Volume 5 issue 1 (5) NOVEMBER 2014

Volume 5 issue 1 (5) NOVEMBER 2014

Editorial Team PUBLISHER: International Institute of Marketing Professionals

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WRITERS: Dr. Anne-Flore Maman Larraufie (PhD) Victorija Gromova Dr. Alexandra Vignolles Dr. Tamer A. Awad Dina Ashraf El-Shihy Dr. Riteshkumar Dalwadi Wail Alhakimi Aayed Qasem Dr. Rehman Gul Gilal Rukhsana Gul Gilal Faheem Gul Alfred Riachi EDITORIAL REVIEW BOARD: Dr. Aftab Alam, PhD (Business Administration) Dr. Alfred Riachi, PhD (Strategic Marketing) Dr. Alvin Chan, DBA, MBA, PGDE Dr. Bashir Ahmed Bhuiyan, PhD (Marketing) Dr. Bikramjit Rishi, MBA, PhD (Management) Dr. Claudia Cacia, PhD (Marketing & Communication) Dr. Devinder Pal Singh, PhD Dr. Gurmeet Singh, PhD (Marketing) Dr. M. Tariq Intezar, PhD Dr. Pierre McDonagh, MBA, PhD (Marketing) Dr. Rany Ibrahim, MBA, F.CIM, Ph.D (s) Dr. Sanjaya Singh Gaur, PhD (Management) Dr. Slavica Cicvaric Kostic, PhD (Marketing & Public Relations) Dr. Sofia Daskou, PhD (Marketing) Dr. Vandana Tandon, PhD (Services Marketing) Dr. Veena Tewari Nandi, PhD, MBA (International Marketing) Dr. Wu Zhiyan, PhD (Marketing & Consumer Research) Dr. Dhiraj Sharma, PhD (Marketing) Prof. Dr. Christopher Preece, FCIOB, MCIM, FHEA, PhD (Construction Marketing) Prof. Dr. Devashish Bose, PhD (Marketing) Prof. Dr. Elena Cedrola, PhD (Marketing Research) Prof. Dr. Jane Peihsun Wu, PhD (Marketing) Prof. Dr. JD Singh, PhD (Marketing) Prof. Dr. Naushadul Haque Mullick, PhD (Marketing) Prof. Dr. Pacha Malyadri, M.Com., PhD, PGDCA Prof. Dr. Peter Yannopoulos, PhD (Marketing) Prof. Dr. V.V Gopal, PhD (Retail Management) Prof. dr. Virgilijus Sakalauskas Prof. Kunal Gaurav, MBA, PhD (Marketing) Candidate Prof. Ashish Bhalla, MBA (Finance & Marketing) Djordje Teofilovic Djordje, MBA, PhD (Marketing) Candidate Jacqueline Humphries, MBA (Marketing) Marija Jovic, MSc, PhD (Marketing) Candidate Richard K. Achu BSc.(Hons), MBA, DipM, ACIM Zahid Ali, MBA (Marketing), M.Phil MANAGEMENT TEAM: Zahid Ali, MBA (Marketing), M.Phil - VP Publications Marija Jovic, MSc, PhD (Marketing) Candidate - Editorial Director Sumardy Coffin, MBA - Graphic Art & Design Director Burak Eker, BS - Editorial Manager Cagdas Kanar, BS - Editorial Manager Dimitar Stoyanov, BA (International Business) - Editorial Manager Richard K. Achu, MBA, ACIM - Editorial Manager

International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

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Table of Contents Editorial

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Group Buying Websites as a Communication Tool – The Case of Latvian Small and Medium Businesses

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Dr. Anne-Flore Maman Larraufie (PhD), Victorija Gromova, Dr. Alexandra Vignolles

Assessing the Effect of Consumers’ Attitudes toward PushNotifications and Shopping Intentions

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Customer Preference of Organized versus Traditional Retail Stores in India: A Comparative Analysis

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An Analysis of the Use of Marketing Strategies by Private Universities in Less Developed World: the Case of Yemen

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Determinants of Role Stress in Commercial Banks: Evidence from Pakistan

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The Six Dimensions Model of Competitor Advantage (The Six D’s)

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Dr. Tamer A. Awad, Dina Ashraf El-Shihy

Dr. Riteshkumar Dalwadi

Wail Alhakimi, Aayed Qasem

Dr. Rehman Gul Gilal, Rukhsana Gul, Gilal Faheem Gul

Alfred Riachi


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Editorial

Dear colleagues,

The fifth issue of the International Journal of Marketing Principles and Practices (IJMPP) highlights the diversity of marketing across countries, cultures, markets and institutions. The authors bring to your attention broad scope of marketing targets, models and efforts depending on local conditions, technological development and cross-border integration. One of the goals of the current issue is to provide broad picture of challenges which marketers meet in different business settings, and to urge for continuous enhancement of marketing knowledge leading to efficient strategies and decision making. The articles cover new marketing models shaped by internet and mobile business, analyse behaviour of customers in transition economies, provide characteristics of marketing in the formal institutions, and attain higher conceptual level of strategic development. The first article is presented by the international team of authors Dr. Anne-Flore Maman Larraufie (PhD), Victorija Gromova, and Dr. Alexandra Vignolles. The article analyses transformation of group buying from specific large business model to the marketing tool of small and medium enterprises. The article provides analysis of group buying characteristics and introduces original interpretation based on empirical research in the emerging online market of Latvia. The research builds insights for implementing marketing efforts in the area of group buying not only in Latvia but in similar countries which have recently joined EU and integrated to its technological and business networks. The second article authored by Tamer A.Awad and Dina Ashraf El-Shihy presents transformation of push-marketing models to the new advertising medium of push notifications applied in mobile communication based marketing. The authors summarize the results of survey conducted among users of mobile services in Egypt for exploring the customers’ attitude to the push notification tools and their effect to the future shopping behaviour. The research implies to expanding usage of the push notification model due to its positive effect to the behaviour characteristics of perceived usefulness and ease of use. The third article, presented by prof. Riteshkumar Dalwadi, carries big contrast to the technology-based marketing issues, as it analyses the preference parameters of customers for shopping at newly established organized retail stores rather than in traditional stores of India. The findings of the exploratory research performed in four majors cities of Gujarat state provide valuable information for further expansion of retail store network in India. The research enables to clearly differentiate among the customer preferences characterizing convenience of visiting the retail store and the type of goods intended to buy. The fourth article by dr. Wail Alhakimi and Aayed Qasem deals with the characteristics of marketing in institutional settings. The article analyses marketing strategies fulfilled by private universities in less developed world, namely in the case of Yemen. The research results showed that level of utilization and effectiveness of marketing strategies in private universities of Yemen has not yet reached its full potential, especially in the area of market segmentation, which was not utilized and even not perceived to be very effective in recruiting students. However the survey showed increasing interest and effectiveness of implementing marketing strategies, and enabled to provide recommendations for the case of educational market in Yemen. The fifth article prepared by Assoc.prof. Dr. Rehman Gul Gilal (Pakistan) and Phd candidate Rukhsana Gul (China) investigates patterns of working environment of commercial banking, which has recently become one of the most crucial service sectors in Pakistan. The research results show that the impact of working environment shaped by policies and procedures imposed by regularity authorities have extremely big impact to increasing stress level of employees, especially those having direct interaction with customer and dedicated to fulfilment of their requirements. The sixth article suggested by Alfred Riashy builds on the theoretical foundations of marketing area by providing conceptual framework of six dimensions for competitive strategy, or the Six D’s. The theoretical model and illustrative examples provided by the author brings original insights to the discipline and encourages discussion among the researchers of highly diverse and challenging marketing field. Our greatest respect and gratitude is addressed to the authors of the articles and to the team of reviewers who devoted their efforts and generous advice to the researchers.

Assoc.prof. Dr. Dalia Kriksciuniene Editor-in-Chief of IJMPP


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Group Buying Websites as a Communication Tool – The Case of Latvian Small and Medium Businesses Dr. Anne-Flore Maman Larraufie (PhD) SémioConsult & ESSEC Business School e-mail: [email protected] Victorija Gromova Google & ESSEC Business School Dr. Alexandra Vignolles INSEEC Business School

Abstract This paper deals with a booming online phenomenon: group buying websites (GBWs). While their long-term sustainability along with the motivations for consumers to use them for acquiring products have been explored, the present research tries to unfold the interest for small and medium businesses (SMBs) to rely upon it, as a marketing tool. Taking the case of a developing country, Latvia, we show that GBWs are perceived as an efficient marketing communication channel, to be fully integrated in an IMC campaign. How SMBs react to them and plan to capitalize on them are key addressed issues in this paper, which ends with practical managerial recommendations and future research directions.

Keywords:

Group Buying Websites, Small and Medium Businesses (SMBs), Case Study, IMC, Emerging Economies


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1. Introduction Group buying websites are a new consumption trend of mature markets. The most well-known is Groupon, a US-based deal-of –the-day website featuring discounted gift certificates usable at local or national companies. Launched in Chicago in 2008, it is nowadays making billions of dollars each year, has over 50 million subscribers in 300 different markets, and hundreds of copycat rivals all around the globe. It is said to be worth as much as $25 billion (Salmon 2005). The popularity of these daily-deals websites (also known as group or collective buying websites, hereafter labelled GBW) has skyrocketed: only from 2009 to 2011, the searches on Google for daily-deals have increased by 448% (Neil 2011). But, while consumer’s interest in such websites is clearly understandable, as part of their daily run for bargains and hot deals, the reasons why businesses, especially small ones, may be willing to get involved are not that clear. Interestingly, no other marketing channel has received as much attention in recent months as GBWs: prior academic studies have observed consumer’s experiences with daily deal promotions and their perceptions (Dholakia 2011; Dholakia and Kimes 2011; Dholakia and Tsabar 2011). However, very little research has been conducted on small local businesses, with the exception of Dholakia (2011). There is thus lack of evidence regarding how small merchants go about cooperating with group buying websites, what they are struggling for and how effective at the end this marketing channel is for them. More interrogations are then raised when exporting the Groupon business model from the United States to a small-economy country, such as Latvia: would the needs and expectations of Latvian merchants be in line with their American counterparts? The group buying industry in Latvia is still relatively new and somewhat unexplored, paving the way for numerous research questions and issues. The present case aims at filling this gap in both academic and managerial literatures. Its double-


objective is to grasp Latvian small and medium businesses’ motivations for using/re-using GBWs, as well as to understand their expectations from doing it. It has a rather discovery perspective and is thus exploratory by nature, given the scarce literature on the topic, while paving the way for future more confirmatory research. Consequently, this case study intends to interpret the evolution of GBWs in Latvia, and in particular to explore how small and medium local businesses (SMBs) in the country perceive them as marketing tools. The definition of what a SMB is varies country by country. The present research uses the European Commission’s definition of 2011, which states that medium size enterprises employ up around 50 to 249 employees and generate the annual turnover of less than or equal to 50 million, while small businesses, employ up to 10 to 49 employees, with the annual revenue not exceeding 10 million. Furthermore, micro businesses employ only 1 to 9 employees and generate the turnover of less than 2 million per year. To achieve its objective, the study follows a threestep process: after an introduction exposing the basic principles of the group-buying business model and its ecosystem, a review of the group-buying industry in Latvia will be offered. Then, results from on-site observations, interviews and questionnaires with Latvian businesses using group-buying websites will be presented. The case study ends with the analysis of the impacts of such websites on SMB’s communication strategies.

2. Group-buying Business Model & Ecosystem Online group-buying auctions were introduced during mid-1990s to the end of 1990s (Kauffman and Wang 2001). They were primarily originated and concentrated in the United States: Mobshop.com and Mercata.com, two early adopters, were considered as

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successful leaders at that time, even if they failed to attract the average US consumer. The concept was born, and the recurrence of the idea of collective buying was scheduled to boom in the late 2008s. This is the time when Groupon was launched, with future exponential growth: from 2009 to 2011, the site has grown to cover more than 300 markets in 35 countries (Neil 2011). Today, the website employs more than 4,000 people, uses a database of more than 50 million global subscribers who are e-mailed with its offers on a daily basis. Network effects are highly important for GBW: the more subscribers sign up, the more targeted the group’s deals can be (Salmon 2005). Figure 1 explains the basic functioning principles of GBWs, involving three types of actors: GBWs themselves, SMBs (Small and Medium Businesses) and consumers. The process starts with consumers and SMBs signing up with a GBW. Consumers motivation is to find a cheap product or service on the daily-deal website (Dholakia and Kimes 2011). SMBs’ goal is to advertise its products or services, to increase awareness and entice more customers to try out them. However, in order to display their offer on the website, GBWs impose a heavy discount (50-90%) on the product or service. By requesting a significant price reduction, GBWs ensure a large share of pageviews of their audience. In addition to price reduction, daily-deals websites also “charge” SMBs with a commission fee, increasing the discount rate, up to 30% of the product value (Dholakia and Tsabar 2011). This is for the service of processing and displaying the deal on their websites. SMBs do not make any upfront payments to GBWs. Instead, the necessary reductions are made from the advertised product value. In other words, SMBs are entitled to receive only around 25% to 40% of the actual value of the product being displayed. When the terms and conditions between the GBW and SMBs are agreed, the deal is featured on the daily-deals website, reaching a significant Internet users base. Consumers are offered with coupons they can later exchange for the advertised product or service, by showing up in the premises of the product or service provider. Ideally,


the promotion has a display time limit (for example, Groupon offers one deal per day) and is valid only if a certain minimum number of consumers purchase the coupon. When acquisition of the coupon is made, the GBW collects the money from consumers and if the minimum threshold of coupons has been reached, it pays out the share of money to SMBs. Consumers are later entitled to redeem the purchased coupons with the SMBs within a preset time period.

Figure 1: The schematic plan of a GBW

Although SMBs do not make a lot of profit via GBWs, they still get some benefit: guarantee of a certain revenue and large audience exposure (Neil 2011), possibility to drop excess of stock due to lower spending in economic recession times (Reibstein 2011), and potential effectiveness of GBWs’ vouchers as advertising tools (Edelman et al. 2011): by featuring the deal on collective buying websites, local businesses hope that it would improve their brand awareness among competitors and customers. Besides, they do not pay for distributing the coupons (traditional couponing model), but get back some money while being able to advertise (Salmon 2005). Although setting up a GBW might not require significant resources (such businesses are pureplayers), it does request some talent to be able to scale the business in various cities or countries (Moran 2011a; Moran 2011b). Figure 2 displays what it might cost to go outside of the original location. Basically, it implies that increased deal volumes require more ad personalization. This increase in revenue would allow

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targeting more cities. However, to be able to scale outside of one’s own city of origin, more sales staff and subscribers are needed.

in line with the birth of the group-buying idea back in 2008, and with the wave of the financial crisis (Moore 2011). Moran (2011) believes that the profitability of the GBW model has reached its terminating point. He claims that, for instance, in mature markets, group buying giants are making less cash per subscriber, as well as less per supplier compared to what they used to earn before.

Figure 2: Cycle of Daily Deals Source: (Moran 2011a)

Limits & Critics to the Model Offering coupons is not profitable for all types of businesses, with daily deals being more profitable for SMBs launching a new product or service, still relatively unknown. Service providers would be the best-suited businesses for this industry (Dholakia 2010), with for example 53% of beauty and healthcare providers earning profit, vs. only 43% of bars and restaurants. The sustainability and fairness of the GBWs model are questioned by a number of experts: Salmon (2005) believes that the group buying industry discourages long-term profitability and is to a certain degree unfair, since respectable American businesses suffer from misallocation of national resources that go to “mediocre venues” which collaborate with daily deals. Dholakia (2011) found that daily deals are seen as disturbing and expensive for many small- and medium-sized businesses. When discounts offered to consumers and commission fees are taken into account, the supplier is usually left with insufficient resources to cover the costs. Reibstein (2011) states that the GBWs model performs and is better applied in recession economies, which is International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

However, the literature is too scarce to tell us if these assumptions made are right or wrong. They might hold in the case of Latvia, as presented later on. Another limit to the model, as far as SMBs are concerned, is related to their lack of understanding about how to take advantage of social media marketing tools and how to communicate effectively to a broad audience. This is part of the most typical problems that such businesses face, in sales and marketing areas (Gilmore 1971). Quite often, due to limited cash flows and resources to allocate to marketing activities, most of them do not hold a real marketing plan and would think twice before spending in advertising, as this does not bring immediate ROI. SMBs usually rely upon informal marketing strategies, reactive to market needs and based on personal contacts (networking) and on the owner’s vision.

A Glance at Consumers Reibstein (2011) conducted a series of surveys with GBWs’ consumers. He found that they tend to be young, well-educated and in most cases white-collar workers. Those most interested in GBWs are ‘dealprone consumers’, usually price-sensitive and barely ever loyal. Another motivation for using GBWs which has been identified is the opportunity to tryout new products and services (Dholakia and Kimes 2011). However, such consumption would not be the most representative of the market, be it in terms of revenues or volumes. Converting ‘deal-prone’

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consumers into repeat ones is very difficult for SMBs, which also have to cope with unusual workload at a given moment (influx of consumers). Having in mind all these facts and data, the objective of the present research is to investigate whether GBWs are perceived the same way by SMBs in Latvia, an emergent economy. Particular attention will be paid at the issues faced by such businesses in terms of marketing strategies and at how and why GBWs might play a role to face such issues, if relevant.

order to refocus the next days’ observations (evolving observation grid). Simultaneously, a questionnaire (in Latvian) was dispatched to 400 SMBs which had already used GBWs in the past. Some of them still used it while others had done it only on an ad hoc basis. 93 answers were received, all in a complete and manageable format. The results would be analysed in terms of basic statistics. More details are given on sampling procedures and companies’ profiles later on.

3. Methodology

4. Results

The case study methodology was selected to conduct this exploratory research. It should help uncover hard facts and unexpressed features via a combination of data collection methods, for triangulation purposes. Instead of trying to confirm hypotheses, the current research is exploratory by nature, hence the use of a mix of qualitative and quantitative methods.

This section is organised in three parts: first of all the most important findings from secondary research will be exposed, in order to better grasp the business picture in Latvia, and its specificities. Then, main findings from the on-site observations will be presented, in a narrative style. Lastly, statistics resulting from the survey analysis will be exposed.

In the first phase of the research, information was gathered on GBWs and SMBs in Latvia, thanks to secondary sources. Data was collected reading academic papers, professional publications such as magazines or reports, official publications and on various websites. Data was collected in French, Latvian and English. Both authors were familiar with English and each of them either with French or Latvian. A scan of the data collected, along with a check of its relevance and credibility, was conducted in order to identify potential candidates for observatory work. Out of the five selected SMBs, two agreed to participate, the other ones feeling uncomfortable to share information. The companies had been selected based on their representativeness (size of the business, usage of GBWs, localization etc.). One of the authors spent 6 months as an external observer, in Latvia. Casual talks and more structured interviews were conducted on a regular basis, in Latvian. The observer held a diary to be filled-in on a daily basis. Content analysis was used to analyse data, which was coded on a daily basis, in

Analysis of the Latvian Situation


The Latvian economy experienced a significant GDP growth of more than 10% per year during the years 2006 and 2007, but fell into severe recession in 2008 as a result of abrupt global financial crisis and its unsustainable current account deficit. GDP dropped significantly by 18% in 2009 being the world’s worst GDP decline that year (CIA 2011). In 2010 the economy was still experiencing the symptoms of recession with a GDP decrease of 0.3%. Nevertheless, the European Commission Economic Forecast (2011) showed a sustainable pace of recovery and confirms a favorable growth trend in 2011 and 2012 for Latvia. The GBWs business in Latvia. GBWs in Latvia are fairly new but already very popular. An average online store can generate around 100 purchases maximum per day (Source: 7Guru, 2011), while group buying portals manage to significantly exceed this number. For example, more than 5,399 coupons were sold for the

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exhibition ‘Bodies Revealed’ within two days on the Cherry daily-deals website. Thus this is a flourishing business with great development opportunities. The first daily-deals website, Oppaa, was created in 2010 (Source: MrDeal.lv) but is no more operating today. It was immediately followed by other players, such as KopāLētāk, Bigo or PērkamKopā. In 2011, 23 websites out of the 39 which have tried to start up their operations in Latvia were active (Koroņevskis, 2011). This is a quite significant ratio of GBWs to the country’s population (2,207,708 in 2011), compared to the 322 US websites for a population of 313,232,044 people in the same year. This has important implications for relative market shares, as discussed later on. Three main players hold the market: CityLife (33% of total market shares in 2011), Cherry (19%), and Pērkam Kopā (18%). The remaining 30% market shares are more or less equally distributed among the 20 other players. However, the business evolution is really dynamic and thus changes may occur on a short-time basis: small players may be able to grasp more market shares in the coming years (Vilpponen 2011). Appendix provides the reader with detailed information on Latvian GBWs. Based on the available literature on the GBWs industry (Neil 2011; Reibstein 2011), the value proposition for SMBs of Latvian websites mainly lies in the guarantee of a certain size of audience. For example, the reach of Cherry is around 250 thousand of potential customers. In addition, Latvian GBWs try to persuade SMBs by stressing out the fact that only one new deal gets displayed online every day on the main page. PērkamKopā website’s director, Laura Millere Pikšena, states that businesses should see the group buying portals as a marketing tool, rather than a way to earn extra money (Rutule, 2011). The promotion offer is only a small step towards customer relationship, while small businesses are supposed to track the inflow of their customers, and treat the “coupon consumers” in the same fashion as more regular ones.


