Introduction The importance of customer loyalty to business success in consumer marketing is universally understood. However, little research – empirical or theoretical – has been done as to the effect that new media technology has upon consumer loyalty, and what organizations and marketers can do to remain competitive. Specifically, the ambiguity brought on by the swift infusion of new media technologies into the mainstream of the consumer purchase decision cycle and how it is affecting consumer loyalty, and in turn, the bottom line.
Therefore, the objective of this article is threefold; first, to investigate and report on the ever-changing new media technology landscape; second; offer recommendations for managers to establish and/or maintain a sustainable competitive advantage, and third, propose the potential for further research. This article also touches upon concepts and theories about consumer brand loyalty that are rooted in the mass market consumer package goods marketing era of the 1960s and 1970s, the grocery scanner years of the 1980s and 1990s, through to the present day. However, it is acknowledged that given the changes that have occurred in the marketplace over the past four to six years alone, these approaches and concepts may not be relevant. This seems particularly true in an interactive marketplace where customers have a wide choice and almost unlimited access to product and brands. This -œpower shift- to the consumer is due in large part to their access to product evaluations, intelligent shopping agents, and a myriad of other information sources designed to provide them with instantaneous knowledge and many more options. Many of the factors that provide -˜stickiness’ to a consumer-brand relationship of trust, perceived value and customer service, and the expected benefits from such a relationship, were investigated through an internet-based survey utilizing a questionnaire and some follow up personal interviews, based on defined constructs, using tentative measures developed from personal experience and exiting literature. Marketing literature indicates that new media technologies can have advantages in providing fertile ground for extending consumer loyalty. However, concerns were noted and subsequently supported by the qualitative research about: ? Preferences and values of consumers; ? Attitudes towards marketing in general; ? New media technology experiences The results of the qualitative research were that, with a moderate degree of confidence, it can be stated that the relevant issue is not new media technology versus traditional media; it is old versus new media practices. New media technology experiences are now shaping what consumers want from both marketing and media. In summary, this has fundamental implications for the communications models underpinning marketing, media buying and creative strategy – from traditional media-based models to new techno/media-based models. Therefore, the research hypothesis was rejected and it was concluded that the marketing practices with the greatest potential to build consumer loyalty may require significant innovations and creative advances in both execution and measurement of marketing. However, it should also be noted that demonstrating the failure of a null hypothesis does not necessarily mean the corollary is proven. In fact, due to the stronger links to individuals, new media technologies may have the potential to deliver even more saturation, clutter and intrusiveness than traditional media, in which case new media technologies may have the potential to only worsen consumer’s resistance to marketing in general. CHAPTER 1: INTRODUCTION AND STATEMENT OF THE PROBLEM 1.1 Introduction and Background Consumer loyalty is a marketing topic that has been forcefully debated while being generally misunderstood; including what exactly constitutes a loyal consumer, why and how customers remain loyal and indeed how to prevent consumer defections. In recent years, the more traditional approaches to marketing have become rapidly replaced by a series of trends whereby marketers are redirecting their efforts to new media technologies in the hopes of bolstering sliding consumer attitudes towards their brands and marketing in general. Some of these developments include: ? Companies whose brands create a method of innovation breed excitement and ownership amongst their customers. These same consumers enjoy the feeling of being behind-the-scenes and in control of shaping new products and brands. This desire comes from a consumers’ need to distinguish themselves from the rest of the crowd, and offers the flexibility and efficiencies inherent in new media technology (Brown, 2005). ? Embedded advertising is the digital equivalent of product placement, and takes the form of hypertext links in web-based content, according to a recent Deloitte Research study. As the user’s mouse pointer passes over relevant keywords or objects, small pop-ups appear with a web link to the advertised product. This technology has the potential to stimulate brand awareness, offering new opportunities for marketers to communicate directly with the target audience in a manner that is less intrusive and annoying than many of the more traditional techniques. (Deloitte Research 2005, p.5). ? Music marketers have been the first to emerge as the masters of new media technology by embracing, rather than rejecting, the web as a distribution channel. The growth of music downloads has been fueled most heavily by the popularity of the iPod and the growing quality of online music stores, some of which outperform top retail stores with respect to choice, price, ease-of use and speed of purchase (Deloitte Research 2005, p.3). ? For those consumers that require information on-demand, there is ‘Ready To Know-, technology which enables the user to point their cell phones at any product’s barcode and then get instantly directed to a website on their phone screen where they can view and purchase the item. The same is true for consumers who hear an unknown song while listening to the radio or sitting in a restaurant. They only need enter a number, point their phone to the music source, hit send, and a text message is received with the name of the artist and track, along with purchase information (TrendWatching.Com). These and other trends make the need for enduring consumer loyalty an ephemeral requisite in light of rapidly emerging media technologies, and the reality that brand competition may continue to exponentially breed innovation in the area of new media technologies, and vice-versa. For example, in the retail industry the speed of technological advances and the pace at which the industry has embraced the internet and other forms of new media to reach their consumers has been, in short, and exercise in survival. Many tough questions are also raised for businesses trying to make the most these new channels of consumer communication and interactivity, along with a number of key themes and trends. In 2005, high-speed internet access reached critical mass, representing 41 percent of US online households and 46 percent of European online households. Publishers, advertisers, merchants, and telecom providers have all begun to adapt their strategies accordingly. Advertisers and media companies are using rich media and streaming video content as they become increasingly aware of the effectiveness that these capabilities have on consumer interactions with their brands. Meanwhile, high-speed internet access providers are exploring new strategies for countering churn and optimizing high-speed service bundles (Schatsky 2005). However, as Schatsky (2005) explains, home networks are continuing to flourish and are being used principally for convenience (for example, sharing high-speed broadband connections or printers), but