John Dawes

DO DATA CHARACTERISTICS CHANGE ACCORDING TO THE NUMBER OF SCALE POINTS USED? AN EXPERIMENT USING 5-POINT, 7-POINT AND 10-POINT SCALES

To what extent does the number of response categories in a Likert-type scale influence the resultant data? Surprisingly little attention has been paid to the issue of whether the response category format has any influence on data characteristics such as the mean, coefficient of variation, skewness and kurtosis. This issue is important for several reasons. The first is that decisions are made based on outcomes such as the mean score. For example, marketing organizations and research providers use Likert type scales to measure constructs such as customer satisfaction. In this situation a higher score is better. Could the score have been comparatively better if a different scale format had been used? There is an absence of evidence on this issue. The second reason is that scale formats that are used in on-going market research projects such as tracking studies occasionally change. Can the old results be re-scaled or transformed to be comparable to data from a new scale format? Again, little is known about this. The third reason concerns data characteristics such as variation about the mean, skewness and kurtosis. Analysis tools such as regression are often used on data of this type to explain the variation in certain variables. If there is little variance in the data, this is harder to do. How does scale format affect these characteristics? The answers would be useful to both market researchers as well as academics. A literature review found that little work has been done on this issue. Therefore, this study set out to investigate the impact of scale format on data characteristics. It examined how using Likert-type scales with varying numbers of response categories affects the resultant data in terms of mean scores, and measures of dispersion and shape. Three groups of respondents were administered a series of eight questions (group n’s = 300, 250,185). Respondents were randomly selected members of the general public. A different scale format was administered to each group – either a five-point, seven-point or ten-point scale. The surveys were conducted by a professional market research organization via telephone interview. Data characteristics of mean score, standard deviation, skewness and kurtosis were analyzed according to scale format. The five and seven-point scales were re-scaled to a comparable mean score out of ten. The study found that the five and seven-point scales produced the same mean score as each other, once they were re-scaled. However the ten-point format tended to produce slightly lower relative means than either the 5 or 7-point scales (after the latter were re-scaled). The overall mean score of the eight questions was 0.3 scale points lower for the 10-point format compared to the 5 and 7-point format. This difference was statistically significant at p=0.04. In terms of the other data characteristics, there was very little difference among the scale formats in terms of variation about the mean, skewness or kurtosis. Therefore each of the three formats appears comparable for the type of research project in which multiple-item scales are analyzed with multivariate statistical methods. This study is also ‘good news’ for research departments or agencies who ponder whether changing scale format will destroy the comparability of historical data. Five and seven-point scales can easily be re-scaled with the resultant data being quite comparable. In the case of comparing five or seven-point data to 10-point data, a straightforward re-scaling and arithmetic adjustment easily facilitates the comparison. Finally, it appears that indicators of customer sentiment – such as satisfaction surveys – may be partially dependent on the choice of scale format. A five or seven-point scale is likely to produce slightly higher mean scores relative to the highest possible attainable score, compared to that produced from a ten-point scale.

Market Orientation and Company Profitability: Further Evidence Incorporating Longitudinal Data

This study examines the association between market orientation and company profitability. It incorporates two methodological approaches that have generally not been used in previous research. First, it uses lagged company and environmental control variables in the data analysis, to better discern their effects on profitability and, hence, clarify any relationship between market orientation and perfor Mance. Second, it analyses the individual components of market orientation and their relationships with business profitability separately. The study finds that, of the components of a market orientation, a competitor orientation emerges as the variable with the strongest association with perfor Mance. This association is robust in two models, one with solely cross‐sectional data, and the other with lagged control variables. In simple terms, the strongest distinguishing feature of high‐profit firms in this study is that they are very attuned to the activities and characteristics of competitors. For managers, this reinforces the view that while a customer orientation is vital, competitor intelligence activities may also be a key factor in ensuring high perfor Mance. The implication for researchers is that each component of market orientation should not necessarily be assumed to have equally strong associations with profitability.

The Effect of Service Price Increases on Customer Retention: The Moderating Role of Customer Tenure and Relationship Breadth

This study examines the impact of actual price increases on customer retention in a service context and how the effect of a price increase is moderated by both tenure and breadth of the customers relationship. The study finds that tenure is associated with lowered customer sensitivity to price increases as well as having a favorable direct effect on customer retention rates. The study also finds that relationship breadth can exacerbate the adverse effect of price increases on customer retention. Finally, relationship breadth is found to have a favorable direct effect on retention rates only among newer customers. The managerial implication is that marketers must pay extra attention to short-tenure and broad-breadth customers when implementing price increases. The study represents a unique contribution to the service marketing literature, which to date reports little research examining the effect of actual price changes on consumer behavior.

Assessing the impact of a very successful price promotion on brand, category and competitor sales

Many studies have examined the short‐term and long‐term effects of price promotions. This study adds to previous research by examining, in some depth, the effects of a massively successful price promotion in a consumer goods category. This study sought to determine if this large price promotion had any: longer‐term effect on brand volume; short‐term effect on total category volume for the retailer; short‐term effect on competing retailers; and longer‐term effect on category sales for the retailer that ran the promotion. The results showed that this promotion did not have any longer‐term (positive or negative) effect on the brand, but it did expand the total category for the retailer, albeit temporarily. Sales dropped slightly for one competing retailer at the time of the promotion, but not for the other two retailers in the market. Finally, the study found that the promotion was followed by a decline in total category volume for the retailer, suggesting some degree of purchase acceleration or stockpiling by consumers. The results suggest that the longer‐term negative effect on category volume cancelled out approximately two thirds of the gains of the price promotion to the retailer.

