Posts Tagged ‘MARKETING WEBLOG#8217;

18
Apr

Passing above a low bar or below a high one?

Written on April 18, 2015 by Antonios Stamatogiannakis in Research in practice

Many companies (e.g., Google, Yahoo, etc.) evaluate their employees based on their relative ranking. That is, an employee is not getting extra rewards (bonuses, etc.) based on his/her performance, but based on how good this performance is in comparison to other employees. At the same time, other companies (e.g., Microsoft), are abandoning such relative evaluation systems.

What can be hidden behind these inconsistent practices? One thing seems to be certain – relative evaluation systems – that is, rewarding people (employees, students, consumers, etc.) based on how well they do relative to their peers – seem to work better in some cases than in others.

In recent research* (forthcoming at Human Resource Management) that we conducted at IE with the doctoral candidate Jonathan Luffarelli and the marketing professor Dilney Goncalves, we provide such an example.

In this research, we examine the satisfaction with performance of the people being evaluated (e.g., employees) relatively to their peers. We found that when the people being evaluated focus on their own performance, as expected, they are more satisfied as this performance gets better. However, when they focus on how their performance compares to that of others, an interesting effect occurs. If everyone’s performance gets higher by a certain amount, the relative evaluation remains unchanged. However, at the same time, the performance “bar” is raised – as everyone is doing now exceptionally well. As a result, comparing one’s performance with this new-very high bar- makes one feel less satisfied with his/her performance.

These mechanics would suggest that when the employees of an organization are evaluated generously, a relative evaluation system would make them relatively dis-satisfied. When they are evaluated strictly, though, a relative evaluation system would increase their satisfaction.

Clearly, other things may also vary when a relative evaluation system is implemented. One of them, for example, could be the very tendency of people to compare themselves with others (versus only examine their own performance). It is good to see that both academics and managers are trying to figure out the exact forces that come into play.

Stay tuned for more research based insights!

Antonios (Adoni) Stamatogiannakis, Ph.D.
Assistant Professor of Marketing
IE Business School – IE University

antonios.stamatogiannakis@ie.edu

*The Research leading to these results has received funding from the People Programme (Marie Curie Actions ) of the European Union´s Seventh Framework Programme (FP7/2007-2013) under REA grant agreement No. 298420.

28
Mar

Bad evaluations – happy people… Can it happen?

Written on March 28, 2015 by Antonios Stamatogiannakis in Research in practice

All professors are pushed by the students to give higher grades. In order to relax this pressure, many educational institutions (IE being one of them), started using the curve grading system. In curve grading, the performance of all the students in the class is ranked from the highest to the lowest. The real grade, is then a function of this ranking. E.g., the top 5% get an A, the following 10% gets an A-, and so on.

Alas, though, students still want higher grades! And, many professors give in by employing more relaxed evaluation criteria. For instance, if the “real” grade is based on the ranking only, a professor could make every student happier by adopting a generous evaluation scheme, giving to every student a few points more. The ranking would be the same, and so would the real grade, but everyone would have a higher “evaluation”, and thus everyone would be happier. Well, they would….NOT.

Recent research* (forthcoming at Human Resource Management) we conducted at IE with the doctoral candidate Jonathan Luffarelli and the marketing professor Dilney Goncalves reveals the opposite. In a competitive setting (such as IE), students care relatively more about how others are doing, rather on how well they, themselves are doing. So, if everyone else gets a high grade, any given student would (by comparison) feel less satisfied with his/her grade, even if that is higher too!

Interestingly, neither students themselves, nor professors predict that this would happen, as they overwhelmingly believe that a higher evaluation would result to higher satisfaction. And even more interestingly, when we experimentally made people pay attention to their own performance, they did exactly as they predicted: They were more satisfied when they received a higher evaluation.

So, if you are a professor, or – more generally- an evaluator, do not be overly generous. It can backfire! And if you are a student, or an employee being evaluated, be careful what you are asking for!

Stay tuned for more research based insights!

Antonios (Adoni) Stamatogiannakis, Ph.D.
Assistant Professor of Marketing
IE Business School – IE University

antonios.stamatogiannakis@ie.edu

*The Research leading to these results has received funding from the People Programme (Marie Curie Actions ) of the European Union´s Seventh Framework Programme (FP7/2007-2013) under REA grant agreement No. 298420.

