The effects of competitive context on consumer response to price changes

ABSTRACT

This paper aims to understand how a brand’s price level, relative to its competitors, will affect consumers’ responses to price changes of the brand. The study uses experiments to examine brand choice responses to price increases and decreases across contexts differing in competitor brands and their respective prices. These experiments are conducted with six consumer goods categories. The research identifies three key factors that affect the size of responses to brand price changes – (1) passing a competitor brand’s price, (2) narrowing versus widening the price gaps with competitors, and (3) whether competitors are predominantly higher or lower priced brands.     

The impact of brand equity and the hedonic level of products on consumer stock-out reactions

We investigate the impact of brand equity and the hedonic level of the product on consumer stock-out responses. We also examine whether the hedonic level of the product moderates the effect of brand equity. Using a sample of Dutch consumers divided over eight product groups and eight retail chains, we tested our hypotheses and found that consumers were more loyal to high-equity brands than to low-equity brands in the case of a stock-out situation. In hedonic product groups, consumers were more likely to switch to another store. Purchasers of high-equity brands in hedonic product groups were, compared to purchasers of high-equity brands in utilitarian product groups, less inclined to postpone the purchase but were more likely to switch to another item by that brand. In addition to these two main variables, we also investigate the effect of variables from prior research and some new variables, such as stockpiling and impulse buying. Finally, we discuss the theoretical and managerial implications of the findings.     

Mining the text of online consumer reviews to analyze brand image and brand positioning

The growth of the Internet has led to massive availability of online consumer reviews. So far, papers studying online reviews have mainly analysed how non-textual features, such as ratings and volume, influence different types of consumer behavior, such as information adoption decisions or product choices. However, little attention has been paid to examining the textual aspects of online reviews in order to study brand image and brand positioning. The text analysis of online reviews inevitably raises the concept of “text mining”; that is, the process of extracting useful and meaningful information from unstructured text. This research proposes an unified, structured and easy-to-implement procedure for the text analysis of online reviews with the ultimate goal of studying brand image and brand positioning. The text mining analysis is based on a lexicon-based approach, the Linguistic Inquiry and Word Count (Pennebaker et al., 2007), which provides the researcher with insights into emotional and psychological brand associations.     

Slowing the adoption and diffusion process to enhance brand repositioning: The consumer driven repositioning of Dunlop Volley

What should you do when your brand becomes ‘hot’ overnight among influential endorsers? Do you exploit this sudden rise in popularity and mainstream the brand, or do you attempt to slow the diffusion process and seek to understand how to market to these consumers? Drawing on the case of Dunlop Volley in Australia, we argue that mainstreaming the brand by targeting later adopters results in a short-term fashion cycle rather than creating long-term brand value. Since these brands are ‘discovered’ by consumers, marketers must first understand the value system underlying this adoption and then fit the marketing program to these values. In the case of Dunlop Volley, slowing diffusion rates was achieved through four tactics: the rejection of hard sell marketing, appearing authentic, targeting alternative distribution channels and delaying launch to the mainstream audience. These activities ensured the ongoing credibility of the brand with endorsers and helped revitalize a long-thought ‘dead’ brand.     

Interacting contributions of different departments to brand success

Adopting a grounded theory perspective, this research investigates the roles and interactions between marketing, customer services and human resources (HR) in driving success in UK financial services brands. CEOs/MDs, Directors of Marketing, HR and Customer Services, their line reports, front line staff and their agencies from 2 successful and 4 less successful financial services corporations participated in depth interviews for this project. Marketing strategically defining the brand, HR aligning policies behind the brand and customer services staff being brand exemplars enhances brand success. Organizations should abhor power struggles as no one department is critical — rather working together is key. The brand fulcrum model helps managers and researchers appreciate the harmonious activities of brand guardians (marketing), brand enablers (HR) and promise delivers (customer services). Favoring one department shifts the brand center of gravity resulting in an unstable state, which more equitable responsibility allocation resolves.     

Effectiveness of corporate responses to brand crises: The role of crisis type and response strategies

Brand crises are adverse events that threaten brand reputations. Research indicates that corporate responses to crises play a role in restoring brand equity. However, there is confusion as to the best type of response. On the one hand, there is a strong advocacy for a singular type of response strategy, corrective action, regardless of the crisis type, while on the other, there is support for a contingency-based view suggesting that the relative efficacy of responses depends on other factors. We contribute to this contingency-based view by comparing the efficacy of three major response strategies (denial, reduction-of-offensiveness and corrective action) in restoring post-crisis brand confidence and choice likelihood. We find that the relative effectiveness of response strategies depends on the nature of the brand crisis. Consequently, a “one type fits all” strategy for post-crisis responses can be suboptimal. We discuss the implications of our findings and provide directions for future research.     

