Sthapit, Erose

1. Hillesland, J., Rudolph, T., Meise, J. K.., Gisholt, O., Bendixen, A., Fjeldstad, T., Nordflt, J. &

Clement, J. (2013) Fundamentals of retailing and shopper marketing. Harlow: Pearson

Based on the literature review of Hillesland et al.s book titled Fundamental of Retailing and Shopper

Marketing, I have picked some topics that I consider important, for example, sales promotion, brand portfolio

and portfolio decisions, shopper segmentation model, consumer confusion, retail chain positioning and store

atmospherics. Personally, I consider these topics to be important from both company and consumer perspective

particularly in todays marketplace and in aiding Hillesland et al.s (2013) argument about the need to change

the marketing principle as we know today. I believe that these subjects deserve further discussion and might

even contribute to minimum wastage of the hundreds of billions that are spent as part of marketing. In this part

of the assignment, I have argued that sales promotion is not necessarily bad business practice, the need for

companies to move away from justifying the addition of brands and sub-brands into their brand portfolio, the

sheer negligence of manufacturer and brand owner towards shopper segmentation, consumer confusion as a

vexing problem in todays marketplace, the misconception among marketers about differentiation as the main

element in retail chain positioning, the significance of how consumers perceive stimuli in the store environment

and the need to understand consumer information processing as a more bottom-up approach. I have gathered

materials from different sources to support my arguments and to get an in-depth understanding of the topics. The

content below introduces the chosen topics and includes my opinions, arguments and reasons why they are

important and relevant.

Sales Promotion

Hillesland et al.s (2013) states that although hundreds of billions are spent on sales promotions, hardly anything

is tracked or noticed. In addition, 65% of the marketing budget is wasted. The authors argue that the marketing

discipline as we know it today has to change. The above argument can be illustrated by an example. A price

promotion is agreed by a manufacturer and a retailer in 200 supermarkets. Products are sold 30 percent cheaper

than normal and the manufacturer sets aside 600,000 for promotional materials. However, the promotion is just

offered in 110 supermarkets while the other 90 shops only wanted to do the 30 percent price reduction and use

their own standard posters. Sales volume in the promotion period increased by 12 percent while the retailers that

offer their own price promotion increase their sales by 18 percent. On contrary, half of the material is thrown

away, and 80 percent of the posters and displays used are displayed incorrectly and ineffectively. The

manufacturer does not make any profit. Only posters and displays for around 40,000 or 6.7 percent of the budget

are effective or noticed by customers in the supermarkets. What does the example tell us? In my opinion, it is a

cut price offer, a promotion that is badly administered, less effective and does not reflect the importance of sales

promotion.

http://research.cbs.dk/portal/en/persons/jesper-clement(b736652e-03a3-453d-969c-719c032e1ddb)/publications.html

Hillesland et al. (2013) further argue that selling the product at a lower price is neither the best method to build

more value into a brand, nor the ideal way of competing. However, it can be argued that it is what happens every

day in most of the consumer goods industry, where consumers feel that most brands are equal and unless sales

promotion is done, consumer will not buy a particular brand. Personally, as a consumer I prefer price cuts to any

other forms of promotion and perceive different brands as being equally satisfactory and interchangeable. In fact,

for many categories from salad to toothpaste, I do not have any brand preference at all and just pick these

products based on the place on the shop, price or something else that gets my attention. The reason why this

topic is important and needs to be discussed further is because the influence of sales promotion is not limited to

immediate economic response but also to long-term relationship building. It offers immediate value and

inducement to enter into a transaction and then a loyal relationship (Dahlen et al., 2010). It a realistic example

of what is prevalent in todays market place and is unavoidable while 70 percent of all brand decisions are in

fact made after the shopper enters the store. Therefore, on contrary to the authors views, I believe that sales

promotion encourages brand switching and to build brand loyalty (Lamb et al., 2007). According to the Global

Marketing Effectiveness Report (as stated in Hillesland et al., 2013) 70 percent of marketers believe that short-

term revenue boosting campaigns is more important than long-term intangible brand building while Clancy &

Trout (2002) reported on 40 out of 46 categories where the impact of branding was less evident. In todays

marketplace, shoppers are getting more and more loyal to discounters that offer special offers on the day-to-day

or weekly shopping and only visiting the hypermarkets for the special and stock-up- items (Hillesland et al.,

2013). Moreover, research studies have shown that within product categories, complete loyalty is relatively rare

phenomenon, which most consumers being variety-seekers, accepting and switching between alternatives within

a product category. In my understanding, it is important to understand that it is the area where the consumer

perceives no unique value, and individuals are trading down to mass-value providers that offer good enough

quality for rock-bottom prices (Menon & Kahn 1995, Ratner et al., 1999).

I come across sales promotions every day, for example, while purchasing daily consumer goods at a local

supermarket, Lidl, a German retail discount chain that sells based on low price level. In my opinion, Lidls lower

price does not necessarily mean poorer quality. In fact, the retail discount chain competes with other retailing

cooperatives in Finland. Although their floor area and the range of goods they carry might be far smaller, but

their return on investment is not bad at all (Patten, 2008). Lidls market share increased from 4.8% in 2011 to

6.6% in 2013 with a turnover of 820 million Euros between 2011-2012. Finnish households increased their

spending in Lidl stores by 20% during the past year. Based on the statistics, it shows that the retail discount chain

has been able to deliver what its customers want and that growing number of consumers seeks to purchase from

the same supermarket brand and their brand products. Lidl established its first store in Finland in August 2002

and now has 141 stores around Finland (Invest in Finland, 2014). In my opinion, Lidl adheres to the concept of

everyday low prices, i.e. forging sales promotions through special offers; buy one get one free etc. and

providing an assortment of products with relatively steady prices. I visit the store for its discount image and

perceive it as an intelligent and deliberate choice. Another reason is because Lidls products live up to my

expectation. I am satisfied with the offered products and make repeated purchase. This example strengthens the

fact that the most important factor for grocery retailers continues to be price. Nobody is growing faster than

discounters and soft-discounters. In addition, consumer prices have fallen and those who started buying grocery

items at discount stores have not switched back to their traditional stores as most of the times customers often

act habitually purchased from the category before, they have limited time, and they are not too involved in the

purchase (Hillesland et al., 2013).

It can be further argued that sales promotion is not bad business practice to overcome competition by the

manufacturer and in the context where consumers have become less loyal and their purchase is mainly based

upon price, convenience and value (Murthy & Bhojanna, 2010). It is instrumental in providing the bedrock of a

campaign: stock of product into warehouses, commitment to push product through the supply chain,

negotiating preferred supplier status with key retailers, buying category-shelf space and product facings, and

supporting all activities at point of space (Dahlen et al., 2010). However, considering the large amounts of money

spent on sales promotion, it is important to understand how sales promotion work to produce considerable

savings in time and money (Mullin, 2010). The functional question of where, when, how and priced must be

addressed. In my opinion, there has to be a balance between effectiveness, efficiency and budget. In fact, while

setting the budget, the manufacturer and the brand owner need to assess what changes or reinforcement in the

target market and purchase intention have to be effected in order to achieve the marketing objectives and how

much will a specific input cost to achieve a specific outcome and how appropriate is that expenditure likely to

be (Dahlen et al., 2010)