increasingly for entertainment (e.g., streaming music from PCs to stereos). Jupiter Research (2006) estimates that the number of US households with a home network has grown 30% in the past year, and by 2010, 94% of households with home networks will be wireless. As Schatsky (2005) describes, vendors are tapping into consumers’ desire for entertainment functions, creating new classes of services on top of these networks. These services include providing links back to home networks from outside the home, and new classes of devices that extend, share, and enhance the core functionality of PCs through remote access and improved connectivity. In the home, these new vendor offerings affect devices such as game consoles, digital video recorders, DVD burners, and media hubs. Outside the home, they affect devices such as phones, digital cameras, portable media players, personal digital assistants, and game devices. Intel refers to these developments collectively under the rubric of The Digital Home (Intel 2006). As audiences are fragmenting, channels are proliferating for reaching consumers. For the most part this dynamic is being fueled by the growing popularity of a few enabling technologies such as rich site summary (RSS), peer-to-peer, satellite radio, and voice over Internet protocol (VoIP). In particular, Schatsky (2005) describes RSS as having a dramatic effect on the channels through which consumers experience news and media, as RSS fuels both blogs and next-generation news aggregation services. Savvy marketers are embracing cross-channel synergistic strategies with an eye on the rapidly expanding universe of options available to consumers. As Schatsky’s convergence puzzle illustrates in Figure 1.1 below, this cross-channel mandate is becoming increasingly important and challenging – one that is unlikely to abate in coming years. Figure 1.1: The Network/Device Convergence Puzzle (from Schatsky, 2005) As consumer loyalty diminishes, businesses in a myriad of industry sectors are confronting the challenge of restraining customer acquisition costs by retaining customers. For example, Jupiter Research (2006) data shows loyalty to retailers is down; wireless, broadband, and cable providers commonly experience monthly churn rates of 1.5 percent to three percent or more; and online travel consumers, seeking the best deal, use an average of 2.5 sites and off-line agents in their research process. Companies may want to consider looking beyond conventional loyalty programs to find new ways to keep hard-won customers from wandering. According to Schatsky (2005) another reality is that the growth of the online population is slowing, and the composition of the population is changing, with comparatively older and less affluent users having representation in proportion to their share of the population overall. The Internet and other new media technologies may well continue to remain arenas of great creativity, innovation, and growth, compelling marketers to improve their targeting of specific populations to make efficient use of resources. 1.2 Problem Statement Creating and maintaining consumer loyalty may not be as straightforward as providing superior customer service and therefore there are often concerns and risks involved as to the effectiveness of such a program. Furthermore, much of the literature on consumer loyalty is generic or focused on service or personalization of messaging, so it is not immediately obvious what the advantages and issues would be for both established and emerging brands considering the explosive growth of new media technologies. To address this issue, this article investigates the current thinking, theories and best practices with regard to consumer loyalty and technology; it looks at the benefits and issues of new media technology described in the literature and also from my own professional experience. It then evaluates, using an attitude survey and personal interviews, whether new media technology can be effective in extending consumer loyalty for both established and emerging consumer brands. This article contributes to the understanding of consumer loyalty in that it supplies new data and analysis (from the survey data and the analysis, and my own professional experience) but it also provides evidence to support or disprove the theory that new media technology can be effective in extending consumer loyalty for both established and emerging consumer brands. CHAPTER 2: REVIEW OF THE LITERATURE This literature review starts with an examination of consumer loyalty and its importance in marketing, followed by a review of the writing and research around consumer loyalty evaluation. These concepts have applicability to any study of consumer marketing because loyalty, of course, is intrinsic to the success of consumer brands. The review then continues with a look at a simple model summarizing the key drivers of customer loyalty relationships, and the role of technology in relationship contexts. As with any relationship-related study in marketing, one must include a focus on loyalty as they are both so closely intertwined; hence, this literature review begins with a look at consumer loyalty. 2.1 Consumer Loyalty Clearly, the marketing landscape has changed over the past decade. Consumer attitudes and opinions, shaped by years of ever-changing product experiences, advertising messages, and competition for share of wallets, have necessitated fresh marketing strategies. Strategies that not only tackle such issues as brand name reputation, and communication techniques, but approach the customer experience holistically. After all, consumer trust, satisfaction, service quality and perceived value are not fabricated from viewing a solitary print advertisement or television commercial, but rather from their collective experience with a particular brand. Looking at consumer loyalty research performed over the last several decades, the study of this concept has roughly gone through three stages. First, most of the earlier investigators focused on only one dimension of consumer loyalty – either behavioral or attitudinal. Second, models combining both behavioral and attitudinal dimensions of loyalty were developed. Third, the more recent studies include multiple attitudinal or psychological facets of consumer loyalty which has led to a more profound and integrated understanding of loyalty overall. As stated, the majority of early studies of consumer loyalty looked only at the behavioral dimension -œloyalty to a product or service was simply viewed as the consistent purchase of one brand over time- (Backman & Crompton, 1991b). According to Pritchard et al., Jacoby and Chestnut investigated these behavioral approaches and divided them into the following four groups (Prichard, Howard, & Havitz, 1992, pp.156-157). The first group interpreted loyalty according to the purchasing sequence of a particular brand (Prichard, Howard, & Havitz, 1992, pp.156-157). The second group defined loyalty on the basis of -œthe proportion of purchase devoted to a given brand.- For example, Ross M. Cunningham, the former chairman of the American Marketing Association (1947), used the proportion of purchase to index consumers’ loyalty. The third group applied probability models to analyze purchasing behavior of consumers. Ronald E. Frank (1962) used -œa simple chance model- to investigate repeat purchase probabilities. The fourth group defined consumer loyalty by integrating several behavioral variables (Prichard, Howard, & Havitz, 1992). Burford, Enis, and Paul (1971) put forward an index that combined three measures of behavioral loyalty – -œper cent of budget, allocated to the store or brand, amount to switching, and number of alternatives.