The average commission fee which is charged to local businesses for displaying their offers with the dailydeals website is around 26%. GBWs’ representatives claim that due to fierce competition and market economy, their websites have become more flexible with the percentage of the commission fee, thus ranging around 20-28%, while the smallest group buying counterparts set the fees around 15% of the product/service value. This commission fee should be confronted with the average coupon price, which varies significantly among GBWs. It depends on the nature of the deals offered to consumers on the website, with an average value of 8.6 Euros. With an average number of coupons sold per deal in line with the general tendencies of the market, the successful GBWs (in terms of revenue & market share) are able to sell more coupons per offered product/service than their smaller counterparts. For example, in 2011 CityLife has been on average selling around 521 vouchers per deal, followed by Cherry and PērkamKopā with 264 and 191 coupons respectively. When in comes to the types of deals which get some popularity from Latvian daily-deals hunters, the most sold-out deals include cinema-exhibition-theater tickets or leisure & sport activities (Source: MrDeal. lv). The absolute record was for a bottle of French red wine sold by CityLife in 2011, for which 8,064 coupons were acquired. Overview of SMBs in Latvia. Since 2000, less and less businesses get created in Latvia, with an exclusion rate overplaying the registration one. Thus, even though there are currently more than 70,000 companies operating in Latvia, the low registration trend could put under questioning the long-term plans of finding new business partners for GBWs. SMBs represent 99.9% of the overall business industry in Latvia (Source: Eurostat, 2011) and very few information is available on them. No academic research or consulting work had ever been written at the time the present research was conducted, especially regarding their marketing strategies, the role of marketing in their daily activities, and their usage of advertising channels. This confirmed our choice of exploratory research.

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Advertising trends in Latvia. As the present study is interested in the communication potential of GBWs for SMBs, data was also collected on the state of the communication business in Latvia. Taking the pre-stated economic indicators of Latvia into consideration, one could expect a significant drop of spending in all advertising channels across the country: between 2009 and 2010, advertising volumes dropped by 13% (Source: Latvian Advertising Association, 2011), with the most significant decline observed for print advertising (magazines: -30%; newspapers: -32%) as well as for outdoor advertising (-22%). However, the financial crisis has not severely affected e-advertising with a drop in volumes of only 2%. Broadcast remains the most used media, representing 46% of overall spending (vs. 13% for e-advertising).

experience shared by these two SMBs with GBWs, as well as to assess how much effort it takes for a small company to advertise its name and to attract consumers. The observer let participants talk about the challenges they face in the SMBs environment in Latvia, especially with regard to advertising, and how GBWs come along into this whole picture. The first representative is the photography interior decoration studio Sapņu Studija (www.sapnustudija.lv), and the second is the brain-training center Riga Brain (www. rigabrain.com).

Experts expect an subsequent increase in e-advertising spending in the coming years (Source: Starcom MediaVest Group, 2011), reaching 15% of total ad spending in 2013. The increase in social media advertising is supposed to exceed 58.3% and should concern GBWs as well. The sectors of activity which advertised most in Latvia during the first 6 months of 2011 were mobile communication, retail, pharmaceuticals, financial services and telecommunications. The last three ones are on an increasing budget trend, while the two first ones are on a stable one. All this secondary data helped us better understand the bases of the GBWs business in Latvia, along with the specificities of both SMBs and advertising trends. Case studies were then to be conducted from two carefully selected stakeholders (theoretical sampling).

Results from Case Studies Two companies, carefully selected for past usage of GBWs and for the business profiles (see figures 3), were studied during 6 months. Non-participant observation was conducted, along with casual interviews and more structured ones. Caution was paid to unwrap the


Figure 3: Company-profiles of the two Cases

By the end of 2011, Sapņu Studija employed only 2 people, while RigaBrain – 4 employees. Additionally, according to the data submitted to the State Revenue Service of Republic of Latvia for the fiscal year of 2011 and published on a Lursoft information technology website, the annual turnover of Sapņu Studija accounted for 3.9 thousand Є, while the one of RigaBrain hit the mark of nearly 27 thousand Є. Nevertheless, both companies suffered from the net loss of 5.5 thousand Є and 24 thousand Є respectively. It indicates that every 1 Є sale turned into 1.43 Є loss for Sapņu Fabrika, and 0.90 Є loss for RigaBrain.

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It could partially be related to the increasing selling costs as well as distributing the products and services at below break-even prices with GBWs. A negative Return on Assets (ROA) points at the inability of both companies to effectively use their assets to generate profits. (See table 1 for financial detailed information)

Table 1: Financial data of the two cases

The case of Sapņu Studija. Sapņu Studija is a little studio based in the capital of Latvia, Riga, offering interior decoration and photography services. It was created 2002. However, since its early days, the main focus has shifted from pure interior decoration services to photography. The financial crisis that hit the world in 2008 severely influenced small market players, including Sapņu Studija. Since the nature of interior design operations made the company heavily depend on the construction industry, which in its turn went down, the company faced a life and death issue. The company employs three employees, and is thus a micro-business. Photography stands for around 70% of total sales, while 30% come from interior design service offering. Barbara Freiberga, the photographer in this studio, admits that it has become very difficult to attract new customers and to advertise the company’s name. She claims that previously word of mouth was enough but it’s no more the case owing to fierce competition. She believes that a company should differentiate its services to show its added value to customers and how it stands out from the crowd of competitors. Barbara admits that the role of marketing for SMBs is crucial. However, the studio does not have a preestablished and thoroughly thought-out marketing strategy, since it heavily depends on operational results and customers’ desires and interests. Before the photographer considered trying out GBWs, she


claimed she had too few customers and a necessity to re-brand the studio’s name because of the frequent confusion with Sapņu Fabrika that had nothing to do with photography or design services. She tried her best to find a marketing solution that would target a large audience, as well as would not request significant monetary resources. As a result, Barbara came up with the decision of having barter deals with radio stations and magazines. It implied that in exchange for a reduced price (in the case of radio or print advertising) for advertising services, Barbara and her colleagues would provide the photography services on demand with marketing media. She acknowledged that those deals were working pretty well for her studio, on a short time basis. Some time later she noticed the increasing popularity of group buying websites and decided to try them out as well. Overall, she has displayed five deals across three GBWs: two with KopāLētāk, two with PērkamKopāWhen and one with Superakcijas. She claims that although the conditions usually seem to be more or less the same across GBWs, responsiveness and openness are not the same, while they play a crucial role in decision making. This is an argument supporting the previous assumption regarding the importance of communication with daily-deals websites. Barbara reveals that the deals with PērkamKopā were of 53% and 60% discount to customers, and were acquired by 12 and 215 people respectively. The deal on KopāLētāk offered a 72% discount and managed to be sold to 33 people. Finally, 13 people selected the offer on Superakcijas with a 60% discount. Overall, Sapņu Studija offered more than 273 coupons. It is worth mentioning that one of the business requirements was to limit the number of vouchers being possibly sold to one person to two. The photographer shares that her studio faced quite a significant flow of customers. She had to seriously plan through the schedule to make sure she could handle the customer requests on timely manner. Three

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daily-deals vouchers also actually turned into bigger clients and further cooperation. She also admits that mostly everyone comes to redeem the voucher and the experience overall is positive. However, in the nearest future she does not plan to invest any resources into advertising or display any additional offers online due to limited resources available. The analysis of the Sapņu Studija case leads to the following findings: GBWs do not manage clientrelation is the same way, in Latvia; being able to communicate with GBWs is decisive when selecting a business partner; GBWs enable to get access to a large audience; setting-up a deal on a GBW requires resources (operational, time, etc…); and customer retention is possible after using GBWs daily deals. The Case of RigaBrain. RigaBrain is not the typical client of a GWB. It is a training center offering soundand signal-based brain exercises. Pēteris Urtāns, the owner of the company, admits that the training center did not appear as the result of a thoroughly written business plan. It was rather a response to customers’ needs. It started in 2008, more as a hobby. Now from a one-employee type of start-up, it has turned into a 4-employees, partnering with 3 outsourced specialized companies. Pēteris claims that one of the most important parts of his company is customer service, which constantly needs to achieve a so-called “wow-effect”. “Wow-effect” is often referred to a very powerful event, or in this case customer service that strikes the mind and exceeds customers’ expectations. As in the case of Sapņu Studija, the training center appreciates the significance of word of the mouth when talking about one of the most effective advertising technics. Pēteris admitted that since human brain by nature is mysterious and its processes are very personal to every individual, the services around brain training are not highly commercialized. It means that one can expect a certain degree of mistrust being exposed to the businesses like RigaBrain. A thoughtout approach should thus be established in order to design a marketing strategy of brain training services correctly. He also explained that there is no stable


demand in this service niche. Therefore, the company’s marketing activities highly depend on its audience’s interests, motivations and expectations. As in the case of Sapņu Studija, the brain-training center also tried barter deals with magazines as a way of advertising. Pēteris admitted they started display promotion deals on GBWs because they wanted to attract new customers from new channels. They have offered sound therapy five times and brain exercises sessions around three times. For example, on Deal24 the offer was offered at a 50% discount and no limit on the amount of coupons per person was set. Nine people acquired the service voucher. Next, the deal with Superakcijas proved to be the most efficient in terms of number of attracted people– 84 coupons were sold at 60% discounted price. Finally the recent deal on PērkamKopā had set a limit of maximum four coupons possible to be bought by one person. Nevertheless, the deal did not go live, because of lack of demand. As the result of the successful deal on PērkamKopā, the training center also faced a significant inflow of customers. Pēteris told, that in order to cope with the growing interest at that time they actually had to hire an extra employee. The owner also revealed that around 40% of voucher holders actually have heard of the center before, while also 30% of them still continue the brain training session, which can be referred to a successful customer retention strategy. Apart from GBWs, RigaBrain has advertised in magazines, on TV and on radio, as well as online (Google AdWords). LNT and TV3 television stations had got in touch with Pēteris, because they had heard good feedback and some buzz around the company and were interested to make few videos about its success stories. Pēteris claimed that for the moment they are not planning to advertise with GBWs anymore. They definitely serve as one of the easiest ways to promote a brand name and increase awareness. However, they

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better fit as a one-time solution and perhaps do not guarantee that much ROI, financially speaking. The analysis of the RigaBrain case leads to the following findings: GBWs are used to attract new consumers and increase brand awareness; resources are needed to cope with the aftermaths of a deal (organizational, sales force, etc.); deals can initiate customer retention; and buzz effects (in communication) may follow the display of a deal. General findings from the two cases. When confronting the two cases, some conclusions can be reached. They will be further checked with a survey (see next part): GBWs do not bring additional revenues due to hidden unpredicted costs; GBWs are primarily used to get access to a new audience; deals may be followed by communication buzz and consumer retention effects; there is no long-time partnering between SMBs and GBWs in Latvia; and the client-GBW relationship is key to set-up a deal. These findings, combined with the previously exposed secondary data, enabled the elaboration of a questionnaire, which was sent to 400 SMBs, with a response rate of 93%. The following part presents the methodology of and main results from the survey.

Results from the Survey The survey included 21 questions related to respondents’ past experiences using GBWs. Some questions were closed, with either multiple-choice answers or yes/no answer, while other questions were left with open answering possibilities, in order to let the respondents elaborate their point. Demographic questions were included at the end, in order to be able to get a picture of the sample characteristics. Data was collected on the type of industry the companies operate in, their size (number of employees), their average annual turnover and the country in which they operate. Figure 4 displays these features. Unfortunately, the majority of respondents did not feel comfortable sharing their information revenue: around 43% of them left the question unanswered; while another 10% answered they were uncertain about it. The survey was conducted online, and dispatched to businesses that had completed a daily deal at least once on one of the following sites: CityLife, Zizu, PērkamKopā, KopāLētāk, Superakcijas, Cherry. The authors had taken contact e-mails directly from the GBWs on which they had their promotions displayed. 400 personalized e-mails were sent to business representatives with an invitation to participate, and a reminder e-mail ten days later-on. The response rate was of 23%. Given the pretty recent history of GBWs in Latvia, the sample size was considered as satisfactory, at least for a preliminary explorative study.

Figure 4: Survey Sample Details International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

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The questions were related to three main topics: how much the respondents had used GBWs and how loyal to them they were; the reasons why they decided to collaborate with them; and the outcomes of such collaboration. SMBs’ usage habits of GBWs in Latvia. Among the polled companies, 27% had used the opportunity to display a discount deal only once, while 20% and 21% of respondents had them displayed two or three times respectively. This means an average of 3.8 times usage of GBWs, while 30 times was the maximum acknowledged usage made of them. These figures need to be confronted with the number of daily-deals websites the respondents had been working with. Data shows that it is most common to cooperate for SMBs with only one or two GBWs, with 35% and 33% of respondents marking these answers respectively. Hence, the market is quite concentrated, with SMBs quite loyal to the GBWs they have worked with. However, there is still room for improvement in terms of deal-offered frequency increase. Such loyalty might come from the trust that a business representative has with a particular website, as explained in the open comments left by the interviewees. No clear distinction is made between the websites (lack of clear positioning), so if the partnership goes well once (or if the representative has had some previous experience with it, even as a customer), there is no reason for switching of business partner. The commission fee split conditions do not help in differentiating the various GBWs, with a required discount usually of at least 50% and an average commission fee ranging between 20% and 28%. Since the target audience was selected from the general pool of expired and new deals, there was possibility that some of the companies would not be cooperating with GBWs since then. Thus, a question asked SMBs whether they were still displaying their deals on the GBWs, which was actually done by 81% of the sample. Reasons why SMBs use GBWs or stop using them. The objective was to investigate whether SMBs would have the same reasons (and thus expectations)


when using the websites for the first time, or when re-engaging a deal campaign with the same business partner. Results show that the most crucial reason for Latvian SMBs to decide cooperating with a GBW is to draw-in additional customers to their business (true for 82% of respondents), while the next significant reason is to promote the name of the company (78%). Only few respondents are focused on earning additional revenues or getting-rid of extra stock (19% and 13% respectively), thus contradicting assumptions made by researchers in the literature, but consistent with findings from the two cases. Building brand awareness and knowledge are the main objectives for SMBs in Latvia for using GBWs. In a word, they use such a medium to build part of their Brand Equity. Some multiple-choice questions were offered to let the respondents explain why they kept using GBWs or why not. The reasons for still using GBWs were: for 43% of the respondents their confidence in being able to recruit additional customers (43%) - few of the respondents met an inflow of new clients after they featured the deal previously and thus, having a positive experience, decided to continue with the group buying websites -; and for 33% fast and effective advertising, with the ability to create the sense of urgency and to influence hesitating consumers. The fact that promotion deals let them attract new customers in the “off-peak” season. For a few respondents, the fact that GBWs are one of the very few optimal marketing tools available that could satisfy the needs of a small business in Latvia, because quite often they cannot afford investing significant financial resources into other advertising channels. For the same percentages of respondents (9%), their willingness to generate extra cash and get access to large visitors’ audience of group buying websites. Taking this into account, an average SMB expects to increase its visibility not only across the daily-deals websites, but also in other social media

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mediums. GBWs are thus perceived as one piece of on IMC strategy to strengthen their brand equity. The companies which did not choose to keep using GBWs gave as the most common reason the “one time” need of advertising (29% of respondents). “One time” need in this case implies seasonal promotions or showcase of a completely new product or service. It is interesting to observe that these companies that no longer display offers on group buying websites, on average tried using the service of a GBW at least twice. Furthermore, the other important cause for disrupting the promotion activities is the fact that the company realize that daily-deals are not suitable for the industry within which it operates (24% of respondents). The main representatives of this particular pool of respondents are manufacturers, who complain about the necessity of selling their products below the break-even point. They consider the audience of group buying websites as not compliant with their business needs. Finally, 18% and 12% of respondents respectively claimed to be unable to generate any profits or felt frustrated with daily-deals. Most of this frustration comes from realizing that customers might only search for a better price rather than be genuinely be interested in the product or service provided. The outcomes of using GBWs for Latvian SMBs. Financial results, snowball effects (additional advertising spending), brand awareness increase, and CRM consequences were identified as the most important potential outcomes (from the two cases and the literature). For 54% of the respondents dailydeals turned into profit. Respondents were split into two major categories: product or service oriented, in order to verify whether the general tendency in United States stating that daily-deals are mainly profitable for service providers (Dholakia 2010; Dholakia and Tsabar 2011) could be applied to the Latvian case.

After the preliminary split, the pool of respondents included 74% service-providers and 26% productproviders. As far as the profitability is concerned, the daily deal was not profitable for 58% of product sellers versus 42% of service providers. Thus it means that general tendency holds also in this case. This is consistent then with 88% of product-sellers continuing to display discount deals on group buying websites, versus 78% of service-providers. The present study does not intend to provide additional reasoning for this behavior, but this fact might be researched in future research. Then a split by sectors of activity was done. It turned out that daily-deals were claimed to be financially profitable for leisure/entertainment and retail related promotions with 79% and 73% respectively, the least profitable for beauty salons (37%) and manufacturers (46%). In order to compare the differences between service providers and product providers concerning profitability and continuity in using GBWs, we used chi-square test (as the date is qualitative). We run the same test when comparing 4 sectors (leisure/ entertainment, retail related promotions, beauty salons and manufacturers) concerning profitability and continuity in using GBWs. Our results show that there is a significant difference between service providers and product providers concerning profitability and continuity (Table 2) as well as for the 4 different sectors compared here (khi2 test, pvalue>0.05 in all cases). More than one in two companies considers (54%) that daily-deals turned into profit, nevertheless a large majority (between 71% and 90% according to the sector) continue to display discount deals mainly because even if the profitability is limited they can take the opportunity of a large audience in terms of advertising and hope they will be able to retain new customers.

Table 2: Comparison in profitability and continuity in using GBW International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

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Although from previous questions it could be assumed that SMBs would consider GBWs only as a tool in an IMC strategy, the majority of the respondents had not used any other marketing tools to promote their products or deals (75%). Yet, 33% admitted they planed to do so in the nearest future. Future investigation could be made to identify which communication channel they would point to. Building brand awareness was one admitted objective for using GBWs. 73% of respondents admitted they managed to do so, while almost a quarter of them was hesitating to answer. This issue could also serve as a question for future study. At the moment it is only possible to assume that 24% of respondents were not able to fully analyze/understand the outcome of the promotion offer in terms of their own brand awareness (and how to measure it). Lastly, a couple of questions were designed to understand SMBs’ perceptions of their ability to attract and retain new customers that are coming from GBWs. The majority of respondents (42%) claimed that they were able to engage a significant number of new customers with their business after they featured their deals online, while 23% of them were not able to tell. Next, 56% of respondents claimed not to have any CRM system employed in the company. Actually, 76% of respondents who were not sure whether they managed to attract significant number of new customers do not use any CRM policy and system. Even though tracking daily-deals consumers should be relatively easy by the coupons they bring in exchange for product or service, some of the group buying portals allow the same consumer to acquire numerous coupons. In most cases SMBs do not have a chance to keep the consumers’ e-mails and any other contact information. Thus, the tracking of the results might get slightly overwhelming. Being able to have at least a self-customized in-house CRM system, especially for medium sized businesses, might improve sales and marketing related decision making processes as well as help develop a customer retention strategy.


Finally, the majority of respondents (66%) agreed that the loyalty of deal prone customers is very low. Conclusion: advantages and drawbacks for Latvian SMBs in using GBWs. Among the respondents, 23% consider the market as oversaturated with daily-deals websites. It confuses both potential collaborators from the SMBs side, and consumers. In addition, 13% of the surveyed companies believe that the deals displayed across different GBWs are quite monotonous, and sometimes even odd. These respondents think that more sense of uniqueness is required, because otherwise it makes it even harder to distinguish from competitors and attract new customers. Another negative aspect includes the miscommunication with GBWs and sometimes the inability for smaller companies to break through the biggest daily-deals websites. In addition, respondents mention the huge commission fee to be allocated to GBWs for the service provided and a weak odds of being able to predict and control the outcome of the promotion deal. Few respondents actually faced this situation when they had to temporary hire additional staff or invest additional resources in order to be able to provide full service in exchange to the coupon received. Nevertheless, when looking at the positive thoughts of SMBs about group buying websites, a more unique approach can be observed. 34% of respondents admitted that one of the main strengths of daily-deals websites is their large audience, and thus the visibility they provide to their business partners. A great part of them is aware of the growing importance of online advertising also locally. In addition, around 24% of SMBs mention that they perceive group buying websites not only as a fast, but also as a “costless” marketing tool. It is true that no upfront payments need to be made to group buying website in order to display one’s own offer online. However, it is important not to forget that the cost of this advertising is the discounted revenues that get generated, as well as the degree of distortion in customers’ perception of the product or the service’s value. Based on the data displayed in the previous section dedicated to group

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buying websites in Latvia, the reader could observe that the average price per coupon across the websites is around €8.6, and the average number of coupons sold per deal is 122. For example, let’s assume that the commission fee is 26%. It means that on average the indirect advertising cost per coupon is €8.6 *(100%26%)=€12.7, and thus €12.7*122=€1 553. There is no guarantee that a small business would be able to attract 122 new customers from one-time display of an ad in the newspaper or magazine. However, it should make businesses more aware of what they could have potentially done differently or how should they go about planning their advertising activities. Finally, another positive aspect about group buying websites is the opportunity for businesses to present a brand new product or service to a broad audience, especially out of seasonal peeks; and trumpet about themselves. It also performs well in cases when the company is not well known by the general public.

