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2005 AMA Winter Educators’ Conference Marketing Theory and Applications Editors Kathleen Seiders, Boston College Glenn B. Voss, North Carolina State University Track Chairs Jeff Inman, University of Pittsburgh Cheryl Nakata, University of Illinois at Chicago K. Sivakumar, Lehigh University Paul Bloom, University of North Carolina, Chapel Hill Steve Hoeffler, University of North Carolina, Chapel Hill Ronald C. Goodstein, Georgetown University Brian Wansink, University of Illinois David Henard, North Carolina State University Mitzi Montoya-Weiss, North Carolina State University Sandy Jap, Emory University Rick Andrews, Louisiana State University Danny Weathers, Louisiana State University Peter Golder, New York University Mike Ahearne, University of Connecticut Eli Jones, University of Houston Jagdip Singh, Case Western Reserve University Deepak Sirdeshmukh, North Carolina State University Linda Ferrell, University of Wyoming O.C. Ferrell, Colorado State University Rebecca Slotegraaf, Indiana University Rosann Spiro, Indiana University Volume 16 311 S. Wacker Drive • Chicago, Illinois 60606 • (312) 542 - 9000 © Copyright 2005, American Marketing Association Printed in the United States of America Publications Director: Francesca Van Gorp Cooley Project Coordinator: Charles Chandler Cover Design: Jeanne Nemcek Typesetter: Marie Steinhoff ISSN: 1054-0806 ISBN: 0-87757-314-X 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 Acknowledgements The theme for the 2005 Winter Marketing Educators’ Conference is “Understanding Diverse and Emerging Markets, Technologies, and Strategies.” The multicultural marketplace is the new mainstream and sophisticated marketing technologies provide a better understanding of buyer behavior and the ability to reach diverse segments more efficiently. This year’s conference includes a variety of innovative special sessions presenting key thought leaders and paper sessions addressing research themes that are critical to marketing scholars and educators. Many dedicated individuals contributed to this conference. In particular, we acknowledge the outstanding work of the Conference Track Chairs, whose stellar performances produced a truly distinguished program. Reinforcing the role of the Winter Educator’s Conference as a premier research conference, the Track Chairs worked to shape high-level special sessions and maintained a lofty bar for competitive paper sessions. The Conference Track Chairs are as follows: Consumer Behavior Global Marketing: Marketing and Society Brand Marketing and Communications Marketing, Technology, and Innovations Inter-Organizational Issues Marketing Research Marketing Strategy Selling and Sales Management Services & Relationship Marketing Instructional Innovations Special Interest Group Jeff Inman, University of Pittsburgh Cheryl Nakata, University of Illinois – Chicago K. Sivakumar, Lehigh University Paul Bloom, University of North Carolina – Chapel Hill Steve Hoeffler. University of North Carolina – Chapel Hill Ronald C. Goodstein, Georgetown University Brian Wansink, University of Illinois – Urbana-Champaign David Henard, North Carolina State University Mitzi Montoya-Weiss, North Carolina State University Sandy Jap, Emory University Rick Andrews, Louisiana State University Danny Weathers, Louisiana State University Peter Golder, New York University Mike Ahearne, University of Houston Eli Jones, University of Houston Jagdip Singh, Case Western Reserve University Deepak Sirdeshmukh, North Carolina State University Linda Ferrell, University of Wyoming O.C. Ferrell, Colorado State University Rebecca Slotegraaf, Indiana University Rosann Spiro, Indiana University The program reflects the important contributions of the conference reviewers (listed on pp. iv-vii). All those who submitted papers and special session proposals are to be thanked, as are members of the Academic Council and AMA journal editors whose leadership in creating the featured Conference Special Sessions was instrumental. We are exceedingly grateful to Denise Smart, AMA Academic Council President, for her advice and support throughout the conference planning process. Also, we acknowledge the significant implementation efforts of the AMA staff: Nicole Morris, our Program Manager; Charles Chandler; Francesca Van Gorp Cooley; and Pat Goodrich. Thanks also to Marie Steinhoff for typesetting the proceedings. With deep appreciation, we thank all contributors for making this a conference that is worthy of our field. Kathleen Seiders Boston College Glenn B. Voss North Carolina State University iii 2005 AMA Winter Educators’ Conference List of Reviewers A Manoj Agarwal, Binghamton University Sanjeev Agarwal, Iowa State University Shanita Akintonde, Columbia College Joe Alba, University of Florida Terri Albert, University of Hartford Dana Alden, University of Hawaii Alan Andreasen, Georgetown University Kersi Antia, University of Western Ontario John Antil, University of Delaware Syed Anwar, Western Texas A&M University Neeraj Arora, University of Wisconsin Zeynep Arsel, University of Wisconsin Kwaku Atuahene-Gima, City University (Hong Kong) Craig Atwater, Temple University Anne-Francoise Audrain, Rouen School of Management Jon Austin, Cedarville University Catherine Axinn, Ohio University B Julie A. Baker, University of Texas – Arlington Sridhar Balasubramanian, University of North Carolina Soumava Bandyopadhyay, Lamar University Yeqing Bao, University of Alabama Fleura Bardhi, University of Nebraska – Lincoln Michael Basil, University of Lethbridge Boris Becker, Oregon State University Joseph Bellizzi, Arizona State University West Neeraj Bharadwaj, University of Texas Sundar Bharadwaj, Emory University Mary J. Bitner, Arizona State University Carolyn Bonifield, University of Vermont Greg Bonner, Villanova University Doug Bowman, Emory University Kevin Bradford, University of Notre Dame Michael Brady, Florida State University Steve Brown, University of Houston Tom Brown, Oklahoma State University Eileen L. Bridges, Kent State University Nancy Buchan, University of Wisconsin – Madison Margo Buchanan-Oliver, University of Auckland Cheryl Buff, Siena College Al Burns, Louisiana State University Jim Burroughs, University of Virginia Ronald Bush, University of West Florida C Susan Cadwallader, Texas A&M University Richard Caldarola, American Intercontinental University Meg Campbell, University of Colorado Les Carlson, Clemson University Forrest Carter, Michigan State University Goutam Challagalla, Georgia Institute of Technology Fiona Chan, University of Hong Kong Rajesh Chandy, University of Minnesota Joseph Chang, University of Regina Amar Cheema, Washington University John Cherry, Southeast Missouri State University Lawrence B. Chonko, Baylor University iv Bruce Clark, Northeastern University Lucette B. Comer, Purdue University Robert Cosenza, University of Mississippi Nicole E. Coviello, University of Auckland Bill Cron, Texas Christian University Lawrence Cunningham, University of Colorado – Denver Kerry P. Curtis, Golden Gate University D Peter Dacin, Queens University Kofi Dadzie, Georgia State University Robert Dahlstrom, University of Kentucky Rajiv Dant, Clarkson University Prakash Das, Queen’s University Kirk Davidson, Mount St. Mary’s College Marion Debruyne, Emory University David Dekker, University of Nijmegen Benedict Dellaert, Universiteit Maastricht Carol Demoranville, Northern Illinois University Kalpesh Desai, University of Buffalo Sameer Deshpande, University of Lethbridge Andrea Dixon, University of Cincinatti Susan Douglas, New York University Kent Drummond, University of Wyoming Sean Dwyer, Louisiana Tech E Ike Ekeledo, Northeastern Illinois University Anita Elberse, Harvard University Reham Eltantawy, Florida State University Sunil Erevelles, University of North Carolina – Charlotte Sevgin Eroglu, Georgia State University F Lawrence Feick, University of Pittsburgh Reto Felix, University of Monterrey Karen Fernandez, University of Auckland Rosie Ferraro, Duke University Linda Ferrell, University of Wyoming Leslie Fine, Ohio State University Bob Fisher, Western Ontario Carlos Flavian, Universidad de Zaragoza Thomas Foscht, University of Graz Ellen Foxman, Bentley College Dan Freeman, University of Delaware Frank Fu, University of Houston G Larry Garber, Appalachian State University Nitika Garg, University of Mississippi Mrinal Ghosh, University of Michigan Joan Giese, Washington State University Mary Gilly, University of California – Irvine Charlotte Greig, Golden Gate University Andy Grein, City University of New York Raj Grewal, Penn State University Stephen J. Grove, Clemson University Julie Guidry, Texas A&M University H John Hadjimarcou, University of Texas – El Paso Som Hanvanich, Xavier University Angela Hausman, University of Texas – Pan American Xin He, University of Pittsburgh Tim Heath, Miami University Geraldine R. Henderson, University of Texas – Austin Neil Herndon, University of Missouri – Columbia Louise Heslop, Carleton University Janet Hoek, Massey University Susan Hogan, Emory University Hartmut Holzmueller, University of Dortmund Lee Kam Hon, Chinese University of Hong Kong Heather Honea, San Diego State Mark Houston, University of Missouri Carol Howard, Oklahoma City University Frederick Hoyt, Illinois Wesleyan University Yili Huang, University of Illinois – Chicago John Hulland, University of Pittsburgh Mike Hutt, Arizona State University Bruce Hutton, University of Denver Michael Hyman, New Mexico State University I Subin Im, San Francisco State University Scott Inks, Ball State University Koert van Ittersum, Georgia Institute of Technology Vish Iyer, University of Northern Colorado J Cheryl Jarvis, Arizona State University Rama Jayanti, Cleveland State University Devon Johnson, Northeastern University Chris Joiner, George Mason University Marilyn Jones, Bond University K Rajiv Kashyap, William Peterson University v Harold Kassarjian, University of California – Los Angeles Carol Kaufman-Scarborough, Rutgers University Patrick Kaufmann, Boston University Erdener Kaynak, Penn State University Jeremy Kees, University of Arkansas Stephen Keysuk Kim, Oregon State University Adwait Khare, University of Houston Jaehwan Kim, University of Colorado Noreen Klein, Virginia Tech University Thomas Klein, University of Toledo Yu Jun Koernig, University of Illinois – Chicago Praveen Kopalle, Dartmouth College Scott Koslow, University of Waikato Robert V. Kozinets, Northwestern University Ram Krishnan, California Polytechnic State University Hyojkin Kwak, Drexel University L Dan Ladik, Suffolk University Michel Laroche, Concordia University Debra Laverie, Texas Tech University Ruby Lee, University of Nevada James H. Leigh, Texas A&M University Tom Leigh, University of Georgia Katherine Lemon, Boston College Patrick Lentz, University of Dortmund Steven V. LeShay, Wilmington College Lewis Lim, Indiana University Charles Lindsey, Indiana University Susan Lloyd, American University Terry Loe, Kennesaw State University Brian Lofman, Ramapo College of New Jersey Ritu Lohtia, Georgia State University Peggy Sue Loroz, Gonzaga University Xueming Luo, University of Texas – Arlington M Doug MacLachlan, University of Washington Humaira Mahi, Michigan State University Alan Malter, University of Arizona Elliot Maltz, Willamette University Detelina Marinova, Case Western Reserve University James Maskulka, Lehigh University Charlotte H. Mason, University of North Carolina Charla K. Mathwick, Portland State University Shashi Matta, University of Southern California Debbie McAlister, Texas State University – San Marcos Michael S. McCarthy, Miami University David Mick, University of Virginia Sam Min, University of South Dakota Vikas Mittal, University of Pittsburgh Risto Moisio, University of Nebraska – Lincoln Michael Mokwa, Arizona State University Sangkil Moon, North Carolina State University Bill Moore, University of Utah David Moore, University of Michigan Elizabeth Moore, University of Notre Dame Neil Morgan, University of North Carolina Rob Morgan, University of Alabama David Mothersbaugh, University of Alabama Susan Mudambi, Temple University Paulo H. Muller, University Federal do Paraná Venkatapparao Mummalaneni, Virginia State University Patrick Murphy, University of Notre Dame Jim L. Murrow, Drury University N Kent Nakamoto, Virginia Tech Om Narasimhan, University of Minnesota Ed Nijssen, University of Nijmegen Rakesh K. Niraj, University of South California Thomas G. Noordewier, University of Vermont Patricia Norberg, Quinnipiac University O Gillian Oakenfull, Miami University Matthew P. O’Brien, University of Arizona Elie Ofek, Harvard University Shintaro Okazaki, Universidad Autónoma de Madrid Ulrich Orth, Oregon State University David Ortinau, University of South Florida P Photis M. Panayides, Cyprus International Institute of Management Veronika Papyrina, University of Western Ontario Leonard Parsons, Georgia Institute of Technology Vanessa Patrick, University of Southern California Joann Peck, University of Wisconsin Antony Peloso, Arizona State University Robert Peterson, University of Texas – Austin Jeffrey Podoshen, Prado Jaideep Prabhu, Imperial College Devashish Pujari, McMaster University Ellen Pullins, University of Toledo vi Q William Qualls, University of Illinois R Priya Raghubir, University of California – Berkeley Priyali Rajagopal, Ohio State University Deva Rangarajan, Vlerick-Leuven Gent, Belgium Peter Rea, Baldwin-Wallace College Kristy Reynolds, Louisiana State University Su Bom Rhee, Santa Clara University Greg Rich, Bowling Green State University Keith Richards, University of Houston Nora J. Rifon, Michigan State University Ed Rigdon, Georgia State University Aric Rindfleisch, University of Wisconsin Deborah E. Rosen, University of Rhode Island Bill Ross, Penn State University Abhijit Roy, Loyola College Don Roy, Middle Tennessee State University Subroto Roy, University of New Haven Salvador Ruiz, Universidad de Murcia S Joel Saegert, University of Texas at San Antonio Jeff Sager, University of North Texas Kare Sandvik, Buskerud University Nicola Sauer, University of Mannheim Paul Sauer, Canisius College Saeed Samiee, University of Tulsa Sanjit Sengupta, San Francisco State University Reshma Shah, Emory University Tim Silk, University of Florida Jim Simpson, University of Alabama – Huntsville Alina Sorescu, Texas A&M University Jelena Spanjol, Texas A&M University Richard Spreng, Michigan State University Srinivas Sridharan, University of Western Ontario Raji Srinivasan, University of Texas – Austin Srini Srinivasan, Drexel University James A. Stephens, Emporia State University Rodney L. Stump, Morgan State University Ursula Y. Sullivan, University of Illinois Tracy Suter, Oklahoma State University Scott D. Swain, Boston University T Debu Talukdar, University of Buffalo John F. Tanner, Jr, Baylor University Kimberly A. Taylor, Florida International University Stephen S. Tax, University of Victoria Janet Tinoco, University of Central Florida Julie Toner (Schrader), Bellarmine University U David Urban, Virginia Commonwealth University V Rajiv Vaidyanathan, University of Minnesota Raj Venkatesan, University of Connecticut Alladi Venkatesh, University of California – Irvine Peter Verhoef, Erasmus University Rotterdam Zannie Voss, Duke University W Frank Wadsworth, Indiana University Southeast Kirk Wakefield, Baylor University Wakiuru Wamwara-Mbugua, Wright State University Florian Wangenheim, University of Dortmund Charles Weinberg, University of British Columbia vii Rebecca M. Wells, University of Dayton Patricia West, Ohio State University Chris White, Michigan State University Tiffany Barnett White, University of Illinois at Urbana Champaign John Wong, Iowa State University Arch Woodside, Boston College Y Attila Yaprak, Wayne State University Jun Ye, Case Western Reserve University Virginia Yonkers, Siena College Boonghee Yoo, Hofstra University Gergana Yordanova, University of Pittsburgh Cliff Young, University of Colorado Z Gail Zank, Texas State University – San Marcos Allen Zhang, University of Texas – San Antonio Zhu Zhen, Babson College George Zinkhan, University of Georgia TABLE OF CONTENTS PREFACE AND ACKNOWLEDGMENTS iii LIST OF REVIEWERS iv TABLE OF CONTENTS viii COMPANY-CONSUMER AND CONSUMER-CONSUMER SOCIAL EFFECTS The Impact of the Type, Frequency, and Quality of Customer Contact on Customer Satisfaction Marshall Rice 1 Mirror, Mirror, on the Wall, Am I What I Consume After All: A Framework for Ethnicity Based Consumption, a Social Identity Perspective Tracy R. Harmon 7 Cultural Influence on Word-of-Mouth Communication Desmond Lam, Dick Mizerski, Alvin Lee 9 ORGANIZATIONAL IMPACT ON SERVICE DELIVERY The Effects of Authenticity Rift on Firm Performance Zannie Giraud Voss, Glenn B. Voss, Daniel M. Cable 11 Positioning in Service Firms: Model Development and Some Basic Normative Guidelines Charles Blankson, Stavros P. Kalafatis 13 Antecedents and Consequences of Role Clarity in Explaining Employee-Perceived Service Quality in Call Centers Avinandan Mukherjee, Neeru Malhotra 15 INSTRUCTIONAL INNOVATION IN MARKETING EDUCATION The Status of Cross-Functional Education in Undergraduate Marketing Curricula Within Management Education Victoria L. Crittenden, Elizabeth J. Wilson, Cameron Duffy 18 On Different Teaching Pedagogies: What Happens to Your Course Evaluations? Alma Mintu-Wimsatt, Kendra Ingram, Mary Anne Milward, Courtney Russ 20 An Assessment of a Consumer Behavior Multiple-Choice Question Taxonomy John R. Dickinson 22 PRODUCT PLACEMENTS EFFECTS A Comparison of Consumers’ Responses to Traditional Advertising and Product Placement Strategies: Implications for Advertisers Terry Daugherty, Harsha Gangadharbatla 24 New Brand Worlds: A Comparison of College Student Attitudes Toward Brand Placements in Four Media Yongjun Sung, Federico de Gregorio 26 viii Brands in Action: The Role of Brand Placements in Building Consumer-Brand Identification Andrew T. Stephen, Leonard V. Coote 28 PROCESS AND BEHAVIOR The Marketing Cocompetition Process and Strategic Alliance Instability: A System Dynamics Model Anna Shaojie Cui, Roger J. Calantone 30 Focal Supplier Opportunism in Retailer Category Management Neil A. Morgan, Anna Kaleka, Richard A. Gooner 32 AFFECT-RELATED CONSUMER RESEARCH “No Greater Satisfaction Than to Vindicate Expectation” How Affective Expectations Shape Consumption Experience Andrew K.C. Wong 34 Customer Delight: An Attempt to Comprehend the Dimensions That Compose the Construct and its Behavioral Consequences Stefânia Ordovás de Almeida, Walter Meucci Nique 36 Towards a Conceptual Framework of E-Confusion Vincent-Wayne Mitchell, Gianfranco Walsh 44 UNDERSTANDING CUSTOMER-FIRM EXCHANGE PROCESSES Differential Impacts of CRM on Consumer Responses: Toward an Integrative Framework Frederick Hong-Kit Yim 46 Exploring the Phenomenon of Buyer-Seller Mismatches in Business-to-Business Relationships Christopher P. Blocker 47 Consumer Trust Norms in Multi-Channel Firms: The Role of Trust in Technology and Firm Commitment to Privacy Protection in Technology-Based Service Delivery Devon Johnson 58 EXPLORATIONS OF CULTURE AND ETHNOCENTRISM DIMENSIONS Validation and Application of a Bi-Dimensional Long-Term Orientation Scale William O. Bearden, R. Bruce Money, Jennifer L. Nevins 59 Consumer Socialization of Third Culture Kids in a Cosmopolitan City Alfred Y. Sit, Haksin Chan 61 Consumer Ethnocentrism in the German Market Heiner Evanschitzky, Florian V. Wangenheim 63 NEW PRODUCT CONSUMER DECISION PROCESSES Identifying Information Search Patterns in a Web-Based Environment: Development of a Search Pattern Index Morris K. George, Girish N. Punj ix 65 Perceived Risk and Consumer Innovativeness Hierarchy: An Empirical Study of Resistance to High Technology Product Adoption Tanawat Hirunyawipada, Mohammadali Zolfagharian 73 Perceived Entitativity as a Moderator of Family Brand Evaluations Joseph W. Chang, Yung-Chien Lou 75 MARKET-BASED DRIVERS OF FIRM PERFORMANCE The Performance Implications of Synergistic Knowledge Resource Effects in Differing Environmental Conditions David A. Griffith, Stephanie M. Noble, Qimei Chen 77 The Impact of Market Characteristics on Order-of-Brand Entry Strategy: An Empirical Study Danielle A. Chmielewski, Bryan A. Lukas, Robert E. Widing II 79 Organizational Culture Antecedents of Market-Driven Positional Advantage and Organizational Performance Consequences Artur Baldauf, David W. Cravens, Christian Bischof 87 DEFENSIVE AND PROACTIVE RESPONSES TO SERVICE FAILURE AND COMPLAINTS See No Evil, Hear No Evil, Speak No Evil: A Study of Defensive Organizational Behavior Towards Customer Complaints Christian Homburg, Andreas Fürst 89 The Rest of the Iceberg: An Examination of Noncomplaining Service Customers Clay M. Voorhees, Michael K. Brady, David M. Horowitz 91 From Empathy to Forgiveness: A Prosocial Perspective in Service Failure and Recovery Research Felix T. Tang 92 STRATEGIC CONCERNS IN GLOBAL MILIEUS International Marketing Alliance Dynamics: Empirical Findings from the Pharmaceutical Industry Sengun Yeniyurt, Janell D. Townsend, Erin Cavusgil 94 A Cross-National Study of Consumer-Firm Exchange Relationships Within the Context of Market Milieus Patrick Lentz, Deepak Sirdeshmukh, Ed Nijssen, Hartmut H. Holzmüller, Jagdip Singh 96 CONVERGENT COMMUNICATIONS: MOVING BEYOND ADVERTISING An Examination of IMC at the Tactical Level: Differences Across Time and Product Type Stephen J. Grove, Les Carlson, Michael J. Dorsch, Christopher D. Hopkins 98 Assessing the Effects of In-School Point of Purchase and Sampling on the Choice of a Healthy Food Option Dafina Rexha, Katherine Mizerski, Richard Mizerski 99 x Testing Why Adults Purchase Fast Food Cartoon Character Toy Premiums Claire Lambert, Richard Mizerski 101 COMPETITIVE INTERACTION AND STRATEGIC DECISIONS Multimarket Contact and the Moderating Role of Dominant Local Players: A Conceptual Overview Sweta Chaturvedi Thota 103 The Nature of Co-Opetition: Literature Review and Propositions Pilsik Choi 105 Technology Versus People: Two Schools of Thought on Pricing Capability Development Lewis K.S. Lim, Rebecca J. Slotegraaf, Rockney G. Walters 107 GOVERNANCE Dimensions and Outcomes of Relational Exchange in a Business-to-Business Context: A Meta-Analysis Mohammadali Zolfagharian, Rajasree K. Rajamma 109 Entry Mode and Level of Equity: A Simultaneous Examination of Foreign Direct Investment Governance Sudha Mani, Kersi D. Antia, Aric Rindfleisch 111 Towards an Understanding of the Governance of Complex Networks of Relationships: Uncertainty, Governance System Choices, and Performance Outcomes Andrew T. Stephen, Leonard V. Coote 112 INNOVATIVENESS AND LEARNING Market Driving Relationship Marketing for Radical Innovations Helder J. Sebastiao 114 An Investigation of Perceptual Factors Influencing Consumer’s Intention to Adopt Radical Versus Incremental New Products Audhesh K. Paswan, Lisa C. Troy 117 It’s All about Learning: What Firms Can Learn from Consumer Pioneers Yun Ye 118 SPECIAL SESSION: CULTURE, COMPETITION, AND CONSUMERS’ REACTIONS TO BRANDS Will Consumers Prefer Global or Local Brands? The Role of Identity Accessibility in Consumer Preference for Global Versus Local Brands Yinlong Zhang, Lawrence Feick, Vikas Mittal 125 CONSUMER JUDGMENTS AND MOTIVATIONS IN SERVICES Why Do Conference Goers Return? A Model of Intentions to Attend and Recommend Annie H. Liu, Mark P. Leach, Robert D. Winsor 126 Influence of Other Customers: A Scale Development E. Deanne Brocato, Susan B. Kleiser 128 xi ENCOURAGING YOUNG PEOPLE TO BEHAVE BETTER Beyond Just Being There: An Examination of the Impact of Attitudes, Materialism, and Self-Esteem on the Quality of Helping Behavior in Youth Volunteers Elten Briggs, Tim Landry, Charles Wood, Todd Arnold 130 A Cross-Cultural Examination of the Relationship Between Materialism and Individual Values William Kilbourne, Marko Grünhagen, Janice Foley 132 M.E.A.L. Time: How Nutritional Disclosure Affects Gender Evaluations of Fast Food Menu Items Kenneth W. Bates, Kyle A. Huggins 134 LEARNING FROM CUSTOMERS AND EDUCATING CUSTOMERS IN THE NEW DOMINANT LOGIC OF MARKETING Unlocking Value Through Customer Education Thorsten Hennig-Thurau, Peter C. Honebein, Benoit Aubert 136 Organizational Learning and Dynamic Marketing Capabilities: Implications for Organizational Performance Linda M. Foley, Douglas W. Vorhies, Victoria D. Bush 138 INNOVATION ADOPTION Adopting RFID Technology: Does the Manager’s Attitude Matter? Gilbert N. Nyaga, Roger J. Calantone, Thomas J. Page 140 A Synergistic Model for New Product Success Russell Adams 147 Income Elasticity of Household’s Demand for Communication and its Products: Global Measurement and its Marketing Implications Min Lu, Yanbin Tu 148 CONTEMPORARY PRICE-RELATED CONSUMER RESEARCH Computational Estimation of Partioned Prices: Another Heuristic Moves into the Marketing Neighborhood William J. Jones, Devon S. DelVecchio, Terry L. Childers 154 The Effects of Magnitude Representation Encoding Interference and Order of Price Exposure in Comparative Price Advertising Keith S. Coulter, Robin A. Coulter 155 Influences on What Consumers Know and What They Think They Know Regarding the Persuasive Aspects of Pricing-Related Selling Tactics Jay P. Carlson, William O. Bearden, David M. Hardesty 157 MEASURE ADVERTISING SUCCESS Creativity in Advertising: Purchase Intent and Brand Attitude Effects Brian D. Till, Daniel W. Baack xii 159 Where’s the Affect? An Investigation of the Effect of Three Advertising Scales on Attitude to the Ad Arjun Chaudhuri 161 Marketing Communication and Company Brand Attitude Marc Weinberger, Dale Taoping Tzeng, Paul Bottomley, Harlan Spotts 168 RELATIONSHIP STRATEGIES: INTRA-FIRM, INTER-FIRM, AND SOCIETAL Organizational Antecedents to and Outcomes of Marketing Strategy Development Styles: A Contingency Model J. Chris White, Jeffrey S. Conant, Raj Echambadi 177 Coordinating Marketing and Sales: Exploration of a Neglected Interface Christian Homburg, Ove Jensen 179 THE ROLES OF CROSS FUNCTIONAL TEAMS AND PRODUCT QUALITY IN INNOVATION The Effect of Interactional Justice on the Performance of Cross-Functional Product Development Teams Tianjiao Qiu, Deborah Rupp, William Qualls 181 Cross-Functional Integration and New Product Performance: A Meta-Analysis Tanawat Hirunyawipada, Archna Vahie 183 The Contingent Effect of Product Quality on New Product Performance: A Conceptual Model Kwaku Atuahene-Gima, Gloria Barczak 185 CONSUMPTION OF SERVICES Consumer Experience of Social Power During Service Consumption: An Exploratory Study Kalyani Menon, Harvir Bansal 187 What Drives Customer Success? Consumer Perceptions of Enabling and Restraining Forces Associated with Performing Consumption Tasks Pete C. Honebein 194 The Effect of Event Valence on Wait Management Strategies Elizabeth G. Miller, Barbara E. Kahn, Mary Frances Luce 196 MARKETING RESEARCH: NEW PERSPECTIVES ON DATA ANALYSIS Seemingly Unrelated Regression: An Alternative to Traditional Bridging in Conjoint Analysis Niels J. Blunch 198 Within-Informant Bias in Marketing Research James R. Brown, Anjala S. Krishen, Pushkin Kachroo, Chekitan S. Dev 200 Building Formative Construct Measures: The Example of Corporate Reputation Sabrina Helm 202 xiii STRATEGIC ISSUES IN ELECTRONIC MARKETING Effects of Online Store Attributes on Customer Satisfaction and Loyalty Miao Zhao, Ruby Roy Dholakia 204 Organizational Factors Related to Effective Customer Information Systems Practices Debra Zahay 206 PUBLIC POLICY MEETS CONSUMER RESEARCH Marketing Considerations in Weight Control: Preliminary Findings Angela Hausman 207 Product Involvement and Place Attachment: Insights from the Environmental Psychology Literature Merlyn A. Griffiths 209 Emergency Contraception: Expectations of Product Need and Use Andrew M. Parker, Melanie A. Gold 216 CUSTOMER SATISFACTION AND LOYALTY DYNAMICS Investigating Drivers of Customer Defection: A Relative Weight Approach Thomas Hollmann, Cheryl Burke Jarvis 218 Investigating the Moderators of the Customer Satisfaction-Loyalty Link: Evidence from Retailing Heiner Evanschitzky, Gianfranco Walsh 220 The Interplay of Cognition and Affect in the Formation of Customer Satisfaction: A Dynamic Perspective Christian Homburg, Nicole Koschate, Wayne D. Hoyer 222 BUYER AND ORGANIZATIONAL DYNAMICS IN THE GLOBAL SETTING Marketing Six Sigma: Zero Defects in Intercultural Service Quality Martin C. Reimann, Ulrich F. Luenemann 223 The Impact of Experiential Knowledge and Creativity on Performance of International Project Taewon Suh, Hongxin Zhao, Seung H. Kim, Mark J. Arnold, Mueun Bae 234 COPING WITH A CHANGING TECHNOLOGICAL AND ETHICAL CLIMATE Change and the Marketing Organization Kelly D. Martin, Jean L. Johnson 236 Privacy Concerns and Customers’ Willingness to Provide Information: A Review with Implications for Future Research Mona Srivastava, Robert Harmon 238 Shifts in Workplace Ethics: Opportunities for Conflict? Paul L. Sauer, Paul Chao 240 xiv IMPROVING SALESPERSON PERFORMANCE THROUGH NEW SKILLS AND TECHNOLOGY Interaction Between the Salesperson and Customer: A Framework for Improving the Sales Outcome Elizabeth Hemphill, Chris Dubelaar, Steven Goodman, Gus Geursen 242 EXTRINSIC REWARDS AND CONSUMER CHOICE Coupons: The Inside Scoop Somjit Barat 253 What Next? Explaining Repurchase Decisions After Joining a Loyalty Program Shirley Y. Cheng, Jessica Y. Kwong 254 Not All Deals Are Created Equal: Two Different Roles of Sales Promotion Dongwoo Shin, James H. Leigh 256 ONLINE AUCTIONS, ADVERTISING, AND RESEARCH The Effects of Reserve Prices on Bidding Behavior in Online Auctions Marla Royne Stafford, Ashley Kilburn, Barbara B. Stern 258 Advertising Goes Mobile: Explaining Attitude Toward M-Advertising Parissa Haghirian 260 FOSTERING SERVICE RELATIONSHIPS Regulatory Focus and Relationship Marketing Success Maria Sääksjärvi, Johanna Gummerus 262 Predicting Usage Level and Upgrading Behavior of Service Customers: A Model for Lifetime Value Estimation at Early Relationship Stages Florian V. Wangenheim 268 INTERNATIONAL ADVERTISING AND BRAND POSITIONING ISSUES The Impact of Perceived Language Status on Product and Service Quality Expectations Melissa Maier Bishop 270 Effects of Positioning a Foreign Brand as a Domestic Brand in Countries with Developed (U.S.) Versus Transitioning (Romania) Market Economies Lada V. Kurpis, Simona Stan, Carmen Barb 272 ISSUES IN MANAGING THE BRAND Can Self-Affirmation Reduce Prejudice Expression Toward Stereotyped Brands? Huimin Xu 279 Self and Brand Image Congruence: Driving Consumer Value Adam Marquardt 286 The Spillover Effects of Product-Harm Crises in a Brand Portfolio Jing Lei, Niraj Dawar, Jos Lemmink 288 xv CREATING SUCCESS WITH SOFT ASSETS Market Driven Intangibles and Sustainable Performance Advantages Matti Tuominen, Sheelagh Matear, Sami Kajalo, Saara Hyvönen, Arto Rajala, Kristian Möller, Gordon E. Greenley, Graham J. Hooley 290 Understanding Creative Campaign Implementation: An Investigation of its Antecedents Atlanta L. Stoyle, Leonard V. Coote 292 RELATIONSHIP STRUCTURE Value-Based Differentiation in Business Relationships: Gaining and Maintaining Key Supplier Status Wolfgang Ulaga, Andreas Eggert 294 Affect and Conation in Business-to-Business Relationships: An Empirical Analysis of Loyalty Lifecycle Sequence Chad Ruel Allred 296 The Effect of Total and Asymmetric Specific Asset Investment on Supplier-Buyer Relationship: A Structural Model Taewon Suh, Henry Yu Xie, Ik-Whan G. Kwon 298 AUTHOR INDEX 300 xvi THE IMPACT OF THE TYPE, FREQUENCY, AND QUALITY OF CUSTOMER CONTACT ON CUSTOMER SATISFACTION Marshall Rice, York University, Toronto ABSTRACT This paper presents an investigation of the impact of 81 distinct types of customer contact on customer satisfaction. Data from 8,836 respondents support the finding that customer satisfaction is improved by increasing contact points. In addition, certain types of contact and quality of contact are shown to be important. INTRODUCTION Over the past 20 years, customer satisfaction has become a key concept in marketing (Harvey 1998). Academic research has focused on important customer satisfaction issues that include such topics as the conceptualization and measurement of satisfaction constructs, (Fourier and Mick 1999; Smith 1999), the impact of satisfaction on customer retention (Rust and Zahorik 1993), customer satisfaction and profitability (Gurau and Ranchhod 2002), loyalty and customer satisfaction (Gronholdt, Martensen, and Kristensen 2000), the role of value in customer satisfaction (Day 2002) to name a few. Although the subject of customer satisfaction has been extensively studied, research shows mixed findings and complex relationships between the antecedents and outcomes of business having more versus less-satisfied customers (Szymanski and Henard 2001). In addition, the impact of customer contact has been extensively examined in the CRM literature (Winer 2001). Research has shown that regular contact with customers can improve profits (Reinartz and Kumar 2000), decrease defection/increase retention (Verhoef 2003; Weinstein 2002) and increase the perceived relationship investment (De Wulf, Odekerken-Schroder, and Lacobucci 2001). Further, considerable research shows that increased customer contact by activities such as loyalty programs improve acquisition, retention and customer development (Stone, Bearman, Butscher, and Gilbert 2004), while brand building contact improves loyalty (McAlexander, Schouten, and Koening 2002). Research on customer satisfaction has generally focused on understanding the impact of a limited number of product or firm attributes. In particular, the research has tended to focus on the impact of service and product quality on overall customer satisfaction. It is reasonable to assume, however, that many other contacts that an organization has with its customers can have an impact on American Marketing Association / Winter 2005 satisfaction. For example, a customer’s level of satisfaction with a company (and it’s products and services) is likely impacted by such factors as interaction with the corporate Web site, exposure to marketing communications, participation in corporate events and training, interaction with sales representatives and many other contacts. This paper presents an exploratory investigation of the impact of a larger number of customer contacts than is found in the academic literature. Specifically, this paper examines the impact of the type, frequency and quality of 81 distinct contact points on customer satisfaction. By examining 81 different contact points, we hope to provide some preliminary insights into the following types of managerial and research questions: 1. Can a company improve overall satisfaction by increasing its frequency of contact with customers? 2. Are certain types of customer contact more valuable than others in improving overall satisfaction with a company? 3. Does frequency of contact or quality of contact have a stronger relationship with overall satisfaction with a company? RESEARCH DESIGN AND DATA COLLECTION For this study, the researchers analyzed data provided by a large company in the technology sector (the name of the company is not revealed to protect proprietary data). A total of 8,836 people were intercepted at the corporate Web site and participated in the research which was administered via an online survey. Respondents were typical of those who come to the Web site (i.e., a mix of IT Professionals and Developers and General Users). As an incentive to participate, respondents were able to enter a contest to win a $100 gift certificate from Amazon.com. Data was collected via an Internet population for several reasons. First, experience and usage of many of the variables that we examined (i.e., subscription to Internet services, participation in online events etc.) are not common phenomenon and it would be difficult to obtain these respondents via a simple random telephone sample. Second, the instrument was quite lengthy which would have made it prohibitive to attempt to administer the survey via traditional data collection methods. 1 The 81 contact points that were examined in this paper were arrived at through extensive discussions with decision makers at the company that provided the data. In the discussion, the principal researcher and corporate decision makers began with an informal listing of possible contact variables that can have an impact on satisfaction and that could be measured. This list was then judgmentally reduced to produce the final 81 contact points. Respondents answered a series of closed-ended questions that asked them to identify which of 81 unique types of contact they have had with the company. These 81 contact points were then categorized for analysis into nine distinct types of customer contact as listed in Table 1. Cronbach’s Alpha was used to test the reliability of the scales that make up the nine individual types of contact. All nine items displayed an Alpha of > .85 which is considered good (Nunnaly 1978) and indicates that the individual contact points were measuring a unidimensional construct within each group. Respondents also indicated their level of satisfaction with each type of contact using nine point scales (where 1 indicated that they were “not at all satisfied” and 9 indicated that they were “very satisfied”). Respondents were also asked to rate their overall satisfaction with the company, its products, service and support organization using the same nine point scale. This overall satisfaction question served as the basis (dependent variable) for much of the analysis that is presented in this paper. To answer the research questions, analysis was performed using a combination of cross-tabulation (X2 analysis), analysis of variance (ANOVA) and regression. Research Hypothesis The following research hypothesis are investigated in this paper: H1: Increases in the amount of customer contact points will correlate positively with overall company satisfaction. TABLE 1 Classification of Types of Contact Category of Type of Contact Number of Contacts Within This Group 1. Corporate Web sites visited 16 contact points 2. Received Information about the company/ the company Products 14 contact points: such as reading online reviews about products, company Products seeing print ads, meeting a sales representative, receiving direct mail, etc. 3. Initiated Contact with the company 13 contact points: such as contacting the company by telephone, e-mail communication, contacting support, etc. 4. Subscribed to Newsletter(s) 11 contact points: a total of 11 newsletters were offered and monitored 5. Participated in Training 7 contact points: such as taking an online course, using training materials, etc. 6. Participated in Events/Community Activities 7 contact points: such as participating in an online chat, attending a conference, etc. 7. Planned and Deployed corporate solutions 6 contact points: such as using company products, upgrading a product/service, etc. 8. Subscribed to Services 5 contact points: a total of five services offered by the company were available 9. Product/Service Purchase or Download 2 contact points: purchasing product/service or downloading product/service American Marketing Association / Winter 2005 2 H2: Certain types of customer contacts are more valuable (i.e., have more impact) than others in improving overall satisfaction. H3: Quality of contact will have a stronger relationship with overall satisfaction than frequency of contact. RESULTS AND DISCUSSION H1: Increases in the amount of customer contact will correlate positively with overall company satisfaction. Respondents were categorized into three levels of frequency of contact, based on the number of contact points (out of a possible 81 total number of contacts) they had with the company. Table 2 details the definition of the three categories of frequency of contact: Light Contact, Medium Contact, and Heavy Contact. The frequency of contact into light (10 or fewer contacts), medium (11 to 20 contacts) and heavy contact (21+ contacts) groups was determined judgmentally by key decision makers at the company that provided the data. Specifically, decision makers were asked how many contacts they believe constituted “light,” “medium,” and “heavy” contact with their customers. Using analysis of variance (ANOVA), it was possible to determine that overall satisfaction with the company was significantly different across the three categories of frequency of contact. Those respondents who had the highest levels of contact with the company had a significantly higher mean score on satisfaction with the company as compared to those respondents who had lower levels of contact. Similarly, those respondents who had medium levels of contact had significantly higher satisfaction with the company as compared to those respondents in the light contact category. The mean values of overall satisfaction with the company (on a nine point scale with nine indicating “very satisfied”) for each of these groups are shown in Table 3. A Duncan’s Multiple Range test confirmed significant differences among the mean values shown in Table 3. This positive relationship between frequency of contact and increased overall satisfaction with the company can also be seen in the percentage of respondents who were classified as highly satisfied (HSAT is defined as those respondents who indicated that their satisfaction was either 8 or 9 on a 9 point scale) and those who are classified as “not satisfied” (NSAT is defined as those respondents who indicated that their satisfaction was 1, 2, 3, or 4) on overall satisfaction with the company across the three categories of frequency of contact. As seen in Table 4, as the level of contact with the company increases, the percentage of respondents who fall into the HSAT category goes up significantly, and the percentage of those in the NSAT category goes down accordingly (Chi-square = 119.4, p. < .0001). TABLE 2 Categories of Frequency of Contact Frequency of Contact Light Contact Definition % of Sample 10 or fewer contacts 37% 11 to 20 contacts 34% 21+ contacts 29% Medium Contact Heavy Contact TABLE 3 Impact on Satisfaction based on Frequency of Contact Frequency of Contact Satisfaction With the Company (Mean) Light Contact 6.4 Medium Contact 6.7 Heavy Contact 7.1 (F = 78.61, Significance: < .0001) American Marketing Association / Winter 2005 3 H2: Certain types of customer contact will be more valuable (i.e., have more impact) than others in improving overall satisfaction. Analysis of variance (ANOVA) was used to determine which types of contact were associated with the greatest change in overall satisfaction with the company. For each type of contact, the mean scores on overall satisfaction with the company between those respondents who had that contact and those who didn’t, were compared to determine if a significant difference existed. Table 5 summarizes the change in the mean score of overall satisfaction with the company as a result of each type of customer contact. As Table 5 shows, the most valuable types of contact for the sample overall, based on change in the mean scores of overall satisfaction with the company are: TABLE 4 HSAT and NSAT by Frequency of Contact Frequency of Contact % HSAT % DSAT Light Contact 36% 17% Medium Contact 41% 14% Heavy Contact 49% 10% X2 shows significant differences between all groups: (X2 = 119.4 p. < .001) TABLE 5 Change in Overall Satisfaction With the Company By Type of Contact Satisfaction of Those Contacted (Mean) Satisfaction of Those Not Contacted (Mean) Change in Satisfaction as a Result of Contact Received Info. About The Company 6.78 5.98 +0.80 F = 132.66 p < .0001 Visited Web sites 6.75 6.23 +0.52 F = 57.43 p < .0001 Product/Service Purchase/Download 6.78 6.28 +0.50 F = 80.19 p < .0001 Subscribed to Newsletter(s) 7.01 6.53 +0.48 F = 108.53 p < .001 Participated in Events/Communities 6.99 6.61 +0.38 F = 47.41 p < .0001 Subscribed to Services 6.97 6.64 +0.33 F = 27.67 p < .0001 Planned/ Deployed corporate solutions 6.76 6.56 +0.20 F = 18.40 p < .0001 Participated in Training 6.89 6.60 +0.29 F = 36.76 P < .0001 Initiated Contact with the company 6.72 6.50 +0.22 F = 10.95 P < .001 Type of Contact American Marketing Association / Winter 2005 ANOVA Results 4 a. Received information about the company or the company products b. Visited Web sites c. Product or service purchase or download It is important to note, however, that satisfaction was higher in all categories if the respondent had been contacted. H3: Quality of contact will have a stronger relationship with overall satisfaction than frequency of contact. From a managerial viewpoint it would be useful to know whether frequency of contact or quality of contact has a greater impact on customer satisfaction. That is, given limited resources should organizations direct those resources to trying to increase the number of contacts or should it direct resources to trying to improve satisfaction with some key types of customer contact? In order to study this question, the survey asked respondents to rate their satisfaction with contacts they had experienced on a ninepoint scale (1= not at all satisfied, 9 = very satisfied). A regression analysis was then preformed with overall satisfaction with the company as the dependent variable and aggregate satisfaction measures for the categories of contact that had the largest number of contacts (received information about the company, visited Web sites, product or service download, planned or deployed solutions, initiated contact with the company). The results of this regression clearly show that satisfaction with key customer contact points (i.e., quality of contact) is more strongly related than frequency of contact to overall satisfaction (R2 = .52, all variables significant at the .0001 level). Complete regression results are shown in Table 6. Given these results, it suggests that organiza- TABLE 6 Regression Results Type of Contact Parameter Estimate Significance Initiated Contact with the company .193 p < .0001 Received Info. about The company .282 p < .0001 Product/Service Purchase/Download .209 p < .0001 Planned/ Deployed Corporate solutions .172 p < .0001 Visited Web sites .110 p < .0001 Frequency of contact .132 p < .0001 tions should consider putting more resources into improving the quality of contact rather than increasing the total number of contacts. overall company satisfaction. However, while the number of contacts is clearly important more impact is seen by increasing the quality of each contact. CONCLUSION As this is a exploratory study with only one company, it is suggested that future research focus on different companies and sectors in an attempt to see whether these patterns exist in other industries. In addition, future research should investigate whether different taxonomy/ consumer groups for the same company respond in similar ways to both frequency and type of consumer contacts. This paper is an exploratory study that attempted to show the relationship between the amount and quality of customer contact and it’s impact on satisfaction. As indicated in the paper, the research hypothesis were largely confirmed. Specifically, the data show that increases in the amount of contact points is correlated positively with American Marketing Association / Winter 2005 5 REFERENCES Day, Ellen (2002), “The Role of Value in Consumer Satisfaction,” Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior, 15, 22–33. 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Butscher, and David Gilbert (2004), “The Effect of Retail Customer Loyalty Schemes – Detailed Measurement or Transforming Marketing,” Journal of Targeting, Measurement and Analysis for Marketing, 12 (3), 305–19 Szymanski, David M. and David H. Henard (2001), “Customer Satisfaction: A Meta-Analysis of the Empirical Evidence,” Journal of the Academy of Marketing Science, 29 (1), 16–36. Verhoef, Peter C. (2003), “Understanding the Effect of Customer Relationship Management Efforts on Customer Retention and Customer Share Development,” Journal of Marketing, 67, (4), 30 Weinstein, Art (2002), “Customer Specific Strategies – Customer Retention: A Usage Segmentation and Customer Value Approach,” Journal of Targeting, Measurement and Analysis for Marketing, 10 (3), 259–69. Winer, Russell S. (2001), “A Framework for Customer Relationship Management,” California Management Review, (Summer), 89–105. For further information contact Marshall Rice Marketing Area Schulich School of Business York University 4700 Keele Street Toronto, Ontario Canada M3J-1P3 Phone: 416.736.2100, Ext. 58241 E-Mail: [email protected] American Marketing Association / Winter 2005 6 MIRROR, MIRROR, ON THE WALL, AM I WHAT I CONSUME AFTER ALL: A FRAMEWORK FOR ETHNICITY BASED CONSUMPTION, A SOCIAL IDENTITY PERSPECTIVE Tracy R. Harmon, University of South Florida, Tampa SUMMARY The study of ethnicity as it relates to consumption is fairly recent in the study of consumer behavior and marketing (Ogden et al. 2004). Within the marketing literature, many studies have shown how culture significantly impacts consumer’s perceptions and behavior in the global marketplace (McCracken 1986). Deshpande et al. (1986) suggests that the concept of strength of ethnic identification leads us to believe the existence of fundamental differences between members of a particular ethnic group. Herche and Balasubramanian (1994) discovered that consumers who belonged to a specific ethnic group were likely to display analogous shopping behaviors. Thus, the focus of this research does not address aggregate national cultures; rather the intent is to understand the impact of strength of ethnic identity within a national boundary. This paper therefore seeks to explain the impact of intra-national cultural differences in ethnic identity within the specific context of the United States on consumption behavior. This framework does not seek to underscore the role of consumption in the construction of a socially based ethnic identity, but examines the role of a socially based ethnic identity as an antecedent to the act of consumption. Attempts to assimilate the ethnic self into a one-dimensional “melting-pot” ideology fail to address the complexities of personal and social identities among diverse populations. Thus, the primary assumptions are (1) ethnic identity precedes consumer consumption, (2) as the strength of ethnic identity changes, so does consumption practices, and (3) ethnicity based consumption does not aid in the construction of a socially-based ethnic identity. This research proposes that the strength of ethnic identification displayed by consumers is the focal construct of interest during the investigation of ethnicity based consumption practices. The proposed study will relate the four components of ethnicity (1) ethnic awareness, (2) ethnic self-identification, (3) ethnic attitudes, and (4) ethnic behaviors (Phinney 1990) to consumption practices. We expect the differences to be moderated by the degree of formation of an ethnically based social identity. Social cognition is one of the prevailing perspectives in social psychology which provides the theoretical foundations of conventional conceptions of identity. The assumptions which underlie social cognitive theories of American Marketing Association / Winter 2005 identity are: (1) human cognitive capacities are limited, (2) individuals think about others in order to interact, and (3) individual struggle for understanding in order to predict and control their outcomes. As a result individuals tend to categorize information about themselves, others, objects, and situations before engaging in memory or inferential processes, relevant to social interactions and consumption. Gilly and Penaloza (1999) state that marketers investigate culture indirectly, resulting in references to disparate cultural groups and marketing practices, with less attention to generalized adaptation processes. Their point highlights what is missing form the ethnic identity consumption research, the underpinning foundation of ethnic identity, which precedes consumption, which is addressed with the proposed framework. Therefore ethnicity-based consumption is more meaningful than the use of a sign, or symbol that is consumed, it is a self-concept of image, that cannot be expunged by the presence of a global marketplace. Based upon the current research trends in consumer acculturation and the lack of fit of acculturation to microcultures within a nation, as well as within an ethnic group, a framework is presented that expands the study of consumer buyer behavior. This lack of fit leads to an important question relevant to marketing: Does the degree of ethnic identity affect consumption practices? The framework suggests consumption practices are moderated by the degree of ethnic identity formation. The framework includes taking into the consideration the core self, identifying the strength of a consumer’s ethnic identity using Phinney’s (1989) key dimensions which are influenced by socialization processes, and determining whether purchase decisions vary by degree of ethnic identification during the consumption process. The proposed framework considers the collective nature of ethnic identification, which considers the elements of the self, motive, ethnicity, and factors of socialization. These four components capture the core of the individual while accommodating the situational and contextual factors of intersecting identities. The proposed framework is divided into two distinct halves, which capture the core ethnic self, and the apparent ethnic self. After consideration of the core ethnic self and the apparent ethnic self, which is influenced by social interac7 tions, the formation of ethnic identity emerges. The framework indicates four defined levels of ethnic identity development, which are termed diffuse, foreclosed, moratorium, and achieved ethnic identities. A diffused ethnic identity has little or no exploration of ethnicity, and lacks a clear understanding of the issues. A foreclosed ethnic identity has little exploration but a clearer understanding of their ethnicity. Whereas, an ethnic identity in moratorium denotes evidence of exploration of ethnicity, but some confusion about the meaning of ethnic groups. Lastly, an achieved ethnic identity is one that has been explored, understood and accepted. It would be expected that during the diffuse stage, an individual would be the least likely to reference his or her ethnic identity during consumption. Whereas, an individual who has achieved development of their ethnic identity, would readily access their ethnic identity more frequently. Individuals who are in the foreclosed and moratorium stages of development may development a multicultural attitude of consumption, and may participate in more frequent culture swapping. Naturally the levels of ethnic identification will vary within ethnic groups and among subcultures within these groups. However these levels of identification will allow marketers to better understand the consumption practices within a particular ethnic group. This framework helps to mitigate the premise of contradictory consumption practices among those who possess a subjectively, strong ethnic self-identity, by providing a better understanding of the factors that help shape a consumer’s ethnic identity. This will enhance the ability to develop marketing communications appropriate for the multicultural market. For further information contact: Tracy R. Harmon Marketing Department University of South Florida 4202 East Fowler Avenue – BSN 3222 Tampa, FL 33620 Phone: 813.74.6184 E-Mail: [email protected] American Marketing Association / Winter 2005 8 CULTURAL INFLUENCE ON WORD-OF-MOUTH COMMUNICATION Desmond Lam, University of Western Australia, Australia Dick Mizerski, University of Western Australia, Australia Alvin Lee, University of Western Australia, Australia SUMMARY The power of word-of-mouth has considerable documentation since the 1960s. Word-of-mouth has been widely reported to be many times more influential than information from prints, radio, and personal selling. Despite the importance and influence of word-of-mouth, it has remained one of the most neglected marketing areas. In fact, many companies are still struggling to develop effective marketing programs that encourage consumer word-of-mouth communication. The authors of this current study believe that a sound understanding of factors influencing word-of-mouth such as those relating to culture may help to create more proactive and targeted promotional programs toward stimulating consumer wordof-mouth. Consumers may engage in word-of-mouth for a number of intrinsic reasons. Word-of-mouth among consumers is also affected by other external factors. The influence of culture appears to be the most important external factors, particularly in the context of international marketing. While there are many studies on the impact of culture on marketing, very few examined the effect of culture on consumers’ word-of-mouth communication. This study attempts to examine whether and how culture can influence consumers’ word-of-mouth behavior. In particular, special attention will be given to distinguish word-ofmouth communication with people of strong ties (defined as in-group) from communication with people of weaker ties (defined as out-group). Consequently, this article provides both theoretical and empirical contribution to the word-of-mouth literature. Ultimately, it is the intention of the authors to help companies to identify markets or societies that may be more receptive to word-of-mouth marketing. The reasons why one engages in word-of-mouth have been extensively researched for about 40 years. Word-ofmouth activity has been shown to influence a variety of consumer conditions, from awareness, expectations, perceptions, attitudes, behavioral intentions to actual behaviors. Past research found that consumers engaged in wordof-mouth mainly for altruistic, product involvement, and self-enhancement reasons. The frequency and intensity of word-of-mouth may also depend on situations, service quality, types of products and markets, social networks, social class, individual personality, and culture of the American Marketing Association / Winter 2005 individuals. Culture, in particular, can have a strong influence on one’s word-of-mouth behavior. It is well documented that culture can have a strong influence on consumers’ thoughts and actions. Hence, culture can potentially have a significant influence on consumers’ word-of-mouth behavior through its influence on individual values and group norms. In one of the most widely cited work, Hofstede (1980) found many differences between the perceptions and the working styles of individuals in 53 countries. Hofstede identified four basic dimensions of differences between national cultures, namely, individualism, masculinity, uncertainty avoidance, and power distance. In this current study, Hofstede’s dimensions were employed to examine individual-level or within-culture differences. A survey was conducted on a convenience sample of 228 total respondents from two universities in Australia. Each respondent was given a questionnaire comprising a number of items on issues relating to their cultural values and word-of-mouth behavior. These items were measured on a 5-point Likert scale from 1 (strongly disagree) to 5 (strongly agree). The data was subjected to confirmatory factor analysis (CFA) and fitted to a structural equation model with AMOS 6.0. The results gave strong support to the influence of masculinity and power distance cultural dimensions on individuals’ word-of-mouth behavior. The influence of masculinity on out-group word-of-mouth was significant and positive. Individuals high in masculinity are expected to be more assertive and aggressive in their approach to communication. As such, they are more likely to exchange product information with weaker ties such as out-groups. The results of this study have supported this hypothesis. In addition, power distance has significant positive influence on in-group word-of-mouth and negative influence on out-group word-of-mouth. Individuals with high power distance are more likely to engage in word-of-mouth within their in-groups than with their out-groups. Those with low power distance are more likely to feel less inhibited and, as such, will more likely engage in out-group word-of-mouth. These phenomena were observed in this current study. However, the study did not find any evidence of influence of individualism on either in-group or out-group word-of-mouth. At the same time, contrary to expectations, uncertainty avoidance appeared to have little impact on both in-group and outgroup word-of-mouth. 9 It is important to note that any extrapolation of the results must be made cautiously given that this research was conducted on a single country and was only represented by a sample of higher-education student population. Future research will attempt to broaden the sample frame across several countries to improve generalization. Also, the support of the influence of culture does not rule out the explanations of other factors that are not covered in this study. Consumers’ word-of-mouth behavior may also change depending upon consumption contexts and on the types of products they consume. Research into these areas will likely yield a more comprehensive insight into the word-of-mouth construct. Word-of-mouth is indeed a major force in the marketplace that should not be taken for granted. Individuals with certain cultural values/dimensions may be more receptive to the use of word-of-mouth compared to others. This study examined and differentiated those cultural values/dimensions that may be more likely to encourage word-of-mouth from those that are less likely to do so. Both word-of-mouth and mass media influence the adoption of new products. The results from this research can provide businesses with greater insight into using wordof-mouth as a tool for marketing, especially in the international context, by examining critical factors that can affect word-of-mouth. For example, if companies understand the factors that affect business referral behaviors, they can then try to create an environment to induce more customer referrals. The results will also enable companies to estimate the potential impact of product or company-related negative and positive word-of-mouth across different national cultures. For further information contact: Desmond Lam Faculty of Economics and Commerce University of Western Australia Social Sciences Building South 35 Stirling Highway WA 6009, Australia Phone: +61.8.6488.2890 FAX: +61.8.6488.1055 E-Mail: [email protected] American Marketing Association / Winter 2005 10 THE EFFECTS OF AUTHENTICITY RIFT ON FIRM PERFORMANCE Zannie Giraud Voss, Duke University, Durham Glenn B. Voss, North Carolina State University, Raleigh Daniel M. Cable, University of North Carolina at Chapel Hill, Chapel Hill SUMMARY This research examines whether internal disagreements relating to organizational identity – authenticity rift – influence firm performance. An authentic organizational identity represents a true, unique and singular statement of core organizational values and beliefs held by all organizational insiders and communicated to all stakeholders. Rift in the authenticity of organizational identity represents clefts or differences in the core organizational values and beliefs held by organizational insiders. These internal differences signal confusion regarding the organization’s core values and lead to divergent goals and strategies. The notion of multiple organizational identities has existed since early explorations by Albert and Whetten (1985), who proposed that dual identity organizations possess both normative and utilitarian orientations, and that organizations may begin with a single identity but acquire multiple identities over the course of time. Thus, firms may have a constellation of values with some values dominating (Gioia, Schultz, and Corley 2000; Voss, Cable, and Voss 2000). As long as the identity of the organization – however complex the set of core values and beliefs – is commonly held and understood, it is still singular and congruent. When authenticity rift exists, an organization possesses diverse and competing responses to the questions “Who are we?” and “What are our core values and beliefs?” Rift occurs when multiple identities create confusion throughout the organization as to the firm’s identity or when different factions within the organization actively espouse different organizational priorities and values (Albert and Whetten 1985; Golden-Biddle and Rao 1997; Pratt and Foreman 2000). Conceptual arguments support alternative hypotheses for the relationship between authenticity rift and firm performance, including (1) no relationship, (2) a negative relationship, or (3) a positive relationship. nonprofit professional theatre industry as the context. We operationalized organizational identity using five organizational value dimensions relevant to the nonprofit professional theatre industry (Voss, Cable, and Voss 2000), and we collected measures from two respondents (i.e., the managing director and marketing director) at each theatre. We tested the hypotheses by conducting polynomial regression analyses that modeled firm performance as a function of the main and quadratic effect of each value dimension reported by each respondent and the interaction between the managing director and marketing director value dimension report. We used two distinct measures of firm performance: customer support, measured as the theatre’s total earned revenue and overall financial performance, measured as net income. Rift had a negative impact on firm performance for four of the five values. These findings offer evidence that multiple definitions of identity may hinder rather than help the firm. Surprisingly, rift had a positive effect on firm performance for the market value dimension, defined as the organization’s commitment to customer satisfaction. Firm performance was lower when both marketing and managing directors reported that market values were either extremely important or not at all important. This suggests that “extreme” market theatres either ignore customers in pursuit of artistic experimentation or are too focused on current customer preferences at the expense of creating exciting new art. Balance appears to be achieved when the marketing director reported that market values were extremely important while the managing director reported that market values were not important. This result questions the wisdom of diffusing market values throughout an arts organization. While much research exists on organizational identity, this study is unique in its empirical examination of the effect of internal discrepancies on firm performance. In short, skillful management of a singular, clear, authentic organizational identity may be more advantageous than multiple, distinctive identities presented to different stakeholders. References available upon request. To test these alternative hypotheses, we conducted a longitudinal, two-wave empirical study using the U.S. American Marketing Association / Winter 2005 11 For further information contact: Zannie Giraud Voss Duke University Box 90680, 206 Bivins Building Durham, NC 27708–0680 Phone: 919.660.3347 FAX: 919.684.8906 E-Mail: [email protected] American Marketing Association / Winter 2005 12 POSITIONING IN SERVICE FIRMS: MODEL DEVELOPMENT AND SOME BASIC NORMATIVE GUIDELINES Charles Blankson, Long Island University, New York Stavros P. Kalafatis, Kingston University, United Kingdom SUMMARY Despite the growing activities and interest attached to the concept of positioning and the fact that the subject is considered to be one of the key elements of modern marketing management (Porter 1996; Kotler 1997), there appears to be a paucity of documented strategic positioning models capable of being applied by managers and advertising executives. This article deals with the actual process of managing the concept of positioning. It attempts to put forward normative guidelines through the formulation, development and operationalization of a comprehensive composite strategic positioning framework. Using a triangulation research methodology, a conceptual positioning framework that is the composite of two extant positioning frameworks (Brand Concept Image Management (BCM) by Park et al. (1986) and the Generic Positioning Framework (GPF) proposed by Hooley et al. (1998)) is formulated, and given the difficulty in the positioning of services (Assael 1985; Zeithaml and Bitner 1996), and the wide spectrum of services available, it was decided to carry out the research in the United Kingdom plastic card service firms (e.g., credit cards, charge cards, store cards, debit cards industry). The proposed framework thus represents the composite of the BCM and GPF positioning framework. The rationale for combining these two models (see Jacoby 1978; Wright and Kearns 1998) stems from the need for the development of a comprehensive framework that incorporates the management of positioning over time and at the same time, ensures marketing synergy, i.e., congruence of related activities. From the findings, the paper puts forward some basic normative guidelines and in the process, reveals that services pursue two key positioning aims (profit and market share; profit and status) and two main positioning objectives (functional and symbolic). Furthermore, this study finds that services are managed within two broad life cycle stages (fortification and membership) out of seven (i.e., primal, consolidation, latent, deposition, fortification, membership, fallow). Moreover, they employ “the name” (i.e., the brand name) as the dominant positioning strategy. In conclusion, the general patterns of the components of the model, i.e., decisions and activities, are described and underline the comprehensiveness and robustness of the new model. Concerning the definition of the decisions and activities incorporated in the framework, on the basis of inductive reasoning, the following three phases and the related managerial decisions and activities have been identified: Phase 1 Definition, by management, of the overall positioning aim(s). Phase 2 Identification of positioning objective(s), which are deemed as, appropriate in order to achieve the desired positioning aim(s). Phase 3 – (i) Decisions related to the selection of specific positioning strategies which reflect both the life cycle stage of the offering and the objectives identified in phase 2. Phase 3 – (ii) Management (i.e., implementation and monitoring) of the positioning related activities. Secondly, based on literature-derived descriptions and in-depth face-to-face interview, the managerial decisions and activities were operationalized leading to the following normative guidelines. Positioning Aim(s) Positioning Objective(s) Life Cycle Stages (LCS) Profit & Market Share Profit & Status Functional Symbolic Primal Consolidation Latent Position Deposition Fortification Membership Fallow American Marketing Association / Winter 2005 13 Thirdly, the resultant guidelines were applied in the U.K. plastic card services domain and in this process, data were collected using a combination of face-to-face interviews (executives/experts), survey (target group), and content analysis (company communications). These have been used in the descriptions of the four card brands’ positioning aim(s), objective(s), life cycle stages, and strategies. The latter has been distilled into a simple summary and is presented in Table 1. Our study calls for new ways of thinking about and conceptualizing the application of positioning in service organizations. TABLE 1 Summary of Application of the Comprehensive Strategic Positioning Model Overall Positioning Strategies Employed, i.e., Overlapping in Executives/Experts, Communications, and Target Group Card Brand Positioning Aim(s) Positioning Objective(s) LCS Credit Card: Visa Profit and Market Share Functional Fortification and Membership Reliability and The Brand Name Charge Card: Amex Profit and Status Symbolic Membership Top of the Range and The Brand Name Store Card: M&S Profit and Status Functional Fortification Service, Value for Money, and The Brand Name Debit Card: Switch Profit and Market Share Functional Fortification The Brand Name For further information contact: Charles Blankson Department of Marketing College of Management Long Island University – C. W. Post Campus Brookville, NY 11548–1300 Phone: 516.299.3094 FAX: 516.299.3917 E-Mail: [email protected] American Marketing Association / Winter 2005 14 ANTECEDENTS AND CONSEQUENCES OF ROLE CLARITY IN EXPLAINING EMPLOYEE-PERCEIVED SERVICE QUALITY IN CALL CENTERS Avinandan Mukherjee, Montclair State University, New Jersey Neeru Malhotra, Aston University, United Kingdom SUMMARY Role clarity as perceived by frontline service employees is the extent to which they receive and understand information required to do the job in the manner that is expected by the management (Kelly and Hise 1980; Teas et al. 1979). Role clarity is critical to delivering service quality in service organizations. This is particularly true in call centers, where customer contact employees are frequently subjected to conflicting demands of cost efficiency and customer service, thus leading to lower perceptions of role clarity. In the absence of adequate role clarity, call center representatives (CCR) could end up misguiding customers, providing wrong information to them, transferring calls unnecessarily, putting calls on hold or asking the customer to call later, all of which would lead to poor service quality. Lack of role clarity can also have negative effects on job satisfaction and organizational commitment (Ruyter et al. 2001). Hence, the key purpose of this study is to investigate how frontline staff’s role clarity in telephonic voice-to-voice service encounters affects their perception of the service quality delivered by them. We also examine in this research the influence of selected antecedents and consequences of role clarity in explaining service quality. The conceptual model is provided in Figure 1. According to Singh (1993), the study of relationships between organizational factors and role clarity is rooted in the path-goal theory of leadership (House 1971) and the job characteristics model (Hackman and Oldham 1976). Key antecedents of role clarity are five variables mostly relating to organizational job design characteristics – two job-related variables (feedback and autonomy), two supervisory variables (participation and supervisory consideration), and one social variable (teamsupport). Feedback refers to the degree to which carrying out the work activities required by the job results in the individual obtaining direct and clear information about the effectiveness of his/her performance (Hackman and Oldham 1976). Autonomy is the degree to which the job provides substantial freedom, independence, and discretion to the individual in scheduling the work and in determining the procedures to be used in carrying it out (Hackman and Oldham 1976). Participation in decisionmaking refers to the degree to which employees are able American Marketing Association / Winter 2005 to influence decisions about their job (Teas 1983). Supervisory consideration refers to leader behaviors concerned with promoting the comfort and well-being of the subordinates (Boshoff and Mels 1995). Finally, team support – support from co-workers – not only provides an outlet to service burnouts arising from difficult service encounters, but also acts as a channel for disseminating practical knowledge and information relating to the jobs of the frontline employees (Sergeant and Frenkel 2000). Key consequences of role clarity are organizational commitment, job satisfaction, and service quality. Job satisfaction and organizational commitment also affect service quality. Organizational (affective) commitment refers to the employee’s emotional attachment to, identification with and involvement in the organization (Meyer and Allen 1991). Job satisfaction refers to the extent to which the employees feel satisfied with the kind of work they do and with the nature of their job. Service quality is the result of human interaction between the service provider and the customer. Service quality as perceived by frontline employees is chosen as the performance consequence of their role clarity, as “customer contact employees are well placed to effectively judge the quality of services that they deliver” (Sergeant and Frenkel 2000, p. 19). We adapted the SERVQUAL instrument (Parasuraman et al. 1988) to include only those dimensions that relate to the employees’ service quality. As far as possible, measurement items for the variables were drawn from standardized scales well established in literature having acceptable reliabilities. However, some items were adapted and the shortened versions of some scales were used based on a 2stage pre-test. All items were linked to five point Likert type scale ranging from “strongly agree” to “strongly disagree.” We based our study on an “in-house” call center of a major retail bank, where customer satisfaction is one of the main objectives. Self-administered anonymous questionnaires were mailed to their “Head of Customer Services” responsible for call centers who further forwarded them to the respective CCRs. Questionnaires were distributed to 710 call center employees. Three hundred eighty questionnaires were returned to the researchers, providing a response rate of 53.5 percent. These in turn yielded 342 useable questionnaires. 15 A structural equation model is developed and tested on this sample of 342 call center representatives. A twostage approach was followed (Anderson and Gerbing 1990). First, the measurement model was estimated and standardized regression coefficients obtained, and second, the structural model was estimated. The final model satisfied all three criteria (absolute fit, incremental fit and parsimonious fit) to determine goodness-of-fit for the model. Of the 11 hypotheses, all except H2, H4, and H11 were accepted (see Figure 1). Our study helps to understand the nature and significance of role clarity in customer service. Role clarity affects service quality positively, and directly as well as indirectly through organizational commitment and job satisfaction. Although job satisfaction does not affect service quality directly, it does so indirectly through organizational commitment which has a positive effect on service quality. Further, managers need to act upon the key antecedents of role clarity in call centers. Detailed scripting and setting clear expectations in call centers would improve role clarity. Effective feedback based on random call recording becomes vital in a highly mechanized call-center environment. Participation in decisionmaking by the customer contact employees on issues concerning their jobs and going beyond scripts contribute to role clarity. Team support, in terms of helpful and supportive team workers, further assists in role clarity by disseminating useful information concerning various issues in their jobs that are not explicitly known or instructed, and through sharing each other’s experiences and learning from them. Overall, our research suggests that boundary personnel in service firms should strive for higher perceived role clarity to be able to deliver higher service quality. Our research reveals that role clarity plays a critical role in explaining service quality. Further, feedback, participation and team support positively influence role clarity, which in turn increases job satisfaction, organizational commitment and service quality. However, autonomy and supervisory consideration have no significant effect on role clarity. Our research suggests that boundary personnel in service firms should strive for higher perceived role clarity to be able to deliver higher service quality. Hence, this study establishes linkages between internal marketing and external marketing in service firms, demonstrating that customer contact employees, who are clear of their job roles, feel satisfied and committed and deliver better service quality to customers. FIGURE 1 The Research Framework with Hypothesized Relationships and Structural Model Coefficients Feedback H1 (0.414*) Autonomy Participation H2 H7 (0.12*) Organizational Commitment H3 (0.19*) Role Role clarity Clarity H4 Supervisory H4 Consideration H9 (0.226*) H6 (0.295*) H5 (0.12*) H8 (0.652*) Job Satisfaction Service Quality H11 Team Support *Significant at p < .01, std parameter estimate within parenthesis. American Marketing Association / Winter 2005 16 REFERENCES Anderson, J.C. and D.W. Gerbing (1990), “Structural Equation Modeling in Practice: A Review and Recommended Two-Step Approach,” Psychological Bulletin, 103 (3), 411–23. Boshoff, C. and G. Mels (1995), “A Causal Model to Evaluate the Relationships Among Supervision, Role Stress, Organizational Commitment, and Internal Service Quality,” European Journal of Marketing, 29 (2), 23–42. Hackman, J.R. and G.R. Oldham (1976), “Motivation Through the Design of Work: Test of a Theory,” Organizational Behaviour and Human Performance, 16, 250–79. House, R.J. (1971), “A Path-Goal Theory of Leadership Effectiveness,” Administrative Science Quarterly, 321–39. Kelly, J.P. and R.T. Hise (1980), “Role Conflict, Role Clarity, Job Tension, and Job Satisfaction in the Brand Manager Position,” Journal of the Academy of Marketing Science, 8 (2), 120–37. Meyer, J.P. and N.J. Allen (1991), “A Three-Component Conceptualization of Organizational Commitment,” Human Resource Management Review, 11 (1), 61– 89. Parasuraman, A., V.A. Zeithaml, and L.L. Berry (1988), “SERVQUAL: A Multiple Item Scale for Measuring Consumer Perceptions of Service Quality,” Journal of Retailing, 64 (1), 12–40. Ruyter, K. De, M. Wetzels, and R. Feinberg (2001), “Role Stress in Call Centres: Its Effects on Employee Performance and Satisfaction,” Journal of Interactive Marketing, 15 (2), 23–35. Sergeant A. and S. Frenkel (2000), “When Do Customer Contact Employees Satisfy Customers?” Journal of Service Research, 3 (1), 18–34. Singh, J. (1993), “Boundary Role Ambiguity: Facets, Determinants, and Impacts,” Journal of Marketing, 57 (April), 11–31. Teas, R.K., J.G. Wacker, and R.E. Hughes (1979), “A Path Analysis of Causes and Consequences of Salesmen’s Perceptions of Role Clarity,” Journal of Marketing Research, 16 (August), 335–69. ____________ (1983), “Supervisory Behaviour, Role Stress, and the Job Satisfaction of Industrial Salespeople,” Journal of Marketing Research, 20 (February), 84–91. For further information please contact: Avinandan Mukherjee Marketing Department Montclair State University Montclair, NJ 07043 Phone: 973.655.5126 FAX: 973.655.7673 E-Mail: [email protected] American Marketing Association / Winter 2005 17 THE STATUS OF CROSS-FUNCTIONAL EDUCATION IN UNDERGRADUATE MARKETING CURRICULA WITHIN MANAGEMENT EDUCATION Victoria L. Crittenden, Boston College, Chestnut Hill Elizabeth J. Wilson, Suffolk University, Boston Cameron Duffy, Boston College, Chestnut Hill SUMMARY It has been 20 years since Behrman and Levin suggested that real-world business problems “do not yield to a single-discipline solution” (1984, p. 142). During this 20-year period, there have been numerous calls for integration across college and university curriculums (cf., Association of American Colleges 1985; Boyer 1987) and within colleges of business in particular (Porter and McKibbin 1988). Schelfhaudt and Crittenden (2005) report, however, that while most MBA curricula have been revised to accommodate the trend toward cross-functional integration, the curricula of undergraduate business programs frequently fail to adapt to the changing needs of modern organizations. To meet these needs, employees must be skilled in organizational flexibility, teamwork, and cross-functional communication and collaboration (Smart and Barnum 2000; Sheth 2002). There is concern as to whether undergraduate students will matriculate with the people and technical skills needed in today’s workplace (cf., Newman 1999; Parker 2003). Marketing has been suggested as the broadest area in business management and, as such, the boundary-spanning function with a company (Crittenden 2003). Academically, Barber et al. (2001, p. 240) suggested that the marketing department in a college of business “is in a powerful position to serve an important role in guiding and binding together other areas” in the facilitation of cross-functional teaching and learning. Following this practitioner and academic line of logic, the study reported here assesses the state of cross-functional management education from the perspective of the chairs of marketing departments in universities across the United States. tions and teamwork that is facilitated and enhanced by advances in technology. 2. Graduates with integrative academic experiences that build on strong functional expertise have a competitive advantage in the job market and a greater chance of long-term success. Regarding the integration of marketing and other functional areas, Crittenden (2003) and Barber et al. (2001) suggest that the marketing function is in a boundary-spanning role in facilitating increased functional integration. It is not surprising, then, that many cross-functional, academic examples include interactions with marketing. As suggested by Alden et al. (1991), these examples cover a wide range of integration models, both within and outside the business school. Additionally, the functions included in the academic examples are consistent with the results of a 2002 study which found that participation in new product development included marketing, quality, manufacturing, engineering, and purchasing (Goldense and Schwartz 2002). Research Questions and Methodology The current research addresses three major questions with respect to the business school’s marketing department and its integration with other functional areas for undergraduate management education: 1. Does integration occur between marketing and other functional areas? 2. How is the integration accomplished? Cross-Functional Education 3. What are the impediments to integration? Several researchers have examined the need for crossfunctional integration in the business school curriculum (e.g., Alden et al. 1991; DeMoranville, Aurand, and Gordon 2000; Schelfhaudt and Crittenden 2005). Based on these research findings, there are two major reasons for integration within the business school program: In the spring of 2004, a “Status of Cross-Functional Business Education in the United States” survey was sent to marketing department chairs at colleges and universities across the United States. The purpose of the survey was to benchmark the state of cross-functional undergraduate marketing education by addressing the three major research questions identified above. The survey resulted in a 15 percent response rate, slightly below the 18 to 57 percent response rates found in previous studies 1. Cross-functional integration is the norm in business, resulting in increased interdepartmental communica- American Marketing Association / Winter 2005 18 utilizing academic directories as the sampling frame (Andrus, Laughlin, and Norvell 1995). Results It appears that marketing educators are participating in some level of cross-functional education. Interestingly, cross-functional education is more of a priority at private schools than public schools. The majority of integration takes place in Geiger and Dangerfield’s (1996) “integrating project curriculum” model. This level is more control- lable by individual faculty members and less time-intensive than more comprehensive programs. In terms of integration in the marketing classroom, respondents reported some difficulty at finding materials, agreed that teaching experience is an important resource for effective delivery of cross-functional content, and suggested that industry experience is a plus in cross-functional teaching. More importantly, educators may not be doing a good job conveying the importance of cross-functional learning. References available upon request For further information contact: Vicky Crittenden Boston College 450 Fulton Hall Chestnut Hill, MA 02467 Phone: 617.552.0430 FAX: 617.552.6677 E-Mail: [email protected] American Marketing Association / Winter 2005 19 ON DIFFERENT TEACHING PEDAGOGIES: WHAT HAPPENS TO YOUR COURSE EVALUATIONS? Alma Mintu-Wimsatt, Texas A&M University – Commerce, Commerce Kendra Ingram, Texas A&M University – Commerce, Commerce Mary Anne Milward, Texas A&M University – Commerce, Commerce Courtney Russ, Texas A&M University – Commerce, Commerce SUMMARY A recent conversation with several colleagues prompted quite an animated discussion regarding various modes of delivering business education and the role of instructional technology. Some vehemently claimed that the traditional face-to-face pedagogy is by far the most effective means of teaching students. Others purported that technology mediated distance learning modes are just as effective. Interestingly enough, regardless of how each colleague felt about various teaching pedagogies – ultimately, a consensus was reached. That is, the group agreed that their teaching evaluations had “gone haywire” with distance education classes despite the advances in instructional technology. This consensus opinion prompted us to investigate how teaching pedagogies affect students’ course evaluations. That is, does delivery method affect how students evaluate their instructors? The primary purpose of this study was to compare MBA students’ evaluative perceptions of their professor in three different classroom contexts: traditional, ITV and Internet-Based Marketing Management course. This study investigated how students’ evaluation of the instructor was affected when different teaching pedagogies are used. MBA students evaluated their instructor based on five evaluation criteria: (1) teaching skills, (2) rapport with students, (3) grading policies, (4) knowledge of materials, and (5) presentation skills MBA students enrolled in the Marketing Management course during their first year of the graduate program served as the sample groups for this study. Most of the students are in the 25–30 age range and have worked for at least two years. The students were requested to complete a standardized University evaluation form. For the Internet-based students, a second evaluation form was utilized to assess online technology-related issues. Course evaluation forms were distributed during the last week of classes. American Marketing Association / Winter 2005 The results suggest that the traditional students consistently ranked the professor the highest in all five evaluative criteria. Looking at each of the evaluative criteria, only the variable “grading policies” produced slightly different results. That is, for “teaching skills,” “rapport with students,” “knowledge of material,” and “presentation skills” – the traditional class was significantly different (at p < .01) from ITV and Internet-based methods. No statistical differences were found between ITV and Internet-based groups on the said four variables. Regarding the variable “grading policies,” ITV students ranked the professor the lowest. ITV result was statistically different from traditional and Internet-based at p < .01. Meanwhile, no statistical difference was found in the “grading policies” between the traditional and Internet-based classes. This findings in this study compared how one seasoned professor’s evaluative rating [who has been recognized with several university teaching awards] was significantly affected by the mode of delivery. It appears that instructors are rated better in the traditional face-to-face context. However, it is noteworthy to mention that while students rated both ITV and Internet-based modes lower, the rating itself was still relatively favorable (i.e., means of less than 2 in a scale of 1–5). Given today’s student needs and university budgetary constraints, it is a foregone conclusion that instructional technology is here to stay. Unfortunately, while technology can significantly improve teaching effectiveness [through the use of e-mails, power point presentations, web pages, etc.] it can also provide many challenges. Perhaps, there is none more intimidating to educators than the seemingly adverse impact it has on student course evaluations. After all, most tenure and promotion decisions hinge on students’ evaluative ratings of their professors. 20 For further information contact: Alma Mintu-Wimsatt Department of Marketing & Management Texas A&M University – Commerce Commerce, TX 75429 Phone: 903.886.5698 FAX: 903.886.5702 E-Mail: [email protected] American Marketing Association / Winter 2005 21 AN ASSESSMENT OF A CONSUMER BEHAVIOR MULTIPLE-CHOICE QUESTION TAXONOMY John R. Dickinson, University of Windsor, Ontario SUMMARY This study conducts an assessment of the taxonomy into which multiple-choice questions are classified in a question bank accompanying a widely adopted consumer behavior text (Solomon, Zaichkowsky, and Polegato [SZP] 2002). The study provides not only an assessment of that particular question bank, but also a pro forma for similar assessments of other question banks. Multiple-choice questions are classified by SZP on two dimensions: question difficulty (easy, moderate, difficult) and “. . . the main cognitive skill it is designed to test. . .” (Forrest 2002, “Preface”) (applied, recall). “The analysis of multiple-choice items typically begins with the computation of a difficulty and a discrimination index for every item.” (Aiken 1991, p. 78) In this study question difficulty was operationalized as the percent of correct responses for a given question. The mean percent was 55.7 percent, ranging from 2.4 percent to 100.0 percent. Discrimination was operationalized as the point-biserial correlation between a student’s total exam score (excluding the focal question) and the dichotomy of whether the student answered the question correctly or incorrectly. The mean point-biserial correlation was 0.218, ranging from -0.364 to 0.669. H1: The mean percent of correct answers is inversely related to classified question difficulty. H2: The mean percent of correct answers to questions classified as recall is greater than the mean percent of correct answers to questions classified as applied. H3: There is a significant interaction between classified question difficulty and classified question cognitive skill on percent of correct answers. H4: The mean point-biserial correlation of questions classified as moderate is greater than the mean pointbiserial correlation of questions classified as either easy or difficult. H5: The mean point-biserial correlation of questions classified as recall is not significantly different from the mean point-biserial correlation of questions classified as applied. H6: There is no significant interaction between classified question difficulty and classified question cognitive skill on discriminating ability. Data were drawn from two midterm examinations (40 and 42 students, respectively) covering chapters one through eight and two noncumulative final examinations (41 and 42 students, respectively) covering chapters nine through seventeen. For each examination, six questions were selected at random from each chapter on a systematic basis, for a total of 204 questions. TABLE 1 Factorial Analysis of Variance Significance Levels Criterion Factor Measured Difficultya Discrimination Indexb Classified Difficulty 0.031 0.876 Cognitive Skill 0.103 0.011 Difficulty x Cognitive Skill 0.983 0.948 a b Arc sine transformed Fisher’s r to z transformed American Marketing Association / Winter 2005 22 H1 through H3 and H4 through H6 were analyzed using a 3 (difficulty levels) x 2 (cognitive skills) factorial analysis of variance. Significance levels, i.e., p-values, for all statistical tests are presented in Table 1. Mean values for the respective criteria of percent answered correctly and point-biserial correlation are presented in Table 2. References available upon request. TABLE 2 Mean Criterion Values Percent Correct Point-Biserial Correlations Factor Level Recall Applied Row Recall Applied Row Easy 65.25 59.65 63.38 .251 .172 .225 Moderate 56.24 50.30 54.02 .251 .170 .221 Difficult 54.03 48.77 52.28 .231 .169 .210 Column 57.68 51.98 .243 .170 H1 and H2 were supported, H3 was not supported. H4 and H5 were not supported, H6 was supported. John R. Dickinson Odette School of Business University of Windsor Windsor, Ontario Canada N9B 3P4 Phone: 519.243.4232, Ext. 3104 E-Mail: [email protected] American Marketing Association / Winter 2005 23 A COMPARISON OF CONSUMERS’ RESPONSES TO TRADITIONAL ADVERTISING AND PRODUCT PLACEMENT STRATEGIES: IMPLICATIONS FOR ADVERTISERS Terry Daugherty, University of Texas, Austin Harsha Gangadharbatla, University of Texas, Austin SUMMARY Product placement is a form of advertising and promotion in which brands are placed in television shows, movies, or other entertainment content to generate visibility and achieve audience exposure. Proponents of product placement cite several potential advantages for embracing this method, such as a long shelf life, prominent exposure, and enhanced realism. For example, even years after a movie is released or a television show airs, advertisers are still able to receive some level of benefit from DVD/video releases and television re-runs (Morton 2002). Furthermore, product placement allows advertisers to escape “commercial zapping” because consumers cannot skip over products placed within media content. In fact, television networks believe that by 2007, there will be 24.7 million DVR owners (Digital Video Recorders) resulting in a loss of about $6.6 billion in advertising revenue. However, there are common disadvantages associated with product placement, such as the lack of control over how products are portrayed or incorporated into a scene or storyline. Further, advertisers have no influence over how successful media programming will be, making it difficult to predict where to place brands for maximum exposure. Nevertheless, advertisers continue to spend as much as $20 million to have their products appear in media content (Grover 2004). While a considerable amount of research has explored the effects of product placement, key issues remain for understanding this strategic tactic. For instance, much of the research investigating product placement to date has advocated or used memory-based tests (either recall or recognition) to assess effectiveness (Brennan and Dubas 1999; Eddington 1991; Pracejus 1995; Russell 1998; Weaver and Oliver 2000) with very little work done comparing the effectiveness of product placement versus traditional advertising. Therefore, the purpose of this study is to explore consumer attitudes toward the various forms of product placement (i.e., movies, television, video games, music lyrics, etc.) and investigate how these differ from traditional advertising. According to the Elaboration Likelihood Model, consumers process information through a central route when they are highly involved or interested in content and a peripheral route when involvement or interest is low American Marketing Association / Winter 2005 (Petty and Cacioppo 1983). Thus, information is processed actively when deemed relevant and relegated to a secondary status when relevance is perceived as low. For the most part, product placement is more likely processed through the peripheral route since the message is secondary to that of the media content. For instance, while watching movies or television shows the likelihood that a viewer is more focused on the placed product than on the programming content is low. While elaboration of messages can vary depending consumer motivation, the implications for processing product placement is important when measuring the effectiveness of this tactic given the inherent differences between various types of media and advertising. Gupta and Lord (1998) compared product placement with traditional advertising and found that prominent placements outperformed traditional advertising. However, this work does not lend itself toward understanding product placement occurring in other media modalities, such as television, computer games and music videos (Nelson 2002). To explore these issues, five hundred adults were randomly selected from an online panel and asked to complete a thirty-item survey. Subsequently, a total of 227 completed questionnaires were collected resulting in a response rate of 45.4 percent (227 out of 500). The variables measured centralized around four categories: opinions about advertising, opinions about multiple forms of product placement, perceived advertising effectiveness, and perceived effectiveness of multiple forms of product placement. The findings suggest that in general product placement is less effective in generating brand awareness than traditional advertising, but more effective in stimulating interest and generating immediate or short-term product purchase intentions. Further, while attitudes toward product placement in movies and television were elevated over those in video games and music lyrics, more work is needed in this area before any conclusions can be made discounting these nontraditional alternatives. Academic theorists are poised to expand our knowledge in this area as research exploring these issues has both important industry and theoretical implications for explaining the nature of product placement in media. Empirical research is needed though to fully conceptual24 ize this tactic and identify exactly how product placement impacts affective (attitude) responses rather than simply cognitive (memory). The objective of this study was not to suggest definitive attitudinal or behavioral preferences over product placement or traditional advertising. Rather, the goal was simply to expand this growing body of work and lead to future research in this area. While advertisers are continuing to search for alternative tactics to reach their target audiences, media professionals need to be cautious in how they approach these methods, as more work is needed to extend our understanding of product placement. References available upon request. For further information contact: Terry Daugherty Department of Advertising University of Texas at Austin 1 University Station A1200 Austin, TX 78712 Phone: 512.471.8917 FAX: 512.471.7018 E-Mail: [email protected] American Marketing Association / Winter 2005 25 NEW BRAND WORLDS: A COMPARISON OF COLLEGE STUDENT ATTITUDES TOWARD BRAND PLACEMENTS IN FOUR MEDIA Yongjun Sung, The University of Georgia, Athens Federico de Gregorio, The University of Georgia, Athens SUMMARY Discussions of brand placement in the popular press and academic literature tend to predominantly revolve around film. However, recent content analytic work (e.g., de Gregorio and Sung 2004; Ferraro and Avery 2000; Friedman 1991) demonstrate that brand appearances within other media are prevalent and continue to increase in incidence as time progresses. Brand placement in other media is not a recent phenomenon. Advertisers produced and sponsored television shows in the 1950s such as Texaco Star Theater (McCarthy 2001), the Sega video game company placed Marlboro ads in its early racing games (Emery 2002), and a song from 1903 entitled “Under the Anheuser-Busch” asked listeners to “Come, come, drink some Budwise [sic] with me” (Agenda, Inc. 2003). Although not voluminous, there has been a steady stream of academic research since the late 1980s on the strategy of brand placement. Although scholarly brand placement research has been ongoing since the late 1980s (Steortz 1987), it has largely focused on the context of films, with a dearth of investigations of the practice in other media. Some commonly investigated factors have included: extent and type of placement (e,g., Devanathan et al. 2002; Sapolsky and Kinney 1994), audience recall and recognition of placed brands (e.g., Gupta and Lord 1998; Ong and Meri 1994), and qualitative explorations of consumers assimilation and interpretation of the meaning of brands placed (DeLorme and Reid 1999). In addition, a distinct sub-stream of the literature has been devoted to the gauging of audience opinions about and attitudes toward brand placements in films. While numerous attitudinal studies of brand placement in films exist, to the authors knowledge only a single, qualitative study has yet examined attitudes toward brand placement in multiple media (DeLorme 1998). This exploratory study builds on and contributes to previous work by serving as the first quantitative investigation of attitudinal responses to brand placement in films, television shows, popular songs, and video games. Its overall objectives are to examine and compare the attitudes of college student consumers with regards to brand placement across different media. In addition, this study also investigates two potential antecedents of attitudes toward brand placement American Marketing Association / Winter 2005 (attitude toward advertising in general and brand involvement). Employing a convenience sample of college students (n = 437), the results of this study reveal that opinions regarding movie and TV show placements tend to be rather similar and more positive (perhaps due to perceived similarities of their characteristics) than those dealing with music and video games. Respondents tend to perceive music and video game placements as: more inappropriate, less effective enhancers of content realism, inferior sources of brand information, less influential in purchase behavior, and more unethical and misleading. As no previous study has looked at content genre within the context of brand placement, our incorporation throws further light on and expands the knowledge of consumer perceptions of placement strategy. Finding of the study indicates that film and television have more genres considered appropriate for brand integrations than music or video games. It is interesting to note that animated fare for both movies and television is considered particularly inappropriate for brand placements by more than 50 percent of respondents. It is also notable that genre appropriateness for music tends to be split based on “mainstream-ness” – country, rock, and hip hop being considered appropriate (genres generally well represented on the weekly mainstream music charts) and blues, jazz, Christian, and classical/opera inappropriate (genres rarely on the mainstream music charts). For video games, sports is clearly the genre of choice among respondents (it is possible that racing was considered a type of sport, thereby explaining the closeness of percentages) and is also viewed as especially appropriate for brand placement as a television genre. This would seem to point to an association of sports with branding, which is of intuitive sense as sports events tend to be brimming with sponsorships and advertisements. In addition, the present study provides evidence that those who are more positively disposed towards advertising in general are also likely to be more accepting of its specific forms (in this case placed within media content). Further, there exists a positive relationship between involvement with brands and positive perceptions of placement strategy. Thus, our results provide preliminary evidence that two ways advertisers can potentially segment 26 their brand placement audience is according to acceptance of advertising in general and level of involvement with brands. Greater research is needed, however, to develop more detailed and precise points of segmentation for the two criteria than our separation of high/low and more/less. For further information contact: Yongjun Sung Department of Advertising and Public Relations Grady College of Journalism and Mass Communication The University of Georgia Athens, GA 30602 Phone: 706.549.0988 FAX: 706.542.2183 E-Mail: [email protected] American Marketing Association / Winter 2005 27 BRANDS IN ACTION: THE ROLE OF BRAND PLACEMENTS IN BUILDING CONSUMER-BRAND IDENTIFICATION Andrew T. Stephen, University of Queensland, Australia Leonard V. Coote, University of Queensland, Australia SUMMARY Brand placement in mainstream media such as films, television programs, computer and video games, and music videos has become a common practice, and a component of many integrated marketing communication strategies. There are now countless examples of brand placements in media, particularly in films and television programs. Some recent placements in television programs include General Motors’ products in CBS’s Survivor and Bravo’s Queer Eye for the Straight Guy, Mitsubishi, American Express, and Coors in NBC’s The Restaurant, Coca-Cola in Fox’s American Idol, MSNBC in NBC’s The West Wing, Dell Computer in Fox’s 24, and the Trump corporate brand as the focus of NBC’s The Apprentice. Most commercial studio films feature brand placements, such as Fox News in 20th Century Fox’s Day After Tomorrow, and the suite of brands placed throughout the recent James Bond films (including Omega, BMW, Aston Martin, Heineken, and Visa). Past research on brand placement has focussed on measuring the effectiveness of placements with respect to consumer memory and recall and attitudes towards brands, practitioners’ views on brand placement, and consumers’ attitudes towards the practice of brand placement with respect to mostly ethical and moral considerations. Little extant research has considered more enduring and fundamental processes or outcomes of brand placements. This paper links brand placement with brand loyalty outcomes through a process of consumer-brand identification. The integration of consumer-brand identification with a nontraditional marketing communications strategy such as brand placement is novel. Despite their prevalence in marketing, the processes for leveraging brands to create strategically valuable communication mechanisms and highly loyal consumers is not yet fully understood. The existing literature has built a detailed and thorough foundation for understanding brand placement and its potential benefits to advertisers and marketers, however it is yet to consider the contributions brand placement makes to developing strong social and emotional bonds between consumers and their brands. Brand placements are a unique form of marketing communication in that they allow consumers to view brands “in action.” When brands are placed in popular mass media, this not only provides exposure to potential American Marketing Association / Winter 2005 target consumers, but the placement also shows brands being used or consumed in natural settings. This may be more believable, since media characters with which consumers might relate to and identify with use the placed brands. Social identity theory is thus relevant in this context. A conceivable outcome of brand placements putting brands in “action” in the eyes of consumers may be the development of consumer-brand identification. Identification literature has considered image-, knowledge-, and social-related antecedents of identification (e.g., Bhattacharya and Sen 2003). Brand placements showing brands in apparently realistic (yet contrived) contexts may signal richer image, knowledge, and social information about brands to potential consumers than other forms of marketing communications due to the more realistic medium. Examining brand placements and consumer-brand identification then helps not only to advance knowledge of the effectiveness of this communication device, but also to improve our understanding of how to actualize deep-level bonds of identification between consumers and brands. A conceptual framework advanced in this paper proposes a process through which image-, knowledge-, and social benefit-related characteristics of brand placements contribute to the development of identificationbased bonds between consumers and brands. Loyalty or relational outcomes of identification are also considered (i.e., brand loyalty, brand advocacy, and brand defence). This process is thought to be moderated by characteristics of a marketing communication strategy of which a given placement is part, and characteristics of the focal brand. Consumer characteristics with respect to (1) attitudes towards brand placement (e.g., acceptance of the device), and (2) personal relevance of the focal brand are also posited as moderators of this process. Implications for theory and practice are considered. The main contribution of this paper is the integration of social identity theory and consumer identification with the brand placement literature. These theories provide compelling justifications for brand placement as a marketing communication strategy because they explicate the deeper connections that can form between consumers and their brands, and the attitudinal and behavioral loyaltyrelated outcomes of these connections that are possible. In terms of practical implications, this paper provides marketers and brand managers with a viable approach to 28 fostering consumer-brand identification. Bonds of identification between consumers and their brands are difficult to break; a loyal customer base with a high level of consumer-brand identification is strategically valuable and a potential source of competitive advantage. Although brand placement has been used in mass media for many decades, its current growth and economic value across a variety of media warrants a deeper examination of its effectiveness as an emerging “hybrid” communications strategy (cf., Balasubramanian 1994). This paper considers placement from a different perspective by examining its role in the process of consumers identifying with brands and the outcomes of this process. The ability of a brand placement to show a brand in “action” and to personify a brand by associating it with media characters in a realistic and believable manner makes it a unique communication device, and one that is conducive to fostering consumer identification with a brand. While advertisers and marketers rightly perceive brand placement to be an effective communications and brand-building strategy, this paper considers the possibility that the benefits advertisers can potentially enjoy from investing in such a strategy may be more wide-reaching and valuable than previously thought. References available upon request. For further information contact: Andrew T. Stephen UQ Business School University of Queensland Brisbane, Qld 4072 Australia Phone: +61.7.3365.9721 FAX: +61.7.3365.6988 E-Mail: [email protected] American Marketing Association / Winter 2005 29 THE MARKETING COCOMPETITION PROCESS AND STRATEGIC ALLIANCE INSTABILITY: A SYSTEM DYNAMICS MODEL Anna Shaojie Cui, Michigan State University, East Lansing Roger J. Calantone, Michigan State University, East Lansing SUMMARY To gain speed to market and to enable firms to address markets otherwise inaccessible in the short run, marketing alliances often form. The coexistance of cooperation and competition between partners makes alliances a process of cocompetition. The force of cooperation based on common benefits holds an alliance together, while the force of competition based on private benefits tears an alliance apart. The two countervailing forces interact with each other during the partnering process and influence the stability of an alliance. Previous research has recognized competition as a source of alliance instability, however, largely due to the limitation of methodologies employed in extant literature, few research has taken a dynamic view and studied the cocompetition process overtime. System dynamics modeling is a simulation method that has been widely applied to model all kinds of complex systems. This methodology provides a way to study complex interactions and feedbacks overtime. Having not been widely used in marketing, more specifically in interfirm partnerships, this methodology has the potential to improve our understanding of the interaction between cooperation and competition and its influence on the instability of an alliance. In this study we build a system dynamics model in the context of horizontal learning alliances (Figure 1). The dyadic model captures the two partner firms’ learning, increase in competitive advantage, dependence and willingness to continue the partnership, with “willingness to continue the partnership” directly related to the stability of an alliance. The model is symmetric between firm A and B. For both firms, private learning increases individual firm’s competitive advantage, while collective learning increases the joint competitive advantage, which is shared by the two firms; dependence increases with investment in the partnership and unavailability of alternative partners; American Marketing Association / Winter 2005 willingness to continue the partnership is based on the firm dependence on the partner, satisfaction for past cooperation, and the learning potential in the partnership. Embedded in the model are positive loops capturing the force of cooperation and negative loops capturing the force of competition. Through the positive loops the willingness to continue the partnership builds up itself. For example, increasing with the willing to continue, investment further enhances the firm’s dependence and willingness to continue. Similarly, willingness to continue increases the cooperation effort and correspondingly the benefits generated from the partnership, which in turn increases the willingness to continue. Through the negative loops the willingness to continue the partnership reduces itself. In respect to benefit sharing, disadvantage in sharing benefits, increased by high dependence and reduced bargaining power, decreases the firm’s satisfaction for the relative outcome and reduces its willingness to continue. Related to partner availability, learning improves a firm competency and increases the availability of alternative partners, which in turn decreases the firm’s dependence and willingness to continue. Also, because of opportunism, a firm dependence on the partner firm decreases the partner firm cooperation effort, which reduces the focal firm learning and willingness to continue. The model is run under a symmetric setting where all parameters are set the same for the two firms and an asymmetric setting where some parameters are set different for the two firms. The simulation results confirm that when the force of competition overweighs the force of cooperation, the propensity of instability is increased. Further, when two firms are perfectly symmetric in learning capability, partner knowledge and intent of appropriation, the partnership is highly stable, while asymmetry in these characteristics increases the propensity of instability. 