- Although the behavioral approaches mentioned above are easily operationalized (i.e., defined so that results could be measured or expressed quantitatively), they have many weaknesses as a theoretical framework to study consumer loyalty. From the late 1960s, some students of consumer loyalty even started to criticize behavioral loyalty (Howard, Edginton, & Selin, 1988, p. 42). As far as measurement is concerned, because behavioral conceptualization of consumer loyalty depends on observable and overt behaviors, it was doomed to make mistakes such as classifying some consumers as loyal in one study while non-loyal in another (Backman & Crompton, 1991b, p. 206). Moreover, the failure to identify the relationships between loyalties measured by different pattern of use -œled researchers to conclude that brand loyalty encompasses more than repeat use- (Backman & Crompton, 1991b, p. 206). Conceptually, Day (1969) noted that behavioral models could not discriminate between -œtrue- or intentional loyalty and -œspurious- loyalty (Backman & Crompton, 1991b; Prichard, Howard, & Havitz, 1992). Day (1969) and Jacoby (1971) proposed that the attitudinal dimension should be introduced to the conceptualization of loyalty to better understand consumer loyalty. Pritchard et al. (1992) even quoted Jacoby’s words that -œto exhibit brand loyalty implies repeat purchase based on cognitive, affective, evaluative and predispositional factors – the classical primary components of an attitude- (1971, p. 26). These early researchers not only looked at the behavioral part of consumer loyalty but also at the psychological side. Prichard, Howard, and Havitz (1992) briefly reviewed this research noting that scholars such as Guest, Monroe, and Guiltinan, Bennett and Kassarijia, Jain, Pinson, and Malhotra all made efforts to study consumers’ attitudes or intentions. However, studies focusing on attitudinal loyalty only, just like a behavior-only approach, had their limitations. According to Prichard, Howard, and Havitz, many loyalty theorists found that these early studies of attitudinal components of consumer loyalty lacked theoretical conceptualization. A result of this lack of theoretical focus is seemingly the multitude of measures that sometimes confound researchers even to this day. Examination of the theoretical and empirical rigor underlying the development of various attitudinal measures raises some construct validity questions (Prichard, Howard, & Havitz, 1992). In sum, most early definitions of loyalty focused on one side of consumer loyalty which was not only superficial but also insufficient. Therefore they were vulnerable to critiques. Consumer loyalty as a two-dimension approach soon replaced the one-dimensional perspectives. As noted by Jacoby and Chestnut, neither behaviors nor psychological attachments alone could well explain consumer loyalty (Backman & Crompton, 1991a, p. 2). Therefore, a model that integrated both the behavioral and attitudinal dimensions of consumer loyalty came into being from the critiques of earlier one-dimensional approaches of loyalty studies, especially behavioral loyalty. Day found that the index, based on his two-dimension definition of consumer loyalty that combined both behavioral and attitudinal dimensions, had the predictive power twice that of the behavioral approach (Selin, Howard, Udd, & Cable, 1988, p. 220). Olson and Jacoby’s six-point definition of loyalty (1971), following the line of Day (1969), -œempirically corroborated the idea that both -œcognitive- and -œbehavioral- parts of loyalty were -œseparate-” and -œidentifiable- (Backman & Crompton, 1991b, p. 207). Olson and Jacoby (1971) defined the loyalty as -œa biased, behavioral response, expressed over time, by some decision making unit, with respect to one or more alternative brands out of a set of such brands, and is a function of psychological processes- (Prichard, Howard, & Havitz, 1992, p.159). This was -œwidely accepted as the conceptual basis for loyalty research- (Backman & Crompton, 1991b, p. 207). According to Selin et al. (1988, p. 219), the two-dimensional model suggested by Day and Jacoby was further clarified in one of Jacoby’s articles with Kyner (1973). They used a two dimensional definition of loyalty, which included both repeat purchase and attitude of consumers, that became -œthe definitive measurement standard- of consumer loyalty studies. Many researchers applied this two-dimensional model to investigate consumer loyalty. Most representative is Backman and Crompton’s (1991a) operationalization of this approach in loyalty research. After reviewing the conceptualization of loyalty by the earlier researchers such as Pessemier, Day, Olsen and Jacoby, Howard, Edginton, and Selin, Backman and Crompton (1991a) used attitudinal and behavioral scores to segment respondents in their studies. A 13 item (semantic) differential scale was used to measure -œparticipants’ general feelings toward the activities- (p.208). Then used was a two-dimensional matrix to distinguish four discrete levels of loyalty. A -œfour-quadrant matrix served to classify participants into specific groups by weak or strong attitudes and high or low behavioral consistency- resulted (Mahoney & Howard, 2000, p. 16). Consumers were then divided into four groups with different levels of loyalty: low loyalty (weak behavioral consistency and weak psychological attachments); latent loyalty (weak behavioral consistency but a strong psychological attachment); spurious loyalty (strong behavioral consistency but a weak psychological attachment); and high loyalty (strong behavioral consistency and a strong psychological attachment) (Backman & Crompton, 1991a). Mahony and Howard (2000, p. 17) believed that Backman and Crompton’s research improved -œthe understanding of loyalty because their two-dimensional operationalization not only -œreaffirmed and extended Day’s claim- about loyalty but also -œprovided important insights into the complexity of the construct- (Mahony, Madrigal, & Howard, 2000). After Day (1969) and Jacoby (1971) first proposed that the concept of loyalty should include both attitudinal and behavioral facets, a consensus that loyalty is a -œtwo-dimensional construct- and -œto measure loyalty necessitates assessing both affective attachment to an activity as well as measuring behavioral use of the activity- was developed (Backman, 1991, p. 335). This two-dimensional approach combines both the psychological and behavioral facets of consumer loyalty. Therefore it advanced the understanding of loyalty by overcoming the weaknesses of one-dimensional approaches. However, most two-dimensional studies of consumer loyalty were lacking in that the measurement of psychological attachment of consumers was very complicated. For example, the operationalization of Backman and Crompton’s attitudinal loyalty was far from sufficient (Mahony, Madrigal, & Howard, 2000, p.17). The further investigation of the attitudinal dimension in recent years has led to the conceptualization of consumer loyalty as a dynamic process. In recent years, many researchers have paid attention to the many-sided complexities of consumer loyalty, especially the attitudinal dimension. For example, Prichard, Howard, and Havitz (1992) noted that the commitment as a component of attitudinal loyalty attracted great attention from researchers of loyalty in the past decades. According to Prichard et al. (1992), the multidimensional models of commitment, based on Buchanan’s (1985) three-dimensional definition of commitment (behavioral consistency, affective engagement, and degree of investment), paralleled the studies of composite loyalty. In addition, Prichard et al. (1992) believed that Crosby and Taylor’s (1983) conceptualization of commitment, which included -œcognitive consistency-” and -œposition involvement,- -œcould provide a sound theoretical basis for operationalizing the attitudinal dimension of recreation loyalty.