How and Why Decision Models Influence Marketing Resource Allocations

56 Pages Posted: 26 Aug 2006

See all articles by Gary L. Lilien

Gary L. Lilien

Pennsylvania State University - Institute for the Study of Business Markets

Arvind Rangaswamy

Pennsylvania State University - Department of Marketing

Katrin Starke

Pennsylvania State University - Institute for the Study of Business Markets

G.H. van Bruggen

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Erasmus Research Institute of Management (ERIM)

Date Written: August 2001 6,

Abstract

We study how and why model-based Decision Support Systems (DSSs) influence managerial decision making, in the context of marketing budgeting and resource allocation. We consider several questions: (1) What does it mean for a DSS to be "good?"; (2) What is the relationship between an anchor or reference condition, DSS-supported recommendation and decision quality? (3) How does a DSS influence the decision process, and how does the process influence outcomes? (4) Is the effect of the DSS on the decision process and outcome robust, or context specific? We test hypotheses about the effects of DSSs in a controlled experiment with two award winning DSSs and find that, (1) DSSs improve users' objective decision outcomes (an index of likely realized revenue or profit); (2) DSS users often do not report enhanced subjective perceptions of outcomes; (3) DSSs, that provide feedback in the form of specific recommendations and their associated projected benefits had a stronger effect both on the decision making process and on the outcomes.Our results suggest that although managers actually achieve improved outcomes from DSS use, they may not perceive that the DSS has improved the outcomes. Therefore, there may be limited interest in managerial uses of DSSs, unless they are designed to: (1) encourage discussion (e.g., by providing explanations and support for the recommendations), (2) provide feedback to users on likely marketplace results, and (3) help reduce the perceived complexity of the problem so that managers will consider more alternatives and invest more cognitive effort in searching for improved outcomes.

Keywords: DSS, marketing models, decision quality, decision process, resource allocation

JEL Classification: M, M31, C44

Suggested Citation

Lilien, Gary L. and Rangaswamy, Arvind and Starke, Katrin and van Bruggen, Gerrit H., How and Why Decision Models Influence Marketing Resource Allocations (August 2001 6,). Available at SSRN: https://ssrn.com/abstract=370888

Gary L. Lilien (Contact Author)

Pennsylvania State University - Institute for the Study of Business Markets ( email )

University Park, PA 16802-3306
United States
814-863-2782 (Phone)
814-863-0413 (Fax)

HOME PAGE: http://www.smeal.psu.edu/isbm/about/people/LILIEN.

Arvind Rangaswamy

Pennsylvania State University - Department of Marketing ( email )

University Park, PA 16802-3306
United States

Katrin Starke

Pennsylvania State University - Institute for the Study of Business Markets ( email )

University Park, PA 16802-3306
United States

Gerrit H. Van Bruggen

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands
+31 10 408 2258 (Phone)
+31 10 408 9011 (Fax)

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
500
Abstract Views
3,114
Rank
86,196
PlumX Metrics