Connect with us

BizNews

Crowdsourcing contests: Understanding what brings high rewards, low risk

Crowdsourcing contests that limit the entries to professional creators but open the judging to crowd voting have the highest returns and lowest volatility in stock prices.

Published

on

During Frito-Lay’s first “Crash the Super Bowl” contest in 2006, thousands of participants submitted 30-second videos promoting Doritos. Entries were winnowed down to five finalists, and a public vote selected the winning commercial, which aired during the most watched American television broadcast of the year.

The ad boosted Doritos sales and pulled in awards, sparking other big brands, like Nestlé, BMW and Fisher-Price, to launch their own crowdsourcing contests.

“Crowdsourcing has become more prevalent over the last decade. It can generate innovative ideas and solutions and engage consumers. The contest itself serves as a promotional event that draws a lot of attention to the product or brand,” says Hui Feng, associate professor of marketing at Iowa State University.

Feng studies how certain marketing strategies affect a company’s financial outcomes, including stock prices. In a study, Feng and her co-authors show that crowdsourcing contests are associated with high returns — but also high risks. The team suggests ways companies can strike the right balance and put investors at ease.

Investors in big public firms are forward looking. So, the stock price will reflect how investors view a crowdsourcing contest regarding future cash flow, says Feng.

To collect their data, researchers analyzed more than 500 “marketing ideation crowdsourcing contests” held from 2006 to 2019. They focused specifically on contests that created either promotional content or product development, such as Ben & Jerry’s Do Us a Flavor and Google’s new power inverter design challenge. The researchers also looked at whether contests were open to the general public or professionals, judged by an expert panel or public vote and had a clearly stated purpose and narrow scope.

Feng and her co-authors then collected each firm’s accounting and stock-returns data two days before and after the official announcement of the crowdsourcing contest. If other significant events, like large layoffs or mergers, occurred during this window, the researchers removed the contest from their sample. They didn’t want other factors that could influence stock prices to muddy their dataset.

Big takeaway

The researchers found crowdsourcing contests that limit the entries to professional creators but open the judging to crowd voting have the highest returns and lowest volatility in stock prices.

“When a contest is open everyone to participate,  a lot of submissions are going to be low quality, and  bad or problematic entries can sometimes go viral because people think they’re funny and vote for them to win. The firm can lose control of the content,” explains Feng.

Restricting the judging to a panel of experts may help reign it in, but it also reduces transparency. The researchers say letting a crowd vote for professionally-created content strikes the right balance.

“Focusing contests on professionals allows for high-quality ideas to emerge that are more consistent with the firm’s objectives. In addition, consumers enjoy voting on contest submissions,” Feng adds.

Other findings

The researchers found the most significant stock return increase occurs on the event announcement day.

Crowdsourcing contests experience higher returns if the purpose is clearly defined and the scope is narrow and specific, rather than broad and general. For example, asking for a 30-second video that will build awareness and excitement around a specific product ensures more focused entries in the submission pool. Asking for a video showing how brand can improve education, health care, economic development and the environment does not, says Feng.

The researchers say new product development crowdsourcing contests also carry higher risks than promotional contests.

“In general, new product development is difficult. There’s a lot of uncertainty about whether it will be commercially successful, if there will be enough demand for it, and it could signal a new direction for the company. Promotions generally take less time and are a less risky investment,” says Feng.

Another finding is that large, well-known brands benefit more from crowdsourcing than small or niche brands because they can engage a wider audience and receive more ideas and content.

Feng emphasizes crowdsourcing is a complement to a firm’s own marketing capability, not a substitute. Having a strong marketing team is important for investors to be confident about contests, which need to be designed, promoted and managed.

The black box and ongoing research

The researchers’ latest study shows the effects of crowdsourcing, but Feng says the stock price reaction is still partially “a black box.” She and her co-authors are interested in better understanding why investors react a certain way. Future research could include additional interviews and surveys with investors, along with more experiments and analysis of contest web traffic.

Feng co-authored the paper with Zixia Cao, University of Colorado Denver, and Mike Wiles, Arizona State University.