Understanding the omnichannel customer journey: The effect of online and offline channel interactivity on consumer value co-creation behavior

Building on the service dominant logic, this study explores the effect of online and offline channel interactivity on consumers’ value co-creation behavior (VCB), the mediating effect of brand involvement, and the moderating effect of cross-channel consistency (CCC). We surveyed 387 customers who engage in omnichannel shopping. The relationship between online and offline channel interactivity and VCB was positive and partially mediated by brand involvement. The interaction effect of online channel interactivity (ONI) and offline channel interactivity (OFI) had a negative effect on brand involvement when CCC was low but a non-significant positive effect when CCC was high. These findings enrich the theoretical understanding of value co-creation and provide insights into omnichannel management.     

Applying the multisensory sculpture technique to explore the role of brand usage on multisensory brand experiences

Service firms have turned their attention to the design and development of multisensory brand experiences to positively influence customer satisfaction and brand loyalty. However, the role of brand usage and the application of effective sensory evaluation techniques have been overlooked when designing multisensory brand experiences. The current research addresses this gap by conducting sixteen interviews employing the multi-sensory sculpting (MSS) technique with heavy and light customers (classified based on the extent of brand usage) of a restaurant. The results show that it is important to consider how heavy and light users receive, select and ascribe meaning to sensory experiences to design effective multisensory brand strategies. Moreover, the MSS technique is recommended as an effective means to understand consumers’ perceptions of multisensory brand experiences.     

Consumer reactions to olfactory congruence with brand image

Store managers tend to select odors based upon their pleasing nature without taking into account the notion of congruence between the odor and the brand image. Studies have explored the effects of odors, but little attention has been paid to olfactory congruence, and even less to olfactory congruence with the brand image. This study investigates the impact of olfactory congruence with the brand image upon consumers. The results show the positive effect of olfactory congruence upon spending, attitude, pleasure, arousal, and perception of the store atmosphere. In the strong olfactory congruence condition being tested, these reactions are more positive than in the weak congruence and control conditions.     

Exploring the impact of different factors on brand equity and intention to take up online courses from e-Learning platforms

Understanding service branding from the customer perspective is helpful for various organizations to attain a competitive edge and build a strong customer base. This research work aims to evaluate the various dimensions and constructs that affect brand equity and user's willingness to undertake courses from various e-Learning providers. Data for the quantitative study was obtained using a questionnaire based survey. Analysis of the 378 responses reveals that consumer experience is a strong predictor of both brand meaning and customer satisfaction. Although brand meaning positively impacts brand equity, brand awareness demonstrates a negative effect on brand equity. However, brand equity and customer satisfaction have a significant and positive impact on intention to undertake courses from online learning platforms. The study concludes with discussion on different implications, shortcomings, and directions for future research.     

Connected consumers' responses to negative brand actions: The roles of transgression self-relevance and domain

Brand misdeeds abound in the marketplace, but prior research indicates that having a strong connection with a brand buffers consumers from adverse effects of brand transgressions. However, the present research questions the scope of this buffering effect. The studies in this research demonstrate that strongly connected consumers are not so forgiving of a brand transgression if the brand's actions are personally relevant to them or if the negative actions are of an ethical nature rather than related to product performance. In particular, this research finds that the well-documented buffering effect emerges only when negative brand actions are not self-relevant for the individual consumer and the negative actions lie in the product, not ethical, domain. Therefore, contrary to the findings of prior research, connected consumers' brand attitudes are far from immune to brand misdeeds. Implications for managing brand crises conclude the article.     

The effect of advertising on brand awareness and perceived quality: An empirical investigation using panel data

We use a panel data set that combines annual brand-level advertising expenditures for over three hundred brands with measures of brand awareness and perceived quality from a large-scale consumer survey to study the effect of advertising. Advertising is modeled as a dynamic investment in a brand’s stocks of awareness and perceived quality and we ask how such an investment changes brand awareness and quality perceptions. Our panel data allow us to control for unobserved heterogeneity across brands and to identify the effect of advertising from the time-series variation within brands. They also allow us to account for the endogeneity of advertising through recently developed dynamic panel data estimation techniques. We find that advertising has consistently a significant positive effect on brand awareness but no significant effect on perceived quality.

Explaining Competitors' Reactions to New Product Introductions: The Roles of Event Characteristics,Managerial Interpretation,and Competitive Context

Competitive reactions to new product introductions can be explained by observable characteristics related to the event, and by the interpretations of these factors by the defending competitors. A general model of competitive response is developed to explore the mediating role of interpretation factors between event characteristics and reaction decisions, and to study the contextual factors that moderate the relationship between event characteristics and interpretations. Results clearly demonstrate that if the interpretation factor is not taken into account researchers may overlook the influence of important variables explaining competitive reactions. Also, results indicate heterogeneity among managers regarding their interpretation of observable characteristics. Possible moderating factors are explored. The outcomes of this study are important both for new scientific insights in competitive reaction decision making, and for managers who act in the competitive arena.     

