Customer loyalty to food retailers in Northern Ireland: ‘devoted loyals’ or ‘promiscuous switchers’?

Store loyalty is a major challenge for food retailers, and the food retail market in Northern Ireland has been subject to considerable change in the past decade. Although shoppers will often patronize many stores, they typically have a primary affiliation to a ‘main’ food store that captures the majority of their food purchases. This study uses a unique approach to segmenting customers into groups based on loyalty in terms of both the type of data used to generate a loyalty score and the data collection techniques used. Innovative projective techniques have been used alongside traditional questioning techniques to reveal ‘behavioural’ and ‘emotional’ loyalty indicators, and in doing so create a holistic measure of customer loyalty to a main food store, allowing customers to be segmented into groups based on loyalty. A paper‐based questionnaire was administered to 152 food shoppers from throughout Northern Ireland. Responses to traditional questioning formats and projective techniques (cartoon friends and mini case studies) were analysed and used to generate a loyalty score for each respondent. The first group of customers nearly always visit the same store, are willing to recommend the store to others and are less likely to switch to a competitor, even when offered an incentive to do so. They also rate the ‘hard’ attributes of this store highly. As a result of these characteristics, customers in this segment were termed ‘devoted loyals’. The second group of customers may occasionally use a different supermarket for food shopping, some would consider switching to a competitor if offered an incentive, and they rate ‘hard’ store attributes at a slightly lower level than the ‘devoted loyals’. Based on their group profile, these customers were assigned the title of ‘susceptibles’. The third group of customers are less willing to actively encourage friends and family to shop at a specific store. Many in this group did not consider their current store as their number one choice in the next few years. An incentive to switch to a competitor store is more likely to trigger a transfer of loyalty by this group. These customers were termed ‘promiscuous switchers’.     

Profit Maximization and the Market Selection Hypothesis

We examine the proposition that competitive firms must behave as if they were maximizing profits; otherwise they would go bankrupt, or even fail to be financed in a competitive capital market. We investigate a model in which an entrepreneur raises funds for a risky enterprise on a competitive capital market, by offering a "dividend policy" based on the realized (stochastic) flow of earnings. We show that an entrepreneur who maximizes the expected sum of discounted dividends is sure to fail in finite time. On the other hand, many other behaviours yield positive expected profits and are able to attract investment funds, and yet result in a positive probability of surviving forever. As a consequence, if new firms have sufficiently diverse behaviours, then even if there is a constant stream of new entrants, after a long time practically all of the surviving firms will not have been maximizing profits.     

Strategic analysis of petty corruption with an intermediary

This note reports part of a larger study of “petty corruption“ by government bureaucrats in the process of approving new business projects. Each bureaucrat may demand a bribe as a condition of approval. Entrepreneurs use the services of an intermediary who, for a fee, undertakes to obtain all of the required approvals. In a dynamic game model we investigate (1) the multiplicity of equilibria, (2) the equilibria that are “socially efficient”, and (3) the equilibria that maximize the total expected bureaucrats’ bribe income. We compare these results with those for the case in which entrepreneurs apply directly to the bureaucrats.     

Start-Up Capital: "Does Gender Matter?"

Female and male entrepreneurs differ in the way they finance their businesses. This difference can be attributed to the type of business and the type of management and experience of the entrepreneur (indirect effect). Female start-ups may also experience specific barriers when trying to acquire start-up capital. These may be based upon discriminatory effects (direct effect). Whether gender has an impact on size and composition of start-up capital and in what way, is the subject of the present paper. The indirect effect is represented by the way women differ from men in terms of type of business and management and experience. The direct effect cannot be attributed to these differences and is called the gender effect. We use of a panel of 2000 Dutch starting entrepreneurs, of whom approximately 500 are female to test for these direct and indirect effects. The panel refers to the year 1994. We find that female entrepreneurs have a smaller amount of start-up capital, but that they do not differ significantly with respect to the type of capital. On average the proportion of equity and debt capital (bank loans) in the businesses of female entrepreneurs is the same as in those of their male counterparts.     

The Performance Impact of Informal and Formal Institutional Differences in Cross-Border Alliances

This study addresses the simultaneous and diverse effects of differences in informal and formal institutions on cross-border alliances’ financial performance. We utilize data from 405 microfinance institutions (MFIs), based in 74 developing countries, that have alliances with partners from developed countries. We find that the impact of informal institutional differences between MFIs and their cross-border partners is sigmoid-shaped, with performance first increasing, then declining, before improving again as informal institutional differences grow large. By contrast, formal institutional differences appear to be detrimental to MFIs’ performance. Consistent with our prediction, we find that MFIs’ cross-border experience moderates both formal and informal institutional effects.     

Petty corruption: A game-theoretic approach

The paper explores a game-theoretic model of petty corruption involving a sequence of entrepreneurs and a track of bureaucrats. Each entrepreneur's project is approved if and only if it is cleared by each bureaucrat. The project value is stochastic; its value is observed only by the entrepreneur, but its distribution is common knowledge. Each bureaucrat clears the project only if a bribe is paid. The bribe for qualified projects ("extortion") and unqualified projects ("capture") may differ. We identify the nature and welfare implications of different types of equilibria under appropriate technical assumptions on the structure of the game.     

Strategies,Uncertainty and Performance of Small Business Startups

Personal strategies of owners/founders of small business startups are related to performance and to environmental uncertainty. This is done using a longitudinal data set. Personal strategies are operationalized by a behavioral measure of the manners in which small business founders deal with situations. The results suggest a dynamic process between strategy and performance. Business owners that perform poorly employ a Reactive Strategy, with poor performance leading to increased use of reactive behavior. High performing business owners start out focussing on the most crucial issues (Critical Point Strategy), with high performance leading to a more top-down (Complete Planning) approach. These relations are controlled for characteristics of the environment of the firm. Strategy use is dependent upon the type and level of environmental uncertainty. Complete Planning strategy is used less frequently in a fast changing environment and more often in a complex environment. Use of Opportunistic Strategy is negatively related to the complexity of the environment, while the Reactive Strategy is used more frequently in a non-munificent environment. This revised version was published online in August 2006 with corrections to the Cover Date.     

A Learning-Based Theory of Joint Venture Life-Cycles

We provide a two period, learning-based model of joint venture formation and breakdown. We show that depending on parameter values different dynamic patterns emerge. If the rate of learning is low, then a joint venture forms in both the periods. If the rate of learning is large, then the outcome may either involve joint venture breakdown, or delayed joint venture formation.