30 FIGURE 1 A System Dynamics Model of Cocompetition in Learning Alliances For further information contact: Anna Shaojie Cui Department of Marketing and Supply Chain Management The Eli Broad College of Business Michigan State University N370 Business College Complex East Lansing, MI 48824 Phone: 517.432.5535 E-Mail: [email protected] American Marketing Association / Winter 2005 31 FOCAL SUPPLIER OPPORTUNISM IN RETAILER CATEGORY MANAGEMENT Neil A. Morgan, University of North Carolina at Chapel Hill Anna Kaleka, Cardiff University, United Kingdom Richard A. Gooner, Scott, Madden & Associates, Raleigh SUMMARY Leveraging suppliers resources and capabilities via category management has become the focus of widespread attention in the supermarket industry, as retailers seek competitive advantage in the face of industry consolidation, globalization, and the rapid expansion of massmerchandisers into the grocery market (ACNielsen 1998; Gruen and Shah 2000; Hopkins 2003). Category management concerns treating sets of complementary and/or competing brands in retail settings as strategic business units and allocating resources within these categories to maximize planned outcomes (e.g., Blattberg and Fox 1995; Dhar, Hoch, and Kumar 2001; Zenor 1994). Category management therefore involves the analysis of category-level data, setting goals for category performance, and the formulation and execution of category plans, all of which might be undertaken with varying degrees of involvement from suppliers (Basuroy, Mantrala, and Walters 2001; Dussart 1998). However, analysts suggest that retailers can enjoy significant performance benefits if retailers allow a focal supplier to assume the role of “category captain” where the supplier undertakes or has significant input into the retailer’s category management (e.g., Blattberg and Fox 1995; Cannondale 1999; Freedman, Reyner, and Tochtermann 1997). Despite this, fear and/or experience of supplier opportunism means that many retailers are either unconvinced or report having failed to make such category management relationships with focal suppliers work (e.g., Brandweek 1999; Supermarket Business 1999). The literature offers surprisingly little guidance to retailer and supplier managers regarding this important issue. There has been little empirical study of category management generally, and no research focused on the key issue of focal supplier opportunism at the categorylevel (Dhar et al. 2001; Gruen and Shah 2000). The literature reveals a number of different theories relevant to understanding buyer-supplier relationships (e.g., transaction cost analysis, relational exchange, resource dependence, etc.) and their impact on firm performance (resource-based view, industrial organization, etc.). However, many of these theories offer different viewpoints on various aspects of supplier-retailer relationships in category management, and none provide a comprehensive framework that permits the broad understanding of this American Marketing Association / Winter 2005 complex issue required by retailers. For example, most theory and empirical evidence regarding buyer-seller relationships adopts a dyadic perspective, either focusing on a single buyer-supplier relationship (e.g., Dyer and Singh 1998; Jap 1999), or treating each supplier relationship with a common buyer separately (e.g., Subramani and Venkatraman 2003). Yet, since retailers have more than one supplier to almost all categories, and prescriptions advocate giving a key supplier significant influence over retailer category management, the retailer-focal supplier relationship may affect relationships with other suppliers to the category in ways that impact the retailer performance. Since these conditions have not been addressed in previous theory development and empirical research, the literature has little guidance to offer managers facing such situations. This research contributes to theories of interfirm relations and competitive advantage and offers guidance for retailer and supplier managers by developing and testing a model of opportunism among focal suppliers at the category-level, its antecedents, and associated performance outcomes. Our research contributes to knowledge in three areas. First, synthesizing insights gained from qualitative fieldwork with those available in the literature, we develop a conceptual model of important antecedents and consequences of category-level focal supplier opportunism. Second, we test our model using data from 73 category managers representing six grocery retailers across a representative set of 35 different product-categories to provide new empirical insights into focal supplier opportunism and its impact on category-level performance. Our data suggest that focal supplier opportunism decreases retailer category performance. Consistent with retailer fears, we find that focal suppliers with significant influence in retailers category management efforts are more likely to engage in opportunistic behavior. However, our data also reveal that retailer fears that being dependent on a focal supplier will lead to greater supplier opportunism are largely unfounded, while supplier dependence on the retailer is also unrelated to focal supplier opportunism. Finally, we find that retailers’ ability to monitor – but not to punish – its focal suppliers is negatively related to opportunistic behavior among focal suppliers. Third, our findings illuminate the important but largely ignored case in which a buyer relationship with a focal supplier puts that supplier in a position to directly influence the buyer 32 relationships with other competing suppliers, who also continue to supply products to the buyer. From this perspective, we find that focal supplier opportunism increases militant behaviors among non-focal suppliers to the category but that these militant behaviors do not significantly negatively impact retailer category-level performance. For further information contact: Neil A. Morgan Kenan-Flagler Business School CB# 3490, McColl Building University of North Carolina at Chapel Hill Chapel Hill, NC 27599–3490 Phone: 919.962.9835 FAX: 919.962.7186 E-Mail: [email protected] American Marketing Association / Winter 2005 33 “NO GREATER SATISFACTION THAN TO VINDICATE EXPECTATION” HOW AFFECTIVE EXPECTATIONS SHAPE CONSUMPTION EXPERIENCE Andrew K.C. Wong, The Chinese University of Hong Kong, Hong Kong SUMMARY Consumption experience is subjective, dynamic and subject to external influences. Consumers may unconsciously color their judgments through the tinted glass of a priori expectations. Imagine, when we take the first sip of an award-winning Pauillac wine, or when the long awaited sequel of an international blockbuster finally opens, are we immune to the influence of expectations and let the moment of truth tells the truth? According to the Disconfirmation Paradigm (Olson and Dover 1979), satisfaction is determined by the discrepancy between expectation and experience. Treating and measuring expectation and experience as two independent entities, one can compute the discrepancy by simple mathematics and determine the dis/satisfaction. Accordingly the prediction is intuitively appealing: the higher the expectation, the bigger the disappointment. But what if the experiential perception is vulnerable to the magnetic force of expectations? The focus of this paper is to examine how prior expectations shape subsequence consumption experience. Affective Expectation Theory Olson and Dover (1979) defined expectations as pretrial beliefs about the product, and belief as a subjective probability of association between a product and an attribute. Subsequent studies mostly focused on attributebased evaluation (e.g., Deighton 1984; Smith 1993). While emphasis has long been given to the cognitive side, the affective side of expectation is under explored. Not until recently was the affective nature of expectations formally conceptualized and empirically tested. Wilson and Klaaren (1992) defined affective expectations as “people’s predictions about how they will feel in a particular situation or toward a specific stimulus” (p. 3). In the context of consumption, advertising can induce not only attribute-related expectations, but also the affective expectations of how a consumer feels during and after consumption. In accordance with the affective expectation theory, it is possible that even the actual consumption experience objectively fails to meet a priori expectation, consumers would still unconsciously surrender to their own affective expectations such that the discrepancy between expectation and experience is not noticed. As a American Marketing Association / Winter 2005 result, disconfirmed experience tends to be assimilated to the affective expectations, leading to satisfaction. P1: Ad-induced affective expectations will lead to an assimilation bias such that negatively disconfirmed experience will be evaluated in the direction toward the prior affective expectations, provided that the discrepancy is not noticed. Ambiguity Moderates the Effects of Affective Expectations The assimilation bias of affective expectations is contingent on the noticeability of the discrepancy (Wilson et al. 1989). When facing an ambiguous experience, which is open to multiple interpretations (Herr et al. 1983; Hoch 2002), a consumer may have difficulty in recognizing the discrepancy, if any. Past research suggested that ambiguous stimuli tended to be assimilated to contextual stimuli (Herr et al. 1983; Hoch and Ha 1986; Martin et al. 1990; Schwarz and Bless 1992), providing tentative support to the notion. In the discussion of product attributes, Hoch and Deighton (1989) related ambiguity to the search, experience and credence qualities. Information in an ad highlighting the experience or credence qualities of the focal product is by default more ambiguous and likely to induce greater assimilation to affective expectations. P2: With the presence of affective expectations, an ad highlighting experience or credence attributes of a product or service will lead to greater assimilation bias than does an ad highlighting search attributes. Ambiguity can be reduced by the presence of a comparison standard. It is not uncommon that past experience is recalled as a standard to resolve ambiguity. The retrieval of past experience strongly suggests self-referencing, which occurs “when information is processed by relating it to aspects of oneself, e.g., one’s own experience” (Burnkrant and Unnava 1995, p. 17). Phillips and Baumgartner (2002) proposed that affective expectations could be formed based either on the remembrances of retrospective consumption-related emotions, or anticipatory visions of future emotions. These two types of selfreferencing attempt are in accordance with the retrospective and anticipatory self-referencing proposed by Krishnamurthy and Sujan (1999). They defined retrospective self-referencing as anchoring the stimulus to 34 autobiographical experiences, and anticipatory self-referencing as referencing the stimulus to imagined future experience. Under retrospective self-referencing, the retrieved details of a past consumption activated by an ad may serve as a background against which the actual consumption is evaluated. Discrepancies, particularly those negative ones that fall short of the expectations, should be more noticeable and subsequently reduce the assimilation bias or even lead to a contrast effect (Schwarz and Bless 1992). In the case of anticipatory self-referencing, the interpretation of the actual experience should be more “open” and more likely to be assimilated to the affective expectations. In summary, the temporal orientation of self-referencing may either resolve (under retrospective self-referencing) or enhance (under anticipatory self-referencing) the ambiguity of the experience, and thus moderates how affective expectations influence judgment. P3: The assimilation bias of affective expectations is reduced under retrospective self-referencing, but enhanced under anticipatory self-referencing. For further information contact: Andrew K.C. Wong Department of Marketing The Chinese University of Hong Kong Shatin, N.T. Hong Kong Phone: 852.2609.7808 FAX: 852.2603.5473 E-Mail: [email protected] American Marketing Association / Winter 2005 35 CUSTOMER DELIGHT: AN ATTEMPT TO COMPREHEND THE DIMENSIONS THAT COMPOSE THE CONSTRUCT AND ITS BEHAVIORAL CONSEQUENCES Stefânia Ordovás de Almeida, Pontifícia Universidade Católica do Rio Grande do Sul, Brazil Walter Meucci Nique, Universidade Federal do Rio Grande do Sul, Brazil ABSTRACT UNDERSTANDING CUSTOMER DELIGHT The goal of this research is to propose and test a scale that is suitable to measure the dimensions that compose the customer delight construct, as well as its behavioral consequences. Aiming that, three studies were used to prove the existence of content and construct validity for the proposed dimensions. Customer delight can be defined as “an emotion, characterized by high levels of joy and surprise, felt by a customer towards a company or its offering (product/ service)” (Kumar 1996, p. 9). Thus, customer delight is defined as a rather positive emotional state towards the purchase/consumption experience, generally derived from the surprisingly positive disconfirmation level of perceived performance (Oliver et al. 1997; Rust and Oliver 2000). Delight would be characterized as an emotion made up of cognitive and affective aspects, including here surprise (Kumar 1996). In this sense, Izard (1997) clarifies that even the cognitive concepts inherent in satisfaction and, consequently, in customer delight – such as need and desire –, and its comparative standards are considered affective by nature or, at least, as having an affective component. INTRODUCTION Regardless of the great number of academic researches giving prominence to customer satisfaction, the understanding of what happens to the customer when he/ she experiences something beyond satisfaction during the post-consumption experience is still incipient. Going beyond satisfaction engenders a deeply positive emotional state regarding the experience of buying or consuming, which is known as customer delight. Considering this scenario, this paper attempts to contribute to the Consumer Behavior literature by proposing a scale that is an attempt to comprehend and measure the dimensions that compose the customer delight construct, as well as its behavioral consequences, and which is also suited to evaluate different cases of buying or consuming experiences. With this in mind an exploratory/qualitative research was carried out, trying to understand the construct and generate items for the construction of a measurement scale. Subsequently, a quantitative/descriptive research was conducted through three studies: the first two aimed at the fine-tuning of the measures by successively applying the scale to distinctive samples; the third also aimed at the validation of the scale through the criteria of model adjustment, unidimensionality, reliability, convergent, and discriminant validity properly attributed to the instrument. The content validity was a permanent concern during the study. Furthermore, this study consists of a theoretical review of the aspects that involve customer delight and the description of the methodological procedures used in field research. The explanation regarding the analyses performed and results found has the purpose of describing the research findings as a whole, giving a basis for the discussion that encloses the study. American Marketing Association / Winter 2005 Notwithstanding the fact that a delighted customer should be at first satisfied, delight cannot be mistaken for mere satisfaction. The differentiation basically occurs at an arousal level of the positive emotional response: at a low level there lies satisfaction; at a high level, delight (Oliver and Westbrook 1993). In this sense, previous studies also determined that pleasure and arousal are part of intrinsic characteristics of either the goods or the services experiences. Therefore, both dimensions are viewed as complementary in the delight formation, considering that pleasure by itself is regarded as a positive affect of moderate arousal (Mano and Oliver 1993). Other evidence on the differentiation between satisfaction and delight can be found in the studies of Oliver and Westbrook (1993). These studies showed that customers who experience high levels of joy and surprise presented greater indexes of repurchase intention and a high degree of expectations disconfirmation. Therefore, the authors empirically confirmed the existence of a delight state separated from satisfaction. Kumar (1996) also attributed discriminant validity to the constructs and concluded that the effects of delight on the repurchase intentions of individuals are higher and go beyond those of satisfaction. In this sense, it can be observed that the differentiation between satisfaction and delight is not present just at the level of surprisingly positive disconfirmation experienced, but also at the level of the 36 positive affect felt by the consumer, including here arousal, and in the post-consumption behavior generated. THE DELIGHT SCALE DEVELOPMENT – EXPLORATORY PHASE The exploratory/qualitative phase of the scale development process was responsible for the construct domain delimitation and creation of items. First a bibliographic investigation was carried out through the analyses of several studies in the marketing and psychology areas. After this investigation, 30 consumers were questioned concerning their highly satisfactory consumption experiences. Subsequently, 20 consumers whose illustrations fit into the theoretical formulation of the theme were selected to participate in the in-depth interviews. The highly positive disconfirmation of expectations was observed in all respondents’ descriptions as a fundamental point in delight formation. In this sense, surprising consumption was experienced by all respondents interviewed and was always related to the positive affect. The possibility of personalization of services as a way of surprising consumers, as well as the product tailored to one’s needs and desires, was a reason for the descriptions of delightful experiences through personalization. Concerning the price perception, six respondents mentioned this item directly and, often, the positive perception of price was associated to the positive performance of the product or service. The intention to buy again and the tendency towards positive word of mouth were observed among all respondents. The measuring items for the scale construction come from different sources. The ones responsible for the positive surprise measurement were taken from the Differential Emotions Scale – DESII by Izard (1977). The items used to measure the other dimensions were mainly adapted from the studies of Kumar (1996), Oliver et al. (1997) and Rust and Oliver (2000), with the grounding of the in-depth interviews. These items were submitted to a Portuguese version process. Once the version was finished, two marketing academics evaluated its comprehension. Therefore, three marketing experts analyzed the items defined for the scale and suggested improvements. Thus, 40 items formed the first version of the built scale through five broad dimensions: cognitive aspects, affective aspects, positive surprise, price perception and postpurchase evaluation. THE DELIGHT SCALE DEVELOPMENT – DESCRIPTIVE PHASE The descriptive phase of the delight scale development began with a pre-test of the instrument done with 10 people from the same study population. With the objective of testing, purifying and validating the scale, three American Marketing Association / Winter 2005 different samples of the same population were used. Undergraduates from business schools of three different universities in Brazil formed the population. The first and second samples, which were used only for scale finetuning, had 146 and 124 respondents respectively; the third, which should also be submitted to validation, had 240 respondents. Regarding the samplings, it was verified that a rate of 81 percent of the respondents in the first study, 92 percent and 71 percent in the second and third studies respectively, analyzed experiences with goods, while the others did so with services. The procedures used for testing and fine-tuning the scale were based on the propositions made by DeVellis (1991), in which the exploratory factorial analysis (EFA), the communalities of the items – accepted at 0.5 (Evrard 2002); the measure of the reliability through Cronbach’s Alpha – accepted at 0.6 (Evrad 2002); the item-item correlation – minimum of 0.5 (Evrard 2002) and the itemtotal correlation – maximum of 0.80 (Kline 1998) were taken into account, apart from the basic descriptive measurements. The software used here was SPSS 10.0. In addition, following the recommendations of Hair et al. (1998), unvaried outliers were examined through the Z coefficient test and only in the third data collection the necessity of withdrawing eight outliers from the sample arose. Data Collection and Measurement Scale Data collection was carried out throughout March and May/2003 by the researcher in the classrooms, and respondents filled out the questionnaires by themselves. The recommendation given to the participants when answering the questionnaire was to take into account a highly satisfactory consumption experience that they had gone through, considering the study focus. As a measurement scale, a 7-point Liket scale was used, where point one represented the “totally disagree” assertive, and point 7 a “totally agree” assertive. Items indicating high agreement represented a higher tendency to delight. THE VALIDATION OF THE DELIGHT MEASUREMENT SCALE Aiming at the proposed scale validation, two procedures were carried out: the content validity and construct validity, both suggested by DeVellis (1991). The content validity was achieved by logical analysis. The construct validation was done using the AMOS 4.0. software. Besides the validation process, the inexistence of multivariate outliers (measured by the Mahalanobis D² distance) was confirmed. Small problems of normality were also verified and eliminated, according to the principles suggested by Kline (1998). The results of the scale development process and its later validation are presented below. 37 RESULTS OF THE DELIGHT SCALE DEVELOPMENT PROCESS – FIRST STUDY The first scale version, applied to the first sample and submitted to EFA, indicated nine factors responsible for representing 67.32 percent of total variance explained. The results of the EFA, after some gatherings were done to regroup variables that were isolated or misallocated based on their conceptual coherence and their factorial loadings (Evrard 2002), are presented in Table 1 through the factorial loadings of the items and their communalities. With the reliability and correlation analyses done, considering the EFA results, it was decided that some variables needed to be removed. The variables and the factor they belong to are: Factor 1: V4, V5, V10. Factor 2: V18, V26. Factor 5: V6, V9, V36. Factor 6: V27. Since the standardization measured through item V18 was not being well comprehended in its relation to delight, a new item called “I received personalized service/good” was inserted with the same variable code for the second study. The Cronbach’s Alpha for the factors after the modifications were: Factor 1: 0,9303; Factor 2: 0.8542; Factor 3: 0.8125; Factor 4: 0.8343; Factors 5: no items left; Factor 6: only one item left; Factor 7: 0.5164. After all these procedures, a new EFA was done and no items presented values lower than 0.5. THE DELIGHT SCALE DEVELOPMENT PROCESS – SECOND STUDY The adjusted factorial composition of the second study showed five dimensions and a total variance explained of 67.19 percent was presented, with a KMO value of 0.861. Only one factor, represented by items V37, V38, and V39, presented improper solutions in the analysis performed, with a Cronbach’s Alpha of 0.3848, and improper correlations. In this way, variable V37 was rewritten as “the price of this service/good spurred me to buy,” and variable V38 was excluded for being prone to dubious interpretations. Apart from that, no other changes were made in the scale related to the previous study. THE DELIGHT SCALE DEVELOPMENT PROCESS – THIRD STUDY The third sampling pointed to a factorial structure composed of six dimensions, responsible for a total variance explained of 64.52 percent and a KMO measure value of 0.874. For the results analysis, the EFA was initially conducted and its results were compared to those from the internal consistency and item-item/item-total correlation analysis, running all the procedures again each time a variable was removed. Thus, at the end of all analyses employed, the rejection of the following items was performed: V40, V35, V17, V34, V13, and V16. American Marketing Association / Winter 2005 The items related to the price perception measurement were not widely supported in the literature and they were inserted in the analysis for their constant appearance throughout the in-depth interviews. The observation of its low adherence to the scale and, consequently, to the studied construct, led us to the belief that price perception was not correlated to the presence of delight. Consequently, the necessity of rewriting the statements on price was brought up from the moment of the first data collection – along with the bad indexes that also indicated the minor correlation of price factors with the construct. Therefore, despite the fact that the final price factor (variables V37 and V39) had presented in the latter study a Cronbach’s Alpha of 0.6996 and an item-total correlation of 0.5381, the elimination of the factor was applied for the theoretical motives explained above. With the removal of the price perception factor, a new EFA was run and the final factorial structure presented five factors. Items V20 and V18 were presented alone under one factor that was called personalization dimension. According to Kumar’s (1996) study personalization is a feeling that can be associated both to satisfaction and delight. Furthermore, he points out that this appraisal is diagnostic and a significant predictor of delight. Personalization is, most of the time, related to unexpected extras provided by the employees to tailor the offer to customer needs. In this sense, higher levels of personalization make the customer feel that the company cares about him, leading to delight (Kumar 1996). The final factorial structure of the scale to be validated, covering a total variance explained of 68.71 percent, followed by its communalities, means and standard deviations is presented in Table 2. When analyzing the descriptive measures here presented, the existence of high standard deviations was detected. The comprehension for those values came though the employment of an ANOVA among consumers of services and goods that corroborated the existence of statistically significant differences in the groups’ means for 16 of the 23 analyzed variables. In these cases, the consumers of services always had the highest means. Thus, the scale observed in Table 2 is the one presented for validation, being composed of 23 items, divided into five factors. The dimensions that compose customer delight and its behavioral consequences are described below, along with their respective Cronbach’s Alpha values: Factor1 – Affective Aspects Dimension (0.9179); Factor 2 – Cognitive Aspects Dimension (0.8497); Factor 3 – Post-consumption Evaluation Dimension (0.7735); Factor 4 – Positive Surprise Dimension (0.7725) and Factor 5 – Personalization Dimension (0.7830). As a result, the validation process of the proposed scale is demonstrated below. 38 TABLE 1 First Study Initial Factorial Structure V11 V3 V7 V15 V16 V2 V1 V8 V14 V17 V10 V13 V5 V12 V4 V23 V24 V19 V20 V22 V21 V25 V18 V26 V30 V29 V28 V32 V33 V34 V31 V35 V6 V36 V9 V37 V27 V38 V39 V40 Factor 1 – Items This experience brought me happiness This service/good transmitted positive feelings to me This was a stimulating experience This experience brought personal satisfaction to me This was an irresistible experience to me This experience brought me pleasure This experience brought me joy This experience was fascinating I felt fulfilled with this consumption experience This experience was attractive to me This service/good made a dream come true This experience made me feel special I personally I identify myself with this service/good This experience made me feel important This consumption experience was one of the most important I have ever had Factor 2 – Items This service/good had an exceptional performance This consumption experience completely satisfied my desires This experience surpassed all my expectations I received personalized assistance The quality of the service/goods is superior to that of others In this experience all the attributes that could be satisfactory were more than satisfactory This service/good had great value to me I received standard service/goods I received more than is expected in this consumption experience Factor 3 – Items I was positively amazed with this experience of consumption I was positively astounded with this consumption experience I was positively surprised with this consumption experience Factor 4 – Items I intend to repurchase this service/good in the future I would recommend this service/good to a friend After this consumption experience I felt like complimenting the company/ employee I am likely to make positive remarks about this service/good to other people I am the most loyal customer after this experience Factor 5 – Items If I had not bought this service/good, I would have felt frustrated I consider having a connection with the company whose service/goods I bought This service/good was made to order for me Factor 6 – Items Loa. Com. The price was a decisive variable within the choice of this service/good There was flexibility so as to assist my necessities in this consumption experience Factor 7 – Items Regarding my purchase potential, the price of this service/good is too high The price of this service/good influenced my level of satisfaction towards the consumption experience I believe I have paid a fair price for this service/good. Loa. .803 .698 .679 .670 .673 .666 .654 .652 .647 .608 .600 .597 .592 .564 .356 Loa. .794 .755 .680 .678 .677 .655 .632 .481 .424 Loa. .749 .692 .537 Loa. .795 .735 .672 .605 .511 Loa. .694 .653 .535 Com. .740 .736 .698 .662 .736 .743 .758 .710 .790 .707 .602 .754 .676 .723 .600 Com. .744 .728 .670 .719 .643 .691 .562 .691 .608 Com. .651 .799 .711 Com. .723 .803 .726 .609 .662 Com. .679 .585 .570 .834 .543 Loa. .741 .758 .530 Com. .727 .698 .597 .577 .573 Extraction Method: Principal Component Analysis with VARIMAX Rotation Source: Data Collection Kaiser-Meyer-Olkin Measure (KMO): 0.862 Bartlett’s Test of Sphericity 1911.087 – sig. = 0.000 American Marketing Association / Winter 2005 39 TABLE 2 Third Study Final Factorial Structure V1 V7 V3 V2 V11 V14 V15 V25 V8 V12 V23 V22 V24 V21 V19 V33 V32 V31 V30 V29 V28 V20 V18 Factor 1 – Affective Aspects This experience brought me joy This was a stimulating experience This service/good transmitted positive feelings to me This experience brought me pleasure This experience brought me happiness I felt fulfilled with this consumption experience This experience brought me personal satisfaction This service/good had great value to me This experience was fascinating This experience made me feel important Factor 2 – Cognitive Aspects This service/good had an exceptional performance The quality of the service/goods is superior to that of others This consumption experience completely satisfied my desires In this experience all the attributes that could be satisfactory were more than satisfactory This experience surpassed all my expectations Factor 3 – Post-Consumption Evaluation I would recommend this service/good to a friend I intend to repurchase this service/good in the future I am likely to make positive remarks about this service/good to other people Factor 4 – Positive Surprise I was positively amazed with this experience of consumption I was positively astounded with this consumption experience I was positively surprised with this consumption experience Factor 5 – Personalization I received personalized assistance I received personalized service/good Loa. .824 .809 .806 .796 .793 .669 .667 .653 .638 .612 Loa. .812 .742 .738 Com. .763 .740 .740 .677 .653 .629 .622 .596 .602 .572 Com. .772 .595 .689 Means/Std.Dv. 5.6/1.3 5.3/1.4 5.8/1.2 5.6/1.3 5.3/1.3 5.2/1.4 5.5/1.4 4.4/1.7 4.9/1.5 4.6/1.7 Means/Std.Dv. 5.4/1.3 5.2/1.5 6.0/1.2 .644 .605 Loa. .832 .820 .681 .597 Com. .792 .719 5.0/1.4 5.3/1.3 Means/Std.Dv. 6.2/1.1 5.6/1.7 .603 Loa. .770 .702 .546 Loa. .875 .868 .605 Com. .672 .746 .711 Com. .818 .812 5.8/1.4 Means/Std.Dv. 4.1/1.6 5.3/1.5 5.6/1.2 Means/Std.Dv. 4.9/2.0 4.5/2.0 Extraction Method: Principal Component Analysis with VARIMAX Rotation Source: Data Collection Kaiser-Meyer-Olkin Measure (KMO): 0.887 Bartlett’s Test of Sphericity: 3105.668 – sig.= 0.000 Note: Although the load of V28 is rather low, it was decided that this variable should be maintained, since otherwise we would have a factor with only two variables, which is not recommended in the validation process. Furthermore, this three-item factor had already been proposed and validated by Izard (1977), as well as used in many studies before this one, proving its reliability. RESULTS OF THE DELIGHT SCALE VALIDITION PROCESS Since the content validity was already achieved through the methodological accuracy employed in the development phases and in the scale fine-tuning, clearly specified in the study method, with the aim of verifying the construct validity, the five-scale dimensions were submitted as five different measurement models to the confirmatory factor analysis (CFA). This method is widely applied in marketing studies, as well as correlated fields, in the search for the construct validity (Bagozzi et al. American Marketing Association / Winter 2005 1991; Garver and Mentzer 1999; Jöreskog and Sörbom 1982; Steenkamp and Trijp 1991). In these circumstances, these authors recommend the necessary procedures to achieve construct validity as unidimensionality, reliability, convergent and discriminant validity, besides the measurement models adjustment criterion. Table 3 shows the CFA results for the five-scale dimensions. Analyzing the fit-indexes, one can detect that most of the measures are satisfactory. The χ2/df for the personalization dimension is higher than expected, but the probability of the qui-square being influenced by the sample 40 TABLE 3 Results of CFA for the Five-Scale Dimensions Fit-Indexes Affect χ2) Chi-square (χ Degrees of freedom (GL) χ2/GL) Chi-square/degrees of freedom (χ Goodness-of-fit Index (GFI) Adjusted Goodness-of-fit Index (AGFI) Tucker-Lewis Index (TLI) Comparative Fit Index (CFI) Root Mean Square Error of Approximation (RMSEA) 59.145 33 1.792 0.952 0.919 0.976 0.983 8.534 4 2.134 0.985 0.944 0.975 0.990 4.745 1 4.745 0.986 0.917 0.964 0.988 6.285 2 3.124 0.983 0.950 0.976 0.984 6.980 1 6.980 0.971 0.913 0.945 0.945 0.059 0.070 0.127 0.096 0.161 Estimation Method: Maximum Likelihood size is well known and discussed in the literature (Hair et al. 1998; Kline 1998). Therefore, Raykov and Marcoulides (2000) recommend that other fit-indexes should be analyzed, so that a real idea on the model adjustment can be reached. When analyzing the measures of the indexes GFI, AGFI, TLI, and CFI, it can be noted that their values were always higher than 0.90, which is in agreement with the recommendations of Hair et al. (1998) and Kline (1998). The adjustment measure RSMEA possesses acceptable values ranging between 0.05 and 0.08 (Hair et al. 1998). Analyzing the data mentioned in Table 3, one can observe that the dimensions of post-purchase evaluation, positive surprise and personalization presented values that exceeded the acceptability for the referred index. According to Raykov and Marcoudiles (2000), this index shares the same theoretical nature of the CFI. Thus, due to the high values of the CFI obtained in the analysed dimensions, these measures were considered validated as well. After presenting the criteria that led to the conclusion that all the dimensions of the proposed scale are fit and validated, unidimensionality was pursued and achieved through the examination of standardized residues proposed by Garver and Mentzer (1999), Jöreskog and Sörbom (1988), and Steenkamp and Trijp (1991). According to the authors, in order to present unidimensionality, a dimension should have all its standardized residuals lower than 2.58. The highest standardized residual score found in the study was 2.049 in the personalization dimension, therefore, all dimensions may be considered unidimensional. According to Garver and Mentzer (1999) a reliable measurement model – in this case a reliable dimension – should present a composite reliability (CR) over 0.7 and American Marketing Association / Winter 2005 Cognition Post-Purchase Surprise Personalization Source: Data Collection an average variance extracted (AVE) over 0.5. By analyzing the reliability of the five dimensions, we could affirm that all the measurement models are reliable. Thus, the affective dimension presented CR = 0.9749 and AVE = 0.6880, the cognitive dimension presented CR = 0.9609 and AVE = 0.6296, the post-consumption evaluation dimension presented CR = 0.9672 and AVE = 0.6887, the positive surprise dimension presented CR = 0.9695 and AVE = 0.7121, and the personalization dimension presented CR = 0.9648 and AVE = 0.6406. For Garver and Mentzer (1999) and Bagozzi et al. (1991), the convergent validity of a scale is given by the quality of its fit-indexes. Besides all the scale dimensions having been validated through the examination of their fit-indexes, the factor regression coefficients were also verified to certify the convergent validity. All the factor regression coefficients were statistically significant, which, according to Bagozzi et al. (1991), means that t-values are higher than |2,00| for p < 0.05 (7.86 was the lowest t-value found in the study). As a strong condition for convergent validity, Steenkamp and Trijp (1991) suggest that all the factor regression coefficients should exceed 0.5. This condition was also achieved, since 0.591 was the lowest value found. As a final procedure, so as to infer construct validity, the discriminant validity was verified through the method proposed by Fornell and Larcker (1981). This method proposes that the average variance extracted for each dimension should be higher than the squared correlation between this dimension and any other dimension, which characterizes the shared variance. For the studied construct – customer delight and its behavioral consequences – discriminant validity was detected among the dimensions. This can be observed by the values of the average variance 41 extracted for these dimensions: 0.6880 for the affective aspects, 0.6296 for the cognitive aspects, 0.6880 for the post-purchase evaluation, 0.7122 for the positive surprise and 0.6406 for the personalization dimension. These values were by far higher than the highest value found for the shared variances among dimensions (0.3600). The following discussion comments all these results. DISCUSSION The scale construction and test practiced in this study meet the demand of developing a greater theoretical comprehension on customer delight. Within this context, the first evidence on the study can be described as a measure purification relevance, through a successive scale reapplication; for only the empirical evidence can prove that some items, or even entire dimensions, such as price perception, did not belong to the construct. Hence, an implication for the marketing academy is demonstrated in the confirmation of the dimensions that compose the customer delight construct and its behavioral consequences. This evidence was achieved through the favorable fit-indexes of the models and the confirmation of unidimensionality, reliability and validity for the proposed scale in all analyzed dimensions, which confirms its construct validity. The content validity was also achieved, by logical analysis, because of the quality of the scale measurement items, accessed by the exploratory/qualitative research, which was done before the scale construction, and also by the successive fine-tunings. Yet, a scale application with new contexts and another population is encouraged, supplying the deficiencies that might have come up in this study, such as the employment of the students’ sample, concerning the limitations of external validity that result with this type of sampling. It’s important to note that although discriminant validity was established between the dimensions of the scale proposed, this was not done between delight and its close relatives, such as joy, as proposed by Oliver et al. (1997), which suggested a more psychometric specification and differentiation between the called “positive affects.” Therefore, this can be a suggestion for future studies. The discriminant validity between satisfaction and delight was not the goal of this study either, as already established by Kumar (1996). The peditive and nomological validity were not established either, since, to infer this, it would be necessary to test the whole structural model. Thus, it remains as a suggestion for the future. When evaluating the research object used by the respondents in the three studies, it is observed that the citation of goods shows supremacy when compared to the ones of services. Causes for this phenomenon were not yet American Marketing Association / Winter 2005 found. However, the ANOVA realized in the third study denotes the existence of statistically significant differences between the means of consumers of goods and services: the latter group’s means are always statistically higher. In these circumstances, the importance of the insertion of a variety of services in goods that are generally standardized must be emphasized, considering the necessity of variety when one is seeking to deliver an unexpected pleasant performance (Oliver et al. 1997). What could be observed from the consumption of goods is that most of them were symbolic ones, so the need of personalization was replaced, in these cases, by the congruency of the good with consumer self-concept. Besides that, these differences are not relevant to the process of scale development; neither do they show the need for separated scales to evaluate the consumption of goods and services. The difference between these consumers lies in the kind of consumption experience and not in the dimensions analyzed, which pertain to both of them. Another question to be regarded is the conclusion that the price perception variables are not a customer delight dimension. Thus, the perception of a low or fair price is only part of customer delight when accompanied by other attributes that also have the capacity of delighting (e.g., “these pants fit me perfectly and they were also cheap” – respondents answered in one in-depth interview). The fact of being only cheap is not enough to give the pants the power of delight, it solely satisfies the bargain or equity item. The presence of delight presumes that the experience possesses other components that might effectively generate a positive affect and surprise. Therefore, still maintaining the consideration of the need for new studies so as to confirm the real accessory role of price in delight formation, care must be taken when intending to use it as a way of delighting customers. This observation is important for organizations to perceive that delight should occur through their differentiated attributes rather than strategies that can be easily copied by their competitors, such as price promotion (Rust and Oliver 2000). All things considered, the inclusion of delight, through the proposed scale, in theoretical models on the postconsumption evaluation process will allow a deeper understanding of the distinct impacts between satisfaction and customer delight in following behavioral results. The complete theoretical model test is another step to be taken towards the comprehension of the existent relations among the construct dimensions and the verification of which dimensions have a higher impact on subsequent behaviors. Furthermore, other relations that search for a greater comprehension of the role of customer delight in the postconsumption evaluation should be empirically verified, pursuing a wider vision of customer delight as a highly positive emotional result to the experience of consumption. 42 REFERENCES Bagozzi, Richard P., Youja Yi, and Lynn W. Philips (1991), “Assessing Construct Validity in Organizational Research,” Administrative Science Quarterly, 36, 421–58. Devellis, R.F. (1991), Scale Development: Theory and Aplications. Newbury Park: Sage. Evrard, Yves (2002), “Instrumentos de Pesquisa, Coleta e Análise de Dados,” class material, Business School, Federal University of Rio Grande do Sul/Brazil. Fornell, Claes and David F. Larcker (1981), “Evaluating Structural Equation Models with Unobservable Variables and Measurement Error,” Journal of Marketing Research, 18 (February), 39–50. Garver, Michael S. and John T. Mentzer (1999), “Logistics Research Methods: Employing Structural Equation Modeling to Test for Construct Validity,” Journal of Business Logistics, 20 (1), 33–57. Hair, J.F.J., R.E. Anderson, R.L. Tatham, and W.C. Black (1988), Multivariate Data Analysis. New Jersey, EUA: Prentice Hall. Izard, Carroll E. (1977), Human Emotions. New York: Plenum. Jöreskog, Karl G. and Dag Sörbom (1982), “Recent Developments in Structural Equation Modeling,” Journal of Marketing Research, 19 (November), 404–16. Kline, Rex B. (1998), Principles and Practice of Structural Equation Modeling. New York: The Guilford Press. Kumar, Anand (1996), Customer Delight: Creating and Maintaining Competitive Advantage. Doctoral dissertation, Graduate Faculty, Indiana University. Mano, Haim and Richard L. Oliver (1993), “Assessing the Dimensionality and Structure of Consumption Experience: Evaluation, Feeling and Satisfaction,” Journal of Consumer Research, 20 (December), 451–66. Oliver, Richard L. and Robert A. Westbrook (1993), “Profiles of Consumer Emotions and Satisfaction in Ownership and Usage,” Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior, 6, 12–27. ____________, Roland T. Rust, and Sajeev Varki (1997), “Customer Delight: Foundations, Findings, and Managerial Insight,” Journal of Retailing, 73 (3), 311–36. Raykov, Tenko and George A. Marcoulides (2000), A First Course in Structural Equation Modeling. New Jersey: Lawrence Erlbaum Associates. Rust, Roland T. and Richard L. Oliver (2000), “Should We Delight the Customer?” Journal of the Academy of Marketing Science, 28 (1), 86–94. Steenkamp, Jan-Benedict E.M. and Hans C.M. Trijp (1991), “The Use of LISREL in Validating Marketing Constructs,” International Journal of Research in Marketing, 8, 283–99. For further information contact: Stefânia Ordovás de Almeida Faculdade dos Imigrantes/Pontifícia Universidade Católica do Rio Grande do Sul Afonso Taunay 180/605 Porto Alegre/RS Brazil 90520–540 Phone: 00.55.54.2271433 FAX: 00.55.54.2271433 E-Mail: [email protected] American Marketing Association / Winter 2005 43 TOWARDS A CONCEPTUAL FRAMEWORK OF E-CONFUSION Vincent-Wayne Mitchell, City University of London, United Kingdom Gianfranco Walsh, University of Strathclyde in Glasgow, United Kingdom SUMMARY In 2004, the worldwide Internet population amounted to 945 million and projections for 2005 put this at 1.1 billion (Clickz.com 2004a). However, this growing number of consumers is presented with overwhelming amounts of online information and websites and the pace of technological development is faster than some consumers can adapt to. Recent authors have suggested that hyper-choice confuses people, increases regret, is initially attractive but ultimately unsatisfying and is psychologically draining (Mick, Broniarczyk, and Haidt 2004). Such confusion can affect attitudes toward online-shopping and make consumers; dissatisfied, less brand loyal, less trusting, postpone purchases, and shop offline (Walsh et al. 2002). It is surprising then that so little research has addressed the specific issue of consumer confusion on the Internet and its effects on consumers. The aim of this research then is to develop a conceptual model of e-confusion and to explore some of its antecedents and consequences using a cognitive, affective and behavioral framework. Our framework extends that of Walsh et al. (2004) who suggest confusion can be caused by too similar, too many or unclear stimuli. Websites that look and feel similar and give visual cues and/or brand appearance of a “look-a-like” or “fake” website can cause consumers to believe mistakenly, for example, that website A is the same as website B. The website, www.pirated-sites.com, offers many cases of Web design piracy. Consumers can feel unclarity e-confusion when they encounter ambiguous, incongruous, misleading or inadequate Internet information. For example, Mobile phone sites (e.g., www.dialaphone.com) can make prices difficult to understand and workout. Overload e-confusion antecedents can occur when consumers are confronted with more productrelated e-information than can be processed in the shortterm memory. A good example of e-information overload is the often uncategorized results of search engines. Individual characteristics exert an influence on e-confusion because they are often linked to the consumer’s ability to rationalize and process stimuli. For example, age may reduce e-confusion through an Internet experience framework or may increase e-confusion as processing competence decreases with the ageing process. Field independent individuals impose organization upon visual stimuli, and are able to locate a sought-after component. The American Marketing Association / Winter 2005 ability to better organize visual stimuli makes field independent consumers less likely to experience e-confusion from overload and unclarity antecedents. Situational variables, such as using the Internet under time constraints, can lead to rushed decision-making, shortened information-processing and inference-making time which is expected to increase e-confusion because of decreased processing time. When e-confused, consumers attempt to understand who they will attribute responsibility for the confusion and can either blame themselves or others for the confusion. We suggest that attribution serves as a moderator of the confusion-outcome link. We propose that the immediate effect of all e-confusion is indecisiveness and hesitation resulting in the consumer either doing nothing or postponing their web activity. We conceptualize e-confusion as a temporary state of disorientation which has feelings associated with it. These affective consequences represent an individual’s feelings and emotions in relation to their evaluation of the website such as frustration, irritation, anxiety, or even anger. Cognitive consequences refer to consumers’ knowledge and beliefs about a website. Consumers may form erroneous beliefs about the website which can affect trust, satisfaction and loyalty. Behavioral consequences represent consumers’ behavioral intentions or tendencies, or actual overt actions toward the website. We divide behavioral consequences into two types; (1) Generic, i.e., those which are generic to e-confusion and (2) Specific, i.e., those which are specific to the antecedents causing e-confusion. E-companies need to learn how to identify and eliminate sources of confusion on their websites and could reduce confusion sources by doing a confusion audit of their websites. From a regulation perspective, more governmental and private monitoring of the web might help to reduce the numbers of copycat website and cyber squatting which will reduce sources of similarity-induced e-confusion. Better e-mail filtering systems will obviously help, but it may be time for the establishment of a government sponsored e-mail preference service (EPS), to which all organizations should subscribe. Our main contribution to theory lies in developing a model of consumer e-confusion. Future research should include the development of a measurement instrument and subsequent testing of the conceptual model and hypothesized relationships. References are available upon request. 44 For further information contact: Vincent-Wayne Mitchell Cass Business School City University of London 106 Bunhill Row London EC1Y 8TZ Phone: +44.207.040.5108 FAX: +44.207.040.8328 E-Mail: [email protected] American Marketing Association / Winter 2005 45 DIFFERENTIAL IMPACTS OF CRM ON CONSUMER RESPONSES: TOWARD AN INTEGRATIVE FRAMEWORK Frederick Hong-Kit Yim, Drexel University, Philadelphia ers” is more strongly related to value perceived by consumers. SUMMARY As a new paradigm in marketing, CRM is in need of theoretical assistance (Gummesson 2002). Much, if not most, of the research on CRM has tended to focus on its favorable performance metrics such as sales growth. There is scant research effort directed at examining the differential impacts of CRM dimensions on delivering consumer value. In particular, there is no attempt to look into the mechanism of how customer loyalty can be nurtured via value, satisfaction, and trust in CRM projects. Notwithstanding some disappointing CRM results, we believe that the early failures of CRM are not perennial and CRM movements are not expected to terminate (Sheth 2002). A sharper theoretical understanding of CRM can effectively advance future CRM endeavors and successfully breed outstanding firm performance. To avoid the premature death of the CRM discipline (Fournier, Dobscha, and Mick 1998), this study seeks to advance the CRM literature by examining how the CRM dimensions differentially impact consumer value. In particular, CRM is conceptualized to have four distinct behavioral dimensions, namely, (1) focusing on key customers, (2) organizing around CRM, (3) managing knowledge, and (4) leveraging information technology (Yim 2002). We posit that when compared with other CRM dimensions of “organizing around CRM,” “managing knowledge,” and “leveraging information technology,” “focusing on key custom- Moreover, drawing from the diverse research on relational exchanges (e.g., Garbarino and Johnson 1999; Nijssen et al. 2003; Sirdeshmukh, Singh, and Sabol 2002), a comprehensive theoretical framework for understanding how consumer loyalty can be achieved through value, satisfaction, and trust in the CRM context is developed. Specifically, we postulate that value perceived by consumers is positively related to satisfaction with the service firm, which, in turn, is positively related to trust in the service firm. We further posit that trust in the service firm is positively related to loyalty to the service firm. In conclusion, in response to the call for more theoretical assistance for CRM (Gummesson 2002), our research contributes to the marketing discipline both theoretically and managerially. Theoretically, it advances the CRM literature by explicating how a number of exchange-relevant constructs are related, and sheds light on how organizational CRM efforts differentially impact value perceived by consumers in a service setting. As far as managerial implications are concerned, managers are afforded the broad picture of how loyalty can be grown via a number of consumer response constructs, and therefore inculcated the effective way to direct their CRM efforts in terms of delivering value to their key consumers. For further information contact: Frederick Hong-Kit Yim Bennett S. LeBow College of Business Drexel University 32nd and Chestnut Streets Philadelphia, PA 19104 Phone: 215.990.9129 or 215.895.2145 FAX: 215.895.6975 E-Mail: [email protected] American Marketing Association / Winter 2005 46 EXPLORING THE PHENOMENON OF BUYER-SELLER MISMATCHES IN BUSINESS-TO-BUSINESS RELATIONSHIPS Christopher P. Blocker, University of Tennessee, Knoxville1 ABSTRACT Evidence shows relational strategies can prove successful in some cases but are costly and ineffective in others. Yet, understanding favorable conditions for a relational over an arm’s length approach is still emerging. One area that holds promise for shedding light on this issue is buyer-seller mismatches, as they occur when firms strive for dissimilar goals and relate in incompatible ways. This paper draws focus to this concept by integrating the literature and exploring the complexity of buyer-seller incompatibility. INTRODUCTION Building strategic buyer-seller relationships that are marked by long-term, close dealings has captured the attention of firms and researchers alike (Day 2000). Given the substantial resources firms invest to make relationships work, it is unsettling to find a significant number of relationships end in failure (Das and Teng 2000; Wathne, Biong, and Heide 2001). One leading scholar posits that “some firms lose half or more of their customers every three years, and the worst is still to come” (Day 2000, p. 25). These are difficult realities considering the abundance of research performed in relationship marketing over the past two decades. In view of these realities, research in business-tobusiness relationships shows a noticeable movement from enthusiasm that included declarations of a new paradigm (Gronroos 1994) and a fundamental re-shaping of the field (Webster 1992), to a dampened realization that relationship strategies are not universally applicable or painless to implement (Day 2000). For example, many firms make significant investments in technologies (e.g., CRM) promising greater customer retention and loyalty, but the large majority fail to realize the anticipated return (Newell 2003). Additionally, researchers historically have argued for suppliers to shift customer interaction from a transactional mode to a relationship building mode (Kotler 1991; Webster 1992). Regrettably, this approach has influenced some firms to attempt partnering initiatives without respect to the other party’s fit or desire (Day 2000; Garbarino and Johnson 1999). Recently, researchers have urged firms to pull back the reins on relationship strategies, in favor of plural strategies blending relational and transactional approach- American Marketing Association / Winter 2005 es relative to the situation (Coviello et al. 2002). However, research is still seeking to build theory that can prescribe targeted relationship strategies to firms as they interact with diverse sets of customers in various situations (Siguaw, Baker, and Simpson 2003). Existing efforts to address this issue take several approaches, including: identifying relationship-relevant dimensions on a continuum (Anderson and Narus 1991; Webster 1992), mapping product market types to relational strategies (Coviello et al. 2002), analyzing relationships with ROI (Gummesson 2004), and identifying profitable customers (Reinartz and Kumar 2003). For the most part, these approaches take a seller’s one-sided viewpoint. Unfortunately, key questions of whether the other party desires a relationship – or perhaps more important – whether a “close relationship” means the same thing to both parties are largely left unaddressed. Additionally, some have used the concept of buyerseller mismatches – specified as a mismatch in relationship goals – to provide greater explanation into why relationships might succeed or fail (Gronroos 1997; Pels, Coviello, and Brodie 2000). This approach has at least two key advantages. First, assessing mismatches requires a dyadic perspective. Knowing only one party’s intentions and goals is not enough. Second, mismatch considerations give priority not only to stable characteristics of each party but also to situations that might significantly influence relationship outcomes. If firms can understand possible mismatches up front, before investing significant resources, there is potential to drive down the rate of relationship failure, and thus, risks associated with sunk costs and missed opportunities elsewhere. Use of buyer-seller mismatches as a specified construct in relationship research is infrequent. However, the concept is inherent in much of the literature that, for example, discusses mismatches in relationship values, social mismatches leading to relationship failure, and relationship dysfunctions, to name a few. In general, research questioning the appropriateness of relationships in light of potential incompatibilities supports the idea of mismatches (Colgate and Danaher 2000). However, mismatch research thus far oversimplifies the phenomenon. Existing research points solely to a single match or mismatch from a global view of the relationship. At this aggregate level, there is little appreciation for the complexity of business exchanges, wherein a variety of mismatched goals might occur at different levels of the 47 relationship. This leads to several questions such as: What types of mismatches are common across various ongoing exchanges? Which ones significantly impact the relationship as a whole? When should a mismatch be overlooked versus deemed insurmountable? Given these questions and current difficulties that business relationships face, a deeper look is warranted. A more granular understanding of the buyer-seller mismatch phenomenon could provide additional insight into understanding why relationships succeed or fail. Thus, a primary question needing further development is this: how might a deeper look into the nature of mismatches expand upon previous conceptions of relationship incompatibility and provide a clearer window into the true complexity of buyer-seller relationships? BUYER-SELLER RELATIONSHIP PERSPECTIVE Developing buyer-seller relationships has been recognized by firms as an integral component to overall strategy for many years (Cannon and Perreault 1999). Specifically, firms now see customer retention and management of relationships as a key to fending off rivals, who constantly seek to attract customers away (Day 2000). From a financial perspective, managers covet the performance gains that research suggests can be achieved through retention (Noordewier, John, and Nevin 1990). Furthermore, market drivers such as elimination of middlemen, global competition, technological innovation, and supply-chain coordination provide both the motive and means for fostering close relations (Sheth and Parvatiyar 2000). Alongside the flurry of relationship activity in the business community, a rich tradition of research has supported the surge of interest in buyer-seller relationships. Early works observed business relationships diverging from transactional models towards long-term associations (Arndt 1979). Research streams have since examined traits like trust and commitment (Gundlach, Achrol, and Mentzer 1995), dependence (Heide and John 1990), and potential performance outcomes (Kalwani and Narayandas 1995). Generally, one could argue that the most significant progress thus far has been exploring a wide selection of relationship-relevant constructs. These constructs serve as key variables in the process of developing and maintaining relationships. Upon examining the development of buyer-seller relationships, at least three themes emerge. First, an overwhelming bulk of research has sought to explain how good relationships are built. Second, researchers have given a great deal of attention to linking relationships to positive outcomes such as lower costs (Noordewier, John, and Nevin 1990), greater control (Dwyer, Schurr, and Oh American Marketing Association / Winter 2005 1987), satisfaction (Berry and Parasuraman 1991), and profitability (Kalwani and Narayandas 1995). The main thrust of research to date generally assumes that firms should be in the process of shifting from arm’s length dealings to building close relationships (Colgate and Danaher 2000). Finally, research generally takes a seller’s “push” perspective in attempting to retain customers, erect switching barriers, and build profitability. Despite substantial attention directed towards developing buyer-seller relationships, current signs point to instability in relationships, continued customer attrition, and termination of partnerships (Wathne, Biong, and Heide 2001). Blatant drawbacks to the relationship approach have drawn criticism including potential for: hidden costs, negative return on investment (Gummesson 1997), and other negative outcomes. Further, despite the popularity of relationship strategies, many firms continue to rely on competitive, transactional dealings (Cannon and Perreault 1999). One key learning from this discussion is the realization that, prior to embarking upon relationship strategies, greater consideration should be given to the resources needed and potential risks. Doing so might prevent wasted resources, and ultimately, messy relationship failures. So, while the potential benefits of relationships are clear, the net recommendation is for firms to pursue plural strategies that employ both transactional and relational approaches relative to varying situations, customers, and environments (Frazier 1999; Garbarino and Johnson 1999). However, this shift is not easily accomplished. Many agree that existing theory is not sensitive to situational factors (Wilson 2000). Beyond this, it rarely allows for a much needed dyadic perspective. Though a supplier might see a particular customer as ripe for relationship building, the customer may not be responsive. Even more complex, both parties might agree in principle but simply view relationships in different ways. A supplier may believe a strong relationship is one that is exclusive. Yet, the respective customer might feel it is simply good business practice to keep suppliers “on their toes” by engaging competitors. The next evolution, then, of buyer-seller theory should adequately address these variations and develop theory around the issue of with whom firms should build relationships in given situations. BUYER-SELLER MISMATCHES The term mismatch in business relationships was first used by Pels, Coviello, and Brodie (2000), who sought to integrate transactional and relational strategies into a plural approach. They posit that buyers and sellers often operate under mismatched exchange orientations. Exchange orientations, they theorize, are overarching ways of dealing with another party and arise from specific relationship needs. In other words, relationship needs 48 give rise to a party’s pursuit of either transactional or relational dealings. Thus, a mismatch of exchange orientation occurs when one party elects a transactional mode and the other operates under a relational mode. Similarly, Gronroos (1997) asserted that customers operate in one of three modes: a transactional mode, a passive relational mode, or an active relational mode. Mapping these customer modes to a seller’s relational or transactional approach, he argues that dollars spent by sellers in relationships where modes do not match are wasted efforts. These two perspectives provide a baseline understanding of buyer-seller mismatches and are illustratively condensed into Figure 1. This figure serves as an overarching picture of the phenomenon, yet does not distinguish the reality that many mismatches can occur at different levels in a relationship. One other comparable example to note is the work of Gassenheimer, Houston, and Davis (1998), who introduce the notion of relative relational distance. They theorize that social and economic value discrepancies between parties create relational distance. The result of this distance is that parties evaluate social and economic value discrepancies by a comparison of alternatives and subsequently decide to tolerate the differences or exit the relationship. While this perspective is dyadic, relational distance is modeled as a “summary disposition” (p. 335) and does not attend to the specific discrepancies that occur across a variety of ongoing exchanges. In addition to these examples, the concept of buyerseller mismatches can be traced from a variety of sources such as mismatches in relationship values, mismatches of relationship desire, behavioral and social mismatches leading to relationship failures, and relationship dysfunctions, to name a few (Table 1). In reviewing this literature, several concepts emerge. For one, the discussion on mismatches and related topics has occurred as an afterthought to the excitement around building relationships. This might be attributed to a realization in the last decade that many relationships fail because of relationship mismatches. Additionally, up to this point, research addressing mismatches has limited itself to high-level descriptions of the phenomenon and has not explored integrative connections to the extant literature on relationships. MISMATCHES DEFINED Although the concept of mismatches has been discussed both explicitly and implicitly in relationship literature, no formal definition has been offered. This work seeks to expand upon previous perspectives (Gronroos 1997; Pels, Coviello, and Brodie 2000) of buyer-seller mismatches and integrate ideas from literature that speaks FIGURE 1 Buyer-Seller Mismatches Buyer Exchange Paradigm Transactional Relational Relational Transactional Seller Exchange Paradigm American Marketing Association / Winter 2005 49 American Marketing Association / Winter 2005 TABLE 1 The Concept of Mismatches in Relationship Literature Topic As It Relates to Mismatch What Is Specifically Mismatched? Illustrative Author(s) 1. Mismatch of Exchange Orientation – Seller’s Exchange Orientation vs. Buyer's Exchange Orientation – Seller’s Offer and Buyer's Need – Gronoos 1997; Pels, Coviello, and Brodie 2000 2. Mismatch of Desire for Relationship – Seller’s Motivation for Relationship vs. Buyer's Motivation for Relationship – Barnes 1997; Day 1994;Garbarino and Johnson 1999; Sollner 1999 3. Mismatch of Relationship Values – Seller’s Values vs. Buyer’s Values – Gassenheimer, Houston, and DAvis 1998 4. Behavioral or Social Mismatch Leading to Relationship Failure – – – – Seller’s Relationship Investment vs. Buyer’s Relationship Investment Seller’s Time Orientation vs. Buyer's Time Orientation Seller’s Collaborative Orientation vs. Buyer’s Collaborative Orientation Seller’s Level of Dependence vs. Buyer’s Level of Dependence – – – – Krapfel, Salmond, and Spekman 1991 Garbarino and Johnson 1999 Garbarino and Johnson 1999 Gundlach and Cadotte 1994; Keep, Hollander, and Dickinson 1998; Kumar, Scheer, and Steenkamp 1995 – Seller’s Levelof Information Sharing vs. Buyer’s Level of Information Sharing – Kumar, Scheer, and Steenkamp 1996; Sirdeshmulch, Sinah, and Sabol 2002 – Keep, Hollander, and Dickinson 1998 5. Mismatch of Marketing Tools – Seller’s Marketing Tools vs. Buyer’s Exchange Orientation – Jackson 1985 6. Unexpected Costs Leading to Relationship Failure – Seller’s Expectations vs. Relationships Ability to Meet Financial Goals – Cannon and Homburg 2001; Cannon and Narayandas 2000; Dwyer, Schurr, and Oh 1987; Gummeon 1997; Jackson 1985 7. Relationship Disfunctions – Buyer Seller Expectations vs. Inherent Drawbacks of relationships – Wilkinson and Young 1998; Hakansson and Senhota 1995; Colgate and Danaher 2000; Walter, Ritter, and Gurmenden 2001 8. Prerequisites for Relational Strategy – Seller Expectations vs. Actual Readiness for Relationship Strategy – Berry 1995; Bitner 1995; Colgate and Danaher 2000; Gordon McKeage, and Fox 1998; Gronroos 1995; Payne and Ballantyne 1991; Pine, Peppers, and Rogers 1995; Sheth and Parvatiyar 1995 – Seller’s Level of Trust vs. Buyer’s Level of Trust 50 to mismatches (Table 1). As such, the following serves as an initial definition for buyer-seller mismatches: Buyer-Seller mismatches are composed of active or latent differences in parties’ perceived needs and wants from a business relationship, as shaped by situational factors and dissimilar goals, that are ultimately reflected in incompatible interfirm relations. Variety of Mismatches: Inherent in this conceptualization is the idea that a variety of mismatches can occur in relationships. Business relationships can be complex because a range of exchanges may take place. This complexity allows for multiple layers of interaction across product/service exchanges, partnership investments (Rokkan, Heide, and Wathne 2003), information exchange (Anderson and Weitz 1992), social norms (Cannon, Achrol, and Gundlach 2000), operational linkages, and many others. So, while an overall mismatch of transactional versus relational exchange orientations might exist, a variety of mismatches can occur that may or may not significantly impact the relationship as a whole. This represents a departure from previous notions of a solitary overarching match or mismatch. Perceived Needs and Wants Consistent with theory applied to relationships (e.g. resource dependence, TCA, social exchange), parties enter relationships with the expectation that doing so will be rewarding (Berry and Parasuraman 1991). Buyers and sellers pursue a range of needs and wants from the other party. Within the context of mismatches, buyers and sellers can strive for needs that the other party is ultimately unable or unwilling to provide. Mismatched needs can occur across (1) homogenous relationship dimensions (i.e., common to both parties) or (2) heterogeneous relationship dimensions, such as supplier dependability in exchange for an exclusive relationship. Finally, research suggests that desired needs and wants can be latent or active as the situations change (Gronroos 1997). Shaped by Situations and Goals Several authors acknowledge that relationship theory has been generally insensitive to situational factors that shape relationships (Coviello et al. 2002). Mismatches provide a framework for including them. For example, a multitude of situational conditions in the macro and task environment and firm characteristics can shape buyerseller mismatches such as: environmental factors (Keep, Hollander, and Dickinson 1998), product-market characteristics (Crosby and Evans 1990), firm strategy (Wilson 2000), and risk orientation. Relationship goals also shape buyer-seller needs and wants. Firms enter relationships for the purpose of fulfilling strategic goals like entering new markets and serving customer needs to name a few American Marketing Association / Winter 2005 (Sheth and Parvatiyar 2000). These goals play an active role in shaping relationship needs. When buyers and sellers have incompatible relationship goals, they result in mismatches. Reflected in Incompatible Interfirm Relations Borrowing from the Nordic school of relationship theory, mismatches are reflected in ongoing interaction between buyers and sellers (Gronroos 1997). Mismatches become manifest in actions that buyers and sellers take or fail to take towards each other, resulting in an unsatisfied need or want across a particular relationship dimension. These differences can be assessed at a high level (like in previous research) as one firm’s general desire for relational dealings versus the other party’s general desire for transactional dealings (see Figure 1). It is suggested here, however, that desired needs and wants from the relationship drive the exchange orientation. Thus, mismatched exchange orientations serve as a proxy for a variety of underlying mismatched needs and wants. Ultimately, mismatches become salient, take shape, and result in incompatible dealings. To illustrate, buyers can be confronted with a seller who constantly attempts to raise the bar on the commitment of the relationship, when in fact, the buyer senses no return on this investment. While this seller might see potential growth in getting “deeper” into the customer relationship, they are met with buyer apathy. Alternatively, buyers can be frustrated in relationships where they continually vie for attention from a seller who is “busy with other opportunities.” These differences in perceived needs and wants are played out and result in mismatches. To further explore the connection between mismatched needs and wants within exchange orientations, the following discusses buyer-seller tradeoffs associated with transactional and relational dealings. BUYER-SELLER EXCHANGE TRADEOFFS Organizations, for the most part, make intentional decisions to establish relationships and have particular goals in mind (Oliver 1990). Furthermore, they do so in ways that maximize rewards from these relationships (Frazier 1983). Many have explored various goals and tradeoffs for suppliers and customers arising from a transactional or relational exchange. For example, many posit that relationship strategies can lead to competitive advantage (Day 2000), yet others suggest maintaining close relationships can also prove very costly (Sharma and Tzokas 1999). An integrated review of these benefits and sacrifices as they map to both a transactional and relational orientation is presented in Table 2. It is suggested that understanding these factors presents insight into why buyers and sellers might pursue incompatible needs and wants from relationships. 51 American Marketing Association / Winter 2005 TABLE 2 Buyer-Seller Exchange Tradeoffs Buyer – Transactional Orientation Buyer – Relational Orientation Benefits Gained / Sacrifices Avoided Associated with Transactional Orientation Benefits Gained / Sacrifices Avoided Associated with Relational Orientation * Avoidance of Switching Costs, Sunk Costs e,f,m,p High Avilability of Alternatives a,g,p‘ * High Leverage (Low Vulnerability) with Suppliers, l,p,ac,ah,ak Less Hassle / Low Commitment j,aa * Low Price through Adversarial Bidding a,g,p,aj Access to Technology g,p,ag Access to Value-Added Services h,d Conflict Resolution More Manageable p * Cost Reduction through Synergies b,g,p,r,z,ag,ak Efficiency / Effectiveness for Value Chain p,ak Greater Customization of Products/Services e,d,ad,ag Higher Control of Direction of the Relationship ag * Higher Relationship Satisfaction c,k,n,x,ab,ab,ac,ah Greater, Specialized Service Levels h,w,ad Leads to Economies of Scale s Leads to Opportunities for Competitive Advantage ad Outsourcing Benefits, Ability to Focus Energies Elsewhere d Reducation of Choices / Efficient Decision Making d,ad Risk Reduction in Crisis Situations s Shortened New Product Development Time g,p Seller – Transactional Orientation Seller – Relational Orientation Benefits Gained / Sacrifices Avoided Associated with Transactional Orientation Benefits Gained / Sacrifices Avoided Associated with Relational Orientation * Avoidance of High Service Costs, Investments, Adaptation n,o,t,v,aa,ac Avoidance of Overdependence, Relationship Burdens p,r,ae Greater Ability to Focus on Acquiring New Customers j,i Less Hassle / Low Commitment j,o,aa Cost Reduction through Synergies p,r,u,ac,ag Customer Learning p,ag * Customer Retention, Satisfaction, Loyalty c,k,n,x,y,ac,ah Optimized Focus of Resources, Retention j,i.ag Leads to Economies of Scale s * Leads to Opportunities for Competitive Advantage j,u,ad,ai Greater Price Stability p,ac Risk Reduction / Higher Leverage with Buyers ae Sales / Profitability Outcomes j,ac,af * Items have received greated attention in Relationship Literature a b c d e f g h i j amihud 1976 Anderson 1995 Berry and Parasuraman 1991 Bitner, Gwinner, and Gremler 1998 Brennan and Turnbull 1999 Burnham, Frels, and Mahajan 2003 Cannon and Homburg 2001 Cannon and Narayandas 2000 Child and Dennis 1995 Day 2000 k Garbarino and Johnson 1999 l Gasseheimer, Houston, and Davis 1998 m Billiland and BEllo 2002 n Golicic, Foggin, and Mentzner 2003 o Gronroos 1997 p Han and Wilson 1993 q Helper and Levine 1992 r Kalwani and Narayandas 1995 s Keep, Hollander, Dickinson 1998 t Krapfel 1991 u v w x y z aa ab ac ad Krapfel, Salmond, and Spekman 1991 LaBahn and Krapfel 2000 Lambert, Emmelhainz, and Gardner 2000 Leuthesser and Kohli 1995 Morgan and Hunt 1994 Noordeweier, John, and Nevin 1990 Pels, Coviello, and Brodie 2000 Sharma and Grewal 1995 Sharma and Tzokas 1999 Sheth and Sharma 1997 ne af ag ah ai aj Sollner 1999 Spekman 1988 Sriram, Krapfel, and Spekman 1992 Webster 1992 Weitz and Jap 2000 Williamson 1985 52 A MODEL OF BUYER-SELLER MISMATCHES An economic mismatch could include conflict over preferred discounts or length of contract. A social mismatch might arise from asymmetrical levels of trust. Form also explains whether the mismatch occurs across a homogenous relationship dimension (e.g., frequency of interaction) or a heterogeneous one (e.g., buyer’s need for reliability vs. seller’s push for exclusivity). Given the newness of the concepts presented in this paper, the model (Figure 2) is a framework to guide theory development and testing of buyer-seller mismatches. Situational Conditions The model assumes a context shaped by situational conditions that emanate from the macro and task environment, as well as both party’s characteristics. This elevation of situational conditions lends greater understanding to the types of relationships that can feasibly form in a given context. Conditions act to motivate, as well constrain relationship development due to incentives and deterrents arising from the context. In the model, situations shape buyer-seller goals, needs and wants from relationships; mismatches that take place; comparison level of alternatives; and resulting outcomes. Buyer and Seller Relationship Goals, Needs, and Wants 2. Salience: This refers to whether the mismatch is latent or active for either party. 3. Priority: Mismatches relative to goals, needs, and wants can be assigned a certain priority, which could be perceived differently by the parties. A high priority mismatch could be a shift in strategic direction that significantly alters the relationship structure. A low priority mismatch might be a personality conflict between two boundary personnel. 4. Extensiveness: The extensiveness of a mismatch describes the degree to which incompatibilities exist at an individual level or organization. A seller may determine that a blocked need for closer interaction within a customer’s firm is localized around a particular gatekeeper. Buyers might see the overall seller’s offer (organization) falling short of its needs. 5. Magnitude: Mismatches take on relative magnitudes based on the perceived gap size. 6. Temporal Nature: Parties to a relationship may learn to cope with certain mismatches over a long period of time, while others require immediate action. These components shape what is sought in a relationship and are where mismatches of needs and wants occur. A disproportionate focus in the literature has discussed buyer needs and wants from a relationship, however, it is asserted that inclusion of seller’s needs and wants provides a more holistic picture. Buyer and Seller Exchange Orientations The assumption here is that exchange orientations arise out of need structures (Pels, Coviello, and Brodie 2000). Changes in need structure might drive changes in exchange orientation. If a seller sees a need to retain a customer whose past interaction has remained arm’s length, that seller might begin utilizing relationship tactics, thus altering the exchange orientation. A buyer who desires “less hassle” in a relationship might enact a transactional orientation to ward off unnecessary use of time. Thus, it is suggested firms do not adopt some degree of transactional or relational orientation for its own sake. Rather, orientations arise as a perceived means for achieving desired needs and wants from the relationship. Buyer-Seller Mismatches When considering the host of mismatches that can occur within a relationship, understanding their traits adds insight towards classification of the phenomenon. The following traits within the model are considered an initial set of aspects to define a mismatch. It is not assumed that this list is exhaustive, as further inquiry will likely refine and/or add to this set. 1. Form: Mismatches can take different forms. A simple typology might include economic and social needs. American Marketing Association / Winter 2005 Perceived Mismatches and Comparison Level of Alternatives (CL alt) The model proposes two basic outcomes of mismatches. First, it suggests that, parties perceive mismatches relative to their situation, goals, needs, and wants. Second, they judge these mismatches against a comparison level of alternatives, hereafter CL alt (Thibaut and Kelly 1959). A significant stream of research has used the concept of CL alt to study relationships (Wilson 2000), i.e., parties continually evaluate outcomes against desired needs and wants. CL alt is the lowest level of outcomes that a party will accept in light of other available alternatives. This standard serves as the deciding factor for whether the party will cope with the outcomes or seek alternatives (Thibaut and Kelley 1959). CONCLUSIONS Given the instability of many relationships, research recommends buyers and sellers move toward plural approaches that blend relational and transactional strategies. 53 American Marketing Association / Winter 2005 FIGURE 2 Buyer-Seller Mismatch and Mismatch Outcomes Situational Conditions (Macro and Task Environment, Firm Characteristics) Set of Buyer-Seller Mismatches Form Salience Buyer Goals, Needs, and Wants from Relationship Seller Priority Extensiveness Goals, Needs, and Wants from Relationship Magnitude Temporal Nature Buyer Exchange Orientation Seller Exchange Orientation Perceived Mismatches Coping/Maintain Seek Alternatives No Yes No Below Comparison Level of Alternatives (CL alt)? Coping/Maintain Below Comparison Level of Alternatives (CL alt)? Yes Seek Alternatives 54 Yet, making this move is not easy. Firms struggle with determining strategies for particular situations and answering the question of with whom close or arm’s length relationships make sense. On one side, firms might miss the benefits of a close relationship. Conversely, some firms dive into relational strategies and waste significant resources when relationships do not pan out. Further, many agree that existing research does not adequately account for diverse situations and customers (Cannon and Perreault 1999; Coviello et al. 2002; Wilson 2000). Understanding relationship incompatibility from the perspective of mismatches, casts a wider net that allows for a more comprehensive view of both parties’ desires and a deeper look at situations that influence success or failure. Key contributions offered from this discussion are threefold. First, a brief review of relationship literature identifies the need for theory to offer a dyadic perspective and greater sensitivity to situational factors. Current research is largely limited to a single firm perspective and oversimplifies the concept of incompatibility. This paper puts forth the first known attempt to integrate the mismatch concept to directly address these issues. Second, a detailed definition, with discussion of relevant variables and refinement of existing discussion on mismatches is offered. This work builds on previous studies to theorize that incompatible needs and wants lie at the core of mismatches. Finally, a model of buyer-seller mismatches is proposed, including antecedents, aspects of the phenomenon, and potential consequences around mismatch outcomes. Managers are urged to appreciate the concept of mismatches as they occur in relationships. The concept of mismatches forces managers to look deeper at both sides of the equation. This might help firms both avoid wasted resources and optimize relationship investments. Within existing relationships, mismatches could guide sellers in ENDNOTE 1 The author thanks Dr. John T. Mentzer for his valuable comments on a previous version of this paper. REFERENCES Anderson, E. and B. 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Sheth and Atul Parvatiyar, eds. Thousand Oaks, CA: Sage, Inc. For further information contact: Christopher P. Blocker University of Tennessee 304 Stokely Management Center Knoxville, TN 37996–0530 E-Mail: [email protected] American Marketing Association / Winter 2005 57 CONSUMER TRUST NORMS IN MULTI-CHANNEL FIRMS: THE ROLE OF TRUST IN TECHNOLOGY AND FIRM COMMITMENT TO PRIVACY PROTECTION IN TECHNOLOGY-BASED SERVICE DELIVERY Devon Johnson, Northeastern University, Boston SUMMARY Although web-based self-service technology delivers convenience benefits to customers and transaction cost savings to firms, it also heightens consumers’ concerns about the privacy of personal identity and contact information. These concerns are perhaps salient due to the absence of tangible and verifiable cues regarding a seller’s intentions and capabilities (Balasubramanian, Konana, and Menon 2003). Information security and technology concerns have been recognized as essential to consumer evaluations of a Web a site’s trustworthiness. Trust in a web site is therefore regarded as critical to web site success and a key focus of competitive differentiation (Urban, Sultan, and Qualls 2000). This article addresses a gap in the literature by proposing two new facets of consumer trust in a technologybased service firm: trust in technology and perceived commitment of the firm to privacy protection. The study proposes a model that demonstrates the importance and role of these two constructs in the wider nomological network of consumer-multi-channel service firm relationship. Affective commitment, operational benevolence, and problem solving orientation are modeled as antecedents of trust in technology and commitment to privacy protection. Trust in the firm, frequency of transactions, and customer-company identity are examined as consequences of the two trust norms. The model is evaluated using combined survey and transaction data from 834 personal computer (PC) banking customers of credit union. The results reveal that trust in technology and perceived commitment to privacy protection play an essential mediating role between the aforementioned antecedent and consequence variables. Interestingly, overall trust in the firm does not mediate the impact of these trust norms on the consequence variables, i.e., commitment to privacy and trust in technology directly impact customercompany identity and frequency of transaction, respectively. The findings indicate that managers and researchers need to consider cross-channel effects of consumer evaluation of other firm channels in evaluating the trustworthiness of a web site. Managers also need to explore ways of demonstrating and reinforcing firm identity ideals in technology-based service delivery. Finally, the study suggests that rather than regard service delivery technology as a generic invisible black box, managers should communicate the capabilities and integrity of its service delivery technology to customers. For further information contact: Devon Johnson Northeastern University Boston, MA 02115–5000 Phone: 617.373.3549 FAX: 617.373.8366 E-Mail: [email protected] American Marketing Association / Winter 2005 58 VALIDATION AND APPLICATION OF A BI-DIMENSIONAL LONG-TERM ORIENTATION SCALE William O. Bearden, University of South Carolina, Columbia R. Bruce Money, Brigham Young University, Provo Jennifer L. Nevins, University of South Carolina, Columbia SUMMARY Time orientation exists as a ubiquitous influence that permeates many aspects of life for every individual, whether in a personal or business-related context. As such, marketing researchers have long been interested in how time is valued by consumers and decision makers in business settings. Measures of long- versus short-term time orientations have been the subject of recent inquiry regarding their conceptualization, measurement and levels of analysis. The research reported here involves an assessment and validation of a multi-factor set of items designed to measure long-term orientation at the individual level using data from a study involving 592 American and Japanese adult respondents. In addition, two application studies investigate the predictive validity of the long-term orientation measures in consumer and managerial decision contexts. Time Orientation Use and Measurement Hofstede’s (1980) work on national cultural values has generated numerous citations and discussion, as well as criticism (Oyserman et al. 2002; Spector et al. 2001, 2002). Specifically, Long-Term Orientation (LTO), or Confucian Dynamism, as Hofstede’s fifth dimension was originally called, has been the subject of recent inquiry regarding the conceptualization, measurement, and levels of analysis this dimension was designed to capture (Fang 2003). The lack of clarity regarding the underlying values, as well as confusion surrounding the dimensionality and polarity of the LTO construct has contributed to increasing scrutiny of this cultural dimension. Hofstede’s fifth dimension has come to be used as a measure of time orientation. Indeed, attitudes toward time have been shown to vary systematically among consumers (Prelec and Loewenstein 1998), business/marketing managers (Kim and Oh 2002) and national cultures (Graham 1981). The concept of LTO has been used in a number of international marketing studies (Nakata and Sivakumar 1996), with many indicating the need for improved measurement. Some of these studies either empirically or conceptually correlated Hofstede index scores for the countries involved, but could have benefitted from better individual-level measurement. In an effort American Marketing Association / Winter 2005 to address the shortcomings of extant measures, Bearden et al. (2003) developed a measure of long-term orientation composed of eight items in two subscales of four items each designed to address tradition and planning aspects of LTO. In the current research we evaluate this two-factor LTO scale with data collected from two samples of U.S. (n = 339) and Japanese (n = 253) adults (study 1). Validation and Equivalence From the U.S. and Japanese data, a uni-dimensional model in which all eight items loaded on one factor, a twofactor uncorrelated model, and a two-factor correlated model, in which the two sets of four items loaded on their respective tradition and planning factors, were estimated. Comparisons of these models (cf., Anderson and Gerbing 1988) across both country analyses revealed that the twofactor correlated model provided the best representation of the data. Overall, these results provide evidence of discriminant validity for the separate factor LTO subscales (tradition and planning) and are consistent with the previous results reported by Bearden et al. (2003). Additionally, we examined the measurement equivalence of the data following the procedures outlined by Singh (1995) and Steenkamp and Baumgartner (1998), who recommend tests of configural equivalence and metric equivalence, both of which exhibited satisfactory levels of fit. These results support the cross-cultural applicability of the LTO scale. Additional Evidence Responses from the U.S. and Japan were also collected for the eight-item consumer frugality scale of Lastovicka et al. (1999), a four-item measure of personal ethics (Vitell, Rallapalli, and Singhapakdi 1993), and a twelve-item consumer compulsive buying scale (Valence, d’Astous, and Fortier 1988). It was hypothesized that individuals scoring high in the tradition and planning facets of long-term orientation would score higher in terms of consumer frugality, and ethics, and lower in compulsive buying tendencies. In addition to these other constructs, single item convergent validity items for both of the proposed LTO scales were also assessed using the procedures recommended by Bagozzi (1993). A series of consistently significant (p < .01) and generally strong 59 estimates between the two tradition and planning subscales and these additional measures provided supportive evidence of validity for the proposed LTO measures. Application Studies In addition to study 1 assessments of equivalence and validity, two additional studies were conducted to investigate the extent to which the proposed LTO measures are correlated as expected with important consumer outcomes (study 2) as well as managerial decision making (study 3). In study 2, data were collected from 54 undergraduate business students under the ruse of a study of consumer credit use among college students. Two measures of credit involvement were obtained: total average monthly credit card balance and the total number of credit cards owned. Although the correlations between the credit measures and planning and tradition were mixed, both the simple correlations, as well partial correlation estimates, for the total eight-item LTO scale and both of the credit measures were significant (p < .10). We also found evidence of the ability of our measures to moderate the negative relationship between Lastovicka et al.’s (1999) consumer frugality scale and the two credit outcome variables described above. In study 3, seventy-three MBA students first reacted to a choice scenario involving selection of a pricing strategy that varied in terms of long-term versus short- term outcomes related to firm profits and market share. Following completion of the choice task, respondents then replied to an item designed to elicit their confidence in their decision, as well as the tradition and planning LTO measures. While the correlations between the tradition and planning measures and the dichotomous choice variable were modest, the estimates are positive and significant as expected and provide additional support for the proposed scales in terms of predictive validity. Conclusions and Implications The results reported in this article are generally supportive of the bi-dimensional measure of long-term orientation proposed by Bearden et al. (2003). A replication and application of the proposed LTO measure yielded evidence of convergent, discriminant, and predictive validity, dimensionality, and nomological validity. The implications of our research are important to business academics for several reasons. Our study adds to the body of knowledge regarding culture, and LTO in particular, and supports a valuable tool for studying an important aspect of culture. Rather than merely assign index scores as reflective of whole groups, researchers using new scales such as the LTO scale described in the current research, will be able to investigate outcome phenomena dependent directly on the individual values of subjects in various countries. Citation information available upon request. For further information contact: William O. Bearden The Moore School of Business University of South Carolina Columbia, SC 29208 FAX: 803.777.6876 E-Mail: [email protected] American Marketing Association / Winter 2005 60 CONSUMER SOCIALIZATION OF THIRD CULTURE KIDS IN A COSMOPOLITAN CITY Alfred Y. Sit, Chinese University of Hong Kong, Hong Kong Haksin Chan, Chinese University of Hong Kong, Hong Kong SUMMARY Third culture kids (TCKs, children raised outside their passport countries) are a growing segment of global significance. We conducted an in-depth, qualitative study on consumer socialization of adolescent TCKs (ATCKs), and the data suggest that the unique cross-cultural experiences of ATCKs are conducive to self-socialization, a phenomenon that has largely been neglected in the marketing literature. Our findings highlight ATCKs’ flexible use of socialization agents, as well as the influence of ATCKs’ own motives and values. Contrary to much of previous research, the adolescent consumer is not a passive recipient but rather an active agent in the consumer socialization process. Straddling the home (i.e., first) and host (i.e., second) cultures, ATCKs are naturally exposed to a wide range of market information, but they are at the same time quite purposive as they “pick and choose” from a variety of potential consumer socialization agents. Notably, ATCKs’ motives and values play a significant role in the consumer socialization process, as they negotiate the multi-cultural terrain of global markets. From a self-development perspective, ATCKs strategically engage in selective exposure to socialization agents and actively construct their own shopping and consumption scripts. Methodology To conduct a discovery-oriented study addressing complex and dynamic issues of consumer socialization, we adopted phenomenological interviewing as the method for data collection. Textual data were generated by means of in-depth interviews with 13 English-speaking female ATCKs (ages 15 to 17) in a cosmopolitan city. The data were analyzed using a modified meaning condensation technique. After establishing an internal structure through an iterative process, we generated meaning categories via collective coding. Finally, inter-relationships among the categories were established in keeping with the overarching theme of consumer socialization. Findings The ATCKs in our study have very strong ties to the immediate family. In contrast to previous findings of waning parental influence during adolescence, parents American Marketing Association / Winter 2005 have largely maintained their socializing influence on our ATCK participants. Often deprived of an extensive network of social support as they frequently relocate, many ATCKs have developed an unusually strong bond with the immediate family. The consensus in the literature is that peer influence is negatively correlated with parental influence. Given ATCKs’ strong family ties, one would expect their peers to assume a smaller role. Indeed, the strength of peer group influence does appear weaker for ATCKs. However, the diminished peer group influence may also be attributable to the mobility of ATCKs. Their nomadic lifestyle apparently attenuates peer group influence. School is the place where adolescents spend most of their time awake. Interestingly, extant consumer socialization research has produced little evidence of school influence. Note that school life extends far beyond the classroom, and extracurricular activities are an important part of school life for many ATCKs. One interesting finding is that extracurricular activities afford special shopping and consumption opportunities that otherwise would not be available to the adolescent consumer. Previous research has suggested that TV is a potent force shaping consumer values. This is, however, not the case for the ATCKs in our study. Our participants opt for the Internet and teen magazines to enrich their marketplace knowledge of the first culture, even though the firstculture marketplace is thousands of miles away. Broadly speaking, these media are selected because they enable the ATCKs to stay connected to their cultural roots. Contrary to past research which suggests that adolescents from higher-income families are more materialistic, the well-off ATCKs in our study generally do not consider themselves to be brand-conscious. Situated in a heterogeneous brand environment in the diverse expatriate community, ATCKs appear to be less vulnerable to the hegemony of leading global brands. Implications Unlike much of the empirical research on consumer socialization, our ATCK study has brought the cultural context to the forefront. In light of the encouraging findings of this study, the door is wide open for follow-up studies on consumer socialization of ATCKs, and for 61 investigations into the impacts of global marketing on the socialization of consumers in different cultures. A concerted effort in cross-cultural research on consumer socialization would contribute to our understanding of international consumer behavior and the broader impacts of globalization. Some have envisaged a homogeneous youth market. The socializing influence of global marketing, however, is mediated by socialization agents. There are hints of unyielding local differentiation, given that young consumers are active participants in the socialization process. Many ATCKs in our study long for a connection to their cultural roots while adapting to the second culture. Notably, previous research has found that expatriate executives, ATCKs’ adult counterparts, also share this sentiment. This has important implications for global marketers targeting the growing expatriate communities around the world. Arguably, the marketing and public policy implications apply to immigrant communities as well. For further information contact: Haksin Chan Department of Marketing The Chinese University of Hong Kong Shatin, Hong Kong Phone: 852.2609.7637 FAX: 852.2603.5473 E-Mail: [email protected] American Marketing Association / Winter 2005 62 CONSUMER ETHNOCENTRISM IN THE GERMAN MARKET Heiner Evanschitzky, University of Muenster (MCM), Germany Florian V. Wangenheim, Universität Dortmund, Germany SUMMARY International marketing researchers have for long been concerned with determining whether consumers are predisposed towards a preference for domestic as opposed to foreign products. Empirical studies have consistently confirmed the existence of such as “domesticcountry bias” (DCB), which is manifested in stronger product preferences and buying intentions for homemade products (for an overview, see Verlegh and Steenkamp 1999). DCB has typically been explained by an individually varying, trait like property named “consumer ethnocentrism” (CE; Shimp and Sharma 1987). In brief, the more ethnocentric consumers are, the stronger the DCB, and consequently, their predisposition to prefer domestic over foreign products. In a recent study, Balabanis and Diamantopoulos (2004) identify a number of weaknesses of prior research linking CE to DCB. First, earlier research had typically been restricted to one product category, thereby not allowing researchers to investigate potential variation of DCB across product categories. Second, previous studies had focused on a very limited number of countries of origin (COO) of the researched product categories, which in turn prevented findings regarding varying degrees of DCB for different COOs included in the study. Since there are some indications that the effect of CE on DCB depends on the specific configuration of COO and product category, it is important to consider both aspects jointly. In sum, there are reasons to believe that the effect of consumer ethnocentrism on domestic country bias is likely to differ both across countries and product categories, but prior research has not been designed to test this assumption. termed consumer cosmocentrism (CC), which we introduce due to the specific circumstances surrounding etnocenstrism in Germany is able to explain DCB better than the CE construct. Results In a German context, we examine the relationship between CE and CC on consumer preferences and investigate whether competitiveness and cultural similarity can help explain the varying strength of CE effects. The inclusion of a new construct, CC, adds little explanatory power to our models. It seems important to verify that CE does in fact explain consumer preferences better than its counterpart, even in a culture which is likely to be biased towards the formulation of the CE scale. In general, it seems that preference rankings can be better explained by the combination of demographic variables and CE for Germany than for Britain. The highest R 2 -value in the study by Balabanis and Diamantopoulos (2004) is .14 (Cars/Britain), while the highest explained variation in the present study is .18 (Shoes/Germany). Taken together, the fact that the highest R2-value in both studies is obtained for the home country suggests that CE is better suited for explaining domestic rather than foreign-country bias. Still, the level of explained variance is far from satisfactory. Since the CC construct has not yielded satisfactory results, one implication from this study is that further research is needed to understand more clearly how preference judgments for domestic versus foreign products are formed. Based on those weaknesses, Balabanis and Diamantopoulos (2004) investigate the effect of CE on DCB for one domestic (Britain) and five foreign countries of origin in eight product categories, and find initial support for the assumption that this effect varies across product categories and COOs. The effect of CE on domestic product preference is a consistent finding in both Balabanis and Diamantopoulos (2004) and the present study. Domestic firms in Germany can well rely on a “safeguarding” effect when marketing their products to consumers high in CE. At the same time, managers from foreign countries cannot rely on CE as a reliable indicator of the inclination of consumers to downgrade their products. Replicating and extending Balabanis and Diamantopoulos (2004), we contribute to the literature by (1) conducting a similar study using a larger sample of German consumers, (2) investigating a total number of 14 product categories (including the eight categories researched by Balabanis and Diamantopoulos 2004) and (3) testing whether the addition of an alternative construct, The findings of the study confirm that CE effects are product- and country-specific, which confirms Balabanis and Diamantopoulos’ (2004) findings. However, the results of the study contradict Balabanis and Diamantopoulos (2004) somewhat, in that at least economic competitiveness of the country-of-origin plays a role in determining respondents’ judgments. One explanation for this finding American Marketing Association / Winter 2005 63 may be that Germans are higher in uncertainty avoidance than Britons. Therefore, Germans tend to choose products that they believe to be superior rather than to “experiment” with home country products when competitively better offers are available. This finding is also important from a managerial perspective, as Balabanis and Diamantopoulos (2004) concluded that in Britain, managers from economically strong countries cannot count on a country-of-origin effect in their favor, due to economic competitiveness. For the German market, however, that seems to be the case: American and British firms are not negatively affected by CE effects, and in a few cases it even seems that CE is positively related to preference for them. When further examining the structure of effects of CE on preferences, we are able to generate some explor- atory insights that could help shape further research questions. First, it seems that CE affects preference ratings for the home country negatively in product categories (a) that are perceived as being strong drivers of the economy (in Germany: cars, TV sets, electronics) and/or buying from foreign firms may endanger employment in the home economy (fashion wear, toys). Consequently, CE exhibits the expected effects in product-country configurations that are likely to be perceived as threats for the home economy (e.g., French food products, Italian fashion wear and shoes, Japanese electronic products and TV sets). From that perspective, it may be concluded that German ethnocentrist view British and American products as good and competitive, but not as harmful for the German economy, and therefore do not discount them in their preference ratings. References and tables with results available upon request. For further information contact: Heiner Evanschitzky Marketing Center Muenster Am Stadtgraben 13–15 D-48143 Muenster Germany Phone: +49.251.83.22036 FAX: +49.251.83.22032 E-Mail: [email protected] American Marketing Association / Winter 2005 64 IDENTIFYING INFORMATION SEARCH PATTERNS IN A WEB-BASED ENVIRONMENT: DEVELOPMENT OF A SEARCH PATTERN INDEX Morris K. George, University of Connecticut, Storrs Girish N. Punj, University of Connecticut, Storrs ABSTRACT We propose an index (labeled as Search Pattern Index) that can be used to capture distinctive patterns of consumers in an online store setting. A sensitivity analysis reveals that the proposed index can capture a variety of search sequences, thereby enabling a better understanding of underlying online behavior. However, based on previous research on information source usage in traditional settings (Bruner 1986; Westbrook and Fornell 1979) it is possible to hypothesize likely influences on search in a web environment. These may be broadly classified as Consumer Characteristics and Product and Situational Factors and are briefly described next. Consumer Characteristics INTRODUCTION The internet has become a dominant source of information about products and services. The information search sequences used during consideration set formation stage may vary across consumers depending on several consumer, product and situational influences. The observed search sequences are an external (and measurable) manifestation of what the consumer is perhaps thinking while evaluating a particular brand for inclusion in a consideration set. Buried in the search sequences are insights into the behavior of consumers in an online store environment. The purpose of this study is to propose a methodology by which distinct search sequences can be measured and classified. Specifically we seek to develop a Search Pattern Index (SPI) that can be used to capture the distinctiveness of common search sequences used by consumers in accessing web-based product information. Consumers are likely to use the web as an information source during the early phases of the consumer decision making process. Later, this information is likely to be supplemented by (and integrated with) information gathered through a mix of traditional sources such as personal (friends, family, etc.), neutral (books, magazine articles, etc), and marketer-dominated (advertisement, etc.) Search sequences in these environments, while also important, are much more difficult to capture. But, by then the purchase decision has already been framed by the information initially gathered on the web. Hence, it is important to understand the search sequences used by consumers during this important initial phase. FACTORS INFLUENCING INFORMATION SEARCH PATTERNS There is relatively little research on the factors that may determine search patterns in an online store setting. American Marketing Association / Winter 2005 Domain expertise is defined as the ability of consumers to navigate through a website to access relevant information. Consumers construct navigational maps, consisting of places or “landmarks” (Hodkinson et al. 2000). Landmarks are “features of the online environment which are relatively stable and conspicuous” (Dillion et al. 1993, p. 173), such as known websites. Domain expertise can be expected to be an important influence on search patterns. System Expertise: Is the ability of an individual to use the web and it includes skills such as being able to navigate through menus, plan and execute an online search, and the ability to manipulate and interact with a search engine or decision aid. System expertise can also be expected to be an influence on search patterns (Hodkinson et al. 2000). Demographic Characteristics: Such as education, occupation and income can also be expected to influence consumer search patterns. Education is assumed to increase the buyer’s need for information relating to the purchase decision. Occupation and income are also important influences because of their effect on search costs (Westbrook and Fornell 1979). Attitude Towards the Web: Can be expected to influence search patterns because of consumers varying beliefs of the credibility and reliability of information posted on the web. Consumers may be skeptical of marketer-dominated information and may perform unneeded search solely to establish the credibility of such information. Brand Preference: Consumers with a strong brand preference normally limit their search to information about their preferred brand. A consumer who has decided to buy a particular brand will primarily be interested in comparing prices for the selected model and choosing the 65 best store/outlet. Hence, search patterns are likely to focus few attributes. Price and Non-Sensory Attributes: The search attributes can be categorized into (1) brand name, (2) price, (3) searchable sensory attributes, and (4) non-sensory attributes (Degeratu et al. 2000). Non-sensory attributes form an important evaluative criterion in a web-based store environment. The importance given to price and other non-sensory attributes as an evaluative criterion by a consumer depends on the price sensitivity and utilitarian needs of the consumer. Product and Situational Factors Nature of the Product: The complexity and value of the product and the consumer’s prior experience are likely to influence search patterns. For a complex, high value product, consumers are likely to access more information about product attributes and product reviews or ratings. For low value products, information search is likely to be limited to brand and/or price comparisons. Shopping Strategies: Are likely to be an important influence on consumer search patterns because of their relationship to two important goals, namely, the urgency of the purchase and the motivation for the website visit (Moe and Fader 2001). A taxonomy based on these two dimensions suggests four shopping strategies: directed purchase visits, search/deliberation visits, hedonic browsing visits, and knowledge building visits. Directed Purchase Visits: Since an immediate purchase is planned, consumer search will be product specific and of the “drill-down” type (Lynch and Ariely 2000). In other words, consumers will visit few sites, but examine more pages at a visited website. Another phenomenon consumers are likely to display is referred to as “harking back” (Green and Jackson 1976), which refers to frequently going back to pages visited earlier. Search/Deliberation Visits: The search patterns will be similar to those in a directed purchase visit, except that there will be less “harking back” due to the diminished urgency for the purchase. Also, consumers are likely to visit more websites, and examine fewer pages at a visited site. Hedonic Browsing Visit: The search patterns are likely to be more random, since an immediate purchase is not planned and neither is there a sense of purpose. Consequently, consumers are more likely to be susceptible to the effects of “flow” (Hoffman and Novak 1996). They are likely to visit many websites, but only access a few pages at a visited site. American Marketing Association / Winter 2005 Knowledge Building Visit: The search patterns are likely to be similar to those in a hedonic browsing visit but with more structure to them. They are less likely to be affected by “flow.” Fewer websites are likely to be visited with more pages being accessed at a visited site. Web-Design Features: The amount of information stored on a website and the navigational tools or decisions aids that facilitate search between and within web pages that are linked to that site have an important influence on search patterns. These design features determine to a great extent the total number of pages visited, the frequency with which pages are visited more than once and the sequence of page visits. There are at least two different approaches that can be used to understand how consumers navigate across the webpages linked to a website. According to the economics of information perspective, there is a likely negative relationship between search cost and extent of search (Stigler 1961). Search cost in a web-based environment is closely related to the time or effort required to execute the search (Johnson et al. 1999). Web-design can play an important role to reduce the time or effort required for search by providing readily identifiable links to related attribute information on other pages. According to the information foraging framework, information resides in “patches” and consumers allocate time to searching between-patches versus within-patch search, such that they optimize the rate of information gain per unit cost (Pirolli and Card 1999). In an online store setting, consumers will allocate time to within-page versus between-page search in order to maximize information gain. The easier it is to access information across web pages, the more within-page search there will be. To summarize, information search patterns in a webbased environment are likely to be influenced by the Consumer Characteristics and Product and Situational Factors as discussed above. The manner in which these factors interact to influence search patterns is depicted in Figures 1 and 2. Figure 1 shows the factors influencing the search activity of a consumer. Regardless of the product, consumers have certain inherent consumer characteristics such as demographic, domain and system expertise and attitude toward web, brand preference, etc. that they bring to the search task. Once web-based search is initiated, purchase related product and situational factors, such as shopping strategy (e.g., directed search vs. hedonic browsing), web-design features, especially amount of information and the organization of information in different webpages, will either facilitate or distract the consumers in their search for information. Taken together, the abovementioned factors determine the information search patterns of consumers in an online store setting. 66 FIGURE 1 Factors Influencing the Information Search Pattern in a Web-Based Environment Consumer Characteristics • Domain expertise • System expertise • Demographic characteristics • Attitude towards web • Brand preference • Price & non-sensory attributes Direct Purchase visit Consumer Web Search Purchase Planned Search/ Deliberation visit Product & Situational Factors • Nature of the product • Shopping strategy Web-design features • Amount of information • Navigational tools’ HedonicBrowsing visit KnowledgeBuilding visit decision aids Figure 2 shows the different paths consumers may take in a web-based information search depending on the influence of the above factors at different stages of the search process. Each of these paths reflects different patterns of information search. For example, a consumer in a directed search visit (immediate planned purchase) who has decided the brand to buy will directly access any known website to search for evaluative information. On the other hand, a consumer without a pre-search decision about brand and with less product knowledge will first try to access product information through a search engine or decision aid (depending upon domain and system expertise). At this stage too, the amount of information accessed varies from consumer to consumer depending on the motivation to acquire information. In both the above cases, the number of sites visited (inter-site search) and number of pages visited per site (intra-site search), links taken from a site and the type of sites visited depend to a great extent on the design of the web-sites. American Marketing Association / Winter 2005 DEVELOPMENT OF A SEARCH PATTERN INDEX Search patterns are important for designing websites for different kinds of products. A manager is interested in understanding specific search patterns consumers display for their product. The formation of a consideration set is often an outcome of a web-based search. It is therefore important for the manager to understand the search patterns used in the formation of a consideration set. Many websites of electronic stores or retail chains are designed in such a way that a consumer can search for alternatives in a product category using certain attributes or attribute values as search criteria. Depending upon customers’ preferences, these alternatives can also be sorted based on price, consumer ratings, or best-selling brands. In developing a Search Pattern Index, it is important to understand the underlying search behavior of consum67 FIGURE 2 Flow Chart of Web-Based Information Search for a Directed Purchase Visit Brand loyalty Prior search Domain and system expertise Brand site Directed Purchase visit Brand price decision Yes Specific site address known? No No Shop bots Search enginekeyword search Search enginekeyword search Experience/ Prior Search Yes Shop bots Sufficient knowledge about product category? No Involvement of Consumer Yes Shop bots Company/ Brand site High Reviews/ Consumer reports ers. Consumers start their search with the “ultimate, all singing, all dancing version of the product rather than with a straightforward replacement” (Smith 2000). In other words consumers search for a product which scores high on all their important evaluative criteria (attributes). This gives them an opportunity to know what is available in the market and at what price. But very often this ideal product will be a high priced premium product and not what the consumer wants. Consumers then “trade down” (Smith 2000) to evaluate more realistic brands for the purpose of forming a consideration set. Since information search is associated with search cost in terms of time (and cognitive effort), customers attempt to arrive at the consideration set with minimum number of searches. They select criteria which, according to them, will reduce the number of searches required for the formation of consideration set. In order to achieve this goal, consumers may engage in attribute (alternative) based search. Some of the earlier studies have focused on developing a search index, which reflects this kind of search pattern in a web based decisionmaking environment. Payne (1976) proposed Search Index as: American Marketing Association / Winter 2005 Product sites Low Visit estores Product & Siturational Factors Search Index = Alternative transitions – Attribute transitions Alternative transitions + Attribute transitions where alternative (attribute) transitions represent the number of instances in which the ith +1 piece of information accessed was of the same alternative (attribute) as the ith. This will give an indication whether it is an alternativebased search or attribute-based search depending on whether search index is positive or negative. This index captures the consumers’ search pattern in cases where the information accessed can be segregated as attribute based or alternative based. However, in most searches, a combination of attributes and attribute values are used as search criteria and this makes it difficult to use this index. The general search pattern indicates that instead of accessing information about an attribute, consumers use attribute-values as search criteria to arrive at a set of alternatives. This brings up the need for a new search index, which captures the search pattern described above. 