- These relational studies of multiple dimensions facilitated the understanding of the concept of consumer loyalty and are more comprehensive than the earlier approaches. This path analytic model furthered the investigation of the method by which individuals’ loyalty develops. Although less prudent than earlier models, it provides a perceptive speculative framework for additional studies of consumer loyalty. This article has made every effort to review the evolution of the concept of consumer loyalty. By looking at a several decade exploration of loyalty, the development of consumer loyalty studies has been divided into three stages. The early approaches focused on only one dimension of consumer loyalty — either behavioral or attitudinal – and therefore were insufficient. The second stage was a composite loyalty approach which combined both behavioral and attitudinal approaches. Although it was a combination of the approaches from the first stage, its investigation of different aspects of the attitudinal loyalty were still superficial. The third approach was the multidimensional model of loyalty studies including the relational analyses of dimensions and the -œpath analytic model- (Iwasaki and Havitz, 1998). Therefore, compared with the approaches reviewed in stages one and two, the last approach provides a more comprehensive understanding of consumer loyalty. The dynamic psychological process model especially represents a direction for future research of consumer loyalty because it reveals the complexity of this concept (Iwasaki and Havitz, 1998). 2.1.1 The Quality-Value-Loyalty Chain Marketing studies of recent years past have elaborated on the linkages between price factors and perceived value (Dodds et al., 1991; Grewal et al., 1998), as well as between price and customer loyalty (Voss et al., 1998). In addition, literature supports the general notion that pricing factors affect perceived value, which, in turn, contributes to customer loyalty (Reichheld, 1996). In this age of new media technologies, the quality-value-loyalty chain is even more important due to a range of factors involving pricing, competition, technology, marketing strategies, and positioning. Since, in general, price information can be conveyed quite easily and unambiguously, such information is a crucial comparison variable in competitive markets. New media technologies enable most consumers to comparison shop more efficiently by allowing price information to be conveyed in a less costly manner across the market. In order to remain competitive, sellers thus have to lower their prices (Lee, 1998). Lower prices and hence, lower margins, force marketers to pay more attention to the quality-value-loyalty chain and to seek ways in which they can regain margins by providing superior value to consumers and, thereby, to encourage their loyalty. Rapid and continuing reductions in the costs of enabling technology for marketing via new media technologies, as well as the removal of the business form from the constraints of a fixed geographical location, have resulted in an increase in competition in almost all product markets (Sheth et al., 2000). Such competition is now not only domestic in scope, but with the expansion of the Internet infrastructure into most nations, has the potential for increased global development. In part, this is a result of the lower costs of setting up business on the Internet, attracting even smaller entrepreneurs to a competitive field that was earlier restricted by significant entry barriers. For example, even a home-based business can now compete in similar products in a wider trading area, as compared to a department store located strategically in the local town mall. With hypercompetitive new media technology markets, attention and emphasis is once again placed on ways in which the quality-value-loyalty chain can contribute to customer acquisition (Hof, 1999). Rapid advances in new media technology for the buyer-seller interface not only increases the communication flows between buyers and sellers, but also provide each with the ability to obtain more information on the other (Bakos, 1997; Sheth et al., 2000; Sinha, 2000). For example, several e-marketers routinely track, monitor, record, and analyze visits to their websites. At the same time, the Internet provides more sources of information, including search agents, shopping portals, and shopping dots (such as mysimon.com, Yahoo! shopping, and pricescan.com) that buyers can use to evaluate vendors. Further advances in new media technology promise greater potential for mutual gains from the quality-value-loyalty chain, including product and service customization, preferred customer discounts, and other loyalty-enhancing programs. In summary, some of the major impacts of new media technologies have been: (i) a reduction in buyer search costs and, thus, seller margins; (ii) lowered costs of market entry and, thus, increased competition in various product-markets; (iii) reduced information symmetry between buyers and sellers; (iv) a renewed emphasis on customer needs and an increased attention on the alignment between customer needs and perceived value; and (v) an increased emphasis on individual information and on customized marketing (Grewal et al, 2003). Given such changes created by new media technologies, marketers are only now beginning to understand the various antecedents to customer value in online shopping, with the vast majority of the discussions on marketing and technology focused primarily on the economic sense of lower costs for the consumer, as well as the reduction in seller margins. A focus on the various psychological dimensions of trust, satisfaction and commitment, and their impact on perceived value and loyalty provide crucial insights necessary to move new media technology marketing to its next era of evolution, i.e., one where the benefits and value of online shopping vastly exceed the concerns and non-monetary costs for the consumer. Once the competitive scenario becomes more stable, firms may be better equipped to build and convey very distinct value propositions to consumers and, thereby, to develop consumer loyalty despite lower entry and exit barriers of conducting business via new media technologies. The provision of superior value and customer loyalty may serve to be the best entry barriers that a firm could erect to keep competition at bay in an age where the physical presence and high capital costs of traditional retailing no longer matter (Grewal et al, 2003). 2.1.2 Key Drivers Of Consumer Loyalty It is widely known that perceived value, a potential key determinant of consumer loyalty, is composed of a -œget- component which is described as -œthe benefits a buyer derives from a seller’s offering- and a -œgive- component which is -œthe buyer’s monetary and non-monetary costs of acquiring the offering.