It's a Dirichlet World: Modeling Individuals' Loyalties Reveals How Brands Compete, Grow, and Decline

ABSTRACT The Dirichlet is one of the most important theoretical achievements of marketing science. It provides insights into the distribution of consumer loyalties and is used widely in industry for benchmarking and interpreting brand performance. The Dirichlets implications run counter to some well-entrenched marketing pedagogy and so, unsurprisingly, it has attracted criticism arguing that it cannot adequately reflect the dynamic nature of consumer choice. The authors address these criticisms by discussing how consumer loyalties are manifested and examining whether changes in consumer loyalties do, in fact, disrupt Dirichlet buying patterns. To the best of our disciplines knowledge, based on extensive empirical and theoretical work, brands compete in a Dirichlet world.

Comparing retailer purchase patterns and brand metrics for in-store and online grocery purchasing

Abstract Online shopping is growing rapidly in many sectors, particularly in the retail grocery sector. The rise of online shopping poses some questions for retailers and manufacturers. First, to what extent does the online mode attract other retailer’s customers, as opposed to one’s own current in-store shoppers? Second, is online shopping resulting in more retailer cross-purchasing by consumers? Next, does brand loyalty differ across in-store and online? Lastly, how do private labels perform online compared to in-store? Using data from multiple categories in the UK, this study finds that (1) online sales for a retailer come disproportionately from its own in-store customer base; (2) there is an ‘online-buying’ market partition across retailers; (3) online-induced retailer cross-purchasing is increasing over time; (4) brand loyalty is somewhat higher for online purchasing; and finally (5) private-label brands enjoy slightly higher market share online than in-store.

Price changes and defection levels in a subscription‐type market: can an estimation model really predict defection levels?

This paper examines the relationship between price changes and customer defection levels in a “subscription”‐type market, namely car insurance. Two regression models are constructed to estimate this relationship, one model for younger customers and another for older customers. The regression models closely estimate the defection rates associated with different levels of price changes. The analysis also shows that the impact of price decreases on defection rates is less than the impact of price increases, extending previous research. The paper notes that models of this type should offer true predictive ability and therefore tests the ability of the model to predict defection rates for new data. The models performed comparatively poorly in this regard, particularly for price increases. The paper concludes that multiple sets of data are needed to develop and validate predictive models.

Loyalty to price tiers in purchases of bottled wine

Purpose – Investigates the purchasing of brands across different price tiers. The purpose was to determine if buying across price tiers followed the same pattern widely found in brand purchasing, known as the Duplication of Purchase Law.Design/methodology/approach – Uses a consumer survey methodology, using bottled wine as an example category. It provides evidence that while buyers exhibit repeat‐purchase loyalty to price tiers, they also buy from a repertoire of different price tiers.Findings – Finds that sharing of purchases with other price tiers does approximate the Duplication of Purchase Law. That is, a price tier shares customers with other price tiers approximately in line with the overall popularity of those other price tiers. This suggests that competition between price tiers is largely predictable, and based on the prevalence of purchases at each tier. However, there is also consistent “partitioning” where adjacent price tiers share customers to a greater extent than would be expected under the...

Recall of radio advertising in low and high advertising clutter formats

This study investigated the relationship between radio advertising clutter and advertising recall using the Australian radio market as a test case. The term ‘clutter’ is defined here as a greater number of advertisements in a given time period. The study used an experimental design in which certain groups of participants were exposed to a radio format with high advertising clutter, while others were exposed to a low-clutter format. The ‘low-clutter’ respondents recalled as many ads on average as the ‘high-clutter’ respondents. Since the low-clutter respondents were exposed to far fewer ads, the proportion of ads recalled by the low-clutter respondents was more than double that of the high-clutter respondents, and this effect was consistent across multiple recall measures. That is, the low-clutter participants were twice as likely to recall a particular advertisement among those ads to which they were exposed. They were also twice as likely to correctly recall the product category the advertisement was for, and were twice as likely to correctly identify the advertised brand. In addition, the respondents exposed to a low-clutter advertising environment showed almost three times greater prompted advertising recognition. The study also tested the relationship between position in the advertising block and the recall of the ad. Ads that were placed at the start and end of large blocks of ads were better recalled than ads in the centre of such large blocks. This effect was comparatively stronger for ads at the start of a block and weaker for ads at the end of a block. These results suggest that low-clutter stations are justified in charging a price premium. Exactly how much this premium should be depends largely upon the measure of effectiveness used, but based on advertising recall the price premium could be double. More research is needed to establish a suitable premium and to extend the findings of this study into a real-life radio listening environment.

Can a brand outperform competitors on cross‐category loyalty? An examination of cross‐selling metrics in two financial services markets

Purpose – Many service organisations seek to grow by selling additional different products to their existing customers. Many managers are evaluated on the level of customer loyalty in terms of cross‐product holdings – for example, the average number of bank products or insurance policies held per customer. The purpose of this paper is to provide managers and researchers with some contextual knowledge and norms concerning “cross‐category” loyalty.Design/methodology/approach – In order to compare the levels of loyalty for competing brands, five relevant loyalty metrics were used in the analysis, with data sourced from two service industries, banking and insurance.Findings – The results show little variation in loyalty scores between competing brands, and what variation there is can be explained by historic factors, without reference to CRM strategies. This suggests that investments into CRM and cross‐selling initiatives seem to have less effect on loyalty metrics than many marketing textbooks and CRM advoca...