68 It is evident from the general pattern of search that (1) consumers use attribute-values as search criteria (2) the number of attributes used in a search and attribute-values differ across searches (3) consumers try to minimize the number of searches in arriving at a desired set of alternatives. They use attributes and attribute-values in such a way that it helps to reduce the number of searches. An ideal situation would be one in which the consideration set is arrived at in one search using the correct number of attributes and the right attribute-values. But in reality, consumers tend to over calibrate or under calibrate, or, in other words, they start with more stringent or less stringent criteria for selection. In subsequent searches, this over/under calibration is corrected by relaxing/tightening the criteria. For an index to reflect the search pattern, it should capture this over/under calibration and transitions in consecutive searches, i.e., from under calibration to over calibration or vice versa. Measuring Over/Under Calibration As discussed above, attributes and attribute-values are used as criteria in searches. Therefore, the number of attributes and attribute-values used in a search gives us an indication of how stringent the criterion is. Since this varies with consumers and searches, the index of search pattern should include the following variables to represent over/under calibration: attributes selected remains the same, (b) the attribute value remains the same, but the number of attributes change, and (c) both the attribute value and the number of attributes change. Here, we are ignoring the scenario where both attribute values and numbers of attributes remain unchanged because, in such cases, the alternatives selected will be the same and it would not be an effective search. In most cases, the attribute value, which has the maximum impact on selection, is price range. Hence, we are considering only price range as the attribute value. In the three cases mentioned earlier, identifying transition is easy in the first two cases. In the first case, when the number of attributes remains unchanged, narrower/ wider price range will indicate more/less stringent criteria for selection, and hence becomes a case of transition to over/under calibration. In the second case, when attribute values remain unchanged, more/less number of attributes in the second search indicates more/less stringent criteria and thus is transition to over/under calibration. However, in the third case, it is very difficult to identify transitions. To identify transition, one can follow a general rule of thumb like the one mentioned below: 1. When the number of attributes is less and the price range is more, in the second search, it is a case of under calibration. 2. When the number of attributes is less and the price range smaller, it is over calibration. 1. Number of attributes used in the first search, A1 2. Number of attributes used in the last search, AL 3. Total number of attributes, NA 3. When the price range is larger and the number of attributes more, it is under calibration. 4. The attribute value: in most cases, the price range, in the first search, R1 4. When the price range is smaller and the number of attributes less, it is considered over calibration. 5. Price range in the last search, RL 6. Maximum price range, RMAX. In addition to the above variables, we need to measure the transitions- under calibration transitions, NU, and over calibration transitions, NO. In two consecutive searches, if the search criteria are more stringent in the second search than in the first, it is a case of transition to over calibration and NO is taken as 1. Similarly in the second search, if the search criteria are less stringent compared to the first, it is considered as transition to under calibration and NU is taken as 1. Identifying Over/Under Calibration Transitions In consecutive searches, the following scenarios are probable: (a) the attribute value changes, while number of American Marketing Association / Winter 2005 In (3) and (4) it is assumed that when the price range is smaller, the selection criteria becomes stricter even though the number of attributes is less and is treated as transition to over calibration. Similarly, larger price range indicates less strict selection criteria and the transition is treated as under calibration transition. Using the above parameters, an index of search pattern can be expressed as: SPI = 100 {(A1 – AL)/2NA + (RL – R1)/2RMAX} NU/NT where A1 AL NA R1 RL = = = = = number of attributes in the first search number of attributes in the last search total number of attributes in the search price range in the first search price range in the last search 69 RMAX = maximum price range NU = number of transitions to under calibration NT = total number of transitions The term, NU/NT is a measure of consumers’ willingness to correct his/her initial over calibration in the subsequent searches. Together with the first term, this indicates the magnitude of over/under calibration. The term, {(A1 – AL)/2NA + (RL – R1) / 2RMAX} is a measure of over all under/over calibration. Theoretically, the most extreme values for this term are -1 and +1. Here, we are interested in the sign of the expression. The following scenarios are possible with respect to the sign of SPI. The index, we proposed allows for range specification only in price. However, in reality, the websites allow for range specification in more number of attributes. In order to capture the search patterns in such cases, one can modify SPI by adding terms, similar to (A1 – AL)/2NA, representing the over/under calibration with respect to the range specification of different attributes. However, by doing so the interpretation of SPI becomes more complex. Since we thought price is a surrogate measure in many cases for product features and performance, only price range is included in our search pattern index. Positive Sign: This can happen in the following conditions. • • Customer specifies relatively stringent criteria on the attributes as well as the price range (i.e both (A1– AL) and (RL – R1) are positive) in the initial search. This is a simple case of over calibration. The customer searches for the ideal or dream product in the first search itself. Other conditions, in which SPI is positive, are not so straightforward. Customer may over calibrate in one criterion but under calibrate in the other. In this case, SPI will be positive only when the under calibration in attributes/price range is canceled out by the over calibration in price range/attributes. For example, if a customer specified 4 attributes initially and 8 attributes in the final search, and if NA=10, then under calibration by the customer in attributes is -0.2 (i.e., (A1 – AL)/2NA). However, if the same customer had specified a price range of 100 initially, 700 in the last search, and if RMAX is 1000, then the over calibration in price range, (RL – R1) / 2RMAX) is 0.3. Hence, the overall over calibration in this case is 0.1. AN ILLUSTRATION OF THE INDEX The Search Pattern Index is tested using data from an experiment involving apartment search in a web-based environment. A total of 19 attributes (NA = 19) of the apartment like location of the apartment, availability of heat/hot water, facilities such as swimming pool, fitness room in the complex are used as search criteria. Along with these attributes, participants specified maximum and minimum monthly rent for the apartment as other search criteria. The maximum monthly rent that can be entered for search was $1300 and minimum was $400. Hence the maximum price range, Rmax is 900 (i.e., 1300 – 400). Participants used a combination of these search criteria in a number of searches to arrive at a list of apartments, which they consider for renting. The participants’ choice of attributes and the price range specified in each of the searches was captured in log files. The experiment was conducted in severe to slight pressure and few alternatives vs. many alternatives (2 x 2 experiments). SPI will be negative in the following conditions: • • Customer specifies relatively less stringent criteria on the attributes as well as the price range (i.e both (A1 – AL) and (RL – R1) are negative) in the initial search. This is a simple case of under calibration. The customer searches for what is available in the market and then goes toward the product which best suits his/ her needs. Another explanation may be that a customer who under calibrates may not have sufficient knowledge about the product. Other necessary condition for a negative sign for SPI is the overall under calibration by the customer, similar to the second condition explained in the case of positive sign. Here, for SPI to be negative, the over calibration in attributes/price range has to be cancelled out by under calibration in price range/attributes. American Marketing Association / Winter 2005 The search histories of eight participants who display different search patterns are studied. The search parameters A1, AL, R1, RL, NO, and NU, are calculated from the log files and used to arrive at the Search Pattern Index. The SPI, calculated for different combination of search parameters are given in Table 1. The search histories selected show great amount of variability. The number of attributes used in the first search varies from 13 to 4 and that in the last search ranges from 1 to 8. Similarly the price range selected varies from 200 to 900. In all these cases, the Search Pattern Index (SPI) captures the underlying aspect of search pattern. The sign of SPI indicates whether it is overall over/under calibration and magnitude represents the extent of over/ under calibration. The index is positive with higher magnitudes when stricter criteria (over calibration) are used in 70 TABLE 1 Search Pattern Index in a Web-Based Information Search Maximum price range, RMAX = 900 Total No. of Attributes, NA = 19 Sl. No 1 2 3 4 5 6 7 8 Search Pattern Index Search Parameters A1 AL R1 RL NU NT 12 7 7 11 6 8 13 4 5 4 8 4 1 4 3 1 300 250 900 600 700 900 600 400 700 900 600 200 200 450 300 900 14 5 3 10 1 4 3 4 18 8 8 12 2 7 6 4 the first search compared to the last search, in terms of both the number of attributes and price range (cases 1, 2, and 8 in Table 1). When less stringent criteria are used in the first search, in terms of both the number of attributes and price range, the index is always negative (case 3). However in cases where participants used more attributes but wider price range, the sign and magnitude of the index depends on the extent of overall over/under calibration specified by both price range and number of attributes used in the search. In cases 4, 5, and 6, the under calibration in terms of price range was large enough in order to nullify the over calibration specified in terms of A1 and AL and therefore the overall index is negative. But in case 7, the over calibration specified in terms of A1 and AL is sufficient to nullify the under calibration expressed in terms of price range and hence the search index is positive. This illustrates the SPI’s ability to capture the search pattern in terms of overall over/under calibration in different searches. 31.61 27.50 -7.24 -3.17 -7.31 -8.27 4.82 35.67 more efficiently. One way of customization, which many companies do, is to make the search more interactive and prompt customers to visit more appropriate sites. This is done by tracking the sites and pages visited by the consumers in their search. Identification of search pattern and more importantly making inferences about the consumers from the search pattern will help to customize the search for individual consumer. In this paper we identified certain factors that influence search patterns. These factors have varying influence on consumers’ search activity at different stages of their search. Also, in order to reflect the individual search pattern, especially in the search for formation of consideration set, a Search Pattern Index is developed. This can be used as a dependent measure in future researches to understand and predict consumers’ search pattern in a web-based environment. The index can be easily modified to suit websites of different e-stores because the basic nature of search remains the same- i.e., searching for alternatives using attributes and attribute values as criteria. CONCLUSIONS AND FUTURE RESEARCH Emergence of web as an important source of information has necessitated the identification of search patterns. More and more e-businesses are trying to customize their web sites to help the consumers search for information American Marketing Association / Winter 2005 We developed a uni-dimensional index to represent search pattern, which is a multi-dimensional activity. Future research can focus on developing a multi-dimensional index without sacrificing the ease of interpretability. 71 REFERENCES Bruner, C. Gordon (1986), “Problem Recognition Styles and Search Patterns: An Empirical Investigation,” Journal of Retailing, 62 (3), (Fall) 281–97. Degeratu, Alexandru M., Arvind Rangaswamy, and Jianan Wu (2000), “Consumer Choice Behavior In Online and Traditional Supermarkets: The Effects of Brand Name, Price, and Other Search Attributes,” International Journal of Research in Marketing, 17, 55–78. Smith, Gerald E. (2000), “Search at Different Price Levels: The Impact of Knowledge and Search Cost,” The Journal of Product and Brand Management, 9 (3), 164–78. Green, T.R. and P.R. Jackson (1976), “Hark-Back: A Simple Measure of Search Patterns,” British Journal of Mathematical and Statistical Psychology, 29 (1), (May), 103–13. Hodkinson, Chris, Geoffrey Kiel, and Janet R. McCollKennedy (2000), “Consumer Web Search Behaviour: Diagrammatic Illustration of Wayfinding on the Web,” International Journal of Human-Computer Studies, 52, 805–30. Johnson, J. Eric, Gerald L. Lohse, and Naomi Mandel (1999), “Designing Marketplaces of the Artificial: Four Approaches to Understanding Consumer Behavior in Electronic Environments,” INFORMS Conference “Marketing and the Internet.” Moe, W. Wendy and Peter S. Fader (2001), “Uncovering Patterns in Cybershopping,” California Management Review, 43 (4), (Summer), 106–17. Payne, J. Stephen, Andrew Howes, and William R. Reader (2001), “Adaptively Distributing Cognition: A Decision-Making Perspective on Human – Computer Interaction,” Behaviour & Information Technology, 20 (5), 339–46. Pirolli, Peter and Stuart Card (1999), “Information Foraging,” Psychological Review, 106 (4), 643–75. Westbrook, Robert A. and Claes Fornell (1979), “Patterns of Information Source Usage among Durable Goods Buyers,” Journal of Marketing Research, 16 (August), 303–12. For further information contact: Morris K. George Department of Marketing University of Connecticut 2100 Hillside Road Storrs, CT 06269 Phone: 860.486.1102 FAX: 860.486.5246 E-Mail: [email protected] American Marketing Association / Winter 2005 72 PERCEIVED RISK AND CONSUMER INNOVATIVENESS HIERARCHY: AN EMPIRICAL STUDY OF RESISTANCE TO HIGH TECHNOLOGY PRODUCT ADOPTION Tanawat Hirunyawipada, University of North Texas, Denton Mohammadali Zolfagharian, University of North Texas, Denton SUMMARY Consumer innovativeness is a central element in the studies of diffusion of innovation (Midgley and Dowling 1978), and it identifies early adopters from general consumers (Roehrich 2002). Finding early adopters can accelerate the diffusion of innovation and minimize the chances of new product failure (Robertson 1971, pp. 112– 113). Consumer innovativeness studies generally seem to focus on arousal and novelty seeking as the underlying reasons for consumers to seek novel products (Hirschman 1980). However, new products also inherently encompass an element of risks associated with resistance to adoption (Ram and Sheth 1989). This study examines: (1) consumer innovativeness is the trait that engenders the adoption of innovation; (2) new products encompass resistance to adoption. We hypothesize that perceived risk, which is a highly salient, influential attribute of innovation resistance (Bettman 1973; Dholakia 2000), moderates the relationship between consumer innovativeness and new product adoption. Reviewing consumer innovativeness literature (e.g., Midgley and Dowling 1978, 1993; Hirschman 1980; Roger 1983; Venkatraman and Price 1990), we delineate the consumer innovativeness hierarchy, which includes the three different aspects: global innovativeness (GI), domain-specific innovativeness (DSI), and actualized innovativeness (AI). GI is defined as the degree to which an individual is receptive to new ideas and independently adopts the ideas through various forms of new products. GI is also disaggregated into cognitive innovativeness (CGI) and sensory innovativeness (SNI). DSI is considered an individual’s innovativeness predisposition toward generic product class. AI is defined as the degree to which consumers are relatively earlier in adopting new products than other members of their societies. We suggest that AI be disintegrated into the adoption of actual products (Adoptive innovativeness, ADI) and the acquisition of novel information about products (Vicarious innovativeness, VCI). This study also proposes that perceived risk, i.e., instigating resistance to the adoption of innovation, moderates the relation between consumer innovativeness and innovation adoption. Perceived risk is a multidimensional American Marketing Association / Winter 2005 construct containing common dimensions across product categories as well as category-specific dimensions. Since this study focuses on high-tech products, network externalities is introduced as a category-specific risk while financial, performance, physical, time, social, and psychological risks are included as perceived risk dimensions generally found across categories. The seven dimensions of perceived risk are collectively tested to explore the effect of innovation-resistance on the consumer innovativeness hierarchy. Data collected from 746 graduate and undergraduate students at a major public university in Southwestern U.S. show strong supports for all 12 hypotheses. The positive relation between CGI and ADI suggests that CGI is a propensity to enjoy cognitive process that needs practical and pragmatic activities and that can be obtained through using products. This trait can drive consumers toward the actual innovation adoption. The positive relation between SNI and VCI shows that SNI trait relates to consumers’ tendency to seek fantasy and arousal for optimizing their level of stimulation. This arousal is achieved by the mere adoption of stimulus information. SNI is therefore a trait in consumers with positive propensity toward VCI. The positive relation between DSI and AI (both ADI and VCI dimensions) may suggest that consumer innovativeness becomes stronger within specific product categories. DSI encompasses consumers’ interests in specific categories and constitutes higher propensity to adopt innovations. The results confirm the moderating effect of perceived risk, that is, consumers with high overall perceived risk typically score high on VCI (the higher perceived risk, the higher VCI). This is a key answer to the ongoing dispute concerning the proneness of globally innovative consumers (GI) toward new product adoption. The resistance to innovation adoption, represented by perceived risk associated with new products, clearly counteracts the influence of the CGI trait. It is only the SNI trait that significantly influences the adoption behavior of innovative consumers with high concern about risk. This effect causes innovative consumers to reject new products but still acquire and enjoy products’ novel information. Perceived risk changes the innovators from “doers” to “dreamers.” However, perceived risk has insignificant impact on the relation between DSI and AI (both ADI and VCI). DSI 73 consumers’ interests and knowledge in certain product categories may mitigate perceived risk from his/her adoption. The result implies that marketing managers should first target DSI consumers as early adopters for high-tech products. GI consumers make up the second best potential adopters. To achieve this objective, managers should manipulate the market mix so that both groups of consumers are targeted. Promotional messages, while stressing CGI and SNI, should ensure consumers that they can overcome the risk associated with innovation adoption. Product demonstration, product trials, and appropriate warranty programs are among considerable activities to mitigate consumers’ perceived risk. Future study should consider more diversified product categories. By doing so, the other dimensions of perceived risk might be identified, and the external validity of the model might be increased. Additionally, the hierarchy of consumer innovativeness needs further theorization, especially on other moderating variables that can significantly influence AI. The dimensions of perceived risk, which may be salient in different aspects of consumer innovativeness, are another interesting avenue for future research. 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 2005 74 PERCEIVED ENTITATIVITY AS A MODERATOR OF FAMILY BRAND EVALUATIONS Joseph W. Chang, University of Regina, Regina Yung-Chien Lou, National Cheng-Chi University, Taiwan SUMMARY Research in family brand evaluations uncovers that the reciprocal effects of brand extensions on family brands are moderated by the categorical similarity of brand extensions (e.g., Chang 2001; Loken and John 1993; John, Loken, and Joiner 1998) and the accessibility and diagnosticity of brand extension information (e.g., Ahluwalia and Gurhan-Canli 2000; Chang 2002). When the accessibility of extension information is high, consumers engage in piecemeal or systematic processing on brand evaluations, where detailed brand extension information is processed for the impression formation of family brands. Under the circumstances, the valence of highly accessible extension information is more diagnostic than the contextual factor of categorical similarity on family brand evaluations. The images of family brands are weakened by negative extension information and are enhanced by positive extension information, regardless of the categorical similarity of brand extensions. Most recently, a considerable amount of attentions in the research of social cognition has been given to the influences of new group members on the impression formation of social groups with high and low perceived entitativity (e.g., Crawford, Sherman, and Hamilton 2002; Lickel, Hamilton, Wieczorkowska, Lewis, Sherman, and Uhles 2000; McConnell, Sherman, and Hamilton 1997). A social aggregate is perceived as having “the nature of an entity, of having real existence” (Campbell 1958, p. 17; McConnell et al. 1997, p. 750), whereas perceived entitativity is defined as the degree to which a collection of persons is perceived as being bonded together in a coherent unit (Campbell 1958; Lickel et al. 2000, p. 224). The concept of perceived entitativity emphasizes the interactive coherence among group members (Gaertner and Schopler 1998). Expected variability discusses the similarity among existing group members in a more static fashion, such as race, gender, and quality, whereas perceived entitativity emphasizes the relationship among group members on the dynamic perspective of interactive coherence (Gaertner and Schopler 1998; Hamilton, Sherman, and Rodgers 2003; Lickel et al. 2000). Low variable groups with same ethnicity or gender, such as American Marketing Association / Winter 2005 Jews, women, may be perceived as low or moderate entitative groups with insignificant coherent interactions. Social groups with coherent interaction among group members, such as task or intimacy groups, are normally perceived as high entitative and strongly valued (Lickel et al. 2000). Social groups with different perceived entitativity activate different psychological processes and lead to different subsequent impression formation (or judgments) of groups. Moreover, Crawford et al. (2002) find that the abstracted traits of the individual behaviours of high entitative groups are more likely to be applied to revise group stereotypes than those of low entitative groups, which suggests that new individual members of high entitative groups are more influential than those of low entitative groups on group impression formation. The findings suggest that, except for similarity and information accessibility-diagnosticity, group impression formation is moderated by the perceived entitativity of groups. For brand evaluation research, the results may also imply that the new extension information of high entitative family brands is more influential than that of low entitative family brands on family brand evaluations. Based on group impression formation and accessibility-diagnosticity theories, experimental hypotheses are developed to examine the intermediating roles of perceived entitativity, information valence, and categorical similarity on family brand evaluations with laboratory experiments under high accessibility situations. Both high and low entitative family brands are enhanced and diluted by positive and negative extension information respectively, regardless of the categorical similarity of brand extensions and the perceived entitativity of family brands. The polarization effect of perceived entitativity on the quality judgements of family brands is also observed. High entitative family brands are more favorably evaluated than low entitative family brands. The polarization effect then serves as a mediator on reciprocal extension effects and leads to the results that high entitative family brands are more significantly diluted by negative extension information and low entitative family brands are more significantly enhanced by positive extension information. References available upon request. 75 For further information contact: Joseph W. Chang University of Regina 1320C Grace Street Regina, SK S4T 5M8 Canada Phone: 306.949.9523 FAX: 310.356.4934 E-Mail: [email protected] American Marketing Association / Winter 2005 76 THE PERFORMANCE IMPLICATIONS OF SYNERGISTIC KNOWLEDGE RESOURCE EFFECTS IN DIFFERING ENVIRONMENTAL CONDITIONS David A. Griffith, Michigan State University, East Lansing Stephanie M. Noble, The University of Mississippi, University Qimei Chen, University of Hawaii, Honolulu SUMMARY Introduction Despite the growing interest among scholars and practitioners, there is a lack of research on and a need to improve our understanding of the process of implementing a knowledge management strategy. This article addresses this area and contributes to our understanding by providing insights into both synergistic knowledge resource effects and the environmental influences on knowledge management strategy implementation effectiveness. Specifically, we investigate the synergistic effect of combining knowledge of customers, industry, and firm practices to develop the capability of ability to meet customer needs and the influence of the capability of ability to meet customer needs on performance. Further, as our focus is resource conversion into the capability of ability to meet customer needs, we examine the moderation effect of two environmental conditions i.e., competitive intensity and market dynamism, on the conversion effectiveness. Method and Analysis We tested the hypotheses using data collected in the retail industry. Trained market researchers were then sent into the field to conduct 320 pre-arranged in-office interviews with retailers systematically selected from a directory. A total of 293 usable responses were received, yielding a 60 percent response rate (when taking the replacement sample into account). Retail sectors in the sample consisted of airlines, major household appliance, automobile dealers, banks, beauty salons and services, clothing retail, computer dealers, convenience stores, copy and duplication service, cosmetics retail, department stores, electronic appliances, florists retail, furniture retail, gift shops, golf, grocer, hotels, insurance, jewelers, pet shops, pharmacies, photo finishing, pizza, real estate agent, restaurants, sporting goods, toys, and travel agencies. The fit of the measurement model was assessed by examining factor loadings from latent variables to indicator variables, the chi-squared test, and fit indices. All factor loadings were significant at the p < .001 level and American Marketing Association / Winter 2005 all standardized factor loadings were well above .40, a minimum threshold of acceptability (Hair et al. 1998). The measurement model produced a chi-square value of 399 with 216 degrees of freedom, a chi-squared/df ratio of 1.85, GFI of .90, IFI of .943, and CFI of .942, indicating that the model provides a good overall fit. Results and Discussion This study makes several important contributions to the literature. First, researchers have yet to fully explore the synergistic effects of knowledge resources in their conversion into capabilities. Day (1994) identifies capabilities and skills related to “market-sensing” and “customer-linking,” as critical to a firm’s competitive advantage. Our results build on this and indicate that when the firm’s knowledge resources (i.e., knowledge of a firm’s customers, its industry and the firm’s practice) are developed and implemented in conjunction with one another the firm is able to establish more well developed capabilities in relation to meeting customer needs. The findings of this study also demonstrate the influence of environmental conditions on resource conversion. The results indicate that competitive intensity does not diminish the conversion of knowledge resources into the capability of ability to meet customer needs. In fact, the conversion of knowledge resources had a positive influence on the ability to meet customer needs even in highly competitive markets. These finding are encouraging as they indicate that even in markets stronger in competitive intensity, synergistically combining knowledge resources can result in the development of the capability of ability to meet customer needs. Further, the results pertaining to the influence of market dynamism on resource conversion indicated that market dynamism did in fact influence a firm’s knowledge resource conversion. Specifically, the results indicated that firms who were able to synergistically combine knowledge resources operating in highly dynamic markets were less effective at developing the capability of ability to meet customer needs when compared to firms operating in less dynamic markets. As theorized, dynamic markets are characterized by ever changing consumer 77 demands and as such even firms who are able to synergistically combine resources are faced with unique market challenges. This is not to indicate that firms that were able to synergistically combine resources were not able to develop the capability of ability to meet customer needs, for the results clearly indicate that there was a strong relationship between these two elements in markets characterized by high and low market dynamism, but rather that the market environment itself hampered the firm from fully capitalizing on its ability to synergistically combine knowledge resources. In addition, most studies of knowledge resources have focused almost exclusively on direct performance implications, thus neglecting the importance of resource conversion into viable capabilities. The importance of knowledge resources to a firm is often viewed in terms of its performance outcomes, without careful consideration of its intervening firm capabilities, such as the ability to meet customer needs. As such, the findings of this study underscores, and provides empirical support for, the theoretical precepts put forth in the capabilities literature, i.e., that resources are necessary yet insufficient for the establishment of enhanced performance. Here, the findings demonstrate that it is through the conversion of knowledge resources into capabilities that a firm is able to develop a unique market position allowing for enhanced performance. As such, this study extends the literature on knowledge resources and the RBV of the firm by exploring the employment of knowledge resources under a capabilities perspective. References available upon request For further information contact: David A. Griffith Department of Marketing and Supply Chain Management The Eli Broad College of Business Michigan State University East Lansing, MI 48824–1122 Phone: 517.432.5535, Ext. 260 FAX: 517.432.1112 E-Mail: [email protected] American Marketing Association / Winter 2005 78 THE IMPACT OF MARKET CHARACTERISTICS ON ORDER-OFBRAND ENTRY STRATEGY: AN EMPIRICAL STUDY Danielle A. Chmielewski, The University of Melbourne, Australia Bryan A. Lukas, The University of Melbourne, Australia Robert E. Widing II, The University of Melbourne, Australia ABSTRACT This study empirically investigates the impact of competitive intensity, market turbulence and market growth potential on a firm’s order-of-brand entry decision. The results indicate that the greater the competitive intensity and market growth potential, the earlier the brand entry. Directions for future research are discussed. INTRODUCTION Order-of-brand entry refers to the sequence of entry of brands into a market (Schoenecker and Cooper 1998). The issue of when to introduce a new brand into a market is a complex one, because as Schnaars (1986) asserts, different entry strategies are optimal for different firms as well as for different market conditions. Whilst earlier entry into a market can lead to the development of a firstmover advantage (see Lambkin 1988; Robinson 1988; Robinson and Fornell 1985), there are also risks and costs associated with introducing a brand earlier into the market. Development and particularly promotion costs of the brand are high, and the risk of failure is considerable, as demand uncertainty exists (Lambkin 1988; Urban et al. 1986). In a new market, it can also be difficult to accurately forecast the size of the market and the optimal positioning of the new brand (Sullivan 1991). Entering a brand later into the market can allow a firm to benefit from a late-mover advantage (see Sullivan 1991; Shankar, Carpenter, and Krishnamurthi 1998), although later entry also has its risks, because the brand is entering a more competitive marketplace. Therefore, by understanding the factors affecting the order-of-entry decision for a brand, a firm is better placed to enter a brand into a market in such a way as to balance the risks of entering too early with the problems of missing opportunities by entering too late (Lilien and Yoon 1990). The strategic marketing and management literature has long argued that a firm’s environment affects a firm’s strategy (e.g., Miller 1987; Tan and Litschert 1994). A firm’s external environment can be a source of information uncertainty (Rajagopalan and Spreitzer 1996). Conducting an analysis of the competitive environment enables a firm to better understand and measure “the attractiveness of industries for long-term profitability and the factors that determine it” (Porter 1985, p. 1). Given the American Marketing Association / Winter 2005 highly competitive nature of the consumer goods industries, it is important for firms to better understand the impact of market factors on its order-of-entry strategy. This will help ensure that a firm’s order-of-entry decision for a brand reflects the conditions it faces in the market it is choosing to enter. Against this background, the purpose of this study is to empirically examine the impact of key characteristics of the market, namely competitive intensity, market turbulence and market growth potential, on a firm’s order-ofbrand entry strategy in a range of consumer goods industries. These three characteristics affect the attractiveness of the market into which a firm wishes to enter. This is a very important and managerially relevant issue, because it suggests that different market characteristics require different order of entry decisions. It has been argued that the order-of-entry of a product into a market is a key determinant of the success or failure of the product (Fuentelsaz, Gomez, and Polo 2002). Understanding the interplay between the market and order of entry strategy will allow firms to make a more informed decision about the most appropriate entry strategy to employ, given the market conditions. The paper is structured as follows. First, we present the conceptual model and put forth our hypotheses by providing a brief review of the relevant literature. Then, we identify the methodology employed in this empirical study, before presenting our results. In the final section, we provide a discussion of the results and some future research avenues. CONCEPTUAL BACKGROUND AND HYPOTHESES Figure 1 is a conceptual framework for the discussion that follows. We now discuss each of the proposed relationships and develop hypotheses based on existing literature. An attractive market is defined as one “where the average competitor consistently earns a return above its cost of capital, i.e., it is creating value for shareholders” (Doyle 2000, p. 157). Market attractiveness is a function of the structure of the market in which a firm competes, and the extent to which the market is turbulent influences 79 FIGURE 1 Order-of-Brand Entry Strategy: A Conceptual Model Market Attractiveness (a) Competitive Intensity (b) Market Turbulence (c) Market Growth Potential the attractiveness of that market (Glazer 1991). A turbulent, dynamic market requires a firm to be responsive and adapt to changes in its environment (Rajagopalan and Spreitzer 1996). A number of factors influence the attractiveness of the market, including customer turbulence, competitive intensity, technological intensity, buyer power, and supplier power (Doyle 2000; Jaworski and Kohli 1993; Miller 1987; Porter 1980). This study will focus on three key factors; competitive intensity, market turbulence, and market growth potential (Doyle 2001). We now turn to a brief discussion of each of these factors. Competitive Intensity Competitive intensity refers to the extent to which the composition of the market and competitive actions change over time (Gatignon and Xuereb 1997; Kohli and Jaworski 1990; Slater and Narver 1994). According to Fuentelsaz, Gomez, and Polo (2002, p. 250), “competition stems from firms interacting and striving in the same environments and for the same resources.” Competitive intensity addresses the breadth and aggressiveness of a competitor’s actions (Slater and Narver 1994). Day (1994) asserts that the intensity of competition within a market determines the profit potential of that market. According to Porter (1980, p. 17), competitive intensity in a market occurs “because one or more competitors either feels the pressure or sees the opportunity to improve position.” Rivalry can take the form of price competition, aggressive advertising and marketing tactics, product introductions, and increased levels of customer service or warranties. A firm achieves superior performance by choosing to enter an attractive market, where it can defend its position against competitors. An increased level of competitive intensity decreases the attractiveness of the market, in that it can result in the erection of barriers to entry such as economies of scale and strong brand name recognition (Urban and Hauser 1993). Entry barriers provide early American Marketing Association / Winter 2005 Order-of-Brand Entry entrants with a “head start,” because they increase the lead-time between early-movers and late-movers. Barney (1991) argues that early entrants can develop an advantage over late entrants, because they have the opportunity to develop solid relationships with suppliers, establish strong brand awareness, and obtain a large share of the market. Consequently, they are able to lock in suppliers and customers and create barriers to entry, thus making entry more difficult for subsequent entrants. If firms know that their industry will be characterised by intense competition, they have an incentive to make a preemptive move by entering earlier and erecting barriers to entry, rather than entering later and facing barriers to entry. On this basis, we put forth the following hypothesis: Hypothesis 1: The greater the competitive intensity in a market, the earlier the brand entry. Market Turbulence Market turbulence is defined as the extent to which the composition of customers and their preferences change over time (Han, Kim, and Srivastava 1998; Kohli and Jaworski 1990). Market turbulence is similar to “environmental heterogeneity,” which refers to “the change in diversity of production methods and marketing tactics required to cater to customers’ needs” (Miller 1987, p. 62). Customers are an important component of an industry. They can influence the nature of competition within an industry (and hence industry profitability) by forcing prices down, demanding higher quality or more services, and playing competitors against each other (Porter 1980). A market that is characterised by high levels of turbulence implies that a firm must constantly modify its portfolio of brands or develop new brands in order to continuously meet customers’ changing preferences or latent needs (Jaworski and Kohli 1993). This makes a 80 market quite unattractive, because brand preferences are frequently changing. In addition, in turbulent markets, increased customer pressure puts profit margins under threat (Doyle 2000). Thus market turbulence makes it difficult for firms to accurately forecast the demand potential for their brand, as well as to develop an appropriate positioning strategy for their brand (Sullivan 1991). Where market turbulence is present, later brand entry may be the best option for a firm. The reason for this is as follows. Entering earlier into a market requires high set up costs, such as R&D, advertising, and market development costs. A market that is turbulent is not particularly attractive, therefore in order to maximise its return, a firm should engage in a strategy that is cost-effective and less risky. Later entry allows a firm to free-ride on the investments made by earlier entrants, hence reducing the costs associated with entry and increasing the profitability of the brand entry (Sullivan 1991). Lowest-cost entrants are most likely to generate profitability for their new brand (Doyle 2000). In light of this, we hypothesize the following: Hypothesis 2: The greater the market turbulence, the later the brand entry. Market Growth Potential Market growth potential refers to the level of potential and demand growth of the market at the time of entry of the brand strategy (Fuentelsaz, Gomez, and Polo 2002). According to Lilien and Yoon (1990), a firm’s order of entry decision depends on the market potential and demand growth of a market. A higher growth and demand potential increase the attractiveness of the market, because it is easier for a brand to be successful if the market into which a firm is entering is growing (Doyle 2000). According to Doyle (2000), “growth markets are nonzero-sum: all the competitors can grow, which acts to reduce destructive price competition and margin erosion” (p. 158). However, in order to capitalise on the growth potential of the market and capture early-mover advantages, high market growth potential is most likely to lead to early brand entry. Therefore: Hypothesis 3: The greater the market growth potential, the earlier the brand entry. METHODOLOGY Industry Selection To be consistent with previous research (e.g., Golder and Tellis 1993; Kalyanaram and Urban 1992; Schoenecker and Cooper 1998; Sullivan 1991; Urban et al. 1986), our unit of analysis is the strategic business unit (SBU) of firms operating in a range of consumers goods industries. These industries include beverages, clothing and footAmerican Marketing Association / Winter 2005 wear, food, household products, motor vehicles, personal care products, and computers. Respondents were asked to complete the survey with respect to a new brand that their SBU had introduced into the market at least one year ago. Data Collection The sampling frame for this research comprised 2894 consumer goods manufacturers in Australia and New Zealand. The mailing list was obtained from a public mailing list company. T-tests found that there were no significant differences between the Australian and New Zealand responses. The study employed direct mail data collection in the form of an on-line survey. An on-line survey was chosen because past research has found that an on-line survey generally “produces an acceptable response rate at a lower cost per returned questionnaire than mail” (Tse 1998, p. 353). E-mail invitations containing a hyperlink leading to a web-site with the on-line survey were sent to marketing executives, brand managers, or general managers of strategic business units in our sample firms. The initial e-mail was followed by two subsequent follow-up e-mails. The response rate, after taking into account a number of ineligible and/or unreachable respondents, was six percent, with 149 useable surveys completed. Whilst the response rate is low, it is not unusual. Alreck and Settle (1995) note that it is not uncommon for direct mail data collection response rates to fall within the range of five to ten percent. Indeed, our response rate (6%) was consistent with the response rate obtained by Tse (1998) (7%) in his study comparing response rates when using e-mail versus mail data collection methods. Low e-mail response rates may be attributed to the sharp increase in junk e-mails in recent years, and increasingly effective anti-spam software blocking unsolicited e-mails (Tse 1998). For the purposes of this study, a high internal validity was more important than external validity, which is consistent with the view put forth by Wittink (2004) in his recent Editorial Statement of the Journal of Marketing Research. We nonetheless controlled for a possible nonresponse bias in three ways. First, in the spirit of Armstrong and Overton (1977), we tested for differences between early and late respondents by dividing the data into thirds using the three response waves as the grouping variable. The t-tests between mean responses of first-wave and second-wave, first-wave and third-wave, and secondwave and third-wave responses indicated no statistically significant differences (p < .05) across market turbulence, competitive intensity, market growth potential, order of entry, and business unit size. Second, we conducted a oneway between-groups analysis of variance to explore the impact of response wave on market turbulence, competitive intensity, market growth potential, order-of-brand entry, and size of business unit. Respondents were divided 81 into three groups according to the response wave. There were no statistically significant differences (p < .05) in the mean scores of first-wave, second-wave, and third-wave responses. Third, we used the Mann-Whitney U Test to compare the median responses between first-wave and second-wave, first-wave and third-wave, and secondwave and third-wave responses across market turbulence, competitive intensity, market growth potential, order-ofbrand entry, and size of business unit. No statistically significant differences (p < .05) were found. These findings indicate that non-response bias was not a problem in this study. using exploratory factor analysis (EFA) run with SPSS 11.5 and confirmatory factor analysis (CFA) run with LISREL 8.5. EFA identifies the structure of the factors to be tested (Gerbing and Anderson 1988). Market turbulence, competitive intensity and market growth potential were subjected to EFA using principal components extraction method with oblique rotation in order to allow the factors to correlate with each other (Tabachnick and Fidell 2001). Factors with eigenvalues greater than 1.0 were retained, and items with low loadings (less than 0.40) were deleted (Hair, Anderson, Tatham, and Black 1998). The results supported both discriminant and convergent validity for all three constructs. The Measures This study used a combination of existing scales and new scales. Order of Brand Entry: The scale was adopted from Green, Barclay, and Ryans (1995) and Schoenecker and Cooper (1998), and comprised a single item, “how many brands were in the market prior to entry of your brand?” The item was scored using a 7-point Likert-type scale, were 1 = 7, 2 = 6, 3 = 5, 4 = 4, 5 = 3, 6 = 2, and 7 = 1 brands. Competitive Intensity: We adopted the 7-point scale used by Jaworski and Kohli (1993) to assess competitive intensity. The scale consisted of six items, where 1 = strongly disagree, and 7 = strongly agree. Market Turbulence. We adopted the 7-point scale used by Jaworski and Kohli (1993) measure market turbulence. The scale consisted of six items, where 1 = strongly disagree, and 7 = strongly agree. Market Growth Potential: A new scale was developed for this construct in this study. The scale for market growth potential comprised 4 items: (i) the market for our brand did not grow as fast as expected, (ii) the untapped dollar value of our market was not as large as expected, (iii) our market did not provide the expected sales potential for the brand, and (iv) our market was not as profitable as expected. These were assessed using a 7-point scale, where 1 = strongly agree, and 7 = strongly disagree. Control Variables: Consistent with prior research studies on new brands and order of entry (see Fuentelsaz, Gomez, and Polo 2002; Lilien and Yoon 1990; Robinson and Fornell 1985; Smith and Park 1992), this study employed brand development time, quality of the brand, degree of similarity of new brand with existing brands, and business unit size as control variables. Assessment of Measures A pretest was first conducted to determine face validity. We then assessed measure reliability and validity American Marketing Association / Winter 2005 After conducting EFA, we subjected market turbulence, competitive intensity and market growth potential to CFA to test the underlying structure identified in the EFA (Gerbing and Anderson 1988). The chi-square of the measurement model was statistically significant (χ2 = 96.84, p = 0.04, df = 74). The goodness-of-fit index (GFI), adjusted goodness-of-fit index (AGFI), root mean square error of approximation (RMSEA), parsimonious normed fit index (PNFI), comparative fit index (CFI) and normed incremental fit index (NFI) indicate an acceptable fit with the hypothesised measurement model (GFI = 0.86, AGFI = 0.81, RMSEA = 0.06, PNFI = 0.59, CFI = 0.88, and NFI = 0.72), and meet the benchmarks suggested by the literature (Baumgartner and Homburg 1996). Reliability of the three constructs was measured by looking at the composite reliability and cronbach alpha. Convergent validity was assessed by examining the parameter estimates, t-values and average variance extracted (AVE). Discriminant validity was assessed by comparing the squared correlations for all pairs of constructs in the measurement model with the AVE for each construct (Fornell and Larcker 1981). The three constructs exhibited acceptable reliability levels, with the cronbach alphas ranging from 0.70 to 0.82 (exceeding the recommended level of 0.70) (Churchill 1979), and the composite reliability ranging from 0.69 to 0.83 (exceeding the recommended threshold of 0.60) (Churchill 1979; Fornell and Larcker 1981). All of the parameter estimates were significant, with the t-values ranging from 3.70 to 7.79. All the t-values were significant (p < 0.01) (Hair et al. 1998). Moreover, nearly all parameter estimates met or exceeded the threshold of 0.60 recommended by Bagozzi (1981), providing evidence of convergence validity. The AVE ranged from 0.33 (for customer turbulence), 0.50 (for competitor intensity), and 0.40 (for market growth potential). Whilst two of the constructs had AVE values that did not meet the recommended threshold of 0.50 (Fornell and Larcker 1981), they exhibited acceptable levels of reliability and face validity. There was also evidence of discriminant validity between the constructs. Looking at the correlations in 82 Table 1, it can be seen that the squared correlation between any pair of the three constructs does not exceed either of the construct’s AVE. RESULTS Regression analysis was conducted to test the hypothesized relationships. Table 2 provides a summary of the results. Hypothesis 1 predicted that the greater the competitive intensity, the earlier the brand entry. Order of brand entry is significantly and positively related to competitive intensity (ß = 0.715, p < 0.01). Hypothesis 1 was supported. Hypothesis 2 predicted that the greater the market turbulence, the later the brand entry. Order of brand entry is negatively and marginally significantly related to market turbulence (ß = -0.206, p < 0.10). While Hypothesis 2 could not be supported, it was marginally significant and thus warrants future research. This will be discussed later. Hypothesis 3 predicted that the greater the market growth potential, the earlier the brand entry. Order of brand entry is significantly and positively related to market growth potential (ß = 0.691, p < 0.01). Hypothesis 3 was supported. Two of the four control variables were significant. The results show a significant and negative relationship TABLE 1 Pearson Correlations and Descriptive Statistics Mean 1. 2. 3. 4. Order of Brand Entry Competitive Intensity Market Turbulence Market Growth Potential 3.57 4.83 4.54 4.52 S.D 1 2.26 1.25 .93 1.07 1.0 .01 -.06 .30 2 1.0 .24* -.02 3 4 1.0 -.02 1.0 * p ≤ .01 (two-tailed test) TABLE 2 Regression Analysis: Standardized Regression Coefficients Dependent Variable Independent Variables Order of Brand Entry ß t Control Variables Brand development time Quality of brand Degree of similarity of brand Business unit size -.421 -.435 .196 -.170 -2.338** -2.711** 1.290 -.845 Direct Effects Competitive Intensity Market Turbulence Market Growth Potential .715 -.206 .691 4.195* -1.570*** 3.950* R2 Adjusted R2 F .922 .832 10.188 * p ≤ .01; ** p ≤ .05; *** p ≤ .10 (one-tailed test) American Marketing Association / Winter 2005 83 between brand development time and order of brand entry (ß = -0.421, p < 0.05), and a significant and negative relationship between quality of the brand and order of brand entry (ß = -0.435, p < 0.05). These two significant results will be discussed briefly later. DISCUSSION AND FUTURE RESEARCH The purpose of the study was to empirically test several hypotheses grounded in the literature regarding some possible antecedents of order-of-brand entry strategy. The findings support our hypothesis that the attractiveness of the market influences a firm’s order-of-brand entry strategy. The study suggests several factors as important determinants of a firm’s order-of-brand entry strategy. First, competitive intensity in a market appears to be an important determinant of early brand entry. In competitively intense markets, a firm must be strategically aware that their competitors are likely to enter earlier rather than later, so this should be factored into a firm’s entry decision. A firm should recognize that entering such a market earlier helps a firm generate switching costs and establish barriers to entry through the development of strong brand awareness and strong relationships with buyers and suppliers (Barney 1991). In addition, as Mueller (1997) states, early-movers face lower costs than late entrants, because they can disregard these sunk costs when making strategic decisions, whereas later entrants must incur both the sunk costs and any other costs in order to compete on the same level as the early-movers. Second, as market turbulence had only a marginally significant impact on later brand entry, this warrants further investigation. To the degree that future research supports market turbulence as being an important determinant of order-of-brand entry, this suggests that a firm should factor market turbulence into its entry decision. Market turbulence reduces the attractiveness of a market and increases the risks of entry for a new brand, in that it becomes more difficult to accurately forecast the demand potential for a brand (Sullivan 1991). Entering later in the market allows a firm to free-ride on the investments made by established competitors in the market, hence reducing the financial risks of entry into such an unstable market (Doyle 2000). Again, in this study, the marginally significant result should be interpreted with caution. Finally, the results indicate that the growth potential of the market is also an important determinant of early brand entry. In markets with strong growth potential, a firm must be aware of the likelihood of its competitors entering earlier rather than later, thus indicating that a firm must factor the market growth potential into its entry American Marketing Association / Winter 2005 decision. A strong market growth potential denotes a more favourable, attractive market, because it reduces the risks of entry and increases the likelihood of a firm capturing an early-mover advantage (Doyle 2000). In sum, our results, taken together, suggest that market characteristics are indeed important drivers of orderof-brand entry. Therefore, a thorough knowledge of the market is necessary to make an informed entry decision. Importantly, these market characteristics will enable decision-makers to have a more complete understanding of competitor reaction by enhancing the likelihood of correctly predicting their competitors’ entry decisions (Porter 1980). This knowledge may subsequently influence a firm’s decision to enter earlier or later. Two control variables, brand development time and brand quality, were significantly and negatively related to order-of-brand entry, thus indicating that both these variables are also important determinants of later brand entry. Future research needs to be conducted in order to further our understanding of the impact of these two variables on order-of-brand entry. There are some other possible avenues for future research that would help to develop a more comprehensive understanding of the market attractiveness – orderof-brand entry relationship. Market turbulence was negatively and marginally significantly related to order-ofbrand entry. Further investigation of this relationship is necessary to more fully understand the impact (if at all) that market turbulence has on a firm’s order-of-entry decision for a brand. In addition, it seems desirable to include performance indicators (such as return on investment, return on sales, and market growth) in the model in order to empirically determine the performance of the order-of-brand entry strategies given a market’s competitive intensity, market turbulence and market growth potential. 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New York: Harper & Row, Publishers, Inc. Tan, J. Justin and John R. Hauser (1993), Design and Marketing of New Products, 2d ed. New Jersey: Prentice Hall, Inc. ____________ and Robert J. Litschert (1994), “Environment-Strategy Relationship and its Performance Implications: An Empirical Study of the Chinese Electronics Industry,” Strategic Management Journal, 15 (January), 1–20. Danielle A. Chmielewski Department of Management (Marketing Program) Alan Gilbert Building The University of Melbourne Parkville Vic 3010 Australia Phone: +61.3.8344.1886 FAX: + 61.3.9348.1921 E-Mail: [email protected] American Marketing Association / Winter 2005 86 ORGANIZATIONAL CULTURE ANTECEDENTS OF MARKET-DRIVEN POSITIONAL ADVANTAGE AND ORGANIZATIONAL PERFORMANCE CONSEQUENCES Artur Baldauf, University of Bern, Switzerland David W. Cravens, Texas Christian University, Fort Worth Christian Bischof, University of Bern, Switzerland SUMMARY Research attention has been given in several studies to organizational culture, market orientation, innovation, and organizational performance. Dimensions of culture are potential antecedents to market-driven positional advantage which is expected to impact organizational performance consequences. Nonetheless, only limited research has considered the simultaneous antecedent and consequence relationships. In the focal construct we view positional advantage as a multi-dimensional construct consisting of market intelligence, innovativeness, and learning and development. The proposed organizational culture antecedent dimensions are market focus, participative decision making, support and collaboration, and power sharing. We also relate the focal construct to desired consequences and argue that a market-driven positional advantage positively impacts market performance, profitability, and sales growth. The organizational culture, positional advantages, and performance conceptualization adds to prior cultural, market orientation, and performance research in the following ways: (1) cultural and process perspectives of market orientation are considered in an antecedent consequence context; (2) positional advantage which could be termed as a receptivity to innovate is conceptualized as a three dimensional construct consisting of market intelligence, innovativeness, and learning and development; and (3) a multi-dimensional view of organizational performance is examined in terms of culture and innovation antecedents. We view organizational culture in terms of widely shared and strongly held values and belief systems and consider the higher level construct as a source of competitive advantage. Our market-driven positional advantage dimensions are proposed to capture relevant dimensions of the capacity to innovate, and represent a more comprehensive reflection of innovative behavior than is considered in prior research. Based on our conceptual logic we specifically interested in examining the following cultural and positional advantage hypotheses: American Marketing Association / Winter 2005 Hypothesis 1: There is a positive relationship between (a) market focus, (b) participative decision making, (c) support and collaboration, (d) power sharing and market intelligence. Hypothesis 2: There is a positive relationship between (a) market focus, (b) participative decision making, (c) support and collaboration, (d) power sharing and innovativeness. Hypothesis 3: There is a positive relationship between (a) market focus, (b) participative decision making, (c) support and collaboration, (d) power sharing and learning and development. Market intelligence, innovativeness, and development and learning positional advantages are expected to have a positive impact on the market and financial performance of the business unit. We offer the following hypothesis: Hypothesis 4: There is a positive relationship between (a) market intelligence, (b) innovativeness, and (c) learning and development and market and financial performance of the business unit. The data for examining the hypotheses were collected from senior managers employed by companies in a German-speaking business environment. The sampling objective was to include a wide range of larger firms in a wide range of different businesses. A judgment sampling procedure was applied to identify candidate companies. We utilized a standardized questionnaire which was pretested for wording and understanding before final mail distribution. After several follow-up activities we received 204 usable questionnaires were returned reflecting a response rate of 21 percent. Established multiple item measures were used for the ten construct measures which we purified applying state-of-the art methodologies. Acceptable reliability and validity of the scales was indicated. Besides investigating the above stated direct relationships we also controlled in our path models for potential effects of customer type and company size on the 87 organizational culture and positional advantage relationships. In addition, market turbulence, competitive intensity, and technological turbulence were included as moderators for the positional advantage and performance relationships. Regression analysis was used to test the hypotheses. The results for H1, H2, and H3 are encouraging but mixed. Market focus and participative decision making are strong predictors of market intelligence, innovativeness, and learning and development. Power sharing is only a predictor of learning and development; support and col- laboration has no significant impact on the positional advantage dimension. Higher market intelligence activities result in higher market, profitability, and growth performance. Innovativeness positively impacts profitability but not market and growth performance. Learning and development positively impacts all three performance consequences. Hence we find partial support for H4a and H4c and mixed support for H4b. The moderating effects of the environment constructs are not supported. For further information contact: Artur Baldauf Management Department 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 2005 88 SEE NO EVIL, HEAR NO EVIL, SPEAK NO EVIL: A STUDY OF DEFENSIVE ORGANIZATIONAL BEHAVIOR TOWARDS CUSTOMER COMPLAINTS Christian Homburg, University of Mannheim, Germany Andreas Fürst, University of Mannheim, Germany SUMMARY Despite substantial benefits of an effective complaint management, there is ample evidence that many organizations do not handle customer complaints appropriately. Instead, organizational members often exhibit an apparently irrational and dysfunctional defensive behavior towards complaints. This paper aims at providing a theoretical explanation for this phenomenon. Furthermore, based on a dyadic data set, it analyzes antecedents and consequences of the prevalence of defensive organizational behavior towards complaints (DOB). Conceptualization of DOB Based on individual psychology and organizational theory as well as in line with literature on organizational behavior and complaint management, we argue that individuals in organizations perceive customer complaints as a source of actual or potential threat to self-esteem, reputation, autonomy, resources, or job security. Thus, in order to protect themselves against this threat, they exhibit different types of DOB. Overall, we identify seven types of DOB that can be assigned to one of the three following categories: complaint acquisition (i.e., isolation from complaints, hostile behavior towards complainants), complaint transmission (i.e., no/biased transmission of complaints to complaint managers, no/biased transmission of complaints to senior managers), and complaint utilization (i.e., no/inadequate handling of complaints, no/inadequate analysis of complaints, and no/inadequate use of complaint information in decision making). Methodology Our data analysis is based on 110 dyads. Each dyad consists of a managerial assessment of the antecedents (i.e., customer orientation of human resource management (HRM), customer orientation of corporate culture, prevalence of negative attitudes towards complaints) and types of DOB in the focal company and five customer assessments related to their post-complaint responses (i.e., complaint satisfaction, overall customer satisfaction, perceived complaint-based improvements, future American Marketing Association / Winter 2005 complaint intention), representing the consequences of DOB. Results With respect to the (direct and indirect) antecedents of the prevalence of DOB, the results of our study support the prediction that the prevalence of negative attitudes towards complaints is negatively affected by customer orientation of HRM and customer orientation of corporate culture, respectively (p < .01). Moreover, as suggested, the prevalence of negative attitudes towards complaints, in turn, has a positive effect on the prevalence of DOB (p < .01). In addition, our results provide evidence for the prediction that the prevalence of DOB is also (directly) negatively affected by customer orientation of HRM (p < .01). However, we fail to find statistical support for our assumption that the prevalence of DOB is too (directly) negatively influenced by customer orientation of corporate culture (p > .10). Furthermore, all hypotheses related to the consequences of the prevalence of DOB are confirmed by the data. More specifically, the prevalence of DOB is found to have a negative effect on complaint satisfaction as well as on perceived complaint-based improvements (p < .01). Moreover, we observe that complaint satisfaction positively influences overall customer satisfaction and future complaint intention, respectively (p < .01). In addition, our findings confirm a positive impact of perceived complaint-based improvements on overall customer satisfaction as well as on future complaint intention (p < .01). Research Issues First, drawing upon individual psychology and organizational theory, we provide a theoretical explanation for the phenomenon of DOB. Second, our study provides evidence for the high relevance of this phenomenon. More specifically, we show that the presence of DOB has a significant negative impact on customers’ complaint satisfaction and on the ability of the firm to learn from complaints (i.e., the implementation of complaint-based improvements). 89 Third, our research provides an understanding of the forces within an organization that can influence DOB. A particularly strong influence on the prevalence of DOB comes from the customer orientation of HRM. Managerial Implications Our research also provides guidance for managers on how to improve a firm’s complaint management. More specifically, the findings of our study suggest that managers should strive to reduce the prevalence of DOB in their company. This can be done in two ways: First, managers can work directly on this phenomenon. Our conceptualization of DOB (i.e., the identification of seven different types) provides managers with a checklist type of structure. Based on this structure, they can analyze the prevalence of DOB in their company and, in turn, initiate activities to reduce this behavior. Second, managers may also work on the antecedents of the prevalence of DOB. In this context, the customer orientation of a firm’s HRM is particularly important. For further information contact: Christian Homburg Marketing Department I University of Mannheim L 5-1 68131 Mannheim Germany Phone: +49.621.181.1555 FAX: +49.621.181.1556 E-Mail: [email protected] American Marketing Association / Winter 2005 90 THE REST OF THE ICEBERG: AN EXAMINATION OF NONCOMPLAINING SERVICE CUSTOMERS Clay M. Voorhees, Florida State University, Tallahassee Michael K. Brady, Florida State University, Tallahassee David M. Horowitz., Florida State University, Tallahassee SUMMARY While most service recovery strategies have focused on customers that actively complain to the firm, it has been suggested that these customers represent only the “tip of the iceberg” (Diener and Greyser 1978, p. 22). This means that the majority customers that experience poor service simply exit the encounter and managers receive no opportunity to recover. Davidow (2003) suggests that in order to fully understand customer behavior in failed encounters a study must be forwarded that investigates the responses of the consumers that do not register complaints. In an effort to address this critical gap in the literature, the current study conducts a comprehensive comparison of groups of customers that opted not to complain and those that registered a complaint to the firm. The comparisons are made across repeat purchase intentions and a number of negative outcome variables. It is hypothesized that consumers that end a failed encounter with a satisfactory recovery are most likely to return to the service provider. Moreover, consumers that simply exit a failed encounter may demonstrate more favorable intentions toward the firm than those that opt to complain and experience poor recovery efforts. The analysis reveals significant differences between the different consumer groups with respect to their repeat purchase intentions and several negative outcomes variables. Specifically, the results confirm the hypotheses and demonstrate that consumers that receive a satisfactory recovery effort have the most favorable intentions toward a firm. Following this, noncomplainers demonstrate the next most favorable intentions. Finally, consumers that complain but receive a dissatisfactory recovery effort are least likely to return to do business with a service provider. Ultimately, the findings offer significant implications for both service researchers and managers. In particular, the results provide further justification for research on service recovery strategies as it appears that poor recovery efforts can be costly to a firm. References are available upon request. For further information contact: Clay M. Voorhees Department of Marketing Florida State University Tallahassee, FL 32306–1110 Phone: 850.645.1519 FAX: 850.644.4098 E-Mail: [email protected] American Marketing Association / Winter 2005 91 FROM EMPATHY TO FORGIVENESS: A PROSOCIAL PERSPECTIVE IN SERVICE FAILURE AND RECOVERY RESEARCH Felix T. Tang, The Chinese University of Hong Kong, Hong Kong SUMMARY Consider a dinning scenario in which your server has completely forgotten your order. How do you feel? This is an outcome failure and the extant literature predicts that you will become dissatisfied, and you may also engage in negative word-of-mouth and exit behaviors. What if your server collapses into tears in front of you after finding out that he/she has completely forgotten your order? Would you feel sympathetic towards the server despite of the service failure? Would you abandon your resentment towards the service provider? In such situation, consumers might feel empathetic and behave in a merciful way towards the server even if there has not been a word of apology or compensation. Although this scenario may be pushing the limits, it exemplifies a boundary condition where the concepts of justice, equity, fairness, disconfirmation, and attribution are not adequate to explain all consumer behaviors. The traditional view downplayed consumers’ ability to selfrestore satisfaction, ignored consumers’ consideration for other’s welfare, and overlooked the effect of positive emotions on post-recovery evaluation. Prosocial Behavior and Forgiveness Prosocial behavior research in psychology suggests consumers may look beyond their own well being (Batson et al. 1995). Prosocial behavior is broadly defined as “social behaviors oriented to benefit another, regardless of potential outcomes for oneself” (Miller, Kozu, and Davis 2001). Such behavior includes but not limited to donating, forgiving, helping, sharing and volunteering. Philosophers, such as Hume (1949), considered prosocial behavior as moral actions of human instinct. Of the various prosocial behaviors, forgiveness is one of the most relevant concepts in the service marketing context. Modern philosophers, such as North (1987), agreed that the central theme in forgiveness involves replacing resentment with beneficence. Using McCullough, Pargament, and Thoresen’s (2000) definition, forgiveness is an intraindividual and prosocial change toward a perceived transgressor. Empathy The most proximal determinant of forgiving of forgiveness is empathy (McCullough et al. 1998). Empathy American Marketing Association / Winter 2005 reflects a concern for others and incorporates the concepts of sympathy, compassion, and tenderness (Batson 1990). When people feel empathy towards the transgressor, they are more likely to forgive him/her (McCullough et al. 1997, 1998). Such evidences have been found across demographics variables, across cultures, and across contexts (Eisenberg and Miller 1987). Thus, consumers are capable of displaying prosocial behavior, even if such behaviors may not be directly beneficial. The concept of empathy has also been discussed by Parasuraman et al. (1988), Tax et al. (1998), but the conceptualization is quite different in this paper. While Parasuraman et al. (1988) and Tax et al. (1998) saw consumers as recipients of empathy, this paper advocates the possibility for consumers to be givers of empathy. Observational set and perceived similarity are the two most relevant antecedents in the service recovery context. Observational set is the focal of one’s attention and it can be instructed or cued. When people focus on the needy other’s emotional state or perspective, they are more likely to feel empathetic towards those who are in need than when people focus on the facts (Eisenberg and Miller 1987). Perceived similarity concerns one’s perception of the resemblance between oneself and a comparison object. In their meta-analysis of sixteen studies, Miller et al. (2001) concluded that perceived similarity with another was associated with or led to feelings of empathy or sympathy. Forgiveness as Consumer Behavior What marketers are doing during service recovery are essentially wooing for consumer forgiveness with compensation and apology, asking consumer to replace resentment (e.g., dissatisfaction) with beneficence (e.g., satisfaction). The two consequents of forgiveness, lower avoidance and lower revenge, are also strikingly similar to the marketing consequents of successful service recovery (e.g., increase repatronage and lower negative word-ofmouth activity). Thus, forgiveness is a valid, alternative perspective of service recovery. Hypotheses Based on insights from prosocial behavior research, six hypotheses are postulated and are summarized in Figure 1. Due to space constraint, the hypotheses and their development are not discussed here. The Figure should be 92 FIGURE 1 An Empathy-Forgiveness Model in the Context of Service Failure Observational Set + Empathy Perceived Similarity + Forgiveness + + + Satisfaction Repatronage Intention Negative WOM Intention self-explanatory (the positive and negative signs indicate the predicted directions of relationship) and the logics flow from the discussion above. our ability to explaining consumer behavior; (3) postulate a new perspective by seeing service recovery efforts as attempts to seek consumers forgiveness. Discussion No doubt, the concept of justice, equity, fairness, disconfirmation, and attribution remain the cornerstones of our understanding on consumer behavior in the recovery process. However, let us not blindly rely only on these concepts for they do not give us a complete picture of consumer behavior. References available upon request. This paper aims to (1) call for attention to the limitations of the current views and theories on service recovery; (2) introduce the concepts of prosocial behavior, empathy, and forgiveness into service recovery to broaden For further information contact: Felix Tang Department of Marketing The Chinese University of Hong Kong Hong Kong Phone: 852.9678.5958 FAX: 852.2603.5473 E-Mail: [email protected] American Marketing Association / Winter 2005 93 INTERNATIONAL MARKETING ALLIANCE DYNAMICS: EMPIRICAL FINDINGS FROM THE PHARMACEUTICAL INDUSTRY Sengun Yeniyurt, Michigan State University, East Lansing Janell D. Townsend, Michigan State University, East Lansing Erin Cavusgil, Michigan State University, East Lansing SUMMARY Collaborative ventures are an indispensable tool for executives in the quest for achieving a sustained competitive advantage in the marketplace. The significance of this instrument is evidenced by a marked increase in the use of cooperative arrangements as a business form, and the variety of studies related to this phenomenon. The boundaries of what define the marketplace, however, have evolved in ways previously unimaginable. The world has become more integrated in terms of infrastructure and dependence; the drivers of these global trends leave few industries untouched by the increased velocity and intensity of competition for resources and customers (Wolf 2000). In this domain, collaboration has become an indispensable means through which firms are able to respond to environmental turbulence (Achrol 1991), effectively extending the reach and resources they would not have otherwise. The use of alliances in marketing and international contexts is inextricably linked. This complex phenomenon encompasses dynamic aspects of the competitive environment and various perspectives of firm behavior. As firms collaborate to compete (Ohmae 1989a), the relative population of potential partner firms remains somewhat static over time, eventually leading to competition for collaboration in an industry. What remains to be discerned is the nature of the competition for alliance partners, particularly in light of the increased environmental turbulence and diversity established by the globalization of industries (Achrol 1991). Additionally, experiential learning is posited to be fundamental to a firm’s ability to accumulate knowledge (Huber 1991; Sinkula 1994) and conduct international operations (Cavusgil 1980; Johanson and Vahlne 1977); yet, empirical findings supporting this position remains sparse. While the literature generally proposes cultural distance as a significant factor in the internationalization process (Johanson and Vahlne 1977; Johanson and Weidersheim-Paul 1975; Kogut and Singh 1988), recent findings do not support this proposition with respect to international market entry timing (Mitra and Golder 2002). The question remains as to whether the diversity of cumulative culture distance experiences affects an organization’s inclination toward future international collaborative ventures. This study contributes to the literature through the reconciliation of these perspectives by American Marketing Association / Winter 2005 uncovering the effects of competition for collaboration, experiential learning and culture distance on the propensity to engage in a specific mode of entry: international marketing alliances. A co-evolutionary dynamic framework is introduced as a means to understand the complex phenomena involved in forming international marketing alliances. The advantages derived from international marketing alliances are first explored based on the concepts of resource complementarities and extension. In order to reveal the consequences of the intensity of collaboration and company experience on international collaborative venture formation in the global marketplace, we draw on the organizational ecology perspective. Further, we employ the concepts of organizational learning and the assumptions of the internationalization process to delineate the effects of experience and culture on international collaborative ventures. The hypotheses are tested through the analysis of the global marketing alliance activity announced by U.S. pharmaceutical firms from 1984 to 2003; this includes 792 international marketing alliance formations engaged by 317 firms. An event history was constructed for each U.S. pharmaceutical company starting with the date of its first international marketing alliance. The data were arranged into yearly spells updated when an event occurred and at the end of each year to account for the changes in variables. A continuous 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 international alliance. The findings of a Cox hazard rate model support the hypothesized effects of legitimation and competition, sustaining the assumptions of organizational ecology, extending the theory to the global context of inter-firm relationships. Particularly important to the literature is that companies are eager to follow their competitors in the early stages of industry level internationalization utilizing marketing alliances as a mode of entry; yet once a critical mass of international marketing alliances is attained in the industry, the propensity to engage in alliances declines. Our results provide strong support for the proposition that companies learn from their international alliance formations. Cultural distance is a significant factor in interna94 tional marketing alliance engagement, as the cumulative cultural distance of previous alliances increases the likelihood that a company will engage in a future international marketing alliance. Previous studies have only considered the effect of culture distance experience in specific markets, as opposed to the impact of the diversity of cumulative cultural distance experiences on an organization’s inclination toward future actions. Finally, organizational size has a positive effect on the propensity to engage in a new international marketing alliance. References are available upon request. For further information contact: Sengun Yeniyurt Department of Marketing and Supply Chain Management The Eli Broad Graduate School of Management Michigan State University N370 Business College Complex East Lansing, MI 48824 Phone: 517.353.6381 FAX: 517.432.4322 E-Mail: [email protected] American Marketing Association / Winter 2005 95 A CROSS-NATIONAL STUDY OF CONSUMER-FIRM EXCHANGE RELATIONSHIPS WITHIN THE CONTEXT OF MARKET MILIEUS Patrick Lentz, University of Dortmund, Germany Deepak Sirdeshmukh, North Carolina State University, Raleigh Ed Nijssen, Radboud University, The Netherlands Hartmut H. Holzmüller, University of Dortmund, Germany Jagdip Singh, Case Western Reserve University, Cleveland SUMMARY Broadly, two fundamental mechanisms are relevant for understanding the dynamics that promote or impede consumer-firm market exchanges in a global society of networked economies. One fundamental mechanism focuses on the ongoing exchanges between individual consumers and sellers, and involves understanding the motivations for each party to enter into, consummate and continue market exchanges, from here on referred to as micro mechanism (e.g., Nicholson, Compeau, and Sethi 2001). A second fundamental mechanism focuses on the embeddedness of market exchanges and involves understanding the social and market context that provides an arena for individual consumer-firm exchanges to occur, referred to as macro mechanism (e.g., Shapiro 1987; Zucker 1986). Few if any studies have focused on the macro mechanisms of individual consumer-firm exchanges, which is particularly troubling since different markets around the globe are likely to vary both in terms of their micro and macro mechanisms. Conceptual Background and Research Hypotheses We draw from extant literature to develop a micro model of Satisfaction-Trustworthiness-Trust-Value-Loyalty (ST 2VL) relationships (e.g., Liu, Furrer, and Sudharshan 2001; Sirdeshmukh, Singh, and Sabol 2002). Regarding the larger context in which exchanges occur, we draw from sociology (Shapiro 1987; Zucker 1986) and economics (Hirschman 1970; Nooteboom, Berger, and Noorderhaven 1997) to define market milieus. These involve consumers’ and sellers’ expectations regarding the norms governing customer-firm interactions in a given market. Market milieus thus refer to the dominant and shared normative structure that forms the context for consummating exchanges between providers and their customers. As Kramer (1999) notes, in the absence of specific knowledge about each other, consumers and firms can revert to formal rules at one end of a continuum to mutual relationships at the other end, to solve their problem or uncertainty. We thus define two dominant configurations of market milieus, that is, rule-based (characterized by contracts, detailed legal environments, and American Marketing Association / Winter 2005 other control mechanisms) and relationship-based (characterized by reciprocity, fairness, and personal exchange processes) market milieus. We propose hypotheses regarding the effects of market milieus on micro relationships, mainly drawing from Granovetter (1985), Kollock (1994), and Zucker (1986): H1: Consumers’ perceptions of exchange value and satisfaction will be significantly higher in rule based market milieus, relative to relationship based market milieus. H2: Consumers’ judgments of trust will be significantly higher in relationship based market milieus, relative to rule based market milieus. H3: Consumers’ loyalty intention judgments will not vary significantly for different configurations of market milieus. H4: Relative to relationship based market milieus, the influence of consumers’ satisfaction and value judgments on loyalty will be significantly higher in rule based market milieus. H5: Relative to rule based market milieus, the influence of consumers’ trust judgments on loyalty will be significantly higher in relationship based market milieus. Research Design Two different samples were used to test the hypotheses. First, we collected a consumer sample regarding the individual-level dynamics between satisfaction, trustworthiness, trust, value, and loyalty with their insurance company (n = 365, 504, and 316 for the U.S., Germany, and the Netherlands, respectively). Second, a separate consumer sample was used to evaluate the macro environment, i.e., the market milieus at the industry level in the same three countries (n = 18, 30, and 31 for the U.S., Germany, and the Netherlands, respectively), which helped circumvent method bias. To test our hypotheses, the two types of data were joint in an hierarchical type of analysis 96 using both mean analyses and multiple-group SEM, with the three countries as separate groups. Items for analyzing the micro environment have been adapted from existing literature, whereas items capturing the level of rules and relationships have been developed for the purpose of this study, and pretested using “think aloud” exercises with small convenience samples. The measurement model evidenced good levels of reliability and validity. and partial support for H1, since only value shows higher levels in rule based relative to relationship based market milieus; however, H2 cannot be supported. Third, turning to the moderating effects of market milieus, we find partial support for H4 and H5. While both satisfaction and trust in frontline employees differ in their influence on loyalty according to our hypotheses, trust in management policies and practices as well as value do not. Results Discussion Our analysis revealed substantial and statistically significant differences across the three market milieus at the macro level. We found that the U.S. insurance market milieu is more relationship based, the German insurance market is rule based, and the milieu of the Dutch insurance market is located between the two extreme positions. Although additional differences were found in the micro model relationships between countries, the more interesting result is related to the influence of market milieus. First, the macro level variables add significantly to model fit. Second, regarding direct effects of market milieus on exchange-specific constructs, we find full support for H3 Our study results demonstrate that examining consumer-firm relationships in situ is a promising approach for better understanding exchange relationships, particularly when considering markets in different countries. This extends contemporary understanding of the exchange dynamics and thus provides both theoretical and managerial relevance. The results clearly reveal that an isolated investigation of micro mechanisms is inappropriate, especially in cross-cultural settings. We believe that our work enhances the knowledge of macro effects on micro mechanisms by conceptualizing and empirically demonstrating the different effects. References available upon request. For further information contact: Patrick Lentz Department of Marketing University of Dortmund Otto-Hahn-Str. 6 D-44227 Dortmund Germany Phone: +49.231.755.3277 FAX: +49.231.755.3271 E-Mail: [email protected] American Marketing Association / Winter 2005 97 AN EXAMINATION OF IMC AT THE TACTICAL LEVEL: DIFFERENCES ACROSS TIME AND PRODUCT TYPE Stephen J. Grove, Clemson University, Clemson Les Carlson, Clemson University, Clemson Michael J. Dorsch, Clemson University, Clemson Christopher D. Hopkins, Clemson University, Clemson SUMMARY Since its inception, Integrated Marketing Communication (IMC) has been viewed as a valuable concept by marketing practitioners (McArther and Griffith 1997). IMC has been characterized as the coordination of communication tools (e.g., advertising, publicity, sales promotion, etc.), for a brand. A review of this phenomenon in practice uncovers three broad categories including IMC as “integrated communication,” IMC as “one voice” communication and IMC as a “coordinated marketing communication campaign.” This study focuses on the integrated communication approach because it appears to be the one most often used in practice. Relative to services, it is argued that advertising in this area should be characterized by a greater presence of IMC than the advertising of physical goods. This is largely do the fact that IMC may provide a mechanism that addresses some of the problems associated with marketing a product the customer has difficulty comprehending clearly and thus, may alleviated a degree of perceived risk. This study empirically investigates the utilization of IMC across product type and over time. It is expected that there is greater usage of IMC among sellers of services than among sellers of goods. It is also expected that the usage of IMC has grown over the years, reflecting its increased emphasis in the marketing discipline. To measure the nature and incidence of IMC, the study focuses on its manifestation at the tactical level. A research design was employed to compare services print advertisements and goods print advertisements on their degree of integration and the trend towards integration over time. First, a sample of services and goods print advertisements was generated to obtain a wide range of advertising messages over three different time periods. Next, a data collection process was established for extracting data from each print advertisement. The data extraction process consisted of two steps. During the first step, content analysis of each print advertisement was conducted in order to profile it in terms of the communication tools that it employed. During the second step, the profiled print ads were re-examined to determine the extent to which they were integrated. This two-step process produced a data set consisting of count data. Once the data set was created, the data were examined using both inferential and descriptive analyses. Results indicate that while IMC is a reality among both services and physical goods advertisements, IMC was found to exist in services advertising to a greater extent relative to goods advertising. Moreover, the incidence of IMC at the advertisement level, regardless of the product type that is being advertised, has not increased significantly over recent years. As a result, there appears to be much room for further and more enlightened adoption of IMC principles. References available upon request. For further information contact: Christopher D. Hopkins Department of Marketing College of Business and Behavioral Science Clemson University 233 Sirrine Hall, Box 341325 Clemson SC, 29634–1325 Phone: 864.656.3952 FAX: 864.656.0138 E-Mail: [email protected] American Marketing Association / Winter 2005 98 ASSESSING THE EFFECTS OF IN-SCHOOL POINT OF PURCHASE AND SAMPLING ON THE CHOICE OF A HEALTHY FOOD OPTION Dafina Rexha, The University of Western Australia, Australia Katherine Mizerski, Edith Cowan University, Australia Richard Mizerski, The University of Western Australia, Australia SUMMARY Childhood obesity has tripled in the U.S., U.K., and Australia in the past decade with one in four children now being classified as overweight or obese (Azhar 2004; de Brito and Segal 2002). These children are more likely to develop health problems such as diabetes, asthma, cardiovascular disease, joint problems, back pain, and psychological problems (Anthony, Patterson, and Kemp 2002; Cameron et al. 2003). There are a number of factors thought to contribute to the “obesity epidemic” (Time 2004) with increased consumption of energy-dense foods and decreased levels of physical activity, receiving most of the blame (Waters and Baur 2003). Advertisers of these energy-dense foods and fast foods have come under scrutiny and are accused of targeting their products directly to children. This targeting has led for a call to ban food advertising during children’s programmes in a number of countries (Canning 2004) and has forced manufacturers to re-evaluate their offerings. Recently, a new culprit has been identified as a contributor to childhood obesity. It has been suggested that schools, that routinely educate children about good nutrition in the classroom, have failed to send the right messages from their school canteens. A study by Which? Magazine (2003) found that school canteen offerings read more like fast food menus and contributed less than one portion of fruit and vegetables to a child’s daily intake. This has led to criticism being levelled at schools for failing to fulfil their duty of care towards students by providing “unhealthy” food choices (Stanton 2002; Wallis 2004). With one third of all children’s meals coming from outside the home and more than half (52%) of these being consumed at school, many food preferences and food acceptance patterns are developed in schools (Birch 1999; Story 2002). Schools are also a critical component of the child’s social environment and play a significant role in shaping children’s food preferences and eating behaviours (Baxter 1998). Not only are children reinforced through their own choices at school, they are also affected by the choices of their peers (Kubik et al. 2003). This peer American Marketing Association / Winter 2005 influence and socialisation can have a significant impact on children’s first purchasing decisions. School canteens are one of the first places where children are faced with the decision of what food to purchase by themselves. Usually parents give their children money to purchase from the school canteen. The parents, however, are not present at the time the purchase decision is made. Many suggest that an immediate change in the school food and nutrition environment needs to occur (Stitzel 2003; Wallis 2004) so that schools are healthy environments where the food related policy of the canteen allows children the opportunity to make healthy choices (Baxter 1998; Conento et al. 1995). O’Dea (2003), in her research into children’s eating practices, identified convenience, taste and social factors as barriers to healthy eating. The children in the study noted, however, that they would eat what was available and “allowed.” This would suggest that if healthy food were available for children to purchase and eat at school, they would do so. There is a lack of research, however, on how to create this change and how to encourage children to eat healthier. The current study attempts to fill this gap and provides the results of a multiple observation period experiment undertaken at a primary school canteen in Australia. The experiment was designed to determine the effects of sampling, subtle promotion, and availability of healthy food in children’s preferences and purchases of canteen food. The sample consisted of 166 children in grades one to four. Each child who purchased food from the canteen during recess was observed and their food choices recorded. After obtaining a baseline of existing product sales, Smoothies, a healthy food choice consisting of strawberries, skim milk, and orange juice, were made available as a new option. This new option was supported with point of purchase promotion in the form of a large poster at each window. In addition, two of the classes were provided with samples prior to recess. The results support previous research into the effect of advertising on children’s preferences but go beyond this to look at the effect of alternative promotional tools on 99 actual purchase. While the point-of-purchase ad did have the effect of increasing sales, sampling, an often used tool in adult food purchases (e.g., Fazio 1986; Smith and Swinyard 1980), was not as effective. Although more children who had sampled ultimately purchased, the differences were not significant. Evidence from the study suggests that the availability and promotion of a healthy food product can reduce the purchase and consumption of other “less healthy” options. This effect, however, was short-lived. The rebound of these less healthy options in the absence of promotional tools may provide a strategy for long-term behavioural change. If schools are serious about encouraging good eating habits, and joining the fight to reduce childhood obesity, perhaps they need to consider the use of “promotional” materials. Given that most schools provide infor- mation in class on nutrition, these promotional tools could serve as reinforcement for the educational message. Although the findings of the current study are based on children’s choice behaviour in a school canteen setting, the findings may be generalizable to a broader venue. As canteens are one of the first places where children can make independent food choices, the results of this study can be used by other outlets where children make choices (i.e., fast food outlets). The results can provide valuable information for managers of food outlets that target children and for producers of food targeted at children. By providing information on healthier options, food advertisers may be able to circumvent restrictions on advertising during children’s programs. References available upon request. For further information contact: Katherine Mizerski MTL/BPM Edith Cowan University Pearson St. Churchlands 6018 Western Australia E-Mail: [email protected] American Marketing Association / Winter 2005 100 TESTING WHY ADULTS PURCHASE FAST FOOD CARTOON CHARACTER TOY PREMIUMS Claire Lambert, University of Western Australia, Australia Richard Mizerski, University of Western Australia, Australia SUMMARY The Fast Food Industry has come under extensive criticism for its “junk food” content and its aggressive marketing to children (Sieders and Petty 2003). The use of extensive advertising to children and toys as premiums are alleged to cause young consumers to develop poor eating habits, become overweight or obese, and labor under long-term health problems due to a diet of too much Fast Food (Dore, Harris, and Whittaker 2002; WHO 2003; McKimmie 2004). New restrictions, including warning labels on fast food meal packaging, the banning of advertising to children, and eliminating promotions that involve toys as premiums, are being studied by some Australian States and their Federal Government in order to tackle rising obesity in young Australian children (Cumming 2002). Similar sentiments have been expressed in the United States and the United Kingdom, where there are initiatives to restrict or ban fast food advertising and promotion aimed at young consumers (Banzhaf 2003; Barboza 2003; House of Commons 2004). There are present bans on “junk food” advertising during children’s television programs and restrictions concerning the type of premiums used in five other countries (Lambert and Mizerski 2003). The success of premium based promotions appears rare for many product categories, with consumer participation rates often reported as one percent or less of a brand’s buyers (Schultz, Robinson, and Peterson 1993). However, the experience of fast food retailers is quite different (Taylor 2001). McDonalds, Burger King, and Wendy’s lead all other companies in the use of premiums in their promotions. Most of their premiums appear to be aimed at children, with some Fast Food retailers beginning their targeting to three years olds (AFA 2001). Critics of the Fast Food Industry (Schlosser 2001; WHO 2003; McKimmie 2004) charge that the special allure of toy type premiums, and the sheer volume of their use, may train young and naïve children into repeatedly requesting or purchasing Fast Food meal items. The promotion of these meals frequently feature cartoon character premiums tied into television programs or movies in their advertising and sales promotion (Spethmann 2002). The repeated use of heavily promoted premiums is assumed to build Fast-Food brand and category loyalties American Marketing Association / Winter 2005 among children. However, few of the three to seven year old consumers that are targeted actually purchase the premiums. Because independent visits to Fast Food restaurants appear rare before the age of eight, the vast majority of toy premiums are bought by adults. It is assumed that adults purchase Fast Food premiums after being “pestered” by the child to obtain the items (McKimmie 2004). The most effective time for a child to request a Fast Food toy premium would appear to be at the Fast Food restaurant, where the decision is made and the retail environment showcases the product. One would expect that meal buyers accompanied by a child to a Fast Food facility, would have a greater probability of purchasing a cartoon toy premium aimed at that child than a buyer without a child with them (AFA 2001). Fast Food and brand past purchase frequency and perceived value of the premium were also tested for an effect in the premium’s purchase. The research was conducted using a field experiment at a major Fast Food brand’s retail facility located in the Perth, Australia metropolitan area. The promotion was a four-week long continuity premium promotion that offered 16 versions of a Snoopy plush toy. The campaign included local media advertising that almost exclusively aired on children’s television, as well as point-of-purchase material meant to generate awareness and intentions to visit the fast food retail operations. The study used a cross-section sample of meal buyers that were personally interviewed over three time periods to investigate the effect of the Snoopy premium on consumer decision-making and purchase in this category. A total of 50 surveys were completed per day (n = 100 per weekend) over three periods, and sampled meal buyers that visited the Fast Food facility in-store, during the weekend lunch period. It was found that the accompaniment of children with the meal buyer was not a significant effect in the purchase of a Snoopy cartoon toy premium, nor for the number of Snoopy premiums reported purchased in the past. Buyers of the premium provided a significantly higher mean value of the Snoopy premium than non-buyers of the premium, but these values were significantly lower if the buyer was accompanied by a child or children. However, 101 there were no differences in the groups’ perceived value of the Snoopy premium if pre-campaign respondents’ mean estimation of the premium’s value was included in comparisons. The effect of previous purchase of the Snoopy premium, not purchase of the brand of Fast Food, was a significant effect in buying the Snoopy premium on the visit that was surveyed. In addition, the reported purchase of the premium reflected a distribution not significantly different from the Negative Binomial Distribution often observed with fast moving consumer package goods and gambling products (Mizerski et al. 2004). This suggests that purchase of the continuity premium may have become habitual. This apparently habitual component was a significant effect in repurchase of that premium, and potentially more influential than the respondent’s perceived value of the premium. The study’s results provide an insight into the effectiveness of children’s requests for Fast Food toy premiums targeted at them. The claims that cartoon-based premiums necessarily lure children to a Fast Food restau- rant should be re-evaluated as it appears they may tend to primarily lure adults. These results suggest that potential Public Policy interventions need to be aimed at the parents and caretakers that largely make the purchase decisions for what children eat. The need for bans on the use of cartoon–based premiums targeted to the children’s market (cf., Sieders and Petty 2003; McKimmie 2004), needs more evidence before causality can be assumed. Of course, it may be that simple possession of a premium is enough as reported by Pierce et al. (1998), but rejected by Lee et al. (2004), in regard to finding of an effect of Tobacco premiums in smoking initiation. Researchers that have looked into the stochastic pattern for fast moving consumer package goods have argued (cf., Ehrenberg 1969) for there generally being little or no effect of information processing or attitudinal precursors in frequent choice behavior. Information-based programs and remedies may be expected to be less effective than if the buyer of the premium was more cognitively involved in the decision. Clearly, more research needs to be conducted to see if these early findings can be replicated and explained. References available upon request. For further information contact: Richard (Dick) Mizerski School of Economics and Commerce M261 The University of Western Australia 35 Stirling Highway, WA 6009 Australia Phone: +618.6488.7210 FAX: +619.6488.1055 E-Mail: [email protected] American Marketing Association / Winter 2005 102 MULTIMARKET CONTACT AND THE MODERATING ROLE OF DOMINANT LOCAL PLAYERS: A CONCEPTUAL OVERVIEW Sweta Chaturvedi Thota, James Madison University, Harrisonburg SUMMARY This paper identifies the factors that moderate the relationship between multimarket contact and mutual forbearance observed by firms that operate in multimarkets. A framework is developed that identifies the market factors that moderate the relationship between multimarket contact and mutual forbearance. Specifically, the paper discusses the moderating effects of factors, which arise mainly due to the presence of dominant local players, on the levels of mutual forbearance observed by firms. It is proposed in this paper that the suggested moderating factors would reduce the level of mutual forbearance observed by firms when firms operate in multimarkets. Multimarket competition is defined as a situation where firms compete with each other simultaneously in several markets (Karnani and Wernerfeldt 1985). This situation is present in multiproduct industries or industries with different geographic markets (Fernandez and Marin 1998). A better understanding of multimarket competition is of great importance to marketing strategy research and practice because of the central nature of the issue of interfirm rivalry to marketing strategy issues. Thus, it is of extreme importance to firms that compete in multiple markets to develop an understanding of the behavior of other firms that operate in these markets. Further, in formulating a strategy for multimarket competition, it is important to consider the impact of various factors that affect the level of competition between firms. Despite attempts by past research to explore issues revolving around multimarket competition, there is a dearth of research that explores the roles of the various moderating variables on the relationship between firms that engage in multimarket competition. Strategy researchers and industrial economists have examined whether firms that engage in multimarket competition would compete aggressively against each other or observe mutual forbearance (i.e., tacitly collude). Mutual forbearance is a form of tacit collusion in which firms avoid competitive attacks against the rivals they meet in multiple markets (Jayachandran, Gimeno, and Vardarajan 1999). Interestingly, past research has argued both for and against whether mutual forbearance is a deterministic outcome of multimarket contact. It is stressed here that although the relationship between multimarket contact and mutual forbearance has been examined in prior research, the factors that moderate American Marketing Association / Winter 2005 the relationship between multimarket contact and mutual forbearance have not received adequate attention in extant literature. In this paper, the factors that moderate the relationship between multimarket contact and mutual forbearance are identified. The paper draws from gametheoretic propositions and hypercompetition literatures and develops a framework that identifies the market factors that moderate the relationship between multimarket contact and mutual forbearance. It is proposed that the various moderating variables would reduce the level of mutual forbearance observed by firms when firms operate in multimarkets. In this paper, primary market factors that moderate the relationship between multimarket contact and mutual forbearance are identified, which would help in understanding and determining the relationship between multimarket contact and the mutual forbearance observed by firms. The paper discusses the moderating effects of factors that arise mainly due to the presence of single-market firms or dominant local players on the levels of mutual forbearance observed between firms. The factors identified are the presence of single-market firms or dominant local players, the level of competition triggered by dominant local players, and resource similarity between the single-market firms and the firms operating in multimarkets. The discussion in this paper, that describes the process through which multimarket competition influences the intensity of competition and leads to reduced mutual forbearance, has been represented in a framework. The framework, demonstrates the role of moderating variables that reduce mutual forbearance and heighten the intensity of competition when firms operate in multimarkets. The framework and propositions in this paper have several research implications for managers and researchers. The impact of the several moderating variables on the level mutual forbearance and, consequently, on the level of competition between firms that operate in multimarkets has been examined in this paper. The reduced levels of mutual forbearance and the increased intensity of competition may have serious implications on the success of multimarket firms and on the level of competition that multimarket firms may face from a single-market firm or a dominant local player operating in that market. This study will help shed light on how managers of multimarket firms should mentally map their market and determine their rivals. 103 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 2005 104 THE NATURE OF CO-OPETITION: LITERATURE REVIEW AND PROPOSITIONS Pilsik Choi, University of Illinois, Champaign SUMMARY Interfirm interactions have been extensively studied in economics, marketing, strategic management, and organization theory. Over the last two decades, research on interfirm interactions has evolved into two research streams: one based on firms’ competitive behavior and the other on firms’ cooperative behavior. Before the mid 1980’s, interfirm interactions were analyzed with great emphasis on firms’ competitive behavior. This stream of research was influenced by economic theory, which generally embraces intense competition. In the mid and late 1980’s, while other researchers dwell on the tradition of firms’ competitive behavior, a number of researchers turned their attention to the cooperative aspects of interfirm interactions. Since then, they have identified various types of interfirm cooperation, e.g., symbiotic marketing, co-marketing, strategic alliances, etc. All of these concepts emphasize cooperation between firms. In the early 1990’s, sharing the similar background to that of the concepts emphasizing cooperation, a new concept, “co-opetition,” was created. Unlike the other concepts, co-opetition (blend of cooperation and competition) focuses on both cooperation and competition at the same time. The book, Co-opetition, by Brandenburger and Nalebuff (1996) ignited the popularity of the concept. The book has generated tremendous interest among practitioners and researchers. In light of the amount of interests in co-opetition, however, it is surprising that academic publication on co-opetition is very limited thus far. Addressing this issue in the literature, this paper attempts to investigate the nature of co-opetition. The purpose of this paper is to review the literature related to co-opetition and examine its antecedents and consequences. Specifically, this study attempts to address the following questions: (1) What is co-opetition? (2) How can it be classified? (3) Which firm characteristics cause co-opetition? (antecedents), and (4) What benefits does co-opetition generate for firms that adopt the concept? (consequences). Co-opetition is defined as the situation where a group of competitors cooperate in activities associated with creating mutual benefits while at the same time they compete with each other in activities associated with dividing up the benefits. Co-opetition is different from symbiotic marketing, co-marketing, and strategic alli- American Marketing Association / Winter 2005 ances mainly because it focuses on both cooperation and competition with competitors simultaneously while the other three focus only on cooperation with suppliers, customers, competitors, and/or noncompeting firms. Competitors in this paper are defined as direct competitors who are competing in the same market(s). Co-opetition is categorized into channel co-opetition, marketing co-opetition, and R&D co-opetition. Channel co-opetition denotes a situation where one competitor becomes the other competitor’s buyer or supplier or a situation where one competitor uses the other’s distribution channels or production facilities while they compete with each other in a final goods market. Marketing coopetition is a situation where direct competitors cooperate for joint marketing efforts (e.g., brand alliances, joint promotion, bundling, etc.) while they compete with each other in the same market. R&D co-opetition occurs when direct competitors join forces in research and development or other similar activities (e.g., joint new technology development, joint industry standard development, etc.) while they compete in other activities. Drawing upon the literature on co-opetition, strategic alliances, co-marketing, and symbiotic marketing, I identify complementarity, compatibility, managerial ability, and competition level as antecedents of co-opetition. Complementarity occurs when the pooled skills and resources can create excess value relative to their value before the pooling. Since the cooperation part of coopetition requires mutual benefits, one partner should have certain skills or resources that the other partner needs in order for such cooperation to be formed. Thus, a high level of complementarity between competitors will likely lead them to enter into co-opetition. In this process, technological change moderates the influence of complementarity on co-opetition. Compatibility, which is characterized as similarities in management style and company culture, is another important factor for the cooperation part of co-opetition. Although competitors are complementary with each other, if they are not compatible in the areas where they cooperate, it is difficult for them to cooperate with each other in those areas. Hence, a high degree of compatibility between competitors will likely lead them to engage in co-opetition. Management ability is also an important factor for co-opetition formation. Management that has the ability to recognize skills and resources it needs and seek those skills and resources from other companies will more likely identify co-opetition 105 opportunities with other competitors that can provide such skills and resources. Therefore, competitors with such management ability will likely forge a co-opetitive relationship. Finally, competition level can influence coopetition formation as well. When two companies compete fiercely in a market, they likely perceive each other as an enemy to defeat and have less willingness to collaborate, even if they have complementary skills and resources. Thus, it is proposed that a high level of competition between competitors will decrease the possibility of formation of a co-opetitive relationship. In terms of consequences, co-opetition brings better competitiveness and efficiency to participating competitors. Since competitors outside the co-opetitive relationship do not possess all the skills and resources that are available to the firms in the co-opetitive relationship, their products and services are not likely to match those from the firms in the co-opetitive relationship. Thus, the firms in the co-opetitive relationship gain a competitive edge over competitors outside the relationship, which increase competitiveness. In addition to increased competitiveness, co-opetition also provide the participating firms with efficiency because they do not need to develop skills and resources they need internally. The most important contribution of this paper is that, to my knowledge, this study is the first study that formally defines co-opetition and examines both its antecedents and consequences. Given the fact that research on coopetition is at its early stage, this study provides groundwork on which future research on co-opetition can build. For further information contact: Pilsik Choi Department of Business Administration 339 Wohlers Hall University of Illinois at Urbana–Champaign 1206 South Sixth Street Champaign, IL 61820 Phone: 217.333.4240 FAX: 217.244.7969 E-Mail: [email protected] American Marketing Association / Winter 2005 106 TECHNOLOGY VERSUS PEOPLE: TWO SCHOOLS OF THOUGHT ON PRICING CAPABILITY DEVELOPMENT Lewis K.S. Lim, Indiana University, Bloomington Rebecca J. Slotegraaf, Indiana University, Bloomington Rockney G. Walters, Indiana University, Bloomington SUMMARY A growing number of studies in marketing and strategic management are concerned with the notion of pricing capabilities. Within this emerging literature, two schools of thought dominate the intellectual discourse. The “technological” school, reflected mainly in industryoriented and business practice writings, emphasizes computational precision, and objectivity as prerequisites to effective pricing. Accordingly, it views pricing capabilities as driven by the installation of information systems and the procurement of pricing engineering expertise. In contrast, the “people” school, espoused largely by scholars subscribing to an organizational capabilities or organizational learning perspective, sees market sensing and concerted organizational action as the fundamental mediators of effective pricing. Focusing on such higherorder people-dependent processes, this school advocates the development of coordination mechanisms, tacit knowledge, and routines over time to improve pricing effectiveness. Noting the divergent viewpoints, we construct two “implied” models of pricing capability development in order to bring to light the mediating processes and driving mechanisms assumed by proponents of the respective schools of thought. In the technological model of pricing capability development, we depict the availability of accurate and timely information on cost and revenue flows, the acquisition of pricing engineering knowledge, and the customization of data display in information systems as antecedents, and pricing precision and objectivity as mediators, of pricing astuteness. In the people model on the other hand, we suggested collective task experience in developing the pricing process, a shared/ dominant logic about the marketplace, and interfunctional goal alignment within the organization as antecedents, and market sensing and concerted organizational action as mediators, of pricing astuteness. By juxtaposing the two alternative models, we are able to draw differential implications of each school. Evidently, each school suggests a different set of resource American Marketing Association / Winter 2005 investment priorities for firms. Specifically, the technological school would place a greater priority on the external acquisition of material, tangible resources such as software and consultancy services, whereas the people school would prescribe the internal development of abstract, intangible resources such as tacit market knowledge, and interfunctional conflict resolution mechanisms. Each school inherently emphasizes resource acquisition from a different kind of factor market and may be suited for adoption in a different type of organizational environment. These issues call for linking the study of pricing capabilities to the broader theories of management, such as the resource-based view, transaction cost theory, and contingency theory. In exploring these two schools of thought, this paper contributes to marketing knowledge in a number of ways. First, the current state of understanding concerning pricing capabilities is put into proper perspective, with the delineation of two possible alternative positions scholars, consultants, and practitioners alike might hold toward the topic. Certain implicit theories or otherwise unstated premises on either side are thereby illuminated. Second, within each school of thought, the notion of a pricing capability itself is further clarified with the identification of the key enabling skills and resources. Third, the alternative processes of improving pricing effectiveness are explicated, thus allowing us to understand how different compositions of resources influence the effectiveness of price decision making. As an agenda for future research, we outline two primary directions in which the framework proposed in this paper could be extended. For a start, investigations could be carried out into the managerial-perceptual and organization-specific factors that lead a firm to adopt either the technological or the people model of pricing capability development. Thereafter, research could focus on determining the contingent deployment of different pricing capabilities to suit the organizational decision environment. More definite conclusions could then be drawn about the role of pricing capabilities in influencing firm performance. 