2006 ABA Winter Educators` Conference—Marketing Theory

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2006 ABA Winter Educators` Conference—Marketing Theory
2006 AMA Winter Educators’ Conference
Marketing Theory
and Applications
Editors
Jean L. Johnson, Washington State University
John Hulland, University of Pittsburgh
Track Chairs
Maureen Morrin, Rutgers University
G. Tomas M. Hult, Michigan State University
David A. Griffith, Michigan State University
Elizabeth S. Moore, University of Notre Dame
Niraj Dawar, University of Western Ontario
Erwin Danneels, Worcester Polytechnic Institute
Chick Kasouf, Worcester Polytechnic Institute
Kersi D. Antia, University of Western Ontario
Joseph A. Cote, Washington State University
Rebecca J. Slotegraaf, Indiana University
Kwaku Atuahene-Gima, City University of Hong Kong
Su Chenting, City University of Hong Kong
Neeli Bendapudi, Ohio State University
Dhruv Grewal, Babson College
Joan Lindsey-Mullikin, Babson College
Douglas Vorhies, University of Mississippi
Volume 17
311 S. Wacker Dr. • Chicago, IL 60606
Copyright © 2006, American Marketing Association
Printed in the United States of America
Publications Director: Francesca Van Gorp Cooley
Project Coordinator: Christopher Leporini
Cover Design: Jeanne Nemcek
Typesetter: Marie Steinhoff
ISSN: 1054-0806
ISBN: 0-87757-319-0
All rights reserved. No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any
means, including photocopying and recording, or by any information
storage or retrieval system, without the written permission of the
American Marketing Association.
Preface and Acknowledgments
The 2006 AMA Winter Educators’ Conference theme is “Marketing’s Continuing Evolution in Today’s
Competitive Landscape.” Rapidly evolving technologies, converging global markets, shifting power in buyer–
seller relationships, changing consumer tastes, and dynamic organizational structures are all putting pressure on
marketers to continually address change. In response, marketers are exploring nontraditional solutions, using
focused and novel media, entering into multicompany alliances, developing new products and brands to appeal
to changing market demands, and reaching out to new stakeholder groups. This year’s conference includes a
variety of innovative special sessions that build on thought leaders’ insights and on their original research papers,
which address important research topics valued by marketing scholars and educators.
Many people have dedicated substantial time and effort to ensure that the 2006 Winter Educators’ Conference
is a success. Although we thank everyone for their help and support, we particularly acknowledge the outstanding
contributions of the Conference track chairs. The chairs have shown leadership in ensuring an exceptional
academic program, both in professionally managing the review process and in attracting top-notch special
sessions. The Conference track chairs are as follows:
Consumer Behavior
Global Marketing
Marketing and Society
Brand Marketing and Communications
Entrepreneurship and Innovation
Interfirm Issues
Marketing Research
Marketing Strategy
New and Existing Products
Relationship Marketing
Retailing and Pricing
Special Interest Groups
Maureen Morrin, Rutgers University
G. Tomas M. Hult, Michigan State University
David A. Griffith, Michigan State University
Elizabeth S. Moore, University of Notre Dame
Niraj Dawar, University of Western Ontario
Erwin Danneels, Worcester Polytechnic Institute
Chick Kasouf, Worcester Polytechnic Institute
Kersi Antia, University of Western Ontario
Joseph A. Cote, Washington State University
Rebecca J. Slotegraaf, Indiana University
Kwaku Atuahene-Gima, City University of Hong Kong
Su Chenting, City University of Hong Kong
Neeli Bendapudi, Ohio State University
Dhruv Grewal, Babson College
Joan Lindsey-Mullikin, Babson College
Douglas Vorhies, University of Mississippi
The program also reflects the valuable contributions of the conference reviewers (listed on p. v). We thank
all of those who submitted papers and/or special session proposals, the members of the AMA Academic Council,
and the AMA journal editors. We also appreciate the detailed implementation support provided by the AMA staff:
Nicole Morris, Cher Doherty, Chris Leporini, Francesca Cooley, and Pat Goodrich. We also extend our thanks
to Marie Steinhoff, who typeset the proceedings.
Finally, we want to single out Kenneth Evans, AMA Academic Council President, for providing us with his
terrific advice and support throughout the planning process.
Jean Johnson
Washington State University
John Hulland
University of Pittsburgh
iii
Best Papers by Track
Conference Best Paper
Global Marketing Track
“Understanding Latent Conflict in Marketing Teams”
“The Moderating Effects of National Cultural Values on
Intraorganizational Factors-Market Orientation Relationship: A Cross-Cultural Model”
Ruth Maria Stock, University of Hohenheim
Martin Klarmann, University of Mannheim
Ahmet H. Kirca, George Washington University
Honorable Mention
Interfirm Issues: Buyer–Seller & Distribution
Channels Track
“Pricing of Mall Services When Transactions Can End
Outside the Mall”
“Pricing of Mall Services When Transactions Can End
Outside the Mall”
Hong Yuan, University of Illinois at Urbana–Champaign
Aradhna Krishna, University of Michigan
Hong Yuan, University of Illinois at Urbana–Champaign
Aradhna Krishna, University of Michigan
Track Best Papers
Marketing Research Track
Brand Marketing & Communications Track
“Standardized or Specialized? What Is the Best Approach
for Measuring Corporate Reputations?”
“Exploring Hispanic Cultural Values: A Comparative
Analysis of Hispanic and General U.S. Market Print Ads”
Klaus-Peter Wiedmann, University of Hannover
Nitish Singh, California State University, Chico
Boris Bartikowski, Euromed Marseille Ecole de
Management
Marco Gomez, California State University, Chico
Marketing & Society Track
“To Eat or Not to Eat: Effects of Objective Nutrition
Information on Consumer Perceptions of Fast Food
Chains’ Meal Healthiness, Future Health Concerns, and
Meal Repurchase Intentions”
Consumer Behavior Track
“Searching for the Perfect Gift: The Role of the Maximizing Trait in Decision Making”
Scot Burton, University of Arkansas
Kenneth W. Bates, University of Arkansas
Kyle A. Huggins, University of Arkansas
Tilottama G. Chowdhury, Quinnipiac University
S. Ratneshwar, University of Missouri
Marketing Strategy Track
The Development of New & Management of
Existing Products Track
“Understanding Latent Conflict in Marketing Teams”
Ruth Maria Stock, University of Hohenheim
Martin Klarmann, University of Mannheim
“Innovation, Imitation, and New Product Performance:
The Case of China”
Pricing & Retailing Track
Kevin Zheng Zhou, University of Hong Kong
“The Relationship Between Consumers’ Tendencies to
Buy Excessively and Their Motivations to Shop and Buy
on the Internet”
Entrepreneurship & Innovation Track
“Voices from the Field: How Exceptional Electronic
Industrial Innovators Innovate”
Monika Kukar-Kinney, University of Richmond
Nancy M. Ridgway, University of Richmond
Kent B. Monroe, University of Richmond
Abbie Griffin, University of Illinois at UrbanaChampaign
Raymond L. Price, University of Illinois at Urbana–
Champaign
Matthew M. Maloney, Mars Inc.
Edward W. Sim, University of Illinois at Urbana–
Champaign
Bruce A. Vojak, University of Illinois at Urbana–
Champaign
Relationship Marketing Track
“An Exploration of Partner Effects on Customer Evaluations of a Focal Firm in a Business-to-Business Service
Network”
Felicia Morgan, Ohio University
Dawn Deeter-Schmelz, Ohio University
Christopher Moberg, Ohio University
iv
2006 AMA Winter Educators’ Conference
List of Reviewers
A
Natalie Ross Adkins, Creighton
University
Manoj Agarwal, Binghampton
University
Sangeev Agarwal, Iowa State
University
Pankaj Aggarwal, University of
Toronto
Irfan Ahmed, Sam Houston State
University
Alan R. Andreasen, Georgetown
University
J. Craig Andrews, Marquette
University
Jonlee Andrews, Indiana University
Rick Andrews, Louisiana State
University
Jen Argo, University of Alberta
Tomas Gomez Arias, University
of A Coruña
Dennis B. Arnett, Texas Tech
University
Zeynep Arsel, University of
Wisconsin – Madison
Laurence Ashworth, Queen’s
University
B
Cem Bahadir, Emory University
Ainsworth Bailey, University of
Toledo
Stacey Menzel Baker, University
of Wyoming
Anne L. Balazs, Mississippi
University for Women
A. Dwayne Ball, University of
Nebraska – Lincoln
Yeqing Bao, University of
Alabama, Huntsville
Gloria Barczak, Northeastern
University
Michael Basil, University of
Lethbridge
Rajeev Batra, University of
Michigan
William O. Bearden, University of
South Carolina
Simon Bell, University of
Cambridge
Paul Berger, Boston University
Barry Berman, Hofstra University
Subhrendu Bhattacharya, NationalLouis University
Melissa Bishop, University of
Texas at Arlington
Charles Blankson, University of
North Texas
Lauren Block, City University of
New York, Baruch
Paul N. Bloom, University of
North Carolina at Chapel Hill
Serkan Bolat, University of
Tennessee
Paula Fitzgerald Bone, West
Virginia University
Carolyn M. Bonifield, University
of Vermont
P. Greg Bonner, Villanova
University
David Boush, University of Oregon
Adrian Bóveda-Lambie, University
of Rhode Island
Doug Bowman, Emory University
Kevin D. Bradford, University of
Notre Dame
Adam Brasel, Boston College
Sheri Bridges, Wake Forest
University
Terry Bristol, Arizona State
University, West Campus
James Brown, Virginia Tech
University
Stephen Brown, University of
Houston
Tom J. Brown, Oklahoma State
University
Norris Bruce, University of Texas
at Dallas
Frederic Brunel, Boston University
Frank Bryant, Howard University
David Buisson, University of
Otago
Osama Butt, University of Texas –
Pan American
C
Susan Cadwallader, Texas A&M
University
Roger Calantone, Michigan State
University
v
Meg Campbell, University of
Colorado at Boulder
Les Carlson, Clemson University
Debra Cartwright, Truman State
University
Eve M. Caudill, Winona State
University
Brian Chabowski, Michigan State
University
Subhra Chakrabarty, Mississippi
State University
Pierre Chandon, Northwestern
University, INSEAD
Aruna Chandra, Indiana State
University
Rajash Chandrashekaran, Fairleigh
Dickinson University
Rajesh Chandy, University of
Minnesota
Sophie Changeur, University of
Paris
Mike Chao, Saint Louis University
Subimal Chatterjee, Binghamton
University
Amar Cheema, Washington
University in St. Louis
Cristian Chelariu, York University
Haipeng Chen, University of
Miami
Qimei Chen, University of Hawaii,
Manoa
Terry L. Childers, University of
Kentucky
Jyh-Shen Chiou, National
Chengchi University
Tim Christiansen, University of
Arizona
Alka Citrin, Georgia Institute of
Technology
Cindy Claycomb, Wichita State
University
Angeline Grace Close, North
Georgia College & State
University
Suraj Commuri, University of
Missouri
Larry D. Compeau, Clarkson
University
Don Lloyd Cook, University of
New Mexico
Kathryn Cort, Elon University
Angelica Cortes, University of
Texas – Pan American
Robert Cosenza, University of
Mississippi
Thomas G. Costello, Eastern
Illinois University
Robin Coulter, University of
Connecticut
Amy Cox, University of North
Carolina at Greensboro
David Cranage, Pennsylvania State
University
Vicky Crittenden, Boston College
D
Peter A. Dacin, Queen’s University
Kofi Q. Dadzie, Georgia State
University
Robert Dahlstrom, University of
Kentucky
Peter Danaher, University of
Auckland
Peter R. Darke, University of
British Columbia
Rene Y. Darmon, ESSEC
Jenny Darroch, Claremont
McKenna College
Thomas E. DeCarlo, Iowa State
University
Luigi De Luca, University of
Bucconi
Rohit Deshpandé, Harvard
University
Sameer Deshpande, University of
Lethbridge
Debra M. Desrochers, University
of Notre Dame
Thomas S. Dewitt, Bowling Green
State University
Kristin Diehl, University of South
Carolina
Andrea Dixon, University of
Cincinnati
Eric Dolansky, University of
Western Ontario
D. Todd Donavan, Kansas State
University
Mike Dorsch, Clemson University
Wenyu Dou, City University of
Hong Kong
Chris Dubelaar, Monash University
E
John P. Eaton, University of
Arizona
Diane Edmondson, University of
South Florida
Ahmet Ekici, Bilkent University
Elizabeth A. Edwards, Eastern
Michigan University
Jill Ellingson, Ohio State
University
F
Ann Fairhurst, University of
Tennessee
Xiang Fang, Oklahoma State
University
Martin Fassnacht, WHU
Reto Felix, University of
Monterrey
Troy Festervand, Middle
Tennessee State University
Leslie M. Fine, Ohio State
University
Karen Flaherty, Oklahoma State
University
Linda M. Foley, University of
Akron
Howard Forman, Drexel University
Thomas Foscht, Karl-Franzens
University of Graz
Edward Fox, Southern Methodist
University
Ellen Foxman, Bentley College
Ruud T. Frambach, Tilburg
University
George R. Franke, University of
Alabama
Gary Frankwick, Oklahoma State
University
Frank J. Franzak, Virginia
Commonwealth University
Bobbie Fuller, Winthrop
University
Olivier Furrer, Radboud University
Nijmegen
G
Gerald Y. Gao, University of Hong
Kong
Nitika Garg, University of
Mississippi
James W. Gentry, University of
Nebraska – Lincoln
Joseph Giglierano, San Jose State
University
Dave Gilliland, Colorado State
University
Mary Gilly, University of
California, Irvine
vi
James L. Ginter, Ohio State
University
Peter Golder, New York
University
Thomas J. Goldsby, Ohio State
University
Tracy Gonzalez-Padron, Michigan
State University
Gurram Gopal, Elmhurst College
John Grabner, University of North
Texas
Barnett Greenberg, Florida
International University
Yany Gregoire, Washington State
University
Andreas Grein, Baruch College
Rajdeep Grewal, Pennsylvania
State University
Bianca Grohmann, Concordia
University
Barbara L. Gross, California State
University, Northridge
Stephen J. Grove, Clemson
University
Thomas Gruen, University of
Colorado at Colorado Springs
Joseph P. Guiltinan, University of
Notre Dame
Gregory T. Gundlach, University of
North Florida
Michael Guolla, University of
Ottawa
Kevin P. Gwinner, Kansas State
University
H
Rebecca Hamilton, University of
Maryland
Richard Hanna, Boston College
Katherine E. Harris, Babson
College
Manoj Hastak, American
University
Curtis P. Haugtvedt, Ohio State
University
Diana Haytko, Southwest Missouri
State University
Timothy B. Heath, Miami
University of Ohio
Jan Heide, University of
Wisconsin – Madison
David Henard, North Carolina State
University
Louise Heslop, Carleton
University
Jonathan Hibbard, Boston
University
Charles Hofacker, Florida State
University
Susan Hogan, Emory University
Gillian Hogg, University of
Strathclyde
Mary Holden, Waterford Institute
of Technology
Betsy B. Holloway, Stamford
University
Heather Honea, San Diego State
University
Mark Houston, University of
Missouri
Michael Hu, Kent State University
Joel Huber, Duke University
Erik Hultink, Deft University of
Technology
Claes Hultman, University of
Otago
Thomas Hustad, Indiana University,
Bloomington
Michael Hutt, Arizona State
University
R. Bruce Hutton, University of
Denver
Michael R. Hyman, New Mexico
State University
I
Subin Im, San Francisco State
University
Chuck A. Ingene, University of
Mississippi
Gopal Iyer, Florida Atlantic
University
J
Shailendra Jain, Indiana University
Cheryl Jarvis, Arizona State
University
Satish Jayachandran, University of
South Carolina
Robert E. Jewell, Kent State
University
Mindy Ji Song, Iowa State
University
Myong-Soo Jo, McGill University
Bill Johnson, Nova Southeastern
University
Chris Joiner, George Mason
University
Eli Jones, University of Houston
Marilyn Jones, Bond University
Ashwin Joshi, York University
Annamma Joy, Concordia
University
Sungwoo Jung, Columbus State
University
K
Manish Kacker, Tulane University
Jacqueline Kacen, University of
Houston
Michael Kamins, University of
Southern California
Karl Kampschroeder, St. Mary’s
University
Vinay Kanetkar, University of
Guelph
Eric Karson, Villanova University
Rajiv Kashyap, William Paterson
University
Vishal Kashyap, Xavier University
Jerry Katrichis, University of
Hartford
Carol Kaufman-Scarborough,
Rutgers University
Garland Keesling, Towson
University
James Kellaris, University of
Cincinnati
Scott W. Kelley, Kentucky State
University
Adwait Khare, University of
Houston
Kyeong-Heui Kim, University of
Toronto
Stephen Keysuk Kim, Oregon State
University
Jill Klein, INSEAD
Noreen Klein, Virginia Tech
University
Thomas A. Klein, University of
Toledo
Robert Kleine III, Ohio Northern
University
Elko Kleinschmidt, McMaster
University
Kitty Koelemeijer, Nyenrode
University
Chiranjeev Kohli, California State
University, Fullerton
Praveen Kopalle, Dartmouth
College
Dmitri Kuksov, Washington
University in St. Louis
vii
L
Gene R. Laczniak, Marquette
University
Maria Lam, Malone College
Jay Lambe, Virginia Tech
University
Matt Lancelotti, California State
University, Fullerton
Jeff Langenderfer, Berry College
Fred Langerak, Erasmus University
Michel Laroche, Concordia
University
Loraine Lau-Gesk, University of
California, Irvine
Robert Lauterborn, University of
North Carolina at Chapel Hill
Anne Lavack, University of Regina
Jill Lei, Maastricht University
Julie Li, University of Hong Kong
Donald R. Lichtenstein, University
of Colorado at Boulder
Lewis K.S. Lim, Nanyang
Technological University
Fang Liu, University of Western
Australia
Brian Lofman, Ramapo College of
New Jersey
Tina Lowry, University of Texas at
San Antonio
Jason Lueg, Mississippi State
University
Bryan Lukas, University of
Melbourne
M
Doug MacLachlan, University of
Washington
Vijay Mahajan, University of Texas
at Austin
Naresh K. Malhotra, Georgia
Institute of Technology
Margaret Malloy, Pennsylvania
State University
Alan Malter, University of Arizona
Elliot Maltz, Willamette
University
Sudha Mani, University of Western
Ontario
Ken C. Manning, Colorado State
University
Detelina Marinova, Case Western
Reserve University
Francois Marticotte, University of
Quebec at Montreal
Brett Martin, University of
Auckland
Dawne Martin, Kansas State
University
Marlys J. Martin, Oklahoma State
University
Jim Maskulka, Lehigh University
Charlotte H. Mason, University of
North Carolina at Chapel Hill
Shashi Matta, University of
Southern California
Sarah Maxwell, Fordham
University
Michael B. Mazis, American
University
Debbie T. McAlister, Texas State
University – San Marcos
Peter McClure, University of
Massachusetts
Robert McDonald, Texas Tech
University
Pauric McGowan, University of
Ulster
Matthew L. Meuter, California
State University, Chico
Stefan Michel, Thunderbird
University
Elizabeth Miller, Boston College
Sam Min, University of South
Dakota
Sanjay Mishra, University of
Kansas
Saurabh Mishra, Northwestern
University
Vincent-Wayne Mitchell, City
University, London
Vikas Mittal, University of
Pittsburgh
Risto Moisio, University of
Nebraska – Lincoln
Mitzi Montoya-Weiss, North
Carolina State University
Mark Moon, University of
Tennessee
Bill Moore, University of Utah
Jesse Moore, Clemson University
Page Moreau, University of
Colorado at Boulder
Felicia Morgan, Ohio University
Neil A. Morgan, Indiana University
Robert Morgan, Cardiff University
Carol M. Motley, Howard
University
Susan McDowell Mudambi,
Temple University
Patrick E. Murphy, University of
Notre Dame
Janet Murray, Saint Louis
University
Kyle B. Murray, University of
Western Ontario
Feisal Murshed, University of
Michigan – Flint
N
Cheryl Nakata, University of
Illinois at Chicago
Robert W. Nason, Michigan State
University
Stern Neill, University of
Washington, Tacoma
Erik Nes, Norwegian School of
Management
Jennifer Nevins, University of
South Carolina
Carolyn Nicholson, Stetson
University
Jesper Nielsen, University of
Arizona
Rakesh Niraj, University of
Southern California
Charlie Noble, University of
Mississippi
Patricia Norberg, Quinnipiac
University
O
James L. Oakley, Purdue
University
Carl Obermiller, Seattle University
Matt O’Brien, University of
Arizona
Gina O’Connor, Rensselaer
Polytechnic Institute
Erica Okada, University of
Washington
Shintaro Okazaki, Autonomous
University of Madrid
Eric Olson, University of Colorado
at Colorado Springs
Amy Ostrom, Arizona State
University
Cele Otnes, University of Illinois
at Urbana–Champaign
Adesegun Oyedele, University of
Texas-Pan American
P
Jeong Eun (John) Park, University
of New Hampshire
Vanessa Patrick, University of
Georgia
Marcel Paulssen, Humboldt
University, Berlin
viii
Joann Peck, University of
Wisconsin – Madison
Lisa Penaloza, University of
Colorado at Boulder
Laura Peracchio, University of
Wisconsin – Milwaukee
A. Morys Perry, Michigan State
University
Mark Peterson, University of
Texas at Arlington
Robert A. Peterson, University of
Texas at Austin
Ross D. Petty, Babson College
Nigel Piercy, University of
Warwick
Leyland Pitt, Simon Fraser
University
Jeff Podoshen, Temple University
Wesley Pollitte, Michigan State
University
Michael J. Polonsky, Victoria
University
Nicole Ponder, Mississippi State
University
Constance Elise Porter, University
of Notre Dame
Paulo Prado, CEPPAD, UFPR,
Brazil
Carolyn E. Predmore, Manhattan
College
Chris Pullig, Baylor University
Ellen B. Pullins, University of
Toledo
Q
Tianjiao Qiu, University of Illinois
at Urbana–Champaign
William J. Qualls, University of
Illinois at Urbana–Champaign
Pascale Quester, University of
Adelaide
R
Randy Raggio, Ohio State
University
Priyali Rajagopal, Ohio State
University
Lopo L. Rego, University of Iowa
Joseph O. Rentz, University of
Tennessee
Subom Rhee, Santa Clara
University
Edward E. Rigdon, Georgia State
University
Aric Rindfleisch, University of
Wisconsin – Madison
Debra J. Ringold, Willamette
University
Robin Ritchie, University of
Western Ontario
John R. Roberts, University of
New South Wales
Michelle Roehm, Wake Forest
University
Anne Roggeveen, Babson College
José A. Rosa, University of Illinois
at Chicago
Bill Ross, Pennsylvania State
University
Martin Roth, University of South
Carolina
Robert I. Roundtree, Howard
University
J. Edward Russo, Cornell
University
Julie Ruth, Rutgers University
Dan Rutledge, Purdue University,
North Central
S
Alberto Sa Vinhas, Emory
University
Amit Saini, University of
Nebraska – Lincoln
Saeed Samiee, University of Tulsa
Susan Sanderson, Rensselaer
Polytechnic Institute
Özlem Sandikci, Bilkent University
Kåre Sandvik, Buskerud University
College
M.B. Sarkar, University of Central
Florida
Matt Sarkees, University of
Pittsburgh
Paula Saunders, Wright State
University
Nicola Sauer, University of
Mannheim
Debra L. Scammon, University of
Utah
Hope Jensen Schau, University of
Arizona
Minet Schindehutte, Syracuse
University
Detlef G. Schoder, WHU
Kathleen Seiders, Boston College
Sankar Sen, City University of New
York, Baruch
Arun Sharma, University of Miami
K. Sivakumar, Lehigh University
Stanley Slater, Colorado State
University
Brock Smith, University of
Victoria
Sanjay Sood, Rice University
Alina Sorescu, Texas A&M
University
Jelena Spanjol, Texas A&M
University
Susan Spiggle, University of
Connecticut
David Sprott, Washington State
University
Srinivas Sridharan, University of
Western Ontario
Raji Srinivasan, University of
Texas at Austin
Simona Stan, University of Oregon
James Stephens, Emporia State
University
Barbara Stern, Rutgers University
Dave Stewart, University of
Southern California
Anne Stringfellow, Thunderbird
University
Rodney Stump, Towson University
Mohan Subramaniam, Boston
College
Bharat Sud, University of Western
Ontario
Ursula Sullivan (Alvarado),
University of Illinois at Urbana–
Champaign
Baohong Sun, Carnegie Mellon
University
Raj Suri, Drexel University
Scott D. Swain, Boston University
Vanitha Swaminathan, University
of Pittsburgh
Bernhard Swoboda, University of
Trier
Lisa R. Szykman, College of
William & Mary
T
Charles R. Taylor, Villanova
University
Mrugank Thakor, Concordia
University
Shawn Thelen, Hofstra University
Hans M. Thjomoe, Norwegian
School of Management
Martin T. Topol, Pace University
Michael Tsiros, University of
Miami
ix
Matti Tuominen, Helsinki School
of Economics
U
H. Rao Unnava, Ohio State
University
Nancy M. Upton, Suffolk
University
V
Ann M. Veeck, Western Michigan
University
Sriram Venkataraman, Emory
University
Madhubalan Viswanathan,
University of Illinois at Urbana–
Champaign
Douglas Vorhies, University of
Mississippi
Glenn B. Voss, North Carolina
State University
Kevin Voss, Oklahoma State
University
Nicole Votolato, Ohio State
University
Peter Voyer, Royal Military
College
W
A.N.M. Waheeduzzaman, Texas
A&M University – Corpus
Christi
Kirk Wakefield, Baylor University
David Wallace, Illinois State
University
Gianfranco Walsh, University of
Hannover
Fang Wan, University of Manitoba
Guangping Wang, Pennsylvania
State University
Sijin Wang, Polytechnic University
James Ward, Arizona State
University
Ken Wathne, University of
Wisconsin – Madison
Yinghong (Susan) Wei, University
of North Carolina at Chapel Hill
Art Weinstein, Nova Southeastern
University
Bart Weitz, University of Florida
Rebecca Wells, University of
Dayton
Mary Werner, Jacksonville
University
Carolyn White, Peace College
J. Chris White, Michigan State
University
Tiffany White, University of
Illinois at Urbana–Champaign
Klaus-Peter Wiedmann, University
of Hannover
Joshua L. Wiener, Oklahoma State
University
Jan Wieseke, Philipps University,
Marburg
James B. Wiley, Victoria
University
William L. Wilkie, University of
Notre Dame
Jerome D. Williams, University of
Texas at Austin
Terrell G. Williams, Western
Washington University
James Willis, University of
Hawaii, Manoa
Terrence H. Witkowski, California
State University, Long Beach
Andrea Wojnicki, Harvard
University
John P. Workman Jr., Creighton
University
X
Lan Xia, Bentley College
Henry Xie, Saint Louis University
Y
Manjit Yadav, Texas A&M
University
x
Goksel Yalcinkaya, Michigan State
University
Bonghee Yoo, Hofstra University
Z
Chun Zhang, University of
Vermont
Jie Zhang, University of Michigan
Yang Zhilian, City University of
Hong Kong
Rongrong Zhou, Hong Kong
University of Science and
Technology
Mohammadali Zolfagharian,
University of North Texas
TABLE OF CONTENTS
PREFACE AND ACKNOWLEDGMENTS
iii
BEST PAPERS BY TRACK
iv
LIST OF REVIEWERS
v
TABLE OF CONTENTS
xi
SEGMENTATION IN GLOBAL MARKETS
A Strategic Framework for Understanding Cross-National Segmentation
Hugh M. Cannon, Attila Yaprak
1
A Conjoint-Based Segmentation of Airline Passengers: A Three-Country (NAFTA)
Comparison
Edward R. Bruning, Michael Y. Hu, Andrew W. Hao
3
CULTURE AND BRAND
Exploring Hispanic Cultural Values: A Comparative Analysis of Hispanic and
General U.S. Market Print Ads
Nitish Singh, Boris Bartikowski, Marco Gomez
5
Celebrities as “Image Conditioner” for Brands? An Empirical Study Based on the
Match-Up Hypothesis
Katja Leschnikowski, Markus Schweizer, Jan Drengner
7
A Contingency Framework of the Moderating Effect of Personality Traits on Attitudes
Toward Advertisements
Susan D. Myers, Sandipan Sen, Aliosha Alexandrov, Alan Bush
9
NEW THEORETICAL PERSPECTIVES ON RELATIONSHIPS
The Nature and Impact of Collective-Relational Paradox in Consumer Trust Judgments
Rama Jayanti, Jagdip Singh
11
An Exploration of Partner Effects on Customer Evaluations of a Focal Firm in a
Business-to-Business Service Network
Felicia Morgan, Dawn Deeter-Schmelz, Christopher Moberg
13
Social Exchange Perspective on Consumer Loyalty
Chiharu Ishida, Janet E. Keith
15
USING METHODS TO GAIN MANAGERIAL INSIGHTS
Standardized or Specialized? What Is the Best Approach for Measuring Corporate
Reputations?
Klaus-Peter Wiedmann
17
Linking Marketing Strategy to Shareholder Value: A Review on Event Study Methodology
Mehmet Berk Talay
19
Subjective Measures of Retail Performance: Accounting for Occasions
Adam Finn
21
xi
INTERFIRM DYADS AND NETWORKS
Japanese Keiretsu’s Demise: The Influence of New Collaborations on Wholesalers’
Performance
Mohammed Y.A. Rawwas
23
Seeking Congruence on Norms: Revisiting Kaufmann and Dant’s (1992) Dimensions
of Exchange
Mary T. Holden, Thomas O’Toole
25
The Effect of the Buyer’s Reputation on the Seller’s Reputation: A Network Perspective
Tiebing Shi
28
SERVICE RECOVERY STRATEGIES
Antecedents and Consequences of Customer Participation in Service Recovery
Beibei Dong, Kenneth R. Evans, Shaoming Zou
30
Developing Effective Service Recovery Strategies: The Role of Explanation and
Compensation
Anne Roggeveen, Dhruv Grewal, Michael Tsiros
32
The Role of Perceived Fairness in Consumer Penalty Evaluation
Young “Sally” Kim
34
SHOPPING BEHAVIOR
The Relationship Between Consumers’ Tendencies to Buy Excessively and Their
Motivations to Shop and Buy on the Internet
Monika Kukar-Kinney, Nancy M. Ridgway, Kent B. Monroe
36
Why Do e-Shoppers Abandon Shopping Carts – Perceived Waiting Time, Perceived
Risk, and Transaction Inconvenience?
Rajasree K. Rajamma
38
The Effect of Return Legitimacy Upon Retail Salesperson Role Stress
Chad W. Autry, Donna J. Hill, Matthew O’Brien
40
ATTAINMENT OF CUSTOMER RELATIONSHIPS AND THE VALUE
OF CUSTOMER-BASED CAPABILITIES AND REPUTATION
Achieving Customer Relationship and Organizational Performance Through Assets,
Capabilities, and Processes
Artur Baldauf, David W. Cravens, William L. Cron
42
Interaction Orientation: The New Measure of Marketing Capabilities
Girish Ramani, V. Kumar
44
Customer-Based Corporate Reputation – Introducing a New Segmentation Criterion
Gianfranco Walsh, Sharon E. Beatty, Betsy B. Holloway
46
GOING GLOBAL: ENTRY MODE AND STRATEGIC PARTNERSHIPS
Strategic Partnerships and the Internationalization Process: The Case of Software Firms
Aileen Kennedy, Kathy Keeney
xii
48
Entry Mode Revisited: An Exploration-Exploitation Perspective
Shichun Xu
50
Choosing a Partner to Ensure Goal Attainment in International New Product
Development Alliances
Steven H. Seggie, Mehmet Berk Talay, S. Tamer Cavusgil
52
LINKING MARKETING TO STOCK MARKET RETURNS AND PROFIT
PERFORMANCE
The Impact of Film Product Placement on the Market Value of the Firm
Michael A. Wiles, Anna Danielova
54
Shareholder Value Orientation of Marketing: The Construct and Its Performance
Implications
Christian Homburg, Sabine Kuester, Thomas Lueers
55
Product-Market Strategy Comprehensiveness and Business Performance: An
Analysis of Antecedents and Moderators
Paul Hughes, Robert E. Morgan, Mathew Hughes, Nick Lee
57
UNDERSTANDING RELATIONSHIP LOYALTY
An Investigation of the Non-Linear and Multi-Level Effects of Customer Satisfaction
on Customer Defection
Thomas Hollmann
59
A Test of the Effect of Consumer Trust and Transaction Costs on E-Loyalty
Cuiping Chen, Matthew O’Brien
61
Affective and Calculative Commitment as Antecedents of Customer Loyalty
Heiner Evanschitzky, Hilke Plassmann
63
DETERMINANTS OF SUCCESS OF INNOVATION STRATEGIES
Innovation, Imitation, and New Product Performance: The Case of China
Kevin Zheng Zhou
65
Crucial Determinants of New Product Alliance Success
Mehmet Berk Talay, Steven H. Seggie, S. Tamer Cavusgil
67
The Role of Firm Resources and Characteristics on the Market Valuation of New
Product Announcements
Ruby P. Lee, Qimei Chen
69
SATISFYING CUTOMER NEEDS AND EMOTIONS
Satisfiers, Dissatisfiers, Criticals, and Neutrals: Understanding Their Relative
Effects on Customer (Dis)satisfaction
Kaori Nagao, Stephen L. Vargo, Fred W. Morgan
71
Entertainment Consumption: How Entertainment Goods Give the People What
They Want
Justin Anderson
73
Toward a Typology of Desire in Consumer Research
Alexandra Aguirre Rodriguez
75
xiii
ESTIMATING AND PREDICTING CUSTOMER LIFETIME VALUE
The Power of Customer Advocacy
V. Kumar, J. Andrew Petersen, Robert P. Leone
81
Predicting Customer Lifetime Duration and Future Purchase Levels: Simple
Heuristics vs. Complex Models
Markus Wübben, Florian von Wangenheim
83
Understanding Your Customer Portfolio: A Simple Approach to Customer
Segmentation According to Lifecycle Dynamics
Patrick Lentz, Florian von Wangenheim
85
CONTEMPORARY ISSUES IN NUTRITION INFORMATION AND SOCIAL
MARKETING
To Eat or Not to Eat: Effects of Objective Nutrition Information on Consumer
Perceptions of Fast Food Chains’ Meal Healthiness, Future Health Concerns, and
Meal Repurchase Intentions
Scot Burton, Kenneth W. Bates, Kyle A. Huggins
87
Nutrition Labels: The Effect of Specific Health Concerns on Decision Quality and
Decision Time
Michael Basil, Debra Z. Basil, Sameer Deshpande
89
If the Cause Doesn’t Fit, Must the Social Marketer Quit? Investigating the Importance
of Fit Between Brands and Social Causes
Rajiv Kashyap, Fuan Li
91
EMPLOYEE AND MANAGEMENT IMPACT ON RELATIONSHIPS
Does Management Commitment to Service Quality Impact on Frontline Employees’
Affective and Performance Outcomes?
Steven H. Seggie, Nicholas J. Ashill
99
The Positive and Negative Consequences of Internal Customer Orientation on
Internal Customer-Supplier Relationship Quality
Ashley Kilburn, Jeff Thieme, Greg Boller
101
Customer Perceptions of Service Employee Motivation: An Attribution Theory
Perspective
Ayse Banu Elmadag, Katherine N. Lemon
103
CONSUMER INFORMATION SEARCH: SITUATIONAL AND DISPOSITIONAL
ISSUES
The Impact of Media Specific Investment and Trust on the Use of the Internet for
Information Search
Talai Osmonbekov, Naveen Donthu, Danny N. Bellenger
105
Positive “Word of Mouse”: The Role of Personalization
Lan Xia, Nada Nasr Bechwati
107
Searching for the Perfect Gift: The Role of the Maximizing Trait in Decision Making
Tilottama G. Chowdhury, S. Ratneshwar
109
xiv
GLOBAL MARKETING STRATEGY ISSUES
The Moderating Effects of National Cultural Values on Intraorganizational
Factors-Market Orientation Relationship: A Cross-Cultural Model
Ahmet H. Kirca
111
An Empirical Examination of Firm Capital on Performance: A Cross-Cultural Study
Roger Calantone, David Griffith, Goksel Yalcinkaya
112
Positioning Strategies of Firms in South Africa
Charles Blankson
114
SERVICE CONVENIENCE
Measuring Service Convenience and Assessing Its Influence on Retail Customers
Kathleen Seiders, Glenn B. Voss, Andrea L. Godfrey, Dhruv Grewal
116
Behavioral and Monetary Effects of Positive and Negative Capacity-Driven Service
Experiences: Why Revenue Management Systems Are Due for Change
Florian v. Wangenheim, Tomás Bayón
118
The Salesperson-Customer Interface: How Salespeople’s Job Attitudes and
Behaviors Influence Customer Relationships
Jane Zhen Cai
120
SOCIAL INFLUENCES ON CONSUMER BEHAVIOR
The Role of Virtual Communities as Shopping Reference Groups
Iryna Pentina
122
Guilt and Giving: A Process Model of Empathy and Efficacy
Debra Z. Basil, Nancy M. Ridgway, Michael D. Basil
124
Consumer Embarrassment and Its Behavioral Consequences
King-Yin Wong
126
EMERGING TOPICS IN INNOVATION AND NEW PRODUCTS
Marketing Strategy Formulation and the Commercialization of New Technologies:
A Network Perspective
Leslie H. Vincent
128
Institutional Dynamics and Innovation: Lesson Learned from the Open Source
Software Industry
Tanawat Hirunyawipada
130
Voices from the Field: How Exceptional Electronic Industrial Innovators Innovate
Abbie Griffin, Raymond L. Price, Matt Maloney, Edward W. Sim, Bruce A. Vojak
132
FINANCIAL RETURNS TO RELATIONSHIPS
A Comparison of Aggregate and Disaggregate Level Approaches for Measuring and
Maximizing Customer Equity
V. Kumar, Morris George
142
The Impact of Customer Relationship Management on Performance
Ilaria Dalla Pozza, Giuliano Noci
144
xv
Relational Market-Based Assets and Sustainable Financial Returns
Xueming Luo
146
BRAND MANAGEMENT
Brand Modernity: Scale Development and Implications for Brand Management
Patrick Lentz, Christine Sauermann, Hartmut H. Holzmüller
147
The Ratings Game: A Framework for Investigating Factors Influencing Consumers’
Perceptions and Usage of Online User Reviews
Hieu P. Nguyen
150
Linking an Individual’s Brand Value to the Customer Lifetime Value: An Integrated
Framework
V. Kumar, Man (Anita) Luo
152
COLLABORATION IN INTERFIRM RELATIONSHIPS
Fairness in Interfirm Exchange Relationships and Its Impact on Consumer Judgments
and Behavioral Intentions
D. Eric Boyd, Marcus Cunha, Jr.
154
A Three-Component Model of Benevolence in Buyer-Supplier Relationships
Qiong Wang
156
The Determinants of Cooperative Sentiments in Business-to-Business Partnerships
Niklas Myhr
158
WHEN CONSUMERS CONSUME: SOCIAL, TECHNOLOGICAL, AND
ENVIRONMENTAL CONSIDERATIONS
The Internet: Leveler or Divider? A Cultural Capital Perspective
Esther Smith-Mitchell, Chris Dubelaar
160
Hedonic and Utilitarian Dimensions of Online Retail Shopping Behavior: Does
Disability Matter?
William J. Jones, Terry L. Childers, Carol Kaufman-Scarborough
168
Materialism and Its Relationship to Environmental Beliefs and Environmental
Concern
William Kilbourne, Greg Pickett
169
PERSPECTIVES ON COMPETITION AND SOCIAL WELFARE
Cultural Competitiveness, Market Responsiveness, and Performance: The Influence
of Stakeholder Orientation
Tracy Gonzalez-Padron
171
Competitive Strategy and Product Liability: Consequences for Interorganizational
Relationships
Karl A. Boedecker, Jack J. Kasulis, Fred W. Morgan, Jeffrey J. Stoltman
173
Resource Advantage Theory as a Post-Chicago Argument for Legal Coopetition:
The Role of Imperfect Information Among Competing Firms of an Alliance
Michael A. Levin, Robert E. McDonald
175
xvi
BRAND RELATIONSHIPS
Services Branding: Revealing the Rhetoric Within Retail Banking
Deirdre O’Loughlin, Isabelle Szmigin
177
Rhythms of the Branding Beat: Experiences of Classical Music Performing Artists
Maureen Bourassa, Peggy Cunningham
184
Business Relationship Closeness Inventory (BRCI): A Framework for Measuring
the Quality of Long-Term Business Relationships
Arne Floh
186
UNDER-RESEARCHED TOPICS IN CONSUMER BEHAVIOR
Uncovering Attributes of Authenticity: The Creation of Brand Meaning in the Luxury
Wine Trade
Michael B. Beverland
189
Getting a “Sense” of Financial Security for Generation Y
Tilottama G. Chowdhury, Robin A. Coulter
191
The Effect of Music Congruence and Gender on Online Users’ Flow Experiences
Liz C. Wang, Lu-Hsin Chang
193
BRAND EVALUATIONS AND ATTITUDE
The Role of Emotion and Reason in Brand Attitude Formation
Arjun Chaudhuri, Mark Ligas
195
How Do Consumers Evaluate Line Extensions? The Importance of Consumer Attitudes
in Line Extension Success
Sweta Chaturvedi Thota
202
Envelope Message Framing Strategies, Envelope Characteristics, and Direct Mail
Effectiveness
Clinton Amos
204
INTRAORGANIZATIONAL CONFLICT, MARKET FORESIGHT, AND NEW
PRODUCT OUTCOMES
Understanding Latent Conflict in Marketing Teams
Ruth Maria Stock, Martin Klarmann
206
Market Foresight Capability: Determinants and New Product Outcomes
Mike McCardle, J. Chris White
208
Explorative New Products and Their Organizational Antecedents
Erwin Danneels, Rajesh Sethi
210
LOYALTY
An Integrative View of Customer Loyalty: Is it Different for Maximizers
Versus Satisficers?
François A. Carrillat, Diane Edmondson, Daniel M. Ladik
212
Measuring and Managing Customer Lifetime Value Based Retailer Strategy
V. Kumar, Denish Shah, Rajkumar Venkatesan
214
xvii
Making Customers Happy Without Seeing Them: The Employee-Customer
Satisfaction Link at Varying Customer Contact Levels
Heiner Evanschitzky, Florian v. Wangenheim
216
BRANDING ISSUES IN GLOBAL MARKETS
Consumer Preference for Cyber and Extension Brands: A Two-Step Model
Maria Sääksjärvi, Saeed Samiee
218
Does “Country of Origin” Affect Attitudes of Chinese Consumers? Mediating Effect
of Brand Sensitivity and Moderating Effect of Product Cues
Yujie Wei
220
The Dynamics of Brand Internationalization: Spatial, Temporal, and Hierarchical
Considerations
Sengun Yeniyurt, Janell D. Townsend, Ravi Parameswaran
222
TECHNOLOGY-ENHANCED RELATIONSHIPS
Self-Service Technology Effectiveness: The Roles of Comparative Information,
Interactivity, and Individual Differences
Zhen Zhu, Cheryl Nakata, K. Sivakumar, Dhruv Grewal
224
Virtual Sales Agents
Hans H. Bauer, Marcus M. Neumann, Tobias E. Haber, Ralf Mäder
226
The Role of Customer Relationship Management Software in Customer Satisfaction:
Examining Service Employee-Customer-Technology Relationships
Regina C. McNally, Abbie Griffin
232
AFFECT AND ATTITUDES IN CONSUMER BEHAVIOR
Does Nonconscious and Conscious Affect Combine Additively or Multiplicatively?
William D. Lucky, Jr., Barnett A. Greenberg
234
Understanding Celebrity Endorsement: A Classical Conditioning Approach
Brian D. Till, Sarah Haas, Randi Priluck
241
In Search of Attitude Persistence Using Sales Promotion
Joseph M. Jones
243
MARKET INFORMATION USE IN PRODUCT DEVELOPMENT
Functional Stereotypes and Stereotype Change in Cross-Functional New Product
Development Teams
Amy E. Cox
245
Organization Redundancy for Enhancing Utilization of Customer Information in New
Product Development: An Empirical Study of Japanese Consumer Goods Industry
Tomoko Kawakami
247
Acquire and Forget: The Conflict of Information Acquisition and Organizational
Memory in the Development of Radical Innovations
Joshua H. Johnson, David M. Dilts
254
xviii
COORDINATING EXTERNAL RELATIONS
Expanding Distribution: Using Economic and Relational Incentives to Maintain
Existing Channel Relationships
Jill Mosteller
256
Antecedents and Consequences of Social Influence Strategies in Supply Chain
Management
Horace L. Melton
263
Pricing of Mall Services When Transactions Can End Outside the Mall
Hong Yuan, Aradhna Krishna
270
VALUE-BASED PRICING, CITY-OF-ORIGIN EFFECTS, AND “ASIAN WAY”
ENTREPRENEURSHIP
A Value-Based Pricing Perspective on Value Communication
Gerald E. Smith, Thomas T. Nagle
272
City-of-Origin Effects in the German Beer Market: Transferring an International
Construct to a Local Context
Patrick Lentz, Hartmut H. Holzmüller, Florian von Wangenheim
274
An Exploratory Investigation into the “Asian Way” of Undertaking Entrepreneurial
Marketing Practices in the U.K.
Shiv Chaudhry, Dave Crick
276
xix
A STRATEGIC FRAMEWORK FOR UNDERSTANDING
CROSS-NATIONAL SEGMENTATION
Hugh M. Cannon, Wayne State University, Detroit
Attila Yaprak, Wayne State University, Detroit
SUMMARY
The rapid globalization of markets, accompanied by
the proliferation of both global and local media, has raised
the possibility of developing advertising campaigns that
address cross-national rather than geographically or politically based segments. This paper considers the possibility of cross-national segmentation in light of underlying forces driving globalization. It not only suggests
different patterns of cross-national segmentation, but also
the dynamic forces by which they are likely to change.
A Contingency Approach to Cross-National Segmentation
As suggested in Figure 1, our framework assumes
that a marketing situation will tend to depend on two
factors: The target market orientation, or the degree to
which the relevant consumer decisions are anchored in
parochial versus cosmopolitan values; and the nature of
the product benefits being addressed by the marketer,
whether it is functional or symbolic.
Cosmopolitanism represents the tendency of people
to orient one’s self beyond one’s local organization
(Gouldner 1957) or local community (Merton 1957). We
have used the term parochial rather than local because it
implies a narrow, or limited, perspective, which may not
be associated with lack of travel or exposure to global
communications (Cannon and Yaprak 2002).
The relevance of parochial/cosmopolitan distinction is reflected, in part, by cosmopolitans’ relative
openness to new ideas. Through continuous exposures to
modern products, mass media and consumption-oriented
lifestyles, cosmopolitans come to look globally for the
products and services that best meet their needs and
desires. By contrast, parochials are more strongly influenced by social norms and tradition to guide their consumption.
The functional versus symbolic distinction can be
seen as an expression of means-end chaining (Young and
Feigin 1975; Gutman 1982; Reynolds and Gutman
1984,1988; Reynolds and Craddock 1988; Reynolds and
Gengler 1991; Lautman 1991; Valette-Florence and
Rapacchi 1991; Ter Hofstede, Steenkamp, and Wedel
1999) and the related area of functional attitude theory
(Sarnoff and Katz 1954; Katz 1960; Herek 1986, 1987;
Kristiansen and Zanna 1988; Shavitt 1989; Snyder 1989).
FIGURE 1
A Contingency Framework for Cross-National Segmentation Strategies
American Marketing Association / Winter 2006
1
We use the term functional to represent behaviors emerging from the subset of means-end linkages that Katz calls
“utilitarian.” They draw on a theory of reasoned action,
where consumers evaluate products through a conscious
analysis of benefits desired and social norms (Fishbein
and Ajzen 1975). By contrast, symbolic behaviors grow
out of situations where products are linked to values that
have no direct relationship to the functional benefits the
products deliver (Belk 1988). It follows that consumers
with similar functional needs who have contact with each
other will gravitate toward similar products, namely
those that best provide the desired utility. By contrast,
symbolic needs might be served by different products.
The products serving similar needs can vary dramatically
by cultural and other value-defining groups.
In a cosmopolitan setting, symbolic behaviors tend to
be much more conscious and deliberate. The symbols tend
to have much deeper meaning because they represent
choices from among a much broader range of alternatives.
patterns of migration across situations as people gain
experience.
•
Pattern a represents the adoption of more useful
product solutions, as consumers become more open
to new, innovative ideas, such as the movement from
paper to modern word processors.
•
Pattern b represents the movement from symbolic
behaviors that are dictated by social norms and
tradition to value-expressive behaviors, through which
products are used as an expression of one’s identify,
values, or ideals.
•
Pattern c represents the tendency of functional behaviors to take on symbolic significance, reinforcing
the activities through which a society has survived
over time.
•
Pattern d is similar to Pattern c, except that it is much
more conscious. Functional behaviors (such as the
use of chop sticks in Chinese restaurants) take on
symbolic value, representing cultural “authenticity.”
•
Pattern e represents the replacement of symbolic by
functional behaviors as repetition erodes their symbolic potency. References available upon request.
Applying the Framework
Given the general theoretical background we have
just discussed, consider the specific framework presented
in Figure 1. Each cell represents a unique class of
segmentation situations. Furthermore, there are standard
For further information contact:
Hugh M. Cannon
Wayne State University School of Business
5201 Cass Avenue, Suite 300
Detroit, MI 48202–3930
Phone: 313.577.6040
FAX: 313.577.5486
E-Mail: [email protected]
American Marketing Association / Winter 2006
2
A CONJOINT-BASED SEGMENTATION OF AIRLINE PASSENGERS:
A THREE-COUNTRY (NAFTA) COMPARISON
Edward R. Bruning, University of Manitoba, Winnipeg
Michael Y. Hu, Kent State University, Kent
Andrew W. Hao, Kent State University, Kent
SUMMARY
The globalization of the marketplace is one of the
most important challenges facing multinational enterprises today (Hofstede, Steenkamp, and Wedel 1999).
There are several trends in the international marketing
literature. Customers are becoming more homogeneous
across national boundaries. Geopolitical and economic
boundaries may no longer be necessary as segmentation
base factors (Hassan and Craft 2005). Consumers in
different countries often have more in common with one
another than with fellow consumers in the same country.
A major challenge facing international marketers is how
to identify international market segments and reach them
with products and tailor marketing programs that meet
the needs of these consumers. On the other hand, natural
segments based on country, cultural, or political system
can be easily employed as a base for international segmentation. Further segmentation focusing on consumer preferences may be performed within each country (Hassan,
Craft, and Kortam 2003).
This study investigates several research issues that
are pertinent to and important for international market
segmentation:
1.
Are “natural” segments still appropriate for international segmentation (e.g., segmentation at the country level)?
2.
Should consumer preference-based segments be used
to further augment the natural segments?
3.
Do preference-based segments vary across countries?
To address these issues, we collected conjoint measures and demographic information from 4,975 air travelers in Canada, U.S., and Mexico. Country-level segments were first formed. Consumer segments based on
relative importance of six airline attributes are examined
within each country. We also examined differences in
segment sizes and demographic characteristics across the
three countries.
American Marketing Association / Winter 2006
Previous research (Bruning 1997; Bruning and Hu
1984) indicated six salient airline attributes: price, inflight services, stops, on-time performance, country of
airline, and frequent flyer program. Sixteen scenarios
with four additional holdouts were constructed from
combinations of these attributes. Air travelers were asked
to provide a 1 to 9 preference rating for each of these 20
profiles. The data was collected by conducting personal
interviews at 18 airports in Canada, U.S., and Mexico
yielding a total of 4,975 participants. Interviewers were
positioned at the departure areas. The questionnaire
developed for the study in English was translated to
French and Spanish language and back translated. In
addition to the conjoint exercise, participants provided
information on four demographic questions: income, age,
gender, and place of birth.
The derived utilities of the attribute levels and the
relative importance of each attribute were extracted using
PROC TRANSREG (SAS 2005). For Canadian and
American consumers, price was the most important attribute, while Mexican consumers value on-time performance the most. K-means clustering routine (Hair, Anderson, Tatham, and Black 1998; SAS 2005) was then used
to form segments with the relative importance scores
within each country. The clustering procedure identified
five similar segments for each country (1) price sensitive,
(2) quality seeker, (3) convenience-oriented, (4)
“punctualist” and (5) nationalist (home country-oriented).
Natural segments based on country are not product or
service specific. Thus further segmentation using consumer preference/importance is deemed necessary. It is
interesting to note that even though the five segments are
the same for the three countries, the relative sizes of the
segments are quite different. Roughly 24 percent to 26
percent of the U.S. and Canadian travelers are in the price
sensitive segment as compared to 16 percent for the
Mexican travelers. These service attribute based segments differed substantially across the three countries
along each of the demographic dimensions.
The international market segmentation of NAFTA
airline consumers developed in this study presents a
challenging but worthy task, particularly when little
3
systematic research has previously been reported on this
topic to date. This study examines three key issues in
international segmentation in a unified and meaning
manner. Implications for international marketers and
academics are drawn based on the results of this study.
References are available upon request.
For further information contact:
Michael Y. Hu
Department of Marketing
College of Business Administration
Kent State University
Kent, OH 44242
Phone: 330.672.1261
E-Mail: [email protected]
American Marketing Association / Winter 2006
4
EXPLORING HISPANIC CULTURAL VALUES: A COMPARATIVE
ANALYSIS OF HISPANIC AND GENERAL U.S.
MARKET PRINT ADS
Nitish Singh, California State University, Chico
Boris Bartikowski, Euromed Marseille Ecole de Management, Marseille
Marco Gomez, California State University, Chico
SUMMARY
Introduction
Hispanics are an important and large consumer
segment in the American market. An important factor
contributing to the surge in targeted Hispanic marketing
and advertising is the meaning of the often claimed
uniqueness of the Hispanic cultural identity (e.g., Davila
2001; Romero 2004). It has been argued that successfully
targeting Hispanics requires recognizing their unique
differences from U.S. American consumers (e.g., Valencia
1989; Valdes and Seoane 1995). Latinization, or seeing
Hispanics sharing a common ethnic identity, language
and culture (Davila 2001) is a view point shared by many
researchers and practitioners. However, what are the
common Hispanics cultural values, justifying the differentiation of Hispanic versus general U.S. American advertising? To answer this question, this study analyzes
and compares print advertising targeted to Hispanic and
general American consumers, in an attempt to explore
differences and similarities in depiction of cultural values.
Cultural Value Framework
The use of advertising as a vehicle for analyzing
cultural values, norms, and symbols of a society has a long
tradition in the advertising literature (e.g., Albers-Miller
and Gelb 1996; Cheng and Schweitzer 1996; Cho et al.
1999; Mueller 1987; Tse, Belk, and Zhao 1989). Yet, only
few studies have investigated Hispanic cultural values in
media. The present study extends the previous literature
by proposing a theoretically developed framework on
cultural values along which Hispanic and general U.S.
print advertisements may be investigated for their depiction of cultural values. Based on an extensive review of
literature, cultural dimensions of Hall (1976), Hofstede
(1980), and Kluckhohn and Strodtbeck (1961), were
retained for developing a coding scheme this study used
for content analyzing Hispanic and general U.S. advertising. The coding scheme consists of a set of 21 unique
cultural categories that operationalize cultural dimensions as proposed in the literature.
American Marketing Association / Winter 2006
Based on the review of literature, this study hypothesized that Hispanic compared to general U.S. print
advertising shows higher levels of collectivism (family,
community, and group affiliation), power distance (status, prestige appeal), masculinity (gender roles, performance appeal), past-orientation (tradition themes),
present-orientation (modernity appeal) and high contextuality (politeness, soft sell, and aesthetics) than general
U.S. print advertising. The study furthermore supposed
that general U.S. compared to Hispanic print advertising
shows higher levels of individualism (independence,
uniqueness) and that Hispanic compared the general U.S.
print advertising shows lower levels of future-orientation
(futuristic appeal) and low contextuality (rank, hard sell,
simplicity, superlatives, terms, and conditions) than general U.S. print advertising.
Method and Data Collection
To study the depiction of cultural values in Hispanic
and general U.S. print advertising, the content analysis
procedure was applied (e.g., Cho et al. 1999; Kassarjian
1977). Four hundred Spanish print ads and 310 general
U.S. print ads from three Hispanic magazines and their
English counterparts (e.g., Selecciones in Spanish and
Reader’s Digest in English) were content analyzed along
the coding scheme by two bi-lingual Hispanic and two
English speaking coders. Hypotheses related to theoretically derived differences between Hispanic and general
U.S. cultural values were tested through chi-square significance tests.
Results and Discussion
Results show high inter-judge reliability based on
percentage of agreement between the coders (e.g.,
Kassarjian 1977). Significant differences in the depiction
of cultural values in print advertising targeting Hispanic
and non-Hispanic populations appeared. Except for community appeal (collectivism dimension) where no significant differences were noted, and present-orientation,
where the results were in opposite direction as hypothesized, all hypotheses were supported.
5
Actually, product performance or effectiveness appeal seems to emerge as the most frequently used appeal
among Spanish ads in Hispanic print media. This corresponds to results from previous studies showing that
Hispanics place more importance on quality and reputation than solely on price (e.g., Herbig and Yelkur 1997).
Another interesting observation was that no significant
difference in depiction of community involvement among
Hispanic and non-Hispanic print advertising was found.
There is also only normative evidence in the literature to
support the use of community involvement when targeting Hispanics (e.g., Faura 2004; Valdes and Seoane
1995). Finally, a unique finding of the study was that
Hispanic print advertising shows higher levels of futureorientation than general U.S. advertising. In fact, timeorientation dimension in previous studies relating to
Hispanic and Mexican media has generated mixed findings (e.g., Chandler 1979; McCarty and Hattwick 1992;
Roberts and Hart 1997). Overall, the analysis conducted
in this study gives marketers and academics further
insights into how to improve culturally relevant advertising content for the Hispanic market. References available
upon request.
For further information contact:
Nitish Singh
College of Business
California State University, Chico
Chico, CA 95929–0051
Phone: 530.898.6090
FAX: 530.898.6360
E-Mail: [email protected]
American Marketing Association / Winter 2006
6
CELEBRITIES AS “IMAGE CONDITIONER” FOR BRANDS? AN
EMPIRICAL STUDY BASED ON THE MATCH-UP HYPOTHESIS
Katja Leschnikowski, University of Berne, Switzerland
Markus Schweizer, University of St. Gallen, Switzerland
Jan Drengner, Technical University of Chemnitz, Germany
SUMMARY
Lately, the advertising industry often falls back on
individuals who enjoy public recognition in order to
endorse consumer goods and to attract consumers’ attention. The so-called celebrity endorsers (McCracken 1989)
have become common practice in marketing communication to enhance the effectiveness of advertising campaigns (e.g., Erdogan 1999). Mainly, U.S.-American
researchers developed various models to explain the
effectiveness of celebrity endorsers (e.g., Erdogan 1999;
Jowdy and McDonald 2002). In the following, we examine the Match-up Hypothesis which suggests that advertising response is positively influenced by the perceived
fit between the celebrity and the brand or product being
endorsed. Literature (e.g., Kahle and Homer 1985; Kamins
and Gupta 1994; Till and Busler 2000) indicates that a fit
boosts the effectiveness of communication concerning
recall, attitude towards the ad and the brand, advertisement credibility, and purchase intention. The common
purpose of engaging celebrities in marketing campaigns
is to transfer particular characteristics from the endorser
to the brand (McCracken 1989). Although McCracken
(1989) mentioned in his Meaning Transfer Model that
there is a positive impact of a fit on an image transfer from
the endorser to the brand, to our knowledge, there is no
study analyzing this effect. Thus, the following hypothesis is provided:
and the results of the first pretest showed, not all items of
the brand personality scale were suitable to measure both
the image of the celebrity and the image of the brand.
Thus, 12 experts were asked to rate 50 different adjectives
in terms of suitability to describe both the personality of
a celebrity and a brand in a second pretest (on a 6- point
Likert scale). The 10 items, which showed the highest
means for both objects were selected. To measure the
image transfer, the study was conducted twice as a class
room experiment with a master student sample. In the
first study, 43 students rated the images (celebrity and
brands) without the spot on a 6-point Likert scale (pre
study). The study was repeated two weeks later confronting the same 43 students with the spots (post study).
Results and Discussion
Research Approach and Methodology
The correspondence analysis is a highly effective
method to graphically present a complex contingency
table in low-dimensional space. Hereby, rows (objects)
and columns (attributes) are positioned in such a way that
the proximity/distance of the elements gives implications
for the perceived fit/misfit between the objects (Hair et al.
1998). The following objects were analyzed: Beckenbauer
(without spot, in Erdinger spot and in o2 spot), Erdinger
(without and in spot) and o2 (without and in spot). The
attributes are the ten characteristics selected in the second
pretest. The correspondence table illustrated a high fit
between Beckenbauer and Erdinger (without spots). Furthermore, the comparison of Beckenbauer and o2 (without spot) revealed a misfit. The Euclidean Distance was
then calculated for each pair. The results of the pair wise
t-test for dependent samples showed that there is a
significantly higher image fit between Beckenbauer and
Erdinger compared to the rig Beckenbauer and o2.
To minimize external effects, a 2x1 experimental
design with one celebrity endorsing two different brands
was adopted. A pretest with 26 master students was
conducted to select the celebrity and the brands by adopting the items of Aaker’s brand personality scale on a 5point Likert scale (1997). Between the celebrity (Franz
Beckenbauer, a German soccer legend) and the first brand
(Erdinger, a Bavarian beer brand), a high image fit was
revealed; whereas between the celebrity (Beckenbauer)
and the second brand (o2, a German mobile company), we
discovered a low image fit. As discussions with experts
The results of the correspondence analysis and the
pair wise t-test for dependent samples revealed that the
assessment of Erdinger and o2 was not affected by the
stimulus. Therefore, regardless of the image fit, the
celebrity did not have an effect on the evaluation of the
brands. Thus, the earlier stated hypothesis needs to be
rejected. The widely expected enhancement of a product’s
existing characteristics by a celebrity endorser does not
occur. This finding challenges the run for celebrities in
marketing communications. Albeit, the correspondence
table and a pair wise t-test surprisingly revealed a modi-
H: If there is a high fit between the image of the celebrity
endorser and the image of the brand, there is a
stronger image transfer compared to a low-congruence situation.
American Marketing Association / Winter 2006
7
fication of the celebrity’s image due to the television spot
in both experimental lines (Beckenbauer and Erdinger,
Beckenbauer and o2). The brand’s characteristics have
been rubbed off on the celebrity – independent of the
image fit (statistics available on request).
Consequently, it is suggested that practitioners should
precisely test the effectiveness of an endorser in a marketing communication pretest to discover, which characteristics will be transferred from the celebrity towards the
product or vice versa. If there is no image transfer in the
intended direction (from the celebrity towards the brand),
the appropriateness of a celebrity should be rethought.
Regarding the research restrictions, it has to be considered that the image is a rather consistent construct.
Therefore, a single contact with a commercial does not
necessarily cause an essential permanent image change
(Otker and Hayes 1991). Further research is needed to test
the empirical findings in a longitudinal study. Furthermore, as our results could have been influenced by the
conception of the primarily known spots and the preexisting attitude towards the ad or brand, the study should
be repeated with yet undisclosed and similar commercials.
The empirical study revealed that an image fit does
not affected the image transfer from the celebrity towards
the brand. This finding suggests that there is no need to
emphasize a match-up between the image of the celebrity
endorser and the image of the brand in order to enhance
an image transfer. Nevertheless, an image fit boosts
marketing communication effectiveness. Consequently,
a fit can be seen as a “hygienic factor” in advertising. It
is recommended that practitioners should precisely examine in a pre test which aspects in an advertising
campaign support an image transfer from the celebrity
endorser towards the brand. It remains to further research
to test which variables enhance an image transfer from a
celebrity endorser towards the brand. References available upon request.
For further information contact:
Katja Leschnikowski
Department of Marketing
Institute of Marketing and Management
University of Berne
Engehaldenstrasse 4
Berne, 3012
Switzerland
Phone: 011.41.31.631.80.31
FAX: 011.41.31.631.80.32
E-Mail: [email protected]
American Marketing Association / Winter 2006
8
A CONTINGENCY FRAMEWORK OF THE MODERATING EFFECT OF
PERSONALITY TRAITS ON ATTITUDES TOWARD
ADVERTISEMENTS
Susan D. Myers, The University of Memphis, Memphis
Sandipan Sen, The University of Memphis, Memphis
Aliosha Alexandrov, The University of Memphis, Memphis
Alan Bush, The University of Memphis, Memphis
SUMMARY
With today’s extremely fragmented markets, recognition of the importance of understanding customers as a
means of achieving efficiency and effectiveness have
never been greater. Since the meaning of an ad can be
created in the person who receives the message, it is
logical to suggest that different people may have unique
preferences for different types of ads according to their
characteristics, and that customers may react most positively when exposed to an advertising stream that matches
their personality. The purpose of this research is to
develop a contingency framework to study the moderating effects of personality traits on attitude toward advertising messages and to introduce the advertising literature
to the use of the big five personality traits.
traits affect the attitudes formed through exposure to
different types of ads. We look at the possible effects of
personality traits on differences in responses to informational vs. transformational, comparative vs. noncomparative, and one sided vs. two-sided ads.
What makes us different from one another has fascinated researchers for years. Personality holds possible
answers to the question by focusing on the human mind
and character. Trait theory is a genetically rooted concept
which holds that individuals behave differently because
they possess varying amounts of certain measurable traits
(Goldberg 1999). The five-factor model is a well-established framework for measuring personality traits. The
Big Five were identified by searching for the smallest
number of synonym clusters in the English language that
could account for the greatest variation of personality
differences. The factors in the model are meant to measure the underlying traits of extraversion, agreeableness,
conscientiousness, neuroticism, and openness to experience by using personality markers to identify the degree
of each of these factors that an individual possesses. This
research recognizes that Saucier’s abbreviated personality markers can serve as a useful tool for studying personality across disciplines.
This model proposes that specific traits will impact
the persuasive ability of a stimulus by moderating the
links to attitude toward the ad, attitude toward the brand,
and purchase intentions. We specifically hypothesize that
those high in extraversion will have more favorable
attitudes toward transformational ads than informational
ads, more positive attitudes toward ads for popular brands
regardless of their attitudes toward the ad, and stronger
purchase intentions when their attitudes toward the brand
are stronger. Those high in agreeableness will have more
favorable attitudes toward transformational, noncomparative, and, one-sided ads to their counterparts, will have
more positive attitudes toward popular brands, and will
have more positive attitudes toward any given stimulus
than those low in agreeableness. Those high in conscientiousness will have more favorable attitudes toward informational, comparative, and two-sided ads than their
counterparts, will have attitudes toward the brand consistent with their attitudes toward the ad, and will have
purchase intentions consistent with their attitude toward
the brand. Those high in neuroticism will have more
favorable attitudes toward transformational and comparative ads, and stronger links between their attitude toward
the ad and attitude toward the brand. Those high in
openness to experience will have more favorable attitudes
toward transformational than informational ads, and
stronger purchase intentions than those low in openness
to experience. We also hypothesize that effects of personality traits will be most apparent in low involvement
conditions.
Shimp (1981) and Mitchell and Olson (1981) introduced into the literature the idea that consumers’ behavior is likely to be influenced by attitudes toward the
advertising stimulus. This model looks beyond the qualities of the ad to ask the question what type of ads are most
effective for what types of people? In order to answer this
question, it is important to find exactly how personality
If attitudes toward types of ads are affected by personal traits, than it will be possible to predict, partially,
how different kinds of customers will respond to different
types of ads because personal traits evoke specific and
known behaviors. What is more, the discovering of
personal traits will be a part of a bigger project for the
revealing of customer identity. If it is true, that personal
American Marketing Association / Winter 2006
9
traits are better predictors than demographic characteristics, than it opens a new highway for resource optimization and customer segmentation. Personality research
could pave the way for an accountable and more precise
marketing in the future that would lead companies to
know customers the same way customers know companies (Deighton 2004).
Very few empirical studies have been done in the
marketing literature that look at the degree or combination of personality traits, which in turn, creates a void in
terms of developing a comprehensive awareness of who
customers are and how they respond to persuasive com-
munication. Looking within the consumer may provide
opportunity for future research to advance a broad understanding of the role that personality traits play in all
arenas of marketing communications including advertising, personal selling, and promotion. Personality traits
may also be useful for marketing knowledge outside of the
communications stream in determining purchase habits,
innovation, and brand loyalty, etc. It does not seem
possible to effectively communicate or build a relationship with a customer without looking at both the external
environment and the individual characteristics in a holistic manner. References available upon request.
For further information contact:
Susan D. Myers
Department of Marketing and Supply Chain Management
Fogelman College of Business and Economics
The University of Memphis
Memphis, TN 38152
Phone: 901.678.4197
FAX: 901.678.2685
E-Mail: [email protected]
American Marketing Association / Winter 2006
10
THE NATURE AND IMPACT OF COLLECTIVE-RELATIONAL
PARADOX IN CONSUMER TRUST JUDGMENTS
Rama Jayanti, Cleveland State University, Cleveland
Jagdip Singh, Case Western Reserve University, Cleveland
SUMMARY
Rarely in its long history has the marketing discipline faced a paradox of such magnitude and clarity as it
faces today in local and global markets. On a firmconsumer level, the focus on building relationships, deepening loyalty, and fostering consumer trust in the firm’s
commitment to serve customers has never been more
intense or clear. However, at a collective level, the general
distrust of business motivations, open cynicism and widespread belief that business in general and marketing in
particular will opportunistically exploit society’s trust if
given a chance has never been more palpable or real.
Stories of this “crisis of confidence” abound in the popular press (Byrne et al. 2002). Additionally, polling data
demonstrates declining public trust in Corporate America
(Poncet 2002; Booth-Harris Trust Monitor 2001), general loss of public faith in institutions (Schlesinger 2002;
Stevens 2001), government (Chanley, Rudolph, and Rahn
2000) and business (Nye 1997). That collective distrust
can coexist in an era when firms are redoubling their
efforts to build relational trust is a paradox that has thus
far remained below the radar screen of researchers and
practitioners alike. As such, the collective-relational paradox of trust is little understood; even less recognized are
its implications for consumers and firms in general, and
individual firm-consumer relationships in particular.
The purpose of our study is to provide an initial
exposition of the collective-relational paradox. Theoretical and empirical foundation exists to suggest that consumers cognize collectives and relational partners distinctly. For instance, it has been shown that consumer
attitudes and dispositions toward marketers (collectives)
can be reliably accessed through self-reports, and that
such reports evidence differentiation with respect to
consumer dispositions for a specific brand and/or service
provider (Gaski and Etzel 2005; Nijssen et al. 2003).
Theoretically, the collective-relational hierarchy has parallels with research on category structures wherein it is
believed that consumers organize information hierarchically into abstract product categories (superordinate), and
within this category at a more specific, brand level
(subordinate; cf., Sujan 1985; Alba and Hutchinson1987;
Loken and Ward 1990). Research shows that superordinate
categories include heterogeneous exemplars and usually
non-comparable across categories. By contrast, subordinate categories tend to be homogenous within, although
American Marketing Association / Winter 2006
highly heterogeneous across categories (Goldberg 1986;
Loken and Ward 1990; Sujan and Dekleva 1987; MeyersLevy and Tybout 1989). Likewise, we contend that collectives represent a categorization schema at the superordinate
level to store, update and organize information about a
group of agents who belong to a particular industry. By
comparison, information about the specific agent that the
consumer has chosen for developing relational exchanges
is stored, updated and organized at a subordinate level.
Importantly, cognitive schemas at the super- and subordinate level are maintained, altered and accessed separately, although they are inter-related. Consistent with
this, social cognition researchers have coined the term
marketplace meta-cognition to suggest that consumers
hold distinct cognitive representations about the behaviors of marketers, and use such representations to cope
with marketplace demands (Wright 2002; Brown and
Krishna 2004). In this view, the notion of markets is
loosely defined as coherent collectives of firms that enter
the marketplace to consummate exchanges with customers.
Collective trust evaluations are likely to be affected
by industry specific word-of-mouth and public communications (e.g., media, popular press) that tend to be dominated by negative information. Research shows that consumers are more likely to engage in word-of-mouth
communication involving negative than positive experiences (Laczniak, DeCarlo, and Ramaswami 2001). Likewise, public and popular media has generally highlighted
consumer problems, complaints and dissatisfaction
(Henard 2002). To the extent these communications are
assimilated into collective schemas because of their salience and relevance, it is likely that collective trust is
evaluated less positively than relational trust. In support,
consumer tracking studies generally indicate a declining
trend in collective trust with high levels achieved during
1985 and a consistent negative slope for most collectives
thereafter (Harris Interactive’s Trust Monitor).
Based on the preceding discussion, we propose that
collective trust is distinct from relational trust, and relational trust is evaluated more positively than collective
trust. Additionally, we explore the dynamics of collective-relational trust paradox by examining the impact of
collective trust on both relational trust – loyalty and
value – loyalty relationships. Results based on data collected from a real estate agency support our assertion that
11
collective trust at the industry level is distinct from
relational trust at the specific provider level, and that
collective trust is generally evaluated less favorably than
relational trust. We found that the interaction between
collective and relational trust to be positive and significant, indicating that increasing collective trust amplifies
the influence of relational trust on loyalty intentions.
Finally, high collective trust is shown to dampen the
relationship between relational value and loyalty. We
conclude by proposing future research directions within
the collective-relational paradox and the pragmatic significance of the paradox in amplifying or attenuating a
firm’s efforts to build customer loyalty. References available upon request.
For further information contact:
Rama K. Jayanti
BU 462, Monte Ahuja Hall
Cleveland State University
Cleveland, OH 44114
Phone: 216.687.4786
FAX: 216.687.9354
E-Mail: [email protected]
American Marketing Association / Winter 2006
12
AN EXPLORATION OF PARTNER EFFECTS ON CUSTOMER
EVALUATIONS OF A FOCAL FIRM
IN A BUSINESS-TO-BUSINESS
SERVICE NETWORK
Felicia Morgan, Ohio University, Athens
Dawn Deeter-Schmelz, Ohio University, Athens
Christopher Moberg, Ohio University, Athens
SUMMARY
The evolution of service provision toward multiple
providers calls for transitioning from the traditional focus
on the customer-firm dyad to a focus on service networks.
A service network consists of two or more entities that
jointly provide a service experience to a customer (Morgan 2004; Morgan and Tax 2004). Discovering how
customers evaluate service experiences in which multiple
firms co-produce the service within a service network can
provide firms with the guidance needed to improve the
performance of the entire network and the overall service
experience of network customers.
Early research on service networks has focused on
business-to-consumer (B2C) relationships and suggests
that, in service network contexts, partner firm performance is a key influence on customer evaluations of the
focal firm. Specifically, the early findings indicate that
partner firm performance, the strength of the focal brand,
and the perceived strength of the relationships between
the focal firm and its partner firms all significantly
influence consumers’ evaluations of the focal brand’s
image during a service network experience. While examining consumer evaluations of service networks is valuable, there are business-to-business (B2B) contexts where
service networks are common, even when tangible goods
are sold. Due to an increasing focus on core competencies,
many selling firms rely upon third-party companies to coprovide the post-sale service components in typical buyerseller relationships. Industrial firms may outsource a
wide range of services activities, including accounting
and billing services, personal selling, advertising, call
center operations, data processing, and logistics (Dwyer
and Tanner 2002; Moberg and Speh 2004). In other
words, the key relationship-building functions comprising after-sales service and support are increasingly likely
to be provided by parties outside of the selling firm.
Therefore, partnering with cooperative, competent firms
that can ensure excellent post-sale service will result in
the stronger and longer customer relationships needed by
sellers to remain competitive in the marketplace.
ment of the firms co-producing after-sales service affects
their evaluation of a focal selling firm. A model and
research propositions are presented and implications for
researchers and practitioners are discussed.
Because customer perspectives on networked organizations have been scarcely studied, the proposed model
and propositions focus on the primary relationship of
interest – that between the partner firm’s performance
and customer evaluations of the focal firm. Specifically,
we propose that the network partner’s performance will
have direct and positive effects on customer evaluations
of the focal firm. These evaluations include important
relational outcomes such as satisfaction with the focal
firm, brand image of the focal firm, and behavioral
intentions toward the focal firm. The outcome of high
significance here is brand image, an increasingly critical
point of differentiation for B2B firms that remains underresearched in the industrial marketing literature (Lynch
and de Chernatony 2004).
Other variables are considered only in their capacity
as moderators of the relationship between the partner
firm’s performance and customer evaluations of the focal
firm. These key situational or “context” factors include
the strength of the relationship between the focal firm and
the customer, focal brand strength, the importance or
“criticality” of the partner’s service within a particular
service network context, and the strength of the relationship between the focal firm and the partner firm. Two of
these variables – focal brand strength and focal firmpartner firm relationship strength – have been shown to
influence service network evaluations in a consumer
setting (Morgan 2004). Empirical research is needed to
examine the proposed relationships in a B2B environment.
The proposed conceptual model of B2B service networks addresses several gaps in the industrial marketing
literature, namely B2B services and branding, extends
previous work on service networks, and provides a foundation for future empirical investigation in this emerging
area of research.
This research explores how customers evaluate firms
in a strategic, B2B service network and how their assessAmerican Marketing Association / Winter 2006
13
REFERENCES
Dwyer, F. Robert and John F. Tanner, Jr. (2002), Business
Marketing: Connecting Strategy, Relationships, and
Learning. Boston, MA: McGraw-Hill Irwin.
Lynch, Joanne and Leslie de Chernatony (2004), “The
Power of Emotion: Brand Communication in Business-to-Business Markets,” Brand Management, 11
(5), 403–19.
Moberg, Christopher R. and Thomas W. Speh (2004),
“Third-Party Warehousing Selection: A Comparison of National and Regional Firms,” Mid-American
Journal of Business, 19 (2), 271– 77.
Morgan, Felicia N. (2004), “Brand Image Formation and
Updating Across Multiple-Episode Experiences
Within Service Networks,” unpublished doctoral
dissertation, Arizona State University.
____________ and Stephen S. Tax (2004), “Toward a
Theory of Service Delivery Networks,” Arizona State
University, Working paper.
For further information contact:
Felicia Morgan
Marketing Department
Ohio University
534 Copeland Hall
Athens, OH 45701
Phone: 740.593.2145
FAX: 740.597.2150
E-Mail: [email protected]
American Marketing Association / Winter 2006
14
SOCIAL EXCHANGE PERSPECTIVE ON CONSUMER LOYALTY
Chiharu Ishida, Virginia Tech, Blacksburg
Janet E. Keith, Virginia Tech, Blacksburg
SUMMARY
Despite the importance of consumer loyalty and over
two decades of rigorous research efforts by both academics and practitioners, we are still far from fully understanding consumer loyalty. Based on social exchange
theory (Thibaut and Kelly 1959; Kelly and Thibaut
1978), we point out that the extant research largely
ignores the presence and impact of accessible alternative
brands to which consumers are exposed.
Adapting the theory to consumer contexts, we explicitly consider consumers’ evaluations of both focal (i.e.,
the consumer-brand dyad) and external relationships
(i.e., relationships with available alternative brands).
Based on Kelly and Thibaut’s (1978) definitions of Comparison Level (CL) and Comparison Level for Alternatives (CLalt,) we posit consumers use two sets of standards
when evaluating their consumption:
•
The standard that an individual has come to expect
from a given kind of relationship (i.e., CL)
•
The standard that she/he expects from the best available alternative (i.e., CLalt)
Because individuals are almost always exposed to
alternative brands and are capable of making comparisons, a consumer-brand dyad is embedded in a larger
context; that is, a marketplace. Based on their longitudinal qualitative data, Fournier and Mick (1999) show the
significant role of CLalt, or he lowest level of acceptable
outcomes in view of available alternatives (p. 9), in
consumers display of satisfaction. Drawing on social
exchange theory, we implement CLalt as the social exchange perspective that is lacking in the extant consumer
loyalty literature.
In investigating dissimilar implications of CL and
CLalt, we consider consumer loyalty to have multiple
dimensions: preference loyalty (i.e., favorable attitude
toward a brand), repeat purchase loyalty (i.e., purchase
frequency), and price indifference loyalty (i.e., the extent
of the consumer willingness to continue to patronize a
particular brand even with a premium price). In addition,
we explicitly consider economic and affective satisfaction
separately and argue that each has different implications
for brand loyalty. Economic satisfaction, or perceived
economic utility, derives from the instrumental evaluation of brand attributes. This type of satisfaction is
American Marketing Association / Winter 2006
utilitarian in nature. Affective satisfaction reflects edonic
value (Chaudhuri and Holbrook 2001) of consumption,
which reflects the nontangible, subjective, emotional
elements of pleasure, and the symbolic aspects of consumption.
We tested the effects of CL and Clalt on consumer
loyalty with a sample of 170 undergraduate students
using an online survey. Respondents indicated their level
of satisfaction with and loyalty to their current brand and
their satisfaction with the best accessible alternative
brand for three different products. Measurements of
product involvement were also obtained.
Consistent with prior research, we found only partial
support for the positive effect of CL on loyalty. Our results
indicate, however, that economic satisfaction CLalt is a
significant predictor of both repeat purchase loyalty and
price indifference loyalty. The results indicate that consumers patronize a particular brand when their evaluations of the economic benefits of consumption exceed
those of their best alternative brand. Therefore, it can be
said that the traditional measure of satisfaction measured
as CL is incomplete in the sense that it only provides a
partial picture of the brand comparative benefits against
alternative brands. As a post hoc analysis, we also examined our conceptual model with two subgroups representing low and high variety-seekers to see whether the
individual differences may interact with the effects of
satisfaction measures on loyalty. The results suggest that
CLalt is critical for high variety-seekers in patronizing
decisions, but it is not the case for low variety-seekers. For
these individuals, the affective component of CL seems to
be the major criterion for loyalty.
In sum, our results demonstrate that the traditional,
dyadic-level analysis of satisfaction gives only limited
information about the nature of the consumer-brand
relationship. Consumers decisions to patronize a particular brand can be effectively determined by the extent to
which the current brand economic benefits exceed those
of the best alternative brand (i.e., economic satisfaction
CLalt). Our results suggest that the satisfaction trap may
be avoided by paying attention to relative satisfaction
considering the alternatives. At the same time, affective
benefits provided by the current brand (i.e., affective
satisfaction CL) also predict well their decisions. The
results reinforce the extant literature suggestion that
affective consumption is distinctly different from the
utilitarian counterpart. References provided by request.
15
For further information contact:
Chiharu Ishida
Virginia Tech
3067 Pamplin Hall (0236)
Blacksburg, VA 24061
Phone: 540.231.9618
FAX: 540.231.3076
E-Mail: [email protected]
American Marketing Association / Winter 2006
16
STANDARDIZED OR SPECIALIZED? WHAT IS THE BEST
APPROACH FOR MEASURING CORPORATE REPUTATIONS?
Klaus-Peter Wiedmann, University of Hannover, Germany
SUMMARY
In recent years, a huge effort has been made to
develop a concept for measuring corporate reputations in
different industries and on a global scale with the help of
one standardized measure, called the reputation quotient
(RQ). Basically, the RQ consists of six dimensions (Product & Services, Vision & Leadership, Financial Performance, Workplace Environment, Social Responsibility,
and Emotional Appeal), that reflect along twenty items
the perceptions and assessments of all relevant stakeholders. It also reveals the basic understanding of corporate
reputations as the sum of the perceptions and assessments
of all relevant stakeholders with regard to the companies’
performance, products, services, persons, organizations,
etc.
Based on rigorous scientific work that was subjected
to a comprehensive literature review, theoretical reasoning, and scale development comprising construct development, scale design, pilot testing and validation, the RQ
was iteratively shaped into its current form. And since
1999, the corporate reputation of the most visible business
firms in many countries (USA, Canada, Australia, South
Africa, and 12 European countries) was tracked, in some
countries even on a yearly basis. The great benefit of such
a standardized instrument will be its ability to enable
cross-national comparison and very interesting benchmarking studies.
No doubt, a huge effort has been made to ensure the
scale’s validity and generalizability, and especially its
cross-cultural applicability. Nevertheless, the validity
and generalizability of such a scale must be examined
continuously. And, in the meanwhile, some empirical
evidence has already shown that it might be necessary to
adapt the RQ to different countries, and also to different
industries. Against this background, the idea of our study
was, not only to replicate the approach of the RQ studies
as realized until today, but also to extend the search for
relevant dimensions for evaluating the reputation of
companies in three different industries in Germany:
banking, energy, and insurance.
Concerning examination of scale development, we
conducted a multi-step approach, starting with expert
discussions (representatives of marketing departments)
and also qualitative studies integrating customers and
other stakeholders to discern the basic understanding of
American Marketing Association / Winter 2006
corporate reputation, and especially of the drivers of
“good” corporate reputations in the different industries.
Following the qualitative pre-studies, a questionnaire
concept was then developed for each of the various
industries that constituted the basis of a telephone survey.
Over the telephone, 350 persons were questioned about
the reputation of banks and savings banks, 230 persons in
view of insurance companies, and 210 persons in view of
energy suppliers. The persons could be assigned either to
the sector of private customers or to that of the public, or
to the area of non-customers.
The focus of the data evaluation was confirmatoryfactor analyses or so-called covariance-structure analyses, which allow the subjective psychology of those questioned to be transferred to a measurement model. To
develop an optimum reputation model for each sector the
following procedure was applied: (1) Each one of the
hypothetically determined reputation factors was validated with the aid of a main axis analysis and a reliability
test on the basis of Cronbach’s alpha. (2) With the aid of
a confirmatory-factor analysis, the remaining factors and
their items were transferred into a combined model and
checked empirically. (3) Finally, in a third step, a factor
analysis of the second order was carried out for each sector
model.
In our study three sector-specific measuring models
emerged that exhibit significant differences. In summary,
we can state that a uniformly standardized measurement
of corporate reputation over all sectors leads to suboptimum results. The empirically confirmed differences
in the perception and evaluation of the companies in the
individual sectors show that special reputation models or
measuring instruments are required in order to be able to
generate realistic results and thus recommendations for
successful action. An inter-sectoral, standardized measurement would neglect the actual processes of processing information about the structures by the customer. This
would cause a loss of important information. Proceeding
in this way would not provide any insight into the
available perception structures of the assessments of
companies in one sector. For the sustainable support of
the planning and control of successful reputation management, it appears particularly expedient to develop
differentiated measuring concepts for the recording and
evaluation of existing corporate reputations as a basis for
the definition of operational targets for a future-oriented
elaboration of reputation strategies and measures.
17
Additionally, we were able to show that more differentiated analyses of competition are necessary in order to
be able to correctly assess existing corporate reputation
and to recognize relevant chances and risks. In this
regard, it also seems of particular importance to consider
the scatter for the respective assessments by the stakeholders over the competitors along the various reputation
dimensions. Thus, there may be reputation dimensions
that may well be assessed as very important, but for which
there is only very little scatter over the competitors in the
assessment by each of the relevant stakeholders. This was
the case, for instance, for the “emotional appeal” of the
banks in our study. As shown in this paper, when the
assessments already move at a very high level, no (or only
a few) decisive competitive advantages can be achieved in
a positioning field of this kind. The corresponding advantages would have to be bought at a relatively high expenditure (e.g., for communications measures) without, however, ipso facto being secure or sustainable.
Although we have found empirical evidence to plead
for specialized, industry-specific reputation measures,
our discussion leads to the conclusion that future research
should simultaneously try to achieve convincing progress
in the development of a standardized measure of corporate reputation to use as a yardstick for benchmarking
processes. However, the typical, inductive approach of
scale development is insufficient. More than that, a
theory-based concept of scale development is of great
importance. Additionally, solely concentrating on scale
development is also insufficient. Scale development should
go hand in hand with the development of theoretical
models to better understand and explain the contingencies of a reputation dimensionality as well as the relevant
reasons for and impacts of existing and also targeted
patterns of reputation perceptions and evaluations in
specific situations. References available upon request.
For further information contact:
Klaus-Peter Wiedmann
Institute for Marketing and Management
University of Hannover
Koenigsworther Platz 1
30167 Hannover
Germany
Phone: +49.511.762.4862
FAX: +49.511.762.3142
E-Mail: [email protected]
American Marketing Association / Winter 2006
18
LINKING MARKETING STRATEGY TO SHAREHOLDER VALUE:
A REVIEW ON EVENT STUDY METHODOLOGY
Mehmet Berk Talay, Michigan State University, East Lansing
SUMMARY
Despite the fact that the contribution of marketing
activities to a firm’s shareholder value has always been an
important concern for both marketing scholars and practitioners, it is hard to say that the benefits of, or the value
created by, the marketing activities, particularly with
regard to the performance metrics, have been clearly
expressed to the senior management (Srinivasan and
Bharadwaj 2004). Event study method, which enables the
researchers to shed light on the relationship between
marketing related activities and their impact on shareholder value, appears as a useful means to quantify the
value creating effects of marketing strategy.
Ceteris paribus, the market reacts efficiently with
respect to the publicly available information, meaning
that stock prices reflect the market’s opinion (i.e., increase in case of approval and vice versa) about the firms’
decisions (Brealey and Myers 1988). Nevertheless, it is
necessary to isolate the particular effect of a decision on
company’s stock price from other events pertaining to the
firm, in order to evaluate the precise response of market
to firm’s particular decision. Therefore, reflecting the
“collective mind” of investors, stock market reactions
may serve as an ex post mechanism to predict the future
of marketing-related initiatives, as long as their impact
can be sequestered from the “noise.”
Based on these assumptions, Fama (1969) suggests
event study method by means of which “any event’s
impact on the wealth of shareholders can be measured by
changes in the firm’s stock prices over a relatively short
period” (Srinivasan and Bharadwaj 2004). This method
has been used extensively in accounting, finance, and
management literature in order to understand the significance of certain events such as CEO successions (Friedman and Singh 1989), plant closings (Clinebell and
Clinebell 1994), corporate illegalities (Davidson and
Worrell 1992), and managerial response to takeover bids
(Turk 1992). Nonetheless, as Srinivasan and Bharadwaj
suggests (2004), despite its potential to “relate marketing
strategy initiatives to changes in shareholder wealth,
event studies have been underutilized in marketing.”
Some of the examples of event studies in marketing
analyze the contexts of celebrity endorsements (Agrawal
and Kamakura 1995), new product introductions (Chaney,
Devinney, and Winer 1991) and brand extensions (Lane
and Jacobson 1995).
American Marketing Association / Winter 2006
Drawing upon the previous works in the business
literature, this article aims to provide the marketing
scholars with the fundamentals of, possible future research directions with using, the event study methodology. Specifically, this study reviews the finance and
management literatures specifically to find and analyze
the studies, which examine the relation between the JV
formation announcements and the stock market reactions. In doing so, the articles, which try to estimate the
impact of joint ventures on the market value of the firm,
are examined with regard to the covariates assumed to be
affecting the magnitude of the market value of the companies forming joint ventures.
While creating the sample set, four keywords were
used: (i) joint venture, (ii) event study, (iii) market value,
and (iv) stock price and ABI/INFORM database, Academic Search Elite; Emerald Fulltext, Science Direct
databases were browsed. The search was limited to “full
text” articles in scholarly journals of relevant business
literature (i.e., finance, management and marketing)
only. Further, references section of each eligible article
found via this search procedure were examined to increase the sample size. The search yielded 26 articles in
14 journals (complete list of these articles, along with the
list of references are available from the authors upon
request).
These studies comprise a wide variety of independent
variables (IVs) because of the different hypotheses they
attempt to test. To put another way, there are numerous
hypotheses about the antecedents about the reaction of the
stock markets to JV formations. There are 43 different
independent variables, which may be classified into four
main domains: firm related IVs, industry related IVs, JV,
related IVs, and country related IVs.
Findings of this study suggest that a large body of
inspiring research exists in economics and finance literature. Taking these studies as benchmarks, marketing
scholars can analyze the effects of (i) marketing strategy
decisions, (ii) corporate interactions on marketing decisions, (iii) crisis events in marketing, and (iv) role of
marketing capabilities and resources on firm value
(Srinivasan and Bharadwaj 2004)
Analyses also revealed that while there exists many
studies even in finance literature, there is still room for
improvement in the methodology. It is evident that there
19
is a threat of multicollinearity especially between the
country-related variables (i.e., cultural distance, market
growth, political risk, and trading openness).
Moreover, in event study methodology, abnormal
returns are calculated with regard to the returns of the
entire stock market (mostly with regard to the S&P 500
index). This means comparing giants (e.g., General
Electric) to dwarfs (e.g., Adobe Systems), which does not
sound reasonable. Further, in this methodology, a mature
industry (e.g., mining), in which the context, and hence
the profits, are presumably more stable, are compared to
emerging industries (e.g., genetics), which are by their
very nature are turbulent in every sense. Therefore, a new
event study methodology, in which the returns of a
company are compared not to all the market at large, but
to the industry the firm operates, may be proposed.
The last, but not the least, this literature review
demonstrates not only which type of variables may be, if
not must be, considered in firm, industry and countrylevel research, but also how to operationalize them.
References available upon request.
For further information contact:
Mehmet Berk Talay
Michigan State University
N370 North Business Complex
East Lansing, MI 48824
Phone: 517.432.5537, Ext. 233
FAX: 517.432.1112
E-Mail: [email protected]
American Marketing Association / Winter 2006
20
SUBJECTIVE MEASURES OF RETAIL PERFORMANCE:
ACCOUNTING FOR OCCASIONS
Adam Finn, University of Alberta, Edmonton
SUMMARY
Retail managers require accurate measures of their
service performance to make sound decisions. Finn and
Kayandé (1997) advocate the use of generalizability
theory (G-theory) when designing service assessment
studies for managerial decision-making. G-theory uses a
G-coefficient to summarize how well a decision maker
can generalize from observed measures to the universe of
potential observations where a decision will have its
effects. Finn and Kayande (1999) employ G-theory to
assess the effectiveness of mystery shopping when assessing the store environment and service quality. However,
their substantive conclusions need to be treated with
caution. Measurement occasion was not considered a
potential source of error, so no information was obtained
for generalizability over time, an issue that is critical if the
results are to be used managerially (DeShon, Ployart, and
Sacco 1998). This neglect of the hidden “occasions” facet
can lead to seriously overestimates of G-coefficients
actually achieved in decision studies.
