These are some of my current projects. Comments and suggestions are welcome.
The differential effects of time and usage on the brand premiums of automobiles
co-authored with Eyal Biyalogorsky and Amir Heiman, 2020.
We investigate how status and functional benefits of cars’ brands lose value over time. Theoretically, we show that brands with a higher status, or that appeal to status-conscious consumers, exhibit steeper price decline over time. Empirically, we take advantage of the phenomenon of twin cars – pairs of car models that are nearly identical from a structural and mechanical standpoint, but that are sold under differing brand names – to disentangle the effects of physical wear and tear, which should impact both the premium brand and the corresponding standard brand similarly; and time-related price decline, which should affect each brand differently. The main result is that a premium car’s price declines much faster than that of the corresponding standard car (controlling for physical condition, mileage, and initial price). This result suggests that status declines faster than do functional attributes, and status seekers tend to replace their cars earlier.
Growth, popularity, and the long tail: Evidence from digital markets
co-authored with Gil Appel and Barak Libai, 2019.
The fact that the adoption rate of successful innovations is bell-shaped (cumulative S-shaped) is considered the basis for most insights and analyses of new product marketing. However, these insights have been largely based on the growth of popular durables and services. In contrast, contemporary digitized markets are largely comprised of a long tail of low-popularity products for which we have little evidence on which to base the expected shape of growth. We study the growth of close to 100,000 digital products in two markets; with product size ranging from 50 downloads, to hundreds of millions. We find that across various product categories, while indeed bell-shaped growth is the clear majority among the very popular products, for lower-popularity products, it becomes a minority, with growth dominated by an exponential-like decline (“slide”), or a combination of the first two, i.e., a slide and a bell (S&B). We examine the possible explanations for this phenomenon in the markets we analyze, and discuss some of the wide-ranging implications of our understanding of new product marketing in long-tail markets.
Customer transferal: Satiation and lifetime value for fast-moving hedonic experiences
co-authored with Michael Haenlein and Barak Libai, 2019.
Fast-Moving Hedonic Experiences (FMHEs) is a large market that includes products such as music streaming, mobile games, and YouTube videos. FMHE markets suffer from consumer satiation, where users enjoy the experience less with time. This results in temporal declining usage and reduced customer profitability. Behavioral research has suggested ways to affect the individual’s perception in order to mitigate the sense of satiation. Here we propose an alternative solution, which is becoming notable in digital markets such as mobile games: Instead of changing the customers, exchanging them. Using what is labeled in the industry “cross promotion” activities, customers are de-facto encouraged to churn the current brand toward an alternative destination. For internal cross promotion, the destination is to another product in the brand portfolio, where the customer is not yet satiated. In the case of external cross promotion, firms are aided by a platform that mediates among various brands. Using a customer lifetime value framework, we explore when, for whom, and how it is profitable to transfer a brand’s customers elsewhere.