Should you play hardball when the stakes get high?

From: Blog

If you’re planning on taking part in any high-stakes negotiations, pay special attention to the results of a new study by Chicago Booth’s Richard Thaler. He and his team wondered how people’s dickering strategies might change when the stakes get big—really big. It’s a hard question to test in the lab, where payout is typically low, so they looked to the British TV game show Divided to provide them with the perfect setup.

In the show, players jointly answer trivia questions to create a jackpot, which can range up to £225,000. Once the jackpot is determined, the players have to decide who should get what portion—the trick is that the pot is always divided into three unequal portions (for example, 10%, 30%, and 60%), and the players have to talk (or argue) among themselves to reach a verdict. But with each second that ticks by, 1% of the jackpot disappears. At the end of the 100–second negotiating time, there’s nothing left. Deciding quickly on how to divvy up the money is, obviously, key. And it’s apparently easier said than done.

The good news is that the team found that most people were fairly accurate at gauging “moral property rights”—that is, who’s entitled to higher or lower shares, based on how much a person contributed to the trivia portion. Some researchers had argued earlier that this input-output concern, often dubbed equity theory, doesn’t survive when the stakes get high—perhaps because greed or some other motivation takes over. But Thaler and colleagues found that in fact players did continue to value fairness, even at very high stakes, which, they say, “refutes the commonly held view that fairness concerns are unimportant when monetary incentives are sufficiently large.”

The problem was that people often gravitated to a particular negotiation strategy that wasn’t so effective: Hardball. The refusal to budge from one’s initial claim to the largest pot, for example, ended up costing everyone money—and the more one refused to budge, the more the spoils were wasted. Though hardball players might walk away with more money compared to others, everyone’s shares generally plummeted in the presence of one or more hardball players. “Announcing a hardball strategy turns out not to be beneficial,” the authors conclude.

The relevance of the study? It definitely tells us something about human nature: Namely, that even though we might be pretty good at tracking relative contributions, refusing to budge can tear that all down. But it’s also applicable to realms like politics, where long-standing arguments over land have led to serious strife between nations. And in the business setting, the advice might be to pick your battles wisely, since playing hardball can deteriorate negotiations—and relationships.

This is what happens when everyone plays hardball: 

This is what happens when players—eventually—strike a deal: 

This is what happens when things really end all warm and fuzzy: 

—Alice G. Walton

Cat:Business,Sub:Behavioral Science,



Online data targeting offline consumers

From: Blog

Billboards, flash mobs, and road shows making tech-savvy comeback

In a recent post I discussed the increasingly sophisticated ways in which marketers are using online data to target consumers. Doing so allows firms to use marketing dollars more efficiently. At the same time, there have been a number of innovations in offline marketing that have become commonplace, as well. Inspired by the capabilities of online marketing, some of these are instances where the "targetability” of online marketing is translated into the offline world. Others are aimed largely at generating buzz, and yet others are traditional methods being complemented by online features. In addition, there have been some offline methods not seen in several years making a comeback.

The first of these offline marketing methods is billboards. Gone are the days when billboards were the forlorn-looking rectangles on the sides of highways, braving the elements. Today’s billboards are more like the ones from the movie Minority Report. Who can forget the various billboards in the mall that called out to John Anderton (the character played by Tom Cruise)? "The road you’re on, John Anderton, is the one less-traveled,” went a Lexus ad. After the character changed his identity following a gruesome eyeball transplant, he heard, “Hello Mr. Yakamoto, and welcome back to the Gap. How did those tank tops work out for you?”

Essentially, digital technology allows firms to change the content of a billboard to reflect the type of potential customer walking by (young, old, male, female, etc.), the time of day (morning or night), and the location (a baseball stadium or a movie theater, for example). This flexibility also allows marketers to respond quickly to world events as they occur; as reported by the Economist, when Usain Bolt won the 100-metre race in the summer Olympics, the cidermaker Strongbow hoisted a celebratory billboard within 15 minutes. The same idea is being embraced by virtual grocery stores that allow consumers to shop for their everyday needs while waiting for their trains on subway platforms (see a video on Peapod’s mobile app). More recently, cities such as Chicago have been entering into long-term contracts allowing billboard companies to install digital billboards along state highways and interstates (see article “20-Year Deal for Digital Billboards on Expressways Gets City Approval” from the Chicago Sun-Times).

In the movie Friends with Benefits, Dylan (the character played by Justin Timberlake) professes his love to Jamie (Mila Kunis) with Semisonic’s "Closing Time" playing in the background. A critical part of the scene, however, shows a flash mob aimed at replicating the sense of frenzy that Dylan felt when Jamie convinces him to quit his job in San Francisco and move to New York. While flash mobs originally began as shows of entertainment and self-expression, and as ways to poke fun at conformity, they have morphed into marketing vehicles, as well, with organizations like Dance Mob Nation organizing flash events for corporate clients. Filed by marketers under the broad category of “customer engagement,” the typical objective of this marketing activity is to leverage a focused event into something more widespread. Marketers want the positive mood, high energy, and upbeat atmosphere to transfer to the brand. They also want people surrounding the flash mob and watching it to recognize the brand of a new company or product, and they’re hoping that the resulting buzz transfers to others via YouTube and Facebook posts and offline conversations (see a Nike-sponsored flash mob here).

A third development in “niche” offline efforts has been the resurgence of the road show. While such road shows have been popular in the past and are still being used in developing countries (see a Wall Street Journal article for a description of how traveling “infomercials” work in India), the advent of mass media and its reach into remote areas thanks to cable and satellite TV has rendered the road show an expensive option for marketers. Yet the need for consumer engagement, and for the two-way communication between the firm and the customer that has been facilitated by online social media, has once again rejuvenated the roadshow as an offline means to this end. One could still argue that the costs associated with such an enterprise probably still outweigh the benefits. Firms can now amplify the limited reach of road shows by posting videos associated with these road shows online, thereby engaging a larger set of consumers with their brands. CBS is running a CBS Buzz Tour to promote the network and its programming. As part of the tour, the company plans to give away merchandise and facilitate meet-and-greets with stars of its shows (see a New York Times article on road shows).

Digital billboards, flash mobs, and road shows are all vehicles for brands’ “experiential” marketing – meant to connect with consumers in a more personal and personalized manner. Such efforts are not without pitfalls. Digital billboards may not be appropriately targeted, people could find the flashmob performances disruptive and tasteless, and the roadshows may not attract any interest. Before embarking on these ventures, firms need to understand how responsive customers are to these efforts and then weigh the benefits of such actions against their costs, given the overall marketing budget allocation decision. Nevertheless, there might be benefits to simply experimenting with some of these approaches, to better understand their potential impact on current and future customers. As Sean (the character played by Ryan Guzman) notes in Step Up: Revolution, a flashmob-inspired movie, “Sometimes it’s good to break the rules.”

—Pradeep Chintagunta, the Joseph T. and Bernice S. Lewis Distinguished Service Professor of Marketing

This article originally appeared on the
Kilts Center Faculty Blog.

TAGS: Marketing, Pradeep Chintagunta, billboards, flash mobs, road shows

Cat:Business, Sub:Marketing,