Summary of Findings The three data collection methods and results gain from their analyses enabled to reach the following conclusions: Finding 1: The GBW industry in Latvia lacks dynamism, leading to a rather low frequency usage. GBWs lack differentiation. However, it is a business full of potential developments, its main advantage being in the visibility opportunities it brings to SMBs. Finding 2: Latvian SMBs use GBWs to build brand awareness and brand knowledge among the Latvian population. If this is a one-time advertising need, they stop using them. Otherwise, they pursue the collaboration in order to strengthen their brand equity. Finding 3: SMBs consider GBWs as only one medium to be integrated in a more complete IMC strategy. Getting there is usually the first step toward opening to advertising in general. Finding 4: The customer-retention rate is very low, mainly because SMBs do not hold any CRM tool or spirit.


Conclusion The results of the survey and analysis of the overall situation around the group buying industry in Latvia have revealed that first of all, 82%-polled businesses agree that the main goal of using GBWs is to attract additional customers, while 75% of them also perceive the websites as an advertising tool. Often small businesses in Latvia do not have a separate and wellthought marketing strategy. Therefore, as in the case of Sapņu Studija and RigaBrain, they are searching for the cheapest and most affordable solutions. Following this idea, 75% of survey respondents have not advertised they product or service elsewhere or only plan to do so. GBWs are one of the possible affordable solutions for such businesses, taking into account that almost no other advertising channel would ensure such a huge visitors audience. For example, according to Gemius data, only in Auguust 2011 CityLife portal managed to generate more than a million of pageviews (Source: Gemius, 2011). Nevertheless, it does not restrain businesses from assuming that daily-deals come without a cost. The opportunity of doing something differently always stays at stake. There is a group of businesses (almost the quarter of respondents) that still hope to get extra revenues from displaying the deals. Promotion offers turned out to be profitable for only 42% of producers and 58% of service providers, while companies in retail and entertainment could brag about more successful results, and health and beauty salons being the most dissatisfied. To worry about profits is not necessarily a bad approach, however, this is one of the factors that make Latvian SMBs get frustrated about cooperation with group buying websites, along with the fact that consumers are no more than just “price tourists”. As soon as the offer is over, it is up to a merchant to have a strategy of treating the “coupon customer” as a normal customer and think of ways to retain them. Among the inquired merchants, 62% fell into the category of a micro company; Therefore, no high expectations can be set around suppliers using CRM tools. Only 44% of

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respondents had a customer relationship management tool in place. However, simple alternatives can be set up to be able to improve customer tracking and relationships.

In addition, an important observation to be taken into account is that around 15% of survey respondents as well as experts’ indications suggest that those daily deals are lacking some uniqueness. There are plenty of similar offers to choose from and while the trend is still new it is going to get attention, but what about afterwards? Even if 99% of Latvian business are classified as small and medium sized, and they are best suitable for group buying experiences, over the nearest future, it is likely that daily deal sites would have to be flexible and settle for lower shares of revenues from businesses, and it will be harder and more expensive for them to keep finding viable candidates to fill their “stock” of daily deals.

Finally, interestingly enough, even with a certain degree of frustration, around 81% of small businesses continue to display their offers online. Lastly, the group buying industry in Latvia is growing on the expense of businesses still suffering from the echo of economic recession. At the moment the market is oversaturated with daily-deals websites, making it harder for any one site to stand out from the crowd. Every second attempt to create a group buying website fails. Nevertheless, this is a fairly new tool and it would take some time for SMBs and consumers to get fully aware of it and accept it. APPENDIX: Latvian GBWs

GBW

Daily unique page views per user 3.06 3.1 1.97 3.27 2.1 2.26 2.7 1.9 1.6 2.2

CityLife Cherry Pērkam Kopā Zizu Kopā Lētāk SuperAkcijas Akcijas24 Bigo CitySale Lētāk24 GBW

Audience Audience (age) (sex)

CityLife Cherry Pērkam Kopā Zizu Kopā Lētāk SuperAkcijas Akcijas24 Bigo CitySale Lētāk24

18-34 18-34 18-24 18-24 18-34 25-34 18-24 18-34 18-34 25-34

F F F F F F F F F F

Audience (browsing location) Work Work Work Home Work Work Work Work Work Home

Estimated daily time on site (min) 3.98 2.79 2 5 1.3 2.2 2.33 1.99 1.81 2.36

Audience Audience (kids) (education) No No No No No Yes No No No No

No college Graduate College No college Graduate Graduate No college College Graduate Graduate

Source: Alexa.com, Web Information Company, November, 2011 International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

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References

Moore, Alex (2011), “Groupon IPO: Will It Still Look Good After the Recession Ends?,” in Death and taxes.

Agrawal, Rakesh (2011), “Why Groupon Is Poised For Collapse,” in TechCrunch.

Moran, J (2011a), “Group buying by the numbers,” in Yipit.

CIA (2011), The World Factbook 2010. Washington, DC: Central Intelligence Agency.

Moran, James (2011b), “Groupon and Industry Resume Growth, Post Record Revenue in August,” in Yipit.

Dholakia, Utpal (2011), “How businesses fare with daily deals: a multi-site analysis of Groupon, Livingsocial, Opentable, Travelzoo, and BuyWithMe promotions,” Available at SSRN 1863466. ---- (2010), “How Effective are Groupon Promotions for Businesses?,” in Available at SSRN 1696327 Vol. 28 Sept. Dholakia, Utpal and S. E. Kimes (2011), “Daily deal fatigue or unabated enthusiasm? A study of consumer perceptions of daily deal promotions,” in Available at SSRN: http://ssrn.com/abstract=1925865.

Neil (2011), “Infographic: The numbers behind Group Buying websites,” in DealPonder. Reibstein, David (2011), “How Sustainable Is Groupon’s Business Model?,” in Knowledge@ Wharton Vol. 25 May. Salmon, Felix (2005), “Grouponomics,” in Opinions. New York: Thomson Reuters. Vilpponen, Antti (2011), “In Depth Analysis Into The Daily Deals Market In The Baltics,” in ArcticStartup.

Dholakia, Utpal and G. Tsabar (2011), “A startup’s experience with running a Groupon promotion,” in Available at SSRN 1828003. Edelman, Ben, S Jaffe, and S. D. Kominers (2011), “To Groupon or not to Groupon: The profitability of deep discounts,” in Harvard Business School Working Paper. Gilmore, Franck F. (1971), “Formulating strategy in smaller companies,” Harvard Business Review, 49, 71-81. Kauffman, R. J. and B. Wang (2001), “New buyers’ arrival under dynamic pricing market microstructure: The case of group-buying discounts on the Internet,” in 34th Annual Hawaii International Conference on System Sciences (HICSS). Island of Maui: IEEE Computer Society.


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Assessing the Effect of Consumers’ Attitudes toward Push-Notifications and Shopping Intentions

Assessing the Effect of Consumers’ Attitudes toward Push-Notifications and Shopping Intentions Dr. Tamer A. Awad Associate Professor of Marketing German University in Cairo [email protected] Dina Ashraf El-Shihy Associate Lecturer Ahram Canadian University

Abstract Purpose – Push-notifications are a new advertising medium that has not been sufficiently explored before hence, the researcher aims to investigate the effect of consumer’s attitudes towards push-notifications and future shopping intentions (FI) on push-notifications using the Technological Acceptance Model (TAM). Methodology – The researchers adapted the TAM to investigate the consumers attitude towards the pushnotification as a new marketing mean of communication. The Data for this study were gathered by the researcher and were obtained through the distribution of questionnaires to consumers18 to 30 years old consumers who own smartphones. Findings - The results of this study revealed that factors such as Perceived Usefulness (PU), and Perceived Ease of Use (PEOU) had a positive effect on the attitudes and the FI of young consumers. These findings support the results of previous literature that were conducted on mobile marketing and SMS advertising. Implications - The researcher recommends that the companies that have not yet used push notifications should consider adopting this advertising medium and put into consideration the effect of factors such as PU and PEOU on their target consumers attitudes and FI towards push notifications. Originality – The research investigate the use of push-notification as a new marekting tool which different type of businesses have been using over the last few years. Businesses used push notifications as a more personalised mobile marketing communications tool among adult tools which repersent the market future in the Egyptian market. Using the TAM the researchers investigate the consumers attitude towards the push notifications and its effect on their future shopping intentions. Keywords: Mobile Marketing, Digital Marketing, Push Notifications, Technological Acceptance Model, Perceived Usefulness, Perceived Ease of Use, Future Intentions.


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Introduction The last few years have witnessed advanced development of information-processing technology allowing advertisers to shift the focus of their efforts from traditional mass advertising channels to personalized advertising to deliver tailored messages to individual preferences. Such development has not gone unnoticed by marketers who have started exploring the effectiveness of the channel for related communications (Kerckhove, 2002; Nysveen, Pedersen, and Thorbjørnsen 2005; Ferris 2007). Over the years, consumers have used different ad avoidance means such as filtering e- mail, ad blocking tools, and different do-not track programs. Such behavior has been investigated through a wellarticulated body of academic research on advertising avoidance across traditional and online media (Abernethy 1990; Bellman, Schweda, and Varan 2010; Nuttall 1962; Rich, Owens, and Ellenbogen 1978). On the other hand, the recent technological advancement has offered marketers golden opportunity for mobile marketing endeavors, which has been called the next generation of e-marketing. Along with the rapid propagation and intrinsic characteristics of mobile devices the mobile platform holds the most potential among other communication means because it is considered more cost effective, personalized, and results-driven (Shankar and Malthouse, 2007; Sultan and Rohm, 2005; Jayasingh and Eze, 2010). Barnes and Scornavacca (2004) argue that within few years mobile devices will become the mainstream channel for advertising. As the consumer showed an unorthodox shift and growth in using the mobile device, such growth has been so fast that marketers have yet to determine how to fully embrace it (Bauer, Barnes, Reichardt, & Neumann 2005; Varnali & Toker, 2010). Watson, Pitt, Berthon and Zinkhan (2002) state that technical benefits of the mobile medium present a new marketing environment in which firms should take part if they want to survive and flourish. Mobile marketing incorporates several forms of mobile practices and technology varying from SMS, voice mobile, internet, email, Bluetooth besides other


concepts such as mobile advertising, SMS marketing, and location-based marketing (Lamarre, Simon and Harold, 2012) On the other hand, push notifications emerged as a new mean of mobile marketing. Push notifications allow an application that is not running on the device to notify the users with the updates or new information (Local and Push Notification Programming Guide, 2011). Marketers can use push notifications for several reasons. They represent an additional channel of messaging for smartphones. Push notifications can be used to send alerts on the devices for the new features and updates about the applications. Push notifications provide information about coupons and new offers. Besides, communicating information about events; and also enable the users to implement the ‘’peer to peer’’ messaging (Push notifications 2011; cf. Local and Push Notification Programming Guide, 2011). Such development was backed up by smartphones; which grant control and permits the end-users to either enable or disable the push notifications for a certain application. Push notifications are configurable on the devices. The end-user has the ability to choose either to turn off all the notifications or to turn on certain applications on the device (Push notifications, 2011). Push notifications led the consumers to use an application from 18% to 30% more. The development of push notifications made it easier for marketers to target their audience (Heussner, 2012).

Literature Review Mobile Marketing The market of the mobile communications has been experiencing rapid growth since the year 1994 with regards to the number of subscribers and the number of the global system for mobile communications (GSM) operations (Barutceu 2008). The new technologies helped organizations to better reach their consumers in terms of the frequency and the impact of the advertising (Punyatoya & Durgesh 2011). With the increasing penetration and adoption of mobile phones, which are constantly with the individuals, marketers became more capable of reaching consumers anytime anywhere. As

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a new advertising unique channel, mobiles became a medium for the consumer’s immediate and direct response (Leek & Christodoulides 2009).

communication and promotion of an offer between a firm and its customers using a mobile medium, device or technology.”

The growth of the wireless and mobile communications that have been taking place worldwide have affected the way individuals communicate with each other either verbally and/or through text messages. Moreover, consumers are now using their mobile phones beyond any purposes of personal communication. This gave the marketers the potential of using mobile phones as platforms for companies through which they can utilize for transactions; relationship building and brand communication purposes (Bamoriya & Singh 2012). Mobile devices are considered a relatively cheaper and an inexpensive opportunity for organizations to enter the world of the consumer on the spot because they are in the hands of the consumers at the point of purchase or sales. Any interaction that happens from the side of the company to the consumer through a mobile device is considered to be mobile marketing. This interaction can be in the form of offering a service, help, information, promotion, advertisement or an invitation (Mannari 2011).

Push Notifications – A push notification can be defined as a short message that is pushed to a certain application on an individual’s smartphone. This message informs the end user that there is an update or a calendar event available that is related to that specific mobile application. For example, an individual might be notified about the scores of sports or movements of stock through push notifications (Push notifications 2011; cf. Local and Push Notification Programming Guide 2011).

The Mobile Marketing Association (MMA, 2008) defines mobile marketing as, “A set of practices that enables organizations to communicate and engage with their audience in an interactive and relevant manner through any mobile device or network.” Some scholars, yet, interpret its role more precisely e.g. Scharl, Dickinger and Murphy (2005) refer to mobile marketing as, “Using a wireless medium to provide consumers with time- and location-sensitive, personalized information that promotes goods, services and ideas, thereby benefiting all stakeholders.” Wireless Advertising Association (WAA) refers to “mobile marketing as the releasing of the advertising messages to the mobile phones via a wireless network”. Mobile marketing incorporates several forms of mobile practices and technology varying from SMS, voice mobile, internet, email, Bluetooth besides other concepts such as mobile advertising, SMS marketing, and location-based marketing (Lamarre, Simon and Harold, 20120). The most comprehensive definition that incorporates all relevant information on mobile marketing up to date was argued by Shankar and Balasubramanian (2009) “The two way or multi way

Mobile applications are meant to be downloaded and used on smartphones, tablet PC, and/or portable media players. Push notifications are considered a lighter version of computer applications’’. The market of mobile applications has been dramatically growing since 2009 where they have reached 100-million user base (Rishi 2012).


A push notification is a software application that is mainly designed to work on smartphones or tablet computers (Bamoriya & Singh 2012). Push notification is a way that allows an application that is not running on the device to let the users know that it has updates or information. Push notifications can display alert messages or play an alert sound to notify the users with the new updates (Local and Push Notification Programming Guide 2011).

Individuals can use push notifications for several reasons as they represent an additional channel of messaging for smartphones. Push notifications can be used to send alerts on the devices for new features and updates about the applications. It provides information about the coupons and new offers. Moreover, it has been stated that any business that wants to develop a smartphone application, must consider the messaging channel of push notifications (Push notifications 2011; cf. Local and Push Notification Programming Guide 2011). Mobile applications are available through certain application distribution platforms that are operated by the operating system of the mobile such as Android

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Market, BlackBerry Application World, and Apple Application Store. Usually, these applications are downloaded to certain target devices. These devices are Android, Blackberry or Apple phones. Other applications may be downloaded by the consumers themselves from different mobile software platforms or from web applications (Bamoriya & Singh 2012). Push notifications lead the consumers to use an application from 18% to 30% more. The development of push notifications gave the consumers better control over the messages they receive; it also made it easier for marketers to target their audience (Heussner 2012). Smartphones – In the fast evolution of smartphones over the past few years, most of the definitions of smartphones have become obsolete. This is because its definition changes with the evolution of mobile devices. However, a smartphone today is a high level device that has a higher price, and outstanding features (Pananen 2011). Smartphone technology offers spatial resolution and high temporal with built-in timing of display of the stimuli, and the responses are touch screen. Smartphones are portable tools that can be easily used, is multimedia enabled, has Internet access, and is the same for all users anywhere in the world. The real smartphone’s revolution starts with its mass coordination on all smartphones on the worldwide level (Dufau, Dunabeitia, Moret-Tetay, McGonigal, Peeters, Alario, Balota, Brysbaert, Carreiras, Ferrand, Ktori, Perea, Rastle, Sasburg, Yap, Ziegler, Grainger, 2011). The increasing demand of smartphones, media tables, and other smart electronics gave birth to a new electronic market era. Moreover, this made the supply chain companies change the way they think about the producers and designers of the mobile communications and other electronic devices. Smartphones and other media tablets are dramatically changing the electronic industry. They also started to open opportunities to suppliers as it focused on the delivery of more multipurpose solutions to create a unique and a different user experience in everything related to the tablets and automobile entertainment systems (Kickham, 2011).


The Egyptian Telecommunication Industry – The number of mobile phone subscribers in Egypt has increased to reach 60.2 million subscribers in August 2010 with 20.3% increase compared to the number of subscribers in August 2009 (Aly, 2010). The penetration of mobile phones has increased from about 23% in the year 2006 to reach 80% in 2010. It is also expected to expand to more than 100% by 2015 (Rao, 2011). The number of owners of mobile phones has been increasing dramatically as it was also found that around 9.93 million actually own two lines of mobile phones (Aly, 2010). According to eMisr National Broadband Plan (2011), the mobile phone penetration rate was higher in Egypt than the developing and global countries. By the second quarter of 2011, the penetration has increased to reach 95.07%. Technological Acceptance Model (TAM) – In 1986, Fred Davis derived the Technology Acceptance model (TAM) from a general model from social psychology the ‘’Theory of Reasoned Action’’ (TRA) that was developed to explain human behavior and was actually proven successful in the prediction and explanation of the behaviors of individuals in different domains (Ekebom 2012; cf. Ismail & Razak 2011). TRA is a well-known model that has been widely used to explain the individual’s behaviors in different domains (Wu & Wang 2005; cf. Mak et al. 2009). TAM is considered an extension to TRA. It aims to explain the reason behind a user’s acceptance or rejection to information technology through adapting TRA (Park 2009; cf. Mannari 2011). According to TRA, the behavior of an individual is determined by his/her intention to actually perform a specific behavior. Behavioral intention is influenced by the individual’s attitude and subjective norms that are related to that behavior (Kwak & McDaniel 2011; cf. Mak et al. 2009; cf. Ismail & Razak 2011). On the other hand, TAM mainly focuses on the explanation of the consumer’s attitudes and intentions to use a certain technology or service, as depicted in fig – 1. It is considered one of the very important theoretical frameworks that can be used to understand the acceptance of users to information technology

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(Kwak & McDaniel 2011; cf. Carlsson, Hyvönen, Repo & Walden 2005).