Hidden Facets. A facet is hidden when variance
components are estimated using a data collection design
which does not explicitly sample conditions of the facet,
creating interpretational complexities and potential bias
in generalizability statistics (Brennan 2001, p. 149). If
data are collected on a single (fixed) occasion, G-coefficients based on variance components for the data will be
overestimates if the interest is really in generalizing over
occasions (see Brennan 2001, p. 151). The extent of the
bias is determined by the magnitude of the variance
component due to the interactions with occasions, which
are treated as universe score variance in the hidden facet
situation, but are identified as part of relative error
variance in the crossed occasions data.
The purpose of this paper is to investigate the effects
of failing to account for a hidden occasions facet when
assessing the quality of retail performance data. This is
achieved using test-retest mystery shopping data, providing a sampling of occasions, to estimate the larger set of
variance components and explicitly account for the occasions effect in various decision problems.
G Study Application
Mystery shopping data were collected for perceptions of 15 stores on 13 aspects of retail performance,
American Marketing Association / Winter 2006
including service quality (Parasuraman, Zeithaml, and
Berry 1994), assortment and store environment (Williams and Torella 1992, p. 128). The data were collected
using a zero to ten rating scale, with anchor labels of
excellent and terrible. The shopper visits were conducted
by six research assistants chosen from the population of
students who are the primary target market of stores
located in the mall. All shoppers were given individually
counterbalanced schedules for their store visits, such that
visits to a store were scheduled to occur at four times of the
day and on all five days of the week. Moreover, they were
asked to follow a standardized procedure for each visit.
The six mystery shopper raters evaluated the 15
stores in February and then a second time in March. Thus
the data consisted of a total of 180 mystery-shopping
reports. The shopper raters, stores, aspects, items and
occasions were treated as random factors in the analysis.
All sources of variance were fully crossed except items,
which were nested within aspects. Thus the facets and
their respective levels available for the analysis were
occasions, with two levels; stores, with 15 levels; shopper
raters with six levels; aspects with 13 levels, of which
seven were for the physical environment and six were for
service and product quality; and items nested within
aspects, with 3 items per aspect for the physical environment and 4 items per aspect for service and product
quality. Variance components were estimated using the
expected mean squares approach (see Searle, Casella, and
McCulloch 1992).
The variance components for ten main and interaction effects, plus the highest order interaction effect,
which is confounded with residual sources of error sources,
are estimated separately for the February data and for the
March data. There are substantial proportions of variance
due to raters, stores, stores by raters, stores by raters by
aspects and stores by raters crossed by items nested within
aspects confounded with error. To investigate the previously hidden occasions facet, the variance components
for the full 23 sources of variance including occasions and
all its interactions are also estimated. The main effect of
occasions and many of its lower order interactions are
negligible. However, the variance components for stores
by raters by occasions (6.4%) and for stores by raters by
aspects by occasions (8.6%) are large enough to substantial bias the hidden occasions estimates for stores by raters
and stores by raters by aspects.
21
Discussion
Our results show evidence of bias in mystery shopping variance components estimated when ignoring the
existence of a hidden occasions facet. The bias is substantial for stores by raters and for stores by raters by aspects.
The effects of the biased estimates are found to be
relatively minor for benchmarking of stores, for comparing the severity of raters, and for scaling stores by aspects
for positioning purposes. G-coefficients meeting the standards for theoretical research applications can still be
obtained when sampling a single occasion, although the
G-coefficients fall below the values expected when relying on the biased data with a hidden facet. Reaching the
expected G-coefficients requires somewhat larger samples
of items, aspects, raters or stores. However, this somewhat rosy picture did not hold for segmentation decisions
requiring a scaling of stores by raters. Accounting for the
variation associated with the hidden occasions facet
revealed that it would be necessary to collect the proposed
number of items and aspects on ten occasions, collecting
ten times as much data, to really achieve the level of Gcoefficient normally expected for theoretical research.
References available upon request
For further information contact:
Adam Finn
School of Business
University of Alberta
Edmonton, Alberta
Canada T6G 2R6
Phone: 780.492.5369
FAX: 780.492.3325
E-Mail: [email protected]
American Marketing Association / Winter 2006
22
JAPANESE KEIRETSU’S DEMISE: THE INFLUENCE OF NEW
COLLABORATIONS ON WHOLESALERS’ PERFORMANCE
Mohammed Y.A. Rawwas, University of Northern Iowa, Cedar Falls
SUMMARY
The Japanese distribution system has been described
by many researchers as labyrinthine as a Shogun’s palace
because of its old-fashioned, inefficient, wasteful, and
complex operating system (Heshiki, Rosenbloom, and
Larsen 2000; Tajima 1984). While western firms understand integration as ownership of other suppliers and/or
buyers, Japanese firms forge tight collaborations, known
as “keiretsu,” instead of buying channel members. These
alliances are not contractual, but consist of strong links
among channel members that originate from personnel
exchanges and trust to giving long-term supply agreements and technology, sharing vital information, and
managing resources into developing new products and
processes. In January 1995, the Kobe earthquake devastated a major part of Kobe’s distribution infrastructure.
Apart from the expected complaints about lost sales,
wholesalers reported some surprising comments after the
reopening. Wholesalers stressed the advantages of newly
designed distribution channels, especially the opportunity to end longstanding business relationships known as
keiretsu. The purpose of this manuscript is to examine the
effect of several strategic and logistics elements of the
newly designed collaborations on the performance of
Japanese wholesalers in Osaka and Hyogo prefectures in
Japan.
Theoretical Background
Collaboration of wholesalers with suppliers is characterized by continuous planning, forecasting, and replenishment. Collaboration could be divided into relationships that were concerned with the development of
services and goods and those that focused on the reorganization of processes (Laurent 1996, p.145). The first type
of collaboration was regarded as strategic, because such
relationships had an impact on corporate effectiveness.
The second type of collaboration, which focused on the
introduction of new systems of logistics, was often characterized as operative, because it had an “impact upon
corporate efficiency and improved the current position of
the involved parties” (Sheth and Parvatiyar 1992, p. 75),
as wholesalers would be able to respond to the changing
needs of buyers. State-of-the-art logistics would provide
the wholesalers with an agility to adapt to unexpected
American Marketing Association / Winter 2006
service measures and to respond to unique customer
requests (Maltz and Maltz 1998).
Results
Multiple regression analysis revealed that the
supplier’s service to wholesaler (promoting strong collaboration, offering trustworthy information, accommodating a variety of needs, supporting the mission, determining the price, and organizing my business), the
supplier’s offerings to the wholesaler (supplying power
brands and assortments), buyer’s service to the wholesaler (offering credible forecasts, promoting strong alliance, backing the mission, and accommodating various
needs), and the wholesaler’s intra logistics activities
(providing JIT operation and supplementary activities,
absorbing cost increases of logistics activities, and facilitating the receipt of returned goods) explained 23 percent
of the wholesaler’s performance.
Implications and Limitations
The recent earthquake in Kobe has freed wholesalers
of the old bondage system by breaking up the keiretsu. To
revamp their performance, Japanese wholesalers have to
add real value to their operation, be smart, nimble, and
willing to grow beyond mere distribution to offer customers services they cannot get anywhere else, especially
from manufacturers themselves. The study has identified
a synchronized two-hand strategy that should be used by
wholesalers in their new collaborations with suppliers
and buyers. They should focus on both strategic development of services and goods and operative logistics systems to boost their profits and performance.
Although the present exploratory study identified
crucial elements that contributed to the performance of
the wholesaler associated with the new collaborations in
the Japanese marketing channel, none of the coefficients
of determination were particularly high. Apparently,
there was an ample deal of variation in wholesalers’
perceptions toward improving their performances that
this research did not explain. Future researchers are
encouraged to identify other factors that might explain
more of the observed variations in wholesalers’ perceptions toward performance. References available upon
request.
23
For further information contact:
Mohammed Rawwas
Department of Marketing
University of Northern Iowa
Cedar Falls, IA 50614–0126
Phone: 319.273.6946
FAX: 319.268.9544
E-Mail: [email protected]
American Marketing Association / Winter 2006
24
SEEKING CONGRUENCE ON NORMS: REVISITING KAUFMANN AND
DANT’S (1992) DIMENSIONS OF EXCHANGE
Mary T. Holden, Waterford Institute of Technology, Ireland
Thomas O’Toole, Waterford Institute of Technology, Ireland
SUMMARY
The major goal of our current studies is to advance
substantive theory on relational exchange theory (RET)
by examining the effect of primary relations (interpersonal relationships) and communication on the development
of relational norms. One of the first steps to achieving this
goal was the operationalization of Macneil’s framework,
however a review of the literature indicated incongruence
on relational norms due to the subjective and contextual
approach taken by most researchers in this field – there is
a large discrepancy between researchers on which interorganizational behaviors are relational norms (see Blois
2002; Ivens 2003; Ivens and Blois 2004). Therefore our
first task in achieving our overarching goal was to conceptualize and operationalize relational norms. Because
of the aforementioned incongruence, we revisited Kaufmann and Dant’s (1992) dimensions of Macneil’s common contracting norms and decided to utilize them in our
study because, although not faultless, their work represents the most extensive operationalization of Macneil’s
thinking in the literature as well as characterizing what
we perceive to best represent, at this time, the veritable
nature of relational norms.1
Utilizing Dillman’s (2000) guidelines, our methodology was cross-industrial and involved a postal survey of
senior Irish executives who were selling a product to
another firm. Two hundred and thirty useable surveys
were realized – the response rate was 52 percent. There
were four response waves and groups were checked for
nonresponse bias (see Armstrong and Overton 1977).
Measurement items were examined for face/content validity, and validity and reliability using exploratory factor
analysis and Cronbach’s alpha as well as confirmatory
factor analysis. Results from these tests were within
guidelines (Hair et al. 1998). The next two steps concerned: (1) an assessment of first-order factors, involving
discriminant validity, convergent validity and goodnessof-fit, and (2) an examination of “relational norms” as a
second-order factor. Discriminate validity results indicated multicollinearity between mutuality and solidarity
(correlation = .93; supported by overall findings from the
first-order confirmatory factor analysis involving a series
American Marketing Association / Winter 2006
of chi-square difference tests between all seven first-order
factors), solidarity was dropped from further analysis.2
First order factor loadings are significant at p < .000,
indicating convergent validity. Further results indicate
that most of the correlations between the dimensions are
significant at p < .05, however the correlation between
“mutuality” and “relational focus” is not significant (p =
.11) and the relationship between “flexibility” and “relational focus” is significant only at p < .10. Based on the
foregoing, the model was respecified and Figure 1 outlines results from its estimation.
Kaufmann and Dant (1992) were the first to attempt
a comprehensive conceptualization of Macneil’s (1980)
work. They found support for a six dimension solution –
conflict resolution was eliminated by them due to measurement problems. This study supports a six factor
model but our model had to eliminate solidarity due to
measurement problems – this could be attributed to the
lack of variation in the data as respondents were asked to
report on the closest relationship they had with another
firm, however we feel that results are more likely due to
the need to revisit their conceptual foundations. Because
our survey was cross-industrial, our results support
Kaufmann and Dant’s findings concerning the contextfree nature of their dimensions; we feel that support for a
seven factor solution is feasible if further scale development is completed together with the use of a more variant
sample (note that we perceive that the elimination of
“relational focus” from our model was due to scale
problems). Finally, based on overall results, some of
which are evident in Figure 1, and our extensive review
of the literature, we call for a return to basics. Researchers
need to differentiate between “abstract summarizing
norms” (see Macneil 1980) and other relational behaviors
which may be antecedents to or consequences of relational norms – this differentiation should lead to a convergence in the literature on the nature of relational norms,
which, in turn, should result in the standardization of
measurement items for each relational norm, thereby
moving RET forward through the replication of research
results. References available upon request.
25
FIGURE 1
Respecified Model
e1
e2
e3
e3
e5
e6
e7
e8
e9
e10
e11
MUT1
MUT4
MUT5
FLEX1
FLEX2
POW1
POW2
ROLE1
ROLE21
CON3
CON4
d1
Power
Restrain
Flexibility
Mutuality
d2
Role
Integrity
d4
d3
× 2(39) = 68.9 p = .002
AGFI = .91
NFI = .92
CFI = .97
RMSEA = .058
Standardised RMR = .04
Conflict
Resolution
d5
Relational
Norms
All regression weights are significant at p < .000
a
Fixed parameter
ENDNOTES
1
As we indicate – they are not faultless, so although we
utilized Kaufmann and Dant’s seven exchange dimensions as the basis of our operationalization of
relational norms, we did not operationalize the dimensions with exactly the same items used by them
for several reasons, mainly: (1) for some relational
norms, the literature indicated items that had achieved
a higher reliability score (Cronbach’s Alpha; several
of Kaufmann and Dant’s scores were in the low
seventies with two of them below .70); (2) we disagreed with their definition of mutuality – we felt the
scale’s “monitoring” aspect did not reflect Macneil’s
definition of mutuality as involving “some kind of
evenness;” (3) Conflict Resolution had to be dropped
American Marketing Association / Winter 2006
2
by them due to measurement problems, indicating
that using the same items in our survey would be
unwise, and (4) practitioners indicated that because
of the verboseness of some of the items, the meaning
of the items was unclear. The items for measuring
each of the norms in this study were adopted from
three major sources: Kaufmann and Dant (1992),
Berthon et al. (2003) and Ivens (2003). Also, note
that we do not investigate the proposed discriminating nature of these dimensions (see Kaufmann and
Dant 1992) rather our purpose involves assessing the
extent to which these norms are prevalent in relational exchanges.
Solidarity was dropped rather than mutuality because
mutuality had a much higher alpha and better goodness-of-fit estimates.
26
For further information contact:
Mary T. Holden
Waterford Institute of Technology
Cork Road
Waterford, Ireland
Phone: +353.0.51.845600
FAX: +353.0.51.302688
E-Mail: [email protected]
American Marketing Association / Winter 2006
27
THE EFFECT OF THE BUYER’S REPUTATION ON THE SELLER’S
REPUTATION: A NETWORK PERSPECTIVE
Tiebing Shi, Queen’s University, Kingston
SUMMARY
Corporate reputation is not new in the literature
(Albert and Whetten 1985; Markwick and Fill 1997;
Whetten and Mackey 2002; Davies et al. 2003). However,
many of the previous studies focus on one source of
corporate reputation: the firm itself (Moingeon and Soenen
2002). Another potential source – the buyers – has not
been explored enough. Brown and Dacin (1997) find two
types of corporate associations: corporate social responsibility associations (CSR) and corporate ability associations (CA). However, the factors affecting the salience of
CSR or CA associations are rarely studied (Beliveau et al.
1994). This study aims to fill the two gaps by examining
the potential effect of buyers’ reputation on a seller’s
reputation and the factors affecting the salience of CSR or
CA associations.
A seller and its buyers could form a perceived buyerseller network (Achrol and Kotler 1999). Network social
responsibility (NSR) associations are those reflecting the
network’s status and activities with respect to its perceived general societal obligations. Network ability (NA)
associations are the collective associations related to all
members’ expertise on producing and delivering their
outputs. Depending on the combinations of strong or
weak NSR associations and strong or weak NA associations, such networks could be divided into different
categories.
According to social identity theory (Tajfel and Turner
1979), via self-categorization process, a prospective buyer
might categorize itself into a favorable buyer-seller network depending on the degree of similarity between its
desired corporate associations and the network’s associations. Via social comparison process, the network members might evaluate the in-group and out-group on selected aspects of NSR and/or NA associations. The two
processes help the network gain favorable network associations which help all members gain access to critical
resources (Stuart et al. 1999). If it is not familiar with the
seller, a prospective buyer could first infer the network
associations from those of the familiar current members
(e.g., critical current buyers) and then extend the network
associations to the seller. The network associations mediate the relationship between the critical current buyer’s
corporate associations and the seller’s corporate associations.
American Marketing Association / Winter 2006
This study also proposes that the relative salience of
CSR or CA associations depends on some factors. (1) At
the society level, when consumerism (Kolter 1972) is
stronger (vs. weaker), the CSR associations could be more
(vs. less) salient than they were before though not necessarily more (vs. less) salient than the CA associations.
Also, when there is no influential business scandals, firms
are more likely to compete on delivering quality products
and services and thus CA associations might be more
salient than CSR associations. However, a sudden influential scandal could make CSR associations more salient
than CA associations in an industry or across industries.
(2) At the industry level, high technology uncertainty and
technology heterogeneity might make technology a source
of critical competitive advantages and thus make CA
associations more salient than CSR associations. Generally, in the early stages of industry life cycle (e.g.,
emergence and growth) technology uncertainty is higher
and thus CA associations might be more salient than CSR
associations. Further, the CSR-oriented or CA-oriented
reputation strategies of dominant players’ could affect the
industry patterns because other firms might mimic these
strategies (DiMaggio and Powell 1983). (3) At the organization level, social ties such as outside directors from
firms emphasizing CSR or CA associations could affect
the focal firm’s reputation strategies. (4) At the individual
level, the social ties of powerful managers (Geletkanycz
and Hambrick 1997) could affect their decision-making
regarding the firm reputation strategies.
This study finally proposes that, the more salient
CSR or CA associations are in a specific context, the
stronger effect a current buyer CSR or CA associations
have on the corresponding associations of the network
and the seller. For example, when the CA associations are
more salient in an industry, a prospective buyer might
more like to join a buyer-seller network with favorable CA
associations and thus be more likely to make CA association inferences from the current buyers and extend such
inferred associations to the buyer-seller network and the
seller.
This study has several limitations. First, a tentative
experiment design is presented in this study but more
strict experiments, surveys, or historical data are needed
to test the proposals. Second, this study assumes the
existence of the perceivable buyer-seller network but the
perceived buyer-seller network could be too feeble in
28
certain contexts. The proposals might be more applicable
to industries which have only a few dominant, highly
visible sellers who provide some critical parts or services
which could be the base of relatively stronger perception
of buyer-seller networks. Several future research directions are discussed in this study. First, future research
needs to study a seller coordinating role, collaborating
dynamics among buyers who could be competitors, and
the possible intra-hierarchy of the network from the
reputation management perspective. Second, knowledge
about how to leverage a firm reputation as a kind of
negotiation power will be helpful. Third, future research
could explore the other types of corporate associations.
Fourth, research about how a firm selects and coordinates
its network memberships will enrich our literature. Fifth,
the possible effects of organizational associations of other
stakeholders on the seller reputation also need to be
explored. Finally, future research needs to explore the
transferability of various elements of CSR and CA associations.
In summary, a buyer reputation could affect the seller
reputation; the associations of the buyer-seller network
mediate the relationship between a buyer corporate associations and the seller corporate associations; and several
context factors affect the relative salience of CSR or CA
associations of a specific firm. References available upon
request.
For further information contact:
Tiebing Shi
Queen University
47 Van Order Drive, Building 3-202
Kingston, ON K7M 1B6
Canada
Phone: 1.613.547.5822
FAX: 1.613.533.2622
E-Mail: [email protected]
American Marketing Association / Winter 2006
29
ANTECEDENTS AND CONSEQUENCES OF CUSTOMER
PARTICIPATION IN SERVICE RECOVERY
Beibei Dong, University of Missouri – Columbia, Columbia
Kenneth R. Evans, University of Missouri – Columbia, Columbia
Shaoming Zou, University of Missouri – Columbia, Columbia
SUMMARY
Unique characteristics of services often require customers to participate in co-creating service value either by
serving themselves (e.g., ATM) or by cooperating with
service providers (e.g., health care) (Claycomb et al.
2001). What motivates this study is the recognition that
encouraging customers to be “co-producers” of services is
the next frontier in competitive effectiveness (Bendapudi
and Leone 2003). Customer co-production benefits both
customers (e.g., faster speed and lower prices) and firms
(e.g., enhanced operating efficiencies and increased service value). However, it is impossible to ensure 100
percent error-free service.
Research to date appears to have addressed how to
“employ customers” to increase productivity in a successful service delivery context (Lovelock and Young 1979;
Scheider and Bowen 1995; Prahalad and Ramaswamy
2000). Little has been done to explore how firms might
manage customers responses when service failure occurs
in a co-production context. Moreover, as service recovery
has been traditionally defined as a firm’s effort to recover
from a failure (Gronroos 1988), little is known about
customers role in the recovery of a co-produced service.
Drawing on previous research of customer co-production and service recovery, this study attempts to bridge
these two research streams by exploring how customer
participation in service recovery influences the customer
intention for future co-production. We attempt to (1)
conceptualize a new construct – customer participation in
service recovery; (2) develop a conceptual framework to
examine the effects of customer participation in service
recovery; and (3) explore the possible antecedents of
customer participation in service recovery.
Our study focuses on customer co-production with
self-service technologies (SSTs), considering the significant impacts of SSTs in services. Examples of SSTs
include ATMs, online banking and retail self-checkout.
To investigate customer contribution in service recovery,
we focus on customer-driven failure, failures mainly due
to customers inability or faults.
American Marketing Association / Winter 2006
Conceptualization of Customer Participation in Service Recovery
Drawing upon the definition of service recovery
(Gronroos 1988) and customer participation (Dabholka
1990), customer participation in service recovery is
defined as “the degree to which the customer is involved
in taking actions in response to a service failure.” Similar
to the categorization of customer co-production developed by Meuter and Bitner (1998), recovery efforts are
classified into three types based on the degree of customers’ participation in service recovery: firm recovery,
joint recovery and customer recovery. Firm recovery
is a situation in which the recovery effort is delivered
mostly by the firm and its employees, while customers
may only have a physical presence or merely offer basic
and necessary input/information. For instance, in retail
self-checkout failure, an employee checked out the items
for a customer without any contribution from the customer. Joint recovery is a situation in which both the
customer and firm’s contact employees interact and participate in the recovery process. As an example, the
customer was guided through the entire self check-out
process by working together with an employee. Finally,
customer recovery is a situation in which the recovery
actions are delivered entirely by the customers, with no
interaction with the firm or its employees. An example of
this occurs when the customer kept trying and eventually
worked it out.
Consequences and Antecedents of Customer Participation in Service Recovery
As the benefits of customer co-production have been
well recognized, customers intention to co-produce in the
future has significant implications for the firm success.
We present a model of the antecedents and consequences
of customer participation in service recovery in Figure 1.
The manner in which a customer engages in service coproduction is determined by the customer ability and
motivation to co-produce. There are two main mechanisms underlying the relationship between customer participation in service recovery and customer ability. Customer socialization theory (Claycomb et al. 2001) posits
30
that involving customers in a recovery process is an
effective means for socializing customers. With participation in recovery, customers will understand their roles
and procedures better, and develop skills to function more
productively. Learning theory suggests customer participation in recovery functions as a meaningful way for
knowledge transfer (Vargo and Lusch 2004) and the
negative effect of service failure will also be offset through
successful recovery experience. Thus, we propose customer participation in service recovery has a positive
effect on the customer ability for future service coproduction (P1). However this relationship depends on
customer perceived value of participation. The effect of
customer ability on customer intention for future coproduction will be stronger when a customer perceived
value for future co-production is high than when the
perceived value is low (P2).
Situational factors and individual factors are expected to impact the level of customer participation in
FIGURE 1
Customer
selfefficacy
Presence of
other
customers
P4
P3
Customer
participation
in service
recovery
P1
Customer’s
ability to coproduce in
the future
P2
Customer
Intention to
co-produce
in the future
Perceived
value of coproduction
service recovery. Two antecedents, presence of other
customers (situational variable) and customer self-efficacy (individual difference), are investigated. We argue
that customers with high self-efficacy are more likely to
participate in self-service recovery than those with low
self-efficacy (P3) and that when other customers are
present, a customer is less likely to participate in selfservice recovery than when other customers are not
present (P4).
This paper has important insights for practitioners:
(1) as recovery without customer participation may have
a relatively less positive impact on customers’ willingness for future co-production, it implies superior firm
recovery may not be the only or the best strategy for
recovering service failures; (2) customer participation in
recovery constitutes a good way to offset the negative
effect of service failure and to encourage customers to
participate in the future; (3) Training customers with
more costs in short run could lead to long-run benefits for
firms; and (4) with different customer characteristics and
environmental influences, managers should be aware of
and able to choose the most appropriate way to recover
from service failures. Reference available upon request.
For further information contact:
Beibei Dong
University of Missouri – Columbia
436 Cornell Hall
Columbia, MO 65211
Phone: 573.884.6416
FAX: 573.884.0368
E-Mail: [email protected]
American Marketing Association / Winter 2006
31
DEVELOPING EFFECTIVE SERVICE RECOVERY STRATEGIES: THE
ROLE OF EXPLANATION AND COMPENSATION
Anne Roggeveen, Babson College, Boston
Dhruv Grewal, Babson College, Boston
Michael Tsiros, University of Miami, Miami
SUMMARY
You have just arrived at the airport to find that your
flight has been cancelled. The airline assures you that you
will be put on a flight three hours later. Unfortunately, this
is not an uncommon service failure scenario. Of course,
the reasons for the failures vary, as well as the manner in
which the airlines respond to the failure. A customer who
is delayed due to bad weather simply receives an explanation for the delay; whereas a customer who is delayed due
to overbooking receives a travel voucher. But for which
failures is each response appropriate? In other words, in
which situations is explanation alone sufficient as a
recovery effort and under which conditions is compensation also necessary? In this research we investigate the
impact of the explanation provided. More specifically, we
use attribution theory to explore how the explanation
provided for the failure mitigates the effectiveness of
explanation alone versus explanation and compensation
as recovery strategies.
The explanation provided for a service failure can be
wide ranging. It can be due to factors the company is not
responsible for (e.g., in the case of a flight delay, weather
conditions) or to factors which the company is responsible
for (e.g., mechanical difficulties). Furthermore, the explanation may indicate that the failure is an unstable
event (e.g., poor weather conditions occur infrequently)
or a stable event (e.g., poor weather conditions occur
frequently). We demonstrate that, provided the explanation is believable, the explanation itself impacts how
customers respond to the recovery effort. More specifically, we investigate whether customers require compensation in addition to the explanation, or whether the
explanation alone is sufficient to positively impact repurchase intentions.
Experiment 1 used a 2 between-subjects design which
manipulated stability of the problem (stable versus unstable) and compensation (none versus 50% off coupon).
ANOVA results There was a significant interaction between stability and compensation (F(1,107) = 4.36, p <.05)
on repurchase intentions. When the problem was stable,
offering compensation (versus no compensation) improved consumers repurchase intentions (Mcompensation =
2.87 versus Mnone = 2.11; F(1, 107) = 10.53, p <.01). When
American Marketing Association / Winter 2006
the problem was unstable, there was no difference in
repurchase intentions between those who were compensated and those who were not (Mcompensation = 3.30 versus
Mnone = 3.23; F < 1). Thus, offering compensation improves repurchase intentions, but only when the failure
was ascribed to a stable cause.
Experiment 2 used a 2 × 2 × 2 between-subjects
design. The locus of responsibility (company is responsible [shortage of flight crew] versus company is not
responsible [weather]), the stability of the cause of the
problem (stable versus unstable), and whether compensation was offered (compensation versus no compensation)
were the between-subjects factors. Results revealed a
significant three-way interaction among stability, responsibility, and compensation (F(1, 243) = 5.69, p < .05).
When the company was responsible for the failure and the
failure was stable, offering compensation (versus offering
none) improved participants’ repurchase intentions
(Mcompensation= 2.4, Mno compensation = 1.9; F(1,243) = 7.8, p < .01).
When the company was responsible for the failure and
failure was unstable, participants have similar evaluations regardless of whether they were compensated
(Mcompensation = 2.4, Mno compensation = 2.8; F(1,243) = 3.09, ns).
When the company was not responsible, there were no
differences between compensation conditions regardless
of the stability of the failure (Stable: Mcompensation = 2.8, Mno
= 2.8; F < 1; Unstable: Mcompensation = 2.6, Mno
compensation
= 2.5; F < 1). Thus, Experiment 2 replicates
compensation
Experiment 1 in that compensation improves repurchase
intentions if the failure is ascribed to a stable cause and the
company was responsible for the failure. It extends Experiment 1, by demonstrating that if the company is
perceived not to be responsible for the failure, compensation does not improve repurchase intentions.
Previous research has shown that compensation positively impacts customer’s post-recovery evaluations and
intentions (e.g., Bitner 1990; Kelley, Hoffman, and Davis
1993). Thus, companies may be inclined to always offer
compensation after a service failure. However, as demonstrated in this research, not all service failures require the
same recovery efforts. In some cases, compensating customers does not enhance their repurchase intentions
above levels that could be achieved with a simple explanation for the situation.
32
Conditions under which compensation is/is not an
effective recovery tool are important for managers to
understand – especially as firms increasingly evaluate the
effectiveness of market activities on their bottom line or
on return on investment (Ambler et al. 2001). Managers
must also carefully weigh the costs of these service
recovery strategies relative to their benefits. If not care-
fully managed, the costs of such plans can increase
astronomically. Helping customers understand the cause
and stability of the service failure, by providing explanations, can be a powerful tool to help manage the effectiveness of service recovery plans. Of course, the explanation
provided must be believable to be effective.
REFERENCES
The Effects of Physical Surroundings and Employee
Responses,” Journal of Marketing, 54 (April), 69–
82.
Kelley, Scott W., K. Douglas Hoffman, and Mark A.
Davis (1993), “A Typology of Retail Failures and
Recoveries,” Journal of Retailing, 69 (Winter), 429–
52.
Ambler, Tim, Flora Kokkinaki, Stefano Puntoni, and
Debra Riley (2001), “Assessing Market Performance:
The Current State of Metrics,” Center for Marketing
Working Paper No. 01-903, London Business School.
Bitner, Mary Jo (1990), “Evaluating Service Encounters:
For further information contact:
Anne Roggeveen
Babson College
215 Malloy Hall
Babson Park, MA 02457
Phone: 781.239.4289
FAX: 781.239.5020
E-Mail: [email protected]
American Marketing Association / Winter 2006
33
THE ROLE OF PERCEIVED FAIRNESS IN CONSUMER
PENALTY EVALUATION
Young “Sally” Kim, Shenandoah University, Winchester
SUMMARY
Despite the popularity of penalty uses by organizations, very little is known about how customers evaluate
penalties and how those evaluations affect behaviors.
This research is the first study that specifically examines
the effects of customers’ penalty evaluations on behavioral consequences such as repurchase intentions, intentions to engage in negative word-of-mouth, and intentions to comply with the organization’s policies in the
future. More specifically, the study examines the following research questions: (a) What is the role of perceived
justice in consumer penalty evaluation?; (b) What are
behavioral effects of transaction-specific evaluation (i.e.,
evaluation specifically related to an incident–penalty)
and global evaluation (i.e., overall evaluation of the
organization) in a consumer penalty context?; (c) Does
transaction-specific evaluation account for more variances in behavioral intentions than global evaluation in a
consumer penalty context?; (d) Do emotional responses
influence how customers “process” the penalty evaluation?
The study uses the framework as shown in Figure 1.
The first hypothesis is related to the relationship between
perceptions of justice and global evaluation and predicts
that perceptions of justice will influence overall evaluation. The second hypothesis addresses the relationship
between perceptions of justice and behavioral responses.
When customers perceive the penalty is fair, they are
expected to behave more favorably for the organization
(e.g., less negative word-of-mouth, higher repurchase
intention). The third hypothesis is concerned with the
relationship between global evaluation and behavioral
responses and predicts that overall satisfaction will influence behavioral responses. The fourth hypothesis predicts that transaction-specific evaluation (i.e., perceptions of fairness) will explain more variances in customers’ behavioral intentions than global evaluation. The
final hypothesis addresses the moderating role of emotional response and predicts that customers who respond
to the penalty with more negative emotion will weigh
transaction-specific evaluation and global evaluation differently than those who respond with less negative emotion.
American Marketing Association / Winter 2006
The cross-sectional survey was used to collect data
from customers of the financial service industry. Respondents were asked to evaluate the penalty using an incident
they experienced in the past. The final sample size was
111. The measures were adapted from previous studies
and were subjected to reliability and validity analyses.
Based on the results of high reliability and validity, the
average of the items was used to estimate the model.
Covariates that were significant at = 0.1 were included for
estimating the model.
The results suggest that perceptions of fairness play
an important role in increasing customers’ overall satisfaction as well as helping customers behave in a desirable
way (e.g., increased repatronage intentions and compliance intentions). However, the relationship between perceptions of fairness and intentions to comply was found to
be opposite from what was expected. The effect of perceptions of fairness on intentions to comply was expected to
be negative, but the results show a positive relationship.
This finding is interesting given that operant conditioning theory suggests that a negative stimulus or an unpleasant experience increases the likelihood that individuals avoid the situation that led to the negative consequence and make efforts to comply with the standard. The
positive influence of perceptions of fairness on compliance intentions existed even after controlling for the
effect of penalty amount, which had a positive influence
on compliance intentions. The study found that customers’ global evaluation (overall satisfaction) is an important determinant of behavioral intentions, but, transaction-specific evaluation (e.g., perceptions of fairness)
account for more variances in behavioral intentions than
global evaluation do in the consumer penalty context. In
support of the hypothesis regarding the moderating role
of emotion, the results show that customers who respond
with more negative emotion weigh the antecedents of
repatronage intentions differently than those who respond with less negative emotion. In sum, the study
supported all hypotheses discussed earlier. Several important managerial implications are offered in the paper.
References available upon request.
34
FIGURE 1
Framework of the Role of Perceived Fairness in Consumer Penalty Evaluation
Perceived
Fairness
(Distributive Justice,
Procedural Justice,
Interactional Justice)
Global
Evaluation
Intentions
to Repatronize
Negative
WOM
Intentions
Compliance
Intentions
For further information contact:
Young “Sally” Kim
School of Business
Shenandoah University
1460 University Dr.
Winchester, VA 22601
Phone: 540.678.4473
E-Mail: [email protected]
American Marketing Association / Winter 2006
35
THE RELATIONSHIP BETWEEN CONSUMERS’ TENDENCIES TO BUY
EXCESSIVELY AND THEIR MOTIVATIONS TO SHOP AND
BUY ON THE INTERNET
Monika Kukar-Kinney, University of Richmond, Richmond
Nancy M. Ridgway, University of Richmond, Richmond
Kent B. Monroe, University of Richmond, Richmond
SUMMARY
Numerous recent research articles, popular press
articles, books, and websites on compulsive buying indicate a growing interest in the problems overspending may
cause. Researchers traditionally have used the term “compulsive buying” to describe the dysfunctional, maladaptive, or abnormal consumptive behaviors exhibited by a
small number of pathologically ill consumers who are
unable to control the overpowering impulse or urge to
buy. Previous research suggests that between 1.8 and 8.1
percent of the general population could be classified as
compulsive buyers (Faber and O’Guinn 1992). Moreover,
research has found that compulsive buyers may also suffer
from additional psychiatric disorders (e.g., Faber,
Christenson, de Zwaan, and Mitchell 1995; McElroy
et al. 1994). Finally, compulsive buyers are more likely to
be women (Dittmar and Drury 2000; McElroy et al.
1994).
While a relatively small percentage of the general
population may qualify as pathological compulsive buyers, in that they cannot resist the urge to buy and their
buying behavior results in unmanageable financial debt,
it is our belief that more consumers are affected by what
has been called “excessive buying” (Ridgway, KukarKinney, and Monroe 2005). In comparison with pathological compulsive buyers, excessive buyers may not
continuously experience an uncontrollable urge to buy.
However, they may occasionally or often exhibit tendencies for buying too much and too frequently. A second key
difference between excessive and compulsive buying is
that it is not necessary that excessive spending results in
harm (particularly financial) to the consumer (Faber and
O’Guinn 1992; Hassay and Smith 1996). Hence, excessive buying has been defined as the extent that a consumer’s
buying behavior (1) tends to be impulsive in nature, (2)
represents a strong preoccupation in the consumer’s life,
(3) helps the consumer alleviate prior negative feelings,
and (4) elicits positive feelings in the consumer. In many
respects, excessive buying is similar to compulsive buying; however, it covers a broader set of consumers.
Indeed, the popular press articles alluded to above seem
to be more about excessive buying than the pathology of
American Marketing Association / Winter 2006
compulsive buying (Chaker 2003; Hoffman 2000; Kelly
1999).
The importance of Internet retailing has been growing steadily in recent years (Grewal, Iyer, and Levy 2004),
increasing the need to understand how consumers perceive and react to different Internet retail strategies as
well as what motivates them to shop and buy on the
Internet. In the Internet environment, consumers can
search relatively more easily for product and price information, as well as purchase from a retailer without
geographical restrictions (e.g., see Underhill 2000).
Moreover, the Internet retail environment possesses characteristics that encourage compulsive or excessive buying
episodes. For example, the Internet offers convenience in
buying (e.g., ability to buy 24 hours a day, seven days a
week; one-click buying option offered by many e-tailers,
such as Amazon.com), lower cost of information search
per store (Bakos 1997), and leads to a perception of a more
novel experience (Grewal, Iyer, and Levy 2004). Moreover, shopping on the Internet can be more exciting,
allowing consumers to experience a feeling of “flow” (i.e.,
totally in the moment and unaware of all else;
Cziskszentmihalyi 1990; Hoffman and Novak 1996).
Finally, the Internet allows consumers to more quickly
satisfy an urge to buy.
Building upon previous research on compulsive or
excessive buying and research on the influence of the
Internet, the present research investigates how buyers
who score high (versus low) on an excessive buying index
exhibit differences in their shopping motivations that
relate to their likelihood to be more (less) likely to shop
and buy on the Internet. The goal of the present research
is to develop further a theory of excessive buying. While
advancing excessive buying theory is a key contribution
of the present research, we also contribute to this area of
research by developing measures of shopping and buying
motivations that can be used to predict consumers’ tendencies to be excessive buyers. Moreover, we also determine the functional form of the relationship between
excessive buying tendency and shopping motivations,
identify additional characteristics of an excessive buying
consumer segment, and validate the research results with
36
actual consumer purchase data. Finally, finding that
Internet shopping is indeed positively related to excessive
buying and discovering the motivating drivers of this
relationship allows us to offer important managerial and
public policy implications. References available upon
request.
For further information contact:
Monika Kukar-Kinney
Robins School of Business
University of Richmond
1 Gateway Rd
Richmond, VA 23173
Phone: 804.287.1880
FAX: 804.289.8878
E-Mail: [email protected]
American Marketing Association / Winter 2006
37
WHY DO E-SHOPPERS ABANDON SHOPPING CARTS – PERCEIVED
WAITING TIME, PERCEIVED RISK, AND
TRANSACTION INCONVENIENCE?
Rajasree K. Rajamma, University of North Texas, Denton
SUMMARY
After almost a decade since its inception, online
retail sales represent only 1.6 percent of the world’s total
retail sales (Cox 2003). This is an interesting situation
considering the phenomenal growth in online retailing.
One possible explanation for the under performance of
online retailing is that, online shopping activities of many
customers are not culminating in purchase. Studies estimates that approximately 75 percent of the shopping carts
are abandoned before purchase is completed (Goldwyn
2001; Eisenberg 2003). In addition, trade data suggests
that each incidence of shopping cart abandonment represents approximately $175 in lost sales to the online
retailer (Bizrate.com 2000). The total online retailing
industry loss, thus, would amount to more than $6.5
billion per year (McGlaughlin 2001). To avoid future
financial losses as well as customer erosion, it is important that practitioners as well as researchers understand
the factors leading to shopping cart abandonment.
The current research is aimed at examining the above
mentioned knowledge gap, which is leading to the loss of
online retailers’ revenues. Shopping cart abandonment as
examined in this paper comes right after the purchase
decision regarding individual products has been made but
before the purchase is completed. Most of the existing
studies have examined the customer during the initial
stages of the buying process such as from problem recognition stage to the evaluation of alternatives stage (“Five
stage model of consumer buying process” – Kotler 1999).
There is a paucity of research aimed at understanding
customer behavior at the transaction stage. This paper is
expected to fill that lacuna. For the purpose, the antecedents to shopping cart abandonment such as perceived
waiting time, perceived risk and, transaction inconvenience are examined using expectancy-disconfirmation
model as the overarching theory.
Fifty-four undergraduate students enrolled in a marketing research course formed the initial sample for the
study. Snowball sampling was then used to recruit further
respondents. Each of the fifty-four students was asked to
forward an online survey to at least ten people. The final
sample of the study, thus, consisted of 611 respondents.
American Marketing Association / Winter 2006
The results suggest that perceived waiting time and
perceived risk are important antecedents of shopping cart
abandonment. However, we could not find any support for
the relationship between transaction inconvenience and
shopping cart abandonment.
The results of this study provide a good overview of
the factors influencing online shopping cart abandonment. Further to the substantive contributions made to a
hitherto unexplored area of online shopping, the results
hold several implications for the e-tailers. The findings
indicate that negative disconfirmation of shoppers’ expectation regarding the time required for completing a
transaction, adversely affects their decision to continue
with online shopping. Perception of risk was also found
to influence shopping cart abandonment. However, the
direction of this relationship was reverse of that expected
and could be explained based on perceptual bias theory.
This suggests that it is important for e-tailers to create
positive perceptions about the safety of the site at the stage
when the consumer starts information search about the
same. Findings also point to the importance of reducing
perceived waiting time to reduce incidences of shopping
cart abandonment. The third factor, transaction inconvenience was not found to influence shopping cart abandonment. The reason for this anomalous finding could stem
from the scale used for measuring transaction inconvenience. After purification, the remaining scale items
measured mainly the difficulty and time involved in order
processing, thereby excluding other important factors
such as technical glitches, non-availability of stock and
non-disclosure of shipping and handling charges until
later in the ordering process. These excluded factors have
been found to be important influencers of the decision to
abandon shopping carts in commercial studies. Absence
such important influencers from the scale could have
resulted in the non-significance of the transaction inconvenience construct in this study.
In spite of the limitations, the results of this study
provide a good overview of the factors influencing online
shopping cart abandonment and offer several implications for the e-tailers. References available upon request.
38
For further information contact:
Rajasree K. Rajamma
Department of Marketing and Logistics
College of Business Administration
University of North Texas
Denton, TX 76203–1396.
Phone: 940.565.3174
FAX: 940.565.3837
E-Mail: [email protected]
American Marketing Association / Winter 2006
39
THE EFFECT OF RETURN LEGITIMACY UPON RETAIL
SALESPERSON ROLE STRESS
Chad W. Autry, Texas Christian University, Fort Worth
Donna J. Hill, Bradley University, Peoria
Matthew O’Brien, Bradley University, Peoria
SUMMARY
In many retail purchasing situations, when customers are dissatisfied with a purchase they have made, the
retailer will “guarantee” the product by allowing the
customer to return it. These liberalized return policies are
seen as a point of differentiation – Nordstrom would take
back any item at any time in any condition! Thus,
particularly during the last decade, a trend toward a “noquestions-asked,” extremely liberalized returns policies
where the customer can return nearly anything, nearly
any time, and in nearly any condition has become the
norm (Dacy 1994; Rosenbaum and Kuntze 2003). However, some retailers are becoming concerned that they
take this portion of the service recovery effort too far.
Fraudulent and abusive returnees cost retailers 16 billion
dollars annually accounting for approximately 9 percent
of all returns in the United States (Speights and Hillinski
2005). Many stores are considering, or have already
instituted, policies to counter return fraud. As a consequence, managing the return policy for a retailer and their
salesclerks has become less clearly defined. In turn, this
could lead to an increased level of role stress for those who
are responsible for accepting returns.
Role stress is a global phenomenon made up of two
dimensions: role ambiguity and role conflict. Role ambiguity, although not always clearly defined, occurs when
individuals lack a clear definition of the expectations of
their role and the required methods to fulfill their duties
(Rizzo, House, and Lirtzman1970; Sohi 1996; Singh
2000). Role conflict, on the other hand, occurs from
incongruity of role expectations. It can occur when an
individual confronts multiple constituents, each with
expectations that are difficult to satisfy simultaneously
(Agarwal 1993). Role conflict occurs in boundary spanning positions because of conflicting expectations from
inside and outside the organization. For example, when
a customer wants to return a product for a refund and
expects their return to be accepted without question, the
salesperson is expected to satisfy the want of the customer. Additionally, the salesclerk is expected to screen
out fraudulent returns and to reject returns that do not
adhere to the store’s policy. The result of this situation is
role conflict. The focus of this paper is on role stress which
can be created by the returns process. Role stress can lead
American Marketing Association / Winter 2006
to job dissatisfaction, employee turnover, a diminished
ability to service customers, and burnout (Flaherty,
Dahlstrom, and Skinner 1999; Hartline and Ferrell 1996;
Singh, Goolsby, and Rhoads 1994; Bettencourt and Brown
2003).
Institutional theory has long been used to explain the
viability or legitimacy of organizations. Through legitimization, organizations are said to offer symbolic or
evocative symbols to garner societal support (e.g., Ashforth
and Gibbs 1990; Pfeffer and Salancik 1978; Suchman
1995) or to become culturally embedded such that common expectations are formed related to organizational
performance (e.g., DiMaggio and Powell 1983; Zucker
1987). There is general agreement in prior institutional
theory research that credibility and various types of
support for organizations are determined as a result of
their being granted legitimacy status (Suchman 1995).
This status is gained as a result of three linked, but distinct
processes where interactions are verified as being in
compliance with regulatory institutions, normative institutions, and cognitive institutions (Scott and Meyer 1983;
Meyer and Zucker 1989; Berger and Luckmann 1967). In
other words, entities are granted legitimacy in proportion
to their tendency to conform to commonly accepted rules,
social norms, and/or cognitions (Suchman 1995). Institutional theory, to date, has generally been used to explain
the legitimacy of organizations or firm processes; it has
rarely, if ever, been employed in the marketing context.
The current study is therefore an initial endeavor to adopt
institutional theory for the purposes of explaining the
dynamics of the exchange process. In doing so, legitimacy
is operationalized as the expected norms, rules, and
cognitions governing the actors within retail exchange
episodes. This operationalization is important in that for
retail returns, there are behavioral expectations grounded
in rules, social norms, and logic that the parties to the
exchange are expected to follow.
The types of legitimacy the salesperson perceives the
customer to meet or violate are predicted to influence the
salesperson’s role ambiguity. Additionally, the salesperson may be asked to engage in behaviors that are against
their own personalities, orientations, or values by either
the customer or the organization for which they work.
This has been referred to as person/role conflict. The
40
types of legitimacy the salesperson perceives the customer to meet or violate are predicted to influence the
salesperson’s role conflict.
tionally, we provided empirical evidence that illegitimate
rules-based attempts of returns act as clarifying the role
for the salesperson by reducing role conflict.
To test the proposed hypotheses we conducted a
survey that was given to retail salespeople. From the
analyses, there appears to be no evidence of the influences
of the bases of return legitimacy upon role ambiguity. We
find differing effects of legitimacy type upon role conflict.
Our findings indicate that cognitively illegitimate return
attempts increase the salesperson’s role conflict. Addi-
While our findings highlight the importance of the
customer’s return request in this process, further studies
are needed to investigate the influence of return legitimacy attempts upon other important salesperson job
characteristics, perceptions, and outcomes such as performance, job satisfaction, and employee turnover. References available upon request.
For further information contact:
Matthew O’Brien
Bradley University
1501 West Bradley Avenue
Peoria, IL 61625
Phone: 309.677.3482
FAX: 309.677.3374
E-Mail: [email protected]
American Marketing Association / Winter 2006
41
ACHIEVING CUSTOMER RELATIONSHIP AND ORGANIZATIONAL
PERFORMANCE THROUGH ASSETS, CAPABILITIES,
AND PROCESSES
Artur Baldauf, University of Bern, Switzerland
David W. Cravens, Texas Christian University, Fort Worth
William L. Cron, Texas Christian University, Fort Worth
SUMMARY
Achieving effective customer relationships is acknowledged as essential by a wide range of executives
competing on a global basis. Despite the recent advances
in customer relationship management (CRM) technologies, adoption of information technology is no guarantee
that customer relationships will improve. Increasingly,
scholars and managers are realizing that the outcomes
anticipated from CRM adoption require more extensive
and fundamental changes in enterprise level processes,
capabilities, and strategies. The drivers of customer relationship performance have received substantial research
attention, but have been approached from a functional
and often limited perspective including sales force initiatives, loyalty and promotional programs, electronic commerce, supply chain services, and services.
Determining enterprise level factors that influence
key customer relationship performance is an important
research question. Prior research points to three promising antecedents to customer relationship performance:
(1) business core process capabilities (customer relationship, supply chain, and new product development), (2)
process improvement orientation (quality and cost), and
(3) product positional advantage. Customer relationship
performance is proposed as an antecedent to market
profitability performance. Based on this conceptual logic
we examine the following hypothesized relationships:
Hypothesis 1: Business core process capabilities will
be positively related to customer relationship performance.
Hypothesis 2: A quality (differentiation) process
improvement orientation will have a stronger positive effect on customer relationship performance
than a cost process improvement orientation.
Hypothesis 3: Product offering advantage will be
positively related to customer relationship performance.
American Marketing Association / Winter 2006
Hypothesis 4: Customer relationship performance
will be positively related to business performance
(market and profitability).
Industry type, product type, company size, and business design are included as control variables in the
conceptualization. We examine relationships between
the three antecedent variables, customer relationship
outcomes, and business performance from a chief executive perspective, across a variety of industries, business
designs, and companies located in Switzerland. Many of
the firms in the sample compete internationally. The
sampling objective was to include a wide range of firms
in different industries. We utilized a standardized questionnaire which was pre-tested for wording and understanding before final mail distribution. A total of 234
usable questionnaires were returned reflecting a response
rate of 26 percent. Established multiple item measures
were used for the construct measures which we purified
applying state-of-the-art methodologies. Acceptable reliability and validity of the scales was indicated. Regression
analysis was used to test the hypotheses.
The results from the analyses of the relationships of
core process capabilities, process improvement orientation, and product offering advantage with customer relationship performance provided strong support for H1, H2,
and H3. The overall model fit indices for the main effects
model were R2 = 0.31, F-value = 10.25, and p < 0.01.
Business process capabilities was the strongest predictor
(ß = 0.37) compared to quality process improvement
(0.20), cost process improvement (-0.10), and product
offering advantage (0.13). The relationships between
customer relationship performance and market and profitability performance were significant at the 0.01 level for
market performance and 0.10 level for profitability performance, thus, providing support for H4. None of the
control variables was significant at the 0.05 level. Managerial and research implications are discussed and future
research needs are examined. Reference available upon
request.
42
For further information contact:
Artur Baldauf
Department of Management
University of Bern
Engehaldenstrasse 4
3012 Bern
Switzerland
Phone: +41.31.631.5331
FAX: +41.31.631.5332
E-Mail: [email protected]
American Marketing Association / Winter 2006
43
INTERACTION ORIENTATION: THE NEW MEASURE OF
MARKETING CAPABILITIES
Girish Ramani, The University of Connecticut, Storrs
V. Kumar, The University of Connecticut, Storrs
SUMMARY
Advances in technology have resulted in increasing
opportunities for interactions between firms and customers, between customers, and between firms (Yadav and
Varadarajan 2005). Interactions may be inter-personal or
artificial. The effective and efficient management of
interactions and the interfaces where these interactions
occur is increasingly being recognized by firms as a
source of lasting competitive advantage (Rayport and
Jaworski 2005). Firms that develop the capabilities needed
for the successful management of firm-to-customer, customer-to-customer, and firm-to-firm interactions would
be termed “interaction oriented.” Firms operating in
business markets tend to vary in the degree to which they
are interaction oriented. Retail firms that deal with their
customers through multiple communication and transaction channels, and firms operating in consumer markets
are waking up to the benefits of an interaction orientation.
However, there does not exist in extant research a construct that captures the elements of the strategic orientation of firms that is appropriate for survival and success
in increasingly interactive market environments. The
contributions from this study include: (1) the identification of the components of interaction orientation, (2) the
development of scales to measure interaction orientation,
and its consequences, and (3) an understanding of the
antecedents that determine the degree of interaction
orientation in a firm.
The Components of Interaction Orientation
Based on a review of literature and exploratory
interviews with a total of forty-eight managers from
twenty-six business-to-business and eighteen businessto-consumer firms, we define interaction orientation as
an organizational capability which emanates from the
firm’s belief in the customer concept and results in the
firm (a) developing an interaction response capacity
based on dynamic database systems, (b) empowering
customers by allowing them to shape customer-to-firm
interactions and customer-to-customer interactions, and
(c) adopting customer value management as a guide to
profitable marketing decisions. We proceed to explain the
four components of the interaction orientation construct
underlined above: (1) Customer concept is the belief that
the unit of analysis of every marketing action and reaction
should be the individual customer. (2) Interaction reAmerican Marketing Association / Winter 2006
sponse capacity represents the degree to which the firm
is capable of offering successive products, services and
interaction experiences to each customer by dynamically
incorporating feedback from previous behavioral responses
of that specific customer. (3) Customer empowerment
reflects the extent to which a firm provides its customers
avenues to (a) connect with the firm and actively shape the
nature of transactions, and (b) connect and collaborate
with each other by sharing information, praise, criticism,
suggestions, and ideas about its products, services, and
policies. (4) Customer value management is defined as
providing differentially tailored treatment, based on the
expected response from each customer to available marketing initiatives, such that the contribution from each
customer to overall profitability is maximized (Kumar,
Ramani, and Bohling 2004).
The Consequences of Interaction Orientation
The consequences of any strategic orientation have
often been evaluated in terms of aggregate level business
performance measures like sales, profits, and market
shares. However, since interaction orientation prescribes
that the individual customer should be the unit of analysis, it would be logical to examine first if firms that are
interaction oriented do indeed exhibit superior performance in terms of customer-centric measures. We therefore posit that the consequences of an interaction orientation are (1) identification of profitable customers, (2)
acquisition and retention of profitable customers, (3)
conversion of unprofitable customers to profitable ones,
(4) increased satisfaction among profitable customers, (5)
generation of positive word of mouth, and (6) a higher
degree of customer ownership of the firm. The proposed
conceptual framework also links interaction orientation,
through these customer-centric measures, to aggregate
level performance measures like profits, return on marketing investment, and customer equity.
The Antecedents of Interaction Orientation
We propose that a firm’s dependence on trademarks
and patents has a negative correlation with the practice of
customer empowerment. Also, the width of a firm’s
product line is positively linked to the practice of customer empowerment and customer value management.
We posit that the greater the outsourcing capability of a
firm, the greater is the firm’s interaction response capac44
ity. We also propose that the strength of the belief in the
customer concept would be greater for business-to-business firms than for business-to-consumer firms.
Conclusion
The benefits to a firm of adopting interaction orientation are: (1) the firm is able to attract and retain the most
valuable customers, (2) the firm’s customers develop into
a skilled resource for the firm, (3) the firm’s customers
keep competitors away because of their heightened sense
of ownership of the firm, (4) the firm develops the ability
to foresee customer responses and plan marketing activi-
ties for longer time horizons, and (5) the firm exhibits
superior aggregate level business performance. The effect
of interaction orientation on firm performance appears to
be asymmetric. For example, Dell manages to make
steady progress by maintaining a high level of interaction
orientation. On the other hand, the product centric approach that Gateway follows seems to be resulting in a
sharp erosion of its competitive advantage. The consequences of not adopting an interaction orientation are
more severe for business-to-business firms than for business-to-consumer firms. References available upon request.
For further information contact:
V. Kumar
Department of Marketing
The University of Connecticut
2100 Hillside Road
Storrs, CT 06269
Phone: 860.486.1086
FAX: 860.486.8396
E-Mail: [email protected]
American Marketing Association / Winter 2006
45
CUSTOMER-BASED CORPORATE REPUTATION – INTRODUCING
A NEW SEGMENTATION CRITERION
Gianfranco Walsh, University of Strathclyde Business School, United Kingdom
Sharon E. Beatty, University of Alabama, Tuscaloosa
Betsy B. Holloway, Samford University, Birmingham
SUMMARY
Corporate reputation continues to attract attention
within marketing and management literatures. However,
few studies focus on one important group, customers, or
attempt to use corporate reputation to segment markets.
We conceptualize corporate reputation as an attitude and
treat it as a base for market segmentation. From a sample
of over 500 customers, we develop a five-dimensional
structure and measure of corporate reputation. The reliability and validity of the scale is then fully assessed and
cluster analysis on a second sample identified three
meaningful segments.
Introduction
A growing body of evidence suggests that firms with
good reputations have competitive advantages in regards
to attraction and retention of customers. Thus, it is
important to understand how various constituents feel in
regards to reputation and its components. Our research
contributes to the literature by developing a scale of
consumer-based corporate reputation of service firms.
Unlike previous studies, we conceptualize corporate reputation as an attitude and use it to identify segments. One
advantage of grouping customers together according to
their attitudes towards the firm’s reputation is that it can
help firms better target their corporate messages. This is
the first study that attempts to identify customer segments
based on their evaluations of a firm’s reputation.
Method and Results
A consumer-based corporate reputation (CBR) scale
was systematically developed and validated in several
steps, involving several stages of exploratory research as
well as survey data collection.
Measure Development. Based on exploratory work,
we developed a multi-dimensional 39-item measure to
capture our conceptualization of CBR. Using this measure, we conducted a web-based survey using a convenience sample (n = 504) in regards to our respondents’
current service provider in one of three industries (banking, retailing, or fast-food restaurant). We performed
principal axis factor analysis, resulting in a five-factor
solution that accounted for 66 percent of variation. We
American Marketing Association / Winter 2006
labeled these dimensions: Customer Orientation, Good
Employer, Reliable and Financially Strong Company,
Quality Orientation, and Social and Environmental Responsibility.
Measure Testing. To further test our scale, we again
conducted a web-based survey, resulting in 682 usable
responses. This survey included the CBR measure, as well
as four outcomes which are typically associated with
corporate reputation, customer satisfaction, loyalty, word
of mouth, and trust. Several relevant demographic variables were also collected. The five-factor structure was
tested using confirmatory factor analysis. Several items
were dropped to increase model fit. Model identification
was achieved with 28 items and all fit indices were
acceptable.
Corporate-Reputation Segments. Next to identify
corporate-reputation segments, we conducted a hierarchical cluster analysis. The corporate reputation items
representing the five dimensions were used as cluster
variables in step 1. We aggregated the items of each CBR
dimension and used the respective mean values as input
variables for clustering. A three-cluster solution most
adequately represented the segments. Then, identified
clusters were described relative to the outcome variables
and demographics.
Reputation Admirers is the second-largest group
(n = 256) and its members tend to be older and better
educated. These individuals rated all five reputation
factors higher than the other groups. The factors Customer Orientation, Reliable and Financially Strong Firm,
and Quality Orientation received particularly high ratings. This cluster also scored higher on all outcome
variables.
Reputation Ambivalents, the largest group (n = 349),
scored moderately on the five reputation dimensions–
rating all five reputation factors higher than the third
cluster, but lower than the first cluster. Similarly, they
scored moderately on the four outcomes variables. This
relatively older group rated their company particularly
high on Customer Orientation and Good Employer,
indicating that they feel the company cares about its
customers and employees.
46
Reputation Criticals scored lowest on the five reputation dimensions compared with the other groups, indicating that they are the most critical customers in terms
of corporate reputation and the most troubling from the
firm’s perspective. This cluster, who tended to be younger
and less educated, also rated their service providers lower
on all outcome variables.
Implications
Our results revealed three groups of consumers who
have specific reputation-related attitudes toward the firms
they rated. These attitudes can be used to tailor segment-
specific marketing mixes. Given that the Reputation
Criticals scored lowest on the reputation dimensions as
well as on the outcome variables, these customers may be
the hardest to win over. Thus, attempting to solicit their
positive opinions may have lower payback. Also, since
the Reputations Admirers already think highly of their
firms, they do not require excess attention. Thus, the
middle group, Reputation Ambivalents, may offer the
most swing power in regards to potential corporate reputation influence. However, actual purchase data would
need to be combined with this information to assess the
financial viability of the groups.
For further information contact:
Gianfranco Walsh
Department of Marketing
University of Strathclyde Business School
173 Cathedral Street
Glasgow G4 0RQ
United Kingdom
Phone: +44.141.548.3196
FAX: +44.141.552.2802
E-Mail: [email protected]
American Marketing Association / Winter 2006
47
STRATEGIC PARTNERSHIPS AND THE INTERNATIONALIZATION
PROCESS: THE CASE OF SOFTWARE FIRMS
Aileen Kennedy, Dublin Institute of Technology, Ireland
Kathy Keeney, Dublin Institute of Technology, Ireland
SUMMARY
In an increasingly competitive environment, often
characterized by larger firms with access to plentiful
resources, the ability of small to medium sized enterprises
(SMEs) to survive and expand their business hinges on
the formulation of appropriate competitive strategies.
One such option is participation in strategic partnerships,
which has become an increasingly popular method of
conducting business in overseas markets (BarNir and
Smith 2002). This paper, based on the theoretical paradigm of strategic choice, examines partnerships as part of
the wider literature dealing with inter-organizational
relationships (Barringer and Harrison 2000). Strategic
partnerships can be defined as “the pooling of specific
resources and skills by cooperating organizations in order
to achieve common goals, as well as goals specific to the
individual partners” (Varadarajan and Cunningham 1995,
p. 282) while retaining their separate entities.
Strategic partnerships appear to make sense for
many small high-technology firms. Since smaller firms
generally suffer from resource constraints in overseas
markets, such relationships make international expansion possible (Coviello and Munro 1997; Jones 1999;
Harris and Wheeler 2005). Partnerships can be used by
SMEs to build on innovative capability and technological
competence, overcome weaknesses such as poor financial
position or low levels of expertise in production, marketing and management (Jarratt 1998) and to access alternative methods of serving customers (Elmuti and Kathawala
2001). The firm gains access to embedded knowledge or
skills of their strategic partner (Inkpen and Beamish
1997) permitting the smaller firm to increase market
strength, visibility and credibility, and to improve its
international competitiveness (García-Canal et al. 2002).
High technology-based firms have demonstrated the use
of relationships in sustaining international growth
(Coviello and Munro 1995; Jones 1999) and competitive
advantage (Spence 2004) implying that strategic
partnering relationships between firms are influential
throughout the internationalization process. A software
firm’s strategic partner may permit the firm to offer a
more complete solution to the end customer (Moen et al.
2004) and provide localization or other development
assistance. Though strategic partnering is seen as an
integral part of international business competitive advantage (Kanter 1994), limited research exists examining
American Marketing Association / Winter 2006
partnering activities of SMEs in high-technology sectors
(Forrest 1990; Drago 1997).
Despite Ireland’s spectacular success in attracting
inward investment from multinational software companies, the ability of indigenous companies to become major
international players is vital for the continued success of
the local software industry. At the end of 2003, the
indigenous Irish software sector had approximately 860
firms whose internationalization activities accounted for
¤1.1bn (ISA 2005). These companies are generally small
and experience difficulties in growing revenue at the rate
needed to compete in global markets. To achieve the
necessary critical mass to compete successfully on an
international scale, firms must leverage strategic partnerships as facilitators and enablers of market entry and
international development (ISA 2005) to allow them to
capitalize on future growth within the global software
market. Despite the recognition from industry bodies and
practitioners that strategic partnering activities are a vital
and unique attribute of the software industry (Crone
2002) their influence has been largely neglected from a
national research perspective.
The research methodology employed is qualitative in
approach and is based on ten indigenous software firms
selected using non-probability judgmental sampling to
facilitate the inclusion of information rich cases (Shaw
1999). The sample is drawn from the 40 percent of
software firms who generate revenue in the ¤2–10m
range. All sample firms are SMEs employing less than
250 people (European Commission 2005). Qualitative
research was considered suitable for such a process based
study (Quinn-Patton 2002). The research objectives are
(a) to examine the extent of strategic partnering activity
within local software firms, (b) to investigate firm motivations for engaging in strategic partnering, (c) to examine the benefits achieved by firms and (d) the challenges
encountered to date.
Nine of the ten sample firms were engaged in some
form of strategic partnering activities and represent diversity within the sector. Both verbal and written agreements supporting alliances emerged from the data and
within the sample there is evidence of differing types of
partnership agreements between firms, both formal and
informal in nature. Firms acknowledged strategic partnerships as key assets to the firm and maintain that
48
strategic partners contribute to learning within the firm
and also influence its long-term vision.
The strategic motivations of firms engaging in partnership agreements include the firms desire to build
business knowledge, expertise and skills via information
exchange and also to access new client groups. Respondent firms engaged in active information sharing and
joint marketing activities, involved strategic partners in
market entry and used them as mechanisms to enhance
firm reputation and credibility. Association with strategic
partners has led to increased firm confidence and the
perception of increased customer trust and assurance in
the company as both partners appear larger, well funded
and robust when seeking entry to larger companies.
Strategic partners have also facilitated increased market
presence and visibility; ultimately affecting the firm’s
sales and branding strategies. Partnerships formed have
served to enhance firm credibility, provide entry mechanisms into foreign markets and access to vital local
market knowledge and have also allowed firms to accelerate their sales cycles and reduce risk in overseas markets.
Firms also faced challenges in managing strategic
partnerships. Issues of control and partner dependence
can cause tension, and some sample firms were cautious
of partnerships where larger players may exert undue
influence over smaller firms and situations where over
reliance on international strategic partnerships may develop. The selection of a suitable strategic partner also
remains a problematic issue for firms.
In conclusion, the imperative for the software sector
to reach a critical mass to compete effectively in international markets remains. Simultaneously there is a paucity
of research investigating strategic partnerships from the
business and international competitiveness perspective of
SMEs and small high-technology firms. These two factors combine to generate an impetus for further research
in this expanding business sector where a more comprehensive understanding of the intricacies of the relationships involved in strategic partnerships would be valuable to academics, practitioners, and policy makers alike.
Future research directions include a longitudinal study of
partnership activities within the software SME sector.
References available upon request.
For further information contact:
Aileen Kennedy
School of Marketing
Dublin Institute of Technology
Aungier Street
Dublin 2
Ireland
Phone: 00.353.1.402.7150
FAX: 00.353.1.402.7198
E-Mail: [email protected]
American Marketing Association / Winter 2006
49
ENTRY MODE REVISITED: AN EXPLORATION-EXPLOITATION
PERSPECTIVE
Shichun Xu, Michigan State University, East Lansing
SUMMARY
The choice of entry mode has received particular
attention in international business research since it was
regarded as a major determinant of the success of the
foreign operations (Root 1987; Killing 1982). Different
foreign market entry modes offers firms different levels of
control over the operations in the foreign market (Root
1987; Calvet 1984) and requires different levels of resource commitment from the firm (Vernon 1987; Erramilli
and Rao 1993). Although these studies provide us with
some understanding of the entry mode choice decision
making of firms, the current literature suffers from the
following shortcomings. First of all, most studies have
taken on a disparate perspective in studying the entry
mode choice in that some studies only focused on the
macro distinction (equity vs. non-equity) or analyzing the
differences among choices in one category (Kim and
Hwang 1992; Erramilli, Agarwal, and Dev 2002). Therefore, there is not a comprehensive framework that incorporates all the micro level entry modes to guide the
decision of the entry mode choice. Secondly, we may
observe firms choosing two different entry modes into the
same foreign market. However, current theories fail to
address this issue.
I believe that the concurrent choices of different entry
modes into one country can be explained by the motivation for that specific venture in discussion. Drawing on
the exploration-exploitation framework (March 1991),
this paper attempts to analyze how the interaction of
internationalization motivation and cultural distance’s
influence on the transferability of different kinds of
resources affect the choice of entry modes. A firm’s choice
of the entry mode into a foreign market can be distinguished by its motivation to either explore for new
resources in the foreign market or to exploit its existing
capabilities (Koza and Lewin 1998; March 1991).
When a firm tries to open a new market or form
alliances with a firm from another culture, there will be
inevitably some form of resources transfer among the
partners or across different functions within the organization. While transfer of resources between departments or
between sister units within the same country is far from
trivial, it is clear that the problems associated with the
transfer will increase with demographical and cultural
distances (Bresman, Birkinshaw, and Nobel 1999). Furthermore, resources involved (physical, human, and organizational resources) are not of equal transferability
American Marketing Association / Winter 2006
when a firm tries to expand globally and maintain a
competitive advantage in the new market of a new culture,
which further complicates the picture. Some resources
may be greatly impeded by the cultural distance while
other resources will not be significantly affected. Cultural
distances play a major role in deciding whether a certain
kind of resource can be successfully transferred. As such,
firms with different motives to enter an international
market will therefore choose the appropriate forms of
entry mode to overcome these difficulties in the resources
transfer in order to achieve their goals of resource deploying or resource seeking.
Cultural distances affect the transferability of all four
categories of resources. However, there are differences in
the degree each category is subject to the influence of
culture. If we put them on a continuum of transferability,
we will expect the physical resources to be the easiest one
to be transferred across cultures, while organizational
resources would be the most difficult to transfer across
cultures with human capital resource lies somewhere in
between.
As a result, the transferability of different resources
will require firms to choose different entry modes to start
their internationalization process. Different motives with
different resources used as the basis for going global will
determine what entry mode firms will prefer if they decide
to go international at all. For exploiting purposes, the
more difficult the resources to transfer, the more likely a
firm will utilize greenfield. For resource-seeking purposes, the more difficult the resources to transfer, the
more likely a firm will utilize acquisition.
Specifically, we propose the following: For firms
interested in exploring tangible physical resources, joint
ventures and acquisitions may be used. For firms interested in exploiting their existing tangible physical resources, exporting an licensing will be preferred. For
intangible physical resources, exploration will be achieved
by acquisition and exploitation will be achieved by
Greenfield or joint venture. For human capital resources,
exploration motivation will prefer strategic alliances and
acquisition and exploitation motivation will prefer management contracting services. Firms will not be motivated by exploring organizational capital resources but
could achieve exploitation of their organizational capital
resources by Greenfield. References available upon request.
50
For further information contact:
Shichun Xu
Department of Marketing and Supply Chain Management
Eli Broad Graduate School of Management
N370 North Business Complex
Michigan State University
East Lansing, MI 48824–1122
Phone: 517.353.6381, Ext. 279
FAX: 517.432.1112
E-Mail: [email protected]
American Marketing Association / Winter 2006
51
CHOOSING A PARTNER TO ENSURE GOAL ATTAINMENT
IN INTERNATIONAL NEW PRODUCT
DEVELOPMENT ALLIANCES
Steven H. Seggie, Michigan State University, East Lansing
Mehmet Berk Talay, Michigan State University, East Lansing
S. Tamer Cavusgil, Michigan State University, East Lansing
SUMMARY
The contemporary dynamic business environment
necessitates inter-firm partnerships and collaborations at
an unprecedented level. These collaborations are both
domestic and global and occur at every stage of the valuechain, including new product development. This unprecedented growth in collaborations has led to a great deal of
interest in the business press in these interorganizational
new product alliances, however, this interest is less
noticeable in the domain of academic research. This is a
gap that we hope to fill with this piece of research.
This study examines international new product alliances in the pharmaceutical industry and looks at one of
the fundamental questions requiring an answer: does this
international collaboration lead to the launch of a new
product? Although the launch of a new product is not a
final metric for success, it is still a matter of interest to
academics as it is one of the stages toward the success of
new products.
We frame our study within the resource-based view
(Barney 1991) and the relational view (Dyer and Singh
1998). We believe that the resources available to an
alliance will determine the success of the alliance. These
resources include both tangible resources such as plant
and equipment, and also intangible resources such as
knowledge sharing routines and complementary marketing capabilities. We examine a comprehensive database
of international new product alliances in the pharmaceutical industry and explore what firm and alliance specific
factors account for product launch as opposed to project
termination.
We also examine the impact of a relational construct,
mutual dependence, to examine the impact of this construct on the ability of international new product alliances
American Marketing Association / Winter 2006
to go to launch. When partners are mutually dependent
then there is a balance between the partners. Mutual
dependence and dependence asymmetry are constructs
that have been widely studied in the channels literature
(e.g., Anderson and Narus 1990; Buchanan 1992; Frazier,
Gill, and Kale 1989; Kumar, Scheer, and Steenkamp
1995). We believe that the existence of mutual dependence will lead to positive outcomes for the alliance.
However, a lack of mutual dependence, or dependence
asymmetry will lead to a lack of balance in the relationship and power will reside with the less dependent party
(Dwyer, Schurr, and Oh 1987). The partner that is less
dependent will be able to leverage this relationship and as
a result behave in such a manner so as to achieve
preferential outcomes from the relationship (Anderson
and Narus 1984). The less dependent partner will be in a
position to exert great influence over the more dependent
partner (Anderson and Narus 1990) and, as a result, may
be able to propagate its own agenda. An outcome of this
manipulation and influence may even be a state of domination with the less dependent partner dominating the
more dependent partner (Molm 1994).
The results of our study show that dependence asymmetry is associated with the likelihood of a terminated
project. This is in line with our expectations as we
expected the existence of asymmetrical dependence to
affect the longevity of the relationship and negatively
impact upon the outcome. In addition we also found that
complimentary resources were key to the successful launch
of a project. As such it is key for managers to choose
partners carefully when setting up international new
product alliances. Special attention should be paid to
finding a partner that can provide the synergies of complimentary resources, and in addition, that will be as
dependent on the success of the outcome. References
available upon request.
52
For further information contact:
Steven H. Seggie
Department of Marketing and Supply Chain Management
Michigan State University
East Lansing, MI, 48824–1122
Phone: 517.353.6381
FAX: 517.432.1112
E-Mail: [email protected]
American Marketing Association / Winter 2006
53
THE IMPACT OF FILM PRODUCT PLACEMENT ON THE MARKET
VALUE OF THE FIRM
Michael A. Wiles, Indiana University, Bloomington
Anna Danielova, McMaster University, Hamilton
SUMMARY
Product placement is the paid inclusion of branded
products or brand identifiers through audio or visual
means within mass media programming. Film product
placement originated in the 1940s, but only in the past
decade have firms embraced it as a key marketing tactic,
paying $412 million in fees, free products, and promotional support for film product placement in 2004.
For firms, product placement is attractive because
consumers are growing increasingly resistant to traditional advertising. Film placements reach a captive audience, and they show products in natural use. Films also
have a wide message reach and a long message life, so
placements have a declining cost per exposure. And in the
marketing literature, consensus is building that product
placements in films and television can positively impact
consumer memory and attitudes.
However, film product placement can be risky because the firm does not control the nature of the product’s
exposure in the film. Because the director retains the final
vote on whether a placement appears, product placements
are often clipped from the final film. Firms also take the
chance that their brands will be portrayed in a negative
manner. Coca-Cola, for instance, was displayed prominently during the graphic film Natural Born Killers. And
firms have limited control over the placement’s reach
because the number of people exposed to the placement
depends on the film’s popularity.
Further, a film product placement can represent a
significant financial commitment for a firm. For instance,
the product placement fees from 15 firms contributed over
$25 million for the production cost of 2002’s Minority
Report, and Mitsubishi spent $25 million for placement
and promotion for 2 Fast 2 Furious. These significant
financial commitments suggest that firms have confidence in the value of film product placement despite its
expense and risks.
Little is known, however, about whether film product
placement leads to increased firm market value. To fill
this gap, this paper uses an event study methodology to
examine the impact of film product placement on a firm’s
stock market return. An examination of 157 product
placements among films during the year 2002 revealed a
positive mean cumulative abnormal return of 0.90 percent for firms during the film’s opening. Results from a
cross-sectional regression suggest that tie-in advertising
and audience size augment the product placement’s shareholder wealth creation, but audience absorption, critical
acclaim, and violent film content inhibit the creation of
shareholder value. References available upon request.
For further information contact:
Michael A. Wiles
Kelley School of Business
Indiana University
1309 E. Tenth Street
Bloomington, IN 47405
Phone: 812.855.5530
FAX: 812.855.6440
E-Mail: [email protected]
American Marketing Association / Winter 2006
54
SHAREHOLDER VALUE ORIENTATION OF MARKETING: THE
CONSTRUCT AND ITS PERFORMANCE IMPLICATIONS
Christian Homburg, University of Mannheim, Germany
Sabine Kuester, University of Mannheim, Germany
Thomas Lueers, Prof. Homburg & Partner, Germany
SUMMARY
Understanding how marketing contributes to firm
value and, in particular, to shareholder value is an
increasingly important topic. Top management requires
that marketing view its ultimate purpose as contributing
to the enhancement of shareholder returns (Day and
Fahey 1988; Lukas, Whitwell, and Doyle 2005; Rust et al.
2005). As a consequence, marketing managers are required to provide convincing evidence that marketing
strategies do indeed create shareholder value. As a result,
it has become even more important for marketing managers to understand and measure marketing’s impact on
firm value.
The growing interest in the role of marketing for the
creation of shareholder value is also reflected in scholarly
work in this area. The existing literature can be classified
according to the following three perspectives: the first
perspective deals with the impact of specific marketing
activities on shareholder value, the second perspective
investigates how certain specific marketing metrics influence shareholder value, and the third perspective addresses the fundamental question of how the “basic”
orientation of a firm’s marketing approach affects shareholder value. Important contributions have been made in
all three areas but there is paucity of empirical research
addressing the impact of the overall orientation of marketing on shareholder value.
Shervani, and Fahey (1998) whose framework specifies
four levers through which marketing can contribute to the
creation of shareholder value. These four levers include
(1) accelerating cash flows, (2) enhancing cash flows, (3)
reducing volatility and vulnerability of cash flows, and (4)
enhancing residual value of cash flows (see Srivastava,
Shervani, and Fahey 1998). We developed a measurement model that integrates different marketing perspectives of the shareholder value orientation of marketing
approach. We defined four foci of shareholder value
orientation of marketing, customer focus, asset focus,
growth focus, and productivity focus and discussed how
each of them influences the four levers and, therefore,
shareholder value.
Our research aims to fill this gap by (1) developing
a comprehensive conceptualization of shareholder value
orientation of marketing, (2) developing and validating a
measurement instrument of shareholder value orientation of marketing, and (3) analyzing the performance
outcomes of a shareholder value orientation of marketing.
An interesting feature of our research is the dyadic nature
of the data that we collected to pursue our research
objectives. More specifically, while shareholder value
orientation of marketing was assessed with a survey
among managers we used capital market data to assess the
performance impact of this construct.
We then argued along a causal chain where marketing activities impact market success and marketing productivity, which impacts financial success and, last but
not least, the success in financial markets. With respect to
this causal argument we considered four performance
measures in our study: market success, marketing productivity, financial success, and stock market performance. Our conceptual model includes a causal chain in
which shareholder value orientation of marketing directly impacts market success and marketing productivity, which both impact financial success. Financial success then influences stock market performance. We call
this chain of effects the Performance Effect A. Additionally, we argue that the shareholder value orientation of
marketing has also a direct impact on stock market
performance, the Performance Effect B. In short, to
distinguish these performance effects, the indirect impact, Performance Effect A, is based on the logic that the
capital market rewards current performance created
through shareholder value orientation of marketing. The
direct effect, Performance Effect B, is based on the
rationale that the capital market expects future performance because of shareholder value orientation of marketing and also rewards this performance expectation.
The strength of the direct relationship, we contend, is
moderated by the balance between the four foci of shareholder value orientation of marketing.
Conceptual Development
Methodology
We conceptualized the focal construct of shareholder
value orientation of marketing based on work by Srivastava,
For the empirical study we gathered primary data
from managers and secondary data on stock market
American Marketing Association / Winter 2006
55
performance of the firms in our sample. To operationalize
the construct of shareholder value orientation of marketing and the constructs in our conceptual model we developed multiple-item scales. The summary statistics for the
focal construct show desirable psychometric properties
(e.g., Cronbach’s Alpha of .88; composite reliability of
.89). For the causal model we measured our dependent
variable of stock market performance with Tobin’s q, a
capital market-based measure of the value of the firm,
using data provided by Bloomberg.
Data Analysis and Results
The overall causal model was estimated using LISREL
8 (Jöreskog and Sörbom 1996). The fit statistics indicate
an adequate fit of the model with the data (e.g., χ2 / d.f. =
1.76; GFI = .93, CFI = 1.00). Furthermore, all hypothesized effects are fully supported by our empirical finding. The proposed Performance Effect A can be observed
and we also find evidence for our Performance Effect B (at
least at 5%-level). Using moderated regression analysis
the result confirms a positive and significant moderator
effect of the variable balance.
Discussion
One major contribution of this study is a more
detailed insight into the mechanisms through which
shareholder value orientation of marketing contributes to
stock market performance. More specifically, we distinguished two distinct mechanisms. First, we find that a
shareholder value orientation of marketing impacts market success and marketing productivity which in turn
increase financial success. Financial success is then re-
warded with higher stock market performance (Performance Effect A). Thus, shareholder value orientation of
marketing makes a firm more successful in the market
and renders its marketing activities more productive. The
resulting higher profitability is then rewarded in terms of
superior stock prices. In this context, the stock market
rewards current performance.
The second performance effect (Performance Effect
B), refers to a direct effect of shareholder value orientation of marketing on the stock market performance. Our
rationale was that shareholder value orientation of marketing will not only enhance retrospective measures such
as productivity but also expected future performance. In
other words, we argued that the financial community’s
perception that a firm’s marketing activities are growth
oriented, asset oriented, productivity oriented, and customer oriented leads to a positive impact of expected
future revenues and profitability. Our empirical result
supports this reasoning. We found evidence of an
“investor’s response” to the firm’s shareholder value
orientation of marketing.
We also contended that it is unlikely that one of the
four dimensions of shareholder value orientation of marketing will yield superior performance in financial markets when pursued in isolation. Interestingly, we found
that the impact of the shareholder value approach on stock
market performance will be even stronger the more
balanced this orientation along the different foci. Thus, a
shareholder value orientation needs to pursue all four
dimensions in a balanced way. References available upon
request.
For further information please contact:
Sabine Kuester
University of Mannheim
Castle
68131 Mannheim
Germany
Phone: 011.49.621.181.2388
FAX: 011.49.621.181.2398
E-Mail: [email protected]
American Marketing Association / Winter 2006
56
PRODUCT-MARKET STRATEGY COMPREHENSIVENESS AND
BUSINESS PERFORMANCE: AN ANALYSIS OF
ANTECEDENTS AND MODERATORS
Paul Hughes, Loughborough University, United Kingdom
Robert E. Morgan, Cardiff University, United Kingdom
Mathew Hughes, University of Nottingham, United Kingdom
Nick Lee, Aston Business School, Birmingham
SUMMARY
Introduction and Background
Product-Market Strategy Comprehensiveness
(PMSC) is the extent to which firms seek to be exhaustive
in strategy-making. Information processing activities are
implied as key antecedents to PMSC but this remains
largely theoretical. Information processing refers to acquiring, distributing, interpreting, and storing information. We focus on information distribution, learning,
memory, and symbolic information use. Symbolic information use is separate to memory. Symbolic use encompasses the collection and misuse or manipulation of
information. Memory is based on past retained information, not collected in the present as with symbolic information use, although some of this knowledge could have
been manipulated also (e.g., due to past symbolic use).
Several knowledge gaps exist. First, information processing activities are yet to be studied as facilitators of PMSC.
Second, symbolic information use has not been empirically examine din this context. Third, studies tend to rely
on subjective performance data, leading to mixed findings on the effects of PMSC on performance. Fourth, we
look at environment as a moderator by distinguishing
between competitive intensity and technological turbulence.
Theoretical Development
Information distribution, learning, and memory
should be positively related to PMSC. Distributing and
sharing information widely should create new understanding and facilitate PMSC. By learning from customers and the market, the firm will be more comprehensive
in strategy formation. Memory may also lessen perceived
cost and time concerns in being comprehensive. In contrast, symbolic use should negatively affect PMSC as
information misuse or manipulation can misleadingly
deliver a strong strategic solution to strategists. PMSC
may enhance performance by developing and analyzing a
range of alternatives; managers can gain insights into
their competitive situation and develop a clear strategy.
By thoroughly identifying options, it is likely that valu-
American Marketing Association / Winter 2006
able opportunities will be identified that may otherwise
have been missed. We also examine moderator effects. As
competitive and technological turbulence increase, PMSC
will be more important for performance. As a number of
strategic options are developed and assessed, the firm
may be endowed with the necessary information to make
rapid strategic changes. We suspect this is influenced by
implementation however. Strategies provide a basis for
high performance when implemented successfully. We
expect that PMSC will have a greater effect on performance when the firm has a capability to implement
strategy effectively.
Research Method
Using the Kompass Register as the sampling frame
and systematic random sampling, we mail surveyed 1000
high technology, U.K. manufacturing firms with the
Chief Marketing Executive as key informant. No nonresponse bias concerns were found from 139 usable
responses. Measures were drawn from past studies but
some were discarded due to poor loading or incompatibility issues. We sought to remedy common method bias
with objective data but it may still remain as a single
informant is used to gather data on all other variables. A
Harman one-factor test revealed no problems. CFA results of χ2 (d.f.) = 751.34 (460); RMSEA = .07; CFI = .94;
NNFI = .94; reveal acceptable fit. All composite reliabilities
were above minimum limits. Average variance extracted
was between .37 and .85.
Results
Structural equation modeling was used following
established guidelines for evaluating structural models
with interaction terms. Factor loadings and error variances for the interaction terms were calculated and two
models were specified. The first was a restricted model
and the second an unrestricted model in which parameters at first fixed at zero were freed. The fit statistics for
the restricted model were χ2 (d.f.) = 505.86 (253);
RMSEA = .09; CFI = .94; NNFI = .93. The fit statistics
for the unrestricted model were χ2 (d.f.) = 481.15 (250);
RMSEA = .08; CFI = .94; NNFI = .93. Moving to the
57
unrestricted model resulted in a significant decrease in χ2
(d.f.) and so the unrestricted model is superior and should
be used in hypothesis testing. All hypotheses are supported with the exception of learning on PMSC (H2) as
this relationship was insignificant.
Discussion
Several points warrant discussion. First, learning
may have a negative quadratic relationship with PMSC.
There will be little PMSC at low levels while at high
levels, issues such as cost, time, and cognition may reduce
PMSC. Learning may also moderate PMSC. Second,
symbolic information use negatively affects PMSC and
marketers must guard against misinformation and making decisions based on past strategies, ensuring comprehensive strategy-making. Symbolic use may also have a
negative effect on performance itself, or, moderate the
PMSC–performance link as strategies based on poor or
misused information may damage goal realization and
performance. Third, the costs of PMSC are outweighed by
the performance benefits. Marketers must use PMSC to
develop an optimum strategy. Fourth, firms can tolerate
environmental uncertainty as the performance effect of
PMSC increases with uncertainty. Along with implementation, firms can deal with multiple contingencies as they
arise through comprehensive strategy-making. References available upon request.
For further information contact:
Paul Hughes
The Business School
Loughborough University
Loughborough LE11 3TU
United Kingdom
Phone: 00.44.1509.228.274
FAX: 00.44.1509.223.962
E-Mail: [email protected]
American Marketing Association / Winter 2006
58
AN INVESTIGATION OF THE NON-LINEAR AND MULTI-LEVEL
EFFECTS OF CUSTOMER SATISFACTION ON
CUSTOMER DEFECTION
Thomas Hollmann, Arizona State University, Tempe
SUMMARY
Customer defection is the customer-initiated reduction of a business relationship. Defection behavior manifests itself when a customer moves some or all of the
spending in a product category away from a provider or
supplier. Clear evidence of the profit and growth effects
of reducing customer defection exists (e.g., Reichheld
1996; Reichheld and Sasser 1990), thus making it imperative to include customer defection management in
efforts to improve these vital statistics for any organization. Prior research on customer defection has focused on
managing customer satisfaction and customer loyalty,
central tenets in the practice of customer relationship
management (CRM) for both goods and services. Yet,
despite almost two decades of intensive research on
satisfaction and loyalty, losing between 10 and 40 percent
of existing customers is common for many organizations
(Griffin and Lowenstein 2001). Therefore, it may be
surprising that defection itself has received far less attention in both research and practice than its counterparts of
loyalty and retention. Only recently, a variety of studies
have started to look at specific drivers of customer defection (e.g., Ahmad 2002; Capraro, Borniaczyk, and
Srivastava 2003; Keaveney 1995) or more generally at
influences on repurchase decisions (e.g., Bolton and
Lemon 1999; Jones, Mothersbaugh, and Beatty 2003).
Several calls for increased research on the issue of customer defection have been made (Oliver 1999; Wilson
1995; Dwyer, Schurr, and Oh 1987) as it has become
evident that customers do not reduce relationships for the
same reasons for which they expand relationships.
Customer satisfaction has been found to have a
significant impact on repurchase, but that impact is
typically small (Bolton 1998), and it has been shown that
in some cases as much as 60 percent to 80 percent of
defected customers report being “satisfied” or “highly
satisfied” (Reichheld 1996). Even dissatisfaction is not
necessarily a predictor of defection (Hennig-Thurau and
Klee 1997). For a loyal customer, it may take repeated
incidences of dissatisfaction with various elements of a
product purchase or service encounter before the customer chooses to switch. Or, it may require that a customer reaches a threshold level of dissatisfaction on a
particular factor or combination of factors to choose to
leave. Even if a customer is not particularly satisfied,
defection may not occur despite unsatisfactory experiAmerican Marketing Association / Winter 2006
ences, because of convenience or switching barriers. The
role of customer satisfaction in the defection process is
thus to date unresolved.
Therefore, the objectives of this paper are to investigate whether there is a link between customer satisfaction
and customer defection, and what shape this link might
take. This paper contends that defection is not simply the
flip-side of satisfaction, i.e., that low overall customer
satisfaction is no or only a weak predictor of defection. As
a consequence, current models of customer satisfaction as
a driver of defection would be misspecified. Customer
satisfaction can also be seen as an indicator of many
operational, cognitive or affective sub-dimensions such
as whether the call center employee was friendly, whether
the pricing structure is adequate, and whether cell phone
calls are dropped. This paper also investigates whether
some of the operational sub-dimensions of satisfaction
are additional predictors of defection over-and-above the
emotional state of overall satisfaction, thereby providing
a multi-level perspective of the issue.
The paper reports results from a customer satisfaction survey of a random sample of 2000 business-tobusiness customers of a large financial services company.
The methodology for this paper is a series of binary logit
models with defection (1 = defected, 0 = still a customer)
as the dependent variable. Overall satisfaction with the
focal service and 23 operational level satisfaction measures are the independent variables for this study. The
contract status for each of the 489 customers that had
responded to the survey provides the dependent variable
for the analysis.
The study shows that a linear model of the satisfaction-defection relationship finds no significance in this
study (and has found only weak or also no evidence in
other studies) while a curvilinear relationship is significant. Customers at the mid-level of satisfaction (5 to 7 out
of 10) have the highest odds of defection. Customers at
lower levels of satisfaction exhibit behavioral loyalty
equivalent to those customers at the top end of the
satisfaction scale. This finding highlights that a low-sat
customer is hesitant to defect, i.e., that other exit barriers
exist for this customer. The most vulnerable customers
are those that feel rather indifferent to the company (i.e.,
show a mid-level of overall satisfaction).
59
The findings of this paper can help in resolving the
debate over the role of overall satisfaction in defection as
being due to the curvilinear shape of the relationship as
described above. With sample fluctuations, a curvilinear
relationship can lead to a weak linear relationship in some
samples as born out in the extant literature, while the
underlying relationship between satisfaction and defection is non-linear.
The impact of operational level attributes is primarily manifesting itself through the mediating effect of
overall satisfaction. However, this study shows that some
operational level attributes have direct, unmediated effects. It is important for practitioners to understand which
operational level attributes have direct effects on defection and to then work on these factors in particular overand-above improvements in overall satisfaction. References are available upon request.
For further information contact:
Thomas Hollmann
W.P. Carey School of Business
Arizona State University
P.O. Box 874106
Tempe, AZ 85287–4106
Phone: 480.965.3621
FAX: 480.965.8000
E-Mail: [email protected]
American Marketing Association / Winter 2006
60
A TEST OF THE EFFECT OF CONSUMER TRUST AND TRANSACTION
COSTS ON E-LOYALTY
Cuiping Chen, The University of Arizona, Tucson
Matthew O’Brien, Bradley University, Peoria
SUMMARY
The reason trust is so important to the e-commerce
environment is due to the following unique characteristics of online transacting in that: (1) it uses an open
technological infrastructure (i.e., the Internet) for transactions (Pavlou 2002), (2) the technological structures it
relies on are instable because Internet and Internetrelated technologies are still new (Mcknight, Choudhury,
and Kacmar 2002), (3) the protective institutional (i.e.,
legal, governmental, contractual, and regulatory) structures supporting it are still on the slow arrival and (4) it
is impersonal in nature, which is opposed to face-to-face
transactions consumers are familiar with (Pavlou 2002).
For consumers, the online transacting environment is
risky because online shopping involves many other disadvantages such as issues surrounding privacy, delays in
delivery for physical products, the fact that customers
cannot touch and feel the merchandise prior to purchase,
and that customers return merchandise often at their own
expense. These disadvantages make even greater demands on trust for consumers to be involved in e-business
activities. Thus, it is essential for e-retailers to understand
how trust works in the online context.
While there have been academic studies that have
emphasized the significance of trust in Internet strategy
(e.g., Hoffman, Novak, and Peralta 1999; Urban, Sultan,
and Qualls 2000) and suggested potential antecedents
and consequences of online trust (e.g., Shankar, Urban,
and Sultan 2002; Yoon 2002), most focus on the interface
of e-business, that is, the website. However, as the novelty
of the Internet is wearing off, new studies need to go
beyond the interface of e-business and begin to understand the role of trust in developing consumers into
longer-term, loyal customers.
In this study, the following key research questions
will be explored. First, does trust influence a consumer’s
loyalty with an e-retailer? Second, do consumer transaction costs influence a consumer’s loyalty toward such eretailer? Finally, what is the relative role between trust
and consumer transaction costs in this process, namely,
do consumer transaction costs play as the key mediating
variable? To address these issues, this study proposes a
conceptual framework of consumer trust in an e-retailer
and the transaction costs a consumer faces when exchanging with an e-retailer as antecedents of consumer e-
American Marketing Association / Winter 2006
loyalty in an e-retailer. This study makes important
theoretical contributions. First of all, this study adds to the
online trust literature by empirically linking trust to eretailer loyalty. Additionally, this study introduces the
concept of transaction costs to online consumer exchanges. By applying transaction cost analysis (TCA) to consumer choice of supplier for a transaction, it provides a
strongly logical explanation for why trust influences
consumer loyalty online, which not only extends the
traditional application of TCA but also adds to the trust
literature.