7
Mar

Assume that you are booking a room at a fancy hotel. This is an important stay for you, so you are willing to pay a lot for a good room. Would it make a big difference if you had to pay 213 or 223 euros per night? Probably not. Ten euros for such stay sound like no big deal.

Now assume that you are arriving at the hotel. It is great- as you expected it. You try to access your Social Media account to let everyone know how great this is…but there is a problem. You have to pay 10 euros/ day to have Internet access. Would it make a big difference to you, compared to if the Internet connection was free? Probably yes. Paying extra when you are already paying a lot (being it 213 or 223), does not sound quite right.

This example illustrates how smart pricing can really affect consumer satisfaction, and was first introduced by the Behavioral Economist Richard Thaler, some 30 years ago. Thaler argued, among other things, that a small loss (or payment) integrated into a bigger one, would be a lot less painful than two separate losses. Paying 223 and having Internet for free, is a lot better than paying 213 and having to pay extra 10 for Internet.

So why do not all companies (hotels etc.) follow this principle? I think the basic reason is that many companies still, implicitly, price based on costs. If Internet (or whatever else) is a separate cost for the company, it should be priced separately. This approach, however, ignores a fundamental fact. Customers, typically, do not care about a company’s cost. They care about their own satisfaction. And pricing, like all other marketing activities, should be done with that in mind.

Similar questionable practices are found in the airlines industry in the US. There are “low cost” flights with a duration of about 5 hours. They cost about 250, or more. What do you think most people would prefer? Pay 250 and then have to figure out if they want to pay some more for a sandwich? Or pay 255 and have a sandwich for free? Given that this is a long flight, the first option looks rather cheap – on behalf of the airline. The second one, looks a lot more generous. It basically buys (for the company) consumer satisfaction at no extra cost.

Stay tuned for more research based insights!

Antonios (Adoni) Stamatogiannakis, Ph.D.
Assistant Professor of Marketing
IE Business School – IE University

Antonios . Stamatogiannakis @ ie . edu

31
Jan

When elections are coming, most political parties do more or less the same. They highlight their core ideology (e.g., liberals, socialists, etc.), they emphasize what they will do well, and what their opponents will do badly. This process has of course a lot to do with marketing principles. For instance, a party whose voters (customers) are known to be religious will typically emphasize how close it is to the respective religion, what it will do to protect religious rights, and will try to differentiate from other parties which are not so religious.

But sometimes, there are opportunities for really disruptive positioning. So how about an advertisement for a political party showing a kid in a toy store unsuccessfully trying to operate a train-toy, and the leader of the party coming to help the kid understand when to speed up and when to slow down. Something like this spot, from the recent Greek elections.

YouTube Preview Image

What does positioning have to do with this? Well, in EVERY poll preceding the recent Greek elections, there were two findings. First, the left-wing party who eventually won the elections (SYRIZA) was always in the lead. Second, its leader (and current prime minister – Alexis Tsipras) was judged as “inappropriate” to rule (either because he was too young or too extreme).

So, to bring this to the advertisement context, most Greeks wanted this kid (called Alexis in the spot) to drive the “Greek Train” (notice the Greek flag at the beginning). They are skeptical however that the Alexis will not make it on his own. These voters – exactly as if they were customers – want someone to guarantee that Alexis will drive the train, but at the same time keep them safe. And – exactly as any good business would do – the leader of the political party “Independent Greeks” – Panos Kammenos – comes to save the day. He helps little Alexis rule. Teach him when to speed up, and when to slow down.

Of paramount importance, reading the market research right (in this case, the pre-election polls) is necessary for any good differentiation and positioning. Had “Independent Greeks” (a party of the right wing, with deep traditional and religious roots) not identified the appeal of the “help Alexis” positioning, they would have probably followed a traditional political campaign highlighting their right-wing beliefs and values. In these polarized elections, that would most likely have resulted to a disaster for them, as they would have been squeezed by the leading “right-wing” party – leader the former government – “New Democracy”.