I agree that sales promotion is a short-term measure to increase the sales immediately; but it is very difficult to

stimulate consumer demand only through advertising (Murthy & Bhojanna, 2010). Families no longer sit around

the TV set and thus are not a captive audience (Dahlen et al., 2010). For example, 77 percent of interactive TV

viewers are choosing to record prime-time TV programmes and are skipping past the advertisements while 8 out

of 10 teenagers are channel hopping, in the commercial breaks. In addition, the most worrying for brand owners

and media though is the fact that 90% of consumers who are able to, avoid TV advertising altogether and that

the average person is influenced by less than 4 percent of advertising (Dahlen et al., 2010). What does the

example tell us and why is it important? In my opinion, the examples show that traditional advertising that relied

on the notion of the interruption of captive audiences is totally irrelevant for most customers (Dahlen et al.,

2010). It is important because marketers need to understand that advertising does not interest customers in the

same way anymore and that traditional advertising is losing its effect. On contrary, internet has become a

fascinating medium for advertising (Hillesland et al., 2013). However, it is imperative to understand that in

todays world control of viewing is increasingly in the hands of the viewer and not the sender of communication

(Dahlen et al., 2010). Therefore, in order to engage or attract consumer interest through any form of

advertisement, the marketer must consider content that the consumer wants and that gives him or her value. In

other words, there is a need for creative content (Hillesland et al., 2013).

On the other hand, I believe that it is also important to understand why it is not straightforward and obvious to

move research resources from advertising to promotion effectiveness for companies. In fact, it is not carried out

in most of the FMCG (fast-moving consumer goods) companies. The reason is that companies do not know what

the effect of these sales promotions are having (Hillesland et al., 2013). I believe the answer to this question and

the above example by Hillesland et al. (2013) would be to undertake a strategic approach to sales promotion. In

my opinion, sales promotion needs to be conceived, integrated and implemented professionally. I consider it to

be essential to budget and calculate whether or not they are going to make money during the promotion and to

assess and communicate marketing results (Mullin, 2010). Lastly, I believe that such an approach to sales

promotion may help to ensure that the hundreds of billions spent on sales promotion is spent wisely and is a step

towards changing the way how marketing is done in todays marketplace.

Brand portfolio and portfolio decisions

I have observed that brand portfolio and portfolio decision are exceptionally important because they have a major

impact on the companys revenue and profitability. However, the complexity of some brand portfolios can be

staggering. For example, Nestle has 8000 different brands. Newell-Rubbermaid has 500 brands. Kraft foods has

59 different brands with over $100 million in annual revenue. It can be argued that such brands created with a

prospect for a new business are overestimated, for example, as prediction of customer demand simply turn out

to be wrong. General Motors, for example, continues to struggle with the Saturn brand, 22 years after it was first

publicly announced in 1983. Saturn contributes little to GM in the way of profitability, and the brand adds

substantially to the organizations complexity (Calkins et al., 2005). If the portfolio includes profitable and

growing brands that have little overlap, the company will do well. If the company is made up of poorly

performing brands that compete with each other, the company will struggle (Calkins et al., 2005). Therefore, I

believe that it is important to justify the addition of brands and sub-brands to the portfolio and evaluate whether

the brands have a unique position in the market, or does it overlap with other brands (Aaker, 2004) because it is

inefficient to have multiple brands with excessive overlap. Another important task for brand owners is to examine

whether all of the variants are moving out of the supermarkets and warehouses with required speed and whether

there is sufficient shelf space for the best-selling SKUs (Hillesland et al., 2013).

It can be further argued that companies must move away from justifying the addition of brands and sub-brands

to the creation of focus and clarity by eliminating or dialing down marginal or redundant brands after they have

outlived their usefulness. In my understanding, it is vital to understand that companies with wide brand portfolio

must reduce the number of brands and customer offerings although the decision to drop an acquired brand is

often not so easy (Aaker, 2004) because a reduced portfolio with the least profitable variants delisted is not

necessarily catastrophic but enables the company to focus on the most profitable ones. In so doing the company

has automatically taken out some fixed cost by reducing overall complexity of the company (Hillesland et al.,

2013). Aufreiter et al. (as stated in Dahlen et al., 2010) state that brands are losing their distinctiveness, becoming

commoditized and getting lost in the clutter of saturated categories. In addition, Aaaker (1991) provides

supporting claim by stating that brands are being mismanaged. Unilever, for example, in February 2000

announced a strategic plan designed to accelerate sales growth and increase operating margins by focusing on

few, stronger brands. The goal was to reduce the 1600 brands under its management to around one-quarter of

that number and to focus on those leadership brands with enduring consumer appeal, worthwhile sales and

growth prospect (Aaker, 2004). What does the example tell us and why is it even more important in todays

marketplace? In my opinion, the example shows that building all of the brands simultaneously and maximizing

the portfolio in total are often very different things, and the best way to build a portfolio is often to focus on

some brands at the expense of others (Calkins et al., 2005). It is even more important in todays marketplace to

understand the significance and complexity of portfolio decisions because it helps companies to achieve brand-

driven simplicity by focusing their time and investment on existing and successful brands. I agree that in the

short-term the company will lose some volume share but there is increase in profit (Aaker, 2004).

On the other hand, it is also important to assess the causes of brand proliferation and overlapping offering because

it leads to lack of focus and confusion in the marketplace. In fact, the result is a mess; while customers have a

hard time understanding what is being offered and what to purchase (Aaker, 2004). I believe that one of the main

reasons is that people within organizations charged with coming up with a new product or even new product

modifications in order to fuel growth are inclined to exaggerate the newness of the product, the sales prospect,

and its prospect for long term success (Hillesland et al., 2013). Another reason is that companies often think of

their benefits instead of consumer needs when they launch new brands, and the two are different. If a consumer

does not see the benefit or how the brand is different to others in the category, they will simply not buy (Dahlen

et al., 2010). In my opinion, successful brands need to enter into peoples consideration set by being accessible

on the store shelves while eliminating overlapping offerings. In summary, I believe that optimizing each brand,

in the absence of a broader perspective might not be right for the company as whole (Calkins et al., 2005) and

that companies must use more time on current portfolios, rather than on innovation (Hillesland et al., 2013).

Shopper Segmentation

It is surprising to learn that most brands dont have a shopper segmentation model and focus primarily on

consumer segmentation.

Allocating money for shopper research is still a tough battle for many manufacturers, and other manufacturers

sometimes get carried away by shopper research (Stahlberg & Maila, 2012). In my opinion, it is vital to direct

the companys sales and marketing resources towards the group of people that are the potential buyers and

consumers. The reason why it is important is because 70 percent of all brand decisions are made in the shop and

that marketers need to use significant amount of their resources to reach to their major shoppers. In fact, retailers

and brand owners should look at their shoppers as profit centres (Hillesland et al., 2013).

A chocolate manufacturer, for example, runs a yearly in-store promotion where a customer could win a week

for two in south of France after having bought their chocolate brand. Their major shopper segment consisted of

young, single women between 20 and 26 years old. When the manufacturer did their shopper segmentation, they

found out that the major shoppers and consumers in big supermarkets were actually women between 35 and 50

with families, working and with good income. Younger women were hardly visiting these big supermarkets.

They also found out that this shopper segment of women did not want to win a trip to France; they wanted a

holiday together with their families (Hillesland et al., 2013). What does the example tell us and why is shopper

segmentation models more important than ever? The example shows that identifying and targeting the shopper

segments help retailers and brand owners enormously when creating successful shopper programmes. My

response to why shopper segmentation models are more important than ever is because it will help the brand

owners to organize the chaos of shoppers into groups and to organize the chaos of products into groups, and then

to introduce the appropriate groups of people to the appropriate groups of products (Sorensen, 2009). In addition,

having insights into shoppers buying habits is not enough (Hillesland et al., 2013), while true intimacy with the

shopper is the necessity. It involves understanding what shoppers do and is going to do in the shopping

environment and why, and with this knowledge, brand owners can better tailor and deliver both the message and

offer to encourage trial and long term brand loyalty (DeHerder & Blatt, 2010).