Fig – 1: TAM Model Source (Davis, 1989) The actual use of technology is mainly influenced by an individual’s intention to use it which is influenced by the attitudes he/she develops towards this new technology. The attitudes the user acquire from this technology are influenced by two main variables that are the Perceived Usefulness (PU) and the Perceived Ease of Use (PEOU). These two variables can be affected by other external variables (Mak, et al. 2009; cf. Carlsson, et. al. 2005; cf. Park 2009; cf. Bamoriya, Singh 2012; cf. Treeratanapon 2012; cf. Mannari 2011; cf. Mak et al. 2009; cf. Ismail & Razak 2011). PU is defined as the extent to which an individual believes that the usage of a specific system would improve his/her performance in the job (Lules et al. 2012; cf. Bamoriya & Singh 2012; cf. Treeratanapon 2012). PEOU is the extent to which an individual believes that the usage of a specific system would be effortfree (Lules et al. 2012; cf. Bamoriya, Singh 2012; cf. Treeratanapon, 2012). TAM was first developed to examine the consumer’s acceptance and utilization of computer technology, adding that it was then considered a valid model when it came to predicting the perceptions and acceptance of the individuals to different corporate IT systems. Since then, TAM has been used in other types of technologies including email, voice mail, software and the World Wide Web, a lot of studies were conducted in the mobile service context such as mobile banking, International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

mobile credit card, mobile advertising, and the mobile services that has also utilized TAM (Ismail & Razak, 2011; cf. Carlsson et. al., 2005) The full growth and development of mobile marketing is heavily based on both the individual’s acceptance and technology improvement. However, given the fact that mobile devices are entirely personal, the acceptance of the mobile marketing can be different from the acceptance of any other technology. The advertising message that is delivered to the consumer via mobile device can only be accessed by him/her as he/she will be the person who has possession over this device and therefore, have instant and direct access to it. Due to this personal relationship that exists between the user and his/her mobile device, the mobile data services and adoption of mobile marketing should be put apart from the adoption of any other new technology because not all other technological devices are considered as personal as mobile devices (Mannari, 2011). Based on the previous, the following hypotheses have been developed to test the consumer’s acceptance through TAM, as shown in Fig – 2: H1: PU of push notifications has a positive effect on FI H2: PEOU of push notifications has a positive effect on FI

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H3: PU of push notifications has a positive effect on the attitudes towards push notifications H4: PEOU of push notifications has a positive effect on the attitudes towards push notifications

H5: PEOU of push notifications has a positive effect on the PU of push notifications H6: Demographics have an effect on FI

Fig – 2: Conceptual Model developed by the researchers

Methodology Sampling and Sample Size – An exploratory

quantitative research has taken place through the distribution of questionnaires on the sample under investigation where they were asked questions related to the topic. The survey was developed through the data that the researcher gathered from previous literature, surveys and conceptual frameworks that were adopted from academic sources. The sample of the study consisted of 385 Egyptian young consumers aged from 18 to 30 years old. The sample under investigation must have owned smartphone devices. The questionnaire has been distributed all over Giza and Cairo using the convenience sampling.

Sample Characteristics – The respondents

consisted of 55.3% males 44.7% females. Regarding the respondents age, 63.6% were between 18 and 22 International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

years old, 26.8% were between 23 and 27 years old, 5.5% were between 28 and 32 years old, 2.6% were less than 17 years old, and the remaining 1.6% were more than 32 years old. Concerning the respondents household income, 47% stated that their income was less than 5000 LE, 15.6% were from 6000 to 10,000 LE, 15.3% were between 17,000 to 22,000, and 8.3% were more than 23,000 LE per month. Concerning the respondent’s level of education, 51.9% of the respondents highest level of education was high school, 33.8% were bachelor degree holders, and the remaining 14.3% were engaged in postgraduate studies. With regards to the respondents occupation, 63.4% were students, 11.9% were engineers, 10.1% were teachers or lecturers, 4.4% were employees, 3.9% chose others, 2.3% were bankers, 1.8% were doctors, 1.0% were accountants, 1.0% were businessmen.

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Reliability Analysis – The reliability test that is used

Instrument Validity – The researchers conducted

in this study is Cronbach’s Alpha. This test is used to determine the reliability and the internal consistency of the data. The reliability of the questionnaire resulted in 0.854, which indicates consistency and reliability. Reliability analysis results are shown in table –1 Constructs PU PEOU Attitudes F1

content validity for all constructs of the study. It was established because most of the questionnaire items were already derived from existing instruments and relevant literature (Mak & Nickerson 2009). The PU items generated in this study were based on Gao, et al., (2012), Wells, et al., (2012) and Bamoriya & Singh’s (2012) scales. The PEOU items were based on Gao, et al. (2012) and Treeratanapon’s (2012) scales. The attitudes items were based on Gao, et al. (2012) and Altuna & Konuk’s (2009) scales. Finally, the FI items were based on Wells, et al.’s (2012: 11) scales.

Cronbach’s Alpha .840** .846** .817** .793**

** All constructs are reliable; more than 0.7

Data Analysis and Results – Results of this study

Table (1): Reliability Analysis

have been analyzed using Regression and ANOVA statistics. Through these tests, the researchers were able to test the hypotheses. Regression helps in exploring the interrelationships that exists between the variables and explains how different variables can predict an outcome (Pallant 2002).

Each variable was then tested separately for reliability and all variables indicated reliability.

Model 1

R .636a

R Square .405

Adjusted R Square .403

Std. Error of the Estimate .56442

Table (2): Regression Analysis 1

Model Regression Residual Total

Sum of Squares Df 82.935 1 122.013 383 204.948 384

Mean Square 82.935 .319

F 260.333

Sig. .000

a

Table (3): ANOVA Analysis When the relationship between PU and FI was tested, R square was equal to .405 which means that around 40% of the variation in FI is caused by the variation in PU. As seen in the ANOVA table above, PU was highly significant with FI. The value is considered significant if it is less than 0.05, which makes these variables

highly significant, as the P value of the variable was equal to 0.000. The significance of the results proves that the hypothesis “PU of Mobile Marketing has a positive effect on FI” is supported. Therefore, H1 is accepted.

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

.634a

.402

.401

.56556

Table (4): Regression Analysis When the relationship between PEOU and FI was tested, R square was equal to .402 which means that around 40% of the variation in FI is caused by the variation in PEOU. As seen in the ANOVA table above, PEOU was found to be highly significant with FI as International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

the P value was equal to 0.000. The significance of the results proves that the hypothesis “PEOU of Mobile Marketing has a positive effect on FI” is supported. Therefore, H2 is accepted.

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Model Dimension

1

R .704a

R Square .465

Adjusted R Square .494


Table (5): Regression Analysis When the relationship between PU and Attitudes was tested, R square was equal to .495 which means that around 50% of the variation in Attitudes is caused by the variation in PU. As seen in the ANOVA table above, PU was highly significant with Attitudes as Model Dimension

1

R .724a

R Square .524

the P value was equal to 0.000. The significance of the results proves that the hypothesis “PU of Mobile Marketing has a positive effect on attitudes towards push notifications” is supported. Therefore, H3 is accepted. Adjusted R Square .523


Table (6): Regression Analysis When the relationship between PEOU and Attitudes was tested, R square was equal to .524 which means that around 50% of the variation in Attitudes is caused by the variation in PEOU. As seen in the ANOVA table above, PEOU was highly significant with FI Model Dimension0 1

R .749a

R Square .561

as the P value was equal to 0.000. The significance of the results proves that the hypothesis “PEOU of Mobile Marketing has a positive effect on Attitudes towards push notifications” is supported. Therefore, H4 is accepted. Adjusted R Square .560


Table (7): Regression Analysis When the relationship between PEOU and PU was tested, R square was equal to .561 which means that around 56% of the variation in PU is caused by the variation in PEOU. As seen in the ANOVA table above, PEOU was found to be highly significant with PU as the P value was equal to 0.000. The significance

Between Groups Within Groups Total

Sum of Squares .135 204.813 204.948

of the results proves that the hypothesis “PEOU of Mobile Marketing has a positive effect on PU of Push Notifications” is supported. Therefore, H5 is accepted. The effect of demographics on FI was tested using the ANOVA tests. Df 1 383 384

Mean Square .135 .535

F .253

Sig. .615

Table (8): ANOVA Analysis


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Gender was found to be highly insignificant with FI as the P value was equal to 0.615. Between Groups Within Groups Total

Sum of Squares 2.277 202.672 204.948

Df 4 380 384


F 1.067

Sig. .372

Table (9): ANOVA Analysis Age was found to be highly insignificant with FI as the P value was equal to 0.372. Between Groups Within Groups Total

Sum of Squares .442 204.506 204.948

Df 2 383 384


F .413

Sig. .662

Table (10): ANOVA Analysis Education was highly insignificant with FI as the P value was equal to 0.662. Between Groups Within Groups Total

Sum of Squares 3.129 201.819 204.948

Df 4 380 384


F 1.473

Sig. .210

Table (11): ANOVA Analysis

The effect of demographics on the FI was then tested using the ANOVA tests. Income was highly insignificant with FI as the P value was equal to 0.210. This implies that “H6: Demographics have an effect on consumer’s FI” was not supported. Thus, H6 is rejected.

Discussion and Conclusions – This paper serves as

a foundation and basis for an enhanced understanding of the consumer’s acceptance and adoption of push notifications. As stated earlier, push notifications are a new mean of marketing communication. Therefore, it was essential to identify the most important factors that affect the consumer’s willingness to adopt it. The aim of this study was to explore the effect of young consumer’s attitudes toward push notifications and FI in Egypt. The research findings were an extension to the marketing communications and mobile marketing literature. The literature tackled the consumer’s acceptance to new technologies and the most noticeable and reliable theory was TRA that was then extended and developed to TAM (Gao, et al. International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

2012). Investigating the effect of TAM variables such as PU, PEOU, and attitudes helped in finding how young consumers responded to this new mean of communication. The findings of the research revealed that PU and PEOU were strong determinants of the consumer’s attitudes and intentions to receive push notifications. PEOU was found to have a strong effect on PU as well. The positive relationship confirmed the findings of previous literature that employed TAM to test the consumer’s acceptance in the business to consumer’s adoption contexts to mobile marketing and new technologies. The first hypothesis of this study “PU of Mobile Marketing has a positive effect on FI” was accepted as PU was highly significant with FI. That was in support with Bamoriya & Singh (2012) that mentioned that PU is a strong determinant of the consumer’s intentions to receive SMS advertising. Furthermore, Wu & Wang (2005) and Du (2012) also mentioned that PU has a strong effect on consumer’s FI and is positively related to the intentions and willingness to use the mobile data services.

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PEOU was also found to be highly significant with FI, which makes the second hypothesis of this study “PEOU of Mobile Marketing has a positive effect on FI” accepted. These results in support with previous literature on SMS advertising as Bamoriya & Singh (2012) explained that PEOU was a strong determinant in the explanation of the consumer’s intentions to receive SMS advertising. However, Wu & Wang (2005) refuted these findings stating that even though previous literature and research stated that the PEOU has a direct effect on the consumer’s FI, it is not a very strong factor in determining the consumer’s FI like other TAM variables. They also stated that PEOU has an indirect effect on the consumer’s intentions through PU. Moreover, PU was highly significant with attitudes. The significance of the results proves that the hypothesis “PU of Mobile Marketing has a positive effect on attitudes towards push notifications” is accepted. PU is a strong predictor of the attitudes of the consumers towards SMS advertising (Bamoriya & Singh 2012). This was in support with Gao, et al. (2012) and Du (2012) who mentioned that PU is the main and the most important determinant of the young consumers attitudes towards mobile marketing. Besides, PU of using the mobile device has a strong influence on the consumer’s attitude. Furthermore, PEOU was also highly significant with attitudes. Therefore, the hypothesis “PEOU of Mobile Marketing has a positive effect on Attitudes towards push notifications” is accepted. However, this was inconsistent with previous findings, Gao, et al. (2012) stated that PEOU was insignificant with attitudes on mobile marketing. Bamoriya & Singh (2012) also mentioned that PEOU was a weaker predictor of the consumer’s attitudes towards SMS advertising. Bamoriya & Singh (2012) also argued that PU was a stronger and more influential predictor of attitudes towards mobile marketing than PEOU because users are more familiar and experienced with mobile marketing. Therefore, PEOU is considered a weaker predictor with regards to the attitudes of the consumers to mobile marketing.


PEOU was highly significant with PU which makes the hypothesis “PEOU of Mobile Marketing has a positive effect on PU of Push Notifications” accepted. These findings were in support with Gao, et al. (2012) who mentioned that PEOU has a significant positive effect on PU and the adoption of mobile marketing. Moving to the effect of demographics on the consumers FI, the responsiveness to mobile marketing is related to demographic variables such as gender, age, and income (Friman 2010: 28). With regards to gender, findings revealed that it had no effect on consumer’s FI. However, findings of previous researches indicated that females are more active and participative to mobile marketing and SMS advertising than men (Friman 2010: 28). Moreover, Luxton & Ferraro (2009: 5) mentioned that males tend to buy items through mobile marketing less than females. Age was also insignificant with FI, which implies that age had no effect on consumer’s FI. However, Friman (2010: 26) and Du (2012: 25) mentioned that age is inversely related to consumer’s acceptability and that younger respondents had more positive attitudes and were more accepting to mobile advertising than elder respondents. Leek & Christodoulides (2009: 46) also added that the age group of 18 to 29 is willing to receive messages that are relevant to them. Nevertheless and as previously mentioned, the sample that was chosen for this study was young consumers due to their faster adoption rates to new technologies. Therefore, one possible explanation to the insignificance of the findings is that all the sample of this study was young consumers and the age intervals were very close. Study findings indicated that education had no effect on consumer’s FI. However, as stated Mak, et al. (2009: 312-313) previous studies indicated that education had a strong and significant effect on the mobile phone usage. More educated and wealthier consumers are more likely to adopt new services and are less price sensitive than other consumers. Results also indicated that there was not any effect on consumer’s FI and that was in support with Friman (2010: 28) who stated that income did not have an effect on the consumer’s perceptions and responsiveness.

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Implications

messages, and informative content (Bamoriya & Singh 2012).

Mobile communications have been experiencing a rapid growth in the past years. This is especially the case after the spread of smartphones such as the iPhone, iPod, Android and others. This growth creates other new opportunities for the advertisers and marketers to reach their target consumers. It is important that marketers recognize and understand the various obstacles and drivers that affect the acceptance of the consumers to mobile marketing practices (Gao, et al. 2012).

As PU and PEOU were found to be significant variables with regards to push notifications, they should be taken seriously by marketers in their advertising messages. Also, as PU has a positive effect on PEOU, this should provide good managerial implications for them to better reach and satisfy their customers. Consequently, increase their FI and adoption rates.

Business sectors that want to develop a smartphone application, must consider the communication channel of push notifications (Push notifications 2011; cf. Local and Push Notification Programming Guide 2011). This is basically because developing mobile applications represent significant marketing opportunities for businesses (Chen, et al. 2012). Therefore, the researcher recommends the businesses that have not yet applied this advertising medium to start considering applying it. Push notifications are relatively a new topic that has not been adequately researched before by academics especially in the Egyptian context. Therefore, this paper is considered a new extension to the mobile marketing literature which provides good theoretical implications to this study. Moreover, the findings of this study propose various managerial implications to the organizations that are involved in the strategies of mobile marketing and the development of such programs. The study also suggests that marketers should know the effect of factors such as PU and PEOU on the attitudes and FI towards push notifications among young consumers.

Limitations and Prospects for Future Research The researcher was exposed to some limitations through the conduction of the research. Firstly, convenience sampling is a non-probability sampling technique that limits the generalization of the findings. Therefore, a probability sampling that would make the findings of the study more generalizable is recommended in future research. Secondly and lastly, literature stated that there are other factors that have an effect on the attitudes and future behavioral intentions of the consumers towards mobile marketing that have not been tested in this study. These factors include personal attachment, privacy concerns, innovativeness, risk avoidance (Gao, et al. 2012), perceived enjoyment, perceived entertainment, image, output quality, job relevance and result demonstrability (Mannari 2011), perceived trust (Bamoriya & Singh 2012). Therefore, the study suggests examining these factors, their roles and effect with regards to push notifications in future research.

In order to increase the consumer’s acceptance to mobile marketing, marketers should focus on enhancing the PU and PEOU of the advertising messages. This is to ensure that the target consumers develop positive attitudes to mobile marketing which would accordingly influence their behaviors and FI over time. Marketers can increase PU and PEOU of mobile marketing by offering incentives, personalized


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Customer Preference of Organized versus Traditional Retail Stores in India: A Comparative Analysis Dr. Riteshkumar Dalwadi, Professor Marketing Humber Institute of Technology and Advanced Learning, Toronto, Canada E-mail: [email protected]

Abstract Retail sector expanding with fastest rate in India. Total retail sector is growing at a much faster rate of 45-50% per annum. From which, organized retail reported 16% for the year 2011-12. At the same time traditional retail formats have predominately covered the market. Now, the retail formats are operating with more sophistication in order to provide a new and distinct experience. The Modern retail stores are providing now a new shopping experience to customers and constantly providing a wide range of choice. In order to know how the modern formats appeals to consumers on different dimensions or parameters various studies were carried out. In the literature the relationship between store attributes and preference for retail format is also examined. This study focuses on, why consumers prefer a modern retail store in comparison with a traditional retail store. Keywords: Retail Formats, Customer Preference, Organized Retailing, Traditional Retailing


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Introduction Retail sector expanding with fastest rate in India. Total retail sector is growing at a much faster rate of 45-50% per annum. From which, organized retail reported 16% for the year 2011-12. At the same time traditional retail formats have predominately covered the market. Now, the retail formats are operating with more sophistication in order to provide a new and distinct experience. The Modern retail stores are providing now a new shopping experience to customers and constantly providing a wide range of choice. The modern formats appeals to the consumers on different dimensions or parameters. However, in the literature the relationship between store attributes and preference for retail format is also examined. There are few past studies, for example, Arnold (1997) and Sparks (1995) have shown in their research work that pricing, product assortment, and customer services are important factors in determining choice of format in the department store context. In addition, according to Baker et al. (1994) and Donovan et al. (1994) mentioned that store environment and atmosphere appear to be influential in consumers’ preferred format decisions. The findings of studies published in the trade literature like Chain Store Age (2004) and Taylor (2003) are similar, identifying product assortment, availability, convenience, and pricing as significant drivers of format preference. Therefore consumers prefer to visit on one of or some of those parameters.

Hence, it becomes very important for organized retailers to know that on which parameters consumers prefer organized retail store than traditional store for shopping.

Research Objectives and Methodology The basic objective of this study is to identify the customer preference parameters for selection of retail stores. It aims to identify the preference parameters for shopping at organized retail stores rather than traditional stores. For this study, an exploratory research design was considered appropriate. The information was collected through a sample survey. Data were collected from the consumers visiting Big Bazaar, D-Mart, Reliance Mart, and Vishal Mega Mart in four major cities of Gujarat state (Ahmedabad, Vadodara, Surat, and Rajkot). Researchers have drawn the samples applying convenience sampling procedure. The sample size was determined applying proportions (determining the sample size when estimating proportions). Considering confidence level of 95 per cent, a margin of sampling error (or precision) of ± 5 per cent, and proportion of a sample for the survey is shown in the following table. Thus, the final sample size was calculated to be 955. Thus, the study attempted to attain sample reliability within ± 5 per cent margin of error at the 95 per cent confidence level.

Table 2.1 Determination of Sample Size City

pa

qb

p*q

SSEc

Std. Value

p*q/SSE

Sample Size (n)

Ahmedabad

0.85

0.15

0.128

0.0025

3.8416

0.000650771

196

Vadodara

0.82

0.18

0.148

0.0025

3.8416

0.000650771

227

Surat

0.81

0.19

0.154

0.0025

3.8416

0.000650771

236

Rajkot

0.74

0.26

0.192

0.0025

3.8416

0.000650771

296

Total Sample Size

955

a. Probability b. 1 - Probability c. Square of sampling error


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The secondary data was collected from journals, magazines, reports, research studies, government publications, professional publications, research organizations and websites. A survey approach was chosen in order to collect data directly from consumers visiting the identified organized retail stores operating in the city of selected cities. A survey methodology permits the use of questions to measure constructs exclusively internal to respondents, e.g. perceptions, attitudes, opinions, intentions, etc., (Cooper and Schindler, 1998), and the answers can be collected and combined to represent the answers of an entire population (Reaves, 1992). At an exit door (store intercept manner) was conducted at storefront with consumers who were asked to fill the questionnaire, used by Rani and Velayudhan (2008) in their study. For the purpose of computing statistical accuracy researchers applied one sample Binomial Test and Percentage & Frequency Analysis. From the calculated outcomes meaningful interpretations were drawn for the organized retail sector.