And now? What about results? What about “market share”? Before this advertisement, the polls were predicting that “Independent Greeks” (a right-wing party) would get a percentage of about 2.5%, leaving them outside of the parliament. They finally got almost double – 4.75%. And as they promised, they are now in the government with SYRIZA (a left-wing party).

So, whether right or left, smart positioning wins in the end.

Antonios (Adoni) Stamatogiannakis, Ph.D.
Assistant Professor of Marketing
IE Business School – IE University

Antonios . Stamatogiannakis @ ie . edu

20
Dec

In a previous post, I introduced to you a joint effort by the IE marketing department and Travel-Club, the purpose of which was to study consumer loyalty (for more details, see here).

In this post, I am excited to present to you the first results!

The IE research team(marketing professors Dilney Gonçalves, Shameek Sinha, myself, and our research collaborator David Santos), leaded by the head of the marketing department, professor Teresa Serra, started investigating a key question: Do loyalty programs really work?

To respond to this question we have analyzed a database of near 4 million of real customers’ transactions, which took place in the multi-sponsor loylaty program Travel Club (www.travelclub.es), the greatest experts in loyalty programs in Spain, recently collaborating with one of the leading international loyalty agencies – Aimia.

 

Some of the key results so far are:

  • Use the channels efficiently: Communication with customers is the key of the program (optimizing the number and the timing of offers and communications does increase memberspending)
  • Use the rewards strategically: Give a final push to members who are close to getting a reward.
  • Use the presence of other partners in the program wisely: Having more partners in the program can increase the members’ spending through cross-selling.

In summary, loyalty programs really work only when they are used strategically, taking into consideration the needs and behavior of the program mebers, and being with them as much as possible, not only at the time of a transaction.

For further information, and for a full report of the results, you can visit directly: www.catedrafidelizacion.ie.edu (only in Spanish – sorry :) )

No doubt, that with such great infornation on such an interesting and important topic, you will be hearing from us more in the future!

Let me wish Merry Christmas and a Happy New year to everyone!

 

Antonios (Adoni) Stamatogiannakis, Ph.D.

Assistant Professor of Marketing IE Business School – IE University

Antonios . Stamatogiannakis @ ie . edu

*This post is co-authored with David Santos

29
Nov

Christmas is fast approaching, and so the “national craze” of Lotería Navidad. Millions of Spaniards are rushing into buying lottery tickets in all likely and unlikely ways, just to get a shot to be mulch-millionaires.

But why are they doing it? As any economist would tell you, buying a lottery ticket is basically one of the worst things you can do with your money. For instance, it is a lot more likely to get struck by a lightning, than to win in a lottery (for more interesting examples check here).  Yet very few people would bet on the former.

So why are people still buying lottery tickets? Is it that they are completely unaware of their low chances? This is probably true, but only partially. To fully understand this behavior, let’s take a look at the latest advertisement of the  Lotería Navidad – which already has about 4 million views on youtube.

YouTube Preview Image

The fact that there is a remote chance to win, is only a small part of this story. At the same time, the plot capitalizes on several other important drivers of human decision making.

  • Reference point and loss aversion. Many decades of research have shown that losses loom larger than gains. For instance, losing 100 euros would make you a lot more unhappy than finding 100 euros would make you happy. Interestingly, the “no win” situation in the ad is depicted as a loss. This is a lot more impactful.
  • Anticipated regret. When people make a difficult choice, they often try to minimize anticipated regret. The ad cleverly illustrates this. It basically re-frames the decision as “a 20 euros expense vs. potential lifetime regret”. Looked at this way, buying a lottery ticket makes a lot more sense.
  • Identification. The protagonist has been buying a lottery ticket for many years. He never won so far… Wait a minute!! This is probably the story of almost EVERY lottery ticket buyer! So “this guy, could actually be me. I cannot let that happen!” is what many potential buyers would think.

There are many more – but there is no need to analyze everything. The point is that to sell a lottery ticket, like many other products and services, an organization has to appeal to a more hot-emotional side, and not to a cold-rational one. This ad does that in an excellent way.

Let me wish very good luck to those who will play!

 

Antonios (Adoni) Stamatogiannakis, Ph.D.
Assistant Professor of Marketing
IE Business School – IE University

Antonios . Stamatogiannakis @ ie . edu

27
Sep

Hello everyone,

today I just want to open up an issue I was thinking about over the last few days…No answers, just questions.