- (Dodds et al., 1991; Zeithaml, 1988). As mentioned previously, research in this area suggests that loyalty includes some degree of predispositional commitment toward a brand. Therefore, the notion of customer loyalty should include both attitudinal commitment and behavioral purchase loyalty (see Figure 2.1). Figure 2.1: Key Loyalty Driver Relationships (after Luarn & Lin, 2003) Based on the theory of brand commitment in relationship marketing (Fournier, 1998; Gundlach et al., 1995; Morgan and Hunt, 1994; Parasuraman and Grewal, 2000; Chaudhuri and Holbrook, 2001), it is evident that trust, customer satisfaction, and perceived value are each related to both commitment and loyalty, consistent with the concept of one-to-one marketing relationships. Trust has long been regarded as a catalyst in consumer-marketer relationships because it provides expectations of successful transactions (Schurr and Ozanne 1985). Especially trust has always been an important element in influencing consumer behavior and has been shown to be of high significance in uncertain environments, such as in an Internet-based e-commerce context (Jarvenpaa and Tractinsky 1999; Jarvenpaa, Tractinsky and Vitale 1999). Several researchers have proposed trust as an important element of B2C e-commerce (e.g. Gefen 2000; Jarvenpaa and Tractinsky 1999; Keen 1999; Palmer, Bailey, and Faraj 2000). Gefen (2000) showed that trust is essential in the acceptance of new media technologies. Palmer, Bailey, and Faraj (2000) argued that building consumer trust in Web retailers is fundamental to the growth of B2C e-commerce. Jarvenpaa and Tractinsky (1999) empirically showed that trust has a direct significant effect on consumer purchase intentions in multiple cultures. Keen (1999) proposed that trust is the foundation of e-commerce, focusing on the strategic implications of trust for consumer-marketer relationships. The role of trust in building and maintaining brand loyalty has also been researched extensively in consumer buying situations (Cowles, 1997; Doney & Cannon 1997; Chaudhuri & Holbrook 2001). Trust plays a central role in augmenting both behavioral and attitudinal loyalty which in turn influences marketing outcome related factors like market share maintenance and price elasticity. In the field of new media technology, several structural models of trust and its relationship to repeat visits to e-commerce sites, for example, have been presented (Jevons & Gabbott, 2000). Trust, particularly the unique dimensions of transactional security and privacy (Hoffmann et al., 1999), play a critical role in generating customer loyalty to an e-business. A recent study by Ratnasingham (1998) has shown that fear of online credit card fraud has been one of the major reasons customers have not done more extensive online buying. Moreover, privacy concerns have led to a public relations fiasco for some major e-businesses resulting in substantial brand image erosion (Advertising Age, 2000). Several unique tools and techniques are available to e-businesses to enhance customer trust in their website. This includes third party approvals, encryption, authentication, and non-repudiation strategies. Encryption assures data security in transmission, authentication guarantees the identity of the participants involved in the electronic contract, and non-repudiation means maintaining an authentic transcript of the specific terms and conditions of the contract agreed to by both parties. Passwords are most commonly used in this authentication processes. Trust, which is closely related to security, is a very important factor in the buying behavior process when using new media technologies like the Internet or other e-commerce enabled media tools. In general, you cannot feel, smell, or touch the product. You cannot look into the salesperson’s eyes. Therefore, these ways of developing trust are excluded when using new media technologies. Brand trust usually contributes to a reduction of uncertainty. In addition, trust is a component of the attitudinal component of loyalty. So it seems palpable that loyalty in general and brand trust in particular can help to overcome some of the disadvantages inherent with purchases placed with new media technologies, e.g. to overcome perceptions that they exist in an unsafe, dishonest, and unreliable marketplace. In fact, these perceptions may still be stopping some potential customers from doing business with web-enabled technologies. With regards to customer satisfaction as a key driver of consumer loyalty, Dick and Basu (1994) have proposed that brand loyalty should be greater under conditions of more positive emotional mood or affect. The brands that make consumers happy or joyful or affectionate should prompt greater behavioral (purchase) loyalty and attitudinal commitment (Chaudhuri and Holbrook, 2001). Similarly, consumer satisfaction is believed to mediate consumer learning from prior experience and to explain key post-purchase behaviors, such as complaining, word of mouth, repurchase intention, and product usage (Oliver, 1980; Westbrook and Oliver, 1991). Indeed, Wang et al. (2001) have suggested that customer satisfaction gained from interactions with new media technologies like the internet, have a significant influence on repurchase intention and post-purchase complaint. Perceived value, the third key loyalty driver discussed herein, is the perceived e-service utility relative to its monetary and non-monetary costs, assessed by the consumer and based on simultaneous considerations of what is received and what is given up to receive it. Clearly, quality of product/service and the user’s technology interface is a logical driver of perceived value. In instances where the core of what the new media technology vendor offers to the customers is a digitized product/service (e.g., online banking, content aggregators, and online stock trading), there is no tangible product and, as such, it is difficult for consumers to differentiate product quality, service quality, and user interface (UI) quality. Even in instances where the technology vendor offers the buyer a physical product, superior presale and post sale service rendered by the vendor can add to the benefits received (the -œget- component) and also reduce the customer’s non-monetary cost such as time, effort, and mental stress (the -œgive- component). Furthermore, part of the -œgive- and -œget- of the user experience also involves the quality of the UI. For example, the online consumer gives time, consideration and effort to the experience of interacting with the Web site, and gets an experience enabled by the Web site that hopefully makes it easy to find needed/wanted products, to checkout quickly and to received confirmation about all important aspects of the purchase, such as order-confirmation and delivery-tracking. In this regard, the product quality, service quality, and Web site (UI) quality are also intertwined with one another. Cumulative insights from prior studies support the general notion that perceived value contributes to customer loyalty (Parasuraman and Grewal, 2000; Dodds et al., 1991; Grewal et al., 1998; Voss et al., 1998). The value-loyalty linkage is also consistent with Reichheld’s (1996) work on loyalty. Regardless of whether the core offerings of a new media technology vendor are products or services, customer perceived value of products/services and UI quality provided by a vendor should be positively related to customer loyalty and commitment. Parasuraman and Grewal (2000) suggest that the influence of perceived value on loyalty is an issue in need of more empirical research. In summary, previous researches have implied that attitudinal commitment and behavioral loyalty should be the product of trust, customer satisfaction, and perceived value of products/services provided by a new media technology service vendor. But these perspectives have been examined independently by marketing researchers. Integrating these perspectives and empirically examining the factors that build customer loyalty in a new media technology service context that lacks the typical human interaction can only advance our understanding of these constructs and their linkage to repeat purchase behavior. (Luarn 2003) 2.1.3 The Role Of Technology In Consumer Loyalty Over the past few years, a considerable volume of research has focused on tracking consumer and retailer adoption of new media technologies and forecasting future penetration. Government agencies and various consulting and media research firms (including the U.S. Census Bureau, Forrester Research, Jupiter Media Metrix, Accenture, and Ernst & Young, among others) issue regular reports and projections. For example, recent U.S. census figures indicate that more than 50 percent of households have one or