There is high need for consumer trust in the consumer-e-retailer exchange relationship (Urban et al. 2000)
because for the consumer, there are high risks involved in
transacting with e-retailers and the online consumer is
dependent on the e-retailer to secure the goods or services
he/she needs in the way he/she wants. The high risks
involved in transacting with e-retailer come from two
sources. First is the uncertainty involved in the online
transacting environment, and the second is the uncertainty regarding whether e-retailer intends to and will be
able to perform appropriately. The online transacting
environment is highly uncertain because it carries the
following characteristics: (1) it uses an open technological infrastructure (i.e., the Internet) for transactions (Pavlou
2002), (2) the technological structures it relies on are
instable because Internet and Internet-related technologies are still new (Mcknight et al. 2002), (3) the protective
institutional (i.e., legal, governmental, contractual, and
regulatory) structures supporting it are still on the slow
arrival and (4) it is impersonal in nature, which is opposed
to face-to-face transactions that consumers are familiar
with (Pavlou 2002). Additionally, the impersonal nature
of online environment creates many other disadvantages
for online shopping, such as the fact consumers cannot
touch and feel the merchandise prior to purchase and
delays in delivery for physical products. These disadvantages create even more risks for consumers to shop and
purchase online.
From a consumer’s perspective, risk-taking action in
his/her relationship with an e-retailer is his/her patronage
behaviors and intentions toward the retailer’s online
store, noted here as e-loyalty. Zeithaml, Berry, and
Parasuraman (1996) indicate consumer loyalty is noted
by a number of potential intentions to maintain a relationship with the focal firm, here an e-retailer. In the contrac-
61
tual exchange relationships, trust is of economic value
because trust reduces (although not eliminates) the time
and resources that the transactors spend on ex ante
search, contracting, and ex post monitoring and enforcing (Dyer and Chu 2002). Thus, trust is believed to reduce
transaction costs (Dyer and Chu 2002; Ganesan 1994;
Ganesan and Hess 1997). Further, formal surveys and
empirical research do show that the magnitude of consumer transaction costs can be large enough to influence
consumer choice behavior (Bell, Ho, and Tang 1998;
Crafton 1979; Currim, Weinberg, and Wittink 1981;
Tyagi 2004).
We collected data via survey to test these assertions.
The survey developed was distributed to college-age
students in four, nationally recognized U.S. universities.
The tests of the developed hypotheses were performed
using analysis of covariance. Empirically, we found that
trust showed a positive influence on loyalty. The findings
also suggest that there is a negative relationship between
trust and the degree of perceived transaction costs the
customer is expecting to incur. Finally, we also find
support for a negative relationship between consumer
transaction costs and loyalty. References available upon
request.
For further information contact:
Matthew O’Brien
Bradley University
1501 West Bradley Avenue
Peoria, IL 61625
Phone: 309.677.3482
FAX: 309.677.3374
E-Mail: [email protected]
American Marketing Association / Winter 2006
62
AFFECTIVE AND CALCULATIVE COMMITMENT AS ANTECEDENTS
OF CUSTOMER LOYALTY
Heiner Evanschitzky, University of Muenster, Germany
Hilke Plassmann, Stanford University, Stanford
SUMMARY
The relevance of customer loyalty for firm performance has been widely discussed. Loyal customers buy
more, are less price sensitive and act as advocates for a
firm. Therefore, a strong interest of researchers and
practitioners in gaining and sustaining customer loyalty
has evolved in the last decades. Ultimate loyalty exists
when a customer desires to repurchase a product or
service and pursue this quest against all odds and at all
costs. According to Oliver (1999), a consumer’s belief,
affect, and intention must point to a focal brand preference that in turn induces purchase intention and purchase
behavior. While previous research has mainly analyzed
the relationship between satisfaction and repurchase intention, few studies have examined the link between
satisfaction ratings and repurchase behavior. Moreover,
relatively little work has been conducted to analyze the
psychological state of commitment that might influence
customer loyalty as displayed by purchase intention and
behavior.
Against this background, this study attempts to increase our understanding of consumer commitment. It
investigates how customer loyalty is influenced by the
different psychological states, namely affective and calculative commitment. To achieve this goal our work is
grounded on prior work in consumer loyalty and commitment literature. As commitment is conceptualized inconsistently in marketing research, we apply here, in contrast
to previous studies, a psychological model of a twodimensional commitment as preceding psychological attachment states of customer loyalty to service providers.
This model and its influence on both, attitudinal as well
as behavioral loyalty are then tested in an empirical study.
Based on this theoretical reasoning, the following hypotheses are tested against a sample of 2,389 users of a
mobility service provider:
Hypothesis 1a: Calculative commitment has a positive impact on both loyalty dimensions.
American Marketing Association / Winter 2006
Hypothesis 1b: The positive impact of calculative
commitment on behavioral loyalty is stronger than
on affective loyalty.
Hypothesis 2: Affective commitment has a positive
impact on both loyalty dimensions.
Furthermore, we assume a stronger positive influence of affective commitment on attitudinal
Hypothesis 3a: Affective commitment is more positively related to attitudinal loyalty than calculative
commitment.
Hypothesis 3b: Calculative commitment is more
positively related to behavioral loyalty than affective
commitment.
Results of a structural equations model (SEM) indicate that, calculative commitment has a week, yet significant, impact on attitudinal loyalty, while having a relatively strong impact on behavioral loyalty. Therefore,
hypotheses 1 is supported. Moreover, affective commitment has a positive impact on both loyalty dimensions.
Therefore, hypothesis 2 is supported as well. Interestingly, affective commitment has a much stronger impact
on both loyalty dimensions than calculative loyalty. Most
notably, even the impact on behavioral loyalty is stronger
for affective commitment than for calculative commitment, hence, hypothesis 3a is supported but hypothesis 3b
has to be rejected. In sum, our results clearly indicate the
importance of affective commitment as key antecedent of
both loyalty dimensions.
These findings offer some important insights for
management. It can be noted that for a mobility service
provider, it is not sufficient to concentrate on “bounding”
customers with for instance discount loyalty card (e.g.,
50% off regular ticket fares) but to indeed satisfy customer needs. This can be achieved by delivering better
service quality, for instance punctuality or more friendly
staff. References available upon request from the authors.
63
For further information contact:
Heiner Evanschitzky
Marketing Centrum Muenster
Lehrstuhl für Distribution & Handel
University of Muenster
Am Stadtgraben 13–15
D-48143 Muenster
Germany
FAX: +49.251.83.22032
E-Mail: [email protected]
American Marketing Association / Winter 2006
64
INNOVATION, IMITATION, AND NEW PRODUCT PERFORMANCE:
THE CASE OF CHINA
Kevin Zheng Zhou, The University of Hong Kong, Hong Kong
SUMMARY
The importance of innovation in new product developments is well recognized, in that developing and bringing to market innovative products ahead of competitors
can generate various benefits in economic, preemptive,
technological, and behavioral factors. A successful innovator therefore can outsell even superior late entrants,
build a large market share, and enjoy a sustainable
competitive advantage. From this perspective, firms should
always invest heavily in R&D and speed new products to
market, i.e., an innovation strategy is key to long-term
success.
Some researchers, however, posit that the benefits of
innovation and early market entry may have been oversold. Golder and Tellis (1993), for example, find that
market pioneers continue to be market share leaders in
only 4 of the 50 product categories in their study. The
average market share of pioneers is only 10 percent and
their failure rate is 47 percent. In comparison, late market
entrants enjoy low failure rates (8%) and large average
market shares (28%). Other case analyses also show that
late entrants overtake pioneers in various markets, including high-tech industries such as personal computers
and cameras, as well as low-tech categories such as food
processors, ballpoint pens, and light beer. According to
this view, firms can exploit the innovator’s efforts in
developing the products and markets and then overtake it
with their improved products. That is, an imitation strategy is a wiser choice for firms to gain a competitive
advantage.
depend on external factors, such as market environments,
as well as internal factors, such as firm resources. Because
few studies empirically examine this contingency aspect,
the more intriguing issue of when innovation/imitation
strategies matter more remains unexplored (Shamsie,
Phelps, and Kuperman 2004).
Another limitation of extant research on product
innovation and entry strategies is that most studies have
been based on North American (mostly U.S.) data, which
leaves the generalizability of their findings to other
economies an open question. For example, due to the
unique cultural characteristics of Asian countries, the
pioneer and follower phenomenon in Asia may not be
systematically explained by theories largely embedded in
the West. In addition, emerging economies, during their
transition to market economies, experience unprecedented
changes in their social, legal, and economic institutions,
which in turn raise serious theoretical challenges to
Western practices (Zhou, Yim, and Tse 2005).
To address this debate, existing studies have devoted
great attention to the direct comparison of innovation
versus imitation strategies by assessing the performance
differences between pioneers and followers. However,
because both innovation and imitation strategies have
their own merits, which strategy is more effective may
To fill these research gaps, I study the effects of
innovation versus imitation strategies on new product
performance in China. In particular, I take a contingency
perspective to examine whether the roles of innovation
versus imitation strategies vary across environments with
different levels of demand uncertainty, technological
turbulence, and competitive intensity. The empirical
results from a cross-industry survey show that, consistent
with literature based on the Western experience, an
innovation strategy has a greater impact on new product
success than an imitation strategy in China. However,
contrary to extant Western literature, market uncertainty
and technological change do not hurt the performance of
innovators. Instead, the benefits of an innovation strategy
over an imitation strategy become stronger as market
demand is increasingly uncertain and technology changes
rapidly. I discuss the implications of the findings in light
of China’s unique market characteristics.
ENDNOTE
KEY REFERENCES
This study was supported by a research grant from the
University of Hong Kong and partially supported by
Institute for the Study of Business Markets (ISBM).
Golder, Peter N. and Gerard J. Tellis (1993), “Pioneering
Advantage: Marketing Logic or Marketing Legend?” Journal of Marketing Research, 30 (May),
158–70.
American Marketing Association / Winter 2006
65
Shamsie, Jamal, Corey Phelps, and Jerome Kuperman
(2004), “Better Late than Never: A Study of Late
Entrants in Household Electrical Equipment,” Strategic Management Journal, 25, 69–84.
Zhou, Kevin Zheng, Bennett Yim, and David Tse (2005),
“The Effects of Strategic Orientations on Technology- and Market-Based Breakthrough Innovations,”
Journal of Marketing, 69 (April), 42–60.
For further information contact:
Kevin Zhou
School of Business
The University of Hong Kong
Pokfulam, Hong Kong
Phone: 852.2859.1011
FAX: 852.2858.5614
E-Mail: [email protected]
American Marketing Association / Winter 2006
66
CRUCIAL DETERMINANTS OF NEW PRODUCT ALLIANCE SUCCESS
Mehmet Berk Talay, Michigan State University, East Lansing
Steven H. Seggie, Michigan State University, East Lansing
S. Tamer Cavusgil, Michigan State University, East Lansing
SUMMARY
More and more firms today are engaging in new
product alliances (Rindfleisch and Moorman 2001).
Philips has been active, teaming up with assorted firms
including: Unilever to develop an electronic iron with an
anti-grease cartridge developed from Robijn detergent;
Inbev Sa to develop a home beer appliance; and Sara Lee
Corp to develop Senseo coffee machines (Knapen 2004).
While a great deal of research has been conducted in the
area of interorganizational relationships (e.g., Anderson
and Narus 1990; Dwyer, Schurr, and Oh 1987; Lusch and
Brown 1996), research into interorganizational new product development (i.e., new product alliances) is rather
sparse. This is somewhat surprising bearing in mind the
growth that has occurred in research and development
partnerships since 1960 (Hagedoorn 2002). Some of the
major contributions in the area of new product alliances
are by Rindfleisch and Moorman (2001), Sivadas and
Dwyer (2000) and Kotabe and Swan (1995).
Our definition of new product alliance success is
when the new product alliance leads to the launch of the
product as opposed to the termination of the project prior
to the launch. We are aware that many launched products
fail, however, many succeed also and an unavoidable step
toward new product success is the successful launch of the
product. Without product launch the product will definitely fail. Thus, new product alliance success is a key
area that needs to be addressed by firms entering into new
product alliances, as ultimately the ability to progress
through the stages and reach the launch of the new
product will depend to some extent on these determinants.
The conceptual framework that we use for our model
builds upon the resource-based view of the firm and how
it is relevant to the new product alliance. Traditionally the
resource-based view has used the firm as the unit of
analysis, however, we believe that the RBV can be
extended to the alliance as the unit of analysis (Griffith
and Harvey 2001). Extending the logic of the RBV, we
believe that the key determinants of new product alliance
success rest upon the resources that partner firms can
make available to the alliance. These resources include
tangible resources such as plant and equipment and also
intangible resources such as technology, marketing, and
personnel.
American Marketing Association / Winter 2006
We used new product alliances in the pharmaceutical
industry to test our hypotheses. The pharmaceutical industry is appropriate to test the hypotheses of this study for
several reasons. First the industry is characterized by
rapid change, and intense competition with excessive
variation in product specifications and market positioning across time. Second, focusing on the pharmaceutical
industry, this study is an attempt to contribute to the
cumulative knowledge gained through previous studies
that utilized the same industry.
The results of our analysis show that greater marketing capabilities had a positive impact on the likelihood of
a successful product launch from a new product alliance.
This result bodes well for marketers in a day and age
where showing the returns on every investment a firm
makes is becoming more and more crucial. Both academics (Moorman and Rust 1999) and practitioners (de Paula
2003) have been demanding that marketers be more
conscious of the need to measure the return on marketing
investment. Greater technological capabilities were also
shown to be positively impacting upon the likelihood of
new product alliance success. This result reiterates the
necessity for firms to produce superior products if they
want to be successful (Calantone and Cooper 1981).
We also found that the existence of dependence
asymmetry led to the termination of projects before
successful launch. Dependence asymmetry within the
new product alliance leads to a situation where one firm
can control the other and does not engender cooperation
and trust in the relationship. Without the aforementioned
trust and cooperation it is unlikely that the new product
alliance can be successful (Heide and John 1988) thus
leading to the termination of projects. This only reemphasizes the importance of choosing partners carefully when
entering into an alliance and trying to ensure that, as
much as possible, mutual dependence exists in the new
product alliance. Without, at least approximate mutual
dependence it seems that any new product alliance is
doomed to failure before it even begins.
We were surprised to find no impact of resource
complementarity on the likelihood to launch the product.
In fact we found that partners in the same industry were
more likely to be successful in launching the product
rather than less successful. One explanation for this may
be some sort of overlap in knowledge between the partners
67
and an overlapping of knowledge of cultures. It is perhaps
the case that firms in the industry share certain similarities in organizational culture and as result of this those
firms with similar cultures make more successful partnerships that lead to successfully launched products. It may
be the case that we have to differentiate between Type 1
and Type 2 diversity (Parkhe 1991) and measure the
impact of these different types of diversity on new product
alliance success.
Overall, the decision to enter a new product alliance
is one that requires extensive care and planning and
analysis of the available resources that both partners can
bring to the alliance. References available upon request.
For further information contact:
Steven H. Seggie
Department of Marketing and Supply Chain Management
Michigan State University
East Lansing, MI 48824–1122
Phone: 517.353.6381
FAX: 517.432.1112
E-Mail: [email protected]
American Marketing Association / Winter 2006
68
THE ROLE OF FIRM RESOURCES AND CHARACTERISTICS ON THE
MARKET VALUATION OF NEW PRODUCT ANNOUNCEMENTS
Ruby P. Lee, University of Nevada Las Vegas, Las Vegas
Qimei Chen, University of Hawaii, Manoa
SUMMARY
Introduction
This study integrates literatures on resource-based
perspectives, organizational structure, and financial returns on announcements and proposes that R&D resource
intensity, marketing resource intensity, and firm size are
important to enhance the value of new product introductions. Results on 660 new product announcements demonstrate the potent of firm resources and characteristics in
determining the market valuation of new products.
Conceptual Framework and Hypotheses
Market Valuation of New Product Announcements.
According to the finance literature, when an event is
unexpected by the stock market, any new information of
the event released to the public can create either positive
or negative changes in expected future cash flows, resulting in abnormal stock returns (Fama 1970). Similar to
past research we expect that new product announcements
can generate positive abnormal stock returns (Chaney,
Devinney, and Winer 1991).
H1: New product announcements are related positively to
firm value.
Firm Resources. Resources related to research and
development (R&D) and marketing are imperative to new
product performance (Cohen and Levinthal 1990;
Srivastava, Shervani, and Fahey 1998). Through its
commitment to R&D and marketing, the firm should
convey a message to investors its motivation to produce
quality and innovative products and thus the investors are
likely to honor the firm’s resources (Henard, McFadyen,
and Malkewitz 2003).
Nonetheless, the financial implications of R&D resources on strategic outcomes have been found inconsistent in previous studies (for review see Henard and
Szymanski 2001). We believe that R&D resource intensity creates dual effects on performance. R&D can be
viewed as an expenditure, which creates negative effects
on firm value (Narayanan, Pinches, Kelm, and Lander
2000). In contrast, R&D intensity can reflect a firm’s
capacity to assimilate and dissimilate knowledge and has
been viewed as an investment of learning and innovative
American Marketing Association / Winter 2006
capabilities (Cohen and Levinthal 1990). Since R&D
investment incurs opportunity costs, we hypothesize that
when R&D intensity is at a minimum to moderate level,
investors evaluate a firm’ market value decreases because
the marginal costs of R&D investment likely outweigh its
potential benefits. Such an effect, however, will become
positive when the investment of R&D provides marginal
benefits greater than its marginal costs, leading to positive economic returns.
While R&D resources serve to materialize a new
product concept at various developmental stages, marketing resources put forward to support the product to
successfully launch to the market (Srivastava, Shervani,
and Fahey 1998). Without committed marketing resources, even though a new product is technically sound
and innovative, it may not be able to draw attentions from
the market. We posit that,
H2: There is a U-shape nonlinear relationship between
levels of research and development resource intensity and firm value.
H3: Committed marketing resources are positively related to the market valuation of new product announcements such that the higher the marketing
intensity, the stronger is its effect on firm value.
Firm Size. Firm size indicates a firm’s ability to
provide resources to manage uncertainties and support
new product development. Extant research suggests that
large firms have accumulated with evolved and substantial resource bases such that they are able to transform
new products into firm value (Kerin, Varadarajan, and
Peterson 1992). Nevertheless, larger firms are expected
by investors to produce new products more than smaller
firms (Chaney, Devinney, and Winer 1991). As such,
given smaller firms often have fewer resources and if they
have produced and launched a new product which is
unexpected by the market, investors will honor the new
product higher. Thus, in consistent with some past research, we expect a negative relationship between the
financial returns and firm size (e.g., Narayanan et al.
2000).
H3: Firm size is negatively related to firm value, such that
the larger the firm, the lower is its market value of
new product announcements.
69
Extraneous factors are included when estimating our
model.
Methods and Results
We used new product announcements in the Wall
Street Journal Index between 1990 and 1998 as our
sampling frame. We tested our hypotheses 660 new
product announcements that had complete data. We
followed recent research to use an event methodology to
test H1. We found support for it (3-day abnormal returns = 2.69, p < .01). We used OLS regression to test our
remaining hypotheses. Our data support H2 in that there
exists a nonlinear relationship between committed resources on R&D and market valuation (b = -.301, p < .05,
b = .001, p < .05) and H3 in which marketing resources
are positively related to market valuation such that the
more intense a firm invests in marketing-related func-
tions, the stronger it signals to investors its commitment
to new production introductions (b = 6.659, p < .05). H4
that posits a negative relationship between firm size and
market valuation is also supported (b = -4.485, p <.001).
Conclusions
This research takes an alternative approach to study
the market valuation of new product announcements.
Instead of focusing primarily on announcements, we
examine firm resources and characteristics that drive
behind the success or failure of the new product introductions. We believe that this study provides value to practitioners to understand to what extent they dedicate their
resources in R&D and marketing can generate different
performance outcomes and be aware of over sizing their
firms to avoid inertia to innovations. References available
upon request.
For further information contact:
Ruby P. Lee
University of Nevada Las Vegas
4505 Maryland Parkway
Las Vegas, NV 89154–6010
Phone: 702.895.1841
FAX: 702.895.4854
E-Mail: [email protected]
American Marketing Association / Winter 2006
70
SATISFIERS, DISSATISFIERS, CRITICALS, AND NEUTRALS:
UNDERSTANDING THEIR RELATIVE EFFECTS ON
CUSTOMER (DIS)SATISFACTION
Kaori Nagao, University of California, Riverside
Stephen L. Vargo, University of Hawaii, Manoa
Fred W. Morgan, University of Kentucky, Lexington
SUMMARY
Customer satisfaction is important because of its role
in creating competitive advantage and therefore has
received significant attention in the marketing literature.
Highly satisfied customers will be brand loyal, remain
customers longer, provide favorable word-of-mouth advertising, increase purchasing of goods and services, and
ultimately enhance sales. On the other hand, dissatisfied
consumers are likely to stop purchasing the products and
services, to provide unfavorable word-of-mouth advertising, and to complain, return and boycott the product class,
the brand and the seller or retailer.
Satisfaction has traditionally been conceptualized
using the disconfirmation of expectations model (DE).
The DE model assumes that satisfaction and dissatisfaction are bipolar or extremes on a single continuum and
that individuals evaluate product or service performances
by comparing the perceived performance with their
expectations. When the perceived performance exceeds
the expectations, it causes positive disconfirmation or
satisfaction, and when perceived performance is below
the expectations, it causes negative disconfirmation or
dissatisfaction.
The multifactor model of satisfiers, dissatisfiers,
criticals, and neutrals has challenged the traditional DE
model (Cadotte and Turgeon 1988). Satisfaction and
dissatisfaction are not seen as bipolar ends of a single
continuum, but rather as unipolar and often unrelated to
each other. These factors have been found in literatures
from disciplines as diverse as human resources. Table 1
presents a cross-disciplinary comparison of the terms
used to represent these evaluation factors.
Satisfiers are factors that elicit satisfaction when
present, but their absence does not cause dissatisfaction.
They are intrinsic in nature and are considered ends in
themselves. Examples in the lodging industry include the
spaciousness of the lobby, helpful attitudes of employees,
and management’s knowledge of service. Dissatisfiers
are factors for which low performance (or absence) can
cause dissatisfaction, yet, higher levels (or presence) do
not increase satisfaction. They are extrinsic in nature, are
related to the functional performance of products, and are
means to ends. The unavailability of parking spaces near
a restaurant and the number of accepted credit cards are
examples of dissatisfiers.
Criticals are factors that elicit both positive and
negative feelings. Thus, criticals possess characteristics
similar to those described by the disconfirmation of
expectations model that views (dis)satisfaction as a bipolar or extremes on a single continuum. Criticals could be
the most important factors to control because they create
TABLE 1
Correspondence of Terms for Factors of (Dis)Satisfiers
Cadotte & Turgeon
(1988)
Satisfiers
Dissatisfiers
Criticals
Neutrals
Herzberg et al. (1959)
Motivators
Hygiene Factors
—
—
Swan & Combs (1976)
Expressive
Instrumental Factors
—
—
Kano et al. (1984)
Attractive
Must-Be
One-Dimensional
Indifferent
Monovalent
Satisfiers
Monovalent
Dissatisfiers
Bivalent
Satisfiers
Null
Relationships
Oliver (1995)
American Marketing Association / Winter 2006
71
either a positive or negative impact and nothing in
between. Examples might be quality of service and quality of food in a restaurant. Neutrals are factors that do not
elicit positive or negative evaluations regardless of their
presence or absence. Examples might be the quality of
advertising, variety of service, and convenience of location.
The central problems that emerge from a review of
the various streams of dealing with satisfiers and
dissatisfiers are (1) the question of whether satisfaction
and dissatisfaction are different concepts different parts
or arrangements of the factors of the same underlying
evaluative and (2) how to measure them. These questions
are likely related to a single, more fundamental issue:
what is the appropriate model for understanding evaluative phenomena?
investigation of satisfiers and dissatisfiers, such as the
zone of indifference model of. These multiple-standard,
non-linear, latitude-based models may provide more robust foundation for understanding (dis)satisfaction and
its factors, but have never been fully developed. One
theoretical structure that may be able to provide a foundation for organizing and elaborating these models is social
judgment-involvement theory (SJI) SJI, which conceptualizes attitudes in terms of evaluative reference scales
composed of three latitudes: the latitude of acceptance,
the latitude of rejection, and latitude of non-commitment.
Arguably, satisfiers could be conceptualized as evaluative reference scales that are dominated by the latitude of
acceptance; dissatisfiers may be thought of as evaluative
reference scales by the latitude of rejection; and neutrals
may be thought of as evaluative reference scales dominated by the latitude of non-commitment. These correspondences need to be investigated further.
Alternative, nonlinear, multiple-standard models
have been proposed. Some of these are associated with the
REFERENCES
Cadotte, Ernest R. and Norman Turgeon (1988),
“Dissatisfiers and Satisfiers: Suggestions from Consumer Complaints and Compliments.” Journal of
Consumer Satisfaction, Dissatisfaction, and Complaining Behavior, 1, 74–79.
Herzberg, Fredrick, Bernard Mausner, and Barbara B.
Snyderman (1959), The Motivation to Work, 2nd ed.
New York: Wiley.
Kano, Noriaki, Nobuhiku Seraku, Fumio Takahashi, and
Shinichi Tsuji (1984), “Attractive Quality and MustBe Quality,” presented at the 12th Annual Meeting of
the Japan Society of Quality Control.
Oliver, Richard L. (1995), “Attribute Need Fulfillment in
Product Usage Satisfaction.” Psychology and Marketing, 12 (January), 1–17.
Swan, John E. and Linda Jones Combs (1976), “Product
Performance and Consumer Satisfaction: A New
Concept,” Journal of Marketing, 40 (April), 25–33.
For further information contact:
Fred Morgan
College of Business & Economics
University of Kentucky
Lexington, KY 40506–0034
Phone: 859.257.6248
FAX: 859.257.3577
E-Mail: [email protected]
American Marketing Association / Winter 2006
72
ENTERTAINMENT CONSUMPTION: HOW ENTERTAINMENT GOODS
GIVE THE PEOPLE WHAT THEY WANT
Justin Anderson, University of Southern California, Los Angeles
SUMMARY
What is it about entertainment goods that consumers
find so entertaining? Despite the size and growth of the
entertainment industry and its importance in our economy,
this question remains to be answered. Communications
scholars tend to address the psychological processes of the
entertainment experience, whereas marketing scholars
focus narrowly on building econometric models for forecasting motion picture revenues. The purpose of this
paper is to address the nature of entertainment goods
themselves, by asking the question: what are the characteristics of entertainment goods that generate entertainment benefits?
Current research on entertainment comes mainly
from two disciplines: communications and marketing.
Communications scholars tend to focus on the benefits
that consumers receive from entertainment, and the processes that cause entertainment. Work in this area has
explored the roles of mood management (Tannenbaum
1980), empathy (Zillmann 1994), and immersion (Green
et al. 2004) as processes that influence the entertainment
experience. However, this work does not address marketing issues, such as attributes of entertainment goods, or
how these goods attract consumers. In contrast, most
marketing studies of the entertainment industry are restricted to econometric models for forecasting motion
picture revenues (e.g., Sawhney and Eliashberg 1996) or
competitive strategy in movie release timing (Krider and
Weinberg 1998). Yet, while these papers are relevant to
marketing issues, they fail to address consumers’ experiences with entertainment goods, and are restricted to the
motion picture category. The few marketing papers that
do explore consumer psychological processes of entertainment (e.g., Holbrook 1984) fail to address the product
features that create entertainment benefits. This research
gap presents an opportunity to develop a framework
regarding the marketing of entertainment goods, specifically focused on identifying the characteristics of entertainment goods that generate entertainment benefits.
Entertainment Benefits
Entertainment is fundamentally a form of play
(Vorderer 2001), and therefore provides three benefits of
play: self-realization, emotional gratification, and escapism (Bosshart and Macconi 1998). Self-realization is the
creation or modification of one’s self-identity, attitudes,
American Marketing Association / Winter 2006
and/or behavioral standards. When consumers experience an entertainment good, they compare themselves to
the characters in the story, and use those comparisons to
help shape their own self-identity. Emotional gratification is the satisfaction of emotional needs. Consumers
need to experience a wide variety of emotions, but reality
may prevent some emotions from being aroused very
often, and social norms prevent others from being pursued. Entertainment goods can provide consumers with
the emotional stimulation they seek, especially for emotions that are not experienced often enough or strongly
enough in real life. Furthermore, consumers use entertainment gods simply to manage their mood, for instance,
to pick themselves up when feeling down (Tannenbaum
1980; Zillmann 1988), which is another form of emotional gratification. Finally, escapism is the stress relief
derived from temporarily ignoring reality in favor of a
fictional existence. An essential element of narrative
entertainment is the setting, which may range from very
realistic to very fantastic. When experiencing an entertainment good, consumers place themselves into the
setting of the story, allowing the pressures of their real
existence to melt away. In short, they escape from reality
while experiencing the entertainment good.
Entertainment Characteristics
If these are the benefits of entertainment, what are the
characteristics of entertainment goods that generate entertainment benefits? The answer lies in the three main
characteristics of entertainment content: the characters,
the narrative, and the setting. Character content is the
main character(s) featured in the story. These characters
provide a reference against which consumers compare
themselves, their attitudes, and their behaviors through
the process of empathy, or “feeling with” the characters
(Zillmann 1994). Thus, character content provides the
self-realization benefit. Narrative content is story’s plot,
or actions that the characters undergo. As the characters
move through the narrative, consumers participate through
a process of transportation (Green et al. 2004, Shapiro
et al. forthcoming). This allows the audience to vicariously experience the same emotions as the characters in
the story, and provides the benefit of emotional gratification. Finally, setting content is the fictional reality of the
narrative, including the time, place, and other properties
(e.g., realism or fantasy). Through a process called presence (Tamborini and Skalski forthcoming, Wirth et al.
forthcoming), consumers place themselves into the set-
73
ting of the story, and temporarily feel as though they exist
within the setting of the story. By leaving the real world
behind, consumers also leave behind their real stresses
and pressures, which provides the benefit of escapism.
Empirical Testing
To test the hypotheses that character content generates self-realization, narrative content provides emotional gratification, and setting content generates escap-
ism, 200 undergraduate college students were surveyed
about their movie preferences. Data analysis using structural equation modeling provided support for the first two
hypotheses, that is, preferences for character and narrative content were, respectively, associated with preferences for self-realization and emotional gratification
benefits. The third hypothesis, that setting content generates escapism, was not supported. Better measurement of
the setting construct may improve the results. References
available upon request.
For further information contact:
Justin Anderson
USC Marshall School of Business
University of Southern California, Los Angeles
3660 Trousdale Pkwy, ACC 306E
Los Angeles, CA 90089–0443
Phone: 213.740.5033
FAX: 213.740.7828
E-Mail: [email protected]
American Marketing Association / Winter 2006
74
TOWARD A TYPOLOGY OF DESIRE IN CONSUMER RESEARCH
Alexandra Aguirre Rodriguez, University of Illinois at Urbana–Champaign, Champaign
ABSTRACT
This paper presents a broader and deeper understanding of the concept of desire. Classical philosophical
perspectives are integrated with behavioral decision research to create a typology of desire. Then, the focus of
discussion will turn toward urges, which are an underresearched, prevalent desire motivation in consumer behavior.
INTRODUCTION
The dominant view in consumer research attributes
decision making to systematic, deliberated processes,
while leaving the less deliberated, more hedonic processes in the periphery of inquiry. However, recent research on the role of passionate consumption desires,
which involve very little deliberation or reason, points to
the importance of examining this important motivational
influence (cf., Belk, Ger, and Askegaard 2003; Belk, Ger,
and Askegaard 2000). However, another fundamental
flaw inherent in consumer research is the assumption that
there is only one type of desire and that their role is
subsumed under the general influence of affective reactions. Thus, a broader and deeper understanding of the
concept of desire and the various forms of desire is needed
to enrich consumer decision making research.
In this paper, classical philosophical perspectives of
desire are integrated with existing behavioral decision
research perspectives to create a typology of the various
kinds of desire. Then, the focus of discussion will turn
toward the type of desire known as urges, which are a
prevalent influence in consumer behavior (Rook 1987;
Rook and Hoch 1985). The various treatments of urges in
consumer research and behavioral decision research will
be examined in light of the philosophical perspective.
Furthermore, a unified conceptualization of consumption
urges will be discussed.
TOWARD A TYPOLOGY OF DESIRE
While consumer research was relatively mute on the
topic of desire until Belk and colleagues’ recent work (cf.,
Belk et al. 2003; Belk et al. 2000), the philosophy
literature is replete with discussion of this important
motivational mechanism.1 Nested within debates regarding the nature of intentional action, agency, and motivation, the philosophical perspective of desire is not easily
defined in a simple sentence since much of the literature
focuses on how desire relates to other concepts such as
American Marketing Association / Winter 2006
beliefs, intentions, needs, and free will. For instance,
Davis (1997) asserts that desire is “the motivational
element in intention” and that “intention, unlike desire,
entails belief” (pp. 137–138). According to this view,
belief regarding the attainability of a future state of events
results from the desire for this future state and leads to
intentions to do what is required to attain said future state.
Along a similar line of reasoning, Stampe (1987) likens
desire to a perceptual state and describes its role in
relation to perception and intention as follows, “Like a
fulcrum, then, desire transforms the inward pressure of
perception into the outward impetus of intention. Desire
is the crux of practical reasoning, and around it we turn”
(p. 381). In order to differentiate desires from belief and
intention, Stampe further decomposes the process triggered by desire in the following example of an individual
who desires a cow:
Desire:
(a) I have a cow tomorrow.
Belief:
(b) I have a cow tomorrow if (or: if and
only if) I will go buy a cow today.
Intention: (c) I will go buy a cow today.
Because a belief entails knowledge of something that
is true or certain, a desire cannot be classified as a belief
because even though the individual may want the state of
affairs whereby he or she has a cow to become true, it is
not a true state of affairs at present. In this example, desire
involves wanting to have a cow tomorrow, belief involves
believing that having a cow tomorrow will be obtained if
one buys a cow today, and intention involves intending to
buy the cow today. Thus, the desire for a cow is directed
at a future state of affairs and when coupled with the belief
that to make the future state of affairs true requires buying
a cow, the intention to buy the cow is formed. The
importance of differentiating desire from intention and
demonstrating that desires lead to intentions has been
researched extensively in goal pursuit research (Bagozzi
2000; Bagozzi 1992; Bagozzi and Dholakia 1999; Bagozzi,
Dholakia, and Basuroy 2003).
It is important to note, however, that desire does not
always lead to intention-formation. For instance, Mele
(1995) points out that hoping is a type of desiring that
does not constitute the motivation to act in a way that
accomplished what one hopes. For example, I may hope
the Florida Marlins will win the World Series again next
year, but there is little I can do to fulfill this desire. Thus,
my belief that there is no action I can implement to obtain
75
my desire prevents me from forming an intention that
fulfills my desire. Similarly, yearnings or longings are
another form of desire that lack motivational intensity.
For instance, in Belk et al.’s (2003) recent work on desire
the authors interview people with long-term desires such
as having a cabin in the woods similar to a childhood
vacation spot; living in a movie-like house in the forest
with a well in the garden; and having a giant aquarium to
recreate the experience of vacationing in a childhood
summer house. All of these desires have persisted, and
quite passionately, for many years yet have not motivated
action or intention-formation.
Frankfurt (1984) discusses the distinction between
desires and needs by pointing out that “when something
is needed it must therefore always be possible to specify
what it is needed for, or to explain what one cannot do
without it” (p. 3). Thus, necessities are needed as conditions to attaining a certain end. Desires, on the other hand,
may constitute ends that necessitate certain means. Belk,
Ger, and Askegaard (2003) present a similar argument,
stating that “needs are anticipated, controlled . . . and
gratified through logical instrumental processes. Desires,
on the other hand, are overpowering; something we give
in to . . . and totally dominates our thoughts, feelings, and
actions” (pp. 326–327). In both of these perspectives, a
similar theme emerges – that desires involve a lack of
deliberation and control. However, Belk et al.’s (2003)
suggestion that desire is inextricably linked to affect
requires some qualification since logical distinctions
have been drawn between desires rooted in affective
content and those rooted in reason. After all, one can say
that on intends to pay a traffic ticket without any desire to
do so, but in spite of one’s grudge-filled disposition
toward the act, one has an instrumental desire to pay it
(Mele 1995). Thus, there is necessarily more than just one
sense of desire.
In common, everyday usage, the term desire is applied across a variety of contexts and is extended to
numerous meanings. For example, the term desire is
synonymous with want, wish, hope, crave, and yearn.
While all these terms have a common thread of desire
interwoven at their core, they differ substantially in terms
of characteristics such as their source, motivational intensity, and temporal duration. While issues such as motivational intensity and duration are important, the focus here
is on the source of the desire, since it provides the most
logical and parsimonious basis for creating a typology of
desire.
The primary distinction made in the philosophy
literature for is referred to here as the source of the desire
is of two types: appetitive and volitive. Examples of
synonyms for desire that pertain to the appetitive category
of desires are “hungering,” “craving,” “yearning,” “longing,” and “urge.” Examples of synonyms for desire that
American Marketing Association / Winter 2006
pertain to the volitive category of desires are “want,”
“wish,” and “would like” (Davis 1984; Davis 1997).
Intuitively, these two terms indicate that appetitive desires come from a source similar to an appetite, which is
not willed in to being, where as the source of volitive
desires are more volitional, or acts of will. This distinction refers to the rationality of appetitive versus volitive
desires. As volitional motivational states, volitive desires
are characteristically reason-based, whereas appetitive
desires, as a motivational state arising without one’s will,
do not constitute reasons for desiring. Davis (1984) thus
compares appetitive desires to aches and pains and volitive
desires to beliefs. For example, if you ask someone their
reason for craving an ice cream sundae, there is no
appropriate response for why one is craving, only explanations for why the craving arose-perhaps the scent of the
hot fudge topping or an image on the television. On the
other hand, if a person is asked their reason for wanting
to eat an ice cream sundae, appropriate reasons for
wanting to eat it include nourishment, sharing a social
moment with a friend, and, of course, gratification of a
craving for ice cream sundaes. This last reason illustrates
an important relationship between appetitive desires and
volitive desires – that “while appetitive desires are not
themselves influenced by reasons, they generally provide
reasons for volitive desires” (Davis 1984, p. 186).
Davis (1984) characterizes appetitive desires as being directed at objects that are “appealing” and that are
“viewed with pleasure.” Viewing something that is appealing with pleasure means that the prospect of having
or doing X is viewed with pleasure, even if actually
having or doing it may not bring pleasure. For example,
I may view the prospect of eating an ice cream sundae with
pleasure, but my recent dental surgery would prevent me
from experiencing pleasure from actually eating it. One
cannot argue that appetitive desires are motivated by
pleasure, since for reasons such as dental surgery or
dieting efforts, my desire for the ice cream sundae is not
inextricably linked to my anticipating pleasure from
consuming it. Thus, appetitive desires are not merely a
form of hedonism or pleasure-seeking.
In summary, the major distinction of the two senses
of desire is their source, which can be volitional or
appetitive. Each of these two major categories consist of
variations of volitive and appetitive desires that differ in
characteristics such as motivational intensity and temporal duration. While these were not discussed in detail,
their application in the present typology provides theoretical insights regarding the types of predictions with
respect to behavior that each type of desire is associated
with. Table 1 demonstrates several types of desires that
correspond to the classifications by source, motivational
intensity, and temporal duration. It should be noted,
however, that some types of desire may span across
categories, particularly with respect to motivational in76
tensity. The focus will now turn to urges, which are an
important influence in consumer behavior, yet have been
largely overlooked in consumer research.
CONCEPTUAL BACKGROUND:
CONSUMPTION URGES
Much of the extant research concerning consumption urges only provides a “dark side” view of this
phenomenon, focusing on their role as temptations that
should be resisted (see Mischel 1996). This line of
reasoning corresponds with the philosophy of “akrasia”
or weakness of will, which characterizes certain desires
that are supposedly irresistible by the person experiencing them. These are desires that a person chooses to enact
even when he or she has reasons against enacting (Mele
1990). Philosophical dialogues regarding “akrasia” generally resolve by concluding that logically, no desire is
truly irresistible. Indeed, Baumeister (2002) presents a
similar line of reasoning by suggesting that few genuinely
irresistible desires exist, such as the desire to breathe,
urinate, or sleep; however, the usual suspects, such as
urges for products or foods can be resisted. According to
Baumeister (2002), “most claims of irresistible impulses
are more a matter of rationalization than of genuinely
being helpless against strong desires” (p. 671). Although
the “dark side” view of urges is not espoused in this paper,
the existing points of view that advocate this view will be
reviewed next.
Consumer research typically portrays buying impulses as the arch nemesis of consumer’s self-regulation
efforts (Baumeister 2002; Vohs and Faber 2002). Based
on this view, consumption urges represent the “dark side”
of consumer behavior where giving in to urges results
from weakness of will and debilitated self-control. For
example, according to Baumeister (2002), who refers to
urges as impulses, “resisting an impulse depends on a
person’s capacity for self-control,” which entails controlling behavior “so as to pursue high standards and desirable, long-term goals,” by “delay[ing] gratification when
delay will produce better rewards,” and by restraining
impulses (pp. 671–672). Thus, overcoming consumption
urges is deemed as desirable and harmonious with fulfilling long-term goals. In a similar vein, Mischel (1996)
delegates urges to the role of temptations by defining selfcontrol as “the ability to effectively delay gratification for
the sake of better but delayed outcomes that one has
chosen to pursue but that prove difficult to attain in the
face of immediately available smaller rewards and temptations” (p. 198).
Economists also provide several explanations for
why people give in to their urges, such as time-inconsistency, which refers to the preference for immediate reward over long term goals (Hoch and Loewenstein 1991),
and present-biased preferences, which refer to the tendency to place greater importance on events that are more
proximate (O’Donoghue and Rabin 1999). O’Donoghue
and Rabin (1999) propose that people’s ability to resist
temptation depends on their ability to accurately foresee
self-control problems in the future. For instance, “naïve”
individuals are incorrectly optimistic about their future
behavior and are likely to indulge in the present based on
the assumption they will be able to exert self-control when
the next temptation arises. On the other hand, “sophisticated” individuals are correctly pessimistic about their
future ability to employ self-control and are less likely to
yield to temptations in the present. Hoch and Lowenstein
(1991) explain the influence of urges as being due to
TABLE 1
A Preliminary Typology of Desire
Volitive
Appetitive
Short-Term
Duration
Long-Term
Duration
Goal
desire
X
X
Hope
X
X
Short-fuse
instrumental
desire
X
Low
Motivation
X
X
X
Yearning/
longing
X
Urge/
craving
X
American Marketing Association / Winter 2006
X
X
Reference
(Bagozzi
et al. 2003)
(Mele 1995)
X
X
X
High
Motivation
(Dholakia
and
Bagozzi 2003)
(Belk et al.
2003)
X
(Davis
1984)
77
“sudden increases in desire brought about by a shift in the
consumer’s reference point,” which can be brought about
by temporal consumption proximity that causes “the
consumer to partially adapt to the notion of owning or
consuming the product” (p. 494). This phenomenon
results in the addition of a negative utility component to
the existing positive utility component of acquiring versus not acquiring the product. The positive utility is
driven by the consumer’s existing desire for acquiring the
object prior to the reference point shift. The negative
utility involves the deprivation the consumer would experience from not consuming or acquiring the object once
the reference point shift has occurred. Hoch and
Lowenstein (1991) refer to this phenomenon as partial
adaptation, which places the consumer in an “intermediate state between owning and not owning the product”
(pp. 494–495). These economic views of intertemporal
decision making also assume urges are temptations to be
resisted and focus on the role of self-regulation needed to
overcome these “dark” consumption urges.
The substance addiction literature presents a similar
“dark side” conceptualization of consumption urges as
cue-stimulated desire states that propel the individual to
consume addictive substances such as alcohol, cigarettes,
and drugs (Abrams 2000). Evidence from addiction research suggests urges increase the likelihood of consumption particularly when elicited by actual or symbolic
external cues involving such as the presence of addictive
substances or cues that remind the subject of situations in
which the substance has been consumed in the past
(Sayette, Martin, Wertz, Shiffman, and Perrott 2001).
These “dark side” accounts of consumption urges are
negatively biased and overlook the positive role of consumption urges in signaling to the consumer a “product’s
rightness” (Thompson, Locander, and Pollio 1990). Furthermore, making only planned purchases is not necessarily consumers’ primary goal while shopping. In fact,
many consumers have expressed their preference for
buying products that trigger their urges (Rook 1987;
Thompson et al. 1990). This evidence is consistent with
Davis’s (1984) description of appetitive desires as better
indicators of a enjoyment of desire satisfaction than
volitive desires. Thus, consumers are not irrational to
prefer and enjoy more to make urge-driven rather than
planned, deliberated purchases.
CONCEPTUALIZING CONSUMPTION URGES
Evidence from consumer discourses provides some
general guidelines regarding how consumption urges
should be viewed. Consumers regard them as sudden,
often powerful motivators of the pursuit of immediate
satisfaction of a desire for a product (Rook 1987; Rook
American Marketing Association / Winter 2006
and Hoch 1985). As one consumer puts it, “You suddenly
feel compelled to buy something” (Rook 1987, p. 193).
For some consumers consumption urges may represent
temptations, but others attribute a functional role to them
as catalysts for pleasing shopping experiences. Another
consumer describes this functional role by stating, “I
can’t imagine someone saying, ‘I need something for my
coffee table, and I am going to look ‘til I find something.’
I just don’t think that is the way you end up decorating.
You just run across something that catches your eye”
(Thompson, Locander, and Pollio 1990, p. 356). However, in spite of being a common and potentially powerful
influence on buyer judgment and behavior, consumption
urges have received very little attention in consumer
research. Beatty and Ferrell (1998) mark the importance
of distinguishing the felt urge stage from the rest of the
impulse buying process and state that urges appear to be
“an important intervening variable between actual impulse purchase and several precursors. . .” (p. 184).
This evidence from consumer research is consistent
with the philosophical perspective which attributes to
urges the qualities of appetitive desires, but unlike yearnings and longings, urges are short-term desires. They are
fleeting in the sense that urges arise suddenly and dissipate quickly if unsatisfied. Thus, based on philosophical,
consumer behavior, and behavioral decision research
perspectives, consumption urges are defined here as
short-term appetitive desires. As such urges are directed
toward an object viewed with pleasure, arises spontaneously in an undeliberated manner (e.g., in response to
internal or external stimulation) and motivate immediate, intrinsic pursuit of an object (Davis 1984; Loewenstein
1996; Rook and Hoch 1985).
CONCLUSION
Belk and colleagues’ recent research on desire illuminated the importance of this motivational state in
consumer behavior. A shortcoming of these recent explorations of consumer desire is the inherent assumption that
there is only one type of desire. This paper presents a
broader and deeper understanding of the concept of desire
by integrating classical philosophical perspectives with
behavioral decision research to create a preliminary
typology of desire.
Special attention was directed toward the type of
appetitive desires known as urges, which existing research demonstrates are a prevalent and influential motivator of consumer behavior. More attention needs to be
directed to this special category of consumption desires,
which has been viewed far too narrowly in the past in
conjunction with impulses, temptations, and low involvement consumer decision-making.
78
Future research should focus on the distinctive predictions that can be drawn from each type of desire,
particularly urges, with respect to various behavioral
outcomes such as consumption, satisfaction, frustration,
and regret.
ENDNOTE
Philosophy and Phenomenological Research, 45
(1), 1–13.
Hoch, Stephen and George F. Loewenstein (1991), “TimeInconsistent Preferences and Consumer Self-Control,” Journal of Consumer Research, 17 (4), 492–
507.
Loewenstein, George (1996), “Out of Control: Visceral
Influences on Behavior,” Organizational Behavior
and Human Decision Processes, 65 (3), 272–92.
Mele, Alfred R. (1990), “Irresistible Desires,” Nous, 24,
455–72.
____________ (1995), “Motivation: Essentially Motivation-Constituting Attitudes,” The Philosophical Review, 104 (3), 387–423.
Mischel, Walter (1996), “From Good Intentions to Willpower,” in The Psychology of Action: Linking Motivation and Emotion to Cognition, Peter M. Gollwitzer
and John A. Bargh, eds. New York: Guilford Press,
197–218.
O’Donoghue, Ted and Matthew Rabin (1999), “Doing It
Now or Later,” American Economic Review, 89 (1),
103–25.
Rook, Dennis W. and Stephen Hoch (1985), “Consuming
Impulses,” in Advances in Consumer Research,
Morris B. Holbrook and Elizabeth C. Hirschman,
eds. Provo, UT: Association for Consumer Research,
12, 23–27.
____________ (1987), “The Buying Impulse,” Journal
of Consumer Research, 14, 189–99.
Sayette, Michael A., Christopher S. Martin, Joan M.
Wertz, Saul Shiffman, and Michael A. Perrott (2001),
“A Multi-Dimensional Analysis of Cue-Elicited Craving in Heavy Smokers and Tobacco Chippers,” Addiction, 96, 1419–32.
Stampe, Dennis W. (1987), “The Authority of Desire,”
The Philosophical Review, 96 (3), 335–81.
Thompson, Craig J., William B. Locander, and Howard
R. Pollio (1990), “The Lived Meaning of Free Choice:
An Existentialist-Phenomenological Description of
Everyday Consumer Experiences of Contemporary
Married Women,” Journal of Consumer Research,
17, 346–61.
Vohs, Kathleen and Ronald J. Faber (2002), “Self-Regulation and Impulsive Spending Patterns,” in Advances in Consumer Research,
1
While desire is also discussed in fields such as sociology
and anthropology, these are not discussed here as
they are covered extensively in the context of Belk
and colleagues’ perspective of desire.
REFERENCES
Abrams, David B. (2000), “Transdisciplinary Concepts
and Measures of Craving: Commentary and Future
Directions,” Addiction, 95 (Supplement 2), 237–46.
Bagozzi, Richard P. (1992), “The Self-Regulation of
Attitudes, Intentions, and Behavior,” Social Psychology Quarterly, 55 (2), 178–204.
____________ and Utpal Dholakia (1999), “Goal Setting
and Goal Striving in Consumer Behavior,” Journal
of Marketing, 63, 19–32.
____________ (2000), “On the Concept of Intentional
Social Action in Consumer Behavior,” Journal of
Consumer Research, 27, 388–96.
____________, Utpal Dholakia, and Basuroy (2003),
“How Effortful Decisions Get Enacted: The Motivating Role of Decision Processes, Desires, and Anticipated Emotions,” Journal of Behavioral Decision
Making, 16, 273–95.
Baumeister, Roy F. (2002), “Yielding to Temptation:
Self–Control Failure, Impulsive Purchasing, and
Consumer Behavior,” Journal of Consumer Research,
28 (March), 670–76.
Beatty, Sharon E. and M. Elizabeth Ferrel (1998), “Impulse Buying: Modeling Its Precursors,” Journal of
Retailing, 74 (2), 169–91.
Belk, Russel W., Guliz Ger, and Soren Askegaard (2000),
“The Missing Streetcar Named Desire,” in Why of
Consumption, S. Ratneshwar, David Glen Mick, and
Cynthia Huffman, eds. London: Routledge, 98–119.
____________ (2003), “The Fire of Desire: A MultiSited Inquiry Into Consumer Passion,” Journal of
Consumer Research, 30 (December), 326–51.
Davis, Wayne (1984), “The Two Senses of Desire,”
Philosophical Studies, 45, 181–95.
Davis, Wayne A. (1997), “A Causal Theory of Intending,” in The Philosophy of Action, Alfred R. Mele,
ed. New York: Oxford University Press, 131–48.
Frankfurt, Henry G. (1984), “Necessity and Desire,”
American Marketing Association / Winter 2006
79
For further information contact:
Alexandra (Lexy) Aguirre Rodriguez
University of Illinois at Urbana–Champaign
350 Wohlers Hall
1206 South Sixth Street
Champaign, IL 61820
Phone/FAX: 217.239.1908
E-Mail: [email protected]
American Marketing Association / Winter 2006
80
THE POWER OF CUSTOMER ADVOCACY
V. Kumar, University of Connecticut, Storrs
J. Andrew Petersen, University of Connecticut, Storrs
Robert P. Leone, The Ohio State University, Columbus
SUMMARY
There has been a significant amount of research that
has suggested that customer attitudes are good predictors
of customer behavior. However, in the customer lifetime
value (CLV) literature, none of the models use customer
attitudes to aid in determining the value of customers. The
customer value metric which is being used by marketing
managers of many top firms only considers behavioral
(transaction) and profile (demographic or firmographic)
information when computing the customer value. In this
paper, we argue that it is important not to forget about
advocacy (or word-of-mouth) behavior when valuing
customers. Therefore, we develop a metric that can be
used to measure the true value of a customer to the firm
(CVF) using both behavioral (transaction) and attitudinal
(advocacy) measures and show how this metric can
potentially change strategic customer decisions for marketers.
The calculation for the CLV metric for each individual customer in the marketing literature involves
projecting the expected future profits from that customer
and discounting it to present day value. Then, a manager
on a limited budget can go out and select the “best”
customers based on the rank-order of the CLV measures
that were calculated using transaction and profile data
from each of the customers. However, while this has been
shown empirically as an effective way to approximate
which customers are going to add future value back to the
firm, by not incorporating a measure for the value of what
a customer tells other customers about the product or
service, this customer selection process may not be optimized. In this case we argue that the manager needs to
value not only the transaction and profile information
from each customer, but also each customer’s referral
behavior.
Therefore, we propose a new measure for a customer’s
value to the firm (CVF). This measure includes both the
customer’s CLV in addition to a measure of the customer’s
referral behavior. So, the measure for a customer’s CVF
is calculated by adding together that customer’s CLV and
a measure of that customer’s width and depth of referral
behavior. In this case, width refers to the number of direct
referrals that a customer creates and depth refers to the
number of levels of indirect referrals that a customer
creates. For example, a customer with 3 direct referrals
American Marketing Association / Winter 2006
where each referral again refers more people has a width
of 3 referrals (direct) and a depth of 2 referrals (generations of referrals).
To show how the effects of referral behavior can
change the overall value of a customer to the firm (CVF),
we show 3 different business scenarios that model actual
business situations we have observed in business practice.
In the first example, we allow the timing of referrals to
change, holding all the other factors constant. We use 4
customers to show how different timings of referrals can
vastly affect each CVF. The results of the study show that
a customer who has the highest CLV among the 4
customers who chooses not to refer can have a CVF that
is 10 times less than a customer with a low CLV who
chooses to refer 3 new customers at each time period (with
3 total time periods). Our results even show that a
customer who only refers for 2 periods can still have a
significantly higher CVF (3 times higher in our example)
than the customer who initially had the highest CLV.
This implies that if the manager could only choose 2 of the
4 customers to market to, the manager would not even
choose the customer with the highest CLV.
In the second example, we allow the number of
referrals to change, holding all the other factors constant.
We again use 4 customers to show how different numbers
of referrals can vastly affect each CVF. The results of the
study once again show that a customer with a lower CLV
(compared to the customer that has the highest CLV who
chooses not to refer) that begins to refer customers in time
period 1 (for 3 time periods) can have a CVF that is over
20 times the amount of the customer with the highest CLV
that chooses not to refer. In addition, the results show that
all three of the customers who begin to refer in the first
time period have a higher CVF than the customer who
begins with the highest CLV. This implies that if the
manager could choose 3 customers to market to, the
manager would not even choose the customer with the
highest CLV based on transactions and profile information.
In the third example, we allow both the number of
referrals and the referral timing to vary, holding all the
other factors constant. In this case we use 9 different
customers who either refer 1, 2, or 3 customers starting in
time periods 1, 2, or 3. While this example does not use
a base case of a high CLV customer to compare the impact
81
of referral values, it does show how the cascading effect
of early referrals combined with a larger number of
referrals has on the CVF for each customer. The results
show that when a customer starts referring 1 new customer in period 3 the value of that customer can be more
than 35 times less than a customer who starts referring 3
new customers in each period beginning in period 1. The
implications for managers is significant since getting
customers to refer earlier and more often (even from 1
referral to 3 referrals in an earlier period) can have an
impact as large as an increase in customer value by over
35 times.
While the 3 examples that were shown in this paper
were based on actual business scenarios found in practice,
it is still important for further research to consider
situations using real data to validate the results. However,
the impact of these results is significant to marketers.
Marketing managers have been relying on CLV based
purely on transactional and profile information to choose
the best customers. The findings in this paper show that
customers who have the highest CLV are not necessarily
always going to be the customers that give the most profit
back to the firm. Firms must also incorporate a measure
of a customer’s attitudes when valuing and choosing
customers. And, if a firm does not choose the right
customers before implementing a customer-level marketing strategy, at each stage of the customer-level strategy
the manager will not be reaching an optimal level of
profitability. References available upon request.
For further information contact:
V. Kumar
University of Connecticut
2100 Hillside Road Unit 1041
Storrs, CT 06269–1041
Phone: 860.486.1086
FAX: 860.486.8396
E-Mail: [email protected]
American Marketing Association / Winter 2006
82
PREDICTING CUSTOMER LIFETIME DURATION AND FUTURE
PURCHASE LEVELS: SIMPLE HEURISTICS
VS. COMPLEX MODELS
Markus Wübben, University of Dortmund, Germany
Florian von Wangenheim, University of Dortmund, Germany
SUMMARY
Consider a marketing executive at a catalogue retailer facing the following challenges: First, she wants to
distinguish customers in the customer base likely to
continue buying from the firm (active customers) from
those customers likely to defect or from those that already
defected (inactive customers). This information should
help (a) to identify profitable inactive customers that
should be reactivated, (b) to remove inactive unprofitable
customers from the customer base, and (c) to determine
active customers that should be targeted with regular
marketing activities such as new catalogues or mailings.
Second, she wants to generate transaction forecasts for
individual customers in order to classify these into high/
medium/low customer segments, or to compute customer
lifetime value. Such information should help her targeting those groups with differential mailing frequencies
and loyalty program offerings. Third, she wants to predict
the purchase volume of the entire customer base in order
to make provision for capacity planning, to compute the
firm’s customer equity and to know when customer
acquisition efforts need to be strengthened.
For this non-contractual setting, the state-of-the-art
approach in determining the activity and future purchase
levels of a customer is the Pareto/NBD model (Schmittlein,
Morrison, Columbo 1987; Schmittlein and Peterson 1994)
The Pareto/NBD model has recently been employed in
quite a number of studies (Reinartz and Kumar 2000,
2003; Krafft 2002; Fader, Hardie, and Lee 2005; Ho,
Park, and Zhou 2005) and its implementation has been
recommended on even larger scale (Balasubramanian
et al. 1998; Jain and Singh 2002; Rust and Chung 2005;
Kamakura and Mela 2004). This model is attractive for
the following reasons: (a) For each customer it yields a
probability that she is still active (P(Active) value), (b) the
model makes forecasts of individuals’ future transaction
levels and (c) it operates on past transaction behavior.
More precisely, it solely operates on the frequency and
recency information of a customer’s past purchase behavior. More recently, Fader, Hardie, and Lee (2005) developed the BG/NBD model which is meant to be an alternative to the Pareto/NBD model. The BG/NBD model also
makes forecasts of individuals’ future transaction levels,
operates on past transaction behavior, is much easier to
implement but does not yield a P(Active) value.
American Marketing Association / Winter 2006
Given the time and money costs associated with
implementing complex stochastic models in managerial
practice, the marketing executive will only be convinced
to make use of the academic methods when their superiority is clearly demonstrated on the aggregated as well as
on the individual customer level. This is especially true if
these models are to be used in a one-to-one marketing
context where each individual customer is target of
personalized marketing actions. Yet, not only practitioners would benefit from these insights. For research, it is
important to know which of the predictions made by these
models can be trusted to produce good forecasts under
which circumstances for future implementation of these
models in, e.g., customer lifetime value research such as
in Reinartz and Kumar (2000, 2003).
It is thus all the more surprising that none of the
studies on the stochastic models (Schmittlein, Morrison,
Columbo 1987; Schmittlein and Peterson 1994; Fader,
Hardie, Lee 2005) have extensively validated their predictions on the individual customer level. Even more
importantly, to our best knowledge, there exists no study
that compared the predictions made by the models on
both, the aggregated and individual customer level,
against the simple heuristics generally in use in managerial practice. This is the gap the present work aims to fill.
We validate and benchmark the Pareto/NBD and
BG/NBD model against simple heuristics on three different data-sets from three different industries. More precisely, we conduct the analysis on data-sets from the
apparel retailing, online CD retailing and Airline business.
Our results show that a simple “recency of last
purchase” analysis is superior to the Pareto/NBD model’s
P(Active) facility. On all three customer bases, this simple
management heuristic distinguished the active from the
inactive customers better than the Pareto/NBD model at
much lower implementational cost. This result has substantial implications for both academic and managerial
applications. For example, both Reinartz and Kumar
(2000, 2003) and Krafft (2002) base their customer
lifetime value (CLV) estimations substantially on the
P(Active) prediction of the Pareto/NBD model. Given
that our results show that empirical P(Active) values have
less predictive power than the recency rule, we recom83
mend that future research that employs CLV prediction in
non-contractual setting should not use the Pareto/NBD
model for prediction of lifetime duration. Further, for
managers that want to determine which customers are
inactive in order to select them for reactivation campaigns or delete them from their database, not the Pareto/
NBD model but simple recency analyses should be used.
Concerning the transaction level prediction, the
Pareto/NBD and BG/NBD model perform nearly identical and much better than our simple management heuristic. On the aggregated purchasing level, both, the Pareto/
NBD and BG/NBD model gave decent predictions but
showed a general tendency to under-predict purchases.
On the individual level, both, the Pareto/NBD and BG/
NBD model show good results and especially for 50
percent of the customer bases, the models made very
precise predictions of the number of future purchases.
Thus, although we do not recommend using the Pareto/
NBD model for P(Active) analyses, it does make sense to
implement the models in research and managerial applications, for example, when it comes to making individual- or customer base-level predictions. Important
managerial applications are in capacity planning for
future time periods, classifying customers into high/low
value classes, and customer equity computation. Given
that the Pareto/NBD and BG/NBD model perform nearly
identical, the easier-to-implement BG/NBD model should
be the preferred option. References available upon request.
For more information contact:
Markus Wübben
Service Management Department
Dortmund School of Business
Otto-Hahn-Str. 6
University of Dortmund
44221 Dortmund
Germany
Phone: +49.231.755.3838
FAX: +49.231.755.5254
E-Mail: [email protected]
American Marketing Association / Winter 2006
84
UNDERSTANDING YOUR CUSTOMER PORTFOLIO: A SIMPLE
APPROACH TO CUSTOMER SEGMENTATION ACCORDING
TO LIFECYCLE DYNAMICS
Patrick Lentz, University of Dortmund, Germany
Florian von Wangenheim, University of Dortmund, Germany
SUMMARY
Customer relationship development over time is
known to be heterogeneous. We propose easy-to-compute
metrics that allow for a customer segmentation focusing
on the dynamics of customer development over time. We
apply and test these metrics empirically and find that our
segmentation is able to differentiate between customers
with the same historic value, but different developments
in the future.
Introduction
Understanding how customer relationships develop
over time is of central interest to both managers and
academics (e.g., Johnson and Selnes 2004; Dwyer, Schurr,
and Oh 1987). However, most empirical research in this
area focuses on key events such as the initiation or the
termination of customer relationships (e.g., Bolton 1998;
Thomas 2001). Much research here has relied on the case
study evidence provided by Reichheld and colleagues
(e.g., Reichheld and Teal 1996), which suggests that
customer profitability steadily increases over time. However, the generalizability of these studies has been questioned both conceptually (e.g., Dowling and Uncles 1997)
and empirically (Reinartz and Kumar 2000). Therefore,
the present research is designed to derive insights into this
research area, and attempts to make three contributions.
First, we derive easy-to-use metrics for a customer segmentation that are closely aligned to the literature on
evaluating financial assets. Second, we empirically test
the applicability of these metrics. Third, we derive a
segmentation scheme based on these metrics, which is
able to differentiate between customers with same historic
values, but different developments in the future, and test
this scheme using quarterly data from 1999 to 2002 of
23,562 customers in the airline industry.
Customer Lifecycle Descriptors
Research related to the term “customer asset management” (e.g., Rust, Lemon, and Zeithaml 2004) seems
American Marketing Association / Winter 2006
particularly promising for generating lifecycle metrics
since financial valuation models also use measures that
capture an assets’ temporal development over time. Of
specific importance in financial valuation models are
variables that indicate how the value of the asset develops
over time (an assets’ value trend) and its variance or
volatility (Hogan et al. 2002). In these models, volatility
of cash flows is used as an indicator of an investment’s
risk (e.g., Rappaport 1986). Thus, a conceptualization of
the customer risk in a non-contractual setting would
include both (temporal) inactivity and trend of relationship spending, which in addition to a customer’s past
spending are included in our segmentation scheme. Additionally, we empirically investigate the stability of these
metrics and how they influence future customer development.
Empirical Results and Discussion
First, we find that number of inactive periods and
past revenues correlate strongly, comparing years 1999
and 2000 to years 2001 and 2002; however, this is not
found for trend of relationship spending. Second, stepwise
multiple regression analysis shows that past revenues
yield the strongest influence on future revenues, followed
by the corresponding trend in revenues and by number of
inactive periods, using years 1999 to 2001 to predict
revenues in 2002. Finally, our segmentation scheme
reveals six clusters of airline customers; specifically,
pairs of two clusters exist who share similar characteristics in average revenues and number of inactive periods,
but show extreme differences with respect to the underlying trend in revenues. Consequently, two customers with
the same historic value may differ dramatically with
regard to their future value to the corporation, and our
study shows that some of the proposed variables and our
segmentation scheme are well able to differentiate between such customers. This provides some interesting
implications for both academics and practitioners, which
will be discussed in more detail at the conference. References available upon request.
85
For further information contact:
Patrick Lentz
Department of Marketing
University of Dortmund
D-44221 Dortmund
Germany
Phone: +49.231.755.3277
FAX: +49.231.755.3271
E-Mail: [email protected]
American Marketing Association / Winter 2006
86
TO EAT OR NOT TO EAT: EFFECTS OF OBJECTIVE NUTRITION
INFORMATION ON CONSUMER PERCEPTIONS OF FAST FOOD
CHAINS’ MEAL HEALTHINESS, FUTURE HEALTH CONCERNS,
AND MEAL REPURCHASE INTENTIONS
Scot Burton, University of Arkansas, Fayetteville
Kenneth W. Bates, University of Arkansas, Fayetteville
Kyle A. Huggins, University of Arkansas, Fayetteville
SUMMARY
In 2001, the United States Department of Health and
Human Services (U.S. DHHS) projected that obesity
would overtake tobacco as the leading cause of preventable death in the United States. Almost two-thirds (64%)
of adults in the United States currently are either overweight or obese, and there are some 54 billion meals eaten
at fast food or table service restaurants annually. In a
recent study of young adults, positive relationships were
found between the frequency of fast-food restaurant dining and increases in both bodyweight and insulin resistance (Pereira et al. 2005). Given these recent findings,
coupled with the recent proposed legislation to disclose
calorie information for fast-food fare (MEAL Act), the
purpose of this research was to address several issues
regarding consumers’ fast food dining behavior, perceptions of fast food meal nutrition levels, and potential
effects of exposure to actual fast food nutrition levels.
Specifically, we address the following research questions.
First, how do (a) the objective calorie and nutrient levels
and (b) the accuracy of consumers’ estimates of calorie
and nutrient levels of fast food meals purchased vary by
specific restaurant chain and gender? Second, are the
initial perceptions of nutrition levels, weight gain and
disease risk, and repurchase intentions for the meal
affected by the combination of exposure to specific objective nutrition information for the meal and the calorie
level of the meal consumed? Third, does the accuracy of
the consumers’ meal calorie estimate mediate these effects?
To test hypotheses, data from a seven-day diary of
self-reported fast food purchases were merged with survey data on study participants’ meal expectations, nutrition perceptions, and meal attitudes. The study involved
four stages of data collection. Undergraduate student
participants first kept a seven-day diary of their fast food
restaurant visits, including the specific food and drinks
purchased (and condiments used), name of the restaurant,
amount spent, and their satisfaction with the meal. Following the completion of this seven-day diary, estimates
of the calories, fat, saturated fat, and sodium levels for
each of the purchased meals reported in the diary were
American Marketing Association / Winter 2006
obtained from participants. Ratings of meal healthiness,
level of calories, likelihood of repurchasing the meal, and
likelihood of gaining weight and heart disease risk from
regularly consuming the meal also were obtained. Following collection of this survey data, participants were
given instructions on how to access restaurants’ websites
to obtain objective levels of the calories and nutrients for
each of the meals recorded in the diaries. In the final stage,
participants repeated their ratings of meal healthiness,
level of calories, likelihood of repurchasing the meal, and
likelihood of gaining weight and heart disease risk from
regularly consuming the meal. Thus, these measures were
assessed at two points in time, once before and once after
obtaining the calorie and nutrition information from the
restaurants’ websites.
For these participants more than 500 meals were
reported in the diaries. Results indicate that compared to
females, males in general consumed unhealthier items,
underestimated meal calorie and nutrient levels more,
and ate more often at fast food establishments. These
findings suggest consumer health and welfare concerns
for male consumers and raise questions about longerterm health effects and differences in the magnitude of
potential benefits of nutrition disclosures for males versus
females. Findings in this study also illustrate how poorly
consumers understand the nutritional content of many
fast food meals. Most consumers know which fast food
items are the lower calorie and healthier choices (e.g., a
salad from a fast food restaurant generally is lower in
calories and fat than a large hamburger and fries), but they
still do not recognize how unhealthy many fast food meals
can be and the possible effects of frequent, long-term
consumption.
Specific comparisons across fast food chains frequented by our respondents suggest that the average
meals at Chick-Fil-A and Subway are the healthiest in
terms of actual calories and fat levels. For these participants and meals Burger King topped the chains with the
highest average calorie and fat levels per meal (54 grams
of fat, over 80% of the recommended daily level). In
addition, calorie levels were underestimated by 361 for
the meals purchased from Burger King. Across restau-
87
rants, results show that consumers’ underestimation of
calories, fat, and sodium levels increases substantially as
items become higher in fat and calories.
It was predicted that (a) exposure to objective nutrition information and (b) the level of the objective calorie
level of the meal, would both decrease consumer evaluations and repurchase intentions, but the meal calorie level
would moderate the effect of exposure to website nutrition
information. Results of repeated measures analyses offer
broad support for these predictions. Higher calorie meals
lead to these lower perceptions and more unfavorable
evaluations compared to results prior to the disclosure,
while lower calorie meals lead to no significant changes
or more favorable evaluations.
In general, these data suggest that passage of the
MEAL Act (or similar legislation requiring nutrition
disclosures for restaurant chains) would tend to decrease
the perceptions of fast food meal healthiness and increase
heart disease risk perceptions. Although there are questions about the generalization of these findings to other
disclosure contexts, the results for meal repurchase intentions generally suggest that disclosure of nutrition information at the point-of-purchase potentially may reduce
consumer choices of higher calorie, less nutritious items,
an obvious purpose of proposed legislation. References
available upon request.
For further information contact:
Scot Burton or Kenny Bates
Marketing and Logistics Department
Sam M. Walton College of Business
University of Arkansas
302 BADM
Fayetteville, AR 72701
Phone: 479.575.4055
FAX: 479.575.8407
E-Mail: [email protected]
or
[email protected]
American Marketing Association / Winter 2006
88
NUTRITION LABELS: THE EFFECT OF SPECIFIC HEALTH
CONCERNS ON DECISION QUALITY AND DECISION TIME
Michael Basil, University of Lethbridge, Lethbridge
Debra Z. Basil, University of Lethbridge, Lethbridge
Sameer Deshpande, University of Lethbridge, Lethbridge
SUMMARY
Over the last 100 years, food consumption has shifted
away from traditional foods toward prepackaged and
processed foods. Given this shift to processed food,
consumers needed to increasingly rely on the ingredient
lists on labels in order to know what they were eating.
Thus, an asymmetry of information could be seen where
food manufacturers had considerably more information
on processed food than did consumers. As a response to
the concern over food additives such as salt and fats, the
Nutrition Label Educational Act (NLEA) of 1990 required food manufacturers to provide information on
processed foods in the form of a laboratory analysis that
provides a breakdown of the fat, carbohydrate, and protein content. The present research seeks to assess the
effectiveness of these nutritional labels in making food
decisions.
To be most useful nutrition labels should facilitate
decision making by providing relevant information in a
convenient manner. However, psychologists know that
people’s ability to process information is limited (e.g.,
Broadbent 1958; Cherry 1953; Miller 1956). They have
proposed that people focus their attention in a way that
filters through a barrage of incoming information (Norman
1976). People apply a wide range of guidelines or “heuristics” to sift through this information. Unfortunately,
the use of these heuristics can reduce the quality of
decisions that are made (Jones, Schipper, and Holzworth
1978; Tversky and Kahneman 1974). In the case of
nutritional decisions, we should examine what factors
come into play in making food choices, how effective
nutrition labels are in shaping food choice, and whether
heuristic decision strategies can be improved. We are
interested in examining naturally occurring decision
heuristics used by individuals. Two of the most prevalent
nutrition related health concerns in North America are
cardiovascular disease (CVD) and diabetes. When a
health concern is present, it can be used as a decision
heuristic for food choices. How does this vary by health
concern?
Pretest
A pretest was conducted with 196 university students. Subjects were randomly assigned to a health con-
American Marketing Association / Winter 2006
dition that was manipulated with a fictitious doctor’s
letter (heart disease, diabetes, or no health concern) and
to a label format (extended label, standard label) in a fully
crossed between-subjects experiment. They were asked to
make nine food choices based on their health condition.
They saw three options and made one selection for each
of the nine food categories. We made use of nutrition
information from actual branded products to enhance
the credibility of the products and the external validity of
the choices.
It took participants an average of five and a half
minutes to select products from these nine product categories, an average of 37 seconds per product choice. In
terms of the manipulation check, respondents made food
selections appropriate to their supposed medical concern.
Assessing quality of choice, an ANOVA was run with the
computed “low fat” score as the dependent variable.
Those in the heart disease condition were significantly
more likely to make low fat choices. The effect of label
format was also examined. Decisions did not take significantly longer when using the extended nutrition label.
These results indicate that when given specific guidelines
individuals are able to use them to make appropriate food
choices.
Experiment
This experiment improved on the pretest in six ways.
First, it used a non-student sample. Second, actual health
concerns were used. Third, the sample was restricted to
respondents over 40 – those most likely to face these
health concerns. Fourth, respondents were directly asked
about the importance they placed on various nutrients
when making decisions, rather than inferring these importance weightings from their decisions. Fifth, a parallel
study was conducted with dietitians in order to determine
the best food choices from a dietitian’s perspective. Sixth,
the broader health condition of cardiovascular disease
(CVD) was used rather than heart disease in order to
address the concerns of a broader group of individuals.
Method. A 3 (health concern: diabetes, CVD, no
health concern) x 2 (nutrition label: standard, extended)
x 2 (doctors letter reinforcing health concern) betweensubjects experiment was conducted on-line to test the
preceding hypotheses.
89
Respondents. Respondents were part of the
Zoomerang on-line research panel. An invitation to participate in the on-line study was sent to 2,200 Zoomerang
panel members, resulting in 800 completed surveys. The
gender distribution was 46 percent female and 54 percent
male (n = 367 and 425 respectively, 14 missing). The
average respondent was 58 years old. Height and weight
questions were used to calculate each respondent’s body
mass index (BMI) and the average BMI was 30 (for
reference, a BMI of 25 or more indicates an overweight
person).
Results
The manipulation was successful – respondents receiving the nutritional instructions placed greater importance on the nutrients instructed relative to the other
nutrients. Health condition significantly predicted selec-
tion of low sugar/high fiber, low fat/low sodium choices.
Label format did not significantly predict decision time.
Extended nutrition labels do not lead to significantly
longer decision times. Which nutrition label format an
individual saw did not affect their product choice for
either dependent variable. Again these results suggest
that extended nutrition labels do not impair decision
making.
Discussion
These results are very positive from a public policy
perspective. They suggest that the nutrition labels did
help people make better choices. They also show, in both
studies, that additional information did not negatively
impact decision quality or speed. Therefore, people appear to rely on useful heuristics to process nutritional
information. References are available upon request.
For further information contact:
Michael Basil
Faculty of Management
University of Lethbridge
4401 University Drive West
Lethbridge, AB T1K 7K9
Canada
Phone: 403.329.2075
FAX: 403.329.2038
E-Mail: [email protected]
American Marketing Association / Winter 2006
90
IF THE CAUSE DOESN’T FIT, MUST THE SOCIAL MARKETER QUIT?
INVESTIGATING THE IMPORTANCE OF FIT BETWEEN
BRANDS AND SOCIAL CAUSES
Rajiv Kashyap, William Paterson University, Wayne
Fuan Li, William Paterson University, Wayne
ABSTRACT
The growing importance of social marketing programs has prompted a quest for suitable causes to serve as
alliance partners. Our experimental study finds a less
than even playing field with larger, familiar brands and
typical causes being accorded an advantage.
whether researchers employ brand or company level
measures. Therefore, this study is aimed at evaluating the
impact of fit upon consumer evaluations under different
conditions of brand and cause (un)familiarity.
CONSUMER EVALUATIONS
Brand Intentions
INTRODUCTION
Conventional wisdom suggests that a good fit between a brand and a social cause improves the efficacy of
cause related marketing efforts. However, recent research
has shown that the importance of fit may be moderated by
a number of individual characteristics such as consumer
familiarity with brands and causes, their knowledge and
attitudes towards social marketing, and perceived size
and typicality differences amongst causes and brands.
Further, it isn’t clear whether initial conditions matter.
That is, are larger, familiar brands better positioned to
benefit from cause related marketing? What about the
type of cause? Previous research suggests that familiarity
with the cause moderates the impact of fit upon consumer
attitudes (Lafferty, Goldsmith, and Hult 2004). However,
there has been no investigation of which causes are
considered more or less deserving of corporate support.
These questions have important implications for brand
strategy and management. For instance, if brand size and
familiarity moderate the impact of fit upon consumer
evaluations, less well known brands (including most B2B
brands) may be better off investing their resources elsewhere. Also, if the type of cause is a boundary condition,
the universe of beneficial alliances is potentially limited.
Marketers have focused upon Company-Consumer
identification as the key to understanding the perceptual
benefits conferred by brand-cause alliances (Bhattacharya
and Sen 2003; Lichtenstein, Drumwright, and Braig
2004). However, studies suggest that a vast majority of
U.S. consumers are poorly informed about corporate
social initiatives (Deephouse 2000; Mohr, Webb, and
Harris 2001). In the absence of information about a firm’s
CSR efforts, consumers are likely to utilize other extrinsic
(e.g., brand size, cause typicality) and intrinsic cues (e.g.,
attitude towards CSR support for the cause) to form
evaluations. Moreover, inferences about the success of
cause related marketing programs can vary depending on
American Marketing Association / Winter 2006
Despite theoretical guidance for the impact of social
marketing programs on brand equity (Hoeffler and Keller
2002), few studies have measured the effects of social
marketing activities on brand intentions. From a managerial perspective, consumer intentions to purchase a brand
or try new products are additional metrics that can be used
to assess the efficacy of social marketing programs.
Marketers have also recognized the importance of brand
advocacy for products that can benefit from word-ofmouth promotion. Willingness to champion the brand
may be especially relevant for social marketing programs
as supporting a well known cause may engender social
approval (Hoeffler and Keller 2002). Our measure was
developed to specifically describe the aforementioned
consumer intentions.
Brand Affect
A number of studies have shown that successful
social marketing programs lead to improved consumer
evaluations (Lichtenstein et al. 2004; Hamlin and Wilson
2004; Rifon, Choi, Trimble, and Li 2004). Researchers
have found an improvement in attitude towards the brand
after exposure to a CRM program (Lafferty et al. 2004).
Social marketing activities help consumers experience
the “warm glow” of having helped those less fortunate
and/or purchase moral satisfaction (Strahilivetz and Myers
1998). This helps engender self respect and social approval (Hoeffler and Keller 2002). Engaging in prosocial
behaviors is a consequence of an empathic coping process
(Bagozzi and Moore 1994) that leads to increased self
esteem (Dawson 1988).
Brand Sacrifice
Researchers assert that the success of many social
marketing programs is predicated on the extent and
willingness of consumers to sacrifice economic for social
91
benefits (Barone, Miyazaki, and Taylor 2000; Lichtenstein,
Drumwright, and Braig 2004). This suggests that consumers engage in some sort of mental calculus; their
choices reflect trade offs of money, time, and psychic and
hassle costs for some desired social benefit such as
supporting a cause like breast cancer, or driving a hybrid
car to save the environment. This includes willingness to
pay premium prices, donate time, effort, and money, or
even tolerating a loss in product performance. Such
compensatory strategies that involve sacrifice of economic value are important indicators of the efficacy of
social marketing programs.
Social Reputation
A company’s social reputation refers to the set of
corporate associations (including image, perceptions,
inferences, emotions, moods, beliefs, knowledge, evaluations, (cf., Brown and Dacin 1997, p. 69; Bhattacharya
and Sen 2003), that each stakeholder possesses about the
motives and behaviors of a firm with regard to its social
responsibility. A chief objective of social marketing strategy is enhancing the company’s social reputation. A
company’s social reputation is a strategic asset that can
provide a competitive edge into today’s increasingly
competitive markets. A social reputation serves to legitimize the firm (Handelman and Arnold 1999) and creates
positive brand and company associations (Hoeffler and
Keller 2003).
BRAND CHARACTERISTICS
Brand Equity
Numerous studies have shown that brand equity
improves the efficacy of marketing strategy through
enhanced customer responses to product, extension, price,
communications, and distribution-related marketing activities (see Hoeffler and Keller 2003 for a review).
However, little is known about the influence of brand
equity on consumer perceptions of brand-cause alliances.
Specifically, how does brand equity impact consumer
evaluations of brand-cause alliances? We suggest that in
a social marketing context, brand familiarity (as a proxy
for brand knowledge) and brand size are the most relevant
dimensions of brand equity. A number of studies have
shown that brand familiarity differentially influences
consumer evaluations due to increased attitude accessibility (e.g., Lafferty et al. 2004). Such positive bias
towards familiar brands is a consequence of enhanced
information processing and selective attention (Kent and
Allen 1994), and a tendency to favor known brands
(Hoeffler and Keller 2003). Therefore, we expect that
familiar brands will be more effective in gaining attention
and support for brand-cause alliances in the absence of
other relevant information. Another striking characteristic of brand-cause alliances is that public expectations of
American Marketing Association / Winter 2006
social responsiveness vary according to the size of the
brand. Larger brands are more vulnerable to institutional
pressures since they are highly visible to their stakeholders (Oliver 1991). One explanation for this is that the
public believes that larger brands have more resources
and therefore, a greater ability to assume the burden of
social causes. In addition, from an ethical perspective,
businesses are considered to be given the power to operate
and conduct their business by society. Therefore, one may
argue that the larger the brand the more it draws upon
societal resources (i.e., factor markets), and consequently,
the larger the expected payback. Meeting social responsibilities is seen as a way of fulfilling social contracts. It
is likely that as brand equity increases, the importance of
fit between brand and cause decreases, and is obscured by
the expectation of greater social responsiveness.
H1: As brand equity increases, the perceived fit between
brand and cause becomes less important.
CAUSE CHARACTERISTICS
Typicality
Typicality refers to the perception that the cause is
representative of the type of cause normally supported by
businesses. Drawing upon previous research (Loken and
Ward 1990), we suggest that cause typicality is determined by: (1) Attributes shared with other members in the
group. For example, causes such as breast cancer or
multiple sclerosis are considered typical since they are
debilitating, life-threatening afflictions. So are natural
disasters such as Hurricane Katrina and the Asian tsunami that caused devastating losses of life and property.
(2) Familiarity arising out of knowledge about the cause.
For instance, causes such as breast cancer or the Special
Olympics may be familiar due to their personal relevance.
Previous research has shown that cause familiarity and
knowledge moderates the relationship between pre and
post attitudes towards brand-cause alliances (Lafferty,
Goldsmith, and Hult 2004). Lafferty et al. (2004) showed
that attitudes towards familiar causes were more easily
accessed than attitudes towards non-familiar causes. (3)
Visibility, that is, the frequency of exposure to the cause
through mass media or personal situations. Visible causes
reduce the burden of promotion for social marketing
programs. Some causes enjoy a less broad appeal as they
are limited by geographic scope (e.g., support for local
community causes) or reach (e.g., minority assistance).
Companies that choose to ally with less visible causes risk
raising less than the desired level of support or developing
“fragmented” brand persona. On the other hand, if a
narrow focus is in line with company strategy, then
allying with less visible causes will provide a useful
means to satisfying its segmentation objectives. Therefore,
92
H2: As typicality increases, perceived fit between brand
and cause becomes less important.
Perceived Fit
Perceived fit is described as the degree of similarity
or congruence perceived between the brand and the cause.
The underlying rationale for seeking a good fit is that
consumers form favorable impressions of the brand either
through repeated pairings with the cause (transference in
low involvement situations) or through cognitive learning (elaboration in high involvement cases). Fit may be
perceived on the basis of a match between a brand’s
functional attributes and the objectives of the alliance. A
firm may possess a core competence to contribute meaningfully to accomplishing the mission and objectives of
the alliance. For instance, American Airlines is perceived
primarily as a travel service provider. AA’s “Miles for
Kids in Need” program providing disadvantaged kids
with travel opportunities is consistent with its core travel
business. Similarly, Bristol Myers Squibb has the functional competence to develop drugs that can help fight
breast cancer. Note that such conceptualization moves
away from a narrow perspective that relates to consumers
use of brands to a broader view that emphasizes the ability
of the brand to help the cause. In addition, this does not
necessitate consumer use of the brand for congruence to
be perceived. In addition to a functional fit, some companies may attempt to “create” a fit (Becker-Olsen and
Simmons 2002) with causes by emphasizing similarity in
values. For instance, the Body Shop’s program to collect
and distribute cell phones to victims of domestic violence
is a result of their corporate focus on women’s selfesteem. In a similar vein, Barnes and Noble partners with
the Anti Defamation League to promote the eradication of
racial hatred. Consumers are required to make the link
that “education” (symbolized by the bookstore chain)
fosters tolerance, which is the most relevant attribute for
the match between the two parties.
Reasons for avoiding a low fit are twofold: first, lack
of fit may lead to negative perceptions as consumers are
uncomfortable with incongruent information that lies
outside their latitude of acceptance (Sherif et al. 1963),
and second, consumers may become confused about a
brand’s signals when it is incongruously associated with
a cause (Erdem and Swait 1998). However, another
school of thought suggests that incongruity may increase
consumer attention as it motivates efforts to resolve
inconsistencies (Heider 1958; Mandler 1982). In addition, the expectation that well-known brands must be
socially responsible (Davis 1973) can easily overwhelm
considerations of fit. A low fit might actually alleviate
opportunistic attributions. For instance, Harley Davidson’s
support for muscular dystrophy and American Express’s
endorsement of the Ellis Island Statue of Liberty campaign did not suggest functional or values-based connecAmerican Marketing Association / Winter 2006
tions between the brands and causes. However, both
campaigns were very successful, and reports from HD
indicate that they raised over seven million dollars in their
most current 14 month campaign (Harley Davidson 2003).
Therefore, we expect that when the brand is large and the
cause is typical, fit has no impact on affect, intentions, and
social reputation. However, incongruence due to unknown brands or atypical causes is likely to induce
additional processing. Consumers might be motivated to
question firm motives. In such cases we expect that a low
perceived fit will lead to lower consumer evaluations. In
our study, incongruity was created through three types of
manipulations, the pairing of a fictitious brand with a
typical or atypical cause and a real brand with an atypical
cause. Our hypotheses may be summarized as follows:
H3: For large brands and typical causes, fit will have no
effect on brand (intentions, affect, sacrifice) and
company social reputation.
H4: For unknown brands and/or atypical causes, fit will
have a positive effect on brand (intentions, affect,
sacrifice) and company social reputation.
CONSUMER CHARACTERISTICS
Attitude Towards CSR
Individual attitudes towards corporate social responsibility are likely to temper their evaluations and judgments of social marketing initiatives. Some consumers
may support the “Friedman” view that the social responsibility of a business is to increase its profits. Others may
feel that companies need to be concerned about societal
needs and especially the communities in which they do
business. It appears that the trend at least in many
developed countries is towards the latter. Consumers
generally have a favorable attitude towards socially responsible companies and expect them to solve social
problems (William and Endacott 2004). They are willing
to switch brands, pay premium prices, and favor socially
responsible brands. It is likely that consumers with positive attitudes towards CSR will be less concerned or care
about the fit between brands and causes. Therefore,
H5: The more positive the attitude towards CSR, the
lower the effect of fit on brand (intentions, affect,
sacrifice) and company social reputation.
Perceived Opportunism
A perplexing social marketing issue is deciding to
what extent firms should promote their social initiatives.
On the one hand, there is sufficient evidence to suggest
that the vast majority of consumers are unaware of
corporate social endeavors (Mohr, Webb, and Harris
1998). On the other, too much promotion may be received
93
with skepticism and opportunistic motivations by consumers. For instance, consumers may attribute less than
altruistic motives when they find firms rushing to endorse
new “hot” social causes (e.g., patriotism due to 9/11).
Opportunism refers to deliberate efforts to disguise profiteering motives behind a façade of social responsibility.
Such efforts have been labeled “greenwashing” and
“bluewashing” by consumer activist groups. Attributions
of opportunism can be traced to consumers questioning
the motives for firms’ social endeavors (Yoon, Yeosun,
Gurhan-Canli, and Zeynep 2003). Consumers who suspect firm motives are less likely to trust the company and
attribute social marketing efforts to ulterior motives.
Hence, we expect that
similar format. The first paragraph described the firm, its
business, and its core values, the second described the
cause and its prevalence, while the third provided details
of the firm’s social marketing initiative. The program was
described in terms of the firm’s effort to create awareness
and support grassroots organizations and charities. After
reading the press release, the subjects were asked to turn
the page and describe their overall impression of the press
release that they had just read. Then they answered a
number of questions about the constructs of interest. At
the end, they were asked to describe their opinion of the
purpose of the study. None of the subjects correctly
guessed the purpose of the experiment.
Measures, Analysis, and Results
H6: As perceived opportunism increases the effect of fit
on brand (intentions, affect, and sacrifice) and company social reputation decreases.
Personal Support For Cause
Previous research has underscored the importance of
individual characteristics for evaluation of CSR initiatives (Sen and Bhattacharya 2003; Dacin and Brown
1997). Drawing upon social judgment theory (Sherif et al.
1963), Sen and Bhattacharya (2003) show how consumers’ personal support for CSR moderates their product
evaluations. Cause affinity and personal relevance increase consumer support for the brand-cause alliance so
that judgments of fit become less important. In addition
they show their concern by their willingness to donate
money, time, and effort to support the cause. Therefore,
we expect that
H7: As personal support for the social cause increases,
the effect of fit on brand (intentions, affect, sacrifice)
and company social reputation decreases.
METHOD
The research design consisted of a 2 (high brand
equity, low brand equity) x 2 (fit, no fit) x 2 (typical,
atypical cause) experiment in which subjects were randomly assigned to groups. Brand equity was manipulated
by providing familiar (i.e., real) and large brands in one
condition versus fictitious, proprietary brands in the
other.1 Altogether 202 students participated in this study.2
The treatment consisted of press releases that were designed to manipulate the aforementioned factors. The real
brands chosen for the study were the Body Shop, BristolMyers Squibb, and Verizon Wireless. The fictitious brands
were called Cohen’s Skin and Body Care, Cohen’s Pharmaceuticals, and Cohen’s Telecom. We included one
typical cause (breast cancer) and three atypical causes
(domestic violence, community trade, and conservation
of Galapagos Islands). To maintain consistency, all press
releases consisted of between 250–260 words and had a
American Marketing Association / Winter 2006
We employed a mix of 7-point semantic differential
and Likert type scales to measure the constructs.3 Each
construct was measured using either three or four items.
For example, Perceived Fit was measured with a 7-point
semantic differential scale (Cronbach’s α = 0.83), with “I
think the social cause chosen by the company was” (a poor
fit/a good fit, very logical/not logical, very appropriate/
not appropriate). Opportunism was measured with a 7point Likert scale (Cronbach’s α = 0.83) anchored at
Strongly Disagree/Strongly Agree) on the following four
items: (1) I think that the company has an ulterior motive
for supporting the cause. (2) I think that the company has
a genuine interest in the cause. (3) Its support for the cause
is sincere. (4) The company does not really care – this is
just another way to generate more sales. Scale reliabilities
as measured by Cronbach’s alpha ranged between 0.78
and 0.92. We began the analysis with a simple comparison of the cell means of perceived fit under varying brand
and cause conditions (see Figure 1). An ANOVA with
perceived fit as the dependent variable and brand equity
and cause typicality as factors revealed a significant main
effect for brand equity (t = 3.56, p < 0.000) and a mildly
significant interaction (t = 1.91, p = 0.05) with a non
significant effect for cause see Figure 1).
The result provides support for H1 suggesting that
brand equity would increase perceived fit, but no support
for H2 suggesting that typicality does not increase perceived fit. Next, we employed a series of ANCOVAs with
the consumer evaluation constructs as dependent variables and fit as the independent variable. The individual
characteristics including opportunism, attitude towards
CSR, and personal support for the cause were entered as
covariates in the analyses. The results are reported in
Table 1.