When conducting shopper segmentation, I believe that it is important to include shopping missions as a

segmentation approach together with demographic factors such as age, sex, domicile and income level because

demographic factors are fairly easy to get from external data sources and do not necessarily tell much about the

customers buying behavior. Shopper mission study conducted by Roland Berger & Partnering Group, on

convenience stores found to have six shopper segments: main shopper, top-up shopper, impulse shopper, distress

shopper, grab-and-go shopper and habitual shopper. Different shopping missions are associated with different

needs, and consumers choose stores depending on the need at a given time (Stahlberg & Maila, 2012). Based on

my personal experiences, I visit the nearest grocery and convenience store, Siwa, one of the supermarket chains

in Finland, particularly during weekends to save time and because it is convenient . In reference to Roland Berger

& Partnering Groups shopper segments, I would consider myself a grab-and-go shopper, who enters Siwa to

buy a pizza and who invests a minimum amount of time to quickly satisfy his hunger.

Besides conducting shopper segmentation by asking the shoppers how they shop using different research tools

from internal sales data to questionnaire, it is also important that brand owners should observe and get to know

shoppers behavior and understand who their shoppers are, why they are in the supermarket and when they are

there (Hillesland et al., 2013). Behavior is the critical in-store factor. Also, it is widely recognized that it is more

reliable to observe what people do than to ask them what they do. Therefore, if behavioral data is available, it

will be more reliable and relevant as shopper behavior it is strictly a behavioral matter (Sorensen, 2009) and may

offer retailers to create a variety of shopping experiences addressing the distinctive needs of groups of shoppers.

I do agree that it would be easier for retailers to respond to a small number of large groups inside the store far

more intelligently and in more targeted way then they can do to a large number of smaller groups. However, in

defense of the segmentation schemes producing large number of groups, these may be effective outside the store,

where various advertising media may be targeted distinctly to more varied groups (Finne & Sivonen, 2009).

Consumer confusion

I have observed that consumer confusion is an increasingly vexing problem and calls for better marketing and

brand management in retailing (Hillesland et al., 2013). Consumers are swamped with immeasurable

information on more products sold through more channels and promoted in more ways than ever before. I believe

that it is important to discuss this topic because consumers are faced with this problem everyday in todays

marketplace, it causes dissatisfaction (Criticaleye, 2010) and make the shopping process more complicated

(Zentes et al., 2011).

Personally, I feel that many markets offer bewildering number of products, including many product-line

extensions that present only minor emotional or rational differentiations. In my opinion, companies with a

reputation for generating customer confusion will lead to lower levels of purchaser brand choice and frequency

of visits because confusion contributes to a negative mental state, which is uncomfortable and unpleasant for

consumers and leads to frustration, irritation, anxiety and even anger (Hillesland et al., 2013). In fact, it is realistic

to say that the greater the number of things to be considered, the more difficult the choice as a typical household

buys around 4-500 different products during the year (Criticaleye, 2010). There is no doubt that consumers have

a hard time trying to keep up with the product names, attributes, and advertising message as most brands have

become interchangeable and no longer offer differentiated products (Hillesland et al., 2013). A typical grocery

store might carry ten brands of ketchup in three different sizes while Costco will carry only one brand of SKU.

Costco is the sixth largest retailer in the US and the ninth largest in the world (Krafft & Mantrala, 2010). Another

example is the German discounter Lidl that has only 1600 SKUs in their stores. Moreover, some years ago,

IKEA reduced the number of SKUs in many of their warehouses from around 30,000 to 10,000. Their bestsellers

got more space and slow moving items were removed. The response from the consumers was more products as

the buyers saw the attractive products more often (Hillesland et al., 2013). What does the example tell us? It

shows the need for clarity and ease of shopping.

Based on my personal experiences, I believe that the shopping environment (the store layout, variety of products

on offer, arrangement of the merchandise, music, color, lighting, etc.), especially product relocation within a

store contributes to confusion, and may lead to frustration and aborted purchases. I feel that when retailers change

the positioning of product categories within the store during sales periods, it may cause consumers to spend more

time searching for the product they seek and temporarily make them indecisive and inactive. Another factor that

may contribute to consumer confusion is the store layout. At times it is nearly impossible for consumers to get

out of the stores without visiting the entire stores. Therefore, it is important that retailers must manage to

standardize their shop layouts because 80 percent of shoppers time is spent moving from place to place in the

store, not buying but searching for their products. When thinking about the small amount of products that a

family might buy during a year (4-500), it would be a good idea to place more of these items in the main street,

to shorten the shopping time and help shoppers find their core products faster (Sorensen 2009). On the other

hand, pricing can add to the stress and confusion especially when factoring in the relative benefits of loyalty

schemes, money-off, percentage off, three-for-two offers, etc. because of a distressing sense that there might be

an even better deal to be had by waiting (Criticaleye, 2010).

Based on my personal experiences, I feel that one of the ways to reduce consumer confusion is to train sales

people better. I feel that it is an important step towards reducing consumer confusion because at times, I myself

have become a confused shopper. I become inactive and even suspend the decision making process and try to

seek help from the sales people. Sales associates should be available to assist shoppers when and where

consumers need help. Solomon et al. (2010) also provide supporting claim by stating that the consumers

encounter with a salesperson is a complex and important process. Another strategy to reduce consumer confusion

would be to narrow down the set of alternatives. Retailers need to stock products that are highly valued and

remove unhelpful/duplicate products. It is better to offer enough choice to meet a range of needs, but not so

much as to confuse. Moreover, I believe that encouraging brand loyalty is the key factor to reduce consumer

confusion as it reflects habitual purchasing and requires less decision-making, information seeking and brand

evaluation. In other words, the greater the brand differentiation, the greater the loyalty and the easier it is to shop

in a confusing environment (Criticaleye, 2010).

Positioning for retail chains

The large variety of shopping centers and the expansion of product offerings by traditional stores have intensified

retailing competition. Retail positioning is therefore an important consideration (Pride & Ferrell, 2013).

However, most retail chains tend to focus most of their efforts on operations and very little on positioning. In

fact, the main issue for retail chains is that the positioning goes hand in hand with their operations. In fact, it is

important to understand what lies at its core because it can add attractive values to a retail chain (Mathur, 2010),

attract customers to the shops (Hillesland et al, 2013) and create a image of the retailer in the customers mind

relative to its competitors (Dahlen et al., 2010).

It can be argued that a general misconception about positioning of retail chains is that most marketing managers

believe that differentiation is the main element in a position. In fact, it is not. Firstly, it is important to understand

the subject; retail positioning is about identifying an unserved or underserved market segment and serving it

through a strategy that distinguishes the retailer from others in the minds of those customers (Pride & Ferrell,

2013). Secondly, marketing managers must find out how to deliver on what is most important in the category

rather than trying to be different. In my opinion, it is not about differentiation when doing positioning;

particularly looking for what is different in their brand compared to competitors and with a vague notion of their

customers. In fact, it is about what is the most important driver for customers when they choose in the category

(Hillesland et al, 2013) and the assessment of category needs has to be done from customer needs (Dahlen et al.,

2010). In other words, the starting point is evaluating customer requirements based on a full review of customer

store experience (Dahlen et al., 2010) and probing deep into the customers collective and individual mind

(Eduardo, 2013). In fact, differentiation for a retail chain is not a tool for growth. Differentiation is a goal that is

achieved when the chain really delivers best on most important drivers in the category (Hillesland et al, 2013).