Literature Review Proximity of Location: Store preference is regarded as a cognitive process and one of the influential factors for the preference of a store is store location. Therefore, at the time of making choice of shopping place consumers assign due importance to the location of a retail store. A study carried out by Baltas and Papastathopoulou (2003) identified store location as a key driver for the choice of a retail store. As pointed out by Kahn and Schmittlein (1989), that store choice has also been found dependent on the timing of shopping trips as consumers may go to a local store (having close proximity of location) for short “fill-in” trips and to a more distant store for regular shopping trips. Parking: Consumers mostly visit the retail store by their personal vehicle, often by two-wheeler or a car in India. Newman and Cullen (2002) mentioned that consumers require plenty of free parking nearby store with adequately spaced places for easier parking. It was further identified that poor and costly parking


services also influence the consumers for their preference to shop at the particular retail store. Range of Products: The most important element of the retail mix is the range of products offered to consumers, which in turn help retailers to make a consumers’ preferred retail store. A study undertaken by Hansen and Solgaard (2004) provides several important findings relevant to merchandise. Product assortment (range of products) was identified as the single most influential variable affecting the preference for retail format. In addition, similar results were produced in a research done by Baltas and Papastathopoulou (2003) where product assortment was one of the key drivers of preference for the kind of a retail store. Price: The consumers’ preference for a particular shopping place is based on the price of the merchandise. According to Sheikh and Fatima (2008), price is perceived as one of the important element in the consumers’ purchase decision and therefore it impacts the store choice decision of them. It is also supported by Bajaj et. al. (2005) that from consumers’ perspective, price is considered always a significant parameter in the purchase decision of a product which in turn influences the store preference decision of consumers. Time Taken for Billing: Today consumers are found with less or no time and hence time taken for billing becomes an essential attribute of the retail store. As mentioned in one of the report published by Orizin Technologies (n.d), long queue at the billing section is one of the most common scenarios visible today at all the retail stores. It was further mentioned that currently the systems installed cannot read multiple items together at the time of billing leading to long queues in front of the billing counter and hence wastage of customer’s precious time. Kushwaha (December/2009) shared that consumers are convinced by all the store attributes but there are still some problems in retail stores, to begin with lots of time are wasted in billing even in festive season and in

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weekdays shopping time are much less than billing time. So, it is posits as under. Noninterference: Today consumers are much confident and it is proposed that consumers are predetermined about their shopping. They do not consider any other’s opinion. Such consumers do not seek any guidance it is regarded as needless interference. Explaining the same issue, Prus (1993) quoted that while consumers are typically envisioned to be skeptical of the retailer they encounter in their shopping ventures. Therefore, noninterference becomes one of the most important parameter for store preference. Courtesy of Employees: The behavior of employees upon store choice has relevance. Employees’ politeness and the interest shown in helping the consumer make his/her decision are important determinants of a store’s preference for shopping, as highlighted by Armistead and Kiely (2003). Fram and Axelrod (1990) explained that courtesy of employees while providing information on product quality is even more important when consumers are buying expensive goods such as electrical appliances. It is reasonable then to assume that employees’ behavior influence the preference for the store format. Discount Offers: Discount offers remain home to plenty of consumer spending. But discount offers should be designed more nimbly to track fickle customer preferences. According to Varley and Rafiq (2004), discount offers stimulate consumers for the limited period of time to stimulate trial or increase in sales. The economic shoppers always take advantage of such discounts and hence it becomes the preference parameter of the store choice for the consumers. So, researcher posits. Accuracy of Weights: Based on the researcher’s discussion with the consumers with respect to accuracy of weights, it was identified that weights might not be accurate at the traditional retail stores especially in case of fruits and loose items. Therefore, researcher has tested here whether consumers prefer organized retail store or traditions retail store based accuracy of weights.


Ambience of the Store: The role of ambience in store choice has also been found significant. Kotler (1973) has proposed atmospherics as an important parameter considered by consumers while visiting retail store. It is also found that the shoppers determine to buy the merchandise based on non-monetary costs including the store atmosphere, noted by Zeithaml (1988). Treblanche (1999) found that ambience (a nonmonetary value) was the major driver for visiting a retail store. The shopping experience, as created by the store environment, has been found to play an important role in building store patronage and making it a proffered shopping place for consumers. Home Delivery: The traditional retailers are ubiquitous and they already offer a very convenient home delivery service in India. Rangaswamy (September/2007) reported that the traditional retailers (mom and pop stores) will dominate the grocery home delivery segment of the Indian retail market. In addition to this, he further mentioned that large retailers, like Reliance Fresh, Trinetra, Spencer Daily, Big Bazaar will not be able to match this home delivery service. It was also reported by him that in the US and Europe the results on home delivery has been mixed. Webvan, Home Grocer, Streamline all folded up. However, Sainsburys, Safeway and Tesco are continuing with the home delivery service. In India Unilever’s Sangam Direct and Fabmart’s home delivery grocery have closed now. Personal Consideration: Li J. et. al. (2009) opined that for retailers, a rich and engaging in-store customer shopping experience is a key to become a proffered shopping store for customers and increasing the value of customers’ shopping baskets. Santosh (2009) cited that big format have the benefit of economies of scale, hence can give huge discount & provide huge varieties. But the sheer number of footfalls makes it very difficult to provide personalized services. Small formats operating on lower customer base should focus on forging personal relationships. Wadhwa (2009) mentioned that establishing customer relationship by providing great shopping experience through personalized service ensures customer loyalty is an important store part of shopping experience.

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Data Analysis and Results For the purpose of analysis and finding the preferred store on particular parameter, the researchers have

organized data in the frequency and percentage of consumers through frequency distribution table as under.

Table: 1: Consumers’ Preference for Organized or Traditional Retail Store vs. Comparison Parameters Organized Retail Store (Modern Store)

N=955 Comparison Parameters

Traditional Store (Conventional Store)

Frequency

Percent

Frequency

Percent

Proximity of Location

750

78.5

205

21.5

Parking

845

88.5

110

11.5

Range of products

853

89.3

102

10.7

Price

751

78.6

204

21.4

Time taken for billing

476

49.8

479

50.2

Noninterference

640

67.0

315

33.0

Courtesy of employees

849

88.9

106

11.1

Discounts offers

875

91.6

80

8.4

Accuracy of weights

830

86.9

125

13.1

Personal consideration

440

46.1

515

53.9

Home delivery

439

46.0

516

54.0

Ambience of the store

854

89.4

101

10.6

The frequency distribution table (Table 5.20) shows that majority of the consumers prefer the organized retail stores than the traditional retail stores on the basis of the identified comparative parameters namely, proximity of location, parking, range of products, price, noninterference, courtesy of employees, accuracy of weights. Whereas around 50% of the consumers prefer both the organized retail stores and the traditional

retail stores on the basis of the identified comparative parameters namely, time taken for billing, personal consideration, home delivery. H1: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on proximity of location.

Binomial Test Preference based on Proximity of Location

N

Observed Prop.

Test Prop.

Asymp. Sig. (2-tailed)

Organized Retail Store

750

.79

.50

.000a

Traditional Store

205 955

.21 1.00

Category Group 1

Group 2 Total a. Based on Z Approximation.

The binomial test significant value (for the two tailed test) is 0.000, where the test proportion value is 50%. Hence the null hypothesis is rejected, and it is obvious that there is significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on proximity of International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

location. At the same time the observed proportions value suggests majority of the consumers (79%) give preference to organized retail store based on the proximity of location. Thus, it may be concluded that majority of the consumers prefer organized retail store based on proximity of location.

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H2: There is no significant difference in the proportions of consumers for the preference

of organized retail store and traditional retail store based on parking.

Binomial Test Preference based on Parking

Category

N

Observed Prop.

Test Prop.


.50

.000a

Group 1


845

.88

Group 2

Traditional Store

110

.12

955

1.00

Total a. Based on Z Approximation.

With the test proportion value of 50%, the binomial test significant value (for the two tailed test) comes 0.000. Therefore the null hypothesis is rejected and it can be noticed that there is significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on parking. On the contrary, the observed proportions value indicates majority of the consumers (88%) give preference to organized retail store based on the

price. Hence the analysis suggests that majority of the consumers prefer organized retail store based on parking. H3: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on range of products.

Binomial Test Preference based on Range of Products

Category

N

Observed Prop.

Test Prop.


.50

.000a

Group 1

Traditional Store

102

.11

Group 2


853

.89

955

1.00


Here, the null hypothesis is rejected as the binomial test significant value (for the two tailed test) is 0.000, with test proportion value of 50%. Hence, there is significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on range of products. In fact the observed proportions value implicates majority of the consumers (89%) give preference to

organized retail store based on the range of products. Thus, it is clear that mostly all the consumers prefer organized retail store based on range of products. H4: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on price.

Binomial Test Preference based on Price

Category

Group 1 Organized Retail Store Group 2 Traditional Store Total a. Based on Z Approximation.


N

Observed Prop.

Test Prop.


751 204 955

.79 .21 1.00

.50

.000a

40


Here the observed proportions value suggests majority of the consumers (79%) give preference to organized retail store based on the price. Though the binomial test significant value (for the two tailed test) is 0.000, considering the test proportion is 50%. Hence the hypothesis is rejected, so it is obvious that there is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on price. Hence,

organized retail store is a preferred shopping place for majority of consumers. H4: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on time taken for billing.

Binomial Test Preference based on Time taken for billing

Category

N

Observed Prop.

Test Prop.


.50

.948a

Group 1

Traditional Store

479

.50

Group 2


476

.50

955

1.00


In case of consumers’ preference for organized retail store or traditional retail store, the binomial test significant value (for the two tailed test) is 0.948 which is almost near to one, keeping the test proportion value as 50%. Hence the null hypothesis is accepted and it is much obvious that there is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on time taken for billing. This suggests 50% of

consumers prefer organized retail store and 50% of consumers prefer traditional retail store based on time taken for billing. H5: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on noninterference.

Binomial Test Preference based on NonInterference

N

Observed Prop.

Test Prop.


Group 1 Organized Retail Store

640

.67

.50

.000a

Group 2 Traditional Store

315

.33

955

1.00

Category


The binomial test significant value (for the two tailed test) is 0.000, where the test proportion is 50%. Hence the hypothesis is rejected, hence it can be noticed that there is significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on noninterference. Considering the observed proportions value, it is inferred that more than of the consumers (67%) give preference to organized retail store based on


the non-interference. Thus it is clear that majority of consumers prefer organized retail store based on noninterference. H6: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on courtesy of employees.

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Binomial Test Preference based on Courtesy of employees

Observed Test Prop. Prop.

Category

N

Group 1

Traditional Store

106

.11

Group 2


849

.89

955

1.00


In case of courtesy of employees, keeping the test proportion value of 50%, the binomial test significant value (for the two tailed test) comes 0.000. Hence the null hypothesis is rejected and therefore, there is significant difference among consumers’ preference for organized retail store and traditional retail store based on courtesy of employees. On the contrary, the observed proportions value indicates majority of the consumers (89%) give preference to organized retail

.50

Asymp. Sig. (2-tailed) .000a

store based on the courtesy of employees. Therefore, it is evident that majority of the consumers prefer organized retail store based on courtesy of employees. H7: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on discounts offers.

Binomial Test Preference based on Discounts offers

Category


The binomial test significant value (for the two tailed test) is 0.000, where the test proportion is 50%. Hence the hypothesis is rejected, hence it is obvious that there is significant difference among consumers’ preference for organized retail store and traditional retail store based on discount offers. At the same time the observed proportions suggests majority of the consumers (92%) give preference to organized retail store based on the

N Observed Prop. 875 80 955

.92 .08 1.00

Test Prop.


.50

.000a

discount offers. This suggests, organized retailers that almost all the consumers prefer organized retail store based on discounts offers. H8: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on accuracy of weights.

Binomial Test Preference based on Accuracy of weights

N

Observed Prop.

Test Prop.


Group 1 Traditional Store

125

.13

.50

.000a

Group 2 Organized Retail Store

830

.87

955

1.00

Category



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Here the observed proportions value suggests majority of the consumers (87%) prefer to organized retail store based on the accuracy of weights. Though the binomial test significant value (for the two tailed test) is 0.000, keeping the test proportion is 50%. Hence the hypothesis is rejected, thus it is clear that there is significant difference among consumers’ preference for organized retail store and traditional retail store

based on accuracy of weights. From this analysis it is evident that majority of the consumers prefer organized retail store based on accuracy of weight. H9: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based ambience of the store.

Binomial Test Preference based on Ambience of the store

N

Observed Prop.

Test Prop.


854 101 955

.89 .11 1.00

.50

.000a

Category


With the test proportion value of 50%, the binomial test significant value (for the two tailed test) comes 0.000. Therefore the null hypothesis is rejected and it is inferred that there is significant difference among consumers’ preference for organized retail store and traditional retail store based on ambience of store. At the same time the observed proportions value suggests majority of the consumers (89%) give preference to organized retail store based on the ambience of store.

So, it can be concluded that majority of the consumers prefer organized retail store based on ambience of the store. H10: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on home delivery.

Binomial Test Preference based on Home delivery

Category

Group 1 Traditional Store Group 2 Organized Retail Store Total a. Based on Z Approximation.

For the home delivery, considering the test proportion value of 50%, the binomial test significant value (for the two tailed test) comes 0.014. So, the null hypothesis can be accepted at lower level and therefore it can be concluded that there is no significant difference among consumers’ preference for organized retail store and traditional retail store based on courtesy of employees. However, the observed proportions value shows 46% of the consumers prefer organized retail


N

Observed Prop.

Test Prop.


516 439 955

.54 .46 1.00

.50

.014a

store based on the home delivery. This suggests that almost equal number (50%) of consumers prefer both organized retail store and traditional retail store based on home delivery. H11: There is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on personal consideration.

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Binomial Test Preference based on Personal consideration

Category

N

Observed Prop.

Test Prop.


.50

.017a

Group 1


440

.46

Group 2

Traditional Store

515

.54

955

1.00


Based on personal consideration, the binomial test significant value (for the two tailed test) comes 0.017, taking the test proportion value of 50%. Hence, the null hypothesis may be accepted at lower level and thus it can be concluded that there is no significant difference among consumers’ preference for organized retail store and traditional retail store based on based on personal consideration. From the observed proportions value it is clear that 46% of the consumers give preference to organized retail store based on the personal consideration. Hence it is clear that based on personal consideration, roughly equal number (50%) of consumers prefer organized retail store and traditional retail store.

Conclusion: From the survey findings it is surmised that majority of the consumers prefer to buy grocery, vegetables, cosmetics & beauty products, and clothes/apparels from the organized retail stores, the percentage of consumers prefer to buy grocery, vegetables, cosmetics & beauty products, and clothes/apparels from the organized retail stores. On the contrary, most of the consumers prefer to buy gift articles, toys, fabric care products, oral care products, stationery, medicines, electronics items, and books & CDs from the traditional/any other retail stores. Whereas around equal number of the consumers have shown the preference to buy cutlery, footwear, furniture, and food products from either the organized retail stores or traditional/any other retail stores. The primary research disclosed that there is significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on proximity of location, parking, range of


products, price, noninterference, courtesy of employees, discount offers, accuracy of weights, accuracy of weights and majority of consumers prefer organized retail stores on the basis of the above store preference parameters. According to survey results, there is no significant difference in the proportions of consumers for the preference of organized retail store and traditional retail store based on time taken for billing, home delivery, and personal consideration as for these parameters almost equal proportion (half) of consumers preferred both organized retail store and traditional retail store.

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Chain Store Age (2004), “Age doesn’t affect buying patterns”, Chain Store Age, June, p. 33. Cooper, D.R. and Schindler, P.S. (1998), Business Research Methods, 6th ed., McGraw-Hill, New York, NY. Cooper, D.R. and Schindler, P.S. (1998), Business Research Methods, 6th ed., McGraw-Hill, New York, NY. Donovan, R., Rossister, J., Marcoolyn, G. and Nesdale, A. (1994), “Store atmosphere and purchase behavior”, Journal of Retailing, Vol. 70 No. 3, pp. 283-294. Fram, E.H. and Axelrod, J. (1990), “The distressed shopper”, American Demographics, October, pp. 5-44. Hansen T. and Solgaard H S. (2004), New Perspectives on Retailing and Store Patronage Behavior: A Study of Entrepreneurship: vol. 4. Kluwer Academic Publishers, Boston, USA. Hansen T. and Solgaard H S. (2004), New Perspectives on Retailing and Store Patronage Behavior: A Study of Entrepreneurship: vol. 4. Kluwer Academic Publishers, Boston, USA.

Rangaswamy R. (September /2007). Can Reliance Fresh, Trinetra, Spencers, Nilgiris, Shubiksha win in the home delivery segment? Retrieved on February 22, 2010 from http://streamlinesupplychain.wordpress. com/2007/09/03/71/ Rani L. and Velayudhan S. K. (2008). Understanding consumer’s attitude towards retail store in stockout situations, Asia Pacific Journal of Marketing and Logistics Vol. 20 No. 3, pp. 259-275 Reaves, C.C. (1992), Quantitative Research for the Behavioral Sciences, John Wiley and Sons Inc, New York, NY. Santosh (2009). “How to build and retain loyal customers in retail stores?” Retrieved on February 22, 2010 from http://toostep.com/idea/how-to-build-and-retain-loyalcustomers-in-retail-industry Sheikh A. and Fatima K.(2008). Retail Management. Mumbai: Himalaya Publishing House. Sparks, L. (1995), “Customer service in retailing”, in Akehrst, G. and Nicholas, A. (Eds), Retail Marketing, Frank Call, London.

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Varley R., Rafiq M. (2004). Principles of Retail Management. New York: Palgrave Macmillan.

Li J., Ari I., Jain J., Karp A. H., and Dekhil D. (2009). Mobile In-Store Personalized Services, Retrieved on February 22, 2010 from http://www.hpl.hp.com/techreports/2009/HPL2009-48.pdf Newman A. J. and Cullen P. (2002). Retailing: Environment & Operations. New Delhi: Vikas Publishing House Private Limited.

Wadhwa A. (2009). “How to build and retain loyal customers in retail stores?” Retrieved on February 22, 2010 from http://toostep.com/idea/how-to-build-and-retain-loyalcustomers-in-retail-industry Zeithaml, V. (1988), “Consumer perception of price, quality and value: a means-end model and synthesis of evidence”, Journal of Marketing, Vol. 52, pp. 2-22.

Orizin Technologies (n.d). Retail Automation Solution, Retrieved on February 22, 2010 from http://www.orizin. net/images/pdf/e0c17c1b2fd2e0b22671c7bad71a0bbd. pdf Prus R. (1993). Shopping with companions: Images, influences and interpersonal dilemmas. Qualitative Sociology, (16) 2, pp. 87-110 retrieved on January 15, 2010 from http:// www.springerlink.com/content/n246501327n40582/ International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

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An Analysis of the Use of Marketing Strategies by Private Universities in Less Developed World: the Case of Yemen Wail Alhakimi Marketing Department, Faculty of Administrative Sciences, Taiz University, Yemen. E-Mail: [email protected] Aayed Qasem Marketing Department, Faculty of Administrative Sciences, Taiz University, Yemen.

Abstract Nowadays, marketing has become a part of the routine activities of many higher education institutions. However, it is still a relatively underdeveloped concept in many parts of the world. Despite its acknowledged significance in the face of new challenges, it has not yet become fully embedded within the strategic operations and vision of many higher education institutions especially in private universities of Less Developed World. This study examined the level of utilization and effectiveness of marketing strategies in Yemeni’s private universities in recruiting first year students. Results showed that marketing plan and resource analysis strategies were highly utilized and perceived to be highly effective, and market segmentation strategy was least utilized. A positive and significant relationship between usage and perceived effectiveness of all of the fifteen marketing strategies exists. Several challenges and recommendations in utilizing marketing strategies were highlighted and discussed in the study. Keywords: Marketing strategies, private universities, Yemen, Less Developed World.


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1. Introduction Recently, Yemen has witnessed a rapid growth in public and private higher education institutions. In the past, many institutions of higher education in Yemen have taken a passive approach to student recruitment. Little numbers of universities and huge number of applicants have resulted in the view of ‘‘marketing’’ the institution to attract better students or increase student enrolments as an unnecessary expense. After achieving unification in 1990 and because of the social pressure, political and marked improvement in natural resources, Yemen had seen a boom in the field of higher education. It continues the opening of universities and colleges, government and private. Until the year 2010/2011, there were more than 30 public and private universities (Alworafi, 2012). Higher education is a complex sector because it is a highly intangible service and a result of interactions with multiple parties (e.g. students, parents, tutors, industry, professional bodies, government, alumni) (Moogan, 2011). The role of the university is that of developing and offering programs believed to be desired by the clients (Maringe, 2005). Nowadays, the marketing environment in higher education is extremely competitive (Mount and Belanger, 2004). Expansion, increasing variety of institutions, growing heterogeneity of higher education products and increasing competition in this growing industry have been the key drivers of higher education marketing (Maringe, 2005). Changes in technology have lowered the barriers of market entry, leading to an increase in both distance-learning and internet-based courses (Naude and Ivy, 1999). As a result of this competition, all higher institutions are becoming increasingly aggressive in their marketing activities (Ivy, 2001). Different philosophies control the universities in the world of education. Etzel et al. (1997) have identified three critical conditions to be met in applying marketing philosophy in the education sector. First is a complete focus on students’ needs in developing qualifications and programs that satisfy those needs. This requires


concerted market research as an integral aspect of the development of curriculum. Second is the need for an integrated effort through coordinated activities ensuring that different departments of university focus on the same mission: that of delivering students’ needs. Third is the related issue of developing a goal achievement orientation. In marketing terms, the success, the quality, and the entire outcome of the university experience should be determined by the extent to which the institution has satisfied its customers. Effective marketing must have an “outside in” or external focus, i.e., the university providing what the community needs. Private universities adopt the competitiveness and profitability philosophy, focusing on advertising. Formal plans are developed to implement the use of marketing techniques at institutions to recruit students (Edmiston, 2009). Overall, literature reveals more higher education institutions are implementing marketing strategies to recruit students.