Probably most of you have noticed the “bend-gate” of the last few days.. The new Iphone 6 bends in people’s pockets… Here is an illustration.

YouTube Preview Image

So, angry Iphone users are wondering why they are paying so much money…But wait a second! Bending is not so bad, as Samsung exemplifies in related products!!

YouTube Preview Image

So, could apple (with a bit of R&D and a lot of marketing investment of course), could turn the “bend-gate” into a “Bend-able phone that everyone loves”? Something like this:

YouTube Preview Image

What would it take? As I said in the beginning, I am not sure at all. Could it be that Apple is starting to lose a bit of their marketing magic? Or will they turn this around, sooner or later?

What do you think? Well, let’s wait and see!

Best,

Antonis

Antonios (Adoni) Stamatogiannakis, Ph.D.
Assistant Professor of Marketing
IE Business School – IE University

Antonios . Stamatogiannakis @ ie . edu

22
Mar

When faced with a bad event, most humans have the tendency to look for a “bright side”. This tendency has been captured by popular idioms in many languages, such as “Να χρυσώσει το χάπι” (“to coat the pill with gold”) and “Ουδέν κακόν αμιγές καλού” (“There is nothing bad without a bit of good in it”) in Greek, or “every cloud has a silver lining” in English.

YouTube Preview Image

But what is a “silver lining” in economics? The answer comes from important research published in Marketing Science by Richard H. Thaler (University of Chicago; 1985, 2008). Thaler (among many other behavioral economists) argues that every financial transaction is mentally categorized as either a “gain” or a “loss”, relative to a reference point (usually the status quo). In addition, the perceived value of money is very different depending on how it relates to the reference point. Put simply, not all money is equal. Although an amount of money (let’s say 500 euros) can  buy the exact same things regardless where it comes from, its value for people can vary dramatically. One such variation is the “silver lining” principle. Let me explain this with an example.

Over the past (let’s say 3) years, Greece is experiencing the biggest post-second world war economic crisis. Many Greek citizens have lost large parts of their income, and the amount of this loss is for many something like 500 euros / month. For 3 years, this is a 3 x 12 x 500 = 18 000 euros. Now, the Greek economy seems to be slowly recovering. The Greek Prime minister just announced that Greece had surplus, 500 million of which will be distributed to about a million needy Greek citizens (see here). That is 500 / citizen, on average.

 

 

There are two possible ways to frame this 500. The first, is to “integrate” it in the previous loss: The prime minister, in this case, would say: “From the surplus, we will reduce the loss that the neediest Greek citizens had over the last 3 years from 18000 to 17500”.

Instead, he chose to say, more or less: “From the surplus, we will give to the neediest Greek citizens 500 euros each”. Which one sounds better? Clearly the second. Reducing the huge loss of 18000 by 500, would not make anyone any happier. They would still be losing 17500, roughly equal to 18000. Instead, the 500 windfall gain is presented in isolation from the disproportionately larger loss. Now, everyone is happy to have gained suddenly 500 euros; That is a silver lining.

In general, although traditional economics would say that X euros is always X euros, people do not understand money this way. They seem to be considering mostly “what difference does this amount make?”. For example, very small amounts of money may make a difference in how people pursue their financial goals (see here: http://marketing.blogs.ie.edu/archives/2013/07/improving-versus-maintaining-which-one-is-harder.php*). Or, as the “silver lining” principle suggests, when people face a big loss and a disproportionately smaller gain, combining the two into a slightly smaller loss would not make much difference. In these cases, people will “like” the same amount of money more, if they were treated as gains (i.e., gain 500) than if they are treated as “loss reductions” (i.e., limit a 18000 loss by 500)….and politicians seem to know that J.

 

Antonios (Adoni) Stamatogiannakis, Ph.D.
Assistant Professor of Marketing
IE Business School – IE University

Antonios . Stamatogiannakis @ ie . edu

 

*The Research leading to these results has received funding from the People Programme (Marie Curie Actions ) of the European Union´s Seventh Framework Programme (FP7/2007-2013) under REA grant agreement No. 298420.

