Faculty & Research

Marketing

Marketing

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About the Unit

Marketing is critical for organic growth of a business and its central role is in creating, communicating, capturing and sustaining value for an organization. Marketing helps a firm in creating value by better understanding the needs of its customers and providing them with innovative products and services. This value is communicated through a variety of channels as well as through the firm's branding strategy. Effective management of customers and pricing allows the firm to capture part of the value it has created. Finally, by building an effective customer-centric organization a firm attempts to sustain value over time.

Our faculty addresses a broad array of topics in all of these areas. Our work attempts to get a better understanding of how consumers use information and make choices and how these choices affect the firm's strategy for new product development, customer relationship management, branding and other marketing efforts. We examine issues related to branding, business marketing, global marketing, distribution channels, pricing, direct and interactive marketing, sales management and return on marketing investment. Some of our faculty specializes in specific industries such as retailing, agribusiness, social enterprise, media, arts and entertainment.

There are several new developments in marketing that offer opportunities for us to make important contributions in the future. The current economic crisis is changing consumers' current and future purchase and consumption patterns. Search engines have changed the way consumers obtain information and make decisions and they are also dramatically changing the advertising industry. Social networks and user generated content have opened a new way for consumers to engage with each other as well as with brands and companies. There are significant changes in the attitudes of consumers and companies about social issues. Consumer preferences and choice of products are increasingly influenced by social factors. Companies are recognizing that there is a large market at the "bottom of the pyramid" and marketing to these consumers may require a new framework. These and related developments provide great opportunities for the marketing faculty to make a significant impact in the future.

Recent Publications

CRM and AI in Time of Crisis

By: Michelle Y. Lu and Navid Mojir
  • 2021 |
  • Working Paper |
  • Faculty Research
A crisis can affect the incentives of various players within a firm’s multi-layered sales and marketing organization (e.g., headquarters and branches of a bank). Such shifts can result in sales decisions against the firm’s best interests. Motivated by the backlash to the Paycheck Protection Program and the subsequent adoption of artificial intelligence (AI) in the banking industry during the COVID-19 pandemic, we develop a model of decision authority allocation between headquarters and branches, then examine the impact of AI on decision authority and intra-organizational conflicts. Our model reveals how an increased concentration of decision authority at headquarters during a crisis can push the bank to focus on its largest clients and explains why such a strategy might not be beneficial. Furthermore, using AI does not always help the firm. When it replaces the branch’s due diligence efforts (e.g., Fintech firms), AI can mitigate intra-organizational conflict and enhance resource allocation. Yet when AI supplements the branch’s due diligence efforts (e.g., traditional banks), the branch might decrease its efforts and thus lower the bank’s information about the branch’s clients. AI can thus create new conflicts of interest and result in decision authority becoming concentrated at headquarters. This effect of AI is exacerbated during a crisis. Our findings have important implications for both practitioners and policy-makers that apply beyond the COVID-19 crisis.
Keywords: Customer Relationship Management; CRM; Artificial Intelligence; AI; Decision Authority; B2B; COVID-19; Pandemic; Crisis Management
Related

Putting Your Corporate Purpose to Work

By: Hubert Joly
  • November 15, 2021 |
  • Article |
  • Harvard Business Review (website)
Making a company purpose come to life is an arduous journey that requires a multi-pronged and sustained approach. Yet as hard as it is, the journey is well worth it and will yield positive transformation not only for the company, but also for the people who work there. And by changing how the company and its people relate to customers, suppliers, shareholders, and communities, that transformation radiates well beyond the organization itself. The author presents five steps for turning a company purpose into reality, using both the head and the heart.
Keywords: Organizations; Mission and Purpose; Corporate Strategy; Management Practices and Processes; Organizational Culture; Business and Stakeholder Relations
Related