107 For further information contact: Lewis K.S. Lim Kelley School of Business Indiana University 1309 East Tenth Street Bloomington, IN 47405 Phone: 812.855.1116 FAX: 812.855.6440 E-Mail: [email protected] American Marketing Association / Winter 2005 108 DIMENSIONS AND OUTCOMES OF RELATIONAL EXCHANGE IN A BUSINESS-TO-BUSINESS CONTEXT: A META-ANALYSIS Mohammadali Zolfagharian, University of North Texas, Denton Rajasree K. Rajamma, University of North Texas, Denton SUMMARY Research in the last two decades identifies relational exchange as the key underlying factor driving business performance. However, the theoretical foundation of relational exchange is far from clear. Relational exchange has been operationalized using over 37 different dimensions, many of which overlapping and interrelated (Gundlach et al. 1995). This might be due to the contextual and methodological differences of the studies. The contribution of our meta-analysis is twofold: (1) to establish whether an overall positive association exists between relational exchange and its purported outcome variables and (2) to identify the contextual, methodological and measurement peculiarities that instigate variation in findings reported by different researchers. Hence, our first proposition is that there is an overall positive relationship between relational exchange and its outcomes. The database for meta-analysis was constituted of 34 studies, altogether contributing 37 dimensions of relational exchange and 13 outcome variables. After collapsing dimensions with similar definitions and eliminating those that have less than 10 correlations, our database consisted of 19 studies (55%) providing 89 usable correlations. These correlations were associated with five relational exchange dimensions: solidarity, durability, flexibility, information exchange and mutuality, and three outcome variables: satisfaction, performance, and commitment. These dimensions and outcomes were categorized into (1) instrumental/concrete including flexibility, information exchange (two dimensions) and performance (one outcome) and (2) abstract including solidarity, durability, mutuality (three dimensions), satisfaction and commitment (two outcomes). We hypothesized that the instrumental dimensions and outcomes of relational exchange would have significant, positive relationship with the effect size. Differences across correlations in meta-analyses are often attributed to four broad categories of characteristics: measurement method, research context, estimation procedure, and model estimation (Sultan et al. 1990). As our analysis focused on correlations, model estimation procedure and model specification (i.e., omitted variable bias) were not considerable issues for this study (Henard and Szymanski 2001). Therefore, two contextual and two American Marketing Association / Winter 2005 methodological moderators below were identified and used in our analysis. 1. Contextual Moderators: 1.1 The country from which data was collected (U.S. vs. other countries). 1.2 Whether the data was collected from a single industry; and two. 2. Methodological moderators: 2.1 Whether upstream or downstream firm in the relationship responded to the survey. 2.2. Respondent’s status in the firm (whether the respondent was a top executive or not). We hypothesized that relational exchange dimensions have a stronger impact on its outcome variables (a) when the sample is drawn from within the U.S. (b) when it is drawn from a single industry (c) when the upstream partner is the respondent in the study and (d) when the respondent has a high rank in the firm. Analysis was done using the multiple regression technique with dummy coded variables (0/1). The ztransformed correlations formed the criterion variable and the five dimensions of relational exchange, the three outcome variables and the four moderator variables formed the predictor variables in the regression equation. All the data, except the effect size, were dummy-coded. The findings offer insights to researchers as well as practitioners. We could not find any significant overall relationship between relational exchange and its outcome variables. The results also partially support our argument that instrumental dimensions (flexibility) as well as instrumental outcomes (performance) of relational exchange are more salient than abstract dimensions. Further, significant moderators of the relationship were found to be sampled industry (studies that collected data from a single industry had stronger positive effect sizes) and the respondent’s rank in the firm. Responding firm’s position in the relationship was found to marginally moderate the relationship. By far, it was seen that, sampled industry is the strongest moderating factor of the relationship. In sum, the findings indicate that the association between relational exchange and outcome variables is 109 highly dependent on three factors: (1) how relational exchange is operationally defined, (2) who evaluates the relationship (upstream firm versus downstream firm and high-status employee versus low-status employee within the organizational hierarchy), and (3) the data source (single- vs. multiple-industry). One major limitation of our findings stems from the small number of empirical studies that are available and that explore the relationship between relational exchange and its outcomes. This calls for more studies in the area. Moreover, we found that other meaningful dimensions of relational exchange such as trust, harmonization of conflict have received barely any attention from the researchers. Hence, this is an avenue for further research on the subject. Future research should also include the views of all the parties involved in the relationship in order to get a more comprehensive view of what is happening within a given relationship. For further information contact Rajasree K. Rajamma College of Business University of North Texas P.O. Box 311396 Denton, TX 76203–7231 Phone: 940.565.4787 FAX: 940.381.2374 E-Mail: [email protected] American Marketing Association / Winter 2005 110 ENTRY MODE AND LEVEL OF EQUITY: A SIMULTANEOUS EXAMINATION OF FOREIGN DIRECT INVESTMENT GOVERNANCE Sudha Mani, University of Western Ontario, London Kersi D. Antia, University of Western Ontario, London Aric Rindfleisch, University of Wisconsin – Madison SUMMARY Entering a foreign market is an expensive, risky, and daunting task comprised of multiple decisions. Among the most important of these decisions is the governance arrangement of a new subsidiary. Firms entering foreign markets must first select a mode of entry (e.g., a whollyowned subsidiary versus a joint venture with a local partner). For joint ventures, the entering firm must also decide upon its level of equity investment. Although these two governance decisions are strategically inter-related, the extant FDI literature has examined them in isolation. The bivariate model in this paper addresses the problem associated with the correlated nature of these two decisions. The key theoretical perspectives explaining entry mode and level equity have been the transactional cost and experience perspective. Prior studies have typically assumed common antecedents of transaction cost analysis (TCA) and experience for both aspects of governance, and little is known about their specific effects on each aspect of governance. TCA emphasizes capability protection, while the experience perspective considers governance with a view to capability enhancement. Despite recent research examining these dual objectives (Delios and Henisz 2000; Lu 2002; Madhok 1997), the relative predictive ability of these two theoretical perspectives across both aspects of FDI governance is unknown, as there has been no simultaneous estimation of their influence. Our paper addresses this lacuna by simultaneously estimating both mode and level of FDI governance via the lens of both the TCA and experience perspectives. Our inclusion of these dual viewpoints allows us to assess their relative theoretical merit upon both aspects of FDI decisions. Using a rich dataset of 4,459 subsidiaries of 858 Japanese firms across 38 countries over a nine-year period, we specify a cross-classified, multilevel, bivariate model of FDI governance. This model enables simultaneous estimation of entry mode and level of equity decisions and integrates theoretical viewpoints from both the TCA and experience perspective. The results from the bivariate multilevel analysis suggest a need to integrate the TCA and experience perspective. Our findings reveal that TCA factors have a greater significant impact on choice of entry mode than it does on the level of equity participation. In contrast, experience considerations significantly determine both aspects of governance. The much larger effect sizes obtained for entry mode and host country experience, relative to that of advertising intensity lend support to the assertion that models of FDI activity that focus solely on TCA-related concerns are underspecified (Blodgett 1991; Brouthers 2002). Further, our analysis reveals that although experience exerts a powerful influence on FDI governance, the direction of its effects is dependent upon the type of experience in question. This research was supported by a grant from the Social Sciences and Humanities Research Council of Canada (#411-98-0393) at the University of Western Ontario. References available upon request. For further information contact: Kersi D. Antia Richard Ivey School of Business University of Western Ontario 1151 N. Richmond Street London, Ontario N6A 3K7 Canada Phone: 519.661.4231 FAX: 519.661.3959 E-Mail: [email protected] American Marketing Association / Winter 2005 111 TOWARDS AN UNDERSTANDING OF THE GOVERNANCE OF COMPLEX NETWORKS OF RELATIONSHIPS: UNCERTAINTY, GOVERNANCE SYSTEM CHOICES, AND PERFORMANCE OUTCOMES Andrew T. Stephen, University of Queensland, Australia Leonard V. Coote, University of Queensland, Australia SUMMARY The governance of interfirm relationships in marketing channels is complex. Much extant literature has considered relationship governance from the perspective of discrete, isolated dyadic relationships (e.g., a single buyer and a single supplier). In reality, relationships in marketing channels, supply chains, and distribution networks combine to form relationship networks that are inherently complex and can have high levels of uncertainty. The governance of relationships in these networks is likely to vary significantly from the governance of the single dyadic relationships that have been the focus of many previous studies. An emerging stream of literature considers the governance of multiple, linked relationships in network-type structures (e.g., Heide 2003; Mishra, Heide, and Cort 1998; Wathne and Heide 2004). While it is understood that complex systems of interfirm relationships exist and are relatively commonplace in practice (cf., Anderson et al. 1994), research into the governance of these networks of relationships is needed. Continuing in the tradition of this emerging stream of literature, and seeking to extend previous, more descriptive conceptualizations of relationship networks in marketing, this paper advances a more general conceptualization of governance in relationship networks. The paper focuses specifically on how governance system choices are made and what factors influence these decisions, and the performance-related outcomes of systems of governance. An important element of the conceptual discussion in this paper is the notion that governance choices for one level in a network are strongly influenced by a firm’s assessments and evaluations of conditions of uncertainty and relationship characteristics at other levels in the same network. The authors present an extended conceptual discussion and formal propositions in an attempt to advance thought towards a more general framework of network governance. A central issue considered in the conceptual framework relates to the use of plural forms, or plural governance, in managing multiple, linked relationships in net- American Marketing Association / Winter 2005 works (cf., Bradach and Eccles 1989; Heide 1994, 2003). Plural governance is intended to afford firms in networks with greater flexibility to adapt to changing conditions in their environments or channels. This notion is applied to more general considerations of how uncertainty can be dealt with in relationship networks through governance mechanisms. The discussion then turns to introducing the notion of governance system compatibility; that is, optimal configurations or combinations of governance modes under plural governance must be compatible across levels or branches of relationship networks. The most efficient governance systems or plural forms of governance are those that provide sufficient flexibility and greater certainty, and that are compatible across levels. The conceptual framework builds on these foundations and advances propositions that predict (1) how downstream channel conditions can influence upstream channel governance choices, and (2) when plural governance is required based on prevailing conditions elsewhere in a network. The concepts and propositions discussed in this paper have a number of implications for theory and practice. Studying relationship networks and how they might be efficiently governed in order to increase flexibility and certainty for firms in these networks is of importance to academic and practitioner audiences. At a theoretical level, the framework proposed in this paper is novel in the sense that it considers contingent effects across levels of networks (e.g., upstream vs. downstream) in determining the most appropriate systems of governance that are compatible with each other. This builds on recent work by Mishra et al. (1998) and Wathne and Heide (2004). Including plural governance in these conceptualizations adds to the depth and richness of the framework. For practitioners, this paper offers suggestions for how to make optimal and efficient governance system choices under conditions of uncertainty and complexity in a relationship network context. The conceptualizations provide guidelines for what practitioners should consider and evaluate as part of the process of designing the most appropriate governance systems for their needs. References available upon request. 112 For further information contact: Andrew T. Stephen or Leonard V. Coote UQ Business School University of Queensland Brisbane, Qld 4072 Australia Phone: +61.7.3365.9721 FAX: +61.7.3365.6988 E-Mail: [email protected] American Marketing Association / Winter 2005 113 MARKET DRIVING RELATIONSHIP MARKETING FOR RADICAL INNOVATIONS Helder J. Sebastiao, University of Oregon, Eugene SUMMARY Firms that launch radical product and process innovations are market driving: creating, shaping, and accelerating markets for their radical innovations and redefining customer expectations, value propositions, and business processes. Successful market driving is dependent on developing, growing, and strategically leveraging networks of alliances and key customers, and relationship marketing plays a critical role in fostering collaboration. This suggests a fundamental shift in marketing focus from targeting and communicating with prospective customers towards the cultivation, management, and leveraging of multiple collaborative relationship ties. Thus initial relationship marketing efforts should be concentrated on establishing strong alliance network ties and conducting frequent and intensive mutual learning-oriented communications with initial customers. Contrasting Being Market Driven with Market Driving Market Driven Firms Are Responsive: Market driven relationship marketing strategies emphasize responsiveness to both channel member and existing customer needs. When a firm is market driven its primary objectives are to gain full channel member support of a product launch and to leverage existing customers in adopting an incremental innovation, often through the use of product/service migration strategies. The result of a successful market driven strategy should be expanded market share or share of wallet/budget, reinforced brand loyalty, and enhanced existing customer satisfaction. While firms can maintain competitive advantage by being market driven in existing markets, they become vulnerable to firms pursuing a market driving strategy. Market Driving Firms Are Opportunistic and Collaborative: Market driving firms are generally new entrants who revolutionize an industry by delivering a substantial leap in customer value through either a breakthrough technology or marketing system made possible by a unique business process (Kumar, Scheer, and Kotler 2000). The most successful radical innovations produce what Arthur (1990) refers to as a market in lock-out, where a technology or technology-based business process becomes an industry standard that is extremely difficult to dislodge. Examples include Amazon.com and EBay being perceived as the standards for conducting e-com- American Marketing Association / Winter 2005 merce, and Dell driving the standard for modular computer manufacturing processes (Kumar, Scheer, and Kotler 2000). The market driving entrepreneur typically creates and enters new markets through alliances and similar cooperative strategies rather than competitive positioning (Sarasvathy 2001). Success is dependent on leveraging and building upon who they know: industry contacts, funding sources, supporters, suppliers, and customers (Sarasvathy 2001). This emphasis on alliances and collaboration is the most significant influence on the selection of relationship marketing objectives and strategies. Alliances facilitate widespread industry adoption and provide access to markets and customers that otherwise may not be available to the entrepreneurial firm. Initial customers provide feedback and the input that drives successive product iterations and service enhancements (Gatignon and Xuereb 1997; Hill 1997). Market driving firms both drive the formation of expectations and use an iterative approach to refining new products and services to meet customer and alliance partner expectations that evolve through successive interaction with their networks. Due to limited resources entrepreneurs must achieve this incremental learning within a relatively short timeframe. Interaction with the firm’s networks must also reinforce strategically important relationships. Market Driving Creates an Innovation Network A collaboration-oriented relationship marketing strategy should result in lower product launch costs, reduced time for market acceptance, and reduced market uncertainty. Embedded relationships provide an additional barrier against competitive threats and help reduce overall marketing costs. The strategic leveraging of these relationships leads to ongoing product, service, and market opportunities as the network expands and becomes increasingly interconnected to other alliance and customer networks. The desired end state is status as an industry standard and possession of a highly embedded network of relationships contributing to future innovations based on joint value creation. This is a natural evolution for the initial customer relationships in which the seeds of collaboration were planted. This environment of shared risk and reward fosters greater learning between the firm and the customer, which in turn can lead to improved efficien- 114 cies, higher quality, and faster turnaround times (Prahalad and Ramaswamy 2000). Table 1 summarizes the differences between market driving and being market driven. TABLE 1 Market Driving Versus Market Driven Relationship Marketing Market Driving Market Driven Type of Innovation Radical product and/or process innovation Incremental product / service innovation Firm Situation Typically entrepreneurial; new product to new markets New product/service to existing markets Basic marketing philosophy Essentially proactive, iterative, and committed to creating technology standards and markets Essentially reactive/responsive to market demand Basic strategic approach Strategy evolves from an iterative process, testing as many alternatives as possible by leveraging ♦ Firm technical, functional, market expertise ♦ Emerging networks of prospective customers/alliances ♦ Collaboration Select an optimal strategy among alternatives based upon expected returns, using ♦ Pre-specified criteria ♦ Pre-determined goals ♦ Research and projections ♦ Knowledge of existing channels and customers Involvement of target customer in the innovation process Initial target customer input is integral to the iterative process of product/service and segment refinement; Dialog is continuous, and network of potential customer/collaborators continually expands Possible contact via context of NPD research Leverage existing relationships for potential migration Key Relationship Mktg Strategies Identifying, recruiting and forming networks of alliances and customers Building commitment to the technology as a standard Joint value creation via embedded network relationships Customer adoption/migration to new product Full channel cooperation Customer as input to future product ideas Customer as referral source Key Relationship Mktg Goals (1) Well defined market (2) Standards as an effective barrier to entry (3) Access to additional markets and opportunities (1) Expand market share (2) Expand share of wallet/budget (3) Reinforce brand loyalty Key Mktg-Based Assets from RM Activities (1) Industry standard technology or process (2) Embedded product innovation network acceptance time (1) Expanded cash flow from incremental sales (2) Enhanced cash flow from reduced market Conclusion Traditional relationship marketing models for established, market driven firms do not adequately account for the characteristics and challenges of entrepreneurial market driving firms. These firms redefine markets with radical innovations that trigger dramatic changes in customer expectations, value propositions, and business pro- American Marketing Association / Winter 2005 cesses. Successful market driving is dependent on developing, growing, and strategically leveraging networks of alliances and key customers. Relationship marketing plays a critical role in market driving and ultimate radical innovation launch success, particularly in fostering collaboration with alliances and customers. References are available upon request. 115 For further information contact: Helder J. Sebastiao University of Oregon Lillis Business Complex 1208 University of Oregon Eugene, OR 97403–1208 Phone: 541.346.4179 FAX: 541.346.3341 E-Mail: [email protected] American Marketing Association / Winter 2005 116 AN INVESTIGATION OF PERCEPTUAL FACTORS INFLUENCING CONSUMER’S INTENTION TO ADOPT RADICAL VERSUS INCREMENTAL NEW PRODUCTS Audhesh K. Paswan, University of North Texas, Denton Lisa C. Troy, University of North Texas, Denton SUMMARY The objective of this paper is to enhance our understanding of key perceptual dimensions influencing consumers’ intentions to adopt radical and incremental new products. We do so by investigating five key perceptual factors as antecedents to intention to adopt (or purchase) a radical new product (RNP) or an incremental new product (INP): perceived knowledge about the RNP and INP, perceived complexity of the RNP and INP, perceived financial risk and perceived performance assurance (opposite of risk) associated with the RNP and INP, and perceived comfort associated with purchase of the INP or RNP. Our investigation of whether these perceptual factors vary across radical versus incremental new products, and whether they influence the adoption of radical versus incremental new products similarly differs from existing literature which typically focuses on consumer innovativeness as a trait or a behavior and which often lumps consumers together into radical versus incremental groups despite the fact that consumers may actually adopt incremental products some of the time and radical products in other situations. The respondents for the study were composed partly of senior and graduate students at a major university in a suburban campus and partly of non-students contacted personally through student interviewers from two market research classes. The scale items for measuring the five perceptual factors were adapted from existing studies. The same scale items were repeated in two separate sections of the survey – one for Incrementally New Products (INPs) and another for Radical New Products (RNPs) in the context of consumer electronics. A total of 609 surveys were first analyzed for reliability and validity (convergent and discriminant) using Cronbach’s Alpha and inter-item correlations. The results indicate acceptable levels of reliability and validity. We next tested the hypotheses using pair wise t-tests and multiple regressions to test the hypotheses of interest. Separate models were run using purchase intention towards the RNP and the INP, and for both models the multi-collinearity estimates were well within acceptable limits. Findings from the study indeed indicate that the very same consumer can have similar adoption intentions for different types of products (i.e., radical versus incremental), possibly desiring to adopt both a radical and an incremental new product within the same broad category of consumer electronics. Additional findings suggest that consumers seem to differ in the way they perceive the two types of innovative products (radical versus incremental) along perceptual dimensions such as complexity, financial risk and performance assurance dimensions but do not differ (in our sample) across product types in their perceptions of perceived knowledge or perceived comfort with the purchase process. Finally, we find that the influence of key perceptual factors on adoption intentions may be similar for radical versus incremental new products. Our findings are important for marketers who have historically sought to lump consumers into innovative categories with the assumption that these would hold across products. Furthermore, consumers seem to differ in the way they perceive the two types of innovative products along perceptual dimensions such as complexity, financial risk, and performance assurance dimensions but do not differ (in our sample) across product types in their perceptions of perceived knowledge or perceived comfort with the purchase process. These findings are also important to marketers as they seek to design marketing plans to address consumer’s perceptions. For further information contact: Audhesh K. Paswan Department of Marketing and Logistics College of Business Administration 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 2005 117 IT’S ALL ABOUT LEARNING: WHAT FIRMS CAN LEARN FROM CONSUMER PIONEERS Yun Ye, The University of Arizona, Tucson ABSTRACT This paper identifies an implicit potential resource that can generate sustained competitive advantage for firms that produce innovative products: consumer pioneers. Examining the mechanism of consumer learning and organizational learning, this paper emphasizes the mediating role of higher-level organizational learning and the dynamics how consumer pioneers generate sustained competitive advantage. INTRODUCTION Identifying resources that can generate sustained competitive advantage has been an important area of study in strategic management. In the existing literature, some unique resources, such as strategic planning, information processing systems and positive reputations, are considered to be able to generate sustained competitive advantage for firms (Barney 1991), but resources which can generate sustained competitive advantage have become more implicit and limited today. As environmental uncertainty is growing faster in this technology era, it has become more crucial to exploit new resources to serve as sustained competitive advantages for firms, especially for those firms whose products are highly innovative and need to be upgraded constantly, such as digital product industry (e.g., computer, digital camera, PDA, etc.) Thus, the purpose of this study is to address another implicit and important potential resource that can generate sustained competitive advantage for firms that produce innovative products: consumer pioneers. Defined as lead consumers with high learning capability and low learning costs, consumer pioneers as a resource have four empirical indicators of the potential to generate sustained competitive advantage: value, rareness, imperfect imitability, and non-substitutability (Barney 1991). The underlying idea is learning transfer. That is, firms can generate consumer pioneers to sustained competitive advantage by learning from what consumer pioneers have learned. Prior studies have considered working with lead customers to recognize strong needs before the rest of the market and to find solutions to those needs as a salient strategy for firms to gain competitive advantage (Slater and Narver 1995). But what is the underlying mechanism that such a resource generates sustained competitive advantage? Under what conditions does this resource become crucial to firms, and to what kind of firms? This article provides answers to the above questions by examining the relevant American Marketing Association / Winter 2005 literature and developing a mediation model. The model indicates that the resource of consumer pioneers can generate sustained competitive advantage through the mediator of higher-level organizational learning, especially under high-level environmental uncertainty for firms that produce high-level innovative products. In the next section, I will discuss the concept of consumer pioneers from a consumer learning perspective, followed by a discussion of why the resource of consumer pioneers could be a potential sustained competitive advantage by addressing its four attributes. Then I will discuss the mediating role of higher-level organizational learning. Finally, a conceptual framework and some additional propositions are presented to build a comprehensive mediation model incorporating consumer pioneers, organizational learning and sustained competitive advantage. CONSUMER LEARNING AND CONSUMER PIONEERS Consumer Learning Consumers learn, but their learning varies. The basic definition of learning, which refers to the relatively enduring changes in the response to stimuli (Rogers 1962), already points out the key issue: change. But how do changes happen? How are they different from consumer to consumer? And what does the difference mean to researchers and marketers? These are the major issues I will address here. Consumer learning occurs not only through exposure to external information sources such as advertising and word-of-mouth, but also through a process of internal knowledge transfer from familiar to novel domains (Gregan-Paxton and John 1997). Employing the internal knowledge transfer view, this study focuses on the endogenous mechanism of consumer learning. Two popular views that apply to the endogenous mechanism of consumer learning are the hierarchical connections between stored pieces of information (Miller 1956) and the model of Consumer Learning by Analogy (Gregan-Paxton and John 1997). According to the hierarchical connection theory, the information previously stored in consumers’ memory will associate their learning when they encounter similar information. Similarly, the model of Consumer Learning by Analogy predicts that previously acquired knowledge is transferred by analogy in the process of consumer learning. These two views reveal that learning is a relatively harder task to consumers when they encoun118 ter an innovative or a new product and use the product for the first time, as they may not be able to refer to similar previous experience. Thus, firms that have innovative products face harder tasks of consumer learning than those firms that don’t. Innovation Adoption and Diffusion As Rogers (1962) stated, the process by which innovations are adopted by consumers is a special example of consumer learning. There are five stages in the adoption process: awareness, interest, evaluation, trial and adoption. Depending on the degree of innovativeness, different consumers belong to different categories of the diffusion curve: innovators, early adopters, early majority, late majority, and laggards. Consumer innovation adoption and diffusion are especially important to firms entering the market with innovative products because consumers’ learning costs are usually high for such products. Just as Mistri (2002) indicated, “the consumer’s learning behavior presupposes that he is in a situation of bounded rationality and must proceed with a progressively more and more refined classification of a product or group of products, and that he is seeking a strategy that enable him to classify the goods with a minimum research effort” (p. 310). Thus, the main barrier for consumers to adopt an innovative product is the relatively high learning cost. Learning Costs Since most of the time consumers do not have complete information of the product, they are more likely to learn inaccurately and misperceive product quality. Perfect learning only occurs when consumers can accurately evaluate product quality (Goering 1985). Not all consumers can perform perfect learning for all products. Gabszewicz, Pepall, and Thisse (1992) explained “as with most new products, consumers need to learn how to use the new good, and consumers differ in their ability to learn, or in their willingness to adapt to something new” (p. 399). Thus, the combination of consumers’ willingness and ability to learn can be seen as their learning capability. As Gabszewicz, Pepall, and Thisse (1992) stated, a consumer with low learning capability has a high learning cost, and is predicted to dislike trying new products. Meanwhile, a consumer with high learning capability has a low learning cost and will enjoy trying innovative products. Thus, I refer to consumers with high learning capability and low learning costs as consumer pioneers, and I refer to those with low learning capability and high learning costs as average consumers. Consumer Pioneers As we can see, for an innovative product, there are always various groups of consumers who have different learning capabilities and adoption actions, and they are American Marketing Association / Winter 2005 located on different positions of the diffusion curve. Among them there exists such a group that enjoys learning, trying and sometimes adopting new products, especially high technological products such as digital cameras, MP3 players, new models of computer, and hybrid electric vehicles. These consumer pioneers are active and effective learners compared to average consumers. Their learning usually does not stop at adoption, or even at rejection of a product. Unlike average consumers, these pioneers will extend their learning beyond adoption or rejection with high interest and enthusiasm. For example, after adoption, when they find what they like or dislike about the product, they will express their satisfaction, dissatisfaction, or further demands to the marketers. On the other hand, if they reject the product, they clearly know why they rejected the product and what needs to be improved in the future. In both cases, they are willing to deliver their perceptions (e.g., satisfaction, expectations, and demands) to others (other consumers or the firm). In the beginning, when they are interested in the product, they can be very passionate and highly motivated. Later, when they evaluate the product, they can be very rational and professional. In this article I use the term “consumer pioneers” rather than “consumer experts” or “innovators/early adopters” because these three groups are from different consumer behavior perspectives. Precisely, consumer experts emphasize expertise and knowledge (consumer behavior status) and early adopters emphasize adoption (consumer behavior consequence), while consumer pioneers emphasize learning (consumer behavior process). Consumer experts are “people whose prior knowledge is well developed, in part because they have had a lot of experience, knowledge, and familiarity with an object or a task” (Hoyer and MacInnis 1997, p. 101). Thus, these consumers may have high expertise in necessary choice and purchase, but may not be willing to learn and try new products. Some firms use consumer experts in test marketing because of their expertise. However, since they are not necessarily interested in new products in the first place, their opinions may not be that reliable to represent average consumers in the real market, and may cause firms to overestimate the market. In contrast, consumer pioneers may not have as much expertise as experts, but they have more enthusiasm to learn and try new products as well as communicate with marketers and other consumers. Additionally, since their actions are more spontaneous, firms could lower consumers’ learning costs by studying consumer pioneers’ learning processes. This may not only help the firm to explore flaws of their products, but also to accelerate the diffusion process. Also, a consumer pioneer can be a member of either the first two categories of adopters: innovators and early adopters. The reason it is not necessary to distinguish consumer pioneers from innovators or early adopters is that this article focuses on the process of consumers’ 119 choice (learning) rather than the consequence of choice (adoption). It’s not important whether a consumer pioneer eventually adopts the product, but he/she engages in the learning process with high learning capability during the choice. Nowadays, it is common to see numerous online communities in which people communicate with each other about their experiences with certain products and brands. Consumer pioneers often are active members, though not necessarily opinion leaders (Rogers 1962). One salient characteristic of them is their high willingness to communicate with other consumers and also with marketers. Unlike consumer experts, who are usually located by firms to ask for opinions, consumer pioneers voluntarily locate firms to provide suggestions. Such activities include writing online reviews, providing feedback cards, e-mailing to technology support departments, and so on. The underlying motivation could be their needs for self-esteem and self-fulfillment, which needs further research. But at least one thing is clear: such communication between the marketers and consumers as well as that among consumers is crucial to innovation adoption and diffusion processes (Schiffman and Kanuk 2000). CONSUMER PIONEERS AS A POTENTIAL RESOURCE OF SUSTAINED COMPETITIVE ADVANTAGE The definition of sustained competitive advantage that Barney (1991) provided is “a firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors, and when these other firms are unable to duplicate the benefits of this strategy” (p. 102). Also according to Barney (1991), to have the potential of sustained competitive advantage, the resource must have four attributes: value, rareness, imperfect imitability, and non-substitutability. To argue that consumer pioneers are a potential source of sustained competitive advantage, I first examine whether it has these attributes. Value A firm’s resource is considered valuable if it exploits opportunities in a firm’s environment. Consumer pioneers are such a valuable resource in two ways. First, as mentioned above, consumer pioneers are willing to provide valuable evaluations and suggestions for products, especially new products, to firms. These evaluations and suggestions help firms accurately estimate their product and market and plan future strategy. Since the comments from consumer pioneers are representative of average consumers to a certain degree, firms may identify what American Marketing Association / Winter 2005 consumers and market really expect from the product and exploit new opportunities. Second, as mentioned earlier, since high learning cost is a main barrier for average consumers to adopt new products, firms may exploit the strategy that can lower consumers’ learning costs through consumer pioneers’ experience. For example, firms could find how to improve consumers’ willingness to try a new product by stimulating their interest, which can be discovered from consumer pioneers’ experience. Learning from consumer pioneers’ experience, firms can also improve consumers’ learning ability by designing education programs and upgrading products. Thus, the above argument indicates that consumer pioneers can be considered a valuable source that can help firms to exploit new opportunities in the market, and finally generate sustained competitive advantage. Rareness Just as not all firms can have sustained competitive advantage, not all consumers can be consumer pioneers. Only those active and effective learners with high learning willingness and ability can be consumer pioneers. A few factors put constraints on consumers’ learning willingness and ability, such as interest, financial support, education level, time, and so on. For example, a consumer with a tight schedule may not have time to try new products even though he may be interested in them. A consumer with limited financial support also will not try new products because he will not risk his money at all (Rogers 1962). A consumer with limited education may have difficulty understanding a high technology product and may be unable to provide insightful comments even after he has adopted it. Thus, for certain product categories, there is a limited amount of consumer pioneers, and they compose a rare resource for firms to perform competition. Imperfect Imitability To be a potential source of sustained competitive advantage, the source must be imperfectly imitable. That is, firms that do not possess it cannot obtain it. Barney (1991) proposed how firm resources can be imperfect imitable. One possibility is that the resource is socially complex. Are consumer pioneers such a socially complex resource? The answer is positive if a firm can create longterm and stable relationships with them. However, it is not an easy task. It requires unique pursuing strategies for the firm to hold a pool of its own loyal consumer pioneers, and this complex relationship is hard to be mimicked by other firms. Moreover, if a firm can create the reputation among consumer pioneers that it is a superior relationship holder, this imperfect imitability will be durable. 120 Non-Substitutability A potential resource of sustained competitive advantage cannot be strategically substituted. The substitutes for this resource may be valuable but are neither rare nor imperfectly imitable. As to consumer pioneers, as long as the firm can maintain a stable relationship with them, they are non-substitutable. One reason is that consumer pioneers are mobile and time-effective. For a particular brand the consumer pioneer pool is unique and willing to serve the firm who locate them first. Moreover, even competitors can locate them later, often the optimal timing (e.g., introductory period) has passed, and the consumer pioneer pool is no longer effective for the product. Of course, this argument is based on some assumptions. That is, consumer pioneers usually have limited effort and are easier to obtain brand loyalty for the firm that cares them most. For example, a consumer pioneer who serves Microsoft may be hard to serve Macintosh simultaneously, not only due to his preference for Microsoft but also due to his limited time or expertise. In summary, possessing these four attributes – value, rareness, imperfect imitability, and non-substitutability – consumer pioneers can be considered a potential resource of sustained competitive advantage. Thus, the first hypothesis is, H1: Consumer pioneers are a potential resource of sustained competitive advantage for firms. But this poses another question: how can this resource generate sustained competitive advantage? Does every firm have the ability to generate this resource to sustained competitive advantage? The answer lies on organizational learning. As Cravens (2000) addressed, firms can benefit from organizational learning which helps them quickly respond to opportunities and threats, reduce time to develop new products, improve existing products and services, and accelerate new product adoption. In the next section, I will examine the mediating role of organizational learning in the relationship between consumer pioneers and sustained competitive advantage. CONSUMER PIONEERS AND ORGANIZATIONAL LEARNING Organizational Learning Foil and Lyles (1985) defined organizational learning as “the development of insights, knowledge, and associations between past actions, the effectiveness of those actions, and future actions” and adaptation as “the ability to make incremental adjustments as a result of environmental changes, goal structure changes, or other changes” (p. 811). They also classified organizational learning into two levels: lower- and higher-level learning. American Marketing Association / Winter 2005 Lower-level learning, also called adaptive learning (Senge 1990) or single-loop learning (Argyris 1977), occurs within a given organizational structure when organizational contexts are well understood and reflect the organization’s assumptions about its environment and itself. In contrast, higher-level learning, also called generative learning (Senge 1990) or double-loop learning (Argyris 1977), tries to adjust overall rules and norms rather than specific activities or behaviors. This type of learning is a more cognitive process and the associations resulting from it have long-term effects and impacts on the organization as a whole. Obviously, learning from consumer pioneers is such a higher-level learning. In the three-stage process of learning that includes information acquisition, information dissemination, and shared interpretation (Slater and Narver 1995), learning from consumer pioneers is crucial in the stage of information acquisition for innovative firms. When organizations perform this kind of learning from consumer pioneers, they should not only focus on the openness to such external “learning partners” (Slater and Narver 1995), but also create an effective interface and long-term relationship with them, thus establishing a superior organizational culture and reputation among customers. This type of higher-level learning can be considered market-based organizational learning. Market-Based Organizational Learning and MarketBased Absorptive Capacity As Sinkula (1994) stated, market-based organizational learning is different from other types of learning in five ways. First, it focuses on external information (e.g., customers and suppliers) and it is not as explicit as most internally focused organizational learning. Second, it results in the fundamental bases of competitive advantage. Third, it pays more attention to the observation of competitors. Fourth, the information it acquires and stores in organizational memory is difficult to access. Finally, market-information is equivocal. From these five attributes, we can see that learning from consumer pioneers is such a market-based organizational learning. Consumer pioneers provide “access to a greater number of information sources, force the development of mechanisms that facilitate the sharing of information, and offer alternative perspectives to the meaning of critical information that could lead to generative learning” (Slater and Narver 1995, p. 70). Furthermore, this kind of “information-driven” (Goldstein and Zack 1989) and “marketdriven” (Jaworski, Kohli, and Sahay 2000) learning is especially important to innovative firms because they face barriers of high learning costs for average consumers in their innovation adoption. Two dimensions underlying innovation – technology and market – suggest that developing new products needs not only technology that is different from prior technology, but also fulfilling key customer needs better than existing products (Chandy and 121 Tellis 1998). Thus, even though the primary goal of the innovative firms is to drive the market to a new direction, identifying which direction is most likely to be successful based on consumers’ needs is at least as, if not more, critical as new technology development. How does one identify the right direction? In this article, the answer lies in market-based absorptive capacity from consumer pioneers. Absorptive capacity, also called innovative capability, is defined as the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends (Cohen and Levinthal 1990). As Cohen and Levinthal (1990) addressed, “absorptive capacity refers not only to the acquisition or assimilation of information by an organization but also to the organization’s ability to exploit it” (p. 131). Thus, the ability to exploit market-based knowledge and information can be seen as market-based absorptive capacity, which is a special form of higher-level organizational learning. This exploration ability, which will eventually determine the firm’s innovative capability, is crucial to the firm’s success. An organization’s market-based absorptive capacity depends mostly on its direct interface with the external environment (e.g., customers, suppliers, competitors). Since innovative firms face more barriers of high learning costs from consumers than non-innovative firms, they especially benefit from working with consumer pioneers to discover effective ways to lower learning costs for average consumers when develop new products (e.g., radical product innovation) or upgrade existing products (e.g., incremental innovation). As average consumers usually experience difficulties in innovation learning (Engelland and Alford 2000), the information provided by consumer pioneers will help the firm match average consumers’ expectations to increase their willingness to learn, make product quality or features less ambiguous, and finally lower their learning costs and diminish the entry barriers. Thus, I argue that higher-level organizational learning, i.e., market-based organizational learning and absorptive capacity, serves as a mediator in the relationship between consumer pioneers and sustained competitive advantage. H2: The resource of consumer pioneers can generate sustained competitive advantage by the firm’s higherlevel organizational learning (i.e., market-based organizational learning and market-based absorptive capacity). CONCEPTUAL FRAMEWORK AND OVERVIEW OF THE METHOD Employing the knowledge transfer theory, the conceptual model illustrates the knowledge transfer mechanism which emphasizes that firms learn from what consumer pioneers learn and generate the tacit knowledge to sustained competitive advantage (Figure 1). There are two moderators in the model. One is environmental uncertainty, including market and technology uncertainty. Prior research shows that under high environmental uncertainty, customer orientation has a positive influence on firms’ innovation because the development of a new product in a highly uncertain environment FIGURE 1 Conceptual Framework of Relationship Among Consumer Pioneers, Higher-Level Organizational Learning, and Sustained Competitive Advantage Environmental Uncertainty Product Innovative Level Higher-Level Organizational Learning Consumer Pioneers American Marketing Association / Winter 2005 Sustained Competitive Advantage 122 creates the need for more market scanning and networking with users to identify customer needs (Gatignon and Xuereb 1997). Thus the third hypothesis is: H3: The higher the environmental uncertainty, the more the likelihood that the resource of consumer pioneers can generate sustained competitive advantage for the firm via higher-level organizational learning. Another moderator is the innovative level of the product. As I stated before, consumers’ learning costs are higher for radical products than for incremental products (Chandy and Tellis 1998). Therefore, it is especially important for firms that produce radical products to remain close with their customers, lower their learning costs and increase their adoption rates via consumer pioneers. So the final hypothesis is: REFERENCES Argyris, Chris (1977), “Double Loop Learning in Organizations,” Harvard Business Review, 55, 115–25. Barney, Jay (1991), “Firm Resources and Sustained Competitive Advantage,” Journal of Management, 17, 99–120. Chandy, Rajesh K. and Gerard J. Tellis (1998), “Organizing for Radical Product Innovation: The Overlooked Role of Willingness to Cannibalize,” Journal of Marketing Research, 35, 474–87. Cohen, Wesley M. and Daniel A. Levinthal (1990), “Absorptive Capacity: A New Perspective on Learning and Innovation,” Administrative Science Quarterly, 35, 128–52. Cravens, David W. (2000), Strategic Marketing. Boston: Irwin McGraw-Hill. Engelland, Brain T. and Bruce L. Alford (2000), “Consumer Learning and The Creation of Primacy Advantages for Followers,” Journal of Business Strategies, 17, 145–62. Foil, C. Marlene and Marjorie A. Lyles (1985), “Organizational Learning,” The Academy of Management Review, 10, 803–13. Gabszewicz, Jean, Lynne Pepall, and Jacques-Francois Thisse (1992), “Sequential Entry with Brand Loyalty Caused by Consumer Learning-by-Using,” Journal of Industrial Economics, 40, 397–416. Gatignon, Hubert and Jean-Marc Xuereb (1997), “Strategic Orientation of the Firm and New Product Performance,” Journal of Marketing Research, 34, 77–90. Goering, Patricia A. (1985), “Effects of Product Trial on Consumer Expectations, Demand, and Prices,” Jour- American Marketing Association / Winter 2005 H4: The higher the innovative level of the product, the more the likelihood that the resource of consumer pioneers can generate sustained competitive advantage for the firm via higher-level organizational learning. Method The possible method will be a survey among key informants in innovative product industries. These informants include firms’ gatekeepers or knowledge managers, who monitor the environment and translate external information into understandable internal knowledge to the research group (Cohen and Levinthal 1990). Another survey will be conducted using relevant industry databases to examine the performance of these firms’ R&D. nal of Consumer Research, 12, 74–82. Goldstein, David K. and Michael H. Zack (1989), “The Impact of Marketing Information Supply on Product Managers: An Organizational Processing Perspective,” Information Technology & People, 4, 313–36. Gregan-Paxton, Jennifer and Deborah R. John (1997), “Consumer Learning by Analogy: A Model of Internal Knowledge Transfer,” Journal of Consumer Research, 24, 266–84. Hoyer, Wayne D. and Deborah J. MacInnis (1997), Consumer Behavior. Boston: Houghton Mifflin. Jaworski, Bernard, Ajay K. Kohli, and Arvind Sahay (2000), “Market-Driven versus Driving Markets,” Academy of Marketing Science, 28, 45–54. Miller, George A. (1956), “The Magical Number Seven, Plus or Minus Two: Some Limits on Our Capacity to Process Information,” Psychological Review, 63, 81– 97. Mistri, Maurizio (2002), “Consumer Learning, Connectionism and Hayek’s Theoretical Legacy,” Eastern Economic Journal, 28, 301–17. Rogers, Everett M. (1963), Diffusion of Innovation. New York: The Free Press. Schiffman, Leon G. and Leslie L.Kanuk (2000), Consumer Behavior. Upper Saddle River: Prentice Hall. Senge, Peter M. (1990), The Fifth Discipline. New York: Doubleday. Sinkula, James M. (1994), “Market Information Processing and Organizational Learning,” Journal of Marketing, 58, 35–45. Slater, Stanley F. and John C. Narver (1995), “Market Orientation and the Learning Organization,” Journal of Marketing, 59, 63–74. 123 For further information contact: Yun (Serah) Ye The University of Arizona 320 McClelland Hall 1130 E. Helen P.O. Box 210108 Tucson, AZ 85721 Phone: 520.621.9179 FAX: 520.621.7483 E-Mail: [email protected] American Marketing Association / Winter 2005 124 WILL CONSUMERS PREFER GLOBAL OR LOCAL BRANDS? THE ROLE OF IDENTITY ACCESSIBILITY IN CONSUMER PREFERENCE FOR GLOBAL VERSUS LOCAL BRANDS Yinlong Zhang, The University of Texas at San Antonio, San Antonio Lawrence Feick, University of Pittsburgh, Pittsburgh Vikas Mittal, University of Pittsburgh, Pittsburgh SUMMARY Globalization is becoming the buzzword of this century. Business executives and marketing academics are discussing this term to explore the profound changes that will happen in marketing practice. Many marketers nowadays face decisions on whether to market their products globally or locally. One aspect of this global versus local decision is whether to emphasize their market brands as global or local ones. For example, a recent trade article (Marketing News 2004) reported that many new soft drink companies are making decisions on whether to stress their brands as global, like Pepsi or Coke, or as local based on what can be proven to better their chances for success in markets that are both increasingly globalized and localized. From a theoretical perspective, this decision asks whether emphasizing a brand as global or local will induce positive responses from consumers. Marketing literature offers contradictory empirical answers for this question. For example, Steenkamp, Batra, and Alden (2003) found that labeling a brand global instead of local can increase its appeal to customers even if the objective product quality is the same. While Zambuni (1993) found the opposite: consumers like it more when a brand is emphasized as a local one than when it is emphasized as a global one. Along the same line, De Mooij (1998) argued that localization strategy seems to be more attractive than the globalization strategy for consumer products. These inconsistent findings on global versus local suggest that some boundary conditions moderate the main effect of global or local on consumer preference. In other words, being global can induce better responses from consumers sometimes, but being local can induce better responses in other situations. Three experiments were proposed to investigate the effect of accessibility of global versus local identity construct in consumer preference between global and local brands. Study one manipulates the relative accessibility of global versus local identity, inducing effects in consumer preference for global or local brands. Study two measures the relative accessibility of the consumer’s global and local identity, and obtains the same pattern of results as Study one on consumer preference. The first two studies offer convergent evidence supporting our hypothesis: When a global identity is activated, consumers tend to value the global brands more highly than the local brands; when the local identity is activated, consumers tend to value the local brands better than the global brands. Study three manipulates the differential versus integration modes to replicate the results similar to the one manipulating the accessibility of local versus global identity. This will, in turn offer the initial evidence that the effect of global versus local identity on consumer preferences runs through the differential versus integration ways of thinking. Implications from these three studies on globalization and accessibility-diagnosticity are discussed. Through these studies we make a key theoretical contribution to the literature of globalization, since we offer a powerful theoretical explanation for the inconsistent findings in past studies. Our results are consistent with the recent development in the literature of cross-cultural psychology. Our studies are also consistent with the recent development in the accessibility diagnosticity framework. For further information contact: Yinlong “Allen” Zhang The University of Texas at San Antonio 6900 North Loop 1604 West San Antonio, TX 78249 Phone: 210.458.6331 FAX: 210.458.6335 E-Mail: [email protected] American Marketing Association / Winter 2005 125 WHY DO CONFERENCE GOERS RETURN? A MODEL OF INTENTIONS TO ATTEND AND RECOMMEND Annie H. Liu, Loyola Marymount University, Los Angeles Mark P. Leach, Loyola Marymount University, Los Angeles Robert D. Winsor, Loyola Marymount University, Los Angeles SUMMARY Abstract In the face of competition for limited vacation and leisure time, meeting planners and membership associations have traditionally been interested in how to attract new members and enhance attendance at organizational conferences. This study empirically investigates members’ intentions to attend organizational conferences using an accessibility-diagnosticity framework. Findings suggest that post-attendance attitudes are the most important factors predicting intentions to (1) attend a future conference and (2) recommend the conference to others. Furthermore, what one has heard about the conference (i.e., the buzz) and one’s perceived congruence with the values of the organization are also found to be important when predicting attendance intentions. Purpose of the Research and Hypotheses The purpose of this research is to investigate members of professional organizations regarding their intentions to attend conferences. Toward this goal, we examine three types of information that might be relevant to the formation of conference intentions. These are: (1) the member’s attitude toward the conference, (2) information acquired through word-of-mouth (i.e., the conference buzz), and (3) the member’s perceived congruence with the values of the organization. We further utilize the accessibility-diagnosticity framework to provide a theoretical rationale for why the relative importance of these three information types might differ between attendees (i.e., those members who have previously experienced one or more of the organization’s conferences) and nonattendees. Specifically, it is hypothesized that for attendees, attitudes toward the conference will be more diagnostic with regard to intentions to attend future conferences. For non-attendees, conversely, their attitudes will be less diagnostic, and therefore other information sources will be accessed and utilized. In addition, it is hypothesized that for non-attendees, attitudes will be formed primarily based on what they have heard about the conference, and from their general feelings about the organization. For attendees, attitudes will instead be formed upon more elaborative judgments (e.g., American Marketing Association / Winter 2005 a cost-benefit analysis [perceived value assessment], or an analysis of how well expectations were met [perceived satisfaction assessment]). Underlying these hypotheses is our premise that the high degree of elaboration associated with these assessments makes attitudes more easily accessible and highly diagnostic. We were further interested in members’ intentions to recommend a conference to others. By evaluating the relationship between attitudes regarding a conference and referral intentions for past attendees, and the relationship between word-of-mouth information and attendance intentions for non-attendees, this study will provide an empirical test of whether or not a reinforcing feedback cycle exists for conference attendance. Model, Methodology, and Results Our base model incorporates three antecedent variables predicting attendance: perceived organizational congruence, word-of-mouth information, and attitude toward the conference. In addition, this model includes relationships between perceived organizational congruence and attitude, and word-of-mouth information and attitude. An expanded model includes intentions to recommend, and adds three direct relationships between perceived organizational congruence and referral intentions, word-of-mouth information and referral intentions, and attitude toward the conference and referral intentions. A sample of 800 members of an organization for retired employees of a government agency was randomly drawn from the population of approximately 8,000 organizational members, and mailed a questionnaire. The total number of useful and complete responses obtained was 448, representing a 58 percent response rate. Structural equation methodology was used to test the hypothesized relationships. Results indicated that for the sub-sample that had attended a recent conference, intention to attend a future conference was directly related only to one’s attitude toward the conference. In addition, attendees’ attitudes toward the conference were found to be related to perceived organizational congruence and to information they received from word-of-mouth. The direct relationship between one’s perceived organizational congruence and intention to attend was not found to be 126 statistically different from zero. Neither was the relationship between word-of-mouth information and intention to attend. Thus, for those who have attended, the effects of perceived congruence and word-of-mouth information appear to be fully mediated by one’s attitude. For the sub-sample without a recent conference experience, intention to attend a conference was directly related to one’s perceived congruence with the organiza- tion, and their attitude toward the conference. In addition, one’s perceived organizational congruence and the information acquired through word-of-mouth were found to be related to one’s attitude toward the conference. Again, the direct relationship between the word-of-mouth information and intention to attend was not found to be significant, suggesting that this relationship is fully mediated by one’s attitude toward the conference. For further information contact: Annie H. Liu College of Business Administration Loyola Marymount University One LMU Drive Los Angeles, CA 90045 Phone: 310.338.3039 FAX: 310.338.3000 E-Mail: [email protected] American Marketing Association / Winter 2005 127 INFLUENCE OF OTHER CUSTOMERS: A SCALE DEVELOPMENT E. Deanne Brocato, The University of Texas at Arlington, Arlington Susan B. Kleiser, The University of Texas at Arlington, Arlington SUMMARY Services literature has recognized the role customers play as an integral part of the service environment (Baker 1987; Bitner 1992; Grove and Fisk 1997). Other customers in many instances can be viewed as part of the service environment (Martin and Pranter 1989), since they are often required to share the same facility (Baker 1987). Drawing on inference theory (Huber and McCann 1982), other customers within a service environment provide cues, which in turn are used by consumers to make assessments of quality (Baker, Parasuraman, Grewal, and Voss 2002). “The appearance, behavior, and number of other customers and contact personnel can clearly affect the way consumers perceive the service firm” (Baker 1987, p. 79). The importance of service personnel has been documented in several studies (Parasuraman, Zeithaml, Berry 1988; Bitner 1992; Baker 2002), but there appears to be a gap in the extant literature concerning the influence of other customers on the perceptions of service facility quality and ultimately on service evaluations, such as satisfaction. The lack of attention devoted to the influence of other customers is surprising since many times “the number and duration of such c-c [customer to customer] encounters exceed that of employee-customer encounters by an order of magnitude” (Martin and Clark 1996, p. 347). Furthermore, the presence of other customers in a service environment may influence, albeit directly or indirectly, one’s satisfaction (Martin and Pranter 1989). In addition, frequent interactions among customers can lead to either a more favorable or less favorable service experience depending on the type of interaction (e.g., friendly patrons, crying children, cursing, etc.). This paper sets forth to create the Other Customer Influence (OCI) scale to measure the influence that other customers have on one’s evaluation of facility quality and ultimately on satisfaction with the service experience. Dimensions of Other Customer Influence Drawing on services literature (Martin and Pranter 1989; Grove and Fisk 1997; Martin and Clark 1996; McGrath and Otnes 1995; Baker 1987; Baker et al. 2002) three dimensions of the Other Customer Influence (OCI) construct are posited. These dimensions are compatibility, visual cues and behavior. We define compatibility as: capable of existing or performing in harmonious, agreeable, or congenial combination with another or others. Martin and Pranter (1989) address the need for managers American Marketing Association / Winter 2005 to create service environments where the customers that enter the environment are compatible. It makes intuitive sense that customers will “gravitate toward those service environments with which they are most compatible” (Martin and Pranter 1989, p. 7). In line with compatibility, the visual characteristics (appearance, dress, gender, ethnicity) of other customers can have an influence on the service environment. Age, income, and social class have been suggested as characteristics that should influence perceptions of the environment (Baker 1987). Other patrons’ behaviors can have profound effects on customers. Grove and Fisk (1997) found in an exploratory study at a theme park, behaviors of other customers affected consumer both positively and negatively. For example, other customers cutting in line and shoving during waiting for service created dissatisfying service encounters and waiting in line with polite patrons led to satisfying encounters. In another exploratory study by Martin (1996), general factors of behaviors were found to influence patrons’ evaluations of service satisfaction. Scale Development Scale items for the dimensions of compatibility, visual cues and behavior were generated drawing from services literature that has explored customer-to-customer interactions (Martin and Pranter 1989; McGrath and Otnes 1995; Grove and Fisk 1997). Forty-one (41) items were developed in order to capture the full conceptual domain of the construct. After item purification 11 items remained in the model representing the three dimensions. Evidence was found for convergent and discriminant validities. Also, all Cronbach’s alpha reliability coefficients exceeded the .7 lower limit (Hair et al. 1998) with the dimension reliability estimates ranging from .74 to .83. Nomological validity was assessed by investigating the hypothesized paths between the three dimensions of OCI and the facility quality construct. The model fit was assessed and found to be sufficient: (GFI .90; AGFI .86; CFI = .98; RMSEA = .065). The chi-square value was significant (χ2 = 278.40, 128 df, p < .00), however this was expected due to the sample size (Marsh, Balla, and McDonald 1988). Positive links between compatibility and behavior to facility were found to be significant (p < .05) as indicated by the positive gamma (γ) parameters. The parameter linking visual cues and facility quality was not found to be significant. Finally, the path from facility quality to satisfaction was significant. 128 Discussion, Limitations, and Future Research One study cannot provide sufficient evidence of a valid measure. However, this study lays the foundation for the continuing process of construct validation. The evidence provided indicates the OCI scale is a valid measure. This measure provides marketers with the ability to determine how other patrons’ social factors influence evaluations of facility quality and service satisfaction. The recognition of other customers as an integral part of the service environment provides the justification for this new measure. This measure is a starting point for future investigations into the construct of OCI. Each dimension should be investigated and expanded as more empirical evidence is gathered. Continual refinement is needed for all measures and this measure is no different. The complexity of the construct necessitates the need for future research and investigation. References available upon request. For further information contact: E. Deanne Brocato The University of Texas at Arlington Box 19469 Arlington, TX 76019–0469 Phone: 817.272.6765 FAX: 817.272.2854 E-Mail: [email protected] American Marketing Association / Winter 2005 129 BEYOND JUST BEING THERE: AN EXAMINATION OF THE IMPACT OF ATTITUDES, MATERIALISM, AND SELF-ESTEEM ON THE QUALITY OF HELPING BEHAVIOR IN YOUTH VOLUNTEERS Elten Briggs, University of Oklahoma, Norman Tim Landry, University of Oklahoma, Norman Charles Wood, University of Tulsa, Tulsa Todd Arnold, Oklahoma State University, Stillwater SUMMARY Young people represent a strong and growing source of volunteers for not-for-profit organizations (NPO), and represent an important focus for NPO marketing efforts. Therefore, it is in the long-term interests of NPOs that they develop a better understanding of teenage volunteerism. Despite the importance of the topic, research concerning the volunteer sector in the marketing literature has been scant historically (Bendapudi, Singh, and Bendapudi 1996; Fisher and Acherman 1998; Wymer and Starnes 2001), and no marketing studies have focused on the challenges faced by charitable organizations in their efforts to attract and solicit quality help from youth volunteers. The present study attempts to bridge this gap by examining the determinants of helping behavior in a sample of youth volunteers involved in a task requiring significant self sacrifice. We hypothesize that attitudes toward this task will mediate the effect of other individual variables on the quality of the helping behavior received by the NPO. Based on the conceptualization of helping behavior forwarded by Bendapudi, Singh, and Bendapudi (1996), we consider two distinct dimensions of helping behavior – help vs. no help and token help vs. serious help. The first of these dimensions is captured by the variable participation, which indicates whether or not the respondent chose to take part in the fast; and the second of these dimensions is captured by the variable goal-setting, which indicates whether or not the individual set a fundraising goal. We examine three primary independent variables of interest that have been theorized to play key roles in determining volunteer behavior and that should be especially relevant for better understanding teens’ charitable participation: (1) their attitudes towards the organization, (2) their level of self-esteem, and (3) their level of materialism. Our hypotheses are as follows: H1a: The relationship between attitude towards the organization and the decision to volunteer is mediated by attitude towards the task. H1b: The relationship between attitude towards the organization and goal setting is the mediated by attitude towards the task. American Marketing Association / Winter 2005 H2a: The negative relationship between materialism and the decision to volunteer is mediated by attitude towards the task. H2b: The negative relationship between materialism and goal setting is the mediated by attitude towards the task. H3a: The relationship between self-esteem and the decision to volunteer is mediated by attitude towards the task. H3b: The relationship between self-esteem and goal setting is the mediated by attitude towards the task. Questionnaires were administered by mail to a national sample of youth who had received marketing materials asking them to participate in a fundraising effort for an international relief organization that involved fasting – i.e., not eating solid food for 30 hours. The respondents’ attitudes towards the organization and towards the fundraising task were measured by instructing the respondent to “Please mark an “X” on the space that best describes your honest attitudes or feelings about each of the following.” The fasting task and the name of the organization were each followed by a five-point scale anchored by “negative” and “positive.” Materialism (MAT) and Self-Esteem (SES) were both measured using established scales. In order to test our hypotheses we followed the procedure outlined by Barron and Kenney (1986) for testing mediation. This test entails three steps: (1) regress the independent variable on the mediator, (2) regress the independent variable on the dependent variable, and (3) regress both the independent and mediator on the dependent variable. Four of the six anticipated relationships were supported: H1a, H1b, H2a, and H3b. A task was consistently a significant predictor of both helping behavior dependent variables. Our findings indicate that for NPOs marketing to youth for involvement in volunteer projects, even if teens think highly of an organization, the choice of the task is crucial to their participation and their commitment to fundraising. For NPOs recruiting teens that are likely to be higher in materialism, the nature of the task or activity 130 needs to be interesting and compelling enough to get them to join in. However, once they have joined the activity, attitudes toward the fundraising task do not appear to be enough for them to follow-through with actual fundraising activities. Finally, our results seem to imply that the relationship between helping behavior quality and selfesteem becomes more pronounced upon the decision to participate in a volunteer task, but in our context, selfesteem was not predictive of the initial decision to volunteer. For further information contact: Elten Briggs University of Oklahoma 307 West Brooks, Room 10A Norman, OK 73019 Phone: 405.325.4675 FAX: 405.325.7688 E-Mail: [email protected] American Marketing Association / Winter 2005 131 A CROSS-CULTURAL EXAMINATION OF THE RELATIONSHIP BETWEEN MATERIALISM AND INDIVIDUAL VALUES William Kilbourne, Clemson University, Clemson Marko Grünhagen, Southern Illinois University at Edwardsville, Edwardsville Janice Foley, University of Regina, Regina SUMMARY Interest in materialism and its implications is apparent as far back as the early Greek philosophers. Pythagoras, for example, required that students relinquish their personal possessions before entering his school. Rudmin and Kilbourne (1996) provide an historical view of different attitudes toward materialism from the ancient world to the modern. Marketing scholars recently returned to an assessment of materialism in contemporary societies. While some studies have remained critical of consumption practices, referring to materialism as a “dark side” variable (Mick 1996), others have suggested that materialism might have positive aspects as well (Holt 1997). Despite the many examinations of materialism, it remains unclear how it relates to other aspects of life. Burroughs and Rindfleisch (2002) argue that the nature of materialism needs to be clarified, and that more researchers are beginning to examine it in the context of other life goals and values. While there have been many definitions of materialism, what they have in common is that they reflect the use of consumption to acquire more than instrumental or use value in the things purchased. Collectively, the definitions suggest that the individual seeks a relationship with objects through which she or he is enhanced in some way. Moschis and Chruchill (1978) and Richins (1987) have measured materialism as an attitude structure focusing on the meaning of possessions to the individual. The model developed here depicts materialism as an attitude structure that is influenced by the individual values of self-enhancement and self-transcendence as used by Schwartz (1994). Methods The sample for the study consisted of university students from Canada, Germany and the U.S. There were 168, 139, and 97 respondents respectively from the three countries. Canadian students completed and returned the questionnaire in class, and U.S. and German students completed the questionnaire outside of class and returned it the next week. All participation was voluntary and no American Marketing Association / Winter 2005 incentives were given. The final sample was 46 percent female and 54 percent male. Following Roberts, Manolis, and Tanner (2003), materialism is represented as a second order factor model with success, centrality, and happiness as first order latent constructs. Second, the model suggests that self-transcendence values will be inversely related to materialism, and self-enhancement values will be positively related to materialism. The model will be tested across three cultures, Germany, Canada, and the U.S., using the procedures suggested by Steenkamp and Baumgartner (1998). Both the measurement model and the structural model were tested for invariance across the samples. In these tests, five statistics were used with standard cutoff criteria as suggested by Hair et al. (1998). In addition, successively constrained models were subjected to sequential Chi square difference tests to determine if the constrained model fit the data as well as the baseline model. The analysis required that the structural model proposed be tested. This was done as suggested by Byrne (1999), maintaining the invariances established in the measurement models in the initial structural model. Because the measurement model for materialism was invariant, it was included as a fully constrained measurement model across the three countries. The values measurement model was fully invariant except for the covariances that were partially invariant with the German sample left free to vary. The final structural model was tested first for overall fit across countries and satisfied all criteria used. In addition, the sequential Chi Square Difference Test yielded a p-value of 0.74 indicating that the constrained model predicted as well as the original model. We concluded that the structural model was invariant across countries as predicted. The path coefficients for the structural model were consistent with the hypotheses established. The coefficient from self-transcendence to materialism was -0.21 (p < 0.01) indicating the negative relationship hypothesized. The result was consistent across the three countries. The coefficient from self-enhancement to materialism was 0.70 (p < 0.01) demonstrating the positive relationship hypothesized. This result also held across the three samples. 132 Conclusions There are two main conclusions to be drawn from the study. The results of the analysis indicate that the reduced form of the materialism scale produces a valid second order factor model of materialism. The latent constructs are happiness, centrality, and success and the model was shown to be invariant across countries. The second objective or the study was to determine the causal sequence for values and materialism assuming that the materialism scale is a measure of attitudes toward consumption rather than a true value labeled as materialism. The hypothesized causal sequence was individual values having an effect on attitudes toward materialism. The results indicated that the proposed causal model had an acceptable fit on all criteria. In addition to this, the causal model was demonstrated to be invariant across all three countries. The relationship between self-transcendent values and materialism was negative, and the relationship between self-enhancement values and materialism was positive as hypothesized. 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 2005 133 M.E.A.L. TIME: HOW NUTRITIONAL DISCLOSURE AFFECTS GENDER EVALUATIONS OF FAST FOOD MENU ITEMS Kenneth W. Bates, University of Arkansas, Fayetteville Kyle A. Huggins, University of Arkansas, Fayetteville SUMMARY Obesity has become a major health concern for many citizens in the United States, and it is an issue, that according to the CDC, has reached epidemic proportion (Manson and Bassuk 2003). It has been projected by the United States Department of Health and Human Services that obesity will soon overtake tobacco as the leading cause of preventable death in the United States and will offset many of the medical advancements made in diseases such as cancer, diabetes, and heart disease (U.S. DHHS 2001; Manson and Bassuk 2003). Due to these recent developments many policy makers, public-interest groups, and concerned citizens have turned their focus upon the restaurant industry. In the last thirty years, the amount of money spent on food purchases outside-thehome has risen 20 percent and accounts for almost half of American’s total yearly expenditures on food (Lin, Frazão, and Guthrie 1999). The correlation between increases in restaurant patronage and obesity has created concern about the healthiness of restaurant menu items, and propositions have been made that Congress should extend the Nutrition Labeling and Education Act (NLEA) to include restaurant menu items. The Menu Education and Labeling Act (MEAL) of 2003 in Congress requires restaurant chains with twenty or more outlets to list key nutrition information (DeLauro 2003), and the FDA has initiated preliminary discussions about possible national standards for the provision of nutrition information for restaurant foods (Mathews and Leung 2003). Any ruling that mandates the provision of nutrition information at restaurants will have profound financial, tactical, and strategic implications for retailers in the restaurant industry. Given the importance of this issue to public policy makers and restaurant industry managers, our research extends recent findings related to nutrition disclosure in table service restaurants to the fast food industry. Burton et al. (2004) found that consumers significantly underestimate the nutritional content of items that are higher in calories, fat, and sodium while estimations of relatively healthier items were far closer to actual nutrient levels. When item nutrition levels were actually provided, respondents significantly decreased in their purchase intention for items inconsistent with nutrient estimates (relatively unhealthier items) and either showed no effect or increased purchase intention for items consistent with nutrition estimates (relatively healthier items). Results American Marketing Association / Winter 2005 show that consumers may be able to distinguish differences between relatively healthy and non-healthy items, but they are generally unaware of the large degree to which many items are unhealthy. This, in conjunction with the decline in purchase intention for unhealthy items when nutrition information is provided, suggests benefits from nutritional disclosure in dinner house restaurants. While these are important findings for dinner house restaurants, we believe the fast food industry is an equally important arena for exploration. The National Restaurant Association projects that $123.9 billion will be spent on quick service dining in 2004 (National Restaurant Association 2004). While Burton and his colleagues (2004) assessed the effect of nutrition disclosure on purchase intention and choice, we propose that significant gender differences will be found within fast food item evaluations and choice. There has been a substantial amount of research stressing the importance of physical appearance and attractiveness, especially the importance that it holds for females (e.g., Cash, Winstead, and Janada 1986; Bar-Tal and Saxe 1976; Richins 1991). According to Hirschman (1987), women’s personal value is much more likely to be determined by physical attractiveness while males will be evaluated on a wider range of attributes. In 1992, Myers and Biocca found that watching only 30 minutes of television programming and advertising can alter a young woman’s perception of her body. Empirical studies have also found that women are more concerned about their physical appearance than men (Burton, Netemeyer, and Lichtenstein 1995); young women frequently compare themselves with idealized advertisement models, and the amount of comparison is negatively correlated with satisfaction of one’s physical appearance (Richins 1991). Therefore, in light of this stream of literature, it seems appropriate to investigate gender effects within the patronage of quick service restaurants. Overall, fast food results model that of dinner house restaurants as respondents’ estimations of calorie, fat, and sodium levels in fast food items are generally inconsistent with actual levels. As items become higher in unhealthy attributes, consumers significantly underestimate objective nutrient levels. Of concern to the MEAL proposition, consumers are also unable to predict, with any increased accuracy, the levels of fat or sodium in an item when 134 caloric content alone is provided. While consumers may know that higher calories are positively related to higher saturated fat and sodium levels, they do not appear to make accurate predictions of these levels from calories alone. Findings also indicate that males generally visit fast food establishments more often than females, have more positive attitude towards unhealthy items, and choose them more frequently. As expected, when no nutrition information is provided, males select unhealthy items nearly 70 percent of the time as opposed to women at only a quarter of the time. However, under the full nutrition condition (provided information on calories, fat, and sodium), males and females both significantly decrease their frequency of choosing these items. Although males still choose the unhealthy items 47 percent of the time compared to women at only 5 percent, this provides empirical support for requiring nutrition disclosure. Due to the preference exhibited by males for unhealthier items and the significant effect of nutrition condition on item content favorability and purchase intentions, the level of nutritional disclosure could potentially have a large impact upon the male gender. References available upon request. For further information contact: Kenneth W. Bates Marketing and Logistics Department Sam M. Walton College of Business, 302 BADM University of Arkansas Fayetteville, AR 72701 Phone: 479.575.4055 FAX: 479.575.8407 E-Mail: [email protected] American Marketing Association / Winter 2005 135 UNLOCKING VALUE THROUGH CUSTOMER EDUCATION Thorsten Hennig-Thurau, Bauhaus-University of Weimar, Germany Peter C. Honebein, University of Nevada, Reno Benoit Aubert, Grenoble Ecole de Management, France SUMMARY Vargo and Lusch (2004) argue that it is the customer who eventually determines the value of a product by using it, not the producer by manufacturing and distributing it. Specifically, the customer “must learn to use, maintain, repair, and adapt the appliance to his or her unique needs, usage situation, and behaviors” (Vargo and Lusch 2004, p. 11). The question we address in this research is derived directly from this shifting of the focus of value production from the producer to the customer: How can the producer ensure that there is not only value potential embedded in its goods, but also that this value potential will be unlocked appropriately by the customer during product usage? the product’s consumption and, ultimately, its disposal. The overall customer value of a product is the totality of values realized across these different stages. Second, the customer value delivered by a product over the different phases is the result of a joint effort of the producer and the consumer. Both parties’ actions and competence are indispensable for generating customer value in each phase. In the joint value creation framework, manifest products carry the potential for a certain level of customer value, with this potential being innovated and implemented by the producer in its laboratories and factories, respectively. The level of value production can be increased by an active role of the customer in these phases. Customer Education Model In this research, by drawing upon the literature of customer-as-coproducer from service research, we present the idea of a joint value creation process between producers and consumers for the context of consumer goods. We then illustrate how the use of customer education, referred to as a company’s measures and actions that are targeted at the development of post-purchase related customer knowledge and skills, can impact key company outcomes, such as customer satisfaction, trust, and loyalty. Joint Value Creation Organizations should endeavor to increase the competence of customers that is needed by the customer to stimulate full use of a product during consumption. We suggest a joint value creation framework should serve as the theoretical basis for the customer education concept since it demonstrates how customer value is created. The framework is founded on two basic axioms. First, it is presumed that the generation of customer value represents a multi-stage process, which starts with the generation of the product idea, continues with the development and production of the product, and finalizes with American Marketing Association / Winter 2005 As illustrated in the joint value creation framework, customers hold the key to unlocking post-purchase value through the preparation, use, and disposition of products. To aid the customer, companies offer supporting activities, such as customer education, which ensure customers have the necessary skills to perform key value-driven tasks. We offer a conceptual model that predicts the effects of unlocking value through customer education on product satisfaction, company satisfaction, customer trust in the firm, and customer loyalty (see Figure). From a conceptual standpoint, our research suggests that customer education can be a catalyst for increasing customer loyalty. Through the acquisition of skills, we expect customers to use products more intensely, which leads to greater product performance and increased product satisfaction. Additionally, we believe customer education also influences the customer’s satisfaction and trust with the company. The combination of customer satisfaction, company satisfaction, and company trust is what ultimately leads to customer loyalty. Future research should examine the link between customer education and customer loyalty. 136 FIGURE For further information contact: Thorsten Hennig-Thurau Department of Marketing and Media Research Bauhaus-University of Weimar Bauhausstr. 11 99423 Weimar Germany Phone: +49.3643.58.3822 FAX: +49.3643.58.3791 E-Mail: [email protected] American Marketing Association / Winter 2005 137 ORGANIZATIONAL LEARNING AND DYNAMIC MARKETING CAPABILITIES: IMPLICATIONS FOR ORGANIZATIONAL PERFORMANCE Linda M. Foley, University of Mississippi, University Douglas W. Vorhies, University of Mississippi, University Victoria D. Bush, University of Mississippi, University SUMMARY Increasingly, the dynamic capabilities view is being utilized as a favored approach to understanding a firm’s competitive advantage. The dynamic capabilities view builds on the previous resource based view of the firm by supplementing its strengths while simultaneously recognizing its weaknesses (Priem and Butler 2001; Eisenhardt and Martin 2000; Teece, Pisano, and Schuen 1997). This emerging capabilities literature realizes that the possession of rare, imperfectly imitable, and valuable resources is an important step to build competitive advantage. However, dynamic capabilities also address the development and deployment of these resources and how resources are integrated together within a firm (Barney, Wright, and Ketchen 2001; Day 1994). The dynamic capabilities “view recognizes that the deployment of resources through these organizational processes may better explain firm performance variations than absolute resource levels in driving firm performance” (Ray, Barney, and Muhanna 2004). Due to its inherent advantage, researchers have studied this important concept (e.g., Teece, Pisano, and Schuen 1997; Day 1994). However, despite all the recent attention, little research has been conducted with specific regard to dynamic capabilities and marketing. Since marketing processes are constantly undergoing adaptations that parallel the changes in consumer preferences and the environment as a whole, it is extremely important to understand marketing processes in a dynamic context. A better understanding of marketing capabilities may lead to the ability to answer some fundamental questions REFERENCES Barney, Jay, Mike Wright, and David J. Ketchen, Jr. (2001), “The Resource-Based View of the Firm: Ten Years After 1991,” Journal of Management, 27, 625–41. Day, George S. and Prakash Nedungadi (1994), “Mana- American Marketing Association / Winter 2005 to both academics and practitioners. For example, why are some firms better at adapting to change than others? What business processes and routines must be in place to allow firms to adequately adjust to modifications in consumer preferences, economic, or other environmental conditions? How do firms generate continual and successful innovative thinking? How does this internal reconfiguration to adapt to external changes affect overall business performance, from both a perspective of financial outcomes and positions of advantage? And, finally, how do specific marketing functions such as customer relationship and brand management play into outcomes like customer satisfaction and brand equity from a dynamic capabilities perspective? This paper attempts to answer the above questions by integrating dynamic capabilities into a single unified framework. In order to do so, we classify and subdivide the various levels of organizational routines and processes into lower and higher order capabilities constructs. Since the addition of the word “dynamic” to the term “dynamic capabilities” implies learning through reconfiguration, development, and integration, it was necessary to integrate the organizational learning literature into the framework presented here. This paper contributes to academia by tying marketing capabilities to the financial performance of the firm, which is a topic which has had numerous calls for research (e.g., Srivastiva, Shervani, and Fahey 1998) including a recent edition of the Journal of Marketing devoted to understanding this relationship. Additionally, the framework was also developed based on qualitative interviews with key informants in marketing organizations. gerial Representations of Competitive Advantage,” Journal of Marketing, 58 (April), 31–44. Eisenhardt, Kathleen M. and Jeffrey A. Martin (2000), “Dynamic Capabilities: What Are They?” Strategic Management Journal, 21, 1105–21. Priem, Richard L. and John E. Butler (2000), “Is the Resource-Based ‘View’ a Useful Perspective for 138 Strategic Management Research?” Academy of Management Review, 26 (1), 22–40. Ray, Gautam, Jay B. Barney, and Waleed A. Muhanna (2004), “Capabilities, Business Processes, and Competitive Advantage: Choosing the Dependent Variable in Empirical Tests of the Resource-Based View,” Strategic Management Journal, 25 (1), 23–38. Srivastava, Rajendra K., Tasadduq A. Shervani, and Liam Fahey (1998), “Market-Based Assets and Shareholder Value: A Framework for Analysis,” Journal of Marketing, 62 (1), 2–18. Teece, David J., Gary Pisano, and Amy Shuen (1997), “Dynamic Capabilities and Strategic Management,” Strategic Management Journal, 18 (7), 509–33. For further information contact: Linda M. Foley Department of Marketing School of Business Administration University of Mississippi University, MS 38677 Phone: 412.401.2662 FAX: 412.481.3160 E-Mail: [email protected] American Marketing Association / Winter 2005 139 ADOPTING RFID TECHNOLOGY: DOES THE MANAGER’S ATTITUDE MATTER? Gilbert N. Nyaga, Michigan State University, East Lansing Roger J. Calantone, Michigan State University, East Lansing Thomas J. Page, Michigan State University, East Lansing ABSTRACT This paper explores the mediating role of manager’s attitude, subjective norms, and perceived behavioral control in the adoption of RFID technology. Moderating variables are also examined. Strategic and theoretical implications are discussed. The examined antecedents are posited to have significant influence on RFID adoption. INTRODUCTION Advances in technology have made the need for companies to implement new systems that improve business process performance a continuous imperative. However, decision makers in organizations are not always willing to implement or adopt new technologies or to do so early. This unwillingness maybe due to shortage of funds, lack of appreciation of the technology’s potential, or even outright negative attitude toward new technology. This study seeks to understand how managers’ attitude toward a new technology, radio-frequency identification (RFID), influences their decisions to implement, delay, or reject its adoption. RFID is the latest technology byword in supply chain management. Manufacturers, wholesalers, retailers, and third party firms are seeking to leverage the advantages brought about by the RFID technology. Yet, there are marked differences in the deployment of the technology among firms, especially with respect to the attitude of managers mandated to evaluate and implement RFID adoption. There exists a significant body of research on the reasons why people accept or reject new technological systems (Davis et al. 1989). Most studies are premised on theories and models borrowed from social psychology (Davis 1986; Swanson 1987). In this study, the theory of reasoned action (TRA) and its two variants, the theory of planned behavior (TPB) and the technology adoption model (TAM) are used. Extant literature shows that stipulations of these theories have been applied, directly or indirectly, in examining the impact of an individual’s attitude on behavioral intention, and subsequently observed behavior (Eagly and Chaiken 1993). Most studies on technology adoption tend to focus on end users (Davis et al. 1989) while ignoring the role of manager’s involved in implementation of those technologies. This study seeks American Marketing Association / Winter 2005 to address this gap by underscoring the importance of managers’ attitude toward RFID adoption. LITERATURE REVIEW Radio-Frequency Identification (RFID) Technology RFID consists of a passive radio-frequency tag with a printed antenna and a radio-frequency (RF) emitter/ reader. The tag emits a signal using energy derived from the RF emitter/reader. The tag stores detailed product information and is attached to a product or pallet, with each tag specifying a unique product identification code (Rutner et al. 2004). Currently the RFID signal range is a few meters, but with continued advances in technology, the range is likely to increase tremendously. Use of RFID enables more accurate inventory management, fewer stockouts, and less product loss throughout the supply chain. As a result, most retailers including Wal-Mart, Target, and Albertsons as well as the Department of Defense have imposed deadlines for their suppliers to begin shipping RFID-tagged pallets and cases (Bednarz 2004). RFID can be deployed in anything that can be tagged, which means that RFID can be used in very diverse industries and data management systems. For instance, in the tire industry, RFID chips that are smaller than the size of a rice grain can be embedded into new tires, which enables association of the tire with a specific vehicle, store a 12-character coding for a number required by the U.S. Department of Transportation, and indicate when and where the tire was manufactured (Faber 2002). Both big and small firms are implementing RFID technology. For example, a fairly small company, Beaver Street Fisheries is using RFID to track cases and pallets of fish and more exotic fare-including alligator and turtle meat at the company’s seafood-processing and packing plant (Sullivan 2004). In spite of the demonstrable benefits, some managers are less than enthusiastic about implementing RFID technology. One of the reasons is that it is a costly investment. Generally, the cost of implementing RFID ranges from $100,000 to several millions (Sullivan 2004). A market study by The Aberdeen Group shows that most of the polled company officials believe that deploying RFID 140 will add costs and significantly erode their profit margins (Cooke 2002). Other concerns include lack of RFID standardization and security/privacy issues. Managers are concerned that some RFID deployments may not be compatible with those of supply chain partners. Indeed, big firms such as Kimberly-Clark, Target, and Wal-Mart have been pressing for adoption of standards on what is included in RFID chip and how readers and tags communicate (Bacheldor and Sullivan 2004). individual’s belief about the extent of difficulty or ease of performing the behavior (i.e., implementing RFID). It is a measure of a person’s perception of his or her control over factors necessary to carry out the behavior (Hill et al. 1996), and is expected to reflect past experiences as well as anticipated impediments and obstacles (Doll and Ajzen 1992). Examining managers’ perceived behavioral control as an antecedent of intention to adopt new technology can help better understand RFID adoption. Theories TAM is an adaptation of TRA, which aims at providing a basis for tracing the impact of external factors on internal beliefs, attitudes, and intentions (Davis et al. 1989) and is specifically tailored for modeling user acceptance of information systems (Phillips et al. 1994). According to TAM, the key determinants of acceptance behavior are perceived usefulness and perceived ease of use. Perceived usefulness refers to the prospective user’s subjective probability that using a specific application system will increase his/her job performance in an organizational context. Perceived ease of use (EOU) reflects the potential difficulties in transferring and utilizing the new technology both by the adopting firm and individuals expected to use it (Phillips et al. 1994). TAM stipulates that people form intentions to perform behaviors that they have positive affect. For instance, people form intentions toward using computer systems based largely on their cognitive appraisal of how the computer system will improve their performance. TAM offers a base for examining antecedents of managers’ attitude toward deploying RFID. The theory of reasoned action (TRA) (Ajzen and Fishbein 1980) is a very general model that has been subjected to several adaptations. These include Davis’ (1986) technology adoption model (TAM) and the theory of planned behavior (TPB) (Ajzen 1980). These theories have been shown to provide a robust analysis of the attitude-behavior intention relationship. In this study, antecedents of attitude toward technology adoption postulated in TAM, and antecedents of behavioral intention posited in TRA and TPB are integrated to develop a model of RFID adoption. TRA stipulates that an individual’s performance of a behavior is determined by his or her behavioral intention (BI) to perform the behavior, and that BI is jointly determined by the person’s attitude and subjective norms concerning the behavior in question (Ajzen and Fishbein 1980; Davis et al. 1989). BI is a measure of strength of ones intentions to perform a specified behavior while attitude refers to the degree to which a person has favorable or unfavorable evaluation of the behavior in question. Subjective norm (SN) is a person’s perception that people who are important to him/her think that he/she should or should not perform the behavior (Ajzen and Fishbein 1980; Hill et al. 1996). Extant literature on adoption identifies several salient referents including top management, supervisors, the organization’s MIS department, technology experts, and peers. Attitude toward a behavior is determined by an individual’s salient beliefs about consequences of performing the behavior (i.e., adopting RFID technology) multiplied by the subjective values or evaluations of those consequences (i.e., impact of RFID technology). Beliefs refer to an individual’s subjective probability that performing the target behavior, in this case deploying the RFID technology, will result in a given consequence. TRA has been applied widely and provides a useful framework for this study. TPB is an extension of TRA, which seeks to address limitations in TRA with respect to behaviors over which people have incomplete volitional control (Ajzen 1985; Doll and Ajzen 1992). TPB stipulates that besides attitude and subjective norms (as stipulated in TRA), another factor, perceived behavior control is predictive of behavioral intentions. Perceived behavioral control refers to an American Marketing Association / Winter 2005 CONCEPTUAL MODEL AND HYPOTHESES The preceding literature review highlights several variables that have a bearing on a manager’s attitude and behavioral intention with respect to implementing RFID in their organizations. Each of the three models, TRA, TPB, and TAM, provides some bases for understanding technology adoption. Thus, this study integrates stipulations of the three models to develop the model shown in Figure 1. As argued in TAM, perceived usefulness and perceived ease of use are stipulated to influence managers’ attitude toward RFID technology adoption (Davis et al. 1989; Adams et al. 1992; Phillips et al. 1994). In the case of RFID adoption, perceived usefulness refers to perceived RFID utilities for the organization. It is conceptualized in terms of costs and benefits of RFID technology compared to current technology (i.e., technology in use that is to be replaced). For instance, if a firm has bar coding technology in place and wishes to adopt RFID, the manager will compare the costs of implementing RFID (actual, purchase cost, installation costs, employee training costs, etc.) and expected benefits (i.e., asset management, error reduction, supply chain collaboration, etc.) against 141 FIGURE 1 Conceptual Model Perceived usefulness of RFID Perceived ease of use and implementation of RFID Normative beliefs and motivation to comply with referent H1 H2 H3 Manager’s attitude toward adopting RFID Manager’s subjective norms toward adopting RFID Manager’s perceived behavioral control on adopting RFID H4 H5 Behavioral intention about adopting RFID H6 H7a,b,c Moderators ♦ Manager’s experience ♦ Firm size the costs and benefits of bar coding. If the gap between these is significantly large (i.e., RFID is more effective than bar coding), then the manager can justifiably seek RFID implementation. Whether a firm adopts RFID technology or not is likely to be influenced by the manager’s cognitive evaluation of the gains from the implementation. Thus, it is hypothesize that: H1: Perceived usefulness has a direct and positive effect on the manager’s attitude toward RFID adoption. Perceived ease of use is conceptualized in terms of extent of difficulty, time, and learning costs associated with changing from the current system to RFID technology. If RFID deployment is perceived to be cumbersome and difficult, or inconveniencing to supply chain partners, then it is expected that managers might be hesitant to implement it. However, if the deployment is perceived to be less involving, then managers might be inclined to readily implement it. Moreover, the cost of training employees on how to use RFID can be high and time consuming. Learning costs can also include the negative performance implications of technology changeover and potential losses in the process of replacing the current system with RFID. These costs could influence managers’ attitude toward RFID adoption. Thus, it is hypothesized that: H2: Perceived ease of use has a direct and positive effect on the manager’s attitude toward adopting RFID. American Marketing Association / Winter 2005 Managers’ normative beliefs and motivation to comply with referents are stipulated to influence subjective norms and subsequently behavior intention (Ajzen and Fishbein 1980; Davis et al. 1989). Referents expected to exert influence on managers adopting RFID include supply chain partners, senior managers, consultants, etc. For instance, recommendations by highly reputed consultants as well as advice by experienced executives held in high esteem by a manager may motivate the manager to undertake a specific business function, in this case, deploying RFID technology. Furthermore, if supply chain partners and competitors are deploying RFID, then managers will most likely follow suit. Thus, it is hypothesized that: H3: Manager’s normative beliefs and motivation to comply with a referent have direct effects on his/her subjective norms toward RFID adoption. The manager’s attitude toward implementation of RFID is posited to be a major determinant of whether or not he/she executes RFID deployment. Attitudes develop from beliefs that people hold about the object of the attitude (Doll and Ajzen 1992). It is expected that if managers strongly believe that implementing RFID in their organization will culminate in improved process performance and better coordination with supply chain partners, they are likely to develop favorable attitudes toward RFID. However, if their RFID evaluation is negative, then we expect that their attitude toward RFID implementation will be negative. This is expected to 142 impact on their behavioral intentions and subsequently decisions to either implement or not implement the RFID. Thus, it is hypothesized that: H4: Manager’s attitude toward RFID technology has a direct and positive effect on intentions to adopt RFID. Subjective norms have been shown to influence behavioral intention (Ajzen and Fishbein 1980; Hill et al. 1996; Karahanna et al. 1999). In the case of RFID adoption, it is expected that manager’s subjective norms as determined by normative beliefs and motivation to comply with referents will have a strong influence on technology deployment. These norms may arise from available information (i.e., trade journals, business magazines, consultant reports, etc.) or desire to conform to expectations of senior managers, experts, and/or supply chain partners. Thus, it is hypothesized that: H5: Manager’s subjective norm toward RFID has a direct and positive effect on intention to adopt RFID. Perceived behavior control, according to Ajzen (1991), can influence whether people choose to pursue an outcome, their degree of preparation, the effort they expend, their perseverance, as well as the thoughts and emotions experienced during the task. Thus, the extent to which manager’s view themselves as capable of implementing RFID, both in terms of mandate to oversee RFID implementation and possession of requisite skills, will influence their behavioral intention. Moreover, as Doll and Ajzen (1992) state, beliefs dealing with presence or absence of required resources and opportunities to perform a specific behavior are perceived to dictate perceived behavioral control. It is expected that the more resources and opportunities a manager has, the greater should be their perceived behavioral control over RFID adoption. Consequently, greater perceived behavioral control is expected to lead to greater intention to adopt RFID. Thus, it is hypothesized that: H6: Manager’s perceived behavioral control on RFID deployment has a direct effect on intention to adopt RFID. experience with a practice differentially affects their attitudinal and normative beliefs, which in turn influences their intention to continue or introduce a practice. Doll and Ajzen (1992) concluded that experience with behavior increased the overall predictiveness of attitude, subjective norm, and perceived behavioral control on behavior intention. Firm size has also been stipulated as a moderator. In their international study of attitudes toward adoption, Bunker and McGregor (2002) suggest that contextual variables such as firm size and business type are the most influential factors. Indeed, they report that skill-based (experience) factors have lesser influence on adoption than contextual factors (i.e., firm size, business type). Sillence et al. (1998) also reported size of business as an influential factor in adopting e-commerce. In small firms faced with resource constraints, RFID implementation may not be the highest priority project. However, in large firms with greater resource endowment, RFID implementation may be easily accomplished. Moreover, the influence of trading partners may be more intense (i.e., WalMart’s requirement that its top 100 suppliers adopt RFID). From these studies, it can be argued that managers’ past experience in implementing new technology and firm size will increase the predictive power of antecedents of behavioral intention (attitude, subjective norm, and perceived behavior control). In other words, the three antecedents will more strongly predict intention to implement RFID among managers with experience in implementing new technologies than those with no prior experience, and in bigger firms than in small firms. Thus, it is hypothesized that: H7: The influence of (i) attitude, (ii) subjective norms, and (iii) perceived behavioral control on intention to adopt RFID technology increases with: a. Increases in manager’s experience in new technology adoption b. Increases in firm size METHOD Moderators of Attitude-Behavior Relationship Past studies employing TPB have shown that situational and personal factors moderate the relationship between attitude, subjective norm, perceived behavioral control, and behavior intention (Doll and Ajzen 1992; Hill et al. 1996; Ajzen 2001). For instance, in a study of competitive benchmarking intentions among managers, Hill et al. (1996) found out that attitude has stronger effect for more experienced managers than less experienced managers. They posit that managers’ experience or lack of American Marketing Association / Winter 2005 To test the proposed model, data can be collected using a survey questionnaire directed to senior logistics officials involved in the new technology implementation process. The study sample can be selected from member list of appropriate industry associations such as the Council of Logistics Management. Mail surveys can be effective in collecting required data. To measure the constructs stipulated in the study, tested and validated measures in extant literature could be adapted. For perceived usefulness and perceived ease of use of RFID, Davis’ (1989) 143 technology acceptance scale could be adapted with modifications to make them relevant to RFID deployment. Measures of attitude and subjective norms could be adapted from TRA scale (Ajzen and Fishbein 1980) while perceived behavioral control construct measures could be adapted from Ajzen’s (1985) TPB scale. Behavioral intention construct measures have been developed in all three theories (Ajzen and Fishbein 1980; Ajzen 1985; Davis 1989). The scales entail asking the respondents to indicate the extent to which they agree or disagree with statements concerning the subject of interest on a sevenpoint Likert scale anchored with 1 = “Strongly Disagree” and 7 = “Strongly Agree” (Ajzen and Fishbein 1980; Ajzen 1985; Davis 1989). Measures of moderator variables include information about the respondent such as number of years as a manager (experience) and company information such as annual revenue, number of employees, etc (firm size). Firms could also be grouped as small, medium, or large in size. To analyze the data, structural equation modeling (SEM) approach could be used. SEM is a comprehensive statistical approach to testing hypotheses about relations among observed and latent variables, and combines aspects of multiple regression and factor analysis to estimate a series of interrelated dependence relationships simultaneously (Hair et al. 1998). SEM provides a robust way of addressing the relations between constructs and subsequently enables a better understanding of issues in question. STRATEGIC AND THEORETICAL IMPLICATIONS RFID’s implementation is expected to attract inputs from diverse quarters including industry pundits, supply chain partners, managers’ peers, and top echelons of firm’s management hierarchy. However, extant literature has not given much attention to this fact. This study therefore raises an issue of practical and theoretical import, which calls for further investigation. Third, the study implicitly extends the theory of reasoned action to supply chain research. In examining an issue that has widespread impact on the supply chain, the study serves to open new frontiers for TRA, TAM, and TPB applications and research. Future research is likely to add great value by investigating organizational and supply chain issues within the framework of expectancy models. Moreover, the study takes into account all three theories, thereby developing a more comprehensive assessment of attitude-intention linkage within the context of new technology adoption. Such an integrative view of expectancy models is likely to give better insights to future research. Fourth, the study raises the issue of factors moderating the impact of manager’s attitudes toward new technology adoption on behavioral intentions. Firm size and manager’s experience are only a start. There could be other moderating variables that future research can explore. For instance, how does centralization versus decentralization mediate the attitude-intention relationship? By understanding the moderating effects of different variables, researchers and practitioners alike will be able to identify conditions in which specific actions are most appropriate. This in turn will have both managerial and theoretical implications. There are several strategic and theoretical implications from the preceding arguments. First, the study raises the issue of manager’s attitude toward RFID application, and by extension technology adoption for firms engaged in supply chain relationships. Past studies have tended to ignore the role of manager’s attitude, yet, in the final analysis, the manager in charge of new technology deployment must be convinced that RFID implementation is appropriate, feasible within a given timeframe, and urgent. This is an issue of great importance especially with the expanding deployment of RFID in supply chain operations. By examining the role of managers’ attitude, greater insights are likely to emerge that could enable a better understanding of not only RFID adoption, but also other new technology adoption situations. This could result in better planning of marketing efforts. Scholars and practitioners alike concur that new technology adoption is a process characterized by many challenges for both the users and implementers. The study shows that the role of managers involved in technology adoption ought to be given greater consideration when examining technology adoption. In addition, the study shows that an integrative assessment of propositions from various expectancy models greatly help in the understanding of technology adoption process. Moreover, as Davis et al. (1989) suggest, conditions under which attitudes mediate the belief-intention link ought to be investigated further. This study is a positive step in responding to Davis et al.’s challenge. Secondly, the study reinforces the role of normative beliefs in technology adoption. RFID deployment has strategic and operational implications on firm’s partners in the supply chain. Furthermore, being a recent development in supply chain collaboration and management, The issues raised in this study have important implications for academics and researchers. For academicians, the study raises important questions about the mediating role of manager’s attitude in technology adoption. Indeed, the study’s focus on technology adoption from the point American Marketing Association / Winter 2005 CONCLUSION 144 of view of the manager’s attitude will be of interest to consumer behavior researchers. For practitioners, the issues raised offer an opportunity for a better assessment and planning of new technology implementation and marketing programs. 