Applying option thinking to value experiential marketing content

Abstract

ABSTRACT Investments in new marketing offerings are notoriously risky, as they require firms to make judgments about an uncertain future. The authors develop an option-thinking framework for valuing and selecting new marketing offerings that combines real-options theory with virtual markets. They apply the framework and demonstrate its power empirically in the context of experiential content, where valuing marketing offerings constitutes a particularly challenging issue. Specifically, they test the proposed option-thinking framework in two experiential settings (movies and professional team sports) and compare it to current managerial practice. Each experiential setting deals with a common managerial marketing challenge. Study 1 examines extending a brand into a new category, and Study 2 investigates ingredient branding. The proposed framework provides managers with an empirical approach that enables them to consider the “value of waiting” when making investment decisions that involve uncertainty regarding future market developments.