advertising expenditures worsen the negative effect of design innovativeness on initial sales' status, but boost its positive effect on sales' growth rates.

Evaluation of the Colour of Dried Dutch Rose Flowers Using a Colorimeter

The visual appearance of flowers, fresh fruits and vegetables is one of the first quality determination made by the consumer. Often the appearance of the commodity is the most critical factor in the initial sale. The flower colour of fresh and dried Dutch rose varieties at Regional Horticultural Research and Extension Centre, UHS (Campus) GKVK, Bengaluru was documented using a Minolta CR-10 portable tristimulus colorimeter. With the colorimeter, flower chromaticity was recorded in Commission Internationale d’ Eclairage L*, C* and h° colour space coordinates. In this system of colour representation the values L*, C* and h°, where L value corresponds to the brightness of the flower, C describes the intensity of the colour and h° represents the hue angle. The colorimeter, however, allowed the description of colours that fell between the colour charts and had the ability to compare the specific colour attributes of different varieties of similar and different colour. The ability to interpolate colours with the colorimeter allows a greater precision in documentation and discrimination of flower colour.

The Unstable Lives of Bicycles: The ‘Unbecoming’ of Design Objects

A predictable byproduct of any ‘successful’ mobility system is the breakdown and destruction of once desired, fashionable, shiny, and useful objects, yet mobilities scholars have largely ignored such issues. In this paper we document and analyze ethnographically neglected and ‘half-dead’ bikes in Copenhagen as we encounter them in racks, on the pavement, and when the municipality attempts to clear them out or recycle them. We are theoretically informed by ideas that see consumer objects as having a social and material life beyond their initial production and sale. They are constantly in a process, (un)becoming, and marked by that life. Where cycling is normally conceived of as a sustainable and environmentally friendly practice, this study shows that many bikes are ill treated and quickly become waste, and ‘matter out place’.

The Duration of Dutch Export Relations: Decomposing Firm, Country and Product Characteristics

Using Dutch transaction-level data on international trade we find that the intensive margin drives trade growth year by year. After 6 years, new trade relations cover about 50 % of Dutch exports. Only 25 % of the new relations specified by firm, product and destination survives after 2 years. The estimates conclude that new trade relations with new exporting firms or with new destinations have lower hazard rates than those with new products. If the destination is an EU country the hazard is much lower as is also case for higher initial sales.

An approach based on the Bass model for analyzing the effects of feature fatigue on customer equity

Integrating more features into one product makes the product more attractive, thereby increasing initial sales; however, once customers start using the high-feature product, they become dissatisfied with the usability problems caused by too many features. This phenomenon is called "feature fatigue". Feature fatigue will lead to dissatisfaction and negative word-of-mouth, which will damage the brand's long-term profit, and ultimately decrease the manufacturer's customer equity. In this paper, we propose an approach based on the Bass model to analyze the effects of feature fatigue on customer equity, helping designers evaluate and alleviate feature fatigue. We integrate product capability, usability, and word-of-mouth effects into the Bass model to analyze customer purchase behavior under different product capability and usability. Then a customer equity model is proposed to calculate customer equity according to customer purchase behavior. A feature fatigue degree is defined and a feature fatigue evaluation method is proposed, providing decision supports for designers to decide what features should be added so as to alleviate feature fatigue. Finally, a case example is illustrated to validate the proposed approach.

Modeling seasonal effects in the Bass Forecasting Diffusion Model

The Bass Forecasting Diffusion Model is one of the most used models to forecast the sales of a new product. It is based on the idea that the probability of an initial sale is a function of the number of previous buyers. Almost all products exhibit seasonality in their sales patterns and these seasonal effects can be influential in forecasting the weekly/monthly/quarterly sales of a new product, which can also be relevant to making different decisions concerning production and advertising. The objective of this paper is to estimate these seasonal effects using a new family of distributions for circular random variables based on nonnegative trigonometric sums and to use this family of circular distributions to define a seasonal Bass model. Additionally, comparisons in terms of one-step-ahead forecasts between the Bass model and the proposed seasonal Bass model for products such as iPods, DVD players, and Wii Play video game are included.

Selected Topics in Mutual Fund Distribution

This chapter working paper examines the channels through which mutual fund shares are distributed to investors: (1) direct, (2) advice, (3) retirement plan, (4) supermarket, and (5) institutional. The first four channels mainly serve individual investors. In the direct and institutional channels, fund distributors transact directly with investors in the sale and redemption of fund shares. In the other indirect channels, fund shareholders transact with funds through financial intermediaries. In 1980 the Securities and Exchange Commission adopted rule 12b-1, which emphasizes the role of independent fund directors in monitoring fund use of assets for distribution. The rule also addresses conflicts of interest between funds and fund advisers when funds pay distribution fees to grow fund assets. This chapter investigates whether introducing and adopting 12b-1 plans have benefitted shareholders and fund managers.This chapter provides an in-depth discussion of important issues related to mutual fund distribution. Two major topics are fund distribution channel characteristics and rule 12b-1 fees and distribution. Distribution channel characteristics discussed include direct channel, advice channel, retirement channel, institutional channel, supermarket channel, and multiple-share classes. Rule 12b-1 fees and distribution discuss adoption of rule 12b-1, rule 12b-1 after adoption, current 12b-1 fees, and issues with 12b-1 fees. A final major topic discussed direct sold and broker-sold services.The 12b-1 fee compensates brokers for initial sales of fund shares, ongoing servicing of fund shareholder accounts, and advertising and promotion expenses. Higher broker sales increase fund adviser assets under management (higher inflows) and adviser profits−primary motivations. Additionally, higher fund share sales increase broker profits, while higher broker fund share sales increase the size and cost of fund portfolio trades, amounts of broker commissions, and execution fees. Higher 12b-1 fees increase fund outflows, but higher share sales increase fund inflows. 12b-1 fees are transparent direct line-item costs in fund expense ratios that motivate using multiple share classes in direct and broker (and other intermediary) sold funds, including sales of fund shares to large individual and institutional investors. Payments reduce current fund net asset values (NAVs) and shareholder returns. Lastly, 12b-1 fees provide major agency conflicts with shareholder interests and returns.

Learning to export from neighbors

This paper studies how learning from neighboring firms affects new exporters' performance. We develop a statistical decision model in which a firm updates its prior belief about demand in a foreign market based on several factors, including the number of neighbors currently selling there, the level and heterogeneity of their export sales, and the firm's own prior knowledge about the market. A positive signal about demand inferred from neighbors' export performance raises the firm's probability of entry and initial sales in the market but, conditional on survival, lowers its post-entry growth. These learning effects are stronger when there are more neighbors to learn from or when the firm is less familiar with the market. We find supporting evidence for the main predictions of the model from transaction-level data for all Chinese exporters over the 2000-2006 period. Our findings are robust to controlling for firms' supply shocks, countries' demand shocks, and city-country fixed effects.

Revenue Management Without Commitment: Dynamic Pricing and Periodic Fire Sales

A profit-maximizing monopolist seller has a fixed number of identical goods to sell before a deadline. Over time, buyers privately enter the market, and they strategically time their purchases. In the unique Markov perfect equilibrium, the seller sporadically holds fire sales to lower the stock of goods. This increases future buyers' willingness to pay, but it also lowers the willingness to pay of buyers who arrive early in the game. On the path of play, only one unit is offered in each fire sale, so buyers may be rationed. Interestingly, at the limit where the probability of a buyer being rationed vanishes, the seller gets rid of all but one unit of the good during a big initial fire sale.