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(2002), “RFID: The Next Tool for Managing Records?” Information Management Jour- American Marketing Association / Winter 2005 145 For further information contact: Gilbert N. Nyaga Michigan State University N370 Business College Complex East Lansing, MI 48824 Phone: 517.353.6381 FAX: 517.432.1112 E-Mail: [email protected] American Marketing Association / Winter 2005 146 A SYNERGISTIC MODEL FOR NEW PRODUCT SUCCESS Russell Adams, University of Texas – Pan American, Edinburg SUMMARY For decades researchers have ascribed to Rogers’ and Porter’s contention that new products are one of the strategic keys for a company’s survival (Porter 1980; Rogers 1962), much research has been conducted in this field which is well summarized by Mahajan, Muller, and Bass (1990). Companies are continually developing new products to remain competitive in their markets. Given the substantial investment involved and the relatively low success rates of new product introduction, fifty percent of new product introductions fail within the first year (Zirger and Mandique 1990), and given that new products can count for a third of a firms profits (Booz et al. 1982) research that discovers ways to increase this success rate is critically important. Several aspects of successful New Product Development (NPD) and adoption have been studied independently, such as diffusion, strategic partnerships, Word-of-Mouth (WOM), and installed user base as well as the effects of marketing, but these factors have not been modeled in conjunction. The goal of this paper is not to create a definitive model for guaranteeing the success of new product launches, but to shift the theoretical lens to allow researchers to pursue avenues that have yet to be studied. By combining the different aspects of product success into one model it will be easier to recognize the critical factors of success and facilitate the focus of future research on these aspects. The paper also explains the appropriateness of using percolation (Weisbuch and Solomon 2000) as an alternate view of diffusion theory that reflects what occurs in consumer markets. The model views product success, measured by diffusion, as the intersection of two important paths; production, and marketing. From the production side, network effects are created by both installed user base and licensing relationships, this then expands the content value of the hardware leading to greater diffusion. The marketing side involves the human or consumer element. With appropriate marketing and the positive attitude (which can also be derived from the installed user base), positive WOM will synergistically combine with the network to result in product diffusion (percolation). The comprehensive model is then applied to the current platform wars for computer gaming. Currently Sony, Microsoft, and Nintendo are vying for dominance in the console game market with Sony’s Playstation 2 the current leader. The value of the model becomes apparent as the factors of success for Sony reflect the synergies that are developed in the model. References available upon request. For further information contact: Russell Adams University of Texas – Brownsville 80 Fort Brown Brownsville, TX 78520 FAX: 956.983.7558 E-Mail: [email protected] American Marketing Association / Winter 2005 147 INCOME ELASTICITY OF HOUSEHOLD’S DEMAND FOR COMMUNICATION AND IT PRODUCTS: GLOBAL MEASUREMENT AND ITS MARKETING IMPLICATIONS Min Lu, University of British Columbia, Vancouver Yanbin Tu, University of Connecticut, Storrs ABSTRACT This paper investigates the income elasticity of household’s demand for communication and IT (CIT) products in twenty-three OECD countries during 1989 to 2001. We find that CIT products are luxury goods to the households in these countries. We discuss the marketing implications of our findings, and provide some marketing recommendation. INTRODUCTION Business firms engaged in the manufacturing and sales of communication and IT products are facing a dynamic and challenging marketplace. In such an environment, the capacity to attract and retain consumers, and maintain reasonable profit margins, is critical to the business success. The idea and practice of differentiating and segmenting customers are quite common in the technology sector. Some communication and IT products vendors such as Dell divide their customers into categories of home, small business, and large business. Other vendors such as Amazon target the markets in different countries. However, these differentiations and segmentations are typically based on differences in the type of product or service each segment desires. Theoretically or empirically, we need to offer additional information that can be used to support and refine their differentiating and segmenting strategy. One perspective is to measure whether one commodity is necessary or luxury to different groups of customers. This represents an important research topic, because understanding the nature of income demand elasticity is very useful to developing effective pricing and versioning strategies for communication and IT products vendors. According to economic theory, the income elasticity of demand is used to describe how many percentage points the demand for an item will change when income adjusts by one percent. An income elasticity of demand greater than one suggests that the good is luxury to the consumer. An income elasticity of demand between zero and one implies a necessary good to him, while a value less than zero suggests that the good is an inferior good to him. The objective of this research is to determine whether communication and IT products are considered luxury American Marketing Association / Winter 2005 goods or necessary goods by households, who exhibit different demand patterns from other categories of consumers such as private firms and government agencies. We investigate the income elasticity of household’s demand for communication and IT products in the OECD countries ranging from 1989 to 2002, and find that communication and IT products are luxury goods to households in OECD countries. We also discuss the marketing implications of our findings in the paper. The rest of the paper is organized as follows: Brief Literature Review; Hypothesis and Testing Results; A Discussion of our Findings; and Concludes the paper with Limitations of this work. BRIEF LITERATURE REVIEW For a given product, income elasticity and price elasticity of demand are expected to change over time as the product moves through its life cycle. Early marketing researchers about product life cycle theory including Clifford (1965), Levitt (1965), Cox (1967), Polli and Cook (1969), and Scheuing (1969) describe in detail the four major stages in a product’s life cycle: introduction, growth, maturity, and decline. New products diffusion models that incorporate price changes have been developed by Robinson and Lakhani (1975), Bass (1980), Jeuland (1981), and Kalish (1985). From this literature, price elasticity is expected to increase as a product moves through its life cycle. Two reasons are for this result. First, consumers will collect more information about the product, especially regarding availability, deals, prices. and promotions, in the later stages of the life cycle (Tellis 1988; Tellis et al. 1988). Second, the “early adopters” during the introduction stage tend to have higher incomes and are more likely to exhibit lower price elasticities, accordingly lower income elasticities, than late adopters (Onkvisit et al. 1989; Nagle 1987; Simon 1979). So, we can say that price elasticity of demand is likely to be more negative in the later stages of the product life cycle. A better understanding of income elasticity and/or price elasticity of demand in combination with the product life-cycle theory can enable more effective marketing strategies. For instance, if a product is necessary to some consumers, they are more likely to be early adopters and 148 more likely to purchase the product during the introduction and growth stages of the product life cycle. In addition, these consumers are less price-sensitive so a price premium can be charged. Luxurious users, on the contrary, do not tend to have an “urgent” need for the product, and are more likely to buy the product during the growth or maturation stages. Luxurious users are also more sensitive to prices, that is, lower prices likely to spur demand and higher prices likely to discourage demand. Economics and marketing scholars have conducted some empirical research on the income elasticities of a number of goods and services, such as energy (Bohi 1981), agricultural products (Klonaris and Hallam 2003; Mdafri and Brorsen 1993) healthcare (Matteo and Matteo 1998; Getzen 2000; Freeman 2003) and information goods (Bakos and Brynjolfsson 1999, 2000). Lu et al. (2004) measure whether computers and packaged software are necessary or luxury to private firms, households and government agencies in USA. They find that such IT products are necessary goods to private firms, luxury goods to households and inferior goods to government agencies. This paper is related to Lu et al.’s research. However, the difference of this study form theirs is as follows: (1) we investigate communication and IT products, a broader range of commodities, which include computers and packaged software; (2) we conduct a global measurement of income elasticity of communication and IT products across twenty-three countries, which provide more robust testing results; (3) this study only focuses on the households. RESEARCH HYPOTHESIS AND TESTING RESULT The demand for a commodity is said to be normal if demand does not fall when income rises, and inferior if demand falls when income rises. We define the income elasticity of demand for x as η = (cx / cM) where M is the income of consumer. η is interpreted as the percentage by which the demand for good x changes when income changes by one percent. A commodity, say x, is a luxury good if η < 1, a necessary good if 0 < η < 1, or an inferior good if η < 0. While some parts of communication and IT products will be necessary goods to private firms (see Brynjolfsson and Yang 1996; Dewan and Min 1996; Lu et al. 2004), we expect that overall communication and IT products will be considered luxury goods by households, since the main function of such products are entertainment, and communication, and rarely critical computing to households. Following this reasoning process that private firms will tend to be early adopters of communication and IT products, as their income elasticity of demand is quite low, we expect that households, on the other hand, will tend to be later adopters of communication and IT products, as their American Marketing Association / Winter 2005 income elasticity of demand is higher. We set up the following hypothesis. Hypothesis (H): Communication and IT products are luxury goods to households. In order to measure the income elasticity of demand, empirically we perform the following regression: In Q = α + β In M + ε where Q is the quantity of good, M is income or expenditure and ε is the error term. Taking the derivative with respect to M, we obtain β = (cQ / cM) (M / Q)which is the estimated value of the income elasticity of demand for Q. We collect the data of annual household final consumption expenditure, annual expenditure on communication products and annual expenditure on audio-visual photographic and information processing equipment (called IT products) which are all at 1995 prices, from 1989 to 2001 in OECD countries (OECD 2002). We conduct regressions for communication products and IT products respectively. Table 1 shows the regression results for communication products in twenty-three OECD countries. From the table, we clearly see that the estimated coefficient for each country is greater than one (from the highest 8.686 for Japan to the lowest 1.577 for Iceland), which suggest communication products are luxury goods to the households in these countries. The t-values for these estimated coefficients indicate that they are significant at one percent level. Most important, the R-squares for most of countries (17 out of 23) are over 0.90 (the average Rsquare is 0.927), which means that, generally, the regressions have a high level of goodness-of-fit. Table 2 presents the regression results for IT products in seventeen OECD countries. Except for Germany, all the estimated coefficients for other countries are greater than 1 (from the highest 6.221 for Demark to the lowest 1.576 for Korean), which also indicate that IT products are luxury goods to the households in these countries. All the estimated coefficients, except for Germany and Greece, are significant at one percent level. The R-squares for 13 out of 17 countries are over 0.90, and the average Rsquare is 0.906, which mean that the regressions for IT products have a high level of goodness-of-fit as well. German, the outlier in the sample, has the income elasticity of 0.8141, which suggests IT products are necessary goods to German households. But, the testing for it is not significant below three percent level. The testing results for both communication and IT products support the hypothesis (H) in the study, that is, that overall communication and IT products are luxury goods to the households in OECD countries. Since most of OECD countries are developed countries, we can generalize our conclusion to that communication and IT products are luxury goods to the households globally. The 149 TABLE 1 Regression Results for Communication Products Country Australia Austria Belgium Canada Czech Demark Finland France Germany Greece Iceland Ireland Italy Japan Korean Mexico Netherlands Norway Poland Spain Sweden UK USA Income Elasticity t-Value p-Value # of Observation R-Square 3.115 4.095 5.048 2.075 5.175 2.535 4.710 5.821 6.063 4.683 1.557 2.445 6.186 8.686 4.752 3.752 4.723 3.510 4.860 3.128 3.301 3.021 2.195 21.914 15.702 11.340 20.254 5.09392 6.360 4.523 36.213 15.337 14.423 9.731 47.216 17.563 7.795 11.785 6.767 13.012 12.548 8.363 23.737 4.823 26.507 44.806 8.77x10-10 2.25 x10-8 0.000345 4.67x10-10 0.002235 5.37x10-5 0.001103 6.13x10-12 3.24x10-7 5.09x10-8 2.04x10-6 4.29x10-12 2.14x10-6 2.72x10-5 1.4x10-7 4.9x10-5 0.00098 4.71x10-6 0.003585 1.8x10-5 0.016986 1.35x10-10 7.38x10-6 12 12 6 13 8 13 12 12 10 12 12 11 13 11 13 12 5 9 5 6 5 12 12 0.980 0.961 0.985 0.974 0.812 0.786 0.672 0.992 0.967 0.954 0.905 0.996 0.966 0.871 0.927 0.821 0.983 0.957 0.959 0.993 0.886 0.986 0.995 TABLE 2 Regression Results for IT Products Country Income Elasticity Austria Belgium Canada Demark Finland France Germany Greece Iceland Ireland Italy Korean Mexico Norway Spain UK USA 3.051 2.755 3.434 6.221 3.564 5.061 0.8141 5.354 2.798 2.096 3.454 1.576 1.602 2.832 2.220 4.246 4.655 t-Value p-Value # of Observation R-Square 11.049 17.151 34.224 20.673 14.974 35.897 2.598 4.404 14.058 6.422 10.699 17.314 4.893 14.297 41.896 21.250 82.128 6.33x10-7 6.78x10-5 1.59x10-12 3.75x10-10 3.56x10-8 6.69x10-12 0.032 0.012 6.51x10-8 0.000122 3.75x10-7 2.5x10-9 0.00063 1.95x10-6 2.99x10-5 1.19x10-9 1.75x10-15 12 6 13 13 12 12 10 6 12 11 13 13 12 9 5 12 12 0.924 0.987 0.990 0.975 0.957 0.992 0.458 0.829 0.952 0.821 0.912 0.965 0.705 0.967 0.998 0.976 0.999 American Marketing Association / Winter 2005 150 underlying reason is that if such products are considered as luxury goods by the households in developed countries, they must be perceived as luxury goods by the households in developing countries as well since the developing countries have a low GDP per capital and an associated living standard. DISCUSSION AND IMPLICATIONS OF FINDINGS Why are communication and IT products luxury goods to the households? Unlike private firms, who use communication and IT products for the purposes of computing function and competitive advantage, households usually use such products for entertainment, communication and convenience. It is common to state that game software, digital camera, audio or video systems are luxury goods to households. For other IT products such as computers, households need them to function these “luxury” goods. Therefore, computers and associated application software are the extension of such luxury goods to the households. Figure 1 shows the percentage of households with access to a home computer in OECD countries in 2000. The percentage varies from 11.1 for Mexico to 65 for Demark. For U.S., 51 percent households use computer at home in 2000. Figure 2 shows that more and more people buy and use personal computers in USA during 1997 to 2001, which tells us that even in USA, not every household processes a computer. Intuitively, these two figures further demonstrate that computers are luxury goods to households in OECD countries. This study provides some interesting insights into communication and IT products markets. We find evidence in the global setting to suggest that communication and IT products are luxury goods to households. Vendors of communication and IT products can take advantage of these findings by strategically setting prices for the household. Vendors should set low prices of communication and IT products for households for two reasons. First, as these products are considered to be luxury goods, a high price will result in a sharp drop in demand. Second, as growth in the household sector is a precursor to growth in the overall market, a drop in current demand will also entail a reduction in future sales (see Lu et al. 2004). As Lu et al. (2004) point out that during the introductory stage of the product life cycle for computers and packaged software the consumer base will tend to be comprised predominantly of private firms, and once the growth stage begins, marketing and advertising efforts should shift to cultivate demand within the household sector. Our findings in the global setting further confirm that vendors of communication and IT products should make more marketing efforts towards the household markets when their products evolve into the growth stage. As FIGURE 1 Households With Access to a Home Computer in 2000 Notes: Mexico Turkey (4) Italy Spain Ireland France Austria Portugal Belgium (3) United Japan Finland (1) Germany Australia Canada United Korea Sweden Switzerland Denmark 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Beginning of 2002; 2March 2001–April 2002 (financial year) instead of 2001; 31999 instead of 2000; Households in urban areas only; 5For 1999, households in urban areas with more than 15,000 inhabitants only. 1 4 American Marketing Association / Winter 2005 151 FIGURE 2 Personal Computers in USA (Per 1000 People) 700 600 500 400 300 200 100 0.0 1997 1998 the life cycle of communication and IT products become shorter and shorter, this recommendation is significant to the communication and IT industry. CONCLUSIONS, LIMITATIONS, AND FUTURE RESEARCH This paper investigates the income elasticity of household’s demand for communication and IT products in 23 OECD countries during 1989 to 2001. 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For further information contact: Yanbin Tu Department of Operations and Information Management Business School University of Connecticut Storrs, CT 06269 Phone: 860.486.6485 FAX: 860.486.4839 E-Mail: [email protected] American Marketing Association / Winter 2005 153 COMPUTATIONAL ESTIMATION OF PARTIONED PRICES: ANOTHER HEURISTIC MOVES INTO THE MARKETING NEIGHBORHOOD William J. Jones, University of Kentucky, Lexington Devon S. DelVecchio, University of Kentucky, Lexington Terry L. Childers, University of Kentucky, Lexington SUMMARY Economic choice models originally conceived consumers as rational agents making optimal choices. Later, consumer researchers would present evidence of a consumer who is rational within the bounds set by the desire to maximize outcomes given an acceptable level of mental effort (e.g., Payne, Bettman, and Johnson 1993; Simon 1978). In such a “satisficing” mode, consumers rely on heuristics to reduce processing demands. One of the most widely cited heuristics is anchoring and adjustment. Anchoring and adjustment has often been used to explain the integration of price information (e.g., Morwitz, Greenleaf, and Johnson 1998; Yadav and Seiders 1998). This may be a popular heuristic among consumers since it requires little mental effort. However, anchoring and adjustment typically fails to provide highly accurate estimates (e.g., Jacowitz and Kahneman 1995). In this study we introduce computational estimation as an alternative explanation to consumers’ use of partitioned prices. Dowker et al. (1996) define computational estimation as a procedure in which elements of simple computation and approximation skills are combined to devise strategies for manipulating numbers. The strategies in computational estimation include, but are not limited to, rounding, using known numbers (e.g., transforming $106 X .23 to $100 X .25), distributing one number into two or more (e.g., 15% is broken into 10% + 5%), and use of fractions (e.g., 80 X 25 = 80 X ¼ X 100). Thus, computational estimation procedures enable consumers to evaluate price information in a more sophisticated manner than other heuristics, but without investing the large amount of mental energy needed to perform exact calculations. This research addresses three key questions examined via three studies. First, what varieties of computational estimation strategies are consumers likely to employ when revising a discounted price? Second, given computational estimation strategies how do interactions between the numerical value of the price and discount influence consumer choice? Specifically, we examine situations in which price and discount combinations suggest a particular computational estimation strategy and how the effort expended in using this strategy affects choice share. Third, does the affect generated from employing more or less effortful computational estimation procedures increase or decrease choice share for the brand. In or initial study, we examine strategies that consumers use when estimating the value of a discount for 144 price-discount combinations. Study 2 examines choice behavior for a discounted brand and how price-discount combination s favoring particular computational estimation strategies increase or decrease share for the brand relative to other brands. Study 3 largely replicates Study 2, but measures affect and confidence generated through the estimation process. Because of its higher accuracy, lower effort niche, we expect that consumers employ computational estimation strategies in a variety of situations. Thus, our point-ofview is consistent with a bounded rationality view of consumer decision-making, but one that supposes greater mental effort and accuracy than the predominant heuristic. This view is supported by results that differ from those that would be predicted by anchoring and adjustment. However, additional studies that directly contrast anchoring and adjustment and computational estimation in terms of consumers’ price estimates and choice are warranted. For further information contact: William J. Jones Gatton School of Business and Economics University of Kentucky Lexington, KY 40507 Phone: 859.275.2962 FAX: 859.257.3577 E-Mail: [email protected] American Marketing Association / Winter 2005 154 THE EFFECTS OF MAGNITUDE REPRESENTATION ENCODING INTERFERENCE AND ORDER OF PRICE EXPOSURE IN COMPARATIVE PRICE ADVERTISING Keith S. Coulter, Clark University, Worcester Robin A. Coulter, University of Connecticut, Storrs SUMMARY Research has demonstrated that consumers often rely on the non-conscious, automatic processing of price information when choosing among brands. The numerical cognition literature suggests that one way in which numerical stimuli (and hence prices) may be non-consciously represented and encoded in memory is in terms of magnitude representations. Magnitude representations are judgments of relative “size” arrayed in analog format along a left-to-right oriented mental number line, and may reflect either the exact value (e.g., 8), or an approximation of the exact value (e.g., “large”) of a number (Dehaene 1992). Research further suggests that the magnitude representation that sustains the processing of numeric value may be highly related to the underlying magnitude code that sustains the processing of physical stimuli (Dehaene and Akhavein 1995). Thus, interference may ensue if the magnitude representation associated with the numeric value of a number (e.g., large) is inconsistent with the magnitude representation associated with the physical size or appearance of that number (e.g., small). Consider, then, a set of price lists containing comparatively high (standard) and low (sale) prices for several items within a particular product category. The lower prices are all displayed in either smaller font, such that the numerical value and physical size dimensions are congruent (e.g., $12–10), or larger font such that the numerical value and physical size dimensions are incongruent (e.g., $12–10). In the case of the incongruent lists, we hypothesize that the non-corresponding magnitude representations should interfere with consumers’ ability to encode the sale prices as lower or smaller than the standard high prices. As a result, the differences between the standard high prices and the low sale prices should be perceived as less, and the more favorable price and/or value assessments typically associated with the comparatively low sale prices should be weakened or reduced. The reduced value assessments should lead to a decrease in demand for each of the low-priced items. The opposite effects are expected in the case of the congruent physical-size/numeric value lists. Research has also shown that the order in which buyers are exposed to multiple prices (i.e., in list format) American Marketing Association / Winter 2005 affects their perceptions (Monroe 2003). Because consumers typically examine the items in a list from top to bottom, prices at the top of the list become externallysupplied reference prices that influence the perceptions of prices that occur lower on the list. Buyers who initially see high prices perceive subsequent lower prices as less expensive (and hence of greater value) than they would if they initially see low prices (Slonim and Garbarino 1999). Thus, in the case of the aforementioned price lists consisting of standard/sale prices in different size fonts, we also consider that these prices may occur in either descending (e.g., $20–18, 16–14,12–10) or ascending (e.g., $4–2, 8–6,12–10) series. Thus, relative to a particular target item that appears at the bottom of the lists and hence is typically examined last (i.e., the item priced at $12–10 in the example above), initial reference prices would be higher in the descending series, and lower in the ascending series. In the case of the descending order series, both standard and sale initial reference prices would be greater than a target sale price appearing at the bottom of the list. Thus we hypothesize that a (small) congruent physical size magnitude representation associated with that target sale price should reinforce the perception that the target price is actually lower or smaller (and hence a better buy) than the higher reference price(s). Both size/value congruence and price-order effects are expected to occur. Conversely, a (large) incongruent physical size magnitude representation associated with the target sale price is expected to interfere with the perception that the target price is lower or smaller than the higher reference price(s). Therefore in this latter instance, price-order effects should be diminished. Method Hypotheses were tested in a 2 (congruent/incongruent) x 2 (ascending/descending order) experiment (N = 120). Subjects were shown a list of (6) brands in table format containing high (standard) and low (sale) prices and brief product descriptions. In the congruent (incongruent) conditions the higher standard prices appeared in larger (smaller) font than the lower sale prices. Brands were listed in either ascending or descending order of price, with a fictitious target brand always appearing at the 155 bottom of the list. After viewing the stimulus price list, subjects were exposed to a brief “filler” infomercial. They then completed a paper and pencil questionnaire. Results Findings indicated that congruent magnitude representations result in more favorable value perceptions, lower price judgments, and increased purchase likelihood. Findings also demonstrated that numerical size/ value congruency interacts with price-presentation order such that price-order effects are eliminated under incongruent magnitude representation conditions. Processing check results supported our contention that subjects’ processing of price information was implicit, automatic, and non-conscious, rather than explicit, conscious, and/or inferential. Results also indicated that differing degrees of attention caused by the size of the larger/smaller fonts could not have accounted for dependent variable results. References available upon request. For further information contact: Keith S. Coulter Clark University GSOM 950 Main Street Worcester, MA 01610–1477 Phone: 508.793.7749 FAX: 508.793.8822 E-Mail: [email protected] American Marketing Association / Winter 2005 156 INFLUENCES ON WHAT CONSUMERS KNOW AND WHAT THEY THINK THEY KNOW REGARDING THE PERSUASIVE ASPECTS OF PRICING-RELATED SELLING TACTICS Jay P. Carlson, The Graduate College of Union University, Schenectady William O. Bearden, University of South Carolina, Columbia David M. Hardesty, University of Miami, Coral Gables SUMMARY An array of pricing-related selling tactics (i.e., tactics used by sellers to generate favorable price perceptions regarding their brands, stores, and/or offerings) exists in the marketplace. Prior research examining pricing-related selling tactics has focused on assessing consumer response to individual tactics (e.g., partitioned pricing – Morwitz, Greenleaf, and Johnson 1998; pennies-a-day – Gourville 1998; price bundling – Yadav and Monroe 1993). Research that has studied consumer price knowledge has done so in the context of individual prices (e.g., Dickson and Sawyer 1990; Mazumdar and Monroe 1992; Monroe and Lee 1999; Vanhuele and Dreze 2002). Also, consumer persuasion knowledge, as advanced by Friestad and Wright (1994), has been investigated in the domains of advertising (Boush, Friestad, and Rose 1994) and personal selling (Campbell and Kirmani 2000). However, consumer persuasion knowledge in the domain of pricing, more specifically, for marketer pricing-related selling tactics, has not been examined. Alba and Hutchinson’s (2000) review of knowledge calibration supports the contentions of prior researchers (e.g., Brucks 1985; Park, Mothersbaugh, and Feick 1994) that objective and subjective knowledge are two important but distinct knowledge constructs that differentially impact information search and consumer evaluations. Moreover, prior research examining the relationship between objective and subjective knowledge has not always found consistent results, and researchers argue that a better understanding of the relationship is needed (Cowley and Mitchell 2003). The current research examined both objective knowledge and self-perceived knowledge regarding the persuasive aspects of marketer pricingrelated selling tactics in order to better understand the relationship between the two knowledge constructs. The objective then of the current research was to identify and test a set of hypothesized factors that influence two knowledge constructs as they relate to knowledge regarding the persuasive aspects of marketer pricing-related selling tactics (cf., Park et al. 1994; Radecki and Jaccard 1995). The first of these constructs was objective knowledge or accurate information stored in long-term memory. The second construct was subjective American Marketing Association / Winter 2005 knowledge or self-assessed perceptions regarding what consumers think they know. To this point, no research has attempted to investigate directly influences on objective and subjective knowledge or any moderators of the relationship between objective and subjective knowledge regarding consumer persuasion knowledge of marketer pricing-related selling tactics. To address this objective, the present paper describes the results of a study that investigated issues related to both objective and subjective knowledge of the persuasive aspects of pricingrelated selling tactics. Hypothesized Relationships Preference for numerical information (Viswanathan 1993), need for cognition (Cacioppo and Petty 1982), and experience with pricing-related selling tactics were all predicted to be positively related with objective knowledge. The personal relevance of pricing-related selling tactics, frame of reference (i.e., the beliefs about the knowledge possessed by significant others in an individual’s life – Radecki and Jaccard 1995), experience with pricing-related selling tactics, and objective knowledge were all hypothesized to be positively related with subjective knowledge. Lastly, experience was predicted to moderate the relationship between objective knowledge and subjective knowledge such that this relationship would be weaker when experience was high relative to when experience was low. Study Overview The eight hypotheses were tested from data collected in a survey research study involving a sample of 191 undergraduate students. The data were collected in two time periods, separated by one week. Measures of objective knowledge, subjective knowledge, and experience were collected in phase one, with preference for numerical information, need for cognition, personal relevance, and frame of reference collected in phase two. Results and Discussion Briefly, the results provided support for several hypothesized antecedents of both objective and subjective knowledge and suggest that experience is a key moderator 157 of the objective knowledge – subjective knowledge relationship in the domain of pricing-related selling tactics. Specifically, need for cognition and experience with pricing-related selling tactics were positively and significantly related with objective knowledge, while the relationship between preference for numerical information and objective knowledge received mixed support. In addition, personal relevance, experience, and objective knowledge were positively and significantly related with subjective knowledge, while the relationship between frame of reference and subjective knowledge received mixed support. Lastly, the relationship between objective knowledge and subjective knowledge was found to be positive and significant when experience was low, but was non-significant when experience was high. This result suggests that consumers might be susceptible to overconfidence when experience is high but objective knowledge is low. References available upon request. For further information contact: Jay Carlson The Graduate College of Union University Schenectady, NY 12308 Phone: (518) 388.6738 FAX: (518) 388.6754 E-Mail: [email protected] American Marketing Association / Winter 2005 158 CREATIVITY IN ADVERTISING: PURCHASE INTENT AND BRAND ATTITUDE EFFECTS Brian D. Till, Saint Louis University, St. Louis Daniel W. Baack, Saint Louis University, St. Louis SUMMARY Creativity is a very important component of advertising. With the industry focus on creative advertising, there is surprisingly little research looking directly at the effectiveness of award-winning advertising. There are only a handful of studies that focus specifically on this topic. First, the research by Kover et al. (1995) investigated the link creative advertising and consumers’ responses to that advertising. They found that student defined “creative” advertisements were linked to higher purchase intent. The second study, Ang and Low (2000), investigated the relationship between advertising creativity and subjects’ affective responses. The authors found that creative ads were consistently perceived as more favorable, and, to a lesser degree, resulted in a more favorable view of the brand and increased purchase intent. The third study, Stone et al. (2000), attempted to link creative commercials to likeability. The study found that liked commercials were more often judged as creative. Two recent studies, Till and Baack (2004a) and Till and Baack (2004b) explore the effectiveness of creative advertisements by linking exposure to creative advertising (measured as winning an advertising award) to increased unaided recall of both the brand advertised and the features of the commercial. Till and Baack (2004a) finds that creative advertisements led to greater unaided brand and feature recall. Till and Baack (2004b) replicated their first study, but used a one-week delay measure of recall. They found that brand names and commercial features are better recalled for creative commercials, but only in the unaided recall task. All of the above studies, while significant, leave some issues for further investigation. First, for most of the studies, the grouping of advertisements into creative and non-creative groups was based on student ratings. Students may not be the most appropriate judges of the creativity of an advertisement (White and Smith 2001; Kover et al. 1995). This potential problem with student raters cast particular doubt on studies of the affective effectiveness of creativity advertising. To further investigate this issue, this study explores the link between creative advertising and brand attitude and purchase intent, but uses professionals, not students, to rate creativity. Specifically, the following hypotheses are investigated: American Marketing Association / Winter 2005 H1: Creative advertising will lead to higher levels of purchase intent for the advertised brands. H2: Creative advertising will lead to more positive attitudes for the advertised brands. Methodology For the creative commercials, we used Communication Arts award winners. Communication Arts bases its awards primarily on ad creativity as assessed by a panel of distinguished advertising professionals. Forty advertisements were randomly selected from a pool of winners from three recent years to form the sample. To create the pool of control advertisements, advertisements were sampled during prime time television during four randomly selected days of the week. From this pool, forty were randomly selected. We inserted the commercials selected into two television programs (Dream Living and Ground Forces). We used two programs embedded with a different set of 20 commercials (½ creative, ½ control) for intrastudy replicability. Therefore, our study used four two and a half minute pods with five thirty second commercials each. This resulted in a total of ten minutes of advertising (twenty commercials) per program. Subjects were 69 undergraduate students enrolled in business courses at a Midwestern university. Three weeks before watching the television program, subjects complete a questionnaire measuring the attitude and purchase intentions regarding the brands advertised. After watching the television program, the subjects filled out the same questionnaire previously completed. To measure purchase intent and brand attitude, subjects were asked to rate on a seven-point, bipolar adjective scale purchase intent and brand attitude. Both of these measures were based on previous studies (e.g., Chapman and Aylesworth 1999; Till and Busler 2000). Results and Discussion The unit of measure for the analysis is the change in purchase intent and brand attitude between pre and post advertisement exposure (statistics available upon request). For both programs, a paired t-test analysis revealed no significant differences between control and creative advertisements for brand attitude and purchase intent. 159 This research focused on the effect of creativity on both purchase intent and attitude toward the brand. The results find suggest that creative advertisements, at least with limited viewing, do not appear to affect purchase intent or attitude toward the brand. These results cast doubt on past studies finding that creative advertising led to increased affective effectiveness (Ang and Low 2000; Kover et al. 1995; Stone et al. 2000). It is possible that these results reflect the difficulty in affecting consumer brand attitude and intent to purchase with one commercial exposure. Unlike measures of recall, as used in Till and Baack (2004a) and Till and Baack (2004b), brand attitude and purchase intent of known brands is likely more solidly ingrained and less influenced by a single ad exposure. It also possible that differences in findings between this and previous research is due differences in the types of judges used to evaluate advertising as creative. While past studies have found creative advertisements to be effective using similar measures (e.g., Ang and Low 2000; Kover et al. 1995; Stone et al. 2000), they used students to assess creativity. We feel that the use of professionals to judge the advertising is a far more valid measure of “creativity” and may account for the different results of the present research versus earlier studies. References available upon request For further information contact: Daniel Baack Saint Louis University 3674 Lindell Boulevard St. Louis, MO 63108–3397 Phone: 314.977.3810 FAX: 314.977.3897 E-Mail: [email protected] American Marketing Association / Winter 2005 160 WHERE’S THE AFFECT? AN INVESTIGATION OF THE EFFECT OF THREE ADVERTISING SCALES ON ATTITUDE TO THE AD Arjun Chaudhuri, Fairfield University, Fairfield ABSTRACT A natural viewing situation is used to examine the efficacies of three scales that purport to account for emotional and rational responses to advertising. With attitude to the ad as the dependent variable, the three scales are tested using a large number of subjects, a random and large number of ads and a sufficiently large number of independent observations (each subject was exposed to a single ad only). The results indicate differences in the prediction of attitude to the ad among the three scales. Surprisingly, the most parsimonious of the three scales achieves the greatest predictive ability. INTRODUCTION The purpose of this study is straightforward. Can a short scale for assessing the emotional and rational reactions to advertisements predict the attitude to these ads as well or better than two scales that are well known but are considerably longer in length? If so, the implications of the study for practical purposes of data collection are also obvious. Respondent fatigue will be lowered and better quality of responses may be expected with a substantially smaller scale that also addresses the multidimensional properties of responses to advertising. Accordingly, this study compared the “feelings” scale (53 items) developed by Edell and Burke (1987) and the “judgments” scale [25 items taken from the Reaction Profile for TV commercials (Wells, Leavitt, and McConville 1971)] also used by these authors (Burke and Edell 1989; Edell and Burke 1987; Burke and Edell 1986) with the relatively short (16 items) CASC (Communication Analytic and Syncretic Cognition) scale developed by Chaudhuri and Buck (1995a, 1995b, 1998). The three scales were examined in terms of their ability to predict attitude to the ad. Affect has been operationalized in different ways in consumer research and advertising studies. One way has been to view affect as an overall, global reaction such as “liking” for an ad (Haley and Baldinger 1991; Herr and Page 2004; Mitchell and Olson 1981). Another way has been to assess affect as an amalgam of a set of qualitatively different types of affects that may be evoked by an ad. This has been prompted by evidence (Chaudhuri and Buck 1995a; Edell and Burke 1987) that different dimensions of affect can have strikingly different effects on liking for the American Marketing Association / Winter 2005 ad. For instance, Chaudhuri and Buck (1995a; see also Chaudhuri 2004) showed that reptilian affects are not related to liking for the ad while prosocial affects are positively, strongly and significantly related. Burke and Edell (1989) showed that upbeat, warm and negative feelings differ in their effects as well. One problem with the operationalization of this last approach has been that researchers who use the Edell and Burke (1987) feelings scale tend to shorten the scale (53 items) and adapt it to their purposes (as an example, see MacInnis, Rao, and Weiss 2002). In general though, measurement scales are developed with the understanding that they should be used in their entirety and not abridged according to the purposes of a particular piece of research. Thus, there would seem to be a need for a shorter scale which still captures all the multidimensional aspects of qualitatively different affects. The CASC scale offers such an alternative with only 16 items which purport to measure four different affective and cognitive dimensions. One of the goals of this study was to test if the CASC scale had the same predictive power of the feelings and judgment scales. If so, then it presents a viable and perhaps more practical alternative to the other two scales. Although there has been considerable work, as cited above (see also Batra and Ray 1986; Holbrook and Westwood 1989 and others), that suggests that a range of emotional effects are evoked by advertising, no single accepted theoretical paradigm has emerged that guides research in this area. Individual studies have used a variety of theoretical frameworks, such as Plutchik’s (1980) typological approach (Holbrook and Westwood 1989) and Mehrabian and Russell’s (1974) dimensional approach (Olney, Holbrook, and Batra 1991). None of these approaches, however, are clearly anchored in the structure of the brain. The theory of the “triune brain,” as adapted in the CASC scale, described below, bases itself on knowledge of the human brain. THE CASC SCALE This scale was developed in the area of communication sciences (Chaudhuri and Buck 1995a) and subsequently refined and published in the social psychology and consumer research literature (Chaudhuri and Buck 1995b, 1998). It claims, on the basis of confirmatory factor analysis and repeated testing, to measure both emotional and rational (syncretic and analytic cognitions) 161 responses to advertising with a short list of 16 items which load on four different factors. It has been tested at both the individual level of subjects and at the aggregate level using ads as the units of analysis. It has been tested for both print and television media. Its results have been replicated across different subjects and different ads. The CASC scale also has the virtue of being grounded in a widely accepted theory based upon scientific evidence on the workings of the human brain as described next. The scale uses the theory of the triune brain (McLean 1973, 1990) as its conceptual basis. According to McLean, the human brain has developed in a series of stages and today there are essentially three brain structures that are interconnected and represent a “triune brain.” The first of these structures is the reptilian brain (reticular formation, basal ganglia, and midbrain) that governs such basic behavior as reproduction, aggression, territoriality, etc. The second brain structure is the paleomammalian formation (limbic system) found in mammals which guides prosocial behavior associated with the preservation of the species and also agnostic behavior associated with the preservation of the individual. The third, and most recent, structure is the neomammalian formation (neocortex and thalamic structures) and its primary functions are in the realm of higher order cognitive processing, including verbal communication, language, ideas, problem solving, complex learning, and memory (Chaudhuri and Buck 1995b, 1998). The reptilian counterpart of the human brain is still considered to influence us in certain basic behavior such as the struggle for power, adherence to routine, imitation, obeisance to precedent and deception. These are some of the same behaviors that are espoused in advertising – “never let them see you sweat” (deception), “did you DQ today?” (adherence to routine), “caviar for the power hungry” (power), etc. While the reptilian brain programmes stereotypical behaviors, the old mammalian portion of the brain, or the limbic system, functions in the subjective experience of feelings and desires. In general, circuits involving the septal area are involved in prosocial feelings associated with behaviors conducive to the preservation of the species, nursing, maternal care, parenting, and play. In contrast, circuits involving the amygdala are concerned with individualistic feelings such as fear, anger and disgust, which are associated with self preservation and self protection (Chaudhuri and Buck 1995b, 1998). The CASC scale was developed within the framework of the triune brain and contains multidimensional elements which conform to the mammalian brain (prosocial and individualistic dimensions), the reptilian brain (reptilian dimension) and the neomammalian brain (analytic dimension). CASC is a seven point paper and pencil scale anchored at two endpoints by “not at all” and “a lot.” American Marketing Association / Winter 2005 The general form of the scale is “Did the ad make you feel/ think. . . .” In all there are sixteen items, four in each dimension. The prosocial dimension comprises of the questions “did the ad make you feel happy/proud/hopeful/ a sense of affiliation.” The individualistic dimension contains the items “did the ad make you feel angry/afraid/ disgusted/irritated.” The reptilian dimension consists of the items “did the ad make you feel sexy/aggressive/ envious/a sense of power.” The analytic dimension is based on brand differentiation and asks questions on whether the ad made the respondent think of the “facts about the brand/pros and cons of the brand/arguments for using or not using the brand/differences between the brand and its competitors” (Chaudhuri and Buck 1995b, 1998). Thus, the CASC scale measures both emotional and rational dimensions of responses to ads. The emotional items measure a spectrum of qualitatively different affective responses that are relevant to advertising while the rational items refer to the processing of the elements in an ad which differentiate between brands. Brand differentiation strategies have repeatedly been found to be the single most important executional factor that influences ad effectiveness (Stewart and Furse 1986; Stewart and Koslow 1989) and Holbrook (1987) specifically mentions such strategies among the more desirable effects of advertising. THE FEELINGS SCALE The feelings scale was developed by Edell and Burke (1987) in trying to understand the role of feeling responses to an ad (as distinct from thoughts about an ad) in promoting advertising effects. They took their cue from, among others, Zajonc (1980) in trying to establish that affective responses are valid, reliable, and unique evaluations of objects that are independent of cognitive evaluations. Moreover, they asserted and established that ads were capable of simultaneously evoking both positive and negative feelings among viewers (unlike positive and negative cognitive evaluations) and that such feelings were as important in understanding and explaining advertising effects. Edell and Burke (1987) used 69 items which were drawn from a larger pool of items in a pretest prior to their study. They reported that three factors with high internal consistency between the factors were extracted from a factor analysis of the items. They described these factors as upbeat (“active/confident/good/lively, etc.”), negative (“angry/bad/dull/sad, etc.”) and warm (“affectionate/calm/ kind/sentimental, etc.”). These three factors, the three factors from the judgments scale (Burke and Edell 1986) and prior attitude to the brand were used to predict attitude to the ad. It was found that the upbeat and warm feelings scales did not add uniquely to the explanation of variance in attitude to the ad but that they were jointly significant. 162 The authors concluded that, overall, the feelings dimensions contributed importantly and differently from the judgments scale. Edell and Burke (1987) also reported that in a follow up study they reduced the list of items to 56 items based on the redundancy noted between the items. Examination of the items in the feelings scale shows that the three factors in this scale have some important differences with the factors in the CASC scale. First, the four items in the reptilian dimension of the CASC scale are not represented at all in the feelings scale. Second, the negative dimension of the feelings scale has three of the four items in the individualistic dimension of the CASC scale with the notable exception of the “fear” item. Third, the feelings scale possesses three of the four items in the prosocial dimension of the CASC scale with the exception of the “sense of affiliation” item in the CASC scale. Further, in the feelings scale, these three items are not all on the same factor as in the CASC scale. Fourth, in spite of having four dimensions, the CASC scale is far shorter (sixteen items) than the feelings scale (53 items). Finally, the analytic dimension (four items) of the CASC scale is not represented in either the feelings scale or in the judgments scale as discussed below. THE JUDGEMENTS SCALE The “judgments” scale was used by Burke and Edell (1986) as an adjective based attitude to the ad scale in order to capture ad reactions over time in a naturally occurring situation. These authors used the scale to test television commercial wearout – i.e., to see if subjects’ evaluation of ads declined as levels of exposure increased. They used thirty of the items from the Reaction Profile for TV commercials developed by Wells, Leavitt, and McConville (1971) and four additional items from other research on attitude to the ad in order to compile the scale. The scale was found to be reliable (internal consistency) and to have a stable three factor structure consisting of the 34 items. Notably, it was found in this study that ratings for the scale did not change over time while the ratings of an overall attitude to the ad scale did. Thus, this scale is different from an overall attitude to the ad scale. In a later study, Edell and Burke (1987) reported reducing the scale to 25 items based on the redundancy among some of the items. These authors referred to the three factors of the scale as the “judgments” scale and they found that this scale was qualitatively different from the feelings scales also used in their study. These authors also emphasized that the scale measures judgments about the characteristics of an ad such as Humorous, Informative, Gentle, Valuable, etc. while the feelings scale measures responses that are properties of the individual (happy, sad, etc.) and not a characteristic of the ad itself. This view may be contested since the judgments scale also measures American Marketing Association / Winter 2005 subjective responses by individuals to ads and it is not a scale which assesses the objectively existing elements in an ad such as the use of scenery, actors, music, etc. Such reliably verifiable elements in an ad are often used in content analysis of ads as in the method described by Stewart and Furse (1986). The items in the judgments scale constitute evaluations of ads and, thus, may be better viewed as responses that are a result of the cognitive processing of ads and which are considered opinions of the overall effectiveness of ads while the feelings scale measures affective responses to ads which are more spontaneous and less considered. Note, however, that the judgments scale is different from the analytic dimension of the CASC scale which measures the cognitive processing of brand differentiation (“did the ad make you think of the differences between the brand and its competitors,” etc.) in an ad while the judgments scale asks for a cognitive evaluation of the ad in terms of overall adjective based judgments about the ad. Thus, the analytic dimension of the CASC scale should have a different and unique effect on attitude to the ad over and above the effect of the judgments scale. In any case, controlling for both affective and cognitive responses to ads provides for better model specification in the present study. Thus, the judgments scale was also included in the study. STUDY GOALS The following research goals formed the motivation for the study. Attitude to the ad was chosen as the dependent variable on which to test the predictive ability of the three scales since these scales all purport to measure responses to advertising and not necessarily to brands or companies. Further, attitude to the ad has been found to be an important concept in determining the persuasiveness of advertising messages (MacKenzie and Lutz 1989; Muehling and McCann 1993). 1. Which scale is better overall at predicting attitude to the ad? 2. Which dimensions of the three scales predict attitude to the ad? 3. Are the dimensions of these scales stable under the following conditions? • When there is a natural viewing situation. While the feelings and judgments scales were developed in a naturally occurring setting, the CASC scale was not. • With a random sample of ads. None of the scales were developed under this condition. 163 • With a large sample of ads. Only the CASC scale used over a hundred ads. • With a large sample of subjects. None of the scales used a large sample of individual subjects (not exposures). • When each observation is independent of the others. All of the scales were developed using subjects who responded to multiple ads. This causes autocorrelation, since the units of observation are not independent of each other, resulting in biased estimates. METHODS Data Collection The data were collected in a natural viewing situation. Four hundred and forty eight undergraduate subjects at a private university in the northeast were interviewed in their dorm rooms while watching television. Respondents were asked to tune into one of the major television networks that they normally watched and to watch some program content. During the first commercial break one of the commercials in the pod was randomly chosen and at the end of the commercial the respondent was asked to switch off the television and to fill in a questionnaire about the commercial just viewed. As a result of asking one subject to react to one ad only, a data set of 448 independent observations was obtained for the measures discussed next. Measures The questionnaire contained items from all the three scales and also on an attitude to the ad scale. The CASC scale had 16 items all of which were taken from Chaudhuri and Buck (1998). The feelings scale consisted of the 53 items described by Burke and Edell (1989) which loaded greater than .5 on a factor in that study. The judgments scale had the 25 items refined and used by Burke and Edell (1989) and Edell and Burke (1987). The instructions to the subjects reproduced the instructions provided by Chaudhuri and Buck (1998) and Edell and Burke (1987) for the three scales.1 The attitude to the ad scale was measured as the sum of the responses to a seven point semantic differential scale with the following five items: pleasant/unpleasant, unfavorable/favorable, unlikeable/likeable, good/bad, and negative/positive. These items have been widely used to measure attitude to the ad in previous research (Muehling and McCann 1993). American Marketing Association / Winter 2005 RESULTS In order to investigate the structure of the three scales the data in this study were analyzed using Principal Components Analysis. This is appropriate since all three scales report the use of exploratory factor analysis in the development of the scales. The CASC scale in this study was found to comprise of three factors with an eigenvalue greater than one. A fourth factor with an eigenvalue of .93 was also extracted but not considered further since the cutoff for all the scales was taken to be the customary eigenvalue of one. However, the presence of this fourth factor should be noted since the CASC scale is supposed to have four dimensions. Varimax rotation of the remaining three factor structure extracted 54 percent of the variance in the items. All sixteen items loaded higher than .50 on one of the three factors and not higher than .40 on any other factor. With the exception of the fourth factor which narrowly missed the cutoff, the factor structure of the CASC scale seems to be somewhat stable with three of the four expected factors performing as expected for the set of randomly selected ads. All the four items for the prosocial dimension of the scale loaded on the first factor along with all the four items in the reptilian dimension. Similarly, all the four items for the analytic and individualistic items loaded on the second and third factors respectively. The items were summed according to the factors they loaded on. The feelings scale, which was expected to comprise of three factors, resulted in eleven factors for the 53 items used in this study and explained 64.8 percent of the variance in the items. Moreover, the varimax rotated factor solution failed to converge. Examination of the initial factor matrix showed that only the first three factors had loadings greater than .50 and, accordingly, only these three factors were used in further analysis. Burke and Edell (1989) also state that these items should result in three factors. Thus, only these 39 items were used in further analysis and they were summed according to the factors they loaded on. Thirty one of the items loaded greater than .5 on the first factor; 6 items on the second factor and 2 items on the third factor. The 25 items in the judgements scale loaded on five factors which together explained 60.8 percent of the variance in the items. Burke and Edell (1989) reported that these 25 items loaded on only three factors in their study but this was not the case with regard to the data in the present study. However, the original formulation of this scale (Wells, Leavitt, and McConville 1977; Wells 1964) reported six dimensions and, thus, the five factors were accepted as valid dimensions to investigate further. Accordingly, the items which loaded greater than .5 on each 164 of the factors were summed on their respective factors. All 25 items loaded greater than .5 on one of the five factors and did not cross load higher than .50. There were a minimum of four items on each factor. attitude to the ad and all three of the dimensions in the CASC scale featured in this set of explanatory variables. The three scales were next analyzed with regard to their effects on attitude to the ad. Multiple regression was used for this analysis. First, the feelings scale was used to predict attitude to the ad. All three dimensions of the feelings scale together accounted for 36.8 percent of the variance in attitude to the ad and only two of the three factors were significantly (p. < .05) related to attitude to the ad. Second, the judgments scale was used to predict attitude to the ad. The five dimensions of the scale accounted for 45 percent of the variance in attitude to the ad and only four of the five factors in the scale were significantly (p. < .05) related to the dependent variable. Last, the CASC scale was used to predict attitude to the ad. The three dimensions of the CASC scale accounted for 44.2 percent of the variance in attitude to the ad and all three dimensions were significantly related. Of the three scales in the analysis described above, the CASC scale emerges as the most successful in predicting consumer attitudes to advertising. First, it is the only scale in which all the dimensions made unique and significant contributions to attitude to the ad. In fact, the individualistic dimension of the CASC scale made the highest contribution of all the dimensions in the three scales. The prosocial dimension made the third highest contribution and the analytic dimension made a smaller but unique and significant contribution. Second, even with only 16 items it accounted for more of the variance (44.2%) in attitude to the ad than the 39 items used from the feelings scale (36.8%)and almost as much of the variance (45%) as the 25 items in the judgments scale. Last, it accounted for 9.4 percent incremental explanation of variance in attitude to the ad over and above the contributions of the other two scales. Moreover, its factor structure seems to be fairly stable, in spite of the fact that the fourth dimension of the scale narrowly missed the arbitrarily set eigenvalue cutoff point of one. Three of the four dimensions had eigenvalues higher than one and these explained more than half of the variance in the 16 items. To test the incremental variance in attitude to the ad, if any, accounted for by the CASC scale over and above the variance accounted for by the feelings and judgments scales, a two step procedure was used. In the first step, all the eight dimensions of the feelings and judgments scales were used as independent variables with attitude to the ad as the dependent variable. This resulted in an R square of .484. Next, the three dimensions of the CASC scale were also introduced into the equation. This resulted in an R square of .578. Thus, the increase in R square, or the additional variance explained in attitude to the ad by the CASC scale was .094 or 9.4 percent. In this final step, only one of the three dimensions in the feelings scale and two of the dimensions in the judgments scale were significant (p. < .05) predictors of attitude to the ad. However, all the three dimensions of the CASC scale were significantly (p. < .05) related to attitude to the ad. Thus, all the dimensions of the CASC scale uniquely contributed to the prediction of attitude to the ad and the scale as a whole also uniquely and substantially contributed to the explanation of variance in attitude to the ad over and above the variance accounted for by the feelings and judgments scale. The significant (p. < .05) standardized coefficients (beta) in the last step were .209 (prosocial), .097 (analytic) and -.332 (individualistic) for the three factors in the CASC scale. The only dimension of the feelings scale which was significant (p. < .05) had a beta of -.122. The only two significant dimensions of the judgments scale had beta weights of .242 and -.164. Thus, only six of the eleven independent variables in the equation made unique and significant (p. < .05) contributions to the prediction of American Marketing Association / Winter 2005 DISCUSSION The feelings scale was the least successful of the three scales with only one factor making a unique and significant contribution to attitude to the ad over and above the unique contributions of the CASC and judgments scales. Further, at least in this study, the factor structure of the scale was not as expected. Instead of the three factors which were expected, eleven factors with an eigenvalue greater than one emerged. The judgments scale fared better with all 25 items loading on five factors, more or less according to the specifications of the original formulation of the reaction profile for television commercials (Wells, Leavitt, and McConville 1971). The judgments scale also made a sizeable contribution to the explanation of variance in attitude to the ad and two of the dimensions of the scale made unique and significant contributions. Overall, it would seem from this study that the 16 items of the CASC scale deserve the attention of those attempting to test the effectiveness of television commercials in terms of consumer attitudes. The CASC scale offers the ability to measure both emotional and rational responses to advertising in a practical and fairly stable format. Moreover, it appears to contain unique elements that are not in the other two scales. Further, even with a shorter number of items, it predicts attitude to the ad as well if not better than the other two scales. The CASC scale does not claim to measure the entire range of human 165 emotional experience. However, the simplicity of the CASC scale makes it useful for conducting large scale testing of emotional and rational responses and advertising effectiveness. The scale can be used to aggregate responses and assign scores to ads or it can be used to assess individual level processing of ads. Further, it can be used for ads in both print and electronic media and for a variety of consumer products. And, finally, the scale can be used to test ads with vastly different advertising strategies since it has previously been validated in a sample of 240 ads which contained sex, humor, animation, patriotism, status, fear appeals, family situations, celebrities, animals, typical spokespersons, product demonstrations, comparisons, price appeals, health appeals, etc. (Chaudhuri and Buck 1995b). Finally, the CASC scale performed well in the natural and “real world” setting of the present study with a large ENDNOTE 1 The three scales in the study are not reproduced here due to space constraints but may be obtained from the sources cited in this paper. REFERENCES Batra, Rajeev and Michael L. 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First, all three scales should be tested among “real world” respondents as pointed out above in a limitation of the present study. Future studies should also test the efficacies of all three scales against important outcome variables other than attitude to the ad. For instance, it may be expected that the CASC scale will perform better than the other scales with regard to the formation of attitude to the brand since the analytic dimension of the CASC scale specifically measures responses to brand differentiation within an ad. ____________ and ____________ (1998), “CASC – A Scale for Measuring Emotional and Rational Responses to Advertising,” Zietschrift Fur Sozial Psychologie, 29 (2), 194–206. Edell, Julie A. and Marian C. Burke (1987), “The Power of Feelings in Understanding Advertising Effects,” Journal of Consumer Research, 14 (December), 421– 33. Haley, Russell I. and Allan L. 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Dolan School of Business Fairfield University Fairfield, CT 06824 Phone: 203.2544000, Ext. 2823 FAX: 203.254.4105 E-Mail: [email protected] American Marketing Association / Winter 2005 167 MARKETING COMMUNICATION AND COMPANY BRAND ATTITUDE Marc Weinberger, University of Massachusetts, Amherst Dale Taoping Tzeng, University of Massachusetts, Amherst Paul Bottomley, Cardiff Business School, United Kingdom Harlan Spotts, Western New England College, Springfield ABSTRACT The value of strong stakeholder brand attitudes toward companies has become increasingly apparent to practitioners and academic researchers. Less apparent is the role of the media in the formation of corporate brand attitudes. This research draws on key literature from branding and legitimacy theory to examine the interplay between the volume and valence of publicity and volume of advertising as well as the moderating effect of brand strength in the formation of company brand attitudes. We employ a unique dataset from three proprietary sources providing company advertising, publicity and company brand attitudes for a set of 18 technology firms over a 42 month time period. The outcome reinforces recent assertions about the importance of publicity compared to advertising and also the growing recognition of company brand strength in tempering media effects. corporate reputation, as well as foundation work in branding, negativity, and branding and media effects. Branding The concept of corporate branding has resonance with several disciplines that deal with business and organization theories, but its popularization can be traced to product branding research in the early 1980’s. There is considerable agreement that the corporate brand has important value that must be nurtured and protected. The parallel but related trend to corporate branding has been the emergence of integrated marketing communication with its recognition that product, service, or company reputations are formed by many controllable and uncontrollable forces. These forces may include advertising, but publicity and public relations may have an equal or greater impact on brand perceptions. INTRODUCTION The importance of branding and brand equity for products, companies and organizations has become almost axiomatic over the past decade. Rather than debate the importance of strong brands, research has focused on the creation, maintenance, preservation and worth of brands. This research focuses on the association between marketing communications (advertising and publicity) and company brand attitudes. BACKGROUND Research by Aaker and Jacobson (1994, 2001) and Jacobson and Aaker (1987) examined various aspects of company valuation and branding. Based on firms in computer-related industries, they concluded that “. . . company brand attitude, a component and indicator of brand equity, has value relevance. Not only are changes in brand attitude associated with stock return, but this association is also incremental to information contained in accounting measures” (p. 492). Brand attitude is a major component of brand equity, thus a follow-up question to Aaker and Jacobson’s analysis is “what drives brand attitude?” Our research examines marketing communications related antecedents of brand attitude; specifically, volume and valence of publicity, and, the volume of advertising for firms in the technology industry. The study draws on conceptual work from legitimacy theory and American Marketing Association / Winter 2005 Public relations activity related to branding has often been treated by marketers as the step-child of advertising, but that thinking has been changing in recent years. Rance Crain (2002), Editor in Chief of Advertising Age, argues that “the landscape of marketing is changing more quickly and dramatically than I ever could have imagined, and its new realities will require public relations to shoulder more of the load. Kitchen (1996) argues that the role of advertising in corporate branding may be diminishing with marketing public relations (MPR) and corporate public relations (CPR) on the rise.” In their book The Fall of Advertising and Rise of PR, Al and Laura Ries (2002) assert that public relations has become the most powerful marketing-services discipline. Legitimacy Theory The conceptual basis for the importance on company branding is “Legitimacy Theory,” a field that began with foundation work by Parson (1960) and Weber (1978). It has been extended into the organization and strategy literature in management (for a review see Suchman 1995). “Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman 1995, p. 574). Accordingly, one type of legitimacy is pragmatic legitimacy whose task is to Conform to Demands (respond 168 to needs, co-opt constituents, build reputations), Select Markets (locate friendly audiences), Recruit Friendly CoOptees, and Advertise (advertise product, advertise image). Intermediaries that distribute publicity in the media and advertising by the firm are all potential sources that legitimate the organization. Pollock and Rindova (2003) use the term infomediary to describe the media as a funnel that channels and shapes stakeholder knowledge and opinion. The media may play a pivotal role in the branding process, a view supported conceptually (Gray and Balmer 1997) and empirically (Fombrun and Rindova 1998). To wit, Fombrun and Shanley (1990, 240) observed: “The media themselves act not only as vehicles for advertising and mirrors of reality reflecting firms’ actions, but also as active agents shaping information through editorials and feature articles.” Speaking from the “Legitimacy” perspective, Deephouse (2000) argues that media reputation is a strategic resource for firms. “A firm’s reputation is produced by the interactions of the firm with its stakeholders, and, by information about the firm and its actions circulated among stakeholders, including specialized information intermediaries (Fombrun 1996; Logsdon and Wartick 1995).” He further argues, that “a positive reputation assists the legitimation process is important for competitive advantage because it signals stakeholders about the attractiveness of the firm who are then more willing to contract with it” (Fombrun and Shanley 1990; Weigelt and Camerer 1988). Pollock and Rindova (2003) examine the connection between the media and its influence on market analysts of IPO’s. In their social constructionist framework, social structures like the media enhance the flow of credible information that helps reduces uncertainty in market exchanges. These social structures include specific infomediaries or critics such as financial analyst reports, restaurants reviews, books, movies, and plays (Cameron 1995; Caves 2000; Deephouse 2000; Rindova and Fombrun 1999). Pollock and Rindova (2003) point out that such infomediaries legitimate firms or products by influencing buyer or stakeholder desirability perceptions of an organization’s activities. They directly test this connection between media and legitimacy. “The legitimate organization [is perceived] not only as more worthy, but also as more meaningful, more predictable, and more trustworthy” (Suchman 1995, p. 571). Communication Volume and Valence There are important findings from social cognition about the impact of information on impression formation (Fiske and Taylor 1991) and judgment (Heath and Tversky 1991) that have a bearing on the media effects of volume and valence of coverage. Pollock and Rindova American Marketing Association / Winter 2005 summarize three key findings from social cognition that involve the impact of volume. The first is a familiarity effect that increased exposure is associated with greater familiarity and stronger liking (Harrison 1977; Zajonc 1968). Research by Lee and Labroo (2004) provides evidence that when processing fluency of the target is enhanced by prior exposures, a more favorable attitude is observed (Anand and Sternthal 1991; Bornstein 1989). Second, research by Hawkins and Hoch (1992) suggests that simple repetition increases acceptance of a statement. Finally, the amount of available information about an activity reduces perception of riskiness (Heath and Tversky 1991). Pollock and Rindova (2003) state, “all else being equal, the combined effects of increased familiarity, acceptance, and reduced perceptions of risk can generate legitimacy benefits for a firm that receives a higher volume of media coverage” (p. 633). Of course, all else is usually not equal and so the evidence for a volume of coverage effect is not universal. In an advertising context, Lodish and his co-authors concluded that ad weight is not enough to explain overall sales effects (Lodish et al. 1995). Smaller or newer brands, however, do benefit from greater advertising weight. MacInnis, Rao, and Weiss (2002) examined a sample of mature brands that did benefit from greater volume of advertising and a set that did not. The difference in effects, however, were driven by message type not the volume of spending. There are two general effects related to volume of exposure and valence that may result from the framing of a message as positive or negative (sometimes referred to as tone). Reddy, Swaminathan, and Motley (1998) demonstrated that the valence of a critic’s (infomediary’s) reviews are important for Broadway shows. Shows that received extremely low reviews did not last beyond one or two weeks before closing. In a study of movie reviews, Basuroy, Chatterjee, and Ravid (2003) concluded that both positive and negative reviews are correlated with revenues; just the negative reviews diminish in their impact over time. Valence has also been shown to matter for negative information from critical sources such as Consumers Union when directed at services versus tangible goods (Weinberger and Brown 1978). In a political context the valence of “Ad Watch” coverage of candidate advertising had a significant impact on voter preferences (Min 2002). In a publicity context, message valence is an aspect of media coverage that influences audiences by virtue of the choice of topics covered and the interpretation or spin placed on the coverage. “In particular, framing events and issues in positive or negative terms provides audiences with visible public expressions of approval or disapproval of firms and their actions” (Pollock and Rindova 2003, p. 634). 169 Negativity and Impression Formation Denigrating information about people, products, companies, or other products abound in the media. The impact of negative and positive reports on impression formation of political candidates (Golan and Wanta 2001), products (Weinberger, Allen, and Dillon 1981; Weinberger and Romeo 1989), and job candidates (Bolster and Springbett 1961) are well known. The mere mention of an issue on the news makes a story important, possibly memorable, and perhaps worthy to be passed along to others (Altheide 1977). Information in the media takes on a form of social proof (Rao et al. 2001) leading to information cascades (Bikhchandani, Hirschleifer, and Welch 1992) and availability cascades (Kuran and Sunstein 1999). The role as “infomediary” may result in opinion leadership because of its inherent social proof. Under conditions of uncertainty audiences may consciously or unknowingly imitate media statements rather than form independent judgments (Bikhchandani et al. 1992). Perhaps this helps explain why advertising weight is more important for new products or small brands than for mature brands. If simple volume or mere exposure effects prevailed, any kind of exposure in the media would be expected to have a positive impact on liking of the organization or message target. However, Lee and Labroo (2004) suggest that conceptual fluency is triggered when negatively valenced information is presented, resulting in a less favorable attitude when the valence of other constructs brought to mind are negative. Like prior experience with a company or brand, the conceptual fluency effect presumes a more elaborate message effect and less automatic positive frequency of exposure effect. Existing Company Perceptions Pollock and Rindova (2003) found that volume and valence of media reports influenced the market for new IPO’s (high uncertainty product). Volume affected interest and attention while the valence seemed to affect investor preferences. Here the newness of the offering could explain the inordinate reliance on media reports. A study of consumer response to negative publicity (Ahluwalia, Burnkrant, and Unnava 2000) found that consumers committed to a brand were not affected as severely by negative publicity. IPO’s by their general nature may have fewer investors committed to the company, thus being more influenced by media stories. Company perception expressed as strength of corporate reputation was examined by Wartick (1992), specifically looking at both the volume and valence of media coverage. His model suggests that a defined stakeholder (audience) is exposed to media (amount, tone, and recency) through a filter defined by source credibility, selective perception, and topic relevance. After exposure, stakeAmerican Marketing Association / Winter 2005 holders temper the media message based on prior experience formed through direct and/or indirect communication with an organization. The effect of new information is either enhanced or diminished based on this prior perception. For the overall sample of companies in Wartick’s study, the valence, or tone of coverage, influenced change in corporate reputation. For good reputation firms, volume of media exposure was most highly correlated with level of reputation. In contrast, valence was most important for influencing reputation for firms with poor reputations. It is possible that the mere exposure for companies with neutral or positive reputation are reinforced by more exposure. Negative coverage, however, may be discounted similar to consumers committed to a brand seem to discount disconfirming brand information. Firms with poor reputation may not have this shield of protection and may be vulnerable to negative media coverage. This is the protection that legitimacy theory suggests positive reputation may provide. Perhaps it eases the uncertainty that stakeholders have while a poor reputation may leave it vulnerable to negatively valenced messages from the media. RESEARCH QUESTIONS The current study examines the relationship expressed in Figure A looking at the relative impact of publicity (volume and valence) and advertising weight (volume) on brand attitude. The research examines the important issue of relative impact of advertising weight and publicity on company brand attitudes (CBA). Further, the effect of the volume of stories in comparison to the positive or negative framing of the issues is investigated. The first research question addresses this general issue. RQ1 – What is the relative impact of publicity and advertising volume and publicity valence on company brand attitude? In keeping with current views about the dominance of publicity, the expectation is that publicity will be more closely related to company brand attitudes than advertising. Given that stakeholders are business people in technology firms, it might be expected that publicity dominance should be particularly apparent. Based on the mixed results of past research, it is unclear whether volume or valence will dominate in the overall sample. The second research question (RQ2) addresses the matter of prior brand strength. RQ2 – Are the effects of RQ1 tempered by higher and lower levels of prior company brand attitude? 170 FIGURE A Publicity (Volume &Valence) Media Communication and Company Brand Attitude Publicity (Volume & Valance) Level of Company Brand Attitude Company Brand Attitude Advertising Volume The expectation is that for strong reputation firms, volume will matter more than valence; for weaker firms, valence should be more important than volume. In keeping with research showing information effects dependent on stakeholder perceptions (Wartick 1992; Ahluwalia, Burnkrant, and Unnava 2000), the analysis accounts for stronger and weaker prior company brand attitudes. DATA AND DATA ANALYSIS This study utilizes data on publicity, advertising, and company brand attitude for each of 18 firms, requiring three separate sources. All data cover the period January 1, 2000 to July 1, 2003 encompassing 42 months or 14 quarters. Publicity Data CARMA International provided the publicity data, which are based on a Media Analysis Rating System first developed in 1991. The system rates each article in the context in which it appears. Using a pre-determined set of seven criteria, each article is coded and receives a score between zero (the least favorable) to 100 (the most favorable). All codings begin at 50 (the neutral point), with a possible 50 points added or subtracted from this value. CARMA conducts daily tracking of the volume of positive and negative press coverage as well as the valence rating for each article appearing in eighteen major magazines and newspapers in the U.S. For this study daily data were compiled into quarterly periods to match the company brand attitude data. Advertising Data Data on media spending were collected from Ad$pender (2004), a multi-media database providing American Marketing Association / Winter 2005 national advertising expenditure information on over 100,000 different brands. Monthly data were aggregated into quarters over the time period of investigation for each of the companies included in the study. Company Brand Attitude Data Techtel Corporation provided the company brand attitude data, which was collected via quarterly surveys of the personal computing and network computing markets. Their panel surveyed approximately 1500 people influential in purchasing computer software and hardware (estimated 50% response rate). The Techtel measure of company brand attitude asked respondents whether they have positive, negative, or no opinion of a company. Like Aaker and Jacobson (2001), we made use of this information to develop a company brand attitude measure defined as Net Positive Opinion (NPO = percent of respondents with positive opinion about the firm –percent of respondents with a negative opinion about the company). A simple 3 point scale (positive (1)/neutral (0)/negative (-1) has been used in political science (Robinson, Shaver, and Wrightsman 1999) and has been shown (e.g., Haley and Case 1979) to provide information similar to measures with more scale points. For this study we focus on Techtel’s Enterprise Panel consisting of firms also studied by CARMA, including: AT&T, Cisco, Compaq, Computer Associates, Dell, EMC, Gateway, Hewlett Packard, IBM, Intel, Microsoft, Oracle, Peoplesoft, SAP, Siebel, Sun, Sybase, Unisys. Analysis of Data The company brand attitude variable (NPO) is collected from the first quarter of 2000 to the second quarter of 2003. Since the advertising data and the publicity data on some of the firms in the Techtel enterprise data set were 171 not collected during the exact same period, observations for companies with any missing values were eliminated from further analysis. This process reduced the initial dataset from 266 to 166 usable and unique observations. Analysis first regressed the total number of favorable (volfav) and unfavorable (volunf) articles, the overall publicity rating (valence) and the total advertising spending (advol) on net positive opinion (NPO). Since we have both time series and cross-sectional data, the independent variables were checked for multicollinearity, heteroskedasticity (Breusch-Pagan) and autocorrelation (DurbinWatson). No multicollinearity or heterskedasticity were observed among the variables; however, autocorrelation was a problem, which was corrected with a first order autoregressive process. RESULTS Research Question 1: What is the relative impact of publicity and advertising volume and publicity valence on company brand attitude? Descriptive statistics for the overall sample of firms are presented in Table 1. The average Net Positive Opinion for firms in the sample was 50.38. Volume of publicity varied on average with 66 favorable articles to 43 unfavorable articles per quarter. The average valence of publicity was slightly positive with a CARMA publicity rating of 51.76. Finally, average ad spending was $3,302,000 per quarter. Results of the regression model were statistically significant (see Table 2), explaining approximately 22 percent of the variation in Net Positive Opinion. After appropriate corrections for serial correlation, Favorable Publicity Volume was the only variable influencing Net Positive Opinion. It appears that publicity valence and advertising spending do not significantly influence attitudes toward the company. Research Question 2: Are the effects of Research Question 1 tempered by higher and lower levels of prior company brand attitude? Prior research has established that the effects of publicity vary depending on prior company attitudes. Thus, a median split of the sample was used to divide firms into groups, Stronger versus Weaker Net Positive Opinion. The descriptive statistics for each group are presented in Table 1. As expected, there is a statistically significant difference between the two groups on Net Positive Opinion with higher mean opinions for Stronger than Weaker Companies. While the two groups did not differ on the level of favorable publicity volume, there was a significant difference in the average volume of unfavorable publicity. Firms with Weaker opinion had almost twice the volume of unfavorable publicity as firms with Stronger opinion. Similarly, the valence of publicity was more positive for Stronger than Weaker firms. A Chow test (Greene 1993) was used to test for differences in regression models between the two groups. The results of this test (F = 32.27, p < .0001) indicated that significant differences exist between the two groups of firms in terms of the relationship between marketing communications and Net Positive Opinion. The models differ on volume of favorable publicity (t = 2.25, p < .03) and publicity valence (t = 3.63, p < .001). The other variables in the model were not significant. A regression model including the four independent variables was fit for each group of Stronger and Weaker opinion companies. For Stronger companies the volume TABLE 1 Descriptive Statistics of Variables Used in the Analysis for Overall Sample of Firms, and Stronger and Weaker Net Positive Opinion Groups of Firms (per quarter) OVERALL Net Positive Opinion Favorable Publicity Volume Unfavorable Publicity Volume Publicity Valence Advertising Spending (‘000’s) Stronger Weaker Significance 50.382 62.485 43.582 < .0001 65.666 42.937 51.763 $3302.47 63.559 31.894 53.132 $3376.83 68.417 57.354 49.977 $3205.39 .6718 < .003 < .0001 .8320 94 72 Number of Observations 166 * t-test results based on df = 164. American Marketing Association / Winter 2005 172 TABLE 2 Regression of Ad Spending, Volume of Publicity, and Valence on Company Brand Attitudes Variable Intercept Favorable Publicity Volums Unfavorable Publicity Volume Publicity Valence Advertising Spending Regression Significance Coefficient t-value Significance 32.2088 0.084 -0.003 0.268 -0.0002 2.59 3.17 -0.11 1.20 -1.50 0.01 0.002 0.913 0.230 0.1364 F = 11.22 Df = 4, 161 P < .0001 of favorable publicity was the only significant influence on Net Positive Opinion (see Table 3A). This model accounts for over 50 percent of the variance in the dependent variable. Results for the Weaker opinion companies were markedly different (see Table 3B). The overall regression model accounted for only 22 percent of the variance in Net Positive Opinion. An examination of the individual coefficients revealed Publicity Valence as the only factor having significant influence on Net Positive Opinion. It appears that Volume of publicity and advertising spending had no significant influence on company brand attitude for those with Weaker reputations. DISCUSSION The task of this research was to examine marketing communications related antecedents of company brand attitude, namely the volume and valence of publicity and the volume of advertising on a set of firms in the technology industry. In several articles noted earlier, Aaker and Jacobson argued that company brand attitude is a component of brand equity. These attitudes are related to stock returns and provided information beyond normal accounting measures. Our current research adds to insights about company brand attitude by examining the role advertising and publicity play in the support or weakening of brand equity. First, the volume of advertising is not related to brand attitude for the full sample of 18 firms; nor for the separate examination of firms with stronger or weaker net positive opinion. This result is consistent with conclusions by Lodish et al. (1995) that advertising weight is not sufficient to explain sales effects. In particular they suggested that newer and smaller brands gain the most from advertising. Though our study did not examine newer or smaller brands, firms with weaker company brand attitudes may be expected to gain from advertising like a newer brand American Marketing Association / Winter 2005 R-sq = .2180 where opinions are unformed or neutral. Such a result was not found; no positive advertising effects were detected here. This may support MacInnis et al. (2002) who contend that for mature brands, it is the type of message and not the volume of ad spending that matters. A second notable result was that publicity did matter, with the influence of valence and volume nuanced. In the overall model the volume of positive publicity accounted for the variation in company brand attitude. We can see, however, that this effect obscures a significant difference in how publicity works. Wartick (1992) found that companies with stronger versus weaker reputations are differentially affected by the volume and valence of publicity. In his analysis as in ours, volume of positive publicity correlated with higher ratings for firms with better reputations. These firms were not influenced by publicity valence per se. In the context of the social cognition research discussed earlier, it is possible that companies with prior positive reputations are reinforced by more exposure, a mere exposure effect. Perhaps these stronger perceptions are related to the stronger commitment found to insulate audiences from negative information (Ahluwalia et al. 2000). Firms with weaker prior attitudes are affected by the valence of publicity in the media, but not the volume of positive or negative articles. Again this result is consistent with both Wartick’s and Ahluwalia’s findings that companies with weaker reputations are affected more by unfavorable information than the amount of information. It appears that that firms with stronger prior reputations are given a limited shield of protection not afforded to firms with weaker reputations. Third, firms with stronger and weaker reputations do have some important differences in publicity coverage. As the descriptive statistics reveal, firms with stronger brand attitudes have far fewer negative stories and a more positive publicity rating on average. The levels of positive 173 TABLE 3A Regression of Ad Spending, Volume of Publicity, and Valence on Company Brand Attitudes for Firms with Stronger Prior Company Brand Attitudes Variable Coefficient Intercept Favorable Publicity Volume Unfavorable Publicity Volume Publicity Valence Advertising Spending Regression Significance 19.487 0.243 0.064 0.508 -0.0002 F = 4.60 t-value Significance 0.93 5.92 1.13 1.37 -1.18 0.353 0.0001 0.260 0.176 0.243 Df = 4, 67 P < .0024 R-sq = .2153 TABLE 3B Regression of Ad Spending, Volume of Publicity, and Valence on Company Brand Attitudes for Firms with Weaker Prior Company Brand Attitudes Variable Coefficient Intercept Favorable Publicity Volume Unfavorable Publicity Volume Publicity Valence Advertising Spending Regression Significance 0.789 -0.007 0.034 0.651 -0.0002 F = 4.60 publicity and advertising between stronger and weaker firms are not different. The important result is that the individual regression models run on the firms with stronger and weaker brand attitudes still finds a volume effect for the stronger firms and a valence effect for the weaker firms. Even though firms with stronger company attitudes have about the same number of positive articles as do firms with weaker company attitudes, the volume of positive publicity continues to perpetuate the strong reputation. Firms with stronger prior reputations should strive to enhance the volume of positive publicity they receive.. At the same time, firms with weaker reputations have an average publicity rating lower than the stronger firms; however, they scored right at the CARMA neutral publicity rating of 50. It appears that the variation in valence is influencing firm reputation. This implies that firms with weaker reputations are not impacted by more articles, rather it is the ratings or valence of the articles that is most closely related to the level of company brand attitude. Fluctuations in the rating valence of stories about these firms is closely related to brand attitudes for these weaker reputation firms. American Marketing Association / Winter 2005 t-value Significance 0.06 -0.30 1.54 2.78 -1.05 0.950 0.766 0.128 0.007 0.296 Df = 4, 67 P < .0024 R-sq = .2153 Finally, the results give credence to the belief that public relations activity is gaining ascendance relative to advertising in corporate branding. Here we see the unique role of volume and valence of publicity shaping stakeholder opinions. It supports the view that the media may play a pivotal role in the branding process. Though beyond the scope of the current research, prior research suggests that this media influence effect is magnified under conditions of audience uncertainty where information may reduce riskiness perceptions. No study is without limitations. The effects observed in this investigation are clearly related to a small set of firms within the technology industry for a set period of time. An examination of a larger set of firms across a variety of industries may reveal different relationships. However, the results reported here are consistent with those of other studies focused on different industries and using different measures of company brand attitude, providing a level of convergent validity. The strong effects of publicity found in this study should not be used to eliminate advertising. All that is clear from this study is that the amount of advertising is not related to company brand attitudes. 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(1995), “Managing Legitimacy: Strategic and Institutional Approaches,” The Academy of Management Review, 20 (3), 571. Wartick, Steven L. (1992), “The Relationship Between Intense Media Exposure and Change in Corporate Reputation,” Business and Society, 31 (1), 33. Weber, Max (1978), Economy and Society. Berkeley: University of California Press. Weigelt, Keith and Colin Camerer (1988), “Reputation and Corporate Strategy: A Review of Recent Theory and Applications,” Strategic Management Journal, 9 (5), 443–54. Weinberger, Marc G. and Stephen W. Brown (1978), “A Difference in Informational Influences: Services vs. Goods,” Academy of Marketing Science, Journal (pre-1986), 5 (000004), 389. ____________, Chris T. Allen, and William R. Dillon (1981), “The Impact of Negative Marketing Communications: The Consumers Union/Chrysler Controversy,” Journal of Advertising, 10 (4), 20. ____________ and Jean B. Romeo (1989), “The Impact of Negative Product News,” Business Horizons, 32 (1), 44. Zajonc, Robert (1968), “The Attitudinal Effects of Mere Exposure,” Journal of Personality and Social Psychology Monograph Supplement, 9, 1–27. For further information contact: Marc Weinberger Isenberg School of Management University of Massachusetts Amherst, MA 01003 Phone: 413.545.5674 FAX: 413.545.3858 E-Mail: [email protected] American Marketing Association / Winter 2005 176 ORGANIZATIONAL ANTECEDENTS TO AND OUTCOMES OF MARKETING STRATEGY DEVELOPMENT STYLES: A CONTINGENCY MODEL J. Chris White, Michigan State University, East Lansing Jeffrey S. Conant, Texas A&M University, College Station Raj Echambadi, University of Central Florida, Orlando SUMMARY Despite growing interest evidenced by recent publications in the marketing strategy literature and by the Fortune 500 business members of Marketing Science Institute (MSI), there is a dearth of research on and a need to improve our understanding of the process of developing and implementing marketing strategy. Several important gaps in the literature have limited our understanding. First, most existing models of strategy-making fail to fully capture the complexity and variety of the phenomena, and overlook the roles top managers and organizational members play in developing strategy. Second, prior research has focused primarily on either antecedents or consequences of strategy-making, but not both (see Menon et al. 1999 for a notable exception). And third, despite evidence suggesting the performance outcomes of strategy-making may depend on complex contextual interactions, studies of the implications of strategy-making have focused almost exclusively on direct financial payoffs, with inconsistent results. In this paper, we address these gaps by developing a model that incorporates organizational antecedents and performance outcomes of marketing strategy development (MSD) styles in a contingency framework. The organizational antecedents of MSD styles tap the domain of organizational structure, organizational culture, and top management team characteristics. We propose that the number of MSD styles is positively influenced by organizational formalization, an innovative organizational culture, and heterogeneity of the top management team, and negatively influenced by organizational centralization. We draw on resource-based theory, the theory of competitive rationality, and the paradox perspective on organizational effectiveness to discuss the relationship between the number of MSD styles used by the firm and the ability to implement strategy. Specifically, we argue that even though the use of multiple MSD styles results in benefits (e.g., causal ambiguity, barriers to imitation, etc.), it may also result in additional costs, such as those associated American Marketing Association / Winter 2005 with control and coordination. Therefore, we propose that the relationship between the number of MSD styles used and implementation capability is curvilinear (an inverse U-shaped relationship); that is, the number of MSD styles used is positively associated with implementation capability and the number of MSD styles used squared is negatively associated with implementation capability. We propose that the relationship between MSD styles and implementation capability is contingent on firm size, environmental turbulence, and the organization’s competitive strategy emphasis. Finally, we argue that a firm’s implementation capability will positively impact its performance and that the relationship between number of MSD styles used and performance will be mediated by implementation capability. The conceptual model we develop has the potential to make several important contributions to the marketing strategy literature. First, empirical support would provide evidence that multi-dimensional measures are necessary to capture and better understand the complexity and variety of the strategy development process. Second, empirical testing of the proposed model can improve the reliability of the strategy-making scales created by Hart and Banbury (1994) and adapted to the marketing context by White et al. (2003), thus incorporating an organizationwide approach to the study of marketing strategy development. Third, the propositions put forth in this paper provide guidelines for testing a complex framework in which the relationship between the number of MSD styles used and implementation capability is contingent on the interaction of strategy development with organizational, environmental, and competitive strategy factors. And fourth, we believe empirical testing of the proposed model would support the notion that organizations with superior implementation capability realize significantly greater performance. In summary, this research has the potential to provide managers and researchers alike with a better understanding of the process of developing and implementing marketing strategy. 177 REFERENCES Hart, Stuart and Catherine Banbury (1994), “How Strategy-Making Processes Can Make a Difference,” Strategic Management Journal, 15 (May), 251–68. Menon, Anil, Sundar G. Bharadwaj, Phani Tej Adidam, and Steven W. Edison (1999), “Antecedents and Consequences of Marketing Strategy-Making: A Model and a Test,” Journal of Marketing, 63 (April), 18–40. White, J. Chris, Jeffrey S. Conant, and Raj Echambadi (2003), “Marketing Strategy Development Styles, Implementation Capability, and Firm Performance: Investigating the Curvilinear Impact of Multiple Strategy-Making Styles,” Marketing Letters, 14 (July), 111–24. For further information contact: Chris White The Eli Broad College of Business Michigan State University N370 North Business Complex East Lansing, MI 48824–1122 Phone: 517.353.6381 FAX: 527.432.1112 E-Mail: [email protected] American Marketing Association / Winter 2005 178 COORDINATING MARKETING AND SALES: EXPLORATION OF A NEGLECTED INTERFACE Christian Homburg, University of Mannheim, Germany Ove Jensen, University of Mannheim, Germany SUMMARY Academic research has studied marketing’s interfunctional interfaces in detail (Maltz and Kohli 2000; Ruekert and Walker 1987a). However, it has almost completely neglected one interface that is very important in managerial practice: the interface between marketing units (such as product management, communication, market research) and sales units (such as the field reps). As a result of an MSI workshop on marketing’s interfaces, Montgomery and Webster (1997, p. 16) noted that “intrafunctional conflict within marketing was a more important topic for discussion than we had expected. The most frequently discussed issue was the conflict between sales and marketing.” Given growing recognition that this interface is highly conflict-laden in practice, our paper prepares the ground for future empirical research. We develop a conceptual framework of the interface and of coordination mechanisms for coping with it. Our framework defines the key constructs and develops hypotheses. Literature Review One of the most important findings of our literature review is what we did not find: dedicated empirical research of the M&S interface. The vast majority of studies dealing with organizational issues in marketing have not distinguished between marketing and sales subfunctions or functions. Among those studies that have dealt with the internal structure of the marketing function, one group uses design dimensions such as centralization, formalization, and specialization (Dastmalchian and Boag 1990; Ruekert, Walker, and Roering 1985). However, this work does not further differentiate the marketing function into marketing subunits and sales subunits. Very few articles explicitly deal with the distinction between M&S. The pioneering work of Cespedes (1993, 1994) highlights the key challenges at the M&S interface as well as instruments for managing the interface. Workman, Homburg, and Gruner (1998) develop a typology of the structural location of M&S and identify environmental antecedents influencing the configuration chosen. M&S subunits are found at the corporate level, at the business American Marketing Association / Winter 2005 unit level, and at the local (country) level. However, conflicts between M&S are not further explored. Dewsnap and Jobber (2000) conceptually explore the M&S interface in consumer packaged-goods companies. We identified two studies that provide empirical information on the M&S interface. Strahle, Spiro, and Acito (1996) observe that sales managers do not generally set sales objectives which are consistent with the strategy specified by a marketing executive for a particular product. Some of the reasons behind this gap are miscommunications and volume-goal differences. Their results underline the need for more research on communication as well as coordination between M&S. Homburg, Workman, and Krohmer (1999) compare the influence of five functional groups over marketing and non-marketing issues: marketing, R&D, operations, and finance. However, their study does neither analyze the extent of conflict between M&S nor mechanisms to cope with it. Conceptual Framework Our conceptual framework comprises three general components: (1) coordination mechanisms, (2) performance domains, and (3) moderators and mediators of the coordination-performance relationship. 1. We conceptualize two domains of coordination mechanisms for M&S units: boundary-reducing mechanisms and boundary-bridging mechanisms. These two domains reflect two facets of integration that have been distinguished in the literature. For example, Kahn and Mentzer (1998) differentiate between an “interaction” facet, that focuses on information exchange, and a “collaboration” facet focusing on the willingness to work together. Recent work on coordination mechanisms increasingly acknowledges their differential effects on an interfunctional boundary and complements the classical coordination mechanisms (Galbraith 1973; Van den Ven, Delbequec, and Koenig 1976) by mechanisms targeted at interdepartmental beliefs and values (Martinez and Jarillo 1989; Roth, Schweiger, and Morrison 1991; St. John, Young, and Miller 1999). We define boundary-reducing mechanisms as the “pull” facets of coordination which foster the willingness to cooperate, thereby diminishing the interdepartmental barriers. Among these are integrative recruiting and HR development as well as 179 integrative reward systems. On the other hand, we define boundary-bridging mechanisms as the “push” facets of coordination which drive two departments to cross the boundary, but do not decrease the interdepartmental barrier. These include formalization, integration teams, joint planning, and information systems. 2. Our framework contains two domains of success. The first domain encompasses success at the business level. We distinguish between market-level measures and financial measures. The second domain represents the integration success at the departmental level. Here, we subsume such constructs as coordination efficiency, coordination effectiveness, communication intensity, information quality, and information usage. 3. Our moderators and mediators are centered around the boundary between M&S. By boundary criticality, we understand the amount of coordination needed at that interface. The greater the criticality, the more traffic occurs at the boundary. Boundary criticality is constituted by such constructs as task interdependence and market dynamism. Boundary-creating differences refer to the extent of barriers hampering coordination. Among these are differences in goal orientation, time orientation, and skills. The third domain, integrativeness of the corporate environment, pertains to the extent to which M&S are embedded in an intraorganizational context that fosters coordination between two units. Most importantly, this includes top management support. References available upon request. For further information contact: Christian Homburg Marketing Department Director of the Institute for Market-Oriented Management University of Mannheim 68131 Mannheim Germany Phone: 49.621.181.1555 FAX: 49.621.181.1556 E-Mail: [email protected] American Marketing Association / Winter 2005 180 THE EFFECT OF INTERACTIONAL JUSTICE ON THE PERFORMANCE OF CROSS-FUNCTIONAL PRODUCT DEVELOPMENT TEAMS Tianjiao Qiu, University of Illinois at Urbana–Champaign, Champaign Deborah Rupp, University of Illinois at Urbana–Champaign, Champaign William Qualls, University of Illinois at Urbana–Champaign, Champaign SUMMARY In recent decades, cross-functional product development teams (CFPDTs) have become a popular mechanism for achieving greater interfunctional integration in the new product development process. Research has demonstrated that CFPDTs composed of members from various areas such as marketing, product design, process design, engineering, and finance work as an efficient mechanism for generating innovative new product ideas (e.g., Sethi 2000; Wind and Mahajan 1997). A key characteristic of CFPDTs is the diversity of functional areas represented in the team. On one hand, cross-functional diversity provides for crucial functional inputs during the new product development process. Successful cross-functional relationships ensure a high level of information sharing and integration, which in turn leads to innovative new products. On the other hand, cross-functional diversity poses great challenges to efficient working relationships, reflected in three potential barriers – turf barriers, interpretive barriers, and communication barriers (Hunt 1995). To benefit from cross-functional diversity, a high level of interaction and collaboration among CFPDT members is necessary. Since each team member in CFPDTs is equipped with unique experience with the existing product technology or manufacturing process, it is essential that he/she communicates effectively in order to create the synergy that CFPDTs provide. Without such information sharing and integration, team members cannot develop a common understanding of or a shared goal regarding the product development process. One factor that can potentially influence the level of cooperativeness among CFPDT members is their fairness perceptions. Fairness perceptions have a significant impact on a wide variety of job-related attitudes and behaviors (e.g., Cohen-Charash and Spector 2001; Colquitt 2001; Colquitt et al. 2001). The literature shows that employees make at least three types of fairness judgments: distributive, procedural, and interactional. Using the reward structures as the key variables, Shikhar and Vijay (2001) have examined the performance of CFPDT through distributive and procedural justice perspectives without mentioning the role of interactional justice. To bridge the research gap, we examine how CFPDT members’ interactional justice perceptions about their project American Marketing Association / Winter 2005 managers impact their task performance and interpersonal citizenship behaviors. Interactional justice refers to the extent to which team members feel they are treated with dignity and respect by their project managers. Interactional justice is particularly relevant in the study of CFPDT members’ performance because it reflects the interpersonal dimension of the new product development process. The quality of interpersonal treatment received during the product development process from the project manager greatly influences team members’ fairness judgment and predicts supervisorrelated outcomes. Three aspects of supervisor-related outcomes are examined: team members’ multi-foci commitments, their task performance, and their interpersonal citizenship behaviors. In the paper, we develop and test an integrative model relating interactional justice perceptions to CFPDT performance (see Figure 1). We hypothesize that higher levels of supervisor-focused interactional justice climate enhance the interpersonal relationships between team members and project managers. Such enhanced relationships are reflected in team members’ multi-foci commitments to the team and to the product development project. Furthermore, team members’ multi-foci commitments serve as a mediator between the perceived interactional justice and their task performance as well as their interpersonal citizenship behavior. Members from 50 students’ product development teams participated in the study. Student teams were composed of majors from the College of Engineering and the Business school, which emulate the structure of crossfunctional product development teams. The model is tested using structural equation modeling. The overall model is strongly supported by the data, with satisfactory goodness-of-fit statistics as follows: χ 2(58)=83.42 (p = .02); RMSEA = 0.047; GFI = 0.937; CFI = 0.985; NFI = 0.951; AGFI = 0.902; and RMR = 0.036. All estimated beta parameters for the model are significant at 0.05 levels. The findings indicate that the relationship between team members and the project manager is enhanced by higher levels of perceived interactional justice. Such enhanced relationship is reflected in team members’ multi181 FIGURE 1 The Conceptual Model of Interactional Justice on CFPDT Members’ Task Performance and Interpersonal Citizenship Behavior Task Performance Interactional Justice Person-Focused Interpersonal Citizenship Behavior Multi-Foci Commitment Task-Focused Interpersonal Citizenship Behavior foci commitments towards the team and the on-going project. It is further demonstrated that multi-foci commitment serves as the partial mediator between the perceived interactional justice and both team members’ task performance and interpersonal citizenship behavior. The paper contributes to the better understanding of the role of interactional justice perception in enhancing interfunctional communication and cooperation in the new product development process. For further information contact: Tianjiao Qiu Department of Business Administration 339 Wohlers Hall University of Illinois at Urbana–Champaign 1206 S Sixth Street Champaign, IL 61820 Phone: 217.333.4240 FAX: 217.244.7969 E-Mail: [email protected] American Marketing Association / Winter 2005 182 CROSS-FUNCTIONAL INTEGRATION AND NEW PRODUCT PERFORMANCE: A META-ANALYSIS Tanawat Hirunyawipada, University of North Texas, Denton Archna Vahie, University of North Texas, Denton SUMMARY Literature has emphasized the importance of the relation between cross-functional integration (CFI) and the success of new products (e.g., Anderson 1982; Nystrom 1985; Ruekert and Walker 1987a, 1987b). Many empirical and theoretical studies confirm a positive relation between CFI and new product performance (e.g., Gupta, Raj, and Wilemon 1986; Griffin and Hauser 1992, 1996; Song and Parry 1997a, 1997b). Yet other studies show either non significant or negative effect of CFI on the success of new product development (e.g., Zirger and Hartley 1996; Henard and Szymanski 2001; Gray, Matear, and Matheson 2002). These disparate findings in the literature make the indispensability of CFI in new product development (NPD) a questionable concept. We use metaanalysis to provide a clearer answer to the importance of CFI for the success of new products. Employing the model-level effect sizes, we found 108 correlations between CFI and new product performance. Findings from the meta-analysis show that the relation between CFI and new product success is positively correlated, but that some key factors moderate this relation. This meta-analysis provides three main findings. First, attention must be paid to the operationalization of the constructs because the way the dimensions of the construct are defined can impact the findings. We find that CFI is likely to be comprised of at least two distinct dimensions: internal integration and inter-functional climate. Internal integration captures the concept of CFI in terms of its physical interactivities between functions whereas inter-functional climate is more likely to capture the norm within group or organization that encourages the trust and relationship among different functions. Interfunctional climate can increase the capability to resolve conflicts among integrated teams. The result from the meta-analysis indicates that CFI has stronger relation with new product success when the CFI is defined as the supportive climate for collaboration. This issue casts a doubt on whether researchers have crafted enough dimensions to reflect the underlying concept of CFI. The results also show that the CFI-new product success relation is stronger when the new product performance is operationalized as product effectiveness than when it is operationalized as NPD productivity. This suggests that respondents view a potential outcome of CFI as product effectiveness rather than productivity. American Marketing Association / Winter 2005 Second, the decisions to include or exclude any specific characteristics into the samples always impact the reliability of measures. The results show that the larger the number of functions integrated, the more difficult it will be for CFI to become effective. The results confirm the importance of the inclusion of the R&D function in the CFI team for the success of NPD. The inclusion of the marketing function in CFI shows neutral impact on the CFI-new product performance relation. This may imply that the importance of the marketing function be made clear before it is included in the CFI. Future research may investigate which other function should be integrated for the success of new product. The meta-analysis also shows that the respondents from NPD teams have positive impacts toward effect size. This suggests that the NPD team members, which are the primary source of data, represent the actual information of the CFI-new product success relation better than do the respondents from senior managements. However, this result serves as a warning that people who are involved in CFI may provide biased information about the CFI-new product success relation. Researchers may consider using data from different informants for independent and dependent variables to prevent common method bias. Interestingly, the authors find that studies published in the year 2000 and thereafter show considerably positive relation with effect size. This result sheds some light on why Henard and Szymanski (2001) found no significant relation between CFI and new product success as most of the extant studies they looked at were published prior to year 2000. This finding supports our expectation that the increasing needs for diverse expertise and experiences can lead to more integration of different functions, and therefore to greater outcomes. The generalization of the results is limited because of the moderating effects of contextual variables. Studies with respondents from companies across multiple countries do not support the salient relation between CFI and new product success. CFI may not be able to impact consistently across countries with different norms and cultures. Thus, researchers conducting CFI studies should take the context, organizational environment, and culture into consideration. Accordingly, different cultures and societies can be studied to create a typology of norms that are best suited for CFI. Future research may focus on how multicultural the individual NPD teams are and what impacts this characteristic has on the success of new products. The result also shows that samples from high183 tech products appear to play a moderating role on the effect size. NPD’s time constraint and technology convergence are among the reasons why NPD team in high-tech industry is more likely to seek integration with other functional areas. The samples from western countries also show stronger negative impact on effect size than do samples from other countries. This result can be explicated by the individualistic norm of people in western countries. Workforce in these countries is less likely to commit to rigid group norm or CFI team. The result also implies that CFI in development stage has negative impact on the effect size, and that CFI performs different roles across stages of NPD. A future implication is to research not only the impact of CFI in various stages of NPD, but also the factors and conditions that impact the CFI strategy in each NPD stage. Not surprisingly, goods vs. services as well as industrial products vs. non-industrial products do not explain the variance of the effect size. Given that the overall combined mean is significant, we conclude that CFI is important for NPD irrespective of the nature of the types of products. 