Farfetch: Digital Transformation for Luxury Brands

By: Sunil Gupta, Jill Avery, Elena Corsi and Federica Gabrieli
  • November 2021 |
  • Case |
  • Faculty Research
Farfetch, a global luxury technology platform and digital marketplace had been surfing the wave of digital transformation in the luxury fashion industry since 2008. While the company’s stock price and market valuation had fluctuated since its IPO in 2018, it had achieved positive EBITDA only once in the fourth quarter of 2020. Now, CEO Jose Neves had to decide how to allocate company resources across the various business lines that had sprung up alongside the marketplace, including Farfetch Platform Solutions, a modular set of e-commerce technology solutions and services for luxury retailers and brands, the Store of the Future initiative, a partnership with Alibaba and two of the largest luxury houses (Richemont and Kering), and investment in Farfetch’s own fashion brands. As the company expanded into new business lines, it stewarded an increasingly complex and interdependent luxury ecosystem in which it could be perceived as both a collaborator and a potential competitor to its various constituents. How could Neves chart the best path to profitable growth while keeping everyone satisfied as competition heats up in the online and offline luxury retailscape?
Keywords: Digital Marketing; E-commerce; Digital Transformation; Marketplaces; Retailing; Internet Marketing; E-Commerce Strategy; Marketing; Marketing Strategy; Marketing Channels; Brands and Branding; Luxury; Growth and Development Strategy; Apparel and Accessories Industry; Beauty and Cosmetics Industry; Fashion Industry; Retail Industry; Web Services Industry; Technology Industry; United Kingdom; Europe; Portugal; China
Related

Tommy Hilfiger Adaptive: Fashion for All

By: Elizabeth A. Keenan, Sandra J. Sucher and Shalene Gupta
  • November 2021 |
  • Case |
  • Faculty Research
In Fall 2017, Tommy Hilfiger launched Tommy Hilfiger Adaptive, a line of adaptive and inclusive fashion apparel intended to make dressing easier. Now, Tommy Hilfiger is planning to launch Tommy Hilfiger Adaptive internationally in early 2020. The prospect of making adaptive clothing available globally is exciting, but some wonder if a global launch might be a bit premature. While Tommy Hilfiger Adaptive has experienced some initial success, it is still a relatively unknown line in the U.S. Moreover, despite conducting extensive research, the Tommy Hilfiger team continues to learn more each day about how to best serve the adaptive customer. With a global launch looming on the horizon, there is a lot of work to be done. This case highlights the opportunities and challenges faced with the introduction of a new product line that effectively serves an entirely new and unknown customer while simultaneously starting a movement to provide fashion for all.
Keywords: Marketing And Society; Brands; Fashion; Inclusion; Consumer; Corporate Social Responsibility; Retail; Apparel; Disability; Accessibility; Marketing; Brands and Branding; Marketing Communications; Product Marketing; Social Marketing; Product Launch; Product Positioning; Marketing Strategy; Social Enterprise; Society; Corporate Social Responsibility and Impact; Social Issues; Consumer Behavior; Fashion Industry; Consumer Products Industry; Apparel and Accessories Industry; Retail Industry; United States; North America
Related

PittaRosso (B): Human and Machine Learning

By: Ayelet Israeli
  • November 2021 (Revised December 2021) |
  • Supplement |
  • Faculty Research
This case supplements the "PittaRosso: Artificial Intelligence-Driven Pricing and Promotion" case, and provides major highlights on what happened at the company since the first case.
Keywords: Artificial Intelligence; Pricing; Pricing Algorithm; Pricing Decisions; Pricing Strategy; Pricing Structure; Promotion; Promotions; Online Marketing; Data-driven Decision-making; Data-driven Management; Retail; Retail Analytics; Price; Advertising Campaigns; Data and Data Sets; Analysis; Online Advertising; Budgets and Budgeting; Marketing Strategy; Marketing; Transformation; Decision Making; Retail Industry; Italy
Related

The Value of Professional Ties in B2B Markets

By: Navid Mojir and Sriya Anbil
  • 2021 |
  • Working Paper |
  • Faculty Research
We study how a particular form of social ties (i.e., professional ties proxied by past employment) affect price and profitability in business-to-business (B2B) markets. While most of the work on social ties focuses on information diffusion in business-to-consumer markets, we ask: Do B2B buyers receive higher or lower prices from sellers with whom they have a professional tie? Answering this question is challenging because it is difficult to observe B2B prices, the individual decision-makers (IDMs), and elements of differentiation that drive price variation. We resolve these challenges by leveraging confidential data from the Federal Reserve on the largest market for short-term loans with daily transactions of over $2 trillion, the repo market. In addition, we use financial disclosure laws to unmask IDMs at sellers and use LinkedIn to reveal their ties. We show that a seller IDM who is the buyer's former employee, charges the buyer, on average, 25 basis points more than other buyers with no ties. This extra expense translates into 1.6% of additional revenue for the average seller. The mechanism driving this price increase involves a reliability premium." Sellers with a professional tie to the buyer act more reliably towards the buyer in the face of supply-demand imbalances. Our work suggests professional ties can affect B2B prices beyond observable supply-demand dynamics and provide value for sellers and buyers.
Keywords: Social Ties; Business-to-business Marketing; B2B; Pricing; Decision-making; Financial Markets
Related

