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The Right Way to Manage Customer Churn for Maximum Profit

by Michael Blanding

Many companies actively manage customer churn but aren't seeking out the best customers to retain, warns Sunil Gupta. Open for comment; 0 Comments.

These Aren't Beach Books, but Managers Should Read Them Anyway

by Sean Silverthorne

As you contemplate your summer reading, consider these recent books from Harvard Business School management scholars that can boost your career and improve on-the-ground management skills. Open for comment; 0 Comments.

If the Key to Business Success Is Focus, Why Does Amazon Work?

Re: Sunil Gupta

Sunil Gupta explores the infiltration of Amazon into dozens of industries including web services, grocery, and movie production. What’s the big plan? Is the company spread too thin? Open for comment; 0 Comments.

Developing a Strategy for the Digital World

by Sean Silverthorne

A new book by Sunil Gupta, "Driving Digital Strategy," explores how traditional businesses can make the leap into the digital age. Open for comment; 0 Comments.

'Likes' Lead to Nothing—and Other Hard-Learned Lessons of Social Media Marketing

by Dina Gerdeman

A decade-and-a-half after the dawn of social media marketing, brands are still learning what works and what doesn't with consumers. Open for comment; 0 Comments.

Building India’s First $100 Billion Company

Re: Sunil Gupta

Startups welcome growth but are often strangled by it. In this podcast, Sunil Gupta discusses how entrepreneur Vijay Shekhar Sharma is meeting this challenge with his mobile payments company Paytm. Open for comment; 0 Comments.

Is E-commerce at Risk in Apple's Security Dispute with the FBI?

Re: Sunil Gupta

Apple invests heavily in making its products secure, but now is being commanded by the FBI to make more investments to undo that work. Sunil Gupta discusses the fallout when business and government collide. Open for comment; 0 Comments.

A Dedication to Creation: India's Ad Man Ranjan Kapur

by Sean Silverthorne

How do you build a brand amid the uncertainties and opportunities of a developing market? Harvard Business School Professor Sunil Gupta shares lessons learned from Ranjan Kapur, an iconic figure in the Indian advertising industry. Open for comment; 0 Comments.

Amazon Prime Day: The Logic Behind a Retailer’s Made-up Holiday

Re: Sunil Gupta

The company is celebrating its 20th birthday with a sale—a shopping event for its 40 million Prime customers. Sunil Gupta explains what's driving the creation of a Black Friday out of nowhere. Open for comment; 0 Comments.

Leadership Lessons From Outer Space

by Carmen Nobel

Beaming in from space via teleconference, International Space Station Commander Terry Virts discusses leadership, technology, and thunderstorms with professors and students at Harvard Business School. Open for comment; 0 Comments.

Digital Initiative Summit: Big Messages, Small Screens, Many Choices

by Carmen Nobel

How do companies profit from the fact that mobile users are more engaged than ever? Panelists discuss "Monetization in a Mobile World." Open for comment; 0 Comments.

Users Love Ello, But What’s the Business Model?

Re: John A. Deighton & Sunil Gupta

Social network upstart Ello is generating terrific buzz among users, but can its ad-free approach compete against Facebook? Professors John Deighton and Sunil Gupta provide insights into what drives social media success. Closed for comment; 0 Comments.

Separating Homophily and Peer Influence with Latent Space

by Joseph P. Davin, Sunil Gupta & Mikołaj Jan Piskorski

People are often more willing to try new things when they see others doing so. This phenomenon, which academics call "social influence", has a profound impact on many aspects of customer decision-making and marketing. For example, social influence affects consumers' willingness to take up new technologies, adopt and use social networks, and ask their physicians for particular prescription medicines. Marketers are thus eager to understand how and to what extent social influence affects people's consumption decisions. To date, however, it has been difficult to pinpoint the effects of social influence, as researchers have struggled to separate it from a simple fact that like-minded people tend to enjoy the same things, per the adage "Birds of a feather flock together." The authors use the field of mobile app adoption in Japan to examine this problem. Japan is an ideal testing ground because approximately 80-85 percent of all page views occur through mobile. In addition, mobile apps are often social in nature, especially those that are linked to a social network platform. The authors devise a new method to assess social influence by controlling for other factors that usually complicate the picture. Overall, the findings show that peer usage accounts for more than a quarter of all mobile app adoptions. The paper also highlights a risk that firms could overestimate social influence by 40 percent on average, even up to 100 percent in certain cases. The authors' method helps overcome this risk. Key concepts include: Social influence is clearly important in customer decision making and marketing. It has a profound impact on the adoption of new technologies, social network usage and adoption, eCommerce, new prescriptions of pharmaceutical drugs, ad effectiveness, group decision making, and customer retention. Using a new approach, this paper documents the impact of peer behavior on the adoption of mobile apps in a social network. Results show that peers drive more than a quarter of all mobile app adoptions. Results also show that firms risk overestimating the impact of social influence by 40% on average, even up to 100% in certain cases. The authors' method helps overcome this risk. Closed for comment; 0 Comments.

A Smarter Way to Reduce Customer Defections

by Dina Gerdeman

Companies can't afford to lose hard-won customers, but in truth some are more important to keep than others. Recent research by Sunil Gupta and Aurélie Lemmens explains how to find them. Closed for comment; 0 Comments.