BizNews

In-aisle store displays might crowd shoppers and reduce overall sales

Retailers might seek strategies to boost product exposure without also increasing crowding – especially for cart shoppers who may experience greater crowding effects – and that excessive use of in-aisle fixtures will likely dampen sales at the aggregate level rather than increasing it. 

Published

on

In a study involving a real-world grocery store, in-aisle displays meant to boost product visibility were in fact associated with reduced sales and purchase-related behaviors, with results amplified for shopping cart users.

Mathias Streicher of Austria’s Department of Management and Marketing presents these findings in the open-access journal PLOS One.

Retailers often place extra product displays directly in aisles in an effort to boost visibility and enhance sales. However, in-aisle displays could increase spatial crowding, which occurs when people feel restricted in their freedom of movement and has been linked with purchase-avoidance tendencies. To help clarify if in-aisle displays result in more purchases, Streicher conducted several experiments with a partnering grocery store.

First, they tracked weekly sales for an aisle containing household, baby and pet staples over a six-week period during which five product-display stands were placed mid-aisle. The stands were then removed for six weeks. Comparison of sales data showed that in fact, sales increased after removal of the in-aisle displays, with the average weekly percentage of total store revenue from that aisle rising from 4.33 to 4.83 percent.

A second in-store experiment in the same aisle showed that people using shopping carts also stopped and physically handled products—behavior previously linked with sales—about 7.05 times more often when in-aisle displays were absent than when they were present. Non-cart shoppers also touched products more often when displays were removed, but the effect was smaller (3.81 times).

Finally, in an online experiment, 200 participants imagined using a shopping cart or basket while viewing photographs of the same aisle from the in-store experiments, with or without in-aisle displays. They tended to rate the aisle with displays as more crowded and reported lower levels of perceived control for aisles with displays than those without, with effects amplified for imagined cart versus basket use.

Together, these findings suggest retailers might seek strategies to boost product exposure without also increasing crowding – especially for cart shoppers who may experience greater crowding effects – and that excessive use of in-aisle fixtures will likely dampen sales at the aggregate level rather than increasing it. 

Further research could address some of this study’s limitations, such as by considering the effects of human crowding, promotional offers on products, and seasonal influences on shopping behaviors.

Streicher adds: “The research shows that adding merchandise into store aisles can actually reduce overall sales by making the environment feel crowded and harder to navigate. Importantly, this negative effect is even stronger for shoppers using carts, as they experience greater spatial constraints and reduced control while shopping.”

Continue Reading

BizNews

Structure of online reviews shapes their helpfulness

Reviews that grow increasingly positive are most helpful to readers, while those that turn negative are least helpful. For average-rated products, progressively negative trajectories enhance helpfulness, whereas reviews that start negative and grow positive are least effective.

Published

on

A study of nearly 200,000 Amazon reviews shows that the usefulness of online product reviews depends not only on what is said, but on how the information is structured.

The researchers, from the Universities of Cambridge and Queensland, studied Amazon reviews for products ranging from clothing to food to electronics. They found that how the information is organised matters as much as what is said, and that different review structures are more or less helpful, depending on how highly the reviewer has rated the product.

Their results, published in the journal Scientific Reports, could help companies and third-party review platforms design their review pages to prompt the sort of reviews that will be most helpful to potential customers.

For example, a reviewer assessing a laptop might praise its performance and design while criticising its battery life, so how should such information be structured to be most useful to the reader? Should the review begin with criticism and end on a positive note, or start positively before turning to drawbacks?

“Any target of evaluation typically has both positive and negative aspects, which makes crafting evaluative messages challenging,” said co-author Dr Yeun Joon Kim from Cambridge Judge Business School. “The key question is how to structure these elements within a single message. For example, one might present criticism upfront and then move to praise, or instead integrate negative points within an otherwise positive evaluation. Yet research has paid little attention to this structural dimension.

“We wanted to understand whether certain structures are consistently more effective, or whether their effectiveness depends on the performance of the target being evaluated.”