2. Problem Statement Michael et al. (1995) noted that while marketing is perceived as the cornerstone of the business world, its relevance and applicability to education are controversial and less understood. After World War II, higher education institutions increased their use of marketing techniques to stand out from competing institutions. The essence of marketing a university is the service promise and the customer value offered to the student, whereby the student is acquiring the knowledge and developing their skills in order to gain the qualification and enhance their career (Moogan, 2011). The increasing tuition fees in universities and growth in number of students have increased consumer interest in quality, standards and value for money for higher education (Shah and Nair, 2011). However, most institutions did not use formal marketing plans (Goff, Patino, and Jackson, 2004). Studying potential students’ environment and consumption patterns gives insight into consumer behavior. Indeed, there

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are two perspectives that influence students in their selection of a higher education institution: emotional and rational (Angulo, Pergelova, and Rialp, 2010). This study addressed the following questions: 1. To what degree private universities have utilized marketing strategies, 2. To what degree have the marketing strategies been perceived to assist private universities in recruiting first year students?

3. Research Objective Several objectives are examined in the current study: 1. Identify the level of marketing utilization by private universities in Yemen. 2. Examine the perceived effectiveness of marketing strategies at private universities in Yemen. 3. Examine the nature of the relationship between utilization and effectiveness of marketing strategies. 4. Identify the challenges private universities face in their adoption and implementation of marketing strategies.

4. Literature Review The purpose of marketing is to provide customer satisfaction. An understanding of the changing needs of students can only help to guarantee all round greater satisfaction to the students (Maringe, 2005). Universities’ offerings could be classified into three levels – the core, tangible, and augmented product. Firstly, students are buying the benefits that a degree can provide in terms of employment, status, and lifestyle. Secondly, tangible attributes might include the physical layout of the campus, the library, laboratories and sporting facilities. Finally, the augmented level is made up of intangible attributes such as library membership for graduates, student loans and finance, an employment or placement service (Levitt, 1980). However, Kotler and Fox (1995) argue that students are raw materials, graduates the product, and prospective employers the customer. In fact, in the developed world (very rarely in the less developed world, i.e. in this study Yemen) it is common


these days to see a marketing office designated as such as a stand-alone department within the university system (Maringe, 2005). Curran (2001) has suggested five key strategies which university departments could utilize to support a growing marketing orientation. He has argued for support of senior management, the creation of structures to serve a marketing function, developing an in house marketing training program, hiring marketing trained staff and developing a system of rewarding good marketing practice. Marketing typically moves from selling the institution to a more proactive role of determining future strategies. In the current study, utilization and effectiveness of marketing strategies are examined. Utilization means the degree to which marketing activities are employed by private universities. While effectiveness means achieving the institution’s objectives through optimizing it is resources to achieve good results for both the short-term and long-term. In fact, improving marketing effectiveness can be achieved by employing a superior marketing strategy. Changing demographics, declining government funding, and increasing competition are some of the factors that have recently led many universities to use aggressive marketing strategies (Berger and Wallingford, 1996). Marketing strategy consists of the analysis, strategy development, and implementation of activities in: developing a vision about the markets of interest to the organization, selecting target market strategies, setting objectives, and developing, implementing, and managing the marketing program positioning strategies designed to meet the value requirements of the customers in each target market (Cravens and Piercy, 2009). A marketing plan is a written document that contains the strategies and tactics the institution uses to recruit students. Effective implementation of a marketing plan depends heavily on faculty and staff support of the plan. Therefore, every faculty and staff member is essentially a sales representative for the institution (Reese, 2008). The application of the marketing perspective to higher education does not involve a dramatic shift of power from educator to student, but does suggest that in order

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to achieve quality, the expectations of students need to be taken into account and ideally their views and those of the educators be brought into harmony (Scott, 1999). However, the absence in many universities of forecasting plans, product differentiation documents, customer needs surveys, customer satisfaction records suggest that the marketing function remains at the operational rather than the strategic level in the majority of universities (Maringe, 2005). Two of the steps used in implementing marketing strategies are “perform the resource analysis” and “scan the environment.” Information from environmental scans and resource analysis can help educational institutions in making accurate decisions (Cann and George, 2003). Therefore, it is important for educational institutions to adopt the market orientation philosophy, which is the organizationwide generation of market intelligence that pertains to current and future customer needs, distribution of intelligence across departments, and organizationwide responsiveness to intelligence (Kohli and Jaworski, 1990). The next step in strategic marketing is to formulate goals and objectives. Administrators have the task of ensuring the objectives are met. Goals are measurable tasks that ensure the implementation of objectives (Bloom and Kotler, 1984). In addition, segmentation is an activity that allows the accurate identification of needs in a selected group of the customer base. Degree courses in many universities are often developed on the basis of perceived rather than real needs (Maringe, 2005). The competitive environment of higher education is the main reason that positioning is a concept that higher education administrators should use. Positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers (Kotler and Armstrong, 2012). The higher education literature views positioning as a vital element in developing and implementing successful marketing strategy. That is, positioning allows universities to effectively deal with the reality, that is, institutions are perceived according to their differences, not their similarities (Bingham, 1993). Positioning is commonly viewed by higher education marketers as


the part of the strategic marketing process, where the institution finds a way to fix its product/service in the mind of the target market (Shank et al., 1994) Image studies are a useful method to determine how the institution is viewed through the eyes of potential students (Kotler, 2003). Higher education institutions can use the survey methods to measure familiarity and favorability of the institution. Studying potential students’ environment and consumption patterns gives insight into consumer behavior. There are two perspectives that influence students in their selection of a higher education institution: emotional (i.e. students’ values, needs, wants, and anticipation of higher education) and rational (i.e. quality of faculty and scholastic excellence) (Angulo et al., 2010). Owilia and Aspinwall (1996) found that customerorientation in higher education is a generally accepted principle by most practitioners. The ultimate role of the higher education institution as a product is to fulfill students’ educational needs. Students’ perspectives on selecting higher education institutions depends on many marketing variables, such as the institutional reputation (quality academic programs, athletic program success, and quality of faculty), location of the institution (rural versus urban), cost (tuition, fees, health insurance, accommodation, and other charges), financial aid, and other service programs. Educational service must match with the cost of tuition and fees to an institution. Both services and pricing decision are an important marketing strategy. Furthermore, higher education institutions use promotion incentives to attract students. Several universities in the United Kingdom reward students for selecting their institution with laptop computers, bicycles, sport tickets, and art supplies (Gibbs, 2007). The traditional promotions element of the marketing mix is frequently standard mass media advertising and hard copy promotions like the prospectus and direct mail, but e-documents and the use of technology are becoming increasingly important sources (Moogan, 2011). Universities use advertising as a main promotional tool. It can take a variety of forms such as view books, websites, television, radio, and print advertisements.

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Nowadays, social networking has transformed the method in which people communicate. Higher education institutions maintain a good presence in several social networks such as Facebook, Twitter, and Linked In. Page administrators should post items that are relevant to potential students such as upcoming college entrance test dates, scholarship deadlines, and on-campus preview days (Tariq and Wahid, 2011).

which generally focus on offering courses in specialized areas. The expansion in private universities is attributed to many factors including: changes to government policy related to tertiary education; unmet student demand in public universities; migration policies, which are linked to skills shortages; and huge investments in education by private consortiums (Shah et al., 2013).

4. Research Design

The number of universities in Yemen operating until the year 2010/2011 was more than 30 including 21 private universities (Alworafi, 2012). Table 1 shows the indicators of the universities working in Yemen for the academic year 2009/2010.

The scope of this study concentrated on marketing strategies that are implemented by private universities in Yemen. Students are turning to private universities,

Table 1. The Indicators of Yemeni’s Universities for the Academic Year 2009/2010 University

Private Universities

Taiz University

13

Hodeidah University Ibb University

University Al-Eman University International University of Holly Quran

No. of Faculties 4 4 3

13 8

Al-Andalous University for Technical Sciences Future University University of Modern Sciences

Dhamar University

11

Lebanese International University

4

Hadhramout University

13

Azal University of Sciences and Technology

2

Amran University of Technology

7

Arabian University of Sciences and Technology

4

Albaida University University of Sciences and Technology

2 5

Yemen Jordan University Yemeni University

4 3

Yemeni University National University Queen Arwa University Sabaa University Al-Ahgaff University

4 6 5 5 5

Dar Alsalam University Alnaser University Alhekma University Bin khaldon University International University of Technology Twintech

5 1 3 2 2

Private Universities

Public Universities

Sana’a University Aden University

No. of Faculties 19 20

3 2

Source: Alworafi (2012)

A descriptive survey methodology was adopted. Admissions directors at 21 private universities in Yemen were questioned on their utilization and perceived effectiveness of the fifteen predetermined marketing strategies in their effort to recruit first year students. Respondents were asked to rate their level of usage and perceived level of effectiveness for each


marketing strategy on the Likert scale. In addition, demographic data from each institution were collected and the respondents were encouraged to express their opinions in open ended questions. Several drafts of the questionnaire were evaluated by academic staff in order to increase the content validity of the research instrument.

50


Several data analysis techniques were used, such as frequencies and correlation coefficient to determine the strength of the relationships between usage and perceived effectiveness of marketing strategies. A self-administered questionnaire was distributed to all admissions directors of the 21 private universities. Afterwards, internal consistency was examined; overall Cronbach’s Alpha is 0.95, which indicates high internal consistency among the items representing the construct. Majority of the surveyed universities were local (76%) and only two international universities. More than half of them (60%) have less than 500 first

year students who are enrolling in the class of Fall 2013/2014.

5. Results Only five universities have a marketing department; the rest employed a marketing specialist to conduct the marketing activities (71%). Table 2 summarizes the main results of the frequencies and correlation coefficient to determine the level and the strength of the relationships between usage and perceived effectiveness of marketing strategies.

Table 2. Level of Utilization and Perceived Effectiveness of Marketing Strategies

Frequent

Often

Very Ineffective

Ineffective

Effective

Very Effective

Resource analysis Measuring current and future trends

10%

14%

52%

24%

10%

0

76%

14%

.753

.000*

14%

19%

57%

10%

14%

10%

57%

19%

.902

.000*

Consumer behavior analysis Market segmentation Positioning Product differentiation Product decisions Price decisions Sales promotions Publicity Advertising Online marketing Personal selling Market research Marketing audit

5% 76% 5% 28% 38% 14% 5% 19% 5% 5% 28% 14% 10%

28% 10% 5% 38% 24% 33% 0 14% 10% 29% 10% 24% 5%

48% 4% 52% 28% 33% 48% 76% 67% 47% 33% 24% 52% 52%

19% 10% 38% 6% 5% 5% 19% 0 38% 33% 38% 10% 33%

5% 62% 5% 24% 33% 14% 5% 14% 5% 5% 24% 14% 10%

5% 14% 5% 33% 14% 19% 5% 10% 19% 19% 9% 14% 0

62% 19% 67% 38% 48% 67% 67% 62% 43% 52% 38% 62% 52%

28% 5% 23% 5% 5% 0 23% 14% 33% 24% 29% 10% 38%

.640 .809 .513 .792 .865 .846 .778 .856 .839 .874 .937 .872 .877

.002* .000* .017* .000* .000* .000* .000* .000* .000* .000* .000* .000* .000*

Marketing Strategy

Sig.

Seldom

Pearson Correlation

Effectiveness Rating

Not at All

Level of Usage

* Correlation is significant at the 0.05 level.

The first objective of this study was to identify the level of marketing utilization by private universities in Yemen. The results revealed that majority of private universities have a marketing plan and 90% of them perceiving it as effective or very effective tool. However, only five strategies out of the fifteen marketing strategies emerged with more than 75% of respondents using them frequently or often (i.e.


resource analysis, positioning, sales promotion, advertising, and marketing audit). On the other hand, the least used strategies were market segmentation (76% respondents reported never used), product differentiation (66% respondents reported never and seldom used), and product decision (62% respondents reported never and seldom used).

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In addition, the results revealed that there are other marketing strategies used by private universities, such as SMS advertising, social networks, and positive word-of-mouth by senior students. These results are consistent with Maringe’s (2005) study, which showed that, on the whole, marketing is narrowly perceived as advertising or promotion by both senior executives and marketing operatives in university institutions. He also found that majority of universities used the communication model of marketing rather than a relationship building of the application of the marketing idea. This perception appears to be pervasive across the world in developed and less developed countries (Smith et al., 1995; Naude and Ivy, 1999; Ivy, 2002; Maringe, 2004). The second objective of this study was to examine the perceived effectiveness of marketing strategies at private universities in Yemen. The results revealed that ten strategies out of the fifteen marketing strategies emerged with more than 75% of respondents perceiving them as effective or very effective (i.e. resource analysis, measuring current and future trends, consumer behavior analysis, positioning, sales promotion, publicity, advertising, online marketing, market research, and marketing audit). The least effective strategy as perceived by respondents is market segmentation with 62% of respondents considering the strategy as very ineffective, which justifies it being the least used strategy. These results are consistent with Maringe’s (2005) study, which showed that, the overall perception amongst senior executives and operatives is that marketing is highly valued and indispensable given the overarching forces and challenges universities across the world are faced with. The third objective of this study was to examine the nature of the relationship between utilization and effectiveness of marketing strategies. Table 2 illustrates the significant correlations between usage and perceived effectiveness of fifteen marketing strategies. The results revealed a positive and significant relationship between usage and perceived effectiveness of all of the fifteen marketing strategies. Most of the strategies indicated a strong linear relationship between the two variables (i.e. r > 0.70, p < 0.05). That is, the more frequently admission directors implement the strategy; they perceive it to


be very effective in recruiting first year students. Only two strategies indicated a moderate linear relationship between the two variables (i.e. consumer behavior, and positioning). That is, when admission directors implement the strategy, they perceive it to be least effective in recruiting first year students. The last objective of this study was to identify the challenges faced by private universities in their adoption and implementation of marketing strategies. The respondents were asked to explain the marketing challenges facing private universities in Yemen. Several insights were given such as: • Shortage of financial resources, • Higher education rules in Yemen did not support the private universities expansion strategies, • Difficulties in satisfying public’s needs, • High price sensitivity of Yemeni’s students to the tuition fees, • High promotional costs, and • Intensive competition.

6. Conclusion, Implications, and Recommendations Even though few universities have a marketing department; while most of them employed a marketing specialist to conduct the marketing activities, the results revealed that Yemeni’s private universities intensively utilize and perceived effectiveness of marketing plans. It is the responsibility of the institution to implement the marketing plan after their marketing consultant has formulated it. Several challenges facing private universities in the implementation stage were highlighted by the admission directors such as intensive competition, financial resources, and price sensitivity. Resource analysis was given a significant attention by private universities. The results revealed that Yemeni’s private universities intensively utilize and perceived effectiveness of resource analysis. The resource analysis examines opportunities and threats as external factors that affect higher education. The

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benefit of performing a resource analysis is that institutions can use the data to create strategic plans for the future. The results revealed that market segmentation was not utilized often nor perceived to be very effective in recruiting students. The low usage and perceived effectiveness responses could have been due to the fact that admissions directors did not have a clear understanding of market segmentation. Higher education institutions can employ market segmentation when developing recruitment plans. Market segmentation allows an institution to determine which segment(s) of potential students they desire to recruit to their institution. The results revealed that almost half of the private universities did not utilize consumer behavior analysis. In fact, admission directors should conduct consumer behavior studies for their target markets to determine if potential students are using technology in their daily lives. Studying potential students’ environment and consumption patterns gives insight into consumer behavior. Before an institution can recruit students, it must first learn about its potential student pool. Technology has enabled online marketing to become a permanent tool in the marketing tool box that admissions directors can utilize to recruit first year students. The results revealed that there are other marketing strategies used by private universities, such as SMS advertising and social networks. Admissions directors will increase their usage of online marketing as they become more familiar with the technology. Technology allows admissions directors to track potential students’ responses to online marketing efforts. Social networking sites and search engines have options that permit an institution to track the traffic from advertisements placed by the institution. The admission directors should continue to draw up marketing plans and ensure they implement the following marketing strategies: resource analysis, positioning, sales promotion, advertising, and marketing audit. The respondents perceived those marketing strategies to be effective when they were utilized to recruit potential students.


Several recommendations are crucial to be adopted by higher education sector. It is very important for universities to establish marketing departments so that they can perform important functions such as focus on the customer, monitor the competition, create new ideas, communicate internally, and set the strategy and execute it. Admission departments should conduct professional workshops and training programs to share the best practices in implementing marketing strategies. They should allocate sufficient resources on implementing effective marketing strategies. Future studies should be conducted to investigate marketing strategy usage and actual effectiveness at other higher education institutions, such as twoyear colleges. Furthermore, it should examine how marketing resources should utilize to implement productive marketing strategies.

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Cravens, D. W. and Piercy, N. F. (2009), Strategic Marketing, 9th edn. McGraw-Hill Irwin. Curran, P.J. (2001), Competition in UK Higher Education: competitive advantage in the research assessment exercise and Porter’s Diamond Model, Higher Education Quarterly 26(2): 223-251. Edmiston, D. (2009). An examination of integrated marketing communication in US public institutions of higher education. International Journal of Educational Advancement 8(3/4): 152-175. Etzel, M.J., Walker, B.J. and Stanton, A. (1997), Principles of Marketing, 11th edn, Prentice Hall, Englewood Cliffs, NJ. Gibbs, P. (2007). Does advertising pervert higher education? The case for resistance. Journal of Marketing of Higher Education 17(1): 3-11. Goff, B., Patino, V, and Jackson, G. (2004). Preferred information sources of high school students for community colleges and universities. Community College Journal of Research and Practice 28: 795803. Ivy, J. (2001), Higher education institution image: a correspondence analysis approach, International Journal of Educational Management 15(6): 276-82. Ivy, J. (2002), University image: the role of marketing in MBA student recruitment in state Kohli, A. K. and Jaworski, B.J. (1990). Market orientation: The construct, research propositions, and managerial implications. The Journal of Marketing 54(2): 1-18. Kotler, P. (2003). Marketing Management. Upper Saddle River, NJ: Pearson Education. Kotler, P. and Armstrong, G. (2012). Principles of Marketing. 14th Edn, Prentice-Hall Inc. Kotler, P. and Fox, K. (1995), Strategic Marketing for Educational Institutions, 2nd Edition, Prentice-Hall, Englewood Cliffs, NJ.


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private higher education, European Journal of Higher Education 1 (2-3): 261-273. Shah, M., Nair, C., and Bennett, L. (2013). Factors influencing student choice to study at private higher education institutions. Quality Assurance in Education 21(4): 402- 416. Shank, M. D., Walker, M., and Hayes, T. (1994). Linking the strategic marketing process and marketing research. In Proceeding for the Marketing of Higher Education (pp. 16-20). Chicago: American Marketing Association. Smith, D., Scott, P. and Lynch, J. (1995), The Role of Marketing in the University and College Sector, Heist Publications, Leeds. subsidised universities in the Republic of South Africa, PhD Thesis, University of Leicester, Leicester. Tariq, M. and Wahid, F. (2011). Assessing effectiveness of social media and traditional marketing approaches in terms of cost and target segment coverage. Interdisciplinary Journal of Contemporary Research in Business 3 (1): 1049-1074.


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Determinants of Role Stress in Commercial Banks: Evidence from Pakistan Dr. Rehman Gul Gilal Associate Professor Department of Business Administration Shah Abdul Latif University Khairpur, Pakistan E-mail: [email protected] Rukhsana Gul Ph.D. Scholar Wuhan University of Technology, China E-mail: [email protected] Gilal Faheem Gul Research-scholar Dongling School of Economics and Management, University of Science and Technology Beijing, China E-mail: [email protected]

Abstract This study aims to explore facets of work stress in commercial banks of Pakistan. Sampling unit was employees of commercial banks. Non-probability sampling technique was used in this study, particularly convenience and judgmental techniques were used to choose respondents. Total sample size was 114 (N=114) respondents. Survey technique was used to collect primary data. Exploratory factor analysis (EFA) technique was done for data analysis. The study revealed and confirmed that there are eight factors that cause stress in banking sector of Pakistan, Particularly role enrichment, excess work, role indistinctiveness and self diminution proved to be influential. This study provides some important insights for policy makers, specifically Strategic Managers and Human Resource Managers. The major implications of this study are that, Management should rethink and reconsider the working hours (should be flexible) so that employees can have balance between work and social life. Explicitly major emphasis should be given to the job design; it involves consideration for employees, timely feedback, and appropriate powers and opportunities for employees’ development. Keywords: Role Stress, Role Indistinctiveness, Role Excess, Role Divergence, Self-Diminution, Role Fortification, Role Insecurity, Role Enrichment, Commercial Bank.


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1. Introduction

2. Literature Review

Employees are always wide-open to demanding environment because of radical changes at workplace. Increase in information technology, instantaneous communication, consumerism, targets and competition have transformed the nature of work and job demands (Sparks & Faragher, 2001).Work stress has become the major issue, employees at work place experience stress and even extremely stressed due to their work. Kalia in (2002) put forward, an estimate of World Health Organization (WHO) that mental health disease particularly stress will be second leading cause of disabilities by 2020.