Also, it is important to identify which drivers will make more people visit the shops more often in the retail chain

category by conducting research, particularly, a regression analysis or a conjoint analysis using mathematical

models (Hillesland et al, 2013). In addition, perceptual maps are used to profile the relationship against

competition, requirement of category and customer needs, and the value proposition of the retail brand benefits

(Dahlen et al., 2010). Supermarkets, for example, display a wide range f positioning strategies while in every

retail category there are a handful of drivers that are important for customers when making their choice, known

as retail mix - location, price, ambience, customer service, advertising, promotion etc. However, these drivers

will only be relevant to consumers when they offer them a functional or emotional benefit to provide high

proportions of useful shopping value. In other words, the customers life will have to become cheaper, easier or

more pleasant because of it (Floor, 2010). For example, if the driver is price, best price is what matters (Hillesland

et al, 2013). For example, Aldis positioning strategy, when it first entered the UK market, was the lower-priced

no frills sector which it succeeded in achieving. Aldi manages it positioning through tight control of product,

store format and price positioning (Brandes as stated in Dahlen et al., 2010).

Shoppers and the in-store atmosphere

In most marketing literature, decision making is assumed to be top-down. However, it can be argued that

consumer information processing is more bottom-up in nature because majority of the decision making occurs

in the store (Hoch & Deighton 1989) and the display of products exercises a strong influence on customer

behavior. In fact, in my opinion, to comprehend the strong effect different kinds of display could have on

customer purchases demands a better understanding of how consumers perceive stimuli in the store environment

known as atmospheric effects or in-store atmospherics (Hillesland et al, 2013). In-store atmospherics

influences how people feel about the products, which in turn affects the way they feel about the store.

Consequently, the products in the store will be evaluated differently on what type of atmosphere the retailer

creates (Schlosser as stated in Hillesland et al., 2013). Solomon et al. (2010) provide supporting claim by stating

that the store environment experts a major influence: shopping is like a stage performance, with the customer

involved either as a member of the audience or as an active participant. The quality of the performance is affected

by sales people or other customers, the image of a particular store and the feeling it imparts and the store fittings

and promotional materials which try to influence the shoppers decision.

On the other hand, a behavior where a customer is walking around the store, looking at the products, is an

example of a bottom-up process. In my opinion, it is a different kind of decision making than top down that is

largely influenced by bottom-up processes, relies on non-conscious processes during decision making, vision is

an input used in cognitive processes and cognitive processing. I believe that these factors further point to the

profound influence of in-store atmospherics on the decision making processes. It can be considered as one of the

most profitable (Hillesland et al, 2013) and a very strong tool in the hands of the retailer as in-store environment

arouses emotions in the customers and then these emotions affect their customer behavior (Pradhan, 2009).

Findlay (2002) suggests that the correct emotional combination of pleasantness and arousal created by store

atmosphere can stimulate shopping behavior within the store. On the other hand, I believe the more of a task-

oriented shopping trip it is, the less effective atmospherics will be. That is, the more of a shopping trip where the

customer is striving to keep 8-10 items in his or her mind, the more artificially administered stimuli will risk

disturbing that recollection process. However, in defense of in-store atmospherics, I believe that it is worth

repeating as a kind of package for the assortment in the store as they have a very strong effect on consumer

behavior (Hillesland et al., 2013).

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Prentice Hall

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2. Dahlen, M., Lange, F. & Smith, T. (2010). Marketing Communications. A Brand Narrative

Approach. John Wiley & Sons

Based on the literature review of Dahlen et al.s book titled Marketing Communications. A Brand Narrative

Approach, I came across different topics and have selected ones that I consider to be important and required

further discussion. As part of this assignment, I have started with a discussion on marketing communications

and have argued that the interactional and dialogue approaches to marketing communication are both justifiable

and compatible in todays marketplace as more and more companies are seeking to enter into a meaningful

http://research.cbs.dk/portal/en/persons/jesper-clement(b736652e-03a3-453d-969c-719c032e1ddb)/publications.htmlhttp://www.investinfinland.fi/articles/news/retail/lidl-increases-its-market-share-in-finland/51-1147%20/

dialogues with their customers, which enables more spontaneous and creative communication geared towards

solving business problems and to exploit business opportunities. I have then followed with a discussion on brand

narrative and focused on why it is important as a holistic approach to successful brand communications requires

a persuasive narrative. In addition, I have also discussed on how vital it is in todays marketplace for ongoing

brand narratives to be built and maintained in order to involve consumers and reinforce the brands story in all

brand encounters with numerous examples (eg. Green & Black, LEGO, Levi and Volvo). The third subject of

discussion is word-of-mouth which is essential for adoption of products and to achieve the life-time customer

value of repeat purchase, and have also discussed its greater impact and relevance from my personal viewpoint

and in todays digital era of Internet. Among many case studies that I read, I found it important to discuss

Destination Australia as it shows not only the effect of marketing communications on consumer behavior, but

also the effect on different cultures which undermined its success. It is relevant in todays marketing

communications context because if marketers fail to emphasize on the need to understand its target audience,

then it will affect the success of marketing communications and undermines the success of any marketing

campaign. The $180 million campaign was banned in many countries, did not generate any major increase in

visitor numbers; instead the number of tourists declined, criticized for not taking into account specific cultural

issues in target markets while developing a global marketing communication and finally withdrawn in February

2008. Another topic that I have chosen is integrated marketing communication (IMC) and have discussed its

significance in the twenty-first century, from both company and consumer perspective and the need for planning

in order to deliver a consistent message and how without IMC, a brands marketing communication becomes

less effective. Lastly, I have concluded with an argument that the goal for any relationship marketing must be to

retain existing customers rather than attracting new customers to keep the business headed in a successful

direction and the need for changing levels of brand communication and to invest in relationships with customers

to build and sustain brand longevity.

Significance of two-way dialogue in marketing communications

Marketing communications is concerned with engagement: the planned, integrated and controlled interactive

dialogues with key target audiences to help achieve mutually beneficial objectives (Dahlen et al., 2010).

However, in marketing, prominence was given to mastering the practice of one-way communications (Jenkinson

& Sain, 2003) which views the process as linear, similar to injecting its audience with information. It still has a

significant role, especially for audiences who prefer transactional exchanges (Fill, 2006). However, marketers

attempt to plan and craft persuasive messages that in many cases are not persuasive at all (Jenkinson & Sain,

2003). Dahlen et al. (2010) state that todays marketing communications has to be integrated, and must be able

to grow with the target audience; as well as reflect a two-way perspective which stresses on mutuality and shared

perspectives (Fill, 2006). In my opinion, ideas about how marking communication must work in todays world

must be founded on the notion and significance of the level of interaction that the organization and its stakeholder

audiences desire. However, it is also important to understand that two-way communication based on the

interaction with audiences who desire continuing contact or dialogue for those who desire a deeper, more

meaningful relationship (Fill, 2006), is at the heart of marketing communications (Dahlen et al., 2010). In fact,

being willing and able to enter into a dialogue indicates that there is a new emphasis on the relationships

organizations hold with their stakeholders (Fill, 2006).

