Dacko S.G. The Advanced Dictionary of Marketing Putting Theory to Use
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elaboration likelihood model 180
assessments of market asset prices more generally. The hypothesis has
both economic advocates and critics, with critics including many mar-
ket analysts concerned with predicting share prices to identify those
likely to achieve the best returns, for example. The hypothesis is further
recognized as involving several forms (i.e. weak, semi-strong, and strong
form efficiency), where weak form efficiency has received the broadest
acceptance.
KEY WORDS Market efficiency, asset valuation
IMPLICATIONS
Marketers concerned with the accurate assessment (e.g. prediction or
estimation) of asset prices may benefit from a greater understanding
of the efficient market hypothesis in its various forms. While the over-
all hypothesis itself remains controversial, knowledge of its theoretical
assumptions as well as its use in settings ranging from share price eval-
uations to currency exchange rate assessments may nevertheless provide
the marketer with insights into alternative perspectives on asset valua-
tions.
APPLICATION AREAS AND FURTHER READINGS
Marketing Research
Agrawal, Jagdish, and Kamakura, Wagner A. (1995). ‘The Economic Worth of
Celebrity Endorsers: An Event Study Analysis,’ Journal of Marketing, 59(3), 56–62.
Marketing Strategy
Zulauf, C. R., and Irwin, S. H. (1998). ‘Market Efficiency and Marketing to Enhance
Income of Crop Producers,’ Review of Agricultural Economics, 20, 308–331.
Dutt, S., and Ghosh, D. (1999). ‘A Note on the Foreign Exchange Market Efficiency
Hypothesis,’ Journal of Economics and Finance, 23, 157–161.
BIBLIOGRAPHY
Fama, Eugene F. (1970). ‘Efficient Capital Markets: A Review of Theory and Empir-
ical Work,’ Journal of Finance, 25, 383–417.
eighty-twenty principle see Pareto principle
eighty-twenty rule see Pareto principle
elaboration likelihood model
DESCRIPTION
A model of persuasion and attitude formation and change that proposes that
an individual’s process for attitude change is dependent on the individual’s
level of motivation.
KEY INSIGHTS
According to the elaboration likelihood model (ELM) as developed by
Petty and Cacioppo (1983, 1986), a high level of individual motivation
leads an individual to pay more attention to the quality of arguments
presented in a persuasive message, whereas a low level of motivation
leads an individual to be more likely to respond to peripheral elements
of the message. Examples of peripheral elements in advertising include
181 elasticity of demand
background music or spokesperson attractiveness. The model further
suggests that individuals responding to peripheral elements of a message
will experience attitude changes that are much more short-lived relative
to the case of the individuals’ focusing on, and responding positively to,
the quality of a message’s arguments which may lead to longer lasting
attitude changes.
KEY WORDS Persuasion, attitudes, motivation
IMPLICATIONS
Marketers may benefit from understanding the extent that consumers
are likely to have high or low motivations to process persuasive messages
since such knowledge can enable marketers to adjust the content and
composition of persuasive messages accordingly to achieve greater per-
suasive effectiveness.
APPLICATION AREAS AND FURTHER READINGS
Relationship Marketing
Gordon, M. E., McKeage, K., and Fox, M. A. (1998). ‘Relationship Marketing Effec-
tiveness: The Role of Involvement,’ Psychology and Marketing, 15(5), 443–460.
Advertising
Droge, Cornelia (1989). ‘Shaping the Route to Attitude Change: Central versus
Peripheral Processing through Comparative versus Noncomparative Advertis-
ing,’ Journal of Marketing Research, 26(2), May, 193–204.
Homer, Pamela M. (1990). ‘The Mediating Role of Attitude toward the Ad: Some
Additional Evidence,’ Journal of Marketing Research, 27(1), February, 78–86.
BIBLIOGRAPHY
Bitner, M. J., and Obermiller, C. (1985). ‘The Elaboration Likelihood Model: Limita-
tions and Extensions in Marketing,’ Advances in Consumer Research, 12, 420–425.
Petty, Richard E., Cacioppo, John T., and Schumann, David (1983). ‘Central and
Peripheral Routes to Advertising Effectiveness: The Moderating Role of Involve-
ment,’ Journal of Consumer Research, 10(2), September, 135–146.
Petty, Richard E., and Cacioppo, John T. (1986). Communication and Persuasion: Central
and Peripheral Routes to Attitude Change. New York: Springer-Verlag.
elastic demand see elasticity of demand
elasticity of demand
DESCRIPTION
The change in demand for a good which results from a change in the price of
the good itself or that of another related good.
KEY INSIGHTS
While elasticity of demand usually refers to the price elasticity of demand
of a firm’s own goods and thus is an indicator of the responsiveness of
demand for the good relative to a change in its price, the term may also
refer to cross-elasticity of demand, which is an indicator of the responsive-
ness of demand for the good relative to a change in the price of another
related good. As such, users of the term may benefit from adopting
greater specificity in terminology in avoiding any confusion or ambiguity.
elation effect 182
Referring to price elasticity of demand, elastic demand is present when
the elasticity of demand is greater than one (i.e. the percentage change
in the quantity demanded is greater than that for its price), whereas
inelastic demand is present when the elasticity of demand is less than one
(i.e. the percentage change in the quantity demanded is less than that
for its price). In assessing changes in demand attributable to the price
change of another good, the relationship between goods (i.e. substitutes
or complements) should be taken into account when determining cross-
elasticity of demand.