Work related stress is one of the most important issues in many countries including Pakistan. Many aspects of work life are connected with stress. Stress has many negative impacts including physical and psychological problems. According to Beehr et al. (2000: p391) Stress is environmental stimulus that has greater influence on individual performance because they are close to work. Work stress not only has negative influences but also has positive effects on individual performance. Stressor that have positive impact is called positive stressor or challenge stressor because they cause sense of achievement and fulfillment where as Negative stressors or a hindrance pertains to negative outcome such as employees absenteeism, lower productivity, low performance , dissatisfaction with job (Cavanaugh et al. 2000).

Stress at work place has potential to affect the physical and psychological well being of employees, that affect the productivity and functioning of the organization. In the era of high global competition, organizations can only achieve sustained competitive advantage by considering wellbeing of the human resources. As banking sector is considered as high stress work place, current study therefore examines the role stress among the bank employees. In banks, role based factors such as short of power; role vagueness and role conflict can be major determinant of stress (Bruke, 2000). Further research put forward that lack of support, role overload, lack of cohesiveness among group and inequality can contribute to stress of employee (Kumar, 2006 and Driscoll, 1994). Moreover, it is evidenced that in service sector all the employees who have direct interaction with customers and have to fulfill their demands while attempting to fulfill the expectations of management, role stress has been found very imperative, in determining the job satisfaction and commitment to the organization (Dubinsky et al, 1984). So by keeping in mind the above literature there is huge gap in literature do exist about the sources of stress in banking sector of Pakistan. By considering above, it is highly important to examine the sources of role stress experienced by employees in commercial banks. This study will contribute in creating effective strategic management strategies for human resources as organization’s success on resource based view is considered as black box for the organization.


It is specially important to optimize the work place condition to prevent the work related problem as research corroborate that at work place all those factors that affect the individual and requires additional coping strategies will cause the stress and the consequence of stress at work place can affect job satisfaction, job involvement and organizational commitment (Spector, 1997). But contradictory to this, research suggests that stress do not always fallout from pressure itself but rather from the perception of pressure (Jex, 1998). Where as another research suggests that there is positive relationship between stressors and performance for example low level of stress results in low performance and high level of stress leads to high performance (Sullivan, 1992), further more Siu, 2003 find negative relationship between stressor and employee performance, further explore that stress can distort the employee and ultimately results in low performance (Siu, 2003). Research also identified that determinant of stress at work place is job vagueness. If the employee is not well versed about the management’s expectations, scope and responsibilities of task, employees will experience stress. Excess work load and job demand is another major cause of stress, employees in

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banking sector are assigned the tasks that are above the maximum capacity of threshold so they can not justify and maintain the quality of work. As a result of high work load and demand the work occupy major time of the employees’ lives. So they find little time to spend with family friend and religious activities (Jyoti, 2011). Therefore role performed by employee has greater potential for conflict due to which stress may start that may effect the job satisfaction and causes low employees productivity (Pareek, 1993). In addition to this, level of stress in public sector and private sector was measured. Research imply that the employees in public sectors banks experienced more occupational stress on area of role vagueness, role conflict, political pressure and poor peer relations than private sector Bank’s employees. And employees in private banks experience more stress due to overload than public sector employees (Mishra et al, 1997). Too much work pressure may cause the stress, demolition of work spirit, dissatisfaction and absenteeism and even resignation from work (Strahan et al, 2008). Organizations can also suffer due to prevailed stress among their employees. Due to stress employee can loses capacity of work and may tend to leave the organization so organization have to bear the extra training cost associated with new employees due to high turnover (Cartwright and boyes, 2000). According to (Certo, 2003) optimal level of stress is essential for employees motivation towards work and learning but Fevre et al, 2003, disagree with idea of implementation of stress because manager do not exactly knows the what level of stress is optimal for employees and d some goal oriented employees are willingly accepting different kinds of stressors to achieve the goals (Bruke, 2000). One of technique by management to control the performance is MBO. MBO was designed for collaboratively setting goals and performance evaluation system but research suggest that MBO can create hindrance rather than helpful if is not used in its real essence. MBO can fail in practice when implemented for performance evaluation system and it end up with stress (Dinesh and Palmer, 1998).


Research by (Siu, 2003) suggests that stress wastes time & energy the employee spends on coping with stressors there by off-putting the concentration on work and affect the performance. Stress not only affects the mental well being of life it also constitutes a threat for employee’s quality of life and burnout results due too much pressure and few source of satisfaction (Dyck, 2001). Extra working hours or variable working hours is associated with stress as it not only effects the individual health but it also increases work family conflict, when there is no control over the work , people will find little time to spend with family and friends, this will impinge disturbance in life (Yui chi, 2011). Several studies have given various findings about stress and performance and stress coping strategies but there is much gap to analyze the role of stress that create anxiety in banking profession. This study therefore make an effort to identify the causes of stress particularly role stress experienced by employees in banking sector. As banking sector in Pakistan is one of the most up-coming service sector, increased competition at work place has put great pressure on bank employees, specially those employees who have direct interaction with customer are more vulnerable to stress, as on the one hand they have to fulfill the demands of much savvy customers and on the another hand they have to keep into consideration of policies and procedures imposed by regularity authorities. This study therefore provides important insights for strategic managers and human resource managers who make policies and procedures for banks without any consideration of maximum working capacity of bankers.

3. Research Methodology In order to investigate stress caused by role among employees in the banking sector of Pakistan, the employees of commercial banking were chosen as a targeted sample of this study. The non-probability sampling technique was applied, particularly convenience and judgmental techniques were used to choose respondents. The total sample size comprised

58


of equal number of employees from public and private sector banks, which is 114 (N=114). The majority of respondents were between the age limit of 21-30, with

income level ranging from Rs. 20,000 to 200,000. Almost majority of respondents were married.

Table 1 Kaiser-Meyer-Olkin Measure of Sampling Adequacy and Bartlett’s Test of Sphericity

Kaiser-Meyer-Olkin: Measure of Sampling Adequacy. Bartlett’s Test of Sphericity Approx. Chi-Square Df Sig.

Kaiser Meyer olkin which measures the sampling adequacy was .627 and Bartlett’s test of spericity was found to be 583.836 with degree of freedom 114 which is very high for practical significant. In order to measure the role stress among employees of banking sector in Pakistan, the data was collected with the help of a pre-tested instrument known as “Organizational Role Stress (ORS)” developed by Pareek in 2005. This instrument (ORS) is considered as one of the reliable instrument to measure the role stress in the organizational settings (Pareek, 2005). However some modifications were made in instruments by interviewing 50 employees of banks

.627 583.836 114 .000

to fit instrument in the Pakistani context, finally the instrument was finalized after pre-test. Responses on the scale were obtained on five point likert scale alternating from strongly agree to strongly disagree (Vagias, Wade M. 2006). The data was collected through Email and Intranet, questionnaire was sent to employees of various banks as well as data was personally gathered. Total 150 questionnaires were sent and overall response rate was 76% as 114 questionnaires were returned. Reliability of instrument was also measured by chronbach alpha which is found to be .681 that shows the good level of instrument’s reliability.

Table 2: Instrument Reliability

Instrument Reliability--- Organizational Role Stress Items Construct Organizational Role Stress

Number of Items 22

4. Results/Findings The objective of this research was to identify the role dimensions that cause stress among employees in banking sector of Pakistan. Total 21 variables were taken into account. The results of principal components

Reliability Coefficient .681

factor analysis suggested that employees consider eight dimensions of role that causes stress. Factors identified in this research included the role intensity, role excess, role indistinctiveness, self-diminution, role augmentation, role enrichment, role divergence and role fortification (table.3).

Table 3. Result of Eight Factors of Organizational Role Stress Factor

Name

% of Variance explained

Cumulative %

1

Role Insecurity

10.258

10.258

2

Role Indistinctiveness & Ambiguity

9.883

20.141

3

Role Excess

8.247

28.388

4

Self-Diminution

7.885

36.273

5

Role Enrichment

7.651

43.924

6

Role Augmentation

5.993

49.917

7

Role Divergence

5.171

55.088

8

Self-Fortification

4.912

60


59


Eight factors account for 60 % of total variance; it indicates that 60% of variance can be explained by the factors. In addition to that the reliability test of these dimensions were analyzed by chronbach alpha,

the value of chronbach alpha was .681 which is sufficient to show the reliability of variables. The value of communality was also significant which indicates the proportion of variance explained by the variable.

Exhibit 1. Factor analysis (Principal Component, Varimax Rotation)

Factors Item 1 2 3 4 5 6 7 8 Role Insensitivity I am not able to give time to my family because of work

.81 7 My family and friends complain that I do not spend time with them due to .79 the heavy demands of my work role. 6 I have various other interests (social, religious, etc.) which remain .70 neglected because I do not get time to attend to these 8

Role Excess I cannot do much more than what I have been assigned I am assigned tasks without much resource to complete it I have so much work that I do not have time to think about maintaining quality

.76 2 .70 8 .55 6

Role Indistinctiveness I am not clear on the scope and responsibilities of my role I have to work under vague and unclear directions.

.71 3 .70 6

Self-diminution I have been given too much responsibility I should have given more attention to the development of skills which I need If I had full freedom to define my role, I would be doing some things differently from the way I do them now

.73 6 .63 5 .50 0

Role Augmentation I see many growth opportunities for myself I have enough time and opportunities to prepare myself for the future challenges of my role

Role Enrichment

I need more training and preparation to do my work properly I feel that the amount of work I have to do is more than it should be

.82 5 .59 4 .76 7 .60 6

Role Divergence I have adequate knowledge to handle the responsibilities in my role

.712

I am able to satisfy the conflicting demands of various people above me

.612

I am not able to satisfy the demands of clients and others, since these are conflicting with one

-.475

Role Fortification I know what the people I work with expect of me. I want more challenging tasks to do

.80 7 .73 3

Extraction Method: Principal Factor Analysis: Rotation Method Varimax with Kaiser Normalization


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5. Discussions Role Insensitivity: The only three Items loaded in

factor role insecurity including “I am not able to give time to my family because of work”, my family and friends complain that I do not spend time with them due to the heavy demands of my work role”, “I have various other interests (social, religious, etc.) which remain neglected because I do not get time to attend to these” .817, .796, .708 respectively. The high score loadings evinced in this factor, indicating that banking sector causes the work stress due to too much working hours that employees are unable to spent enough time with family and friends. This factor accounts for 10.258% of total variance explained.

Role Excess: Role Excess factor comprised of Items

such as “I can not do much more than I have assigned”, “I am assigned tasks without much resource to complete it”, “I have so much work that I do not have time to think about maintaining quality”. The loadings of this factor suggest that banking sector in Pakistan causes work stress and even that employees are unable to maintain the quality of work. This factor accounts for 8.247% of total variance. Research shows that factor such as inadequate supply of human, physical, financial and informational resources are more likely to be leads to the stress. Therefore, it can be concluded that when employees are given task without adequate resources, it will more likely to be leads to role stress.

Role Indistinctiveness & Ambiguity: is another

major issue at work place of banking sector in Pakistan. The ambiguity in role, such as lack of clarity about scope and responsibilities of job, and lack of comprehension. This factor accounts for 9.883 % of total variance explained. In Pakistani context two statements were loaded in this factor such as “I have to work under vague and unclear directions’, “I am not clear on the scope and responsibilities of my job”. High score loadings were observed on these Items which determine the dimensionality of ambiguous role that causing the stress in banking sector.

Self-Diminution: This factor accounts for 7.885%

of total variance explained. Three items were heavily loaded on this factor including “I have given too much International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

responsibility”, “if I had freedom to define my role, I would be doing some things differently from the way I do them now”. “I should have to given more attention to the development of skills which I need” and the statement “I have given too much responsibility”. Respondents consider assignments of work as diminution in growth because due to excess work load, employees are unable to find enough growth opportunities and could not develop their skills. So according to the employees’ perception in banking sector of Pakistan, too much responsibility is a hurdle in their career growth and success. The overall results suggest that whenever employees feel that the job do not offer him/her sufficient self-grooming capabilities even lessen the existing mental competencies, it is considered as a source for the stress. The items loaded in this factor suggests that when employees feel the blocking nature of work, they seek for the ways to enhance their skills and competencies even they tend to redefine the roles.

Role Augmentation: Three items were loaded on this

factor which include “I see many growth opportunities for myself”, “I have enough time and opportunities to prepare my self for the future challenges of my role”. “As the banking job is repetitive in nature, same job is performed in same way every time no any creativity is involved, therefore it contribute to tiredness and contribute to stress”. This factor explained total variance of 5.993%, high loading on the Items showing the high relevance of nature of work that contribute to stress.

Role Enrichment: This factor has loading Items

from different factors, which indicates differences in culture. Therefore new name role enrichment was given to this factor. The Items loaded on this factor comprise of “I need training & preparation to do my work properly”, “I feel that the amount of work I have to do is more than should be”, and “I feel isolated at work”. The study corroborated that due to intense competition in banking sector, every banks want to capture the maximum market share and attract more customers, therefore employees working in banks are under pressure to meet the target and maximize the productivity level. The factor loading of these Items show that employees consider lack of training opportunities, work load and isolation as basis that causes stress. Most obvious factor in bank found to be

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monotonous jobs that do not call for stretches the nerves so that employee can explore their talent. They mostly do the work and take the decision in a programmed way, which likely to be lead to monotonous and repetitive jobs that ultimately create stress.

Role Divergence: Role divergence plays important

role at work place, which eventually refers that employees are knowledgeable and have adequate information about the work, so this research contributes that when there is lacking on this part, the employees will suffer from the stress. This factor contributes 5.171 % of total variance explained. Employees at work place tend to find new challenging and creative task to accomplish. Change plays an important role to learn new ways of doing things. The statement “I am not able to satisfy the demands of clients and others, since these are conflicting with one another” are negatively related with this factor.

Self-Fortification: This factor measures the role

strengthens nature of jobs. Role fortification is an autonomous role related factor that contributing to stress. It accounts for 4.912% of total variance explained. The only two items loaded in this factor, which have value .807 and .733 respectively. The loading Items show that when the job is not challenging it will be likely to be lead to the stress.

6. Limitations: The results of the study must be interpreted in the lights of limitations. Firstly, the response rate of this study is less than ideal, so this can lead the result in system bias, therefore adequate sample size must be taken to confirm and generalize the results. Secondly, the role stress is multifaceted concept to have thorough analysis of role dimensions that leads stress. Third, the interpretation of stress may be different for different people, it also vary to gender, age and occupation, therefore it may represent the reporting bias as the definition of stress may be different for different people.


7. Conclusion and Implications The study concluded that the role stress in commercial banks of Pakistan can be determined through eight factors which include role invasiveness, role excess, role indistinctiveness, self diminution, role augment, role enrichment, role divergence and role fortification. Further this study contributes some Implications for Top Management (Strategic Managers and Human Resource Managers), that working hours should be flexible so that employees can have balance between work and their social life, Specifically major emphasis should be given to the job design, it involves consideration for employees, timely feedback, and appropriate powers should be given to employees for major decision and actions and providing the opportunities to employees for skills development. Another implication of this study is that, stress is not always dysfunctional; sometimes dealing with stressful situation gives strength to deal effectively with other stressful situation. This study suggests that managers can likely to be obtained rewarding results if they implement training programs. This strategy do not only proved to be effective but also efficient in terms of improvement of outcomes/business results. Moreover this study evidenced that scarcity of resources can obstruct the performance, so therefore management should provide adequate resources and provide appropriate development opportunities to employees. Finally employers and top management of commercial banking sector of Pakistan should use this body of knowledge to rethink and refocus on these perilous issues, which require painstaking attention and provide necessary impulsion for more effective programs that ultimately result in improved performance/business results.

References Beehr, T.A., Jex, S.M., Stacy, B.A. and Murray, M.A. (2000) ‘Work Stressors and Coworker Support as Predictors of Individual Strain and Job Performance’, Journal of Organizational Behavior, 21: 391–405.

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Burke, R. J., (1988), “Sources of Managerial and Professional Stress in Large Organization”, in Cooper C. L., Payne, R. (Eds.), Causes, Coping and Consequences of Stress at Work, John Wiley and Sons, Chicester, pp. 77-112. Burke, R. (2000), “Workaholism in organizations: psychological and physical well-being consequences”, Stress Medicine, Vol. 16 No 1, pp.11-16. Dinesh, D. & Palmer, E. (1998), “Management by objectives and the Balanced Scorecard: will Rome fall again?”, Management Decision, Vol. 36 No 6, pp.363-369. Cavanaugh, M.A., Boswell, W.R., Roehling, M.V. and Boudreau, J.W. (2000) ‘An Empirical Examination of SelfReported Work Stress among US Managers’, Journal of Applied Psychology, 85(1): 65–74. Cartwright, S., Boyes, R.F. (2000), “Taking the pulse of executive health in the UK”, The Academy of Management Executive, Vol. 14 No 2, pp.16-24. Certo, S.C. (2003), Supervision: Concepts and Skill Building, 4th ed., McGraw Hill, New York, NY, Resource Management, International Thomson Business Press, London Dewa , A H Thompson , P JAscob : Relation ship between Job stress and worker perceived responsibilities and the job characteristics, International journal of occupational and environmental medicine, , Vol 2 Number 1; January, 2011 Driscoll, Michael P.; Beehr, Terry A. (1994), “Supervisor Behaviours, Role Stressors and Uncertainty as Predictors of Personal Outcomes for Subordinates”, Journal of Organizational Behaviour, Vol. 15(2), pp. 141- 155. Dubinsky, Alan J. & Yammarino, Francis J. (1984), “Differential Impact of Role Conflict and Ambiguity on Selected Correlates: A Two Sample Test”, Psychological Reports, 55, 699-707. Dyck, D. (2001), “The toxic workplace”, Benefits Canada, Vol. 25 No 3, pp.52. Le Fevre, M., Matheny, J., Kolt, G. (2003), “Eustress, distress, and interpretation in occupational stress”, Journal of Managerial Psychology, Vol. 18 No 7, pp.726-744 Gupta, Palas R. and Adhikari, Ajoy (2008), “Role Stress in Nurses”, The ICFAI Journal of Organizational Behaviour, Vol VII (1), pp. 49-56.

Jex, S. M. (1998). Stress and job performance: Theory, research, and implications for managerial practice. Thousand Oaks, CA: Sage Kalia, M. (2002), “Assessing the Economic Impact of Stressthe Modern Day Hidden Epidemic”, Metabolism, Vol. 51 (6 Suppl 1), pp.49-53. Kumar, Dileep, M (2006), “A Study on Job Stress of Nationalized and Non Nationalized Bank Employees”, http:// www.indianmba.com/Faculty_Column. Pareek, U. (1993), Making Organizational Roles Effective, Tata McGraw-Hill, New Delhi. Sparks, K., Faragher, B., & Cooper, C. L. (2001). Wellbeing and occupational health in the 21st century workplace. Journal of Occupational and Organizational Psychology, 74, 489_509. Spector, P. E. (1997). Job satisfaction: Application, assessment, causes, and consequences. Thousand Oaks, CA: Sage Publications, Inc. Siu, O. L. (2003). Stress and job performance among employees in Hong Kong: The role of Chinese work values and organizational commitment. International Journal of Psychology, 38, 337_347 Strahan, C., Watson, B., Lennonb, A. (2008), “Can organizational safety climate and occupational stress predict work-related driver fatigue?” Transportation Research, Part F 11, pp.418-426. Sullivan, S. E., & Bhagat, R. S. (1992). Organizational stress, job satisfaction and job performance: Where do we go from here? Journal of Management, 18, 353_374. Vagias, Wade M. (2006). Likert-type scale response anchors. Clemson International Institute for Tourism & Research Development, Department of Parks, Recreation and Tourism Management. Clemson University. Yui chi wu ‘job stress and job performance among employees in the Taiwanese Financial Sector : The Emotional Role of Emotional Intelligence Social Behavior and personality, 2011, Society for Personality Research (Inc.), DOI 10.2224/ sbp.2011.39.1.21

Joyoti and Arti ‘Role stress among employees:An empirical study of commercial banks’,Journal of Gurukul Business Review (GBR), Vol.7 (spring 2011), pp.53-61


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The Six Dimensions Model of Competitor Advantage (The Six D’s) FIRST D.: Diagnosing: SECOND D.: Distinguish: THIRD D.: Development: FOURTH D.: Decisiveness: FIFTH D.: Driving: SIXTH D.: Doctrine: Alfred Riachi e-mail: [email protected]

Acknowledgement I would like to dedicate this paper to all who believe that knowledge is a never ending process, and a start for enlightenment. I also dedicate it to the people, whether researches, professors or business-men or women who did achieve and or introduced a new business model, theory, process, thinking, that helped us to be what we are currently became; in particular to those who are no longer with us.