It can be argued that the interactional and dialogue approaches to marketing communication are both justifiable

and compatible in todays marketplace (Fill, 2006). The reason why I keep this particular viewpoint is because

consumers correspond to the dialogue, which enables more spontaneous and creative communication geared

towards solving business problems and exploit business opportunities (Jenkinson & Sain, 2003). I believe that

such approaches help to inform, reassure and persuade consumers of the appropriateness of an organizations

product or service in matching their needs and wants. For example, GE extended its Ecoimaginaton ideal from

a linear television narrative to an interactive opportunity for customers to participate in the brand story and Nike

IDs Create your own shoe application provides a nonlinear online complement that allows consumers to Just

Do It. These examples further demonstrate how traditional linear, one-way, transmitted communication process

is being replaced by interactive, two-way, nonlinear dialogues (Dahlen et al., 2010).

It is an interactive process of learning together and that mutual understanding can take place even when the

parties agree to differ (Ballantyne, 2004). However, I believe that there must be a meaningful exchange of

information, because the organization needs to know that its messages are being received and interpreted in the

ways in which they were indented. It is not simply about sending messages out to the audiences but requires a

two-way process, a meaningful dialogue (McCabe, 2008). Personally, I feel that in todays marketplace new

technologies and new communication infrastructures give increasing numbers of people the opportunity to

experience both interactive and dialogue-based marketing communications. Moreover, I believe that it is more

important than ever for marketing practitioners to know when to move from one-way to two-way, to interactive

and dialogue based marketing communications (Fill, 2006). In summary, I consider that the importance of

understanding target audience requirements and the need to create long-term meaningful dialogue are the key to

successful marketing communications dialogues (Dahlen et al., 2010).

Brand Narratives

Every product has a name, a logo, unique packaging all material markers of the brand. In fact, they are the

shells of meaning which will speak to target audiences and carry the brand story. However, I have observed that

without a story, they are devoid of meaning and will only be informational and not transformational (Dahlen et

al., 2010). The most famous brands have markers: a name, for example, McDonalds and IBM; a logo the

Nike swoosh; a distinctive product design feature (the Harley engine sound) or any other design element which

is associated with the product. They have also filled them with meaning: the brands narrative. I believe that it

is important to discuss this topic because branding is about narratives, an ongoing connecting dialogue between

company and customer. It must be engaging, enjoyable experience; having a premise and a point; and be

memorable. People generally interpret the meaning of their experiences by fitting them into a story and remember

narratives (Dahlen et al., 2010). Stories translate information into emotion, and best stories stick to consumers

brain and their heart. I feel that applying storytelling principles to a brand development strategy simply makes

the journey more efficient and effective. For example, the brands with the strongest emotional connection with

their customers, for example, Apple, Jet Blue and Haley-Davidson, are masters at storytelling. They are good at

creating a story that the bulk of the storytelling responsibility is left to their cheer-leading customers (Conley &

Friedenwald-Fisherman, 2006). It is a co-creation, started by the company and ultimately joined and improvised

by the consumers and the brand communities (Mootee, 2013).

I believe that this is even more critical for challenger brands which enter mature markets and need to evoke a

brave new story through the visual identity of the brand against the competition (Denning, 2011). I agree that

tactical positioning is important for creating awareness, clarity and linking for the brand. In fact, a brand has to

capture all elements of tactical positioning name, logo, packaging, advertising, website and all other brand

encounters with target audience. However, all these elements need to be immersed in a narrative. Green & Black,

for example, started by a pioneering organic food company entered the mature market of chocolate category in

1991with a high quality, bittersweet dark chocolate bar packed with 70% organic cacao from Belize. It is now

the biggest organic chocolate brand in the UK and in the US. Green & Black achieved this by building a brand

narrative of ethical, organic quality differentiated by salience and emotion from traditional manufacturers

(Dahlen et al., 2010).

In my opinion, consumers are more interested in the brand narrative and that tactics like products and packaging

of products are dependent upon the long-term brand narrative because the most effective integrated marketing

communications are driven through a core brand narrative. In fact, all of the key elements of the marketing

communications strategy and process feed out from, and into, the brand narrative and for a holistic approach to

successful brand communications require a persuasive narrative (Dahlen et al., 2010). I believe that the brand

narrative, once communicated, becomes a promise that the company makes, and is therefore, the promise that

the company have to keep (Mootee, 2013). In my opinion, brand narratives in themselves are relatively easy to

dream up. However, the difficulty is turning that narrative into a reality by ensuring that the company actually

delivers on the implicit promise in the narrative (Belk, 2010). Wal-Mart, for example, faced the wrath of

consumer for its unconvincing storyline of investing in small local businesses as a big business bad practice

(Denning, 2011). LEGOs profit margin declined between 1994-2004 because of its inconsistent brand narrative,

lack of integrated marketing communications and over diversification with ventures into clothing, theme parks,

online gaming and movies that ultimately diluted the brand. Similarly, Levis brand is once again in decline

because of it outdated imagery, lack in promoting a lifestyle narrative and expansion beyond the core blue jean

lines as well as links with mobile phones and iPods (Dahlen et al., 2010). On the other hand, Green & Black

seem to have succeeded in keeping the brand promise. In addition, if IBM can turn itself into a company that

actually provides business solutions, rather than simply pushing boxes, it succeeded in the marketplace (Denning,

2011). If the company does not keep the brand promise, there will be gap between the desired perception of the

company and the actual perceptions (Mootee, 2013).

Lastly, I believe that it is now vital in todays marketplace for ongoing brand narratives to be built and maintained

in order to involve consumers and reinforce the brands story in all brand encounters (Denning, 2011). Volvo,

for example, owned the category for safety. The strength and actual metaphor safe cage soon became its

weakness because of conventional command and control approaches to communication which is

counterproductive, that resulted in a limited brand narrative. And so Volvo has now reconstructed a story built

on being fun, cool, ecologically sound and something to be shared with friends; all different stories but all

consistent with the overreaching brand narrative: Life is Better Lived Together. LEGO, on the other hand,

used online platform to engage users in online dialogues which are essentially user generated to deliver a

consistent content of the companys narrative. This approach allowed thousands of individual stories to be born

which make up the total LEGO brand narrative. The use of consistent content of the brand narrative to customers

and with integrated marketing communications programmes, the company has been successful in recreating the

LEGO legend. In my opinion, it is a suitable approach to build individual stories through communication and

content and to create engaging, ongoing brand narrative (Dahlen et al., 2010).

Word of Mouth

Word of mouth is a type of personal communication about a product. It reaches buyers through neighbors,

friends, family members and associates (Kotler & Armstrong, 2006) and is independent, unbiased, and lacking

in vested interest (Silverman, 2011). As a consumer, news and scandals about brands are at times topic of

conversation and generate much positive and negative word of mouth (Dahlen et al., 2010). Based on the

literature review, I have observed that there is a growing acknowledgement of the financial value of consumer-

to-consumer recommendations for a brand (Kirby & Marsden, 2005). However, given the importance of word

of mouth as a marketing tool and the ill effects of negative word of mouth, it can be argued that most companies

have not attempted to quantify its impact on sales (Goodman, 2009). In fact, little work has been done to compare

the financial value of positive recommendations to the financial value of negative recommendations. In my

opinion, these are important questions to consider because the marketplace is a mixture of brands having strong

advocates and many times equally strong detractors. In fact, I believe that the impact of word of mouth on

consumer responses is very often greater than planned communications because since it involves face-to-face

communication, it might have substantially greater impact on recipients (Zeithaml, 2012). Second, the source is

not seen as being from the company but from other customers (Dahlen et al., 2010). Third, word-of-mouth

communication can be more damaging since it is communicated to many others (Zeithaml, 2012).