The impact of mergers and acquisitions on brand equity: A structural analysis

An overlooked strategic benefit of mergers and acquisitions (M&As) is their impact on brand equity. M&As may affect consumer brand preferences, which in turn will affect a firm’s profit. We develop a structural model with a difference-in-differences specification to measure how M&As affect a firm’s profit through three mechanisms: brand equity, cost synergies, and product portfolios. We analyze Lenovo’s acquisition of IBM’s PC division in China’s PC market and find that the increase in brand equity contributed the most to increasing Lenovo’s profit, followed by cost synergies. To explore the generalizability of our modeling approach, we apply it to Geely’s acquisition of Volvo and also find that the gains in brand equity contributed the most to Geely’s profit increase.     

Strategies to offset performance failures: The role of brand equity

In this research, we examine the role of brand equity as a strategy to offset the negative effects of a performance failure. Two independent studies, spanning four industries and involving 669 respondents are employed to investigate this issue. Results suggest that high brand equity leads to more favorable satisfaction evaluations and behavioral intentions than low brand equity. The brand equity effect is identified as a prevailing advantage that spans the entire failure and recovery sequence. This is an important finding because it implies that the advantages of high brand equity theoretically can apply to all failures, not just those for which recovery is attempted. Further inspection, however, reveals that despite the prevailing advantage, high-equity brand failures lead to a more drastic decline in customer evaluations immediately after the failure episode. Managerial implications and future research are addressed.     

Effects of the perceived diagnosticity of presented attribute and brand name information on sensitivity to missing information

Four experiments demonstrated that as the perceived diagnosticity of the presented information increases, sensitivity to missing diagnostic information decreases. However, experts were sensitive to missing information regardless of the diagnosticity of the presented attribute information. When a well-known brand name was paired with the attribute information, novices were insensitive to missing information regardless of the diagnosticity of the presented attribute information. Implications of the results for understanding information utilization and omission neglect are discussed.     

Building strong brands in Asia: selecting the visual components of image to maximize brand strength

Asian brands have often struggled to develop quality images. The visual aspects of branding have received little attention on how they might be used to strengthen brand perceptions in Asia. Guidelines for designing visual brand stimuli are developed using evaluations of logos in China and Singapore. There is a significant relationship between design and the responses companies seek, including positive affect, perceptions of quality, recognition, consensus in meaning, and feng shui. How designs are perceived, and their effect on consumer responses, were similar between China and Singapore. Companies are encouraged to leverage design to strengthen their brands. In particular, they should select logo designs that are elaborate, natural, and harmonious as these created positive affect and quality perceptions, clear meaning, true recognition, and feng shui. Many of these relationships hold in the United Sates as well, implying that the visual aspects of brand strategies may accomplish companies' goals across international borders.     

Exploring origins of ethical company/brand perceptions: Reply to Shea and Cohn's commentaries

This article responds to key questions that Shea (2010) and Cohn (2010) raise on Brunk's (2010a) work on consumer perceived ethicality (CPE) of a company or brand and expands on suggestions for further research. In particular the response here (1) considers concerns of generalizability, impact of cultural context, and transiency of the domain of CPE framework, (2) offers new insights into the complex and dynamic nature of CPE and its formation, (3) discusses issues relating to ethical consumption behavior, and (4) concludes with a debate on managerial implications including real-life strategic as well as operational challenges of effective CSR management.     

How to retain customers in omnichannel retailing: Considering the roles of brand experience and purchase behavior

The opportunities and challenges of omnichannel in retail industry have been widely discussed, yet despite these benefits, the key elements that constitute an effective omnichannel and how customers respond to omnichannel retailing strategies remain unclear. This research conducted online surveys to test the effects of omnichannel elements on various brand experiences and customer retention, considering the moderating role of purchase behavior. The results indicate that omnichannel elements (integration, individualization, and interaction) are generally helpful in retaining customers, through omnichannel elements influence brand experiences differently. In addition, these omnichannel elements have different influences on customer retention due to different purchase behaviors. The findings suggest that retailers can use different omnichannel strategies to attract customers’ purchases and provide insights for practitioners who want to use omnichannel strategies to deliver superior experiences for customers.     

Brand positivity and competitive effects on the evaluation of brand extensions

The dominant approach in brand-extension research has focused on the role of fit in the extension evaluation process. Overemphasis on fit has resulted in research designs that involve singular evaluation of the extension without considering how competing brands in the target category might affect the evaluation of brand extensions. Singular evaluations are known to result in brand positivity effects; that is, brand extensions are evaluated more favorably than is warranted. This research finds that singular evaluations do indeed lead to brand positivity effects. However, brand positivity effects are mitigated when respondents were provided with competitive information along with target-category structure and comparative/non-comparative brand positioning statements. Results also suggest that parent brand-extension fit, though an important determinant of an extension's assessment, plays a less critical role in a comparative evaluation context when an extension's brand strength is accounted for in relation to its competition in the target category. Therefore, the findings stress the importance of both competition and parent-brand fit in making informed positioning decisions and more realistic predictions of extension success. The research demonstrates when, how and to what extent comparative evaluations result in lower extension ratings and provides managerial strategies to introduce an extension effectively.