2007 INFORMS Society for Marketing Science Practice Prize

The 2007 INFORMS Society for Marketing Science Practice Prize was awarded to P.K. Kannan, University of Maryland, Barbara Kline Pope, National Academies Press, and Sanjay Jain, Texas A&M University, for “Pricing Digital Content Product Lines: A Model and Application for the National Academies Press.”

The prize was presented at the Marketing Science Conference on October 15, hosted by the Wharton School, University of Pennsylvania. Awarded for an outstanding implementation of marketing science concepts and methods, the prize is supported by grants from MSI, the Institute for the Study of Business Markets, the European Marketing Academy, and the Australian Marketing Institute.

The 2007 Practice Prize Committee was chaired by MSI Academic Trustee John Roberts and included MSI Executive Director Russell Winer.

The winning research addresses an increasingly important issue facing content providers: balancing the distribution and pricing of digital and hard copy products. Kannan, Pope, and Jain examine the case of a specialist publisher, National Academies Press, which was provided an opportunity to distribute multiple formats of its content via the Internet. While digital copies such as pdf files are possible substitutes for printed books, there is complementarity in the form of some consumers buying bundles of both. The authors develop a pricing model for both product forms (separately and together), allowing for both substitution and complementarity effects. The model is calibrated using an online experiment testing different product and bundle prices. The results of this calibration are then validated using actual sales data after the model was implemented.

The other finalists in the competition were:

• V. Kumar and Jia Fan, University of Connecticut, and Rohit Gulati and P. Venkat, P&G Asia Pacific, for “Marketing Mix Recommendations to Maximize Value Growth at P&G Asia-Pacific.” Kumar et al. worked in conjunction with Procter and Gamble in India to optimize marketing mix for higher profits in the Indian heavy-duty detergent market. One of the biggest challenges in executing this study was to come up with a modeling framework that would not only accommodate the complexity in the data structure but also capture the uniqueness of SKU response to the marketing-mix elements over time. By understanding both the market structure (in terms of the different pricing tiers in the market) and the effect of pricing on distribution, the study provided key strategic guidelines so that Procter and Gamble was able to increase the price and distribution of certain SKUs. Consequently, significant gains in profits were realized in this market.
• Jie Du, Lili Xie, and Stephan Schroeder, J. D. Power and Associates, for “PIN Optimal Auction Vehicle Distribution (ODAV) System: Applying Price Forecasting, Elasticity Estimation, and Genetic Algorithm to Used Vehicle Distribution.” This entry examined the U.S. auto resale market in which automotive manufacturers and their captive channels need to remarket their rental fleet return vehicles and lease return vehicles at auctions throughout the country. Realized prices depend on a number of characteristics related to the car (make, model, features, and condition), the mix of consumers in each geographic area, and local dynamics of supply and demand. Many of these factors are changing quite rapidly. J. D. Power’s model generates a vehicle distribution plan to maximize the auction net profit by considering simultaneously the auction price arbitrage across the country, costs associated with the vehicle shipping, and business constraints. A number of automotive manufacturers and their captives use the system each day to allocate their incoming return vehicles.

As with previous competitions, presentations of the three entries will be made available in DVD version for classroom use. DVD adopters also will have access to related material for classroom use. This material, along with the material from previous competitions (available now), will be available by the end of February 2008 at http://www.informs.org/Edu/MarketingScience. In addition, papers and reports on these outstanding implementations of marketing science will appear in a forthcoming issue of Marketing Science.