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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.

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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.

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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.

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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. 

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If you’re a perfectionist at work, your boss’ expectations may matter more than your own, research finds

Help your employees by clarifying expectations through regular feedback and performance conversations to reduce role ambiguity, as doing so can provide employees with a better understanding of role expectations and enhance mutual understanding of those standards.

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If you’re among the 93% of people who struggle with perfectionism at work, new research suggests that your experience may depend less on your own high standards and more on whether those standards meet your supervisor’s expectations. 

Researchers from the University of Florida Warrington College of Business found that whether perfectionism helps or harms employees depends largely on whether employees’ personal standards align with their supervisors’ expectations. 

Specifically, they looked at the connection between employees’ self-oriented perfectionism, or the expectations of flawlessness they set for themselves, and supervisors’ other-oriented perfectionism, which reflects the extent to which they set excessively high standards for and critically evaluate their employees’ performance. 

Using data from more than 350 employees and about 100 supervisors, the researchers found that perfectionism’s impact depends on whether employees’ standards align with what their supervisors expect and how clearly those expectations are understood. 

When employees’ personal standards are aligned with their supervisors’ expectations, they tend to experience less role ambiguity, meaning they have less uncertainty about the expectations and standards for their role, why those standards matter and the consequences of not meeting them. This clarity in their work is linked to better performance, lower burnout and higher job satisfaction. 

“Problems between employees and their supervisors are more likely to arise when these expectations don’t match,” explained Brian Swider, Beth Ayers McCague Family Professor.

The most difficult situation occurs, Swider and his colleagues found, is when supervisors expect higher levels of perfectionism than employees expect from themselves. In these cases, employees reported greater uncertainty about their roles, along with worse work outcomes including higher burnout and lower job satisfaction.

“If you’re an employee who struggles with perfectionism at work, our findings suggest that understanding your supervisor’s expectations may be just as important as managing your own tendencies towards perfectionism,” Swider said. “Talking to your supervisor about priorities, standards and how your performance will be evaluated can help reduce uncertainty and ensure you both share a clear understanding of what success looks like.”

The researchers have similar recommendations for employers: help your employees by clarifying expectations through regular feedback and performance conversations to reduce role ambiguity, as doing so can provide employees with a better understanding of role expectations and enhance mutual understanding of those standards.

The researchers also recommend that organizations should consider how employees and supervisors are paired, as mismatched expectations can increase stress, reduce job satisfaction and ultimately impact performance. 

The research, “The influence of employee-supervisor perfectionism (in)congruence on employees: a configurational approach,” is published in Organizational Behavior and Human Decision Processes

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Study shows scaling startups risk increasing gender gaps

Founders with HR‑related education counteract these challenges. In ventures led by founders with HR training, the odds of hiring a woman increase by more than 30 percent, and the odds of appointing a woman to a managerial role increase by 14 percent for the same level of scaling.  

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When startups scale quickly, founders often make hurried hiring decisions that unintentionally disadvantage women, according to new study from the Stockholm School of Economics in Sweden. The study shows how the pressures of rapid growth increase the likelihood that founders rely on mental shortcuts and make biased decisions. 

Drawing on large‑scale Swedish data, the study shows that scaling—when companies hire far more people than their usual growth trend would predict—puts pressure on founders to decide swiftly, which increases the use of mental shortcuts. These shortcuts can activate gender stereotypes, shaping who gets hired and who moves into managerial roles.  

“During those moments of rapid growth, even well‑intentioned leaders can fall back on familiar stereotypes when assessing who they believe is best suited for the role,” says Mohamed Genedy, co-author and Postdoctoral Fellow at the House of Innovation, Stockholm School of Economics. 

Reduced odds of hiring female managers 

His research analyzes more than 31,000 new ventures founded in Sweden between 2004 and 2018. It finds that in male‑led startups, scaling reduces the odds of hiring a woman by about 18 percent, and the odds of appointing a woman to a managerial position by 22 percent.  

These patterns emerge even in a highly gender‑equal national context, making the findings especially noteworthy.  

Crucially, the study reveals that founders with HR‑related education counteract these challenges. In ventures led by founders with HR training, the odds of hiring a woman increase by more than 30 percent, and the odds of appointing a woman to a managerial role increase by 14 percent for the same level of scaling.  

“When founders have experience with structured hiring practices, the gender gaps shrink, and in some cases even reverse,” Genedy says.  

“This shows that getting the basics of HR right early on really pays off. When things start moving fast, founders with HR knowledge are less likely to rely on biased instincts and more likely to hire from a broader talent pool.”  

Prior experience in companies with established HR practices also helps, though less so. It raises the likelihood of hiring women as the new ventures scale, but does not significantly affect managerial appointments. 

Differences persist in female-led ventures 

The study additionally shows that these patterns are not driven by founder gender alone. Even solo female‑led ventures display similar tendencies when scaling, though to a somewhat lesser degree.  

And in female‑dominated industries, scaling increases the hiring of women for regular roles but still reduces the likelihood that women are appointed into managerial positions.  

“When scaling accelerates, cognitive bias kicks in for everyone,” says Mohamed Genedy. “Female founders are not immune to these patterns.”  

Together, these results point to underlying cognitive mechanisms that shape decisions under time pressure.

The study, Scaling with Bias? The role of founders’ HR knowledge and experience in hiring and managerial appointments, was published in Human Resource Management.

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