We found that fit had no effect on brand intentions for
large, familiar brands and typical causes. However, we
also found no effect of fit on intentions for unknown
brands or atypical causes. There was a significant effect
of fit on brand affect for typical causes but the coefficient
94
FIGURE 1
Perceived Fit for High and Low Brand Equity with Typical and Atypical Causes
for brand equity was not significant. In the case of brand
sacrifice measured by willingness to pay more for the
brand, we found a significant interaction between fit and
brand, a significant main effect for cause typicality, but no
main effect for brand equity indicating that when fit was
high, consumers were willing to pay more for high equity
brands and typical causes. For brand sacrifice as measured by willingness to tolerate a slight loss in performance, there was a significant main effect for fit but brand
equity and cause typicality did not matter. Finally, for
brand sacrifice as measured by the percentage of price
premium that subjects would be willing to pay, we found
that there was a significant main effect for brand equity
but no main effect for cause. Interestingly, when it came
to the company’s social reputation, we found significant
main effects for brand equity and cause typicality and
their two way interaction, with no effect of fit. This
suggests that for large, familiar brands and typical causes,
fit has no impact on the company’s social reputation.
Thus H3 and H4 received partial support. In terms of
individual characteristics, we found mixed results for the
effect of attitude towards social marketing on consumer
evaluations. In case of brand intentions and brand sacrifice, attitude towards social marketing had a significant
effect and fit had no effect. However, in case of brand
affect, both attitude and fit were significant with positive
coefficients, suggesting that for more positive attitudes,
fit had a higher impact. Opportunism had a significant
effect on all consumer evaluations. In the two instances
American Marketing Association / Winter 2006
when fit had a significant effect on consumer evaluations
(i.e., for brand affect and brand sacrifice measured by
willingness to tolerate loss in performance), the coefficients had opposite signs, providing support for H6. we
found a significant effect of personal support for the
cause on all but two consumer evaluation measures
(brand affect and sacrifice measured by willingness to
tolerate loss in performance). When support for the cause
was significant, fit had no impact on consumer evaluations, providing support for H7.
DISCUSSION AND IMPLICATIONS
The results indicate that initial conditions do matter.
They influence perceptions of fit between brands and
causes. In addition, they impact to varying extents the
relationships between perceived fit and consumer evaluations. Larger, familiar brands and typical causes were
found to be associated with stronger social reputations.
This may come as no surprise to strategic planners who
view social marketing expenditures as investments in a
social reputation that cannot be easily replicated by
competitors. We also found that fit does not matter as
much as some individual characteristics such as attitude
towards social marketing, perceived opportunism, and
personal support for the cause. In the case of brand
intentions, these individual characteristics were the only
significant variables. Interestingly we found an effect of
fit and cause typicality on brand affect, suggesting that
95
TABLE 1
Parameter Estimates (std. errors) from ANCOVA Analyses
Regressor
Brand – Cause Alliance Variables
Brand
Equity
x
Cause
Fit
x
Brand
Equity
x
Cause
Fit
Brand
Equity
Cause
Fit
x
Brand
Equity
Company
Social
Reputation
0.82
(0.98)
1.88*
(0.78)
1.35*
(0.69)
0.09
(1.31)
0.08
(1.33)
-2.26*
(1.13)
Brand
Intentions
0.85
(1.22)
0.28
(0.98)
0.80
(0.86)
1.25
(1.63)
1.29
(1.67)
Brand
Affect
2.26*
(0.99)
0.45
(0.79)
1.79*
(0.69)
1.63
(1.32)
Brand
Sacrifice
I would be
willing to pay
more for this
brand
-0.63
(0.44)
-0.22
(0.35)
0.68*
(0.31)
I would be
willing to
tolerate a
slight loss in
performance
of this brand
2.36*
(1.05)
0.15
(0.83)
How much
more would
you pay?
(increasing
scale ranging
from 5% to
100%)
-0.32
(3.35)
4.16*
(2.55)
Dependent
Variable
Fit
x
Cause
Individual Variables
Opprtn
Att.
CSR
Supprt
for
Cause
0.92
(1.92)
-0.46**
(0.05)
0.03
(0.04)
0.12*
(0.05)
0.16
(1.42)
1.47
(2.34)
-0.43**
(0.06)
0.17**
(0.05)
0.16*
(0.07)
2.65
(1.35)
1.00
(1.15)
1.22
(1.94)
-0.26**
(0.05)
0.08*
(0.04)
0.09
(0.05)
1.23*
(0.59)
0.34
(0.60)
0.63
(0.51)
-0.81
(0.87)
-0.10**
(0.02)
0.05**
(0.02)
0.05*
(0.02)
0.55
(0.73)
2.34*
(1.41)
1.69
(1.44)
1.08
(1.22)
1.33
(2.07)
-0.09*
(0.05)
0.04
(0.05)
0.01
(0.06)
1.26
(2.40)
1.58
(4.32)
6.16
(4.57)
2.13
(3.71)
2.71
(6.30)
-0.52**
(0.16)
-0.06
(0.14)
0.40**
(0.18)
All one-tailed tests, *denotes p < 0.05, **p < 0.01
congruous associations and well known and accepted
causes are important determinants of affect. When it
came to willingness to pay a premium, we found a
significant main effect for cause and the fit by brand
equity interaction, indicating higher propensities for
typical causes and well liked brands. Fit along with
(lower) opportunism also had a significant effect on brand
sacrifice as measured by willingness to tolerate a slight
loss in performance. This is an important finding for
managers designing products and services that require
American Marketing Association / Winter 2006
consumers to give up economic value to obtain social
value (e.g., environmentally friendly products, green
buildings). We suspect that such trade-offs will warrant
closer inspection of the firm’s core competencies and
their ability to deliver economic and social benefits.
Finally, we found that brand equity along with support for
the cause and perceived opportunism had a significant
impact on the size of premium that respondents would be
willing to pay.
96
In summary, it is important for managers to determine the size of customer segment that harbor favorable
attitudes towards social marketing. Our results also suggest a strong need to manage public perceptions of
opportunism for cause marketing initiatives. While brand
size and familiarity were simultaneously manipulated in
this study, it would be useful to test whether the same
results hold for brands that are equally familiar but differ
in size (e.g., General Motors, Kia). It would also be
interesting to examine differences between different branding strategies (e.g., corporate branding versus house-ofbrands) and their impact upon consumer evaluations of
social marketing programs. The results indicate a less
than even playing field and marketers would be well
advised to exercise caution in their quest to forge profitable alliances with causes.
ENDNOTES
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Hamlin, R.P. and T. Wilson (2004), “The Impact of Cause
Branding on Consumer Reactions to Products: Does
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Handelman, Jay M. and Stephen J. Arnold (1999), “The
Role of Marketing Actions with a Social Dimension:
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Brand Equity Through Corporate Societal Marketing,” Journal of Public Policy and Marketing, 21
(Spring), 78–89.
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Lichtenstein, Donald R., Minnette E. Drumwright, and
Bridgette M. Braig (2004), “The Effect of Corporate
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1
Subjects inferred that proprietary brands denoted smaller
companies in pre-tests.
2
We report results of an ongoing study. Hence cell sizes
are unequal. The smallest cell size was 14 and the
largest was 67. We caution readers that in some cases
the assumption of equal variances was violated during ANCOVA analyses.
3
Details of scales are available from the authors upon
request.
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For further information contact:
Rajiv Kashyap
William Paterson University
Wayne, NJ 07470
Phone: 973.720.3746
FAX: 973.720.2809
E-Mail: [email protected]
American Marketing Association / Winter 2006
98
DOES MANAGEMENT COMMITMENT TO SERVICE QUALITY
IMPACT ON FRONTLINE EMPLOYEES’ AFFECTIVE AND
PERFORMANCE OUTCOMES?
Steven H. Seggie, Michigan State University, East Lansing
Nicholas J. Ashill, Victoria University of Wellington, New Zealand
SUMMARY
Service recovery performance plays a key role in the
way that service marketing programs are implemented
(Zeithaml, Berry, and Parasuraman 1996). Service recovery performance can be defined as what the provider of a
service does in response to some sort of failure in the
service (Bitner, Booms, and Tetreault 1990). An initial
service failure may lead to an initially dissatisfied customer (Ruyter and Wetzels 2000), however, should the
service recovery be successful then the customer may
become satisfied once again.
Frontline employees have a key role to play in service
recovery in the healthcare sector. These employees are
seen to be representing the organization and they are
employed in “boundary spanning” roles (Benoy 1996).
When the patient comes to the healthcare facility often the
first and only person that they interact with is one of the
frontline employees. Service recovery in the healthcare
sector is a planned effort to solicit and deal with patients’
concerns in such a manner to ensure the patients are
satisfied with both the process of recovery and also the
outcome (Osbourne 1995).
Service recovery in healthcare includes a wide range
of issues from those that are more minor to those that are
more major. The minor ones include patients having to
wait to see a nurse or a doctor in the outpatient department
to not being able to find a space in the parking facility. The
more major ones are often complex clinical issues involving substantial expertise where patients are often not
capable of judging the quality provided (Osbourne 1995).
Regardless of the severity of the issue, it is very difficult
to reverse negative opinions and attitudes about the
service after the fact. Thus it is crucial for service providers, and in this instance health care providers, to understand service recovery performance. This understanding
may work as a conduit to anticipation of problems, and
prevention of disasters (Osbourne 1995).
In many Western countries both the public and
private sectors provide healthcare. The public systems are
generally free to the patients and the private systems are
either paid for by the patients themselves or through some
sort of medical insurance. Clearly private healthcare
American Marketing Association / Winter 2006
systems are more representative of a commercial environment with the existence of a paying customer. Public
healthcare systems on the other hand, are less focused on
the needs of the customers although the increasing competitive environment has resulted in calls for public
healthcare facilities to become more efficient and of a
higher quality (Wolfersteig and Dunham 1998).
With all the preceding in mind, the purpose of this
study is to examine the impact of management commitment to service quality (MCSQ) on frontline employees’
service recovery performance in both the private and
public sector. MCSQ has been defined as the conscious
choices that management makes toward ensuring the
implementation of quality initiatives (Ahmed and
Parasuraman 1994). Previous research has shown that
MCSQ is crucial in determining employees’ behavior
toward excellence in service (Babakus et al. 2003; Hartline
and Ferrell 1996), however, little or no research has
examined the impact of MCSQ on frontline employees’
service recovery efforts. This is one of the first attempts to
undertake such research and in addition, as far as we are
aware, this is the first study to directly compare the
performance of the frontline employees in the public
sector versus those frontline employees in the private
sector.
In this study we use a cross-sectional survey to
investigate a model of service recovery performance. We
asked frontline hospital employees in both the public and
private sector to complete a questionnaire on how management commitment to service quality (MCSQ) impacted on their service recovery performance. We then
conducted a two-group analysis using EQS 6.1 following
the steps laid out by Calantone, Schmidt, and Song
(1996).
The result of the study showed general invariance
across both the public sector and private sector samples.
The only path that exhibited any difference was that
between MCSQ and organizational commitment. Here
we found that the loading was larger for the private sector
sample. We found that the relationship between MCSQ
and service recovery performance is mediated by organizational commitment, but not by job satisfaction. References available upon request.
99
For further information contact:
Steven H. Seggie
Department of Marketing and Supply Chain Management
Michigan State University
East Lansing, MI 48824–1122
Phone: 517.353.6381
FAX: 517.432.1112
E-Mail: [email protected]
American Marketing Association / Winter 2006
100
THE POSITIVE AND NEGATIVE CONSEQUENCES OF INTERNAL
CUSTOMER ORIENTATION ON INTERNAL CUSTOMER-SUPPLIER
RELATIONSHIP QUALITY
Ashley Kilburn, The University of Memphis, Memphis
Jeff Thieme, The University of Memphis, Memphis
Greg Boller, The University of Memphis, Memphis
SUMMARY
Internal customer orientation (ICO) is a mindset in
which internal providers of services perceive current or
potential users of those services to be customers. Here,
individuals, departments, and functions within organizations assume the roles of internal suppliers and internal
customers. Internal customers are defined as those within
an organization who are supplied with products or services by others in the organization (Gremler et al. 1994;
Hauser et al. 1996) where suppliers provide services or
products to internal customers (Hauser et al. 1996).
In this study, we investigate both the positive and
negative consequences an ICO has on internal customersupplier relationship quality. Social Exchange, Psychological Contract and Role Theories along with tenants of
relationship marketing provide the theoretical foundation for the propositions. Specifically, high levels of trust,
commitment, relationship benefits and shared values are
treated as variables conducive to high levels of relationship quality. Age and similarity of pre-ICO roles are
introduced as moderating variables.
Social exchange theory refers to “the voluntary actions of individuals that are motivated by returns they are
expected to bring and typically do, in fact, bring from
others” (Blau 1964, p. 91). Here, entities join together
only insofar as they believe and ultimately find it in their
mutual interests to do so (Burgess and Huston 1979).
Psychological contracts outline the criteria upon which
individuals base exchange-related behaviors. These contracts outline perceived behaviors, priorities, rights, and
obligations each individual has of other individual(s)
within an exchange, given their own behavior (Schein
1980). Psychological contracts are ever-changing and
may be implicit or explicit in nature (Rousseau 1989).
One way in which psychological contracts are formed is
through schemas. A schema is the mental knowledge
structure derived from roles wherein social information is
represented (Berscheid 1994). Role theory suggests that
individuals apply learned behaviors to their sociallyappointed positions of coworker, customer, or supplier.
The internal customer-supplier dynamic within internal markets present a new opportunity for exploring
American Marketing Association / Winter 2006
how individuals create, build, and maintain relationships. The psychological impact of the introduction of an
ICO may alter existing relationships and roles between
coworkers. Relationship quality describes the overall
perceptions of how well a relationship fulfills the expectations, goals, and desires of each party involved and is
typically influenced by a number of variables (Dwyer,
Schurr, and Oh 1987; Henning-Thurau 2000; Morgan
and Hunt 1994). Four factors commensurate with high
levels of relationship quality are trust, commitment,
relationship benefits, and shared values. We define trust
as individual’s abstract, positive expectations that they
can count on a partner to care for them and be responsive
to their needs, now and in the future (Berscheid 1994).
Relationship commitment is conceptualized as an
individual’s intention to stay in a relationship. Relationship benefits are those positive consequences of a relational association with another entity (Morgan and Hunt
1994) and include value-adding technologies, processes,
and abilities of the relationship partner. Finally, shared
values are defined as “the extent to which partners have
beliefs in common about what behaviors, goals, and
policies are important or unimportant, appropriate or
inappropriate, and right or wrong” (Morgan and Hunt
1994, p. 25).
An ICO creates a new customer-supplier psychological contract between the two parties, where the contracts
serve to govern exchanges between the two parties, align
the contractual terms held by both parties, and achieve
more efficient mechanisms through which exchanges are
made, thereby positively impacting the determinants of
relationship quality.
P1: The initiation and implementation of an ICO will
result in increased levels of trust between internal
suppliers and customers.
P2: The initiation and implementation of an ICO will
result in increased levels of commitment between
internal suppliers and customers.
P3: The initiation and implementation of an ICO will
result in increased levels of shared values between
internal suppliers and customers.
101
P4: The initiation and implementation of an ICO will
result in increased levels of relationship benefits
between internal suppliers and customers.
Without a consensus on roles, the partners may be
unable to develop appropriate schemas early on, introducing potential for schema discrepancies, or misalignment
of what each party believes differently regarding acceptable terms and obligations (Rousseau 2001). Potential for
discrepancies may decrease with the age of roles as well
as their similarity to previously-held roles. Longer relationships are likely to have more elaborate or sophisti-
cated schemas than newly developed relationships and
may offer greater resistance to the implementation of an
ICO (Solomon et al. 1985). Dissimilar roles may cause
negative reactions for a period of time lasting until the
new schema can be integrated.
P5: The age of the pre-existing role attenuates the impact
of an ICO on relationship quality variables.
P6: The similarity of new and previous roles strengthens
the impact of an ICO on relationship quality variables. References available upon request.
For further information contact:
Ashley J. Kilburn
Department of Marketing and Supply Chain Management
Fogelman College of Business and Economics
The University of Memphis
Memphis, TN 38152
Phone: 901.678.4197
FAX: 901.678.4051
E-Mail: [email protected]
American Marketing Association / Winter 2006
102
CUSTOMER PERCEPTIONS OF SERVICE EMPLOYEE MOTIVATION:
AN ATTRIBUTION THEORY PERSPECTIVE
Ayse Banu Elmadag, University of Alabama, Tuscaloosa
Katherine N. Lemon, Boston College, Chestnut Hill
SUMMARY
The prevailing view in the services marketing literature suggests that employees are the organization in the
minds of customers (Zeithaml et al. 1996). Although
many researchers have pointed out the importance of
employee attitudes in satisfying customers (Zeithaml
et al. 1996), customers’ perceptions of employee motivation has not gotten enough attention (Schultz 2002). This
study examines the role of customers’ attributions of
service employee motivation on customer attitudes and
behaviors. Furthermore, the moderating influences of
customers’ situational involvement and recovery outcome are examined using an experimental design.
Literature Review and Hypotheses
Studies have emphasized the influence of service
employee attitudes on customers’ perceptions of service,
quality service and customer satisfaction (Hartline and
Ferrell 1996; Singh 2000). As a part of these perceptions,
attributions of service employee have been found to
influence customer satisfaction or dissatisfaction (Oliver
and DeSarbo 1988), preferred recovery, and future repurchase intentions (Folkes et al. 1987). As with product
failures, attribution theory (AT) also provides insights
into consumer perceptions and intentions relative to
service recovery experiences (Swanson and Kelley 2001)
for the common idea behind AT is that people interpret
behavior in terms of its causes and that these interpretations partly determine reactions to the behavior (Kelly
and Michela 1980).
Weiner (1974) showed that internal attributions,
relative to external, enhanced affective reactions such as
pride for success and shame for failure. Empirical support
is also forthcoming from the services literature (Bitner
et al. 1990; Crosby and Stephens 1987). Crosby and
Stephens (1987) demonstrate that satisfaction with the
contact employee contributes to customers’ judgment of
the core service. Since intrinsically motivated behaviors
denote an inherent tendency to seek out novelty and
challenge, to extend and exercise one’s capacity, to
explore, and to learn (Gagné and Deci 2005), when
customers’ attributions of FLSE motivation are intrinsic,
they may have more favorable perceptions towards the
service experience than when attributions are extrinsic or
amotivated. Thus, we hypothesize;
American Marketing Association / Winter 2006
H1: Customers’ attributions of intrinsic FLSE motivation are associated with higher customer attitudinal
and behavioral response than extrinsic and amotivated
respectively.
Although, customers’ attributions of FLSE motivation have a direct impact on customers’ attitudes and
behaviors, the service recovery performance may influence the strength of this relationship. Weiner et al.
(1978), suggests that some affects are discriminably
linked to specific attributions while others are linked only
to outcomes, e.g., people feel pleased after success, regardless of the cause. When the service recovery outcome
is positive, the effect of customers’ attributions of FLSE
motivation on customers’ affective responses and behavioral outcomes will be less apparent than when the
outcome is negative. Therefore we hypothesize that;
H2: The outcome of the service recovery moderates the
relationship between customers’ attributions of FLSE
motivation and customers’ affective and behavioral
responses.
As the personal relevance of a focal service increases,
involvement tends to increase (Zaichkowsky 1985). When
a customer is highly involved in service situation, perceptions of the core service elements will dominate the
customers’ perceptions. Prior research shows that greater
involvement produces more effortful processing and thus
stability (Petty, Cacioppo, and Schumann 1983). Thus we
hypothesize the following;
H3: Customers’ situational involvement moderates the
relationship between customers’ attributions of FLSE
motivation and customers’ affective and behavioral
responses.
Research Design and Method
Consumers were randomly assigned to the cells of a
2 (intrinsic vs. extrinsic) x 2 (high vs. low situational
involvement) x 2 (positive vs. negative outcome) between
subjects design. All participants were instructed to read a
scenario about a hotel.
Results
Manipulation check results indicate that FLSE motivation (Ext = -4.42, Int = 4.53; p < .01), situational
103
involvement (low = 2.01 high = 2.66, p < .01) and
outcome (neg = 1.13, pos = 1.93; p < .01) were viewed as
intended. An analysis of variance tested the main effect of
perceptions of FLSE motivation on repurchase intentions
(MExt = 3.733, MInt = 4.667, p < .05), satisfaction with the
FLSE (MExt = 3.844, MInt = 4.703, p < .05), and satisfaction with the service encounter (MExt = 4.066, MInt =
4.667, p < .05). The results were significant; therefore, H1
is supported. Consistent with H2, a two-way interaction
of customers’ perceptions of FLSE motivation by outcome (positive vs. negative) of the service recovery effort
on satisfaction with the service and repurchase intention
was significant. However, this effect was not found for
satisfaction with the FLSE (F(1,181) = .157, p > .05).
Thus, the data provides partial support for H2. Contrary
to the expectations represented in H3, situational involvement (low vs. high) did not show an interaction effect on
the relationship between customers’ perceptions of FLSE
motivation and satisfaction with the service, satisfaction
with the service employee, and repurchase intentions.
Although not significant, the results obtained for H3 are
in the expected direction.
Discussion
The objective of this study was to explore the influence of FLSE motivation on customer attitudes and
behaviors and the factors affecting this relationship. Our
results indicate that customers’ attributions of FLSE
motivation have a direct effect on customer satisfaction
with the service and service employee and customer
repurchase intentions. Additionally, outcome of the service recovery effort is found to be an influential factor on
the relationship between customers’ attributions of FLSE
motivation and their attitudes and behaviors. That is,
when the service recovery effort is not successful (negative outcome), customers have higher levels of satisfaction with the service and repurchase intentions if the
FLSE is perceived to be intrinsically motivated than
extrinsically motivated. The expected interaction effect
of situational involvement, however, is not found in the
analyses. Although the interaction plots show that there
might be an effect of situational involvement on customers’ perceptions of motivation and outcome relationship,
the analyses do not reach the desired significance level.
References available upon request.
For further information contact:
Ayse Banu Elmadag
Culverhouse College of Commerce and Business Administration
The University of Alabama
Box 870225
Tuscaloosa, AL 35487–0225
FAX: 205.348.6695
E-Mail: [email protected]
American Marketing Association / Winter 2006
104
THE IMPACT OF MEDIA SPECIFIC INVESTMENT AND TRUST ON
THE USE OF THE INTERNET FOR INFORMATION SEARCH
Talai Osmonbekov, University of Southern Mississippi, Hattiesburg
Naveen Donthu, Georgia State University, Atlanta
Danny N. Bellenger, Georgia State University, Atlanta
SUMMARY
Information obtained on the Internet has a major
influence on consumer buying decisions. Although Internet
access is widely available in the U.S., there seems to be a
large variance in the actual usage of it for information
search. The purpose of this study is to explore the factors
that impact the use of the Internet for information search.
Drawing from transaction cost analysis, technology adoption model, and trust literatures, the authors propose a
model (see Figure 1) explaining the use of the Internet for
information search.
FIGURE 1
Proposed Model
Perceived
Ease of
Use of the
Internet
H2
MSI in the
Internet
H6
H1
Use of the
Internet for
Information
Search
H7
H4
H5
Trust in the
Internet
H3
An empirical investigation involving 291 adult consumers reveals significant impact of media specific investment and trust on perceived ease of use and perceived
usefulness. The latter two perceptions are found to be
American Marketing Association / Winter 2006
Perceived
Usefulness
of the
Internet
important antecedents to the use of the Internet for
information search. Managerial implications of the findings and directions for future research are proposed.
105
For further information contact:
Naveen Donthu
Marketing Department
Georgia State University
Atlanta, GA 30303
Phone: 404.651.1043
FAX: 404.651.4198
E-Mail: [email protected]
American Marketing Association / Winter 2006
106
POSITIVE “WORD OF MOUSE”: THE ROLE OF PERSONALIZATION
Lan Xia, Bentley College, Waltham
Nada Nasr Bechwati, Bentley College, Waltham
SUMMARY
Many manufactures and retailers invite customers to
write reviews for the products they sell on their websites.
However, few researchers have examined why some
reviews are more powerful than others. Internet WOM
differs from traditional WOM in that sources of information are individuals who have little or no prior relationship with the information seeker (Granitz and Ward
1996). Theory of persuasion indicates that there is a
tendency for people to trust and agree with those they like
(Chaiken 1987). In addition, the perception that the
source of a message is similar to the reader can lead to
greater persuasive effects (Hass 1981; McGuire 1969;
Price, Feick, and Higie 1989). Therefore, when reading
an online review, if a reader can apply the content of the
review to oneself and resonant with the reviewer, he/she
may perceive the review as more credible and trustworthy. Hence, we propose that the cognitive personalization
initiated by the reader is essential in determining the
influence of an online review. Higher level of personalization when reading an online review leads to (a) higher
perceived trustworthiness; (b) higher perceived usefulness; and (c) higher purchase intention.
We further examined factors that influence level of
personalization including (1) affect intensity, an individual trait, (2) type of review, experiential vs. factual,
and (3) nature of the product, search goods vs. experiential goods. First, Affect Intensity (AI) is an individual
difference referring to individuals emotional response to
various events (Larsen and Diener 1987). Consumers
with higher AI are expected to react more strongly to the
content of an online review. Hence, they are expected to
be more influenced by a positive online review than
individuals with lower AI. Further, we propose that the
influence AI is mediated by personalization. Second, the
extent of personalization may also depend on the nature
of the review. Some reviews may focus on plain facts, such
as product attributes (factual reviews) and other reviews
may focus on the reviewer own specific experience when
buying or using the product (experiential reviews). We
proposed that factual reviews are more likely to be
perceived as trustworthy and useful than experiential
reviews. Finally, search goods can be described by a set of
standard attributes and evaluated through instrumental
cues. In such a case, how good the review is in terms of
conveying these attributes to the reader will directly
influence its perceived trustworthiness and usefulness.
However, for experiential goods, which lack standard
American Marketing Association / Winter 2006
“attributes,” different reviewers or readers may focus on
different aspects of the product/service. In those cases, the
influence of the review will depend on whether readers
can personalize the message. Therefore, we hypothesize
that personalization will mediate the influence of type of
review for experiential goods but not for search goods.
A study with 2 x 2 mixed factorial design using 57
student participants was conducted. Type of review (experiential vs. factual) was manipulated as a between
factor and type of product was manipulated as a within
factor. Airline ticket and digital camera were used as
examples of experiential and search goods, respectively.
A scenario-based approach was used. Participants were
told that they needed to book a ticket and buy a digital
camera. Participants were asked to read some online
reviews to help them make their final decisions. Each
participant read two reviews, one for airline and one for
digital camera. After reading each review, participants
answered a set of questions regarding their level of
personalization, perceived trustworthiness of the review,
perceived usefulness, and purchase intentions. Then, AI,
online shopping experience, general attitude toward online
reviews, and interest in airlines and cameras were measured.
Results showed that personalization has significant
positive effects on trustworthiness of the review (b = 0.55,
t = 4.94, p < 0.001 for airline, b = 0.45, t = 3.75, p < 0.001
for camera), perceived usefulness (b = 0.65, t = 6.36, p <
0.001 for airline, b = 0.42, t = 3.46, p < 0.001 for camera),
and purchase intentions (b = 0.58, t = 5.37, p < 0.001 for
airline, b = 0.603, t = 5.66, p < 0.001 for camera) for both
products. To examine the mediating effect of personalization between AI and the three dependent variables, we
followed the procedure to test mediation suggested by
Baron and Kenny (1986). A mediation effect was supported because regressions showed that (a) AI directly
influences trust/usefulness/purchase intention; (b) AI
directly influences personalization; and (c) the direct
effect of AI on trust/usefulness/purchase disappears when
personalization is added as a predictor. Further, ANOVA
analysis showed that for both products, factual reviews
were perceived as more useful than experiential reviews
(F(1,56) = 4.49, p = 0.038 for airline; F(1,56) = 8.39, p =
0.005). Finally, as expected, the influence of type of
review on perceived usefulness was mediated by personalization in the airline review but did not show in the
camera review.
107
Overall, results support most of hypotheses. Our
research contributes to existing knowledge by offering an
explanation of why some reviews are more influential
than others. Our research demonstrates that personalization is the key to understand the level of influence of a
review. These findings may have important theoretical
implications in terms of how persuasion works online and
managerial in terms of how retailers can guide consumers
to write more effective reviews. References available
upon request.
For further information contact:
Lan Xia
Bentley College
175 Forest Street
Waltham, MA 02452
Phone: 781.891.2468
FAX: 781.788.6456
E-Mail: [email protected]
American Marketing Association / Winter 2006
108
SEARCHING FOR THE PERFECT GIFT: THE ROLE OF THE
MAXIMIZING TRAIT IN DECISION MAKING
Tilottama G. Chowdhury, Quinnipiac University, Hamden
S. Ratneshwar, University of Missouri, Columbia
SUMMARY
We build on the recent research of Schwartz and his
colleagues (2002, 2004) who have theorized individual
differences in maximizing behavior in regard to decision
making. Maximizers are individuals who always aim to
make the best possible decision and thus often conjecture
post hoc in any choice situation whether they could have
done better. Satisficers, in contrast, usually do not aspire
to optimize, but are willing to settle for the first option that
meets certain threshold criteria or standards. Schwartz’s
construct seems intuitively appealing and potentially
quite important for illuminating certain kinds of consumer decisions. Nonetheless, very little empirical work
has been done till now in understanding how the maximizing trait might impact consumer choice behavior and
decision-making processes.
In the present research, we explore the role of the
maximizing trait in decision making in a simulated gift
purchase context. A study was conducted with 223 undergraduate students from a large Midwestern university.
Participants were asked to shop for a Christmas gift from
an assortment of products on a special Web site that had
been set up specifically for this research. Assortment size
was manipulated between-subjects to be either small or
large by varying the number of available product categories (6 vs. 24) in the starting menu; each product category
name had four to eight different gift options linked to it
and the “small” set was in fact a subset of the “large” set.
Male and female participants were assigned to different
Web sites that had different assortments of products
designed to suit the preferences of the respective genders
(e.g., wallets for males and jewelry for females).
The study was comprised of two distinct parts. In the
first part, all participants shopped for the gift under
considerable time constraint; they were allowed only
three minutes to make a decision. In the second part of the
study, participants were given ample time (i.e., 20 minutes) and provided the opportunity to shop again for the
gift from the same assortment; they could thus browse
through the options again and change their original
decision if they so wished. After completing various
American Marketing Association / Winter 2006
dependent measures, participants ultimately responded
to items meant to assess the maximizing trait.
The results show that the maximizing trait influenced several aspects of the decision-making process. For
example, as predicted, the data show a three-way interaction between decision time, assortment size, and maximizing trait on perceived time pressure. Specifically,
when given very little decision time on the first choice
opportunity, maximizers (versus satisficers) perceived
significantly more time pressure in the case of a small
assortment; however, both maximizers and satisficers
perceived similarly high time pressure while choosing a
gift from a large assortment. On the other hand, when
given ample decision time (second choice opportunity),
maximizers (versus satisficers) perceived greater time
pressure while making a purchase decision from a large
assortment; however, both maximizers and satisficers
perceived similarly low time pressure in the case of a
small assortment.
The results also showed a reliable maximizing trait
by assortment interaction for consideration set size. As
anticipated, in the case of satisficers, participants who
were exposed to a large (vs. small) assortment had a
significantly larger consideration set size. In contrast, in
the case of maximizers, the size of the assortment of
available alternatives did not significantly influence consideration set size; the set size was relatively large for
these individuals regardless of whether the assortment
was small or large. Finally, the data on decision change
across the two choice opportunities provided even more
evidence on why the maximizing trait matters. A significantly larger proportion of maximizers (vs. satisficers)
changed their original decision when given a second
opportunity.
To the best of our knowledge, this is one of the first
studies to investigate the role of the maximizing trait in
a controlled choice experiment. The results overall are
very encouraging regarding such a line of inquiry, and we
are optimistic that future research will provide many
more interesting insights on the behavioral differences
between maximizers and satisficers. References available
upon request.
109
For further information contact:
Tilottama G. Chowdhury
Department of Marketing and Advertising
Quinnipiac University
275 Mt. Carmel Avenue
Hamden, CT 06518–1964
Phone: 860.466.9151
E-Mail: [email protected]
American Marketing Association / Winter 2006
110
THE MODERATING EFFECTS OF NATIONAL CULTURAL VALUES ON
INTRAORGANIZATIONAL FACTORS-MARKET ORIENTATION
RELATIONSHIP: A CROSS-CULTURAL MODEL
Ahmet H. Kirca, The George Washington University, Washington DC
SUMMARY
The purpose of this manuscript is to examine how
national cultural values moderate the relationships between market orientation and its various antecedents.
Using Schwartz’s cultural value dimensions, we present
a set of propositions regarding the moderating effects of
conservatism, intellectual autonomy, hierarchy, egalitarianism, and mastery dimensions of national culture on
the relationships involving market orientation and, interdepartmental connectedness, top management emphasis,
interdepartmental conflict, centralization, formalization,
and market-based reward systems.
The paper is organized in two major sections. In the
first section, a review of the market orientation literature
with emphasis on the antecedents of market orientation is
provided. Our literature review illustrates that, among the
most frequently studied antecedents of market orientation, top management emphasis, interdepartmental connectedness, reward systems, and market-based training
positively affect market orientation. Past empirical re-
search also indicates that centralization, interdepartmental conflict, and formalization impede the implementation of market orientation.
In the second section, various research propositions
are provided in efforts to guide future empirical research
on the antecedents of market orientation in cross-cultural
contexts. In short, the theoretical framework proposed in
this paper offers insights for future theoretical and empirical research that examines the implementation of
market orientation in a global context. Specifically, our
paper suggests that the bottom-up approaches might be
more appropriate in more egalitarian cultures in which
employees can take initiative and use the formal and
informal communication channels by forming teams and
engaging in market-oriented activities. On the other
hand, a top-down approach might be more effective in
countries that rank high on the hierarchy dimension of
national culture since such cultures more readily accept
the role of top management leadership in reinforcing the
importance of market orientation in organizations.
For further information contact:
Ahmet H. Kirca
International Business Department
School of Business
The George Washington University
2023 G Street, Suite 235
Washington, DC 20052
Phone: 202.994.0820
FAX: 202.994.7422
E-Mail: [email protected]
American Marketing Association / Winter 2006
111
AN EMPIRICAL EXAMINATION OF FIRM CAPITAL ON
PERFORMANCE: A CROSS-CULTURAL STUDY
Roger Calantone, Michigan State University, East Lansing
David Griffith, Michigan State University, East Lansing
Goksel Yalcinkaya, Michigan State University, East Lansing
SUMMARY
Firm capital is increasingly being mentioned in the
literature as a mechanism for assisting in firm survival. It
is an essential resource for all firms, and its outcome is
uncertain, particularly when firms are dependent upon
external markets. Firm-specific capital has been broadly
recognized as a bridge between resources and competitive
advantage (Barney 1991; Wernerfelt 1984). Specific resources are, in essence, a source of “quasi-rents” when the
price of capital is substantially higher than its market
price (Klein et al. 1990). The firm’s competitive advantage is based on specific resources that will be sustainable
as long as the firm continues the activities for which these
resources are valuable (Peteraf 1993; Hunt and Morgan
1995). Unfortunately, markets and technologies often
progress in unpredictable ways. This uncertainty, in turn,
makes specific investments riskier and more expensive to
finance.
Many researchers assume that the resource-advantage theory of competition (hereafter R-A theory) is a
useful tool for predicting performance (Hunt and Morgan
1995). Some researchers claim that R-A theory provides
comprehensive view of firm capital because it is not
committed to the fact that zero economic profits for firms
are optimal, as neoclassical theory argues. Rather, the RA theory argues “firms, through the process of competition, accumulate, develop, and create the various kinds of
tangible, intangible, and higher order resources that
collectively constitute an economy’s private sector capital” (Hunt 2000).
R-A theory posits that firms accumulate, develop,
and create resources that constitute an economy’s private
sector capital. In his 2000 piece, Hunt identifies four
major elements of firm resources: human capital, relational capital, organizational capital, and informational
capital. Hunt defines human capital as the business skills
and knowledge of firm’s individual employees. By his
definitions, relational capital is the firm’s stock of relationships with such entities as customers, suppliers,
competitors, governments, and unions. Organizational
capital refers the stock of a firm’s policies, cultural
routines, and competencies. He also defines informational capital as a firm’s stock of information concerning
American Marketing Association / Winter 2006
its products, production processes, customers, and competitors. We argue that these four elements of firm capital
affect firm performance to varying degrees cross culturally.
Despite the theoretical strength of the idea that the
firms’ capitals creates competitive advantages, research
that demonstrates the influence of applied firm capital on
market performance has not been empirically supported
to date. To our knowledge, no prior cross-cultural study
has empirically investigated the impact of firm capital on
market performance. The objective of this paper, then, is
to propose and test a model of the effect of firm capital on
market performance. Based on large-scale surveys of
firms in the USA, Japan, and Croatia, we examine the
importance of firm capital on market performance empirically. In addition, we look at if any significant crosscountry differences exist in terms of international diversification and performance.
The analysis provides elucidating results that engender significant contributions to the competitive advantage literature. First of all, the findings parallel and
support the idea of competitive advantage momentum.
According to this framework, the possession of unique
resources and capabilities provides a major source for
firms’ competitive advantage (Barney 1991; Peteraf 1993;
Hunt 2000). As such, the findings of this study empirically test and support the idea that firm capital is a unique
resource for the firms and increases the firms’ market
performance when it is utilized efficiently and effectively.
Thus, this study validates the usefulness of firm capital as
a competitive advantage and extends the resource-advantage theory literature. Second, our findings indicate that
among the four types of capital, human and organizational capitals are the ones that significantly affect the
firms’ market performance. These results highlight the
importance of a firm employee’s business skills and
accumulated knowledge as well as the firm’s policies,
cultural routines, norms, and competencies. Third, our
findings suggest that the relationship between firm capital and the firms’ market performance differs crossculturally. Results point out that the firm capital’s effect
on market performance is highest in Japanese firms,
followed by U.S. firms and the Croatian firms. Therefore,
results from this research helps marketing academics and
112
practitioners to better understand the influence of cultural
differences on the firm capital. In addition, the study
suggests that firms seeking to gain competitive advantage
by effective utilization of firm capital should understand
the underlying factors of the environment it is in. References are available upon request.
For further information contact:
Goksel Yalcinkaya
Department of Marketing and Supply Chain Management
Eli Broad Graduate School of Management
N370 North Business Complex
Michigan State University
East Lansing, MI 48824–1122
Phone: 517.353.6381, Ext. 287
FAX: 517.432.1112
E-Mail: [email protected]
American Marketing Association / Winter 2006
113
POSITIONING STRATEGIES OF FIRMS IN SOUTH AFRICA
Charles Blankson, University of North Texas, Denton
SUMMARY
Positioning is viewed as a relatively new term (Ries
and Trout 1986; Trout 1996) that has evolved from
market segmentation, targeting, and market structure
changes in the 1960’s and the early 1970’s (Myers and
Tauber 1977; Sekhar 1989). Therefore, positioning is,
broadly speaking, inextricably linked with the concept of
segmentation and targeting (Doyle and Saunders 1985;
Bennion 1987; Dibb and Simkin 1991). According to
Arnott (1992, 1993), positioning is a strategic concept
that can be operationalized. It is concerned with the
attempt to modify the tangible characteristics and intangible perceptions of a marketable offering in relation to
competition. The author formally defines positioning as:
“. . . the deliberate, proactive, iterative, process of
defining, measuring, modifying and monitoring consumer perceptions of a marketable object. . . .”
Despite the central role that positioning plays in
modern marketing management and in international
marketing, there appears to be a paucity of positioning
research activities in the Sub Saharan African market
environment. Thus the overall purpose of this paper is to
assess the application of positioning in a Sub-Saharan
African market environment. More specifically, this study
is exploratory and consistent with Radder’s (1996) call
for research into the applicability of conventional marketing paradigms in liberalized market environments, this
research seeks to assess a phenomenon developed and
validated in Western business cultures, i.e., U.K., in an
African economy that is regarded as complex in that it
reflects both First World and Third World economic
status (Morris and Pitt 1993; Ross II 2004). From an
academic point of view, the current study contributes to
the growing body of empirical literature on positioning.
For the purposes of this study and based on availability and convenience, data on advertisements (ads) from
newspapers and a radio station with nation-wide coverage were collected and then content analyzed to detect the
positioning strategies employed by firms in South Africa
(domestic and foreign). The coding procedure was based
on the frequency system. In line with Hugo-Burrows
(2004), only English-based ads were examined and content analyzed. It is important to note that although South
Africa has eleven official languages (i.e., Afrikaans,
English, Ndebele, Northern Sotho, Southern Sotho, Swati,
Tsonga, Tswana, Venda, Xhosa, and Zulu) (see http://
www.gov.za), English-based advertisements are comAmerican Marketing Association / Winter 2006
mon and English language is widely spoken and understood by majority of South Africans.
The content of each form of communication (ads)
was coded using the scale-items of the eight positioning
constructs put forward by Blankson and Kalafatis (2001,
2004) (see Table 1). In line with Pollay’s (1985) and
Martenson’s (1987) method of analysis, and FrankfortNachmias and Nachmias (1996) suggestions, coding was
based on the appearance of any of the scale-items in a
particular communication. In order to ensure reliability
of the results of this research, reproducibility reliability
test was employed. Therefore, following Fay and Currier’s
(1994) methodology, apart from the main researcher,
three student judges were recruited and taught to identify
copy points in the categories that satisfy the meanings set
out in the positioning strategies (see Table 1). Following
the content analysis exercise, the inter-judge reliability
test in our research showed that there was 80 percent (two
judges) and 90 percent (one judge) agreement with the
researcher in the newspaper advertisements. As for the
radio advertisements, the agreement was 80 percent
between the three judges and the researcher. This gave us
a tentative confidence as to the reliability of the result.
Our findings show that in terms of the most popular
positioning strategies pursued by firms (domestic and
foreign) in South Africa in print and radio advertisements, “The brand name” stands out. Tentatively, it is
inferred that there is a lot of emphasis placed upon issues/
tactics aimed at branding activities and competitive positioning. Furthermore, positioning effort in print advertisements (“The brand name,” “Attractiveness,” “Value
for money,” “Top of the range,” “Service,” “Reliability”)
appears to be aiming at the upper-middle class target
audience. However, positioning strategies identified in
radio advertisements (“The brand name,” “Service,”
“Reliability,” “Value for money,” “Attractiveness”) are
rather geared to the mass market and to a degree, middlelower class target market.
Essentially, it can be concluded that the adopted
typology of positioning strategies is relevant for the study
of firms’ positioning activities. Other positioning strategies aimed at portraying the attractiveness, friendly service and affordability, i.e., value for money, is pursued but
only second to the brand name. Firms place less emphasis
on strategies and activities depicting discrimination/
selectivity in segments, i.e., the social class system, and
issues surrounding nationalistic sentiments (see also
Hugo-Burrows 2004). Rather, firms are bent on all other
114
TABLE 1
Typology of Positioning Strategies
•
Top of the range: upper class, top of the range,
status, prestigious, posh.
•
Attractiveness: good aesthetics, attractive, cool,
elegant.
•
Service: impressive service, personal attention,
consider people as important, friendly.
•
Country of origin: patriotism, country of origin.
•
Value for money: reasonable price, value for
money, affordability.
•
The Brand Name: the name of the offering,
leaders in the market, extra features, choice,
wide range.
•
Reliability: durability, warranty, safety, reliability.
•
Selectivity: discriminatory, non-selective, high
principles.
Based on Blankson and Kalafatis (2001, 2004).
activities that will enhance their competitive positions.
This exploratory study is important for academics, marketing practitioners, advertising executives, and policy
makers who are involved and/or interested in the South
African market. More specifically, for academics and
graduate students, this research adds to the body of
knowledge on positioning in Sub Saharan African markets and more specifically, the South African market
environment. Within the context, a newly developed
typology of positioning strategies has been tested in the
international market thus furthering our understanding
and appreciation about positioning activities in other
environments (Domzal and Unger 1987; Johansson and
Thorelli 1990; Morris and Pitt 1993; Abratt and Mofokeng
2001). References available upon request.
For further information contact:
Charles Blankson
Department of Marketing & Logistics
College of Business Administration
University of North Texas
P.O. Box 311396
Denton, TX 76203
Phone: 940.565.3136
E-Mail: [email protected]
American Marketing Association / Winter 2006
115
MEASURING SERVICE CONVENIENCE AND ASSESSING ITS
INFLUENCE ON RETAIL CUSTOMERS
Kathleen Seiders, Boston College, Boston
Glenn B. Voss, University of North Carolina, Chapel Hill
Andrea L. Godfrey, University of Texas at Austin, Austin
Dhruv Grewal, Babson College, Wellesley
SUMMARY
Marketers have acknowledged for two decades a
steady rise in consumer demand for convenience, attributing this trend to a variety of economic and sociocultural
factors. Despite its recognized importance, perceived
convenience has received relatively little explicit attention in the marketing literature, and existing research is
limited in terms of the construct’s conceptualization,
dimensionality and measurement. Overall, the lack of
systematic representation and measurement is problematic because it implies that tests of convenience effects
may lack precision. In our research, we address this issue
by developing and validating a well-defined, multi-dimensional measure of service convenience.
We conceptualized overall convenience as a secondorder construct that consists of five dimensions of customers’ perceptions of the time and effort related to
buying or using a service (Berry, Seiders, and Grewal
2002; Seiders et al. 2005). These include decision, access,
benefit, transaction, and post-transaction convenience.
We followed well-established scale development procedures to develop a distinctive, multiple item instrument to
measure customers’ perceived service convenience. We
began by using an exploratory study to gain insight into
how consumers express their attitudes about the different
dimensions of service convenience. Our next step was to
generate a set of items. To purify our scale items, we
conducted an exploratory pretest that involved asking an
expert panel of 20 marketing scholars and professionals
to complete a questionnaire that incorporated the initial
set of items. Next, we performed a formal pretest, administered to three undergraduate business classes. Based on
the analysis of the 119 collected questionnaires, we made
final modifications to the wording of some measures and
to the questionnaire format. The refined scale was included in a questionnaire mailed to a national sample
comprising customers of a specialty retail chain with
approximately 100 North American locations in all major
geographic regions.
Using responses from the specialty retailer sample
(n = 950), we performed several tests to evaluate the
performance of the 17-item service convenience scale.
American Marketing Association / Winter 2006
We used confirmatory factor analysis to assess the latent
structure, internal consistency, and reliability of the latent construct scales. The results of the confirmatory
factor analysis support our conceptualization of a multiitem scale measuring five dimensions of service convenience as well as the reliability and internal and external
consistency of the scales. To test for convergent validity,
we correlated the 17-item scale with a dissimilar measure
of service quality that assessed the extent to which the
service provider “offers excellent overall service quality.”
The correlation between the two supports the convergent
validity of the service convenience scale. We also assessed
whether the measurement model satisfied two conditions
that provide evidence of discriminant validity: the confidence interval for each pairwise correlation estimate (i.e.,
+/- two standard errors) does not include the value of one,
and for every pair of factors, the χ2 value for a measurement model that constrains their correlation to equal one
is significantly greater than the χ2 value for the model that
does not impose such a constraint. In each case, these tests
support the discriminant validity of the constructs, leading us to conclude that our scales measured distinct
dimensions of convenience.
We tested for nomological validation of the convenience measure by examining its relationship to additional constructs representing antecedents, consequential
effects and moderating effects of service convenience (see
Tian, Bearden, and Hunter 2001). Results of tests of
antecedents of service convenience indicate that the service environment and time pressure positively impact
customers’ perceptions of all five dimensions of service
convenience. Customers’ perceptions of brand equity
positively impact perceived transaction convenience but
negatively impact access convenience. Customers’ experience returning items negatively impacts their perceptions of transaction and benefit convenience but does not
significantly impact other dimensions of service convenience. Results of tests of outcomes of service convenience indicate that customers’ perceptions of decision,
transaction, benefit, and post-benefit convenience positively impact their satisfaction with the service provider
while perceived access convenience does not significantly
affect this evaluation. However, access convenience moderates the impact of customer satisfaction on repurchase
116
visits with the service provider. In summary, an examination of the correlations for antecedent effects, outcome
effects, and moderating effects generally supports the
nomological validity of the scales.
The findings of this study successfully validate a
well-defined, multi-dimensional service convenience scale
that can aid future research by helping to ensure more
consistent conceptualization and measurement of the
construct. Our research results suggest that managers
should measure customer perceptions of convenience by
capturing the individual convenience dimensions, as
each represents an integral aspect of a service offering.
References available upon request.
For further information contact:
Kathleen Seiders
Boston College
Fulton Hall
140 Commonwealth Ave.
Chestnut Hill, MA 02467–3961
Phone: 617.552.0425
E-Mail: [email protected]
American Marketing Association / Winter 2006
117
BEHAVIORAL AND MONETARY EFFECTS OF POSITIVE AND
NEGATIVE CAPACITY-DRIVEN SERVICE EXPERIENCES: WHY
REVENUE MANAGEMENT SYSTEMS ARE DUE FOR CHANGE
Florian v. Wangenheim, University of Dortmund, Germany
Tomás Bayón, International University in Germany, Germany
SUMMARY
In many service industries, it is necessary to overbook
capacity because not all ticket or reservation holders
actually show up. Airlines for example sell more tickets
than there are seats on the aircraft, and hotels often sell
more beds than available. Such practices imply that
sometimes the firm may not be able to fulfill all customer
demands because of less “no-shows” than expected (e.g.,
resulting in downgrades or denied boardings). At other
times, it may be in the position to offer some customers
higher value services than those originally purchased
(e.g., upgrades). Drawing from the literature on service
failures and the expectancy-disconfirmation paradigm,
one would expect changes in customers’ behavior to
happen as a result of these forms of (dis)services. Revenue
management systems do however not account for them
(e.g., McGill and van Ryzin 1999). Obviously, designers
either seem to assume that serious changes of customer
behavior upon receiving a capacity driven (dis)service do
not exist, or that if at all happening, changes have no
significant monetary effects. One reason for this may be
that product, not customer based revenue and profit
maximization prevails to be the dominant logic with most
revenue managers. Another reason could be that scholarly research in the area of customer-firm interaction
response measurement has not yet shown striking results
in demonstrating the existence and strength of these
effects.
The objective of this paper is to shed light on this
issue by demonstrating the longer-term behavioral and
monetary effects of capacity driven (dis)services such as
upgrades, downgrades and denied boardings for a major
European airline. The analysis is based on time series
transaction data for 330,000 airline customers for the
REFERENCES
Heckman, James and Salvador Navarro-Lozano (2004),
“Using Matching, Instrumental Variables, and Control Functions to Estimate Economic Choice Models,” The Review of Economics and Statistics, 86,
30–57.
American Marketing Association / Winter 2006
time frame from January 2000 to March 2004, of which
1.500 received capacity driven (dis)services during the
selected period from January to June 2002. Methodologically, the paper employs the method of Propensity Score
Matching (e.g., Heckman and Navarro-Lozano 2004), a
technique recently suggested in econometrics to account
for the fact that the “treatments” analyzed do not happen
at random (as in our case where the likelihood for
receiving an upgrade, downgrade or getting boarding
denied increases with increased flying).
Our results show that customers that have received
negative “treatments” (i.e., downgrading or denied boarding) decrease their transaction behavior and customers
that have received positive treatments (i.e., upgrading)
increase it in comparison to customers of the same
behavioral and socio-demographic profiles. Furthermore,
the results show that in line with Prospect Theory (e.g.,
Kahneman and Tversky 1979; Tversky and Kahneman
1991) and Memory Accessibility Theory (e.g., Mittal
et al. 1998), negative capacity driven treatments have
stronger and more persistent effects than positive treatments. Thus, our study clearly points towards a change in
revenue management practices prevalent in service industries with perishable capacity.
The paper contributes to a more interdisciplinary
view towards service management. It demonstrates that
corporate goals can only be achieved if research results
from one discipline, e.g., marketing, are taken into account by the other, e.g., operations management. Operationally, it helps service marketing managers to stress
their argument towards implementing customer equity
management and customer based accounting for increasing shareholder value.
Kahneman, Daniel and Amos Tversky (1979), “Prospect
Theory: Ana Analysis of Decision Making Under
Risk,” Econometrica, 47, 263–91.
McGill, Jeff and Garrett van Ryzin (1999), “Revenue
Management: Research Overview and Prospects,”
Management Science, 33, 233–56.
Mittal, Vikas and Wagner A. Kamakura (2001), “Satis118
faction, Repurchase Intent, and Repurchase Behavior: Investigating the Moderating Effect of Customer
Characteristics,” Journal of Marketing Research,
38, 131–42.
Tversky, Amos and Daniel Kahneman (1992), “Advances in Prospect Theory: Cumulative Representation of Uncertainty,” Journal of Risk and Uncertainty, 5, 297–323.
For further information contact:
Florian v. Wangenheim
University of Dortmund
Otto-Hahn-Str. 6
44227 Dortmund
Germany
Phone: +49.231.7554611
FAX: +49.231.7555254
E-Mail: [email protected]
American Marketing Association / Winter 2006
119
THE SALESPERSON-CUSTOMER INTERFACE: HOW
SALESPEOPLE’S JOB ATTITUDES AND BEHAVIORS
INFLUENCE CUSTOMER RELATIONSHIPS
Jane Zhen Cai, Drexel University, Philadelphia
SUMMARY
It is well established that firms that focus on building
and maintaining customer relationships are better positioned to achieve long-term success (Deshpande, Farley,
and Webster 1993; Narver and Slater 1990). As “boundary spanners,” salespeople are the organization’s primary
means of communication with customers (Cannon and
Perreault 1999; Sharma et al. 1999; Speier and Venkatesh
2002), and they express their company’s goodwill toward
customers through their own conduct and behavior
(Beverland 2001). As Rust, Zahorik, and Keiningham
(1996) noted, the “personal interaction component of
services is often a primary determinant of the customer
overall satisfaction.” Therefore, developing a strong salesperson-customer relationship is the first step toward
building a successful customer-organization relationship.
Despite the augmented attention drawn to the prominent role of salespeople in forming relationships with
customers, most of the research on salespeople attitudes
and behaviors has focused on their intra-organizational
consequences, such as turnover (Chen, Hui, and Sego
1998; MacKenzie, Podsakoff, and Ahearne 1998). As
salespeople are involved in frequent contact with customers, both of their job attitudes and interaction behaviors
should directly affect customers’ perceptions of relationship quality. However, there seems to be limited research
effort directed at examining the impact of a salesperson’s
job attitudes and interaction behaviors on the customers.
To fill this gap in research and stimulate additional
studies toward this direction, a conceptual model is
proposed that incorporates job attitudes (customer orientation, job satisfaction, and organizational commitment),
interaction behaviors (in-role behavior and extra-role
behavior), and customer responses (customer satisfaction
and trust in the salesperson).
Customer orientation was first conceptualized as a
behavioral construct by Saxe and Weitz (1982) and
follow-up studies have mostly examined customer orientation in behavioral terms (Cravens et al. 1993; Goff et al.
1997; Humphreys and Williams 1996). Later, Brown
et al. redefined customer orientation as a “tendency or
predisposition to meet customer needs” (2002, p. 111).
Building upon both lines of research, we propose that
customer orientation is better positioned as an attitude
American Marketing Association / Winter 2006
that stems from both personality traits and environmental
influences. Along with job satisfaction and organizational commitment, customer orientation is another job
attitude held by salespeople that directly affects
salespeople’s job performance.
Although interest in salespeople’s extra-role behavior has increased greatly due to its special importance in
the field of services marketing (Bell and Menguc 2002;
MacKenzie, Podsakoff, and Ahearne 1998), most of the
research has focused on extra-role behavior effect on
supervisors, co-workers, and the organization, and neglected the influence it may have on the customers.
Customers can perceive salespeople extra-role behavior
in two ways. One is to perceive salespeople’s helpful
behavior toward the organization or their coworkers. The
other is to become recipients of extra-role behavior and
appreciate the “pleasant surprise” such behavior brings to
them. In our model, we put extral-role behavior in the
context of salesperson-customer interaction and theorize
its impact on customer relationship maintenance.
Drawing upon theory of emotional contagion, we
postulate that salespeople job attitudes have a direct effect
on customer responses. Specifically, we propose that the
three job attitudes positively affect customer satisfaction
and trust in the salespeople. In addition, there is an
indirect influence of the three job attitudes on customer
responses through salespeople’s in-role behavior and
extra-role behavior. That is, salespeople’s job attitudes
positively affect salespeople’s in-role and extra-role behavior, and sequentially in-role and extra-role behaviors
positively affect customer satisfaction and trust in salespeople.
In sum, our main contribution to the marketing
literature lies in developing a new model on salespersoncustomer interaction. It advances our knowledge in relationship marketing by explicating how a number of
relationship-building constructs are related, and shed
light on how salespeople’s job attitudes and behaviors
would impact customers’ perception of relationship quality. Future research could work on possible moderators
that affect the proposed relationships. Additionally, the
effects of customer responses to salespeople job attitudes
and behaviors may be an interesting topic as well. References available upon request.
120
For further information contact:
Jane Zhen Cai
Bennett S. Lebow College of Business
Drexel University
32nd and Chestnut Streets
Philadelphia, PA 19104
Phone: 215.895.2145
FAX: 215.895.6975
E-Mail: [email protected]
American Marketing Association / Winter 2006
121
THE ROLE OF VIRTUAL COMMUNITIES AS SHOPPING
REFERENCE GROUPS
Iryna Pentina, University of North Texas, Denton
SUMMARY
It has been estimated that 84 percent of U.S. Internet
users (close to 100 million people) belong to virtual
communities, including professional associations, hobby
groups, political organizations, and entertainment communities (Pew Internet 2005). The interest of marketing
professionals and scholars in virtual communities is
caused primarily by their potential to affect sales by
spreading electronic word of mouth (Hennig-Thurau
et al. 2004), serving as self-selected highly specialized
target markets, and being valuable sources of information
about trends, preferences, and new product ideas (Muniz
and O’Guinn 2001). Other possible effects of virtual
communities are related to their social nature, and include adding interactivity to electronic storefronts to
increase their attraction to recreational shoppers
(Bhatnagar and Ghose 2004), and serving as reference
groups that can influence their members’ shopping preferences.
The existing literature on reference group influence
in consumer behavior context mostly deals with face-toface direct membership groups interacting on a regular
basis (Brinberg and Plimpton 1986), and with socially
distant (aspiration) groups that do not readily provide
opportunity for interaction (Cocanougher and Bruce 1971).
Research on the role of virtual communities as shopping
reference groups has been practically nonexistent. However, due to their increasing presence and expanding
membership they hold a strong potential for marketing,
and therefore deserve close attention. Such characteristics of virtual groups as open, non-discriminatory participation, possibility of anonymity, and low visibility of
product usage suggest that the role of virtual communities
in affecting their members’ shopping decisions may
employ mechanisms of influence that are different from
those of other reference groups, thus making these mechanisms an interesting object of study.
This paper proposes and empirically tests the model
of social influence on individual shopping preferences in
the context of virtual communities. We utilize the social
identity theory (Tajfel 1978; Ellemers, Kortekaas, and
Ouwerkerk 1999), normative influence research (Postmes,
Spears, and Lea 2000), and the concept of susceptibility
to reference group influences (Bearden and Etzel 1982) to
suggest that virtual communities influence their members’ shopping preferences through the mechanism of
social identification and internalization of group norms.
American Marketing Association / Winter 2006
We propose that the degree of social identification and
norms internalization, in turn, is determined by members’ dominant motivations to join the community. Susceptibility to virtual community influence, as an attitude
towards buying behavior formed under the influence of
identification with the virtual group and internalization
of its norms, is proposed to mediate the relationship
between social identity and buying behavior.
Our results show that joining the community with the
socially-oriented goals leads to stronger identification
with the community and internalization of its norms and
values. On the contrary, dominant motivations that do not
assume long-term social involvement (purposive, entertainment, status enhancement, or transactional), do not
lead to identifying oneself with virtual community, and
only in the case of transactional motivation increase one’s
internalization of the community’s rules and norms. Our
results supported Ellemers et al.’s (1999) claims that
three dimensions of social identity are affected differentially by the context. In our sample purposive (informational) motivation was negatively related to cognitive
social identity (probably indicating that the individual
may consider the virtual community members who provide help in problem solving as more competent and
willing to contribute than him/herself), and unrelated to
evaluative and affective components. Similarly, status
enhancement motivation was negatively related to evaluative social identity (indicating that individuals who want
to manipulate others for personal benefit do not hold them
in high esteem), and unrelated to cognitive or affective
components. Finally, entertainment and transactional
motivations were positively related to affective component of social identity, showing that positive experiences
in dealing with other members make one like the group
and want to continue participating in it. We suggested
and confirmed that cognitive self-identification in terms
of the community membership, affective commitment,
and positive evaluation of the community, as well as
internalization of its norms, will increase the likelihood
of virtual community’s influence on members’ buying
choices within the area of virtual community’s expertise
by raising susceptibility to the community’s influence.
Our findings suggest that virtual communities that
can fulfill their members’ social needs, have a higher
potential to influence members’ shopping preferences,
and may present more value for businesses than communities that are more formalized, less interactive, and do
not provide opportunities for relationship formation.
122
FIGURE 1
A Conceptual Model of Virtual Community Influence on
Members’ Buying Choices
Businesses will benefit by upgrading their websites to
have more interactive interests-centered chat-rooms moderated by experts and encouraging opinion-sharing, exchange of ideas and information, and engaging in product-related discussions. These practices will not only
generate valuable information, but will also help develop
loyal visitors, and potentially, customers. Our unexpected
findings of positive relationship between entertainment
and transactional motivations with affective social identity suggest that by creating positive experiences for those
who do not initially intend to socialize can help create
commitment to participating in the community, and
consequently develop desires to identify more strongly
with the community, and accept it as a reference in
shopping decisions. This means that developing attractive entertainment and trading websites that offer discussion and socializing opportunities may also help businesses cultivate loyal customers.
This study made a valuable contribution to understanding the social mechanisms at work within virtual
communities. It has proposed a new construct of dominant motivation to join virtual communities, which inte-
grates social psychology approach with the media uses
and gratifications paradigm. It has confirmed the role of
this construct in explaining the degree of social identification and norms internalization within a community,
and suggested that in the absence of regular reference
group comparative and normative shopping influences,
and under reduced conspicuousness of consumption, the
influence of virtual communities on their members’ shopping choices is exercised through the mechanism of social
identification. Our results have a potential to stimulate
interest in the area of social processes in cyberspace. They
call for more research in the area of virtual community
influence using existing social and group development
theories. For example, norms formation and influence,
the effects of anonymity on social identity, and distinctive
power structures in the context of virtual communities
represent interest for future research. Such issues as
moderating influence of virtual group characteristics
(e.g., size, prestige, expertise, source credibility), members’ demographic characteristics, type of product choices
amenable to virtual group influences, indicate a fruitful
direction for further research as well. References are
available upon request.
For further information contact:
Iryna Pentina
Department of Marketing and Logistics
University of North Texas
P.O. Box 311396
Denton, TX 76203–7231
Phone: 940.565.3174
FAX: 940.381.2374
E-Mail: [email protected]
American Marketing Association / Winter 2006
123
GUILT AND GIVING: A PROCESS MODEL OF EMPATHY
AND EFFICACY
Debra Z. Basil, University of Lethbridge, Lethbridge
Nancy M. Ridgway, University of Richmond, Richmond
Michael D. Basil, University of Lethbridge, Lethbridge
SUMMARY
This research examines consumer response to guilt
appeals. Guilt appeals are used heavily by charities and
health-related products and have been shown to be an
effective tool for influencing consumer behavior (Humann
and Brotherton 1997; Bennett 1998). However several
studies have found that high levels of guilt may lead to
reactance and counterarguing, thus discouraging the
desired behavior (e.g., Coulter and Pinto 1995).
The nature of guilt represented in guilt appeals is
anticipatory (Huhmann and Brotherton 1997), because
the individual anticipates feeling guilty for failing to act,
but the guilt has not yet occurred. Fear and anticipatory
guilt share several similarities. Both are negative emotions that focus on avoiding some undesirable future
outcome. As such, research regarding fear appeals may
help us to more effectively understand guilt appeals.
Witte’s (1992) Extended Parallel Process Model (EPPM),
which is a fear appeal model, is used as a foundation to
develop a model of response to guilt appeals. Two concepts are central to this model: threat and efficacy. The
individual must perceive a severe threat and feel susceptible to the threat. Next, a sense of efficacy leads to
adaptive responses, whereas a lack of efficacy leads to
maladaptive responses.
The EPPM suggests that a threat must be perceived
in order to generate the desired response. In the case of
guilt appeals, the threat at hand is often something that
will happen to another rather than to oneself. It may be
necessary, then, to personalize this threat for the message
receiver. Petty and Cacioppo’s (1986) Elaboration Likelihood Model demonstrates that individuals will more
actively process information when it is personally relevant to them. By inducing empathy we can enhance
personal relevance. Empathy involves encouraging a
person to view a situation from the other’s perspective, in
essence imagining what it would be like to be “in the other
person’s shoes.” The inclusion of empathy in a guilt
oriented charity appeal then should serve the function of
creating a sense of need to act that is parallel to the sense
of threat proposed in the EPPM model for fear appeals.
American Marketing Association / Winter 2006
In our society, there is a socialized norm of helping
the less fortunate (Mead 1985). Violating social norms
can lead to a sense of guilt. The more personally relevant
the norm, the more guilt a person should feel if she/he
violates it. As such, empathy may operate through one’s
sense of guilt, such that helping behavior is motivated by
a desire to reduce one’s anticipated guilt. This suggests
that the effect of empathy on charitable donation intention
will be at least partially mediated by guilt.
The second key element within the EPPM is efficacy.
To the extent that an individual feels she/he can easily
perform the advocated behavior (self-efficacy), the individual is more likely to comply in order to avoid feeling
guilty. If self-efficacy is lacking, however, the individual
may engage in maladaptive responses as a protective
measure to avoid feelings of guilt. This suggests that selfefficacy should lead to anticipatory guilt, and the effect of
self-efficacy on charitable donation intention will be at
least partially mediated by anticipatory guilt.
Specifically, high levels of empathy and self-efficacy
will lead to anticipatory guilt, which will increase donation intention. Low levels of empathy and self-efficacy
will lead to maladaptive responses, which will decrease
donation intention. The effect of empathy and self-efficacy, then, will be at least partially mediated by maladaptive responses as well.
A controlled experiment was conducted to test the
proposed hypotheses. The experiment was conducted online with 1,049 participants recruited from Zoomerang’s
research panel. The panel was nationally representative
on age, income, and gender.
Participants viewed a manipulated charity appeal
and responded to a questionnaire. Empathy and selfefficacy were manipulated in a fully crossed design. Guilt,
maladaptive responses and donation intention were measured.
The results indicated that the effect of empathy on
charitable donations was fully mediated by anticipatory
guilt. Self-efficacy was partially mediated by anticipatory
guilt. The effect of empathy on maladaptive responses
124
was again fully mediated by anticipatory guilt, but only a
small mediation effect was evident for self-efficacy.
charitable donations. Anticipatory guilt also impacts the
role of self-efficacy, but to a lesser degree. References
available upon request.
These results suggest that anticipatory guilt plays an
important role in determining the impact of empathy on
For further information contact:
Debra Z. Basil
University of Lethbridge
4401 University Drive
Lethbridge, Alberta T1K 3M4
Canada
Phone: 403.329.2164
FAX: 403.329.2038
E-Mail: [email protected]
American Marketing Association / Winter 2006
125
CONSUMER EMBARRASSMENT AND ITS
BEHAVIORAL CONSEQUENCES
King-Yin Wong, The Chinese University of Hong Kong, Hong Kong
SUMMARY
Embarrassment can be easily recognized across a
variety of consumer behavior contexts. Admittedly, consumer embarrassment is a pervasive and important phenomenon. Yet little research has been working on it.
What the behavioral consequences consumer embarrassment leads to is a question remains unanswered if not
untouched. To fill the gap, the objective of this study is to
examine the behavioral consequences of consumer embarrassment. In this study, embarrassment is distinguished into two forms (anticipated vs. felt). It is proposed
to incorporate these two distinct forms of consumer
embarrassment into the well-proven framework of regulatory focus theory.
Literature Review
Embarrassment. Although both anticipated and felt
embarrassment arise from events that increase the threat
of negative evaluations from the others, these two states
are quite different and should not be confused. Since
people have a strong desire to avoid embarrassment, it is
contended that anticipated embarrassment leads to a
dread of embarrassment, which is an anticipatory anxiety. This kind of fear of embarrassment precedes and
anticipates the events that will damage a person’s desired
identity. This state of fear of embarrassment is probably
a blend of apprehension and excitement that is akin to
shyness while the state of felt embarrassment is a mixed
feeling of surprise, exposure, fluster, and chagrin (Miller
2001).
Regulatory Focus Theory. According to regulatory
focus theory, individuals with a promotion focus are
inclined to strategically approach matches to desired endstates (and mismatches to undesired end-states) while
those with a prevention focus are inclined to strategically
avoid mismatches to desire end-states (and matches to
undesired end-states).
Theoretical Framework
According to regulatory focus theory, promotion and
prevention focus can be induced by Gain/Non-gain and
Non-loss/Loss situations respectively (Higgins 1997,
1998). It is believed that anticipated embarrassment
resembles a non-loss/loss situation while felt embarrassment resembles a gain/non-gain situation.
American Marketing Association / Winter 2006
When people anticipate embarrassment, there is an
increased likelihood that they will fail in their selfpresentation and lose face (Edelmann 1987). Thus, anticipating embarrassment, people are like facing a nonloss/loss situation (i.e., not losing face or losing face). On
the other hand, people have a general motive to seek social
approval once embarrassed (Miller 1996). Embarrassed
people concern about regaining the lost face and restoring
the desired public images. Thus, feeling embarrassed,
people are like facing a gain/non-gain situation (i.e.,
regaining lost face or not regaining lost face).
Based on the above speculations, a proposed conceptual framework is shown in Figure 1.
As depicted in Figure 1, anticipated (felt) embarrassment prompts prevention (promotion) focus resulting
greater sensitivity to presence or absence of negative
(positive) outcomes, avoidance (approach) strategic inclinations and tendency to insure correct rejections and
against errors of commission (insure hits and against
errors of omission). Specifically, it is proposed that
individuals with anticipated (felt) embarrassment are
more persuaded by prevention-framed (promotion-framed)
information.
Theoretical and Managerial Implications
By incorporating consumer embarrassment into the
well-proven framework of regulatory focus theory, it
seems that the behavioral consequences of consumer
embarrassment can be investigated in a promising direction by considering the differences between prevention
focus and promotion focus.
Practically, the distinction of consumer embarrassment may aid the marketers to attract consumers who
suffer from this pervasive but aversive emotion. For
example, when marketing sensitive products such as
condoms, prevention-framed message like “prevent you
from the dangers of getting AIDS” may appear more
persuasive when consumers are at the state of anticipated
embarrassment while promotion-framed message like
“promote a caring relationship between you and your
partner” may appear more persuasive when consumers
are at the state of felt embarrassment. References available upon request
126
FIGURE 1
Proposed Conceptual Framework Incorporating Anticipated and
Felt Embarrassment Into Regulatory Focus Theory
For further information contact:
King-Yin Wong
Department of Marketing
The Chinese University of Hong Kong
Shatin
Hong Kong
Phone: 852.26097808
FAX: 852.26035473
E-Mail: [email protected]
American Marketing Association / Winter 2006
127
MARKETING STRATEGY FORMULATION AND THE
COMMERCIALIZATION OF NEW TECHNOLOGIES:
A NETWORK PERSPECTIVE1
Leslie H. Vincent, University of Kentucky, Lexington
SUMMARY
Innovation is a key driver of the U.S. economy. In
fact, economists estimate that half of the growth in the
United States GDP over the last 50 years is a direct result
of innovation (National Innovation Initiative Report 2004).
However, the nature of innovation is changing. Innovation is becoming multidisciplinary and technologically
complex and occurs at the intersection of different fields.
Successful innovation requires collaboration and cooperation among scientists, engineers, and other business
units. Furthermore, it is no longer older established
organizations that are developing the major breakthrough
innovations. Rather it is small businesses and start-ups
that are pushing the innovation frontier forward. In fact,
small firms are more likely to invest in radical innovations, and in particular, innovations that are based on
scientific research. The result from these investments
mean that small firms and start-ups are developing the
innovations that are technically important and found to be
among the top on percent of high-impact innovations
(Small Business Administration Report 2003).
However, while small businesses do account for the
majority of high tech innovations developed, the path to
commercialization is not always easy. Despite the astounding number of new ventures being created, the
percentage of those actually succeeding in their commercialization efforts is relatively small (only 30% survive
their first 5 years in business). Perhaps one of the most
cited reasons behind this high failure rate is a lack of
planning or direction for the venture (i.e., no clear
strategy). Moreover, high technology start-ups are particularly prone to this failure because they are focused on
the technology and tend to ignore the market
(www.glocalvantage.com).
Past research regarding innovation has focused primarily on innovation that occurs within well established
organizations. Very little systematic research has attempted to understand how technological innovations are
commercialized outside traditional organizational settings. Given how pervasive start-up activities are in our
economy and there importance in pushing technology
into the marketplace, there is a real need to evaluate how
innovations generated outside of the organizational setting are commercialized. How do inventors of new tech-
American Marketing Association / Winter 2006
nologies determine their strategy to market? While marketing strategies are recognized as being of vital importance to organizations, very little research has addressed
how marketing strategies are actually formulated, and in
particular how marketing strategies are developed for
breakthrough technologies that may not occur within a
traditional organizational context. The sample for this
research comes from a unique panel of university prestartup teams focusing on the commercialization of new
technologies.
Using a dynamic capabilities framework built upon
the Resource-Based view of the firm, the role of internal
and external capabilities in driving marketing strategy
effectiveness for university inventions is explored. The
key to building a conceptual framework based upon the
dynamic capabilities perspective is to identify the building blocks upon which competitive advantages can be
formed, sustained, and improved. One such foundation is
considered to be that of effective knowledge transfer.
These technologies are developed outside of the organization; teams do not have access to well-established resources like those available within organizations. What
the teams do have is novel technology and access to
information. Past research has demonstrated that network ties provide access to information that can be
beneficial to performance outcomes (Tsai and Ghoshal
1998; Tsai 2001). Therefore, the focus of this research is
on the role of network ties in fostering effective marketing
strategy formulation for the commercialization of new
technologies.
The objective of this research is to address the
following gaps in the marketing strategy literature. First,
very little empirical research has focused on the formation
of marketing strategies outside traditional organizational
boundaries. Secondly, this study focuses on the unique
challenges of effective marketing strategy formation for
new technologies, including technologies that may have
been developed without a target market in mind. Finally,
this paper is able to examine for formation of marketing
strategies over time using a panel of prestart-up teams
that stay in tact over a period of two years. More specifically, the objective of this research is to address the
following questions: (1) What impact do market and
technical network ties have on the effective development
of marketing strategies? and (2) Does obtaining market
128
information early on in the commercialization process
pay off in terms of the ability to effectively formulate
marketing strategies?
This study surveys approximately 20 pre-startup
teams multiple times throughout their participation in the
program. In addition, objective outcome measures for
marketing strategy effectiveness will be collected from
outside industry experts and team supervisors. The longitudinal panel data is analyzed using random effects
modeling to account for the dependencies inherent to
panel data. Results indicate that market and technical ties
do have a differential impact on marketing strategy
formulation efforts. Furthermore, the strength of these
ties also impacts the team’s ability to formulate clear and
comprehensive strategies. For example, the results of this
study suggest that perhaps when collecting information
related to the market, having access to nonredundant
information (weak ties) is a better predictor of effective
marketing strategy formation than having increased
knowledge transfer of redundant information (strong
ties). This research was also able to address questions
regarding the timing of market information. Does it
always pay off to gather information relating to the
market application of the technology early on? Results
found that early does not always mean better.
There has been very little empirical research on the
formation of strategies at the team level and furthermore,
even less research examining the formation of strategies
for technologies that were developed outside traditional
organizational boundaries and without a predefined market application. Overall, this research will not only contribute significantly to the current innovation and marketing strategy literature, but will also open up new avenues
of research in marketing entrepreneurship.
ENDNOTE
1
This research is funded by NSF IGERT-0221600.
For further information contact:
Leslie H. Vincent
University of Kentucky
455T Gatton Business and Economics Building
Lexington, KY 40506
Phone: 859.257.2491
FAX: 859.257.3577
E-Mail: [email protected]
American Marketing Association / Winter 2006
129
INSTITUTIONAL DYNAMICS AND INNOVATION: LESSON LEARNED
FROM THE OPEN SOURCE SOFTWARE INDUSTRY
Tanawat Hirunyawipada, University of North Texas, Denton
SUMMARY
Microsoft Windows has dominated operating system
software (OS) in a global personal computer market while
UNIX and Windows NT have governed the small to big
enterprise server OS markets. These key players do not
allow voluntary software developers to access their source
codes and make the modification of program attributes
and features unattainable. The closed-source system and
limited number of OS dictated the ways the users process
their works as well as limited their interactive contribution to the development of the software. The existing OSs
have directed the work procedure as well as specified the
features of executable software that run on their platforms. It appeared that a few operating systems regulated
the practice and standard of industry, and thus instituted
the institution among all levels of their users.
Linux community was established from the collaborative network of several groups of voluntary software
developers who had been aware of or striding for the new
OS that could fulfill their requirements and that encompassed flexible platform to advance its future features and
attributes. This collaborative community, though voluntary, was objectively built to deliver innovation of the OS.
The Linux open source model has engaged co-developers
through collaborative network to make innovation consistently and continuously evolve. Permitting programmers on the Internet to cooperate and freely modify Linux
source code, adapting it, and fixing possible program
bugs engenders software innovation to grow more rapidly
(Sawhney and Prandelli 2000). Linux emerged to challenge the established standard and practices (or the
institution established by the existing OSs) by questioning their contagion of legitimacy. This has been a source
of pressure on the institutionalized norm and practice in
the existing OSs. Challenging the legitimacy of pragmatic value is the beginning of deinstitutionalization of
the existing institution (Scott 2001). Various levels of
voluntary Linux developers’ engagement comply with
the collaborative network and the legitimacy of pragmatic
value in the diffusion process while the continuously
evolving innovation from the Linux community evi-
American Marketing Association / Winter 2006
dences the reinstitutionalization (Greenwood, Suddaby,
and Hinings 2002).
Emerging Linux institution is the relatively, widely
diffused practices and technologies that have become
entrenched in the sense that it is costly to choose the other
practices and technologies when pragmatic value and
investment are taken into consideration. The deinstitutionalization pressures i.e., functional, political, and social pressures as well as voluntary Linux developers’
personal traits, their perception toward the Linux community, and their incumbency in computer may serve as
the pragmatic motives determining the degree to which
they engage in this collaborative community. The voluntary Linux developers who highly engage in the Linux
community tend to have positive cognitive response and
positive attitude toward Linux, and thus enhance their
willingness to adopt and advocate related others to adopt
Linux.
New products have been created in the close system
of which the reciprocal process is unlikely to dominate the
development procedure (Brown and Eisenhardt 1995).
The lesson learned from the Linux development community is just the beginnings of a new approach to collaboration for innovation development. The emergence of the
Linux community to produce, as their proponents claim,
superior software seems to be a call for a revisit of the
traditional approach to innovation. The main thrust of
Linux philosophy is to disaggregate between scientific
knowledge and commercial knowledge. Source code is
considered scientific knowledge that should be distributed without expense while add-on features and applications may be commercially distributed (Ousterhout 1999).
The success of Linux is driven by the technical decision
to allow other voluntary software developers to contribute; thus extending innovation in the way that a single
person, group or team can participate in the software
development while its core function has been preserved
(O’Reilly 1999). Challenge for future research is perhaps
to understand how to apply the approach of semi close, or
semi open system to accomplish the cooperative development for innovation.
130
For further information contact:
Tanawat Hirunyawipada
University of North Texas
P.O. Box 311396
Denton, TX 76203
Phone: 940.565.3120
FAX: 940.565.3837
E-Mail: [email protected]
American Marketing Association / Winter 2006
131
VOICES FROM THE FIELD: HOW EXCEPTIONAL ELECTRONIC
INDUSTRIAL INNOVATORS INNOVATE
Abbie Griffin, University of Illinois at Urbana–Champaign, Champaign
Raymond L. Price, University of Illinois at Urbana–Champaign, Champaign
Matt Maloney, Mars and Company, Chicago
Edward W. Sim, University of Illinois at Urbana–Champaign, Champaign
Bruce A. Vojak, University of Illinois at Urbana–Champaign, Champaign
ABSTRACT
This exploratory research uses in-depth qualitative
interviews to investigate how eleven exceptional innovators in the electronics industry initiated, created, and
commercialized radical innovations in their firms. From
the data, six themes emerge as to how they innovate.
INTRODUCTION
New product development is the lifeblood of high
technology companies, critical to their ongoing growth.
The more radically innovative new products are, while
still solving critical customer problems, the more likely
these new products are to succeed in the market (Cooper
1984). Some breakthrough products result from formal
technology development programs, which are set up with
goals specifically to achieve radical innovation. Other
radical innovations are found serendipitously. Whether
planned or serendipitous, breakthrough technology-based
innovations are made (and identified) by individuals,
albeit frequently in the context of working in an organizational setting. Someone has to create the innovation,
have the insight to see its utility, and sell that utility into
the organization. If firms could understand how these
exceptional innovators develop and work, they might be
able to capitalize on their outputs more effectively.
The creativity literature previously has used case
study approaches to investigate how highly creative individuals develop and create. Gardner (1993) developed a
framework of consistent patterns creators used based on
in-depth studies of seven highly creative individuals,
each one exemplifying at least one of the seven intelligences. The outcome of this study was a framework in the
form of a description of the “Exemplary Creator,” including aspects of personality, how they developed, how they
worked, and how they related to the context of the
domains in which they worked.
While representing very different domains of creativity, allowing some generalizations to be made, the
sample has characteristics that limit the utility of the
results. The most limiting element is that each of these
American Marketing Association / Winter 2006
creators created as an individual. None worked in an
organization where the creation had to be moved through
the organization’s implementation process for it to be a
success.
In a manner similar to Gardners (1993), the research
reported here investigates “hero scientists,” in the domain of the electronics industry – individuals who have
been responsible for creating breakthrough electronic
technologies. The unit of analysis is the exceptional
industrial innovator. The result is an in-depth framework
describing a theory about how innovators in organizations approach and execute exceptional innovation.
LITERATURE REVIEW
New Product Development and Radical Innovation
Much of the product development research in the last
15–20 years has taken the perspective that NPD could be
managed like any other (complex) process of the firm.
The underlying assumption is that standard methods and
protocols could be put into place and individuals and
teams could follow the process to commercialize repeatably
a stream of successful new products. Researchers have
striven to develop institutionally supported frameworks
of procedures and methods that allow any product development team to take an idea from concept through
commercialization. That is, the field has worked to
change the “art” of individual-based product development to the “science” or process of product development
(Griffin 1997).
However, the process view of NPD and research on
NPD processes starts after invention, or after the creative
idea has been generated and fleshed out into a concrete
concept. These formal processes assume that a concept
already exists (Griffin 1997). This time before there is a
well-formed concept, the “Fuzzy Front End,” or FFE
(Smith and Reinertsen 1992), is the messy “getting
started” period preceding the more formal NPD process.
It is where creative ideas are generated, customer needs
are understood and needs are creatively translated to
technical possibilities (Belliveau et al. 2002). Khurana
132
and Rosenthal (1997) studied how 11 companies handle
the FFE. However, they, like most NPD research on the
FFE, focused on rationalizing the chaos by creating a
process for it.
The one exception to trying to create order out of
chaos in terms of research in this area is the Radical
Innovation Project at RPI (cf., Leifer et al. 2000; O’Connor
et al. 2002; O’Connor and Rice 2001; O’Connor and
Veryzer 2001; Rice et al. 2001, 2002). Each of the projects
in this research originated out of R&D, starting from a
technology push objective. They were initiated explicitly
to create a radical innovation. The Radical Innovation
Project’s purpose is to provide systematic insight into the
twists and turns that these sorts of projects encounter, and
suggestions for how to expect and react successfully to
these difficulties.
The RPI study participants generally follow consistent, logical processes that differ significantly from incremental NPD processes (Veryzer 1998). They are more
exploratory and less customer driven and focus on formulating a product application for the emerging technology.
Prototypes are developed at an early stage to aid in
formulating a new product application, preceding opportunity analysis, assessment of market attractiveness,
market research, and financial analysis. These projects
encounter difficulty in trying to create new markets for
their technologies (O’Connor and Rice 2005). The first
product application generally is selected by a research
scientist with little or no business experience. The application selected in turn influences how the technology is
further developed as well as the business model and future
revenue stream from the technology. The majority of the
firms in this research were disappointed with the forecasted revenue streams from the initial technology application selected by the research scientist. In some cases,
this disappointment resulted in business development
individuals brought into the project at later stages being
removed from the project and even fired, when their
forecasts did not meet management’s high expectations,
given the time and money invested in the radical innovation.
Creativity and Product Development
Creativity and creative people have been studied
from a number of perspectives, and significant progress
has been made along several fronts. However, much of it
has focused on highly creative people in the arts, and
those who produce individual creative outputs, such as
books, music, and paintings. A few creativity researchers
have investigated creativity in firms. Amabile has developed a model explicitly addressing links between creativity and project-based innovation, in organizational contexts, and thus, how NPD success and creativity may be
linked, although it has been tested empirically (Amabile
American Marketing Association / Winter 2006
1998). The only input from the individual creativity
process to the organizational innovation process is as a
task in the “produce ideas” stage of the process.
Overall, then, there are three conclusions one can
reach from the literature on creativity and NPD. First,
creativity and innovation implementation are two different processes, requiring different skill sets. Second, the
question of the relationship (if there is any) between
creativity (organizational or individual) and organizational innovation implementation is complex, with a
myriad of personal, organizational and external influences. Whether creativity and innovation are related is an
open question. Finally, a linkage between creativity,
innovation implementation and product development
success in the marketplace has not been uncovered empirically. This research explores how a group of exceptional electronics innovators in mature U.S. firms relate
that they have been able to be successful in creating
radical innovations.
METHODOLOGY
This research was exploratory, using a multiple case
methodology (Yin 1994). In 2002, the magazine Electronic Design officially established an Engineering Hall
of Fame, inducting 58 individuals representing 50 landmark lifetime achievements. The Electronic Design readers determined the honorees through online voting. The
full list is at: [www.elecdesign.com/Articles’Print.cfm?
ArticleID=2851]. About half of these individuals are no
longer alive and therefore unavailable for investigation.
Eleven of the remaining 34 agreed to be interviewed for
this research, a response rate of 32 percent.
Exploratory in-depth telephone interviews were conducted with each innovator. Topics covered in the interview were wide-ranging and included having them recount in great detail the process by which they created
their invention, how they worked in the context of the
firm, customers, and other individuals. Interviews lasted
between 30 and 120 minutes, averaging about 60 minutes.
Interviews were recorded and transcribed. The transcripts were reviewed twice to uncover key themes (Miles
and Huberman 1994), producing five that were salient
across all eleven respondents: personality, perspective,
preparation, political ability, and process. The transcripts
were then reanalyzed again at a more detailed level,
identifying 253 specific statements that were associated
with how and why they innovated. Each statement was
coded into one of these five key themes. Seven statements
did not fit into these five themes, but fell into the category
of motivation, creating a sixth theme. Each theme was
then reviewed to identify additional groupings of repeated or related statements.
133
RESULTS
The framework of Figure 1 was developed by identifying key themes salient across all respondents, and the
relationships between them. The four elements in the
middle of the diagram derive from the individual’s past,
arising prior to the firm context. These exceptional
innovators generally have strong personalities with several distinct characteristics that contribute to how they
creatively think and behave. These characteristics are
buttressed by the attitudes in their perspective or worldview,
which has developed during their maturation to adulthood. Their perspective on life tends to be simultaneously
business-oriented and idealistic. Each innovator took
specific steps during their formative years and earlier
career to prepare themselves for innovating, including
acquiring business knowledge in addition to technical
depth and breadth. These innovators have high motivation to create, specifically directed as a drive to create
useful products. Externally motivating factors support
their natural intrinsic motivation. As the arrows in Figure 1 suggest, these four elements seem to interact in a
reinforcing manner.
The two elements in the outer rings of Figure 1 are
associated with how these inventors are successful in the
context of the firm. They represent how they operate in the
present. First, these extraordinary innovators understand
and are good at the political processes of gaining project
acceptance and support. Second, these individuals have
constructed distinct processes that enable invention of
important products. Furthermore, these processes look
quite different from the typical Stage-GateTM process in
several ways (Cooper 1990), with steps that both precede
and extend beyond the traditional product development
process boundaries.
Personality
Personality, the way a person is hard-wired, is relatively difficult to change. Interestingly, as a group these
individuals were self-aware. As one said: “It is essential
to get to know yourself in terms of the way you fool
yourself, when you are playing games with yourself, when
you are falling prey to the very humanness in you” that
will get in the way of solving the problems you want to
solve. They also were articulate. Interviews that were
FIGURE 1
Exceptional Innovator’s Framework: MP5
American Marketing Association / Winter 2006
134
expected to last less than an hour frequently lasted almost
double that time.
In general, these innovators are positivist in nature,
with confidence and self-esteem. Granted, confidence
and self-esteem might be expected, as they already have
been deemed successful by an independent assessment
body. However, the sense from the interviews was that
they always were confident that they could solve the
problems they undertook – even when those problems had
existed for a long time, with others being unsuccessful at
solving them.
batting average in baseball.” While information from
their successes is reported here, most spoke of working on
failures as well. They have a philosophical acceptance of
failure.
Some also voiced strong attitudes about what is right
and wrong. As one innovator put it, he “feels moral
responsibility to do the best he can.” Again, even though
the focus of the interviews was on activities associated
with innovating, attitudes about what is important to
them also were voiced.
Preparation
As expected, these individuals are innately curious
(“well, maybe I came out of the womb more curious”) and
fascinated with technology. These traits lead them to
investigate technologies and topics far afield of current
assignments. One innovator “got to wondering, ‘well, I
don’t know how a phone works . . .’ so I got a book on how
the phone works.” Understanding how a phone works had
nothing to do with the logic devices he was currently
working on in his job, he just wanted to know how the
technology worked. Importantly, they are systems thinkers, thinking holistically about problems.
These individuals have a high tolerance for ambiguity, they want to be challenged and accept the risks of
undertaking difficult challenges. At the same time, nearly
all indicated a need to be patient and willing to persevere
in solving these very difficult challenges – “I remember
tackling this problem day after day.” They are inherently
“finishers.”
One unexpected characteristic of these innovators is
the positive affect many of them spoke of and with. In
some, this affect was expressed as a passion for what they
were doing. Others expressed that “what we were doing
was a lot of fun.” These innovators are emotional.
Add to the above characteristics an action-orientation, and it is clear that their personality sets the stage for
being able to undertake and solve difficult problems.
Perspective
A number of specific perspectives, or strongly held
attitudes, also came out in our interviews. The first of
these, explicitly voiced by nearly all the innovators, is a
belief that technology and new products must be salable
and able to make profits. Technology is a means to an end,
which is to keep the business self-sustainable through
creating profits. Although they are fundamentally strong
technologists, they are strongly business-oriented.
They understood that failure is likely when you are
undertaking big problems, and they are accepting of that
possibility: “These sorts of projects are similar to a .300
American Marketing Association / Winter 2006
All these innovators undertook specific activities in
preparation across multiple domains, including technical, business and market understanding. In general, their
attitude towards preparing is to “study broadly, dig deeply.”
Technically these innovators developed great depth
in their own sub-field within the electronic domain.
However, each also sought out education in peripheral
technologies to their own field of core competence. One
innovator “brought knowledge from the computer industry to the semiconductor industry. . . . you could just see
it, that computers were going to be designed by chip
manufacturers because they have the core technology.”
They developed great knowledge of multiple technology
domains.
These innovators also developed a concrete understanding of the business environment, starting with understanding the business unit context and need to make
money. They developed knowledge of industry trends, but
also tracked social trends. Understanding the business
environment also includes gaining deep customer knowledge.
The result is that these are individuals with far more
than just technical understanding. They have created a
broad background of knowledge that allows them to join
technical insight to customer problems, in the context of
understanding that the result must be profitable for the
business: “. . . to me, it is the attitude of learning depth and
breadth and relationships and social skills and communication skills.” These are long-standing, multi-faceted
learners.
Motivation
Virtually every model of creativity includes intrinsic
motivation as an element (Amabile 1988; Lovelace 1986).
As one innovator said: “I am constantly looking for some
source of something to do.” Another indicated that “once
you are successful, you get to do it again.” However, the
motivation in these innovators is a directed motivation to
create something that solves customer (or potential cus135
tomer) problems. It consists of two forces. First, customers and firms with urgent and important problems that
they desperately need solved are a powerful external force
that motivates these exceptional innovators. The presence of real customers who can benefit from their work is
highly motivating because it tells the innovators that the
work they are doing is important in a concrete way. This
force works in concert with the acute intrinsic desire to
solve problems that no one else has yet figured out, and the
personal satisfaction the innovators derive when they in
fact do solve those formerly unsolvable problems. Thus,
it is a strong and interacting combination of external and
internal forces that motivates these exceptional inventors.
Political Capabilities
Each of these innovators has developed the ability to
successfully interact within their organizational environment. They know that they must sell their ideas to others,
and that they have to work the political issues up (to
management), laterally (with others needed to do the job)
and externally (with customers and others whose expertise is needed). “You put a product plan together, and it
needs to get signed off, OK. Engineering has to sign off,
marketing has to sign off, and then the CEO has to sign
off.” These did not have a power position that would allow
them to force acceptance of their projects. They depended
upon influencing others to gain acceptance and resources.
Generally they focused on positive influencing actions.
Exceptional innovators frequently use the power of
data to manage the politics of innovation. There is
nothing so persuasive as having facts: “I got the data from
2753 cases [of emphysema] over a decade. I had 17
variables and I analyzed them all and came up with
remarkably interesting findings . . . it was validated in
2000 that I nailed a causal understanding of emphysema.” The findings for this study were used in setting air
pollution standards in Colorado. While outside the
innovator’s job description, his reliance on data in this
inquiry is typical of the importance of factual analysis to
the innovators in general.