4
Jan

New Year’s Resolutions. Why people fail?

Written on January 4, 2014 by Antonios Stamatogiannakis in ADVERTISING, Research in practice, Servicios

Hello again,

first of all let me wish a very happy new year to everyone!!

These days, it is common for many people to set resolutions for the new year. Those are commonly things that they want to achieve or do in order to improve their lives. This trend is so important, that the US government has devoted a special webpage to it: http://www.usa.gov/Citizen/Topics/New-Years-Resolutions.shtml.

Many of these resolutions focus on a better and more healthy lifestyle. Consumers typically aim, for instance, to exercise regularly. This exercising can take the form of either a daily workout routine ( X minutes per day) or a weekly schedule (e.g., 3 times per week). Many marketeers that work on domains that are related to these longer-term goals capitalize on the way that consumers consider them, promoting in their offerings exactly that: The benefits of a standard workout schedule (I am sure you have seen may ads like the following in the past).

YouTube Preview Image

Yet, despite the efforts of governments, marketeers, and consumers themselves, long-term goals, such as new year’s resolutions, often are not achieved… Why may that be the case? Are people so bad at sticking to their goals?

resolutions pic

Recent research by a Cornell university psychologist (Dunning 2007), gives an answer to this question. Dunning argues that people are not that bad in pursuing their goals, but rather they are not very good when setting a goal, in the sense that they do not account for all the information they may have available. For example, when making these resolutions, people often fail to consider that the reason they did not work out as much as they wanted till now, is not that they did not have exercising equipment or a gym membership, but that they lacked the time or the motivation to exercise; It is very hard to find time to exercise, if one’s day is full with other obligations (e.g., career, family, commuting, etc.). Put simply, the day will always have 24 hours, no matter if one owns a gym membership or not!

So, the next time you fail in sticking to a plan of yours, instead of blaming yourself for being lazy, consider whether the plan was feasible to start with.

 

Having said that, I wish you never face such a situation during 2014!

Antonios (Adoni) Stamatogiannakis, Ph.D.
Assistant Professor of Marketing
IE Business School – IE University

Antonios . Stamatogiannakis @ ie . edu

 

 

11
Nov

Is Microfinance the panacea for poverty alleviation?

Written on November 11, 2013 by María López Escorial in Bottom of the Pyramid

The microfinance boom was, among other reasons for its claim to be the only way to tackle poverty in a sustainable, scalable and long term way. Not using donation funds, recovering the invested money and the fact that the poor were directing their own path, gave the microfinance industry the magic bullet.

30 years later many voices claim the opposite. There is no empiric substantial evidence, that microfinance improves the income of its clients in big numbers.

Maybe, we were a bit naïve when advocating for this instrument alone to alleviate such a complex issue and dificult measure as poverty.

Here, there are a few reasons for it:

1- Not all poor are microenterpreneurs

According to Oliver Wyman study, of the 2.640 total poor, there are 180 microenterpreneurs, 80 artisan, fishermen of pastoralist, and 640 small holder farmers that would need working capital or fix capital for their businesses. Those are still less than half of the total poor.

Oliver wyman lively-hood base segmentation

2- Poor are often entrepreneurs by circumstance, not by choice

Some of them do not want to grow their business but just have enough money to subsist or do not have the capabilities to grow it. Not all of us are entrepreneurs or would succeed and increase income by having a microenterprise. Some of us would maybe decrease our income and destroy value in the process.

microenterpreneur

3- Not all microcredits are used for businesses

Some microcredits are used for consumption and family needs. Most of that money would not in general increase income.

4- Poor have other needs to be covered to get out of poverty.
As we saw in another post, by having better and cheaper lighting, housing, cooking devises, household goods, poor would save money for other purposes, increase income, free valuable time to be used in productive purposes, improve health an in turn have more working hours, improve business efficiency, etc…

standar BOP family budget

Microfinance is not the panacea, but a necessary condition to lift people out of poverty, but
Other needs have to be covered and other actors need to be involved.

There are huge opportunities out there to cover those opportunities and work in both ways: create business and social value..
I will try to cover them in another post.

Any other reason you may think of?

I will wait for your comments! here and at @marialescorial

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