In this collection from our archives, Harvard Business School faculty discuss the latest research on online marketing techniques, including consumer reviews, video ads, loyalty programs, and coupon offerings.
Questions to be answered:
- What's the strategy for managing consumer reviews on my site?
- Do people watch online video ads?.
- How can I get more out of my customer loyalty campaign?
- Are online coupon programs like Groupon effective?
What's the strategy for managing consumer reviews on my site?
In a new study, Assistant Professor Michael Luca shows just how much restaurant reviews on Yelp affect companies' bottom lines. The more difficult question: Are these ratings reliable as a measure of product quality? Key concepts include:
- Each ratings star added on a Yelp restaurant review translated to anywhere from a 5-percent to 9-percent effect on revenues.
- Local, independent restaurants were the most affected by reviews, probably because diners have little information about them before the reviews were posted.
- Online marketplaces must be concerned with not just reviews but all the factors that create trust with their users.
Do people watch online video ads?
The mere fact that an online video advertisement reaches a viewer's computer screen does not guarantee that the ad actually reaches the viewer. New experimental research by Thales S. Teixeira looks at how advertisers can effectively capture and keep viewers' attention by evoking certain emotional responses.Key concepts include:
- In a recent experiment, participants watched a series of ads in a computer lab setting. The researchers parsed the viewers' emotional response with the help of eye-tracking technology combined with facial expression analysis software.
- Evoking surprise proved to be the most effective way of capturing attention, while evoking joy was the most effective way of retaining it. This indicates that advertisers should include a surprise at the beginning of an online commercial.
- Ads retained attention better if they delivered several snippets of joy in succession than if they delivered a sustained period of joy.
How can I get more out of my customer loyalty campaign?
Thanks to ever-improving technology, customer loyalty programs are proving extremely popular among retailers—but merchants are not getting all they should out of them. The reason? Professor José Alvarez says retailers need to see customers as partners, not transactions. Key concepts include:
- Most retailers are at a very basic level in using loyalty programs, and many customers see the programs as punitive.
- Successful retailers connect with customers via loyalty programs at three levels starting with an introduction, followed by a retailer-initiated communication, and finally with customer- or retailer-initiated feedback loops.
- Retailers should ask themselves, How do I create a partnership with the consumer?
- Data collected from these programs can help merchants make smarter decisions on everything from where to open a new store to pulling the plug on a fading brand.
Are online coupon programs like Groupon effective?
For retailers offering deals through the wildly popular online start-up Groupon, does the one-day publicity compensate for the deep hit to profit margins? A new working paper, "To Groupon or Not to Groupon," sets out to help small businesses decide. Harvard Business School professor Benjamin G. Edelman discusses the paper's findings. Key concepts include:
- Discount vouchers provide price discrimination, letting merchants attract consumers who would not ordinarily patronize their business without a major price incentive.
- These vouchers also benefit merchants through advertising, simply by informing consumers of a merchant's existence via e-mail.
- For some merchants, the benefits of offering discount vouchers are sharply reduced if individual customers buy multiple vouchers.
- As a marketing tool, discount vouchers are likely to be most effective for businesses that are relatively unknown and have low marginal costs.