A number of innovators created novel approaches to
managing the political situation. One innovator faced
with a management unsupportive of his innovation went
to customers, describing the product to them and telling
them what it would allow them to do. When customer
CEO’s began calling his CEO demanding to know when
the product would be available, support for finishing the
innovation’s development materialized. Eventually, sales
of this device amounted to more than $300 million a year.
Another innovator developed and gave a 3-day, hands-on
seminar on integrated circuit design to his organization’s
top managers to familiarize them with the new technology being proposed and its potential applications in
American Marketing Association / Winter 2006
designing better circuits. By developing an understanding of the technology’s potential in management, resources flowed more freely to the area. Others found
bosses who were adept at supporting them and shielding
them from outside intrusions, and allowed these managers to manage the politics of the situation.
Process
The process used by these innovators has two unique
aspects compared to the processes depicted in the product
development literature. First, their process is more farreaching than the typical product development process,
with more of an emphasis on actions both prior to concept
development and post-commercialization. The executional steps, once the “aha” of invention changes to the
execution of implementation, are seldom mentioned.
These would seemingly follow the rather well-understood
product development process. However, six elements that
are important to the processes these innovators use became apparent from the interviews, as illustrated in
Figure 2.
The second unique aspect is that the process is highly
dynamic across domains, with the innovator iterating
across the customer, technology and market through the
entire process (Figure 3). This is especially true in the
problem-finding, planning and pursuing insight stages.
In the problem-finding stage, the innovator will start
from some identified customer problem, as related in the
motivation section. Then, he will go into the technology
domains and work to obtain a very broad understanding
of why this is a problem and why it hasn’t been solved
before. This information will be taken back to customers
and checked for validity. Again, when pursuing insight,
the technique is “make a little technical progress, check
its viability to customers and in the general market.”
Problem Finding. These exceptional innovators start
by looking for an interesting problem to solve. In their
terms, a problem is validated as being interesting because
someone else (a potential customer) also sees and voiced
the value in its being solved. Getting to understanding
that an issue is an interesting problem requires interacting repeated with customers to validate the utility of the
problem. They proactively look for opportunities in areas
in which they are deeply interested, and start from domains in which they have prepared extensively and have
deep knowledge. Importantly, they think about the commercial potential of an opportunity right at the outset as
a criterion for whether an opportunity is interesting or
not. They believe that “in order to make a company
successful, you have to still have a product that people
really need.” They look to find holes in the environment
others have deemed as “too difficult to solve,” but which
industry or market trends or customer knowledge suggested would be commercially interesting. Two common
136
FIGURE 2
Exceptional Innovator’s Innovation Process
FIGURE 3
Dynamics of Exceptional Innovators’ Processes:
The Convergence of Customer and Technology
themes in identifying interesting problems were (1) fixing problems with how something currently works and
(2) working to simplify complex technology. Nearly half
the innovators explicitly indicated that their goal was
American Marketing Association / Winter 2006
“trying to make something complex simpler.” One related that his job was “figuring out how to take the
complexity out of the hands of the power supply designer,
by incorporating it into a control circuit that we could
integrate as a single chip.”
137
Plan, Then Execute. In the words of one innovator,
the “single biggest mistake technologists make is to just
take off.” Thus these innovators “first define the problem
and make sure it’s defined correctly.” Generally, after
finding an interesting problem, they spent a great deal of
effort in problem definition, “spending significant time
planning and understanding peripheral technology, base
technologies, and customer needs in detail.” They differ
from previous individuals who may have tackled the
problem in that they seek a much broader understanding
of a problem and all of the contextual issues associated
with it. Generating this broad understanding takes a long
time. In one project, “probably 6–9 months went by,
dealing with all of these upfront issues before the pencil
ever hit the paper.” Once they felt they fully understood
the context, these innovators set a specific goal for the
project, and kept the focus on that specific goal, sometimes for quite a long time, until they were able to make
inroads. They “started with the overall idea and refined it
fully before moving on to the details,” “developing the
larger architecture first, then developing the details.”
Finally, and very importantly, a number indicated the
importance of “using the right technology to solve a
problem independent of whether it is the state-of-the-art.”
Part of planning then, is seeking out the right technolog(ies)
that will allow them to solve the problem. As one innovator said: “before I reinvent the wheel, where have I ever
seen a circuit that has any or all of these elements that I
think are necessary. And that took me pretty far afield.”
Perform Your Own Market Research. On the one
hand, these innovators claim that they do not believe in
market research. On the other hand, they emphasize the
importance of directly interacting extensively with customers, focusing on their problems to obtain a deep
understanding of their needs and repeatedly validating
both the importance of the problem and the progress in
creating the solution. Furthermore, they speak of the need
to “better understand the ‘whole picture’ of performance
needs.” They “ask ‘why’ when questioning customers to
get to underlying problems,” and believe it is their job to
help customers understand their own needs – especially
the “system of customer needs and interdependencies.”
“So, very often what the guy says that he wants may not
reflect necessarily, ultimately, what he needs and what he
values. . . . That is not because he’s not telling the truth;
it is because he is lost and wandering the desert as you are
sometimes.” Interaction with customers occurs not just at
the outset of the project, but continues throughout the
entire development cycle. Specifications are tentatively
developed and then customers are probed to determine
whether appropriate trade-offs in performance and feature sets have been made. They will develop specification
sheets, working and non-working prototypes, and will
demo the products repeatedly to obtain feedback across
the phases. They seek new ways to interact with customers.
American Marketing Association / Winter 2006
Playing with Others Throughout the Process. These
innovators are highly connected to others both inside and
outside of their firm and technology domains. While they
may start alone on the project in the definitional phase,
they will reach out to whomever they need to get what they
need during the development process. They seek out those
with complementary skills, including domain skills, such
as in a peripheral technology, and functional skills, like
marketing, and tap into their knowledge. They also will
build the cross-functional team necessary for development. Some indicated that they played multiple roles
throughout the process – project leader, coach, mentor,
facilitator. They play the role they need to play to get the
job done.
Pursuing Insight. While a number of innovators
made statements like “there is no one way to do this,” the
interviews revealed a number of cues as to how they
pursue bringing new insights into solving difficult problems. The first key is to make no assumptions about the
problem. While they will start by reviewing past (failed)
technical approaches to solving the problem, they “ask a
lot of ‘why’ questions, rather than ‘how’” questions. They
then proactively work to change their underlying logic
processes from those that were used to try and address a
problem previously. As part of this process they look
under the surface of the stated symptoms and issues for the
real problems. They soak up and value information from
as many sources as possible. Some innovators will prepare hypotheses about what approaches might work to
solve a problem and then test them. They try things
multiple ways and iterate. Even though these innovators
said they try to anticipate things that might go wrong,
each of these projects stalled at some point in development, with no idea how to proceed forward. One innovator suggested that, “when stalled, restart from bits that
work, play with chunks that you understand and that
work – then seek other bits to add to them.” Perseverance
is key to ultimately achieving insight. “There was this
floundering process when you are dealing with a problem
that I do not believe should be short circuited.” According
to them, insight frequently arises out of intuition for what
will work from simultaneously having both deep understanding and a breadth of understanding. While their
intuition is based on their core deep technical understanding of one area, it is supported by learning peripheral
technologies, which they can then combine into new
configurations. Ultimately, the process of reaching insight is inefficient and time consuming, in part because
they consciously bring in new approaches from peripheral technologies and knowledge domains.
Post-Invention Dissemination. The majority of these
innovators spoke of the importance of helping disseminate information of the innovation post-invention for two
138
major purposes. First, the innovators are directly involved with generating customer acceptance of the innovation. Second, they are simultaneously collecting additional customer problem and opportunity information to
help improve the next generation product, which already
may be planned or even in development. Working with
customers directly to promote the use of the innovation is
necessary, particularly when its use will require changes
in behavior or changes in designs of other interfacing
systems. These exceptional innovators also wrote technical papers and spoke at technical conferences to help
disseminate new devices and the technologies underlying
them. These actions were directed at speeding the rate of
diffusion of the innovation, and thereby also speeding the
revenue stream to the firm.
Process Summary. These individuals focused first
on finding commercially interesting problems that were
important to someone to be solved, defining them completely and understanding the scope and details of the
problems in depth, including the full set of customer
needs. The amount of up-front time and planning spent
was significant. The cross-functional preparation they
already had undertaken is augmented with additional
new learning as needed for this project. While not able to
fully describe how the “ah-ha” of insight was explicitly
achieved, they undertook specific activities that would
increase the probability of achieving insight. They change
their role in the process as appropriate, exhibiting role
flexibility. Finally, they don’t move on to something else
once the product is launched, but continue to work to gain
acceptance in the marketplace.
DISCUSSION AND FUTURE RESEARCH
This research provides insight into the link between
creativity, innovation implementation and success in the
market place for radical innovations. Exceptional innovators with the potential to create and implement radical
new products exist in at least some mature firms. They
embody skills in creativity as well as in innovation
implementation. Even if they do not innovate completely
independently, they are seen as primarily responsible for
success of the innovation – by independent outsiders –
and are associated with the creative, implementation, and
even post-implementation process phases. From our interviews, they may not operate within the boundaries of
the firm’s formal product development process. On the
one hand, we are not suggesting that exceptional innovators should supplant the firm’s formal development processes. Using formal processes is associated with higher
success from NPD (Griffin 1997). On the other hand,
perhaps firms can benefit from simultaneously taking
advantage of these exceptionally innovative individuals
who seem to want to remain in large firms.
However, it would appear that, in order take advanAmerican Marketing Association / Winter 2006
tage of exceptional innovators, the firm may have to
manage them differently than those who are innovating
within the context of current platforms and product lines,
using the formal processes of the firm. Mismanaging
them can have detrimental consequences: they may quit
and find a firm that will allow them innovate. Thus, it is
important for firms to find (or create) places in the
organization that will support and even enable these
individuals.
This research complements the findings from RPI’s
Radical Innovation project in a useful way. Over 10 years
of longitudinal research, RPI has followed a dozen radical
innovation projects, creating significant new insight into
managing radical innovation as a process (Rice et al.
2002; Veryzer 1998), organizing to manage radical innovation (Leifer et al. 2001; Rice et al. 2000), and identifying opportunities (O’Connor and Rice 2001; Rice et al.
2001). Their unit of analysis has been the project, and all
of their projects have originated in the R&D labs from a
technology push start. At the outset, it was not clear
which, if any, of the projects would ultimately be successful. Our research complements their findings because it
has a different unit of analysis – the primary innovator,
and because all these innovators had successful outcomes.
This allows us to take a different perspective on understanding the same phenomena.
A radical innovation project initiated as a technology
push seems to proceed much differently than these projects
by exceptional innovators. The technology push projects
begin without any idea of the application area to which the
technology will be applied (O’Connor 2005). The “hero
scientists” of the early phases of the project have little or
no business or market experience, and the task is pure
technology-oriented. However, even early forecasts for
sales and revenues depend upon the specific application(s)
into which the technology will be directed. Because there
initially is no one with business or marketing experience
associated with the technology development, it is the
scientist who has identified the early application(s), with
little or no understanding of the business ramifications of
their selected applications. These applications generally
are not the “killer apps” that will generate the revenue
level the firm wants. However, as the technology development has been directed to achieve those applications, the
initial business manager assigned later in the process is
stuck with them, at least in the short-medium term.
Management frequently ends up removing or even firing
the initial business manager in a significant number of the
projects because of the disconnect between likely revenue
streams and management’s expectation of future revenue
streams.
These exceptional innovators, on the other hand,
start from a commercially important problem, not a
technology. Even though they are technologists by train139
ing, and they make significant technical contributions
and breakthroughs, they see technology as a means to an
end – and it is the profitable end that is important, not the
means. They fully understand that a product has to
produce profits and is most likely to do so by solving
significant problems for people or firms. Thus, they start
their efforts with an application in mind, and one that
some set of facts has suggested has the potential to bring
in the kind of profits that will be of interest to the firm.
Then, they go seek the technology to solve the problem,
iterating back and forth across the customer, market and
technology domains to validate the importance of the
problem and appropriateness of the solution. This would
appear to be a very different way to manage the process of
radical innovation – one that operates less in a business
vacuum than the technology push approach seems to.
A major result from this research is that there is much
more to understanding how these extraordinary innovators operate than just motivation, domain knowledge and
creativity tools as suggested by Amabile’s (1988) componential model of creativity, although all of these elements
are in the model developed from studying these innovators. These individuals’ preparation provides deep domain knowledge, and all are intrinsically motivated.
Several of the process skills are creativity skills, such as
those they use in problem-finding and insight generation.
However, even within the categories of the componential
model, there are nuances of difference.
First, in contrast to some of Amabile’s findings
(Amabile 1998; Amabile et al. 2002), these innovators
are, at least in part, strongly motivated by extrinsic
factors. They are motivated not just to create for their own
utility or pleasure, but to create to solve problems that
other people say are important to them. This motivation
may arise from their somewhat idealist perspective – they
want to help others. Thus, in addition to management
recognition as an extrinsic motivator, which Amabile’s
research identified, recognition by customers external to
the firm supports intrinsic motivation, at least for these
exceptional innovators.
ENDNOTE
1
It should be noted that there are other Hall of Fame
inductees who innovated as entrepreneurs, including
Steven P. Jobs and Steven Wozniak, benefitting
significantly. However, our sample did not include
any of these individuals.
REFERENCES
Amabile, Teresa M. (1988), “A Model of Creativity and
Innovation in Organizations,” Research in OrganiAmerican Marketing Association / Winter 2006
Second, their preparation combines technical, business, market and even social components. Because of the
organizational location of their innovation, they cannot
afford to be aloof and cold as Csikszenthihalyi et al.
(1984) found separated successful from unsuccessful artists
or isolated from their peers and marginalized, as Gardner’s
exemplary creators were (Gardner 1993). In order to be
successful, they must obtain political (social) skills.
One interesting aspect of these innovators has to do
with how they view risk. None of these innovators was an
entrepreneur. Each innovated in the context of a mediumlarge firm. And virtually all of them have remained with
established firms throughout their career. Had these
innovators created their innovations as entrepreneurs,
they likely would have had a far higher personal financial
return.1 However, they preferred the financial and resource support and stability of an established firm. This
suggests a type of risk aversion. This also suggests that
there will continue to be a place for radical innovation in
large established organizations. Firms need to figure out
how to take advantage of individuals who seem to be
driven to undertake radical innovation in the context of an
established organization.
Clearly, marketing as a function has failed these
innovators, as shown by their stated lack of belief in
marketing research. However, almost ¼ of the processrelated statements they made had to do with obtaining
deep and complete understanding of customer problems
and needs and interacting with customers throughout the
entire development process. As shown in previous research (Griffin and Hauser 1993), these innovators need
to understand both the details and the full set of needs in
order to make the technology trade-off decisions crucial
to success. New techniques to more effectively and efficiently support their quest for this information need to be
developed, including more efficient mechanisms for finding the “right” customers to talk to. Additionally, firms
need to ensure that financial support is available as well
as sufficient managerial encouragement is present to go
into the field.
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Business Review, 75 (5). (September/October), 76–
88.
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Kramer (2002), “Creativity Under the Gun,” Harvard
Business Review, (August), 3–11.
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eds. (2002), The PDMA ToolBook for New Product
Development, New York: John Wiley & Sons, Inc.
Cooper, Robert G. (1984), “New Product Strategies:
What Distinguishes the Top Performers?” Journal of
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Tool for Managing New Products,” Business Horizons, 33 (3), (May/June), 44–54.
Gardner, Howard (1993), Creating Minds. New York:
Basic Books.
Griffin, Abbie, and John R. Hauser (1993), “The Voice of
the Customer,” Marketing Science, 12 (1), (Winter),
1–27.
____________ (1997), “PDMA Research on New Product Development Practices: Updating Trends and
Benchmarking Best Practices,” Journal of Product
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O’Connor, Lois Peters, Mark P. Rice, and Robert
Veryzer (2000), Radical Innovation: How Mature
Firms Can Outsmart Upstarts. Boston, MA: Harvard
Business School Press.
Lovelace, R.F. (1986), “Stimulating Creativity Through
Managerial Intervention,” R&D Management, 16,
161–74.
Miles, Matthew B, and A. Michael Huberman (1994),
Qualitative Data Analysis, 2nd ed. Thousand Oaks,
CA: Sage Publications.
O’Connor, Gina Colarelli, and Mark P. Rice (2001),
“Opportunity Recognition and Breakthrough Innovation in Large, Established Firms,” California
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____________ and Robert W. Veryzer (2001), “The
Nature of Market Visioning for Technology-Based
Radical Innovation,” Journal of Product Innovation
Management, 18, 231–46.
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(2002), “Assessing Transition Readiness for Radical
Innovation, Research-Technology Management, (November/December), 50–56.
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Theory of New Market Creation for Radical Innovation,” RPI Working Paper.
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Colarelli O’Connor (2001), “Radial Innovation: Triggering Initiation of Opportunity Recognition and
Evaluation,” R&D Management, 31 (4), 409–20.
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For more information contact:
Abbie Griffin
Business Administration
1206 S. 6th Street, Room 350
University of Illinois, Urbana–Champaign
Champaign, IL 61820
Phone: 217.244.8549
FAX: 217.244.7969
E-Mail: [email protected]
American Marketing Association / Winter 2006
141
A COMPARISON OF AGGREGATE AND DISAGGREGATE LEVEL
APPROACHES FOR MEASURING AND MAXIMIZING
CUSTOMER EQUITY
V. Kumar, University of Connecticut, Storrs
Morris George, University of Connecticut, Storrs
SUMMARY
Customer equity, the asset value of customers, can be
measured using different aggregate and disaggregate
level approaches. An aggregate level approach is defined
as one where the customer equity of the firm is computed
using firm level measures. In this top-down approach the
individual customer lifetime values are not available for
all the customers but only an average CLV of a firm’s
customer is available. On the other hand, when customer
lifetime values of all the customers are computed first and
then aggregated to get the customer equity of the firm, it
is called a disaggregate-level approach or bottom-up
approach. But these approaches differ from each other
and there is a fair amount of confusion in the field as to
what the contributions of each approach are and under
what conditions one approach is preferred over the other.
Are they conceptually measuring the same metric? How
do we select a particular approach based on the expected
benefits and data requirements? These are some of the
questions we addressed. More specifically, our objectives
in this paper are: (1) explain aggregate and disaggregatelevel approaches to measure customer equity, mainly
highlighting the differences between them, (2) understand the purpose of each of these methods, (3) identify
industries and situations in which these approaches are
best suited and (4) propose a new approach which addresses the issues and challenges in the existing approaches and also helps firms to measure and manage
customer equity in different scenarios.
We discuss in detail four aggregate level approaches
namely: (1) Berger and Nasr (BN) approach, (2) Gupta,
Lehmann (GL) approach, (3) Blattberg, Getz, and Thomas (BGT) approach, and (4) Rust, Lemon, and Zeithaml
(RLZ) approach and a disaggregate-level approach by
Venkatesan and Kumar (VK) approach. We first compare
how customer equity is measured in various approaches.
We find that at the measurement stage, the approaches
mainly differ in terms of data requirement, metrics computed and the level of aggregation. One apparent difference among the approaches is the level at which the
customer value is calculated. This can be at individual
customer level as in VK approach, at segment level as in
BGT approach, or even at firm level as in BN, RLZ, and
GL approaches. BN, RLZ, and GL approaches are similar
American Marketing Association / Winter 2006
to the extent that they obtain the average CLV and
multiply it by the number of customers to get the customer
equity at the firm level. However, these approaches use
different methods to arrive at the average CLV. As a
result, the data requirement is different across these
approaches. GL approach uses publicly available data to
obtain information on average contribution margin and
average marketing costs, RLZ approach uses data from a
sample to arrive at the mean CLV, and BN approach uses
firm level measures such as average retention rate and
average marketing cost to compute average CLV.
Though various aggregate-level approaches differ
based on the formulae used and the data requirements,
there are some similarities and dissimilarities among
them conceptually. While the emphasis on retention is the
common feature across different approaches, they conceptually differ in terms of accounting for existing customers and prospects, acquisition, and the projection
period.
Various approaches also differ in terms of how
customer equity is maximized. In disaggregate-level approach, the customer lifetime value is maximized by
implementing customer level strategies such as optimal
resource allocation, purchase sequence analysis and balancing acquisition and retention spending. At aggregatelevel, the customer equity is maximized by improving the
drivers of customer equity.
We find that a single approach is not capable of
addressing all the issues in customer equity management
even though the approaches are best suited for specific
scenarios. Hence we propose an integrated approach,
which can be used, in different scenarios such as transaction data available/not available, size of wallet information available/not available and B-to-B/B-to-C settings.
For example, if a firm has transaction data as well as firmcustomer interaction data available and wants to maximize customer equity, it has to adopt a hybrid approach.
In this case the firm will compute individual CLV and
implement customer-specific strategies (based on VK
approach) to maximize customer equity of the existing
customers. Since customer equity typically includes the
lifetime values of a firm’s potential customers, the firm
also needs to maximize the CLV of potential customers.
142
If a firm has the size of wallet information available for
prospects (like in a B-to-B setting based on firm characteristics), it can use the profile information obtained from
the analysis of existing customers to acquire the right
prospects and then improve drivers of CLV to maximize
CLV from potential customers. In scenarios where a firm
does not have the size of wallet information for prospects,
it can collect information through survey and use RLZ
approach to come up with firm level strategies that can
maximize customer equity from potential customers. A
combination of these approaches (or a hybrid approach)
will help to measure and maximize the customer equity of
the firm.
The framework can also be used to maximize customer equity of firms selling low ticket FMCG products.
In majority of such cases it may be impossible to even
know the total number of end consumers. For instance a
soft drink manufacturer is unlikely to have transaction
data for all the end consumers and the number of endconsumers will be unmanageably large. The contribution
from each customer may be low and hence managing
business at an individual level may not be the right
strategy because of high touch cost relative to the contribution from an individual customer. Instead, the firm will
be interested in knowing the drivers of consumption at
different age groups so that it can focus on these drivers
to maximize the customer value from that age group.
Firms can gather information on consumption quantity
and demographic variables from a large number of re-
spondents from different age groups through survey.
Based on this data the firms can identify the demographic
variables, which explain the variation in consumption
pattern of customers within an age group by doing OLS
regression of the average monthly consumption quantity
on different demographic variables. The average monthly
consumption quantity (CQ) can be expressed as a function of demographic variables as given below:
CQi = f (Age, Education, Income, Occupation,
Gender, Ethnicity, Religion, . . .)
These drivers of consumption pattern help the firm to
predict the lifetime value of customers in that age group
across a heterogeneous group of individuals and to formulate suitable marketing strategy for each age group. Firms
can make use of publicly available data such as census to
collect information on demographic variables of customers in different age groups as well as the growth in each
age segment of the population. Such information along
with the drivers of lifetime value can be used to predict the
lifetime value of customers in each group (i.e., total of
lifetime values of all the customers in that segment). This
will help the firm to direct its marketing efforts to the high
value customer segment. It can also use the profile
information of high value customer groups to target high
potential prospects. These two strategies collectively will
maximize the customer equity of the firm. References
available upon request.
For further information contact:
V. Kumar
University of Connecticut
2100 Hillside Road
Storrs, CT 06269–1041
Phone: 860.486.1086
FAX: 860.486.8396
E-Mail: [email protected]
American Marketing Association / Winter 2006
143
THE IMPACT OF CUSTOMER RELATIONSHIP MANAGEMENT
ON PERFORMANCE
Ilaria Dalla Pozza, Politecnico di Milano, Italy
Giuliano Noci, Politecnico di Milano, Italy
SUMMARY
In the past few years, there has been an explosion of
interest in Customer Relationship Management (CRM)
by academics and practitioners. CRM is an organizational effort aimed at improving customers’ retention
trough a better management of the relationship lifecycle.
Even if the business press has reported high failure
rates of CRM projects and scarce improvements on the
bottom line, academic studies on the impact of CRM on
company’s performance are almost absent or they consider only local improvements (Boulding et al. 2005).
Moreover, there is a lack of research that takes a strategic
focus on CRM, since previous studies only focused on
single aspects (Reinartz et al. 2004).
According to the above premises, this research has
these goals in mind:
•
To present a framework of CRM and CRM components at the company level;
•
To link CRM and CRM components to performance;
•
To study CRM results over time;
•
To link the company’s decision-making process of
CRM projects with performance. In fact, CRM performance can depend on the sequence according to
which CRM components are implemented.
Essentially, this study is different from previous
research since:
•
•
It is the first study that conceptualizes the implications of CRM on the whole organization (strategy,
people, processes, technology, customer management) and links them to performance. Value of this
study resides in its attempt to classify the CRM
activities in four typologies (customer oriented strategy, organizational alignment, technology, customer
management). These four typologies represent the
four CRM components;
It is the first study that presents longitudinal data on
CRM;
American Marketing Association / Winter 2006
•
It is the first study on CRM that considers the effect
of the decision making process on performance. In
fact companies can favor and develop at different
points in time the different components of CRM
(customer oriented strategy, customer management,
organizational alignment, technology).
Essentially, for providing a framework of CRM we
draw on literature on CRM and we integrate it with case
studies. Particular attention is devoted to the analysis of
the critical success factors of CRM, whose classification
into four different groups (strategic, organizational, technological, customer management critical success factors)
has constituted the preliminary structure of the framework, subsequently better specified through case studies.
We hypothesize that CRM is a second order construct
with four subfactors or dimensions: [1] customer oriented
strategy (top management involvement and definition of
customer oriented objectives), [2] organizational alignment (people and processes), [3] customer management
(customer differentiation and lifecycle management) and
[4] technology (analytical, collaborative and operational
CRM) and that each of the four can be measured reliably
with a multi-item scale. This view allows assessing the
degree to which an organization implement CRM, rather
than force an either/or evaluation.
We test the following hypotheses:
H1: Higher performance is associated with greater implementation of CRM and CRM components.
H2: Different sequences of implementation of the four
CRM components have a different impact on
company’s performance.
To test the link between CRM (and the decision
making process) and performance, a questionnaire has
been sent to 5000 companies in USA and Europe. These
companies are subscribers of a leading American
Consultancy Company in CRM. After data cleaning, 298
questionnaires were used. Performances are defined in a
multidimensional way, considering a set of eight metrics
(LTV, ROI, customer satisfaction, customer retention,
revenue and profitability per customer, number of new
customers; cost reduction).
144
The CRM construct has been tested for reliability,
convergent, discriminant validity, common method bias,
and multicollinearity. The results support the goodness of
the framework.
The relationships between CRM (and CRM components) and performance have been tested by running
regression equations.
In spite of the failures of many CRM projects, the
results clearly show that CRM is positively related to
performance. Relationships are always positive and significant.
However, not all the four components of CRM present
significant relations with performance. The component
“customer oriented strategy” is clearly dominant, with
positive and significant relations with performance, suggesting the need to bring CRM to the core of the corporate
strategy with top management involvement. Technology
doesn’t appear to be a critical element, even if it is a
necessary tool. This fact supports the general knowledge
that technology is an enabler of CRM, but not a critical
element.
Customer retention, the main CRM metric, is strictly
related to organizational issues (people and processes). In
particular, companies adopting empowerment, supported
by appropriate incentive and rewards, obtain the best
results. However, the activities that make up the organizational alignment component are usually the less developed and, on the average, represent the last step in the
decision making process.
CRM results clearly grow over time. Even if companies still don’t present a full understanding of CRM and
the implementation of CRM components is mainly in
progress, comprehension is growing over time, along
with performance. For this reason, companies are still
investing in CRM and it appears that they are “learning
by doing.”
Additional interesting results are provided by the
study between the sequence of starting of the CRM
components and performance. Considering customer retention as performance, companies that adopt a comprehensive view of all the components at the outset of the
project (thus starting the four CRM components almost
simultaneously), guided by a clear customer oriented
strategy, perform better. This result supports the
conceptualization of CRM as composed by four components of equal importance. References available upon
request.
For further information contact:
Ilaria Dalla Pozza
Politecnico di Milano
P.za Leonardo da Vinci 32
20133 Milano
Italy
Phone: +39.02.2399.2816
E-Mail: [email protected]
American Marketing Association / Winter 2006
145
RELATIONAL MARKET-BASED ASSETS AND SUSTAINABLE
FINANCIAL RETURNS
Xueming Luo, The University of Texas at Arlington, Arlington
SUMMARY
The common wisdom of positive returns to customer
satisfaction has been increasingly challenged recently.
For example, Mittal and Kamakura (2001) argue that
response bias due to different customer characteristics
can lead to a non-significant relationship between customer satisfaction and actual repurchase behavior over a
long-period of time. Piercy (1995) reports that there may
be even negative effects of customer satisfaction measurement on the internal employees, managers, and functional departments. More recently, Homburg et al. (2005)
suggest some negative diminishing returns to customer
satisfaction. Several studies have found negative influences of a focus on customers in terms of customer/market
orientation, including myopic R&D, trivial innovation,
and reduced levels of creativity and novelty in new
product development (e.g., Zhou et al. 2005).
In the face of this mounting criticism against a focus
on satisfying customers, this research seeks to explore
why, when, and to what extent customer satisfaction
influences sustainable firm profitability. Drawing on
market-based assets framework (Srivastava, Shervani,
and Fahey 1998) and other theories (Barney 1986; Caves
and Porter 1977; Stigler 1962) in both marketing and
economics, I argue that besides customers’ perceptions,
other marketing external stakeholders’ perceptions are
also important. To obtain and sustain firm profitability
over time, firms need to not only satisfy their customers
in the marketplace, but also build favorable reputations
among corporate audience in the Wall Street stock markets. This is because information stored in a reputation,
as a valuable asset, signals consistent overall firm image
to public and offers privileges to the firm through influencing evaluations by channel partners, financial analysts, and stock investors (Stigler 1961). Indeed, companies not simply compete for customers, but also vie for
reputational status for capitalization (Fombrun and
Shanley 1990). Companies may have obtained high levels
of customer satisfaction and perceptions, but still fail or
struggle perhaps because they are not perceived to be
strong and credible enough in Wall Street to financial
analysts, senior executives, and investors.
Based upon a multi-source archival database, the
results provide initial evidence that complementary synergies among two relational assets (customer satisfaction
and corporate reputation) bestow sustainable firm profitability measured as abnormal financial profits carried
over into subsequent years. Efficient marketing communication spendings are also found to promote these market-based assets. As a result, this research suggests that
firms can use efficient marketing communications (firms’
words) to develop market-based assets (firm’s deeds
perceived by external stakeholders) and therefore, through
these assets as underlying mediational mechanisms, to
generate superior ROA (firms’ results) over time. References available upon request.
For further information contact:
Xueming Luo
Department of Marketing
College of Business Administration
The University of Texas at Arlington
Arlington, TX 76019
Phone: 817.272.2279
FAX: 817.272.2854
E-Mail: [email protected]
American Marketing Association / Winter 2006
146
BRAND MODERNITY: SCALE DEVELOPMENT AND IMPLICATIONS
FOR BRAND MANAGEMENT
Patrick Lentz, University of Dortmund, Germany
Christine Sauermann, University of Dortmund, Germany
Hartmut H. Holzmüller, University of Dortmund, Germany
SUMMARY
In many markets, customers are confronted with a
large amount of different brands focusing all on a single
product or product category, making these brands largely
indistinguishable. If at all, only symbolic and/or emotional attributes of brands allow customers to identify and
perceive different benefits from different brands, thus
creating a basis for differentiation (Fournier 1998; Fournier
2001). Specifically focusing on this aspect, the question
remains on how to empirically capture this disparity. One
possibility is to use the concept of brand personality and
the respective scale developed by Aaker (1997). Interestingly, no discussion has evolved with respect to the
uniqueness of the construct’s structure and its
generalizability across different markets. Anecdotal evidence provided by practitioners points in the direction
that in relatively new and fast growing markets, which are
characterized by younger target groups, unconventional
products, and high levels of innovation, brands which
carry additional emotional values like topicality and
brand modernity tend to be more competitive.
Brand Personality and Brand Modernity – A Conceptual Extension
A number of researchers have discussed a concept
generally referred to as “brand personality” (e.g., Aaker
1987; Malholtra 1988; Belk 1988). Aaker (1997) developed a scale to measure “brand personality,” which
consists of five dimensions (i.e., “sincerity,” “excitement,” “competence,” “sophistication,” and “rugged-
ness”), and has been subsequently employed and confirmed by other researchers (e.g., Hieronimus 2003).
However, despite its recognition, the brand personality
scale has been subject to a large amount of criticism (e.g.,
Azoulay and Kapferer 2003, p. 146). Specifically, although the “excitement” dimension of her brand personality scale contains one item that captures the level of a
brand’s “up-to-dateness,” no further items exist that
intend to capture a modernity facet, despite the possible
importance.
Therefore, we shift our attention to brand modernity.
We define a brand to be modern when it represents a
recent trend and/or lifestyle of the target group, and is
communicated by means of innovative communication.
In line with the scale development process as proposed by
Churchill (1979), we empirically assess the properties of
our developed scale.
Scale Development and Validation
In order to specify the broad domain of brand modernity, we analyzed the closely related literature (e.g.,
Aaker 1997; Keller 2003; Kim et al. 2001) and conducted
personal qualitative interviews to substantiate the content
of the concept (Miles and Huberman 1994). After several
steps (including expert judging and quantitative pretests), we reduced the overall number to six items which
can be found in Table 1. Their measurement properties
can be found in Table 2, showing strong evidence of
reliability, unidimensionality, and convergent validity.
TABLE 1
Brand Modernity (BM) Scale
Modernity
BM1
BM2
BM3
BM4
BM5
BM6
This brand is up-to-date.
The appearance of this brand is perceived as innovative.
This brand fits to our time.
This brand communicates a new, creative advertising message.
This brand combines its advertisements with recent trends.
This brand succeeds in adjusting to changing trends without modifying its basic image.
American Marketing Association / Winter 2006
147
TABLE 2
Measurement Properties of BM Scale
Modernity
Alpha
AVE
.878
.547
BM1
BM2
BM3
BM4
BM5
BM6
LEFA
Comm.
ITT
LCFA
R²
.712
.768
.700
.719
.768
.768
.507
.589
.491
.517
.590
.590
.662
.710
.650
.665
.711
.709
.708
.768
.699
.724
.766
.770
.502
.589
.489
.524
.587
.593
Overall fit indices for CFA (ML estimation):
χ²9 = 10.147 (p = .339), NFI = .977, NNFI = .996, CFI = .997, SRMR = .026,
RMSEA = .028 (90% CI: .000 - .095)
Brand A (N = 163)
LEFA and Comm. represent loadings and communalities obtained from principal axis factoring
LCFA and R² represent loadings and explained variance obtained from ML confirmatory factor analysis
ITT: item-to-total correlation
To assess discriminant and nomological validity, we
additionally collected data for constructs that are closely
related to brand modernity, i.e., brand familiarity, involvement, self-congruency, brand satisfaction, and brand
loyalty. Overall, the proposed measurement structure fits
the data well (χ²d.f. = 104 = 172.58 (p < .001), NFI = .899,
NNFI = .943, CFI = .956, SRMR = .045, RMSEA = .058
(90% CI: .042, .073)). To evaluate discriminant validity,
we follow suggestions by Fornell and Larcker (1981) and
find strong support, since the average variance extracted
through BM items is higher than every variance shared
with the remaining five constructs.
In order to assess the influence of brand modernity on
brand loyalty (and hence nomological validity of the BM
scale), we investigate the relationship between brand
modernity and brand loyalty, while simultaneously controlling for the effects of brand familiarity, brand involvement, self-congruency, and brand satisfaction. First, as
expected, brand satisfaction exerts the largest influence
on brand loyalty, with an estimated unstandardized coefficient of β = .333 (t = 3.161, p < .01). Interestingly, the
second largest influence can be found for brand modernity. In our sample, brand modernity shows a strong
positive effect on brand loyalty (β = .215, t = 2.130, p <
American Marketing Association / Winter 2006
.05), supporting nomological validity. A third, marginally significant effect can be attested to brand involvement (β = .321, t = 1.966, p = .05), while the effects of both
brand familiarity and self-congruency have been found to
be non significant (β = .178 (p > .1) and = .196 (p > .05)
for familiarity and self-congruency, respectively).
Discussion
This paper reports an exploratory study on the development and validation of a measure of brand modernity.
Our main academic contribution is to offer an advance to
the current literature of brand management and communication. First, we explore the concept of brand modernity
using qualitative and literature research, and show its
relevance for a customer’s buying decision. Also, we
empirically test for the influence of brand modernity on
brand loyalty and are able to demonstrate that brand
modernity is relevant for the formation of brand loyalty
and additionally shows strong associations to related
concepts. For marketing practitioners, our findings highlight the belief that forming an innovative and modern
brand is a critical success factor for the overall performance of a brand in trendy markets. References available
upon request.
148
For more information contact:
Patrick Lentz
Department of Marketing
University of Dortmund
D-44221 Dortmund
Germany
Phone: +49.231.755.3277
FAX: +49.231.755.3271
E-Mail: [email protected]
American Marketing Association / Winter 2006
149
THE RATINGS GAME: A FRAMEWORK FOR INVESTIGATING
FACTORS INFLUENCING CONSUMERS’ PERCEPTIONS
AND USAGE OF ONLINE USER REVIEWS
Hieu P. Nguyen, The University of Texas at Arlington, Arlington
SUMMARY
Introduction
This paper attempts to lay a framework for future
research that investigates the various factors influencing
consumers’ perceptions and usage of online user reviews.
User reviews could be treated as a form of interpersonal
communications representing a relatively objective, experience-based source of comments from people who
have purchased and used the product.
Theoretical Framework and Propositions
Product Type, Perceived Risk, and Information
Search as a Risk Reduction Strategy. This paper adopts
the product type schemata suggested by Nelson (1970)
and Dabri and Karni (1973) which consists search-,
experience-, and credence-based goods. It is predicted
that higher risks are associated with credence-based
goods than experience- and search-based goods, respectively and this, in turn, leads to heightened information
search regarding credence-based goods to reduce risks.
The level of perceived risk should be positively related to
the extent to which consumers seek and assign importance to user reviews.
more likely than experts to seek out the opinions of others.
It is predicted that when the reviews are in-depth and
specific, experts will be more likely to rate the reviews as
important than nonexperts. Nonexperts will not rate indepth and specific reviews as more important than general reviews.
Perceived Usefulness of Online User Reviews. The
Technology Acceptance Model theorizes that the perceived usefulness and ease of use of a computer system
interface have significant behavioral implications (Davis
1989). In this paper, perceived usefulness is defined as the
extent to which consumers regard online reviews as
helpful. It is predicted that the perceived usefulness of
online reviews is positively related to the extent to which
consumers seek and use this source.
Perceived Motive of Online Reviewers. Researchers
have found that two-sided messages are linked with
recipients’ inducement of higher confidence (Settle and
Golden 1974; Swinyard 1981) and higher trustfulness
(Smith and Hunt 1978). It is proposed that a varied online
review will be perceived as more objective and trustworthy than a non-varied review. A review perceived as
objective will be thought of as more credible. Consumers
should assign higher importance to reviews perceived as
objective than those perceived as subjective or biased.
Reviewers’ Perceived Credibility. A personal
source’s influence tends to be lower if the recipient
perceives the source as biased or having underlying
personal motives (O’Keefe 1987). A buyer’s perception
of a reviewer’s expertise should be positively related to
the reviewer’s credibility, which should be positively
related to the importance the buyer assigns to the reviewer’s
review. Kiecker and Cowles (2001) contend that another
attribute contributing to source credibility is attractiveness, comprising similarity, familiarity, and likeability. It
is predicted that consumers’ perception of the reviewer’s
similarity to them should be positively related to their
perception of the reviewer’s credibility and the importance they assign to the reviewer’s comments.
Configurations of Online Reviews. Attribution theory
(Kelley 1967) identified three information dimensions
that people use to generate causal attributions: (1) consensus, (2) distinctiveness; and (3) consistency. It is
proposed that consumers exposed to online reviews configured as high consensus, high distinctiveness, and high
consistency will be more likely to attribute the review
toward the product than those receiving other configurations. Meanwhile, consumers exposed to online reviews
configured as low consensus, low distinctiveness, and
high consistency will be more likely to attribute the
review toward the reviewer than those receiving other
configurations.
Consumers’ Expertise. Research suggests that experts are more likely than nonexperts to look for more
information because they are cognizant of more product
attributes or that they may have more specific questions
about the search target (Brucks 1985). Others (Furse,
Punj, and Stewart 1984) postulate that nonexperts are
Consumer Skepticism. The online, publicly available nature of user reviews in effect transforms experience- and credence-based attributes into search-based
attributes because consumers can easily search for information on product performance. Therefore, consumer
skepticism of product claims should not be higher for
American Marketing Association / Winter 2006
150
credence- than experience-based products and consumer
skepticism of product claims should not be higher for
experience- than search-based products. Also all else
being equal, consumers should be more skeptical of
reviews posted on a merchant’s website than reviews
posted on an independent website. References are available upon request.
For further information contact:
Hieu P. Nguyen
Department of Marketing
University of Texas at Arlington
701 S. West St., Room 234
Arlington, TX 76010
Phone: 817.272.2339
FAX: 817.272.2854
E-Mail: [email protected]
American Marketing Association / Winter 2006
151
LINKING AN INDIVIDUAL’S BRAND VALUE TO THE CUSTOMER
LIFETIME VALUE: AN INTEGRATED FRAMEWORK
V. Kumar, University of Connecticut, Storrs
Man (Anita) Luo, University of Connecticut, Storrs
SUMMARY
Brand equity and customer equity are the marketing
assets that may enhance the short-term profit and longterm value of a firm. Despite the fact the two equities do
move in the same direction most of the time, current
practice of building brands doesn’t always represent the
best interests of customer equity. Should a firm place
emphasis on selling its brand with the highest margin or
treat customers as a valuable asset and focus on building
and maintaining such asset? Recent research suggested
the convergence of brand-centric constructs and customer-centric constructs and that firms should think of
brand and customer assets as two sides of the same coin.
Therefore, building brands without getting in touch with
customers make the whole process meaningless and
financially unaccountable. Ultimately, it is the acknowledgment of the value of a brand from existing and
potential customers that creates value for a firm. However, there is limited research on how brand assets and
customer assets can be managed simultaneous to achieve
the positive growth of a firm. Furthermore, although
previous research targeted at the aggregate level of consumers shaped the idea of a strong brand in the market
place, they did not stress on the idea of a brand from an
individual perspective. According to previous research,
the value of a brand is individual-based and customers
differ in their perception of a brand’s equity. Thus,
managing brand equity at an aggregate level limits a
firm’s ability to reach each individual customer.
This study proposed a framework that would enable
a firm to measure an individual’s brand value and relate
such value to his or her customer lifetime value, and to
implement communication strategies that encourage positive growth in both metrics. A conceptual framework is
suggested to show the dynamic process of building an
individual’s brand knowledge, brand attitude, and brand
behavior intentions, and then ultimately transferring
such brand value to his or her lifetime value to a firm. This
study proposes an individual’s brand value to be defined
as “the differential effect of an individual’s brand knowledge, brand attitude, and brand behavior intention on his
or her response to the marketing of a brand.” This
definition was rephrased according to Keller’s definition
of brand equity. The three levels of an individual brand
value examined here correspond to the five dimensions of
brand equity measured at the aggregate level: brand
American Marketing Association / Winter 2006
awareness, brand association, brand attitudes, brand attachment, and brand activity or brand experience. Propositions 1 through 8 provide theoretical justification for
such definition: higher the brand knowledge (brand awareness and brand image), the higher his or her brand value;
higher the brand attitude (brand trust and brand affect),
the higher his or her brand value; higher the brand
behavior intentions (brand purchase intention, premium
price intention, attitudinal brand loyalty, and brand advocacy), the higher his or her brand value.
Therefore, customers’ brand values vary depending
on their differential brand knowledge, brand attitude, and
brand behavior intentions. This study proposes that a
customer who has a higher brand value is more motivated
to engage in activities related to positive growth of the
customer lifetime value than someone with a lower brand
value is. The outcomes of such positive activities include:
positive word of mouth, saved marketing costs, higher
purchase frequency, and higher contribution margin.
Previous research suggested that a customer’s lifetime
value is measured using information on purchase frequency in a given period of time, profitable lifetime
duration, and contribution margin in each purchase occasion, and that willingness to spread positive word of
mouth and the strength of word of mouth should be
incorporated in calculation of the customer lifetime value.
Therefore, a customer’s CLV is a function of an individual’s
brand value, which is composed of measurements on
brand knowledge, brand attitude, and brand behavior
intentions.
In addition, it is essential to understand the role of
customer satisfaction played in brand experience. The
new information derived from brand experience will be
accumulated in a customer’s mind to form a more complex form of brand knowledge. The emotions of satisfaction and dissatisfaction will directly influence a customer’s
new attitude towards the brand and consequent repeat
purchase intention and behavior. Thus, how can a firm
achieve the optimal outcome from brand management
after linking a customer’s brand value to his or her
lifetime value and measuring his or her brand experience?
A firm should build CLV-based strategies to foster positive brand communication between the firm and its
customers. Seven steps are suggested so that a firm can
use this framework to achieve positive growth in not only
an individual’s brand value but also in the customer
152
lifetime value. First, a firm should measure customer
lifetime value of its customer base. The next step is to
sample a percentage of customers from each decile and
measure the components of their brand value so that a set
of customers with variation in CLV is selected. The third
step is to measure an individual’s brand value. The fourth
step is to link an individual’s brand value to his or her
customer lifetime value through the proposed framework.
The fifth step is to optimize an individual’s CLV by
identifying the weak components of his or her brand value
and generating an optimal solution. The sixth step is to
translate the optimized components of brand value to
brand management strategies. Such strategies should be
carried out through effective communications, which
include corporate activities communication, marketing
mix activities communication, and marketing communications. The final step is to reach out to potential customers and measure a potential customer’s lifetime value
driven by his or her brand value.
In summary, this study integrated several aspects
from previous research. It initiated an important step in
understanding the value of a brand at the individual level
and how such value is related to the customer lifetime
value. References available upon request.
For further information contact:
V. Kumar
University of Connecticut
2100 Hillside Road
Storrs, CT 06269–1041
Phone: 860.486.1086
FAX: 860.486.8396
E-Mail: [email protected]
American Marketing Association / Winter 2006
153
FAIRNESS IN INTERFIRM EXCHANGE RELATIONSHIPS AND ITS
IMPACT ON CONSUMER JUDGMENTS AND
BEHAVIORAL INTENTIONS
D. Eric Boyd, James Madison University, Harrisonburg
Marcus Cunha, Jr., University of Washington, Seattle
SUMMARY
Researchers have considered fairness in interfirm
exchange relationships from many different perspectives
including the emergence of relational outcomes like trust
(Ganesan 1994), commitment (Anderson and Weitz 1992),
long-term orientation (Gassenheimer, Houston, and Davis
1998), channel solidarity (Strutton, Pelton, and Lumpkin
1995) and the overall quality of the relationship between
channel members (Johnson 1999; Kumar, Scheer, and
Stennkamp 1995). Fairness has also been shown to
impact contract enforcement behavior (Antia and Frazier
2001) and the undertaking of destructive acts (Hibbard,
Kumar, and Stern 2001) within an interfirm exchange
relationship. Given the relational and behavioral influences of interfirm fairness, it is not surprising that fairdealing is considered a cornerstone of effective interfirm
exchange relationships (Gassenheimer, Houston, and
Davis 1998; Gundlach and Murphy 1993).
Although the literature reveals considerable insight
into the importance of fairness between firms in determining relational and behavioral outcomes associated
with an interfirm exchange relationship, researchers
have focused primarily on fairness in regard to either the
interfirm relationship itself or the firms involved in the
relationship. As a result, we know very little in regard to
how interfirm fairness impacts actors in the broader
marketing environment surrounding an interfirm relationship. The purpose of this paper is to extend the
marketing literature by examining how a firm’s fairness
in its interfirm exchange relationships influences consumers’ judgments and behavioral intentions relative to
the firm’s products.
Drawing on research related to dispositional inference (e.g., Kelley 1972; Reeder 1993; Reeder Vonk, Ronk
Ham, and Lawrence 2004), we hypothesize that consumers develop expectations about the fairness of a firm based
on the firm’s exchange behavior with other firms. We also
examine whether the typicality of a firm’s behavior
relative to the norm behavior for an industry moderates
American Marketing Association / Winter 2006
the effect of interfirm fairness on consumers’ judgments
and behavior intentions.
The stated hypotheses were tested in an experimental
setting. In exchange for participation in the experiment,
162 students from an East Coast University received extra
credit. The experiment involved a 2 (fair/unfair) x 2
(typicality/atypicalty) between-subject design in which
subjects were randomly assigned to each condition. Subjects were told that a manufacturer was planning to
launch a new television that would be priced at $299.00
and was interested in obtaining consumer’s reactions to
the new product. A series of screens described the focal
manufacturer as following a low-price strategy and described the manufacturer’s exchange relationships with
its suppliers and the typicality of the manufacturer’s
exchange behavior relative to the industry norm.
A repeated measures analysis of the price fairness,
likelihood to buy and likelihood to recommend within
levels of manufacturer fairness all demonstrated a main
effect for the fairness factor and no main effect for the
typicality factor. The data revealed mixed results for the
interaction between interfirm fairness and typicality. No
significant interaction was found with respect to fairness
and likelihood to buy but there was a significant interaction between interfirm fairness and typicality in regard to
likelihood to recommend.
The original objective of the research was to identify
how a firm’s fairness in its interfirm exchange relationships influences consumers’ judgments and behavioral
intentions relative to the firm. The finding of a significant
and positive main effect of interfirm fairness relative to all
dependent variables attests to the importance of interfirm
fairness from a customer perspective. It appears that prior
research provided a limited view of the important role of
interfirm fairness in managing exchange relationships by
focusing only on the interfirm exchange relationship or
the firms involved in the relationship. There appears to be
a spillover effect in that interfirm fairness also impacts
business-consumer exchange relationships from both an
attitudinal and behavioral perspective. References are
available upon request.
154
For further information contact:
D. Eric Boyd
College of Business
James Madison University
Harrisonburg, VA 22807
Phone: 540.568.2721
FAX: 540.568.3587
E-Mail: [email protected]
American Marketing Association / Winter 2006
155
A THREE-COMPONENT MODEL OF BENEVOLENCE IN BUYERSUPPLIER RELATIONSHIPS
Qiong Wang, University of Florida, Gainesville
SUMMARY
In the marketing literature, benevolence, along with
reliability and expertise, are considered the basic elements of trust that helps resolve instability and enable
mutual benefits in inter-firm relationships (AtuaheneGima and Li 2002; Geyskens, Steenkamp, and Kumar
1999; Morgan and Hunt 1994). Despite its importance,
the nature of one firm’s concern for the other firm’s
welfare in a relationship – i.e., inter-firm benevolence –
is still under-researched. This study proposes that one
firm’s perception of the other firm’s benevolence works
as a mechanism that may coordinate buyer-supplier activities and produce mutually beneficial outcomes.
Benevolence is defined as the degree to which one
firm is concerned about the other firm’s welfare in a
buyer-supplier relationship. The concept of benevolence
has been investigated at the individual level in the social
psychology literature but is referred to as a social motive
(Blake and Mouton 1964; Deustch 1949, 1973; Messick
and McClintock 1968; Pruitt and Rubin 1986; Tjosvold
1984, 1998). In this study, I argue that inter-firm benevolence has three separable components: (1) an affect
(affective benevolence), (2) a duty (normative benevolence), and (3) a must (calculative benevolence). The
perception of each component arises from behaviors by
the other party, and has different implications for attitudinal and behavioral outcomes in a buyer-supplier relationship.
Affective benevolence refers to a firm’s caring responses regarding the other firm’s welfare. Prior research
has examined this affective aspect of benevolence between two parties (Lewis and Wiegert 1985), which
involves one party’s making emotional investments in the
relationship, believing in the intrinsic virtue of the other
party and expressing genuine care and concern for the
welfare of the other party (McAllister 1995; Rempel,
Holmes, and Zanna 1985). Calculative benevolence reflects a firm’s benevolence that is largely based on a
consideration of the cost and benefit experienced by this
firm in a relationship. In other words, a firm would have
high calculative benevolence towards the other firm in the
relationship when it is costly for this firm not to be
benevolent, or when it is rewarding to be benevolent. This
aspect of benevolence is consistent with Doney and his
colleagues’ suggestions that trust building is a calculative
process involving one party’s calculating the cost and
American Marketing Association / Winter 2006
reward of the other party’s cheating or cooperating in the
relationship (Doney and Cannon 1997). A third component of benevolence is called normative benevolence,
which represents a force that binds one firm to the other
firm out of perceived obligation. It reflects a sense of
moral obligation or duty on the part of one firm to support
the relationship with the other firm. In a buyer-supplier
relationship, normative benevolence results in one firm’s
staying with the other firm because of a sense that it
should.
The key theme in my multi-dimensional benevolence
model is that when a firm perceives that the other firm
engages in behaviors signaling benevolence, this firm’s
satisfaction in the relationship will be increased. Thus, I
propose that concession and knowledge sharing are the
antecedents of affective benevolence. Concession refers
to one firm’s acts of declaration of its own rights to the
good of the other firm. Knowledge sharing behaviors are
defined as the frequent transfer, recombination, or creation of specialized knowledge in the relationship, where
knowledge is viewed as experience, values, contextual
information, and expert insight that provides a framework for evaluation and incorporating new experiences
and information (Grant 1996; Nonaka 1994). Relationship-specific investments, which involve the investments
that are difficult or impossible to be redeployed to other
buyer-supplier relationships, are hypothesized to be the
antecedents of calculative benevolence.
I also show that a firm’s perception of the other firm’s
benevolence will affect this firm’s satisfaction in the
relationship. Satisfaction is defined as the degree to
which a firm perceives that the other firm meets its
expectation in the relationship (Jap 2001; Jap and Ganesan
2000), and is influenced by the nature of the benevolence
a firm experiences. Generally speaking, a firm perceived
to display affects to the other firm (affective benevolence)
might be more likely to induce the other firm to feel
satisfied in the relationship than a firm perceived as
feeling obligated to care about the other firm (normative
benevolence) since normative benevolence reflects a generalized basis for concern while affective benevolence is
related to the specific relationship. Also, when a firm
perceives that the other firm is benevolent out of selfinterests (calculative benevolence), it may actually feel
less satisfied because the other firm seems to be taking the
best out of the relationship for itself.
156
In conclusion, an attempt is made in this study to
introduce a three-component model of benevolence into a
buyer-supplier context. Structural equation modeling
was used to estimate the measurements and test the
nomological validity of the model with data from a survey
of 357 purchasing managers. Empirical results support
the three-component benevolence model and show that
perceived affective and perceived normative benevolence
are positively related to satisfaction while perceived
calculative benevolence is negatively related to satisfaction. Concession and knowledge sharing are found to be
the antecedents of perceived affective benevolence, and
relationship-specific investments are found to be the
antecedents of perceived calculative benevolence. References available upon request.
For further information contact:
Qiong Wang
Department of Marketing
200B Bryan Hall
University of Florida
P.O. Box 117155
Gainesville, FL 32611–7155
Phone: 352.392.0161, Ext. 1273
FAX: 352.846.0457
E-Mail: [email protected]
American Marketing Association / Winter 2006
157
THE DETERMINANTS OF COOPERATIVE SENTIMENTS IN
BUSINESS-TO-BUSINESS PARTNERSHIPS
Niklas Myhr, American University, Washington DC
SUMMARY
Managers of today increasingly need to develop close
partnerships with their suppliers and customers. Supply
chain management researchers and practitioners see whole
sets or chains of organizations as deliberately collaborating to achieve joint goals in competition with other supply
chains. At the same time, managers also struggle to better
understand and to identify the most effective means of
developing such partnerships. In this regard, one key
consideration is that collaboration involves both tangible
manifestations of cooperative behaviors and intangible,
cooperative sentiments that partners hold toward one
another (cf., Alter and Hage 1993). While cooperative
behaviors can be evident in a supply chain relationship
even in the absence of strong degrees of cooperative
sentiments, the emergence of truly collaborative partnerships requires the presence of cooperative sentiments in
the relationship. In particular, a growing consensus among
academics holds that the two cooperative sentiments of
relationship commitment and trust are to be considered
fundamental building blocks of partnerships (cf., Morgan
and Hunt 1994).
•
•
Relationship commitment refers to the degree to
which partners demonstrate a desire to develop a
stable relationship, a willingness to make short-term
sacrifices to maintain the relationship, and a confidence in the stability of the relationship (Anderson
and Weitz 1992).
Trust is the degree to which partners perceive each
other as credible and benevolent (cf., Doney and
Cannon 1997; Ganesan 1994; cf., Kumar et al.
1995).
In spite of the expected interrelationship between
relationship commitment and trust (Achrol 1991), this
study still considers these constructs as distinct from each
other since they tap into different interorganizational
phenomena. A multitude of studies conceptualizing close
interorganizational relationships supports this idea (Dwyer
et al. 1987; Mohr and Spekman 1994; Morgan and Hunt
1994; Wilson 1995). One characteristic that the cooperative sentiments of relationship commitment and trust
share is that they represent incremental processes (Morgan and Hunt 1994) that partners cannot achieve overnight. Factors influencing such incremental processes as
relationship commitment and trust can broadly be di-
American Marketing Association / Winter 2006
vided into intraorganizational and interorganizational
determinants. Intraorganizational determinants represent characteristics of the individual organizations that
make up the relationship. Such factors include cultural
dimensions (e.g., Hofstede 1984), senior management
support (Ellram 1991; Stuart 1993), incentive system
orientation (Narus and Anderson 1995; Wilson 1995),
and variables measuring the intraorganizational structures or bureaucratic orientations (Spekman and Stern
1979; Zaltman, Duncan, and Holbek 1973).
Interorganizational determinants, on the other hand,
are characteristics of the relationships themselves which
support or hinder the development of cooperative sentiments in the relationships. This study introduces a conceptual framework regarding the respective roles of three
such determinants in fostering relationship commitment
and trust:
•
Relationship interdependence is the degree to which
two partners are mutually dependent on their particular relationship (Anderson and Narus 1990).
•
Participative decision making is the degree to which
partners provide input to each other’s decisionmaking processes, including idea generation, decision-making involvement, and goal formulation (cf.,
Dwyer and Oh 1988).
•
Face-to-face interaction is the degree to which partners communicate face-to-face.
Empirically, most of the conceptual framework’s
hypotheses were confirmed in a sample of supply chain
relationships of international subsidiaries of Nordic multinational corporations. The finding of a strong relationship between relationship interdependence and relationship commitment indicates that business-to-business relationships with higher degrees of mutually felt relationship dependence have the potential to develop more
highly committed partnerships. A business can increase
the degree of relationship interdependence in an existing
business-to-business partnership by working closely together with its partner because this will grow the number
of interdependent structures and processes in the relationship. Results also suggest that participative decision
making is a strong determinant of relationship commitment. Participative decision making tends to enhance
managers’ feelings of ownership of the fates of particular
158
business-to-business relationships that these managers
have been involved in (Saxton 1997). Participative decision making also appears to determine the degree of trust
in the relationship. This effect can be explained with the
increased levels of comfort that parties feel if they are
actively involved in organizing the relationship (cf.,
Saxton 1997).
Face-to-face interaction did not have a positive relationship with trust as was expected. One explanation for
this finding could be that the measure of face-to-face
interaction was primarily concerned with the intensity of
face-to-face interaction, and not the quality thereof. Simply placing representatives from different companies in a
meeting room does not necessarily generate trust. In fact,
too much contact can be counterproductive because it
overloads the managers involved (Guetzkow 1965; Mohr
and Nevin 1990). Because participative decision making
processes result in trusting business-to-business partnerships, businesses can spend less time and effort to monitor
that the counterpart is doing its part. Instead, once
decisions relevant to the partnership are made, partners
can focus on carrying out their respective activities.
References available upon request.
For further information contact:
Niklas Myhr
Kogod School of Business
American University
4400 Massachusetts Ave NW
Washington, DC 20016–8044
Phone: 202.885.1971
FAX: 202.885.2691
E-Mail: [email protected]
American Marketing Association / Winter 2006
159
THE INTERNET: LEVELER OR DIVIDER? A CULTURAL
CAPITAL PERSPECTIVE
Esther Smith-Mitchell, Procter & Gamble, Singapore
Chris Dubelaar, Monash University, Australia
ABSTRACT
Past contentions that the Internet will eliminate
divisions between those of high cultural capital and low
cultural capital (Bourdieu 1984) are examined in this
research. We use a grounded theory approach using a
sample of 10 respondents from within a limited demographic profile to demonstrate that those of high cultural
capital use the Internet quite differently from those of low
cultural capital. Our research provides evidence for two of
the six dimensions of taste suggested by Holt (1998).
These differences in use reproduce, reinforce, and exacerbate the extant differences between high and low cultural capital consumers.
INTRODUCTION
The Internet has in recent literature been conceptualized as an egalitarian medium for communication and
consumption. In theory, the Internet should provide all
users with an equal voice and hence break down the
cultural barriers present in conventional media. Stein
(1995, p. 39) argues that only technologies that improve
conditions will survive.
However theories of the Internet as “the great leveler” are increasingly naïve, as the gap between technological “haves” and “have-nots” continues to grow (Azari
and Pick 2005). As consumers use the Internet, they do
not abandon their cultural norms. Rather, these norms
shape the way the Internet is consumed, and so social
division is perpetuated and potentially exacerbated
(Snyder, Angus, and Sutherland-Smith 2002; Stanley
2003). This division can be explored by applying the
model of cultural capital to the consumption of technology.
The theory of cultural capital as an asset for which
people compete and which they exchange was introduced
in the Parisian context (Bourdieu 1984) and reapplied by
Holt (1998) to American consumption. Bourdieu conceptualizes consumption as a status game whereby the individual seeks to compete for cultural capital, by consuming
in a manner that will distinguish him/her from other
members of his/her social class (Bourdieu 1984; Holt
1998). Cultural capital can be generated through consumption in many areas, called “fields” by Bourdieu
(1984).
American Marketing Association / Winter 2006
This article demonstrates that the Internet is not an
egalitarian domain but simply a new type of competitive
field, in which consumers with cultural capital seek to
acquire status. Conversely, those with less cultural capital
struggle to adopt the Internet successfully into their lives
and hence are disadvantaged (Snyder et al. 2002). We
explore in detail the ways this inequality is played out
through the consumption of the Internet.
LITERATURE REVIEW
Pierre Bourdieu’s Theory of Capital
Bourdieu’s Distinction (1984) presented a model of
social organization whereby, according to Holt (1998),
individuals compete for various types of capital in the
“multidimensional status game” (p. 3) of consumption.
As shown in Figure 1, these types of capital are: economic
capital (as defined in Section 2.2.1); social capital, which
is an individual’s network of social memberships; and
cultural capital, which is the possession of cultural refinement that permits complex meanings of consumption to
be appreciated. By engaging in this competition, individuals seek to raise their status, termed symbolic capital
by Bourdieu (1984).
Bourdieu conceptualises consumption as a status
game in its own right, distinct from the status held by
individuals in other areas such as work, religion and
politics. In the game of consumption, the individual seeks
to compete for cultural capital by consuming in a way that
will distinguish himself/herself from other members of
his/her social class (Bourdieu 1984; Holt 1998). It is not
only the object of consumption (see Veblen [1899] 1970)
that provides this distinction, but the meaning attached to
the consumption behaviour.
Cultural Capital and the Field of Technology
Cultural capital can be generated through consumption in many areas, which Bourdieu (1984) calls “fields.”
A field is an institutional domain within which an individual may develop and exchange cultural capital.
Bourdieu’s (1984) context of Paris’ elite society in the
1960s led to a predominant focus on the field of legitimate
arts, while Holt’s (1998) revision of Bourdieu’s theory of
tastes for contemporary America that “the arts constitute
only a small fraction of the universe of consumption fields
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FIGURE 1
Bourdieu’s Model of Capital
Symbolic Capital
Cultural Capital
Social Capital
that can be leveraged for social reproduction” (p. 6) and
that food, fashion, sports and hobbies are all areas in
which America’s social elites readily compete for cultural
capital.
Recent literature has introduced technology as a
consumption field in its own right. Technology plays a
significant role in the delivery of many consumers’
leisure and occupational activities (Aitchison, McDonald,
Merkel, Ravenscroft, and Whannel 1998) and Leung
(2002) explains that in the diffusion of technological
skills in the workplace, employees compete for status by
exchanging their cultural capital (exclusive knowledge
about technology) for social capital (peer and management appreciation of their skills). Rojas et al. (2002)
support the idea of the “techno-field” as an arena of
competition for skills (e.g., education) and resources
(e.g., employment) – that is, for cultural capital (p. 7).
This provides support for the implication that the use
of technology can be defined as a field of consumption
within which cultural capital can be generated. However,
this playing field is uneven. What is it that makes some
individuals consistently develop more cultural capital
than others? To explain this, it is necessary to explore the
concept of habitus.
The Transfer of Cultural Capital and the Habitus
Rojas et al. (2002) explain the tendency for members
of higher social classes to be better at competing for
cultural capital because they have a “certain knowledge
and recognition of the stakes in the field” (p. 7). To
explain this, Bourdieu (1984) introduces the concept of
“habitus.” Habitus is a “feel for the game,” or how the
individual perceives his/her role in society.
The development of the habitus introduces the idea of
socialisation, as the habitus, along with the parents’
accumulated cultural capital, is passed down as a cultural
inheritance from parent to child (Bourdieu 2000). Unlike
American Marketing Association / Winter 2006
Economic Capital
cultural capital, however, habitus cannot be learned; it is
embodied (Reay 1995). With few exceptions, individuals
maintain their habitus throughout their life.
When referring to the meanings of technology consumption, habitus refers to one’s expectations, aspirations, and attitudes toward technology that influence the
consumption and understanding of that technology
(Kvasny and Truex 2000). Consumers not only make
consumption decisions according to their habitus, the
meaning of that consumption decision is shaped by their
habitus (Holt 1998, p. 3). That is, it is the habitus that
shapes the consumption meanings that form cultural
capital.
To give an example of this rather complex interrelationship, Rojas et al. (2002) explain the scenario of
technology in the lives of low income students, whose
class habitus deems computers as not being socially
acceptable. This social predisposition to avoid computers
translates to decreased engagement with technology and
subsequently reduced cultural capital in the field of
technology (p. 23).
Cultural capital is the possession of cultural refinement that permits complex meanings of consumption to
be appreciated. Cultural capital is generated within fields
of consumption and one’s predisposition toward the
attainment of cultural capital is moderated by the habitus,
which is inherited from one’s parents.
Holt’s Dimensions of Taste and Technology
Holt (1998, p. 1) proposed six dimensions of taste for
consumers with low versus high cultural capital resources: material versus formal aesthetics, referential
versus critical interpretations, materialism versus idealism, local versus cosmopolitan tastes, communal versus
individualist forms of consumer subjectivity, and autotelic versus self-actualising leisure. In order to clearly
demonstrate these dimensions, he gave examples from
161
research of participants in the top quintile of cultural
capital resources (hereafter HCC) and those in the lowest
quintile (hereafter LCC).
Cultural capital rating = (Father’s education + father’s
profession)/2 + respondent’s education + respondent’s
occupation.
Concurrently, Mick and Fournier (1998) researched
the paradoxes that technology consumption brings into
the homes of consumers. The authors claim that in some
instances, technology can have a counter effect to what
was originally intended. In order to manage these paradoxes of technological consumption, consumers adopt
different coping strategies. While they are interesting in
their own right, the paradoxes do not directly address how
cultural capital affects technological consumption and
therefore are outside the scope of this study. For further
reading, Mick and Fournier’s (1998) research provides
numerous interesting examples from which instances of
cultural capital about technology can be inferred.
Each item is assigned on a five point scale (see
Table 1); hence the highest attainable CC rating is 15 and
the lowest, 3.
Kates and Dubelaar (2002) noted that paradoxes of
technological consumption are more likely to occur in low
cultural capital (hereafter LCC) than high cultural capital
(hereafter HCC) homes. Kates and Dubelaar conceptualized cultural capital around technology as referring to
“the skills and knowledge embodied by consumers in
their consumption of technological products” (p. 12).
The literature offers preliminary evidence that some
relationship exists between cultural capital and consumption of the Internet. The purpose of this research is to
clarify the nature of this relationship, using a qualitative
methodology as described below.
METHOD
This study used the grounded theory method of
theory induction (Glaser and Strauss 1967), comprising
long interviews (McCracken 1988) as a means of allowing respondents to provide detailed descriptions of their
attitudes and behaviours around technology, without
being limited by the researcher’s a priori categorization
(Fontana and Frey 1994). Data collection spanned a two
month period and ten interviews were held at the
respondent’s home, in front of their personal computer.
This method provided enrichment of the data, as respondents were able to reinforce their answers with tangible
examples in real time. Interviews ranged in duration from
30 to 100 minutes, with most lasting about 45 minutes.
Extensive field observation notes supplemented the taped
interview transcripts, due to the importance of identifying
environmental cues such as the area in which the computer was set up and the respondent’s home décor (see
Holt 1998).
Respondents were pre-screened for their cultural
capital rating, using the scale proposed by Holt (1998).
Cultural capital is calculated as:
American Marketing Association / Winter 2006
Only respondents with very high (above 13) or low
(below 8) cultural capital were interviewed to provide
clear distinctions. A number of constraining variables
were applied to the sample to ensure that cultural capital
was the primary variable being explored. First, respondents who self-reported high and low levels of technological skill were selected among both the HCC and LCC
groups. To constrain variations due to technological
access and ownership, all respondents were primary or
purchase decision makers and users of the Internet technologies (hardware, software, and connectivity) that
formed the interviews’ contexts. Further, the sample was
demographically constrained: all respondents were aged
between 24 and 31, had approximately equal access to
financial resources (through their own and/or a partner’s
income) and resided in the upper-middle class suburbs of
a large Australian city (see Table 2). The findings that
follow consider how cultural capital impacts the consumption of technology and the meanings associated with
its consumption.
FINDINGS
If cultural capital affects how the Internet is consumed, then evidence of Holt’s (1998) dimensions of taste
must be visible in the data. While Holt’s model contains
six dimensions, we have chosen two for explicative
purposes. They are: material versus formal aesthetics and
referential versus critical interpretations. Each of these
dimensions of taste is discussed in detail below.
Material versus Formal Aesthetics
Bourdieu (1984, p. 177) notes that the tastes of LCCs
are centred around the “taste of necessity” and so they
develop functional aesthetics. In contrast, HCCs rarely
experience material difficulties and so consumption becomes a domain for self-expression (Holt 1998, p. 8).
Evidence of this proposition was found in respondents’
reported consumption of the Internet. The LCC respondents emphasised that they do not view the Internet as an
experience in its own right and deliberately avoid using
it for non-functional purposes.
[Natalie, LCC]: I’m not one of these people to search
through the Internet. I’m not one to just think of
something, like I dunno, dolphins, tap in and off they
go. Like some people can really spend hours on the
Internet.
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TABLE 1
Holt’s Cultural Capital Rating Scale
Rating
1
2
3
4
5
Father’s
education
High school
or less
Some college
B.A.
Masters/some
graduate school
PhD or elite B.A.
(i.e., from a
prestigious
university)
Father’s
profession
Unskilled or
skilled manual
labor
Unskilled or
skilled
service/clerical
Sales, low-level
technical, lowlevel managerial
High-level
technical, highlevel managerial
and low cultural
(e.g., primary or
secondary school
teachers)
Cultural producers
Education
High school
or less
Some college
B.A.
Masters/some
graduate school
PhD or elite
B.A. (i.e., from a
prestigious
university)
Occupation
Unskilled or
skilled manual
labor
Unskilled or
skilled
service/clerical
Sales, low-level
technical, lowlevel managerial
High-level
technical, highlevel managerial
and low cultural
(e.g., primary or
secondary school
teachers)
Cultural producers
[Kirsten, LCC]: I conceive it as a work tool; I’m not
really into the whole Internet world in terms of
interaction. . . .
The Internet is not only a tool for HCCs; it is also a
gateway to a broad range of opportunities, permitting
self-expression and an escape from conventionality:
The resistance LCCs show to the idea of an “Internet
world” is indicative of their unwillingness, or inability, to
engage with the technology and therefore the social
equalisation the Internet is purported to enable.
[John, HCC]: . . . it’s like a portal in a sense that
through that, I experience sound, vision, connectivity with experiences and people.
This contrasts sharply with HCC respondents who
reported the functional aspects of the Internet as the least
of its capacity, or “hygiene.” Where the Internet was
conceptualised as a tool, as by Adam, the focus tended
towards facilitation and provision of new opportunities.
[John, HCC]: Internet banking and other stuff that
wouldn’t be worthy of making it into – “oh I spend
that much time a week” . . . it’s hygiene.
[Adam, HCC]: It’s a facilitating tool for me, so it’s
automating a lot of things that I couldn’t normally
do.
American Marketing Association / Winter 2006
[Matt, HCC]: I think the fact that you can access
virtually any information or opinion on information
or just culture on line for free is fantastic.
[Adam, HCC]: A wide variety of potential sources.
It’s not just the mainstream message that media,
governing bodies might want you to have.
The HCC respondents describe using the Internet in
the Utopian fashion it was conceived; as an opportunity to
exchange ideas freely and be connected to a much broader
community. In addition, other HCC respondents noted
that the Internet assists their self-expression by facilitating consumption of the rare and unusual:
163
TABLE 2
Respondent Characteristics
Pseudonym Gender
Belinda
Adam
John
Cathy
Matt
Robert
Kirsten
Lucy
Simon
Natalie
F
M
M
F
M
M
F
F
M
F
Age
24
30
31
23
29
30
25
27
28
24
Occupation
Architect
IT Consultant
IT Project Officer
Academic research
Public Servant
Software developer
Photo lab technician
Administration
Security operator / DJ
Hairdresser
[Cathy, HCC]: For example I collect certain things
and I start looking for suppliers and how I can
actually get it here in Melbourne. Basically I can’t so
I have to do some arrangements and they get it sent
over.
[Belinda, HCC]: . . . say I decide I want to pick up a
new craft, so I look for something peculiar, like just
earlier I saw a rug for sale on eBay and I thought “I
could make that,” so I just did a search on rug
hooking and read up on the equipment I might need.
HCCs are capable of moving beyond functionalism
and using the Internet as a way of expressing themselves,
both through ideas and the ways they consume. LCCs do
not have this capacity; there is an unspoken barrier that
stops them from engaging with the same enthusiasm.
Whereas LCCs view the Internet as a means to achieve
functional tasks, HCCs perceive it as a means of selfexpression and facilitating an abundance of experiences
(in addition to its hygiene role as a functional facilitator).
Referential Versus Critical Interpretations
Holt (1998, p. 9) notes that HCCs have a higher
ability to critique mass cultural texts such as books,
television, film, and music, whereas LCCs are more likely
to accept such texts as “truth.” This is evidenced by LCC
respondents’ willingness to rely on the Internet as a single
source of information, subsuming traditional sources:
[Simon, LCC]And it’s all your news and information, you can do research where before that the only
time you could get a lot of that stuff was in
American Marketing Association / Winter 2006
CC
CC
Rating
Internet
Exposure
(at home)
PC
Exposure
(at home)
HCC
HCC
HCC
HCC
HCC
LCC
LCC
LCC
LCC
LCC
14
13.5
13.5
13.5
13
7.5
7.5
6
4
3
6 years
5 years
12 years
8 years
1 year
9 years
4 years
5 years
4 months
5 years
7 years
16 years
19 years
14 years
24 years
22 years
7 years
13 years
4 months
8 years
encyclopaedias or libraries where you can do it now
just with the click of a button.
[Lucy, LCC]: I probably would use the internet
because you can just go on the net, put a word in the
search [engine] and find out something.
For LCCs, the Internet does not represent a broadening of sources; it simply provides a more convenient
means of accessing information. This implies that LCCs
are willing to trust what they read online (spending much
less time on the search task than the HCCs). On the other
hand, HCC respondents noted a strong degree of caution
in trusting information on the Internet and indicated a
mixed-media search approach to ensure the information
was reliable.
[John, HCC]: What I would actually do is a combination of Internet search first, followed by calling
people up.
[Adam, HCC]: I’d probably use the lyrics sheet from
the CD cover if I had it accessible and compare it to
an on line search.
[Belinda, HCC]: Library, bookshops, people. Walking around and picking up pamphlets.
HCCs seek to supplement information found online
with a variety of other sources. One reason for this may be
the scepticism HCC respondents demonstrated towards
the Internet’s credibility as a source. For example, John
notes that the freedom of speech that the Internet facilitates creates a situation where there are varying degrees
of credibility across the media:
164
[John, HCC]: Because in a market where there’s
potentially infinite choice, there’s also infinite voices
and they’re not all the same kind of voices.
John is cognisant that the Internet is not to be trusted
wholesale. Adam, another HCC, was hesitant to trust the
validity of a site that did not offer a source for its
information. Reassurance in this instance comes through
the provision of a means to check information against a
recognisable source:
[Adam, HCC]: . . . but there’s certainly nothing to
reassure me of the validity of the information, there’s
no source mentioned.
When searching online, Adam seeks to apply a
nuance of his cultural capital that dictates the necessity
for a referenced source. Belinda has a different approach
to assessing credibility: here she explains the critical
thinking process she applies to the Internet, where she
considers the merits of each idea before adopting them as
her own:
[Belinda, HCC]: . . . you know that not everything
you read is truth . . . you’re not just copying people’s
ideas, you’re reading it and deciding if you think it’s
the truth and then you insert it into your work.
HCC respondents demonstrated that they knew not to
trust the Internet and they had several strategies to
overcome this mistrust. LCC respondents also expressed
a mistrust of the Internet, but had not developed coping
strategies. Natalie notes her mistrust of the Internet:
[Natalie, LCC]: You can get misled but you can do
that in [other] media and everything [too].
Like Belinda above she notes that media of all types
can be misleading, but expresses this with a hint of
resignation toward the fact, unlike Belinda who has
developed a means of coping. Also unlike her HCC
counterpart, Natalie later demonstrated acceptance of
information that she found online as a sole information
source:
[Natalie, LCC]: Because this is on another web site
that I have come to. I have seen it on another web site
so it is sort of confirming it for me with this.
Natalie does not apply the sort of rigour demonstrated by the HCCs; seeing the information on two
websites is enough to confirm its accuracy to her. This
rapidity of trust is echoed by Kirsten, who cannot fathom
why an online camera merchant would have misleading
information on a website:
American Marketing Association / Winter 2006
[Kirsten, LCC]: Because it’s sort of just camera
specs, there’s no reason for them to lie about it.
Kirsten is willing to trust online retailers; a sharp
contrast to the HCC John, who calls several “bricks and
mortar” stores before making a purchase online to ensure
he’s getting the best price. Lucy appeared conflicted on
the issue of trustworthiness. On the one hand she had
learned from personal experience that the Internet is not
necessarily a legitimate source:
[Lucy, LCC]: It’s just something like I think because
it is over the Internet, the thing I learnt from experience is there’s no credibility in the Internet and I
think that’s my hesitation . . . I think you just have to
be aware that they are not necessarily, what you see
on the Internet is necessarily legit.
On the other hand, despite past negative experiences
Lucy regularly uses the Internet for major purchases such
as accommodation and airfares and relies on the cost of
establishing such a website as protection from being
misled:
[Lucy, LCC]: I guess that most of the people who
would put up websites probably have to have a bit of
money to pay someone in the first place.
Despite a shared sense of scepticism towards the
Internet and the broader media, it is seems that LCC
consumers are more accepting of the Internet than their
HCC peers. In particular, while LCCs are willing to rely
on the Internet as truthful, HCCs tend to compare various
online and offline sources before drawing conclusions.
Further, while HCCs have coping strategies in place to
assess a website’s credibility, LCCs are not so confident
(for a comprehensive discussion of technological coping
strategies, refer to Mick and Fournier 1998).
SUMMARY OF CULTURAL CAPITAL’S
EFFECT ON MEANINGS OF THE INTERNET
As the two dimensions of taste above demonstrate, an
individual’s level of cultural capital directly and profoundly impacts upon the way the Internet is consumed.
For our LCC respondents, the Internet is merely a functional tool – one which is used with a degree of hesitation,
even reticence. In stark contrast, HCC respondents revel
in the opportunities the Internet provides; for them it is a
means of self-expression, allowing a high degree of
variety, and a strong ability to critique website content.
Clearly, the Internet is not the great social leveler it
was hoped to be. While HCCs’ lives are enriched by
Internet access, LCCs struggle to find meaningful ways to
165
incorporate it into their lives. Access to technology plays
no part in the inequality, since all the respondents had
equivalent access to technology and education, yet for
LCCs, this does not translate into meaningful and empowering experiences. Inequality on the Internet is therefore a much broader issue than simply one of possession
of the physical manifestations of the technology. Rather,
the social division that underpins our society is both
replicated and substantially reinforced in this new medium.
The implications of this social division are potentially broad. If the Internet is intended to promote egalitarianism, then governments must specifically address
the inequality by providing not only access, but technological education, to LCCs from school age. By teaching
children how to read the Internet critically, they will be
better prepared to adopt the technology meaningfully in
adult life. Similarly, online marketers should address
LCC barriers to Internet adoption by employing integrated marketing communication strategies, using more
familiar media to educate and inform.
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American Marketing Association / Winter 2006
166
For further information contact:
Chris Dubelaar
Department of Marketing
Monash University
P.O. Box 197
Caulfield East, VIC 3145
Australia
Phone: ++613.9903.1580
FAX: ++613.9903.1558
E-Mail: [email protected]
American Marketing Association / Winter 2006
167
HEDONIC AND UTILITARIAN DIMENSIONS OF ONLINE RETAIL
SHOPPING BEHAVIOR: DOES DISABILITY MATTER?
William J. Jones, University of Kentucky, Lexington
Terry L. Childers, University of Kentucky, Lexington
Carol Kaufman-Scarborough, Rutgers University, Camden
SUMMARY
Consumers with disabilities use the Internet for
shopping much less than consumers without disabilities.
This finding is saddening given web-based technology’s
potential to facilitate shopping independence for consumers with disabilities. Consider that a consumer with a
mobility disability who shops at a traditional retailer is
likely to encounter narrow aisles, inaccessible products
atop high shelves, and service personnel who are too
poorly trained to offer useful assistance. Since shopping
in e-space could remove many such physical barriers, we
would expect higher participation by consumers with
disabilities.
In this study, we draw upon the technology acceptance model (TAM), a derivative of the theory of reasoned
action (TRA), to gain further insights into the experiences of both disabled and non-disabled Internet users.
Specifically, we examine whether Internet ease of use,
usefulness, and enjoyment are perceived and experienced
similarly or differently by consumers with and without
disabilities.
In considering disabled Internet consumers, it may
be important to ascertain whether Internet shoppers with
disabilities resemble their counterparts without disabilities. Ethically, it is important to ask whether Internet
users with disabilities view online shopping more positively because they find it easier to use and more enjoyable
than non-shoppers with disabilities. Managerially, enhancing web-mediated shopping for consumers with
disabilities can potentially lead to competitive advantage
if retailers can use this to attract a loyal base of consumers
with disabilities.
The results across two samples of consumers suggest
that consumers with disabilities shop online for reasons
similar to consumers without disabilities. Moreover, utilitarian and hedonic dimensions seem to work together in
determining attitudes toward online shopping for both
groups of consumers. The results also suggest that though
the same factors influence online shopping attitudes, how
the factors work together may differ as a function of
disability status. Managerially, the implications of this
study suggest that changes to website utility and enjoyment factors will affect Internet consumers with or without disabilities, but just how that effect is felt may depend
on disability status. References available upon request.
For further information contact:
William J. Jones
455C Gatton College of Business and Economics
University of Kentucky
Lexington, KY 40506–48800
Phone: 859.257.2962
FAX: 859.257.3577
E-Mail: [email protected]
American Marketing Association / Winter 2006
168
MATERIALISM AND ITS RELATIONSHIP TO ENVIRONMENTAL
BELIEFS AND ENVIRONMENTAL CONCERN
William Kilbourne, Clemson University, Clemson
Greg Pickett, Clemson University, Clemson
SUMMARY
Industrialism, and the paradigm it spawned of an
organized system of production and consumption, produces values and beliefs that are antithetical to
sustainability. Sustainability refers to the parsimonious
existence of consumption demand with production necessary to meet that demand. In essence, in a sustainable
environment, the amount consumed could be supported
by available resources, and the depletion of those resources today would not threaten needs of future generations. Production and consumption are at the heart of this
institutionalized paradigm. Both are critical to
sustainability. However, the question of production has
been addressed at length over the past three decades and
will not be addressed here. The focus of this paper is the
problem of consumption, or more specifically, the centrality of consumption in the Western industrial lifestyle
and its role in individuals’ willingness or ability to adopt
more environmentally benign lifestyles.
The question of consumption has been addressed in
the environmental context by numerous authors (e.g.,
Capra 1982; Daly 1991). All have argued from a conceptual framework rather than an empirical one, and all have
addressed the consequences of excess consumption from
the perspectives of pollution, waste, resource depletion,
or some other physical manifestation of consumption
behavior. Few have addressed the impact of consumption
practices from the perspective of individuals and the
value structures that impact on behaviors. The purpose of
this paper is to redress this deficiency by examining the
role of certain consumption patterns and the values that
drive them in the formation of environmental beliefs and
the expression of environmental concern. We will first
develop the framework within which materialistic consumption will be examined. It is certainly true, for
example, that all types and levels of consumption are not
equally complicit in environmental degradation. Green
marketing efforts have, for example, been well substantiated in the marketing literature. Even advocates of limits
to economic growth (Daly and Townsend 1993) argue
that differentiated growth for citizens of the third world,
condemned to poverty, ought to have their consumption
increased to humane levels. Daly and Townsend (1993)
further argue that this is a necessary condition for global
sustainability. We concur with the necessity of this type of
differentiated growth. The type of consumption to be
American Marketing Association / Winter 2006
examined here, however, falls within the rubric of materialism.
Materialism is a value structure whereby individuals
seek more than instrumental or use value from the goods
they acquire. They seek relationships with the objects of
consumption through which their identity is formed and
their well-being enhanced. This conceptualization of
material possessions can be traced back as far as James
(1890) who suggested that one’s identity is the sum of all
they possess. Materialism can thus be seen as a multifaceted construct relating individuals to the goods they
possess. Because it is so firmly institutionalized in Western societies, it can have both individual and social
consequences, and among these consequences. Prominent among these negative consequences is environmental degradation, and this is motivated by the ideology of
consumption that suggests that happiness can be found in
the consumption of material goods (Hetrick 1989). Similarly, Daun (1983) argues that individuals will begin to
organize their lives around material possessions. This
reordering of life’s priorities has significant implications
for society, and it has been characterized as a “dark side”
variable in the marketing process (Mick 1996). Specifically, the collective consequences of individual consumption behaviors have negative environmental consequences.
The purpose of this study is to determine if materialistic values, have effects on individuals’ beliefs about
environmental problems and environmental concern. A
simple causal model can be developed that depicts individual values and their effect on both environmental
beliefs and environmental concern. Additionally, environmental attitudes and beliefs have been linked to a
positive effect on concern. However, the specific value of
materialism has not been examined directly as a contributor to environmental decline.
To test the model proposed, a random sample of U.S.
adults was conducted resulting in a sample size of 318.
The final sample closely approximated the demographics
of the U.S. population. Materialism was measured using
Richins and Dawson’s (1992) scale that defines materialism as a three dimensional construct (happiness, success,
and centrality), though only two dimensions were evident
in this study. Happiness and success emerged as a single
construct. The results of the analysis indicated that centrality influenced both environmental beliefs and envi-
169
ronmental concern negatively. Happiness/success influenced environmental concern negatively but only marginally, and it did not influence environmental beliefs. As
is typically the case, environmental beliefs had a positive
and significant effect on environmental concern.
The policy implications of the results are significant.
It has consistently been demonstrated that belief in environmental problems increases one’s concerns. It is then
assumed that this will lead to behavior changes. The
results of this study indicate that beliefs in the efficacy of
materialism diminish the link between beliefs and concerns by diminishing both beliefs and concerns directly.
Thus, as policies are implemented to increase environmental concern, their effectiveness is dampened by beliefs in materialism. Thus any policy tools ought to take
into consideration the materialistic lifestyle in how they
are developed. References available upon request.
For further information contact:
William Kilbourne
Department of Marketing
Clemson University
Clemson, SC 29634
Phone: 864.656.5296
FAX: 864.656.0138
E-Mail: [email protected]
American Marketing Association / Winter 2006
170
CULTURAL COMPETITIVENESS, MARKET RESPONSIVENESS,
AND PERFORMANCE: THE INFLUENCE OF
STAKEHOLDER ORIENTATION
Tracy Gonzalez-Padron, Michigan State University, East Lansing
SUMMARY
Companies are increasingly under scrutiny for business practices affecting the economic, social, and environmental well-being of the organization’s stakeholders.
Marketers seeking competitive advantage for their firms
in this confrontational climate may need to reassess their
organization’s focus on the culture-based factors of “cultural competitiveness” – the degree to which an organization is predisposed to detect and fill gaps between what the
market desires and what is currently offered (Hult et al.
2002). This paper proposes a conceptual framework that
integrates stakeholder theory and cultural competitiveness to explore the influence of proactive attention to
stakeholder interests on the firm’s market responsiveness, business outcomes and performance.
Organizations focused on “cultural competitiveness”
are dedicated to learning about, being innovative in, and
taking responsible advantage of the current and latent
needs existing in the marketplace beyond that of traditional market-oriented organizations that largely focus
on the customers. The four orientations that make up a
firm’s cultural competitiveness are market orientation,
learning orientation, innovativeness orientation, and entrepreneurial orientation. The interaction of the four
factors of cultural competitiveness can provide insight to
the firm responsiveness to meet market desires and
achieve firm performance objectives.
However, organizations are under increased global
pressure to pay attention to stakeholders such as employees, the community, and the environment. Global companies are experiencing demands to contribute to the economic development, as well as improve the quality of life,
of the workforce and community. The stakeholder theory
of the firm argues that all persons or groups with legitimate interests in an enterprise do so to gain benefits, and
that managerial attention to these stakeholders’ interest
are critical to success (Berman et al. 1999; Donaldson and
Preston 1995). Stakeholder activities may affect the ability to achieve a firm’s objectives, while the firm’s decisions can affect the well-being of its stakeholders. Frooman
(1999) identifies various stakeholder influence strategies
to obtain desired actions from a firm, including consumer
boycotts as that against StarKist to change tuna fishing
practices. Stakeholder orientation refers to the extent to
which a firm understands and addresses stakeholder
American Marketing Association / Winter 2006
demands in daily operations and strategic planning
(Maignan and Ferrell 2004). Organizations displaying
high stakeholder orientation recognize the needs and
expectations of various stakeholders.
Marketers are in a prominent position to include
stakeholder concerns in strategic planning and promote
corporate social responsibility practices within the firm
(Maignan and Ferrell 2004). The experience of marketers
in developing customer relationships may be extended to
establishing relationships with other stakeholders. Additionally, marketing decisions about product production,
introduction, and promotion can unintentionally harm
consumers, society, or other stakeholders (Fry and
Polonsky 2004).
This leads us to consider the influence stakeholder
orientation has on market orientation, learning orientation, innovativeness orientation, and entrepreneurial orientation. What is the influence of diverting managerial
focus to include how business practices affect the economic, social, and environmental well-being of the
organization’s stakeholders? How does expanding the
view of the marketer increase market responsiveness?
Does spending resources on prioritized stakeholder concerns affect firm performance?
The conceptual framework examines the moderating
influence of stakeholder orientation on an organization’s
market responsiveness and performance. Market responsiveness includes activities relating to market selection,
new product development, and distribution and promotion of products and services for greatest stakeholder
satisfaction (Kohli and Jaworski 1990; Matsuno et al.
2002). Business outcomes include social outcomes (employee satisfaction, employee loyalty, and reputation),
market outcomes (customer satisfaction, customer loyalty, and desired market share), and financial performance. Examining the degree of managerial attention on
stakeholders will provide insight into the appropriateness
of corporate social responsibility strategies. Carroll (1979)
provides four philosophies that organizations adopt in
addressing stakeholder issues – reactive, defensive, accommodating and proactive. Our framework proposes
that a proactive stakeholder orientation enhances the
affect of the firm’s market, learning, innovativeness and
entrepreneurial orientations on the responsiveness to
market needs. Reactive or defensive approaches do not
171
influence market responsiveness, yet can influence business outcomes and financial performance.
This paper provides a perspective beyond a customer
and competitor orientation to include other industry
stakeholders. The research questions and framework
presented are useful to examine how a stakeholder orientation can positively influence the relationship between
cultural competitiveness of the firm and responsiveness,
business outcomes, and financial performance.
For further information contact:
Tracy Gonzalez-Padron
The Eli Broad College of Business
Michigan State University
N370 North Business Complex
East Lansing, MI 48824–1122
Phone: 517.432.5535, Ext. 281
FAX: 517.432.1112
E-Mail: [email protected]bus.msu.edu
American Marketing Association / Winter 2006
172
COMPETITIVE STRATEGY AND PRODUCT LIABILITY:
CONSEQUENCES FOR INTERORGANIZATIONAL
RELATIONSHIPS
Karl A. Boedecker, University of San Francisco, San Francisco
Jack J. Kasulis, University of Oklahoma, Norman
Fred W. Morgan, University of Kentucky, Lexington
Jeffrey J. Stoltman, Wayne State University, Detroit
SUMMARY
The past three decades have been marked by interest
in developing collaborative interorganizational relationships and associated governance mechanisms. Distribution channel systems and their governance mechanisms
have evolved in response to several factors, including
fluid market conditions, intense competition, changing
technologies, and internationalization of markets.
These interorganizational arrangements focus on
market access, operating efficiencies, and technology
synergies that are difficult, perhaps impossible, for one
firm to achieve. However, environmental change frequently promotes adaptation in the law and its application
that, in turn, affects the behavior of organizations. For
example, as marketing practices became more complex,
the legal system adapted to the challenge. During the
early 1900s, courts relaxed the requirement that consumers have contractual relationships with manufacturers in
order to recover damages because harmful products were
increasingly being purchased from retailers instead of
directly from manufacturers. Starting in the 1960s, courts
moved to a strict liability standard because consumers
encountered difficulties in proving negligence on the part
of remote manufacturers. Similarly, we believe an outcome of the growth in popularity of interfirm cooperation
is an eventual increased exposure to product liability
litigation. Tort reform efforts, addressing such issues as
limits on jury awards and shorter deadlines for filing
claims, will not lessen this exposure even if new statutes
withstand constitutional scrutiny.