more computers, and 42 percent include a family member who uses the Internet at home (-œReport Counts Computers- 2001). Forrester Research forecasts that in 2006, personal computers will generate $211 billion in online sales, with interactive television and mobile devices contributing another $23 billion in sales (Dykema 2000). These media are predicted to influence an additional $378 billion in offline sales. There are a number of factors affecting consumer adoption and use of these new media technologies (Burke 1997, 1998; Maruca et al. 1999). On one hand, interactive shopping technologies can provide extensive product selections, powerful search and screening tools, and volumes of information (Alba et al. 1997). By lowering search costs, these technologies can improve the quality of purchase decisions (Hauser and Wernerfelt 1990; Ratchford 1982). On the other hand, the quality of the digital information may be poor, especially if consumers typically rely on social or physical interaction to evaluate product quality (Quelch and Takeuchi 1981). New media technologies may be confusing, take time to learn, are prone to failure, and can raise the prices of goods and services, discouraging consumer usage (Mick and Fournier 1998; Venkatesh 2000). A study of self-service technologies by Meuter, Ostrom, Roundtree, and Bitner (2000) investigated consumers’ reactions to a variety of new media technologies and applications, including Internet shopping services, pay-at-the pump terminals, telephone-based and interactive voice response systems, automated hotel checkout, and package tracking, among others. The study used the critical incident technique, asking a sample of respondents from an online panel to report a memorable encounter with a self-service technology. The researchers found that the technologies were most satisfactory in cases where they saved time (30%), worked reliably (21%), were easy to use (16%), addressed a salient need (11%), and offered greater control and 24/7 access (8%). However, many of the technology encounters were not satisfactory, primarily because of technology failure (43%), process failure (17%), or poor design (17%). Zeithaml, Parasuraman, and Malhotra (2000) conducted a series of focus group interviews to understand consumers’ motivations for shopping on the Web rather than through other channels (e.g., catalog, in-store). Participants liked the convenience of online shopping, the ability to buy unusual items, the ease of comparison shopping, and lower prices, but preferred the physical product interaction, service, security, and privacy of offline shopping. The researchers discovered that ease of navigation, flexibility, efficiency, site aesthetics, and price knowledge were critical in the online environment, in addition to several dimensions that were also important in offline shopping (reliability, responsiveness, access, assurance, and customization/personalization). Prior research also reveals that there are distinct differences in the demographic and psychographic profiles of innovators and early adopters of these technologies (Darian 1987; Greco and Fields 1991; Parasuraman and Colby 2001; Zeithaml and Gilly 1987). For example, Parasuraman and Colby (2001) identified five types of technology customers: the optimistic and innovative -œexplorers,- the innovative yet cautious -œpioneers,- the uncertain -œskeptics- who need the benefits of technology proved, the insecure -œparanoids,- and the resistant -œlaggards.- These studies provide insight into the general criteria consumers use to evaluate existing online and offline shopping environments, and they identify factors that affect consumer technology adoption. However, they offer limited guidance in evaluating a host of new interactive media technologies and applications that are being introduced into the retail space. The reality is that marketers need a roadmap showing how consumers want to shop in the future and the desired role of technology. They need to understand consumers’ channel preferences as they move through the purchase process and the unique technology requirements of specific consumer segments and product categories. 2.2 Traditional Media Traditional media still pulls the majority of today’s businesses toward success. We have grown up with newspaper advertising and radio and TV commercials. It is so much a part of our lives we tend to miss its impact. In fact, we seem to revere traditional advertising. Think of the publicity over annual Super Bowl commercials and the Clio Awards for the best commercials. There is also a certain air of nostalgia about older commercials and advertisements. Our very culture is reflected in traditional media. Marketers and media agencies are significantly increasing their commitment to integrated marketing and promotional relationships with traditional and new media technology suppliers (Myers 2005). Most marketers, several major media buying agencies, and a smaller group of media companies are developing new business models and rethinking traditional approaches to their relationships. Industry leaders are more vocally acknowledging that traditional Madison Avenue economics are eroding along with the prominence of broadcast network television as the industry “cash cow.” In the past, media companies have been able to rely on traditional supply and demand economics, increasing their revenues and profits by increasing commercial or advertising load, increasing costs per thousand, and avoiding detailed insights on advertising effectiveness. Today, networks, publishers, agencies, program studios, media agencies and marketers are all looking for and embracing new media technologies. According to Myers (2005), -œThe single most important trend in advertising today is the growing emphasis on creativity by marketers and by media planning and buying groups, yet the actual investment in these advances remains a microcosm of most media companies’ resources and manpower. The commitment of several leading “unbundled” media agencies to building marketing-based relationships with their clients is resulting in an increased awareness that traditional ad agency creative and account groups must catch up with the rest of the industry and understand they can no longer assume a portfolio of traditional thirty second TV spots and full page magazine ads will ensure their economic viability or continued prominent role with clients.- 2.3
New Media Technology The term -œnew media technology- is one that, for the moment refers to a relatively new field of marketing practices that has developed around the computer which plays a central role as the medium for production, storage and distribution. There are multiple forms of new media technology, two being online internet advertising and digital marketing. Online advertising is an online marketing model based largely on traditional metrics and thinking. Online advertising learns its lessons from television, print, and radio. Examples of online advertising are banner ads and website/content sponsorships. According to Boswell (2002), -œDigital marketing is a model based on the possibilities created by tightly networked markets. For example, in the next 24 hours web surfers will search for “used cars” an estimated 36,507 times. Marketers are able to insert themselves into these online markets in ways they never could before via paid keyword search programs. Even in a world filled with spam, consumers and businesses are finding each other on the Internet in unobtrusive ways.