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Ultimately, Bell's uncomfortable, unexpected keynote speech
in 1999 was the beginning of a real shift in organizational culture.
Immediately after the talk, a former Procter and Gamble executive
named Bob Gibson approached Bell, explaining that the analysis
the professor had just presented was the crux of a company he'd
founded called Scanner Applications. Gibson, a Harvard MBA,
had spent his early career in the packaged goods industry working
for leading manufacturers and had grown increasingly frustrated
by the enormous waste in trade promotion. He'd started Scanner
Applications to promote the pay-for-performance concept, using
the retailing industry's ubiquitous scanner as a way to track sales.
Gibson invited Bell to his Cincinnati headquarters to talk to his
sales force about the theory underlying what they were doing. He
also got Bell access to data—data that allowed Bell to test, prove
and forward his theory via two high-profile research papers, a 2002
article in the MIT Sloan Management Review and another last year
in Marketing Science.
Both papers went beyond purely hypothetical data, reporting
evidence from a yearlong field test—an experiment that showed
that "scan-backs" really work. In the field test, a national-brand
beverage manufacturer implemented both off-invoice and scan-
back trade deals in cooperation with retailers in four regions of the
United States. Each retailer received up to four scan-back and four
off-invoice deals at different times over the year. To make the two
deals equally attractive to the retailers, the scan back included a
deeper discount than the off invoice.
What happened? The results revealed that scan-back deals generated
more sales and marketing support from retailers, greater pass-
through of discounts to consumers, limited "forward buying," the
process of stockpiling discounted product for later sale, and more
stable retailer demand.
Today, the sea change Bell proposed has increasingly become a
reality. Roughly 65 percent of packaged-goods retailers' promotion
dollars are devoted to pay-for-performance deals, up from about
one-third a decade ago. And Bell has enjoyed seeing work that began
as theory take shape as practice, and strengthen an industry.
"When you compensate the retailer based on what they sell,
there's no longer any benefit in them loading up on all this inventory,"
Bell said. "And all of the inventory infrastructure and shipping
things all over the country—which is paid for by the retailer
at the manufacturer's expense, but from a systems point of view is
a complete dead-weight loss—is eliminated. Retailers can dramatically
cut inventory costs and reorient their activities around what
should be their core competencies—selling and marketing," he
adds. "The news is good for consumers, too, because retailers are
much more likely to pass on the full amount or even greater than
the full amount of the deal on to the customer."
A Rising Star
Bell, 38, a native of New Zealand, moved to the United States at
age 25 to attend Stanford University, where he earned his PhD.
He joined Wharton in 1998 after three years at UCLA, where he
began his academic career in spite of early offers from Wharton and
other East Coast schools because California reminded him a bit of
home. An avid rugby and squash player, Bell also plays the guitar
and started a band with a group of friends, including two professors
from Harvard and MIT, and says he loves playing pool so much he
became the PhD Association president at Stanford for the sole purpose
of buying a pool table for the student lounge.
He fell into academia somewhat by accident: As an undergraduate
at Auckland University, he found he particularly enjoyed his
research-oriented classes. "Something about trying to answer questions
of human consumer behavior really intrigued me," he said. "I
liked marketing in particular because it is very eclectic." When he
graduated at age 20, Bell admits, he opted for graduate school as a
way to avoid joining the workforce. "Now that I am in this job, I
feel that it really fits, but a lot of getting here was a matter of luck
and circumstance," Bell said.
A prolific scholar, Bell has published 15 research papers in
leading journals between 1997 and 2003—with nine others under
review or revision—on everything from the effect of word-of-
mouth on Internet sales to how store location and pricing structure
affect shopping behavior.
A 2001 research paper called "Store Choice and Shopping
Behavior: How Price Format Works" scrutinized shopping patterns
at "every day low price" stores such as Wal-Mart versus HILO
stores, such as clothier Ann Taylor, which have great disparities
between the highest and lowest prices, thus relying on sales and
promotion strategies to entice buyers. The study provided managers
with a new shopping framework by considering both pricing and
location in store performance, weighing such factors as distance to
the store, familiarity with layout, product assortment and pricing
strategies to create a model store managers can use to predict how
and when people will shop.
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