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 2005 184 THE CONTINGENT EFFECT OF PRODUCT QUALITY ON NEW PRODUCT PERFORMANCE: A CONCEPTUAL MODEL Kwaku Atuahene-Gima, City University of Hong Kong, Hong Kong Gloria Barczak, Northeastern University, Boston SUMMARY Many firms have instituted quality programs in an effort to upgrade and continually improve the quality of their products for the ultimate purpose of creating competitive advantage (Clark and Fujimoto 1991; Menon et al. 1997). This emphasis on product quality is welldeserved as there is strong evidence that product quality is an important determinant of firm performance (Buzzell 2004; Hildebrandt and Buzzell 1991; Jacobson and Aaker 1987; Phillips, Chang, and Buzzell 1983; Sethi 2000). The positive impact of product quality on performance (Buzzell 2004; Hackman and Wageman 1995; Hildebrandt and Buzzell 1991; Jacobson and Aaker 1987; Phillips, Chang, and Buzzell 1983; Sethi 2000) is of particular interest because it suggests a direct effect relationship. Research has investigated the direct effect of product quality on various performance dimensions such as market share and profitability (Buzzell 2004; Hildebrandt and Buzzell 1991; Phillips, Chang, and Buzzell 1983), price (Jacobson and Aaker 1987; Phillips, Chang, and Buzzell 1983) and costs (Jacobson and Aaker 1987; Phillips, Chang, and Buzzell 1983). Though the evidence is substantial, uncritical acceptance of this result suggests that product quality defies the logic of contingency theory. Such a view is subject to theoretical skepticism given that a variety of marketing strategies (e.g., market orientation, innovation, strategic alliances) have been found to follow contingency theory. Practically, uncritical acceptance of the direct effect of quality on performance down plays the role of marketing in ensuring market performance. The importance of the marketing function in building product quality is wellestablished (Cravens et al. 1988; Kordupleski et al. 1993; O’Neal and LaFief 1992). In fact, it has been argued that marketing, as the most customer-focused function (Kordupleski et al. 1993), should play the lead role in establishing product quality (Kordupleski et al. 1993; O’Neal and LaFief 1992) as its job is to understand customer needs and translate those needs into products with high customer value (Cravens et al. 1988; Kordupleski et al. 1993; O’Neal and LaFief 1992). Creation of value through high product quality depends on marketing skills in analyzing and determining customer needs, competitor analysis, identifying appropriate target segments, product positioning, communication, pricing, distribution, and speedy implementation of launch (Cravens et al. 1988; KorduAmerican Marketing Association / Winter 2005 pleski et al. 1993; O’Neal and LaFief 1992). Thus, acceptance of marketing’s key role in establishing product quality implies a contingency view of product quality (Varadarajan and Jayachandran 1999). However, there has been little, if any, research on if and how environmental factors moderate the relationship between product quality and performance. Since product quality is a deliberate firm strategy to differentiate one’s offerings from its competitors’ (Jacobson and Aaker 1987; Phillips, Chang, and Buzzell 1983; Porter 1980; Varadarajan and Jayachandran 1999), we propose that the effectiveness of such a strategy will be influenced by the nature and dynamics of its environment (internal and external). This proposition resonates with Varadarajan and Jayachandran’s (1999) argument that the “market performance outcome of a business’s decision to offer products of a high quality is contingent on . . . consumers’ characteristics and competitors’ reactions” (p. 130). We define product quality from a customer, rather than a supplier, perspective (Bounds et al. 1994; Kordupleski et al. 1993; Morgan and Piercy 1998). A customerfocused approach views quality as the customer’s perception of how well a given product meets their needs and expectations (Kordupleski et al. 1993; Morgan and Piercy 1998; Parasuraman, Zeithaml, and Berry 1985). Put another way, quality is “simply conformance to [the] requirements” (O’Neal and LaFief 1992) of the customer. Although product quality may influence new product performance directly, it is possible that external market factors may help or harm that relationship (Varadarajan and Jayachandran 1999). Our theoretical arguments suggest that when technological uncertainty is high, firms may need to commit to certain aspects of the technology before they know and understand the ramifications of their actions. The level of quality based on those actions is likely to be rendered inferior by new technological developments which may have a negative effect on product quality. Similarly, in situations of high market uncertainty, project teams need to monitor market shifts and adjust product specifications accordingly (Menon et al. 1997). Since it takes time for firms to adjust the level of quality to meet both rapidly changing customer needs and competitive actions, the positive effect of product quality on new product performance is likely to diminish. Greater customer demandingness may indicate that customers are 185 not satisfied with existing products (Li and Calantone 1998), suggesting a lower level of competition for a specific product of high quality. Hence, product quality will be more positively related to new product performance under high level of customer demandingness. Finally, as the hostility of a new product introduction increases, so does the strength of competitors’ reactions (Heil and Walters 1993; Heil and Robertson 1991; Moore 1992). Effective competitor responses suggest an erosion of the competitive advantages of the focal firm’s new product. Regarding internal moderators we argue that a product concept which is familiar to the organization will be easier, less time consuming and less expensive to design, develop, and market. Hence, a project team is more capable of maintaining the level of quality than a product concept high new to the firm. Further, in a new market, where customers know little about how to evaluate a product’s attributes and benefits, product quality may have greater positive effect on performance because the nature of the product “may be able to influence how attributes are valued [and] define the ideal attribute combination” (Kerin, Varadarajan, and Peterson 1992, p. 35). In other words, a quality new product in a new market may define the product category and the nature and level of quality expectations (Kerin, Varadarajan, and Peterson 1992). Finally, a quick implementation implies that product, price, distribution and promotion tactics and activities are operational simultaneously, at full strength, over a relative short period of time. The faster the implementation of a specific product’s marketing strategy, the more likely that the product will be known and accessible to customers and perceptions of value will be determined (Buzzell 2004; Hildebrandt and Buzzell 1991; Jacobson and Aaker 1987; Phillips, Chang, and Buzzell 1983). Our model makes practical and theoretical contributions. From a practical perspective, we focus on understanding the effect, if any, of specific internal environmental variables with product quality. Because these internal variables can be influenced and/or controlled by managers, the findings of this study should provide useful recommendations for enhancing product quality and ultimately, new product performance. It is possible that some of these variables may have an adverse reaction with product quality. Thus, our findings can provide insight as to which variables enhance or weaken product quality and thus, product performance. In terms of theory, an important contribution of this study is its extension of the previous research on product quality to include potential moderators of the relationship between product quality and performance. Unlike existing research, this study draws on contingency theory and argues that the impact of product quality on product performance depends on particular internal product and strategy characteristics as well as external market characteristics. Another major contribution of this study is its focus on specific product outcomes as opposed to most prior research that examines firm-level aggregate outcomes such as the quality of a firm’s products relative to competitors (Clark and Fujimoto 1991; Menon, Jaworski, and Kohli 1997; Morgan and Piercy 1998). By focusing on product quality at the individual product level, this study can provide insights about factors that interact with quality and the differential effects they have on product performance. For further information, contact: Kwaku Atuahene-Gima Department of Management City University of Hong Kong Hong Kong E-Mail: [email protected] American Marketing Association / Winter 2005 186 CONSUMER EXPERIENCE OF SOCIAL POWER DURING SERVICE CONSUMPTION: AN EXPLORATORY STUDY Kalyani Menon, Wilfrid Laurier University, Waterloo Harvir Bansal, Wilfrid Laurier University, Waterloo ABSTRACT A survey derived scripts of consumer experiences of powerfulness and powerlessness during service consumption. Most experiences occurred in high contact services, underlining the social nature of consumer power. Powerfulness and powerlessness were linked with distinct antecedents and consequences that differ from non-consumption situations, and powerfulness appears to be a more complex experience than powerlessness. INTRODUCTION As repeatedly documented by consumer researchers, the social interaction between consumers and service providers is among the most significant determinants of consumer experience in the service (Bitner, Booms, and Tetrault 1990; Keaveney 1995; Menon and Dubé 2000). Service satisfaction and dissatisfaction depends greatly on how the provider relates to consumers, and how they in turn perceive the provider. Research on service provider – consumer dynamics has looked at it primarily from a relationship marketing perspective, to understand benefits to consumers and firms due to long term relationships with service providers (e.g., Gwinner, Gremler, Bitner 1998). These studies have focused on various examples of interpersonal behaviour such as empathy (e.g., Butcher, Sparks, and O’Callaghan 2003), friendship (Price and Arnould 1999) and affective commitment (Shemwell, Cronin, and Bullard 1994). Social psychologists stress that these behaviours are exemplars of two key meta-constructs of power and communion that underlie most social interactions and map the various modes of relating to the world. (Moskowitz et al. 1994). Understanding consumer-service provider interaction and the impact on the consumption experience requires we go beyond examples of behaviour to examine how the two meta-constructs of power and communion occur in services where providers and consumers are required to interact during service delivery and consumption. To our knowledge, no research has thus far adopted such a theoretically anchored approach to the study of the parameters of consumer-service provider interaction. This paper presents an initial investigation of the meta-construct of power from a consumer perspective as American Marketing Association / Winter 2005 it arises during service consumption. The objective is to initiate an in-depth understanding of the nature and components of consumer experiences of powerfulness and powerlessness during service consumption. It is hoped that such an understanding will enable service managers to develop tools and strategies to enhance service experiences. The following section draws on the social psychology literature to describe the concept of power, what is known of the experiential aspects of power and its implications for consumer behaviour. We then present our empirical study of the subject. A survey of consumers of a range of services was conducted and qualitative and quantitative data collected on their experience of power and the lack of it. The data were coded and analyzed to develop scripts of consumer powerfulness and powerlessness. Such scripts map the mental representation of relevant experiences (Fitness and Fletcher 1993; Shaver et al. 1987) and may be crucial to understanding the dynamics of consumer – provider interaction. SOCIAL POWER AND CONSUMER – SERVICE PROVIDER INTERACTIONS Social power has been defined as the control possessed by an individual over another and refers to attempts to enhance and protect differentiation of the individual (Depret and Fiske 1993; Moskowitz et al. 1994). As an extension, we argue it may be thought of as the ability to control another’s outcome. High power and low power have been conceived as polar opposites with high power being manifest in frequent behaviours of dominance and assertiveness and low power expressed by submissive acts. Power dynamics are thought to permeate most social relationships, whether explicitly or implicitly. This concept of power and control may occur explicitly in services such as the control a doctor has over a patient, or a banker has over a mortgage application. While the power equation in such transactions is clearly weighted in favour of the service provider, there may be several other service situations where the power equation may not be so obvious. For instance, a restaurant patron has power in so far as their patronage adds to the business of the restaurant and of the individual waiter. But the restaurant and the waiter in turn can affect the outcome of the diner’s eating experience, and thus may have some power as well. There may also be a range of services where the power equation is mostly absent such as services at the post-office, routine 187 banking, and other such services where the consumer’s and/or the provider’s ability to control the outcome may be relatively irrelevant. While initial research examined individual level factors such as gender as sources of social power (Ridgeway 1992), more recent research stresses the interaction between individual and situation level variables. Gender by itself may not impact social power quite as much as the gender composition of the social group with greater stereotypical gender-power relationship in same gender interactions than in opposite gender interactions (Macoby 1990; Moskowitz et al. 1994). Continuing with the idea that power is a function of the interaction between a person and the situation, social and professional roles have been shown to impact power, For example, individuals express more power in the role of a supervisor but less in the role of a supervisee (Moskowitz et al. 1994). The first question of interest to this paper is what elicits service consumer experiences of powerfulness and powerlessness? Are they mirror images of each other e.g., does the absence of what elicits powerfulness elicit powerlessness and vice versa? This paper also examines the experiential consequences of power and lack of power on consumer cognition and expectations, emotions, and emotion expression. The cognition and expectations of individuals experiencing power or the lack of it tend to have specific biases since powerful individuals are motivated to defend their power and the powerless to compensate for their lack of it (Richeson and Ambady 2002). Thus, in order to preserve their power, powerful consumers may have an exaggerated conception of their role and ability in the service, or may have low expectations of others in the setting. Powerless individuals may focus their attention and cognitive resources on monitoring others in the social setting since they perceive themselves as being dependent on others. In addition to its impact on cognition, powerfulness and powerlessness may impact emotion experiences and expression. According to the interpersonal view of emotions, emotions emerge and are defined during interaction between individuals (Parkinson 1995). There are wellestablished norms about the appropriateness of emotions relative to one’s power and emotions such as anger and joy are typically experienced when one is in a powerful situation while emotions such as anxiety and sadness are experienced in powerless situations. Further, the extent to which individuals express emotions may also be impacted by their experience of power with powerful people being more willing to express their emotions than the powerless (Conway et al. 1999). Thus the second research question of interest to this paper is: How does consumer perceptions of power or the lack of power in a service context manifest itself? What kind of cognition, expectations, emotions, and expressions occur as a result of consumer American Marketing Association / Winter 2005 perceptions of their power in a service situation? Finally, with the objective of examining the impact of power on consumer service experience, we also examine how perceptions of two marketing outcome variables – service quality and consumer satisfaction – vary due to the power experience. The following section presents a survey used to capture the components of consumer experiences of power – antecedents, cognition, expectations, emotions, and expression – as well as consumer evaluations of service quality and satisfaction when they are powerful or powerless in a service context. METHOD Following the method used by previous research on developing scripts of interpersonal dynamics (Fitness and Fletcher 1993; Shaver et al. 1987), we used a self-administered survey with a mix of qualitative and quantitative measures. Research has shown that repeated experiences render people highly knowledgeable about various components of their experiences and that it is possible to elicit memory representations or scripts of these experiences (Fitness and Fletcher 1993; Shaver et al. 1987). Typically, researchers provide individuals with a series of prompts designed to elicit retrospective reports of the experience, and scripts are developed using the most frequently mentioned features of the experience. Sample and Procedure A convenience sample of adult consumers of services (n = 138; 54% male, 46% female) were approached on a university campus and randomly assigned to one of two versions of the survey questionnaire – either the version asking them to recall an experience of powerfulness (n = 60) or one of powerlessness (n = 78) during consumption of any type of service. The respondent pool was mainly composed of the members of the university community such as administrative staff, employees of local businesses, and some faculty. We did not approach any undergraduate students. Majority of the respondents were between the ages of 26 and 50 (approx. 67%), 42 percent had completed an undergraduate degree, 25 percent were graduates, and 14 percent held post-graduate degrees. In each version of the questionnaire, respondents were instructed to recall and report the actual experience of powerfulness/powerlessness in as much detail as possible. Powerfulness and powerlessness was defined for the respondents as control/certainty and lack of control/ certainty respectively in a service context. The questionnaire began with demographic questions and was followed by a series of prompts to aid recall of a relevant experience of powerfulness or powerlessness (e.g., what happened, when, who was present, etc.). This was followed by measures for the dependent variables. 188 Dependent Variables Open-ended questions asked respondents to provide details of the antecedents of powerfulness/powerlessness (what happened to make them feel powerful/powerless), specifically the type of service setting in which the event occurred, gender of the individuals present at the time of the event, and details of the eliciting event. Open-ended questions then captured the experiential consequences of consumer thoughts and expectations. Respondents were asked to describe their thoughts, and their expectations of the service provider as they experienced powerfulness/powerlessness during the event described. Multi-item 5 point scales (not at all – strongly) drawn from past research (Richins 1997) measured experiential consequences of some major consumer emotions. Anger was measured by 5 items (anger, frustration, irritation, outrage, hostility; α = 0.94), anxiety was measured by 3 items (nervousness, worry, anxiousness; α = 0.79), shame was measured by 3 items (shame, embarrassment, guilt, α = 0.71) and happiness was measured by 3 items (joy, excitement, happiness; α = 0.85). The experiential consequences of emotion expression was measured by a single item 7 point scale (not at all – very much so) asking respondents to indicate the extent to which they expressed their emotions using hand and body gestures, facial or vocal expressions. The marketing outcome variables were all measured by multi item scales. Service quality was measured by a 4 item (employee professionalism, quality of information provided, care of customers, overall service quality; α = 0.95) 5-point scales (poor – excellent). Consumer satisfaction was measured by a 2-item 7-point scale (very dissatisfied – very satisfied; very disappointed – very delighted, α = 0.94) adapted from Oliver (1997). Data Analysis The qualitative responses dealing with the antecedents, cognition, and expectations were scrutinized and coded by three coders working independently to reflect underlying dimensions and/or categories. After careful, repeated readings, the data was sorted in to groups reflecting underlying similarities. For instance, when coding responses to the question of the eliciting event, data about delayed service and condescending service provider were assigned to the category of service failure. We ensured that the data assigned to each category was more similar to each other than to data assigned to other categories. Conflicts were resolved by majority vote. The full list of categories is presented in Table 1. Aggregate scores were created for the quantitative measures. Chi square tests and difference of means were conducted to develop scripts of powerfulness and powerlessness. American Marketing Association / Winter 2005 RESULTS Antecedents It is noteworthy that the majority of the experiences recounted occurred in high contact services (retail, professional) rather than in low contact services (miscellaneous services such as online, cable) supporting the contention that power is intrinsically social in nature and arises in the context of interpersonal interaction. Results indicate that while the majority of the powerless experiences (54%) occurred in the context of professional services, the majority of powerful experiences occurred in the context of either retail services such as computer stores, restaurants (48%) or professional services such as financial services, legal services, and government services (45%). In keeping with past research, while consumers were almost equally likely to feel powerful in mixed gender and same gender groups, powerlessness was experienced primarily in mixed gender groups. The mixed gender groups involved either a service provider or other consumers of the opposite gender in close proximity during the event. Interesting differences arose in terms of the nature of the eliciting events for powerful and powerlessness. Powerfulness occurred primarily when consumers perceived they had high levels of knowledge in the service setting (67%). This knowledge could relate to knowledge of the nature of the service (e.g., knowledge of financial instruments a consumer wishes to purchase, knowledge of computer hardware in a retail store) or to knowledge of the script of the service encounter (e.g., consumers knew the process to file a complaint, knowledge of the various phases of consumption in a high-end restaurant). On the other hand, while 32 percent of powerless experiences occurred despite consumer perceptions of knowledge, the majority of powerlessness occurred due to service failures such as service delays, pushy service provider, and being taken advantage of (68%). Powerless consumers did not report lack of knowledge as a cause for their experience, thus indicating that powerlessness, rather than being the mirror image of powerfulness as documented by past research, may be a distinct experience. Experiential Consequences Turning now to the experiential consequences of powerfulness and powerlessness, powerfulness was linked almost equally with provider oriented (49%) and action oriented thoughts (43%). For example, an action oriented thought may concern a consumer thinking of, “how to get it [laptop under repair] back ASAP,” or being “better aware,” so as to “to make a better decision.” Provider oriented thoughts took the form of a consumer thinking of “being ripped off as a consumer [by the service provider] 189 TABLE 1 Frequencies and Mean Values for Episodes of Powerfulness and Powerlessness. Powerful N = 60 Powerless N = 78 0.48 0.45 0.07 0.21 0.54 0.25 0.43 0.57 0.62 0.38 0.67 0.33 0.32 0.68 0.43 0.49 0.06 0.02 0.15 0.55 0.16 0.14 0.46 0.36 0.18 0.25 0.59 0.16 1.97 3.55 2.30 1.48 1.78 2.69 1.30 1.69 4.33 3.90 3.69 2.15 4.87 2.49 Antecedents Service setting (% frequencies) χ2 = 14.33 (p < 0.05) Retail Professional Miscellaneous Gender composition (% frequencies) χ2 = 4.83 (p < 0.05) Mixed Same Eliciting event (% frequencies) χ2 = 18.49 (p < 0.05) Consumer knowledge Service failure Experiential Consequences Cognition (% frequencies) χ2 = 21.49 (p < 0.05) Action oriented Provider oriented Rumination Avoidance Expectations (% frequencies) χ2 = 9.07 (p < 0.05) Core service related Interpersonal service related No expectations Emotions (mean values) Anger t = -8.11 (p < 0.05) Happiness t = 8.44 (p < 0.05) Worry t = -5.42 (p < 0.05) Shame t = -3.21 (p < 0.05) Emotion expression (mean values) t = 1.65 (p < 0.10) Service quality perceptions (mean values) t = 8.47 (p < 0.05) Consumer satisfaction (mean values) t = 9.11 (p < 0.05) having already paid for this expensive chalet,” or focussing on how the provider was delivering the service. Powerless consumers tended to have provider-oriented thoughts (55%) and reported a very low frequency of any American Marketing Association / Winter 2005 action-oriented thoughts. These results reflect past research indicating the “other-focus” of powerless consumers while powerful consumers focus on how they can accentuate and protect their powerful position in the 190 situation. Interestingly, two categories of thoughts – ruminative (e.g., what can I do, how did I get in to this situation) and avoidance (I’ll never come back here again, get out immediately) occurred to some extent in powerlessness but not in powerfulness. Consumer expectations of the service provider during their experience of powerfulness and powerlessness showed a pattern similar to that of consumer cognition. Powerfulness was accompanied by expectations that the provider would attend to both the core service (46%) as well as the interpersonal service (36%). Powerlessness, however, was dominated by expectations that the provider will attend to the interpersonal aspects of the service (59%). For instance, the core service expectations could take the form of, “yes, when I pay for a hotel room or a chalet, I expect it to be ready when they tell me” or “. . . I expected answers to all questions regarding food and the restaurant.” On the other hand, examples of interpersonal service expectations were, “they [the service provider] would be helpful and knowledgeable,” “expected the usual prompt attention,” “politeness,” “be friendly, pleasant,” or “consumer should be utmost.” Regarding the emotions experienced, in keeping with the fact that powerlessness occurred primarily due to service failure, powerless respondents reported higher intensity of all negative emotions (anger = 3.55, worry = 2.69, shame = 1.69) than did powerful respondents (anger = 1.98, worry = 1.84, shame = 1.21; all p < 0.05), while the latter reported greater happiness than did the former (2.30 and 1.48 respectively; p < 0.05). Further, while past findings indicate that powerless individuals are highly conscious of their self-presentation and thus may be less expressive about their emotions, results here indicate that although powerless consumers were indeed less likely to be expressive than powerful consumers, the difference was only marginally statistically significant (means 4.33 and 3.90 respectively, p < 0.10). Marketing Outcomes Results indicate that powerful consumers have higher perceptions of service quality (mean = 3.69) and satisfaction (mean = 4.87) than powerless consumers (2.15 and 2.49 respectively; p < 0.05). DISCUSSION This paper studied consumer experiences of power, an important construct in our understanding of consumer – service provider interactions during service consumption. The research provides details of consumers’ mental representations of their experiences of powerfulness and powerlessness. Evidence indicates that powerfulness and powerlessness may not be simple mirror images of each other. While consumer knowledge elicited American Marketing Association / Winter 2005 powerfulness, respondents reporting powerless experiences did not cite lack of knowledge as a cause of their powerlessness. Rather service failure (which can occur despite consumer knowledge) led to powerlessness. Powerfulness appears to be a more complex experience than powerlessness as evidenced by the fact that for the antecedents such as service setting, and experiential consequences of cognition and expectations, there was no one clearly dominant category for powerfulness. Powerfulness was equally likely in retail and professional services, led to both action oriented and provider oriented thoughts and to expectations regarding both the core service and the interpersonal service. Powerlessness, on the other hand, had more clearly dominant categories. It tended to occur most in professional services, was dominated by provider oriented thoughts and expectations regarding the interpersonal aspects of the service. In this context it should be mentioned that informal feedback from respondents after having completed the surveys indicated that those recalling experiences of powerfulness had greater difficulty in articulating the experiential aspects of this as compared to those recalling experiences of powerlessness. This may indicate that the concept of power becomes more salient for consumers when they perceive the lack of it, and therefore it is more clearly represented in their minds. Since powerlessness was linked with a negative event such as service failure, it is also possible that, since individuals place more emphasis on the negative, these experiences were more sharply sketched in their minds. Managing consumer perceptions of power appears to be an important managerial issue since powerful consumers had higher perceptions of service quality and satisfaction. For instance, consumers tended to feel more powerful in same gender groups than in mixed gender groups, and this could have implications for segmenting consumers and assigning service provider responsibilities according to the gender of the consumer. Further, while service failure is clearly to be avoided, merely preventing failure may not enhance consumer power. Rather, providing consumers with knowledge of the structure and process of the service may go a long way in doing so. Surprisingly, powerless respondents reported high intensity anger, an emotion generally thought to occur when an individual feels in control of a situation or wishes to gain control over a situation (Conway et al. 1999). Further, contradicting past findings indicating that powerless individuals are highly conscious of their self-presentation and thus may be less expressive, results indicate that both powerful and powerless consumers are likely to equally express their emotions. While the nature of our data does not allow an examination of the reasons for this, we speculate that this may be a deliberate strategy by the powerless consumers to convey their experience to the service provider and perhaps recruit the provider’s help in navigating the remainder of the service. Such a reasoning 191 is in keeping with past research indicating that consumers are highly aware of the communicative role of their emotions and use it accordingly (Parkinson 1995). It is also possible that since most people are aware of the power standing connoted by discrete emotions (e.g., Conway et al. 1999), experiencing and expressing high power emotions may be a strategy to try and gain more power in the setting. While as noted previously, experiences of powerfulness and powerlessness occurred primarily in high contact services thus underlining the social nature of power, it will be interesting to study the occurrence of social power in services that are migrating from high contact to self service. Research indicates that consumers attribute human characteristics to their interactions with technolo- REFERENCES Bitner, M.J., B. Booms, and M. Tetrault (1990), “The Service Encounter: Diagnosing Favorable and Unfavorable Incidents,” Journal of Marketing, 54, 71–84. Butcher, K., B. Sparks, and F. O’Callaghan (2003). “Beyond Core Service,” Psychology and Marketing, 20 (3), 187–208. Conway, M., R. Difazio, and S. Mayman (1999), “Judging Others’ Emotions as a Function of the Others’ Status,” Social Psychology Quarterly, 62, 291–305. Depret, E. and S. Fiske (1993), “Social Cognition and Power: Some Cognitive Consequences of Social Structure as a Source of Control Deprivation,” in Control Motivation and Social Cognition, G. Weary, F. Gleicher, and K. Marsh, eds. New York: SpringerVerlag, 176–202 Fitness, J. and G. Fletcher (1993), “Love, Hate, Anger, and Jealousy in Close Relationships: A Prototype and Cognitive Attribution Analysis,” Journal of Personality and Social Psychology, 65, 942–58. Gwinner, K., D. Gremler, and M.J. Bitner (1998), “Relational Benefits in Services Industries: The Customer’s Perspective,” Journal of the Academy of Marketing Science, 26, 101–14. Keaveney, S. (1995), “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing, 59, 71–82. Macoby, E. (1990), “Gender and Relationships: A Developmental Account,” American Psychologist, 45, 513– 20. Menon, Kalyani and Laurette Dubé (2000), “Ensuring Greater Satisfaction by Engineering Salesperson Response to Customer Emotions,” Journal of Retail- American Marketing Association / Winter 2005 gy and it will be interesting for future research to examine consumer power in the context of consumer interactions with technology as substitutes for service providers (Moon 2000). Further, the concept of social power may not be restricted to service situations and consumer – service provider interactions. Consumer perceptions of their power may exist when they interact with other consumers such as during communal consumption activities generated by brand communities, and in fact any consumption situation embedded in a social context. While important insights into consumer experiences of power were gained through this exploratory study, future research is required to address the shortcoming of this study (e.g., the use of a relatively small convenience sample) as well as the queries that arise from its findings. ing, 76 (3), 285–307. Moon, Youngme (2000), “Intimate Exchanges: Using Computers to Elicit Self-Disclosures from Consumers,” Journal of Consumer Research, 26 (4), 323–40. Moskowitz, D., E. Suh, and J. Desaulniers (1994), “Situational Influences on Gender Differences in Agency and Communion,” Journal of Personality and Social Psychology, 66 (4), 753–61. Oliver, R. (1997), Satisfaction: A Behavioral Perspective on the Consumer. McGraw-Hill. Parkinson, B. (1995), Ideas and Realities of Emotions. New York: Routledge. Price, L. and E. Arnould (1999), “Commercial Friendships: Service Provider – Client Relationships in Context,” Journal of Marketing, 63, 38–56. Richins, M. (1997), “Measuring Emotions in the Consumption Experience,” Journal of Consumer Research, 24, 127–46. Richeson, J. and N. Ambady (2002), “Effects of Situational Power on Automatic Racial Prejudice,” Journal of Experimental Social Psychology, 39, 177–83. Ridgeway, C.J. (1992), “Gender, Interaction, and Inequality,” Personality and Social Psychology, 76 (5), 805–19, New York: Springer. Shaver, P., J. Schwartz, D. Kirson, and C. O’ Connor (1987), “Emotion Knowledge: Further Exploration of a Prototype Approach,” Journal of Personality and Social Psychology, 52, 1061–86. Shemwell, D., J. Cronin, and W. Bullard (1994), “Relational Exchange in Services: An Empirical Investigation of Ongoing Customer Service-Provider Relationships,” International Journal of Service Industry Management, 5 (3), 57–68. 192 For further information contact: School of Business and Economics Wilfrid Laurier University Waterloo, ON, N2L 3C5 Canada Phone: 519.884.0710, Ext. 2704 FAX: 519.884.0201 E-Mail: [email protected] American Marketing Association / Winter 2005 193 WHAT DRIVES CUSTOMER SUCCESS? CONSUMER PERCEPTIONS OF ENABLING AND RESTRAINING FORCES ASSOCIATED WITH PERFORMING CONSUMPTION TASKS Pete C. Honebein, University of Nevada, Reno SUMMARY The consumer’s role in unlocking the value that exists in products and services continues to attract the interest of the marketing field. Spearheaded by Vargo and Lusch (2004), the new dominant logic for marketing defines the consumer’s role of coproducer, where the consumer is continually involved in the production of value as he consumes products and services. The consumer’s success as a coproducer is dependent upon the consumer’s physical and mental skills, or if the consumer lacks those qualities, the embedding of those attributes in the product or service itself. Vargo and Lusch (2004) suggest that organizations that recognize this balance can more effectively develop offerings that enable consumers to realize greater value. elements of the consumption environment that must be in place to enable consumer performance. This not only includes such things as policies, but also procedures, tools, interfaces, and technologies. Incentive defines the intrinsic and extrinsic motivators that stimulate consumers to perform in a certain way. Often, these motivators take the form of rewards, punishments, or both. Expertise reflects the knowledge and skills possessed by the consumer, developed through training programs and direct experience. Method and Procedure The development of a consumer’s physical and mental skills through such strategies as consumer and customer education is well recognized, as is the embedding of such qualities in products and services through selfservice technologies (Meuter, Ostrom, Roundtree, and Bitner 2000). Yet, a consumer’s ability to perform activities that realize benefits associated with products and services is dependent not only upon the acquisition of skills or the transfer of skills to another entity, but upon the expectations, feedback, and motivation the consumer possesses and receives from external sources (Bateson 2002; Gilbert 1996). The combination of these factors, which this paper defines as vision, access, incentive, and expertise, forms a coproduction experience model that offers organizations a framework of the causal factors that make self-service possible in the context of coproduction and value creation. The aim of this research is to investigate which consumer performance factor has the strongest influence on consumers’ success and satisfaction with products and services. Given the exploratory nature of our research the design of the study is based on critical incident technique (Bitner, Booms, and Tetreault 1990; Meuter et al. 2000). This methodology involves collecting actual stories that describe, in as much detail as possible, situations in which an organization enables or restrains customer performance. These stories are then classified to uncover patterns or themes, in this case using the coproduction experience model as the primary classification structure. A convenience sample of 144 students in an introductory marketing class was invited to participate in the study. Participation involved posting up to two stories on a webbased bulletin board during a two week period in exchange for extra credit. Participants were asked to write stories of at least 200 words that reflected their personal experience with performance success or failure in one of the following roles: (1) a consumer; (2) an employee working with consumers; or (3) an observation of another consumer. Two example stories prepared by the principal investigator provided participants a model of the form, structure, and length expected for the stories. One example story described a tax preparer’s checklist, and the other described a retail clerk teaching a customer about using a camera. Coproduction Experience Model Results A performance orientation for consumers focuses on four key constructs: vision, access, incentive, and expertise. We define vision in terms of two key components, the consumer’s awareness of key performance goals or outcomes, and the feedback the consumer receives related to the achievement of the goals or outcomes. Access defines Seventy percent of the stories reflected situations where consumer performance was enabled, while 30 percent of the stories reflected situations where consumer performance was restrained. In terms of the consumer performance model, a vast majority of the stories (72%) described situations where access had the strongest influ- American Marketing Association / Winter 2005 194 ence on consumer performance, followed by expertise (13%), incentive (9%), and vision (6%). Within access, SSTs were the most often identified influence on custom- er performance (54%), followed by human policies/procedures (29%), and then other non-human solutions (17%). For further information contact: Peter C. Honebein Managerial Sciences Department University of Nevada at Reno 5450 Wintergreen Lane Reno, NV 89511 Phone: 775.849.0371 E-Mail: [email protected] American Marketing Association / Winter 2005 195 THE EFFECT OF EVENT VALENCE ON WAIT MANAGEMENT STRATEGIES Elizabeth G. Miller, Boston College, Boston Barbara E. Kahn, University of Pennsylvania, Philadelphia Mary Frances Luce, Duke University, Durham SUMMARY Most service experiences involve waiting and thus the total experience can be described as being comprised of multiple parts, e.g., arrival, wait, main event, departure, that extend over time. Each of the components of the experience may be associated with different emotions, and consequently, may require different coping resources and strategies which may interact. We examine such interactions by investigating how the expected valence of an event affects two different wait management strategies – providing duration information and reducing wait times – for managing the stress experienced during the wait. Four experiments demonstrate that event valence can moderate, and even reverse, the effects of wait management strategies. Waiting and Event Valence While the literatures on services and operations management have examined many facets of waiting, such research has not considered the effect of the waited-for event on the waiting experience (other than to suggest that people are willing to wait longer for more important events; Houston et al. 1998; Maister 1985). In addition, such research has typically been conducted in non-stressful environments, such as banks or restaurants. In these environments, waiting is assumed to be negative because the event being waited for is either positive or neutral, and waiting is assumed to be the focal source of consumer stress. In contrast, we argue that waits are not always negative and the valence of the event matters. In particular, we propose that delay may have positive effects when the event being waited for is negative or unwanted. The literatures on procrastination, approach-avoidance, and coping provide support for this contention. Specifically, the procrastination literature suggests procrastination is more likely when people want to avoid a task (Greenleaf and Lehmann 1995), while Miller’s (1959) approach-avoidance conflict theory suggests desires for avoidance increase and are stronger than desires for approach as one nears a feared stimulus. These tendencies suggest that desire for delay may predominate over the desire to have the experience completed. Consequently, people may view delay less negatively (and perhaps even positively) in such situations. American Marketing Association / Winter 2005 In addition, various methods of coping suggest that delay can be preferred. In particular, emotion-focused coping attempts often take the form of denial or avoidance (e.g., Lazarus 1991). To the degree that people practice “wishful thinking” or feel that the event is psychologically further away during a wait, delays may be preferable. Similarly, to the degree people use delay to cope, for example, by taking deep-breaths and telling themselves that things will be okay (more of a problem-focused strategy), delay may also be beneficial. Wait Duration and Duration Information Thus, several literatures suggest that under certain circumstances delay can be beneficial and desired. In particular, such considerations are likely to become relevant when people are waiting for events which they find stressful, negative, or otherwise aversive. We suggest that in such negative situations, there are two sources of stress: that associated with having to wait and that associated with the event itself. Further, considering our arguments about avoidance, coping, and procrastination, we believe that interventions designed to attenuate wait stress may have unintended negative consequences on the stress due to the event. In particular, we believe that since duration information – one popular intervention for reducing wait stress – is thought to operate by reducing uncertainty (Hui and Tse 1996; Osuna 1985), it may be particularly harmful. That is, we predict that when the waited-for event is aversive, duration information can actually increase stress, even though this information attenuates stress in more neutral situations. Further, given that increased wait time can be used for coping, we predict that longer waits may actually result in reduced stress (and thus, a better waiting experience) for aversive events, while the reverse finding is typically found in more neutral situations. We examine these two hypotheses across four studies in several different waiting environments. In the first study, in which participants were asked to wait prior to participating in a discussion group where they would either taste soft drinks or be required to give an impromptu speech, we find evidence that duration information can exacerbate stress when people are waiting for an aversive event and that these adverse effects occur because duration information interferes with the coping process. These results are replicated and further supported in study 2, 196 where we find that people who choose to cope with avoidance-oriented strategies respond more negatively to duration information when waiting for an aversive event (watching an aversive film) than those who do not. Studies 3 and 4 extend these findings to a second wait management strategy – reducing wait times – while also lending credence to the notion that delay can have beneficial effects. Implications Based on these findings, we argue that marketers should consider the characteristics of their service or good, as well as the emotional state of their customers, when determining the best way to manage delays. In particular, managers seeking to apply wait management strategies that have been used successfully in one context should be careful when trying to apply those strategies in other contexts, especially when those contexts differ in their valences. For example, hospitals should be wary of mimicking strategies currently employed by banks (and other industries) to reduce the negativity of waits. In addition, this research suggests that for situations involving negative or stressful aspects for consumers, managers should consider wait management strategies other than duration information to manage these waits. Strategies that assist consumers in managing their stress (from all sources) will likely yield the most positive experiences. References available upon request. For further information contact: Elizabeth Miller Boston College 140 Commonwealth Ave. Chestnut Hill, MA 02467 Phone: 617.552.2988 FAX: 617.552.6677 E-Mail: [email protected] American Marketing Association / Winter 2005 197 SEEMINGLY UNRELATED REGRESSION: AN ALTERNATIVE TO TRADITIONAL BRIDGING IN CONJOINT ANALYSIS Niels J. Blunch, Aarhus School of Business, Denmark SUMMARY Splitting a conjoint job involving many attributes into several jobs each containing a sub-population of the original attributes is a well-known method to overcome respondent overload. In traditional bridging the conjoint job is split into two or more jobs each with a subsection of the attributes (taking care not to split correlating attributes into different jobs) and then combining the partial utility functions into one using the technique of bridging. The name indicating that a few of the attributes are included in both (all) conjoint jobs, and are – so to speak – used as bridges to bring the evaluations on a common scale. This is done by estimating the “best” (in an OLSsense) scale factor, by which to multiply the utilities for the bridging attributes in the second design to match the utilities in the first. The hope being that the coefficients of all factors in the second equation should also be made comparable with those of the first equation by multiplication with the same constant. Only rarely will the “regulated” utilities of the bridging attributes from the second design be the same as those estimated from the first design, and consequently we end up with two estimates of the utilities of the bridging attributes, as well as two estimates of the constant. This problem is solved by averaging these utilities. Although bridging has been used in several conjoint studies as an intuitively reasonable – although somewhat rough – method for solving the problem of respondent overload, the method is not quite satisfactory, as it is best described as a sequence of ad hoc’eries. Consequently the statistical (distributional) properties of the model are rather obscure, making traditional testing meaningless – or at least complicated. In order to overcome the weaknesses of traditional bridging, I would suggest Zellner’s seemingly unrelated regression model (SUR). In its basic form, the model is: Σi α X + ε y =β + Σ βZ +ε j y1 = α0 + 2 0 The name “seemingly unrelated” is due to the fact that the one and only connection between the two equations is the (possible) correlation of the error terms. In the present application, the equations model the first and second bundle of conjoint judgements by a single respondent, and the possible correlation between the error-terms is due to the fact that the two equations refer to the same respondent – a fact that is ignored by traditional bridging. Also, we place the restrictions on the estimation of the parameters that the coefficients referring to the bridging attributes are equal across the equations, and the same goes for the two constants. Comparing the Two Techniques In an experiment seventy-nine business students at master level were asked to express on a scale from 0 to 10 their willingness to by 2 x 27 different cars, each described in an 18-attribute profile. A week later they were asked to evaluate five car profiles (with all 18 attributes). This second round was a holdout round, i.e., the data from this round was not used to calculate the preference functions. Rather they were used to evaluate the functions by comparing the results of the holdout round with predictions based on the preference functions calculated on data from the first round. The main results were as follows: 1. Compared to traditional bridging SUR reduced the MAD (Mean Absolute Deviation) by about 30 percent and the correlation between actual and predicted preferences was increased by no less than about 70 percent. These figures are averages taken over the five holdout profiles. 2. The variation of MAD and correlations across the five profiles was considerable smaller for SUR than for traditional bridging – i.e., SUR is more stable. 3. Traditional bridging results in larger uncertainty on parameters estimated in the second evaluation as compared to the first. i i 1 To sum up: The advantages of SUR as compared to traditional bridging are: j j 2 1. where (possibly) cov(ε1, ε2) =/ 0 American Marketing Association / Winter 2005 Estimation and “bridging” is done in one go instead of in tandem. 198 2. The estimation is based on all variables, which makes the result less erratic than traditional bridging, where the result depends solely on the bridged attributes. 3. The uncertainty is more evenly divided among the parameters in the model, whereas traditional bridging favours the first conjoint evaluation. 4. The possible correlation of the error terms – caused by the fact that the two parts of the model are based on data from the same respondent – are taken into consideration, whereas it is ignored in traditional bridging. 5. Unlike bridging, SUR is a formal model with wellknown statistical properties; which means that statistical evaluation and testing etc. can be performed on the total model, and not only on the separate (unbridged) models. References available upon request. For further information contact: Niels J. Blunch Department of Marketing, Informatics, and Statistics Aarhus School of Business Haslegaardsvej 10 DK–8210 Aarhus V Denmark Phone: +45.8948.6688 FAX: +45.8615.3988 E-Mail: [email protected] American Marketing Association / Winter 2005 199 WITHIN-INFORMANT BIAS IN MARKETING RESEARCH James R. Brown, West Virginia University, Morgantown Anjala S. Krishen, Virginia Polytechnic Institute and State University, Blacksburg Pushkin Kachroo, Virginia Polytechnic Institute and State University, Blacksburg Chekitan S. Dev, Cornell University, Ithaca SUMMARY Empirical researchers who investigate managerial issues in marketing (e.g., sales force performance, marketing channel relationships) often rely upon the key informant methodology to report on organizational structure and behavior, both within the firm and among organizations. For example, Brown and Peterson (1994) as well as Weeks, Chonko, and Kahle (1989) have asked sales managers to provide their subjective assessments of the individual salespeople whom they supervise. The problem with such an approach is that, for a variety of reasons, supervisors’ subjective ratings of their subordinates are not independent. This lack of independence violates a key assumption of multivariate analysis (e.g., ordinary least squares regression, structural equation modeling) that the error terms are independently distributed. Violating this critical assumption can result in biased standard errors (Johnston 1984; Kennedy 1998) and unstable parameter estimates (Johnston 1984; Kennedy 1998). Thus, the objective of this paper is to present and illustrate two methods for reducing the biases that occur when key informants report on multiple organizational units (e.g., customer service reps, salespeople, retail managers, channel member firms). Perceptual reports of informants lack independence because of several factors, including halo effects, leniency or harshness, and central tendency (Cocanougher and Ivancevich 1978). Retrospective accounts of performance may also lack independence because of a desire to appear consistent and rational as a result of the consistency motif (Podsakoff, MacKenzie, Lee, and Podsakoff 2003; Podsakoff and Organ 1986). The problem of within-informant bias can be addressed in at least two ways. One is to use data based upon completely independent observations (e.g., John and Reve 1982). Another is to correct for the within-informant bias mathematically. We take this latter approach here. One method that we propose to adjust for withininformant bias is the mean-centering bias adjustment method. Another is the matrix invest-based bias elimination method, a refinement of the first method. American Marketing Association / Winter 2005 We illustrate our two approaches for reducing within-informant bias using data from two concurrent and related surveys of hotel-brand headquarters relationships in the U.S. and Canada. In the first survey, we gathered data from the general managers of a number of hotels representing two well-known U.S. lodging chains. The second survey asked brand headquarters field representatives of these two chains to report on the relationships between the brand headquarters and the hotels that the reps supervised. The two surveys yielded 245 matched pairs – general managers and brand headquarters reps – with complete enough data, representing a 14.2 percent response rate, to illustrate our approach. Further, virtually all of the headquarters reps reported on their relationships with multiple hotels. Hence, the potential for withininformant bias in our data set appears strong. Reliable and valid measures based on these data were used to estimate an identified system of two simultaneous equations, with hotel opportunism and brand headquarters opportunism as the two dependent variables. Our results show that, as compared to the parameter estimates derived from the unadjusted data, the meancentered bias adjustment method strengthens parameter estimates in some cases and weakens parameter estimates in others, while in still other instances, this method has no strong effect on the parameter estimates. The matrix inversion-based bias elimination method operates similarly. In comparing the two correction methods, the inferences drawn from the 2SLS analysis are not different, although certain parameters do vary somewhat. Thus, for our sample, the particular method used to adjust for within-informant bias appears to matter less than the simple act of correcting for that bias. When key informants (e.g., sales managers) report on more than one organizational entity (e.g., salespeople), those reports cannot be considered independent. When used in multivariate analyses, these dependent reports violate the important assumption that the multivariate error terms are independently distributed. As a result, the parameters estimated from these multivariate analyses can lead researchers to make inferential errors. Such 200 errors can be avoided, however, by correcting for withininformant bias (i.e., the lack of independence among key informant subjective assessments). References available upon request. For further information contact: James R. Brown College of Business and Economics West Virginia University P.O. Box 6025 Morgantown, WV 26506–6025 Phone: 304.293.3053 FAX: 304.293.5652 E-Mail: [email protected] American Marketing Association / Winter 2005 201 BUILDING FORMATIVE CONSTRUCT MEASURES: THE EXAMPLE OF CORPORATE REPUTATION Sabrina Helm, University of Duesseldorf, Germany SUMMARY The epistemic relationship between variable and indicators in latent variable structural equation modeling (SEM) is often not considered by researchers, leading to measurement model misspecification (Burke et al. 2003). Latent variables may be associated with reflective or formative indicators. From a conceptual and methodological standpoint, it is very important which kind of indicator specification is used. Taking the example of the construct of corporate reputation, the paper therefore raises two research questions: 1. How can the correct mode of indicator specification be determined for a complex construct? 2. How can a formative approach to measuring reputation be developed and tested? Due to a resurgence of interest in corporate reputation, an abundance of different definitions of the construct can be found in the literature. Wartick (1992, p. 34) for example defines corporate reputation as “the aggregation of a single stakeholder’s perceptions of how well organizational responses are meeting the demands and expectations of many organizational stakeholders.” In accordance to this and similar definitions, corporate reputation can be understood as a construct based on a firm’s contributions to its stakeholders. This understanding is also relevant concerning the most discussed reputation measures such as Fortune’s “Most Admired Companies” or the “Reputation Quotient” developed by the Reputation Institute. In empirical terms, this definition of reputation results in the formative conceptualization of the measurement model for reputation as rankings are used to measure reputation and to compare companies based on their reputation. Rankings and indices are classical examples of formative construct conceptualization. But as the literature on the two measures implies, they are created using reflective indicators. In the paper, the meaning of a formative and reflective structure of a measure is pointed out in detail. Using reflective indicators, the researcher assumes that the observable indicators represent the construct, the direction of causality runs from the construct to the items. These are interchangeable which means that the construct is unidimensional and the items correlated; they are required to share the same antecedents and consequences. An in- American Marketing Association / Winter 2005 crease in one indicator is accompanied by increases of the other indicators. If reputation were modeled as a reflective construct, the indicators – understood as a stakeholder’s perceptions of (e.g., product quality, treatment of employees, management quality, care for the environment, etc.) – are interpreted as “effects of a construct“ (Bollen and Lennox 1991, p. 305). Reputation leads to these effects meaning that reputation determines the quality of products, the quality of management, the treatment of employees, and so forth, as outcomes of reputation. Formative indicators “cause” the latent variable, they represent different dimensions of it. The construct is a summation of the formative observed variables associated with it meaning that changes in the indicators change the construct. The indicators need not be correlated or represent the same underlying dimension (Bollen and Lennox 1991). Conceptualizing corporate reputation as a formative construct means that the indicators lead to the construct as inputs which seems to be the more suitable relationship between indicators and construct. Reputation is an aggregation of all its indicators such as product quality or treatment of employees. This implies that because it delivers high quality products, a firm has a good reputation; because it treats employees right, it has a good reputation, and so forth. The process of conceptualizing a formative measurement model for reputation is different to the process used for reflective modeling. In the paper, the process is discussed in detail following a set of conceptual criteria to clarify the construct’s epistemic nature. An empirical study in the consumer goods sector serves to illustrate the tasks associated with formative modeling. Diamantopoulos and Winklhofer (2001) suggest a four step approach for index construction, which is used for guidance in our study of reputation. It includes content specification, indicator specification, test for multicollinearity, and external construct validity. The results of the study support a formative measurement model containing 10 indicators. As some of the indicators have low weights (which are the equivalent for loadings in reflective measurement models), the discussions part of the paper is devoted to the implications of formative modeling and the handling of low weights. Generally, ex-post removal of indicators is not considered an option if the formative construct is changed by that deletion procedure (Diamantopoulos and Winklhofer 2001). The findings imply that the individual differences in the importance that stakeholder groups attach to the 202 proposed reputation dimensions need to be investigated more closely. If the importance – meaning the weights of the formative indicators – would prove to be low in one stakeholder setting, but high in another, measurement models for reputation could be adapted to the stakeholder groups if this were acceptable for formative models. This finding would corroborate some authors’ understanding that different stakeholder groups “give different weight” to the reputation dimensions. Eliminating low-weighted indicators would result in a shortened, stakeholder-specific list of indicators. Of course, this would reduce the capacity of the measure to compare different stakeholder groups’ perceptions of a certain company – thereby limiting a study’s generalizability. SELECTED REFERENCES sumer Research, 30, 199–218. Diamantopoulos, A. and H.M. Winklhofer (2001), “Index Construction with Formative Indicators: An Alternative to Scale Development,” Journal of Marketing Research, 38, 269–77. Wartick, S.L. (1992), “The Relationship Between Intense Media Exposure and Change in Corporate Reputation,” Business & Society, 31, 33–49 Bollen, K. and R. Lennox (1991), “Conventional Wisdom on Measurement: A Structural Equation Perspective,” Psychological Bulletin, 110, 305–14. Burke, Jarvis C., S.B. Mackenzie, and P.M. Podsakoff (2003), “A Critical Review of Construct Indicators and Measurement Model Misspecification in Marketing and Consumer Research,” Journal of Con- For further information contact: Sabrina Helm Department of Marketing University of Duesseldorf Geb. 23.31, Universitaetsstrasse 1 40225 Duesseldorf Germany Phone: ++49.211.811.13 49 FAX: ++49.211.811.52 26 E-Mail: [email protected] American Marketing Association / Winter 2005 203 EFFECTS OF ONLINE STORE ATTRIBUTES ON CUSTOMER SATISFACTION AND LOYALTY Miao Zhao, Roger Williams University, Bristol Ruby Roy Dholakia, The University of Rhode Island, Kingston SUMMARY With the emergence of computer-mediated communication (CMC), online stores are experimenting with attributes that are unique to the new media. There is a choice of many attributes (such as search engine, ordering system, order status tracking, customer survey, personalization, and virtual reality display, etc.), each performing a specific function and distinct from other attributes within the website. In addition to deciding which attributes to include and how to specifically operationalize the selected attributes, online store managers are also concerned about the impact of an attribute or a set of attributes on customer satisfaction and loyalty. While there is an established body of literature and decades of experience regarding the design of physical stores, the new world of online stores and website attributes are now beginning to receive attention. In addition to describing multiple attributes, several authors have attempted to categorize them into “must have” and “should have” attributes (e.g., Burke 2002). Given the large number of possible attributes as well as the changing nature of technology that makes new attributes increasingly possible, it is not surprising that there is a lack of consensus regarding “must have” and “optional” attributes. Online Store Attributes and Customer Satisfaction In this paper, the main focus is on the relationships between online store attributes and customer satisfaction. While Baker (1986) and Bitner (1992) proposed categories of attributes that impact consumer responses to retailer cues, Eroglu, Machleit, and Davis (2003) argue that these typologies do not easily translate into the online world. Existing empirical research is limited. We report on an empirical study designed to test whether retail store attributes affect users’ satisfaction with and loyalty to the website. Secondary data, collected at the online store level, were compiled directly from www.bizrate.com in August 2003. Customer ratings on 1079 individual online stores were collected. First, factor analysis of 12 attributes (excluding “overall look and design of site”) was performed and the results indicate that the time at which the measures are taken contribute to the factor loadings; hence the two factors are labeled “at check out” and “after delivery.” The two factors explain 68 percent of the variance. Second, several multiple regression analyses are performed to examine the relationship between the attributes and the attributes and customer satisfaction and loyalty (intention to revisit). Website Attributes Using Ghose and Dou’s (1998) classification of website attributes, we first attempt to identify potential attributes across four different types of websites – communication, entertainment, information, and transaction (online store). With so many website attributes to choose from, our analysis suggests that transaction (or online store) sites are more likely to include certain types of attributes. It also suggests that online stores are “attribute rich” – potentially containing the maximum number (16) of the 25 specific attributes. It is also very likely that online stores will differ not only on the number of specific attributes incorporated within specific websites, but also how a specific attribute such as “customer support” is operationalized. These variations create important challenges for research on the effects of individual attributes on customer satisfaction and loyalty. American Marketing Association / Winter 2005 From the analysis of the customer ratings, we draw some conclusions regarding the influence of online store attributes on site design, satisfaction and repeat purchase intentions. First of all, “ease of finding what you are looking for” and “clarity of product information” are the two most important attributes for generating positive ratings of overall look and design of the site. The analysis also suggests how specific attributes are operationalized are as important as whether or not a specific attribute is included. We also find that the time gap between interacting with a site and evaluating the experience or indicating revisit intentions affects the impact of attributes; some attributes persist in their impact. Others appear to lose some of their impact. 204 Since the analysis relied on secondary data from Bizrate, interpretation of results and conclusions must consider several methodological limitations. While the customer ratings were acquired twice, the temporal association of the second set of attribute ratings with the dependent variables seems to be the primary reason for the observed relationship. Also, it is not surprising that “fulfillment” variables such as “on time delivery,” “product met expectations” became the dominant attributes influencing online store ratings once the customer received actual delivery of the product. These fulfillment variables are biggest challenges to all non-store retailing, including internet retailing. This suggests that the most creative, interactive, vivid online site won’t compensate for weak fulfillment and customer support capabilities. References available upon request. For further information contact: Miao Zhao Roger Williams University One Old Ferry Road Bristol, RI 02809 Phone: 401.253.5351 E-Mail: [email protected] American Marketing Association / Winter 2005 205 ORGANIZATIONAL FACTORS RELATED TO EFFECTIVE CUSTOMER INFORMATION SYSTEMS PRACTICES Debra Zahay, Northern Illinois University, DeKalb SUMMARY Organizations are continually reassessing and realigning their capabilities and seeking to enhance their business performance. There are many factors that contribute to organizational success. In recent years, many firms have turned to a new area, the management of Customer Information Systems (CIS) (Zahay and Griffin 2004) or the use of customer information in systems such as Customer Relationship Management (CRM) systems (Reinartz, Krafft, and Hoyer 2003), to contribute to firm profitability. In addition, failure rates of applications associated with customer information, like Sales Force Automation (SFA) and Customer Relationship Management (CRM), remain high, averaging 50–60 percent (Rigby et al. 2002) and empirical support for their contribution to management success is ongoing. Therefore, factors not included in these prior studies must explain the variance between firms in terms of the use of customer information and its translation of the use of those difficult-to-imitate resources into ultimate firm performance. One possible explanation for these differences is organizational implementation factors. For example, in New Product Development, organizational factors are found to be important in developing successful new products In-depth interviews with 17 managers in REFERENCES Reinartz, Werner, Manfred Krafft, and Wayne D. Hoyer (2003), “Measuring the Customer Relationship Management Construct and Linking it to Performance Outcomes,” Teradata Center for CRM at Duke University Working Paper Series (www.teradataduke. org). five firms identified specific organizational factors pertinent to the management of customer information in a strategic context. One exemplary company was compared to four others to uncover organizational issues and processes leading to effective management of customer information. During the interviews a pattern emerged which indicated how customer information is integrated throughout the organization in a manner similar to the process by which new products are successfully managed within the organization. Co-location, teamwork, and functional integration were recurring themes. Although one exemplary company seemed to do an outstanding job of collecting and disseminating information, all firms struggled with issues of inter-functional conflict, including the role of the sales force in contributing data to these systems. However, there also appear to be organizational factors somewhat unique to the management of customer information. For example, customer-centric strategies are developed interactively as a dialogue between middle and upper management, using customer data and competitive trends. The similarities and differences of the CIS process to the NPD process is the organizing structure of the results section of the paper, which is available upon request from the author. Rigby, D.K., Frederick F. Reichheld, and Phil Schefter (2002), “Avoid the Four Perils of CRM,” Harvard Business Review, 80 (2), 101–109. Zahay, Debra and Abbie Griffin (2004), “Customer Learning Processes, Strategy Selection, and Performance in Business-to-Business Service Firms,” Decision Sciences, 35 (2), 169–203. For further information contact: Debra Zahay Northern Illinois University DeKalb, IL 60115 Phone: 815.753.6215 FAX: 815.753.6014 E-Mail: [email protected] American Marketing Association / Winter 2005 206 MARKETING CONSIDERATIONS IN WEIGHT CONTROL: PRELIMINARY FINDINGS Angela Hausman, University of Texas – Pan American, Edinburg SUMMARY Americans are fat, and getting fatter (Martin, Robinson, and Moore 2000). Despite this over-consumption, people are not eating healthier (Kim, Nayga, and Capps 2001). Consumers are not happy about this trend – that is why they spend billions of dollars trying to correct the defects caused by overeating (Thompson and Hirschman 1995) and 120,000 each year will die prematurely due to nutrition related ailments (Frazao 2000). Governments are not happy about it either – that is why they spend billions of dollars promoting healthier food consumption. Taxpayers and insurance carriers are not happy – since medical costs associated with obesity account for five percent of direct and ten percent of indirect costs (Martin, Robinson, and Moore, Robinson, and Moore 2000). The food industry is not happy as customers line up to file lawsuits blaming restaurants for their excess weight (CBS Evening News 2003). Nothing seems to help. Consumers take off weight through expensive diet programs, pills, surgery, and exercise only to put it back on again. Promotional advertising and educational programs run by the government and insurance companies fall on deaf ears (Wansink 2002). Nutritional labeling, once thought to be the panacea for enabling consumers’ desires to eat healthier, does not appear to be having the desired effect (Hill et al. 2002). Marketing studies have developed models attempting to explain why consumers engage in behaviors that thwart weight control goals. For instance, Bagozzi and various colleagues have developed the theory of trying, and more recently, the theory of goal directed behavior, which explain more of the variance in observed behaviors by incorporating past efforts, control, and desires as antecedents of food consumption (cf., Bagozzi and Warshaw 1990; Bagozzi and Edwards 2000). Recently, Wansink (2002) contributed to this understanding by reviewing research related to World War II efforts to modify food consumption. His study underscored the importance of food availability and familiarity in evaluations of food acceptability. Unfortunately, most of these studies suffer from narrow sampling frames – mainly employing students – and low explanatory ability. Developing reliable and valid measures of modeled constructs has also contributed to the lack of theoretical progress in understanding these behaviors (Bhaskaran 2002). American Marketing Association / Winter 2005 This study attempts to create a more comprehensive understanding of the factors affecting weight control efforts by employing non-student samples and building on Perugini and Bagozzi’s (2001) Model of Goal Directed Behavior (GDB). The resulting model, while developed in the context of weight control, might be equally valuable in understanding similar purposive behaviors, including other health behaviors such as smoking cessation and exercise, dark-side consumption behaviors, such as gambling and eating disorders (Hirschman 1992), and other process behaviors (Bagozzi and Edwards 2000). Hypotheses tested were: H1: (a) Negative attitudes toward diet foods and (b) negative attitudes toward giving up non-diet foods negatively affect the relationship between desires to control weight and performance of weight control behaviors. H2: The perceived usefulness of food information positively affects the relationship between desires and performance of weight control behaviors. H3: The perceived ease of implementing food restrictions positively affects the relationship between desires and performance of weight control behaviors. H4: Mood states affect the performance of weight control behaviors. H5: Satisfying social needs negatively affects performance of weight control behaviors. A preliminary questionnaire was developed and distributed to members of the community using a quota sampling technique. Using a system similar to the one employed by Keaveney (1995), data quality was assessed by contacting randomly selected respondents from each sample. These procedures produced a usable sample size of 199. Existing scales were used to measure constructs. Reliability assessment demonstrated acceptable Cronbach’s alpha for all scales. Analysis showed 95 respondents were not trying to lose weight, while 101 were, using a median split on intentions to lose weight next week as the criterion. As expected from prior research, more women than men were trying to lose weight. Dieters also tended to be under 40, 207 single, and better educated. The effect of income and dieting appeared bimodal, with lower and higher income earners being more likely to be dieters than those in between. Demographic factors affected these variables, showing that women are likely to diet more frequently than men, as are those who are married and working full time. To understand factors effecting weight control, a series of hierarchical regressions were conducted using performance of weight control behaviors as the dependent variable. The regression was run first on the entire dataset, then on subsets of those who are attempting to lose weight and those who are not. Variables were added in sequential blocks starting with exogenous variables and ending with the proposed moderators on performance. Resulting regressions were all significant (at .05 level) and the explained variance was 41.6 percent for the entire dataset, 51.1 percent for dieters, and 47.4 percent for non-dieters, providing superior explanatory ability over those obtained using the GDB alone (r2 = .25), although the variables are best at explaining the behavior of dieters as would be expected. References available upon request. For further information contact: Angela Hausman Management, Marketing, and International Business University of Texas – Pan American 1201 W. University Drive Edinburg, TX 78504 Phone: 956.381.2826 FAX: 956.384.5065 E-Mail: [email protected] American Marketing Association / Winter 2005 208 PRODUCT INVOLVEMENT AND PLACE ATTACHMENT: INSIGHTS FROM THE ENVIRONMENTAL PSYCHOLOGY LITERATURE Merlyn A. Griffiths, University of California, Irvine ABSTRACT Discussions of person-product bonding relationships in the consumer behavior literature have focused on consumer involvement with one category of products; namely physical goods. Yet, evidence exists that people have similar relationships with other types of products like place. Environmental Psychology recognizes personplace bonding relationships as “place attachment.” Drawing on the literatures of product involvement in consumer behavior and place attachment from environmental psychology, this paper provides a conceptual framework through which to understand consumer bonding relationships with places. INTRODUCTION Although products have been defined in the typical marketing textbook to include person, physical good, organization, service, events, properties, places, experience, information, and ideas; anything that can be offered to a market to satisfy consumers want or need (for example, Kotler 2003, p. 407), a preponderance of the consumer behavior literature on product involvement emphasizes consumers’ involvement with physical goods. However, evidence exists that people have similar relationships with other types of products like places. Bonding with places, similar to involvement with products, objects, personal possessions, and other people, is recognized as a universal human phenomenon. Person-place bonding relationships although not classified as such, exist minimally in the consumer behavior literature as part of consumer consumption of places. For example, Penaloza (2000, 2001) demonstrates consumers’ place attachment to the American West through the recreation and commoditization of the Wild West era in American history, through Rodeo and Stock Shows. This reenactment of America’s rich historical legacy has international appeal, and is relived in the United States, Europe (e.g., Old Texas Town in Berlin), and the United Kingdom. It is the cultural meanings ascribed to the West, the values of freedom, family, and naturalism which facilitate the formation of person-place bonds with this historic place of an era long ago. From a psychological standpoint, person-place bonding, similar to person-person attachment (like the bond between infant and caregiver), is a biological human American Marketing Association / Winter 2005 function for attaining security, comfort, connectedness, and survival (Ainsworth and Bell 1970). An apparent congruity exists between the bonding relationships consumers develop with products and that which they develop with places. Although consumer product involvement is extensively studied (e.g., Andrews et al. 1990; Beatty et al. 1988; Bloch 1982, 1984; Higie and Feick 1989; Laaksonen 1994; Lastovicka 1979; Lastovicka and Gardner 1978; Laurent and Kapferer 1985; Richins and Bloch 1986; Zaichkowsky 1985, 1986, 1994), relatively little is known about consumer involvement with places. Unlike the products studied in the consumer behavior literature regarding involvement (e.g., cosmetics, automobiles, clothing, etc.), places offer a wide variety of uses, activities, settings, cultures, and landscapes that marketers can use to build an ongoing relationship with consumers, emphasizing various enticing and attraction factors. These attributes of places, maintain stability as the geographic location and spatial nature of the place never changes (e.g., Brazil never ceases to be Brazil), however, the adventures, excitement, and experiences one can engage in is limited only by the individual’s imagination. Person-place bonding relationships have been recognized in environmental psychology as “place attachment.” This literature offers potentially significant theoretical contributions to the product involvement literature by expanding the range and type of products studied to include “place” as a product. First, it broadens our understanding of person-place relationships that contribute to the individual’s identity. The strength of individuals’ attachment to place is determined by the degree to which they perceive the place as being an innate part of their existence, self image, and self concept (Sirgy 1982), similar to the strength of one’s attachment to personal possessions. As Belk (1988) describes, possessions become a part of the extended self. The extended self, he summarizes, include “body, internal processes, ideas and experiences, and those persons, places, and things to which one feels attached” (p. 141). Thus, one’s identity is tied to the categories of things equated to be a part of the self, including places. Consequently, if place can be a part of the extended self like material possessions, then place must be ultimately tied to one’s identity. Place as it relates to one’s identity is identified in the environmental psychology literature as place identity which is one of the determinants of place attachment representing the emotive and affective aspects including preferences, feelings, and values (Proshansky 1978). 209 Second, place attachment adds to our understanding of the mobility of meanings (McCracken 1986) ascribed to place by individuals. McCracken’s (1986) theoretical account of meaning movement emphasizes the transfer of meaning from the culturally constituted world to the consumer good, to the individual consumer. The place attachment literature presents a theoretical framework through which to explore the breadth of meaning movement by extending our understanding of how and why person-place attachments are formed, the symbolic meanings ascribed to place and the relevance and importance that characterizes these meanings for the individual. Third, understanding how different types of attachments are classified will help researchers clarify boundaries of not only place attachment, but also attachments to brands, products, and material possessions. Kleine and Baker (2004) recognized the lack of overlap between the place attachment literature and possession attachment in consumer behavior, and make a pressing call for researchers to integrate both literatures to broaden the scope of attachment research, further clarifying boundaries, meaning, and value of person-object and person-place bonding relationships. Understanding consumers’ involvement and attachment to places has practical implications for both relationship and place marketers (i.e., tourism and destination marketers) as well. As many segments of the tourism industry reach the maturation stage, these providers of experiential consumption scramble to enhance customer’s psychological attachment to place by seeking to build long term programs that communicate investments of love, status, and reciprocal loyalty (Morais et al. 2004). Leisure and recreation providers have sought to not only understand the formation of and processes involved in person-place bonding relationships, but also the impact on consumer commitment, satisfaction and loyalty to place (Iwasaki and Havitz 2004). For relationship marketers whose primary focus is building strategies of personalization (i.e., one-on-one interaction) individualization (i.e., specific needs and preferences) and continuity (i.e., repeat patronage) (Gordon et al. 1998) comprehension of the process and degree to which consumers’ attachment to places evolves, presents invaluable information in influencing consumer preference, expectation, satisfaction, and loyalty (Lau and McKercher 2004). Although the social aspects of place are often emphasized by these marketers, some promote the importance of bonding with the physical place. Summer camps, for example want individuals to be attached to the place independent of the people that may be a part of the place. In this respect, the physical space, rather than merely social ties, drives campers to return each year, even if their friends do not. Institutions like colleges and universities yearn to increase place bonding relationships with their alumni to gain benefits like increased donations and positive wordAmerican Marketing Association / Winter 2005 of-mouth. These institutions strive to endear alums to the school independent of social ties to other alums. For many alumni the physical place is endowed with relevance and meanings often ascribed to churches, synagogues, or religious institutions. For example, some universities like University of Richmond and University of Virginia are offering columbariums or burial sites on campus, the ultimate extreme in person-place bonding with the physical place even after death. Place as an Entity Place refers to space that has been given meaning through personal, group, or cultural processes (Low and Altman 1992). As a spatial entity to which people develop attachments, place can vary in scope, size, and scale. It can be tangible versus symbolic, known and experienced versus unknown or not experienced (Low and Altman 1992). The tangible, known and experienced places are for example, homes, neighborhoods, communities, and cities. Bonding with these everyday familiar places occurs as a result of long term residential exposure. Similarly, recreational places visited (e.g., Appalachian Trail, Hawaii, Jamaica, Disneyland) are also tangible, known and experienced places however, the experience is short term and non-residential in nature. Yet, special feelings of connectedness develop toward these places that are experienced for a short period of time. Symbolic, unknown and unexperienced places (e.g., heaven, Italy, if one has never visited) are places that have not been physically experienced by the individual. The activities, rituals, or landscape are elaborated on only through the individual’s imagination, influenced by stories, readings, or pictures (i.e., TV, magazines, and internet). Yet for many individuals and groups, although there is no actual exposure in the physical sense with these places, an existential bond develops. An example of an individual’s involvement and subsequent attachment to a place is the 1995 film “While You Were Sleeping,” where the main character (played by Sandra Bullock) has a fantasy world of romance that includes an attachment to Florence, Italy, a place she has strong desires and affinity for, but has never visited. She carries a passport daily in hopes of one day going there. Her endearment to Florence is further evident in the way she speaks of the place as a significant part of her life. The level of her involvement and attachment to this place is based on the feelings and romantic meanings she ascribed to Florence, implying a revered place that if she were to physically experience it, would represent a phenomenal accomplishment. Thus, a place with strong self relevance in its meanings to the individual will be salient in thoughts, have a high degree of emotional significance and expectation of future experiences imagined or anticipated to be possible in that place. 210 Much of the environmental psychology literature emphasizes longevity in residence as a requirement for place attachment to develop. However, Stueve, Gerson, and Fischer (1975) found that the effect of length of residence on feelings about a locale is largely explained by the mediation of local ties. This finding weakens studies that argued that attachment develops as a direct result of length of residence. The narrow geographic view and the bounded condition relegated by the length of residence have limited our understanding of place attachment, a complex and multi-faceted phenomenon (Manzo 2003). This limitation was addressed when Low and Altman (1992) extended the spatial range of previous studies, and asserted that people can be attached to places of varying scale, specificity, and tangibility, from the very small, like objects, to the nation, planet Earth, or the Universe. In a recent study, Hidalgo and Hernandez (2002) found that attachment can also develop after brief contact with place. The subjects in the study demonstrated attachment type behaviors after only short term exposure to place, in particular where the opportunity for social interaction was absent. This finding demonstrates that people can develop attachment to places after short term exposure, and in the absence of social relationships that are typically formed through long term exposure. Based on the arguments above, it is my position that place attachment can also be formed through short term non-residential exposure (i.e., recreational or tourist places) or even non-exposure (i.e., wanting to visit Italy) to a place. This paper introduces place attachment to the consumer behavior literature in an effort to extend our understanding of person-place bonding relationships. Drawing on well-established theories and empirical studies of place attachment from environmental psychology, this paper aims to provide a conceptual framework through which to understand the characteristics of people-place bonding relationships. The goal is to examine the properties of product involvement in its applicability to place as a product. In the sections to follow, an abbreviated review of the place attachment and product involvement literatures is presented, followed by a summary of the key concepts of person-place bonding relationships and potential implications for the product involvement literature. LITERATURE REVIEW (Abbreviated) Place Attachment Place attachment is a complex phenomenon that integrates many aspects of person-place bonding. In the environmental psychology literature, theories of place attachment involve the affective aspects of bonds people form with places (Low and Altman 1992). The emotional qualities are often accompanied by cognition (thought, American Marketing Association / Winter 2005 knowledge, and belief) and practice (action and behavior) (Low and Altman 1992). Within the intellectual milieu, place attachment research builds on the premise that people develop long-standing and meaningful relationships with places. Place attachment can develop through four distinct ways; namely; biological, the evolutionary and physiological adaptations and ecological fit of people to places (Riley 1992); environmental, the interactional experiences of cultural ecology (Hufford 1992); psychological, the experiences across life stages from childhood to adult life (Chawla 1992; Cooper-Marcus 1992; Rubinstein and Parmelee 1992); and sociocultural, the social norm and ideologies, ritual performance, and culturally shared meanings (Ahrentzen 1992; Low 1992). Like product involvement, place attachment has wide variability in its definition and operationalization across studies. According to Low and Altman (1992) place attachment is the bonding of people to places. Hummon (1992) identifies it as an “emotional involvement with places” (p. 256). Low (1992) considers it as “an individual’s cognitive or emotional connection to a particular setting or milieu” (p. 165), and Shumaker and Taylor (1983) views it as a “multilevel person-place bond that evolves from specifiable conditions of place and characteristics of people, and that has implications for the attitudes and behaviors of individuals toward their sociophysical environments” (p. 223). Consensus however, leads to the definition adopted in this paper: place attachment is “a positive affective bond between an individual and a specific place, the main characteristic of which is the tendency of the individual to maintain closeness to such a place” (Hidalgo and Hernandez 2001). In this respect, maintaining closeness includes nearness in physical proximity, cognitive closeness through the imagination, and/ or emotional closeness through the feelings evoked when the place is considered by an individual. Studies of place attachment in environmental psychology first establish a geographic or conceptual terrain of interest as the boundary place to which attachment develops. With few exceptions studies have emphasized limited spatial range of place to routinely familiar places: homes (Ahrentzen 1992; Brown et al. 2003; Harris et al. 1996; Hidalgo and Hernandez 2001), near-home territories (Fuhrer et al. 1993), home town (McAndrew 1998); neighborhood (Bonaiuto et al. 1999; Low 1992) community (Hummon 1992; Pretty et al. 2003; Riger and Lavrakas 1981) and city (Brown and Perkins 1992). These limited spatial ranges represent the tangible, known and experienced aspects of place, which carries a necessary requirement of longevity in residence as a determinant of place attachment. Each type of place offers different experiences and exposure that facilitates the forming of bonds. 211 Spatial Ranges of Place Home: Home as a place we inhabit has many meanings. It is the stage of much of our everyday performances, and cultural artifacts eliciting important meanings to people (Ahrentzen 1992). As a primary territory, home affords residents a sense of control that is rarely experienced in other locations. Home is a safe haven, a place of connection with family, a setting for enjoyed activities, and a medium for identity displayed (Harris et al. 1996). Thoughts of home can elicit powerful memories and affective responses, as among other meanings, home can mean the house one grew up in, the setting where love was first felt, the dwelling where one raised children (CooperMarcus 1992). In his focus on attachment to possessions, Belk (1992) posits that we spend much of our lives in our homes; our desire for what he calls “homeyness” results in feelings of attachment to home. Neighborhood: Neighborhood has been considered the range most important in the formation of attachment bonds, thus the most often studied (Hidalgo and Hernandez 2001). A neighborhood has as its main composition people and the interrelated social ties among them. According to Rubinstein and Parmelee (1992) “life stage and patterns of interdependence are consistent influences on the nature and objective manifestations of emotional bonds with neighborhoods” (p. 150). Neighborhood social ties are held together through group collective behaviors that also serve to maintain order and cohesiveness among the residents. The physical boundaries of neighborhoods vary in size and configuration, and are a result of the residents’ collective demarcation and sentiments (Lawrence 1992). Neighborhoods are an extension of individuals collectively coexisting. Brown et al. (2003, 2004) examined attachment to neighborhood by focusing on the neighborhood blocks as the level analysis. The complexity in a neighborhood has at its source the wide heterogeneity of residents, demographically, socioeconomically, and ethnically, making it a more dynamic concept for place attachment studies. Community: Communities are a composition of multiple neighborhoods, allowing for a wider range of interaction among residents of the neighborhoods that make up the community. According to Riger and Lavrakas (1981) “attachment to communities refer to the neighborhood as a “network of necessities, that go beyond the minimal level of functional necessity and become conscious communities, in which attachment persists because of adherence to a clear set of values, despite the absence of traditional functions which formerly bound people to neighborhoods” (p. 57). A key indicator of community attachment is greater freedom of behavior, exploration, confidence, and affective responses within the local community (Fried 2000). American Marketing Association / Winter 2005 City: The city, larger in spatial range than home, neighborhood and community, represents collective or group ownership of public space and place. As a possession to which individuals and groups become attached, Belk (1992) identified city as “a collection of monuments, including buildings, cemeteries, and museums that extend our personalities” (p. 43). The city encompasses the community, neighborhood, and homes. In this respect, the city allows for further exploration by the residents (insiders), and non-residents (outsiders) alike. As the city is public domain, it is likely that transient non-resident individuals more than residents would utilize the collective sites (museums, monuments) and other public establishments. Determinants of Place Attachment Several concepts have emerged in the environmental psychology literature focusing on person-place bonding, that have been used inconsistently and in some cases interchangeably in the literature. In particular, place identity (Proshansky et al. 1983); place dependence (Shumaker and Taylor 1983), and sense of place (Hay 1998) are most commonly used. The concepts are behaviorally related in that they are concerned with the bonds between people and places. However, in some studies, the concepts have been operationalized as consequences of place attachment, while in others one term has been used to encapsulate the others. Twigger-Ross and Uzzell (1996) for example, purport that place attachment functions to support and develop aspects of place identity. Jorgensen and Stedman (2001) posits that place attachment, place identity, and place dependence are three dimensions of sense of place. Kyle et al. (2004) claims place identity and place dependence are dimensions of place attachment, and Pretty et al. (2003) emphasizes place attachment and place dependence are two of three indicators of place identity. The significant overlap in terminology and definitions of these place related constructs and the lack of uniqueness in operationalization should signal researchers to consider whether these concepts are the same or whether they are theoretically different ways of looking at the same phenomenon: person-place bonding. In this regard, it is logically necessary to examine these constructs to ascertain each of their relation to place attachment and applicability in understanding individual and group bonding relationships with place. Place Identity: Place identity has been defined as “those dimensions of the self that define the individual’s personal identity in relation to the physical environment by means of a complex pattern of conscious and unconscious ideas, beliefs, preferences, feelings, values, goals and behavioral tendencies, and skills relevant to this environment” (Proshansky 1978, p. 155). Place identity relates to “the variety and complexity of physical settings 212 that define the day-to-day existence of every human being” (Proshansky et al. 1983, p. 59). Thus, place identity is one of many facets of an individual’s self-identity that helps in structuring experiences with physical places (Shumaker and Taylor 1983). Place identity is most concerned with how places form identity (Moore 2000), and how a place shapes or builds aspects of an individual’s self identity. For example, a person who identifies with the neighborhood of the South End of Boston might identify himself or herself as a “Southie,” expressing the dimension of self that is defined by and related to the physical environment. The strength of the individual’s emotional attachment to place is based on self definitions of who and what he or she is relative to place (Proshansky et al. 1983). Thus, for an individual to become attached to a place they must first identify with the place. It is the meanings they ascribe to the place that enforces the feeling of similarity, belonging, and relatedness. Place attachment is integral to self-definitions (Brown and Perkins 1992), making place identity the reinforced symbolic representation of the self that identifies with the particular place. In this respect, place identity is representative of the emotive and affective aspects of place attachment. It is the intimate selfinterpretation of what an individual may take to be a sign or locus of one’s identity. Place Dependence: Place dependence refers to “an occupant’s perceived strength of association between him or herself and specific places” (Stokols and Shumaker 1981, p. 457). The strength of the association between person and place is based on the individual’s comparative judgment of the current place as a mechanism to satisfy needs and goals, and expectations of having goals and needs met by alternative comparable places (Shumaker and Taylor 1983). The outcome from each option may be negative; meaning that the current or alternative place may not be ideal in satisfying the individual’s goals. However, in comparison, the judgment is made to choose the better of the two less than ideal options. Place dependence is therefore setting specific, as its main concern is the adequacy of fit between the individual’s goals and the particular place, and the achievement of those goals. It is the functionality of the place that drives the level of dependence an individual develops to the place. Place dependence differs from place attachment in two ways. First, place dependence can be negative depending on the limitations of the place in achieving the individual’s desired goals; and second, the strength of the connection between the person and place is based on specific behavioral goals rather than general affect (Jorgensen and Stedman 2001). The functional aspect of place dependence suggests it is representative of the “commitment to place” aspect of place attachment. Sense of Place: Sense of place is the meaning attached to a spatial setting by a person or group. Further, American Marketing Association / Winter 2005 sense of place is not imbued in the physical setting, but resides in human interpretations of the setting (Jorgensen and Stedman 2001). As viewed by Hay (1998), sense of place can be broader in context than place attachment, as a result of the “subjective qualities, and the sensing of place to create personal meaning” (p. 7). Shamai (1991) describes sense of place as having levels of intensity of feeling and behavior from belonging (affiliation) and attachment (special affinity) to commitment (ready to do something for the place). He further notes that “place is never merely an object, but a part of a larger whole that is being felt through the ‘actual’ experience of meaningful events . . . the experience is felt through all the senses (sight, hearing, smell, taste, and touch)” (p. 348). From this perspective, it can be surmised that sense of place is a necessary requirement for place attachment, as it is the meanings individuals and groups ascribed to the place that feeds attachment. Measurement Approaches of Place Attachment Across studies, the most common measure used to identify the existence of place attachment has been “length of residence” (Bonaiuto et al. 1999; Brown et al. 2003; Riger and Lavrakas 1981). As an indicator of place attachment, length of residence hinges on residents’ demonstration of attachment through physical manifestations like upkeep of the appearance of their homes and property (Jorgensen and Stedman 2001), protecting the home and neighborhood from crime and other incivilities (Brown et al. 2003; Brown et al. 2004), and interacting with other residents (i.e., knowing names of neighbors and neighborhood children) (Mesch and Manor 1998). Length of residence, by the nature of its mandatory requirement of long term participation, neglects attachment bonds that can be formed with temporary residences, places to which exposure is short term or limited, places that are not yet physically experienced, symbolic and other intangible places. Harris et al. (1996) demonstrated that attachment to temporary residence is possible, with their study of attachment to a student housing facility. Kyle et al.’s (2004) study of attachment to the natural setting Appalachian Trail demonstrated that attachment does form through non-residential and short term exposure to place. The length of residence measure is acknowledged as a powerful correlate of attachment; however, it is theoretically problematic as it excludes attachment to non-residential places. A brief review of product involvement is presented here to explore the factors characteristic of product involvement that may be applicable to person-place bonding. PRODUCT INVOLVEMENT Consumer behavior researchers have examined the person-product bonding relationships by focusing on 213 consumer involvement with different product categories. A significant number of empirical studies of product involvement begin by first setting specific parameters identifying a product or object of interest, like automobiles (Bloch and Richins 1983) cosmetics (Coulter et al. 2003) and fashion clothing (O’Cass 2001). As a construct, product involvement has been operationalized in numerous ways, resulting in a great deal of variability in the interpretation of empirical evidence across studies. Coulter et al. (2003) defines product involvement as the personal relevance or importance of a product category; O’Cass (2001) sees it as a person specific characteristic that exists among consumers in varying degrees; Bloch (1986) recognizes it as an unobservable state reflecting the amount of interest, arousal or emotional attachment a consumer has with a product; and Zaichkowsky (1985), Celsi and Olson (1988) and Warrington and Shim (2000) believe product involvement is a person’s perceived relevance of the object or product class based on inherent needs, values, and interests. It is well documented that levels of product involvement exists on a continuum from high to low (Antil 1984; Lastovicka and Gardner 1978; Leavitt et al. 1981). Determination of high versus low is in large part a function of the level of interest in the product and the level of cognitive processing and behavioral activities that the consumer engages in (Antil 1984). Consumers with high product involvement exhibit strong interest in a product that conceivably occupies their thoughts (Richins and Bloch 1986) and demonstrates strong commitment (Warrington and Shim 2000) and enthusiasm (Bloch 1986). Consumers with low involvement product rely on short term memory and routine behaviors or minimal cognitive processing (Leavitt et al. 1981) as they are not closely tied to the product or brand outside of their focal attention (Robertson 1975). As an individually defined phenomenon, involvement with products requires ongoing commitment with regard to thoughts, feelings, and behavioral response (Quester and Lim 2003), emotional connection (Bloch 1986) as a function of the meanings ascribed to the product, and strong personal relevance (Bloch 1986; Bloch and Richins 1983; Higie and Feick 1989). Empirically studied, product involvement has been said to have robust influencing effects on consumer cognitive and behavioral responses, including memory, attention, processing, early adoption, search, brand commitment, satisfaction, and opinion leadership (see Laaksonen 1994). Determinants of Product Involvement Several concepts have emerged in the consumer behavior literature relating to consumer involvement with products. Most often found intermingled with product involvement are brand commitment and brand loyalty. American Marketing Association / Winter 2005 Brand Commitment: Brand commitment and product involvement have been identified as related but distinct constructs (Traylor 1981). These constructs differ in that the object of involvement is a product, while the object of commitment is a brand. In fact, according to Fournier (1998), “brand has no objective existence at all: it is simply a collection of perceptions held in the mind of the consumer. The brand cannot act or think or feel – except through the activities of the manager that administers it” (p. 345). Brand commitment has been defined as an emotional or psychological attachment to a brand or product class (Beatty et al. 1988; Robertson 1976; Traylor 1981; Warrington and Shim 2000). Strong brand commitment has been associated with high levels of involvement (Warrington and Shim 2000), implying the greater the brand commitment, the more firmly fixed is the brand as the only choice for the consumer (Traylor 1981). The strength of the consumer commitment to a brand lies in the distinguishable attributes of the brand and the salience of these attributes relative to the consumer’s belief system in regard to the product (Robertson 1976). However, involvement is not a necessary requirement for commitment, as a consumer can become involved with a product and not be committed to it. Involvement occurs when values important to the individual’s self-image are made salient. Commitment results when these values, selfimage or important attitudes are cognitively connected to a specific situation. In this respect, product involvement leads to brand commitment (Beatty et al. 1988; Coulter et al. 2003; Fournier 1998). Brand Loyalty: Brand loyalty has also been linked to both brand commitment and product involvement. As closely related concepts, distinction in operationalization is often blurred. For example, Quester and Lim’s (2003) study examining the relationship between brand loyalty and product involvement, states that “brand loyalty develops when the brand fits the personality or self-image of the consumer or when the brand offers gratifying and unique benefits that the consumer seeks . . . in both instances, personal attachment develops toward the brand” (p. 26). However, in an earlier study Beatty et al. (1988) claimed that not brand loyalty, but “commitment results when these values, self-images or important attitudes become cognitively linked to a particular stand or choice alternative” (p. 152). Consumer loyalty, as described by Oliver (1999) is “a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing” (p. 34). Thus, loyalty has two distinctive concepts; namely, behavioral which relates to the purchase and repeat aspect, and attitudinal which emphasizes the commitment depth relating to the preferred product or service. This distinction is the basis for the difference between product involvement, brand loyalty, and brand commitment. 