- Companies employing these new media technology tactics in the form of digital marketing are actively working to ensure their customers are getting the best and most relevant information that they need to make purchases. Digital marketing consists of search engine optimization, permission-based email marketing, and online coupons. Marketers were led into online advertising first because it most matched the traditional marketing channels they were accustomed to and the tools for effective digital marketing didn’t exist yet. Like exploring new coasts with dated maps, it was only a matter of time before those marketing online gained better tools and information to make them more successful. According to Jupiter (2003b), spending in online advertising in the United States was only 5 percent in 2001. But once the economy settled down in 2003, it bounced back and has grown at a compound rate of 22 percent over the past three years alone, and it is expected to reach a total of more than $15 billion by the end of 2006. During this same time period, Jupiter predicts that spending on digital marketing initiatives such as search engine optimization, e-mail, and coupons will surpass that of advertising and reach more than $19 billion. The growth for online marketers is huge. According to Jupiter’s Internet Advertising Model (2003b), by the end of 2006 online advertising and digital marketing will account for 7 percent of the total advertising market, up from 3 percent in 2001. Figure 2.2: Online Advertising / Digital Marketing Spending (Jupiter 2001) As marketing online matures, we continue to learn a tremendous amount about how people are conducting themselves online. Traditional models didn’t grasp how powerful combining hyperlinked information and marketing tactics could be. Driven quickly through hyperlinks to information, context becomes an important factor for success. Varying levels of trust are created depending on where information is found. A whole new area of study and research has also risen in the past few years, that of New Media Studies. According to Wikipedia (2006), these studies reflect on the social and ideological impact of the personal computer, computer networks, digital mobile devices, ubiquitous computing and virtual reality. The study includes researchers and propagators of new forms of artistic practices such as interactive installations, net art, software art, new interfaces for musical expression, the subsets of interaction, interface design and the concepts of interactivity, multimedia and remediation. 2.3.1 The Importance Of Addressing Consumer Attitudes The characteristic approach to marketing is rapidly disappearing from the scene. Top down, TV-intensive, saturation-driven marketing no longer fits the marketplace. New media technologies and evolving consumer expectations are fundamentally redefining what it takes to succeed, and this may only intensify in the near future. However, the direction of change is not clearly understood. New media are competing with traditional media for audience and advertisers. Digital, wireless and interactive technologies are transforming the media experience. Yet, while novel and fresh, this new experience is not necessarily better. The biggest challenge facing marketers is not the appearance of new media technologies but the disappearance of engaged, receptive audiences. At the April 2004 Management Conference of the American Association of Advertising Agencies (AAAA), journalist Stuart Elliott reported on a Yankelovich study on marketing resistance which was presented for the first time. These results showed record levels of consumer resistance to marketing. Compared to the findings from a 1964 AAAA study on attitudes toward advertising, Elliott stated that the 2004 Yankelovich study found much higher levels of dislike for marketing and much more aggressive efforts being undertaken to avoid exposure to or interaction with marketing. The chief reason, he gave for marketing resistance is the level of saturation and intrusiveness that characterizes the contemporary consumer experience with marketing. Intrusiveness was the number one dislike of advertising in the 1964 AAAA study and it is the one thing that has increased the most over the ensuing four decades. Consumer complaints about the practice of marketing have become more widespread and more ardent. Stuart emphasized that marketers have begun to address these challenges, yet much remains to be done. Notwithstanding a lot of experimentation and redirection of efforts, consumer concerns remain undiminished. Despite recognition of the challenge ahead, most marketers are unsure about what to do instead. With the problem of marketing resistance now identified and understood, the next task is to decide how to move forward. The Yankelovich (2005) study surmised that consumers are anxious to be engaged by marketers in a more satisfying and compelling way. Marketing resistance is not a desire to stop shopping altogether. Consumers just want a better way to interact with marketers. Smarter, technologically empowered, time-starved consumers want marketing that shows more respect for their time and attention. Consumers don’t feel that the current practice of marketing fulfills this requirement. The 2005 Yankelovich study on marketing receptivity found three key results for the future practice of marketing: 1. Current shifts in marketing have not gone far enough. Negative attitudes toward marketing are undiminished. More is needed. 2. Improvements in marketing practices are more important to consumers than the greater dissemination of new media. While new media are not unwelcome, new media by themselves may not engender greater receptivity. Indeed, improved practices could make all media, new and traditional, more engaging. Thus, the relevant issue is not new vs. traditional media; it is old vs. new marketing practices. 3. Technology experiences not media experiences are now shaping what consumers want from marketing and media. This has fundamental implications for the communications models underpinning marketing, media buying and creative strategy – from traditional. However, the overwhelming majority of consumers expressed a negative opinion about the marketing and advertising they encounter today. ? 54% agree that they are a person who tries to resist being exposed to or even paying attention to marketing and advertising. ? 69% say that they are interested in products that enable them to block, skip or opt out of being exposed to marketing and advertising. ? 56% say that they avoid buying products that overwhelm them with marketing and advertising. While the majority of consumers report attitudes of resistance, a solid majority of 55% also agree that they -œenjoy advertising.- The challenge for marketers may be to find a way to engage these positive feelings about marketing. Unfortunately, current marketing practices are more likely to engender resistance, and this seems to have changed little in the past year despite big, highly publicized efforts by several major marketers to improve the nature of their interactions with consumers. Perhaps more time is needed, but more far-reaching improvements may be needed as well. In the 2005 Yankelovich research, substantial majorities reported a willingness to do more or to pay more in order to get something better from marketers. This remains true. In the latest study, 55% report that they -œwould be willing to pay a little extra to get only the kinds of marketing and advertising that [they] prefer to hear and see.- What sort of marketing this would be was also the focus of the 2005 Yankelovich study. In the study, respondents were asked to rate each of 26 different marketing practices or components using an 11-point scale ranging from 0 to 10, where 0 corresponded to -œhas an extremely negative impact on me and prompts me to avoid it whenever possible- and 10 corresponded to -œhas an extremely positive impact on me and prompts me to seek it out whenever possible.