Based on the literature review, my understanding is that opinion leaders or innovators are first to adopt brands

before helping to diffuse them throughout the rest of the market. In my opinion, these trendsetters can be used

in facilitating word of mouth communication about a new product or other innovation (Rogers, 1995). Apple

Computer, for example, has long relied on its consumer following to spread by word of mouth their satisfaction

with Apple products such as PowerBooks, iPods and iPhones (Pride & Ferrell, 2010). In fact, word of mouth is

particularly relevant to the introduction of new products or services where connected marketing can help ignite

conversations in target markets which result in positive word of mouth and ultimately add value to the brand.

For example, the importance of word of mouth marketing was demonstrated by a U.K trend watcher, Haymarket

Publishing Services, in its study in 2002 that shows the primary motivators for people to try a new product or a

new brand. The strength of advice from friends and families (60%) and seeing others using the brand (27%)

suggests that word of mouth can have a powerful influence on the decision of a customer to try and buy a new

product or brand (Hutchinson, 2005).

I believe that in todays world, brand organizations are beginning to understand the power that digital tools play

in opinion sharing. The Internet and other digital device have made the spreading of opinion as virulent as viral

communication can get and which is made available to multitude of people and institutions (Obbelode, 2013).

Word of mouth takes place in many ways: on Web-based opinion platforms, in forums, news groups, blogs etc.

In my opinion, the companies most effective with this kind of marketing are those who give their customers

reasons to talk about products to others, and then facilitate that communication. One good example comes from

Amazon.com, the worlds biggest internet retail store. Amazon encourages its customers to chat with one another

and to send in their own book reviews, which are published on Amazons website. Amazon also encourages its

customers to help each other figure out how to use companys products through word of mouth feedback (Xu &

Fulton, 2009).

I feel that it was important for me to partake in this particular topic discussion because individual purchases of

products and services are manifestations of strong, enduring and complex relationship (Dahlen et al., 2010) and

at times as a consumer I rely on others opinions, word of mouth and electronic word of mouth as well as inform

myself through forums and blogs to gain more information before making a purchase decision, particularly,

travel bookings. I peruse Internet based opinion forums, newsgroups and blogs to find word of mouth

information and to inquire about other participants experiences and level of satisfaction. Some of the reasons

why I keep this particular viewpoint are to reduce risk and to save search effort, however, keeping in mind the

credibility of the source of information. I believe that when stored in memory is not sufficient to make a purchase

with confidence, consumers utilize an external search which is frequently purchase specific and social acceptance

is a main purchase motivation (Dahlen et al., 2010). In fact, 90% of consumers trust other consumers and their

recommendations concerning buying advice (Pride & Ferrell, 2010). In addition, I share my travel experiences

through the internet on Web-based opinion platforms such as tripadvisor.com and bookings.com. All in all,

internet search engines are becoming information source of choice that offers a rich search experience. Moreover,

in reference to Dahlen et al. (2010), I believe that word of mouth marketing and its elements must be seen as a

catalyst for spreading the word, which is among the best central strategies that any company can use to draw

from the strength of the idea even in todays marketplace. Lastly, as the life-time customer value of repeat

purchase is vital to companies, the further spread of word of mouth is essential for the adoption of products

(Dahlen et al., 2010).

Analysis of Case Study: Destination Australia

The notion of place branding refers to the promotion of a nations economy, countries, cities and regions to try

to create and maintain strong brand positioning strategy. In 2006, Australian tourism had faced the unique

problem of interest shown in visiting the country not being translated into actual tourist inflows. Tourism

Australia commissioned Saatchi and Saatchi to promote Australia. The desired communication effects were to

promote the country as a rough and wild but friendly place for tourists. The advertisements in the So Where the

Bloody Hell are you? campaign featured a total of 11 scenes and 13 still images depicting a diverse range of

experiences on offer in Australia. The campaign acknowledged the impact of opinion leaders and influential

customers. Initial response was very positive, encouraging many additional tourists to visit the country.

However, the campaign became controversial from the start in some of the target markets (Dahlen et al., 2010).

What does the example tell us and why is it relevant in todays marketplace from a marketing communications

perspective?

The example shows not only the effect of marketing communications on consumer behavior, but also the effect

on different cultures which undermined its success. I believe that part of the problem with marketing

communications is the way marketing is communicated. In this case, Tourism Australia did not take into account

the impact that the campaign would have on other cultures. The reason why the example is relevant in todays

marketplace is because if marketers fail to emphasize on the need to understand its target audience, then it will

affect the success of marketing communication. I believe that it is vital for marketers to take into consideration

the differences between cultures that they want to appeal to into account (Gerber & Plessis, 2009). Personally, I

feel that the case study lacks a thorough understanding of the consumer and the environmental factors which

surround them, which is even more vital of marketing communications in an international context. I believe that

where we can reasonably expect to understand the important facets of consumer behavior in a domestic context,

it is far less likely to be the case in different and separate markets where culture, tradition and other factors may

result in vastly different meanings attached to the communication message. Therefore, in order to succeed, a

sound understanding of different cultures is required, particularly those of the target audience. If it is

underestimated, then the results can be devastating (Fill & Hughes, 2006).

Tourism Australia was criticized for not taking into account specific cultural issues in target markets while

developing a global marketing communication. The campaign attracted the rage of many visitor country

regulators because of the use of the swear words bloody and hell. UK banned it for the use of word bloody

while Canada banned it for the opening line in the advertisement of the campaign. Asian countries were

particularly distressed. Due to the alienation of different cultures, the $180 million campaign did not generate

any major increase in visitor numbers; instead the number of UK tourists fell by 2.3%, Japanese tourists by 5.7%

and the number of German tourists dropped by 4.7%. Tourism Australia withdrew the campaign in February

2008 (Dahlen et al., 2010). I believe that market research prior to launching the campaign in the global market,

would have played an important part in identifying areas of similarities in order to allow for the development of

a single consistent message, which is the objective in this case study (Fill & Hughes, 2006).

Integrated Marketing Communication

I believe that the transition from promoting to communicating with customers has changed marketing

communications from both an organizational and consumer perspective. In my opinion, getting close to the

customer is as self-evidently obvious as it is fundamentally important. If marketing communications is the

pathway through the customer, then any approach should start by looking at the customer (Dahlen et al., 2010).

This topic is of particular interest to me because in the twenty-first century, integrated marketing communication

(IMC) is even more important from both company and consumer perspective because when faced with an IMC

approach; the customer will understand the different information and will not be confused by the vast amount of

it from all contact points (Kitchen & Brugmann 2010), while companies adopt it to create synergy among

different marketing elements to achieve short and long term gains (Dahlen et al., 2010).

