Corporate Presence in Second Life

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By now, you probably have heard of Second Life, the popular 3D virtual world that allows its residents to live, interact, buy/sell, and collaborate all under a virtual identity. Where these residents lived, real-world companies have been experimenting too. In my research with Dr. Bill Judge, we have seen more than 50 of the Global Fortune 500 companies who have established an official presence in Second Life. We spoke with some of these companies to find out what drove them to Second Life, how they use it, and how they have benefited from it. Here is a quick summary of what we found:

1. Why Companies Enter Second Life?

Most of the companies we surveyed/interviewed entered SL in 2006. The decision to enter SL varied from an innovative mentality to jumping onto the wagon under competitive pressure. Usually, an individual or a small team of employees were personally involved in SL at first, and they eventually became champions within the company. Interestingly, European companies’ decision to enter SL were driven more by potential for media exposure rather than by the actual functionality or use of the virtual world itself, suggesting important cross-cultural differences in corporate innovation.

2. What Companies Use Second Life for?

Below are six ways the companies have been using SL, ranked by their popularity. The list makes it obvious that communication and learning represent important uses of SL.

Usage of Second Life

3. How Do Companies Benefit from Second Life?

Most companies considered their SL venture to be worthwhile, although only one-third of them acknowledged realizing financial gains. Here is a list of the benefits companies believe they have received from their SL presence, ranked from most-often mentioned to least mentioned:

Benefits of Second Life

What do you think about these findings? Has your company ever experimented with Second Life?  I’d love to hear about your experience.

Ping! Is Getting Better

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Blogging for over a year has been a great learning experience for me.  What I have learned has prompted me to think more about what I can write that will provide the best value to my readers.  After devoting much thought to the question, I decided that filling the gap between the academia and marketing practice will be the best area to focus on, and hence the new subtitle “Bridging the Gap Between Academia and Marketing Practice”.  This subtitle reflects the new direction that Ping! will take in the future.  What I intend to do is to discuss cutting-edge marketing and psychology research and its implications for marketing practice, and at the same time bring new trends, questions, and thinking from the practical world back into the academia. Being a marketing academic who also frequently interacts with the industry, I feel particularly compelled and passionate to fulfill this role.

You might be wondering why I am passionate about this.  To list just a few of my reasons:

  • Few academic marketing journals are read by anyone other than academics themselves, so much so that some academic researchers joke that we write for ourselves.  Why is this the case? It has a lot to do with the way we write in the academia and our insufficient discussion of how our research can be applied to business practice.
  • Another contributing factor is the poor publicity that academic marketing journals receive. This is somewhat ironic, and has a lot to do with the lack of funding by many journals to publicize their research.
  • In today’s quickly changing business environment, the academia has sometimes trailed behind in terms of what we are studying and practicing. A case in point: the only academic marketing journal that uses Twitter is the Journal of the Academy of Marketing Science (@JAMS_updates), and even that is to broadcast to the world rather than building a dialogue (it is not following anyone).

The end result of all this is that we academics limit the impact of our hard work and at the same time may spend time on things that are not the most important/relevant to practice.  My intention therefore is to discuss some excellent research that is especially relevant for business, and how a company can apply the findings to improve their marketing practice.  From time to time, I will also talk about business issues that need more academic research on.

With this shift in focus, Ping! will post a new entry every one to two weeks, and each entry will appear on Monday or Tuesday of the week.  Here’s a preview of what is coming up in Ping!:

  • Why companies experiment with Second Life and what they have learned
  • Research on automaticity and what it means to marketers
  • Consumption and sharing of user-generated content

What do you think?  Please feel free to share your thoughts.  If you are a marketing practitioner and would like to see an issue discussed or researched, please feel free to share them here or drop me a note.

Loyalty Programs and CRM — Insights from Marketing Science 2009 Conference

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At the INFORMS Marketing Science 2009 Conference, I presented my current research project on the effects of loyalty program expiration policy change.  For those who missed the conference, here’s a summary of what I presented. I have also included the summary of the other two research projects that were presented during the same session.

Shortening Loyalty Program Expiration Period May Not Be Bad

One of the headaches companies running loyalty programs have is the liability associated with unredeemed points in program members’ accounts. One way of reducing such liabilities is to shorten the expiration period associated with program points, as major US airlines did in 2007. However, it is possible for such a policy change to alienate existing customers. To see whether this is the case, my co-author and I analyzed data from a convenience store chain that has switched from a no-expiration policy to a monthly expiration policy. To our surprise, we found that, participation in the program has actually increased significantly since the program change. Overall in-store sales have also increased, while fuel sales remained unchanged. What we plan to do next is to see how individual consumers have adjusted their purchase behavior in reaction to the policy change. We suspect that the addition of an expiration policy imposes what we call an “expiration pressure” on consumers, as consumers are pressured into making more purchases to reach a reward threshold before the points expire. However, different consumers (e.g., those with different patronage levels) will experience the pressure differently. I’ll report more findings when we are further along with the project. For now, you can download the presentation slides. We welcome any feedback or comments you may have.

Two other researchers also presented their projects on loyalty program and customer relationship management in the same session. As these are also relevant to loyalty managers, I am summarizing them below:

Loyalty Program Increases Share of Wallet by 10%

Martin Boehm from IE Business School presented his co-authored research project on the effect of loyalty program membership on consumers’ share of wallet at an European supermarket chain. By looking at a consumer panel’s behavior before and after loyalty program enrollment, they show that the loyalty program increased share of wallet by 10%.  This lift is negatively correlated with a consumer’s original share of wallet before the program enrollment. In other words, those with a high share of wallet exprienced minimal lift, whereas those with a low share of wallet experienced the highest lift. These results echo my earlier research findings showing a similar pattern. However, their research better controls for self-selection bias (i.e., better customers are more likely to enroll in loyalty programs) and therefore provides an even stronger argument for loyalty program impact.

Email and Mail Are More Effective Customer Contact Channels…

At least in the context of auto dealership’s services. Using data from an auto dealership, Andrea Godfrey at University of California at Riverside and her co-authors compared the effectiveness of phone, mail, and email customer contact in increasing sales (in this case, service revenue).  They found that mails and emails were similarly effective in increasing sales, while phone contact was the least effective. The effects of mails and emails were both curvilinear, meaning that the effects of those contacts reach maximum after a few times and then drop after the threshold. Not surprisingly, the exact effectiveness of each contact channel on individual consumers also depends on the consumers’ channel preference.  I hope these findings will help eliminate a few annoying dinner disruptions and result in less waste of papers. But I am not so sure I like the prospect of receiving more emails either. Hmm…

Questions or comments?  If you have any questions regarding any of these research projects that I have summarized here, please feel free to let me know, and I’d be happy to answer your question or forward your question to the right author.