- The mean scores and top two box percentages for each marketing practice are shown in Table 2.1 below. (A mean rating of 10 is the highest possible rating and 0 is the lowest possible rating.) Also shown is a leverage difference in which the bottom two box percentages are subtracted from the top two box percentages. A positive difference identifies a marketing practice more likely to engender receptivity; a negative difference identifies a marketing practice more likely to engender resistance. Table 2.1: Rank Order of Marketing Practices (from Yankelovich 2005) Marketing practice: -œMarketing that . . .- Mean Top Two Box Leverage Difference 1. Is short and to the point 7.8 43% +41 2. I can choose to see when it is most convenient for me 7.3 33% +30 3. Is personally communicated to me by friends or experts I trust 7.3 32% +29 4. Provides information about price discounts or special deals 7.2 29% +27 5. Is customized to fit my specific needs and interests 7.1 29% +26 6. Compensates me for my time and attention 7.0 32% +27 7. Has asked and received my permission ahead of time to be shown or sent to me 6.8 29% +24 8. Provides information about all of the competitive brands and products that might be beneficial or of interest to me 6.9 26% +22 9. I can personalize myself to fit my own interests and needs 6.7 25% +19 10. Is associated with a magazine, TV program or organization about which I am enthusiastic 6.5 19% +15 11. Introduces a new product 6.4 18% +15 12. Sponsors programming like entertainment or news and documentaries 6.4 16% +13 13. Is in support of a well-known brand or product 6.3 20% +16 14. Gives me the opportunity to add something of my own to the content or to be creative 6.3 19% +14 15. Provides lifestyle information and tips instead of product information 6.3 18% +15 16. Is popular and something everyone is talking about 6.2 18% +14 17. Is shown before or after rather than during the content 5.9 13% +8 18. I see mostly at home 5.8 15% +9 19. Is itself a form of content and entertainment like a short film or a fun Web site or a game 5.7 13% +6 20. Is in a new and non-traditional format 5.7 10% +4 21. Is interactive 5.6 9% +3 22. Is longer with detailed information, descriptions and pitches 5.3 11% +2 23. Is placed within the content as a part of the story or format 5.3 7% -2 24. Ties together traditional media with new media like the Internet or PDAs or video games 5.0 7% -3 25. I see or hear frequently and repeatedly 4.5 8% -6 26. Only uses new media like the Internet or PDAs or video games 4.2 6% -12 According to Yankelovich (2005), several important findings can be discerned in this rank-order of marketing practices or components. First, the least important marketing practice involves the use of new media. It also has the worst leverage difference. In contrast, the marketing practice most likely to boost receptivity entails being more unobtrusive. Many of the items at the bottom of this rank-order are about the use of new media, while all of the items at the top of this rank-order are about better marketing practices. Second, the kinds of marketing practices cited by consumers as most likely to make them more receptive to marketing entail a range of new types of interaction, not just a limited few. Customization, compensation, permission, more information, non-interruption and control are cited. Broadly speaking, all of these can be identified as a type of power or reciprocity, two of the four cornerstones of better marketing. Third, product placement (rank number 23: -œbeing placed within the content-) is not highly rated and has a negative leverage difference. Apparently, this is seen as little more than another extension of unwanted intrusiveness and saturation. Fourth, traditional practices of intrusiveness and saturation are not highly rated. For example, -œsee or hear frequently and repeatedly- is rank number 25 and -œis longer with more detailed information, descriptions and pitches- is rank number 22. Even -œsee mostly at home- is rank number 18. Finally, while some marketing practices are highly rated, on average no item is rated above 8 on a scale with a top end of 10. Thus, an urgent need remains for fresh creative ideas that can truly revolutionize the interactions of marketers with consumers and thus break through marketing resistance in a strong and compelling way. 2.3.2 What Consumers Expect From Technology Cheap devices and the mainstream adoption of broadband and wireless networks make new media technologies more accessible, and an everyday part of people’s lives. Just a few cases in point: Reuters (2006) reports that more than half of online US households use broadband today; sales of camera phones will bypass digital cameras within three years; and sub-$100 PCs are bringing new media technologies to global masses. At the same time, people are exerting more control over media technology experiences by generating their own content and connecting with others online -” witness the double-digit growth of social networking sites like MySpace and LinkedIn. These empowered consumers are likely to expect technology to conform to -” not dictate -” their needs and behaviors. Thus, their tolerance for clumsy, cold, and confusing technology experiences will be limited. The results from the 2005 Yankelovich study provide some clear indications that consumers are looking for media experiences that go beyond any expectations they could have learned from traditional media. The importance of things like customization, interactivity, non-interruption, permission and control derive from technology interactions (only some of which have been media interactions). Additionally, the value placed on self-sufficiency and authenticity fit well with what new media technologies are able to offer. Increasingly, technology experiences are central to the ways in which consumers want to interact with media, and hence with marketing. Media should engage consumers in ways that are endemic to technology. Thus, the integration of media and technology can be a sound platform for marketing success in the future. But not because consumers (resisters in particular) want to be wowed by technology. Rather, because consumers want technology to be used to deliver better marketing practices. Furthermore, technology may be best utilized as the tool for enabling a superior practice of marketing. This can be seen in more depth from additional analysis of the 2005 Yankelovich marketing receptivity study. A two-step analysis was conducted with the data from the 2005 Yankelovich research. In step one, the 26 marketing practices or components were factor analyzed to create five discreet, cohesive categories of marketing factors. These marketing factors grouped individual practices or components together on the basis of similar patterns of ratings. Thus, each factor can be interpreted for the overarching conceptual idea that links all of the individual items. This has been summarized with the label given to each of the five groupings of items shown in Table 2.2 below. Table 2.2: Category Summary of Marketing Factors (from Yankelovich 2005) Factor 1: Traditional Styles ? Is longer with detailed information, descriptions and pitches ? I see or hear frequently and repeatedly ? I see mostly at home ? Is in support of a well-known brand or product ? Introduces a new product ? Is popular and something everyone is talking about ? Provides information about price discounts or special deals ? Sponsors programming like news or entertainment and documentaries ? Is associated with a magazine, TV program or organization about which I am enthusiastic A group of items that reflect more traditional or classic ways of practicing marketing Factor 2: Customization & Control ? Can personalize to fit my own interests and needs ? Can choose to see when it is most convenient for me ? Is customized to fit my specific needs and interests ? Has asked
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