Marketing is one of the most effective ways for an early-stage business-to-business (B2B) startup firm to grow, yet nearly half of such firms that would benefit from it choose not to do any marketing, according to the findings of a paper co-authored by a Smeal College of Business professor and published in the journal Industrial Marketing Management.

The researchers focused on systematic marketing — where a firm has an ongoing process of collecting and using customer data to improve its offerings, communications and distribution programs. They specifically examined which startup firms conduct systematic marketing, what causes them to do so and what benefits they derive from that investment. The findings may help future startup firms determine whether or not to use systematic marketing and when it is best to do so, the researchers said.

“We have a recipe that tells you whether or not to add that marketing side to this particular dish,” said Smeal Distinguished Research Professor of Management Science Gary Lilien, co-corresponding author on the study.

Lilien and University of Technology Sydney Associate Professor Ofer Mintz used data from the online valuation platform Equidam, analyzing 693 B2B or business-to-consumer (B2C) startup firms that had launched between July 2016 and April 2018, 202 of which also provided current and anticipated financial information for 2019 and 2020.

The startup firms had contacted Equidam for financial valuation, making them a self-selected population different from the larger startup population. To address potential bias in the Equidam data and validate their initial findings, Lilien and Mintz conducted an additional study surveying 377 startup firms selected from a Survey Sampling International panel of entrepreneurs.

The researchers found that 55% of the sample startup firms reported conducting systematic marketing and 45% said they did not. In both studies, the researchers discovered that early-stage B2B startup firms were the least likely of all B2B startup firms to conduct systematic marketing but the most likely to benefit from it, while early-stage B2C startups were the most likely to conduct systematic marketing but the least likely to benefit from it. Late-stage B2B startup firms also benefited less from conducting systematic marketing than early-stage firms.

They also found that startup firms’ decision to conduct systematic marketing influenced the firms’ valuations. More than half of the startup firms surveyed in the two studies — 60% of those in the Equidam study and 61% in the validation study — got the decision about whether to conduct systematic marketing wrong, which would have negative effects on their valuations.

The study provides a framework, which used insights from interviews with startup founders, investors and startup firm consultants, that focuses on the consequences of startup firms conducting systematic marketing. The researchers found that the success of marketing efforts, and the likelihood it will improve a firm’s valuation, depends on the startup firm’s type of customer — direct consumers or other businesses; early versus late-stage development of the firm; previous startup experience of the firm’s top management team; and the environment of the firm’s industry.

Mintz said he initially thought the study would be more about “what types of marketing are best for startups?” but discovered during early interviews that many startup managers didn’t consider marketing at all, often because it would mean redirecting already scarce financial resources.

“I would ask if, say, an investor gave you $10,000 or $100,000, or whatever additional number, how much would you spend on marketing? And most would say zero,” Mintz said. “That was the ‘aha’ moment, when we knew we were on to something bigger than we thought.”

Lilien and Mintz also found that early-stage startup firms were more likely to conduct systematic marketing if they had top management team members with previously successful entrepreneurial experience and were backed by investors with a financial stake in the firm. They observed that some B2B startup firms — many of them spinoffs from existing companies — had smaller but more knowledgeable customer bases than B2C startup firms and therefore a greater ability to verify the credibility of their firms through marketing.

“Marketing for these companies is really sales and tech support and getting a deep understanding of the evolving needs of the existing customers and co-developing products with them,” Lilien said.

Startup firms that conducted systematic marketing provided an observable signal to potential investors about the firms’ level of quality. The researchers said entrepreneurs could use the study to provide guidance for both early-stage startup firms and for investors. They concluded that future research is needed to determine how to best encourage early-stage B2B startups to conduct systematic marketing.

“I think this work is going to be of most benefit to venture capitalists,” Lilien said.

Many consumers who shop online prefer to return items to brick-and-mortar stores rather than mail them back.

This is according to a new study, where researchers assessed a new practice called return partnership, in which online retailers partner with retailers with physical stores to offer offline returns. They conclude that this arrangement can benefit both online and store retailers, though businesses should be careful to choose the right partners.

The study, by researchers at Carnegie Mellon University and the University of Washington (UW), has been submitted for publication.

“Retailers are increasingly adopting a variety of ways to return products to cater to customers’ preferences,” explains Soo-Haeng Cho, IBM Professor of Operations Management and Strategy at the Tepper School of Business at Carnegie Mellon, who co-authored the study. “These new approaches can be a win-win for online sellers and stores.”