New collaborative marketing relationships create
special product liability considerations regarding which
entity within the relationship is responsible for product
liability claims. The concept of enterprise liability provides an appropriate framework to address these collaborative relationship issues. An underlying premise of
enterprise liability reasoning is that losses from injuries
should be assigned to all entities responsible for providing a harmful product or service. Enterprise liability
assumes that riskier products and services will require
higher prices, thereby shifting demand from the more
American Marketing Association / Winter 2006
risky offerings to safer substitutes. Thus, society benefits
as a result of the incentive to provide cost-justified safety
features or at least through an established means to
compensate victims of product-related accidents. As the
legal system gradually recognizes and responds to a
channel environment with a higher incidence of collaborative relationships, we expect legal actions based on an
enterprise liability theory argument to increase.
Enterprise liability is an insurance concept for allocating costs of accidents based on the premise that they
generate the least economic harm if their costs are assigned to and spread across all involved entities. In a
product liability regime, enterprise liability assigns the
costs of product-related accidents to the entities marketing these products with an emphasis on facilitating
recovery, not on the appropriateness of the seller’s behavior. The reasoning is that sellers can incorporate accident
costs and the costs of increased safety into products’
prices. If buyers reject these prices, then products fail
because they cannot be made safe enough at prices that
internalize safety costs. Enterprise liability reasoning
provides the foundation for a number of long-standing
approaches to loss distribution, including no-fault insurance (e.g., workmen’s compensation programs and automobile insurance), partnership liability, and employer
liability for employee acts.
Collaboration, explicitly or implicitly, is the linchpin
for exposure to the enterprise liability argument. With
cooperation, perhaps as innocuous as an electronic data
interchange system, marketing entities may be treated as
coordinated systems in assessing product liability responsibility. Entities in discrete transaction-based relationships are more likely to be treated as having independent
responsibilities, while more collaborative relationships
may be subject to damages based on shared responsibilities. For example, outsourcing previously internal functions tends to increase legal exposure via enterprise
liability reasoning because of the exportation of quality
controls. As the U.S. marketing system has grown more
complex, primarily because of marketers’ remoteness
from consumers, courts have fashioned approaches for
injured consumers to recover.
173
TABLE 1
Evolution of Liability Perspectives
Liability
Rationale
Bases for Recovery
Comments
Contractual
(Contract
Liability)
Contract between buyer and seller
Abnormally and unusually
dangerous product
Privity of contract frustrated direct
litigation involving consumers injured
by manufacturers’ products
Sellers found ways to contract out of
liability because they wrote the contract
Fault-Based
(Negligence
Liability)
Negligence of the seller – product
need not be abnormally dangerous
Contractual relationship unnecessary
Broadened coverage by circumventing
contractual constraints, but left burden
on injured consumer to show
negligence
Inherent
(Strict
Liability)
Defective product, but not
necessarily abnormally dangerous
Responsibility regardless of
negligent behavior
Focused on redressing plaintiff’s injury,
not on proving defendant’s negligence
Addressed imbalance of power in
proving negligence
System-Wide
(Enterprise
Liability)
Enterprise concept extended to a
system
Coverage when buyers are unable to
identify which entity in a system is
responsible
Enterprise liability is an increasingly accepted legal
philosophy to respond to the complexities in today’s
marketplace and a perspective for dealing with product
liability obligations of evolving organizational formats.
Enterprise liability appears to be a solution to problems of
risk distribution, overly powerful sellers, and consumer
knowledge shortages. Enterprise liability provides a use-
ful mechanism for handling complex exchange relationships and the resultant ethical problems. In channels
characterized by power asymmetry, enterprise liability
helps to overcome the inequities that might be levied upon
the weaker channel members, particularly if powerful
channel members are the least quality conscious. References available upon request.
For further information contact:
Fred Morgan
College of Business & Economics
University of Kentucky
Lexington, KY 40506–0034
Phone: 859.257.6248
FAX: 859.257.3577
FAX: [email protected]
American Marketing Association / Winter 2006
174
RESOURCE ADVANTAGE THEORY AS A POST-CHICAGO
ARGUMENT FOR LEGAL COOPETITION: THE ROLE
OF IMPERFECT INFORMATION AMONG
COMPETING FIRMS OF AN ALLIANCE
Michael A. Levin, Texas Tech University, Lubbock
Robert E. McDonald, Texas Tech University, Lubbock
SUMMARY
Historically, the United States government has relied
less on economic theories and more on the ideology of
elected officials and regulatory bodies when deciding to
prosecute antitrust violations. For the past several decades, the United States Supreme Court has relied on a
framework advocated by the Chicago School of Economics to guide the analysis of antitrust cases. Recently, the
Court rejected some of these assumptions and philosophy
of the Chicago School (Lande 1993; Schleicher 1997).
Traditionally, many neoclassical economists viewed
collaboration among competitors as inherently negative,
because it results in collusion. The logic is that whenever
two or more competitors share information, they impede
competition, resulting in harm to consumers. The Chicago School of Economics’ assumption of perfect competition does not allow for competitors to cooperate in an
alliance in such a way as to be good for consumers. This
paper argues that alliances of competitors, coopetition,
can benefit consumers by increasing competition, lowering costs, and improving the value of market offerings
through better quality, wider variety, or lower prices
(Hamel, Doz, and Prahalad 1989; Lambe, Spekman, and
Hunt 2002; Williams 2005). Through coopetition, competing firms can offer goods and services that might not
otherwise be available, creating customer value.
REFERENCES
Hamel, Gary, Yves L. Doz, and C.K. Prahalad (1989),
“Collaborate with Your Competitors – and Win,”
Harvard Business Review, 67 (January/February),
133–39.
Hunt, Shelby D. (2000), A General Theory of Competition. Thousands Oaks, CA: Sage.
____________ and Robert M. Morgan (1995), “The
Comparative Advantage Theory of Competition,”
Journal of Marketing, 59 (April), 1–15.
____________ and ____________ (1996), “The Resource-Advantage Theory of Competition: Dynam-
American Marketing Association / Winter 2006
In rejecting the limited framework of the Chicago
School, the Court has indicated its willingness to consider
alternative views to analyze anticompetitive behavior.
We suggest that marketing should participate in this
discussion, and recommend that resource advantage theory
(R-A theory) may be a useful tool for analysis of competition for two reasons (Hunt 2000; Hunt and Morgan
1995, 1996, 1997). One, it is a theory of competition.
Two, it makes realistic assumptions, including that competition is dynamic, resources are heterogeneous and
imperfectly mobile, market entry and exit are not costless,
and supply and demand are both heterogeneous. Although R-A theory allows for the perfect competition
advocated by neoclassical economists, it considers it to be
a special case.
This paper argues for coopetition because these
alliances allow some firms to successfully compete in
markets that had been otherwise closed to them. Alternatively, market offerings can be produced more effectively
or efficiently through coopetition. When firms form these
alliances, the scope of the relationship is limited. Although these firms do share proprietary information, the
scope and depth of that information is limited to that
which pertains to the alliance. A limited sharing of
information to facilitate the operation of an alliance does
not necessarily meet the standards of collusion.
ics, Path Dependencies, and Evolutionary Dimensions, Journal of Marketing, 60 (October), 107–14.
____________ and ____________ (1997), “ResourceAdvantage Theory: A Snake Swallowing Its Tail or
a General Theory of Competition?” Journal of Marketing, 61 (October), 74–82.
Lambe, C. Jay, Robert E. Spekman, and Shelby D. Hunt
(2002), “Alliance Competence, Resources, and Alliance Success: Conceptualization, Measurement, and
Initial Test,” Journal of the Academy of Marketing
Science, 30 (2), 141–59.
Lande, II, Robert (1993), “Chicago Takes It on the Chin:
Imperfect Information Could Play a Crucial Role in
175
the Post-Kodak World,” Antitrust Law Journal, 62
(1), 193–201.
Schleicher, Tara J. (1997), “The U.S. Supreme Court’s
Use of Post-Chicago Antitrust Theory in Eastman
Kodak v. Image Technical Services: Implications for
Marketing Practice,” Journal of Public Policy &
Marketing, 16 (2), 310–18.
Williams, Trevor (2005), “Cooperation by Design: Structure and Cooperation in Interogranizational Networks,” Journal of Business Research, 58, 223–31.
For further information contact:
Michael Levin
Area of Marketing, MS 42101
Rawls College of Business Administration
Texas Tech University
Lubbock, TX 79409–2101
Phone: 806.742.3162
FAX: 806.742.2199
E-Mail: [email protected]
American Marketing Association / Winter 2006
176
SERVICES BRANDING: REVEALING THE RHETORIC WITHIN
RETAIL BANKING
Deirdre O’Loughlin, University of Limerick, Ireland
Isabelle Szmigin, University of Birmingham, United Kingdom
ABSTRACT
This paper explores the current role and challenges
associated with branding within financial services. Based
upon a qualitative study of seven financial services suppliers and 50 consumers, the research highlighted the
limited role and impact of brand-based appeals and
underlined the growing gap between brand-based expectations and service brand execution.
INTRODUCTION
Despite the commercial importance of services and
the increasing role of brand-related strategy in services
(Berry 2000), an overwhelming majority of academic
interest has been directed at products rather than services
(Turley and Moore 1995). While there is some recent
evidence of conceptual development with regard to services and services branding, there has been a lack of
empirical investigation or understanding of services branding in practice (Moorthi 2002). Debate exists in the
branding literature as to whether the principles of branding and brand building within manufactured goods should
be applied to services (de Chernatony and Dall’Olmo
Riley 1999) and it is proposed that branding adjustments
are needed to comply with services characteristics, such
that for example services brands should be adapted to
accommodate the particular services characteristics such
as intangibility, heterogeneity and inseparability (Berry
2000). It may be argued that brand development is more
crucial in services due to their intangible nature and the
difficulty in differentiating service offerings (Zeithaml
1981; Ries and Ries 2003). Despite this recent increase in
academic attention to branding issues, the branding culture in service firms, notably financial services, is not
strong. Indeed, the financial services sector which has
witnessed significant change and turbulence in recent
times, has enjoyed little success with its branding initiatives and strategies (Dea et al. 1998). The purpose of this
research study is to conduct a much called-for audit of
both consumer and supplier views on the current role and
impact of branding initiatives in retail financial services.
In doing so, we hope to address some of the existing gaps
between practitioner studies, customer perceptions, and
the high degree of rhetoric, which we propose is evident
in current services branding research. In brief, we argue
that a significant divide between services brand theory
and practice still exists; a lacuna which requires remedy.
American Marketing Association / Winter 2006
The Irish Financial Services Sector
The Irish financial services marketplace has seen
similar developments to other international environments; deregulation and technological advances are
amongst the main forces generating new competitive
pressures and turbulence on both the demand and supply
sides (Irish Banking Federation 2000; Government of
Ireland 2001). Although Irish retail banking has traditionally been significantly more concentrated than other
markets (Government of Ireland 2001), the new legislative environment has lowered entry barriers to the sector,
blurred the business boundaries between different types of
financial services and created unprecedented competition
between financial institutions. Faced with these challenges, financial service practitioners have had to reevaluate their marketing strategies and crucially assess
current approaches to the practice of financial service
brand management, within the constraints of their environment and the changing competitive marketplace.
Current Insights From Services Branding
Despite the recognition of the importance of the
brand and branding decisions in services (de Chernatony
and Segal-Horn 2003; Mc Donald et al. 2001; De
Chernatony and Dall’Olmo Riley 1999), there has been
relatively little service-specific research on this critical
issue (Van Riel, Lemmick, and Ouwersloot 2001; Moorthi
2002). While the challenges associated with the characteristics of services have been investigated, few researchers have focused on services branding issues and there has
been a tendency to conceptualize the brand in terms of
physical goods with minimal regard or reference to the
branding of services (O’Cass and Grace 2003). Consequently, many of the extant models of branding (e.g.,
Keller 1993; de Chernatony and Dall’Olmo Riley 1998),
while argued to be applicable to both goods and services,
offer little relevance or guidance in relation to services
branding issues and lack empirical testing (see O’Cass
and Grace (2003) for a recent review). Traditionally,
services research has focused predominantly on the functional aspects of services in terms of services design and
delivery, moving on subsequently to focus on symbolic
aspects of the brand (Arnould and Price 1993). More
recently, it has been proposed that services brands are
constituted by both functional and emotional values (de
Chernatony and Dall’Olmo Riley 1999; de Chernatony
177
and Segal-Horn 2003) with an additional emphasis on
physical evidence and process as a way of communicating
values.
Due to the importance in literature of the notion of the
corporate services brand (Balmer 2001; Mc Donald et al.
2001), a growing number of service companies have
embarked on a journey of positioning through the communication channel with the objective of creating strong
corporate images in order to develop relative attractiveness. More importantly, it has been recognized that the
execution of the services brand is affected by outcome and
process theories (Zeithaml et al. 1990; Berry and
Parasuraman 1991), signaling that services branding
does not just relate to what is delivered but how it is
delivered. Further, the contribution of internal marketing
has been investigated (e.g., Ballantyne 1994) as the
involvement of staff is deemed to be key in creating and
maintaining brand and service delivery standards. The
notion of the services brand has evolved to represent a
multi-dimensional concept embodying values for both
staff and customers of the organization (Dall’Olmo Riley
and de Chernatony 2000; de Chernatony and Dall’Olmo
Riley 1999). It would therefore appear that services brand
success is organization dependent, with customers and
staff interactions being of particular significance.
Despite the recognized importance of services branding, it remains an under-developed area of research and
still warrants further academic attention. While services
branding concepts have been slightly modified from
general branding theory, there is a heavy reliance on
existing branding principles and models e.g., brand image, brand loyalty, and services branding theories remain
highly conceptual in nature. Many of the services specific
branding theories emphasize the importance of the role of
staff and customer-employee interaction in the successful
execution of the services brand (de Chernatony 2001).
The relevance of these theories to current services practices must be questioned considering there has been a
significant replacement of staff by technology and in
many cases services staff have been removed altogether
from the service encounter (O’Loughlin et al. 2004).
Moreover, closer examination of the literature reveals
that much of the branding research in services is derived
from the practitioners’ perspective (e.g., de Chernatony
and Segal-Horn 2003) with the consumer’s perspective
largely missing from the literature. We argue that the
actual practice of services branding has not been investigated sufficiently and further investigation, particularly
incorporating the consumer view is called for.
area of research. Despite strong conceptual arguments for
the relative importance of brands in a financial services
context (de Chernatony and Dall’Olmo Riley 1999), there
is limited empirical evidence of the role and impact of
financial services branding in practice (Abou Aish et al.
2003). There is also confusion in the financial services
branding literature regarding the nature and role of the
financial services brand. Some researchers highlight the
importance of communicating emotional values to consumers as a way of creating uniqueness and differentiation (de Chernatony et al. 2000). Conversely, others
recognizing the pragmatic approach taken by consumers,
underline the importance of functional values and choice
criteria such as size and rate as being key (Devlin 2002;
O’Loughlin and Szmigin 2005). It would also appear that
financial service providers have not been particularly
successful in developing and projecting a unique or
differentiated brand positioning or corporate identity
(Debling 1998; Ries and Ries 2003). Further, the diminishing brand commitment displayed by a more discerning
and “loosely brand-loyal” customer is posing many questions at a strategic level for financial services (Debling
1998). Finally, in the current Internet age, the evolution
of financial services customer-supplier interaction from
face-to-face to automated has direct implications for
service brand appeals and delivery.
RESEARCH PURPOSE AND METHODOLOGY
The purpose of this research study was to explore
both consumer and supplier views on the current role and
importance of branding in retail financial services. In
doing so, we hoped to address some of the existing gaps
between practitioner studies, customer perceptions, and
branding rhetoric. The research involved both an inductive stage with managers and structured deductive stage
with consumers. A series of seven interviews was conducted with key supply-side informants connected with
the financial services sector (Table 1).
Purposive sampling allowed the selection of
interviewees based on their relevance (Denzin and Lincoln 1994; Patton 1990) as representatives of the financial services industry, facilitated through the use of a
snowballing method (Patton 1990). The data collection
continued until convergence was achieved on the themes
being reported. The interviews were transcribed and
analyzed to identify major themes and issues. The transcripts were independently coded by both researchers,
producing an acceptable level of intercoder agreement
and were subsequently discussed and agreement was
reached.
A Financial Services Branding Perspective
While the financial services sector has received
increased academic attention over the last few decades, it
continues to pose challenges for marketers as an academic
American Marketing Association / Winter 2006
An in-depth qualitative consumer study was subsequently conducted to capture consumer perspectives on
the role and importance of branding in financial services.
Structured personal interviews were chosen as the most
178
TABLE 1
Profile of Supplier Respondents
Position of Respondent
Type of Financial Institution (Irish)
CEO
Marketing Manager
Senior Consultant/General Manager (former)
Relationship Manager
Head of Investor Relations
Managing Director
Managing Director
Building Society
Building Society
Retail Bank
Retail Bank
Retail Bank
Market Research Company
Customer Services Consultancy
appropriate means of data collection for sensitive financial issues due to their superior ability to build intimacy
and delve into the respondent’s experience (Denzin and
Lincoln 1994). Questions investigating the key drivers
underlying consumer financial decision-making and behavior were posed to ascertain what role, if any brandbased appeals played. A purposive stratified sampling
method (Patton 1990) was used to recruit 50 consumers,
representing the desired range of demographic characteristics e.g., sex, age, profession, and product-related criteria. In addition, the sample was deliberately skewed to
incorporate a higher proportion of older middle and
higher income consumers, who were considered to have
higher financial usage and experience and were thus
better equipped to engage in brand-related discussions in
relation to financial services. The interviews were transcribed and analyzed using computer software NVivo
facilitating the identification and interpretation of key
themes (Maclaran and Catterall 2000).
FINDINGS: SUPPLIER PERSPECTIVES
Financial services suppliers revealed a number of
issues in the context of branding and brand management
which appear to represent major challenges. Specifically,
suppliers identified key issues in relation to the lack of
perceived differentiation between financial services providers. The CEO of an Irish Building Society classified
this issue as an “identity crisis in the industry” and
highlighted the difficulty of financial services organizations in “standing up and saying we are different.” Due to
the lack of perceived brand differentiation, suppliers
appeared further challenged to create appealing, meaningful and relevant expectations through branding activities. This was emphasized by the numerous contradictions and paradoxes that emerged in discussions. All
suppliers emphasized the importance of creating and
maintaining a strong brand but admitted that they were
not adept at branding and their campaigns had enjoyed
limited success. The CEO of an Irish Building Society
American Marketing Association / Winter 2006
emphasized this, stating, “we’re not good at branding . . .
there is a lack of debate among suppliers and a lack of
confidence among customers.” Respondents readily accepted that this lack of consumer confidence in financial
suppliers is linked to the negative reputation in the
industry as well as the failure to create credible or
meaningful brand appeals. There was also a marked
incidence of uncertainty among individual suppliers in
relation to the relative importance of the role of branding
in appealing to customers in comparison to other functional factors such as interest rates. In turn, this lead to a
mixed message internally regarding the most appropriate
branding strategy to adopt. While many suppliers emphasized that “only a minority (of customers) are really price
conscious” (MD, Customer Services Consultancy), the
emergence of a growing segment of “young, PC literate”
customers was highlighted (Head of Investor Relations,
Irish Retail Bank), who were extremely price aware and
driven primarily by interest rates. This is potentially a real
threat to banks unless they find meaningful ways to
differentiate and position themselves to this increasingly
important segment.
Further challenges were also highlighted in relation
to creating a consistent and coherent image to the customer; this, we suggest, may be categorized as the love/
hate dichotomy of banking. When discussing customer
attitudes to the bank, several suppliers used the slogan, “I
hate the bank and love the individual,” emphasizing the
positive people-related perceptions and the negative associations related to the corporation, both of which combined to create a conflict or dichotomy in relation to
overall bank image. Further complexity was highlighted
in terms of the role and success of corporate branding and
advertising. While suppliers emphasized the importance
of the “umbrella” corporate brand in creating associations
of “reassurance” and “trust,” suppliers also conceded that
“advertising slogans don’t mean anything” (CEO, Irish
Building Society) and admitted that banks were perceived
by many customers as “routine service providers” (Former
179
GM, Irish Retail Bank). The Marketing Manager of an
Irish Retail Bank highlighted the difficulty of communicating meaningful and desired images in banking in his
repeated emphasis that “it’s not like Coke,” underlining
the complexity of the financial service brand in comparison to fast moving consumer goods.
Contradictory responses abounded both between different suppliers and even within the same supplier interview, emphasizing the significance of what was variously
described as the “crisis,” “conundrum,” and “dilemma”
facing suppliers in tackling the role of branding in
creating relevant and desired appeals. A feeling of loss
was also present among suppliers evidenced by their
indecision as to the resolution of these difficulties and a
distinct lack of supplier certainty or conviction existed
regarding their likely success. The CEO of an Irish
building society highlighted the importance of branding
but emphasized the lack of branding success experienced
by the financial services sector:
in its approach to dealing with new and existing customers. However, upon closer analysis, a lack of consumer
involvement with financial services actually underlay
many of these decisions. The lack of importance attached
to banks or banking decisions was reflected by statements
such as “I have no interest in the bank” and “it’s not
important to my life.” Rather than a sense of loyalty
underlying these decisions, the majority of respondents
appeared to stay with their existing bank(s), despite high
levels of dissatisfaction, due to a general low level of
involvement and for reasons of convenience, familiarity
and apathy.
FINDINGS: CONSUMER PERSPECTIVES
In terms of evaluation between financial services
brands, respondents identified a number of values or
attributes, which they deemed to be important. Functional
values appeared to be far more numerous and salient than
emotional values and factors such as “rates,” “advice and
expertise,” “flexibility,” “accessibility,” “efficiency,” and
“innovativeness” emerged as key in discussions. Although functional issues were more numerous and salient
than emotional values, banks appeared to be failing to
differentiate themselves across these key criteria and the
majority of informants believed that banks did not perform well on these functional values. Emotional values
such as “friendliness,” “care and helpfulness of staff,”
and “courtesy” were identified as important by some
respondents, with a smaller number of older predominantly female customers stating their preference for the
“personal touch,” courtesy and the emotional side to
banking. Although emotional values associated with
being a “caring, friendly” bank were deemed to be very
important by this minority group, a large number of
respondents perceived these emotional values as something that is “nice” but not “necessary” to have in banking. Contrary to earlier research studies cited above, these
emotional values were perceived to be derived directly
from individuals’ qualities rather than corporate values
embodied by staff.
In support of the managerial research, there was clear
evidence regarding the lack of brand differentiation as
perceived by consumers. When probed on the drivers
underlying their financial service decisions, consumers
identified several key factors based upon convenience and
consumer involvement but made no reference to issues
related to branding or brand values. Convenience was
referred to by practically all respondents and held many
different meanings but was primarily discussed in the
context of physical location of the bank and accessibility
to products and people. Selecting the bank which is “most
conveniently located” appeared to underlie many financial decisions, as opposed to selection of any particular
financial provider based upon branding or unique brand
values. Informants based many of their decisions on how
physically and psychologically “accessible” the bank’s
people and products were and how “open” the bank was
Perhaps the most significant brand revelation related
to the significant incongruence between expectations,
through projected brand image, and perceptions of experience, reflected by statements such as “they don’t live up
to what they advertise.” Specifically, the reputation of
financial institutions was only discussed in negative
terms and was based upon a number of issues including,
cost-cutting activities, increasing bank charges and internal scandals. Many respondents highlighted an overriding feeling of cynicism regarding the banks’ “obscene”
profit-making policies, “exorbitant” charges and “ruthless” cost-cutting practices in relation to personnel and
branches. In addition, there was a marked lack of awareness, recall and relevance of advertising-based image
building initiatives among consumers. Communicated
brand image and advertising campaigns appeared to be
neither salient nor meaningful to informants with the
It [branding] is critical . . . but our industry isn’t
particularly good at it . . . we haven’t been consumer
centric, we haven’t been driven by the laws of the
market, we haven’t explained the value of our offer
in a win-win way to our target markets (CEO, Irish
Building Society).
In light of these complexities, suppliers appeared to
be uncertain and unclear as to what their (increasingly
cynical and astute) customers really expect or desire from
banks and what brand appeals, if any, are really worthwhile creating. The uncertainty of supplier respondents
with respect to the role and usefulness of branding was
reflected by their inability to identify any financial services success stories, which could act as a branding role
model for their firm.
American Marketing Association / Winter 2006
180
majority unable to identify or discuss any associated
images, stating “I don’t pay any heed to advertising.”
Indeed, customers appeared to be only capable of recalling and recounting negative perceptions of banks’ policies and practices, fueling a negative reputation and
spreading negative WOM. Consequently, customer expectations of financial service providers remained dismally low and an overall cynical view and reputation
prevailed that banks were “a necessary evil.” We argue
that the combination of customer cynicism as a result of
brand image and brand experience incongruence, and a
lack of significant differentiation by suppliers have resulted in an active disregard of branding as an important
cue in financial decision-making.
DISCUSSION AND CONCLUSIONS
This paper asserts that a significant gap exists between the rhetoric of the services branding literature and
the actual practice of branding in financial services. The
key difficulties associated with the brand management of
retail financial services were emphasized through the
range and complexity of issues identified by supply-side
representatives of the financial services sector. The findings clearly highlight supplier confusion and uncertainty
in relation to the relative importance of the brand and
brand image as compared with functional elements such
as interest rate and convenience, which remains a key
factor in consumer decision-making and should, we
contend, play a more salient role in financial services
brand-based appeals. Further, despite the importance in
the literature upon building image based brand appeals
through advertising (e.g., Berry 2000), the findings identify and highlight supplier difficulties in relation to
creating a cohesive and consistent brand image and
developing appealing corporate advertising programs
which are desired or welcomed by customers. Financial
service providers have failed to practice a successful
branding strategy and customers view banking as a highly
commoditized sector in which an aggressive price-driven
approach is applicable.
Echoing supplier concerns, the consumer research
highlighted that branding is used only selectively by
consumers in terms of financial evaluation, decisionmaking and behavior. Instead of relying upon brandrelated criteria in selecting between banks, consumers
emphasized the importance of convenience-related factors (Keaveney 1995) and a low level of involvement or
personal importance (Laurent and Kapferer 1985) was
evident. Contrary to the literature underlining the importance of emotional values in banking (e.g., de Chernatony
and Dall’Olmo Riley 1999; de Chernatony and Harris
2000), respondents rated functional values as significantly more key and actively evaluated and selected banks
based upon functional brand attributes such as rate and
range of services. Further, despite the importance atAmerican Marketing Association / Winter 2006
tached to the role of corporate marketing communication
and advertising campaigns in services (e.g., McDonald
et al. 2003), financial service providers have not succeeded in neutralizing or reducing a growing negative
reputation and customers continue to remain unaware, or
at most cynical and dismissive of brand image and brand
building messages. One can therefore conclude that complex emotive messages and images projected by financial
suppliers to connect and engage with customers do not
appear necessary or welcomed.
Although service branding has been closely aligned
to product branding principles, it is clear that its application differs in many respects (Berry 2000), particularly
within the financial services context. While the importance of people in enacting the internal brand and
operationalizing the brand promise is promoted in the
literature (e.g., Berry and Parasuraman 1991; de
Chernatony et al. 2003), the sector of financial services
have witnessed increased levels of disintermediation,
resulting in financial services employees being effectively removed from banking and replaced by automated
channels. It is therefore highly questionable how brand
theories centered upon the “brand as relationship builder”
(de Chernatony and Riley 2000) concept can be implemented in the increasingly depersonalized environment
of banking. Conversely, it is clear that customers still
desire high levels of service and welcome a banking
approach based upon service process and delivery-related
factors. It is important to distinguish these customers
from the minority group, discussed in the findings, who
welcome a “friendly face” and an emotional approach to
banking. Rather, these process factors relate to high levels
of service in terms of quality and performance, including
responsiveness of the bank to customer needs, and can
therefore be categorized as primarily functional in nature.
We argue therefore that current services branding development remains highly conceptual and has little relevance or value in terms of offering current branding
guidance for financial services providers.
RECOMMENDATIONS AND MANAGERIAL
IMPLICATIONS
Based upon supplier and consumer perspectives on
current branding practice in financial services, it is
evident that rhetoric rather than reality underlies much
services branding theory. While it may be argued that
brand building is imperative in the highly competitive
arena of financial services, the creation of solid core brand
benefits is no longer sufficient to carve a competitive
advantage in the face of intense competition, deregulation
and increasing technological advancement in the financial services market (Debling 1998; Harris 2002). With
the increasing automation and commodification of the
financial services marketplace and the resultant pricedriven, opportunistic approach adopted by consumers, it
181
is crucial that financial services suppliers finally provide
salient brand propositions which are founded upon attributes of importance and relevance to consumers. Given
the consumer importance and relevance of functional
brand values and banks’ current lack of brand building
success, it is recommended that financial services providers design and communicate their brand position in a
manner targeted at consumers’ functional financial needs.
Suppliers are therefore recommended to engage in meaningful consumer research and communication in order to
successfully identify current key financial brand values
and appeals that will form the basis of an effective
branding strategy. In addition, suppliers should also
redirect their financial support of wasteful corporate
campaigns into investing in the continuous training,
development and reward of their financial services staff,
who are central to delivering the brand promise. It is
imperative that a multidimensional financial services
brand strategy is adopted by financial providers which is
based upon the promotion of meaningful functional values and delivered through a customer-centered processdriven approach. Such action should help to build the
much needed bridge between the rhetoric of services
branding theory and the current reality of financial services branding practice.
REFERENCES
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the Brand,” Banking Strategies, (November/December), 47–56.
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Laurent, Gilles and Jean Noel Kapferer (1985), “Measuring Consumer Involvement Profiles,” Journal of
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Mc Donald, Malcolm H.B., Leslie de Chernatony, and
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Maclaran, Pauline and Miriam Catterall (2000), “Ana-
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McKechnie (2003), “A Cross Cultural Perspective
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(1), 128–37.
de Chernatony, Leslie and Francesca Dall’Olmo Riley
(1998), “Defining a ‘Brand,’ Beyond the Literature
With Experts’ Interpretations,” Journal of Marketing Management, 14 (4/5), 417–43.
____________ and ____________ (1999), “Experts’
Views About Defining Service Brands and the Principles of Services Branding,” Journal of Business
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(2000), “The Service Brand as Relationships Builder,”
American Marketing Association / Winter 2006
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For Further information contact:
Deirdre O’Loughlin
Department of Management and Marketing
University of Limerick
Limerick, Ireland
Phone: +353.61.213375
FAX: +353.61.213196
E-Mail: [email protected]
American Marketing Association / Winter 2006
183
RHYTHMS OF THE BRANDING BEAT: EXPERIENCES OF CLASSICAL
MUSIC PERFORMING ARTISTS
Maureen Bourassa, Queen’s University, Kingston
Peggy Cunningham, Queen’s University, Kingston
SUMMARY
Branding frameworks are well-developed in product
and services contexts, but little research has explored
branding as it applies to people. Branding is the set of
activities that communicates a brand – the perceptions,
images, and associations held in consumers’ minds related to that which has been branded (Keller 1998, pp. 3–
4). This study seeks to understand how people brand
themselves by exploring branding practices of classical
music performing artists. Classical musicians represent a
special case. Unlike market oriented organizations, musicians’ goal is often to provoke, challenge, and broaden
the artistic experiences of audiences (Kotler and Scheff
1997, pp. 16–17), and to gain satisfaction with their own
creativity (Hirschman 1983). Some musicians in this
study even displayed a dislike for marketing, making this
a unique case.
Elite interviews were conducted with twelve fulltime, North American classical musicians; phenomenology was our guiding orientation. Pseudonyms are used
when research is discussed. Even though not always
intentionally engaged in branding, musicians are brand
building through brand messages/images, brand names,
and marketing mix elements. Musicians’ branding activities expand current frameworks to suggest that successful branding may include: (1) respectful relationships
and (2) genuine and passionate emotion.
Respectful Relationships
Fournier (1998) argues that relationship principles
can be applied to consumer-brand connections, but recognizes that brands cannot be active, reciprocating relationship partners, except through marketing actions that
support them. Given that musicians can be actively
engaged in relationships, findings related to musiciansas-brands provide new insight into consumer-brand relationship theory. A salient theme that emerged in discussions about relationships was respect. Jon has “always
been the kind of person to hold a lot of respect for other
people.” Liz is concerned about showing respect for her
students by treating them as adults, which contributes to
her desired image as a member of the community. James’
desire to show respect and build relationships is evident –
he creates a good working environment in orchestra
American Marketing Association / Winter 2006
rehearsals and performances by listening, being cooperative, and helping colleagues.
Interestingly, the theme “respect” emerged not only
in musicians’ branding, but also in their overall approach
to marketing and their attitude towards target audiences.
First, they respect their audiences’ desires. When prompted
to talk about whom they seek to please, themselves or their
audiences, all of the informants referred to “balance” –
providing audiences with familiar yet challenging music.
Second, they want to appeal to audiences based on their
talents and who they are as musicians versus manipulating audiences’ tastes in their favor. As Liz puts it, “I prefer
that people just learn that about me. Like I don’t want to
have to tell you I’m great. Could you just figure that out
on your own . . .?”
These findings raise a number of questions. First,
how do musicians show their respect? Maria and Erin
take time to listen to other people’s (including audiences’) ideas and suggestions. Other musicians are helpful, reliable, and punctual. Second, are relationships and
respect an essential part of musicians’ branding, or are
they instead strategies for building brand equity? While
not all musicians may be concerned about respect and
relationships, some recognize benefits, such as career
spin-offs and improved awareness. For Jon, respecting
audiences’ preferences can lead to ultimate brand loyalty,
a “fan forever.” Incorporating values such as respect into
branding is not a new idea (e.g., Harris and de Chernatony
2001). What is new is the possible interaction between
values, especially respect, and relationships in the branding process.
The results of this study relate not only to branding
and relationships, but also to the service-dominant logic
of marketing (Vargo and Lusch 2004). The servicedominant view includes, among other things, a focus on
the co-production of value and collaborative, continuous
learning. Co-production may be enhanced through respect. When musicians respect their audiences’ preferences, audiences are able to be active and proactive
partners in the creation of the musician-as-brand. This
reflects a true manifestation of co-production seldom
witnessed in product-based marketing. Continuous learning may also be enhanced through respect. Musicians-asbrands engage in continuous learning through respectful
184
interactions with audiences or “customers,” listening to
feedback, and adapting to needs.
Genuine and Passionate Emotion
The role of emotion in branding has been explored in
the past (Aaker 1997; Berry 2000), even though much
research has focused on cognitively-based brand appeals
(Keller 1998). Relationships between people and product
brands are unidirectional; while the person may emotionally connect with the product, the reverse does not usually
hold. In contrast, relationships between two people are
inherently proactive, interactive, and thus highly cocreated. In the case of musicians-as-brands, emotion
plays a central role in branding, whether intentional or
not. Emotion is a defining feature of that which is
produced and consumed – the music. For Nick, music is
“a dramatic message, an emotional message, some sort of
love imparted. . . .” Emotions are communicated on stage
through body language. The emotions produced in performances are not solely to connect with audiences, but
result from a performer’s authentic passion for music.
Classical musicians pour emotions into performances
and hope audiences feel them too. The impact is intense.
Erin and Alex strive to make their audiences cry. Liz and
Jon desire that audiences fall in love with them. The idea
that consumers can fall in love with brands was made
clear by Fournier (1998), who found love/passion to be a
facet of brand relationship quality. Musicians provide
important insight into how brands can enable consumers
to fall in love with them. First, passion emanates not only
from consumers, but also from musicians who clearly
love what they do. Service providers might consider how
such passion can be created in other contexts. Second, the
emotion is genuine. Similarly, Berry (2000) characterizes
emotional connections between people and service brands
as authentic and from the heart. Third, musicians desire
that this “falling in love” process be exploratory, voluntary, and discovery-oriented. This co-production of emotional experience may lead to standing ovations and
lasting impressions. References and/or a full copy of the
paper are available upon request.
Maureen Bourassa and Peggy Cunningham
Queen’s School of Business
Goodes Hall
Queen’s University
143 Union Street
Kingston, Ontario
Canada K7L 3N6
Phone: 613.533.2327
FAX: 613.533.2325
E-Mail: [email protected] and/or
[email protected]
American Marketing Association / Winter 2006
185
BUSINESS RELATIONSHIP CLOSENESS INVENTORY (BRCI):
A FRAMEWORK FOR MEASURING THE QUALITY
OF LONG-TERM BUSINESS RELATIONSHIPS
Arne Floh, Vienna University of Economics and Business Administration, Austria
SUMMARY
Introduction
Changes in the business environment (economic
decline, increase in product offerings, competition from
substitute products, low customer loyalty, etc.) have
forced companies to reconsider their strategies
(Gummesson 1999). In response to this development a
concept now known as relationship marketing has
emerged. The difference between relationship marketing,
which is often deemed a new paradigm, and the classic
concept of transaction marketing is that customer relationships are understood as exchange episodes and that
there is a stronger focus on maintaining and strengthening existing customer relationships (Sheth and Parvatiyar
1995). In particular, customer loyalty programs are used
in order to improve customer loyalty and encourage
repeat purchases. The goal of these managerial efforts is
to enhance the quality of business relationships (Grönroos
2000).
Given the high importance of the construct of relationship quality for the continuing existence of a company, it is surprising that academic studies on the measurement of relationship quality is rare or have serious
shortcomings (Wilson 1995). The aim of this articles is
fulfill this research gap and to develop a psychometric
scale which predicts the duration of the of a business
relationship by looking at the quality. An instrument for
measuring relationship quality that predicts the duration
would thus be a significant decision-making aid for both
companies and customers.
Conceptual Framework
Attributive Definition. Kelley provides the most
comprehensive definition of relationship closeness: “If
two people’s behaviors, emotions, and thoughts are mutually and causally interconnected, the people are interdependent and a relationship exists. A relationship is defined as close to the extent that it endures and involves
strong, frequent, and diverse causal interconnections”
(Kelley 1979).
This term is used to describe social, dyadic relationships, which are characterized by mutual dependency and
American Marketing Association / Winter 2006
an evolutionary process (Berscheid, Snyder et al. 1989).
These characteristics seem to apply to the particular case
of business relationships as well, which are often regarded as being part of formal relationships (Barnes and
Sheaves 1996).
Analogous to the Relationship Closeness Inventory
from social psychology (Berscheid and Omoto 1989), the
Business Relationship Closeness Inventory (BRCI) is
intended as a scale for measuring the quality of business
relationships, embracing a cognitive, an affective and a
behavioral sub-dimension. By integrating the perspectives of both partners in the relationship into the measurement, a so-called dyadic study is conducted, which makes
it possible to calculate a total score. To arrive at this value,
the difference between the two sub-scores BCRIsupplier and
BCRIcustomer is calculated. These two sub-scores, in turn,
are calculated by adding up the sub-dimensions. Thus, the
optimum value, i.e., a balanced relationship with mutual
dependency, would be 0. Continuing positive or negative
deviations point to power imbalances in favor of the buyer
or the seller.
Relationships are only perceived as such after a
certain number of interactions (Scanzani 1979). The
BRCI takes into account temporal aspects of a business
relationship. The different perceptions cannot be evaluated or calculated in a meaningful manner until the
second phase (“exploration”). But even at this stage,
results need to be interpreted with care. Expectations of
buyers and sellers differ frequently in this phase. Thus, a
score of the BRCI cannot be ruled out because the process
of getting to know one another has not been completed yet
and does not signal that the cooperative relationships will
be discontinued soon. In the next phase (“expansion”), a
significant reduction in mutual expectations and an increase in mutual dependencies are to be expected. This
phase is characterized by a strong increase in interactions
and can be considered to be the result of satisfactory
previous interactions (Dwyer, Schurr et al. 1987). The
maximum of this mutual loyalty is reached during the
commitment phase.
The difference between the two BRCI sub-scores is
falling steadily and reaches its optimum at 0. The phase
of dissolution in a business relationship begins when one
of the partners is for the first time not satisfied with the
186
other partner’s performance and calculates possible exit
costs or switching costs. In this phase, the BRCI will grow
rapidly.
Structural Definition. In view of the diversity and
heterogeneity of the factors influencing relationship quality, a categorization of the determinants appears to be
helpful. After a thorough analysis of the influencing
factors mentioned in the literature (Crosby, Evans et al.
1990; Roberts, Varki et al. 2003), a distinction among
market-related, supplier-related, customer-related and
relationship-related determinants was made. These may
influence both directly and indirectly the quality of business relationships. A detailed description of all categories
would go beyond the scope of this research proposal.
Dispositional Definition. The theoretical and empirical findings on the positive effects of successful, longterm business relationships are rich. Marketing scholars
have demonstrated that managing business relationships
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Kelley, H.H. (1979), Personal Relationships: Their Struc-
American Marketing Association / Winter 2006
may facilitate access to valuable customer data and improve customer commitment (Morgan and Hunt 1994).
This institutionalized cooperation also results in benefits
regarding the development and testing of new products or
offerings. Also, the positive economic benefits from longterm business relationships attributable to up-selling and
cross-selling are unquestioned (Reichheld and Sasser
1990). Although, the effect of positive word-of-mouth by
loyal customers has not been measured empirically yet, it
is assumed to be positive (Reichheld and Schefter 2000).
Summary and Outlook
Previous research has shown that successful longterm business relationships are conducive to a company’s
success. Surprisingly, there are no reliable findings on the
measurement of quality in business relationships. Previous studies have shortcomings in their conceptualization
and the empirical validation of the findings. This article
seeks to contribute to closing this research gap.
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Associates.
Morgan, R.M. and S.D. Hunt (1994), “The CommitmentTrust Theory of Relationship Marketing,” Journal of
Marketing, 58, 20–38.
Reichheld, F.F. and W.E.J. Sasser (1990), “Zero Defections: Quality Comes to Service,” Harvard Business
Review, (September/October), 105–11.
____________ and P. Schefter (2000), “E-Loyalty: Your
Secret Weapon on the Web,” Harvard Business
Review, (July/August), 105–13.
Roberts, K., S. Varki, and R. Brodie (2003), “Measuring
the Quality of Relationships in Consumer Services:
An Empirical Study,” European Journal of Marketing, 37 (1/2), 169–96.
Scanzani, J. (1979), “Social Exchange and Behavioral
Interdependence,” in Social Exchange in Developing Relationships, R.L. Burgess and T.L. Huston,
eds. New York: Academic Press, Inc.
Sheth, J.N. and A. Parvatiyar (1995), “Relationship
Marketing in Consumer Markets: Antecedents and
Consequences,” Journal of the Academy of Marketing Science, 23 (4), 272–77.
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187
Arne Floh
Institute of Marketing-Management
Vienna University of Economics and Business Administration
Augasse 2–6
1090 Wien
Austria
Phone: +43.1.31336.4626
FAX: +43.1.31336.732
E-Mail: [email protected]
American Marketing Association / Winter 2006
188
UNCOVERING ATTRIBUTES OF AUTHENTICITY: THE CREATION OF
BRAND MEANING IN THE LUXURY WINE TRADE
Michael B. Beverland, University of Melbourne, Australia
SUMMARY
The use of authenticity as a positioning device is
resonating with consumers of goods and services (Grayson
and Martinec 2004; Penaloza 2000). Some go as far to
state “the search for authenticity is one of the cornerstones
of contemporary marketing” (Brown, Kozinets, and Sherry
2003, p. 21). However, confusion surrounds the management of authenticity from a brand perspective. Firstly,
does authenticity have to real, or can it be created from a
stylized version of events, or fictional? Researchers have
identified that authenticity is often more contrived than
real (Brown et al. 2003). Managing perceptions of authenticity will be critical because research reveals what is
perceived as authentic must conform to consumers’ mental frames of how things “ought to be” (Martinec and
Grayson 2004). Also, how far can one go in exploiting
attributes of authenticity? Holt (2002) identified how
creative activities or authentic brands risked devaluing
themselves by being perceived as too commercial. Yet the
branding literature is silent on how marketers can appear
above commercial considerations.
This paper examines two questions: what are some
attributes of authenticity in the commercial context? And,
how do firms seek to manage images of authenticity in the
light of commercial pressures? These two questions are
addressed with reference to case studies of 20 ultra
premium wineries and 30 wine consumers. Regular wine
consumers that spent on average $US500 a month on
wine were selected. Not all of these consumers were
experts, although their sheer experience with wine means
they have more knowledge than low-involvement wine
consumers. The final sample was 56.6 percent male, had
an average age of 47.5 years (range 27–62), and an
average income of $A62, 500 (range 25–100+). For our
purposes ultra-premium wines are priced at over US$100
per bottle (Geene, Heijbroek, Lagerwerf, and Wazir 1999).
Wine represents a fertile context for discussions of authenticity given the recent mainstreaming of wine consumption by New World winemakers in the past two
decades that have seen traditional producers, connoisseurs and critics complain about “Coca Cola” wines and
the lack of authenticity of mass produced wines.
We identified six attributes of authenticity: heritage
and pedigree, stylistic consistency, quality commitments,
relationship to place, method of production, and
downplaying commercial motives. The findings contrib-
American Marketing Association / Winter 2006
ute in a number of ways. Although these six components
are derived from a single industry context, it is possible to
transfer the results to other settings. Brands such as
Gucci, Prada, and Adidas reference their history in their
stores through historic photos of designers in old workshops. Many luxury brands also reinforce heritage and
pedigree by referencing past and present celebrities that
have used their products and drawing on museum stocks
for in-store displays. Stylistic consistency is also transferable to other contexts. For example, Coke’s disastrous
choice to introduce New Coke in the mid-1980s saw the
value of the brand fall overnight. Quality commitments
are an important aspect of authenticity in other products.
For example, poor quality products from Cadillac and
Apple saw consumers desert these brands. Many brands
also refer to place in their communications. For example,
car brands such as Mercedes and BMW reference Germany. Also, brands have often suffered a crisis of identity
when they attempt to remove links to place. For example,
British Airways suffered when they attempted to re-brand
as a global airline and remove the British flag from their
tails in favor of more multicultural designs that reflected
their global customer base. Many brands also make
reference to craft production methods or the role of
designers or craftspeople in production. For example,
Rolls Royce always promoted the fact that parts of the car
were handmade (particularly the famous grill). Also,
celebrity chefs such as Jamie Oliver and Wolfgang Puck
give the impression they are involved in the production of
food that comes from their franchised restaurants. Lastly,
many brands make a virtue of commitment to social
causes such as Ben and Jerry’s and the Bodyshop. These
brands downplay their commercial motives to differentiate themselves from mainstream brands.
We also address concerns on whether authenticity
can be true, stylized, or false. All of the identified attributes of authenticity represented both objective and
subjective sources of authenticity. This created a rich,
multi-nuanced brand story. These rich brand stories are
important because by drawing on all attributes of authenticity they can appeal to consumers with different levels
of expertise and different degrees of variety seeking
behavior. For example, producers did undertake real
commitments to quality, retain old production methods,
and reject many aspects of mass marketing. On the other
hand, many attributes of authenticity were stylized versions of reality (downplaying commercial motives, natural production, and unchanging wine styles), and some
189
consumers viewed authenticity in terms of “how things
ought to be” (Grayson and Martinec 2004). As a result,
marketer projections and consumer understanding of
authenticity consisted of both objective (real) and subjective factors (stylized or fictional). Such results can also be
transferred to other contexts. For example, consider how
Coke projects images consistent with American values
yet produces the product worldwide. Car manufacturers
such as Mercedes do the same, retaining German styling,
but producing in low cost countries. Gucci goes further,
mythologizing links between the brand’s founding family
and the Medici by maintaining the fiction that they were
saddle makers for the Medici in order to build links to the
past (Forden 2001).
At the consumer end a number of questions arise.
Firstly, research could also examine how fine the line is
between exploiting authenticity and reinforcing aspects
of authenticity through experimental scenarios. Further
research is needed on whether consumers with different
cultural capital (Holt 1998), expertise (Celsi, Rose, and
Leigh 1993), or involvement attribute authenticity to
different cues. For example, very low involvement consumers may see a mass-market “Chianti” wine as authentic because the bottle is encased in a cane basket, whereas
high involvement consumers may view this as kitsch.
Another interesting question involves examining what
happens if consumers find out that claims of authenticity
are less than true. References available upon request.
For further information contact:
Michael B. Beverland
Marketing Group
University of Melbourne
Alan Gilbert Building
161 Barry St.
Parkville, Victoria
3010 Australia
Phone: + 61.0.3.8344.1933
FAX: +61.0.3.9348.1921
E-Mail: [email protected]
American Marketing Association / Winter 2006
190
GETTING A “SENSE” OF FINANCIAL SECURITY FOR
GENERATION Y
Tilottama G. Chowdhury, Quinnipiac University, Hamden
Robin A. Coulter, University of Connecticut, Storrs
SUMMARY
What does financial security mean? Does money in
the bank or personal assets ensure feeling of being financially secure? Undoubtedly, financial security is at the
heart of many consumer banking and investment decisions, and yet we know very little about the concept. Some
research suggests that generational influences of life
stage and time-bound economic, social, and political
conditions can impact individuals’ values and aspirations
that in turn determine the ways consumers spend and save
their money, and hence affect their views of financial
security (Smith and Clurman 1997; Hicks and Hicks
1999). Over 70 million Gen Yers, born 1977 to 1994, are
being raised in dual-income and single-parent families
and been given considerable financial responsibility (“Getting Inside GenY” 2001; Neuborne and Kerwin 1999),
yet many reports indicate that they are at risk financially,
facing increased debt with credit card balances and
student loans (Draut and Silva 2004; Gillin 2002).
In this paper, we investigate the meaning of financial
security to Gen Y “adult” consumers, born 1977 to 1987,
who are “optimistic about their earning power,” but “at
the same time, they like to spend.” (“Getting Inside Gen
Y” 2001). To understand the deeper meanings of financial security for this cohort, we engage Gen Yers in tasks
of cross-sensory imaging related to financial security, as
well as assessing their general imaging ability. We report
on three studies designed to assess the extent to understand the meanings that this cohort associates with financial security, as well as the extent to which meanings are
expressed consistently across senses. Further, we consider whether individual differences in general imagery
ability influence their imaging ability of financial security. Finally, we discuss managerial implications and
directions for future research related to greater understanding of the meaning of financial security.
In Studies 1 and 2, 72 and 139 Gen Yers, respectively, responded to the sensory imaging step from the
Zaltman Metaphor Elicitation Technique (ZMET)
(Zaltman 2003; Zaltman and Coulter 1995) designed to
elicit sensory metaphors and thematic meanings related
to financial security. Specifically, we asked the participants to “imagine that you are explaining the meaning of
financial security to some friends using sensory images.”
For each sense, participants were asked to respond to the
American Marketing Association / Winter 2006
following, “Imagine you want your friends to (hear) a
(sound) that expresses financial security. What (sound)
should they hear? Why did you choose that (sound)?” In
other words, participants were asked to identify one
sensory metaphor for each sense, and provide the
meaning(s) that they associated with the sensory metaphor. The two authors independently reviewed the data by
sense for all participants (rather than by participant
across senses), identifying sensory metaphors and thematic meanings related to financial security.
In Study 1, 22 meanings were identified: Money/
cash; Money to pay bills; Money to buy things; Money to
buy luxury items; Indulgence; Stable; Safe; Comfort; No
worries; Happy; Home; Freedom; Soft; Smooth; Warm;
Powerful; Sweet; Fresh; Strong and durable; Calm and
relaxed; Hard work and achievement; and Rich/elegance/
sophistication. In Study 2 were examined the frequency
with which the 139 Gen Yers associated these 22 thematic
meanings with financial security and the consistency of
these meanings across the senses. Participants recorded
the most meanings in relation to smell (231) and sound
(230) metaphors, slightly less for touch (218), taste (205)
and sight/color (200) metaphors. Although, there was not
much difference in the number of meanings related to
each sense (driven in part by the data collection instructions), there was a significant variance in the type of
thematic meanings associated with financial security
across the senses. Uniquely important meanings for each
sense include: touch – strong and comfort; taste – rich/
elegant/sophistication; smell – fresh/refreshing; and
sound – money to buy things.
Two findings are of interest with regard to the
consistency with which the above-mentioned thematic
meanings were associated with financial security; (1)
participants use different sensory exemplars to represent
one thematic meaning, and (2) participants use different
sensory exemplars across the senses. For example, participants mentioned that “being safe” feels like the “smell of
a warm apple pie” or the “touch of a security blanket;”
“being able to buy luxury items” feels like the “sound of
a Ferrari engine” or the “taste of prime ribs.” To further
investigate meaning consistencies, we computed the total
number of mentions and consistent pair-wise comparisons for each meaning of financial security. Our findings
indicated that “money,” “money to buy luxury items,” “no
worries,” and “calm” yielded greater number of consis-
191
tent pair-wise comparisons. Our data suggest greater
consistency present for the concrete “money-related”
meanings than the more abstract meanings of financial
security. Consistency across senses for “money” and
“money to buy luxury items” was evident by greater
number of mentions and consistent pair-wise comparisons. To further calibrate the difference in consistency at
the meaning level of financial security, we developed the
“cross-sensory meaning consistency ratio” – a ratio of the
number of participants mentioning a meaning for more
than one sense to the total number of participants mentioning the meaning. We found greater consistency across
the senses for the meanings: “money,” “money to buy
luxury items,” “no worries,” “safe,” “strong,” “calm.” In
general, we found a low average cross-sensory meaning
consistency ratio (.25, range from 0 to .50), which reflects
that our Gen Y participants use multiple sensory metaphors to convey multiple meanings with regard to financial security.
Study 3 examined the relationship between an
individual’s general sensory imagery ability and their
sensory metaphors with regard to financial security derived from Study 2. We regressed financial security
imaging ability on general imagery ability (modified
version of QMI Vividness of Imagery Scale; Sheehan
1955, Betts 1909) and found a main effect for imagery
ability. Thus, participants with higher imagery ability
made stronger associations between financial security
and the given sensory exemplars with underlying thematic meanings across the senses.
Our research addresses the meaning of financial
security and sensory imaging, two issues that have received little attention. We focus on the Gen Y “adult”
population estimated at 45 million in 2005 (U.S. Census
Bureau 2004). The size of this cohort coupled with its
spending power makes GenYers of extreme interest to
marketers (“Getting Inside GenY” 2001; Neuborne and
Kerwin 1999), yet some reports indicate a propensity to
spend beyond their means (Draut and Silva 2004; Gillin
2002; Neuborne and Kerwin 1999). Having an understanding of the meanings of financial security to Gen Yers
offers advertisers, financial professionals, and public
policy makers a means to communicate and promote
healthy financial practices. References available upon
request.
For further information contact:
Robin A. Coulter
Marketing Department
School of Business
University of Connecticut
2100 Hillside Road
Storrs, CT 06269–1041
Phone: 860.486.2889
FAX: 860.486.5246
E-Mail: [email protected]
American Marketing Association / Winter 2006
192
THE EFFECT OF MUSIC CONGRUENCE AND GENDER ON ONLINE
USERS’ FLOW EXPERIENCES
Liz C. Wang, The University of Texas at Arlington, Arlington
Lu-Hsin Chang, Ling-Tung College, Taiwan
SUMMARY
A study by Jupiter Research showed that 23 percent
of the Web’s top 75 sites use ambient music to increase
consumer online experiences (Crockett 2001). The use of
music on websites is very easy and inexpensive. Previous
research suggests that flow experience is a determinant of
a compelling experience and it can be enhanced by using
music (Hoffman and Novak 1996; Csikszentmihalyi 1990).
The increased flow experiences directly translate into
increased site activity and revenue (Grey Tedesco 2000).
However, previous research suggests that females and
males respond to music stimulation differently (e.g.,
Meyers-Levy 1989; Corso 1963). The purpose of this
study is to examine the effects of music and gender on
online consumers’ flow experiences. The results offer emarketers insights into how to use music to increase
consumer online experience for different genders in an
online store.
Music is able to convey meanings or imagery that
could be either congruent or incongruent with the context
or environment in which it is used (MacInnis and Park
1991). In the context of an online store, music congruence
refers to the conceptual fit of music genre with the etailing context. The flow construct is composed of attention, interest, curiosity, and control elements (Webster,
Trevino, and Ryan 1993). Csikszentmihalyi (1990) argues that when music is organized auditory information,
it helps organize the mind that attends to it. MacInnis and
Park (1991) further suggest that congruent music does not
compete with other environmental elements and helps
deliver the key theme of its environment. It may increase
Internet users’ flow experiences by drawing their attention and evoking interest toward the online store. In
contrast, incongruent music may distract online consumers’ attention and decrease their interest because it requires more mental effort to process information, which
in turn may decrease flow experiences.
Gender differences in information processing strategy, hearing sensitivity, and optimal stimulation levels
suggest that the effects of music congruence may vary
with the sex of listeners. Previous research suggests that
females are detailed processors while males are heuristic
processors (Meyers-Levy 1989). Females often engage in
more detailed elaboration of a specific message and are
more sensitive to the particulars of relevant information
American Marketing Association / Winter 2006
(whether background music is congruent or incongruent)
than are males (Meyers-Levy and Sternthal 1991). Audiologist, Corso (1963) found that females are more hearing
sensitive than males. Additionally, Hebb (1955) contended that every organism most prefers a certain level of
stimulation, which is referred to as an optimum stimulation level (OSL). A large discrepancy between a current
environment and a person’s ideal OSL will lead to
adjustments and, therefore, may result in one’s lower
evaluations toward the current environment. McReynolds
(1971) noted that individuals with higher OSLs tend to
seek more environmental stimulation than individuals
with lower OSLs. Zuckerman (1979) found that males
have higher OSLs than females. Therefore, males are
likely to need more environmental stimulation than females to achieve their satisfactory stimulation levels in a
less stimulating environment.
Based on the literature in music and gender difference, we expect that positive effects of congruent music
on flow experience might be higher for females than for
males. Despite that, incongruent music might result in
negative effects on flow experience, but it does add extra
stimulation. Accordingly, its negative effects on males
might be less because males prefer more stimulation.
Thus, it is hypothesized that the negative effects of
incongruent music on females may be higher than on
males. On a website without music, the gender difference
on flow experience may rely on their OSLs. With higher
OSLs, men might perceive a text-only website (no music)
as less stimulating or more boring than women. Under
such a condition, men’s flow experiences might be lower
than their counterparts.
H1: On a website with congruent music, females will
have higher levels of flow experiences than males.
H2: On a website with incongruent music, females will
have lower levels of flow experiences than males.
H3: On a website without music, males will have lower
levels of flow experiences than females.
A laboratory experiment using a 3 (music factor) X
2 (gender) between-subjects design was employed. A
fictitious company named “Caribbean Travel Net” (CTN)
was developed, providing travel information for two
islands in the Caribbean. Music was manipulated by
193
using three conditions: music congruence (music that is
congruent with the central theme of CTN’s website in the
study), music incongruence and no music. A total of 167
subjects participated in this experiment, including 93
male and 74 female students. The statistical result revealed a successful manipulation (Xcongruent = 6.13 >
Xincongruent = 3.13, F(1, 107) = 111.27, p < .000). No gender
differences on music congruence (t = -1.314, n.s.), music
volume (t = 1.293, n.s.), and music likeability (t = 1.089,
n.s.) were found. ANOVA results indicated an interaction
effect between music and gender (F(2, 161) = 4.351; p <
0.014), but no main effects for music (F(2,161) = 1.862; n.s.)
and gender (F(1,161) = 0.684; n.s.). Three one-tailed T-tests
were performed to test the hypotheses (see Table 1). H2
and H3 were supported, but not H1.
Two tentative managerial implications are offered.
First, it suggests that the addition of congruent music in
TABLE 1
One-Tailed T-Tests
Music Conditions
Male
Female
Z-valuea
P-value
(one tail)
Congruent music (H1)
Mean
S.D.
4.78
0.184
4.84
0.206
0.211
0.416
Incongruent music (H2)
Mean
S.D.
4.71
0.181
4.29
0.245
1.372
0.085*
No music (H3)
Mean
S.D.
4.08
0.196
4.85
0.19
2.81
0.002**
Notes:
a
: Z-value is absolute value; * Significant at 0.10 ; ** Significant at 0.05
an online store would facilitate both genders’ flow experiences. Congruent music should be relevant to the theme,
or the image of an online store. Second, men and women
responded website music differently, especially under
incongruent and no music conditions. A website with
incongruent music may drive female consumers away
while a website without music may disappoint males.
Therefore, online marketers should use congruent music
to increase Internet users’ flow experiences for both
genders.
For further information contact:
Liz C. Wang
Department of Marketing
University of Texas at Arlington
Box 19469
Arlington, TX 76019
Phone: 817.272.2330
FAX: 817.272.2854
E-Mail: [email protected]
American Marketing Association / Winter 2006
194
THE ROLE OF EMOTION AND REASON IN BRAND
ATTITUDE FORMATION
Arjun Chaudhuri, Fairfield University, Fairfield
Mark Ligas, Fairfield University, Fairfield
ABSTRACT
We use ideas on the construction of emotion in social
psychology to develop a theoretical framework which
describes two routes to two behavioral outcomes of brand
attitude formation. First, perceptions about utilitarian
goods lead to tangible brand beliefs, rational brand evaluation, utilitarian brand attitudes, and purchase intent.
Second, perceptions about hedonic goods lead to nontangible beliefs, emotional brand evaluation, affective
brand attitudes, and willingness to pay a higher price for
the brand.
INTRODUCTION
In this paper, we attempt to model a process explaining how people realize that it is worthwhile to pay more
for certain brands. We know from previous research that
consumers develop attitudes about products and brands
and that these attitudes influence their buying decisions
(Keller 1993). However, what are the roles of emotion and
reason in developing and forming such attitudes? Classical attitude theory does not clearly separate the emotional
and rational dimensions of attitudes. Only recently have
scholars explicitly considered the separate effects of
emotion and reason in attitude formation. In general,
hedonic and utilitarian types of attitudes have been identified in the literature (Batra and Ahtola 1991; Voss,
Spangenberg, and Grohmann 2003; Babin, Darden, and
Griffin 1994). We extend the literature by developing
some of the antecedents and consequences (notably,
willingness to pay a higher price) of these types of
attitudes.
ATTITUDE THEORY
Allport (1935) spoke of attitudes as the single most
important factor in social psychology. Subsequently, the
attitude-behavior relationship has continuously been examined by researchers. “A person’s attitude is a function
of his salient beliefs,” (Fishbein and Ajzen 1975). Beliefs
are the subjective associations between any two distinguishable concepts (“I believe that Brand X is pure”).
Such salient beliefs are activated from memory and
considered in a given situation. This is commensurate
with Rosenberg’s (1956) multi-attribute definition of
attitudes, in which attitudes are regarded as multi-dimensional and arrived at after evaluating several beliefs.
American Marketing Association / Winter 2006
Perhaps the most theoretically-unifying framework
for understanding attitude formation is the ELM (Eagly
and Chaiken 1993; Petty and Cacioppo 1986a, 1986b).
According to the Elaboration Likelihood Model, one’s
motives and cognitive abilities determine which “route to
persuasion” that individual will follow when forming an
attitude. If motivation and cognition are high (based on
situational and individual difference variables), “central
route” processing occurs, in which the individual considers issue-relevant information enroute to forming an
attitude. In contrast, the “peripheral route” to persuasion
occurs when motivation and cognition are lower, and the
individual relies on other variables, in addition to cognition, to form an attitude. Such variables include both self
and social factors, as well as affect. Considered together
in the ELM, both routes encapsulate a majority of perspectives/theories on attitude formation (Eagly and
Chaiken 1993).
Attitudes and Branding
In the area of brand development, the traditional
hierarchy of effects model (Lavidge and Steiner 1961)
also postulated that consumer attitudes develop through
a sequence of mental stages. Attitude formation for a
brand starts with beliefs about the brand or cognitions
about the brand. This learning process then leads to a total
attitude towards the brand, which in turn leads to behavior change in terms of action or, at least, as a tendency to
act (the conative component).
Ray (1973) demonstrated that the sequence of steps
in the learning hierarchy, as described above, is not
always the same. The cognitive aspect need not necessarily precede the attitudinal, which must precede the conative. For instance, Gorn (1982) found that positive
attitudes towards a product can develop as a result of the
association of the product with music that had a positive
effect on the listener. Similarly, Mitchell and Olsen
(1981) found a positive effect on consumers’ attitudes
when non-verbal (visual) information was presented.
Further, Mitchell’s Dual Component Model (1986) supported the positive influence of both visuals and verbal
stimuli, working in conjunction to produce specific brand
attitudes, as long as neither stimulus nullified the other by
distracting the customer’s attention. It would appear,
then, that consumers seem to be able to convert visual
information into knowledge and beliefs about the at-
195
tributes of brands. Thus for example, an advertisement
produces a favorable emotional response in the consumer
(“I like Brand X”), which brings about beliefs about the
brand (“Brand X is healthy”), leading to a purchase
intention (“I intend to buy Brand X”). This “alternative”
hierarchy thus validates the use of “image” advertising
and branding in which the consumer “feels” the confidence of the product, rather than “reasons” it out.
The model described next draws on the extant literature by clearly incorporating two separate routes for
emotion and reason based on “affective and utilitarian”
attitudes. The model also contributes to the literature not
only by describing different evaluative processes which
result in these attitudes but also different outcomes which
are the consequences of these attitudes.
A MODEL OF EMOTION AND REASON IN
BRAND ATTITUDE FORMATION
The central and peripheral routes in the ELM identify two distinct paths to attitude formation. In the central
route, object-specific information enables the individual
to form positive, negative or neutral arguments concerning the attitude object, whereas in the peripheral route,
“external” factors, such as emotion, influence the
individual’s evaluation of the attitude object. Our model,
depicted in Figure 1, includes both reason and emotion in
the formation of brand attitudes specifically and also
extends the ELM by describing two types of brand attitude
formation and two types of brand outcomes based on these
different attitudinal antecedents. The model describes the
effect of brand beliefs, brand evaluations and brand
attitudes on purchase intent and willingness to pay.
Moreover, beliefs, evaluations and attitudes have been
broken down into their two components – rational and
emotional. Rational or tangible brand beliefs (“this brand
has fluoride”) lead to rational brand evaluations (“this
brand’s benefits are worth the price”) and utilitarian
attitudes (“this is a good brand”), which in turn leads to
purchase intent (“I intend to buy this brand”). On the
other hand, non-tangible brand beliefs (“this brand is
fun”) lead to emotional brand evaluations (“this brand is
unlike other brands”) and affective attitudes (“I love this
brand”), which in turn leads to both purchase intent and
willingness to pay (“I would pay a higher price for this
brand over other similar brands”). Thus, these two routes
to attitude formation and brand intent are different because the emotional route also leads to willingness to pay
whereas the rational route does not. We maintain (for
reasons explained later) that successful brand differentiation (which leads to higher prices) is essentially an
emotional process. This is important since purchase
intent alone may not indicate a definite source of revenue
for a brand: first, because purchase intent may or may not
American Marketing Association / Winter 2006
translate into actual purchase and sales; second, because
revenue is a function of both sales and price and, hence,
willingness to pay is also an important predictor of actual
revenue. Ultimately, both routes are the best and most
complete predictors of a brand’s profit potential.
The model specifies that tangible brand beliefs are
more likely to be relevant for utilitarian goods while nontangible brand beliefs are more likely for hedonic goods
(Holbrook and Hirschman 1982). Note that, as Okada
(2005) points out, hedonic and utilitarian goods are not on
opposite ends of a continuum, since it is quite possible for
a good to be both hedonic and utilitarian (cars). Further,
goods are neither hedonic nor utilitarian by nature. Any
classification of goods as hedonic or utilitarian must rely
on consumers’ perceptions of such goods as hedonic or
utilitarian.
Brand Beliefs
Beliefs are descriptive facts based on the attributes of
a stimulus (such as price, features, reputation, etc.). Thus
a brand may be identified based on the ingredients it
possesses, the packaging it has, its brand name, price, etc.
Although the intent of our model is to indicate two
different pathways to brand attitude formation resulting
from two different types of brand beliefs, we do depict a
path from tangible brand beliefs to emotional brand
evaluation as well since unique features in a brand should
also lead to emotional brand evaluation (“this brand is
unlike other brands”). Note that tangible and non-tangible brand beliefs are also expected to correlate to each
other, i.e., a brand with tangible brand beliefs could also
be associated with perceptions of non-tangible brand
beliefs, perhaps based on the advertising of the brand or
based on some other set of benefits.
Brand Evaluations
According to Mandler (1982, 1975), evaluations are
formed on the basis of interactions between external
events (brands in our case) and an individual’s existing
schema. A schema is a cognitive structure or abstract
representation of reality which individuals use to guide
thought and behavior, and in marketing it assists in
organizing information and developing expectations
(Bettman 1979; Fiske and Taylor 1984). A schema is
developed through repeated encounters with the environment and, in our case, it may be considered to represent
the consumer’s needs, personality, lifestyle and all the
facets that make up the individual consumer. The level of
congruity between external evidence (say a brand) and
our existing schema (say our needs) determines evaluations. Any evaluation is a function of schema congruity or
incongruity with an encountered stimulus.
196
FIGURE 1
A Model of Emotion and Reason in Brand Attitude Formation*
When a stimulus (brand) involves an existing schema
and is congruous with the activated schema, the result is
a basic judgment of positive evaluation. Such an evaluation occurs when there is “. . . a reasonable fit between
evidence and schema . . .” (Mandler 1982, p. 20) and it
may vary by the type of stimulus and also on the situation
or context in which it occurs. Thus, it is a function of the
individual, the stimulus and the situation. We identify
this resultant evaluation as a rational evaluation of a
brand based on the congruity between the tangible brand
beliefs and the characteristics of the consumer. It is a
basic, positive evaluation unaccompanied by arousal.
In contrast, some evaluations may combine with
physiological arousal to create the subjective experience
of affects such as anger or joy. Such arousal only occurs
when a stimulus is incongruous with existing schema. We
identify emotional evaluation as a positive or negative
evaluation of a brand based on the level of incongruity
between the brand and the consumer’s existing schema
based on other brands. When the incongruity is slight, a
process of assimilation results in a positive evaluation and
a low level of arousal and affect. When the incongruity is
high, a process of successful accommodation may lead to
a positive or negative evaluation and higher levels of
arousal and affective attitude. We do not model these
processes of assimilation and accommodation here since
Mandler clearly states that these processes are largely not
conscious (see also the other references cited by Mandler
1982 in this connection) whereas evaluations are conscious and lasting.
American Marketing Association / Winter 2006
Brand Attitudes
Mandler and others associate evaluations of objects
(say brands) with interest in that object. Perry (1926) also
links interest to favorable attitudes towards the object.
However, interest and evaluation are distinct concepts.
Mandler argues that interest that is associated with
evaluation is the result of interaction between the object
and the person and that only certain things are of interest
to certain persons. Since attitudes can also be associated
with the interaction of certain consumer characteristics
with certain product characteristics, we propose that
brand attitudes are predispositions that can be regarded as
a person’s level of interest in a brand that results from the
person’s rational and emotional evaluations of the brand.
Thus, attitudes are a function of both the brand and the
person and they are based on a match between these two
elements.
Two aspects of attitudes, utilitarian and hedonic,
have been well established in the marketing literature
(Batra and Ahtola 1991; Voss, Spangenberg, and
Grohmann 2003; Babin, Darden, and Griffin 1994) and
we use these in Figure 1 as two components of attitudes,
utilitarian and affective. A utilitarian attitude is defined
as a basic level of interest in a brand that is a rational
predisposition or simple liking or acceptability of the
brand and that leads to intent to buy the brand at a future
date. An acceptable match between an individual’s notions of price and quality, for example, and a brand’s
offerings on these same features result in a utilitarian
197
interest (attitude) in the brand. Mandler asserts that
events or objects that are in congruity with existing
schema create evaluations involving positive liking which
are not accompanied by arousal and, thus, are not evocative of affect. In fact, he states that schema congruity
results in “0” intensity of affect (1982, p. 22). An affective
attitude is defined as a level of interest in a brand that is
based on an emotional predisposition, positive or negative, towards the brand. Hedonic (affective) related criteria have been seen to relate to judgment (Pham et al. 2001;
Adaval 2001; Yeung and Wyer 2004). Similar to valueexpressive attitudes, an affective brand attitude is a signal
of the consumer’s more personal belief, a belief commensurate with one’s self (Eagly and Chaiken 1993; Shavitt
1989). Elsewhere in the literature on emotional and
interpersonal communication we find a similar connection between arousal and the elicitation of affect. Berscheid
(1983) delineates “love” as an interruption to an
individual’s planned activity. Further, Berlyne (1960)
suggests that discrepancies between events cause arousal,
curiosity and interest. Such a “constructionist” theory of
emotion in which evaluations combine with arousal to
produce affect (see also Schacter and Singer 1962) would
appear to be different from the theory of mere exposure
(Zajonc 1980, 1968) in which emotion and reason are not
necessarily considered to be part of the same process and
may have separate mechanisms. The latter theory proposes that mere familiarity (included in our model) with
a stimulus may lead to affect.
We propose that utilitarian brand attitudes, which
are indicative of the consumer’s interest for the brand
based on its usefulness and acceptability, will lead to
purchase intent. This attitude is based on the brand’s
features and characteristics (tangible beliefs), which the
consumer considers when determining how to accomplish a given task (rational evaluation). The end-result is
an intention to purchase the brand. In contrast, a brand
that elicits an emotional evaluation (based on its incongruity with existing schema) will cause the consumer to
form an affective attitude. Information about a brand that
is unexpected (i.e., incongruous with existing schema)
will trigger arousal. In the case of a positive emotional
response, the consumer’s inclination to purchase not only
increases (purchase intent), but the consumer will be
more likely to spend more to acquire the brand (willingness to pay). The case for attitude strength leading to
premium prices has in fact been presented in prior work
on branding (Keller 1993). On the other hand, utilitarian
attitude is a simple behavioral interest in the brand which
results in an intent to purchase the brand. It is not
necessarily indicative of a strong desire for the brand and,
thus, is not capable of eliciting the sacrifice entailed in a
willingness to pay a higher price for a brand over other
similar brands. It is reasonable to expect that people will
be willing to pay more for a unique brand with which they
associate positive feelings.
American Marketing Association / Winter 2006
DISCUSSION
Marketing Implications
This model has interesting implications for our
understanding of market behavior by consumers. We
suggest that unique brands are more likely to be considered incongruous and thus elicit emotional brand evaluation leading to affective attitudes and a greater willingness to pay a higher price. This may help to explain why
marketing textbooks often show that the demand curve
(the relationship of price and quantity demanded) for
prestige products may be upward sloping, in direct contradiction with the laws of supply and demand in economics which state unequivocally that as price goes down,
quantity demanded increases. For certain types of products and certain types of customers, demand may actually
go up as price increases for unique brands.
Using an experimental manipulation in the form of
a game between student subjects as buyers and computers
as sellers, Amaldoss and Jain (2005) show that subjects
who desire uniqueness (labeled as “snobs”) are likely to
increase their demand as the price of conspicuous (prestige products such as cars, jewelry, watches, perfumes)
products increases. In contrast, subjects who are “conformists” are likely to decrease their demand as price
increases. Thus, snobs may want a higher priced product
because they expect that at a high price there will be fewer
people buying the product and this fulfills their craving
for uniqueness. Thus, while on the aggregate (considering all buyers together) the demand curve for a product
may indeed be downward sloping, if we disaggregate the
market place into segments of consumers (see Hunt and
Morgan 1995 for a discussion), then it is very possible that
certain segments (say “snobs”) may display an upward
sloping demand curve in their purchase behavior. Interestingly, and consistent with Figure 1, Amaldoss and Jain
(2005) suggest that companies who make conspicuous
goods emphasize the exclusivity of their products rather
than the functional attributes in order to generate higher
prices and higher profits.
Our model also raises the issue of the importance of
consumer perceptions of product category in attitude
formation. Is the firm’s brand perceived as a utilitarian or
hedonic good? This distinction has clear implications for
how the consumer evaluates and ultimately goes about
obtaining the good. Prior research stresses the influence
of functional versus symbolic product meanings in the
consumer’s life (see for example Belk 1988; Csikzentmihalyi and Rochberg-Halton 1981; Fournier 1991; Holbrook and Hirschman 1982). Our model suggests that this
functional-symbolic dichotomy may directly influence
both cognitive and affective appraisals. The firm must be
certain on the positioning of its offering, because the
consumer’s perception of the offering as more functional
198
or symbolic will have an effect on purchase intention and/
or willingness to pay.
Firms need to better understand the characteristics of
consumers. Clearly, in addition to paying more attention
to their attitudes toward specific brands, marketers should
also find ways to measure both cognitive and emotional
reactions to brand-related information. According to the
model, consumers who are more personally and emotionally tied to their brands (i.e., perceive them as superior to
other brands) will be more likely to pay a higher price.
Future Research
We conceptualize a model of attitude formation and
the influence of attitudes on consumer behavior. Clearly,
the next step is to attempt to empirically validate this
framework. First, work needs to focus on specific measures for our constructs of interest, especially with regard
to maintaining distinctions among the belief, evaluation
and attitude constructs for both types of goods. Once
distinct constructs are established, we then suggest examining the relationships between/among a few of the
constructs at a time, in order to keep the endeavors
manageable. For instance, the relationships between rational brand evaluation and utilitarian attitudes and emotional evaluation and affective attitudes need to be empirically demonstrated. According to our model, rational
brand evaluation should be related to utilitarian attitudes
but not to affective attitudes while emotional brand
evaluation should lead to affective attitudes but not to
utilitarian ones. The relative influence of brand familiarity in this regard should also be tested.
Researchers will also want to define the conditions,
if any, under which some of the relationships apply. The
role of arousal, for instance, in creating emotion has been
an assumption in our model which could be directly tested
in future research. Does emotional brand evaluation lead
to affective attitudes only under conditions of high incongruity and high arousal? Do these conditions also lead to
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American Marketing Association / Winter 2006
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200
For further information contact:
Arjun Chaudhuri
Charles F. Dolan School of Business
Fairfield University
North Benson Road
Fairfield, CT 06824–5195
Phone: 203.254.4000, Ext. 2823
FAX: 203.254.4105
E-Mail: [email protected]
American Marketing Association / Winter 2006
201
HOW DO CONSUMERS EVALUATE LINE EXTENSIONS?
THE IMPORTANCE OF CONSUMER ATTITUDES IN
LINE EXTENSION SUCCESS
Sweta Chaturvedi Thota, James Madison University, Harrisonburg
SUMMARY
This paper proposes a model that identifies how
consumers evaluate line extensions. The paper stresses
the need to use consumers’ attitudes toward a line extension in order to understand and measure the success of
line extensions better. Through the proposed model and
propositions, this paper identifies and proposes the effect
of several antecedents on consumers’ attitude toward line
extensions. This is a mediated model and proposes that
consumers’ attitude toward line extensions mediates the
effects of suggested antecedents on the dependent variables.
Line extensions, by definition, refer to the use of an
established brand for a new offering in the same product
class or category (e.g., Cherry Coke, Liquid Tide, Miller
Lite) and differ from their parent brand in relatively
minor ways such as flavors, sizes, and compositions
(Reddy, Holak, and Bhat 1994). Researchers in the past
have emphasized that introduction of line extension does
not promise success and that the failure rates for line
extensions are high. (Reddy, Holak, and Bhat 1994).
While the failure rates associated with line extensions are
very high, firms need to introduce line extensions to cope
up with fierce competition in the marketplace to match up
competitors’ new offerings (Kotler 1999).
Extant research on line extension has focused mainly
on assessing the success of line extensions in terms of the
key macro-level determinants: (1) characteristics of the
extension’s firm, (2) characteristics of the line extension’s
parent brand, and (3) the extension characteristics – the
marketing support (Reddy, Holak, and Bhat 1994). Though
line extensions are a special case of brand extensions in
that in line extensions, the brand is extended in the same
product category (and not in a different product category
as is the case with brand extensions), it is surprising that
unlike in the brand extension literature, extant research
on line extensions has not focused on identifying the
determinants of line extension success from a micro-level
i.e., consumer-level-viewpoint and has not investigated
the role of consumer attitudes in determining the success
of line extensions.
American Marketing Association / Winter 2006
It is stressed here that the use of attitude measure
would help researchers understand consumers’ choice of
line extensions and, consequently, the success/failures of
new line extensions in the marketplace. Further, in the
brand extension literature, micro-level determinants have
helped researchers and managers understand consumers’
attitudes and the consequent success of brand extensions.
Since line extensions are a limiting case of brand extensions, it is argued that, just as in brand extension research,
identifying the micro-level determinants of success of
line extensions and using consumer attitudes toward line
extensions as a measure of success of line extensions will
help understand and predict the success of line extensions.
This paper addresses the above-mentioned lacuna in
past research on line extensions and develops a model that
focuses on the behavioral explanations of success of line
extensions. This framework contains components that
may be classified into four broad categories: (a) microlevel determinants of line extension and parent brand
characteristics as antecedents, (b) consumer characteristics – product knowledge and variety seeking behavior –
as moderators, (c) consumer attitude toward line extensions as mediator, and (d) purchase intentions and
repatronage intentions toward the line extension as dependent variables. This is a mediated model and proposes
that consumers’ attitude toward line extensions mediates
the effects of suggested antecedents on the dependent
variables.
The arguments and propositions in this paper attempt to identify and understand the determinants (antecedents and moderators) of consumers’ attitude toward
line extensions success, which have been summarized
and represented in the framework as shown in the Figure 1. Through the proposed framework and propositions, this paper identifies and proposes the effect of
several antecedents on consumers’ attitude toward line
extensions from a micro-level i.e., consumer-level viewpoint.
202
FIGURE 1
A Behavior Model for Determining the Success of Line Extensions
CONSUMER CHARACTERISTICS
VARIETY SEEKING
BEHAVIOR
(Nijssen 1999)
LINE
EXTENSION
CHARACTERISTICS
PRODUCT
KNOWLEDGE
(Spence and Bucks 1997)
COBRANDED
ATTRIBUTES
UNIQUE AND BENEFICIAL
PRODUCT ATTRIBUTES
ATTITUDE
TOWARD
THE LINE
EXTENSION
PARENT
BRAND
CHARACTERISTICS
• PURCHASE INTENTION
• REPATRONAGE
INTENTION
PARENT BRAND
QUALITY
(Aaker and Keller 1990)
BRAND AFFECT
(Boush et al. 1991;
Broniarczynk and Alba
1994)
For further information contact:
Sweta Chaturvedi Thota
Department of Marketing
College of Business MSC 0205
James Madison University
Harrisonburg, VA 22807
Phone: 540.568.6817
FAX: 540.568.3587
E-Mail: [email protected]
American Marketing Association / Winter 2006
203
ENVELOPE MESSAGE FRAMING STRATEGIES, ENVELOPE
CHARACTERISTICS, AND DIRECT MAIL EFFECTIVENESS
Clinton Amos, University of North Texas, Denton
SUMMARY
Like any marketing communication element, getting
the consumers’ attention is extremely crucial. In direct
mail, the initial goal of all direct marketers is to get
consumers to open the mail, making the envelope one of
the most important components of a direct mail piece. In
today’s business world of higher costs, fierce competition, and advertising clutter getting the consumer to open
the envelope open is one of the biggest hurdles in direct
mail. Therefore, there is tremendous pressure to maintain
the strength and allure of direct mail pieces. One common
strategy used to increase the appeal of direct mail pieces
is to strategically design the outer envelope to enhance a
consumer’s willingness to open the direct mail piece.
Only a couple of studies have examined the opening
behavior of direct mail in a business-to-consumer context. These studies have primarily focused on specific
envelope characteristics such as color, size, and resemblance to other forms of mail. However, in addition to the
physical features, direct mail envelopes often have messages printed on them to motivate recipients to open the
envelope. The objective of this study is to determine the
effects that features of direct mail envelopes have on
recipients’ envelope opening behavior and to establish a
foundation for developing a better understanding of the
influence of message framing strategies, a common strategy used by practitioners to influence the opening behavior of direct mail by recipients.
Consumers frequently use framing heuristics to reduce the information so that they can make quicker
decisions. Framing strategies are reflective of non-conscious influences and help consumers to make decisions
based upon their gut reactions. Thus, one could argue that
the opening behavior of direct mail is influenced by nonconscious evaluations of envelope characteristics and
message frames. People rely heavily on heuristic processing and through this process judgment about advocacy are
based on the appeal of a surface message cue, namely, the
hedonic favorableness of the message frame, so that
positively framed messages are more persuasive than
negatively framed ones. Consumers, through a heuristic
process, evaluate the risk and relevance associated with
direct mail by examining the message frames and characteristics of the direct mail envelope. From this quick
evaluation, decisions are made about whether or not the
direct mail piece should be opened or discarded. Direct
marketers attempt to take advantage of this heuristic
American Marketing Association / Winter 2006
process by providing a direct mail envelope design and
message which they feel will trigger a favorable response
to the envelope.
A study aimed to capture the influence of envelope
message framing strategies on consumers’ willingness to
open direct mail was conducted on 478 undergraduate
and graduate students. Based upon an in depth examination of collected direct mail envelopes and literature
pertaining to message framing, envelope teaser copies
and envelope characteristics, scales were developed to
measure the proposed message framing and envelope
characteristic dimensions along with opening behavior.
The examination resulted in the message framing constructs urgency, importance, exclusiveness, price benefits, incentive benefits, and gratitude. In addition the
examination resulted in the following envelope characteristic constructs: envelope characteristics-personalized (ECP), envelope characteristics-standardized (ECS),
and envelope characteristics-official (ECO), all of the
constructs were confirmed by factor analysis.
Subsequent multiple regression indicated that only
the message framing constructs exclusiveness, incentive
benefits, and gratitude showed significant positive associations with willingness to open direct mail. Importance
had a moderately significant positive association with
willingness to open direct mail. Furthermore, the regression results indicated that the envelope characteristic
constructs ECP and ECS were significantly positively
related to consumers’ willingness to open direct mail.
Additional information was obtained about attitude
toward direct marketing and attitude toward the firm to
distinguish whether responses differed based on their
attitudes. Cluster analysis was performed on the sample
using respondents’ attitudes toward direct marketing and
firms using direct marketing. The cluster analysis revealed two groups; (1) respondents with more positive
attitudes and (2) respondents with negative overall attitudes. For respondents with more positive attitudes the
regression results indicate that only ECP and ECS are
significantly related to willingness to open direct mail.
For respondents with negative overall attitudes incentive
benefits and ECS have a significant positive association
with willingness to open direct mail while gratitude has
a moderately significant positive association with willingness to open direct mail.
204
At the academic level, the results pertaining to
envelope characteristics support previous findings in
literature and provide an underlying framework for summarizing and evaluating envelope characteristics in future research. Overall, for practitioners the results indicate that envelope message framing strategies and enve-
lope design can be used to target segmented groups of
consumers in a more effective manner.
The limitations of this study include using college
students as a sample and exclusion of additional factors.
Future research should use non-student samples and
explore other factors. References available upon request.
For further information contact:
Clinton Amos
Department of Marketing and Logistics
University of North Texas
P.O. Box 311396
Denton, TX 76203–1396
Phone: 940.565.3121
FAX: 940.565.3837
E-Mail: [email protected]
American Marketing Association / Winter 2006
205
UNDERSTANDING LATENT CONFLICT IN MARKETING TEAMS
Ruth Maria Stock, University of Hohenheim, Germany
Martin Klarmann, University of Mannheim, Germany
SUMMARY
The concept of conflict has been widely studied in
marketing research. However, research has mainly focused on manifest conflict as perceived by the involved
persons. It has been studied in the context of
interorganizational marketing relationships, such as buyerseller relationships and channel relationships, and in the
context of intraorganizational relationships, such as the
relationship between marketing and other functions of
the organization. At the same time, previous research in
marketing has largely ignored the phenomenon of latent
or hidden conflict, i.e., conflict that lingers in an organization without having yet led to overt action. We feel that
this is a limitation, as conceptual research on conflict
emphasizes the possible negative consequences of latent
conflict for organizational functioning.
Against this background we investigate the consequences of latent conflict in marketing teams. Drawing on
process models of conflict, we differentiate between latent
(or underlying) conflict, manifest conflict, and conflict
outcomes. Additionally, based on extensive empirical
evidence on conflict in teams, we distinguish between
task conflict, i.e., conflict with regard to the task the team
has to accomplish, and relationship conflict, i.e., interpersonal incompatibilities among team members. In sum,
we consider four types of conflict in our model: latent task
conflict, latent relationship conflict, manifest task conflict, and manifest relationship conflict.
Mainly based on social influence theory, we then
hypothesize that there is a causal chain leading from
latent conflict over manifest conflict to negative outcomes
for the teams. More specifically, we expect that latent task
conflict positively affects manifest task conflict, which in
turn negatively affects marketing team efficiency. We
also expect that latent relationship conflict positively
affects manifest relationship conflict, which in turn negatively affects team member satisfaction. Additionally, we
hypothesize that latent task conflict has a direct negative
effect on team efficiency and that latent relationship
conflict has a direct negative effect on team member
satisfaction.
We empirically tested our hypotheses using a sample
of 98 marketing teams with two or more respondents per
team (383 respondents in total) from companies in five
industries (automotive, banking, consumer goods, electronics, machine building). In this context, it was a key
American Marketing Association / Winter 2006
methodological challenge to assess the degree of latent
conflict in the marketing teams. The rare previous empirical research on latent conflict has usually relied on
information obtained from single informants that were
asked to report the degree of agreement between the
involved parties. This measurement approach requires
that latent conflict can be readily observed by the informant used in the study. However, it is an important
characteristic of latent conflict that it is not necessarily
perceived by all parties involved. Against this background we used a different measurement approach in our
study. More specifically, our multi-informant setup allowed us to calculate the actual disagreement within the
team regarding different constructs tapping the domain of
personal relations and the domain of task-related interaction within the team. We used the amount of disagreement observed for the relationship constructs as indicators for latent relationship conflict. Similarly, we used the
amount of disagreement observed for the task-related
constructs as indicators for latent task conflict.
Based on this operationalization of latent conflict, we
used structural equation modeling to test our hypotheses.
Our findings only partially confirm our hypotheses regarding the indirect effects of latent conflict. More specifically, we find a significant, albeit small, indirect effect
from latent relationship conflict through manifest relationship conflict on team member satisfaction. However,
our hypotheses predicting that latent task conflict indirectly influences team efficiency through manifest task
conflict could not be confirmed, as neither the effect from
latent task conflict on manifest task conflict nor the effect
from manifest task conflict on team efficiency were
significant. Our hypotheses regarding the direct effects of
latent conflict were confirmed by the data analysis. Thus,
latent conflict itself can be an obstructive factor in a
marketing environment without having led to overt action (i.e., manifest conflict). It is worth emphasizing that
the direct effect of latent conflict on performance is far
stronger than the indirect effect through manifest conflict.
Besides expanding our theoretical knowledge of
latent conflict and its effects, this study is also relevant
from a managerial perspective. Our findings show that
the conflicts that are actually visible in marketing teams
are quite possibly only the metaphorical tip of the iceberg.
While hidden to the eye of the unwary observer, latent
conflict has stronger performance implications than manifest conflict. Marketing managers should keep this in
206
mind when managing conflict in their department. This
is of particular importance, because to this day many
guidelines and trainings for conflict management focus
on the matter of manifest conflict. Also, our study replicates the finding that manifest task conflict does not
necessarily reduce team efficiency. On the other hand,
latent task conflict is strongly detrimental to team perfor-
mance. Against this background, marketing managers
should seek to actively address latent task-related conflict
to transform it to manifest conflict. In other words, other
than implied by the famous adage, silence may sometimes
prove to be nothing more than fool’s gold when dealing
with latent conflict in marketing. References available
upon request.
For further information contact:
Martin Klarmann
Marketing Department
University of Mannheim
68161 Mannheim
Germany
Phone: +49.621.181.1549
FAX: +49.621.181.1555
E-Mail: [email protected]
American Marketing Association / Winter 2006
207
MARKET FORESIGHT CAPABILITY: DETERMINANTS AND NEW
PRODUCT OUTCOMES
Mike McCardle, Western Michigan University, Kalamazoo
J. Chris White, Michigan State University, East Lansing
SUMMARY
Because the heterogeneity of both supply and demand is always changing, the market is in a constant state
of flux (Dickson 1992). This flux creates “opportunities
that can be imperfectly exploited by the motivated, alert,
and hustling decision maker” (Dickson 1992, p. 69). To
capitalize on these opportunities, firms must develop
their ability to sense events and trends in markets ahead
of competitors (Day 1994). We refer to this ability to
anticipate emerging trends as market foresight capability.
A market foresight capability affords organizations
numerous benefits that result from a greater understanding of the future needs of the market, which helps to
reduce uncertainty and create superior customer value
(Day 1994; Slater and Narver 1995). The organization
with superior market foresight capability is in a position
to compete more effectively in existing, as well as emerging markets, through the development of new products
that deliver superior customer value. New product development was selected as the context of this research
because it is a critical domain in the strategy literature due
to its importance to a firm’s long-term competitive performance (Day 1994; Griffin 1997; Wind and Mahajan
1997).
The majority of new products fail (Boulding et al.
1997), often because firms failed to understand their
customers’ needs (e.g., Dougherty 1992; Henard and
Szymanski 2001). In light of this fact, researchers have
concluded that the development of successful new products relies on the knowledge generating capabilities of the
firm (e.g., Day 1994; Dickson 1992; Leonard-Barton
1992; Moorman 1995). Because market foresight is an
indicator of the firm’s knowledge-creating capability,
firms with superior market foresight capability are expected to be in position to better understand their customers and thus introduce new products that satisfy these
needs.
