Browsing by Author "van Heerde HJ"

Now showing 1 - 3 of 3
  • Thumbnail Image
    Item
    Fanning the flames? How media coverage of a price war affects retailers, consumers and investors
    (American Marketing Association, 1/10/2015) van Heerde HJ; Gijsbrechts E; Pauwels K
    This article explores how media coverage of a price war affects customer, retailer, and investor reactions over time. Using data covering a Dutch supermarket price war (2003-2005), the authors find that price reductions, especially deep reductions, trigger media coverage of the price conflict. This sets off a chain of reactions. Press messages have a significant effect on market share and abnormal stock returns, beyond retailers' own price and advertising. Importantly, this study uncovers striking asymmetries regarding the kind of coverage to which stakeholders react: whereas consumers only respond to the tone of price-related press coverage, retailers and investors only react to its quantity. Next, media coverage feeds back into the retailers' pricing actions: more media coverage triggers new price cuts in addition to those dictated by competitive reactions. As such, media coverage triggers a deeper spiral of price cuts, intensifying the competitive price battle. However, as the price war progresses, media coverage becomes less frequent and less favorable, which decelerates the downward price spiral.
  • Thumbnail Image
    Item
    Losses loom longer than gains: Modeling the impact of service crises on perceived service quality over time
    (American Marketing Association, 2015-10) Gijsenberg MJ; van Heerde HJ; Verhoef PC
    Service providers sometimes face mass service failures. These problems occur across service industries, ranging from severe Internet outages to major delays for airlines or trains. The literature has not yet addressed the following key question: How do service crises affect perceived service quality (PSQ) over time? To answer this question, the authors introduce a Double-Asymmetric Structural Vector Autoregressive model. It captures not only the short- and long-term effects of objective service performance on PSQ but also the differential effects of service crises versus service restoration. The authors analyze a unique data set from a major European railway company, spanning seven years of monthly observations. During this period, severe winter weather caused dramatic service crises. The authors find that performance losses loom larger than gains in the short run and also have permanent negative effects on PSQ in the long run. Consequently, a crisis followed by a restoration will result in a net negative long-term effect on PSQ. The impact of a crisis also depends on the prior trend in objective service performance.
  • Thumbnail Image
    Item
    The challenge of retaining customers acquired by free trials
    (American Marketing Association, 1/04/2015) Datta H; Foubert B; van Heerde HJ
    Many service firms acquire customers by offering free-trial promotions. However, a crucial challenge is to retain the customers acquired with these free trials. To address this challenge, firms need to understand how free-trial customers differ from regular customers in terms of their decisions to retain the service. This article conceptualizes how marketing communication and usage behavior drive customers' retention decisions and develops hypotheses about the impact of free-trial acquisition on this process. To test the hypotheses, the authors model a customer's retention and usage decisions, distinguishing usage of a flat-rate service and usage of a pay-per-use service. The model allows for unobserved heterogeneity and corrects for selection effects and endogeneity. Using household panel data from a digital television service, the authors find systematic behavioral differences that cause the average customer lifetime value of free-trial customers to be 59% lower than that of regular customers. However, free-trial customers are more responsive to marketing communication and usage rates, which offers opportunities to target marketing efforts and enhance retention rates, customer lifetime value, and customer equity.