214 KEY CONCEPTS: PLACE ATTACHMENT AND PRODUCT INVOLVEMENT From the literature review on place attachment and product involvement, it can be determined that both are psychological constructs that involve the interplay of individually determined self relevant meanings ascribed to the product or place of interest. However, similarities and differences exist between these constructs. Place, like product can become irreplaceable. When an individual identifies with place and endows it with meanings the extent to which place becomes an interpretation of the self which draws on place as a locus of identity (Hummon 1992), place becomes unsubstitutable. Like products, these places are those that for the individual there are no alternatives or substitutes that have the same meaning as the original. The factors that drive the development of place attachment (i.e., biological, psychological, environmental, and socio-cultural) contributes to our understanding of product involvement. The aspects of an individual’s upbringing, the environmental and sociocultural facets indigenous to where one grew up and the cultural norms and rituals experienced may predispose one to become involved with specific products. For example, an individual growing up in a region where wine consumption is a ritualistic part of meals, (e.g., Italy or France) may influ- SELECTED REFERENCES Ainsworth, Mary D. Salter and Silvia M. Bell (1970), “Attachment, Exploration, and Separation: Illustrated by the Behavior of One-Year-Olds in a Strange Situation,” Child Development, 41, 49–67. Bloch, Peter H. and Marsha L. Richins (1983), “A Theoretical Model for the Study of Product Importance Perceptions,” Journal of Marketing, 47 (3), 69–81. Hidalgo, M. Carmen and Bernardo Hernandez (2001), “Place Attachment: Conceptual and Empirical Questions,” Journal of Environmental Psychology, 21, 273–81. Laaksonen, Pirjo (1994), Consumer Involvement: Concepts and Research. New York: Routledge. Low, Setha M. and Irwin Altman (1992), “Place Attach- ence their interest to the extent to which they become a wine enthusiast. Product involved enthusiasts have been characterized by Bloch (1986) as having high levels of information seeking, opinion leadership, innovativeness, product nurturance, or care and represent a significant marketplace force. CONCLUSION The position taken in this paper is that bonding with place is a cognitive, affective, and behavioral commitment. Further, short term exposure as well as non-exposure can also result in the forming of bonds with place. Experience through fantasy, desire, and imagination supply equally strong interest and involvement to which attachment develops. Developing a bond with place does not require physical experience. Similarly, developing a bond with products does not require ownership of the product. It is generally accepted that a product can be a place. Place, like tangible products, can become an integral part of one’s self image and identity. However, the properties of place that influence an individual in the forming of bonds are not fully explored. In this respect, researchers are encouraged to explore the dynamic nature of place to deepen our understanding of person-place bonds, and extend the product involvement literature using the insights of place attachment from the environmental psychology literature. ment: A Conceptual Inquiry,” in Place Attachment, Irwin Altman and Setha M. Low, eds. Vol. 12, New York: Plenum Pres. Penaloza, Lisa (2000), “The Commodification of the American West: Marketers’ Production of Cultural Meanings at the Trade Show,” Journal of Marketing, 64 (October), 82–109. Proshansky, Harold M., Abbe K. Fabian, and Robert Kaminoff (1983), “Place-Identity: Physical World Socialization of the Self,” Journal of Environmental Psychology, 3, 57–83. Richins, Marsha L. and Peter H. Bloch (1986), “After the New Wears Off: The Temporal Context of Product Involvement,” Journal of Consumer Research, 13, 280–85. Complete set of references will be provided upon request For further information contact: Merlyn A. Griffiths Graduate School of Management University of California, Irvine Irvine, CA 92697 Phone: 714.366.6998 E-Mail: [email protected] American Marketing Association / Winter 2005 215 EMERGENCY CONTRACEPTION: EXPECTATIONS OF PRODUCT NEED AND USE Andrew M. Parker, Virginia Polytechnic Institute and State University, Blacksburg Melanie A. Gold, University of Pittsburgh, Pittsburgh SUMMARY Emergency contraception (EC) is a form of contraception that reduces the risk of pregnancy after unprotected sex or contraceptive failure. Though available in some form since the late 1960’s, only recently has it been the focus of behavioral research. Recent FDA deliberations on switching one EC product (Plan B) from prescriptiononly to over-the-counter status have brought EC even more public attention. Focused on a specialized market (particularly young women) and being potentially stigmaand affect-laden (because it is a medication used solely after unprotected intercourse to prevent pregnancy), EC represents a rather unusual product class. From a marketing perspective, in trying to deliver the product to the consumer in a way that is most useful, it is important to understand how consumers think about, use, and are affected by EC, particularly adolescents and young women. From a public-health perspective, this same information could be invaluable in protecting individuals’ safety and well-being. Because use and misuse of EC reside at the center of this important public health debate, understanding what motivates individuals to seek out and use EC (i.e., market demand) is crucial. The focus here will be on one piece of the EC product-consumer relationship that has not been considered – expectations of the future. Expectations, in this case of having unprotected sex and possibly needing EC, are central to most theories of choice. To the extent that the perceived likelihood of needing EC is high (i.e., unprotected sex seems likely), and to the extent that having EC on hand will diminish the chances of an unwanted outcome (i.e., pregnancy), seeking out EC will be a more attractive option. It is hypothesized that expectations of having unprotected sex will correlate positively with future reports of actual unprotected sex. Similarly, expectations of EC use will correlate with future reports of actual EC use. However, each expectation is hypothesized to correlate poorly with the other behavior. A crucial concern is whether the expectation of using EC will in fact lead to more irresponsible behavior (i.e., unprotected sex). To the extent that EC expectations are not related to subsequent unprotected sex, however, such a concern holds less weight. A similar issue involves the expectation of unprotected sex and actual past EC use. While EC is not recommended as a American Marketing Association / Winter 2005 primary contraceptive, it is possible that experience with EC could lead individuals to think of it as such. On the other hand, EC use can cause a number of temporary but uncomfortable side effects, which if seen as significant may actually decrease future willingness to engage in unprotected sex. Lastly, it is expected that the perceived risk of getting pregnant from an episode of unprotected sex will moderate the positive relationship between actual unprotected sex and actual EC use, with this relationship being stronger for those with higher risk perception. In a longitudinal study, 301 sexually active female adolescents participants completed an initial, one-on-one interview conducted in a research office, followed by six monthly 10-minute telephone interviews (see Gold et al. 2004). At each interview, the perceived likelihood of their next sexual intercourse being unprotected and of using EC in the next month were gathered, as well as whether they had engaged in unprotected sex and/or used EC in the preceding month. Participants also indicated the perceived risk of pregnancy from one episode of unprotected sex. Across the six months, only 5 percent to 9 percent predicted that their next sexual intercourse would be unprotected, while 24 percent to 33 percent predicted EC use during the next month. The overall pattern, across visits, is that expectations of having unprotected sex correlated positively with reports of subsequent unprotected sex (omnibus p < .0001; Strube 1985), while expectations of EC use correlated positively with subsequent reports of actual EC use (p = .03). Significant correlations were not found between expectation of unprotected sex and EC use or between expectation of use and unprotected sex. Finally, reports of actual unprotected sex correlated positively with EC use, although this relationship was not moderated by risk perception. A very similar pattern arose when looking at the relationships between past behavior and expectations of the future. In summary, expectations do correlate with behavior, both past and future. However, a key distinction is between the expectation of having sex (and potentially needing EC) and the expectation of actually using EC. Much of the public policy debate regarding EC has centered on how EC could encourage irresponsible sexual and contraceptive behavior, particularly among adolescents. Two of the results here argue against that concern. 216 First, expectation of EC use did not predict future reports of unprotected sexual behavior. Second, past EC experience did not predict expectation of future unprotected sex. From the perspective of advance provision and EC’s overthe-counter status, while unprotected sex definitely influences EC use (EC wouldn’t be necessary without it), we have no evidence that EC use is influencing unprotected sex. For healthcare providers and marketers, these results suggest the validity of interventions that recognize the usefulness of expectations. If a young woman expects that she will use EC in the future, then this expectation should be identified during a health care visit and counseling should include a discussion about how to facilitate timely use of EC and when the medicine is most effective. REFERENCES haviors,” Journal of Pediatric and Adolescent Gynecology, 17, 87–96. Strube, Michael J. (1985), “Combining and Comparing Significance Levels from Nonindependent Hypothesis Tests,” Psychological Bulletin, 97, 334–41. Gold, Melanie A., Jennifer E. Wolford, Kym A. Smith, and Andrew M. Parker (2004), “The Effects of Advance Provision of Emergency Contraception on Adolescent Women’s Sexual and Contraceptive Be- For further information contact: Andrew M. Parker Department of Marketing (0236) Virginia Tech Blacksburg, VA 24061 Phone: 540.231.3096 FAX: 540.231.3076 E-Mail: [email protected] American Marketing Association / Winter 2005 217 INVESTIGATING DRIVERS OF CUSTOMER DEFECTION: A RELATIVE WEIGHT APPROACH Thomas Hollmann, Arizona State University, Tempe Cheryl Burke Jarvis, Arizona State University, Tempe SUMMARY Customer satisfaction, loyalty and retention are central tenets in the practice of customer relationship management (CRM) for both goods and services, and these concepts have been the focus of heavy study. Yet customer defection rates remain quite high in many service-based industries, as shown by 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). Interestingly, Keaveney’s (1995) qualitative research found that the majority of defected customers identified a complex combination of multiple reasons for a decision to switch service providers, rather than a single driver of defection. This finding highlights the need for both academics and practitioners to understand drivers of defection in the context of a comprehensive model, rather than through individual investigations of single factors in isolation as is typical of the literature to date. In addition, measurement has complicated the study of defection drivers in two ways. First, researchers often have relied on measures of customer satisfaction to identify problem areas in service delivery that might influence future defection. Satisfaction has been found to have a significant impact on repurchase intentions, but that impact is typically small (Bolton 1998), and it has been shown that in some cases as much as 65 percent to 85 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 reach a threshold level of dissatisfaction on a particular factor or combination of factors to choose to leave. Even if a customer is not particularly loyal, defection may not occur despite unsatisfactory experiences, because of convenience or competitive issues. American Marketing Association / Winter 2005 Second, much of the extant research in satisfaction and loyalty uses behavioral intention probabilities (e.g., “likelihood to renew the contract” on a 7-point Likert scale) rather than actual defection data (e.g., Anderson and Sullivan 1993; Parasuraman, Zeithaml, and Berry 1988), despite the fact that Garland (2002) has shown that self-reported switching probabilities overestimate actual defection rates. Thus, both measuring satisfaction as a predictor of defection and measuring self-reports of behavioral intentions fall short in providing researchers a valid tool for identifying and analyzing drivers of customer defection. Different methodological approaches are needed to more effectively measure and evaluate the system of factors that influence customer switching behaviors. Therefore, the goal of this paper is to extend the methodological arsenal of customer loyalty research by proposing and illustrating the use of a defection weight method (DWM) of data collection and analysis to assess the relative influence of key drivers of customer defection. This method allow researchers to investigate the relative influence of a constellation of factors that contribute to switching decisions, rather than evaluating influences in isolation from each other. DWM employs graded paired comparisons to understand the preference structure of defection drivers. The paper reports results from a survey of recently defected consumers on a variety of services using the five elements of the Servqual scale, price, and the physical product as defection driver categories. The study shows that a vast majority of defection decisions are multidimensional. Less than 10 percent of the respondents have a uni-dimensional defection weight profile in which one reason dominates, i.e., represents 75 percent or more of the decision to defect. This finding supports Keaveney’s (1995) qualitative findings of the complexity of the defection decision. The paper also compares the relative influence of the tested defection drivers using the DWM technique to the relative influence of the same drivers as reported by traditional customer satisfaction measures using regression analysis. Significant differences in the relative weights of the tested factors are demonstrated between the two methods, supporting past evidence that traditional measures of satisfaction are not valid proxies for drivers of defection. 218 Finally, we use the DWM results to perform a cluster analysis of customers based on defection drivers, illustrating a method that practitioners and academics alike could use to segment customers and differentiate services. Close to 70 percent of respondents were more heavily influ- enced to defect by the elements of service quality as expressed by the Servqual, while about 30 percent of respondents were more strongly influenced by the nonServqual elements. 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 2005 219 INVESTIGATING THE MODERATORS OF THE CUSTOMER SATISFACTION-LOYALTY LINK: EVIDENCE FROM RETAILING Heiner Evanschitzky, University of Muenster (MCM), Germany Gianfranco Walsh, University of Strathclyde, Scotland SUMMARY Research on the relationship between customer satisfaction and customer loyalty has advanced to a stage in which moderator variables need to be examined more thoroughly. The relevance of customer satisfaction for maintaining successful relationships with customers has been discussed widely (e.g., Oliva, Oliver, and MacMillan 1992; Reichheld 1993; Hennig-Thurau and Klee 1997) and early work on that relationship demonstrates a positive and direct relationship. However, more recent studies argue that satisfaction can have a direct and indirect impact on loyalty (e.g., Hennig-Thurau 1997). Consistent with the notion of a non-linear relationship (e.g., Mittal, Ross, and Baldasare 1998; Audrian 2002), some research suggests that the satisfaction-loyalty relationship is influenced by certain moderator variables (Jones and Sasser 1995). The objective of this study is to provide additional insight into the relationship between customer satisfaction and customer loyalty by empirically examining the effects of selected moderators (loyalty-card membership, critical incidents, expertise, gender, age, income) on this relationship. The sample consisted of 776 customers of a large DIY chain. Testing for moderation, we first looked at a non-restricted model and then restricted the four paths from satisfaction to loyalty to be equal across subgroups. Chi-square differences (with four degrees of freedom) were assessed. Next, we compared two models that only differed in one effect of one satisfaction dimension on one loyalty dimension. One model restricts the parameter to be equal across groups while the second model allows variation in one of that parameter across groups. The restricted model has one degree of freedom more than the general model. A moderating effect would be present when the improvement in Chi-square moving from the restricted to the non-restricted model is significant, meaning the Chisquare difference between the two models (and one degree of freedom) is larger than 3.84 (p = .05). After confirming the influence of the four postulated main effects, we tested for moderator effects. A Chisquare difference test was conducted for all six possible moderator effects, comparing a restricted and a non- American Marketing Association / Winter 2005 restricted model. With four degrees of freedom more, the restricted model exhibits a significant Chi-square difference (at p < .05) for three effects: “critical incident,” “expertise,” and “income.” The Chi-square difference for the “loyalty-card membership” is slightly less than 9.49, indicating a difference significant at a level slightly below .05. Because this effect just fails the threshold, we decided to test for moderation here as well. Only “age” and “gender” showed no general moderating effect (Chisquare difference with four degrees of freedom were 1.913 for age and 1.282 for gender). Therefore, we did not test for specific moderator effects. In summary, it appears that “loyalty-card membership,” “expertise,” “critical incident,” and “income” are relevant general moderators of the link between satisfaction and loyalty. Next, we analyzed specific moderator effects of the two satisfaction dimensions on the two loyalty dimensions for the moderators. Loyalty-card membership impacts only one out of the four effects. It moderates the link between “satisfaction with employees” and “positive wordof-mouth.” Those customers who do not hold a loyalty card seem more likely to relate to their positive experiences with the retailer’s employees to others. Apparently, the loyalty card holders seem to expect employees to be friendly and competent and by doing that, expectancy level of that factor is high. This result questions the appropriateness of investing in loyalty-card programs. Our finding is in line with findings from Reinartz and Kumar (2002) who found little support for the general positive link between loyalty and profitability. Three effects are moderated by “critical incidence.” It is worth mentioning that we only looked at those critical incidents that were resolved to the satisfaction of the customer, meaning we are looking at “recovered customers.” With that in mind, it can be noted that recovered customers – if satisfied with the employees – are far more loyal than customers who did not experience a critical incident. In addition, the link between “satisfaction with the assortment/tangibles” and “positive word-of-mouth” is also moderated by a positively resolved critical incident. Interestingly, “expertise” moderated only the link between “satisfaction with assortment/tangibles” and repurchase intention. It is economically highly relevant that lucrative professional customers (e.g., craftsmen such as 220 carpenters or plumbers) buying their products at the DIY retailer are far more likely to repurchase if satisfied with the assortment. The analysis of income as a moderator shows mixed results. The link between satisfaction with the assortment and positive word-of-mouth is stronger for wealthier customers. Moreover, the link between satisfaction with employees and both loyalty dimensions is stronger for customers with lower income. It seems that high-income consumers are more concerned with the availability of a wide variety of products and less concerned with the friendliness and competence of the employees. The link between satisfaction and loyalty is less straightforward and more complex than previous studies have suggested. Gender and age do not moderate the link from satisfaction to loyalty. Contrary to previous findings (e.g., Homburg and Giering 1999), the satisfaction di- mensions are equally important to men and women and all age-groups in their effect on customer loyalty. A reason for that could be that DIY stores usually offer lowinvolvement goods that are normally purchased less impulsively. Particularly for certain high-involvement products, we would expect a moderating role of gender and age on the satisfaction-loyalty link. Despite the fact that we found no support for the moderating effect of gender and age, there is sufficient evidence for a non-linear relationship between the two constructs “satisfaction” and “loyalty.” Our research suggests that the two satisfaction dimensions, “satisfaction with assortment/tangibles” and “satisfaction with employees,” positively influence the two loyalty outcomes “repurchase intention” and “positive word-of-mouth.” In particular, we found that “loyalty-card membership,” “expertise,” “critical incident,” and “income” are relevant general moderators of the link between satisfaction and loyalty. References and tables with results available upon request. For further information contact: Heiner Evanschitzky Marketing Center Muenster University of Muenster Am Stadtgraben 13–15 D-48143 Muenster Germany Phone: +49.251.83.22036 FAX: +49.251.83.22032 E-Mail: [email protected] American Marketing Association / Winter 2005 221 THE INTERPLAY OF COGNITION AND AFFECT IN THE FORMATION OF CUSTOMER SATISFACTION: A DYNAMIC PERSPECTIVE Christian Homburg, University of Mannheim, Germany Nicole Koschate, University of Mannheim, Germany Wayne D. Hoyer, The University of Texas at Austin, Austin SUMMARY Previous research has recognized that both cognition and affect significantly predict satisfaction judgments. However, only a few studies have investigated cognitive and affective antecedents of customer satisfaction simultaneously. Moreover, these studies have been static (i.e., cross-sectional) in nature. This represents a significant shortcoming since it is well established that customer satisfaction is a dynamic phenomenon. Despite the strong recognition that customer satisfaction should be viewed from a dynamic perspective, the role of cognitive and affective influences has not been systematically studied in this manner. The few studies which have investigated the antecedents of customers satisfaction from a dynamic perspective have focused on the cognitive component of customer satisfaction. Against this background, this study provides a dynamic analysis of the simultaneous influence of cognition and affect in the satisfaction formation process. The fundamental proposition is that the role of cognition and affect may change over time. We argue that affect plays its strongest role at the early stages of satisfaction development, whereas the impact of cognition should increase over time. In addition, we build a case that this phenomenon also depends on the level of consistency of the consumption experience (i.e., is it consistently positive or consistently negative). Furthermore, we argue that satisfaction judgments should become more stable over time and that the ability of both cognition and affect to predict customer satisfaction should increases. The results of an experimental study based on a real consumption experience indicate that the impact of cognition on the satisfaction evaluation increases over time and that the influence of affect decreases. Moreover, these effects are more pronounced in the case of consistent performance experiences. Finally, the study shows that the variance in customer satisfaction jointly explained by cognition and affect increases as experience accumulates. The findings have several important implications for marketing managers. For example, the study helps managers to understand customer satisfaction in a more thorough way. It sheds light on the formation process of customer satisfaction and shows that customers satisfaction has a more stochastic character in early stages. Thus, it is more easily for managers to influence the satisfaction judgment in the early stages where the satisfaction evaluation has not yet been crystallized. Further, it is common in practice for managers to think of customer satisfaction in a logical, rational manner (i.e., if the product or service performs well, satisfaction will be higher). The results of this study point out that affect can play a critical role as well, particularly in the early stages of the satisfaction formation process. Thus, for new relationships or new products and services managers must pay close attention to affective aspects and be careful to manage them effectively. For further information contact: Christian Homburg Institute for Market-Oriented Management (IMM) University of Mannheim 68161 Mannheim Germany Phone: +49.621.181.1555 FAX: +49.621.181.1556 E-Mail: [email protected] American Marketing Association / Winter 2005 222 MARKETING SIX SIGMA: ZERO DEFECTS IN INTERCULTURAL SERVICE QUALITY Martin C. Reimann, Freiberg University, Germany Ulrich F. Luenemann, California State University, Sacramento ABSTRACT The Six Sigma methodology, traditionally referring to defect reduction and quality improvement in manufacturing, can also be applied successfully to marketing. Some service quality defects are related to intercultural differences, especially when taking the direct integration of external factors – international customers – into account. In a study involving German, Spanish, and Swedish customers, the authors found that people from cultures with a high degree of uncertainty avoidance were less satisfied when their service expectations were not met. This suggests that Six Sigma can reduce service quality defects related to intercultural differences if preceded by sound intercultural operative planning and training of service personnel. INTRODUCTION Six Sigma, originally developed in Japan and adapted at Motorola in the late 1980s to eliminate waste by achieving near-perfect results in production processes, is credited with saving billions of dollars also at other wellknown U.S. multinational companies, like General Electric and Allied Signals, just to name a few (Biolos 2002). Traditionally, Six Sigma refers to reduction of defects and improvement of quality in manufacturing; however, it can be applied to marketing as well (Ehrlich 2002). Especially services with high involvement of the customer, the Six Sigma methodology can help to improve service quality (Pande, Neuman, and Cavangh 2000; Biolos 2002; Ehrlich 2000). In this regard, Six Sigma can be defined as a databased methodology or process to prevent service defects and improve customer satisfaction. The statistical concept behind it represents the amount of process variation in relation to customer requirements as the source of all service quality considerations. If a process functions on the Six Sigma level, variation is almost non-existent. Thus, the process results are defect-free in 99.9997 percent of all cases, which means only 3.4 defects per million process steps. According to Kotler (2003), a service features the following three characteristics: (a) the intangibility of the service; (b) the integration of an external factor (an object or a subject on which the service is applied and which is integrated into the service process); and (c) the quality variation of the service. Of special interest for this paper American Marketing Association / Winter 2005 were the two factors integration of the external factor and service quality variation. It was assumed that, as a result of cultural value differences between the service provider and the customer, the integration of the external factor could be defective. This might be based on the perception of the customer, who measures the service’s quality according to his/her own specific cultural values while the service provider might base the service on another culture value. Thus, the integration of external factor – the international customer – is defective. Since the perceived service quality varies based on cultural value differences and there is a dependency between service quality and the integration of the external factor (Hutchens 1989; Stamatis 1996), another assumption was that if the integration of the external factor was defective, the level of perceived service quality would be low. In this paper, different cultural values and their impact on international service marketing will be explained first. Subsequently, the two relevant service characteristics – the integration of the external factor as well as quality variation – will be examined with regard to customers responding differently to a delivered service and its quality. At this stage, cultural value differences and their influence on customer and service provider interactions will be taken into account. In this intercultural context, the Six Sigma methodology will be introduced. The study will show how Six Sigma can help to reduce the defects in the integration of the external factor by focusing on quality variation. Thus, this paper suggests that Six Sigma can be used as a workable tool for enhancing international service marketing provided that it is built into the company’s operative programs and the service personnel has undergone adequate cultural awareness and intercultural preparation training. CULTURAL VALUES The growth and spread of multinational business on a global scale puts strong emphasis on the importance of integrating cultural elements in international service marketing. According to Hofstede (1997, p. 9), culture is “the collective programming of the mind which distinguishes the members of one group or category of people from another.” Thus, “culture is not a characteristic of individuals; it encompasses a number of people who were conditioned by the same education and life experience” (Hofstede 1997, p. 5). Values, the most basic manifestation of 223 culture, are defined as “broad tendencies to prefer a certain state of affairs over others” (DeMooji 1997, p. 46). Values are among the first things children learn, not consciously but implicitly. Developmental psychologists consider that by the age of 10, most children have their basic value system definitely in place and that changes beyond this age are difficult to obtain (Rokeach 1973). Since people are not consciously aware of the values they hold, it is difficult to discuss or observe them (DeMooji 1997, p. 46). Based on the receptivity to the idea of cultural values as an important factor for organizational success, however, the need for intensified cultural value research – especially for multinational companies – became widely acknowledged. During the last two decades, many researchers have tried to make specific predictions of intercultural differences and the related behaviors (Hall 1984; Hall and Hall 1990b; Trompenaars and Hampden-Turner 1998; Schwartz 1999). The most comprehensive study to date on cultural differences in work-related values was done by Hofstede (1980, 2001), who obtained data from over 116,000 questionnaires answered by employees at all levels of a large U.S. multinational company. His research took place in more than 60 countries around the world over a period of six years. In his fundamental approach, Hofstede (1980) concentrated on four basic dimensions of cultural values to which the selected countries have found different answers in explaining. These dimensions were: • • the degree of power distance (indicating the extent to which a society accepts the fact that power in institutions and organizations is distributed unequally); • the degree of uncertainty avoidance (indicating the extent to which a society tries to avoid uncertain situations by, for example, establishing more formal rules and believing in, and/or striving for expertise); • the degree of individualism (indicating the extent to which relationships are based on loose social frameworks rather than on collectivism, where people are tightly integrated in primary groups, such as families and organizations); • the degree of masculinity (indicating the extent to which dominant values or roles in society are viewed “masculine,” for example achievement, assertiveness and performance, when measured against its opposite pole, femininity, defined as quality of life, caring for other people as well as social and gender equality (Hofstede 1980, 1997, 2001). In his research, Hofstede (1980, 2001) compares low and high uncertainty avoidance in societies and uses the degree of uncertainty avoidance to distinguish between societal norms. With regard to peoples’ beliefs, attitudes, and behaviors, low uncertainty avoidance refers to: low levels of stress and anxiety; weaker superegos and less showing of emotions; aggressive behavior is frowned upon; greater tolerance and acceptance of diversity and uncertain situations; strong belief in general approaches and common sense to problem solving, where people should be rewarded for innovative approaches; commitments are less binding and relationships are built quickly but can also be dissolved as quickly; focus on short-term planning (up to five years); rules and laws should be adaptive and changed if they don’t work; more acceptance of dissent; and willingness to take unknown risk. Based on their research in Asia, Hofstede and Bond (1988) found a new dimension, which was later added to Hofstede’s (1997, 2001) research as a fifth dimension and labeled: American Marketing Association / Winter 2005 the degree of long-term orientation (indicating the extent to which a society exhibits a pragmatic futureoriented perspective rather than a conventional, historic short-time point of view. These five cultural value dimensions (Hofstede 1997; Hofstede and Bond 1988) can be used to make important predictions of intercultural differences in work-related values including customer satisfaction. INTEGRATION OF THE EXTERNAL FACTOR AND CULTURAL VALUE DIFFERENCES Cultural values influence how service providers interact with customers. This paper assumes that service defects in the integration of the external customer will happen if different cultural values are not understood. The analytical ability to determine the uncertainty avoidance orientation seems to be the most important cultural value dimension that refers to defects in intercultural service quality. Uncertainty avoidance posits that humans reduce their inherent uncertainty by dint of technology, law, and general rituals (Hofstede 2001, p. 147). As shown in Figure 1, the degree to which uncertainty is generally acceptable within a given culture can differ greatly from another (Hofstede 2001, p. 151). For this study, the German, Spanish, and Swedish cultures were selected due to availability and easy access of data. On the other hand, high uncertainty avoidance refers to: higher stress levels and an inner urge to be busy; robust superegos and more showing of emotions; aggressive behavior of self and others is accepted; less tolerance and acceptance of unclear situations; less acceptance of dissent and strong need for consensus, clarity and structure; strong belief in expertise and knowledge for problem solving, where accuracy should be rewarded; commitments are long-lasting and relationships, which are built slowly, are expected to last for a long time; focus on long- 224 American Marketing Association / Winter 2005 FIGURE 1 Country UAI* Greece 112 Colombia 80 Norway 50 Portugal 104 Brazil 76 New Zealand 49 Guatemala 101 Venezuela 76 South Africa 49 Uruguay 100 Italy 75 Canada 48 Belgium 94 Czech Republic 74 Indonesia 48 El Salvador 94 Austria 70 United States 46 Poland 93 Pakistan 70 Philippines 44 Japan 92 Taiwan 69 China 40 Peru 87 Arab World 68 India 40 Argentia 86 Ecuador 67 Malaysia 36 Chile 86 Germany 65 Ireland 35 Costa Rica 86 Thailand 64 United Kindom 35 France 86 Finland 59 Hong Kong 29 Panama 86 Iran 59 Sweden 29 Spain 86 Switzerland 58 Denmark 23 South Korea 85 West Africa 54 Jamaica 13 Turkey 85 Netherlands 53 Singapore Hungary 82 East Africa 52 Mexico 82 Australia 51 Israel 81 225 * UAI = Uncertainty Avoidance Index 8 term planning (up to 20 years); strong need and adherence to rules and regulations to make behavior predictable; concern with security in life; and knowing about risks (Adler 1997, p. 53; Hofstede 2001, p. 161). Based on these general comparisons, service providers can and should use Hofstede’s (1980, 2001) uncertainty avoidance index to integrate the external service factor in their operations by defining service quality for international customers in terms of cultural awareness and intercultural preparedness of service employees in addition to their obvious business and organizational skills. A specially tailored intercultural training – including service factors such as reliability, responsiveness, competence, courtesy, credibility, security, access, communication, and understanding the customer – can provide appropriate and useful approaches for adaptation to international customers’ different value systems and behaviors. This is especially true when the training focuses on the aforementioned uncertainty avoidance differences as the result of different cultural backgrounds. Therefore, to achieve a high level of external factor integration, service providers should strive continuously to improve the level of customer satisfaction, which should include intercultural understanding and display of correct and appropriate behavior towards international customers. Based on the cultural differences in Hofstede’s uncertainty avoidance dimension, it can be hypothesized: H1: Customers from cultures with a high degree of uncertainty avoidance will be less satisfied when their service expectations are not met. Consequently, in order to achieve customer satisfaction with people from high uncertainty avoidance cultures, the service provider needs to meet all relevant service expectations. QUALITY VARIATION AND SIX SIGMA Quality variation characterizes service as well. The central source of quality variation is the defective integration of the external factor (Hutchens 1989; Stamatis 1996). Among the reasons for defective customer integration are some of the following service personnel shortcomings: lack of responsiveness and timeliness, missing competence and courtesy, miscommunication and faulty understanding of the customer (Heineke and Davis 1994). Kotler (2003) identifies three actions to overcome quality variation: process improvement, customer satisfaction measurement, and service personnel training. All three actions can be achieved with the Six Sigma methodology: • Process Improvement: Six Sigma not only implies statistics; it also uses managerial tools for process improvement. A Six Sigma project usually follows the so called D-M-A-I-C approach (Define-MeasureAnalyze-Improve-Control). In the Definition phase, customer requirements are surveyed, potential savings are evaluated and the process is mapped. The customer requirements directly lead to the relevant American Marketing Association / Winter 2005 process variables, which will then be measured, analyzed, improved, and controlled. The Measurement phase comprises the setup of a capable measurement system to measure the dependent variables: in this case customer satisfaction with regard to a specific service. In the Analysis phase, the independent variables are assessed, which was the service variable “delivery time” in this study. Then, in the Improvement phase, the value of the independent variables will be increased. Finally, the Control phase is necessary to review the measurement system and the correctness of its outputs (Pande, Neuman, and Cavanagh 2000, p. 39). • Customer Satisfaction Measurement: Six Sigma aims at the achievement of fullest customer satisfaction by providing a defect-free process or service. As already mentioned above, customer satisfaction can be selected as dependent target variable, which is influenced by one or more process drivers. Its measurement should be done before as well as after the process improvement to compare and view progress. • Cultural Awareness and Preparation Training: Six Sigma also integrates change management. Improving a process also means changing human behavior in organizations to minimize defects. In international service marketing, operational planning for special cultural awareness as well as preparation training on intercultural differences is necessary and especially essential for the integration of the external factor when service providers and customers have different cultural backgrounds and opposing views on how to deal with uncertainty avoidance. As explained before, the differences between low and high degrees of uncertainty avoidance can be so severe between people from diverse cultural backgrounds that understanding their behavior and being aware of their different perceptions are very important to prevent irreparable service defects. Therefore, proactive intercultural communication training programs based on Hofstede’s (1980, 2001) uncertainty avoidance dimension have to emerge as critical events in the development of the international service provider’s management strategies to improve service quality. Such training can effectively enhance future service quality both for service providers and customers in overseas assignments, as well as in multicultural and ethnically diverse domestic settings. The information gained and behavioral skills learned will not only help to prevent service defects, but also enable the service provider to perform on a much higher quality level. Thus, customers will experience the service function on a much higher satisfaction level. There are basically two ways to achieve a Six Sigma level. One way is through reduction of scattering, the 226 other is through expansion of tolerance. As shown in Figure 2, the defects in the upper normal distribution refer to a three sigma level with a possible yield of 93.32 percent. The two lower distributions refer to a six sigma level with a 99.9997 percent yield. While the reduction of scattering focuses on minimizing variance, the expansion of tolerance focuses on the customer-related requirements (the acceptance of a longer-than-promised delivery time). Achieving Six Sigma Through Reduction of Scattering: As the description of differences between low and high uncertainty cultures has shown, customers coming from cultures with a relatively high degree of uncertainty avoidance have a much lower tolerance for ambiguity. They do not accept unclear situations and deviation from the normal variation as easily as customers coming from cultures with a relatively low degree of uncertainty avoidance. A high uncertainty avoidance index generally also indicates higher anxiety and stress levels, a greater propensity to display emotions, and a tendency towards aggressive behavior when challenged. If a service provider interacts with such an external factor, there is only very little chance to prevent a service defect if the customer encounters a situation or behavior that does not conform to the customer’s cultural and normative expectations. For example, if hotel customers with a high degree of uncertainty avoidance do not get the expected and/or reserved room at check-in, they might not accept any alternate arrangements without aggressive, emotional, and stressful behavior which, in turn, may lead to a fullsize service defect. In such a situation, the service provider has to consider the customers’ level or degree of tolerance to be so narrow that any deviation or scattering from the promised or expected service would automatically lead to the customers’ perception of low service quality or even total dissatisfaction. Therefore, and within the scope of the specific study, it can be hypothesized: H2: If customers posses a high degree of uncertainty avoidance, then a wider tolerance with regard to the promised delivery time is not accepted. Consequently, the reduction of scattering (or upgrading of service) should be an adequate instrument and part of the service provider’s operational planning to meet the requirements of customers with a high degree of uncertainty avoidance. Achieving Six Sigma Through Expansion of Tolerance: Contrary to the previous example, customers coming from cultures with a relatively low degree of uncertainty avoidance have a much higher tolerance for ambiguity. They see uncertainty as an inherent part of life and accept more easily each situation as it comes. A low uncertainty avoidance index generally also indicates that people are more at ease, show less emotions and frown upon aggressive behavior. Based on their higher level of tolerance, they are more flexible and do not feel threatAmerican Marketing Association / Winter 2005 ened as much when encountering deviations from their normative expectations. To use the same hotel example, if customers with a low degree of uncertainty avoidance do not get the expected and/or reserved room at check-in, they are more likely to accept a wider range of alternatives. Thus, a possible conflict can be contained on the level of fairness, flexibility, and common sense without leading to a service defect. Even if all service expectations are not met, such customers are still able to come across with a positive and satisfying service experience. If confronted with such a situation, the service provider can safely assume that the customers’ tolerance level is high enough to allow for certain deviations from the expected service and still perceive a high quality service. As a result, it can be hypothesized for this study: H3: If customers posses a low degree of uncertainty avoidance, then a wider tolerance with regard to the promised delivery time will be accepted. Consequently, the expansion of tolerance could be an adequate instrument and part of the service provider’s operational planning to meet the requirements of customers with a low degree of uncertainty avoidance. STUDY AND HYPOTHESES TESTING To test all three hypotheses, a study was carried out within a Six Sigma project of a global company from the chemical industry. In a questionnaire, which was filled out immediately after a specific service was delivered, 500 customers of three different national cultures were asked about a certain service quality as well as their satisfaction level with regard to only this service. Of the 303 received responses (equaling a response rate of 60.6%), 34 percent were from Germany, another 34 percent from Spain, and 32 percent from Sweden. Using the Six Sigma methodology in this study, customer satisfaction was treated as the dependent variable, whereas a culturally varying degree of uncertainty avoidance, which influences customer service quality satisfaction, was the independent variable. The study had the following parameters: it used a precise delivery time of 240 hours to measure the degree of customers’ service expectation; both data streams were discrete: the degree of customer satisfaction (from 1 = “very satisfied” to 5 = “not satisfied”) as well as the degree of uncertainty avoidance; and it featured three cultures on three different degrees of uncertainty avoidance (1 = “high,” 2 = “medium,” and 3 = “low”). The question asked regarding customer satisfaction was: “In compliance with the achieved delivery time for this delivery, were you satisfied with our service?” According to Hofstede (2001, p. 151), and as shown in Figure 1, Spain ranks fairly high on uncertainty avoidance, Germany takes a rather medium position, and Sweden has a fairly low uncertainty avoidance index. Based on these different ranking positions, the study was able to compare the relevant degrees of uncertainty avoidance in the target cultures. Given the same performance level, hypothesis H1 predicted that 227 American Marketing Association / Winter 2005 FIGURE 2 228 customers from cultures with a high degree of uncertainty avoidance, in this case Spain, will be less satisfied then customers from Sweden when their service expectations were not met. To test this hypothesis, a Chi-Square-test was applied. As shown in Figure 3, the test of hypothesis H1 displayed a high chi-square (χ2 = 141.947) as well as a p-value below 0.05 (p = 0.000). The high Chi-Square resulted from combining the degree of uncertainty avoidance with the level of customer satisfaction based on the outcome of the study. Therefore, the linkage between a high degree of uncertainty avoidance and a certain satisfaction level was established. While 37.8 percent of the Spanish customers were satisfied and 62.1 percent were dissatisfied, there was almost the opposite picture for German customers (62.1% satisfied versus 14.6% dissatisfied). In Sweden, however, most customers were satisfied (85.5% satisfied versus 0.0% dissatisfied). In comparison, this means that people in Spain were overall less satisfied than those in Germany – and especially Sweden – given the same service performance level. Thus, it was found that customer satisfaction is influenced by a culturally varying degree of uncertainty avoidance, which strongly supports hypothesis H1. 71.9%; the p-value is always below 0.05) between all three variables. When inserting the values for the degree of uncertainty avoidance (“1” for Spain with a high degree, “2” for Germany with a medium degree, and “3” for Sweden with a low degree) as well as for delivery time (for example 238 hours versus 245 hours) into the regression equation, it showed that Spanish customers were less satisfied – and much earlier – than their German and Swedish counterparts although the same level of service quality (slower delivery time) was provided. Therefore, the central finding of the study was that the degree of uncertainty avoidance as a cultural variable has significant influence on customer satisfaction. As stated in hypothesis H2, it was found that customers from cultures with a high degree of uncertainty avoidance do not accept a wider tolerance of quality variation as measured by the length of the time for delivery. Customers from cultures with a low degree of uncertainty avoidance, however, do accept a wider tolerance as was hypothesized in hypothesis H3. Consequently, H2 and H3 were also strongly supported. LIMITATIONS After that, hypotheses H2 and H3 were tested. As already stated above, it was assumed that the customer with a lower degree of uncertainty avoidance would accept a wider tolerance in service quality, whereby a fulfilled service would be referred to as a high service quality. In the study, a fulfilled service was the accomplishment of a specific product delivery in a certain amount of time. The average delivery time was 240 hours. Thus, it was defined that a faster or on-time delivery (below or within 240 hours) would be perceived as high service quality while a slower delivery (above 240 hours) would be perceived as low service quality. This relatively small variation in delivery time referred to the “just-intime” production at the customer side. Taking longer than 240 hours meant loss of production or sales since the customer was running empty on the chemical product delivered by the service provider. Thus, and according to the Six Sigma methodology, a delivery taking longer than 240 hours was considered a defect in the service process. The study found that customer satisfaction varied across cultures even if the same variance within the service quality (slower delivery time) had been provided. The reason for this finding was the culturally varying degree of uncertainty avoidance. Respondents from cultures with a higher degree of uncertainty avoidance were less satisfied with the provided service quality than their counterparts from cultures with a lower degree of uncertainty avoidance. As illustrated in Figure 4, it was found that service quality as well as cultural value differences (in this case the degree of uncertainty avoidance) will influence customer satisfaction. The regression equation shows a significant relationship (R2 = 72.1% and R2 adjusted = American Marketing Association / Winter 2005 Although this study provides a unique insight into the relationship between service quality, cultural value differences, and customer satisfaction, some limitations have to be highlighted. First, the study was conducted only in the chemical industry with a rather small sample of customers. Second, although the observed cultures represented a high, medium, and low degree of uncertainty avoidance, members of only three different cultures were interviewed. Thus, conducting more research in other cultures is recommended. Third, the use of additional cultural variables, for examples Hall’s (1984) distinction of chronemics, which relates to the culturally different perception of time as a form of non-verbal communication, or economic differences in supply and demand situations of the target cultures, may have changed or influenced the study’s outcome. Fourth, the application of Hofstede’s cultural value dimensions to further research has to be considered carefully. Critics argue that Hofstede’s model lacks transferability and, therefore, is not representative for a specific nation or a culture since only data from one single U.S. company (IBM) were used as samples (Triandis 1982; Yoo and Donthu 1998). On the other hand, this also ensures some consistency in the research since IBM employees are somewhat similar in regarding organizational culture, job description, or educational level (Lowe 1996). Overall, the above listed limitations show that further efforts must be made to understand the behavioral impact of cultural differences and, if possible, incorporate other cultural values in future research models for more complete explanations. 229 American Marketing Association / Winter 2005 FIGURE 3 χ2 = Σ (Observed Count – Expected Count)2 Expected Count 1 very satisfied 2 3 4 5 not satisfied TOTAL Spain (high degree of uncertainty avoidance) Observed Count Percentage Expected Count 19 18.4% 32.97 20 19.4% 30.25 0 0% 12.92 23 22.3% 12.92 41 39.8% 13.94 103 100% Germany (medium degree of uncertainty avoidance) Observed Count Percentage Expected Count 32 31.1% 32.97 32 31.1% 30.25 24 23.3% 12.92 15 14.6% 12.92 0 0% 13.94 103 100% Sweden (low degree of uncertainty avoidance) Observed Count Percentage Expected Count 46 47.4% 31.05 37 38.1% 28.49 14 14.4% 12.17 0 0% 12.17 0 0% 13.13 97 100% TOTAL Observed Count 97 89 38 38 41 303 χ2 = 5.922 + 3.475 + 12.917 + 7.870 + 52.549 + 0.029 + 0.101 + 9.508 + 0.336 + 13.937 + 7.195 + 2.541 + 0.277 + 12.165 + 13.125 230 p = 141.947 = 0.000 American Marketing Association / Winter 2005 FIGURE 4 231 DISCUSSION For quite a while, cultural issues had been closely observed in terms of overall life and job satisfaction (Hofstede 2001). Previous research, however, has not looked into the relationship between certain levels of service quality satisfaction and cultural values. While some researchers have recognized that international service is people-centered and, therefore, culture must somehow play a role (Clark, Rajaratnam, and Smith 1996; De Ruyter, Wetzels, and Lemmink 1996; Dahringer 1991), their focus has not been on the impact of cultural values on customer satisfaction in terms of a delivered service. Based on the study presented in this paper, it has been shown that uncertainty avoidance – a very important cultural value – has a significant influence on global business and how customers from different cultures perceive a certain service quality level differently. Given the variance of uncertainty avoidance across cultures, the study also shows how global service marketing can improve efficiency and reduce customer dissatisfaction by adopting cultural education and training programs for service personnel. With regard to this study, the research implications demand a closer investigation of the cohesion between cultural values and customer satisfaction in terms of delivery time. For example, not only Hofstede’s degree of uncertainty avoidance but also that of long-term orientation could have implications on the service of delivery time. Furthermore, cultural value items of other researchers, such as Hall and Hall’s (1990a) degree of timing, which differentiates between cultures working parallel on many tasks versus cultures working on one task at a time, might be taken into account as well. As suggested by Kotler (2003), one key characteristic in service marketing is quality variation. The managerial implications in service quality variations are straightforward and can be achieved by applying the Six Sigma methodology. The presented study illustrates through a REFERENCES Adler, Nancy (1997), International Dimensions of Organizational Behavior. Cincinnati, OH: South-Western. Biolos, Jim (2002), “Six Sigma Meets the Service Economy,” Harvard Management Update, 7 (11), 10. Clark, Terry, Daniel Rajaratnam, and Timothy Smith (1996), “Towards a Theory of International Services: Marketing Intangibles in a World of Nations,” Journal of International Marketing, 4 (2), 9–28. Dahringer, Lee D. (1991), “Marketing Services Internationally: Barriers and Management Strategies,” Journal of Service Marketing, 5 (3), 5–17. American Marketing Association / Winter 2005 customer satisfaction measurement tool based on uncertainty avoidance that there are major differences in the customers’ perceptions of service quality across cultures. Subsequently, service process improvement should be applied according to the customers’ requirements in each country or culture (Fitzsimmons and Fitzsimmons 1994). The study’s findings clearly show that only a narrow service quality tolerance delivered in the service process will be accepted by customers from cultures with a high degree of uncertainty avoidance. This means that service managers have to especially plan and aim for a defect-free process in high uncertainty avoidance countries like Spain in this case. One could also deduct from the findings, however, that cultural differences can play a role as a moderator between lower service performance and customer satisfaction in low uncertainty avoidance countries like Sweden. Therefore, and in addition to a stringent service process improvement, new operational service planning for increased quality should include intense cultural awareness and intercultural preparation training for all involved service personnel. More specifically, training with the main focus on Hofstede’s (1980, 2001) cultural dimension of uncertainty avoidance must be seen as critical part of the Six Sigma methodology to achieve zero defects in intercultural service quality. The increased intercultural competence derived from such training not only gives the multinational service provider the opportunity to adjust behavioral patterns accordingly, but can also help to relieve much of the normal anxieties experienced by trying to integrate the external customer in a novel but satisfying cultural setting. It will also help to strive for a defect-free service process and enable the international service provider to perform on the highest achievable service quality level, which will result in an even higher satisfaction level on the customers’ side. DeMooij, Marieke (1997), Global Marketing and Advertising: Understanding Cultural Paradoxes. Thousand Oaks, CA: Sage. De Ruyter, Ko, Martin Wetzels, and Jos Lemmink (1996), “The Power of Perceived Service Quality in International Marketing Channels,” European Journal of Marketing, 30 (12), 22–38. Ehrlich, Betsie H. (2002), Transactional Six Sigma and Lean Servicing. Boca Raton, FL: St. Lucie Press. Fitzsimmons, James A. and Mona J. Fitzsimmons (1994), Service Management for Competitive Advantage. New York: McGraw-Hill. Hall, Edward T. (1984), The Dance of Life. Garden City, NY: Doubleday. 232 ____________ and Mildred Hall (1990a), Hidden Differences: Doing Business with the Japanese. New York: Anchor-Doubleday. ____________ and Mildred Hall (1990b), Understanding Cultural Differences: Germans, French, and Americans. Yarmouth, ME: Intercultural Press. Hofstede, Geert (1980), Culture’s Consequences: International Differences in Work-Related Values. Beverly Hills, CA: Sage. ____________ and Michael Bond (1988), “The Confucius Connection: From Cultural Roots to Economic Growth,” Organizational Dynamics, 16 (4), 4–21. ____________ (1997), Cultures and Organizations: Software of the Mind. New York: McGraw-Hill. ____________ (2001), Culture’s Consequence: Comparing Values, Behavior, Institutions, and Organizations Across Nations. Thousand Oaks, CA: Sage. Hutchens, Spencer (1989), “What Customers Want: Results of ASQC/Gallup Survey,” Quality Process, (February), 29–35. Kotler, Philip (2003), Marketing Management. Englewood Cliffs, NJ: Prentice-Hall. Lowe, Sid (1996), “Culture’s Consequences for Manage- ment in Hong Kong,” Asia Pacific Business Review, 2 (1), 120–33. Pande, Peter S., Robert P. Neuman, and Roland R. Cavangh (2000), The Six Sigma Way: How GE, Motorola, and Other Top Companies Are Honing Their Performance. New York: McGraw Hill. Rokeach, Milton (1973), The Nature of Human Values. New York: The Free Press. Schwartz, Shalom H. (1999), “Cultural Value Differences: Some Implications for Work,” Applied Psychology International Review, 23. Stamatis, Dean H. (1996), Total Quality Service. Delray Beach, FL: St. Lucie Press. Triandis, Harry C. (1982), “Culture’s Consequences,” Human Organization, 41 (1), 86–90. Trompenaars, Alfons and Charles Hampden-Turner (1998), Riding the Waves of Culture. New York: McGraw-Hill. Yoo, Boonghee and Naveen Donthu (1998), “Validating Hofstede’s Five-Dimensional Measure of Culture at the Individual Level,” Proceedings of the 1998 Summer Marketing Educators’ Conference of the American Marketing Association, Boston, MA. For further information contact: Martin C. Reimann Marketing and International Trade Freiberg University Lessingstrasse 45 Freiberg, Germany 09596 Phone: +49.3731.392004 FAX: +49.3731.394006 E-Mail: [email protected] Ulrich F. Luenemann Department of Communication Studies California State University, Sacramento 6000 J Street Sacramento, CA 95819 Phone: 916.278.6688 FAX: 916.929.1638 E-Mail: [email protected] American Marketing Association / Winter 2005 233 THE IMPACT OF EXPERIENTIAL KNOWLEDGE AND CREATIVITY ON PERFORMANCE OF INTERNATIONAL PROJECT Taewon Suh, Texas State University, San Marcos Hongxin Zhao, Saint Louis University, St. Louis Seung H. Kim, Saint Louis University, St. Louis Mark J. Arnold, Saint Louis University, St. Louis Mueun Bae, Inha University, Republic of Korea SUMMARY This study focuses on testing the relationships between the constructs of knowledge and creativity of an international project team and their consequential performance. More specifically, this study attempts to fill in the research void by (1) establishing a research model at the project-team level; (2) centering on the crucial factors concerning knowledge and knowledge-creation for the success of the international project (i.e., experiential knowledge and creativity); and (3) constructing a structural model comprising the multiple relationships between the explaining factors and performance. In the research model, the constructs of experiential knowledge measured at both the firm- and the team-level make the exogenous variables in the model. Experiential knowledge as presented is associated with team creativity, project creativity, and project performance. Team creativity, subsequently, influences the other two endogenous variables, project creativity and project performance. And, project creativity is associated with project performance. Hypotheses are tested through structural equation modeling using Korean MNCs’ sample. Hypothesis 1, predicting that Team-Level Experiential Knowledge (EKT) positively affects Team Creativity (TC), was supported (EKT Î TC: t = 5.62, p < .001). The influence of firmlevel experiential knowledge on creativity was presented in Hypothesis 2. Firm-Level Experiential Knowledge (EKF) is not significantly associated with Project Creativity (PC) (EKF Î PC: t = .93, p > .05). As predicted, TC was highly associated with PC (t = 3.89, p < .001), which supports Hypothesis 3. Hypothesis 4 and 5 were also held up. Project Performance (PP) was significantly influenced by EKF (t = 5.27, p < .001) and TC (t = 2.72, p < .01). However, as the impact PC on PP failed to achieve significance (t = -.80, p > .05), Hypothesis 6 was not supported. Theoretical contributions of this study are summarized to few points. First, the study first used creativity construct in the international business setting, investigating the structured relationships with experiential knowledge and performance. Second, related, experiential knowl- American Marketing Association / Winter 2005 edge as intellectual market-based assets was assessed at the multilevel. Both team-level and firm-level experiential knowledge were identified as unique, independent constructs, exerting important roles in the proposed model. Particularly, team-level experiential knowledge was significant on knowledge implication and transfer, and firm-level experiential knowledge played importantly on the outcomes. Third, this study differentiated the two creativity constructs and their unlike influences in the modeled relationships. With the dual conceptualization, it is quite effectively questioning the seemingly unconscious assumption that creativity is a unitary construct. Fourth, this study has confirmed the fact that project performance is nested in the organization recognizing the need for a multi-level study using the broad framework of the resource-based views. For better performance of a project, we can find two important factors according to the current research setting: firm-level experiential knowledge and team creativity. MNCs should accumulate the domain-specific knowledge at the firm level and encourage creative behavior by nurturing supportive environments and organizational culture. First, in terms of the experiential knowledge, knowledge accumulation would better be focused on developing routines and structures to manage operations since such routines and processes are not sensitive in terms of geographic application. Second, summarizing the literature, the following actions will prove beneficial for better team creativity. Encourage employees to express their ideas openly; provide help in developing ideas; provide time for individual efforts; encourage risk taking and initiative; provide freedom for employees to enable them to do things differently; provide a non-punitive environment using a low level of supervision; encourage team members to interact and participate with other groups besides their own; maintain an optimal amount of work pressure; provide realistic work goals; encourage the delegation of responsibilities; demonstrate confidence in the workforce in a climate of mutual respect; allow individuals to be part of the decision-making process; encourage management to provide immediate and timely feedback to their team members. 234 For further information contact: Taewon Suh Department of Marketing McCoy College of Business Administration Texas State University 601 University Drive San Marcos, TX 78666 Phone: 512.245.3239 E-Mail: [email protected] American Marketing Association / Winter 2005 235 CHANGE AND THE MARKETING ORGANIZATION Kelly D. Martin, Washington State University, Pullman Jean L. Johnson, Washington State University, Pullman SUMMARY More than ten years ago, Achrol’s (1991) work on the evolution of the marketing organization envisaged the dynamic environment in which marketers exist today. He portends, “The future will be characterized most notably by unprecedented levels of diversity, knowledge richness, and turbulence” (Achrol 1991, p. 77). Our discipline has witnessed Achrol’s prophecies come to fruition, as the marketing environment is characterized by unprecedented dynamism and turbulence. Broad social and cultural change in the form of technological intensity, globalization and global outsourcing, and regulatory and political unrest is illustrative of our marketing landscape. Therefore, to extend the predictions of Achrol into the present, and in the spirit of “understanding diverse and emerging markets, technologies, and strategies,” our aim is to advance appreciation of change and its role in the marketing organization. Little is known about the effects of broad social, cultural, and strategic change on the marketing organization in particular. Further, no commonly accepted framework exists by which to categorize and thus better understand specific types of change in marketing. As a foundation, we draw from existing literature in organizational theory on change. Most organizational theorists agree that change may occur either incrementally and peripherally which causes a small scale impact, or radically by altering the core functioning of the organization. Because this first-order or periphery change is the most predominant type of change to be experienced by organizations (FoxWolfgramm, Boal, and Hunt 1998), it is surprising that contemporary research has made little attempt to refine this conceptualization further. One important exception is the typology introduced by Golembiewski, Billingsley, and Yeager (1976), which delineates three distinct categories of change. This typology is considered a relevant lens through which to view marketing specific change, and has been usefully employed in other marketing research (e.g., Cooper 2000). Similar to the radical change classifications of core and second-order change, the typology considers gamma change. The authors define gamma change as a “quantum shift in ways of conceptualizing salient dimensions of reality,” (Golembiewski et al. 1976, p. 138). Alpha change involves smaller scale change such as that described by the terms periphery, non-core, or first-order. Change of American Marketing Association / Winter 2005 the alpha type occurs within a fixed and stable system and can be accurately measured with reliable dimensions. Beta change also involves periphery change within a fixed system, but is complicated by the fact that the dimensions of measurement or calibration have changed as well. Beta change may be likened to changes occurring in a stable system, however fluctuating “rubber yardsticks” provide unreliable measurement. We extend the discussion of this type of change by proposing two distinct forms of beta change. The typology has relevant application to a broad spectrum of change affecting marketing strategy, and we highlight some examples for illustration. In response to the unique impact of change, a few key organizational phenomena will combine to determine marketing’s ability to overcome change. Three relevant factors instrumental to the marketing function’s change response include opacity, asperity, and intricacy. Research has demonstrated these variables’ impact on an organization’s ability to manage and ultimately survive significant change (Hannan, Pólos, and Carroll 2003). Opacity describes phenomena at the individual level, specifically concerning marketing managers’ perceptions, actions, or possible oversights. In particular, we consider opacity as marketing mangers’ inability to foresee, effectively comprehend, and thus plan accordingly in the face of change. Asperity describes normative, cultural phenomena affecting large groups or subgroups within the organization. Within marketing, interrelatedness between normative structures and organizational culture makes the marketing function more or less susceptible to failure in light of change. Finally intricacy describes the overall organizational design, specifically the degree of interconnectedness between relevant organizational units. Although highly interconnected organizations may promote positive communication structures and decentralized decision making for example, organizations that are too highly interconnected may lose flexibility. Achrol (1991) emphasizes that the impact of change will be intensified in densely interconnected and interdependent settings. We apply these organizational phenomena to the marketing discipline with specific descriptions and examples of each opacity, asperity, and intricacy. Our research marries these marketing organizational phenomena to the various conceptualizations of change. Just as alpha, beta, and gamma changes are defined so differently, it follows that their impact on opacity, asperity, and intricacy will fluctuate and vary. In worst-case 236 situations, these variables combine in such a way to divert marketing managers’ time and attention away from opportunities and thus potential resource generating activities (Hannan et al. 2003). Thus, missed opportunities become the key, detrimental outcome of change mismanagement in the marketing organization. Depletion of resources through missed opportunities can ultimately drain the life from a marketing organization. Only significant caches of resources accumulated prior to the change can possibly offset substantial resource depletion occur- ring as a result of missed opportunities. The ultimate consequence of missed opportunities and subsequent resource depletion is marketing failure or even death. It follows that understanding how specific combinations of opacity, asperity, and intricacy impact the marketing organization’s ability to capitalize on, rather than neglect, important resource-generating opportunities is imperative. We consider the consequences for other strategic marketing outcomes, as well as overall firm performance. References are available from the authors upon request. For further information contact: Kelly D. Martin Department of Marketing College of Business and Economics Washington State University Pullman, WA 99164–4730 Phone: 509.335.5848 FAX: 509.335.3865 E-Mail: [email protected] American Marketing Association / Winter 2005 237 PRIVACY CONCERNS AND CUSTOMERS’ WILLINGNESS TO PROVIDE INFORMATION: A REVIEW WITH IMPLICATIONS FOR FUTURE RESEARCH Mona Srivastava, Texas A&M University, College Station Robert Harmon, Portland State University, Portland SUMMARY Organizations and customers are engaged in a battle over information. Too much information being collected has raised privacy concerns amongst customers whereas too little information hampers organizations in their efforts to create long-term customer relationships. Although society may force privacy regulations on marketers through governmental action or legal initiatives, we believe that a market-based solution focused on educating organizations on the benefits of finding the right balance between too much and too little information would alleviate customers’ privacy concerns as well as translate into costsavings for organizations. This paper reviews extant literature on the factors that affect the customer’s willingness to provide information to organizations and explores implications for future research to draw managerial attention towards the ethics of collecting customer information. The potential relationships between the factors that impact the customer’s willingness to provide information to organizations are detailed below. Customer’s Privacy Concerns: Sieber (1998, p. 136) has defined privacy as a person’s “degree of control of the access that others have to them and to information about them.” Customers are increasingly concerned about retaining control over their personal data, and want organizations to reward them for giving information and allowing for its use (Hof 2001). The degree of privacy concern differs as per the type of information (Nowak and Phelps 1992, 1995), type of industry, culture, age, and gender (Petrison and Wang 1995; Milne and Boza 1999; Sheehan 1999). We posit that privacy concerns directly impact trust. Since the role of trust in the relational context has been acknowledged as crucial, it is important to study the impact of privacy concerns on trust (Regan 2003; Fonseca and McCarthy 2003; Cavoukian et al. 2002; Miln and Boza 1999). Customer’s Trust in an Organization: Some of the factors that may determine the degree to which customers are willing to trust an organization include who their personal information is shared with, how it is used, what is the cost-benefit of sharing their information, and the reliability of the organization. Technology has enabled the collection and use of customer information without American Marketing Association / Winter 2005 even the customer’s awareness or permission, and has also helped make the provider, delivery process, and process controls invisible especially in an online environment, which has had a negative effect on trust. We posit an inverse relationship between privacy concerns and trust which may be accentuated or attenuated depending the organizations’ need-to-know that information. Further trust is the mediating factor in the relationship between privacy concerns and the customer’s motivation for a relationship with the organization. Organization’s Need-to-Know: When approached by an organization for information customers are concerned about how this information will be used, can the organization can be trusted with this information and most importantly, whether the organization needs to have this information for better satisfying its customers’ needs? P1: The relationship between the customer’s privacy concerns and the customer’s trust in an organization is moderated by the organization’s need-to-know that information. Customer’s Motivation for a Relationship: Bendapudi and Berry (1997) argue that individuals participate in relationships either because they want to or because they have to. Intrinsic desires like dedication drives high motivation for a customer relationship and such relationships are based on trust as well as dependence. However, when customers are constrained to maintain a relationship, perhaps due to lack of alternatives, then dependence, without trust, leads to a low motivation for a customer relationship. We believe that customers with a high motivation for a relationship would be more likely to acquiesce to an organization’s request for information, providing better quality and/or quantity of information, to achieve mutual benefits. P2: The customer’s trust in an organization increases the motivation of the customer to have a relationship with an organization. P3: Customers with a higher motivation for a relationship with an organization would be more willing to provide better quality and quantity of information to the organization, than those with a lower motivation. 238 Customer’s Technology-Readiness: Parasuraman and Colby (2001, p. 27) define technology-readiness as “people’s propensity to use, embrace and employ new technologies for accomplishing goals in home life and at work.” On one hand it may be argued that people who are more technology-ready would be better able to interact with the technologies that organizations use to collect customer information. However a counter argument may be that highly technology-ready customers would be more aware of how their information can be surreptitiously collected and used, and so would be less willing to provide information to organizations. Further we believe that the impact of the customer’s technology-readiness on the customers’ willingness to provide information occurs only in a relational context. So despite the customers’ technology-readiness, they may not be willing to provide information to an organization unless they trust the organization and have a relationship with that organization. Additionally we argue that the technology-readiness of customers also impacts the relationship between privacy concerns and trust. For different levels of technologyreadiness, the relationship between privacy concerns and trust may be accentuated or attenuated, again depending on the industry context i.e., the organizations’ need-toknow. P4a: Customers with high scores on the technology- readiness index would be more willing to provide information to an organization. P4b: Customer with high scores on the technology-readiness index would be less willing to provide information to an organization. P5: The customer’s motivation for a relationship moderates the relationship between the customers’ technology-readiness and the customer’s willingness to provide information. P6: The customer’s technology-readiness moderates the relationship between customers’ privacy concerns and the customers’ trust in an organization. The answer to this privacy question is not simple and opens up new avenues for research geared towards resolving the tug-of-war between organizations and their customers over customer information, and thus making mutually beneficial customer relationships more fact than fiction. By protecting customer privacy, the contribution made to society would be tremendous and the onus of protecting the rights of customers may shift somewhat from policymakers to organizations, which then would become the enforcers of privacy protection rather than perpetuators of what has become a societal dilemma. References available upon request. Mona Srivastava Texas A&M University College Station, TX 77843 Phone: 979.845.4525 FAX: 979.862.2811 E-Mail: [email protected] American Marketing Association / Winter 2005 239 SHIFTS IN WORKPLACE ETHICS: OPPORTUNITIES FOR CONFLICT? Paul L. Sauer, Canisius College, Buffalo Paul Chao, Eastern Michigan University, Ann Arbor SUMMARY The increased availability and use or abuse of office technology in the workplace is the concern of recent ethics research (Oz 2001; Stone and Henry 2003). Victor and Cullen (1987, 1988) develop a classification of nine types of ethical climate that vary along two dimensions: types of criteria (or ethical criteria) and level of analysis (or locus of analysis). Peterson (2002) shows that giving gifts and favors such as described in items that are contained in our gifts and entertainment section, is related to both the personal morality and corporate rules dimensions of the Victor and Cullen (1988) theoretical framework. Peterson (2002) also provides evidence that calling in sick and lying such as described in items that are in our truth and lies section, are related to Victor and Cullen’s (1988) ethical climate dimensions of personal morality and corporate rules. The purpose of our research to examine the extent of temporal shifts in personal beliefs, in perceptions of the ethical climate in the workplace, and in the potential for conflict caused by changes in incongruence between self-reported beliefs and climate perceptions Building on the concept of value congruence between and individual and the office environment (Liedtka 1989), an approach is developed to assess the shifts in the congruence between individuals’ beliefs and their workplace climate. Subjective perception is the determinant of whether conflict exists (Moser 1988) and depends on the ethical congruence between the individual and his or her workplace. Restraint incongruence occurs when the individual does not perceive a behavior as wrong, but perceives that such behavior is not common in the workplace. Compelled incongruence occurs when an individual perceives a behavior as wrong, but the perceives the same behavior as common in the workplace. Because there is evidence of regional geographic differences in individuals’ consumption habits, lifestyles and values (Kahle 1986; Mittal, Kamakura, and Govind 2004), we administer the survey to working professionals enrolled in part-time management programs operated by a private university in the northeastern region of the United States and a public university in the Midwest. The time frames for administration include pre-2001 and post2001 survey administration. We chose these time frames to span the time before and after ethical scandals revealed in late 2000 and in 2001. We did pre-2001 sampling in the first half of 2000 and post-2001 in spring and fall of 2003. American Marketing Association / Winter 2005 For each workplace behavior we use two scales, one to measure a self-report of strength of personal belief as to how wrong that behavior is and a second to measure selfreport of perceived commonality of that behavior in the respondent’s workplace. All items use a 7-point bi-polar scale with end-points anchored by strongly agree and strongly disagree. This is equivalent to the wording of items and scales used to assess ethical beliefs and confirm dimensions of climate (Cullen and Victor 1987; Peterson 2002). We operationalize perceived incongruence by subtracting each respondent’s perception of ethical climate rating score from that respondent’s ethical belief rating score for each behavior. A score of zero would indicate a consonant state. The greater the positive difference, the greater is the potential for compelled incongruence. The greater the negative difference, the greater is the potential for restraint incongruence. The overall sample consisted of 14.8 percent toplevel managers or directors, 31.7 percent middle level managers, and 35.5 percent lower level staff such as technical employees or assistant managers. Regarding office technology, independent sample t-tests reveal two significant shifts in the direction of weaker ethical beliefs for Midwest respondents and three significant shifts occur in the direction of stronger ethical beliefs for Northeast respondents. Midwest respondents indicate that use of company e-mail for personal reasons is significantly more common while Northeast respondents perceive use of an office computer for Internet shopping to be more common in post-2001. For Northeast respondents perceived compelled incongruence increased for use of company e-mail, use of the office computer for Internet shopping Midwest respondents exhibited a shift toward weaker beliefs regarding gifts and entertainment. For gifts and entertainment, Midwest respondents perceive receiving a $50 gift from the boss as being significantly more common while Northeast respondents’ perception of receiving $200 football tickets from a supplier is significantly less common after 2001. Perceived restraint incongruence increased for a $25 gift certificate from a supplier. For Midwest respondents an increase in perceived restraint incongruence for a $75 raffle prize at a suppliers’ conference occurred. There were no shifts in ethical beliefs about truth and lies. No significant shifts in climate occurred with respect to the two items measuring truth and lies. Overall only four (4) of the 108 tests for pre-2001 and post-2001 differences for the gifts and entertainment and 240 truth and lies items were significant which is less than chance. Results with respect to shifts in beliefs indicate that there is some change with respect to office technology, but essentially none with respect to gifts and entertainment or truth and lies. In spite of the fact that no significant shifts occur with respect to truth and lies behaviors, these forms of ethical abuse appear to provide the most fertile ground for perceived incongruence and conflict. Personal beliefs are very strong that these two behaviors are wrong, yet the perception is that they are generally common in the workplace, especially after 2001. One reason for the lack of more significance effects may be the fact that individ- uals simply do not associate the personal behaviors used in this study with the higher corporate level of illegal and unethical behavior. Another problem is that the pre-2001 and post-2001 data came from two different sets of respondents, thus there is no way to know if individuals changed, only if the aggregate sample changed. This also may explain that not only were there a large number of non-significant differences, but also that there were differences that went in the opposite direction of what was hypothesized. Improvements would include using matching samples over time and confining the study to employees in one or two companies. References available upon request. For further information contact: Paul L. Sauer Canisius College 2001 Main St. Buffalo, NY 14208–1098 Phone: 716.888.2631 FAX: 716.888.3215 E-Mail: [email protected] American Marketing Association / Winter 2005 241 INTERACTION BETWEEN THE SALESPERSON AND CUSTOMER: A FRAMEWORK FOR IMPROVING THE SALES OUTCOME Elizabeth Hemphill, University of South Australia, Australia Chris Dubelaar, Monash University, Australia Steven Goodman, University of South Australia, Australia Gus Geursen, University of South Australia, Australia ABSTRACT This paper examines the role of disclosure on agency establishment. Structural Equation Modeling reveals the need for salespeople to reach a level of “rapport” for a phase transition prior to any eventual sale. Reaching this level is a key driver of successful outcomes, rather than the negotiating skills. “sales” on behalf of the principal? Industry view has long held the importance of rapport building to lead to sales. This paper examines this notion from an academic sense. The objective of this paper is to explain what a salesperson should do to maximize their chances of establishing agency agreements by assembling and empirically testing a model of agent-principal relationship establishment. LITERATURE AND BACKGROUND INTRODUCTION Marketing centres on the process of exchange between buyers and sellers (Kotler, Adam, Brown, and Armstrong 2001). As sellers enter into relationships with suppliers they act as agents in pursuit of consumers/ buyers to the extent that “most of the world’s work is done by agents” (Reuschlein and Gregory 1990). To date marketing literature has adopted a focus on relationship maintenance (Weitz and Jap 1995; Dahlstrom and Ingram 2003), essentially skirting around formation of this relationship (Dahlstrom and Ingram 2003) so that how sales relationships are developed is not well covered, even in personal sales (Weitz and Jap 1995). This paper examines what it is about a specific seller that maximizes their chance of establishing the right to pursue buyers in a way overlooked until now in the literature. Specifically, the approach taken in this paper is to understand the role of rapport building in the establishment of agency relationships. When a seller (agent) is engaged by a supplier (as principal) to undertake some action (such as pursuing buyers) on behalf of that principal, an agency relationship is established. Thus, formation of the agency relationship is essential prior to any longer term association or marketing exchange. In forming the agency exchange, an agent “sells” to a buyer (principal) their offer to serve in a master-servant relationship governed at least by the “rules of agency” (established consensually between agent and principal) and both agency and partnership law (Reuschlein and Gregory 1990). On the surface, establishing the agency agreement therefore looks like a normal sales transaction. As a purpose driven process (Sheth and Parvatuyar 2000), the question remains: What can a sales person really do to increase their chance of forming an agency relationship so they can subsequently pursue American Marketing Association / Winter 2005 The roots of agency relationships come from legal literature that adopts a perspective of enforceability of all terms, covenants, and conditions of the agency agreement. In legal literature (Reuschlein and Gregory 1990) and contract law (e.g., U.S.A. District Court Case: Paul T. Freund Corp. v. Commonwealth Packaging Co.) elements of agency include: consent, fiduciary agreement, absence of gain or risk to the agent, and control by the principal (Reuschlein and Gregory 1990). Legally this fiduciary consensual relationship between agent and principal exists when “one person manifests an intention that another shall act in his behalf and the other person consents to represent him” (Reuschlein and Gregory 1990). Marketing literature has studied the application of agency theory and the role of information in relationship formation (Dahlstrom and Ingram 2003); the purchaser’s perspective of influences that determine a decision to commit (Bagozzi and Dholakia 1999; Bagozzi 2000); relationship maintenance (Sitkin and Roth 1993; Sheth and Parvatuyar 2000; Singh 2000); agency relationship definitions and outcomes (Bergen, Dutta, and Walker 1992); drivers of agent behavior (Richins, Black, and Sirmons 1987; Moore, Smolen, and Conway 1992; Marsh and Zumpano 1998); and significant behavioral predispositions of a salesperson that influence sales performance (Weitz 1981). Relationship marketing literature adopts a focus on the relationship rather than the transaction resulting from relationship formation (Sheth and Parvatuyar 2000), in which a process model clearly differentiates formation of the relationship from other aspects of relationship maintenance. However, even this literature fails to adequately define the process of formation, slipping quickly into an emphasis demonstrated by Levitt (1983) in which the real value of a relationship between customer and seller occurs after a sale. Such a relationship is dependent on establish242 ing trust and cooperation (Morgan and Hunt 1994) and avoiding cognitive dissonance (Festinger 1957) in order for it to continue. If we accept Sheth and Parvatuyar’s (2000) observation that forming a relationship is more important than customer acquisition, agency formation emerges as a critical part yet to be examined empirically for marketing. This paper is therefore an essential first step in understanding how a supplier of agent services is selected from a pool of potential agents. This paper firstly adopts the agent’s perspective. Due to imperfections in self-assessment noted by authors such as (Jaramillo, Carrillat, and Locander 2003), we secondly offer results from a pilot study of principals as a basis for future research to further compare the agent’s perspective with that of the principal. Theoretical Model Based on a number of propositions framed by Weitz and Jap (1995) and Jacobs et al. (2000) we examine how the salesperson influences formation of the agency relationship. Weitz and Jap (1995) argue that relationships are built around trust, communication and negotiation in what is described by other authors as the first stage of relationship building, known also as pre-sale distinct from sale (Sheth and Parvatuyar 2000, p. 332). Communication: Models of customer-salesperson interaction traditionally include an element of information exchange. For example: Information exchange drives a negotiation process (Olekalns 2002), the final stage of which is a level of “give and take” that result in a mutually agreeable outcome; And a noted distinction between the contributions of exchange specific self-disclosure and social self-disclosure in sales exchanges between life insurance sales agents and potential customers/investors (Jacobs, Hyman, and McQuitty 2000). A seller’s commitment to a sale therefore depends on information disclosure between the principal and seller (as agent) on both transactional and personal levels (Jacobs et al. 2000). Negotiation: Weitz and Jap (1995) further find that the sales presentation comes before, and leads to, negotiation. A clear link from salesperson’s behavior to a principal’s decision to commit exists in personal sales literature based on appraisal of interactions with the sales person (Lee and Dubinsky 2003), despite the specific decision influencing criteria of the principal being unavailable to the salesperson as a matter of competition (Spekman 1988). Lee and Dubinsky (2003) establish that courteousness, expertise, and friendliness are assessed to determine satisfaction levels which then influence a purchase decision. Throughout this process, known as “priming” (Whittler 1994), purchase decisions can be influenced by at least the salesman depending on their capacity to establish a sense of trust (Morgan and Hunt 1994), by achieving a level of acceptance by the principal. This research paper tests the conceptual model below (Figure 1) using adaptations of propositions offered by Weitz and Jap (1995) and Jacobs et al. (2000). METHOD This study empirically tests propositions detailed in Table 1 above that have only previously been tested in other environments by Weitz and Jap (1995) and Jacobs et al. (2000). These are based firmly on avoiding cognitive dissonance (Festinger 1957; Spekman 1988; Hunt 1991) FIGURE 1 Conceptual Model Social Disclosure P2, P5 People Skills P1, P3 Negotiation P6 Relationship Establishment Exchange Disclosure P4 Empirical examination of the propositions presented in Table 1 tests this graphical model. American Marketing Association / Winter 2005 243 TABLE 1 Propositions Tested In This Research Propostions Research Propositions Instrument Item Construct Interest is communicated and partner worthiness assessed (Weitz and Jap 1995) The agent came across as being competent People Skills Norms are used to provide a context for messages (Weitz and Jap 1995) Information the agent acquired included which other agents were being considered Social Disclosure P2 Communication increases over time spent on the relationship (Weitz and Jap 1995) The agent got to know the principal People Skill P3 Salespersons must be skilled active listeners that have the ability to communicate (Weitz and Jap 1995) The agent got to know the principal People Skill Exchange specific self-disclosure influences the outcome of a sales attempt (Jacobs et al. 2000) The agent got the principal to share good things about the property Exchange Disclosure P4 Social self-disclosure influences the outcome of a sales attempt(Jacobs et al. 2000) The agent got the principal to share why they were selling and if they had already purchased Social Disclosure P5 Negotiation of terms leads to a sale (Weitz and Jap 1995) The amount of changes to the agent’s proposed service offering (sales commission, list and reserve price, advertisements) Negotiation P6 and aim to determine which agent characteristics influence whether an agent-principal relationship was formed between agent and principal. In this paper real estate agents, or realtors, are used as sellers to examine agent-principal relationship establishment because they engage in commonly occurring agency experiences with property sales (and purchases) that require establishment of an agent-principal relationship for technical or economic reasons. They operate in agentprincipal relationships in which people generally have multi-agent experiences as they sell houses and property at different points in their lives. In general, people who have engaged in such agent-principal relationships as either agent and/or as principal (property vendors that wish to sell their properties with the assistance of an agent) readily share information about their experience. The dependent variable for this research is a relationship establishment attempt. This can be either successful or unsuccessful. If successful, a legally binding agent-prin- American Marketing Association / Winter 2005 P1 cipal relationship is established (a sale of agent services occurs). If unsuccessful, no legally binding agreement is established between that agent and that principal (no sale occurs). Whether an agency agreement is established with another agent, or does nothing at all is not measured. Construct Operationalisation Based on Churchill’s (1979) paradigm, discussions provided a breadth and depth of qualitative data required for empirical instrument development to test Figure 1. For this research we define negotiation as: the bargaining, trading-off, “haggling,” that results in change to the terms of the agent-principal agreement. This excludes the design, plan, and assembling of the agent proposal, anything prior to the completion of initial principal evaluation of the agent proposal, anything prior to both parties establishing their goals, measurement of the principal’s previous experiences, and anything to do directly with 244 potential buyers. We did this because the literature clearly indicates this as an important stage of negotiation (Olekalns 2002). We measure negotiation from the perspective of its contribution to agent-principal relationship establishment by examining the amount of change to a proposed agency agreement. Information disclosure underpins negotiation (Olekalns 2002). We define this as the acquisition of exchange information (about the property) and social information (about the property owner that is the potential purchaser of the agent services). Exchange disclosure is important in this sales process [Agent Focus Group]. “If a house has white ants we need to know it is fixed . . . and if buyers ask we tell them to get an inspection done . . . we tread carefully” [Agent W]. Due to legal requirements of full disclosure in the final sale to a property purchaser, we suggest that agents filter information by probing for resolutions of potentially problematic information but otherwise do not probe for information, thus the amount and nature of exchange information is important. Social information is important in the process of establishing an agent-principal relationship. Real estate agents continually ask questions like “What were you thinking of? Is that all right with you? Do you agree with that?” [Agent Z] and “We try to find out who else the vendor is considering and shy they are selling” [Agent W]. Agents in fact selectively appropriate social information in relationship establishment to simplify agent-principal relationship maintenance and increase their chance of being accepted by the principal. Our definition excludes how the agent uses the information, how the agent acquires the information, whether the information was requested, offered directly, observed indirectly, or acquired by other means, and the quantity of information about the vendor. We did this because “In any negotiation, information is power” (Latz 2001). Measurement of information disclosure is focussed on the opportunity for selective acquisition of property and property seller specific information. As agents’ selectively appropriate information that will improve their chances of selling their services to the principal, measurement of information is focussed on the selectivity of exchange specific information and more personal social information. Data Collection and Analysis Method A self-completion mail questionnaire was developed and sent to 1600 real estate sales agents (as sellers) that had experienced both successful and unsuccessful attempts to establish supply relationships with property vendors. These were randomly selected from the Real Estate Institute of Victoria’s member database but followup data collection involved convenience sampling from the original database. Respondents were screened to ensure they were representative of agents in general providAmerican Marketing Association / Winter 2005 ing in total 274 usable sale attempts. Each response included information on two sale attempts – one successful and one unsuccessful. Differences between the two groups were examined closely to ensure that data were not distorted by selfvalidity bias. Based on McQuitty (2003), sufficient level of power was achieved to enable the model to verified using SEM. Missing answers were imputed using expectation maximisation (Figueredo, McKnight, McKnight, and Sidani 2000; Flury and Zoppe 2000) to best preserve the integrity of this data set. The final response rate was around eight percent. Although this could be considered a major limitation to this research, there is only a six percent (.060412) chance that the sample does not represent the population through calculation of the margin of error (Kline 1998). Verification of sample representativeness involved examining respondents’ personal previous month’s median residential property price sold and comparing this to published property prices for their city of operations. From this, two different types of agent sales performance estimations were evident. Firstly, a large number of agents estimated their sales performance close to published prices. These agents, on average, underestimated their sales performance compared to published sales figures by only approximately 12 percent. This is a relatively small discrepancy, suggesting that respondents were representative of their locations. In these cities, property prices were relatively stable at the time of this research. Secondly, a number of agents underestimated their sales performance compared with published property prices by up to 50 percent. Notably these agents operated in cities that experienced large house price increases over the past 18 months revealing a telescoping effect resulting from agents being asked to consider back over time whilst we take a single snapshot. This means that should this research be replicated at a later date, with more stable property prices, it would be reasonable to expect fewer discrepancies between estimations and published prices. Responding agents were found to be reasonably representative of the regions in which they operate. Anderson and Gerbing’s (1988) approach to Structural Equation Modeling (SEM) was used for data analysis to test the theoretical model (Figure 1) so that indirect effects of model constructs could be estimated and interactions between constructs could be examined. Direct influences of model constructs on the dependent variable were examined with Logistic Regression (McFadden 1976). Variance and correlations were examined to affirm measure reliability, validity, and purity based on Campbell and Fiske (1959), Churchill (1979), Cronbach (1951), Finn and Kayande (1997), Menezes and Elbert (1979) and Peter (1981) prior to structural model evaluation in order 245 to justify implementation of a model evaluation technique (Bagozzi 1982; Bhargava, Dubelaar, and Ramaswami 1994; Churchill 1979; Finn and Kayande 1997; Menezes and Elbert 1979; Nunnally and Bernstein 1994; Peter 1981). Examination of Bollen and Stine p-values reveals that similar results could be expected in 39.9 percent of cases (95.6% for sales compared to 16.3% for no-sales). Such poor model indicators for the unsuccessful relationship establishment attempt (no-sale model) suggest that it is not just the interaction with the salesperson that accounts for no-sale being made. Table 3 shows differences between a sale and no sale estimates. Incorporating the work of Pearl (2000) links tested with SEM are significant when Critical Ratio estimates are greater than 1.96 (Arbuckle and Wothke 1999, p. 74); or Differences between relationship establishment attempt outcomes for a single degree of freedom are significant (if Discrepancy estimates are less than 3.84146 then estimates are considered significantly different from each other at a significance level of 0.05). RESULTS Diagrammatic representation of the resulting structural equation model is shown in Figure 2 below with Table 2 detailing results of model statistics. Structural equation model indicators in the Table show the structural model estimated in the Figure below delivers a reasonable fit within the measurement model (with Fit indicators close to 1), confirming a significant difference between successful (a sale) and unsuccessful (no sale) relationship attempt outcomes. The likelihood that test statistics are correct exists because there is nearly an 80 percent chance that acceptable structural models were rejected, meaning that if not rejected the statistics are more likely understated than overstated to a level of 0.8 for the full data set (McQuitty 2003, p. 7). This Table shows that people skills are significantly related to exchange (CR > 1.96) and social disclosure (CR > 1.96) and that the importance of social disclosure differs significantly between successful and unsuccessful relationship establishment attempts (Significant difference between estimate of 0.40 and -0.47). Logistic regres- FIGURE 2 Structural Model Estimates 1.07 eq 14 a 1.68 eq 14 d 1 1 2.23 eq 11 k 1 1 q 11 e q 14 d q 14 a 1.23 eppl 2.01 eq 11 e q 11 k 1 Exchange Disclosure .68 People Skills 1 2.14 q 11 d 1 1.08 eq 11 d .02 Social Disclosure 1.59 1 -.05 .33 .63 esoc .73 e exch 1.15 1.00 1.03 1.00 1.00 q 11 b q 11 a 1 4.60 eq 11 b 1 1.85 eq 11 a American Marketing Association / Winter 2005 Negotiation 1.00 q 13 a 1 4.08 eq 13 a .90 1 6.16 eneg 1.03 q 13 c q 13 b 1 1 3.38 3.58 eq 13 b eq 13 c 246 TABLE 2 Model Statistics Comparative Fit Boot Strap Mean Disc SE of MEAN Bollen & Stine P-value Chi-Sq Df P RMSEA max Normed Fit Relative Fit IncreMental Fit M’ment Model 18.97 29 .922 .02 .95 .92 1.03 1.00 38.38 .30 .97 Structural Model 40.26 31 .123 .06 .94 .92 .99 .99 38.53 .26 .40 Sale 21.20 31 .906 .03 .94 .91 1.03 1.00 41.47 .32 .96 No sale 47.72 31 .028 .10 .87 .81 .95 .95 36.78 .26 .16 TABLE 3 Differences Between a Sale and No-Sale (SEM Results) A Sale (Successful Relationship Establishment Attempt) No Sale (Unsuccessful Relationship Establishment Attempt) Significantly Different Est. S.E. C.R. P Est. S.E. C.R. P People Skills to Exchange Disclosure 0.63 0.16 3.98 *** 0.68 0.25 2.73 0.01 No People Skills to Social Disclosure 0.32 0.10 3.19 0.00 0.38 0.15 2.53 0.01 No Social Disclosure to Negotiation 0.40 0.28 1.43 0.15 -0.47 0.36 -1.28 0.20 Yes -0.19 0.25 -0.75 0.46 0.16 0.31 0.53 0.60 No Exchange Disclosure to Negotiation sion results in the table below show significant relationships between modelled constructs and the outcome of an agent-principal relationship establishment attempt when Sig. < 0.05. These results show that getting to know the customer (sig. = .009 in Table 4) is the best way to (a) achieve social disclosure and (b) establish the relationship that determines the likelihood that a marketing exchange will occur; Knowing the competition is important aspect for a sale (sig. = .037 in Table 4); That negotiation and exchange specific disclosure will not assist in establishing a sales exchange without the support of the people skills component. American Marketing Association / Winter 2005 On a theoretical level, negotiation should depend on information disclosure for setting up terms of a business relationship. Personal relationships set up the clients’ satisfaction prior to any sharing of information that may lead to commencement of negotiations, or eventuate in a sale. We propose therefore that this can be viewed as two distinct phases of the sales process. The people skills construct can be viewed as what is commonly discussed in industry sales literature and training courses as “rapport building,” or “empathy selling” (Golis 1991). These results give empirical support to the notion that the selling process can be observed as a “phase transition” where people skills (the ability to build rapport) are most important and come first. Without establishing rapport, and 247 completing the phase transition to commitment to purchase, a sale (and an agency agreement) is not likely to be achieved. The notion that self-evaluation in the area of sales and agency relationships is unreliable is supported in our results on the basis that people skills are clearly attributable to success but not necessarily attributed to failure to achieve a sale. Model differences suggest a distinct inability to acknowledge fault when the sale relationship is not established. Given the nature of sales and personal selling, this difference is to be intuitively expected and demon- strates the need for research in which data are gathered from the client side of the agency exchange. Admission of personal inadequacies such as this would be unlikely, as individual agents seek to preserve their self-esteem. Consequently, steps were taken to overcome such a bias in this research by conducting an exploratory pilot study of 200 principals. This Table shows that the most important “sale” influences mirror closely the aspects that significantly differ between the model for a “sale” and “no sale.” That is, personal relationships between agent and vendor are TABLE 4 Logistic Regressions Results Instrument Item Wald Sig. Construct Measured by Instrument Item Why the vendor was selling Which other agents they were considering If the vendors had already purchased Good things about the property All there was to know about the property Change in sales commission Change in property list and reserve price Changes in the advertising campaign Agent persuasively demonstrating competence Agent getting to know the vendor 0.046 4.351 1.127 0.568 0.157 0.409 0.005 0.088 0.428 6.901 0.830 0.037 0.288 0.451 0.692 0.523 0.942 0.766 0.513 0.009 Social Disclosure Social Disclosure Social Disclosure Exchange Disclosure Exchange Disclosure Negotiation Negotiation Negotiation People Skills People Skills TABLE 5 Purchaser Pilot Study Results Influence in Purchase commitment Count % Responses Relationship(acquaintance) with agent Reputation Recommendation Results Market Share Verbal/written submission Corporate identity Media presence Auction/For Sale boards Website Other Total responses 101 74 55 31 26 16 16 12 12 5 23 371 27.2 19.9 14.8 8.4 7.0 4.3 4.3 3.2 3.2 1.3 6.2 100 American Marketing Association / Winter 2005 248 established as the agent gets to know the vendor and perceives a position of competitive advantage in the agent’s ability to perform contracted services after the purchase. These results further support our view that the personal relationship with the agent is most influential in moving the purchaser through the initial phase of their purchase commitment and accept the salesperson and their competence to perform tasks of the agency agreement. We argue that it is not just trust and satisfaction that lead to a sale but the degree to which a salesperson can “Get to know” the customer, thus entering their “space.” Direct interaction and information disclosure between agent and purchaser results in a level of commitment to a purchase decision prior to the actual sale transaction. However, only if rapport is right then transition can be direct to relationship establishment without incurring further risk to the outcome via negotiation. DISCUSSION/IMPLICATIONS This paper strongly argues therefore that agency establishment (as a normal sales exchange) is a multiphase process. In this process the first phase requires establishment of trust between the seller and purchaser (Morgan and Hunt 1994) and establishment of a personal relationship. This relationship must in fact include a level of satisfaction (Weitz 1981) and avoidance of cognitive dissonance (Festinger 1957). Subsequent to moving through this first phase other elements of buyer behavior models may account for the eventual outcome of a sales attempt but in the first instance of phase transition, establishing rapport with a potential customer is critical. This paper examines the point of a sales relationship establishment from the perspective of agent-principal relationship establishment. We do this because (i) an agent must establish these relationships with a principal prior to any further money making transactions on behalf of that principal (ii) as part of a sales transaction marketing is dependent on establishment of these relationships and (iii) more and more, business structures can be seen as agency structures as often business is conducted through networks of independent agents. Establishment of the agency agreement is clearly similar to normal sales transactions in which the agent’s role of establishing rapport with the principal is critical as purchasers are led to a sales commitment by their personal rapport with a salesperson. The key principle this research addresses is the way in which a salesperson (agent) contributes to a position of competitive edge in the mind of the purchaser (principal) in what is essentially a normal sales process (establishment of the agent-principal relationship). Sales literature strongly suggests that a movement towards commitment to a sale is based on the customers’ perception of trust and satisfaction with the sales person (Morgan and Hunt 1994; Weitz and Jap 1995; Jacobs et al. 2000; Olekalns 2002). This paper confirms that agency establishment is a normal sales exchange on the basis that (i) legal requirements prescribe steps prior to agent action on behalf on the principal (ii) vendor (principal) selection of an agent is a competitive process and (iii) the transaction is basically a services marketing transaction in which personal skills of the agent are the driving force. This paper also establishes that the process of negotiation is incorrectly positioned in existing literature because it: (i) cannot occur until a personal relationship has been established; (ii) does not necessarily lead to a final sales transaction; and (iii) does not necessarily rely on information disclosure from the principal (vendor). FIGURE 3 Revised Model Social Disclosure P2, P5 People Skills P1, P3 Negotiation P6 Relationship Establishment Exchange Disclosure P4 American Marketing Association / Winter 2005 249 Significant implications for practitioners (general sales people, agents, and agencies) and theory exist from these findings because: “Selling is a process of influence . . . the ability to present information, without being abrasive or apologetic, is a learnable and important skill . . . [involving a] . . . willingness to be shaped, influenced, and impacted upon by the customer” (Shaw 1981). The important practical implication from our research is in the area of sales training known currently to be a process of (i) developing a taxonomy of behaviors (ii) practicing skills and (iii) providing support and reinforcement (Shaw 1981). This research takes the first step in defining a taxonomy of behavior that leads to sales relationship establishment. By modeling and empirically testing behavior that influences the likelihood that a sale is made, the outcome of a sales attempt is found not to be determined, as described by Bergen et al. (1992), by processes that follow initial contact between an agent and a principal in which terms of an agency agreement are negotiated. It is instead determined at the point at which an initial context, or reference point, is established. This point is translated by the principal into their measure, or perception, of equity and fairness that actually determines the outcome of the agent-principal relationship establishment attempt rather than any negotiation. For the literature, this paper contributes the finding that information disclosure is seen as an influence of the likelihood that a sale will result, rather than negotiation although social information is seen as an influence on negotiation. Quigg and Wisner’s (1998) work needs to be reworked to reflect the contributions of Levitt’s (1986) consumer reference point thereby acknowledging attitudinal psychology; Braun’s (1999) work needs to be modified to reflect the substantial benefit to agent-principal relationship establishment from identification of Kahneman, Knetsch, and Thaler’s (1986) framing effects (identification of the competition); and Jacoby, Chestnut, and Fisher (1978) and Marsh and Zumpano’s (1998) work needs to be modified because these authors incorrectly detail the role of information in agent-principal relationship establishment. Although we do not specifically focus on communication, interpersonal communication between agent and client (in generally getting along and getting to know each other) is shown to be paramount to a sale. Bagozzi (2000) clearly acknowledges the role of emotions in consumer purchase decisions and the level of rationality behind agents’ efforts to avert cognitive dissonance on the part of the purchaser (Bagozzi and Dholakia 1999; Bagozzi, American Marketing Association / Winter 2005 Gopinath, and Nyer 1999; Bagozzi 2000). Adding to Bagozzi and Dholakia’s (1999) definition of the consumer’s pursuit of specific goals, this paper contributes to sales presentation literature by empirically demonstrating that, as the interface with the client, the sales presentation is the highest level predictor variable. People skills are the agent’s mechanism (as a salesperson) with which to enter a client’s space so these skills represent the highest order of the variables in relationship establishment. Negotiation emerges as a demand side benefit (post relationship establishment, post-“sale”) for pursuit of a final transaction and is not needed for relationship establishment. Currently, agent-principal relationships (sales) begin in the case of real estate by presenting a proposed marketing campaign to a client in the context of selective successes and failures that is often tweaked and altered. Our research demonstrates that negotiation is not even desirable when tendering a relationship proposal to a potential client. As a result agency owners should hire agents that have excellent people skills and can get along with a potential client because of the importance of these to a relationship establishment attempt outcome directly; have adequate processes in place so that agents are not put in the position of having to negotiate terms of an agentprincipal relationship because this will not assist in relationship establishment; and ensure adequate training processes are available for personal skill acquisition, practice, and support. Agents need to be most concerned about gaining acceptance by a client at the initial point of contact so that the client will disclose sufficient information to the agent so that the agent can consolidate the initial relationship into a sales transaction. As a result, the client is less likely to experience cognitive dissonance that will result in an unsuccessful relationship establishment attempt. CONCLUSION A fresh view of the selling process as one of phase transitions offers great potential. At a practitioner level, the notion of “rapport” reaching as a prerequisite for a phase transition to negotiation and then onto a sale offers empirical evidence not provided in this way before whilst not being a startling new insight for the sales profession. Thus this research provides new support for existing training methods. 