The constructs selected as determinants of market
foresight capability are supported by dynamic capability
theory, which focuses on the organizational processes
that elevate lower-level capabilities of individuals and
teams to an organization-level or dynamic capability
American Marketing Association / Winter 2006
(Teece et al. 1997). Three processes expected to be critical
to the development of market foresight capability are
learning, reconfiguration/transformation, and coordination/integration. Learning is depicted as antecedent to the
other two processes because it is the process that enables
knowledge generation and dissemination to be performed
better and quicker (Teece et al. 1997). Learning is the
process that guides the evolution of dynamic capabilities
(Eisenhardt and Martin 2000). Reconfiguration/transformation, the ability to reconfigure and transform the
organization’s assets and procedures, is represented by
active scanning, lead user collaboration, consulting with
front-line employees and market experimentation. We
select these knowledge generation processes because
reconfiguration and transformation require constant surveillance of markets and technologies, the ability to scan
the environment, and evaluation of markets and competitors (Teece et al. 1997). The third process, coordination/
integration, is represented by interdepartmental connectedness and future-market focus. The new product outcomes expected to be positively influenced by market
foresight capability include the creativity, speed to market, and market-entry timing of new products.
Data were collected using a nationwide direct mail
survey of 2000 marketing executives from a broad cross
section of manufacturers. A total of 257 questionnaires
were received, which, after accounting for surveys that
were undeliverable (i.e., Menon et al. 1999), represents a
response rate of 25.2 percent. Based on findings from
previous studies whose population of interest consisted of
top tier managers our response rate is at, or above,
acceptable levels.
Our findings show there is a disparity between organizations that possess superior levels of market foresight
capability and those who possess low levels, specifically
with regard to the outcomes associated with new product
development. Greater creativity and superior knowledge
regarding properly timed product introductions are all
enhanced in firms with higher levels of market foresight
capability. As hypothesized, learning enhances the knowledge generation processes reconfiguration/transformation and coordination/integration. Our results indicate
that market foresight capability is heightened by lead user
collaboration, consulting with front-line employees, interdepartmental connectedness and future-market focus.
208
Although our findings show that market foresight
capability enhances new product performance by allowing the organization to anticipate future market events,
possessing the antecedents of market foresight capability
does not guarantee that foresight will magically appear
within the minds of managers. Managers can only detect
what can be seen. As stated earlier, market foresight
capability is defined as the organizational capability that
allows the firm to anticipate emerging shifts in the market
in time to influence the shape of the market. Although it
can be argued that detecting a shift earlier than later is
always preferred, for the most part it does not matter when
the shift in known so long as it is known in time to
influence the market. By possessing market foresight
capability organizations will be in such a position.
While the concept of market sensing has been the
subject of some investigation, the findings of this study
outline an important aspect of this research stream that
has been overlooked. To date, the majority of research in
the marketing literature has focused on the detection of
current conditions. This study shows that market foresight capability is an appropriate and useful measure
when the area of interest is anticipating future market
conditions and its influence on both current and future
customers. References available upon request.
For further information contact:
Mike McCardle
Western Michigan University
3181 Schneider Hall
Kalamazoo, MI 49008
Phone: 269.387.6101
FAX: 269.387.5710
E-Mail: [email protected]
American Marketing Association / Winter 2006
209
EXPLORATIVE NEW PRODUCTS AND THEIR
ORGANIZATIONAL ANTECEDENTS
Erwin Danneels, Worcester Polytechnic Institute, Worcester
Rajesh Sethi, Clarkson University, Potsdam
SUMMARY
A focal point of debate and research in the management literature has been the tension between exploration
and exploitation in firms. While exploration is critical for
long-term survival and sustained competitiveness, little
attention has been paid to what factors can help a firm
foster exploration. Our research addresses this gap in the
literature by focusing on organizational antecedents of
explorative new products (i.e., new products that are
meaningfully distinct rather than similar to competing
products). We examine how the degree to which new
products are explorative is affected by the organizational
context in which new product development takes place, in
particular the organizational culture and the firm’s strategy for dealing with emerging opportunities in the environment.
To identify the aspects of culture and strategy that are
strong candidates for inclusion in a study on exploration,
we draw on the work by Levinthal and March (1993).
Specifically, we focus on two factors related to organizational culture: constructive conflict and tolerance for
failure. Concerning the firm’s strategy, we focus on two
strategic orientations for dealing with the emerging opportunities in the environment: willingness to cannibalize the firm’s existing resources and future-oriented
market scanning. Our unit of analysis is the organization,
in other words, we focus on organizational antecedents
and a firm-level outcome.
Further, the literature has paid little attention to the
role of the external environment in influencing a firm’s
ability to pursue exploration. Therefore, we study how
turbulence in customer, competitive, and technological
environments moderate the effect of firm’s strategies for
dealing with emerging opportunities in the environment.
Method and Results
To test the hypotheses, we gathered survey and
secondary data on public manufacturing firms active in
the U.S. More specifically, the survey was conducted on
U.S. publicly traded, physical goods manufacturing firms
that operate predominantly in a single industry. One
hundred forty-five respondents returned filled out questionnaires (a 30.5% response rate). The firms that completed the questionnaire represent a broad cross-section
American Marketing Association / Winter 2006
of manufacturing firms. A combination of new and
existing measures was used to measure the constructs in
this study. These measures were subjected to various
measurement analyses.
We used moderated multiple regression to test the
hypotheses. Results suggest that cultural antecedents
(constructive conflict and tolerance for failure) and strategies for dealing with emerging opportunities in the
environment (willingness to cannibalize existing resources
and future-oriented market scanning) positively affect
explorative new products. Willingness to cannibalize
more strongly fosters the degree to which new products
are explorative under conditions of competitive turbulence. The effect of future-oriented market scanning on
explorative new products is reduced under customer and
competitive turbulence, but enhanced under technological turbulence. Some additional analysis suggests that
explorative new products play a major role in renewal of
firm’s revenues and growth.
Implications
Our study makes a number of contributions to both
theory and practice. From a theoretical viewpoint, this
study extends the previous work on exploration in two
important ways. First, building on initial suggestions by
Levinthal and March (1993), we identify and empirically
test, in the context of new product development, the effect
of specific factors that support exploration. In doing so,
we extend the research on exploration initiated in the
marketing area by Atuahene-Gima (2005) and
Kyriakopoulos and Moorman (2004). The theoretical
framework we build here can serve as a foundation for
further work on drivers of exploration. Second, our study
draws attention to an important but often overlooked
factor in exploration research, namely environmental
conditions. Environmental conditions, in particular, the
turbulence of the environment, can play a critical role in
mitigating a firm’s efforts to develop explorative new
products. Our findings show that the effect of different
types of turbulence is not alike. The effect is nuanced; it
varies depending on whether the turbulence is in customer, competitor, or technological environments.
From a practical perspective, since we have considered variables that can be influenced by managers, the
findings of our study provide clear recommendations for
210
fostering exploration in the development of new products.
Our results show managers that their instincts usually are
opposite of what promotes explorative new products. For
example, while firms are usually quick to punish failures,
we show that this tendency is not good for explorative
outcomes. Further, we highlight that in turbulent environments, managers need to foster some of the strategic
levers (e.g., willingness to cannibalize) and avoid the
counterproductive effect of others (e.g., future oriented
market scanning). Thus, this study gives managers insight into environmental contingencies so that they can
modify their firm’s strategies to develop explorative new
products. References available upon request.
For further information contact:
Erwin Danneels
Worcester Polytechnic Institute
100 Institute Road
Worcester, MA 01609
E-Mail: [email protected]
American Marketing Association / Winter 2006
211
AN INTEGRATIVE VIEW OF CUSTOMER LOYALTY: IS IT
DIFFERENT FOR MAXIMIZERS VERSUS SATISFICERS?
François A. Carrillat, HEC Montréal, Montréal
Diane Edmondson, University of South Florida, Tampa
Daniel M. Ladik, Suffolk University, Boston
SUMMARY
Loyalty is often the main focus of an organization’s
marketing activities (Bolton, Kannan, and Bramlett 2000;
Dick and Basu 1994). In fact, loyalty has been shown to
have a large positive impact on profit and long-term
performance (Banwari and Lassar 1998; Oliver 1999).
Most models of loyalty conceptualize and operationalize
the construct from a behavioral perspective (e.g., Caruana
2002; Howard and Sheth 1969; Oliver 1999). This paper
offers an alternative perspective proposing that an attitudinal view of loyalty provides a better understanding of
the mechanisms of repeat purchase (Dick and Basu 1994)
and allows unraveling of consumer’s psychological process (Bloemer, Ruyter, and Wetzels 1999).
Research in retailing often investigates other key
variables such as service quality and customer satisfaction (e.g., Cronin, Brady, and Hult 2000; Dhabolkar,
Shepherd, and Thorpe 2000). Empirical evidence tends to
show that service quality leads to satisfaction (Cronin and
Taylor 1992; Dhabolkar, Shepherd, and Thorpe 2000;
Fornell 1992) while customer satisfaction has long been
considered as an antecedent to customer loyalty (Oliver
1980; Bitner 1990; Dick and Basu 1994). However, only
a few studies have integrated together the notion of
customer loyalty, customer satisfaction and service quality (for exceptions see Harris and Good 2004; Caruana
2002).
In an effort to provide better service options to
customers, firms have been adding multiple service offerings to target multiple market segments. According to
Schwartz et al. (2002), people differ fundamentally on the
objectives they pursue when making decision: some people
try to achieve the best possible result (henceforth, maximizers) whereas others try to achieve a result good
enough that is superior to some criteria (henceforth,
satisficers). According to this thinking, satisficer customers may easily wade through the plethora of service
choices while maximizer customers do extensive analysis
to assure themselves that their purchase is the best
alternative. A maximizer cannot be certain that the best
option has been found unless she or he has examined
practically all possible options (Schwartz 2004). As a
consequence, maximizers and satisficers are likely to
American Marketing Association / Winter 2006
profoundly differ on how they make consumption decisions and how they can be satisfied with their purchase
(Schwartz et al. 2002).
It was decided that an appropriate study context
would be the quick service retailing stores of Dunkin
Donuts and Starbucks. The first question on the survey
asked the subjects to review the names of these two retail
brands and choose the one (they could only select one)
they visited most often. Then, the subjects were told to
respond to the service quality, customer satisfaction,
service loyalty, repeat purchase, and switching items with
regard to the retailer they chose. The final set of items on
the survey was Schwartz’s (2004) satisficer/maximizer
measure. For this construct, subjects were instructed that
these items were general questions about them and were
unrelated to the retailing firm they chose at the beginning
of the study. Marketing students in graduate (e.g., MBA)
and undergraduate classes from a northeast private university and a large southeast public university participated in this study for course credit. In total, 263 completed responses were collected via a web survey during
the three week data collection period (mean age = 28.5
years; 55% of females).
The data provided support that customer satisfaction
is positively influenced by service tangibility and service
reliability but not service relationship. The data also
provide support that customer satisfaction positively impacts loyalty, which positively influences repeat purchase
behavior but negatively influences brand switching behavior. The research conducted also confirmed that the
relationship between satisfaction and repeat purchase
behavior and brand switching behavior is mediated by
loyalty. Finally, it was found that consumer maximizing
behavior moderates the relationship between Service
Quality and Satisfaction in such a way that the impact of
Service Quality on Satisfaction is stronger for satisficers
than maximizers.
The research summarized here highlights a number
of important implications for managers of quick service
retail operations. First, physical aspects and service relationship of this type of retail operation strongly influence
customer satisfaction whereas service reliability does not.
Although the context was a quick serve establishment,
212
managers should still be overly concerned with developing good relationships with their patrons as customers
tend to be more concerned about interpersonal relationships than about the dependability of the service offered.
Second, the data presented here support the notion that
satisfied customers tend to be loyal and are more likely to
repeat purchase while, at the same time, have a weaker
switching tendency. It is best for retail managers to strive
for satisfied customers via attractive environments and
friendly service as this is perhaps the best strategy for
repatronage by loyal customers. Finally, a multitude of
service choices is not always best for all customer populations. Maximizers tend to evaluate all possible options
regardless of how many choices an establishment might
offer.
It may be important to include additional constructs
in this model for further research. For instance, perceived
risk could be one such variable as the literature suggests
that loyalty acts as a risk reliever for customers (Bauer
1960; Roselius 1971; Howard and Sheth 1969). In addition, research could also explore extrinsically rather than
intrinsically motivated switching behavior which occurs
when alternative options are more attractive as opposed to
when a more optimal level of stimulation is sought.
Finally, the products under investigation in this model
were low involvement products. Because of this, it is
important to investigate this model using high involvement products. References available upon request.
For further information contact:
Daniel M. Ladik
Suffolk University
8 Ashburton Place
Boston, MA 02108
Phone: 617.573.8759
E-Mail: [email protected]
American Marketing Association / Winter 2006
213
MEASURING AND MANAGING CUSTOMER LIFETIME VALUE
BASED RETAILER STRATEGY
V. Kumar, University of Connecticut, Storrs
Denish Shah, University of Connecticut, Storrs
Rajkumar Venkatesan, University of Connecticut, Storrs
SUMMARY
Imagine being able to look into the future and tell
which customer will be more or less profitable. Now,
imagine this ability to be in the hands of a retailer to
manage and maximize customer profitability. It turns out
that today’s technology coupled with a suitable forward
looking metric can provide retailers (and marketers in
general) the power to manage individual customer relationship based on the lifetime value of the customer. This
paper is the first major empirical study to propose and
empirically test the application of customer lifetime value
(CLV) metric in the retailing context.
By definition, CLV is the net present value of future
profits from a customer. Its importance stems from the
fact that there is a migration amongst corporations from
a product centric to a customer centric focus. These
companies include Harrah’s Casinos, Continental Airlines, TESCO, Royal Bank of Canada, and Wyndham
Hotels to name a few. Each of these companies collects
customer-level information to unearth customer heterogeneity and subsequently deploy customer-specific marketing initiatives. Not surprisingly, “customer management” has become the mantra of virtually all business
corporations and forms the basis of motivation for this
study as well.
Using the database of a national level retailer, we
conducted four cross-sectional time-series analyses to
explore the following research questions: (a) What is the
right metric to manage customer programs for e.g.,
customer loyalty programs? (b) How can the CLV concept
be applied to measure and manage customer value? And
(c) How can the CLV concept be applied to manage store
performance?
In the first analyses, we considered the effectiveness
of traditionally used metrics by retailers such as RFM,
consistency of purchase frequency, and relationship duration to measure and manage customer loyalty. These are
backward-looking metrics. We evaluated the effectiveness of these metrics as a managerial decision tool by
computing the correlation of each the three metrics with
the future profitability of the customer. Surprisingly, we
found a weak correlation (p < 0.4). In other words,
retailers making customer management decisions based
American Marketing Association / Winter 2006
on the backward looking metrics may end up wasting
resources on a sizeable set of customers who may not be
profitable in future. Clearly, there is a need to implement
a forward looking metric such as the CLV that is highly
correlated with the future profitability of the customer.
In the second analyses, we proposed a model to
measure the CLV. The CLV model is made up of three
components: (a) contribution margin model (b) purchase
frequency model and (c) marketing cost model. Each of
the three models helps predict an element of future
customer value. We used linear regression to estimate the
contribution margin and marketing cost for each customer. We modeled the purchase frequency for each
customer by using a generalized gamma model of interpurchase timing. The generalized gamma model accommodates the commonly used exponential distribution for
inter-purchase times. The resultant model resembled the
Hierarchical Bayes formulation of a concomitant continuous mixture model. The output from the three models
was integrated to arrive at a CLV measure for each
customer in dollar terms. The average CLV for a top
decile and a bottom decile customer were $1,580 and –
$152 respectively. The overall average CLV of a customer
was $259. Interestingly, the top 20 percent of the customers for this retailer were providing 95 percent of the
profits. This was aided by the fact that the bottom 30
percent of the customers showed negative CLV.
In the third analyses, based on the distribution of the
CLV scores across customers, we divided the customer
base into 3 segments: High CLV (comprising of the top
20%), Medium CLV (comprising of the middle 30%) and
Low CLV (comprising of the bottom 50%). Next, we did
an impact analyses to evaluate the impact of the drivers of
CLV (i.e., variables used to compute the contribution
margin and purchase frequency model) for the high CLV
segment of customers. We found that cross-buying and
shopping from channels (in addition to the retail stores)
proved to be the strongest drivers of CLV for the top 20
percent customers. To create a richer basis for customer
segmentation, we employed logistic regression to evaluate which of the demographic, lifestyle and shopping
behavior related variables available in the retailer’s dataset
varied significantly across the High and Low CLV segments. We found that the most profitable customers of the
retailer were professionally employed and married fe214
males in the age group of 30–49 years with children,
having high household income, and member of the store’s
loyalty card. In addition, the high CLV customers stayed
relatively closer to the store, and were multi-channel
shoppers. In contrast, the low CLV customers were
identified as relatively low-income, unmarried male customers in the age range of 24–44 years, who were
primarily single-channel shoppers, not necessarily a store
loyalty program member, stayed relatively farther away
from the store and did not own a home.
Finally, in the fourth analyses we computed the
lifetime value of a store as the weighted sum of the net
present value of the lifetime value of customers that
shopped from that store minus the net present value of the
rent for the store. After computing the store’s lifetime
value, we assigned ranks to the stores based on past
profitability and future profitability (based on net present
value of customer profitability for the next 3 years).
Interestingly, the Spearman’s Correlation between the
two ranks were low (0.39, p < 0.05).
Our findings bear some important tactical and strategic implications for the retailers in general. At the
fundamental level, the adoption of CLV metric facilitates
a paradigm shift in doing business by taking the emphasis
from managing customer relationships to managing cus-
tomer value. This is because the former is merely the
means to achieve the latter. Further, our study implies that
retailers may often end up mismanaging store profitability by looking at the store level drivers instead of being
sensitive of their customer portfolio and the future value
of that customer portfolio. Since 30 percent of customers
on an average resulted in negative lifetime value in our
analyses, stores need to exercise greater discretion in
terms of whether they are acquiring and retaining the
right customers. In this context, the profile analyses of the
high and low CLV customers could be used as a guide to
acquire the right profile of customers. The low correlation
between traditional measures of loyalty and future profitability emphasizes the need to use the CLV metric to
manage both loyalty and profitability simultaneously. For
tactical implications, the drivers of CLV can be used to
influence direct marketing initiatives. For example, retailers can target individual customers for cross-purchase
or offer incentives to promote multi-channel shopping
behavior so as to increase the CLV of the customers.
Overall, we feel that the technology innovations of
twenty-first century (such as smart cards, RFIDs etc.) are
bringing the customers closer to the retailer than ever
before. Moving forward, this will only serve to amplify
the importance of the CLV metric in days to come.
For further information contact:
V. Kumar
University of Connecticut
2100 Hillside Road
Storrs, CT 06269–1041
Phone: 860.486.1086
FAX: 860.486.8396
E-Mail: [email protected]
American Marketing Association / Winter 2006
215
MAKING CUSTOMERS HAPPY WITHOUT SEEING THEM: THE
EMPLOYEE-CUSTOMER SATISFACTION LINK AT VARYING
CUSTOMER CONTACT LEVELS
Heiner Evanschitzky, University of Muenster, Germany
Florian v. Wangenheim, University of Dortmund, Germany
SUMMARY
In a world where both producer and retailer markets
are dominated by relatively few, large firms, product
offerings across retailers are ever getting more comparable. As a consequence, it has often been argued that
service rather than product quality is the key differentiator
and success factor for retailers. Therefore, considerable
attention has been laid to services marketing strategies
and tactics. More and more, retailers realize that their
business is essentially a service business and that service
quality may provide a new perspective for the organization striving to create value for customers and shareholders alike.
Because employees play an important role in the
service production process in retailing, the importance of
internal marketing has been pointed out recently. In
particular, frameworks such as the service-profit-chain
highlight the fact that higher employee satisfaction will
lead to increased customer satisfaction, and thus higher
organizational performance. Empirical research has investigated the link between employee and customer satisfaction a number of times, including a few, but not many
studies that use dyadic data for studying the link (i.e., data
from employees and customers). In general, there is
substantial support for the fact that employee and customer satisfaction are positively related to each other.
Also, there is some limited evidence of moderating factors of the link. However, there are also important issues
that are still unaddressed.
Present available dyadic research has focused on
service employees that are in direct and intense customer
contact, such as salespeople, financial service consultants or service personnel from a restaurant chain. This is
indicative of a general neglect of non-customer contact
employees in retail and service settings. Indeed, research
on the employee-customer satisfaction link has generally
aggregated data from customers at the outlet level, thereby
ignoring varying degrees of customer interaction across
employee groups. As a consequence, it is not known
whether the employee-customer satisfaction link also
holds for employees that do their jobs with little or no
interaction with their customers. In retail settings, these
are typically employees working in the storeroom and at
American Marketing Association / Winter 2006
the cashiers. Hence, the research question underlying the
present study is as follows: is the intensity of customer
contact a determinant of the existence or the intensity of
the employee-customer satisfaction link?
Using dyadic data from 53,645 customer and 1,854
employees across 99 outlets of a large DIY-retailer, three
theoretical models – the attraction-selection-model, balance theory, and emotional contagion – have been used to
base the following, competing hypotheses on:
H1a: Employee satisfaction is positively related to customer satisfaction for employees that are in direct
customer contact.
H1b: Employee satisfaction is positively related to customer satisfaction irrespective of the intensity of
the contact.
H2:
Employee satisfaction is positively related to customer satisfaction for all groups of employees and
the strength of the relationship increases as customer contact intensity increases.
For testing our competing hypothesis, we conducted
multiple group analysis on the structural equation model
described above. We tested whether a model in which the
path from employee to customer satisfaction was restricted to be the same across all three employee groups
(restricted model) versus a model in which the path was
allowed to vary across the three groups (unrestricted
model). All other model paths were restricted to be equal
across the three groups for both models, resulting in the
unrestricted model having two degrees of freedom less
(i.e., the two more parameters to be estimated). The null
hypotheses of equal parameters for all three groups is
rejected when the difference in chi-square between the
restricted and the unrestricted value is above the critical
threshold for a 95 percent-confidence interval at 2 degrees of freedom, which is 5.99.
The resulting parameter estimates for the unrestricted model are γ = .30 (t = 6.65, p < .01). for service
and sales employees, γ = .26 (t - 4.21, p < .01) for cashiers
and γ = .18 (t = 2.72, p < .01) for storeroom workers.
Hence, the effect is strongest for employees that are in
216
direct contact with customers, and weakest for employees
that do not have contact at all with customers. However,
the chi-square difference between the restricted and the
unrestricted model is 3.66, suggesting that relaxing the
assumption of equal parameters for all employee groups
do not improve model fit significantly. In combination
with the fact that the effect is statistically significant for
all three groups, this suggests that there are only very
weak differences in the employee-customer satisfaction
link across various customer contact groups. Thus, H1a
must be rejected. H1b receives support. There is some
indication that H2 (that the link is strongest for employees
that are in direct customer contact) is strongest, but since
the test fails to reveal statistical significance, H2 can also
not be confirmed.
Clearly, the results of the present study suggest that
service providers must not neglect the importance of their
non-customer-contact employees. Typically, standard
efficiency measures such as error quota or number of tasks
processed within a given time frame are used to assess the
quality of such employee groups. Our results suggest that
customer satisfaction is also an outcome of the quality of
the work of this group, and work satisfaction is an
important driver of it. References available upon request
from the authors.
For further information contact:
Heiner Evanschitzky
Marketing Centrum Muenster
Lehrstuhl für Distribution & Handel
University of Muenster
Am Stadtgraben 13–15
D-48143 Muenster
Germany
FAX: +49.251.83.22032
E-Mail: [email protected]
American Marketing Association / Winter 2006
217
CONSUMER PREFERENCE FOR CYBER AND EXTENSION BRANDS:
A TWO-STEP MODEL
Maria Sääksjärvi, HANKEN – Swedish School of Econ. and Bus. Adm., Finland
Saeed Samiee, The University of Tulsa, Tulsa
SUMMARY
The Internet has had a significant impact on the
retailing environment. It has virtually changed the way
consumers search, shop, and pay for items (Lotz et al.
2001). One of the greatest advantages of the Internet was
the thought that it would level the competitive arena and
make brands redundant as consumers would execute their
buying decisions based on price (Willcocks and Plant
2001; Bergstrom 2000). As a consequence, most of the
extant literature focuses on pricing issues on the Internet
(e.g., Tang and Xing 2001). Other research, however,
suggests that the Internet has heightened the importance
of brands (Willcocks and Plant 2001; Bergstrom 2000).
Information overload and the very large number of products and services available have heightened the importance of well-known brands for which consumers are
willing to pay premium prices (Bergstrom 2000; Smith
and Brynjolfsson 2001).
It is thus apparent that the importance of branding
has not diminished on the Internet. Firms, however, seem
to have overlooked the importance of their online brands
and many firms have had trouble with their online
branding efforts (Willcocks and Plant 2001). In this study
we consider two different types of Internet brands: cyber
(e.g., Amazon.com) and extension brands (e.g.,
BarnesandNoble.com). Although marketers have suggested that these two types differ in their propensity to
build brands (Schultz 2000), both types have struggled
with their online brand building efforts (Willcocks and
Plant 2001; Bergstrom 2000).
The key in brand building lies in understanding the
customer (Schultz 2000), yet there is limited research that
addresses consumer preference towards Internet brands
based on factors other than price. Further, consumer
preferences towards Internet brands have been limited to
either cyber- or extension brands. Understanding the
drivers of consumer preference is of importance for both
types of brands. Cyberbrands have been accused of focusing solely on brand awareness (Bergstrom 2000) and
would need to examine other factors involved with brand
preference to reach larger markets. For extension brands,
brand preference remains an integral part of their strategy
as Internet retailing has been found to have a positive
influence on firm performance (Lee and Grewal 2004). In
this study, we extend existing research by examining
American Marketing Association / Winter 2006
drivers of consumer preference towards both cyber- and
extension brands. Given the notion that these two types of
brands differ in their branding propensities, we compare
the two types of brands. We validate the proposed model
by examining it across two countries, the U.S. and Finland. As initial analyses of the data demonstrate only
minor differences between the two samples, the data were
pooled across the two countries for the purposes of testing
the model.
Brand Categorization and Preference
Based on categorization theory, we expect extension
brands to have an advantage vis-à-vis cyberbrands in
terms of brand building. Categorization involves treating
two or more distinct products as belonging together
(Medin 1989) by placing them in a joint category representation. Brands can be seen as product categories to
which a number of products and associations are linked
(Boush and Loken 1991). Once a product has been
categorized, we can use our knowledge of its category to
make predictions about it. As extension brands resemble
their market-based counterparts, consumes are likely to
include them into an existing schema and infer their
attitude toward them based on existing category knowledge. Thus, we predict spillover effects to occur to extension brands from their market-based counterparts. However, cyberbrands are distinct from other brands and do
not fit an existing category and, thus, must be evaluated
separately (Sujan 1985). We expect that the spillover
effect offers brand building advantages to extension brands
whereas cyberbrands that must create consumer recognition and attitudes from scratch.
We test our hypotheses by comparing extension
brands to their market-based counterparts and by estimating a model of brand preference that compares cyber and
extension brands. The proposed model identifies five
drivers of brand preference highlighted in the literature:
Internet shopping experience, brand familiarity, brand
character, brand offerings, and brand evaluation. We
propose a two-step model (instead of a direct effect model)
to account for brand preference. In this conceptualization,
Internet shopping experience, brand familiarity, and
brand character are viewed as antecedents to brand offerings and evaluation which, in turn, lead to brand preference.
218
Results and Conclusions
The proposed model is largely supported by the
empirical study. The results show that the proposed
antecedents are significant predictors of brand preference. As hypothesized Internet shopping experience did
not contribute to brand offerings for extension brands. For
both sets of brands, brand familiarity was the strongest
predictor of brand offerings which, in turn, was the
strongest predictor of brand preference.
This study contributes to the literature by demonstrating that consumers categorize cyber- and extensions
brands differently. Extension brands do not differ markedly from their market-based counterparts and are thus
placed into a joint category representation, whereas
cyberbrands are categorized as standalone entities. These
results indicate that cyber brands must work harder to
attain preference whereas extension brands benefit from
spillover effects from their market-based counterparts.
The only significant difference found between a marketplace brand and its corresponding extension type was
brand familiarity. Thus, consumers were more familiar
with market-based brands than their corresponding extensions. This seems intuitively correct given that consumers have been exposed to market-based brands for a
longer period of time than their corresponding extensions. When contrasting the values obtained for marketbased brands with those of cyberbrands, the only similarity was that of brand character. References are available
upon request.
For further information contact:
Saeed Samiee
Marketing & International Business
College of Business Administration
The University of Tulsa
600 South College Avenue
Tulsa, OK 74104–3189
Phone: 918.631.2019
FAX: 918.631.2083
E-Mail: [email protected]
American Marketing Association / Winter 2006
219
DOES “COUNTRY OF ORIGIN” AFFECT ATTITUDES OF CHINESE
CONSUMERS? MEDIATING EFFECT OF BRAND SENSITIVITY
AND MODERATING EFFECT OF PRODUCT CUES
Yujie Wei, Georgia State University, Atlanta
SUMMARY
Introduction
Doing business in China has been considered a tough
challenge for many global companies. Based on the
theory of ethnocentrisms, this paper studies how Chinese
consumers respond to foreign goods in the post-WTO era.
Specifically, the mediating effect of brand sensitivity and
moderating effect of selected product cues on purchase
preference are examined. This article also attempts to
find which country’s products are preferred by Chinese
consumers and investigates the reasons behind the preferences for those products. The managerial implications
for global marketers are provided.
Literature Review
Country of Origin (COO). The term “consumer
ethnocentrism” is frequently used to represent the beliefs
held by consumers about “the appropriateness, indeed
morality of purchasing foreign products” (Shimp and
Sharma 1987, p. 280). From this perspective, purchasing
foreign products is undesirable because it is harmful to the
consumer’s own country’s economy and thus, unpatriotic. For global marketers, consumer’s ethnocentric beliefs can be a means for both positioning and promoting
their products in the more effective manner.
decision making process. A brand is considered to be able
to enhance the perceived product “utility and desirability,” and therefore, it has equity for consumers and
translates into preferences when consumers process product information (Kotler and Gertner 2002). Thus, this
study posits that brand sensitivity mediates the impact of
ethnocentrisms on consumers’ purchase preference:
H1: The COO effect on purchase preference is more
likely to be greater when the consumer is more
sensitive to product brand.
Product Cues and COO Effect. A single-cue COO
effect research has typically not allowed for variations of
different product cues, such as quality, variety, price,
after-sale services, and packaging. One study found that
when other product information cues are provided together with COO information, the COO effect on consumers’ attitude was mitigated (Lim, Darley, and Summers 1994). Based on the previous research, it is posited
that selected product cues play a moderating role on the
effect of COO on the purchase preference:
H2: The COO effect on purchase preference is more
likely to be greater when the consumer is allowed
taking product cues into consideration.
Research Design
COO is usually represented by the phrase, “Made
in . . . .” The empirical results demonstrate that COO has
a considerable influence on the quality perceptions of a
product and highly ethnocentric consumers overestimate
domestic products, and underestimate the imported products (Balabanis and Diamantopulos 2004; Wang and
Chen 2004). Further, COO is a salient attribute, which
can evoke positive or negative feelings, associated with a
country. More often, consumers’ like or dislike of a
product depends on the country stereotype (Kotler and
Gertner 2002).
Eleven types of products imported from four countries (the U.S., Germany, Japan, and South Korea) served
as product stimulus. The evaluation and selection of 11
types of products were potentially global in nature, particularly in China where there continued to be great
demand for those products (Hoffe, Lane, and Nam 2003).
The data collected during the winter holiday 2003 included a convenience sample of 297 Chinese consumers
from 34 cities of China.
Brand Sensitivity and COO. Brand sensitivity refers
to consumers’ propensity to examine and identify product
brands when they process product information. In literature, product brand is related to prestige, reliability,
trustworthiness, social image, identification, and value
for money (Klein et al. 1998; Watson and Wright 2000).
Consumers use brand as one of product cues in their
Both hypotheses were supported. The results indicate that COO effect on purchase intention is stronger on
respondents of lower brand sensitivity. That means when
people do not pay attention to brands, COO has stronger
effects. Otherwise, the COO effect on their purchase
intention is much weaker. This may imply that as a
country is progressing toward globalization, the informa-
American Marketing Association / Winter 2006
Results
220
tion processing of its consumers may shift from utilizing
external (i.e., COO), more general cues to intrinsic and
more specific product cues (i.e., price, variety, and packaging) or auxiliary service such as after-sale service or
return policies.
The findings of this research provide managerial
implications for foreign companies operating in China.
First, from long run, global marketers may benefit by
placing a greater emphasis on branding and increasing
brand sensitivity. Second, more attention may be paid to
product cues, major concerns of most Chinese consumers
when considering the purchasing of foreign products.
Product cues and brand sensitivity mitigate the negative
effect of ethnocentrism. References available upon request.
For more information contact:
Yujie Wei
College of Business
Georgia State University
1340 Jack Robinson
Atlanta, GA 30303
Phone: 404.651.1931
FAX: 404.651.4198
E-Mail: [email protected]
American Marketing Association / Winter 2006
221
THE DYNAMICS OF BRAND INTERNATIONALIZATION: SPATIAL,
TEMPORAL, AND HIERARCHICAL CONSIDERATIONS
Sengun Yeniyurt, University of Nevada, Reno
Janell D. Townsend, Oakland University, Rochester Hills
Ravi Parameswaran, Oakland University, Rochester Hills
SUMMARY
Global branding has been postulated as becoming
more predominant as firms focus on core brands, and
increasingly implement unambiguous international brand
architectures as a strategic means of facilitating brand
consistency across international markets (Douglas et al.
2001). Yet, the existing research related to global brands
has been limited; relatively little is known on the nature
and consequences from a strategic marketing perspective
since scant empirical research has been conducted in this
area. In particular, the drivers of brand dispersion have
not been clearly delineated, especially the corporate and
environmental drivers of brand globalization and emergent brand structures. Thus, the purpose of this study is to
begin the exploration of the drivers of brand hierarchies.
Utilizing secondary data, this article explores the dynamic relationship between global brand architecture
hierarchies and new market entry, while taking into
account both endogenous factors, and external factors
which influence the globalization process.
Global brand architectures are comprised as hierarchical structures of brands in a company’s portfolio.
Within these architectures, global brands are a phenomenon of increasing importance and relative interest due
their importance, the advantages conveyed, and position
within the firm’s repertoire. Global branding, facilitated
by the integration of marketing and centralization of
product selection and positioning allows for the transfer
of knowledge across markets (Kim, Park, and Prescott
2003). Also, global branding speeds up a brand’s new
product introductions by minimizing the number of modifications necessary for individual markets (Steenkamp,
Batra, and Alden 2003). Yet firm level and environmental drivers of global brand market entries have not been
considered. As such, this study investigates the following
research questions: How do brands proliferate geographically over time? Does position in the brand hierarchy as
indicated by the degree of internationalization impact
market entry decisions? Does culture distance matter for
new market entries? This study contributes to the extant
international marketing literature by focusing on the
brand and firm level considerations of global brand
diffusion and evaluating the dynamic effects of a brand’s
global presence and its’ effect on new market entries.
American Marketing Association / Winter 2006
The research questions presented above are tested in
the context of the automotive industry between years 1980
and 2004. A dataset of global dispersion of automotive
brands was acquired from a market research firm that
specializes in collecting and maintaining a database of
global automotive registrations. The original dataset
includes the global dispersions of 135 automotive companies in 55 countries on annual basis. As Hofstede’s
cultural dimension scores are available for 42 countries
on 6 continents, data for 13 countries were excluded from
the dataset, which decreased the number of companies to
119, and brands to 229. Hence in the final dataset,
115,691 spells (brand-country-year combinations) and
1,934 market entries were identified. The inclusion of
economic variables further decreased the sample size to
76,973 spells due to missing observations.
A discrete time event history analysis with time
varying covariates was employed in order to estimate the
effects of the independent variables on the probability of
a company engaging in a new market entry. The covariates
include brand level, company level and host country level
factors. The agent at risk has been selected as the brandcountry-year.
Results reveal that a brands’ position in the brand
hierarchy does not have a direct effect on new market
entries. Yet, culture distance is a significant impediment
and a brands position in the global brand hierarchy
moderate its effect on new market entries. The findings
support the organizational learning from international
operations by indicating an increased likelihood of a new
market entry in another market on a continent where the
company is already present; further, if the brand is already
present on the continent there is additional likelihood of
new country market proliferation on that continent. Future research may consider the impact of geographic
distance on new market entries in conjunction with
culture distance in order to derive meaningful insights
into strategic moves for both focal firms and competitors.
Also, a ceiling effect of global dispersion exists, and then
new market entries will decline after a maximum level of
market proliferation was achieved. Interestingly, Asian
brands are proliferating more quickly that other brands,
indicating the highest level of aggressiveness. Finally, in
the automotive industry, Europe is point of focus for new
market entries, enjoying the highest level of market
attractiveness. References available upon request.
222
For further information contact:
Sengun Yeniyurt
College of Business Administration
Mail Stop 028
University of Nevada
Reno, NV 89557
Phone: 775.784.6993, Ext. 302
FAX: 775.784.1769
E-Mail: [email protected]
American Marketing Association / Winter 2006
223
SELF-SERVICE TECHNOLOGY EFFECTIVENESS: THE ROLES OF
COMPARATIVE INFORMATION, INTERACTIVITY,
AND INDIVIDUAL DIFFERENCES
Zhen Zhu, Babson College, Babson Park
Cheryl Nakata, University of Illinois, Chicago
K. Sivakumar, Lehigh University, Bethlehem
Dhruv Grewal, Babson College, Babson Park
SUMMARY
Self-service technologies (SSTs), in which customers co-produce a service with firm-provided technologies,
have become an increasingly critical component of services marketing. Examples are computerized check-in
terminals at airports and automated mailing services at
post offices. Researchers and practitioners alike recognize the importance of understanding what contributes to
the effectiveness of these devices. The purpose of this
study is to examine the roles of technology elements and
customer characteristics in the effectiveness of SSTs.
More specifically, we theorize and test how customers
respond to SSTs that by providing information, choice,
and procedural controls, empower customers to co-produce the desired service. We also theorize and test what
occurs when the SSTs over-empower customers, offering
features that surpass their capabilities to use them. Furthermore, we predict and explain customer differences in
responses to the SSTs. The basis for our theorization is the
organizational psychology literature on employee empowerment. Studies incorporating employee empowerment concepts to investigate customer service co-production are starting to emerge (Bendapudi and Leone 2003;
Meuter et al. 2005). However, this study may be one of the
first on the issue of over-empowerment in the technologybased service interface.
In this study, we define the effectiveness of an SST
according to two aspects: customers’ perceived control
and a subjective evaluation of the service interface. Comparative information provided in a co-production technology, that is messages given to co-production participants that convey factual and evaluative information
about the price, quality, and availability of selections from
alternative service channels or suppliers (Alba et al.
1997), is utilized to represent an empowering design in
the SST setting. On the basis of prior findings in employee
and consumer studies that sharing information and choices
enhance sense of control and evaluation, we expected
comparative information to have a positive impact on the
SST effectiveness.
The employee empowerment literature also notes
that “over-empowerment,” or empowering employees
American Marketing Association / Winter 2006
with tasks that surpass their cognitive capability, can be
counterproductive (Pasmore and Fagans 1992). In this
study, we investigate the over-empowering condition by
imposing a highly interactive design onto an SST interface that has already provided comparative information to
participants. We consider how comparative information
and interactivity in combination influence SST effectiveness. We expect an over-empowering SST interface that
demands extensive capabilities and skills from participants (e.g., because of challenging navigational technologies) to handle service production information and
choices to cause confusion and frustration, resulting in
adverse effects.
Furthermore, we examine which customer groups
may be more susceptible to a sense of loss in effectiveness
due to over-empowering designs. Specifically, we compare how customers that are active participants in service
co-production with those who are less active in terms of
responses to over-empowering designs. In this experiment, we operationalize the level of participation according to two individual differences: participants’ prior
experience with similar co-production technologies and
their general propensity to accept technology, or to be
technology-ready (TR). For our subject classification,
novice SST users and high-TR customers are considered
active participants, whereas experienced users and less
TR customers are considered inactive participants. We
expected inactive participants to perceive less loss of
control and have less dissatisfactory experiences with the
SST than active participants.
In two computer-mediated experiments, we approximate the real-life experience of consumer participation in
technology interfaces. The first experiment, using an SST
interface for a car-rental kiosk with a sample of shoppers
in four U.S. cities, examines the impact of empowering
and over-empowering designs on SST effectiveness. As
we predicted, the empowering design, where comparative
information on alternative service providers is given,
positively influences SST effectiveness. Customers experienced a higher sense of control and gave more favorable
evaluations of the technology when the comparative
information was rendered in a static interface. However,
in the over-empowering condition, the comparative in224
formation and interactive features compete for cognitive
resources, inhibiting customers’ processing and decisional benefits. This was borne out in that the overempowering condition led to the loss of perceived control
and a decrease in interface evaluation.
The second experiment, using an SST interface of
intelligent ATM, studies how individual differences in
actual participation moderate the effectiveness of coproduction. The results of Experiment 2 show that both
novice and high-TR consumers participate in the coproduction process more actively than do experienced or
low-TR customers. Active participants respond positively to empowering designs but are more susceptible to
the loss of effectiveness in overstimulating conditions.
Specifically, new SST users’ and high-TR customers’
sense of control and evaluation are significantly impaired
in the overstimulating condition. Conversely, when customers are either experienced or low-TR users, the overempowering features do not cause a severe decline in their
control perceptions and evaluations of the technology. In
addition, neither empowering nor over-empowering designs make any difference in perceived control or interface evaluations among inactive participants.
The findings enhance our understanding of the complex nature of customer participation in technologybased service co-production, The theoretical and managerial implications of the study are also discussed in the
article. References are available upon request.
For further information contact:
Zhen Zhu
Marketing Division
Babson College
Malloy 210
Babson Park, MA 02457
Phone: 781.239.5715
FAX: 781.239.5020
E-Mail: [email protected]
American Marketing Association / Winter 2006
225
VIRTUAL SALES AGENTS
Hans H. Bauer, University of Mannheim, Germany
Marcus M. Neumann, University of Mannheim, Germany
Tobias E. Haber, University of Mannheim, Germany
Ralf Mäder, TNS Infratest, München, Germany
ABSTRACT
This study investigates the potential of human like
virtual sales agents (avatars) to increase consumer trust in
electronic commerce. An online experiment with 2,223
participants supports the hypothesized positive effects of
avatars on consumer trust as well as other key dispositions
of consumer behavior.
INTRODUCTION
A review of the existing literature identifies a lack of
consumer trust as the main reason why the enormous
growth potential of end customer service has yet to be
utilized by electronic commerce (Hoffman, Novak, and
Peralta 1999; Gefen, Karahanna, and Straub 2003; Yoon
2002; Yousafzai, Pallister, and Foxall 2005). Technical
and practical research journals are unanimous in their
decision that “without trust, development of e-commerce
cannot reach its potential“ (Lee and Turban 2001, p. 75).
One approach to increase the customer trust with webbased shopping experiences is to use avatars (Barlow,
Siddiqui, and Mannion 2004; Luciano, Banerjee, and
Mehrotra 2001; Redmond 2002).
Avatars are virtual characters that can be used as
company representatives. Avatars can serve as identification figures, as personal shopping assistants or as conversation partners. In these roles, avatars have the potential
to fulfil the consumer’s desire for more interpersonal
communication during the shopping experience. As a
consequence, consumer trust should build up, the shopping experience should become more enjoyable, and the
likelihood of purchase should increase. The goal of this
research is to investigate the effects of avatars as virtual
representatives on commercial Websites.
HYPOTHESES ABOUT THE EFFECTS
OF AVATARS
Coleman (1990) postulates that a trust giver can
build up trust toward a trust taker with the influence of a
third person. He calls this person a trust intermediary. If
there is a trust relationship between the trust giver and the
trust intermediary, it will be transferred to the relationship of the trust giver and the trust taker, given that there
is a trust relationship between the trust intermediary and
American Marketing Association / Winter 2006
the trust taker. According to Giddens (1990) a trust
relationship with a supplier can also be built up with the
help of an additional person. This person provides a point
of access to an abstract system, which will be created by
this “character-dependent connection.” For example, such
points of access can be accomplished by the stereotypical
friendliness of a sales person or the competent demeanor
of a management consultant. The trust mediated by the
representative in this social context is transferred to the
supplier. This process is called “Back-embedding” (Giddens 1990). On account of their similarity to human
beings and their competence based on knowledge, avatars
are principally suitable for holding positions as representatives of businesses and as trust intermediaries in interactive environments.
A study by Sproull et al. (1996) directly examined the
effect of human-like attributes on the perception of trustworthiness in an interactive user interface. The results
showed that the participants attributed a higher degree of
trustworthiness to the user interface that had a human
face than to the merely text-based interface. Compared to
the design elements used in the previously conducted
study, avatars have a more pronounced similarity to
humans. That is why by acting as representatives of a
commercial supplier, they should be more capable of
having a lasting effect on the trustworthiness of this
supplier. We thus state:
H1a:
Using avatars increases the customer’s trust toward the supplier.
According to the theory of self-congruency, individuals prefer interaction partners that resemble themselves. The “birds of a feather flock together” principle
decisively influences human behavior in relationships
and results particularly from the similarity of personality
structures of romantically linked partners (Brehm, Kassin,
and Fein 2005). This also applies to business partners,
where the similarity of the people involved strengthens
the trust and increases the self-commitment toward one’s
partner (Morgan and Hunt 1994). By no means does the
quest for resemblance confine itself only to human interaction partners; it also determines the preferences with
regard to representational objects. In consumer behavior
this is expressed by a correspondence between the character features that are attributed to a brand and the
226
personality of the consumer, which leads to the attitude of
“liking it,” “wanting it,” “not wanting to lose it” (Sirgy
1982). Tests concerning the selection of sales staff have
also provided findings that support the self-congruency
theory. In contrast to efforts that attempt to explain sales
records by an isolated observation of the sales person’s
attributes, interactive approaches relate the participants’
characteristics to each other and thereby derive the sales
outcome (Caballero and Pride 1984). A large quantity of
interactive papers point to the self-congruency principle
and base sales records on the similarity between buyer and
seller. In an experiment Evans (1963) showed a direct
connection between an increase in sales and the perceived
similarity of buyers and insurance agents. In addition,
there are numerous other studies that affirm a positive
influence of the perceived reception between seller and
buyer with regard to the evaluation of both the customer
and the sales records (Woodside and Davenport 1974;
Riordan, Oliver, and Donnely 1977; Churchill, Collins,
and Strang 1975). In summary, it can be concluded that
similarity with oneself creates a positive attitude both
toward human and representational objects of reference.
Using avatars as human-like representatives should therefore also mean that a sales consultant that resembles the
buyer produces a higher degree of trust compared with an
alternative that is unlike the buyer. If a consumer can
choose between different avatars, then the likelihood
increases that consumers will select avatars that they
consider similar to themselves:
H1b:
The employment of an individually chosen avatar
leads to a higher trust in the supplier than the
employment of an assigned avatar.
Thus, the entertainment value of media consistently
determines whether or not and for how long a user stays
and concerns himself with the medium. The Uses- and
Gratifications Approach (Fisher 1978) is based on the
assumption that the use of media can be linked to the
recipients’ motives for satisfying their needs. According
to this theory, the individual actively uses the medium in
order to obtain gratifications. We can identify two of the
most crucial needs, the desire for entertainment and for
personal relationships (Blumler 1979). These findings
are also transferable to the medium Internet. Studies
prove that the entertainment value of Websites is perceived as a benefit and that this positively influences the
intensity of usage (Eighmey and McCord 1998) and
increases the likelihood that an interaction leads to a
purchase (Bauer et al. 2004). Media experts such as
presenters particularly contribute to satisfying recipients’
needs. In the case of TV shows, this can even lead to the
situation that the character of the presenter can influence
the consumer behavior of the onlooker to a greater extent
than the actual contents that are procured (Stephens, Hill,
and Bergman 1996). Despite the lack of any individual
interaction with the viewer, it is even possible that the
American Marketing Association / Winter 2006
latter builds up a relationship to the presenter that is
characterized by perceptions such as friendship and intimacy (Horten and Wohl 1956). The effect of having
avatars on Websites should be comparable to the effect of
TV actors. Both media situations are characterized by
fairly similar needs of their recipients. We therefore
expect that the postulated positive effects of avatars can be
generalized for the entertainment value of the Website:
H2a:
The employment of an avatar leads to a higher
entertainment value of the Website.
An avatar that is similar to oneself should be capable
of increasing the entertainment value as opposed to a nonsimilar alternative. This is based on the fact that interaction partners that are considered to resemble oneself are
attributed a higher degree of attractiveness (Smith 1957;
Kipnis 1962). This effect also occurs with social models
that are employed in advertising (Reingen and Kernan
1993). Interactions with physically attractive people are
pleasant and rewarding (Bull and Rumsey 1988). Because the benefits of interaction as well as the entertainment value increase with the attractiveness of the interacting partner, giving the opportunity to choose between
different avatars should lead to a higher entertainment
value of the Website.
H2b:
The employment of an individually chosen avatar
leads to a higher entertainment value of the Website
than the employment of an assigned avatar.
The attitude toward the product and the buying
intention belong to the particularly buying-sensitive consumer dispositions. Attitudes convey the global value
judgement of a consumer with regard to special offers
(Eagly and Chaiken 1993). According to the attitudebehavior hypothesis, attitudes considerably influence the
buying intention and potentially the actual buying behavior as well. Models of advertising effectiveness postulate
that formal and thematic aspects of advertising efforts
determine the attitude toward the advertising effort,
which again is transferred to the advertised product
(MacKenzie and Lutz 1989). The transfer of the attitude
to the advertised product provides the probably most
fundamental correlation of advertising effects and can
even be unambiguously proven in a comprehensive survey of the empirical studies at hand (Brown and Stayman
1992). If one considers avatars a constituent of the
Website in question, then their positive effect should
influence both the attitude toward the product and the
consequences, such as the buying intention, just like all
other formal and thematic aspects of the Internet performance. With regard to this, we claim the following:
H3a:
The employment of an avatar leads to a more
positive attitude toward the product.
227
H4a:
The employment of an avatar leads to a higher
buying intention.
Attitudes and behavioral intentions are among the
most frequently considered projecting variables when it
comes to analyzing the effects of self-resemblance (Sirgy
1982). As previously discussed, one can rely on the fact
that a higher self-congruency between consumer and
avatar is chosen if a choice is given. The thereby resulting
effect on the consumer’s attitude should transfer to the
attitude of the presented product and should potentially
increase the buying intention of the consumer.
H3b:
The employment of an individually chosen avatar
leads to a more positive attitude toward the product
than the employment of an assigned avatar.
H4b:
The employment of an individually chosen avatar
leads to a higher buying intention than the employment of an assigned avatar.
DATA COLLECTION AND
EMPIRICAL TESTING
Experiments are the most accurate methodology
with which insights into the validity of predisposed,
theoretically and practically established assumptions of
causality can be obtained (Plötner 1995). The hypotheses
regarding the effect of avatars will therefore be analyzed
with the help of an experimental research approach. The
field experiment in this study simulated the Internet
performance of a fictional company that offered the
product travel insurance. The experimental design allotted three treatments consisting of the experimental groups.
The online experiment process can be divided into two
waves, between which there was a time frame of one week.
During the first wave, the participants were asked to
register for the experiment. According to the experimental design, we subsequently subdivided the participants
into different examination groups by randomly arranging
coincidental groups. Next, each participant was presented a questionnaire, in which we posed questions
about social demographics and a questionnaire which
acquired the identity structure of the participants. Following that, the experimental groups one and two were
provided with images of four avatars that differed in their
outward appearance and their sex. The participants in
groups one and two were asked to choose the one avatar
they would most prefer to have as a consultant based on
the subjective criterion of sympathy. The participants in
the control group were not provided with the image of an
avatar. The second wave consisted of the interaction
between participant and avatar in a virtual counseling
interview. The participants of group one were provided
with the avatar they had chosen in wave two, while the
members of experimental group two were randomly
allotted different avatars as consultants. The control
American Marketing Association / Winter 2006
group went through the counseling session without any
interaction with an avatar. Only completely text-based
explanations were given to them while the general framework stayed the same. Following that, the third questionnaire was presented to the participants. In the last step the
experimental groups one and two were presented with a
questionnaire, in which they were asked to assess the
perceived identity structure of their respective avatar
consultants.
When designing the questionnaires, we relied on
pre-existing measurement constructs. All of the measurement instruments were verified in a pretest with 74
participants. Cronbach’s α served as point of reference
for the selection of the items for the main examination
(Gerbing and Anderson 1988). In this pretest, we also
tested whether the avatars employed were generally perceived positively. The results showed that the participants
had a sufficiently high positive attitude (> 5.0, Likert
Scales with seven slight) toward the individual avatars.
The procedure used for the pretest corresponded to the
main experiment. This guaranteed that the perception of
the avatars in the pretest was also based on both the
physical characteristics of the avatars as well as the
interaction with the user. In order to insure the adequate
quality of the operationalization of the related constructs,
an additional confirmatory factor analysis was conducted
within the framework of the main examination. Orienting
oneself to the minimum requirements for relevant quality
marks insures sufficient reliability and validity of the
constructs’ measurement (Table 1).
Within the time span of the field experiment, 2,223
participants signed up for it and went through the entire
process completed. Of these test persons, 959 (43.3%)
were female and 1,258 (56.7%) were male. The mean age
of the participants was 28.31 years, with an age range
between 15 and 60 years.
For the derivation of the hypotheses, it was assumed
that the possibility to choose an avatar increases the
avatar effect as compared to when an avatar is assigned.
The main argument for this is that the possibility to
choose allows the participant to select an avatar with a
personality structure that is similar to his own. We tested
the adequacy of these theoretical assumptions before the
actual test of hypotheses and used City-Block-Metric
(Sirgy 1982, 1985) to depict the congruency between
consumer and avatar.
The empirical examination (t = 98,985; p = 0,000)
showed that the mean of the distance was higher for those
participants to whom the avatar was assigned (3.57) than
for those who were allowed to choose freely (2.41).
Consequently, the possibility to choose an avatar causes
a higher degree of self-similarity than having one assigned. We tested the system of hypotheses by using a one228
TABLE 1
Measurement of the Constructs
Construct
Cronbach’s α
Number of Items
Trust
Attitude
Entertainment Value
Purchase Intention
Global Measures of Adjustment
9
5
3
4
GFI e ≥ 0,90
AGFI e ≥ 0,90
SRMR d ≤ 0,05
χ2 /df d ≤ 2,50
R2 of the measuring equation (Min)
Local Measures of Adjustment
factor Multivariate Analysis of Variance (MANOVA)
(Hair et al. 1995). In our study, the independent factor
“treatment” consisted of three factor levels (chosen avatar, assigned avatar, no avatar). As dependent factors, the
constructs “perceived entertainment value of the Website”
(pevwebs), “trust toward the supplier” (trustsup), “attitude
toward the product” (attprod) and “purchase intention”
(piprod) were examined.
Using the MANOVA computation, we examined
whether the different distribution of the dependent variables across the three experimental groups was significant. The analysis exhibited that the results for Wilk’s
Lambda (F = 30.892, p = 0.000), the Hotelling-Spur (F =
31.666, p = 0.000) and Roy’s greatest characteristic root
(F = 62.078, p = 0.000) were significant. The PillaiCriterion explained 5.2 percent of the total. This is
illustrated by the Pillai-Statistics (PS = 0.103). This value
was significant (F = 30.116), p = 0.000), which means
that we may interpret the following results. We first tested
0.882
0.908
0.860
0.859
0.988
0.982
0.0351
2.41
0.732
the influence of the independent variable with the three
factor levels on the dependent variable trustsup. The significance of the analysis of variance allowed the conclusion that a highly significant difference existed in the
evaluation of trustsup (F = 36.952, p = 0.000), depending
on the “treatment.” H1a is therefore confirmed. Comparison of the mean values of the dependent variables clearly
showed that the group that was allowed to freely choose
its avatar achieved higher values of trustsup. This consequently leads to the confirmation of H1b. The remaining
hypotheses were tested in an analogous manner and were
completely confirmed (Table 2).
CONCLUSION
As central findings of this paper, we can summarize
that avatars can take the position of a trust intermediary
in electronic commerce. They positively influence the
trust of a consumer toward the supplier and consequently
present themselves as effective instruments for the estab-
TABLE 2
Summary of Findings
Construct
Mean
F
p
Chosen
Avatar
Assigned
Avatar
No
Avatar
trustsup
4.00
3.84
3.53
36.952
0.000
pevwebs
3.75
3.63
2.81
111.061
0.000
attprod
4.05
3.94
3.76
9.385
0.000
piprod
3.54
3.45
3.30
7.419
0.001
American Marketing Association / Winter 2006
229
lishment of trust in the distribution channel of the Internet.
As management implications for suppliers in electronic
commerce, we can generally recommend using avatars as
virtual shopping consultants on the Internet. From this
action, one can expect a considerable increase in the trust
shown by a consumer and in other consumer dispositions
that are decisive for a purchase. Because the possibility to
choose between different avatars additionally strengthens
all of the variables relevant to consumer behavior, we can
further recommend to likewise offer a variety of virtual
characters to assist in the buying process. With this
variety, the supplier satisfies the consumer’s need for an
interaction partner that is similar to oneself and thus
creates extra emotional value. This, again, has a positive
effect on trust and other latent constructs of buying
behavior and leads finally to an increase in volume of
online sales.
This study raises a multitude of interesting research
questions for the different sub-disciplines of marketing
research, many of which have a high significance for
business practice. For example, it may be of interest to
analyze the development of the effect of avatars after
repeated contact between avatar and consumer. Standard
literature shows that frequent contact with one person can
lead to the fact that this person is attributed higher
attractiveness and receives higher trust. The contactemotion-phenomenon offers a possible explanation by
suggesting that when plural contacts confirm in a process
determined by evolution, there is no danger radiating
from the object. At the same time, however, repeated
contacts with the avatar can also trigger a so-called
sleeper effect, which would lead to a negative evaluation
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American Marketing Association / Winter 2006
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Kelman and Hovland 1953).
There is also the essential need to research the
application of the hypothesis of self-congruency when
employing avatars. In the context of this study, we showed
that a consumer, when confronted with a choice between
a group of different avatars, will choose the one that has
the closest similarity to himself. These findings imply
that consumers can be assigned to different segments in
their process of self-selection. This offers support for
further research on a low-cost method of market segmentation based on personality structures that provides the
supplier with fundamental information for efficient market penetration. Moreover, the use of avatars poses general questions with regard to brand and communication
management. Thus, the extent to which avatars can be
employed in order to influence a brand image or brand
personality in a targeted manner remains to be analyzed.
A number of analyses illustrate that the employment
of testimonials in advertising communication can alter
brand images (for example Lynch and Schuler 1994). The
current study shows that consumers do not have difficulties with attributing personality features to an avatar.
Similar to the testimonials in advertising, avatars should
be equally capable of modifying the image or the personality of a brand. Avatars could even have a particularly
high potential for brand management. As compared to the
other devices used to influence image, they offer almost
unlimited design opportunities. Moreover, as opposed to
having to deal with real people, the company can easily
exert total control over avatars.
Brown, Steven and Douglas Stayman (1992), “Antecedents and Consequences of Attitude Toward the Ad: A
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For further information contact:
Tobias E. Haber
University of Mannheim
L 5, 1
67227 Frankenthal
Germany
Phone: +49.621.181.1561
FAX: +49.621.181.1571
E-Mail: [email protected]
American Marketing Association / Winter 2006
231
THE ROLE OF CUSTOMER RELATIONSHIP MANAGEMENT
SOFTWARE IN CUSTOMER SATISFACTION: EXAMINING
SERVICE EMPLOYEE-CUSTOMERTECHNOLOGY RELATIONSHIPS
Regina C. McNally, Michigan State University, East Lansing
Abbie Griffin, University of Illinois at Urbana-Champaign, Champaign
SUMMARY
A customer service call center agent’s job is important because it is the implementation of the firm’s service
strategy. Service encounters are the moments of truth in
which call center agents interact with customers to jointly
produce the service. From the customers’ viewpoint, the
encounters are the service. The services marketing pyramid suggests that technology touches all three corners of
the services marketing triangle: the company, the employees, and the customers (Bitner, Brown, and Meuter
2000). Conceptually, therefore, the role of technology is
expected to impact all the relationships operating in the
provision of services. In this descriptive research, we
empirically examine the role of technology in the relationships created by the interaction of customers, service
employees, and technology. The specific technology we
examine is that of customer relationship management
(CRM) software, investigating how this software impacts
employee-customer relationships.
To examine the role of technology in the call center
agent job, we first consider the services marketing triangle, which highlights that customers, service employees, and companies interact with each other in service
provision (Bitner 1995). When technology is incorporated into the services marketing triangle, the result is the
services marketing pyramid (Bitner, Brown, and Meuter
2000). The pyramid conceptualization suggests technology is the fourth point in service relationships. Given that
technology is connected to the three other points, all four
points are inter-connected, creating a pyramid. These
researchers examine how employees and customers can
make use of technology to deliver on three broad categories of service encounter satisfaction: (1) customization/
flexibility; (2) effective service recovery; and (3) spontaneous delight. When used by firms, technology such as
CRM software can make service employees more effective and/or efficient. CRM software in call centers is used
for customization by providing information for agents
about the customer’s entire account history, providing
quicker and more detailed answers to customers, and
identifying additional products or services that might
benefit them. For service recovery, technology can be
used to make it easier for customers to complain, and by
American Marketing Association / Winter 2006
providing the resources front-line employees need to
recover. CRM software can support spontaneous delight
by making customer information and queries available to
all so that customer information is not lost through
personnel turnover.
Empirical evidence for the service employee-customer-technology triangle is provided in an ethnography
of technology-intensive service work (Orr 1996). This
study examines the practices of experienced technicians
maintaining photocopiers for a major U.S. corporation.
This context fits the services marketing pyramid well in
that the customers interact directly with both the technology and the service employees. Orr (1996) finds support
for one side of the pyramid: he concludes that technician
practice is a continuous, highly skilled improvisation
within a triangular relationship of technician, customer,
and machine. The technician’s most serious challenge is
to learn what is wrong with a broken machine so he or she
can repair it. Service technicians find the best way to
understand the problem is to stand at the machine with the
user while the user describes the problem and simultaneously shows the technician where on the machine the
problem occurs. In this way, the technician and customer
“negotiate a mutual understanding” of the problem (Orr
1996, p. 57).
Call center agents, on the other hand, do not interact
directly with the object of the customers’ service request.
Call center agents are not able to negotiate a mutual
understanding in the same way as photocopier service
technicians. Instead, they rely on the customers’ descriptions to understand the service needed. How does this lack
of direct interaction between the call center service employee and the customers’ service issue impact the service
employee-customer-technology relationships? Our research investigates this issue.
This research employs a qualitative methodology to
explore the role of technology in the relationships created
by the interaction of customers, service employees, and
CRM software. The research context is customer support
call centers for two automobile manufacturers fielding
telephone calls from consumers or business customers.
The sample comprises multiple informants, including ten
232
managers, nine call center supervisors, and thirteen call
center agents across the two firms. The data comprise
interview transcriptions and field notes taken during and
after site visits.
While prior conceptual and empirical research considers the relationship between service employees, customers, and technology to be that of a triangle when
customers interact directly with the technology, our analysis reveals the triangle is not an accurate representation
when customers do not directly interact with the technology. A diamond shape explains the interactions between
employees, customers, and technology in this context.
Similar to Orr (1996), we find that the call center agent
and customer work together in an improvisational man-
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Bitner, Mary Jo (1995), “Building Service Relationships:
It’s All About Promises,” Journal of the Academy of
Marketing Science, 23 (4), 246–52.
ner to identify the issue correctly so the problem can be
resolved. Because the product and/or process information
is embedded in the databases of the CRM software, the
agent works with the CRM software to help specify the
problem and identify the resolution. Finally, the customer
interacts with the product/process and must describe the
situation in such a way that the agent can diagnose the
problem accurately for resolution. The call center agent
does not work directly with customers’ products or process issues and the customers do not interact with the
CRM software.
This project is supported by funds from the Teradata
Center for Customer Relationship Management at Duke
University.
____________, Stephen W. Brown, and Matthew L.
Meuter (2000), “Technology Infusion in Service
Encounters,” Journal of the Academy of Marketing
Science, 28 (1), 138–49.
Orr, Julian E. (1996), Talking About Machines. Ithaca,
NY: ILR Press.
For more information contact:
Regina McNally
Department of Marketing & Supply Chain Management
The Eli Broad School of Business
The Eli Broad Graduate School of Management
N370 North Business Complex
Michigan State University
East Lansing, MI 48824–1122
Phone: 517.432.5535
FAX: 517.432.1112
E-Mail: [email protected]
American Marketing Association / Winter 2006
233
DOES NONCONSCIOUS AND CONSCIOUS AFFECT COMBINE
ADDITIVELY OR MULTIPLICATIVELY?
William D. Lucky, Jr., Florida Memorial University, Miami
Barnett A. Greenberg, Florida International University, Miami
ABSTRACT
According to Murphy, Monahan, and Zajonc (1995)
nonconscious and conscious affect combine additively
but there is evidence that suggest the two forms may also
combine multiplicatively. In examining this issue, a
review of the literature concerning the different categories of nonconscious affect is provided along with propositions.
INTRODUCTION
The last half century of psychology has been dominated by the two major paradigms of behaviorism and
cognitivism. Behaviorism is concerned with motivated,
goal-oriented action (i.e., conation) while cognitivism is
mainly concerned with the study of cold, affectless ideation (Forgas 2000). Many researchers, however, now
question the purely cognitive aspect of human processing
(Bargh 1998) and are beginning to realize that most
everyday thinking involves some level of affect (i.e.,
feelings) (Clore and Parrott 1991). In fact, within the last
twenty years research in the area of psychology has
demonstrated that stimuli can be presented suboptimally
(i.e., below conscious awareness) (Ravaja, Kallinen, Saari,
and Keltikangas-Jarvinen 2004) and thus it can have an
effect on judgment (Greenwald, Klinger, and Schuh
1995), evaluation (Ravaja et al. 2004), and behavior
(Fitzsimons, Hutchinson, and Williams 2002).
Since this discovery, attention has turned to the
conditions under which this process occurs and the type
of information that can be conveyed. One such type of
information is that of affect (i.e., feelings). Although
previous research has demonstrated that affect (i.e., feelings) can be produced through nonconscious (i.e., suboptimal) and conscious (i.e., optimal) processes (Murphy,
Monahan, and Zajonc 1995), there has not been a systematic examination of how these different forms of affect
combine. Specifically, there does not seem to be an
understanding as to whether or not nonconscious and
conscious affect combine additively or multiplicatively.
The present research will examine the literature on
the types of conscious and nonconscious affective responses and the empirical results relating to how the two
forms of affect combine. To aid the reader the remainder
of the paper is organized as follows: The first section
provides a definition of affect along with a discussion of
American Marketing Association / Winter 2006
the sources of nonconscious affective responses. The next
section provides a brief discussion of the different categories of nonconscious affect followed by the additive and
multiplicative evidence concerning affective combination. Lastly, propositions are forwarded followed by a
discussion of the implications to marketing.
SOURCES OF AFFECTIVE RESPONSES
There is increasing evidence that people make evaluations by monitoring their subjective affective responses
(Pham 1998; Schwarz and Clore 1996). Affective responses here are considered synonymous with feelings
which encompass emotional experiences, moods, and
even physical sensations (Sypher, Donohew, and Higgins
1988). Emotional experiences and moods differ in that
emotional experiences have a specific cause and target
(e.g., one is angry at someone or happy at something)
(Berkowitz 2000) while moods are more transient in
nature having no discernable cause and no specific target.
A sensation is an affective response that is induced by the
stimulus characteristics themselves (e.g., becoming ill
after ingesting spoiled milk).
By defining affect in such a broad fashion, it is
possible to distill two main sources. According to Pham,
Cohen, Pracejus, and Hughes (2001), affect (i.e., feelings) exist in two forms: (1) incidental and (2) integral.
Incidental affect is that which stems from “. . . a preexisting or contextually induced mood that colors the experience” (p. 168) (e.g., finding money unexpectedly). Hence,
incidental affect (i.e., moods), can be thought of as a very
general feeling state that is not exclusively tied to any
specific stimulus object (Bodenhausen 1993) and is not
intense enough to interrupt any ongoing cognitive processes (Brief and Weiss 2002). Since it is relatively global
in nature, it is capable of altering other affective, cognitive, and/or behavioral responses to a wide array of
objects, persons, and events (Luomala and Laaksonen
2000). Integral affect, on the other hand, stems from an
impression that a target has on an individual when that
individual either comes in actual contact with the target
(e.g., is forced to interact with the target stimuli), or
invokes a mental representation of the target (e.g., imagines having to interact with the target stimuli)
(Bodenhausen 1993). For purposes of this study, only
those affective responses produced integrally will be
examined.
234
Bargh (1988) notes that “[a]ffect does not have a
single cause; it can result from a variety of automatic as
well as controlled cognitive processes” (p. 20). Based on
this distinction, integral affect can be further segmented
into (a) affect which is produced through automatic
processes and (b) affect which is produced through controlled processes (Bargh 1988). Automatic processes are
those mental activities that occur outside the realm of
awareness in a relatively involuntary, unintentional and
effortless manner while controlled processes are mental
activities that are intentional, effortful, directed, and
implemented within the realm of conscious awareness
(Bargh 1999; Macrae and Bodenhausen 2001).
Based on the distinction between automatic and
controllable affective responses, those responses that are
considered to be automatic may themselves result from
several different sources. Bargh (1988) discusses three
possible sources of automatic processes that result in
affective responses labeling them sensation, feature detection, and categorization. In a related note, Pham et al.
(2001) discuss two possible sources of automatic processes that result in affective responses labeling them
Type I and Type II affective responses. There is considerable overlap between these two representations. Hence,
this study will utilize the designations of Category I-IV to
represent the overlap between the types of automatic and
controlled processes discussed by Bargh (1998) and Pham
et al. (2001).
detection and recognition. Whether or not the two systems are separate or interactional, however, is outside the
domain of this research. What is of importance here is the
idea that affective processing can precede cognitive processing, and hence have an independent impact on evaluation, judgment, and behavior.
Category II Affective Responses
Bargh (1988) contends that a second form of automatic processing, which results in an affective response,
concerns feature detection. In this type of automatic
processing, an individual performs a primitive evaluation
of a stimulus target’s features before any higher level
cognitive processes occur (i.e., those dealing with recognition). This automatic nonconscious positive/good or
negative/bad response may serves as an instantaneous
appraisal of the target stimuli (Bargh 1988) which acts as
a signal to the individual that the environment in general
is safe (or unsafe) and, therefore, the individual does not
(or does) need to commit cognitive resources to analyzing
the stimuli further. Pham et al. (2001) do not discuss this
type of automatic affective response. For this study, this
form of affective response will be referred to as Category II
affect. Again, the affect generated from this form of
automatic processing may serves as an affective prime
that may color subsequent cognitive processes by biasing
the information retrieved from memory.
Category III Affective Responses
CATEGORIES OF AFFECTIVE RESPONSES
Category I Affective Responses
According to Pham et al. (2001) “Type I affect is
based on the triggering of innate, sensory-motor programs that are essential to bioregulation” (p. 168). This
type of affect can be considered a sensation that one
experiences. According to Bargh (1988) the affect triggered via a sensation is “. . . an innate response determined by the stimulus features themselves . . . , such as the
1-day-old infant’s cry in response to another infants
cry. . . , or the emotional meanings that are universally
extracted from facial expressions” (p. 20). In an initial
encounter with a target stimulus, this would be the
immediate positive (good)/negative (bad) nonconscious
reaction one experiences in relation to the target stimulus
before having a chance to transform other incoming data.
This automatic unconscious affect may then serve as an
affective prime that may guide or influence subsequent
cognitive processing by biasing the data retrieved from
memory. In relation to this study, this form of affective
responses is termed Category I affect. It should be noted
that this form of affective response constitutes the basis of
the debate as to whether or not affective responses can
occur in the absence of any cognitive processes including
those cognitive process dedicated to stimulus feature
American Marketing Association / Winter 2006
Affective responses can also be “. . . triggered by the
mapping of stimulus features onto acquired schematic
structures that have been previously associated, through
conditioning, with particular emotional responses” (Pham
et al. 2001, p. 168). In relation, Bargh (1988) comments
that:
“. . . whereas all consistently evaluated stimuli
automatically activate their evaluation in the course
of the early, pre-semantic stages of processing . . . ,
only those attitude object stimuli for which the
subject possesses an accessible attitude are able to
proceed further and activate their categorical representation” (p. 25).
Thus, after the features of a target stimulus have been
observed (e.g., color or height), those features are then
given meaning via a superordinate recognition process in
which the stimulus is categorized or classified according
to its gross features. Hence, during this superordinate
stimulus recognition stage, features of the target stimuli
are assessed as a single unit and the stimulus is categorized at which point an affective response is triggered.
This affective response occurs due to the automatic categorization of the target stimulus according to its
discernable features during the encounter. That is, once
235
the target stimulus has been placed into a category, the
affective tag associated with that category will also be
triggered (Fiske 1982; Fiske and Pavelchak 1986). As a
result, the individual will experience an additional affective response towards the target as a result of the affective
tag that is attached to the category being activated (Bargh
1988). For this study, this form of affective responses will
be termed Category III affect. (It should be noted that in
the Pham et al. (2001) article the authors termed this form
of affective response a Type II affective response while
Bargh (1988) called the process by which this type of
affect arises “catergorization”).
Category IV Affective Responses
As noted by Pham et al. (2001), affective responses
can also stem from “. . . controlled appraisal of the
stimulus, which involves a subjective assessment of the
stimulus’ significance for well-being” (p. 168). This form
of affect is likely to materialize when the individual is
thinking about the attributes of the target stimulus. Here
comparisons of the stimulus against some prototype in
memory is likely to occur but instead of simply categorizing the stimuli at some superordinate level, the person
uses individuating information concerning the stimulus
to fine tune the categorization; thereby, placing the
stimulus in subcategories. These subgroups or subcategories will themselves have affective tags associated with
them thus resulting in an affective response based on each
level of categorization (Cohen 1990; Edwards 1990). For
example, upon coming in contact with a target stimulus
one processes the target stimulus as a single unit and
concludes that it is potentially threatening. The assessment that the target stimulus is potentially threatening
will cause the subject to pay close attention to the target.
While paying attention to the target, the subject assesses
incoming individuating information concerning the target such as hand gestures, facial expressions, demeanor,
and/or verbal utterances. The result of this effortful
cognitive processing may ultimately result in an affective
reaction to the target as a result of putting the target in a
general and then more refined category. It should be noted
that since each component characteristic of the category
itself possesses an affective tag, the superordinate category may serve as a general receptacle for the affect
associated with each of the characteristic components.
Bargh (1988) does not discuss this form of affect while
Pham et al. (2001) termed this type of response Type III
affect. For this study, this type of affect will be termed
Category IV affect.
Summary
Category I, Category II, and Category III affective
responses should be produced very rapidly while Category IV affective responses should be much slower in
American Marketing Association / Winter 2006
development (Pham et al. 2001; Cohen and Areni 1991).
This is due to the fact that Category I, Category II, and
Category III affective responses happen automatically
and unconsciously while Category IV affective responses
result from effortful and conscious cognitive processing.
What is of interest here is whether or not these general
categories of affect (i.e., automatic and controlled affective responses) are compatible. That is, whether or not
nonconscious and conscious affect combine with one
another and, if so, does this combination occur as the
result of an additive or a multiplicative process.
ADDITIVE VS. MULTIPLICATIVE
COMBINATION
In discussing conscious versus nonconscious affect,
Murphy, Monahan, and Zajonc (1995) note that given
two sources of affect, if one of the sources is not accessible
to conscious awareness, fusion of the two affective reactions is more likely. This was based on the notion that
nonconscious affect was considered to be more diffuse
compared to conscious affect which was considered to be
more constrained. Thus, given the diffuse nature of the
nonconscious affect, it should fuse with the conscious
affect and manifest in direct measures of likeability.
Based on this discussion, it is apparent that the combinational mechanisms of affective responses are important.
To date, however, there does not seem to be a definitive
conclusion as to how the affect from different categories
combines. There have been studies that have concluded
that nonconscious and conscious affect combine additively while other studies have hinted at the notion that the
two forms of affect may combine multiplicatively.
Additive Evidence
In order to examine the mechanisms under which
affect combines, Murphy et al. (1995) conducted a series
of experiments. They theorized that “. . . affect from two
independent and unrelated sources could be induced, and
the manner in which the two effects combine could be
examined” (p. 591). To test this hypothesis, the authors
relied on the affect produced from stimuli in an affective
priming task and the affect produced from stimuli in a
repeated exposure task.
Based on the notion that affect could be induced from
both priming and exposure methods, Murphy et al. (1995)
conducted a series of experiments designed to determine
whether and how these different categories of affect
combined with one another. According to the authors,
their primary hypothesis concerned the additivity of
nonconscious affect. Specifically, they reasoned that because the two sources of affect were mutually independent, “. . . the affect derived from suboptimal priming,
positive or negative, would combine in a roughly additive
236
fashion with exposure effects” (p. 592). Although their
main hypothesis concerned nonconscious affect, the experimental design also allowed for the examination of
whether nonconscious and conscious affect combined
additively.
Specifically, in Studies 1 and 2 conducted by Murphy
et al. (1995), the authors crossed stimulus accessibility
(optimal and suboptimal) with affect priming and repeated exposures. Each study had an initial exposure
phase in which affect from mere exposure effects was
induced by varying the frequency of exposure to the
stimuli. In a subsequent phase the subjects rated stimuli
that were preceded by either a positive, negative, or
neutral affective prime. Given that mere exposure effects
have been found for both the optimal and suboptimal
conditions, the authors predicted that there would be a
main effect for exposure under both of these conditions.
Therefore, the additivity of affect could be assessed by
examining the effects when both types of affect were
induced suboptimally (i.e., outside the realm of conscious
awareness) and when the affect produced was induced
through optimal and suboptimal conditions. Given that
their primary research hypothesis was to determine if
nonconscious affect combined additively, Murphy et al.
expected to find that the nonconscious affect generated by
affective priming would combine additively with the
nonconscious affect produced from repeated exposure.
But, since the effects of affective primes work best at
suboptimal levels, and given that exposure effects can
occur at optimal levels, the Murphy et al. study also sheds
light on the additive nature of affect produced optimally
and suboptimally.
Study 1 concerned the presentation of suboptimal
exposure and suboptimal priming. Results from the data
revealed that there was a main effect for frequency of
exposure as well as a main effect for affective priming.
According to the authors the differences in the intercepts
among the three curves reflect the effects of nonconscious
priming, while the slopes of the curves comprise the mere
exposure effect. The authors posit that this pattern of
results reflect the fact that positive priming adds a constant to the affective ratings induced by all three exposure
frequencies, while negative priming subtracts a constant
from the affective ratings in these three frequencies.
Based on the results of experiment 1, Murphy et al. (1995)
concluded that “. . . when two sources of affect are
nonconscious, affect combines additively . . .” (p. 595).
Study 2 concerned the presentation of optimal exposure and suboptimal priming. Again there was a main
effect for exposure frequency as well as a main effect for
affective priming. As in Study 1, differences in the
intercepts among the three curves reflect the effects of
nonconscious priming, while the slopes of these curves
American Marketing Association / Winter 2006
depict the mere exposure effect. Study 2 resulted in a
similar pattern of results as those in Study 1. Based on the
results of Studies 1 and 2, Murphy et al. contend that
“. . . nonconscious affective primes combine additively
with repeated exposure effects, whether the exposure
effect is suboptimal . . . or optimal . . .” (p. 596). As a result
of these two Studies, it seems that nonconscious and
conscious affect combine in an additive fashion.
Multiplicative Evidence
Support for the contention that different categories of
affect may combine multiplicatively can also be found in
Murphy et al. (1995). In their study, the results of the
second experiment raise the notion that nonconscious and
conscious affect may combine in a multiplicative (or
interactive) fashion. That is, when exposure effects were
induced optimally and priming effects were induced
suboptimally, there was a significant interaction between
the exposure (conscious) measure and the prime
(nonconscious) measure. This would indicate that there
exists the possibility that the affect induced via the
exposure and priming tasks may have combined in a
multiplicative manner.
Further evidence that nonconscious and conscious
affect may combine multiplicatively can be found in
Greenwald, Klinger, and Schuh (1995). In this study, the
researchers preformed a series of experiments concerning
semantic priming. The combined results of their studies
demonstrate that suboptimally (subliminally) presented
stimuli can have an effect on judgmental tasks. Although
this conclusion is significant in its own right, for the
purposes of this study, there is a more critical finding.
Specifically, Greenwald et al. (1995) state that:
“. . . [t]he present use of regression analyses assumes
that the relation between direct and indirect measures is described by a linear function. Visual inspection of the combined data . . . suggests that the
regression function may have been U-shaped. Tests
using a regression equation with a quadratic term
(which should capture a U-shaped relationship)
showed statistically significant quadratic terms”
(p. 36).
This would seem to indicate that for semantic priming, the indirect (i.e., priming) effects and the direct
(stimulus perceptibility) effects combine in a multiplicative manner. Therefore, it is likely that nonconscious
affect and conscious affect may also combine in a multiplicative manner.
Although this support for the idea that affect can
combine in a multiplicative fashion deals with semantic
as opposed to affective priming, studies have demon-
237
strated that the pattern of results are similar whether the
primes are semantic, lexicographic or affective. According to Davis (1997) for all intensive purposes, affective
and semantic priming are thought to be based on the same
underlying mechanisms. In fact, in a discussion concerning affective priming effects stemming from a lexical
decision task, Spruyt et al. (2004) note that “. . . there are
no reasons to assume that the effect of judgmental tendencies would be restricted to a particular experimental task
or to a particular type of semantic relatedness” (p. 43).
They go on to state that “. . . affective information is stored
within the semantic system . . . [and as such], affective
priming can be considered to be a specific subtype of
semantic priming” (p. 44). Thus it seems that affective
priming can be used to examine semantic priming and
vice versa. Based on the results, there does appear to be
evidence that nonconscious and conscious affect may
combine in a multiplicative fashion.
In the study by Greenwald, Klinger, and Schuh
(1995) concerning the dissociation between unconscious
and conscious cognition, the authors point out that the
pattern of results from their experiments indicate that
“ . . . unconscious cognition is dissociated (i.e., occurs
separately) from conscious cognition” (p. 22). Given that
affective priming is a subcategory of semantic priming
one can conclude that the affect associated with subconscious/suboptimal priming may be separate from the
affect derived from conscious/optimal affective responses.
As a result, based on the evidence presented here, it is
plausible that nonconscious and conscious affect can
combine either purely additively, purely multiplicatively,
a combination of the two, or not at all. Therefore, based
on this contradictory evidence, the conclusion that
nonconscious and conscious affective responses combine
additively is not yet settled. As a result, the following
propositions are forwarded:
Proposition 1: Nonconscious and conscious affect
produced from two independent sources do not combine at all.
Proposition 2: Nonconscious and conscious affect
produced from two independent sources combines
purely additively.
Proposition 3: Nonconscious and conscious affect
produced from two independent sources combines
purely multiplicatively.
Proposition 4: Nonconscious and conscious affect
produced from two independent sources combines
additively and multiplicatively.
American Marketing Association / Winter 2006
DISCUSSION
Looking at the evidence presented, it is feasible to
speculate that the mechanism by which conscious and
nonconscious affect combines has yet to be settled. Hence,
the pursuit of this line of research is necessary given that
it relates so intricately to psychology and consumer
behavior. This is evident in particular when it comes to
the area of memory research. That is, one of the main
assumptions of the spreading activation model of human
memory is that the amount of activation present at any
node is a function of a summation (i.e., additive) process.
If it is discovered that nonconscious and conscious affect
combine multiplicatively, this would be contrary to that
central assumption. Further, given that the basic fundamentals underlying the spreading activation theory are
also applicable to the priming (or preparation) process,
researchers in the area of consumer behavior could benefit from this line of inquiry.
Moreover, those studying hedonic experiences may
also find value in this line of research. By studying the
combinational processes of both conscious and
nonconscious affect, researchers in this area would gain
a better understanding of how hedonic experiences are
affected by these different types of affective responses. For
example, the ambiance of the shopping environment may
have nonconscious effects on the overall evaluation of the
shopping experience. Empirical findings of this nature
would open the door for new theoretical pursuits resulting
in a more concise understanding of the entire shopping
experience.
Finally, those in the area of persuasion could also
benefit from this research focus. Specifically, if
nonconscious affect actually combines additively with
conscious affect, then it would seem that the persuasiveness of a message can be increased by incorporating
nonconscious affect into that message. This may not be as
farfetched as it sounds. Currently, many of the experiments focusing on nonconscious affect have been conducted using hardware and software that are compatible
with computer based mediums. As a result, it seems
intuitive that these methods could easily be adopted to
web based media (i.e., the Internet). Empirical research
along these lines is noble in and of itself; but manipulating
nonconscious affect brings to mind the idea of subliminal
persuasion. This allows those interested in ethical and
public policy issues into the fray. As can be seen, by
examining the combinational mechanisms of affect, researchers across the field of marketing will benefit from
a more precise understanding of affect’s role in the
consumption process.
238
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239
For further information contact:
William D. Lucky, Jr.
Florida Memorial University
15800 NW 42nd Avenue
Miami, FL 33054
Phone: 786.242.2403
FAX: 305.623.4288
E-Mail: [email protected]
American Marketing Association / Winter 2006
240
UNDERSTANDING CELEBRITY ENDORSEMENT: A CLASSICAL
CONDITIONING APPROACH
Brian D. Till, Saint Louis University, St. Louis
Sarah Haas, Saint Louis University, St. Louis
Randi Priluck, Pace University, New York
SUMMARY
The use of celebrities to endorse brands is a popular
advertising strategy estimated to represent more than a
billion dollars in advertising spending according to
Jonathan Holiff of the Hollywood Madison Group, a
company specializing in rating celebrities on 250 criteria
(interviewed by phone 3/21/05). The frequent use of
celebrities as spokespersons stems from a belief that
pairing a product with a well-regarded celebrity improves
consumers’ perceptions of the brand (Kamins and Gupta
1994).
Research in the area of associative learning may
explain the positive effects of celebrity endorsement.
Specifically, classical conditioning researchers have found
that pairing affectively pleasant images with brands may
result in favorable brand attitudes and may lead to inferential belief formation (e.g., Kim, Allen, and Kardes
1996; Stuart, Shimp, and Engle 1987; Grossman and Till
1998; Priluck and Till 2004). Since celebrities also generate positive feelings from consumers, using them as
unconditioned stimuli in conditioning experiments should
lead to affectively favorable responses.
Research on the match-up hypothesis suggests that
congruence between a spokesperson and the product type
is important for credibility and favorable attitudes (Kamins
and Gupta 1994; Till and Busler 2000), however, researchers have not fully articulated the mechanisms that
may explain these effects. One paradigm that may be
useful in understanding why affect is stronger when there
is congruence between images and brands is associative
learning, particularly the notion of US/CS belongingness.
Researchers have tied to McCracken’s (1986) model of
meaning transfer, Batra and Homer’s (2004) social consumption context model, or source credibility (Stafford,
Stafford, and Day 2002) to understand celebrity endorser
effects. While these theories are widely accepted they do
not explain the underlying process of transfer of affect and
beliefs. Our goal is to consider the role of CS/US
belongingness in explaining celebrity endorser effects.
transfer leads to positive attitudes toward the CS. Though
researchers have examined various celebrity endorser
effects, they have not attempted to use celebrities as
unconditioned stimuli within the classical conditioning
framework.
H1: Individuals exposed to the systematic pairing of a
brand with a celebrity will develop a more favorable
attitudes toward the brand than those individuals in
the control condition.
Another important question for this research is
whether celebrities well-matched to the product they are
endorsing produce more favorable brand attitudes. Previous studies have shown that when celebrity spokespersons are congruent with the brand they are promoting,
there is greater recall for the brand (Misra and Beatty
1990). In the conditioning literature, the idea of CS/US
belongingness further supports the idea of strategically
matching the stimuli to strengthen the associative link
(McSweeney and Bierley 1984). Therefore, our prediction is:
H2: When a brand is paired with a celebrity, there will be
an interaction between the perceived fit of the endorser with the brand and brand attitude such that
more favorable attitudes will develop in the higher
endorser/brand fit condition.
Method and Results of Study One
Hypothesis
Study one is a simple two-group design, examining
test versus control group differences in order to establish
conditioning effects. In the treatment condition the subjects were exposed to five systematic pairings of an image
of Jennifer Aniston (US) and a picture of Garra Styling
Gel (CS), as well as randomized pictures of the three filler
brands, two filler celebrities and five filler images. While
the control group was shown they same slides, including
those of Garra Styling Gel and Jennifer Aniston, in a
random sequence. The dependent variable was attitude
toward a fictitious brand of hair styling gel and the
experiment was conducted in groups of between 25 and 50
undergraduate business subjects.
Research in the area of classical conditioning suggests that when a US is paired with a CS direct affect
Brand attitude was measured using an eight item,
seven-point semantic differential scale and purchase in-
American Marketing Association / Winter 2006
241
tent was also measured on a 10 point semantic differential
scale. All measures were standardized and summed to
represent an overall evaluation of brand attitude as per
Stuart, Shimp, and Engle (1991).
H1 was supported, as the treatment condition mean
attitude toward Garra Styling Gel was 4.69, compared to
4.15 for the control condition. This difference was significant (t = 2.40, p .01). The results of study one confirm that
a classical conditioning procedure using celebrities as the
US can be effective in generating positive attitudes toward a previously affectively neutral brand.
Method and Results of Study Two
Study two was a 2X2 factorial design. One factor was
test versus control condition. The other factor was the
“fit” between the celebrity endorser and the product
endorsed. In one group the endorser and product were a
good “fit” (Michael Jordan with Laparo Sports Drink)
and in another there was no perceived “fit” between them
(Pierce Brosnan with Laparo Sports Drink) as measured
through pretesting. The dependent variable was attitude
toward the brand (CS).
All procedures matched those followed in study one
and the measure of brand attitude was identical.
Study two found a significant interaction between
conditioning and fit on brand attitude (F = 4.14, p .05)
with a stronger conditioning effect evidenced in the high
fit condition (Michael Jordan with Laparo) than in the
low fit condition (Pierce Brosnan with Laparo). These
results suggest that conditioning is more effective in
brand attitude formation when celebrity fit is high, supporting H2.
Discussion
Our results indicate that simply pairing a well-liked
celebrity with a brand can positively affect brand attitude.
We repeatedly paired images of Jennifer Aniston with
Garra Styling Gel resulting in a significant increase in
positive brand affect
This research also addresses the question of whether
or not using celebrities that are highly congruent with the
advertised product will result in a stronger conditioning
effect. Study two suggests that using celebrities that are
appropriately matched with the advertised product, such
as Michael Jordan with a sports drink, will result in a
stronger conditioning than when the same product is
paired with a poorly matched celebrity, such as Pierce
Brosnan with the sports drink.
For more information please contact:
Brian D. Till
John Cook School of Business
Saint Louis University
St. Louis, MO 63121
Phone: 314.977.3863
E-Mail: [email protected]
American Marketing Association / Winter 2006
242
IN SEARCH OF ATTITUDE PERSISTENCE USING
SALES PROMOTION
Joseph M. Jones, North Dakota State University, Fargo
SUMMARY
This research uses guidelines derived from a new
integrative model (i.e., a unique blending of the Schema
Congruity Processing Framework and the Elaboration
Likelihood Model) to explore attitudinal effects of direct
consumer premiums (DCPs) in promotion and
postpromotion time periods. DCPs, or free-gifts-withpurchase premiums, are the most frequently used nonpriceoriented sales promotion. The current research, part of an
ongoing series of studies, examines the differential effects
of DCPs on attitudes toward promoted products and
investigates the impact of higher- and lower-levels of
relatedness between DCPs and promoted products.
Lee and Schumann’s Integrative Model (2004) of the
Schema Congruity Processing Framework (Mandler 1982)
and the Elaboration Likelihood Model (Petty and Cacioppo
1981, 1986) provide guidelines for investigating the
impact of different levels of DCP relatedness in different
time periods. In the context of this model, it is proposed
that higher-related DCPs provide information that would
be congruent with expectations about promoted products,
and information would be recalled more rapidly and
retained longer when compared with lower-related DCPs
(i.e., lower-related DCPs provide information incongruent with promoted product expectations). In addition, it is
proposed that higher-related DCPs would serve as simple
high-association cues and would cause more memorable
linkages with promoted products because of their lack of
interference in processing. On the other hand, lowerrelated DCPs would serve as low-association cues that
influence attitudes only temporarily, and would not induce individuals to think about linkages with promoted
products. The basic issue that the current research addresses is: if DCPs stimulate favorable effects in promotion time periods, do certain DCPs continue to stimulate
more enduring effects in postpromotion time periods?
Background
In the mid-seventies, Prentice (1975, 1977) proposed
that DCP relatedness differs with respect to degrees of
association with the promoted product’s use. Some examples of DCPs that have had direct associations with the
use of promoted products include: a towel in a family-size
package of detergent, a razor attached to a can of shaving
cream, a serving carafe filled with wine, and a packet of
hair conditioner given with shampoo. In other examples,
American Marketing Association / Winter 2006
DCPs have had little or no association with the use of
promoted products, such as, a toy trinket in a box of readyto-eat children’s cereal, a steak knife attached to a package of dog food, a juice glass filled with jelly, and
sunglasses given away with pizza.
Varadarajan (1985, 1986) and Campbell and Diamond (1990) suggested that perceptions of relatedness
vary by context and consumer discernment. For instance,
some consumers may view a razor as having a higher
degree of association with the use of shaving cream
(perfect-use complementary linkage) than a towel has
with detergent (partial-use complementary linkage); or a
pair of sunglasses may be perceived as having less of a tiein with pizza (seemingly noncomplementary) than a toy
trinket has with children’s cereal (target market commonality).