Ratings, Reviews, and the Marketing of New Products

By: Itay P. Fainmesser, Dominique Olié Lauga and Elie Ofek
  • November 2021 |
  • Article |
  • Management Science
We study how user-generated content (UGC) about new products impacts a firm's advertising and pricing decisions and the effect on profits and market dynamics. We construct a two-period model where consumers value quality and are heterogeneous in their taste for the new product's positioning and examine three information-transfer structures across generations: no information (benchmark), average rating (AR), and the joint distribution of ratings and taste locations (reviews). First, we show that in the AR case, the firm advertises to a smaller set of consumers and prices higher relative to the other cases. This occurs because the firm has an incentive to use advertising strategically to bump up the first-generation average rating in order to increase second-generation quality perceptions. The firm charges a higher first-period price as consumers who are relatively close to the product's location are advertised to. Second, we find that as more information is transferred across generations, there is a greater likelihood that average ratings will exhibit an increasing pattern over time. This happens because with reviews, second-generation consumers are able to base purchase decisions on the product's positioning in addition to its quality. Interestingly, because of the firm's narrower advertising strategy in the AR case and the richer UGC in the reviews case, average ratings will exhibit a reversal over time: higher in the AR case in the first period but higher in the reviews case in the second period. Third, a firm's expected profits can exhibit a nonmonotonic relationship with respect to the amount of UGC transferred: highest in the AR case if the marginal return on advertising is high (e.g., when advertising is cheap to execute, consumers are insensitive to product fit or consumers greatly value quality) but highest in the reviews case when the return on advertising is low. We then examine a setup whereby second-generation consumers become aware of the product through social interaction with first-generation buyers. We find that advertising and social contagion interact: the firm generally has a greater incentive to advertise as homophily increases, that is, as social interactions occur between consumers who more likely share similar preferences. However, this pattern can reverse with reviews. This paper discusses several robustness checks and model extensions and concludes by highlighting the managerial implications of the results.
Keywords: Online Reviews; Product Ratings; Social Networks; Word Of Mouth; Pricing; User-generated Content; Advertising; Product Marketing; Price; Consumer Behavior; Product Positioning
Related

The Comprehensive Effects of Sales Force Management: A Dynamic Structural Analysis of Selection, Compensation, and Training

By: Doug J. Chung, Byungyeon Kim and Byoung G. Park
  • November 2021 |
  • Article |
  • Management Science
This study provides a comprehensive model of an agent’s behavior in response to multiple sales management instruments, including compensation, recruiting/termination, and training. The model on agents’ behavior takes into account many of the key elements that constitute a realistic sales force setting—allocation of effort, forward-looking behavior, present bias, effectiveness of training, and employee selection and attrition. By understanding how these elements jointly influence agents’ behavior, the study provides guidance on the optimal design of sales management policies. Counterfactual experiments show ways in which alternative compensation schemes, recruiting and termination policies, and sales training opportunities affect the selection and performance of the sales force. A field validation, by comparing counterfactual and actual outcomes under a new policy, attests the accuracy of the model. In addition, the study offers a key methodological contribution by providing formal identification conditions for hyperbolic time preferences. The key to identification is that, under a multi-period nonlinear incentive scheme, an agent’s proximity to a goal affects only future payoffs in non-pecuniary benefit periods, providing exclusion restrictions on the current payoff.
Keywords: Salesforce Management; Recruitment; Selection and Staffing; Compensation and Benefits; Resignation and Termination; Training; Behavior; Analysis
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Marketing Unit
Harvard Business School
Morgan Hall
Soldiers Field
Boston, MA 02163
Marketing@hbs.edu