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For further information contact: Liz Hemphill School of Marketing University of South Australia 27 North Terrace Adelaide, South Australia 5000 Phone: +61.8.8302.0623 FAX: +61.4.1788.2176 E-Mail: [email protected] American Marketing Association / Winter 2005 252 COUPONS: THE INSIDE SCOOP Somjit Barat, University of North Texas, Denton SUMMARY Coupons are distributed with the intent of promoting the product through an increase in sales or encouraging new trials. Even though this widely popular medium of promotion has been extensively researched (Ailawadi et al. 2001; Bawa et al. 1997; Garretson et al. 1999; Heilman et al. 2002; Lichtenstein 1990; Mittal 1994; Raghubir 1998; Reibstein 1982; Ward 1978; Taylor 2001; Nevo 2002) in social science, this paper contributes to the body of knowledge by addressing at least one major shortcoming, that coupons have some inherent disadvantages. These latent weaknesses might eventually act as a detriment to the “promoted” product. Such a possibility arises from the disposition of customers towards coupons in general and the promoted product in particular. Data was collected from a sample consisting of both students and non-students at a large university in the southwestern part of United States. While students are a major segment of coupon-users, the analysis was also restricted to convenience products because this category is one of those where coupons are redeemed the most. The author attempts to buttress his point by investigating how customers evaluate a coupon when they see one. For example, results showed that such an evaluation is based on how strongly customers feel towards a coupon per se as well as on how they view the savings that results from redeeming a coupon. Similarly, on encountering a coupon, customers feel suspicious as well as confused about the real price of the product. Finally, seeing a coupon also influences the perception of the promoted product by the customer. This perception can be operationalized through the income effect and substitution effect, both of which are concepts well grounded in economic theory. The author also categorizes coupons into two major classes: buy-one-get-one-free and half-off coupons, the reason being, they influence the customer’s coupon-value perception and savings-perception in different ways. The conceptual framework, therefore, may be laid out as follows: The perceived value of a coupon affects the direction and magnitude of income and substitution effects and are moderated by the type and face value of coupons, which, in turn, affects the price-perception of the product. Based on this framework, eight hypotheses are suggested out of which, five are strongly and two are partially supported, while one is not supported. As far as implications are concerned, a good knowledge of how coupons might adversely affect sales prospects is critical for managers, manufacturers, and retailers alike. Even within a single product category, one should note what kind of coupon is more appropriate for what kind of products. It also helps to address what face-value to put on a coupon so that it encourages the customer to redeem the coupon as well as increases the bottom line of the coupon issuer. Results from this study can help the customer use coupons in a more efficient way. Moreover, given that the sample consists of both students and nonstudents, the results can be generalized with reasonable level of comfort. On the other hand, future studies can investigate how customers actually utilize the “extra savings” they enjoy by redeeming coupons i.e., whether they just hold on to their savings, buy more of the same or of some other products. Information on redeeming specific type of coupons (e.g., half-off vs. buy-one-get-one-free) can be used to target specific customers, thereby making the whole process more efficient. For further information contact: Somjit Barat 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 2005 253 WHAT NEXT? EXPLAINING REPURCHASE DECISIONS AFTER JOINING A LOYALTY PROGRAM Shirley Y. Cheng, The Chinese University of Hong Kong, Hong Kong Jessica Y. Kwong, The Chinese University of Hong Kong, Hong Kong SUMMARY In the past few years, loyalty program (LP) started drawing attention from researchers. However, extant literature focused mainly on consumer behavior before joining an LP (e.g., joining decisions and program evaluations); how consumers perceive and response to LPs during the program is left largely unexplored. This paper draws on mental accounting theory to explain how LP joining affects a consumer purchase decisions after joining an LP. This focus on purchase decisions subsequent to program joining is crucial because getting the reward requires a consumer to make a series of purchase with the LP-offering company. This extended effort-investing process (Kivetz and Simonson 2003) implies that consumers can decide at any time whether to keep pursuing or not, and the effectiveness an LP depends largely on whether it can influence participants subsequent purchase decisions in favor of the LP-offering company. Thus, we propose that compared to someone who does not join the LP, an LP participant is expected to evaluate a repurchase decision with the LP-offering company more favorably due to the prospect of reward. On the other hand, an LP participant may evaluate a similar transaction with a non-LP-offering company less favorably, because the loss in prospect of reward would result in a deduction of acquisition utility. Due to risk aversion, we predict that losing prospect of reward has greater impact than gaining the same prospect of reward on transaction. In view of the effects of prospect of reward on acquisition utility, this paper proposes that evaluation of acquisition utility can be influenced by an LP structural features, which either: (1) make the value of the prospect definite; or (2) segregate the prospect of reward from other components (e.g., price and value of products) of the transactions. How Does an LP Work? Making the Prospect of Reward Definite According to Thaler (1985) mental accounting theory, consumers evaluate the acquisition utility of transactions, combining what is obtained relative to its price and valuating the utility, in accordance to Kahneman and Tversky (1979) prospect theory. Prospect theory holds that utilities are evaluated as gains and losses relative to some reference point, and while both gain and loss functions are concave (i.e., displaying diminishing sensitivity), loss function is steeper (i.e., loss aversion). Based on these features of value function, Thaler (1985) formulated principles of hedonic framing, which specifies the way of evaluating joint outcomes to maximize resulting utility. To many participants of LPs, the program rewards are uncertain and delayed because they are contingent to a series of subsequent purchases. In response to uncertainty and delay outcomes, people discount their values and impacts on present decisions (Frederick, Loewenstein, and O’Donoghue 2003; Rachlin, Raineri, and Cross 1991). One could thus predict that the effect of reward prospect on acquisition utility can be very limited especially at the early stage of program completion. A transparent medium system may counter the effects by making the prospect of reward definite at the time of transactions. We define the transparency of a medium system as the extent to which the monetary value of each unit of medium is made explicit to the consumers. A transparent medium system will make the reward prospect more definite in values, thus enhance its effect on evaluation of acquisition utility. When a consumer joins an LP, he/she has an expectation of a future reward. Subsequently, every time the consumer makes a purchase after he/she joined the LP, he/ she is approaching the program reward. We termed this partial realization of reward rospect of reward Although the program reward is not obtained in a single transaction, the prospect of the reward does carry utility that, as a part of what is obtained in the transaction, represents a gain in acquisition utility in every transaction with the LP-offering company, but a loss in every transaction with a nonLP-offering company. American Marketing Association / Winter 2005 Segregating the Prospect of Reward Because the gain function is concave, segregating the prospect of reward from other components in utility evaluation enhances resulted acquisition utility. Offering incommensurate reward will prevent consumers from integrating the reward prospect with product value and 254 price when evaluating the acquisition utility. Incommensurate rewards, in the context of LPs, are defined as rewards that are of different units of measurement from that of the effort. Incommensurate reward relative to commensurate reward is expected to have higher value, and thus, more positive impact on acquisition utility. Another way to segregate the reward prospect is to offer multiple rewards. Suppose an LP offers three different gifts as reward, the prospect of each gift will be segregated. The separate prospects of the three gifts will have greater value than the prospect of a single reward with same value. For further information contact: Shirley Y. Cheng The Chinese University of Hong Kong Shatin, Hong Kong Phone: 852.2609.7808 FAX: 852.2603.5473 E-Mail: [email protected] American Marketing Association / Winter 2005 255 NOT ALL DEALS ARE CREATED EQUAL: TWO DIFFERENT ROLES OF SALES PROMOTION Dongwoo Shin, Texas A&M University, College Station James H. Leigh, Texas A&M University, College Station SUMMARY Shopping behavior is goal-directed and often planned. Shoppers seek desired outcomes (e.g., obtaining a desired product) or positive experience (e.g., having a relaxing vacation experience). A consumer often sacrifices other alternatives to achieve his/her chosen goal and implements various self-regulatory strategies to prevent him/ her from giving in to the alternatives. Many sales-promotion strategies are designed to affect such self-regulatory strategies by providing economic and psychological incentives. The action-oriented framework proposed in this paper emphasizes the influence of sales promotions in a consumer’s goal-striving process and regulatory functions of implementation intention. The main premise of the suggested framework is that sales promotion influences not only the process of formulating goal intentions but also the process of creating and executing implementation intentions (Gollwitzer 1999), the building blocks of an action plan, which play the key-mediating variable between goal intention and buying behavior. The model hypothesizes that a sales promotion stimulus influences a consumer’s goal striving process via two routes: formation and disturbance processes. Formation refers to a process which a sales promotion motivates a consumer to form a new set of implementation intentions. The process of formation starts with creating a purchase intention. When a consumer encounters a sales promotion stimulus before developing a purchase intention, he/she includes the additional benefits (i.e., informational, economic, and affective, Raghubir et al. 2004) from the promotion to their decision process. After considering the alternatives, the consumer makes up his/her mind and creates an intention to purchase a certain product. The purchase intention summarizes the strength of motivation that provides the consumer energy to develop, pursue, and realize his/her action plan. After the consumer created a purchase intention, he/she seeks information concerning when, where, and how to formulate implementation intentions. The information from sales promotion provides not only value-related but also planrelated content (i.e., the information about the store location, the period of the promotion, etc.). Such plan-related information is connected with appropriate purchase behaviors, creating new implementation intentions leading to a higher chance of realizing the purchase behavior. American Marketing Association / Winter 2005 Disturbance refers to a process whereby a sales promotion influences a consumer’s buying behavior by breaking his/her current implementation intentions. When a consumer encounters a promotion stimulus, it often breaks his/her original implementation intentions and induces him/her to switch to purchase the promoted product since it provides an alternative with additional benefits. In this disturbance process, the values (i.e., motivations) from the sales promotions should provide sufficient force to break the current action plan. When the incentive is sufficient, the shopper halts the execution of his/her current implementation intention (i.e., it breaks the cognitive link between the environmental cues and the desired behavior), and activates a disturbance feedback loop to reevaluate the current and new options. We introduce Kuhl’s (1994) action orientation tendency as a moderating variable that influences the formation and disturbance processes. An action-oriented person can maintain and execute goal intentions more efficiently than a state-oriented person because he/she focuses more on a realistic action plan. In contrast, a state-oriented person focuses more on the evaluation of the present state, a past state, or a future state and lacks the flexibility of his/ her action plan. Since most sales-promotion stimuli contain the information required to create an implementation intention (when, where, and how), an action-oriented consumer can quickly establish, maintain, and execute an effective and well-developed shopping plan. However, since a state-oriented consumer tends to overanalyze information about alternative goals (end states) even after he/she created a goal intention and implementation intentions, he/she is more easily distracted from the current action plan. Therefore, a sales promotion strategy focused on the formation process will influence action-oriented people more since they utilize the provided information and motivation better for creating implementation inattentions. On the other hand, since state-oriented people are easily distracted from the current goal pursuit process, a sales promotion strategy focused on the disturbance process will influence them more fully. It is also hypothesized that a state-oriented consumer will have a higher correspondence between his/her past behavior with the current behavior since a state oriented person tends to delegate their regulatory functions to the situational cues when they perform repeated behaviors in 256 a stable environment. A stable environment generates little variation in the past, present, and the future. When state-oriented people experience such stability over a period time, they would have less motivation to evaluate alternatives possible states. Consequently, they develop a strong cognitive schema that connects the stable environmental cues with the routine behavior and will create strong correlations between past and future behavior as long as such routines can provide means to achieve their desired goals. On the other hand, an action-oriented consumer, even though she/he usually has a higher correspondence between intention and behavior, he/she will have a lower correspondence between past behavior and current behavior when performing a habitual behavior. Because their main concern is in developing efficient and effective action plans, they will generate more contingency plans in a stable environment, compared to stateoriented consumers. Instead of spending their cognitive resources evaluating alternative end states, action-oriented people will spend their cognitive resources developing more flexible action plans because their main concern is in developing efficient and effective action plans. Therefore, when thy encounter the right opportunities, they will change their habitual behavior by activating another implementation intention. REFERENCES tion,” in Volition and Personality, Julius Kuhl and Jurgen Beckmann, eds. Gottingen, Germany: Hogrefer & Huber. Raghubir, Priya, J. Jeffrey Inman, and Hans Grande (2004), “The Three Faces of Consumer Promotions,” California Management Review, 46 (4), 23–42. Gollwitzer, Peter M. (1999), “Implementation Intentions: Strong Effects of Simple Plans,” American Psychologist, 54 (7), 493–503. Kuhl, J. (1994), “A Theory of Action and State Orienta- For further information contact: James H. Leigh Texas A&M University TAMU 4112 College Station, TX 77843–4112 Phone: 979.845.5893 FAX: 979.862.2811 E-Mail: [email protected] American Marketing Association / Winter 2005 257 THE EFFECTS OF RESERVE PRICES ON BIDDING BEHAVIOR IN ONLINE AUCTIONS Marla Royne Stafford, The University of Memphis, Memphis Ashley Kilburn, The University of Memphis, Memphis Barbara B. Stern, Rutgers, The State University of New Jersey, New York SUMMARY The influence of reserve prices on bidder behavior and bidding activity in online auction exchanges is examined. A reserve price is “the minimum price a seller is willing to accept for the item” (eBay 2002), and sellers use it to specify a hidden amount not disclosed to the bidder that seller designates as a minimum acceptable bid price. Despite the potential influence of reserves on online bidding activity, there is little research about consumer behavior in response to it. Insofar as general research on consumer behavior in online auctions is quite sparse (Chui and Zwick 1999; Wilcox 2000), the aim of our study is to examine the impact of reserve prices on online bidder strategy, and in this way contribute to understanding online consumer behavior. To do so, we investigated buyers’ bidding responses to items with and without a reserve price. The theoretical basis of the study is grounded in the risk perception literature, in which the level of perceived risk is viewed as a powerful tool for predicting and explaining consumer behavior (Mitchell 1999). Under conditions of uncertainty (Bauer 1960; Cox and Rich 1964) such as an online auction in which buyers must rely on a picture of the item and a verbal description in the absence of physical examination (Stern and Stafford, forthcoming). Decision-making under uncertainty has been associated with risks of not only monetary loss but also negative psychological and/or behavioral consequences (Stone and Winter 1987; Sitkin and Pablo 1992). We propose that a seller’s decision to use a reserve price diminishes the buyer’s level of perceived risk and outcome uncertainty by signaling to a potential bidder that until the reserve price is met, no contractual agreement obligates the bidder to buy. H2: The number of bidders participating in the auction is positively related to the total number of bids placed during the auction. H3: The total number of bids placed throughout the auction is positively related to the final bid price. H4: The presence of a reserve price is associated with a higher final bid price. Method To test the hypotheses, two sets of observational data were collected from a list of Bay completed sales including all main eBay categories to ensure a variety of products and price ranges, but excluding real estate and cars. Study 1 consisted of 198 listings (of which 14% had reserve prices) that were gathered over a one-month period. To more adequately assess the impact of reserve prices on bidding activity, a second stratified random set of data was collected with the intent of increasing the number of items with reserve prices, while maintaining the sample characteristics from the first study (i.e., representing all product categories and including those listings which generated activity). Therefore, Study 2 was designed to include at least one item with a reserve price in each selected subcategory (e.g., clocks, postcards and paper, doll clothes and accessories, glassware, classic toys) resulting in a sample of 137 completed sales listings each from different subcategories (of which 32.2% had reserve prices). Two independent coders unaware of the study’s purpose analyzed the items to determine the presence or absence of a reserve price (coded as 1, 0, respectively); the total number of bids placed; the total number of different bidders; and the final bid amount. Inter-rater reliability was 100 percent, as expected in analysis of observational data. The study examines the following hypotheses: Analysis and Results H1A: The presence of a reserve price is positively related to the number of bidders involved in an auction. H1B: The presence of a reserve price is positively related to the total number of bids placed during the auction. American Marketing Association / Winter 2005 AMOS 4.01 was used to test the hypotheses via path analysis. The model fit was strong for Study 1. The Normed Fit Index (NFI) = .996, the Relative Fit Index (RFI) = .960, the Incremental Fit Index (IFI) = .997, and the Comparative Fit Index (CFI) = .997. The RMSEA = 258 .094, and the X2(1) = 2.75, p = .097. In short, the proposed model seems to reproduce the covariance matrix well. Further, four of the proposed hypotheses were supported (H1A, H2, H3, H4). Results from Study 1 suggest that there is a positive direct effect of reserve prices on the number of bidders to participate in their auction, thus supporting H1A. Further, in accordance with H2, there is a positive direct effect of number of bidders on the number of bids placed. As suggested by H3, Study 1 found that an increased number of bids results in a higher final bid. Finally, a significant direct relationship was found between the presence of a reserve price and a higher final bid price, showing support for H4. Study 2 results were more robust, indicating once again that the proposed model reproduced the covariance matrix well; the NFI = 1.0, the RFI = .999, the IFI = 1.0, the CFI = 1.0. The RMSEA = .000 and the X2 (1) = .072, p =.789. In contrast to the results from Study 1, all five hypotheses were supported included H1B (t = 2.6, p < .05), which suggests that the presence of a reserve price is positively related to the number of bids placed by an individual bidder. These findings suggest a positive relationship between the use of reserve prices and number of bidders, number of bids, and final bid prices, indicating that reserve prices may be an important tool for online auction sellers. References available upon request. For further information contact: Marla Royne Stafford Department of Marketing and Supply Chain Management Fogelman College of Business and Economics The University of Memphis Memphis, TN 38152 Phone: 901.678.2499 FAX: 901.678.4052 E-Mail: [email protected] American Marketing Association / Winter 2005 259 ADVERTISING GOES MOBILE: EXPLAINING ATTITUDE TOWARD M-ADVERTISING Parissa Haghirian, Kyushu Sangyo University, Japan SUMMARY Devices and systems based on mobile technologies have become a commonplace in our everyday lives (Balasubramanian, Peterson, and Jarvenpaa 2002) and have also changed the marketers’ world. Opportunities for direct contact with consumers are unprecedented. Consumers can be provided with information they are interested in, which gives marketers the chance to build customer relationships of a new dimension. They also enable interactions between customer and advertiser which become increasingly rapid and easy. As a result, modern advertisers are increasingly relying on various modes of interactive technology to advertise and promote their products and services (Pavlou and Stewart 2000). Despite this, potential customers did so far not have many opportunities to signal their likes and dislikes with marketing activities via mobile devices. This puts marketers at a high risk (Robins 2003). If marketers want to use the communication channels that mobile media provide in an efficient way, they need to understand how mobile consumers perceive and evaluate mobile devices as a source of advertising. A major issue in advertising research is measurement of the effects of advertising on the recipient. This paper aims to contribute to this objective and presents results of a survey on consumer attitudes toward advertising via mobile devices (m-advertising). The objective of this study was to examine the relationships between attitude toward m-advertising and key influence factors. H3b: The higher the informativeness of the mobile advertising message, the higher the perceived value of m-advertising. H4: The higher the irritation of mobile advertising message, the lower the perceived value of madvertising. H5a: The higher the credibility of the mobile advertising message, the more positive consumers’ attitude toward m-advertising. H5b: The higher the credibility of the mobile advertising message, the higher the perceived value of madvertising. H6a: The lower the age of the consumer, the more positive consumers’ attitude toward m-advertising. H6b: The lower the age of the consumer, the higher the perceived value of m-advertising. H7a: Perceived value of m-advertising differs between men and women. H7b: Attitude toward m-advertising differs between men and women. H8a: The lower the education of the consumer, the more positive consumers’ attitude toward m-advertising. The following hypotheses were examined: H1: The higher the perceived value of m-advertising, the more positive consumers’ attitude toward madvertising. H2a: The higher the entertainment factor of the mobile advertising message, the more positive consumers’ attitude toward m-advertising. H2b: The higher the entertainment factor of the mobile advertising message, the higher the perceived value of m-advertising. H3a: The higher the informativeness of the mobile advertising message, the more positive consumers’ attitude toward m-advertising. American Marketing Association / Winter 2005 H8b: The lower the education of the consumer, the higher the perceived value of m-advertising. The study was conducted over a six week period in autumn 2003 during which 815 mobile phone owners were interviewed on their attitude toward m-advertising. The interviewed persons have been selected on the basis of a quota sample that is representative for the Austrian population. The Austrian market shows the highest penetration of mobile phone users in Europe and is therefore very suitable for investigation on mobile marketing and advertising. All measures were assessed via a 5-pointLikert-type scale ranging from “strongly disagree” to “strongly agree.” 260 Evidence in support of hypotheses H4, H6a, H6b, H7a, H7b, and H8b could not be observed. Significant relationships (at a .05 level) were observed between entertainment, informativeness, credibility, educational level, and the dependent variable perceived value of madvertising. Perceived value of m-advertising as well as entertainment, informativeness, and credibility are reflecting positively on attitude toward m-advertising. Focus of the study are influence factors on consumers‘ attitude toward m-advertising. The results show that consumers’ attitude toward m-advertising but also perceived value of m-advertising are strongly related to advertising message content. Most surprisingly, consumers‘ attributes (apart from educational level’s influence on attitude toward m-advertising) do not play such a dominant role regarding attitude toward m-advertising and perceived advertising value. References are available upon request. For further information contact: Parissa Haghirian Department of International Management Kyushu Sangyo University 3-1-2 Matsukadai, Higashi-ku Fukuoka 813–8503 Japan Phone: 0081.92.673.5331 E-Mail: [email protected] American Marketing Association / Winter 2005 261 REGULATORY FOCUS AND RELATIONSHIP MARKETING SUCCESS Maria Sääksjärvi, Swedish School of Economics and Business Administration, Finland Johanna Gummerus, Swedish School of Economics and Business Administration, Finland ABSTRACT Regulatory focus theory proposes consumers to navigate towards goals using either a promotion or prevention focus. We link regulatory focus to relationship marketing success by proposing that the persuasiveness of relationship tactics can be enhanced by inducing a regulatory fit, and that regulatory focus impact relational orientation and thereby commitment. INTRODUCTION Regulatory focus theory states that consumers pursue goals with two different orientations: promotion or prevention focus (Higgins 1987). Promotion-orientation involves approaching pleasure, and relates to advancement, achievement, and aspirations. In contrast, preventionorientation involves avoiding pain in terms of negative outcomes such as responsibilities, obligations, and security (Higgins 2000). The type of focus evoked is of importance as it has been found to affect goal pursuit, motivation, and perceived value (Higgins et al. 2003; Shah, Higgins, and Friedman 1998; Spiegel, Grant-Pillow, and Higgins 2004). Although regulatory focus has received attention within social psychology, research addressing this concept in marketing is still scarce (for exceptions see Aaker and Lee 2001; Zhu and Meyers-Levy 2003). Linking the concept of regulatory focus to relationship marketing is a fruitful avenue due to the established, but unexplored, linkage between regulatory focus and relationship marketing outcomes, such as the effectiveness of relationship marketing tactics and commitment. Support for this linkage comes, for example, from Fennell (1978) who postulated that consumers faced with interest or pleasure opportunities (promotion goals) are more likely to explore brands, whereas those facing problems try to solve or prevent the problem (prevention goals). Of interest to marketers is also the proposition of an optimal fit between personal goals and means to achieve these goals made in the regulatory focus literature. For instance, a person with a promotion goal is more likely to exert behaviors that aim for positive outcomes, whereas a person with a prevention goal directs behaviors towards minimizing negative outcomes. The central tenet of our paper is that regulatory focus impacts relationship marketing success on several levels. First, regulatory focus enhances the effectiveness of relaAmerican Marketing Association / Winter 2005 tionship marketing tactics given that there is a fit between the consumer’s inherent regulatory focus and that temporally evoked by relationship tactics. Second, it affects a customer’s relational orientation, thereby influencing customer commitment indirectly. Acquiring relationally oriented customers is seen as the outcome of successful relationship tactics since they are likely to contribute to firm profitability (Grönroos 1997). By recognizing what contributes to relational orientation and matching relationship tactics to fit a consumer’s inherent regulatory focus, firms are likely to know “when and why consumers respond favorably and strongly to companies’ relationship building efforts” (Bhattacharya and Sen 2003, p. 76). The fit we are proposing contributes to existing literature by suggesting that marketers that evoke temporal regulatory focus and match it with a consumer’s inherent regulatory focus to yield optimal relationship marketing strategy outcomes. We also contribute to the current literature by examining relational orientation, which despite its importance to relationship marketing has received little attention in academia, as well as its impact on customer commitment. We examine these issues by bringing forward a number of propositions. Our conceptual framework depicting these propositions is presented in Figure 1. THE FIT BETWEEN CONSUMERS AND RELATIONSHIP MARKETING STRATEGIES Relational Mode In this article, relational orientation is depicted by means of a consumer’s relational mode, “a consumer’s relatively stable tendency to engage in a relationship with a certain company” (Grönroos 1997). Relational mode is an indicator of a consumer’s receptivity to relationship with a specific firm, and is characterized by consumers reacting favorably to relationship marketing activities (Grönroos 1997). Relational mode measures openness for ongoing relationships and thus differs from a transactional mode where consumers are only motivated to engage in exchanges. It is thus seen as a pre-commitment phase that facilitates relationship maintenance and durability. As suggested by Grönroos (1997), the relational mode can be seen as a continuum ranging from passive to active. Consumers in an active mode seek contact, where262 FIGURE 1 Regulatory Focus P3 P1 P2 Relational Mode Passive-Active P5 P6 Commitment - Affective, Normative, Calculative P4 Need for Connection/ Belongingness Regulatory Focus (Temporally Induced) Relationship Tactics as those in a passive mode rely on the existence of the relationship, considering it as a kind of safety net. More active consumers are often desirable from a marketing point of view: the more active the customer’s role in service production is, the better the outcome. This is especially the case when the service requires customer participation or customer self-service reduces costs to a considerable extent. The relation between relational mode and regulatory focus is closely related to goal independence (Tjosvold 1993), which states that customer willingness to bond may depend on the extent to which customers believe they need the firm’s support to achieve important, personal goals. Regulatory focus is suggested to facilitate goal pursuit (Shah, Higgins, and Friedman 1998) and is thus likely to relate to the effectiveness of a firm’s marketing strategies. Regulatory Focus Regulatory focus theory (Higgins 1987) brings forward the idea that consumers not only care about what goals they reach, but also how they reach them. It proposes consumers to utilize two different self-regulation strategies in goal striving: promotion or prevention orientation. The promotion orientation emphasizes the pursuit of gains (or the avoidance of nongains) and aspirations toward ideals (Higgins 2000). It is related to eagerness; consumers engage in tasks since they are motivated by achievement and aspiration (Crowe and Higgins 1997). The prevention orientation, on the other hand, emphasizes the avoidance of losses (or the pursuit of nonlosses) and the fulfillment of obligations. It is related to vigilance (Crowe and Higgins 1997). Consumers perform tasks as a sense of duty. They feel it is their responsibility, what they ought to do, but do not feel passionate about tasks the same way as promotion-oriented consumers do. American Marketing Association / Winter 2005 We propose a consumer’s regulatory focus to be linked to his/her relational mode. More specifically, as promotion-oriented consumers are consciously aspiring towards goals, they believe in a relationship with a company as it might enable goal achievement. They are thus likely to be more active than other consumers in the relationships they have as to ensure a successful outcome. In contrast, prevention-oriented consumers are more receptive to establish relationships with firms to the extent they believe it helps them avoid losses or fulfill a duty or obligation. This inclination, however, is likely to be passive in nature, as it is based on vigilance and only doing what is necessary (Shah and Higgins 1997). For example, a prevention-oriented consumer could be willing to be linked to a firm as a result of potential cost savings (avoid losing money) or out of a sense of duty (e.g., as a sense of reciprocity upon receiving excellent service), but is not likely to actively contribute to relationship maintenance. In essence, we propose promotion-orientation is likely to contribute to an active willingness to engage in a relationship, whereas prevention-orientation is likely to lead to a passive one. P1a: Promotion-orientation has a positive impact on relational mode. P1b: Prevention-orientation has a negative impact on relational mode. Need for Connection Not all consumers, however, are interested in having relationships with companies. Need for connection (Andersen and Chen 2002) or belongingness (Baumeister and Leary 1995) describes “the need of people to form and maintain strong interpersonal relationships” and is manifested in “frequent, nonaversive interactions with an ongoing relational bond” (Baumeister and Leary 1995). 263 Research in social psychology has also shown that the mere belongingness of self to a certain object (thus referring to its ownership) leads to an increased liking of it (Feys 1991). Given that relationships, as objects, can be seen as extensions of the self (Andersen and Chen 2002) and that consumers are more likely to establish relationships with service organizations than goods (Berry 1995) we expect need for connection to have a positive effect on relational mode. ceive they receive in return for their loyalty) (De Wulf, Odekerken-Schröder, and Iacobucci 2001). More intimate, or higher levels of relationship tactics are signified by preferential treatment (the degree to which consumers perceive that regular customers are being better treated than others) and interpersonal communication i.e., how warm and personal the interaction between the company and the customer is (De Wulf, Odekerken-Schröder, and Iacobucci 2001). P2: Relationship tactics are likely to encourage customers to become relationally involved and committed. For example, warm and personal service, or participation in special events can show consumers the advantages of being actively involved with a company. Furthermore, customers may want to reciprocate and become more active in the relationship if they perceive the relationship tactics to offer value beyond the exchange. Companies that use relationship tactics and thereby communicate a long-term orientation are believed to restrain from opportunistic behavior (Ganesan 1994) and are therefore likely to be preferred by relation-oriented customers. Need for connection has a positive effect on relational mode. We also expect a significant interaction effect to occur between regulatory focus and need for connection. Although promotion-orientation is linked to eagerness and a more active relational mode, a consumer low in need for connection might not simply find relationships important. As one of the main benefits of relationships to customers is the perceived social bond the interaction creates (Gwinner, Gremler, and Bitner 1997), those lacking the need for such connections might not pursue them as means of achieving goals. For example, a promotionoriented consumer might purchase most items from a particular retailer, but might feel no need to belong or identify him/herself with it. In this case, the consumer is more passive in the relationship. In contrast, need for connection might serve to make a prevention-oriented consumer more active in the relationship. For example, a consumer not wanting to avoid missing out on great promotions might be in active contact with the company if she/he feels a need to belong to their network of customers and interact with them on a frequent basis. In this case, the need for connection heightens the consumer’s activity level in the relationship while helping him/ her achieve the same goal, thus contributing to a more active relational mode. P3a: For consumers high in need for connection, prevention-orientation has a positive impact on relational mode. P3b: For consumers low in need for connection, promotion-orientation has a negative impact on relational mode. Relationship Tactics Relationship tactics are means firms employ to increase customer retention. They can be viewed as a continuum ranging from direct mail, tangible rewards, and preferential treatment to interpersonal communication (Berry 1995). The lowest (i.e., least intimate) levels of relationship tactics are represented by direct mail (the perceived degree of contact that companies have with their customer via direct mail) and tangible rewards (the specific benefits e.g., savings in price that customer perAmerican Marketing Association / Winter 2005 P4: Relationship tactics have a positive influence on relational mode. The Perceived Fit Between Relationship Tactics and Regulatory Focus Relationship tactics as other persuasive messages usually involve some goal to be attained (e.g., an increase in the number of loyal customers). When firms employ them, they present arguments in support of the advocated position, which can be framed as in terms of either gains or losses (Cesario, Grant, and Higgins 2004). For example, when trying to recruit customers for a loyalty program, a firm could frame the arguments in terms of eagerly ensuring gains (e.g., join our loyalty program – you will receive special promotions) or in terms of losses (if you do not join our loyalty program you’ll miss our special offers). Thus, the firm can temporally induce a regulatory focus as means of influencing their customers. If these arguments presented match the regulatory orientation of the customer, s/he should experience regulatory fit and feel right, which heightens his/her perceived evaluation of an event and the value derived from it (Higgins et al. 2003). Thus, we propose that if the relationship tactics employed by a firm evoking a particular regulatory focus matches that of the customer they will be perceived as being more persuasive, enhancing consumer willingness to engage in a relationship with a firm. Since regulatory fit also enhances motivational strength (Spiegel, Grant-Pillow, and Higgins 2004), we also propose consumers to take a more active role in the relationship if there is a fit between the consumer’s and the firm’s regulatory focus. 264 P5: Relationship tactics employed by a firm that fit the regulatory focus of the consumer contribute positively to a more active relational mode. Building commitment in customer relationships is one goal of relationship marketing. Commitment is considered as beneficiary to companies since it reflects a customer’s lasting orientation to maintain a long-term relationship (Dwyer, Schurr, and Oh 1987; Moorman, Zaltman, and Deshpande 1992; Morgan and Hunt 1994), and is coupled with excluding other alternatives and being resistant to change (Pritchard, Havitz, and Howard 1999). Commitment differs from relational mode by being a lasting tendency gradually built over time, instead of an inclination or disposition towards relationship building. It can thus be seen as an outcome of a customer’s relational mode. Commitment takes different forms depending on the customers’ reason for staying in a relationship. Previous literature highlights three mains reasons as of why customers stay in relationships: (1) they want to (affective commitment), (2) they perceive they have no other choice (calculative commitment) or (3) they feel obliged to do so (normative commitment). Affective commitment captures issues such as contentment and affection and is based on emotional attachment to a firm (Allen and Meyer 1990). Calculative commitment in turn stems from an acknowledgment of costs associated with leaving a firm (Meyer and Allen 1991) and is often characterized by “a sense of being locked in” (Meyer and Herscovitch 2001, p. 307). Normative commitment can be best described as a feeling of obligation to stay in a relationship (Fehr 1999; Meyer and Allen 1991). Obligation as a state of mind could also be related to consideration of moral rightness of maintaining a relationship (Marsh and Mannari 1977). We suggest that affective commitment stems from active relational mode that induces customers to bind themselves to relationship-building efforts and thereby deepens the relationship, whereas calculative and normative commitment follow from passive relational mode in which the customer is more inclined to engage in relationship maintaining activities than relationship enhancing REFERENCES Aaker, Jennifer L. and Angela Y. Lee (2001), “I Seek Pleasures and We Avoid Pains: The Role of SelfRegulatory Goals in Information Processing and Persuasion,” Journal of Consumer Research, 28 (1), 33– 49. Allen, Natalie J. and John P. Meyer (1990), “The Mea- American Marketing Association / Winter 2005 activities. Indeed, it has been suggested that affective commitment leads to expansion and enhancement of the relationship, whereas calculative commitment supports the maintenance of the relationship (Bendapudi and Berry 1997). Thus, we propose: P6a: An active relational mode contributes to affective commitment. P6b: A passive relational mode contributes to normative or calculative commitment. CONCLUSIONS AND FUTURE RESEARCH The present article brought forward a number of propositions concerning the link between relationship marketing tactics and regulatory focus. Empirical testing should be undertaken to verify the propositions we have presented. To assess fit, regulatory focus could be induced by assessing consumer’s inherent regulatory focus (using the self-guide strength measure, see Higgins and Spiegel 2004) and then match it with a situationally induced marketing message framed as either involving a gain (promotion) or a loss (prevention). 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Liberman, Nira, Lorraine C. Idson, Christopher J. Camacho, and E. Tory Higgins (1999), “Promotion and Prevention Choices Between Stability and Change,” Journal of Personality and Social Psychology, 77 (6), 1135–45. Marsh, Robert M. and Hiroshi Mannari (1977), “Organizational Commitment and Turnover: A Prediction Study,” Administrative Science Quarterly, 22, 57– 75. Meyer, John P. and Natalie J. Allen (1991), “A ThreeComponent Conceptualization of Organizational Commitment,” in Human Resource Management Review, Vol. 1, Elsevier Science Publishing Company, Inc. ____________ and Lynne Herscovitch (2001), “Commitment in the Workplace: Toward a General Model,” Human Resource Management Review, 11 (3), 299–326. Moorman, Christine, Gerald Zaltman, and Rohit Deshpande (1992), “Relationships Between Providers and Users of Market Research: The Dynamics of Trust Within and Between Organizations,” Journal of Marketing Research, 19 (3), 314–28. Pritchard, Mark P., Mark E. Havitz, and Dennis R. Howard (1999), “Analyzing the Commitment-Loyalty Link in Service Contexts,” Journal of the Academy of Marketing Science, 27 (3), 333–48. Shah, James and E. Tory Higgins (1997), “Expectancy × Value Effects: Regulatory Focus as Determinant of Magnitude and Direction,” Journal of Personality and Social Psychology, 73 (3), 447–58. ____________, E. Tory Higgins, and Ronald S. Friedman (1998), “Performance Incentives and Means: How Regulatory Focus Influences Goal Attainment,” Journal of Personality and Social Psychology, 74 (2), 285–93. Spiegel, Scott, Heidi Grant-Pillow, and E. Tory Higgins (2004), “How Regulatory Fit Enhances Motivational Strength during Goal Pursuit,” European Journal of Social Psychology, 34, 39–54. Tjosvold, Dean (1993), Teamwork for Customers: Build- 266 ing Organizations That Take Pride in Serving. San Francisco: Jossey-Bass Publishers. Zhu, Rui and Joan Meyers-Levy (2003), “The Influence of Regulatory Focus on Consumer Information Processing,” in Advances in Consumer Research, 30, 116–17. For further information contact: Maria Sääksjärvi Department of Marketing and Corporate Geography HANKEN – Swedish School of Economics and Business Administration Arkadiankatu 22 P.O. Box 479 00101 Helsinki Finland Phone: +358.9.4313.3227 FAX: +358.9.4313.3287 E-Mail: [email protected] American Marketing Association / Winter 2005 267 PREDICTING USAGE LEVEL AND UPGRADING BEHAVIOR OF SERVICE CUSTOMERS: A MODEL FOR LIFETIME VALUE ESTIMATION AT EARLY RELATIONSHIP STAGES Florian V. Wangenheim, University of Dortmund, Germany SUMMARY The concept of customer lifetime value (CLV) is receiving increased attention in the current literature on customer equity (CE) and on linking marketing to financial performance. Previous CLV research (e.g., Rust, Lemon, and Zeithaml 2004) has investigated predictability of CLV and its drivers mainly in established customer relationships. The objective of the present paper is to investigate how future customer transaction behavior and lifetime value can be forecasted particularly at an early stage of the customer relationship. By differentiating between frequency of customer transactions and upgraded transactions, not only CLV, but also the relevant CLV drivers can be determined. In addition, for a subsample of customers, the paper links the derived CLV prediction error to survey data, thereby determining whether prediction inaccuracies can be partially explained by customer attitudes that reflect the firms’ failure to retain a potentially high-value customer. where CLV, = Lifetime value of customer I. TNT, = Total number of transactions made by customer I in period t. CMNRT = Average contribution margin of base transaction. PUPit = Proportion of “upgrade” transactions by customer I in period t. ∆CMUp = Additional contribution margin for high value transactions. d = Discount rate. t = 1. . .T = Number of time periods considered. CLV Driver Prediction The key focus of the paper is relationship depth (while relationship length is inherently considered due to the longitudinal study design). In accordance with Bolton, Lemon, and Verhoef (2004), relationship depth is defined as the intensity or usage level of services over time, and specifically includes upgrading behavior (i.e., purchasing of higher value or margin products instead of low cost “basic” alternatives). Consequently, in the present study which focuses on the airline industry, relationship depth is conceptualized as two-dimensional: Usage level per period is reflected by the number of flights per period. Upgrading refers to the proportion of upgrades, i.e., flights in a “higher” booking class (where the baseline level is economy class) in the same period. Focusing on those two drivers of the relationship depth dimension rather than directly modeling the monetary transaction value per period offers additional insights for firms and academics, as it allows to differentiate between, e.g., high-value customers whose value mainly derives from a large number of transactions, and another, potentially equally valuable group, which is valuable not because of a large number of transactions, but because it has a strong disposition to use high-value services (i.e., business class). In general, the CLV of a customer in this context is given by T TNTit [ CM NRT + (PUPit . ∆CM)] CLVi = (1) (1 + d)t t=1 Σ American Marketing Association / Winter 2005 As CLV predictors, customer channel usage, enablement of direct communication, competitiveness of choice, past behavior, and demographics are used. Channel choice refers to the differentiation between direct and indirect channel usage. Direct communication enablement is related to the decision whether to allow the firm to get into direct contact with the customer. Competitiveness of choice refers to the variety of providers from which customers choose. Past behavior is given by exhibited flying behavior at the time the prediction is made. Model, Estimation, and Results Data on the above described dependent and independent variables are taken from the frequent filer customer base of a large European airline. Two samples, one consisting of 2,900 customers acquired in the first quarter of 1999, and one consisting of 3,200 customers acquired in the first quarter of 2000, the latter serving as hold-out sample, are analyzed. The predictive power of the independent variables on number of transactions and proportion of upgraded transactions is tested using a nested tobit model. The model results yield strong support for an effect of all predictors on number of transactions, and also support for the effect of past upgrading behavior and direct communication enablement on future upgrading 268 behavior. Fit of the estimated models is generally well, and hold-out predictions do not perform much worse, suggesting some stability in the relationships researched. Further, customer satisfaction and share of wallet data that are available for a subsample of those customers are correlated with the standardized residuals from a regression model where predicted CLV is regressed on actual CLV. Since negative residual values indicate that CLV was overpredicted, both SOW and satisfaction are expected to be positively correlated with the residuals from the regression. The results show that in all cases, there is a positive and statistically significant correlation between the residuals and the share of wallet data, suggesting that indeed customers with a low share of wallet were systematically overvalued. Further, customer satisfaction is also positively related to both the residuals and the SOW data, suggesting that customers overvalued by the model tend to be less satisfied with the airline, and that increases in satisfaction would increase SOW, thereby decreasing the gap between predicted and actual CLV. Discussion, Implications, and Conclusion The results of the study suggest that managers can, at a fairly early stage in the customer relationship predict their customer’s future CLV. There are a number of opportunities for firms to concentrate on customers with a high predicted CLV, and those could receive loyalty program benefits before they have reached the formal “hurdle” set by the firm. Further, firms should try to move their customers towards direct channels and direct communication. Once customers have made those specific investments, firms are better able to increase usage frequency and upgrading behavior. The fact that the study focused on two central drivers of CLV jointly (i.e., number of transactions and upgrading) offers additional insights for CLV-driver based market segmentation. Based on the model, firms can early on in the relationship predict which customer will be valuable mainly due to which driver, and firms can make specific offers addressing the specific needs of “upgrading” customers as opposed to “frequency” customers. Customer segmentation solely based on CLV would not be able to identify those distinct segments. Future research should compare industries with regard to the effect of predictor variables and the degree of CLV predictability. In various service settings, other CLV components than those addressed in the present applications, especially cross-buying, are important CLV drivers. It would be interesting to extend the applied CLV model to account for cross-buying and further CLV components. References available upon request. For further information contact: Florian V. Wangenheim Service Management Otto-Hahn-Str. 6 University of Dortmund 44227 Dortmund Germany Phone: +49.231.755.4611 FAX: +49.231.755.5254 E-Mail: [email protected] American Marketing Association / Winter 2005 269 THE IMPACT OF PERCEIVED LANGUAGE STATUS ON PRODUCT AND SERVICE QUALITY EXPECTATIONS Melissa Maier Bishop, University of Texas at Arlington, Arlington SUMMARY Decisions to standardize or localize international and cross-cultural advertising campaigns are usually made with a cost-benefit analysis (Onkvisit and Shaw 1987), as it is expensive to target every ethnic group within a region with an individualized campaign. Regarding ethnic language, few advocate advertising in a single, more dominant language (such as English or another Westernized language) outside of the benefits achieved through costssavings. The approach to look at the possible beneficial effects of standardized language advertising or the potential negative effects of localized language advertising that extend beyond the “bottom line” is not normally taken (for a notable exception, see Koslow, Shamdasani, and Touchstone 1994). In terms of product quality (PQ) and service quality (SQ) expectations, it is not clear how perceptions of language used in advertising affect their formation. Increasing expectations regarding both PQ and SQ is important, as individuals tend to interpret stimuli consistent with their initial expectations (Hawkins, Best, and Coney 2004). Further, higher product or service quality expectations are generally believed to lead to higher patronage or purchase intentions. For example, previous research efforts have identified a direct relationship between service quality and patronage intentions (Sirohi, McLaughlin, and Wittink 1998; Zeithaml, Berry, and Parasuraman 1996). It is possible that the perceived status of the language used in advertising may be an important moderator in the formation of both PQ and SQ expectations. Language status refers to the perceived relative position or standing of an ethnic language in a society. Strong support has been found for the existence of the languagerelated inferiority complex (LRIC) in which one language is viewed to be inferior to another (see Haarmann 1986; Koslow, Shamdasani, and Touchstone 1994; Christie 1990; Adegbija 1994). The LRIC phenomenon has been found in many countries and in many cultural groups, and varies by severity. For example, Roos (1997) found that although the government of South Africa officially recognizes eleven languages, the process of developing these languages “is complicated by negative attitudes which hold that indigenous languages are somehow ‘inferior’ to English and other Western languages” (p. 171). Applied to advertising, Koslow, Shamdasani, and Touchstone (1994) found support for the LRIC among Hispanics American Marketing Association / Winter 2005 living in the United States. Specifically, Hispanics demonstrated a higher affect for advertising that used at least some amount of English as compared to advertisements that used all Spanish when controlling for cultural sensitivity of the advertiser. Extended to PQ and SQ, the language used in communication and its perceived status may affect formation of these expectations through the phenomenon of the halo effect. The halo effect has been defined as the tendency to let our assessment of an individual on one trait influence our evaluation of that person on other specific traits (Blum and Naylor 1968). Halos have been typically treated as rater errors and viewed as something to overcome in the research process (Murphy, Jako, and Anhalt 1993). However, they can be beneficial to advertisers that understand how to effectively employ them. For example, halo effects may contribute to increased or decreased quality expectations based on the perceived status of the language used in advertising. That is, positive or negative perceptions of the status of the language used in advertising may transfer to congruent expectations regarding PQ and SQ. Thus, the following proposition is proposed: Proposition: The relationship between product and service quality expectations and language used in advertising depends on the perceived status of the language. That is, using a language in advertising that is viewed as relatively superior (inferior) in language status will result in higher (lower) product and service quality expectations among viewers. If the above proposition holds, advertisers may gain increased insight into the need for standardized or localized campaigns that goes beyond issues related to costs. If a foreign language is viewed as superior to the local one, advertisers may benefit due to halo effects, in which positive perceptions of the language transfer to positive expectations of the product. These findings may be particularly relevant to advertised products that require low levels of information processing, such as commodities. Advertising in a “superior” language may give relatively undifferentiated products such as these an advantage over products advertised in the “inferior” language, due to increased PQ expectations – even if slight. “Image” products or services may also benefit from using a foreign language that is perceived as having a higher status so to equate the image (or status) of the product with the image (or status) of the foreign country. For example, Takashi 270 (1990) found this effect among younger Japanese consumers, who viewed products that were advertised with some amount of English as more sophisticated and modern as compared to products advertised in Japanese. In conclusion, the primary purpose of this study is to encourage researchers to consider language as more than a communicative tool. Ethnic language may also contribute to image formation by cueing product and service quality expectations. Empirical work should focus on measuring perceived language status across a variety of languages and ethnic groups to determine how it can strategically influence these expectations. References available upon request. For further information contact: Melissa Bishop Department of Marketing University of Texas at Arlington Arlington, TX 76019 Phone: 817.272.2330 FAX: 817.272.2854 E-Mail: [email protected] American Marketing Association / Winter 2005 271 EFFECTS OF POSITIONING A FOREIGN BRAND AS A DOMESTIC BRAND IN COUNTRIES WITH DEVELOPED (U.S.) VERSUS TRANSITIONING (ROMANIA) MARKET ECONOMIES Lada V. Kurpis, Gonzaga University, Spokane Simona Stan, University of Oregon, Eugene Carmen Barb, University Lucian Blaga, Romania ABSTRACT When companies enter foreign markets they usually market their brands by openly communicating the “foreign-owned” status of their brands. However, these companies sometimes prefer to develop custom brands for a particular international market and position these brands as seemingly domestic for that market. This papers reports the results of an exploratory study conducted in the U.S. and Romania which suggest that, in a transitioning economy, consumers are likely to reward a foreign marketer’s effort to customize the brand so that it seems domestic. On the contrary, in a developed economy, consumers are likely to penalize a marketer’s attempt to position a foreign brand as a seemingly domestic one. The paper provides theoretical arguments based on differences in consumers’ persuasion knowledge, inferences of unfair marketing tactics, and perceptions of expended marketing effort. INTRODUCTION When established companies enter foreign markets they usually market their existing brands by openly communicating the “foreign-owned” status of their brands. Such brands often employ a “foreign consumer culture positioning” (FCCP), in which the brand is associated with a specific foreign culture, through symbols, images, and/or language (Alden, Steenkamp, and Batra 1999). However, these companies sometimes prefer to develop custom brands for a particular international market and position these brands as seemingly domestic for that market. These brands would employ what Alden et al. call a “local consumer culture positioning” (LCCP), by using symbols of the local consumer culture. For example in Russia, in addition to its traditional brands, Swiss-based Nestle Corporation produces and markets Rossia chocolates and Choc candy bars. The advertising themes for both brands are very “a la Russ” (Russian-like) styled. Similarly, tobacco factory RJR-Petro in St. Petersburg, Russia, owned by RJR Nabisco Holdings, produces and markets Peter I cigarettes along with Winstons and Camels (The Peter I brand bears the name of the first Russian emperor Peter the Great, which confers a positive appeal to the glory of the Russian past for most Russians). The American Marketing Association / Winter 2005 association of the custom brands with their foreign owner is not mentioned in marketing communications and, presumably, it remains unknown to or it is overlooked by the majority of their consumers. Creating the appearance that a foreign brand is domestic might enhance or lower brand attitudes when consumers become aware of the true origin of the brand. On the one hand, consumers may perceive the foreign company’s practice of LCCP as a positive effort to customize the brand to their specific market. On the other hand, consumers may perceive the practice as a manipulative attempt. Whether a positive response prevails over a negative response may depend on the international market’s characteristics, such as level of economic development. Research suggests that there is a generalized preference for nonlocal brands in developing economies, due mainly to symbolic, status-enhancing reasons (e.g., Batra et al. 2000). However, it is not clear whether this preference would be affected by a foreign company’s explicit use of a LCCP or FCCP strategy. No known research has addressed these issues, in spite of the significant attention paid to branding in international markets. The purpose of this paper is to explore the following research questions. First, does the practice of positioning a foreign brand as a seemingly domestic brand, as in a LCCP strategy, have advantages over openly communicating the foreign origin of the brand, as in a FCCP strategy? Second, will this practice have different results in a developed free market versus a transitioning economy? The paper starts with a brief review of several theoretical perspectives, followed by hypotheses and the description of an exploratory study conducted in the U.S. and in Romania. THEORETICAL BACKGROUND Perceived Marketing Effort Kirmani and Wright (1989) demonstrate that under certain conditions consumers use the perceived effort a company invests in a persuasion attempt (e.g., the cost of advertising) as a signal of their strength of belief in their product quality, resulting in more favorable brand atti- 272 tudes. Kirmani and Wright (1989) conceptualize perceived effort in terms of marketer’s investment of scarce resources such as money, managerial time, thought, etc. They propose that spending more than other brands in the product category or spending large amounts relative to the company’s available resources would be considered effortful. Consumers in developed economies, such as the U.S., are used to the foreign manufacturers who are ready to go at great lengths in customizing their brands specifically for the lucrative American market, with examples of such brands ranging from Toyota Tacoma trucks to the Swiss-owned Poland Springs water. Therefore, it is likely that American consumers will not perceive efforts associated with developing yet another customized brand as something out of the ordinary. On the contrary, consumers in transitioning economies are not “spoiled” by having too many foreign brand offerings customized for their local markets. Consequently, they are more likely to perceive the company’s marketing effort as substantial and positive. Inference of Unfair Marketing Tactics Although appealing to the values of the local consumers seems to be an advantageous strategy for a foreign brand, marketing literature contains some indications that the favorable effect might be weakened, and even reversed, if the true origin of the brand becomes known to the consumer. Campbell (1995) demonstrates that if consumers infer a manipulative intent on the part of the advertiser, advertising persuasion is lowered. We suggest that the likelihood of consumers’ interpreting the positioning of a foreign brand as a seemingly domestic brand to be a manipulative intent (i.e., deception) is higher in a developed than in a transitioning economy. The rationale is that consumers in developed markets have more experience with marketing, have benefitted from more consumer education, and therefore have more persuasion knowledge. Persuasion Knowledge Lay persons’ persuasion knowledge as described by Friestad and Wright (1994, 1995) consists of a system of beliefs that consumers hold about marketers’ persuasion goals and tactics, as well as about their own coping strategies in dealing with persuasion attempts delivered by the marketers. The Persuasion Knowledge Model (PKM) posits that lay persuasion knowledge is developmentally contingent and improves with frequent practice (Friestad and Wright 1994). Since consumers in a developed economy have to cope with a larger number of persuasion attempts (e.g., telemarketing, advertising) it seems plausible that these consumers will have a better American Marketing Association / Winter 2005 developed and more accessible body of persuasion knowledge than consumers in a transitioning economy. In particular, consumers in a developed economy might have better understanding of the tactical meanings of messages. The PKM posits that if a consumer becomes aware of the tactical meaning of messages (e.g., use of celebrities in advertising), natural processing of a persuasion message might be disrupted and intended persuasion will be undermined (Friestad and Wright 1994). Hence, it is expected that persuasion is undermined more for consumers in a developed economy than in a transitioning economy. All these theoretical considerations conduct to the following hypotheses: H1: In a developed free market economy, a foreign brand positioned as a seemingly domestic brand will evoke less favorable responses (brand attitudes and purchase intentions) than the same foreign brand positioned as a foreign brand. H2: In a transitioning economy, a foreign brand positioned as a seemingly domestic brand will evoke more favorable responses (brand attitudes and purchase intentions) than the same foreign brand positioned as a foreign brand. METHODOLOGY The hypotheses were tested using a between-subjects experimental design in which subjects were exposed to three conditions: a foreign brand positioned as a seemingly domestic brand using LCCP (custom foreign); a foreign brand positioned as a foreign brand using FCCP (foreign “as is”); and a truly domestic brand (used as a base level). The experiment was performed in the U.S., a developed market, and in Romania, a developing Eastern-European market which continues to struggle with the transition process from a centralized to a free market economy. Certainly, country-of-origin effects (e.g., Batra et al. 2000; Maheswaran 1994) are capable of augmenting or attenuating the responses to a foreign brand positioned as a seemingly local one. As this research is not interested in COO effects, efforts were made to identify a product category and a country-of-origin for the foreign brand that would have similar COO effects both in Romania and in the U.S. Based on interviews and pretests, chocolate was chosen as the product category and Belgium as the foreign country of origin. Both Romania and the U.S. have strong domestic chocolate brands and both recognize Belgium, along with Switzerland and Germany as “chocolate countries.” Subjects Subjects were recruited among the students of two mid-sized public universities in the U.S. (n = 99) and 273 Romania (n = 97) to participate in a marketing product concept test for a fictitious brand of boxed chocolate. Respondents in both samples did not differ significantly in terms of age (mean = 22.5 in Romania; mean = 23.3 in the U.S., F(1,207) = 2.4, n.s.), or gender composition (42.7% female in Romania, 50.5% female in the U.S., χ2(209) = 1.26, n.s.). Procedure A fictitious brand name Rhapsody (in English) and Rapsodia (in Romanian) was selected on the basis of pretesting for use with the American and Romanian samples, respectively. All subjects saw the same picture of fine chocolate confections and read the same paragraph describing the test brand as a high-quality brand of gourmet chocolate that is owned and manufactured by a familyowned company with a long successful history of making chocolate confections. The brand’s owner was described as either domestic (American or Romanian, respectively) or foreign (Belgian, for both the U.S. and Romanian samples). Different pictures featured on chocolate packaging were used to manipulate the three conditions. In the truly domestic brand condition and the custom foreign (foreign positioned as domestic) brand condition, the design of the chocolate box featured a landmark from the target market country. The American subjects saw a box featuring the Golden Gate Bridge and the Romanian subjects saw a box featuring the Romanian Atheneum. In the foreign “as is” brand condition, the chocolate box featured a Belgian landmark, a Canal in Bruges (see Table 1). Measures Brand attitude was measured using three 7-point semantic differential scales (bad – good, poor quality – high quality, not appealing – appealing). Reliability of the three-item brand attitude scale reached .81 in Romania and .86 in the U.S. The items were averaged to form a brand attitude index. Purchase intentions regarding Rhapsody were measured on a 5-point scale with response options from (1) definitely will not buy to (5) definitely will buy. An open-ended question: “What do you think the company is trying to tell you by developing a special design of packaging featuring [name of the landmark] for this market?” was used to assess the cognitions underlying the responses. Company’s sincerity was measured using two 7-point semantic differentials (insincere – sincere, dishonest – honest). Country-of-origin effects were measured by asking the subjects to rate perceived quality of chocolate from a number of countries, including the target countries of Belgium, USA, and Romania on a 7point scale from 1 (very poor quality) to 7 (very high quality) with an additional response category 0 (“I don’t know”). To test whether subjects believed that featuring a national landmark on the packaging would be sufficient for misleading the customers about the origins of the brand, respondents were asked: “If an average consumer just sees the packaging of this chocolate brand, how likely is it that he/she will perceive it as a genuine American [Romanian] brand?” (1–very unlikely genuine; 7–very likely genuine). Manipulation Check As expected, the subjects in both countries thought that the custom brand was just as likely to be considered domestic as a true domestic brand (t(68) = .16, n.s. in Romania; t(64) = -.41, n.s. in the U.S.). The respondents also believed that the foreign brand was much more likely to be considered domestic when it featured a landmark from the target market country (Foreign – Custom Positioning condition) relative to the case when it used a landmark from the country of origin (Foreign – No Custom Positioning): t(63) = 4.3, p < 0.001 in Romania; t(61) = 9.7, p < 0.001 in the U.S. These results suggest that subjects believed that the packaging for the custom brand was likely to mislead the uninformed consumer about the brand’s true origin. TABLE 1 Summary of Experimental Conditions Brand Origin Brand Positioning Romanian Sample Romanian Belgian Belgian Local: Romanian landmark (Atheneum) picture on the package Custom foreign (seemingly local): Romanian landmark (Atheneum) Foreign “as is”: Belgian landmark (The Grand Canal in Bruges) American Sample American Belgian Belgian Local: American landmark (The Golden Gate) picture on the packaging Custom foreign (seemingly local): American landmark (The Golden Gate) Foreign “as is”: Belgian landmark (The Grand Canal in Bruges) American Marketing Association / Winter 2005 274 RESULTS First, the direction and magnitude of the country-oforigin effect was evaluated. For both the Romanian and the U.S. sample, Belgian chocolate, in general, is perceived as of significantly better quality than the domestic chocolate (mean = 5.4 versus 3.7, t = 5.4, p < 0.001 for the Romanian sample; mean = 6.2 versus 4.5, t = 6.6, p < 0.001 for the U.S. sample). Hence, both the Romanian and the U.S. samples showed country-of-origin effects for Belgium in the same direction and of similar magnitude. T-test analyses were used to test the directional hypotheses regarding brand attitudes and purchase intentions. The results are presented in Table 2 and Figure 1. To test whether the strategy of developing custom brands by positioning a foreign brand as seemingly domestic remains advantageous even after target consumers learn about the true origin of the brand, the attitudes toward the custom foreign brand were compared to the attitudes toward the foreign brand positioned as foreign (“as is”). These differences reached marginal significance for both the Romanian (t(62) = 1.47; p = .07, one-tailed test) and the U.S. (t(61) = -1.4, p = .08, one-tailed) sample. As expected, the Romanian subjects liked more the foreign brand positioned as a seemingly domestic brand, while the American subjects liked more the foreign brand positioned as foreign. These findings suggest some support for the advanced hypotheses. A comparison of the purchase intentions failed to render any significant differences. However, the pattern in purchase intentions was similar to the pattern in brand attitudes. TABLE 2 Means for the Dependent Variables by Country and Brand Positioning Positioning Romania Brand Attitude Index Purchase Intentions 5.15 3.6 Custom Foreign 5.7 3.9 Foreign “as is” 5.2 3.8 Local 4.9 2.7 Custom Foreign 4.7 2.5 Foreign “as is” 5.2 2.8 Local U.S.A. FIGURE 1 Brand Attitude Index Means by Brand Positioning and by Country 5.8 5.6 5.4 5.2 5.0 4.8 4.6 4.4 4.2 Romania USA Local Custom Foreign (seemingly local) American Marketing Association / Winter 2005 “Foreign as is” 275 In order to explore in more depth the reasons why consumers evaluated a foreign brand positioned as seemingly domestic differently than a foreign brand positioned as foreign, several other analyses were performed. First, we wanted to know whether consumers would evaluate the custom foreign brand differently than a truly domestic brand. Since these conditions differed only in the disclosure of the marketer’s true origin (domestic versus foreign), any difference in brand attitudes would be more likely due to the interpretation of the marketer’s brand position as a persuasion/manipulation attempt or as a positive customization effort. Romanian respondents’ attitudes toward the custom foreign brand were more favorable than their attitudes toward the true Romanian brand (t(67) = -1.8, p = 0.03, one-tailed). This difference was not significant in the U.S. (t(64) = 0.43, n.s.), although respondents seemed to evaluate the true domestic brand slightly more favorable. It seems that consumers in Romania, a transitioning economy, were not concerned with the deceptive positioning of a foreign brand as domestic. On the contrary, in this case, they tended to evaluate the custom foreign brand more favorably, which is consistent with the direction of country-of-origin effect. This phenomenon seems to be reversed for the consumers in the developed country. Second, we investigated respondent’s perception of company’s sincerity in the different conditions. The pattern of company sincerity perceptions followed the pattern of brand attitude ratings in Romania, but not in the U.S. Sincerity ratings of the Belgian company using custom foreign positioning (essentially, using deception) were significantly higher than sincerity ratings of the domestic company in Romania (t(68) = -2.6, p < 0.01). Sincerity of the Belgium company not using custom positioning was still higher relative to the local Romanian company (t(61) = -1.9, p = 0.06). One possible explanation is that Romanian subjects are chronically suspicions of everything that is domestic. The foreign company might have benefitted from a halo effect. Interestingly, there were no significant differences in the U.S. sample. Third, in order to gain an insight into respondents’ thinking processes, while evaluating the brand, we analyzed the open-ended responses to the question about the company’s rationale to feature the specific country landmark. The coding scheme was based on the theoretical perspectives described in Friestad and Wright’s (1994) classification of lay persuasion beliefs. Two judges coded the open-ended responses for the number of thoughts expressed and the category to which each thought belonged. The categories that emerged from the data coding are: (1) explicit inference about the company’s attempt or effort to customize the brand in order to have a domestic appeal (e.g., “the Belgian firm learned about the RomaAmerican Marketing Association / Winter 2005 nian culture and tradition; they used the picture of the Atheneum because it is an important Romanian landmark and therefore it would give the product a Romanian image”); (2) thoughts that infer an explicit attempt by the marketer to persuade the customer about the quality and uniqueness of the product (e.g., “they are trying to give the product a true European feel, to make their chocolate look more authentic and of higher quality”); (3) thoughts that infer the marketer’s attempt to persuade customers to buy the product (e.g., “the company wants to attract more customers to buy the chocolate”); and (4) thoughts that infer a deceptive manipulation attempt by the marketer (e.g., “they trick me; they make me think it is an American product”). The first category seems to be related to “perceived marketing effort” (Kirmani and Wright 1989), while the other three correspond to Friestad and Wright’s (1994) persuasion knowledge categories represented by beliefs about marketers’ tactics and persuasion goals. Finally, some respondents provided seemingly neutral thoughts (e.g., “the Bruges picture shows the origin of the Belgian company”) which were not classified. The results are summarized in Table 3. Overall, it seems that respondents’ thoughts were consistent with the pattern of brand evaluation, in which Romanian respondents were most favorable to the foreign brand positioned as a seemingly domestic brand while the U.S. respondents were least favorable to this customized foreign brand. Romanians seemed more likely than Americans to interpret a foreign brand’s position as seemingly domestic as a positive customization effort (44% of the total number of thoughts provided versus 37%, respectively). In contrast, Americans seemed more likely than Romanians to interpret it as a deceptive manipulation attempt (19% of the total number of thoughts provided versus none). Interestingly, both the U.S. and Romanian respondents were most likely to interpret the communication of the foreign brand as being foreign as an attempt to persuade customers about the quality and uniqueness of the product (41% of Romanians’ thoughts and 58% of Americans’ thoughts). These results support our arguments that consumers in a developed country differ from consumers in a transitioning country in terms of persuasion knowledge and perceptions of a marketer’s effort to customize a foreign brand to appeal to the domestic market. CONCLUSIONS In summary, the results of the reported exploratory study suggest that, in a transitioning economy, consumers are likely to reward a foreign marketer’s effort to customize the brand so that it seems domestic. On the contrary, in a developed economy, consumers are likely to penalize a marketer’s attempt to position a foreign brand as seemingly domestic, instead of communicating it as a foreign brand. Due to lower exposure to marketing tactics and less choice of high quality products, consumers in transition276 TABLE 3 Thoughts Concerning Company’s Intent in Brand Communication Local Brand (Seemingly Local) Custom Foreign Brand Foreign Brand (“as is”) Romania U.S. Romania U.S. Romania U.S. Sample size 39 36 39 30 37 33 Total number thoughts 33 38 36 32 29 33 Customizing effort/ domestic appeal 8(24%)* 13(34%) 16(44%) 12(37%) – – PK: Product quality inferences 12(36%) 11(29%) 7(19%) 3(9%) 14(41%) 19(58%) PK: Sales/Customer attraction inferences 1(3%) 1(3%) 9(25%) 2(6%) 5(17%) 5(15%) PK: Manipulation/ deception inferences – – – 6(19%) – – *Note: Percentages are computed out of the total number of thoughts. ing markets are less likely to be suspicious of a foreign marketer’s persuasion attempts and more likely to appreciate the marketer’s effort to appeal to the domestic consumer. It seems that these consumers are likely to be more suspicious of marketing actions undertaken by domestic producers than the actions undertaken by foreign producers. Evidently, this situation holds if the countryof-origin effect is favorable to the foreign producer. In contrast, an international company attempting to enter a developed market with a strategy of positioning the foreign brand as seemingly domestic will encounter consumers’ suspicions and lack of acceptance. In this case, the company may benefit from explicitly communicating the foreign origin of the brand as a signal for product quality. Evidently, the results of this exploratory study should be interpreted with caution. The study used small samples REFERENCES Alden, Dana L., Jan-Benedict E.M. Steenkamp, and Rajeev Batra (1999), “Brand Positioning Through Advertising in Asia, North America, and Europe: The Role of Global Consumer Culture,” Journal of Mar- American Marketing Association / Winter 2005 of college students, from only two universities, one in a developed and one in a transitioning country. Further, only one product, chocolate, was used. Future research should use multiple products from different product categories and more representative samples in order to draw more definite conclusions. Future research should test whether the effect is moderated by product category. In particular, it is plausible that effects for the “good” products, such as chocolate, might differ from the effects for the “stigmatized” products, such as cigarettes. The current study opens a program of research that intends to replicate and extend reported findings. The study needs to be replicated with various brand and packaging stimuli. Further exploration is also needed to understand the mechanism that brings about the effects of custom positioning a foreign brand as domestic. keting, 63 (1), 75–87. Campbell, Margaret C. (1995), “When Attention-Getting Advertising Tactics Elicit Consumer Inferences of Manipulative Intent: The Importance of Balancing Benefits and Investments,” Journal of Consumer Psychology, 4 (3), 225–54. 277 Batra, Rajeev, Venkatram Ramaswamy, Dana L. Alden, Jan-Benedict E.M. Steenkamp, and S. Ramachander (2000), “Effects of Brand Local and Nonlocal Origin on Consumer Attitudes in Developing Countries,” Journal of Consumer Psychology, 9 (2), 83–95. Friestad, Marian and Peter Wright (1994), “The Persuasion Knowledge Model: How People Cope with Persuasion Attempts,” Journal of Consumer Research, 21, 1–31. ____________ and ____________ (1995), “Persuasion Knowledge: Lay People’s and Researchers’ Beliefs About the Psychology of Advertising,” Journal of Consumer Research, 22, 62–74. Kirmani, Amna and Peter Wright (1989), “Money Talks: Perceived Advertising Expense and Expected Product Quality,” Journal of Consumer Research, 16, 344–53. Maheswaran, Durairaj (1994), “Country of Origin as a Stereotype: Effects of Consumer Expertise and Attribute Strength on Product Evaluations,” Journal of Consumer Research, 21, 354–65. For further information contact: Lada V. Kurpis School of Business Administration Gonzaga University 502 E. Boone Ave. Spokane, WA 99258–0009 Phone: 509.323.7033 E-Mail: [email protected] American Marketing Association / Winter 2005 278 CAN SELF-AFFIRMATION REDUCE PREJUDICE EXPRESSION TOWARD STEREOTYPED BRANDS? Huimin Xu, University of Arizona, Tucson ABSTRACT Prejudice toward brands is recognized as a distinctive construct. Holding prejudice against stereotyped brands serves to defend one’s worldview and to maintain selfesteem. However, when a chance of self-affirmation is provided, the need to maintain self-esteem through prejudice expression is reduced. The implication for effective marketing communication is discussed. INTRODUCTION The equation of consumption with choice and wants/ desire has long pervaded consumer research. This dominant paradigm treats wants/desire as the only, or at least the main motive in consumption. This equation biased various fields of consumer research. For example, it disregards the pushing force of brand loyalty, and neglects the negative form of relationship with brands (e.g., Fournier 1998). Consumers’ prejudice and other negative emotions at the brand level are vastly ignored, though there are some works on emotions in ads. watching and product consumption (e.g., Richins 1997). Realizing that there has been almost no systematic empirical work on consumer prejudice, the current study stresses that prejudice is another way that consumers relate to the commodity world on a daily basis. Some scholars in social psychology and consumer research even take a more assertive stance, suggesting that the avoidance of an undesired state is a stronger driving force of behavior than the pursuit of a desired state (Wilk 1997), and a better predictor of satisfaction (Ogilvie 1987). Their view suggests that studying consumer prejudice is indispensable. It might be due to the following two reasons that scant attention has been paid to consumers’ prejudice: (1) Consumers’ prejudice come side by side with anti-consumption, which usually leaves no material traces. If prejudice is not expressed explicitly, there is no visibility at all. Understandably, it is more difficult to study prejudice than to study more visible consumption; (2) Out of managerial interest, it is more profitable to focus the marketing effort on current and potential consumers, than on people who show resistance against that product/ brand. The current study tries to fill the gap by doing the following: (1) Advance the notion of consumers’ prejudice against brands, and address its important role in American Marketing Association / Winter 2005 consumption. Toward this end, the validity of the metaphor of brands as people is investigated. (2) Borrow relevant theories from social psychology, and conceptualize brand prejudice expression as a means of embracing certain worldview and maintaining self-esteem. This study proposes that self-affirmation decreases the tendency of brand prejudice. A 2x2 factorial experiment is conducted to examine the proposition. In doing so, the current study takes the lead in empirically studying the antecedents of brand prejudice. The empirical result might help assess the effectiveness of some relationship marketing techniques that provide consumers with opportunities of selfaffirmation. BRAND PREJUDICE Consumer research has long been focused on acquisition behavior. How consumers identify themselves with certain brands has been intensively studied, while how consumers deny association with brands remains underexplored. This biases research on consumer emotions. Reducing the multi-dimensional consumption emotions to a range of satisfaction, researchers frequently ignore the fact that there are a variety of both positive and negative emotions (Westbrook and Oliver 1991). Though some scholars have paid attention to emotions in ads. watching, product consumption, and service encounter (e.g., Richins 1997), one specific category of negative consumption emotions, namely, consumer prejudice, has been largely overlooked. Nonetheless, its existence is abundantly documented in mass media. The intellectuals dismiss rap music as vulgar. Abstract art may be accused as pretentious by the working class. “The worst dressed celebrities” exposes and ridicules fashion mistakes. Consumer prejudice permeates our daily conversations. The brand level of consumer prejudice is termed as brand prejudice. Brands prejudice is the emotional antipathy toward brands. This emotional antipathy is mainly based on stereotypic perception of the symbolic meaning of the brands. It is not merely involuntary visceral disgust, though it could be accompanied by the latter. Instead, it often reflects deliberation. To give an example, the following is an excerpt from interviews conducted by Banister and Hogg (2001). “The typical Sharon is . . . that girl, she had this tiny little dress on and she was absolutely hammered (English slang for drunk ) with her mate and she was 279 trying to chat up this group of lads . . . because she had obviously decided that everybody else wore the short strappy little dresses, and that was what she was wearing . . . she looked dreadful. . . .” Another example is the prejudice against Starbucks. This brand is stigmatized as yuppie haven: rushed, impersonal, overly analytical, and sterile. Plus, as a dominant chain store brand, it is charged as contributing to corporate spread and cultural homogenization (Thompson et al. 2004). Brand prejudice is a construct distinctive from consumer dissatisfaction. Unlike consumer dissatisfaction, brands prejudice does not need to be preceded by direct experiences of purchase or consumption. Rather, it often comes together with anti-consumption, which refers to the deliberate avoidance of products and services. Even in the absence of direct consumption experience, one’s observation is sufficient to form stereotypes as the cognitive basis of prejudice. Second, brand prejudice is based mainly on a brand’s unpleasant symbolic implication, while dissatisfaction frequently stems from the utilitarian dimension of brands. The third thing that differentiates brand prejudice from dissatisfaction is that prejudice holders demand no constructive change to the targeted brands, while dissatisfied consumer might require the problems to be corrected, performance to be improved, or the brand to be removed from the market. Why don’t brand prejudice holders demand constructive change? Anthropologists contend that the existence of prejudice target brands might be of positive value to prejudice holders, by serving as “a reminder of the war against the others and their despised way of life” (Douglas 1997). Finally, more than what they do with dissatisfaction, people express their prejudice to seek affiliation and maintain their social identity (Tajfel and Turner 1986). This is why brand prejudice exists abundantly and vocally at group level (Muniz and O’ Guinn 2001; Thompson et al. 2004), besides the private, individual level. Brand prejudice is an ongoing phenomenon. Most people reported that their experiences of disgust and revulsion had changed a great deal during their lifetimes (Wilk 1997). Greater education, moving into adulthood, increased wealth, and foreign travel are correlated with a greater diversity of likes, a broadening of tastes, and fewer hate (Belk et al. 1982; Wilk 1997). These evidences demonstrate consistency with findings in social psychology: Education, especially specific intercultural education, helps engender tolerance (Allport 1954) Both stereotype and prejudice are concepts that originated from psychology and are usually used on people. The metaphor of brands as people needs to be established to justify the construct validity of brand prejudice and any further discussion on this topic. People perceive brands in American Marketing Association / Winter 2005 a similar way they perceive people. Brands are perceived to possess demographic characteristics such as age, gender, and socioeconomic class (Levy 1959). Country-oforigin renders brands a nationality. Besides demographic characteristics, brands also have human-like personalities. Brand personality is a well-accepted concept, which refers to the set of human characteristics associated with a brand (e.g., Aaker 1997). Paralleling the “Big Five” dimensions of human personality, a reliable, valid, and generalizable scale was developed to measure the five dimensions and 42 personality traits of brand personality (Aaker 1997). Sound analogy can be drawn between three of the five dimensions and their counterparts from human personality scale (i.e., sincerity with agreeableness, excitement with extroversion, competence with conscientiousness) (Aaker 1997). Furthermore, just like a person is perceived as a knot in a interpersonal relationship network, a brand is perceived to be embedded in its relationships with other brands, e.g., competing brands, alliance brands, and ingredient brands (Keller 2003). It is argued that the personification of brands origins from the universal human need for animism (Gilmore 1919), which gives rise to the tendency to imbue brands with a variety of human traits. Both marketer and consumers contribute toward this state, with the former consciously spending efforts to enhance certain personification, and the latter willingly accept such personification. Marketers might employ techniques including anthropomorphization, creation of user imagery, celebrity endorsement, event sponsorship, and corporate image presentation. In addition, human-like traits are also associated with a brand in a less direct way through product-related attributes, product category associations, association with other brands, brand name, symbol/logo, packaging, advertising style, price and distribution channel. Prejudice’ Role in Consumption as Another Motive The dominant paradigm treats wants/desire as the only motive for consumption. However, some research suggests that consumer prejudice, including brand prejudice, constitutes another motive. Prejudice may be even more important and effective than consumption in forming a consumer’s identity. This might be particularly true in contemporary developed societies, where status symbols are rapidly disappearing in the face of abundance. In Wilk’s study (1997), it was found that most people, regardless of class and ethnicity, seemed to like approximately the same foods, the same TV shows, and the same music. People rarely got excited about things they liked. Few relationships surfaced between specific tastes and social class, income, or ethnicity. In contrast, distaste and prejudice are much more powerful social predictors. This finding is consistent with Bourdieu’s observation that consumption choices are often constituted in opposition to the choices of other social groups. It is through negation 280 of others’ choice, that one claims his/her position (Bourdieu 1979). Being more articulate, people in Wilk’s interview (1997) would often get deeply involved in discussing the things they hated or disliked and the reasons of their hates/dislikes. In his interview with Belizean high school students, it was found that only a tiny minority pursued the most fashionable, while most students’ consumption choices were driven by anxiety over consuming the wrong things. That means, most were more concerned with being out of fashion than they were with being in the latest style. It appeared that the more important daily consumption skill is that of knowing what not to wear. Literature in social psychology provides an explanation for this phenomenon, if we think of prejudice as vocalizing the undesired self and desire/preference reflecting the ideal self. It was argued that the undesired self is less abstract than the content of the ideal self, since it is more experience based than the ideal self. Thus the undesired self is a more stable standard against which one judges his/ her present level of well-being. The distance between the real self and the undesired self is a better predictor of life satisfaction than is the distance between the real self and the ideal self (Ogilvie 1987). Similarly, of what to consume and what not to, prejudice/avoidance may be a stronger motive than wants. It may be the more frequently used anchor against which we gauge our consumption satisfaction. The desire and prejudice toward brands are closely related with each other. Learning good tastes is largely a matter of learning what bad tastes are. Philosophers like Bataille and Derrida have argued that all desire is ultimately rooted in disgust or rejection. Choices based on wants are always choices based on aversions and distaste as well. Why Brand Prejudice? Can Self-Affirmation Reduce Prejudice Expression? Although there are works which recognize the existence of brand prejudice and its important role in consumption choice, the following questions remain understudied: Why do consumers develop prejudice against brands that have not done any economic or physical harm to them? Under which condition are people more likely to express prejudice toward particular brands? The current study tries to investigate these research questions by conceptualizing brand prejudice as a means of self-esteem maintenance. Cognitive, socio-cultural, and motivational factors all promote and maintain prejudice. The need for selfesteem has frequently been mentioned as the motivational factor of prejudice (Allport 1954; Tajfel and Turner 1979). Many researchers contend that there is a universal need for self-esteem (Greenberg et al. 1997, 1999; Heine et al. 1999). Terror management theory proposes that humans use self-esteem to bring the fear of mortality under control (Greenberg et al. 1997). Terror of mortality is engendered by awareness of the inevitability of death. Humans’ cognitive capacity gives rise to this awareness American Marketing Association / Winter 2005 which is not found in animals. This awareness, combined with the animal instinct for self-preservation, creates terror of mortality. To buffer the fear, we immerse ourselves in a cultural worldview, which “imbues life with meaning, order and permanence, and the promise of safety and death transcendence to those who meet the prescribed standards of value” (Greenberg et al. 1997). By living up to these cultural standards, one gains selfesteem, the belief that he/she is “an object of primary value in a meaningful universe” (Greenberg et al. 1997). Terror management theory has two implications: first, we need to have faith in a particular cultural worldview, defending it when threatened; Second, we need to believe that we live up to the cultural standards. The need for selfesteem drives both noble and contemptible human behaviors. A point relevant here is that holding and expressing prejudice is fundamentally motivated by the striving for self-esteem. This causal link has garnered empirical support. For example, when subjects faced self-esteem threat in the form of receiving negative bogus feedback on their intelligence, they expressed more prejudice toward a negatively stereotyped ethnic group, compared to subjects receiving neutral feedback. Such derogating in response to self-image threat was of positive value to the prejudice holder, since it mediated increase in self-esteem (Fein and Spencer 1997). Holding prejudice against out-groups helps to guard one’s cherished worldview (Allport 1954). The question arises as to whether brand prejudice in particular serves to defend one’s worldview. It has long been proposed and empirically supported that personal values and consumption choices are consistent (e.g., Homer and Kahle 1988; Pitts and Woodside 1983). By contrast, the relation between values and anti-consumption choices has been escaping most consumer researchers’ attention. The current study would argue for this statement’s validity in the arena of consumer behavior. Not only consumption choices, but also anti-consumption choices announce cultural allegiance. This relation has been documented through out various historical eras. Particular kinds of food were consciously renounced by medieval monks, for whom rejecting meat and other luxuries was a repudiation of the values that placed eating first among worldly values. It was once a chic protest against U.S. involvement in the Vietnam War to drive a Swedish-made Volvo, because the Swedish government was vocally criticizing U.S. involvement at that time. The resistance to IBM and Microsoft’s overwhelming dominance coexists with the ideology of democracy. Basically, brand prejudice reflects prejudice against the cultural worldview brands represent. Prejudice expression serves two purposes in the process of boosting self-esteem. First, by belittling the ideology underlying an out-group’s consumption, prejudice expression affirms the validity of our own cultural worldview, or at least one aspect of that worldview. Second, by contrasting ourselves with the out-group along 281 the scale defined by our cultural criterion, we strengthens the belief that we fulfill the cultural standard well enough, since apparently there are some people worse off than ourselves. Fortunately, prejudice is not the exclusive means to promote self-esteem. An individual may also increase self-esteem by enhancing the belief that he/she lives up to the cultural standards. The stronger the belief that he/she lives up to the cultural standards, the smaller the need to defend his/her cultural worldview by prejudice expression. In earlier social psychology research, this substitutability is found between non-prejudiced self-affirmation and prejudice (Fein and Spencer 1997). Self-affirmation is the tendency that people avoid to confront a threat, instead, they affirm some other important aspect of the self to reinforce one’s overall self-adequacy (Steele et al. 1993). The substitutability exists because they both serve a common, higher-order goal: Self-esteem. Self-affirmation is a relatively general substitute for many self-esteem processes. It means self-affirmation can turn other means of self-esteem maintenance on and off, while other processes are able to turn self-affirmation on and off. In Fein and Spencer’s study, Ss were either given an opportunity for non-prejudiced self-affirmation or not. All Ss were asked to rank order 11 personal characteristics/values according to their personal importance. Ss in the self-affirmation conditions were then asked to write down the nunber one personally important value, and describe a time in his/her life when it has been important. Research has shown that causing Ss to think about a personally important value is an effective means of producing self-affirmation (Steele 1999). Ss in the no selfaffirmation conditions were asked to indicate the number nine personally important value, and write about a time when it may be important to a typical student. The second independent variable was the target’s ethnicity. Targets were from either a negatively stereotyped ethnic group or not. It was found that Ss given the opportunity to selfaffirm expressed less prejudice toward members from the negatively stereotyped ethnic group, compared to Ss who were not given the self-affirmation opportunity. This finding has potential managerial implication in marketing. If self-affirmation can substitute for prejudice expression, providing a source of self-affirmation can reduce the holder’s prejudice and lessen the negative influence on others through interpersonal interactions. To sum up, this study is interested in replicating this relation when the prejudice targets are stereotyped brands. Specifically, this study investigates the following hypotheses: H1 When a brand stereotype reflects worldview incongruence, more brand prejudice would occur, com- American Marketing Association / Winter 2005 pared to a brand stereotype that does not reflect worldview incongruence. H2 For incongruent brand stereotype, when individuals are given an opportunity to self-affirm, they are less likely to express prejudice toward the stereotyped brands, compared to individuals who are not given such an opportunity. When the focal brand is not incongruently stereotyped, this study does not expect prejudice to exist. Whether the self-affirmation is available or not should not affect the likelihood of prejudice expression. H3 When a brand stereotype does not involve worldview incongruence, lack of self-affirmation doesn’t increase the tendency of prejudice expression. METHODOLOGY AND INITIAL EMPIRICAL SUPPORT The pretest was a 2x2 factorial between-subjects experiment and was of preliminary nature. Seventy-eight undergraduate students participated. The IVs are availability of self-affirmation and availability of brand stereotype incongruence. Manipulation of self-affirmation is borrowed from psychology, as described earlier. The other IV has two levels: whether the brand stereotype is perceived to be incongruent with the specific sample’s worldview, or there is no such perceived incongruence. Since two real wine cooler brands were used as stimuli, brand familiarity was measured as a covariate. Conventional attitude semantic differentials, combined with six newly written items that purportedly captured “perceived value incongruence” and “refusal of association,” were used as the measure of brand prejudice. ANCOVA shows significant interaction between the two independent variables (p = 0.019). For Boone’s Farm (a brand supposedly involving stereotype incongruence in the subjects’ perspectives), self-affirmation decreases brand prejudice expression (p = 0.064). Therefore, hypothesis 2 is marginally supported. For Seagram’s (a brand supposedly involving no stereotype incongruence), there is no significant difference across the two levels of affirmation availability (p = 0.124). Hypothesis 3 is thus supported. H1 is not supported. The author is fully aware of the limitation of the pretest design. Since real brands were used, alternative explanations can not be ruled out. More rigorous design should be used in the future. FUTURE DIRECTION: THE POWER OF PREJUDICE Once we conceptualize attitudes with certain characteristics as prejudice, a new area is open up for study. Singling out certain attitudes as prejudice has proved to be 282 profitable in social psychology. Prejudice definitely adds beyond the more aged construct of attitude. For example, prejudice predicts discrimination far better than heavily cognitive attitude (Dovidio et al. 1996); It is held more firmly (Abelson et al. 1982), and is more effectively altered by affective rather than cognitive persuasion (Edwards and von Hippel 1995). It would be interesting to find out whether these findings could be replicated in the arena of marketing, after we conceptualize certain brand attitudes as brand prejudice. Based on shared stereotype, brand prejudice is also culturally shared. When stereotype and prejudice toward brands are recognized as socio-cultural phenomenon, we can go on to examine the societal factors that lead to brand prejudice, instead of being confined to the paradigm of individual information processing. In such inquiry, various social psychology theories can be utilized. This would give rise to a new scope of questions which have not been fully explored before. For example, does excessive homogeneity in demographics and psychographics lead to greater brand prejudice, according to social identity theory (Tajfel and Turner 1986)? Can we predict the content of brand prejudice once we know the associated user group’s niche in the social structure? Particularly, does higher social class unavoidably hold paternalistic prejudice toward brands associated with lower class as a means of system justification (Glick and Fiske 2001)? Do dominant corporate brands in different societies possess similar stereotypes and prejudice held against them, according to the transcultural principle of stereotyping (Stephan and Rosenfield 1982)? Are brands associated with conflicting user groups derogatorily viewed by each other, in line with the realistic conflict view of prejudice (Taylor and Maghaddam 1987)? To embark on these intriguing issues more effectively, researchers need to recognize the distinctive contribution of the construct of brand prejudice. DISCUSSION Provision of self-affirmation, via prejudice reduction, eventually strengthens buyer-seller relationship. Buyer-seller relationships are a focal concern of marketing as a discipline (Day and Montgomery 1999). Communication between the two parties, among others, is seen as one antecedent to good buyer-seller relationship (e.g., Nonaka 1994). Particularly, communication increases trust and cooperation (Morgan and Hunt 1994). However, this line of research has been largely confined to communication frequency as the independent variable. The specific characteristics of communication content, among which being self-affirmative is one, have been ignored. This study contends that communication could be of variable magnitude of self-affirming from a consumer’s angle. Highly self-affirming communications pay respect American Marketing Association / Winter 2005 to consumers and help them maintain a positive selfregard. On the other hand, communications utilizing fear appeal or making upward social comparison salient threaten consumers’ self-esteem. Therefore, such communications land on the lower end of the self-affirmativeness continuum. Communication high in self-affirmation, via prejudice reduction, enhances consumers’ trust and contributes to a better buyer-seller relationship. Service marketing managers can reduce prejudiced expression against their brands, utilizing the abundance of interpersonal communication. The concrete implementation is: service personnel employ face-to-face communication to affirm consumers’ self-esteem. Provision of selfaffirmation is not restricted to one-on-one service encounters. It can also be delivered through mass media. For example, advertisement of both services and commodities can convey pleasing messages such as “you are worth it” or “you can do it.” Sometimes, provision of self-affirmation goes farther than pleasant verbal or nonverbal communications. Helping some consumers to achieve major life goals or resolve troubling issues, and hopefully boosting their self-esteem subsequently, has long been used by business. Walmart offers school supplies to needy children. Beverly Hill stylists make over consumers into more glamorous people, who are finally happy with themselves. Negatively stereotyped brands and professions have improved their images by improving consumers’ self-images first. In such cases, consumers who witness self-affirmation provision, though they do not directly experience it, might feel self-affirmed too. At present, this is only a speculation. Whether vicarious self-affirmation could actually occur constitutes a topic for future investigation. Another subtle issue that awaits future research is the distinction between prejudice and prejudice expression. As a value, prejudice is stable and resistant to attempted influence. By comparison, expression of prejudice is more variable, since it is subject to the salience of prejudice content and social norm. Thus the question arises as to self-affirmation’s impact on these two different constructs. Does providing self-affirmation really reduce prejudice, or does it merely temporarily hold back the expression of it? Plus, how long will the curbing effect last? These questions remain for exploration later on. Although brand managers do not always worry about reducing prejudice toward their brands, this does become a concern when a brand attempts to penetrate into a new segment which holds prejudice against the brand. The current study, though preliminary in nature, points out self-affirmation provision as one way to bring down brand prejudice. Besides its obvious managerial benefit, selfaffirmation provision caters to the universal need for selfesteem, delivering genuine value to consumers. Therefore, this research quest fits in the recent trend of stressing communication, value and customer relationship, as re- 283 flected in the American Marketing Association 2004 definition of marketing. More research, with rigorous experimental design, would be worthwhile to pursue this research stream. 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(1997), “A Critique of Desire: Distaste and Dislike in Consumer Behavior,” Consumption, Markets and Culture, 1 (2), 175–96. For further information contact: Huimin Xu Marketing Department University of Arizona 1130 E. Helen St. Tucson, AZ 85721 Phone: 520.621.7485 FAX: 520.621.7483 E-Mail: [email protected] American Marketing Association / Winter 2005 285 SELF AND BRAND IMAGE CONGRUENCE: DRIVING CONSUMER VALUE Adam Marquardt, University of Oregon, Eugene SUMMARY As firms attempt to create value for consumers, many rely on brand image as an effective tool to reach and penetrate their target markets (Park, Jaworski, and MacInnis 1986). This study explores how consumers relate to their chosen brands, specifically investigating the degree to which a consumer’s actual and/or ideal self-image is congruent with the images of his or her preferred brands, and how this impacts the consumer’s level of perceived value. This research combines qualitative interviews with exploratory empirical studies to examine this relationship from the consumer’s viewpoint. Preliminary findings support the role of congruence between the individual’s self-image and the brand image, predicting that as congruence increases, consumer value (customer-based brand equity) will also increase. A strong brand presents consumers with consistent and positive messages, differentiating it from competitive offerings and assisting in the consumer decision-making process (McDonald, de Chernatony, and Harris 2001; Blankson and Caliphates 1999). Firms can create favorable positions in the minds of their customers by presenting attractive brand images. Park, Jaworski, and MacInnis (1986) argue that firms that are able to introduce, elaborate, and fortify the brand’s concept (brand image) will be better able to attract and retain customers, creating stronger and more profitable brands. In doing such, brands are able to generate value for the consumer (customer-based brand equity), and comparative advantages for the firm (McAlexander, Schouten, and Koenig 2002; Keller 1993). The consumer’s self-image plays a critical role in perceiving brand image, and can be described in terms of the imputed brand personality (Aaker and Biel 1993). The consumer’s self-image refers to an individual’s ideas and feelings about one’s self (Underwood, Bond, and Baer 2001), and the basic premise held within this study is that consumers’ possessions contribute to and reflect their identities. This study explores the individual’s actual and ideal self-images, where the individual’s actual self-image refers to how respondents relate their current selfimage along predetermined self-concept scale measures, while the ideal self-image refers to how respondents relate their image perceptions of an ideal person along the same scale dimensions (utilizing projection theory to derive characteristics consistent with the individual’s ideal selfimage). This study proposes that as the degree of perceived fit between an individual’s self-categorization American Marketing Association / Winter 2005 along a given set of specific image traits and characteristics, and the individual’s perceived categorization of a product along the same dimensions increases in congruence, that consumer value will also increase. When areas of customer-desired value are successfully identified, integrated and communicated, consumers will be more likely to buy the brand, often paying a premium in the process (Romaniuk 2001; Keller 1993). Keller (1998) posits the importance of congruence between user imagery and brand personality in building brand image, and suggests that this congruence is particularly “relevant” regarding the more extrinsic benefits associated with symbolic brands. Brand personalities and images appealing to a consumer’s actual or ideal selfimage can help to create consumer value, and thus a deeper level of rapport (Fournier 1998; Aaker 1997). For illustrative purposes, inner-city basketball players provide a good demonstration of how this process operates. For many “streetballers” their chosen brands are not only functional, but also symbolic. Some of these basketball players select athletic apparel and footwear based on their actual level of performance, reputation and status, choosing brands that provide a reflection of their actual self. Other less accomplished and respected players may select the same merchandise based on their desire to project an image or attitude consistent with their ideal self-image (projection of who they want to be). Still others select their apparel and footwear utilizing a combination of their actual and ideal self-images. This study utilized a two-part methodological approach. The first approach involved conducting exploratory interviews with subjects from differing demographic and geographic environments. The purpose of these interviews was to determine if a brand’s image was important to these consumers and if it played a role in their decision-making processes. It was determined that many consumers value a brand’s image, and in fact make the brand image an important factor within their decisionmaking process. The second methodological approach involved an exploratory online survey based on information extracted from Study 1. The survey provides evidence that consumers are inclined to place higher levels of value on brands that exhibit the image traits that they have, or desire to have. Perhaps more importantly, the survey indicates that brand image plays an important role in consumers’ decision-making processes and in their purchasing intentions. 286 The definitive goal of a brand is to signal added value to the consumer such that they look to purchase and/or repurchase the product, thus developing a competitive advantage for the provider. Determining the degree to which consumers place value on brands that embody their actual self-image (reflection of self), their ideal self- image (projection of an ideal self), or some combination of the two has broad implications for branding, marketing and strategic management. This is particularly true if the degree to which self-image and brand image align truly does create superior consumer value (customer-based brand equity). References available upon request. For further information contact: Adam Marquardt Charles H. Lundquist College of Business 205B Peterson Hall University of Oregon, Eugene 1208 University of Oregon Eugene, OR 97403 Phone: 541.346.1438 FAX: 541.346.3341 E-Mail: [email protected] American Marketing Association / Winter 2005 287 THE SPILLOVER EFFECTS OF PRODUCT-HARM CRISES IN A BRAND PORTFOLIO Jing Lei, Universiteit Maastricht, The Netherlands Niraj Dawar, University of Western Ontario, Ontario Jos Lemmink, Universiteit Maastricht, The Netherlands SUMMARY In the current marketplace, complex brand portfolios with multiple brands and sub-brands are often developed by companies to fulfill market segmentation and brand strategy objectives (Aaker and Joachimsthaler 2000b). For instance, Laforet and Saunders (1994) state that, nowadays, the conventional single-brand company is rare and 95 percent of companies have more than one brand for their products. Our starting point is that brands in a portfolio are not cognitively independent in the way that consumers store them in memory. Rather, due to a variety of reasons, including common corporate logos, similar trade dress and design, similar or related advertising, complementary usage, and even common shelf location, consumers may establish associations and linkages between brands in a portfolio to help them navigate the randscape in which they consume. Once these linkages are established in consumers memory, a brand cannot be isolated from exposure to information about related brands in the same brand portfolio. This phenomenon, termed pillover effect (e.g., Balachander and Ghose 2003), refers to the extent to which external information (e.g., a product-harm crisis) about a brand changes attitudes about other brands that are not directly involved. For instance, if Kellogg Cornflakes suffer severe quality problems, consumers might update their attitudes not just about Cornflakes, but also about SpecialK and other Kellogg brands. Therefore, companies with a brand portfolio need to look beyond the impact of external information on the directly involved brands to other affiliated brands. In some cases, spillover effects may even explain more variance in attitude change on a brand than external information that directly addresses this brand. For instance, in the previous example about negative information at Cornflakes, the spillover effect on SpecialK might overwhelm the effect of an advertisement on SpecialK in altering consumers attitude towards SpecialK. Hence, neglecting spillover effects provides a limited view of the antecedents of brand equity (of which brand attitudes are one component) and may lead to inappropriate managerial actions. Yet to our knowledge no research has yet addressed the impact of external information on a brand portfolio, and critically, if and how the impact on one brand spills American Marketing Association / Winter 2005 over to other brands in a portfolio. This is primarily due to the lack of understanding about how brand portfolio information is cognitively organized and represented in consumers memory. The cognitive representation of brand information is of central importance to the understanding of consumer behaviour and marketing. As evidenced in previous literature, many different conceptualizations have been used to study this construct, including nodes in an associative network (Alba and Chattopadhyay 1985, 1986; Nudungadi 1990), semantic categories (Dawar 1996; Park, Milberg, and Lawson 1991), schemas (Sujan and Bettman 1989), and bundles of associations (Keller 1993; Krishnan 1996; Lawson 2002). Common to these conceptualizations is that they place the representation of individual brands in the context of a larger cognitive structure (e.g., a category), and attempt to understand how such representation influences the processing of new information. However, despite examining brands as part of larger structures, past research has largely neglected the interdependency between brands. In particular, there has been little research on networks of brands where brands are associated with each other (as opposed to cognitive networks that link brands to associations, products, and product categories). As a spillover effe
