Focus on Research

January 11, 2013 12:33 pm

Something for the weekend

In a world of social media, where individuals are only a few clicks away from meeting each other via the internet, the adage first impressions count remains as true today as it always has.

But research from Alan Dennis, a professor of information systems at Indiana University Kelley School of Business and Jeff Cummings, a Kelley PhD and now an assistant professor in management information systems at the University of North Carolina-Wilmington, has found that although first impressions remain as relevant today as ever, they now depend on very different information compared with previous generations.

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Focus on Research

Whereas in the past a firm handshake and smart appearance were what counted, today what appears in an individual’s online profile and how it is presented can make all the difference.

The two academics looked at enterprise social media sites – similar to social networking sites – which allow employees within an organisation to build up a profile using information such as education, experience, expertise and skills, as well as personal information. They discovered that subtle changes to an individual’s profile on these sites could significantly change perceptions of their trustworthiness and whether or not they were likely to be selected for specific assignments.

They found that it is not only the profile information that is important, what is equally vital is “information generated by the employee’s connections such as wall posts or recommendations [which] can enhance the perception of factors such as trustworthiness”. For example, having a profile picture which included others in the image led to the perception that the individual was well connected, even when similar profiles without pictures actually had far more connections.

The authors suggest that employees pay considerable attention to their profiles; information should be carefully crafted and any photos or pictures should “communicate visually” any concepts the employee wants to put across. Connections should also be carefully considered and employees should “focus on making close connections and ask them to endorse or comment on the profile”.

When it comes to buying and selling seasonal goods retailers and shoppers can face something of a dilemma.

Do you buy that longed-for coat early in the season when it is retailing at full price or do you wait and buy in the sale, knowing that you will not be able to wear it for too long before the warmer weather arrives? Retailers meanwhile need to know how many coats to order and decide on the optimum time to slash prices.

To try to understand better both sides of this conundrum two academics have analysed two years’ worth of data on the sales and inventory levels of products such as coats and designed a structural model based on patterns gathered from the data.

Lakshman Krishnamurthi, a professor of marketing at the Kellogg School of Management at Northwestern University and student Gonca Soysal, now a professor at the University of Texas at Dallas found that early in the season most customers are fashion sensitive, but as the season progresses they tend to give way to more price-sensitive buyers. These latter buyers are very important for retailers because they soak up excess inventory.

The academics asked what can retailers do to maximise their revenue? If for example they cut prices too rapidly or by too much they risk damaging their sales, but if they wait till too late in the season they run the risk of not attracting price-sensitive customers. Prof Krishnamurthi and Prof Soysal discovered that if retailers were to reduce their stock however, it creates a sense of urgency early in the season and encourages customers to buy earlier, thus increasing the number of sales at higher prices.

“When we reduced stock by just 5 per cent, it increased profits by 4.5 per cent,” adds Prof Krishnamurthi. However he adds that cutting stock by 10 per cent yielded only a 3 per cent gain in profits.

They also discovered that retailers were better off if they offered smaller markdowns early in the season, rather than larger markdowns later on.

Prof Krishnamurthi says that their findings can be applied to any product with a short life cycle although individual retailers need to experiment to discover what is the optimum markdown for their product.

Buying and selling season goods is published online at Kellogg Insight.

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