Based on the literature review, my understanding is that IMC is about planning in order to deliver a consistent

message. I believe that the focus must be on a rigorous planning process that will identify appropriate target

audiences, set specific communication objectives for these target audiences, develop marketing communication

that will accomplish those objectives in a consistent way, and find the best ways to deliver the message. In IMC,

one is setting communication objectives and selecting media to maximize their ability to effectively reach the

target audience. However, rather than considering various ways of using advertising or some form of promotion,

the planning and execution of all marketing communication should be integrated (Percy, 2011) but together they

must present one clear, coherent message (Dahlen et al., 2010). In fact, it can be argued that without IMC, a

brands marketing communication could actually be significantly less effective because the lack of coordinated

communications planning and the delivery of a consistent message, could lead to multiple portrayals of a brand

in the market. If there is lack of a consistent look and feel to all of a brands marketing communication there will

be no synergy (Percy, 2011). For example, LEGOs profit margin declined between 1994-2004 because of its

inconsistent brand narrative, lack of integrated marketing communications and over diversification with ventures

into clothing, theme parks, online gaming and movies that ultimately diluted the brand (Dahlen et al., 2010).

In my opinion, with a consistent look and feel, the overall impact of the campaign is much greater than the sum

of its parts because the processing of each piece of marketing communication is facilitated by the prior processing

of other messages in the campaign (Percy, 2011). The most successful communications are those in which the

consumer receives one message from various sources (Dahlen et al., 2010). I believe that a promotion that

contains the same general look and feel as the brands advertising, which is carried over with the packaging and

reflected in in-store merchandising, means that prior exposure to any of these pieces of marketing

communication will aid in the processing of the others. On contrary, if each of these pieces has its own unique

look, there will be no prior learning or foundation available when a consumer sees it (Percy, 2011). In fact, it

may lead to an incoherent brand image, which can negatively influence consumer behavior and recall behavior

(Kitchen & Brugmann 2010) given the short attention time and instant gratification of consumers today (Dahlen

et al., 2010).

From adoption point of view, IMC requires fundamental changes to the way that marketing communications

have traditionally been practiced (Chitty et al., 2011). However, technology has made integration possible and

IMC programs have already been adopted by various organizations, such as FedEx and Dell (Kitchen &

Brugmann 2010) while some argue about its wide adoption by companies (Percy, 2011; Ang, 2013). Based on

the literature review, one of the major barriers is the structure or organizational make-up of a company or agency.

At its core is the organizations inability to manage the interrelationships of information and material among the

various agencies and vendors involved in supplying marketing communication services (Percy, 2011). Lastly, I

believe that successful implementation of IMC theory needs enterprise to adjust its organization structure (Shin,

2013). LEGO, for example, was able to rebuild the companys brand narrative that literally means play well

through organizational restructuring and alterations to the supply chain, and particularly through the application

of integrated marketing communications after making losses in four out of the seven years between 1998-2004

and losing $250, 000 a day (Dahlen et al., 2010).

Relationship Marketing

I have observed that the narrow concept of relationship marketing has its roots in a business-to-business

orientation and often describes an expansion of personal selling, account management and the management of

the marketing/customer interface. Morgan and Hunt (as stated in Dahlen et al., 2010) offered a broader

perspective by defining it as all marketing activities directed towards establishing, developing and maintaining

relational exchanges. It is a strategic approach that aims at making consumers feel sense of relationship or

personal connection with the brand. Tesco differentiated itself from Sainsbury and other discounting grocery

stores by building a relationship brand rather than competing through an everyday low pricing attack in 1990s.

Tesco targeted young mothers and toddlers, an underperforming sub-segment of consumers to experience the

brand in a more individualized way by offering advice on pregnancy planning, immunization and dietary

considerations. This allowed young mothers to experience the Tesco brand as all customers do (Dahlen et al.,

2010). What does the example tell us? In my opinion, Tesco has tried to create tight relations with sub-segments

of customers, through relationship strategy i.e. by gathering information and using it intelligently to provide soft,

personalized and customized advantages (Pelsmacker et al., 2010).

Harley-Davidson, for example, created the Harley Owners Club which has about 200, 000 members worldwide.

Besides motorbikes, Harley-Davidson also offers an insurance programme, a travel agency, an emergency

roadside service, two magazines, member competitions and 750 local chapters. Nestle regularly sends

information to young mothers. It employs qualified dieticians to operate its customer lines and runs a chain of

baby cafes to cater for families away from home (Pelsmacker et al. 2010). The examples show the importance

of relationship marketing in building long-term and mutually beneficial customer relationships by creating and

maintaining relationships of value (Dahlen et al., 2010). However, it can be argued that the goal for any

relationship marketing must be to retain existing customers rather than attracting new customers to keep the

business headed in a successful direction. Marketers still tend to spend and exert more effort on gaining new

customers rather than on keeping current customers satisfied and loyal. In fact, the part of marketing budgets

assigned to promotional activities aimed at attracting new customers is five times greater than the budget spent

on current customers. In my opinion, the efforts involved in attracting new customers are much higher than those

required to keep the current customers loyal. On the other hand, some claim that companies can realize profit

increases of 35-85% just by decreasing customer loss of 5%. Moreover, the profit per customer will also increase

the longer a customer stays with the company (Pelsmacker et al. 2010). Therefore, it is important to discuss this

topic further as there is a need for changing levels of brand communication and to invest in relationships with

customers to build and sustain brand longevity (Dahlen et al., 2010). In fact, an equal amount of attention and

resources should be devoted to keeping the customer base that already exists because many firms make the

mistake of focusing on new customers at the expense of existing customers. From a broader perspective, my

understanding is that marketers must view relationship marketing as a process in which customers are developed

and satisfaction and loyalty are increased over time, thereby deepening the relationship (Reid & Bojanic, 2009).

I have observed that relationship marketing benefits both, the firm and the customer as it has been demonstrated

in a number of studies that profit increases when customer loyalty increases while customer can obtain social

benefits from these relationships (Bejou & Palmer, 2006). However, communications will only achieve customer

complicity if the organization/customer relationship is a meaningful part of the consumers life (Dahlen et al.,

2010) and results in trust, mutual respect and commitment to continue the relationship rather than a hard sell

selling tactic or a single event which are not connected with each other (Ma & Ta, 2013).

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Mootee, I. (2013). 60-Minute Brand Strategist: The Essential Brand Book for Marketing Professionals. Wiley

Obbelode, N. (2013). Analyzing Word of Mouth in the Web 2.0 for Product Related Marketing Research.

GRIN Verlag

Pelsmacker, P.D., Geuens, M. & Bergh, J.V.D. (2010). Marketing Communications: A European Perspective.

Financial Times Management

Percy, L. (2011). Strategic Integrated Marketing Communications. Routledge

Pride, W.M. (2010). Marketing. Cengage Leaning

Reid, R.D. & Bojanic, D.C. (2009). Hospitality Marketing Management. Wiley

Rogers, E.M. (1995). Diffusion of Innovations. Free Press

Shin, K.Y. (2013). The Executor of Integrated Marketing Communications Strategy: Marcom Manager's

Working Model. Springer

Silverman, G. (2011). The Secrets of Word-of-Mouth Marketing: How to Trigger Exponential Sales Through

Runaway Word of Mouth. AMACOM

Xu, P. & Fulton, J.R. (2009). The Effectiveness of Facilitated Business-to-Business Word-of Mouth Marketing

Strategies on Target Participants Information Sharing Behavior. International Food and Agribusiness

Management Review

Zeithaml, V.A. (2012). Review of Marketing. Marketing Classics Press

http://econpapers.repec.org/article/agsifaamr/http://econpapers.repec.org/article/agsifaamr/

3. Tidd, J. (2010). Gaining Momentum. Managing the Diffusion of Innovations. Imperial College Press

This assignment in based on the literature review of one of the chapters in the book Gaining Momentum.

