Intellectual Capital

This Issue: Marketing and Organization Studies

From the Spring 2015 edition of Vanderbilt Business

Steve Hoeffler

As members of one of the nation’s top research universities, Owen faculty always have something interesting on their minds. Here’s a portion of what two faculty members are currently considering.

Steve Hoeffler

Who: Associate Professor of Marketing Steve Hoeffler. Don’t let the well-worn La-Z-Boy in the middle of Hoeffler’s office fool you. Infused with a laid-back demeanor that hints at his California upbringing, Hoeffler uses the chair as a kind of oasis away from his computer where he can concentrate more intensely on his work. At the same time, the overstuffed recliner speaks to his goal of avoiding the stereotype of a stuffy academic. “I distinctly remember sitting in an economics lecture as an undergrad, thinking, ‘yeah, the professor knows his stuff but the people in this class aren’t going to get it with the way he’s explaining it.’ He was just so technical,” Hoeffler recalls.

After completing his MBA at University of California, Davis, Hoeffler contemplated going to UCLA or University of California, Berkeley, to study consumer marketing. He was drawn instead to the other side of the country to work with renowned marketing scholar James Bettman at Duke University. Hoeffler finished his Ph.D. there in 2000, but had already started teaching across town at University of North Carolina at Chapel Hill. Drawn to Vanderbilt by his former Duke colleague, Associate Marketing Professor Jennifer Escalas, Hoeffler joined the Owen School in 2006.

What he’s researching: The common theme unifying Hoeffler’s research is consumer behavior around “really new products.” Hoeffler classifies these items as anything that allows consumers to do something that they have never done before, not just improved versions of an existing product. For example, the iPhone qualifies as a really new—or radically new—product since it introduced an ecosystem of apps that required learning new behavior. Contrast that, Hoeffler says, with a product that simply uses new technology, like a refrigerator with a new cooling mechanism. At the end of the day, it still keeps food cold inside a metal box and doesn’t require new consumer learning.

In many ways, Hoeffler’s work follows a traditional line of marketing research: What are the factors that influence purchasing decisions? What is it about the products themselves and how they’re marketed that compels people to buy? “Normally it’s easy,” Hoeffler says. “You ask people in focus groups whether they’d use a product and go on from there. But without having a pre-existing mental model of how to use something, you can’t do that.”

One recent study conducted by Hoeffler and co-authors looks at the role different analogies play in helping consumers evaluate really new products. For example, does a product like Google Glass benefit from a straightforward comparison like, “It’s a wearable smartphone”? Or would it be more meaningful for an audience to compare the function in Google Glass that constantly records what you’re seeing to pensieves, devices featured in the popular Harry Potter series to view bottled memories?

One of the next projects on Hoeffler’s agenda is working with Owen colleague Larry Van Horn, a health care economist, to examine the ways consumers value medical care. “Many people have never had to think about health care as a consumer product,” Hoeffler says. “But now with health care reform, and insurers asking patients to shoulder more costs, more people are starting to evaluate things like pricing, which is completely unfamiliar to them.”

Why it’s important: As new products are created, more companies need tools to help discern what products and services actually improve the lives of consumers—and will sell—versus what’s just cool, new technology. But Hoeffler’s research does not revolve solely around marketing the latest in consumer electronics. He’s working with an interdisciplinary group of researchers to examine ways to improve package safety. “We’ve seen that things like laundry detergent pods and e-cigarettes have led to a spike in childhood poisonings,” he says. “And yet, there’s been no real breakthroughs in package safety since childproof caps for medicine bottles were developed.”

Ranga RamanujamRanga Ramanujam

Who: Professor of Management Rangaraj “Ranga” Ramanujam. He joined the Owen faculty in 2008 and soon was recognized for his skills in the classroom and for his prodigious research. Ramanujam received his Ph.D. from Carnegie Mellon in 2000 and taught at Purdue University before coming to Vanderbilt. Prior to academic life, Ramanujam worked at Standard Chartered Bank, where an internal fraud that cost the company millions of dollars prompted his interest in studying how such calamities happen.

What he’s researching: Officially, Ramanujam studies issues linked to operational failures. Less formally, he studies a kind of organizational physics that examines how internal structures lead to catastrophic problems like faulty ignition switches or persistent medical errors. “I could see that there were very strong, but invisible, effects impeding organizational effectiveness,” Ramanujam says. “From a business viewpoint, it’s obvious why this is important. But I don’t think the reasons for such organizational failure are adequately appreciated.”

In many ways, what Ramanujam has been doing is carefully teasing apart how organizational catastrophes happen. What are the preceding conditions and subsequent consequences that surround a serious failure? How do specific features of an organizational structure contribute to problems? And how do organizations learn and improve in a meaningful way in the wake of disasters?

Just as Ramanujam saw his own employer narrowly avoid collapse due to a lapse of internal controls, his early academic research looked at how risk played a role in diverging from accepted policies and procedures at financial services firms. “These failures can certainly be attributed to individual actions like a rogue trader,” he says. “But we know the organizational context matters.” For example, GM’s ignition switch recall can be traced to unspoken company rules that strongly discouraged employees from classifying problems as safety concerns to avoid additional costs. Similarly, intense schedule pressures affected NASA’s ability to respond effectively to early signs of the problems that eventually caused the explosions of space shuttles Challenger and Columbia.

This area of inquiry on organizational safety and effectiveness ultimately led Ramanujam to health care. It’s not just that hospitals face life-or-death stakes when errors or intentional rule violations occur, but also because health care organizations have a wealth of data available to analyze. Ramanujam began by examining how much, when and why medical students report medical errors. That led him to look at work-satisfaction rates among nurses and the role that burnout played on a person’s willingness to speak out about problems.

These days, Ramanujam is seeking answers to fundamental questions surrounding organizations. For example, one of his studies uses restaurant health score data from Los Angeles County as a way to detect the elements that comprise a good rule—or at least one that’s not routinely ignored. Another area Ramanujam thinks about is communication within an organization, specifically when employee silence (not to be confused with a lack of talking) introduces wider risks.

Why it’s important: The public has grown less tolerant of safety violations. Previously, an ignition switch problem like the one that GM encountered last year would not have been such a big deal. Today, it warrants a massive recall that cost GM more than $4 million. For managers, Ramanujam’s research homes in on the specific actions that make for more effective teams and employees. On its widest scale, creating safety-conscious organizations simply benefits everyone.