Findings from studies on the Schema Congruity
Processing Framework (see Mandler 1982) have indicated that information that matches well with an
individual’s existing schema (i.e., organized patterns of
expectations, beliefs, and affect) tends to be encoded
effortlessly. However, if there is not a good match between
information and existing schema, the encoding process
becomes difficult and requires extensive processing (Srull
1981). Because memory has a tendency to become abstract and “schema-driven” over time, memory for certain
congruity may persist over time while memory for incongruity may decay (Alba and Hutchinson 1987). Incongruent information that has not been securely encoded in
memory might be susceptible to lower levels of delayed
recall (Hastie and Kumar 1979; Schmidt and Sherman
1984; Smith and Graesser 1981). Mandler (1982) suggested that schema congruity leads to favorable response
because individuals like objects that conform to their
expectations (Myers-Levy and Tybout 1989). Congruity
as it relates to DCP promotions would be viewed as
matches between existing knowledge structures that individuals hold about DCPs and promoted products. Levels
of congruity would be determined by degrees of match
between related schemas, and DCPs and promoted products (e.g., Meyers-Levy and Tybout 1989; Peracchio and
Tybout 1996).
Elaboration Likelihood Model studies on attitude
persistence have found that persuasion based on peripheral route issues has been less enduring than persuasion
based on central route issues (e.g., Haugtvedt and Wegener
243
1994; Petty and Cacioppo 1984, 1986). However, some
researchers have examined different peripheral cues and
found differential effects for attitude persistence (e.g.,
Sengupta, Goodstein, and Boninger 1997). Alba,
Marmorstein, and Chattopadhyay (1992) argued that
certain peripheral cues might be better than others in
contributing to attitude persistence. In some instances,
higher-related peripheral cues lead to more memorable
linkages because of their inherent simplicity or lack of
interference from similar competing information. In the
context of this model, insofar as almost all DCPs would
be considered peripheral cues, it is believed that higherrelated DCPs would serve as simple high-association cues
and stimulate memorable linkages in different time periods; however, lower-related DCPs would serve as lowassociation cues that influence attitudes only temporarily.
Results from the current research indicate that while
both higher- and lower-related DCPs stimulate initial
favorable attitudes in promotion time periods, only higherrelated ones stimulate persistent effects in postpromotion
time periods. References available upon request.
For further information contact:
Joseph M. Jones
College of Business
North Dakota State University
Fargo, ND 58105–5137
Phone: 701.231.7690
FAX: 701.231.7508
E-Mail: [email protected]
American Marketing Association / Winter 2006
244
FUNCTIONAL STEREOTYPES AND STEREOTYPE CHANGE IN
CROSS-FUNCTIONAL NEW PRODUCT DEVELOPMENT TEAMS
Amy E. Cox, University of North Carolina – Greensboro, Greensboro
SUMMARY
This study examines the possible existence of and
change to functional stereotypes – stereotypes held about
various departments, functional areas or occupations –
within cross-functional new product development teams.
Building on literature about social identity theory, stereotype change and team interdependence and motivation,
propositions about the nature of functional stereotypes
and stereotype change are developed.
Cross-functional teams, consisting of representatives from various corporate functions such as marketing,
research and development and manufacturing, have long
been touted as a key to improving the effectiveness and
speed of firms’ new product development efforts (Walker,
Ruekert, and Olson 1995). However, teams can require a
great deal of time and money, and it is only the promise
of more creative and widely acceptable solutions to problems that make them worth this effort. “Unfortunately,
such teams can also be quite inefficient in terms of
manpower, social conflict and the time required for an
acceptable solution” (Walker et al. 1995).
One issue which may limit the benefits of the team
process is the existence of functional stereotypes. Functional stereotypes are stereotypes held about various
departments, functional areas or occupations. These are
essentially stereotypes about the role or profession pursued by persons in that department, and/or the personal
qualities possessed by those who do that job. It is likely
that some negative stereotypes will be harbored about
functions other than one’s own, as part of the denigration
of the out-group discussed in social identity theory (Haslam
2004). If team members harbor such negative stereotypes,
clearly conflict and lack of trust and coordination may
result. However, it is not necessary that stereotypes be
negative to be dysfunctional. Social identity theory also
predicts that fellow team members will be seen as prototypical of their function (Haslam 2004). Over-reliance on
the functional representative on a team to behave in a
stereotypical fashion can lead to difficulties in teamwork
even if the stereotypical beliefs and behaviors are positive.
For example, if one assumes that a particular functional
representative is a prototypical hard worker, with a getthe-job-done, keep-things-moving mentality, one may be
startled and taken aback when he or she is unable to meet
a deadline or request.
American Marketing Association / Winter 2006
Cross-functional new product teams are likely to be
the most intense and prolonged interaction with other
departments that a departmental representative experiences. It is therefore likely that he or she will start out
expecting the other members to behave a certain way, and
will plan his or her own behavior accordingly. Also, as the
literature on self-fulfilling prophecies indicates, one’s
own behavior has impact on how others behave toward
one (Snyder 1992). Cross-functional teams are also contexts in which one’s own functional identity, as a representative of one’s function or department, is highlighted.
These teams are therefore places where potential identity
conflict or dual social identity exists (Haslam 2004): is
one a functional representative (and a member of one’s
own department) or is one a cross-functional team member? How does this choice of identity affect the use and
effect of functional stereotypes? Presumably, as one identifies with the team, and identifies the other team members as the in-group, the negative effects of stereotyping
should be ameliorated.
As team members interact over time, stereotype
change is expected to occur and is expected to follow the
bookkeeping model of stereotype change, whereby small
changes are made to the stereotype as inconsistencies are
experienced (Weber and Crocker 1983). Because team
members may anticipate working with this function (if
not this individual representative) again in the future,
they should be motivated to make the effort to follow the
bookkeeping model of stereotype change.
A variety of control measures, including the intensity
of one’s own functional identity, the strength of the
original stereotype, and the level of identification felt
with the cross-functional team should be included. A
longitudinal pilot study, using MBA students, is proposed, which would allow the development of materials
and procedures which could then be used to study existing
cross-functional teams in a field experiment.
In sum, the stereotypes held about functional departments could limit the effectiveness of cross-functional
teams. It is therefore a matter of practical interest to
investigate what these stereotypes are and how they may
change during the team process. This study will add
external validity to studies of stereotype change by studying existing groups in a non-laboratory setting. It adds a
dimension-time-which has been neglected in the stereo-
245
type change literature and which has implications for the
nature of stereotype change. It also examines potential
conflict between two different social identities – that as a
representative of one’s own functional area and that of a
team member – and the implications of such conflict for
stereotype change (Haslam 2004). References available
upon request.
For further information contact:
Amy E. Cox
Bryan School of Business and Economics
University of North Carolina – Greensboro
P.O. Box 26165 UNCG
Greensboro, NC 27402–6165
Phone: 336.334.3065
FAX: 336.334.4141
E-Mail: [email protected]
American Marketing Association / Winter 2006
246
ORGANIZATION REDUNDANCY FOR ENHANCING UTILIZATION OF
CUSTOMER INFORMATION IN NEW PRODUCT DEVELOPMENT: AN
EMPIRICAL STUDY OF JAPANESE CONSUMER GOODS INDUSTRY
Tomoko Kawakami, Kansai University, Japan
ABSTRACT
We discuss the effectiveness of organization redundancy for enhancing utilization of customer information
in new product development. The empirical results using
the data of Japanese consumer goods indicate that organization redundancy has positive relationship with technological uncertainty and enhances utilization of customer information only for the development of durable
goods.
INTRODUCTION
Utilizing customer information among organizations has been stressed as an important factor for new
product development (NPD) success (Kohli and Jaworski
1990; Narver and Slater 1990; Narver, Slater, and
MacLachlan 2004). However, it is often difficult for
organization members to share and use the customer
information because of socio-cultural differences between departments (Dougherty 1992). This is why research has been trying to find out how to integrate
marketing and R&D departments for the better collaboration and communication (Gupta, Raj, and Wilemon 1986;
Griffin and Hauser 1996).
In this paper, we focus on how organization redundancy can enhance utilization of customer information
between marketing and R&D members during NPD
process. We adopt the concept of “balanced differentiation” proposed by Kawakami (2004) which defines the
organization redundancy along two dimensions; “background redundancy” and “task redundancy.” Kawakami
(2004) empirically tested the effectiveness of balanced
differentiation in Japanese electronics industry and found
that it influences positively on the utilization of customer
information. However, increasing organization redundancy is not always desirable because it lowers the
efficiency of functional specialization. It is important to
know under what condition it works and when we should
increase organization redundancy. In order to generalize
the findings about the effectiveness of balanced differentiation to other industries, we apply the conceptual model
to Japanese consumer goods industry at new product
project level.
We organize this paper as follows. First, we review
the literature briefly about the utilization of customer
American Marketing Association / Winter 2006
information and organization redundancy to clarify our
theoretical contribution. Second, we explain the conceptual model and hypotheses. After reporting the data
collection methodology, we show the results of analyses
and discuss the implication of this research.
LITERATURE REVIEW
Utilization of Customer Information
As Kohli and Jaworski (1990) discusses, sharing and
utilizing market information among organization is the
essential factor for realizing market orientation. Studies
about utilization of market information, which includes
customer information, began in early 1980s (Deshpande
and Zaltman 1982). Since then, researchers have been
extending their interests from the utilization of marketing
research by marketing managers at individual level to the
dissemination of market intelligence at organizational
level (Moorman 1995).
Consistent with the research stream, we define customer information as follows; market information regarding customer needs and wants necessary for developing new products (Ottum and Moore 1997). We also
define the utilization of customer information within new
product development process as three stages, that is, the
information acquisition-gathering stage, the information
dissemination-transmission stage, and the information
utilization stage (Menon and Varadarajan 1992). Although all of these stages are important, we focus on the
last utilization stage because it is regarded as most
important among them (Ottum and Moore 1997).
Organization Redundancy
The purpose of this paper is to examine how organization redundancy influences on the utilization of customer information. Researchers discuss that organization
redundancy enhances the utilization of extra-functional
information by reducing the socio-cultural differences
between functional departments (Gupta, Raj, and Wilemon
1986; Dougherty 1992). However, we cannot increase
organization redundancy unlimitedly because there is a
trade-off problem between the efficiency of functional
specialization within a department and the efficiency of
information sharing between departments (March and
Simon 1958; Lawrence and Lorsch 1967). To understand
247
the appropriate level of organization redundancy,
Kawakami (2004) proposed a new concept of “balanced
differentiation” to measure the degree of redundancy of
functional knowledge between marketing and R&D members.
Balanced differentiation is especially useful to explain the nature of Japanese NPD organizations. In
Japanese companies, NPD members often possess prior
knowledge about other functional areas through job rotation and in-house educational training before they take
part in the NPD project. They also tend to play extrafunctional roles during the new product development
process. In this way, Japanese companies succeed in
equilibrating the efficiency of specialization within each
department and the efficiency of communication between
departments.
In the literature, we can find similar concepts to
balanced differentiation. For example, Takeuchi and
Nonaka (1986) referred to the existence of knowledge
redundancy in Japanese companies. Others explained the
role flexibility of Japanese NPD members (Moenaert and
Souder 1990; Moenaert et al. 1994). We select “balanced
differentiation” as the conceptual framework of this study
because it defines the organizational redundancy more
clearly and comprehensively than other concepts.
As Brown and Eisenhardt (1995) discusses, some
concepts in the literature prepared for explaining the
characteristics of Japanese NPD management, such as
“subtle control” (Takeuchi and Nonaka 1986) and “high
weight project manager” (Clark and Fujimoto 1991), are
ambiguous and sometimes difficult to understand for
people in other cultures. Therefore, we think it important
to define the concept clearly enough to operationalize for
the empirical testing.
H1b: Marketing background redundancy of R&D people
has a positive effect on the utilization of customer
information.
H2a: R&D task redundancy of marketing people has a
positive effect on the utilization of customer information.
H2b: Marketing task redundancy of R&D people has a
positive effect on the utilization of customer information.
We also consider that the effect of organization
redundancy is different according to the type of goods. In
this paper, we separate the sample into two groups, nondurable goods and durable goods. Urban and Hauser
(1993) discusses that the effective style of new product
development style is different between non-durable goods
and durable goods. They also discuss the importance of
customizing the new product development process according to the type of new products.
Generally, we see more turbulent technological
changes in durable goods than in non-durable goods. As
Workman (1993) observed, it is more difficult to realize
market orientation in the technology oriented companies.
Atuahene-Gima (1995) also discusses that market orientation may be less important for developing products with
more sophisticated and complex technology.
Therefore, it could be more difficult to utilize customer information during NPD process for developing
durable goods than non-durable goods. However, if we
design the organization so that marketing and R&D could
have knowledge redundancy, they understand each other
better which could facilitate the utilization of customer
information in developing durable goods. Therefore we
hypothesize that;
HYPOTHESES DEVELOPMENT
H3:
Organization redundancy means enhancing the similarity of background and task experience between different departments. It can improve communication between
marketing and R&D members by facilitating information
interpretation and reducing perceptual difference between them (Zenger and Lawrence 1989; Moenaert et al.
1994; Kawakami 2004). Based on these discussions, we
hypothesize that the balanced differentiation which consists of the background and task redundancy influence
positively on the utilization of customer information, for
both of marketing and R&D departments respectively.
H1a: R&D background redundancy of marketing people
has a positive effect on the utilization of customer
information.
American Marketing Association / Winter 2006
Organization redundancy has stronger positive
effect on the utilization of customer information
for durable goods than for non-durable goods.
METHODOLOGY
To test the hypotheses, we collected data from 111
new product development projects of Japanese consumer
goods manufacturers. We selected Japanese consumer
goods manufacturers as a sample of this study because
most studies about the utilization of market information
in new product development process focus on industrial
goods or high-tech products rather than consumer goods
(Maltz and Kohli 1996; Ottum and Moore 1997). And
also, it is more advantageous for the generalizability of
results to collect data from consumer goods in general
248
rather than from a specific industry (Atuahene-Gima
1995).
We conducted the survey in February 2003. First, we
looked up the quarterly report of Japanese companies,
Kaisya Shikiho, a Japanese version of Japan Company
Handbook, and selected consumer goods manufacturers
with more than 10 billion Yen in total sales. Then we
picked up 100 companies from them at random. Each
company was asked to provide information about new
product development projects of the product developed
after 2000. For each of the selected projects, two members
of the new product development team (a marketer and an
R&D person) were asked to complete the questionnaire.
As a result, we collected 178 usable questionnaires
(86 from R&D and 92 from marketing) from 39 companies (39% company response rate). For 67 projects, we
received completed questionnaires from a pair of R&D
and marketing. After checking the consistency of the
marketing and R&D responses by performing a paired ttest at concept level, we used the average score for the
further analyses. We added a single respondent from
R&D for 19 projects and a single respondent from marketers for 25 projects to these 67 projects. Thus, the total
sample consists of 111 new product development projects.
The average sales of the respondent companies are 1,509
billion Yen (about 12.58 billion dollars at 120 Yen per
dollar). It contains 66 non-durable products and 45
durable products.
RESULTS OF ANALYSES
In this section, we explain the concepts and measure
items we used in this study. The details will be provided
on request from the author. All the items are adopted from
the existing literature and measured by 11-point Likert
scale (0 = strongly disagree, 10 = strongly agree) as
Japanese people like grading on the scale of 0 to 10 (Song
and Parry 1996). We performed exploratory factor analyses and checked the reliability of all the concepts. All of
the reliability coefficients (Cronbach’s α) exceed 0.70,
the desirable level recommended by Nunnally (1978)
except for the R&D task redundancy of marketing members (α = 0.67).
We operationalized “balanced differentiation” in the
following way by adopting Kawakami (2004). We measured R&D background redundancy of marketing members (BRM) using three items by asking if marketing
people had knowledge of technology, understood terminology of technology and had R&D background. We also
measured marketing background redundancy of R&D
members (BRR) using three items by asking if R&D
people had knowledge of marketing, understood terminology of marketing and had marketing background. We
measured R&D task redundancy of marketing members
American Marketing Association / Winter 2006
(TRM) using five items by asking if marketing department was involved in the following five tasks during NPD
process; technology feasibility test, technology trend research, specification fix, technology prototype, and quality control. We also measured marketing task redundancy
of R&D members (TRR) using five items by asking if the
R&D department was involved in the following five tasks
during NPD process; idea generation, concept creation,
pricing, sales promotion and long-term planning.
As a dependent variable, we measured utilization of
customer information (UCI) using three items by asking
if NPD members used customer information to decide
product specification, to encourage project members’
action during NPD, and to motivate project members. We
also prepared control variables regarding environmental
uncertainty, change of customer needs (CC) and change
of technology (CT), as we include a variety of industries
in our sample.
Organization Structure of Japanese NPD Projects
Before estimating the hypothesized model, we performed descriptive analyses to understand the characteristics of balanced differentiation in Japanese companies.
First, we checked how Japanese NPD organizations realize functional differentiation. We asked the respondents
about the physical proximity and organizational distance
between marketing and R&D. As for the physical proximity, we prepared 5-point scale asking if marketing and
R&D are located in the same floor, in the same building,
in the same site, within 1 hour distance, or farther than
one hour distance. As for organizational distance, we also
used 5-point scale asking if they are in the same groups,
in the same departments, in the same strategic business
unit (SBU), in the same companies, and in different
companies. First, we analyzed using the whole sample
(N = 111), and then we divided the sample into two
groups, non-durable goods (N = 66) and durable goods
(N = 45) to check the differences between them.
In the Japanese consumer goods sample, about 46
percent projects (51 projects among 111) locate marketing and R&D members at least in the same site. The
tendency of arranging these two departments closer is
stronger for durable goods than for non-durable goods.
About 36 percent (24 projects among 66) locate them in
the same site in the cases of non-durable goods, while 60
percent (27 projects among 45) for durable goods. About
29 percent (13 projects among 45) of durable goods even
locate marketing and R&D members in the same floor.
In terms of organizational distance, about 80 percent
projects (89 projects among 111) arrange marketing and
R&D as different departments (50 projects), different
SBUs (37 projects), or different companies (2 projects).
Thus we confirm that most NPD projects in Japanese
249
consumer goods industry differentiate marketing and
R&D functionally. We also find interesting differences
between non-durable and durable goods. As for about 40
percent (26 projects among 66) of the non-durable NPD
projects, marketing and R&D are arranged in different
departments of the same SBU while the percentage is
higher (about 53%) in the case of durable goods. And also,
about 41 percent (27 projects among 66) projects arrange
marketing and R&D in different SBUs for non-durable
goods, while only about 22 percent (10 projects among
45) for durable goods.
In summary, we find that (1) marketing and R&D
differentiate functionally, (2) physical and organizational distance are closer in durable goods than in nondurable goods in Japanese consumer goods industry.
Comparison Between Non-Durable and Durable Goods
Next, we compared the mean differences between
non-durable goods and durable goods using t-test. As we
report in Table 1, in terms of the variables of balanced
differentiation, R&D background redundancy of marketing members (BRM), marketing background redundancy
of R&D members (BRR), and marketing task redundancy
of R&D members (TRR) are significantly bigger for
durable goods than for non-durable goods (the difference
is 2.23, .72, 1.49, p < .05, respectively). This means that
NPD projects of durable goods are more redundant in
terms of their members’ background and task involvement than those of non-durable goods. Second, we find
that customer information is more utilized in the NPD
projects of non-durable goods than in those of durable
goods (the difference is -.82, p < .05). Third, regarding
environmental uncertainty, change of customer needs is
more rapid in non-durable goods than durable goods (the
difference is -1.02, p < .05). In contrast, change of
technology is more rapid in durable goods than nondurable goods (the difference is 1.98, p < .05).
RESULTS OF HYPOTHESES TESTING
To test the hypotheses, we estimated the model using
ordinary least square (OLS) regression. As shown in
Table 2, we tested three models. First, we evaluated the
model with all samples. The model was significant (R
square is .13, adjusted R square is .07, p < .05), but we
couldn’t see any significant coefficients except for the
“type of goods.” Therefore, we separated the sample into
two groups of non-durable goods and durable goods. The
TABLE 1
Comparison Between Non-Durable Goods and Durable Goods
Non-Durable
Goods
(N = 66)
Durable
Goods
(N = 45)
Mean
Difference
t-value
Mean
S.D.
Mean
S.D.
R&D Background Redundancy of Marketing
Members (BRM)
3.42
2.56
5.64
3.05
2.23
4.17*
Marketing Background Redundancy of R&D
Members (BRR)
1.64
1.40
2.35
1.96
.72
2.25*
R&D Task Redundancy of Marketing
Members (TRM)
5.34
1.81
5.53
1.75
.18
.55
Marketing Task Redundancy of R&D
Members (TRR)
5.30
1.93
6.79
1.71
1.49
4.18*
Utilization of Customer Information (UCI)
7.04
1.76
6.23
1.85
-.82
-2.35*
Change of Customer Needs (CC)
7.53
2.38
6.51
2.07
-1.02
-2.34*
Change of Technology (CT)
5.48
1.85
7.46
1.96
1.98
5.40*
Note: *p < .05.
All concepts are measure by 11-point scale. The numbers in Bold style are significantly bigger than the others.
American Marketing Association / Winter 2006
250
model for non-durable goods was not significant while
the model for durable goods was significant (R square is
.30, adjusted R square is .19, p < .05). This result supports
our hypothesis 3.
In terms of the relationship between balanced differentiation and utilization of customer information, the
unstandardized coefficient of R&D background redundancy of marketing members (BRM) is not significant.
Therefore, hypothesis 1a is not supported. The
unstandardized coefficient of marketing background redundancy of R&D members (BRR) is significant, but the
sign is negative (unstandardized coefficient is -.31, p <
.05). It means that hypothesis 1b is not supported, either.
As for hypotheses 2, we could find significant positive
relationships for both of R&D task redundancy of marketing members (TRM) and marketing task redundancy of
R&D members (TRR) (unstandardized coefficient is .47,
.35, p < .05, respectively). Therefore, hypothesis 2a and
2b regarding redundancy of task involvement are supported.
In Table 2, we also compare the results of hypotheses
testing with those of Kawakami (2004) which tested the
same framework in Japanese electronics industry. We
find that the effectiveness of balanced differentiation is
different between durable goods in general and electronics industry.
DISCUSSION
We find that the organization redundancy has positive relationship with technological change and enhances
the utilization of customer information in the case of
developing durable goods in Japanese companies. On the
other hand, it is not effective for developing non-durable
goods.
Moreover, among the variables of organization redundancy, only task redundancy had positive effect in
developing Japanese durable goods. This result is different from Kawakami (2004) which found that R&D background redundancy of marketing members and market-
TABLE 2
Results of Hypotheses Testing
All
Projects
(N = 111)
NonDurable
Goods
(N = 66)
Durable
Goods
(N = 45)
R&D Background Redundancy
of Marketing Members (BRM)
-.03
Marketing Background Redundancy
of R&D Members (BRR)
-.17
R&D Task Redundancy of
Marketing Members (TRM)
.17
Marketing Task Redundancy of
R&D Members (TRR)
.08
Change of Customer Needs (CC)
.08
.19
Change of Technology (CT)
.15
-.00
Type of Goods
Hypotheses Sign
.04
Results
Kawakami
(2004)
H1a
+
Not
supported
Supported
H1b
+
Not
supported
Not
supported
H2a
+
Supported
Not
supported
H2b
+
Supported
Supported
-.31*
.47**
.35*
-1.00*
R2
.13*
.30*
Adjusted R2
.07
.19
F-value
2.26
n.s.
2.77
Note:**p < .01, *p < .05. The numbers represent unstandardized coefficients. The dependent variable is
utilization of customer information.
American Marketing Association / Winter 2006
251
ing task redundancy of R&D members had positive effects
in Japanese electronics industry. This comparison implies that the effectiveness of organization redundancy is
contingent according to the industry or other conditions
among durable goods.
In summary, we can generalize that it is more effective for utilization of customer information to have organization redundancy in durable goods than non-durable
goods. And also, our results indicate that the greater
redundancy is not always good. It is important to check
which dimension of balanced differentiation we should
increase to realize the most suitable redundancy according to the product categories.
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American Marketing Association / Winter 2006
In this paper, we confirm one condition for generalizing the effectiveness of organization redundancy on the
utilization of customer information during NPD process.
However, we need to admit the limitation of generalizing
this result as we used Japanese sample only. Although
using Japanese sample for this study is advantageous as
Japanese NPD organizations are known to be redundant,
future research could test the same conceptual model in
different countries and industries to generalize the findings more extensively. In addition, we focus on customer
information only in this paper. In order to discuss the
organization redundancy more comprehensively, future
research could deal with the utilization of technology
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For further information contact:
Tomoko Kawakami
Faculty of Commerce
Kansai University
Suita, Osaka, 564–8680
Japan
Phone: 06.6368.0145
FAX: 06.6368.3106
E-Mail: [email protected]
American Marketing Association / Winter 2006
253
ACQUIRE AND FORGET: THE CONFLICT OF INFORMATION
ACQUISITION AND ORGANIZATIONAL MEMORY IN THE
DEVELOPMENT OF RADICAL INNOVATIONS
Joshua H. Johnson, Vanderbilt University, Nashville
David M. Dilts, Vanderbilt University, Nashville
SUMMARY
Uncertainty is a major component of the new product
development (NPD) process and such uncertainty is
exacerbated by the degree of uncertainty inherent in the
new innovation. For example, the uncertainty of radical
innovation development is greater than that of incremental innovations (Zahay et al. 2004), where radical innovations (RIs) are defined as those innovations that are new
to the market, new to the technology, or some combination of the two (Garcia and Calantone 2002). The literature on NPD has recognized that the uncertainties associated with radical innovations are typically related to the
market and technology aspects of the product being
developed (Cooper 2000; Garcia and Calantone 2002;
Montoya-Weiss and Calantone 1994), but how does the
information being acquired to resolve these uncertainties
fit with the organizations memories?
The ability of the firm to overcome such uncertainty
is theorized in the concept of organizational learning
(OL). OL includes the processes of acquiring, disseminating, interpreting, and remembering information (Huber
1991). However, because of the inherent high uncertainty, or epistemic risk, of the market and technology of
radical innovations, new product development reveals a
conflict between the drive to use organizational memory
(OM), i.e., past experiences, versus the need to acquire
new, fresh information on a novel product.
Firms typically recognize that there is a need to
collect and remember information. However, with radical
technologies, it is possible that a firm may remember
information beyond that information’s useful life. We
focus on two components of OL that may be inversely
related: organizational memory and information acquisition. Our propositions, developed from a review of the
literature are: P1: Firms developing radical innovations
will seek increased levels of information; P2: The length
of an organizations useful memory will be shorter for
firms developing radical innovations; and P3: Firms
developing radical innovations experience a tension between the information acquisition and organizational
memory functions of OL.
The population for this study is firms that had
developed radical medical device innovations. The mediAmerican Marketing Association / Winter 2006
cal device industry was selected for two primary reasons.
First, from magnetic resonance imaging (MRI) systems
to artificial hearts, this $74 billion industry has historically produced a significant number of revolutionary
radical innovations and has a well-structured categorization for radical innovations (FDA 2004). Second, the
federal government has recognized deficiencies in the
medical devices industry, and has identified the NPD
process as a significant opportunity to rectify the industry’s
deficits (FDA 2004).
Case studies, using a guided field interview method,
were utilized (Yin 1994). The interview questions were
formed by scales taken from prior research, for instance,
product performance (Song and Parry 1997a; Song and
Parry 1997b), memory constructs (Moorman 1995;
Moorman and Miner 1997), and market (Moorman 1995)
and technology (Moorman and Miner 1997) turbulence.
The OL processes and conflicts were studied in four firms:
(1) AlphaCorp, information acquisition, (2) BetaCorp,
information acquisition deficit, (3) Gamma Medical,
organizational memory, and (4) DeltaCorp, the conflict
of information acquisition and organizational memory.
The interviewees were highly experienced with an average of 25 years of experience.
Through these case studies, we found support for the
propositions. AlphaCorp, a developer and manufacturer
of a medical device utilized in the delivery of fluids to
patients, found that to overtake the incumbent firm’s
position in the market would require a complete understanding of the market and product function. We found
that the development of their radical innovation required
a high level of information acquisition and, surprisingly,
the training of respondents.
BetaCorp developed a device that when implanted in
a patient could be remotely programmed, adjusted, and
analyzed. During the NPD process there was limited
market analysis or market development performed. Instead, the product development was driven by the technology of the new product, with little attention given to the
market or market related factors. Addressing proposition
one, this lack of appropriate market research lead the firm
to retract the product from the market after its market
failure.
254
Gamma Medical develops products utilized in the
treatment of neurological and cardiovascular disorders.
Gamma Medical presents a complicated organizational
memory scenario where they utilize two different types of
memories. Their OM processes have resulted in the
codification of memories into a set of “rules” used during
the process. Further investigation revealed that Gamma
used their rules at a general process level and not at the
level of a specific NPD project. Gamma’s technical
knowledge was not constrained by the memories of their
past projects and was continuously updated to fit their
current needs, thus supporting proposition two.
Highlighting the tension between organizational
memory and information acquisition, DeltaCorp manufactures a device the size of a dime, but they have the
technology, i.e., a radical innovation, to make devices
half that size. Their memory suggests that smaller is
better in this market, so they believed that they should
continue to develop innovations allowing for smaller
devices. Despite this drive to make smaller devices, new
information acquired from the market revealed that the
products could become too small for customers to manage. In this situation, memory led to setting one direction
for the product development, while the information acquisition indicated a different direction. As a result of this
conflict, DeltaCorp followed the information gained from
their IA processes over their OM processes. This experience demonstrates the conflict as proposed by proposition
three.
Our results contribute to the literature on the customer involvement in radical and disruptive innovations
(Christensen and Bower 1996). While most NPD literature suggests OM and high customer involvement leads
to successful products in the market (Cohen and Levinthal
1990; von Hippel 1986), Christensen and Bower (1996)
suggest that current customers should not be involved in
the NPD of radical innovations as they may lead a firm to
develop incremental innovations. Our findings suggest
that OM may be a contributing factor to Christensen and
Bower’s findings but that there is an essential tension
between acquiring new information, remembering what
is important and forgetting what is not. Perhaps it is not
so much lack of knowledge that leads to incremental
innovations; rather, it is the need to forget.
This research is a preliminary step in the study of the
conflict between information acquisition and organizational memory during new product development of radical innovations. Future research is required in this increasingly important aspect of NPD. References available
upon request.
For further information contact:
Joshua H. Johnson
Vanderbilt University
Box 351518, Station B
2301 Vanderbilt Place
Phone: 615.322.8494
FAX: 615.322.7996
E-Mail: [email protected]
American Marketing Association / Winter 2006
255
EXPANDING DISTRIBUTION: USING ECONOMIC AND RELATIONAL
INCENTIVES TO MAINTAIN EXISTING CHANNEL RELATIONSHIPS
Jill Mosteller, Georgia State University, Atlanta
ABSTRACT
Manufactures may achieve sales and revenue growth
by expanding into new channels of distribution (Carden
2005; Burt 2005). A conceptual framework with propositions are presented to suggest how relational and economic incentives may enhance cooperation and reduce
conflict between a manufacturer and existing channel
members during the expansion process.
INTRODUCTION
Maintaining existing channel performance through
the use of incentives when expanding distribution is the
paper’s focus. Although a manufacturer may be able to
increase sales and revenues through distribution channel
expansion, this change may impact existing downstream
members (Hibbard et al. 2001). Relations among existing
channel members and the manufacturer may become
strained or strengthened as a result of channel design
changes. Given that channel member performance is
critical to achieving the overall strategic objectives (e.g.,
sales and revenues), types of incentives are explored as
governance mechanisms to managing channel behavior
and outcomes. The issues discussed will be framed within
the internal political economy framework (Stern and
Reve 1980). Internal polity processes include issues associated with power and dependence relations and the
internal sentiments and behaviors that are manifested
through cooperation and conflict between firms. Internal
economic processes include decision-making and bargaining that take place within the channel dyad (Achrol,
Reve, and Stern 1983). Performance outcomes will be
discussed in terms of the differences in levels of cooperation and conflict prior to and after the channel expansion.
The context of discussion will be under different
sociopolitical and economic scenarios that may exist
between the manufacturer and distributor/reseller dyad.
GOVERNANCE THROUGH INCENTIVES
Governance has been defined as a means of organizing transactions (Williamson 1979) and as a multidimensional phenomenon, encompassing the initiation, termination, and ongoing relationship maintenance between a
set of parties (Heide 1994). A more recent definition states
that governance processes are the activities performed to
accomplish the day-to-day work of the channel and the
maintenance of the channel relationship for the better-
American Marketing Association / Winter 2006
ment of one or both parties (Bello, Gilliland, and Gundlach
2005). In this paper, the governance process is defined as
the ongoing relationship between manufacturers and
their distributors facilitated through the use of incentives.
Heide (1994) notes that incentives can be short or longterm and may be tied to outcomes and/or behavior. In
addition, incentives can play a strong role in market
governance structures (Williamson 1991). By integrating
industry incentive research within the political-economic
framework, this paper attempts to generate insights that
may warrant further investigation. We continue the discussion by exploring more recent research on specific
types of channel incentives used by industry and how they
are categorized within the political economic framework.
CHANNEL INCENTIVES
Channel incentives are defined as behaviors or policies that are designed to motivate intermediaries to
support the supplier’s agenda (Gilliland 2003). Thus the
incentives discussed go beyond economic transactions
such as commissions, spiffs or other direct monetary
gains. Incentives can include relational gestures that may
create goodwill. Gilliland’s (2003) survey of high-technology suppliers revealed 173 unique channel incentives.
These incentives were classified into five categories:
credible channel policies, market development support,
supplemental contact, high-powered incentives, and enduser encouragements (Gilliland 2004). From within these
five categories, the types of incentives discussed will be
classified as either economic or relational.
ECONOMIC INCENTIVES
Economic incentives are defined as direct economic
benefits provided to the distributor/reseller, made by the
manufacturer, in exchange for specific performance outcomes. Examples of economic incentives would be credible channel policies and high-powered incentives. Credible channel policies may include pledges made to the
reseller in the form of compensation regardless of the
channel who helped or facilitated the sale (Gilliland
2004). One obvious concern by the manufacturer for this
type of pledge would be the manufacturer’s cost of sale.
From a transactional cost analysis perspective (Williamson
1991), this may be cost prohibitive unless all the other
relational costs associated with facilitating the transaction (e.g., opportunism from sellers, safeguarding assets,
behavioral uncertainty) were considered higher. If the
256
internal economic structure can be assessed prior to the
channel expansion, then transaction costs can be restructured to take this potential conflict into consideration. An
example may be that all sales within the reseller’s territory are counted toward the reseller’s sales objectives,
however the amount of commission or credit earned may
vary depending upon the channel that facilitates the sale.
Given the potential uncertainty of performance outcomes,
channel pledges could be positioned as short-term or
long-term commitments. High-powered incentives
(Gilliland 2003) include unique sellable solutions, as well
as cash incentives, rebates, and discounts on quantities
ordered. High-powered incentives are typically used to
motivate immediate, short-term behavior, rewarding specific outcomes monetarily. Another type of a direct economic incentive would be cash bonuses that are awarded
for performance over a longer period of time (e.g., annually or after a certain period of time) Thus economic
incentives may be short or long- term orientated with a
focus on performance outcomes. Another industry term
that may be aptly used to describe economic incentives is
“pay for performance” plans.
RELATIONAL INCENTIVES
Relational incentives include those activities associated with providing support to channel members. Although the support provided is by no means “free,” in
some cases the support activities may be cost effectively
provided by the manufacturer and greatly valued by the
reseller, thus being perceived as a valuable exchange – or
win/win by both parties. Transactional cost analysis
(Williamson 1991) would suggest that the channel member who can most efficiently produce the value-added
services within the system should perform them. Relational incentives are indirect performance support mechanisms provided by the manufacturer that may assist the
distributor in meeting manufacturer and reseller objectives. Market development support, supplemental contact, and end-user encouragements are examples of channel incentive categories (Gilliland 2003). Promotional
materials, manufacturer support personnel, and co-op
advertising are examples of market development support
incentives. Supplemental contact incentives can be communication programs that are designed to inform resellers
with timely and relevant information that may assist in
their own activities and agendas. End-user encouragements relate to firms working together to generate mutually desirable results (Gilliland 2004). These incentives
are indirect because they may assist in enhancing the
ability of reaching performance expectations established
by the manufacturer. In addition, through additional
communication and perceived support mechanisms, behaviors associated with performance activities may be
influenced according to manufacturer objectives. Relational incentives can also be short or long-term oriented,
may provide indirect economic benefit (the agent does not
American Marketing Association / Winter 2006
have to make investments in providing such services or
supplements) and may also include rewards for behavioral conformity. As we move forward to discuss the
different sociopolitical and economic states that may exist
between firms, these types of incentives will be used to
demonstrate how these governance processes may interact, yielding different outcomes with regard to conflict
and cooperation between firms. Table 1 provides a summary of the incentive examples discussed.
INTERNAL POLITICAL ECONOMY
FRAMEWORK
Power/Dependence
Power has been defined as the degree to which one
party can influence another party to undertake an action
that the other party would not have done (Weitz and Jap
1995). If power is present, dependency is implied (Emerson
1962). Emerson (1962) postulated power and mutual
dependency as intertwined. “By virtue of mutual dependency, it is more or less imperative to each party that he
be able to control or influence the other’s conduct . . . each
party is in a position, to some degree, to grant or deny,
facilitate or hinder the other’s gratification” (Emerson
1962, p. 32). Applying agency theory concepts within the
channel dyad, the way in which power is exercised may
play a key role in channel relationship outcomes. The
principal (manufacturer) is contracting with the reseller
(distributor) to perform on the principal’s behalf. If the
agent chooses not to perform, it is exerting power because
it is hindering the other’s gratification. The use of noncoercive sources of power (e.g., rewards, assistance) has
been empirically associated with greater downstream
channel member satisfaction than coercive sources of
power (punishments) (Lusch and Brown 1982). Thus the
use of incentives as a form of governance may yield
influence over performance through the influence on the
behavioral outcomes of cooperation and conflict. Next we
examine different contexts between firms and which
forms of incentives may help yield desired outcomes. The
conceptual model in Figure 1 outlines the overall framework that will guide the subsequent discussion.
Asymmetric Power – in Favor of the Distributor/
Reseller. Power can be asymmetric – meaning one party
has more influence over the other. An example is when a
retailer yields greater power due to its vast presence, thus
significantly contributing to the manufacturer’s sales
objectives (e.g., Wal-Mart). The key point is that with an
imbalance in power, dependency is an outcome. A manufacturer who has only used indirect distribution to reach
the market may be in a position where it is dependent upon
their distributors for sales and revenues. Prior to channel
expansion, 100 percent of a manufacturer’s sales and
revenues come from the performance of the existing sales
channels. Thus maintaining the relationship and current
257
TABLE 1
(Adapted from Gilliland 2004)
Economic Incentives
Relational Incentives
High powered incentives
Market Development
- Cash, spiffs, bonuses
Credible Pledges/Policies
- Compensation
- Allocation of sales credit
- Promotional materials
- Support personnel
- Co-op advertising
Supplemental Contact
- Communications
End-user encouragements
- Mutual goal setting
performance outcomes (at least in the short run) would
seem to be critical. Agency theory suggests that terms of
exchange from the manufacturer perspective should include such factors as future outcome uncertainties, information asymmetries, and the risk preferences between
firms (Weitz and Jap 1995). Given the dependency of the
manufacturer on the resellers for continued performance,
incentives that reduce future performance uncertainties
such as economic incentives tied to future performance
outcomes may be desirable. From a political economy
perspective, issues from the reseller standpoint may be of
a political and economic concern. First, from a polity
perspective, if the relations between the firms are cooperative and exhibited minimal conflict, then this might
suggest a long-term orientation between the firms.
In this scenario, given that the distributor/reseller is
the more powerful, it may suggest a highly relational and/
or economically beneficial relationship between the reseller
and the manufacturer. Managing and maintaining this
level of cooperation may suggest that the manufacturer
American Marketing Association / Winter 2006
engage the reseller upfront with their expansion plans,
perhaps through relational incentives. Previous research
suggests that a retailer’s perception of vendor credibility
is significantly related to a retailer’s long-term orientation toward the vendor (Ganesan 1994). Credibility has
been empirically associated with trust (Ganesan 1994).
Not communicating future plans with a channel member
thus would seem to attenuate the credibility of the manufacturer with the retailer. In this instance, relational
incentives in the form of communication programs may
be beneficial. Referred to as “Supplemental Contacts,”
these types of incentive may include quarterly update
meetings on the state of the company, video broadcasts to
resellers, and online customized profiles that allow resellers
to control information flow and how it is received (Gilliland
2003).
P1: When a manufacturer is dependent upon distributors
and cooperation exists between parties, relational
incentives in the form of supplemental contacts may
be positively related to future cooperation.
258
FIGURE 1
Internal PE Framework
Power/Dependence
(Asymmetric/
Symmetric)
Trust
(High/Low)
Decision-Making
(One-way/Two-way)
Incentive Governance
Economic Incentives
- High-powered
- Credible channel
policies
Relational Incentives
- Mkt development
- Suppl Contract
- End user
encouragements
In addition, proactive communication about future
plans may provide the opportunity for the exchange of
information that could alert the manufacturer to perceived economic concerns by the reseller. Within the
political economy framework this could be referred to as
the economic processes (Stern and Reve 1980). Terms of
trade, the division of labor, functions, and activities
distributed among actors are examples (p. 62) If the
distributor/reseller expresses concerns on future perceived economic losses (e.g., forgone sales opportunities), this may signal some degree of dependency to the
principal (manufacturer), thus reducing information asymmetries within the relationship. In this case, incentives
considered may include those that signal economic viability and relational stability. One example is to make
pledges to the channel in the form of continued reliance
on the reseller in the form of reseller marketing programs
designed to encourage greater future success for the
reseller. Co-marketing is another type of incentive where
the manufacturer works with the resellers to develop
customized bundled solutions that are offered exclusively
within that channel (Gilliland 2003).
P2: When a manufacturer is dependent upon distributors, cooperation exists between parties, and economic concerns are raised by distributors in response
to direct channel expansion, relational incentives, in
the form of co-marketing programs, may be positively related to future cooperation and reduced
conflict.
American Marketing Association / Winter 2006
Performance Outcome
Channel
Cooperation
Channel
Conflict
Power – Asymmetric – in Favor of the Manufacturer. When distributors are more dependent upon the
manufacturer, effective incentives a manufacturer provides may be different than as previously suggested. In
this instance, the use of non-coercive power (rewards)
may be inversely related to the power of the manufacturer
in relation to the reseller/retailer (Brown and Frazier
1978). From a transaction cost analysis perspective,
economic efficiency would guide governance decisions,
suggesting that providing incentives when they are not
needed is foolish. From the reseller/retailer perspective
however, this shift in distribution by the manufacturer
may signal concerns. In the short term the reseller may
have no immediate viable option, however future planning by the reseller – absent of any additional information
by the manufacturer, may cause exploration into other
sources of product. So in the short term, perceived cooperation may be stable – however a passive aggressive form
of opportunistic behavior may result on behalf of the
reseller. This form of opportunism may manifest itself
into behavior called “refusal to adapt,” where the initial
cost effect may be minimal, however the revenue effect for
manufacturer and reseller may decrease in the long-term
due to maladaption (Wathne and Heide 2000). If the
manufacturer has a short-term orientation toward a reseller
and expects to replace their performance with another
source, then a reseller’s “refusal to adapt”” may be fine,
thus requiring no modification in current incentive design. If the orientation of the manufacturer toward the
reseller is long-term, then relational incentives may be
259
appropriate. End-user encouragements, market development support and supplemental contact may be forms of
incentives that signal long-term, relational commitments
toward the reseller, thus inhibiting opportunistic behavior.
P3: When the manufacturer is more powerful than the
distributor and long-term cooperation is desired with
the distributor, relational incentives in the form of
end-user encouragements, market development support and supplemental contact may be positively
related to long-term cooperation between parties.
Power – Symmetric – Mutual Dependency. The
third power/dependency scenario is when there is mutual
dependency between firms. This type of dependency may
exhibit more frequent use of bilateral power between
parties. Bilateral power would suggest bilateral governance processes – approaches that rely on both parties
working together toward the achievement of shared goals
(Bello, Gilliland, and Gundlach forthcoming). Relational
incentives (e.g., mutual idiosyncratic investments signaling a long-term orientation) as well as economic incentives would be shared between the firms. Empirical
research suggests that goal congruency is positively related to idiosyncratic investments and coordination efforts
in buyer-seller relationships (Jap 1999). Both buyers and
sellers may associate improved profit performance from
the investments and coordination effort made, in addition
to a strong and significant association between goal
congruency and complementary capabilities (Jap 1999).
Effective incentives in this scenario may be long-term
oriented, taking into account the goals of the reseller.
Relational incentives may include market development
support if the retailer is trying to reach new segments, for
example. Economic incentives would be determined based
upon the risk each party has – with rewards being
distributed equitably. On a final note, supplemental contacts may be encouraged by the manufacturer to reassure
the reseller of their long-term intentions. This incentive
may discourage the moral hazards that may be associated
with information asymmetries between firms (Mishra,
Heide, and Cort 1998).
P4: When there is mutual power between the manufacturer and the distributor, the use of both relational
and economic incentives may be positively related to
cooperation and reduced conflict.
Trust
We now continue by examining the dominant sentiment of trust. Specifically how high or low trust within a
socio-political process may interact with incentive selection and its impact on cooperation and conflict outcomes.
American Marketing Association / Winter 2006
According to the political economy framework, internal sentiments and behaviors will manifest themselves
with varying degrees of cooperation and conflict. (Stern
and Reve 1980). Trust is ‘the willingness to rely on an
exchange partner in whom one has confidence’ (Moorman,
Zaltman, and Deshpande 1992 as cited by Ganesan
1994). Nevin (1995) asserts that trust is a prerequisite for
coordination and collaboration. Based upon case studies
conducted by Narayandas and Rangan (2004), trust is
asserted to precede commitment. Commitment by parties
then leads to better cooperation with regard to the execution of plans.
P5: In conditions of low trust by the manufacturer toward
the distributor, economic incentives tied directly to
distributor performance outcomes may be more appropriate than relational incentives.
Under conditions of low trust, if the manufacturer is
more dependent upon the retailer, then high-powered
incentives may beneficial if they are cost effective for the
manufacturer. Engaging in relational or long-term incentive structures may be inefficient and ineffective.
If trust is high, then relational incentives may signal
the desire for/or existence of a long-term relationship.
“Retailers trust vendors to a greater extent who are
concerned with the retailers outcomes more so than
vendors interested in just their own welfare” (Ganesan
1994, p. 3).
P6: Relational incentives (end-user encouragements that
utilize mutual goal setting) that directly support the
distributors’ objectives may evoke higher levels of
commitment, thus inducing greater cooperation, than
incentives that are only related to the manufacturer’s
goals.
Higher levels of commitment are suggested to be
positively associated with higher levels of interfirm coordination. Gilliland (2004) suggests that suppliers can
create attractive incentive programs by identifying and
designing plans that supports specific reseller needs.
Goal congruency has been positively associated with trust
(Anderson and Weitz 1989). Empirical research also
suggests that perceived idiosyncratic investments made
by a channel partner were perceived by the other partner
to be trustworthy (Ganesan 1994). Trust in a supplier
reduces conflict and enhances channel member satisfaction (Anderson and Narus 1990). Thus the following
proposition is proposed.
P7: Manufacturer incentives in the form of transaction
specific investments may enhance perceived trustworthiness, resulting in better coordination and reduced conflict outcomes.
260
If incentives (relational or economic) are designed
that take into consideration reseller goals, then higher
levels of commitment and coordination with execution
should ensue- thus reducing conflict in the process.
Economic Process
Within the Internal Political Economy framework,
internal economic processes refer to the nature of decision-making among channel constituents (Grewal and
Dharwadkar 2002). They are the internal collective choice
processes that determine the terms of trade (Stern and
Reve 1980). Participation in decision-making between
channel members is examined. Two conditions will be
discussed. The first is when the manufacturer asserts the
terms of trade. The second condition is when the manufacturer engages the distributor in a collaborative effort.
The first condition may be driven by a number of factors.
First, the manufacturer may be limited in the ability to
provide a variety of incentives due to economic limitations. Thus the offer to a downstream channel member
may be – take it or leave it (higher power position) or “this
is all I am currently capable of doing” (lower power
position). If the manufacturer’s power is higher than the
reseller’s, then the reseller may accept whatever incentive
is offered (providing it’s viable). Thus a distributor’s
level of cooperation and conflict in response to an
incentive may be moderated by the degree of goal congruency. This situation may also be associated with lower
levels of trust and commitment by the reseller toward the
manufacturer due to perceived lower credibility.
P8: Under conditions of low trust and commitment by the
reseller, economic and outcome based incentives
may be more effective in maximizing cooperation
and reducing conflict.
If the manufacturer is working with experienced
retailers, then economic incentives that address maximizing sales revenue per square foot (goal congruency)
may enhance cooperation and minimize conflict. Celly
and Frazier (1996) found that outcome based coordination efforts were positively related to distributor experience, but not related to behavioral-based efforts. Relational incentive offers may be perceived by experienced
retailers as “telling me how to run my business.” These
findings suggest the following proposition:
REFERENCES
Achrol, Ravi Singh, Torger Reve, and Louis W. Stern
(1983), “The Environment of Marketing Channel
Dyad: A Framework for Comparative Analysis,”
Journal of Marketing, 47, (Fall), 55–67.
American Marketing Association / Winter 2006
P9: Economic incentives may be more positively related
to future cooperation and reduced conflict with experienced resellers, than relational incentives.
The second scenario is when both parties are actively
engaged in the decision-making regarding terms of exchange. This situation reflects a mutual dependency/
symmetric power relationship. When trust is present,
retailers and vendors are likely to address inequities
through solutions over the long run (Ganesan 1994).
Thus the types of incentives that may be appropriate
would be customized based upon the value of added inputs
each member brings, the cost of providing those inputs,
and the importance of each. In an internal economic
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reduced perceptions of risk associated with opportunistic
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would seem to be more likely with bilateral decisionmaking, compared to authoritative approaches.
P10: Bilateral decision-making regarding the appropriate incentive structure is more positively related to
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CONCLUSION
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can determine how incentives can be used to better
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For further information contact:
Jill Mosteller
Georgia State University
35 Broad Street, Suite 1300
Atlanta, GA 30303
Phone: 770.361.8170
FAX: 404.651.4198
E-Mail: [email protected]
American Marketing Association / Winter 2006
262
ANTECEDENTS AND CONSEQUENCES OF SOCIAL INFLUENCE
STRATEGIES IN SUPPLY CHAIN MANAGEMENT
Horace L. Melton, Florida State University, Tallahassee
ABSTRACT
The study explores the antecedents and consequences
of interfirm, interpersonal social influence tactics in a
supply chain context. In the proposed model, relative
power, the type of interfirm relationship and source/
target characteristics predict the type of influence strategies used by the agent of the buyer firm on supplier firm
target employees. Political skill moderates the relationship between buyer influence tactics and influence outcomes.
conceptualization of the antecedents and consequences of
interpersonal influence in a multi-firm supply chain
environment.
This study contributes to the supply chain literature
by linking the Cox et al. (2001) power regime model to the
influence taxonomies of Kipnis, Schmidt, and Wilkinson
(1980) and Jones and Pittman (1982), and by accounting
for source and target characteristics defined by Venkatesh
et al. (1995) in the selection of influence tactics. The study
also broadens the application of the political skill construct by investigating its effect in interfirm relations.
INTRODUCTION
In supply chain exchange relationships, a buyer’s
success in negotiating with a seller is partly determined by
the buyer’s choice of influence tactics and how skillfully
those tactics are used. The purpose of this study is to
explore the effect of relative power, source, and target
characteristics, and type of interfirm relationship on the
selection of interpersonal influence tactics in an interfirm
supply chain context. Furthermore, the study investigates
the moderating effect of political skill on the relationship
between influence tactics and influence outcomes.
Prior research has focused separately on the impact
of source/target characteristics on influence tactic selection within the firm (Venkatesh, Kohli, and Zaltman
1995), how influence strategies derive from the character
of relations between firms (Boyle, Dwyer, Robicheaux,
and Simpson 1992), and how relative power of parties
affects the choice of influence tactics (Somech and DrachZahavy 2002). Also, Cox, Sanderson, and Watson (2001)
have developed an analytic framework for assessing
power relationships between firms of a supply chain
network. But no studies have simultaneously assessed the
effect of participant characteristics and type of interfirm
relationships on the selection of influence tactics in a
supply chain setting. Previous research has not examined
situational elements (i.e., relative power of participants,
nature of interfirm relationship) as well as characteristic
differences of participants as antecedents of influence
tactic selection in an interfirm setting. Persuasion in
interfirm relations frequently involves interpersonal interaction, therefore the political skill with which a manager executes an influence attempt on an individual or
group in the target firm will likely affect the outcome.
Previous research has not explored the effect of political
skill in interfirm influence attempts. The current study
addresses those gaps in the literature through a
American Marketing Association / Winter 2006
The model in Figure 1 represents the construct
relationships discussed in this paper. The following sections review the literature supporting the proposed model
relationships, discuss theoretical and managerial implications, and present opportunities for future research.
SUPPLY CHAINS
The context for this study is the supply chain. Cox
et al. (2001) define a supply chain as “the extended
network of dyadic exchange relationships that must exist
for the creation of any product or service that is supplied
to a final customer” (p. 28). Any product delivered to a
final customer starts out as raw material and passes
through multiple exchanges between buyers and suppliers wherein each exchange transforms the input and adds
some sort of value. For a manufactured product the valueadded supply chain involves firms that extract raw materials, transform materials into subcomponents, components, subassemblies and the final assembled product,
and distribute the product through various marketing
channels. The sequential transformation of materials
involves the flow of material, information and money. For
a pure service supply chain, the flow between firms
consists of information and money. Raw data is transformed by human competence (i.e., tacit knowledge or
written rules) into information of use to individuals and
organizations. Most firms and supply chains provide a
hybrid of products and services, with linkages consisting
of a series of value-adding dyadic interfirm relationships
(Cox et al. 2001).
Active coordination and management of supply chain
activity in western countries grew out of the realization
that successful Japanese auto makers managed relations
with their first-tier and other suppliers proactively and in
a collaborative manner. Since the 1980’s, supply chain
263
FIGURE 1
Antecedents and Consequences of Social Influence in Supply
Chain Management Conceptual Model
Type of
Supply Chain
Relationship
Relative
Power
Influence
Tactic
Manifest
Influence
Source
Characteristics
Political
Skill
Target
Characteristics
practices have evolved among some western firms that
involve active management of relations among firms
from the raw materials stage to end customer product and
service delivery. The key aspect of supply chain management is the replacement of arm’s length, short-term
interfirm relations with longer-term, collaborative relations that drive down cost, and cut waste and inefficiency
in the overall production process. The outcomes of innovative collaboration are lower prices and greater value for
the end customer.
Although the theoretical ideal is an integrated supply
chain management, with all firms in the chain coordinatAmerican Marketing Association / Winter 2006
ing their efficiency efforts, the reality is somewhat different. Cox (2004) acknowledges that a buying firm may
choose from several alternatives in deciding how to
source (i.e., identify) supply firms for input materials.
Different methods of sourcing can involve different types
of interfirm relations (i.e., differences in power-dependence, and level of collaboration), with consequences for
the types of influence strategies used in interpersonal
relationships across organization boundaries.
Sourcing options for buyer firms vary according to
whether the buying firm is proactive or reactive with
suppliers, and whether the buying firm just works with
264
first tier suppliers or the full supply chain (Cox 2004).
Four sourcing options are supplier selection (i.e., reactive
selection from available suppliers based on price and
function), supply chain sourcing (i.e., reactive selection
of suppliers for tiers from raw materials to end product),
supplier development (i.e., long-term, collaborative relationship with first-tier supplier, wherein the buyer sets
targets for cost and functionality) and supply chain management (i.e., proactive supplier development at all stages
from first-tier to raw material).
of relation, and promises focus on the short-term. In
contrast, information exchange is consistent with longterm coordination and solidarity, and recommendations
intended to help the target succeed demonstrate the
source’s commitment to solidarity and mutuality.
Interfirm power relationships can vary among the
different types of sourcing options and buyer-supplier
dyads. There may be buyer dominance, interdependence,
independence or supplier dominance; power relationships are affected by the share held by the buyer of the
supplier’s total market share, availability of alternatives,
switching and search costs, etc. The more powerful party
may choose to work collaboratively or at arm’s length
with the other party; power imbalance or equality will
influence whether monetary value created by the relationship is shared equally or unequally. Cox (2004) combines
the power and way-of-working dimensions into a matrix
of possible supply chain relationships consisting of (1)
adversarial arm’s length, (2) non-adversarial arm’s length,
(3) adversarial collaboration, and (4) non-adversarial
collaboration.
The current study finds similarity in the relationaldiscrete commercial exchange continuum of Boyle et al.
(1992) and the four-part categorization of supply chain
firm relations posed by Cox (2004). Clearly, nonadversarial collaborative relationships correspond to relational commercial exchange, and adversarial arm’s
length relationships correspond to discrete commercial
exchanges. Since there is no commitment to solidarity
and flexibility in the non-adversarial arm’s length relationship, that Cox (2004) category is somewhat like the
Boyle et al. (1992) discrete exchange relationship. The
adversarial collaborative relationship is consistent with
solidarity, and less so with mutuality and flexibility; but
because of the long-term orientation of the relationship,
this study places it in the relational category.
These power/way-of-working dimensions in effect
spread out along a continuum ranging from discrete to
relational. Boyle et al. (1992) hypothesized and tested the
association between inter-firm relationship structures
and influence strategies. In their empirical study Boyle
et al. (1992) found support for the hypothesis that there is
a negative association between relationalism and the
frequency of relatively coercive influence tactics and a
positive association with use of softer influence tactics.
They saw commercial exchanges as ranging from arm’s
length, short-term, discrete transactions to relational
exchanges that involve joint planning, interdependence
and a long-term orientation. For relational exchanges,
norms of behavior include solidarity (i.e., commitment to
preserving the relationship), mutuality (i.e., equity in
sharing of surpluses and burdens throughout the duration
of the relationship), and flexibility (i.e., smooth change to
policies and practices in event of unforeseen or changing
conditions). Boyle et al. (1992) reasoned that firms seeking to continue valued relationships will minimize use of
coercive influence tactics that violate those behavioral
norms. Drawing from the Frazier and Summers (1984)
taxonomy of influence strategies within distribution channels, Boyle et al. (1992) propose that relationalism is
negatively associated with use of promises, threats, legalistic pleas, and requests, while positively related to frequency of use of information exchange and recommendations. Threats and sanctions alienate the target, requests
subtly suggest sanctions, legalistic pleas suggest a breach
American Marketing Association / Winter 2006
Using a sample of automobile replacement tire deals,
Boyle et al. (1992) found support for all of hypothesized
relations, except that promises are positively associated
with relationalism.
Supported by the reasoning and empirical evidence
of Boyle et al. (1992), this study suggests that supply
chain “arm’s length” dyadic firm relations are positively
associated with coercive interpersonal influence strategies in dealings of buying firm personnel with supplier
firm personnel.
The influence strategies cited in the Boyle et al.
(1992) marketing channel study are consistent with the
social influence tactics most cited in the organizational
behavior literature. The integrated Kipnis et al. (1980)
and Jones and Pittman (1982) taxonomy of interpersonal
influence tactics include assertiveness, coalitions, exchange, ingratiation, rationality, upward appeal and selfpromotion. Kipnis and Schmidt (1985) grouped those
tactics as hard, soft and rational and Falbe and Yukl
(1992) found that the groupings varied in effectiveness.
Soft tactics rely on personal power and power sharing
(e.g., ingratiation and consultation); hard tactics rely on
authority and position power (e.g., self-promotion). Falbe
and Yukl (1992) found that use of a single soft tactic in an
influence attempt was more effective than use of a single
hard tactic, and using two soft tactics together, or a soft
tactic and rationality, was more effective than using a
single tactic or combination of hard tactics. In a supply
chain context, use of soft tactics poses less of a threat of
damaging or ending a desired, beneficial business relationship. In his discussion of the network paradigm in
marketing and the social norms of governance, Achrol
(1997) contends that the more relational an exchange
265
becomes, the less likely the exchange partners will exercise coercive power.
Consistent with the categorizations of Kipnis and
Schmidt (1985) and Falbe and Yukl (1992), this study
specifically proposes the following:
Proposition 1: Supply chain buyer firms will use
different interpersonal influence tactics depending
on power/way-of-working relationships that exist;
(a) buyer firms engaged in arms length, short term
transactions will more likely use hard tactics, based
on position power, in their dealings with supplier
firms; (b) buyer firms engaged in collaborative dyadic relationships will more likely use soft tactics and
rationality in their dealings with supplier firms.
RELATIVE POWER
Somech and Drach-Zahavy (2002) demonstrated
that supervisors’ evaluation of their own power relative to
the power of their subordinates will predict the type of
tactics supervisors will use in attempting to influence
subordinates. The current study proposes, likewise, that
the relative power between buyer and supplier firms will
be among the determinants of the type of influence tactic
an agent of a buyer firm will use to influence a target in
a supplier firm.
In their research Somech and Drach-Zachavy (2002)
examine the separate and interactive effects of agent and
target power on the supervisor’s selection of influence
strategies. Power is the “inferred potential of one person
(the agent) to cause another person (the target) to act in
accordance with the agent’s wishes” (p. 168). The French
and Raven (1959) power typology provides insight on
how power is related to interpersonal influence. Their
categorization identifies five sources of power: coercive,
reward, legitimate, expert, and referent. Coercive power
comes from the ability to punish or prevent access to
desired rewards. Reward power is based on one’s ability
to reward others for desirable behavior. Legitimate power
stems from formal authority and the rights and obligations that go with a given position. Expert power is
attributed to a source perceived to possess relevant expertise, ability, or knowledge. Referent power exists when
the target identifies with the source of influence. Power
comes from the source’s position in the organization or
social system (e.g., legitimate, coercive, and reward
power) and from personal attributes (e.g., referent and
expert power) (Yukl 1989; Somech and Drach-Zahavy
2002).
In their review of power and influence, Somech and
Drach-Zahavy (2002) cluster assertiveness, compliance,
threats, aggression, and legitimate power as “hard” influence strategies; bargaining and logic as “rational” stratAmerican Marketing Association / Winter 2006
egy; and ingratiation and other tactics aimed at willful
compliance as a “soft” strategies. Power and influence are
linked through exchange theory, in that both parties can
to an extent affect the ability of the other to achieve their
desired goal. To an extent parties to an exchange are
mutually dependent, therefore the power of both parties
should be considered when the source attempts to influence the target. Somech and Drach-Zahavy (2002) suggested that the source, in effect, considers the relative
power relationship in determining how to influence the
subordinant target, i.e., the source will consider whether
his or her ability to bring about compliance is greater or
less than the subordinate’s. Various empirical studies
have found differences in influence strategies due to
relative status of parties (i.e., peer, upward, downward),
but Somech and Drach-Zahavy (2002) found differences
in downward influence tactics based on relative power
assessments by supervisors. Specifically, their study provided support for the hypothesized effect of relative power
on influence strategy; in their sample, high-power superiors used hard strategies more with high-power subordinates than with low-power subordinates, used rational
and soft strategies more with low-power subordinates
than with high-power subordinates.
The current study proposes a similar effect of relative
power between buyer and supplier firms on the choice of
influence tactics by the agent of the buyer firm to gain
compliance by the supplier firm. Cox et al. (2001) use the
concept of power to develop a more analytical approach
to understanding the formation of supply chains. They
reason that a fully integrated supply chain will form when
there is an equitable distribution of the profits among
firms as product passes through the various tiers to the
end customer. For them, power within a supply chain is
revealed in the appropriation of value (i.e., net operating
profits) by companies participating in the supply chain.
When a buyer firm ultimately earns more profit than the
supplier in an exchange relationship, there is a buyer
dominant power relation and supplier dominance in the
reverse situation. Cox et al. (2001) argue that value and
power flow from the supplier to the buyer when buyer
dominance or buyer-supplier independence exists. In
buyer-seller independence, competition forces the supplier to offer the buyer a good price or the buyer will go
elsewhere to purchase. With buyer dominance, the buyer
has the power edge because the supplier has few other
customers to sell its product to.
The Cox et al. (2001) power regime framework
expresses power in the supply chain in the relative, not the
absolute sense. The current study contends that the type
of influence attempts by agents of the buyer firm will be
determined in part by the relative power relationship
between the buyer and targeted supplier firm. Agents of
buyers in buyer dominant or buyer-seller independence
relations (i.e., high power) will use rational and soft
266
strategies with suppliers because there is no need to
demonstrate excessive power when the supplier already
has few other options. In situations of buyer-supplier
interdependence, buyer agents may tend to use hard
strategies in order to get the desired response from
supplier targets who have equal amounts of resources and
information under their control (Somech and DrachZahavy 2002).
Proposition 2: Relative power between buyer and
supplier firms affects the choice of influence tactics
by the buyer firm agent on the supplier firm target.
Agents will use soft and rational strategies in buyer
dominant and independent relationships, and use
hard strategies in buyer-supplier interdependent relationships.
Proposition 3: Influence strategy is positively associated with the personal power base of the source of
influence in a buyer-supplier relationship.
Venkatesh et al. (1995) found that characteristics of
the target are weaker determinants of influence strategy
than are characteristics of the source. But several of their
results are relevant to analysis of buyer-supplier influence
attempts. The more cohesive the targeted decision-making group was (i.e., trust, respect, and cooperation among
group members), the less the source used coercive means
to influence the target (i.e., less use of threats and
legalistic pleas). And the larger the size of the targeted
decision-making group, the less was the use of threats by
the source to influence the group. Target group cohesiveness and size had significant effects on the source’s
selection of influence tactics.
SOURCE AND TARGET CHARACTERISTICS
Exercise of influence in a dyadic buyer-supplier
relation is affected by relative power between firms, the
structural nature of the relationship (arms-length vs.
collaborative, first tier vs. lower tier) and the personal
characteristics of the source and target participants in the
influence attempt.
Venkatesh et al. (1995) contend that there is a
relationship between source characteristics and influence
strategies. They link certain types of personal power bases
with specific influence strategies. Results of their empirical study supported their hypotheses that a significant,
positive relationship exists between (1) information power
and information exchange, (2) expert power and recommendations, (3) reinforcement power and promises and
threats, and (4) legitimate power and legalistic pleas.
Also there was a strong negative relationship between the
source’s personal referent power and use of hard tactics.
Venkatesh et al. (1995) offered several reasons for the
individual-level tie between personal power and influence tactic choice. A source of influence will more likely
use a tactic they think will be successful (i.e., a person
high in expert power will probably think a recommendation strategy will work). A source will habitually use the
influence strategy that corresponds to their base of power
(i.e., those high in referent power will tend to use requests
to influence others). And a source will use the tactic he
thinks the other party expects him to (i.e., a person with
expert power is expected to offer recommendations).
The current study proposes that the personal characteristics of the influencing party in a cross-organizational
boundary influence attempt will partially determine the
type of influence tactic used. Among the determining
personal characteristics are the source’s base of power.
The influence tactic selected will be consistent with the
source’s base of power.
American Marketing Association / Winter 2006
The Venkatesh et al. (1995) findings and theoretical
rationale suggest that target characteristics should also be
accounted for in considering the determinants of influence in supply chain interfirm relations. When the target
of influence is a decision-making group in the supplier
firm and the group is cohesive, the influence source in the
buyer firm may more likely use noncoercive strategies.
Those strategies are viewed more favorably by groups that
are cohesive and generally operate free of conflict. In
addition, Venkatesh et al. (1995) reason that socially
desirable behavior is more likely to occur in larger groups
rather than smaller groups because of the exposure to a
larger number of people. Therefore, the size of the decision-making group in the target firm will affect the
source’s choice of influence strategy. Social desirability
and large target groups may cause the buying-firm agent
to tend to use less coercive tactics with the supplier firm.
Proposition 4: Target group cohesiveness and target
group size are positively associated with the use of
noncoercive influence tactics and negatively associated with the use of coercive influence tactics by the
source in the buyer firm.
POLITICAL SKILL
Political skill is “the ability to effectively understand
others at work, and to use such knowledge to influence
others to act in ways that enhance one’s personal and/or
organizational objectives” (Ahearn, Ferris, Hochwarter,
Douglas, and Ammeter 2004, p. 311). Politically skilled
organization members effectively read social situations,
know which behaviors and influence tactics are most
effective in response, know how to present their response
in a sincere manner that disguises possible manipulative
intent, and generally succeed in their influence attempt.
Political skill deals with the ability to use an influence
tactic in an effective way, to get the desired result. It deals
267
with the “how to” of influence, rather than the content of
what tactic to use.
The current study proposes that political skill will
affect the strength of the relationship between influence
tactic and influence outcome in a buyer-supplier firm
supply chain context. Venkatesh et al. (1995) defined
effectiveness of an influence strategy as “the extent of
manifested influence in a target due to the use of the
influence strategy” (p. 76). Manifest influence is a change
in decision-related behavior and/or opinion by the target
as a result of the source’s influence attempt. As an
example, an agent of a buyer firm in a collaborative,
independent buyer-seller relationship may use recommendation and information sharing as influence tactics in
an attempt to persuade a supplier firm to customize a
product or dedicate physical or labor assets to the relationship (i.e., asset specificity). The supplier decision to
comply is evidence of manifest influence, and the likelihood of that response is affected by the degree of skill with
which the buyer agent exercises the influence tactics.
Thus it seems reasonable that political skill will strengthen
or weaken the relationship between influence strategy
and manifest influence.
Proposition 5: Political skill moderates the relation
between influence strategy and manifest influence.
The positive relation between influence strategy and
manifest influence is stronger for high levels of
political skill than for low levels.
CONCLUSION
The purpose of the study was to conceptualize antecedent and consequent relationships for influence tactics
applied in a marketing supply chain context. The study
developed a model describing determinants and effects of
influence in supply chains. Model formation was informed by prior empirical and conceptual research on
intrafirm and interfirm influence strategy and a conceptual framework of power relationships in supply chains.
In the proposed model, source/target characteristics, type
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American Marketing Association / Winter 2006
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The study contributes to the supply chain literature,
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Jones, E. and T. Pittman (1982), “Toward a General
Theory of Strategic Self Presentation,” in Psychological Perspectives on the Self, J. Suls, ed. Hillsdale,
NJ: Lawrence Erlbaum, 231–62.
Kipnis, David, Stuart M. Schmidt, and Ian Wilkinson
(1980), “Intra-Organizational Influence Tactics: Exploration in Getting One’s Way,” Journal of Applied
Psychology, 65 (4), 440–52.
____________ and ____________ (1985), “The Language of Persuasion,” Psychology Today, 19 (April),
40–46.
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Power and Influence Strategy: The Effects of Agent/
Target Organizational Power on Superiors’ Choices
of Influence Strategies,” Journal of Organizational
Behavior, 23, 167–79.
Venkatesh, R., Ajay K. Kohli, and Gerald Zaltman
(1995), “Influence Strategies in Buying Centers,”
Journal of Marketing, 59 (4), 71–82.
Yukl, Gary A. (1989), Leadership in Organizations.
Englewood Cliffs, NJ : Prentice-Hall.
For further information contact:
Horace L. Melton
Florida State University
Tallahassee, FL 32306
Phone: 850.644.4417
E-Mail: [email protected]
American Marketing Association / Winter 2006
269
PRICING OF MALL SERVICES WHEN TRANSACTIONS CAN END
OUTSIDE THE MALL
Hong Yuan, University of Illinois at Urbana–Champaign, Champaign
Aradhna Krishna, University of Michigan, Ann Arbor
SUMMARY
Shopping centers or “malls” charge rent to tenant
stores for operating in the mall. Rents are usually set
along two dimensions a fixed monthly rent and a percentage overage based on the store’s sales revenue. Similar
pricing models are being used by Internet malls, which
host on-line stores and charge fixed monthly fees and/or
revenue share fees based on sales revenue generated
through the malls.
Problems with percentage rent based on sales revenue generated through the mall arise when purchases
originating within the mall are made outside it. This
phenomenon which exists in both the physical and Internet
mall contexts is called Percentage Rent Leakage by
practitioners. In the physical mall context, it refers to
catalog purchases made by consumers at the leased premises or from home, after examining the physical products in the stores. These sales are not subject to overage
since they are finalized outside the mall through catalog
orders. Ever since stores began distributing catalogs,
fights about percentage rent have occurred between mall
owners and tenants. However, the phenomenon is more in
the limelight recently as the list of traditional shopping
mall stores selling merchandise through websites has
grown. When consumers choose to buy from a store’s
website after examining the product in the leased premises, or when consumers choose in-store pickups for
their on-line orders, the transactions take place outside
the mall. Therefore, the mall cannot include them in gross
sales of stores (as defined in a typical retail lease) when
calculating percentage rents even though both types of
sales are facilitated by the mall. These are serious issues
that will become even more important as Internet commerce expands and Internet revenues constitute a significant proportion of the tenant store’s total sales. The fact
that stores allow in-store returns of on-line purchases
adds another layer of complication. To save time and
postage, some consumers are returning their Internetbought merchandise to physical stores. The in-store returns of Internet sales made outside the mall is a serious
problem because the original sales were not recorded, but
these returns are not differentiated from store-bought
returns and are counted as credits against a store’s sales
for calculating percentage rent. As a result, shopping
malls are increasingly becoming the return centers for
American Marketing Association / Winter 2006
Internet-bought merchandise and thousands of dollars
are being taken from mall owners’ pockets.
A major concern of mall landlords, therefore, is the
fine-tuning of the definition of gross sales so that sales
facilitated by the mall but made outside it may be included. The traditional concept of percentage rents, and
certainly the method of determining gross sales, need to
be re-examined, modified, and updated to meet this
challenge. However, the problem for the mall is one of
tracking and policing these catalog and Internet orders, a
non-trivial task given that stores wish to find ways of
defying such tracking to occur.
While the physical malls are still struggling with
expanding percentage rent clauses, Internet malls which
host on-line stores already have a device in place to track
sales leakage. Specifically, the leakage of the percentage
rent in the Internet mall context refers to the purchases
consumers make directly from the on-line store’s website,
or through third-party referrals after visiting the Internet
mall’s website. By using cookies, Internet malls, such as
Yahoo!Shopping, are able to track these sales and charge
a revenue share fee based on a broader notion of gross
sales, an All-Revenue-Share Fee. While not a perfect
tracking mechanism, Yahoo!Shopping switched from a
Fixed Fee model to this All-Revenue-Share Fee model in
October 2001.
This paper studies the broader-based All-RevenueShare Fee (ARSF) model, compares it with the commonly
used Fixed Fee (FF) model, and provides insights into
when a shopping mall should use an ARSF model, a FF
model, or a linear combination of the two. We contribute
to the theoretical literature on pricing strategies of shopping malls by endogenizing the stores’ joining decisions
and show the effect of that on the mall’s optimal pricing
strategies. Our analysis indicates that a non-discriminating pricing mechanism (i.e., a FF model) can actually be
more profitable for the mall than a discriminating pricing
mechanism (i.e., an ARSF) when we allow the stores to
opt out. Moreover, we add to the price discrimination
literature by proposing that, to achieve a higher profit, a
mall can price discriminate across different product categories not only by using different amounts of fees, but
also by using different fee structures, i.e., fixed fees in
some product categories and revenue share fees in others.
270
Our results offer many managerial implications on how to
price mall services across product categories and over
time. We also provide an explanation for why Yahoo
switched from a FF to an ARSF model. References
available upon request.
For further information contact:
Hong Yuan
University of Illinois, Urbana–Champaign
454 WH, 1206 South Sixth Street
Champaign, IL 61820
Phone: 217.333.5255
FAX: 217.244.7969
E-Mail: [email protected]
American Marketing Association / Winter 2006
271
A VALUE-BASED PRICING PERSPECTIVE ON VALUE
COMMUNICATION
Gerald E. Smith, Boston College, Chestnut Hill
Thomas T. Nagle, Strategic Pricing Group, Waltham
SUMMARY
In a recent article Mizik and Jacobson (2003) distinguish between two key value-related activities firms
engage in: value creation and value appropriation. Value
creation includes activities your firm engages in to create
value for the customer, especially new product innovation. Value appropriation includes activities that your
firm engages in to capture back some of the value created – for example using price. For the past several
decades value-based pricing has represented the essence
of this view of creating value for customers, and then
capturing back some of the value that is created. Valuebased pricing focuses on the worth of the savings, gains,
and benefits customers realize as a result of using the
product or service (Nagle and Hogan forthcoming; Forbis
and Mehta 1981).
A common myth underlying much customer research for pricing is that customers know the value of
what they buy, which they will reveal if asked in the right
way. However, it is likely that customers will not be well
informed about the value of items they buy unless the
seller proactively educates and communicates value to
them.
In this paper we present a framework that suggests
how to effectively communicate value to customers. We
come at this topic from a pricing and value appropriation
perspective, rather than from a traditional marketing
communication perspective. Researchers have built an
extensive base of communication theory, empirical evidence, and measures of attitudinal processes and effects –
awareness, knowledge, preference, beliefs, attitudes, and
behaviors (see Rossiter and Percy 1997 for a summary).
But value-based pricing considers value communication
from the opposite direction: By translating customer
benefits into monetary value and communicating these
savings and gains to customers, value-based pricing
facilitates customer decision judgments of whether the
price they pay is worth the value they receive.
The framework we propose suggests that the effectiveness of value communication will depend two factors:
The relative cost of search is the cost (financial and nonfinancial) for a customer to determine the features and
performance differences across brands relative to that
American Marketing Association / Winter 2006
customer’s expenditure in the category (Stigler 1961;
Nelson 1970). In addition to the relative cost of search, the
choice of an appropriate value communication tactic also
depends on the type of benefits buyers seek from the
purchase. Many purchases are motivated primarily by
economic benefits, such as reduced cost, a better return on
investment, increased productivity, or fewer breakdowns
that translate readily into gains or savings of time or
money. For other purchases, especially consumer products, buyers are less often motivated by economic benefits
than by psychological benefits such as comfort, appearance, pleasure, status, health, or personal fulfillment.
These two dimensions lead to a typology of four
contexts in which buyers evaluate value, each requiring a
distinct value communication strategy that is likely to be
effective in helping buyers understand and process value
information content. The four contexts and strategies are:
Strategy 1: Economic Value Communication – When
it is relatively easy to judge differences in brands
prior to purchase, and the benefits that buyers seek
are primarily economic, the most effective value
communication strategy is to communicate differential economic value quantitatively.
Strategy 2: Economic Value Assurance – When the
cost to ascertain the differences among brands exceeds the benefits for a target segment an economic
value assurance strategy involving testimonials from
credible experts, opinion leader endorsements from
known and trusted sources – may be more effective.
Strategy 3: Psychological End-Benefit Framing –
When customers are motivated by psychological
benefits, and when the relative cost of search is low,
end-benefit framing is effective, by associating an
important end benefit with your product’s differentiation.
Strategy 4: Psychological End-Benefit Assurance –
When the benefits are psychological and, therefore,
subjective while the differences among brands are
difficult for customers to ascertain, the most effective
strategy is end-benefit assurance by encouraging
trial, or using opinion leader endorsements and
related strategies. References available upon request.
272
For further information contact:
Gerald E. Smith
Department of Marketing
Boston College
Fulton 450
Chestnut Hill, MA 01741
Phone: 617.552.0427
FAX: 617.552.6677
E-Mail: [email protected]
American Marketing Association / Winter 2006
273
CITY-OF-ORIGIN EFFECTS IN THE GERMAN BEER MARKET:
TRANSFERRING AN INTERNATIONAL CONSTRUCT
TO A LOCAL CONTEXT
Patrick Lentz, University of Dortmund, Dortmund, Germany
Hartmut H. Holzmüller, University of Dortmund, Germany
Florian von Wangenheim, University of Dortmund, Germany
Ample research shows that the geographic origin,
i.e., the place of production of goods, exerts a complex
influence on consumer behavior (Askegaard and Ger
1998; Papadopoulos and Heslop 1993). This effect has
been demonstrated empirically on a national, that is,
country level (Baughn and Yaprak 1993; Bilkey and Nes
1982; Johansson 1989; Johansson, Ronkainen, and
Czinkota 1994; Johansson, Ronkainen, and Czinkota
1994; Lampert and Jaffe 1996). Research also exists that
focuses on effects stemming from the regional origin of
products (van Ittersum, Candel, and Meulenberg 2003).
Surprisingly, however, no efforts were taken to investigate the importance of city-of-origin effects on product
preference. In other words, we know very little about the
role of emotional attachment, knowledge about and identification of inhabitants of cities regarding their preferences for locally produced products; an issue which seems
to be of large importance (Kaynak and Kara 2002;
Paswan and Sharma 2004).
Nes 1982; Han 1989) focuses on the impact of a product’s
country of origin on making inferences about or evaluating foreign products, the other stream (e.g., Shimp and
Sharma 1987; Nijssen and Douglas 2004) investigates
factors that might influence consumers’ attitudes towards
“foreign” products as well as possible effects on repurchase intentions and corresponding behaviors. However,
research in both streams has until now only been related
to larger geographical/political entities. Drawing from
Papadopoulos (1993), further geographical units appear
plausible and need to be taken into consideration, e.g.,
regions, cities, or even neighborhoods. These smaller
units may lead to an increased level of information
diagnosticity, since the geographical focus is much more
narrow as when focusing on countries. Looking at the
theoretical concepts that evolved in country of origin
research, namely halo and summary effects in the product
evaluation process and ethnocentrism/animosity aspects
in product evaluation, they seem suited to be used in
analogy within research targeted to the influence of
smaller geographical/political units.
Approaches to Country of Origin
Empirical Study
Drawing from previous literature on consumers’
attitudes and preferences towards “foreign” products, two
main research streams can be identified. While one
stream (e.g., Papadopoulos and Heslop 2003; Bilkey and
Based on the literature review and two exploratory
qualitative studies, we developed a theoretical model to
explain preferences for products produced in the city of
residence, which can be found in Figure 1.
SUMMARY
FIGURE 1
Proposed Research Model
Attitude
towards city
of residence
Attitude
towards
Buy Local
+
+
Attitude
towards local
products
Knowledge
of product
origin
American Marketing Association / Winter 2006
+
Preference
for local
products
-
274
To empirically test our model, we adapted scales
from existing research (e.g., Papadopoulos et al. 1989;
Shimp and Sharma 1987; Tse and Gorn 1993) and
collected data from 316 participants in the Ruhr-Rhine
area, using a standardized questionnaire in combination
with personal interviews. Overall, our measurement instruments evidenced acceptable level of reliability (Alpha
between .64 and .94) and validity (AVE between .58 and
.69). A confirmatory factor analysis shows acceptable fit
of the model to the data (χ² = 531.58 (d.f. = 287), NFI =
.881, NNFI = .933, CFI = .941, RMSEA = .049, sRMR =
.069) as well as discriminant validity, using the FornellLarcker criterion (Anderson and Gerbing 1988; Fornell
and Larcker 1983).
Overall, we obtain strong support for our hypotheses,
as they are all supported by the data. In detail, we find that
both attitude towards buying local products and attitude
towards the city of residence exert significant and positive
effects on the consumer’s attitude towards local products,
with estimated standardized path coefficients of .12 (p <
.05) and .20 (p < .01), respectively. Furthermore, while
customers’ level of knowledge about local product origin,
as expected, exerts a negative effect on customers’ preference for products with local origin (-.13, p < .05),
attitude towards local products dominantly and positively
affects customers’ preference for locally produced products, with a large path coefficient of .81 (p < .001).
Discussion and Conclusion
Our exploratory research demonstrates in accord
with and in analogy to prior research on a product’s
country of origin the relevance of the label “made in city
X” for buying intentions and product preferences. Our
results suggest that the concept of city of origin may, at
least for some product categories, be an important determinant for understanding consumer behavior. The concept may also help understand why some products or
service providers are more successful in some part of a
country, but not in others. Further research could try to
disentangle the meaning of local traditions for customers,
and when they become influential for consumer behavior.
Managers of firms in markets similar to the German beer
market should be using their competitive advantage and
market the “locality” as a central feature of their products.
In contrast, conglomerates that purchase local brands
should retain the original name of the brands to become
successful. References available upon request.
For further information contact:
Patrick Lentz
Department of Marketing
University of Dortmund
D–44221 Dortmund
Germany
Phone: +49.231.755.3277
FAX: +49.231.755.3271
E-Mail: [email protected]
American Marketing Association / Winter 2006
275
AN EXPLORATORY INVESTIGATION INTO THE “ASIAN WAY” OF
UNDERTAKING ENTREPRENEURIAL MARKETING
PRACTICES IN THE U.K.
Shiv Chaudhry, University of Central England, United Kingdom
Dave Crick, University of Central England, United Kingdom
SUMMARY
This paper reports on an investigation into the entrepreneurial marketing practices of Asian-owned firms
(originating from the Indian sub-continent) in the U.K. It
follows recent suggestions from politicians and the media
that an “Asian Way” exists in undertaking business;
indeed, some have argued that this goes some way to
explain why some Asian-owned firms are succeeding
where others, typically owned by the indigenous white
population, have failed. A review of the literature indicated that no agreement existed on defining the “Asian
Way” and subsequent findings from this qualitative study
suggest that in practice this is more appropriate to micro
businesses rather than those of a larger scale. Opportunities may exist for new immigrant communities, but in a
different way to that experienced by Asians that accounts
for their respective cultural experiences and practices.
Results indicate that this is a social phenomenon and with
more integration of communities over time, the issue of
culture is likely to become less important within immigrant groups.
Introduction
The research question addressed in this study is to
establish if lessons can be learnt from the Asian
community’s marketing practices in the U.K. in order to
act as potential educational role models to encourage
entrepreneurial activities in new immigrant groups? The
term “Asian Way” has been used by numerous people in
the U.K. ranging from politicians through to elements of
the media; indeed, television programmes have been
aired featuring entrepreneurial practices, primarily marketing related, labeled as an “Asian Way” of undertaking
business. This is an important consideration given that by
using the term, there is a suggestion of a fairly widespread
belief that there is something different and perhaps
special about the “Asian Way” of undertaking business
activities. The marketing practices of the Asian community in the U.K. have been viewed as positive due to their
entrepreneurial nature vis-à-vis certain other community
groups and their economic contribution to the economy.
Instead of being perceived as a “disadvantaged group,”
the Asian community can be shown, in some cases, as
acting as entrepreneurial role models for other immigrant
communities.
A question must then be raised about the use of the
term “Asian Way,” for example, do the Asian communities, politicians, media (the latter that may be dominated
by staff that are not Asian) etc, perceive the term to mean
something different? An alternative way of considering
the issue may be by asking the question – is the term
“Asian Way” a state of mind/attitude and/or a type of
behavior/entrepreneurial practice? It is this broad consideration that forms the basis of this study. While this
presents a conceptual and methodological challenge in
this study, it also offers an opportunity in taking the
debate further; principally in the U.K. but also internationally given the multi-cultural basis of many countries.
Specifically, an opportunity is available to offer a first step
towards operationalizing the term “Asian Way” and to
provide exploratory data in terms of how a relatively
small sample of entrepreneurs and advisers view business
practice in this respect. Furthermore, as a result of macro
environmental changes in the U.K., whether the practices
associated with first generation Asians are still evident in
the operations of second and third generation Asians.
References available upon request.
For further information contact:
Dave Crick
Business School
University of Central England
Perry Barr
Birmingham B42 2SU
United Kingdom
Phone: 44.121.3316768
FAX: 44.121.3316366
E-Mail: [email protected]
American Marketing Association / Winter 2006
276
AUTHOR INDEX
Alexandrov, Aliosha
Amos, Clinton
Anderson, Justin
Ashill, Nicholas J.
Autry, Chad W.
Baldauf, Artur
Bartikowski, Boris
Basil, Debra Z.
Basil, Michael D.
Bates, Kenneth W.
Bauer, Hans H.
Bayón, Tomás
Beatty, Sharon E.
Bechwati, Nada Nasr
Bellenger, Danny N.
Beverland, Michael B.
Blankson, Charles
Boedecker, Karl A.
Boller, Greg
Bourassa, Maureen
Boyd, D. Eric
Bruning, Edward R.
Burton, Scot
Bush, Alan
Cai, Jane Zhen
Calantone, Roger
Cannon, Hugh M.
Carrillat, François A.
Cavusgil, S. Tamer
Chang, Lu-Hsin
Chaudhry, Shiv
Chaudhuri, Arjun
Chen, Cuiping
Chen, Qimei
Childers, Terry L.
Chowdhury, Tilottama G.
Coulter, Robin A.
Cox, Amy E.
Cravens, David W.
Crick, Dave
Cron, William L.
Cunha, Jr., Marcus
Cunningham, Peggy
Danielova, Anna
Danneels, Erwin
Deeter-Schmelz, Dawn
Deshpande, Sameer
Dilts, David M.
Dong, Beibei
Donthu, Naveen
Drengner, Jan
Dubelaar, Chris
Edmondson, Diane
Elmadag, Ayse Banu
9
204
73
99
40
42
5
89, 124
89, 124
87
226
118
46
107
105
189
114
173
101
184
154
3
87
9
120
112
1
212
52, 67
193
276
195
61
69
168
109, 191
191
245
42
276
42
154
184
54
210
13
89
254
30
105
7
160
212
103
American Marketing Association / Winter 2006
Evans, Kenneth R.
Evanschitzky, Heiner
Finn, Adam
Floh, Arne
George, Morris
Godfrey, Andrea L.
Gomez, Marco
Gonzalez-Padron, Tracy
Greenberg, Barnett A.
Grewal, Dhruv
Griffin, Abbie
Griffith, David
Haas, Sarah
Haber, Tobias E.
Hao, Andrew W.
Hill, Donna J.
Hirunyawipada, Tanawat
Holden, Mary T.
Hollmann, Thomas
Holloway, Betsy B.
Holzmüller, Hartmut H.
Homburg, Christian
Hu, Michael Y.
Huggins, Kyle A.
Hughes, Mathew
Hughes, Paul
Ishida, Chiharu
Jayanti, Rama
Johnson, Joshua H.
Jones, Joseph M.
Jones, William J.
Kashyap, Rajiv
Kasulis, Jack J.
Kaufman-Scarborough, Carol
Kawakami, Tomoko
Keeney, Kathy
Keith, Janet E.
Kennedy, Aileen
Kilbourne, William
Kilburn, Ashley
Kim, Young “Sally”
Kirca, Ahmet H.
Klarmann, Martin
Krishna, Aradhna
Kuester, Sabine
Kukar-Kinney, Monika
Kumar, V.
Ladik, Daniel M.
Lee, Nick
Lee, Ruby P.
Lemon, Katherine N.
Lentz, Patrick
Leone, Robert P.
Leschnikowski, Katja
30
63, 216
21
186
142
116
5
171
234
32, 116, 224
132, 232
112
241
226
3
40
130
25
59
46
147, 274
55
3
87
57
57
15
11
254
243
168
91
173
168
247
48
15
48
169
101
34
111
206
270
55
36
44, 81, 142, 152, 214
212
57
69
103
85, 147, 274
81
7
277
Levin, Michael A.
Li, Fuan
Ligas, Mark
Lucky, Jr., William D.
Lueers, Thomas
Luo, Man (Anita)
Luo, Xueming
Mäder, Ralf
Maloney, Matt
McCardle, Mike
McDonald, Robert E.
McNally, Regina C.
Melton, Horace L.
Moberg, Christopher
Monroe, Kent B.
Morgan, Felicia
Morgan, Fred W.
Morgan, Robert E.
Mosteller, Jill
Myers, Susan D.
Myhr, Niklas
Nagao, Kaori
Nagle, Thomas T.
Nakata, Cheryl
Neumann, Marcus M.
Nguyen, Hieu P.
Noci, Giuliano
O’Brien, Matthew
O’Loughlin, Deirdre
O’Toole, Thomas
Osmonbekov, Talai
Parameswaran, Ravi
Pentina, Iryna
Petersen, J. Andrew
Pickett, Greg
Plassmann, Hilke
Pozza, Ilaria Dalla
Price, Raymond L.
Priluck, Randi
Rajamma, Rajasree K.
Ramani, Girish
Ratneshwar, S.
Rawwas, Mohammed Y.A.
Ridgway, Nancy M.
Rodriguez, Alexandra Aguirre
Roggeveen, Anne
Sääksjärvi, Maria
Samiee, Saeed
175
91
195
234
55
152
146
226
132
208
175
232
263
13
36
13
71, 173
57
256
9
158
71
272
224
226
150
144
40, 61
177
25
105
222
122
81
169
63
144
132
241
38
44
109
23
36, 124
75
32
218
218
American Marketing Association / Winter 2006
Sauermann, Christine
Schweizer, Markus
Seggie, Steven H.
Seiders, Kathleen
Sen, Sandipan
Sethi, Rajesh
Shah, Denish
Shi, Tiebing
Sim, Edward W.
Singh, Jagdip
Singh, Nitish
Sivakumar, K.
Smith, Gerald E.
Smith-Mitchell, Esther
Stock, Ruth Maria
Stoltman, Jeffrey J.
Szmigin, Isabelle
Talay, Mehmet Berk
Thieme, Jeff
Thota, Sweta Chaturvedi
Till, Brian D.
Townsend, Janell D.
Tsiros, Michael
Vargo, Stephen L.
Venkatesan, Rajkumar
Vincent, Leslie H.
Vojak, Bruce A.
von Wangenheim, Florian
Voss, Glenn B.
Walsh, Gianfranco
Wang, Liz C.
Wang, Qiong
Wei, Yujie
White, J. Chris
Wiedmann, Klaus-Peter
Wiles, Michael A.
Wong, King-Yin
Wübben, Markus
Xia, Lan
Xu, Shichun
Yalcinkaya, Goksel
Yaprak, Attila
Yeniyurt, Sengun
Yuan, Hong
Zhou, Kevin Zheng
Zhu, Zhen
Zou, Shaoming
147
7
52, 67, 99
116
9
210
214
28
132
11
5
224
272
160
206
173
177
19, 52, 67
101
202
241
222
32
71
214
128
132
83, 85, 118, 216, 274
116
46
193
156
220
208
17
54
126
83
107
50
112
1
222
270
65
224
30
278

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