Managing Churn to Maximize Profits

by Aurélie Lemmens & Sunil Gupta

Customer defection or "churn" is a widespread phenomenon across a variety of industries. As customer acquisition costs continue to rise, managing customer churn has become critically important for the profitability of companies. This paper provides a novel method for determining which customers to target in order to maximize the profit of a retention campaign. The authors developed a binary classification method that uses a gain/loss matrix, which incorporates the gain of targeting and retaining the most valuable churners and the cost of incentives to the targeted customers. Results show that this approach leads to far more profitable retention campaigns than the traditional churn modeling approaches. In addition, the additional profits come at no cost for companies. The implementation of the retention campaign is unchanged, only the composition and size of the target group changes compared to traditional approaches. Key concepts include: The authors describe a new method of customer retention that leads to substantial improvements for companies with no additional implementation cost. Closed for comment; 0 Comments.

Solving the Search vs. Display Advertising Quandary

by Michael Blanding

Internet advertising was supposed to make it easier for marketers to measure the impact of their ad buys. But a basic question remains: Do search ads or do display ads create more customers on the web? Research by Professor Sunil Gupta. Closed for comment; 0 Comments.

Do Display Ads Influence Search? Attribution and Dynamics in Online Advertising

by Pavel Kireyev, Koen Pauwels & Sunil Gupta

The introduction of online metrics such as click through rate (CTR) and cost per acquisition (CPA) by Google and other online advertisers has made it easy for marketing managers to justify their online ad spending in comparison to the budgets used for television and other media. However, these metrics suffer from two fundamental problems: (a) they do not account for attribution, since they give credit to the last click and ignore the impact of other ad formats that may have helped a consumer move down the conversion funnel, and (b) they ignore the dynamics, since they only account for the immediate impact of ads. As firms spend more of their ad dollars on online search and display, managers and researchers alike recognize a need for more careful attribution adjustment that takes into account the journey consumers follow before conversion as well as account for the impact of ads over time. In this paper, the authors use time series models to infer the interaction between search and display ads and also capture their impact over time. Examining data from a bank that used online advertising to acquire new customers for its checking account, the authors found that display ads have a significant impact on search applications, as well as clicks. The majority of this spillover was not instant, but took effect only after two weeks. On the other hand, search advertising did not lead to an increase in display applications. However, search ads showed significant dynamic effects on search applications that made them very cost effective in the long run. Key concepts include: Classic metrics used in practice are highly biased since they do not account for the effects documented in this study. As a result, firms may be making suboptimal budget allocation decisions. Managers should carefully consider the interaction and dynamic effects of search and display advertising. In the study, revised measures of ad effectiveness lead to a very different budget allocation than the one used currently by the firm. Even though the proposed allocation gives credit to display due to its effect on search applications, the search ad budget should be increased by 36% from its current level due to its strong dynamic effects. The display ad budget should be decreased by 31%. Closed for comment; 0 Comments.

Social Network Marketing: What Works?

by Sarah Jane Gilbert

Purchase decisions are influenced differently in social networks than in the brick-and-mortar world, says Harvard Business School professor Sunil Gupta. The key: Marketers should tap into the networking aspect of sites such as Facebook. Key concepts include: Some social network users are influenced by the purchases of their friends. Of these users, 40 percent show a strong "keeping up with the Joneses" behavior, increasing sales by 5 percent. "High-status" users are more likely to not purchase something that others have bought. On social networks, viral campaigns may work better than advertising. Closed for comment; 0 Comments.

Do Friends Influence Purchases in a Social Network?

by Raghuram Iyengar, Sangman Han & Sunil Gupta

In spite of the cultural and social revolution in the rise of social networking sites such as Facebook and MySpace (and in South Korea, Cyworld), the business viability of these sites remains in question. While many sites are attempting to follow Google and generate revenues from advertising, will advertising be effective? If friends influence the purchases of a user in a social network, it could potentially be a significant source of revenue for the sites and their corporate sponsors. Using a unique data set from Cyworld, this study empirically assesses if friends indeed influence purchases. The answer: It depends. Findings are relevant for social networking sites and large advertisers. Key concepts include: There is a significant and positive impact of friends' purchases on the purchase probability of a user. However, there are significant differences across users. Specifically, this social effect is zero for 48 percent of the users, negative for 12 percent of the users, and positive for 40 percent of the users. "Moderately connected" users exhibit "keeping up with the Joneses" behavior. On average, this social influence translates into a 5 percent increase in revenues. Highly connected users tend to reduce their purchases of items when they see their friends buying them. This negative social effect reduces the revenue for this group by more than 14 percent. This finding is consistent with the typical fashion cycle wherein opinion leaders or the elite in the fashion industry tend to abandon one type of fashion and adopt the next in order to differentiate themselves from the masses. Closed for comment; 0 Comments.

Solving the Marketing Resources Allocation Puzzle

by Sean Silverthorne

Television spots, word-of-mouth, viral ads. Marketing managers have more options at their disposal than ever before. But how to decide? Harvard Business School professors Sunil Gupta and Thomas Steenburgh offer a way for managers to conceptualize the most effective approach. Key concepts include: Managers are being held to higher standards to justify customer investments, and need to develop greater analytical skill. Companies are able to create sustainable competitive advantages by developing a deep understanding of what their customers want and how they behave. Marketing allocation problems need to be addressed in two steps: conduct demand analysis to predict how different marketing actions will affect consumer behavior, and use the economic-impact analysis to determine the best actions for the firm. Closed for comment; 0 Comments.