Photo of Dr. Xueming Luo
Dr. Xueming Luo

There’s a crucial strategy in online advertising that could revolutionize the way marketing agencies target online consumers, according to Fox School of Business researcher.

Dr. Xueming Luo studied how the strategy of competitor-poaching in online advertising influences consumer behavior. His most-recent publication on the topic was named Best Track Paper in Social Media & Digital Marketing at the 2015 American Marketing Association Winter Educator Conference Feb. 14 in San Antonio, Texas. It also received the conference’s honorable-mention distinction among all submissions.

Competitor-poaching in online advertising is responsible for why consumers can search the term “iPhone” using Google’s search engine, and corresponding ads for the Samsung Galaxy, Apple’s closest competitor, will appear, said Luo, Professor of Marketing, Strategy, and Management Information Systems. In his research, Luo uncovered that this strategy results in “clicks wasted,” as consumers glance over the competitor’s ads while remaining loyal to their initial preferences.

“It’s a double-edged sword,” Luo said. “You can increase the impression of the competitor’s brand, but you cannot get consumers to purchase the poaching brand.”

This effect is partly seen because online consumers often develop specific brand loyalties by word of mouth or from reviews that sites like Amazon and Google provide, he said. Firms, Luo found, seek to continually build brand equity and increase positive socialization around their products in order to thwart attempts at online poaching.

“Online poaching impresses non-loyal customers, but fails to get more sales conversion from customers who have high loyalty to the brand under attack” Luo said.

Asking a consumer why they want or prefer a certain product or brand, and how price influences their decisions, can help clarify what incentivizes shoppers, Luo said. Marketing agencies should then target their competitor’s keywords with advertisements that include discounts, he suggested, to capture consumer curiosity.

“To switch consumers from a brand, you need a deeper incentive, such as a 30-percent discount,” Luo said. “If you do this the wrong way, you’ll waste your money. That method can only engender clicks, but not sales conversion.”

This research, Luo said, is a part of his greater interest in how online marketing interweaves big-data analytics, mobile strategies, and consumer insights. As founder of the Global Center on Big Data in Mobile Analytics, which is housed at the Fox School, Luo is interested in investigating how big data gleaned from search engines reveal varying patterns in the evolving sphere of online ads and mobile targeting.

“This is a great way to outsmart competitors and connect customers for superior company performance,” Luo said.

A PhD student from Temple University’s Fox School of Business proved she can stand out in a crowd. Michelle Andrews received the Best Conference Paper Award at the 2014 American Marketing Association Summer Educator Conference Aug. 2 in San Francisco.

Andrews’ paper, titled, “Using Mobile Technology to Crowdsense,” employed crowdedness as an environmental factor that affects how people respond to mobile advertisements. The study for her research paper, which was co-authored by Xueming Luo, a Professor of Marketing in the Fox School’s Marketing and Supply Chain Management department, was conducted within subway trains.

In the context of a subway train, the measurement of crowdedness – a sometimes-abstract entity in research, Andrews remarks – becomes more precise.

“The reason we chose the subway train context was that it was unique,” said Andrews, who will earn her PhD in Marketing from the Fox School in Spring 2015. “During a subway commute, you’re surrounded by others in a public environment with little to do.”

Andrews, who signed a non-disclosure agreement regarding her research paper, could not specify which specific subway system she used for her research paper, but noted it was located in southeastern China, where, as Andrews pointed out, subways are mobile-equipped. That enabled Andrews and her co-authors to determine the number of mobile users within the specific dimensions of a subway train.

“We predicted crowdedness would increase immersion into mobile devices,” she explained. “We found that in congested trains, purchase rates were significantly higher than in uncongested ones.”

Andrews’ winning paper was co-authored by Zheng Fang, of China’s Sichuan University and Anindya Ghose, of New York University.

Also at the conference, Andrews’ research papers earned two further distinctions. The same paper that received the conference’s overall Best Paper Award also garnered the Best Track Paper Award in the Digital Marketing & Social Media track. Another of her research papers, titled “The Effectiveness of Cause Marketing” received the Best Track Paper Award in the Social Responsibility & Sustainability track.

“Michelle is so hard-working and innovative in her thinking for what’s coming next for the Marketing discipline, and the Best Conference Paper Award recognizes her for that,” Dr. Luo said. “Hopefully, this significant award will be influential, not only for our school but also for marketing on the whole, in demonstrating how to connect with consumers anytime, anywhere.”

The longer CEOs stay in the power – and a new study suggests most of them do, exceeding the optimal tenure length by about three years – the more likely chief executives are to limit outside sources of market and customer information, ultimately hurting firm performance.

Research titled, How does CEO tenure matter? The mediating role of firm-employee and firm-customer relationships, examines why a longer CEO tenure may not always produce positive results for firm performance.

The researchers — Charles Gilliland Professor of Marketing Xueming Luo and PhD candidate Michelle Andrews of the Fox School of Business at Temple University and PhD candidate Vamsi K. Kanuri of Robert J. Trulaske, Sr. College of Business at the University of Missouri — explored two primary stakeholders, employees and customers, who are influenced by CEO tenure.

From studying 365 U.S. companies over a decade (2000-10), measuring CEO tenure, and calculating the strength of both firm-employee and firm-customer relationships, researchers found that the longer a CEO serves, the stronger the firm-employee relationship becomes. However, an extended period with the same CEO results in a weakened firm-customer relationship over time.

According to the study, the average CEO holds office for 7.6 years, but the optimal tenure length is 4.8 years.

“As CEOs accumulate knowledge and become entrenched, they rely more on their internal networks – employees – for information, growing less attuned to market conditions and customers,” Luo said. “And because these longer-tenured CEOs have more invested in the firm, they favor avoiding losses over pursuing gains. Their attachment to the status quo makes them less responsive to vacillating consumer preferences.”

There are two types of learning styles CEOs adopt during their tenure: explorative and exploitive learning via external and internal information sources.

In the early stages of tenure, CEOs demonstrate a desire for a diverse flow of information and engage in receiving information from both external and internal company sources. Therefore, firm relationship between employees and customers is positive.

However, as CEOs become more knowledgeable and serve for a longer period, they begin to focus on the flow of information from internal sources versus what comes from outside markets. This is in large part due to longer-tenured CEOs becoming more risk averse because of all they have invested in their firm. This leads chief executives to resist challenging the status quo, further alienating them from market environments and weakening customer relations. Ultimately, this hurts firm performance.

“We’re not saying, ‘Fire your CEOs after 4.8 years,’” Andrews said in regard to the weakened relationship with customers after what researchers found to be the optimal tenure length. “But if company boards restructure CEO packages to cater to consumers more, you may find yourself with better results.”

If boards develop incentive plans for longer-tenured CEOs to encourage more reliance on external market trends and dynamics, customer relations – and therefore firm performance – could be enhanced.

“After all, you’re only a firm if you have customers,” Andrews said. “Without customers, no firm can prosper – or even survive.”

The full study appears online in the Strategic Management Journal.

—Alexis Wright-Whitley