To reduce problems for consumers who want to return goods without having to package and mail them, online retailers (e.g. Amazon) have begun to partner with firms that own a network of physical stores (e.g. Kohl’s) so customers can drop off returns of their online purchases. The partnerships usually do not involve direct monetary payment to the store retailers. The store retailers benefit from purchases made during customers’ visits to stores and online retailers save on shipping costs (the retailer collects and ships multiple returned items from a physical store, which is less costly than individual mail-in returns).

In this study, researchers examined the incentives of online retailers and store retailers in this unique partnership. Cho and his team constructed a model with an online retailer and a store retailer in which customers had several options for buying and returning goods. The study compared the expected profit of the retailers before and after a return partnership was formed and identified when both retailers benefitted from the partnership.

Among the study’s findings:

• Online retailers benefitted from shifting returns to a cost-effective channel, and store retailers benefitted from having more people in their stores.
• Return partnerships can occur with no direct financial transaction between the online and store retailers; the partnership can work when the incentive for the two retailers is based only on how it affects consumer behavior. 
• Such partnerships can feature store partners that operate few stores but offer products similar to those of online retailers, or those that have a large store network but offer differentiated products.
• Online retailers that offer convenient online shopping and lenient returns are best poised to benefit from return partnerships. Online retailers with strict return policies (e.g., high restocking fees) should carefully examine the return rate increasing effects of entering a partnership. 
• Firms should choose their partners to ensure the offline return service benefits their overall business. For example, an online retailer and a store retailer with comparable products have incentives to partner only if the number of stores is not too large because consumers may be swayed to return to stores by the possibility of finding replacements for whatever product they are returning. This would lead to more consumers opting to return their online purchases, which hurts the online retailer’s profit.

“By modeling consumers’ purchase and return decisions and their impact on retailers’ sales, our work provides insights into the types of online retailers that should form partnerships,” says Leela Nageswaran, Assistant Professor of Operations Management at UW’s Foster School of Business, who co-authored the study.

“Attempts to forge return partnerships with store retailers must emphasize the sales boost from returning customers,” adds Elina Hwang, Associate Professor of Information Systems at UW’s Foster School of Business, who co-authored the study. 

The use of congruent messages and emojis when promoting tourist destinations on social media leads to greater user attention. This strategy helps users to process the information effectively and reduces their cognitive effort. More specifically, the use of emojis in online messages about tourism destinations facilitates processing and reduces ambiguity, especially when the recipients encounter content with low levels of congruence.

This is according to a research – “The effect of online message congruence, destination-positioning, and emojis on users’ cognitive effort and affective evaluation” – that was published in the Journal of Destination Marketing & Management.

The study, which was carried out at the University of Granada’s Mind, Brain and Behaviour Research Centre (CIMCYC), consisted of an experiment using eye-tracking techniques on 60 users of the social network Facebook. These individuals underwent a series of experimental procedures in which the researchers manipulated the level of congruence between the messages of those posting and the users, the use or omission of emojis in the content, and the way in which the tourist destination was positioned in the media (natural environment, gastronomy, hotels, sun and beach).

The UGR research team, which includes Beatriz García Carrión, Francisco Muñoz Leiva, Salvador del Barrio García and Lucia Porcu, point out that the study “clearly illustrates the benefits in terms of the effectiveness of using congruent messages in marketing communications in general, and especially in digital communications via social media, as well as how the use of emojis contributes to improving users’ information processing, increasing their attention and reducing the cognitive effort involved. Moreover, congruent messages not only facilitate users’ information processing, but also improve their affective evaluation — a crucial aspect when it comes to making a decision on a tourist destination.”

The key findings included:

• Importance of maintaining a high level of congruence in the information they convey through social media. As the researchers explain: “This involves systematically reviewing and managing comments across all communication channels to identify any comments that do not align with the destination’s desired positioning, with a view to mitigating potential negative effects.”
• Pictorial representations (emojis) significantly enhance the overall comprehension of the information. However, the study did not find a significant impact of emojis on the formation of affective evaluations.
• Tourism managers should focus on information related to the destination’s gastronomy and natural environment, rather than more conventional aspects such as sun and beach facilities or hotel offerings, as the former attract more attention and are perceived more favorably, even under low levels of congruence.

The research findings suggest a shift in the preferences of potential consumers towards more nature-based tourism. “Therefore, tourism managers should place greater emphasis on communicating aspects related to the environment and sustainability of the tourist destination in their social media posts, thereby reaping benefits in terms of visual attention and affective evaluations,” the researchers stressed.