Managing the Diffusion of Innovations. The chapter is titled Understanding Consumer Response to Innovations

by Qing Wang. The authors (Wang) view of innovation begins with the assumption that it is costly to develop

and, many have failed on their promises. Secondly, numerous studies have been carried out to explore the success

or failure factors for innovation, relatively few studies have explored factors influencing the process of new

product adoption. Wang (2010) has sought to examine consumer responses to innovations. I believe that it is

important to discuss this topic further as it is under researched in the area of innovation management.

Wangs (2010) view of why consumers respond to new technologies/products differently is restricted to

consumer related characteristics and innovation related characteristics. From a broader perspective, I believe that

it is important to include all the four major factors, for a better understanding of the factors that influence the

process of new product adoption. These factors are innovation, consumer, firm and environment related

characteristics. Based on the literature review, I believe that innovation related characteristics include relative

advantage, relative cost price, perceived usefulness, ease of use, and network externality (Shane, 2009). Wang

(2010) states that a number of consumer related characteristics are found to be critical to for new product

adoption, such as consumer innovativeness and lifestyle. Consumer innovativeness is measured by the

behavioral profiles of different adopters such as socioeconomic status, personality variables, and communication

behavior. However, it can also be argued that consumer innovativeness also leads to over adoption, for example,

the status-conferring aspect of a consumer innovation may be so important to an individual that adoption occurs,

even though other perceptions of the new idea would lead one to expect that the innovation might be rejected

(Rogers, 1995). Others consumer related characteristics include class, risk deposition, geodemographics,

economic value need, and word of mouth behavior. The firm related characteristics comprise firm size, firm

marketing efforts, and firm reputation. The environment related characteristics that drive new product trials and

repeated purchases include infrastructure, availability and demand for related products, and market conditions.

Moreover, Rogers (2003) proposes that relative advantage and relative price determine the success of an

innovation.

In relation to the above argument for the need to include firm and environment related characteristics for a

holistic understanding of the topic, I believe that firm characteristics, size and reputation of the firm introducing

a new product influences its adoption because potential adopters are likely to try a new product from a reputed

firm and may respond to the same innovation differently. In addition, firms marketing mix efforts such as

advertising; sales force and distribution significantly influence both trial and repeat purchase for a new product.

On the other hand, environmental factors also contribute toward the purchases of a new product. Presence of

right technological and economic infrastructures is important for the adoption of innovations. The availability

and demand for related products such as complements and accessories also determine the rate and level of

adoption of a new product. The market conditions at that time of new product introduction also influence first

and repeat purchases. In addition, competitors actions to the introduction of the new product innovation are also

likely to affect a new products purchases (Shane, 2009).

Besides the four characteristics described above, I believe that the probability of individuals adoption and

subsequent diffusion of an innovation throughout a social system depends not only on perceived newness and

the degree of behavioral change required, but also on certain innovation attributes influencing adoption (Lantos,

2010). In other words it is also important to understand the perceived uniqueness of the new idea, process or

technology. The Innovation Profile, an instrument that calculates potential adopters perceptions about an

innovation, is a promising predictive tool based on a prior evaluation of attributes to explore the factors

influencing the process of new product adoption. Reliability, applicability and effectiveness are central to

innovation adoption process. I believe that focusing on innovation attributes may provide managers with realistic

Innovation Profile that they can use to develop specific, tailored strategies to ensure the successful

implementation of particular innovations (Dearing & Meyer, 1994).

Another important aspect that Wang (2010) fails to address in the discussion is the need to collaborate with

employees and consumers in the whole process for better adoption of the new innovations. I feel that managers

need to assess organizational members perceptions of innovation attributes and employ this information as a

diagnostic tool to evaluate the fit of an innovation within the organization, to anticipate problems arising as a

result of innovation, and to modify innovations to reflect the changes that stakeholders deem necessary (Johnson,

2005). It is closely related to open innovation where different stakeholders participate in the new product

development process. In fact, product development done in an open manner leads to a broader set of adoption

opportunities for consumers while knowledge sharing and collaboration can allow organization to acquire

necessary knowledge and capabilities more efficiently than in-house development (Bidgoli, 2010). I feel that an

important aspect of open innovation is the direct involvement of consumers in the new product development

process. In my opinion, such an approach will help both the company and consumer to grasp how innovation is

perceived (new technology, new attributes, new benefits etc.) as firms evaluation of product newness may not

reflect consumers perception of innovation (Aledda, 2013). In fact; perceived newness of a product can

negatively affect consumers adoption intention of the product (Wang, 2010). On the other hand, the continuing

growth of digital environment cannot be neglected as it offers opportunities and challenges about how to model

adoption behavior and the diffusion process for new products and technologies. The digital environment can

alter the quality and quantity of information that potential adopters use in deciding whether and when to adopt

an innovation facilitating both word of mouth and marketer controlled communications (Mahajan et al., 2010).

Also, my understanding is that the categorization of consumers along their technology adoption also provides a

unique approach to segmenting the market as different adoption categories need different marketing strategies

(Bidgoli, 2010).

According to Rogers (2003), only about 0.2% of studies within the diffusion-of-innovation paradigm have been

devoted to consumer behavior after the technology has been acquired. This calls for the need to address this

critical gap, and investigate the drivers and the consequences of new product usage (Tidd, 2010). In my opinion,

information on post adoption consumer behavior would yield important marketing insights to provide alternative

strategies that are unique to specific consumer groups. The prospects for an innovations success can be greatly

enhanced by researching how different consumer group form and evolve in reaction to the innovation. In fact,

the development and launch of future innovations can be improved by understanding the development of post

launch behavior groupings. In addition, individual behavioral segmentation can also lead to isolating important

variables of segment differences (Bidgoli, 2010).

References

Aledda, R. (2013). Key Success Factors of New Products / Product Innovations. GRIN Verlag

Bidgoli, H. (2010). The Handbook of Technology Management: Supply Chain Management, Marketing and

Advertising, and Global Management v. 2. John Wiley & Sons

Dearing, J.W. & Meyer, G. (1994). An Exploratory Tool for Predicting Adoption Decisions. Science

Communication

Johnson, D. (2005). Innovation and Knowledge Management. Edward Elgar Pub

Lantos, G.P. (2010). Consumer Behavior in Action: Real-Life Applications for Marketing Managers. M.E.

Sharpe

Mahajan, J., Muller, E. & Wind, Y. (2010). New-Product Diffusion Models. Springer

Rogers, E.M. (1995). Diffusion of Innovations. Free Press

Rogers, E.M. (2003). Diffusion of Innovations, Fourth Edition. Free Press

Shane, S. (2009). The Handbook of Technology and Innovation Management. Wiley-Blackwell

Tidd, J. (2010). Gaining Momentum. Managing the Diffusion of Innovations. Imperial College Press

3. Tidd, J. (2010). Gaining Momentum. Managing the Diffusion of Innovations. Imperial College Press

This assignment in based on the literature review of one of the chapters in the book Gaining Momentum.

Managing the Diffusion of Innovations. The chapter is titled Diffusion of Pharmaceutical Innovations in Health

Systems by Rifat A. Atun, Ipek Gurol-Uranci and Desmond Sheridan. The authors view on diffusion of

pharmaceutical innovations in health systems begins with the need to understand the importance of innovations

to sustained improvements in health, the factors which encourage or hinder innovation and adoption of more

holistic approach to policy making and regulation. Atun et al. (2010) argue that the diffusion of innovative

medicines has not been adequately explored, and do not take a holistic view of innovation and health delivery.

In my opinion, it is important to di