RESEARCH

Cashback is Cash Forward: Delaying a Discount to Entice Future Spending
Vana, P., Lambrecht, A., & Bertini, M. (2018). Journal of Marketing Research, 55(6), 852-868.​

The authors examine purchase behavior in the context of cashback shopping—a novel form of price promotion online in which consumers initiate transactions at the website of a cashback company and, after a significant delay, receive the savings promised to them. Specifically, they analyze panel data from a large cashback company and show that, independent of the predictable effect of cashback offers on initial demand, cashback payments (1) increase the probability that consumers will make an additional purchase via the website of the cashback company and (2) increase the size of that purchase. These effects pass several robustness checks and are also meaningful: At average values in the data, an additional $1.00 in cashback payment increases the likelihood of a future transaction by .02% and spending by $.32—figures that represent 10.03% of the overall impact of a given promotion. Moreover, the authors find that consumers are more likely to spend the money returned to them at generalist retailers, such as department stores, than at other retailers. They consider three explanations for these findings; the leading hypothesis is that consumers fail to treat money as a fungible resource. They also discuss implications for cashback companies and retailers.

The Effect of Individual Online Reviews on Purchase Likelihood
Vana, P., & Lambrecht, A. (2020). Under revision at Marketing Science.​

Online product reviews constitute a powerful source of information for consumers. Past research has studied the effect of aggregate measures of reviews (such as, average product rating and number of reviews) on consumer behaviour. In this study, we investigate how individual reviews displayed on a product webpage affect consumers’ purchase likelihood. Identifying this effect is challenging because retailers are free to select which reviews to display on the product page and in what order, making the display of reviews in particular positions potentially endogenous. We address this challenge by utilizing an empirical context where the retailer displays reviews by recency and exploit the variation in review positions generated as newer reviews are added on top of older ones. We find that individual reviews have a strong effect on consumer purchase decisions. These effects are particularly pronounced when individual reviews contrast with the aggregate information that is instantly available on the product page or help consumers resolve uncertainty about the product.

Do Law Enforcement Busts of Darknet Markets Deter Criminal Activity in Other Darknet Markets?
Vana, P., & Pachigolla, P. (2020). Submitted at Management Science.​

A prominent way in which the sale of illegal goods such as drugs, weapons and counterfeit occurs online is through Darknet markets, which are platforms where buyers and vendors transact on the Dark Web. The Dark Web offers a high degree of anonymity and security to its users through its encryption technology and the use of cryptocurrency. Law enforcement agencies have responded to Darknet markets by conducting secret bust operations where they shut down the operation of these markets. In this research, we investigate if bust operations deter the activity of buyers and vendors in other Darknet markets that are not subject to the bust. We leverage a joint bust operation by the FBI and Interpol conducted in November 2014 where Silk Road 2.0, a large Darknet market was shut down. Our results indicate that following the bust, prices dropped and the number of transactions per month per vendor increased in two other large Darknet markets that were not bust. Consequently, the bust did not deter criminal activity in these markets and it was cheaper to buy illegal products. We explore the mechanism for the price drop and find that vendors decreased prices to attract buyers wary of shopping in Darknet markets due to increased risk of getting caught after the bust. We offer recommendations for law enforcement agencies on the sequencing of conducting busts as well as the characteristics of markets that could be bust so that the unintended consequences in other markets could be minimal.

WORK IN PROGRESS

Modelling the Role of Uncertainty in Cause-Based Crowdfunding: A Multiple Discrete Continuous Choice Approach
Vana, P., & Lambrecht, A. (2020). Preparing for submission to Marketing Science

Crowdfunding has become an increasingly popular way for both entrepreneurs and charities to raise funds. For these organizations, a major challenge is to raise their target amount within the time allocated to them by the crowdfunding website. Likewise, in their decision whether or not to contribute to a particular project, donors are concerned whether or not a given project will eventually raise its target amount. This is a particular worry on ‘All or Nothing’ (AoN) cause-based crowdfunding website where all funds raised are returned to the donors as credit on the website (not cash) to be transferred to other projects if a project does not raise its target amount. In this paper, we ask how the uncertainty of an individual donor over whether a project will raise its funds contributes to their decision whether or not and how much to contribute. We develop a model of donors’ contributions to projects advertised on an AoN cause-based crowdfunding website. We account for a donor’s uncertainty about whether a project will reach its target and the effect of this uncertainty on their contribution. We estimate our model on data obtained from the US educational crowdfunding website Donors Choose. Our results demonstrate that donors’ evaluation of uncertainty of project completion is an important driver of whether and how much a donor contributes to a project. We find that not accounting for uncertainty leads to biased estimates of donors’ preferences for projects that have reached either a high or a low level of completion.

Engaging Customers with Engaging Emails
Vana, P., Pachigolla, P. & Neslin, S. (2020). 

Email remains one of the key digital channels through which marketers can reach and engage with customers. The extant research in marketing has focused on such questions as how email promotions, the subject line of the email, or the number of times an email was sent to a customer affect customer behavior. In this research we focus on how the content within the body of the email affects customer engagement. In particular, we investigate how the text content in the body of the email as well as the images in the email affect customers’ likelihood to open an email as well as click on links present in its body. We use data from a large food company that routinely sends emails to its subscribers. To represent content, we use the natural language processing technique of word embeddings and cluster the words in the body of 28 emails into 12 topics. We capture the image information present in the email through metrics related to color, including brightness, hue, and saturation. We estimate Tobit models to model several outcomes including the daily email opens, clicks, page views, time spent on the page as well as social shares as a function of the text and image variables. Based on our results, we generate several suggestions for text and images to be used in the body of the email that would increase customer engagement. 

Quality Competition in the Fast Food Chain Industry: Evidence from Online Reviews
Vana, P., Hong, S. & Hovy, D. (2020). 

This research uses online restaurant reviews from Yelp to explore how restaurants compete in a domain of product and service quality. By focusing on the fast food restaurants, which offer a similar menu of products (e.g., hamburgers) with varying product quality, we document how fast food restaurants adjust their service quality in the presence of higher product quality competitors (e.g., In-N-Out Burger) in the local market. In the presence of distinct tiers of (perceived) food quality in the market, an increase in the number of high-quality restaurants could lead competing restaurants to improve their product offerings. For store managers of a fast food chain, however, such an action of improvement may be limited as their menu and the selection of food ingredients are largely determined and fixed at the chain level. In this context, an interesting question is whether and how each local restaurant competes against high-quality restaurants whose food quality is perceived higher by customers. In particular, we explore if they react to competitors with higher food quality by providing customers with better service quality. For our empirical analysis, we use online consumer review data from Yelp. We first document that restaurants exhibit higher star-ratings in the presence of high-quality competitors in their local markets, applying ATE estimation via machine learning augmented algorithms. Further, we analyse review text data. Word embeddings and clustering words to groups of similar semantic meaning reveal some significant difference in review contents depending on the presence of high-quality competitors. For restaurants competing with high-quality competitors, customers left more comments on positive service (e.g., ‘great customer service’ and ‘friendly staff’) and fewer comments on negative service (e.g., ‘rude’, ‘unprofessional’).

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© 2020 by Prasad Vana.

    Hanover, NH

 

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