The study was based on 195,675 reviews of 5,487 distinct products, and assessed performance and related factors, and a helpfulness score as measured by reader votes.

The researchers identified nine possible structures of online reviews ranging from Type A reviews that start positive and become more positive as they go along, to Type I reviews that start negatively and become even more negative – with lots of variance in between.

For highly-rated products, reviews that grow increasingly positive are most helpful to readers, while those that turn negative are least helpful. For average-rated products, progressively negative trajectories enhance helpfulness, whereas reviews that start negative and grow positive are least effective. For low-rated products, reviews are judged most helpful when they open constructively before introducing criticism.

“The results are nuanced but very clear,” said co-author Dr Luna Luan from the University of Queensland, who carried out the research while earning her PhD at Cambridge Judge Business School. “Looking at the overall sentiment of reviews does not fully translate into message effectiveness. It is the broader structure of sentiment – how positivity and negativity evolve throughout the review – that shapes how readers interpret online reviews.”

“Our findings have practical implications for how platforms and companies can design review pages in order to elicit the sort of reviews that will be most helpful to readers based on how highly products are rated,” said Kim. “For example, instead of simply asking ‘Write your review here’, the online review form could instead include micro-prompts that guide how reviewers structure feedback in a way recipients find most helpful.”

The researchers found the most commonly used review styles are not necessarily the most helpful to readers. In particular, for average- and low-rated products, the structures that reviewers tend to adopt often differ from those that readers find most useful.

This mismatch likely reflects different underlying motivations. Reviewers are not always writing to maximise usefulness for others, but may instead be expressing their own experiences, frustrations or emotions – especially when evaluating products of moderate or poor quality. As a result, review writing often serves both as information sharing and as a form of self-expression. This helps explain why widely used review styles do not always align with what readers perceive as most informative or helpful.

Continue Reading

BizNews

Reversible words can lower consumer disbelief in ads

A simple word choice in marketing messages can significantly impact how confident consumers feel about believing – or not believing – a claim.

Published

on

It’s estimated that consumers experience hundreds if not thousands of marketing messages daily. While the exact number can depend, how much someone believes the message can be more important for marketing success than the number of messages they see. 

A new study reveals that a simple word choice in marketing messages can significantly impact how confident consumers feel about believing – or not believing – a claim. Researchers found that when words differ in their “reversability,” or how easily people can think of their opposites, it can trigger different mental processes when consumers evaluate marketing language. 

Imagine the messaging options for a new sunscreen designed specifically for those who like a strong scented product. The first product description reads, “The scent is prominent,” while the second notes, “The scent is intense.” The word “prominent” is uni-polar, meaning people tend to negate it by adding “not” to the original statement.

“Intense,” though, is a bi-polar word, meaning readers can easily come up with its opposite meaning and negate the statement by replacing it with its antonym. In this example, “The scent is mild,” instead of, “The scent is intense.” 

“When people encounter easily reversible words, like ‘intense’, in messages processed as negations (mild), they experience lower confidence in their judgements compared to words that are hard to reverse, like ‘prominent,’” explained Giulia Maimone, a postdoctoral scholar in marketing at the University of Florida Warrington College of Business. 

Across two experiments of more than 1,000 participants, the research demonstrated that this effect occurs because negations of bi-polar, or reversible, words engage a more elaborate cognitive process requiring additional mental effort, resulting in lower confidence of the statement’s truthfulness. 

Based on their findings, the researchers suggest that marketers take this advice when crafting language: for new products, use affirmative statements with easily reversible words, like ‘The scent is intense’ in the sunscreen example, which most consumers will judge as true with high confidence. Importantly, this language would also minimize the confidence of consumers who will be skeptical about the message, as they will process it via a more complex cognitive process that reduces confidence in those consumers’ disbelief. 

“This simple lexical choice could help companies maximize confidence in their desired messaging and minimize confidence among the doubters,” Maimone explained. 

Continue Reading
Advertisement
Advertisement

Like us on Facebook

Trending