Abstract Due to the last developments, changes, that have been occurred during the last decade, the market power that has transferred from the suppliers to the customers, or what we is called it the customer market [1]. This issue paved the way to a new rivals [2] which later on called competitors [3] to enter the market and to compete with the old organizations, which used to consider themselves dominating their business filed. However, it would be the same case for any new business organization that is willing to accommodate itself in the marketplace in order to grasp part of the market-share [4]. The market is combined of several components and elements that are forming it. Hence, a profound study to the market should be applied on these elements among it the competitors (Historically, a competitor which also called Rival). In my proposed strategy, I will discuss the vision and tasks that any business organization should adopt in order to be efficient in the marketplace and able to compete and perform better in their business arena. Proudly, through introducing the concept of the Six D’s as it will be demonstrated in this paper: Key terms: Competitors, Strategy, Marketplace, Product, Business Organization, Share of Heart, International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

64

Alfred Riachi

The First “D” “Diagnose”

It should be the first homework that a marketer ought to establish, “Diagnose”, but we have to ask ourselves, what we have to diagnose? And by which sequence should we begin first? And when so, is the sequence applicable on both firm and product? Or it should just include the firm’s brand? To answer these inquiries, I would like to demonstrate the following factors that will explain my theory.

The Firm/Product/ Brand Strengths The firm strength [5] /(s) might be varied from a firm to another, since each organization has most of the common points of strength, i.e. brand awareness [6], the positive image, monetary reserve, market experience, advanced (obtained) technology, unique service, solid information and data-base, loyal employees, and having a competent management. These points of strengths whether internal or external should be diagnosed separately in order to perceive the factors that led to one of the particular points of strength that are shown in the current status. An example of that; is when we know that ninety percent of the consumers are aware of our brand elements or name or what are our main POD’s (Points of Difference). Therefore, we have to” Diagnose” the reasons and the adopted schemes that drove for creating this brand awareness and measure its positive outcomes, then research in order to ask ourselves if they were sufficient and efficient? I’m afraid to say if the answer will be negative; it means that we are far behind. Why? When demonstrating any historical case we will find out that there are always changes in the markets, that could be economical (for example when people will reduce their purchases), environmental (for example changes in the atmosphere could lead to reduce buying certain products), cultural and of course behavioral (changes relevant to consumers behavior or trend change) or as a major cause a possible influence which could be applied by the current competitors/products and


by substitute products that could replace our current product/service. Consequently, every organization has to be aware of any potential change and try to hedge itself against any of the mentioned possibilities that could be introduced.

The Firm/Product/ Brand Weaknesses As mentioned above (strengths) will be considered the opposite. Therefore, “Diagnosing” weaknesses take the same importance if not more, as by using the same example what in this scenario that the consumers were not aware of our brand? Then we have to investigate and research and of course as a consequence start planning our strategic objectives in order to enhance our brand awareness. But, the first step should be proceeded is Diagnosing. The proper steps should be diagnosed carefully in order to avoid any side effects which may affect our plans. As a summary, the most important element that we have to take into concern when Diagnosing whether we have more strengths/weaknesses are according to the following: • Diagnosing every single economical issue that could affect the organization (e.g. GDP Growth, Interest rates, Factors which may shift demand or Supply...) • Diagnosing cultural concerns (e.g. the will to buy the product/service without conflicting their beliefs) • Diagnosing all the environmental concerns (e.g. the increased influence of the anti-pollution organization) • Diagnosing the firm, product, brand strengths and weaknesses • Diagnosing the consumers perspectives, preferences, values, (needs and wants) • Diagnosing the competitor’s advantages and disadvantages. By Diagnosing the above mentioned points, we will be able to know why we have to be distinguished and how to apply on our product (s).

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The Second “D” “Distinguish”

To be distinguished, this step is requires various components, e.g. financial structure, an effective R & D system, technology and product/service know-how. Of course every marketer is aware (or have to) about the product/service “Distinguish”. Also, many questions should be raised about How? Why? And When? We will be distinguished.

How The reply for this query, will be more obvious after Diagnosing our product/service in a comportment pilot the organization to acquire a competitive edge, through researching the consumers perceived values and prioritizing them, one by one, in order to receive a clear and lucid information allows us to form a plan and forwarding a strategy, to target the consumers. Distinguish is a principle source of an organization core competency [10]. Figure 1.1 illustrates an example The Product will confer in order to be introduced in a competitive price/Quality/ market/Service

The process illustrated in figure 1.1 is applicable more when having competitive environment. Various concerns are and should be inquired in advanced before deciding differentiating our offerings: • How much we are certain that our offering will satisfy enough our consumers? And even after conducting the necessary researches? what does confirm the efficiency of the outcome? As when Sony Walkman decided to launch a new model with a multiple colors, and they have conducted a research it showed out that the consumers will demand it, but after launching the product, the demand and feedback were negative to convey customer’s needs. • For how long the new product may remain before it will be copied by competitors? • How can we make sure that no other competitor/ competitors will react and introduce a better offering than ours? The answer for these questions is that if we will fail to anticipate the market needs in an effective manner, we have to be ready to adjust our offering (refer to figure 1.1) no matter of how much it will cost the organization as for money, time or energy. Therefore, the distinguishers will and have to lead the organization to have a competitive edge and consequently must enhance the brand equity.

1

Researching prospects who value The Product

Design the of product/service offerings

Launch it to the market

Asses the Demand and Response

Adjust the offering if needed

The Third D “Development”

Development falls into four categories: Developing the human capital. Developing new markets and exploring new segments. Developing the company approach and processes. Developing the products/services Developing the human capital Since the human capital is one of the major source for a successful organization, the organization should expect that its employees loyalty will be affected by providing them with a good and positive relationship otherwise they will not show high loyalty to their own organization.

Alfred e. Riachi, Six Dimensions Six Strategy

Source: Alfred e. Riachi, Six Dimensions Six Strategy

ess illustrated in figure 1.1 is applicable more when having competitive

ment.


concerns are and should be inquired in advanced before deciding differentiating

66

Alfred Riachi

To do that, the organization should offer all the backup for its employees, starting from adopting the organizational approach of internal marketing [7], applying effective induction programs, building and creating reward system in both financial and nonfinancial, strengthening the bond through upward and downward communication, applying socialization events, enhancing the sense of security and develop management by objective [8] policies. Moreover this should not be the only aim of the organization; of course loyalty is important but we should not neglect that the employees should have and willing to develop and update their skills through what the organization offer to them such as training programs and workshops, and what the employee willingness to receive and continue self-development carrier path curriculum. Moreover, the organization has to shift its employees orientations into a marketing orientation approach where each employee has to become a part time marketer to reflect the positive image of the organization in a matter which fall within the organization mission that has to be also a customer oriented mission and not a company oriented mission.

Developing new markets and new segments Developing new markets within the same product could cause to augment the product and organization image and brand exposition in addition to generate sales that may be used in order to reinforce the financial position of the organization, where developing the same Product to other segments will also have the same effects especially if the were accompanied by a careful planning and execution.

Developing the company approach and processes By developing a new approaches such as in the field of relationship marketing [9] or processes such as


delivery process according to the organization nature which might be by utilizing internet application and delivery or going through customization designs.

Developing the products/ services This issue takes a lot of efforts and researchers but as I mentioned, it is a necessary step that should lead to create a competitive advantage over the organization rivals. Consequently, the management have to take into consideration several, factors among which the diversity of products but by maintaining the same core product or when going to diversity to adopt new brand names in order to avoid the new product misconception or diluting the brand image as the case when we go into down-stretch brand extension, and the replacement of the current products that it should adopt and implement.

The Fourth D “Decisiveness”

Introducing a distinguished product or service will not be enough, especially when willing to launch the product/serviced. By being decisive in a market where the competition is fierce. Therefore, when entering a market, we should put within our aims to demolish our competitor’s product before they will knock-out us from the market. As Muhammad Ali Clay used to say; “Hit First, Hit Fast, and Hit Hard”. Of course this does not mean that we want to become the only dominants (but it doesn’t mean that we don not dream to) in the market and to monopole it, but, we shall put one objective, is to be number one in a contest that include many participants, those participants will ultimately reach the finals and will be ranked in various positions [8]. By being Decisiveness, the organization may use numerous ways and methods to be one step ahead of its rivals through establishing and building a strong data-base aiming to analyze the competitors (as shown in figure 1.3) consists of detailed information that should be ordered and prioritorised in a factor lead

67


the organization to exploit their weaknesses, also, we should build a strong security system and process that will not allow our rivals to use the same weapon against our organization. Figure 1.2 Figure 1.2

Analyzing Competitors

Share of Market

Share of Mind

Share of Heart

Source: Philip Kotler, Marketing Management 12 ed. P.345

Mainly, this is not the only factor that will aid our organization to be decisive; we may

Source: Kotler,a new Marketing Management 12set ed. also when forPhilip example introduce product/service, try to concentrate on up P.345 relationships with the competitors customers, through applying orientation schemes directed to them. No doubt that we have to be careful when we use this strategy in order

Mainly, this is not the only factor that will aid our to keep at least a minimum ethical approach, since modern marketing core value is ethics organization toa bad beimage decisive; we may also when for in order to avoid building about the organization. Being Decisive requires do researches as appliedproduct/service, by the competitor’s organization for to example introduce a new try observing their concerns from a different perspective. However we may use in addition to concentrate on set up relationships with the competitors the mentioned a circular strategy when the organization builds other brands in order to customers, through grasp bigger part of the market share. applying orientation schemes Decisive means control the market and in orderthat to control market weto have directed toto them. No doubt wethehave befirstcareful control the minds of the consumers and by doing so the organization shall be a leader in when we use this strategy in order to keep at least a occupying the consumers minds first (as Coca Cola did) or by attacking the competitors minimum ethical approach, since modern marketing position in order to build up a place or a position I the consumers minds. core value intheorder to that avoid An important note is is weethics have to form proper strategy can helpbuilding us to achieve oura bad objectives;about the strategy may organization. vary and will be related to our current situation in the market image the

we are leaders in our market place, our approach should be on defending our position through either attacking our products (example through innovation) or blocking the competitors moves (example when a company launch a new product we counter by introducing a similar one). If we were falling in a situation where we are followers, the approach her should be based on attacking the leader, and this could be done through finding a weakness in the leaders strength in order then to attack it (example of Wall street journal who is divided into two parts, the financial or the strength and the business or the weakness, therefore as a competitors we may introduce a business-week journal to distinguish ourselves and attack their own weakness) and another rule is to launch our attack as narrow as possible (example when encountering a company that has many products we choose to attack one product rather than most or all their products). The rule can also change if were small in the market place where we may flank our competitors through introducing a new product with whom aiming to serve small segment in the market, which will make our task be much easier and also through adopting the guerrilla marketing [11] tactics entail ourselves use small resources against bigger competitors. The bottom of the line we should not allow the competitors to take the initiative no matter what it will be the cost.

The Fifth D

place. Therefore, when and assuming that we are leaders in our market place, our

Being Decisive requires11 do researches as applied by the competitor’s organization for observing their concerns from a different perspective. However we may use in addition to the mentioned a circular strategy when the organization builds other brands in order to grasp bigger part of the market share. Decisive means to control the market and in order to control the market we have first control the minds of the consumers and by doing so the organization shall be a leader in occupying the consumers minds first (as Coca Cola did) or by attacking the competitors position in order to build up a place or a position I the consumers minds.

The Fifth D

“Driving” “ Driving”

The Holistic marketing approach believes that all the organization effort should fall into

The Holistic marketing approach believes that all the organization effort should fall into serving all the consumers’ needs and wants as shown in figure 1.3. Figure 1.3

serving all the consumers’ needs and wants as shown in figure 1.3.

An important note is we have to form the proper strategy that can help us to achieve our objectives; the strategy may vary and will be related to our current situation in the market place. Therefore, when and assuming that Source: Philip Kotler, Kevin-Lane Keller, Marketing Management, 12th ed. P. 18

Figure 1.3

However, being customer-driven is not enough though that it is the ONLY factor that will


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make the organization be distinguished. Quite a few factors, an organization has to take into concern, among them, the economical situation of the market place or places, in

addition to threat that could be imposed by a potential financial collapse; other social factors also should be mentioned e.g. the economical levels and the utilization of income

Alfred Riachi

However, being customer-driven is not enough though that it is the ONLY factor that will make the organization be distinguished. Quite a few factors, an organization has to take into concern, among them, the economical situation of the market place or places, in addition to threat that could be imposed by a potential financial collapse; other social factors also should be mentioned e.g. the economical levels and the utilization of income in the market by the consumers. Therefore this requires adopting a holistic approach starting from studying and researching frequently the various aspects that may affect the consumers. After defining the major concerns related to the market, the organization has to adopt itself in the potential environment changes in order to avoid falling in unpredicted situation that could cause assorted repercussions that might affect the organization image, product or customers. • Now to be market driving this requires the collaboration of ALL the marketing activities and concerns starting from the upper management which should apply an overall strategy encompass the company’s functions and divisions in order to achieve a leading position in the marketplace. However, the company has to start by utilizing and investing its resources in various possessions, starting from the intellectual resources that may generate ideas, plans, strategies, and continuing to financial assets that have to be run in a way that serve the company’s objectives, to the employees to whom it may develop their loyalty, motivation and skills in addition to encourage and promote team-working methods, that also requires the application of integrated marketing through working on stimulating efficient communication mix and keeping on adopting several strategies e.g. Line-Stretch Strategy (the Down-Market Stretch/Up-Market Stretch/Two-Way Stretch); also the process that is concerned with the channel members should be based on a HIGH collaborative policy allowing the company to set-up and receive its products on time or JIT [13] (Just in Time) and of course we should not neglect the process with the intermediaries by whom we have to work to create a mutual trust leads to excellence in


coordination by both parties the organization that usually have to be able to fulfill (e.g. deliver on time and reduce the number of defected products) its promises and the intermediary/intermediaries who have also be able to fulfill their promises (e.g. paying on time); to proceed, today companies and business organizations were taking more seriously the Social Responsibility [14] marketing (or performance marketing), hence, by creating activities and campaigns able to serve the core of social marketing, in addition to maintain and avoid committing actions that could reflect negatively on the organization image or ethics and legal aspects, plus to take into concern the environmental effects and precautions that the organization has to set up standards for. Ultimately, the organization has to set a policy and process lead to enhance the relation with its customers, suppliers and intermediaries, through partnering and communication with the mentioned stakeholders.

The Sixth D “Doctrine”

The doctrine was a successful that made many parties of both political and social in addition sects and religions becoming highly loyal to the beliefs that were introduced by their reference. However, many of what to be considered successful doctrines or credos felt down or face a dramatic decline; we may mention the example of the communism. But the major questions that will come to many of us; how can we do that on something that does not stimulate our inner conscious as the case of a political party or religion, and why business organization did not or failed to implement this concept over their companies or products? The answer is clear and applies on both queries, it is the term PROFIT. Of course this does mean the business organization should transform itself into a charity organization and to become an NGO, but also it should not just aim or short term tactics such as the increase of revenues, profits for the dividends or owners and so on. They have to concentrate on the customer benefits [15], customer socialization [16] and customer share of conscious [9], yes customer conscious through educating our customers about our

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core beliefs and visions which also include our role in the community that it has to educate them about our efforts to provide them with the best. The best products, which are aiming to protect the environment and to provide them (the community) with the best job opportunities, the best financial benefits, socialization approaches and if possible to add structural ties [18]. An example of social approach is when HarleyDavidson [19] the word-famous motorcycle company sponsoring the Harley Owners Group (H.O.G.), which now numbers 700,000 members in over 13, 00 chapters. The first-time buyer of a Harley- Davidson motorcycle gets a free one year membership. H.O.G. benefits a magazine called Hog Tales, a touring handbook, emergency road service, a specially road designed insurance program, theft reward service, discount hotel rates, and a Fly and Rent program enabling members to rent Harleys when on vacation. The company maintains an extensive website devoted to H.O.G. which includes information on club chapters, events, and a special-member section. I would like to say in my opinion that creating a doctrine would be the hardest function that as a marketers may encounter, failure is a possibility, but imagine the success that could be harvested if we were able to position our product or service in the consumers perception as a priority, a must and a factor which may always serve their needs, and not just their pockets. I would like to mention that since the world is changing rapidly and since the rivalry among competitors is increasing, today and even tomorrow, the business organizations have to apply and look differently of how face and encounter their competitors; the solution will be by adopting new approach; how? Of course, the answer is: “the 6 D’s”

Table 1.1 The Six D’s

Table 1.1 The Six D’s

Diagnosing

Distinguish

Develop

Decisiveness

Doctrine

The Human Resource IP The Financial Resources The Human Skills The Prospect Lack of certain products or service The Prospect ability to adopt the changes The Competitors Strengths and Weaknesses Diagnosing the consumers perspectives, preferences, values, (needs and wants) Value proposition Products/services Positioning

The Products/Services Implementing Cost-effective techniques Developing the human capital. Developing new markets and new segments Make the process as Fast as Possible

The Leader should attack himself/& copy the competitive Products The Follower should attack the leader’s strengths/& launch the attack as narrow as possible The Third-Share (s) should flank I uncontested area/ & has the element of tactical surprise, and pursuit The SME, should find a small segment to defend, to never act as the leader, and retreat fast

Create a product/service Doctrine to protect yourself Teach and partner your consumers Create a social benefits with your targeted customer

DoctrineSource: Alfred e. Riachi, the Six Dimensions Strategy

Source: Alfred e. Riachi, the Six Dimensions Strategy

Is the Six Dimensions Strategy just a theoretical approach? A main challenge how managers and businessmen may 17 use the Six Dimension Strategy? We may mention the example of Indevco Group [20], a leading industrial corporation which produces various products ranging from paper, plastic and corrugated packaging, personal care, household and institutional disposables, converting machines, CNC machined parts, develop automation and power distribution solutions, as well as supply renewable energy solutions. The company markets are mainly falling in the MENA region which has more than 10,000 staff and was founded since 1952. Indevco diagnosed its market potentials as well competitors offering where it came up into a new strategy by developing their quality as well markets both demographic and geographic and then went to expand its and thru a product development strategy and then it went into the Integrative Backward integrations and Diversification strategies.


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Alfred Riachi

The company continued to try to distinguish its products thru its R&D by offering quality concerns as well designs. Indevco was able to be decisive when it is keeping attacking its products as well blocking strong competitors’ moves as when one of their main competitors in the tissue market called Mimosa introduced a hygienic tissue, Indevco and thru its subsidiary Sanita by offering the same values of Mimosa. Indevco and through their continues efforts were able to remain in the leadership by being an innovative organization where it was able to capture and improve its share of heart by stressing on the CSR campaigns and engaging in the social concerns such as by employing special need personnel and creating an orphanage organizations as well going through the recycling of the various product that they produce.

References

8. Drucker, Peter F., “The Practice of Management”, 1954. 9. Berry, Leonard (1983). “Relationship Marketing”. American Marketing Association, Chicago. p. 146. 10. Prahalad, C.K. and Hamel, G. (1990) “The core competence of the corporation”, Harvard Business Review. pp. 79–91. 11. Ries, A. and Trout, J. (1981) “Positioning, The battle for your mind”, Warner Books - McGrawHill Inc., New York, 1981, 12. Levinson, Jay Conrad. “Guerrilla Marketing”: Secrets for Making Big Profits from Your Small Business. Boston: Houghton Mifflin Company, 1984. 13. Ohno, Taiichi (1988), “Toyota Production System”: Beyond Large-Scale Production, Productivity Press 14. Freeman, R. Strategic management: “a stakeholder approach” Pitman, 1984.

1. Porter, M.E. (1979) “How competitive forces shape strategy”, Harvard business Review, March/April 1979.

15. BT Gale, RC Wood, “Managing Customer Value” Free Press, New York, 1994

2. Porter, M.E. (1979) “How competitive forces shape strategy”, Harvard business Review, March/April 1979.

16. Kenneth R. Evans, Simona Stan, Lynn Murray, “The Customer Socialization Paradox” Journal of Service Marketing, 2006

3. Porter, M.E. (1979) “How competitive forces shape strategy”, Harvard business Review, March/April 1979. 4. Carlton O’Neal, American Marketing Association, 1968.

17. Paul Kilburn ad Alfred Riachi “Brands vs. non Branded Strategies”, Journal of Marketing p 23, (12, 1 2008)

5. Albert Humphrey, who led a convention at Stanford University in the 1969s. 6. Laurent, Gilles, Jean-Noel Kapferer, and Francoise Roussel (1995), “The Underlying Structure of Brand Awareness Scores,” Marketing Science, 14 (No. 3, Part 2), G170-G79.

18. Leonard Berry and A. Parasuraman, Marketing Services: “Computing Through Quality”, New York, the Free Press 19. www.hog.com 20. Indevco Group, interview with Mr. Nehmat Frem, Indevco Group, CEO, May 2012

7. Burkitt, Hugh and John Zealley: “Marketing Excellence”: Winning companies reveal the secret to their success, Page 295, John Wiley & Sons. International Journal of Marketing Principles and Practices Volume 5, Issue 1(5), November 2014

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