KEY WORDS Demand, price
IMPLICATIONS
Marketers should clearly understand to what extent the demand for their
goods is generally elastic or inelastic if the aim is to manage their current
and future demand in response to price changes in the good or that
of related goods. Relating the conceptual bases of elasticity of demand
to that observed for a firm’s good can provide the marketer with such
insight. Beyond a general understanding, marketers should master the
relatively straightforward methodologies required for their mathematical
calculation to assist the firm in managing demand and price changes with
even greater effectiveness.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Hoch, J., Kim, B., Montgomery, A., and Rossi, P. (1995). ‘Determinants of Store Level
Price Elasticity,’ Journal of Marketing Research, 32, February, 17–29.
Felton, M. V. (1992). ‘On the Assumed Inelasticity of Demand for the Performing
Arts,’ Journal of Cultural Economics, 16, 1–12.
Pricing
Reibstein, D., and Gatignon, H. (1984). ‘Optimal Product Line Pricing: The Influence
of Elasticities and Cross-Elasticities,’ Journal of Marketing Research, 21, 259–267.
Marketing Modeling
Tellis, Gerard J. (1988). ‘The Price Elasticity of Selective Demand: A Meta-analysis
of Econometric Models of Sales,’ Journal of Marketing Research, 25(4), November,
331–341.
Forrest, D., Gulley, D., and Simmons, R. (2000), ‘Elasticity of Demand for UK
National Lottery Tickets,’ National Tax Journal, 855–865.
BIBLIOGRAPHY
Case, Karl E., and Fair, Ray C. (1999). Principles of Economics, 5th edn. Upper Saddle
River, NJ: Prentice-Hall.
elation effect
(also called the Crespi effect)
DESCRIPTION
The phenomenon whereby increasing the reward to an individual for a
particular response leads to a greater rate of response by the individual.
183 e-marketing
KEY INSIGHTS
Based on pioneering research by Crespi (1942), a further characteristic
of the elation effect is that, in comparison to responses obtained with
a smaller reward, the rate of response to a larger reward is observed to
increase to a greater extent than if the larger reward were given initially.
KEY WORDS Incentives, rewards, behavior
IMPLICATIONS
The phenomenon characterized as the elation effect has implications for
the nature of incentives given to individuals as rewards for behaviors
where the elicitation of similar future behaviors is also a consideration.
The implications are therefore broad and may range from the nature of
incentives given to salespeople to service staff as a means to encourage
particularly desirable behaviors.
APPLICATION AREAS AND FURTHER READINGS
Marketing Management
Hines, George H. (1974). ‘Sociocultural Influences on Employee Expectancy and
Participative Management,’ Academy of Management Journal, 17(2), June, 334–339.
Flaherty, C. F. (1995). ‘Incentive Relativity,’ Problems in the Behavioural Sciences, 15.
BIBLIOGRAPHY
Crespi, Leo P. (1942). ‘Quantitative Variation of Incentive and Performance in the
White Rat,’ American Journal of Psychology, 55(4), October, 467–517.
electronic marketing see e-marketing
electronic word-of-mouth marketing see viral marketing
e-mail marketing see e-marketing; direct marketing
e-marketing
(also known as digital marketing electronic marketing, or interactive
marketing)
DESCRIPTION
Marketing that makes use of any interactive electronic communications
technology or media in order to accomplish marketing objectives.
KEY INSIGHTS
In the broader context of e-commerce, e-marketing emphasizes the set
of efforts by a firm that are focused on promoting its offerings and
making them accessible to current and prospective customers by means
involving electronic interactive communication. While e-marketing is
often most closely associated with online marketing, as in marketing via
the internet or Web (see online marketing; Web marketing), the scope
of e-marketing and its applications continue to grow in areas including
mobile communications (see mobile marketing), interactive television,
and touch-screen electronic kiosks. As such, e-marketing approaches may
include marketing approaches commonly associated with direct market-
ing (see direct marketing) including e-mail marketing, which involves
endowment effect 184
sending electronic messages containing marketing material from one
computer to one or more consumer computers on a network, and fax
marketing, which involves using facsimile equipment to electronically
transmit written or graphic marketing material over telephone lines to
and from consumer and marketer locations.
KEY WORDS Communication technology
IMPLICATIONS
Marketers seeking to identify and evaluate e-marketing approaches as
either a central or peripheral means by the firm to market its offerings
should recognize the broad and growing scope of e-marketing. Since the
key benefits of electronic communications technology include opportu-
nities for cost-effectively expanding both the reach and richness of mar-
keting communications relative to approaches not making use of such
technology, a marketer’s efforts may benefit from ongoing assessments
of a wide array of the firm’s marketing processes for possible e-marketing
adoption and integration.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
De Kare-Silver, Michael (2000). E-Shock 2000: The Electronic Shopping Revolution: Strat-
egies for Retailers and Manufacturers. Basingstoke: Macmillan.
Marketing Management
Turban, Ephraim (2006). Electronic Commerce: A Managerial Perspective. Upper Saddle
River, NJ: Pearson Prentice Hall.
Online Marketing
Kalyanam, K., and McIntyre, S. (2002). ‘The E-marketing Mix: A Contribution of the
E-tailing Wars,’ Academy of Marketing Science, 30(4), 487–499.
Smith, A. D. (2002). ‘Loyalty and E-Marketing Issues: Customer Retention on the
Web,’ Quarterly Journal of E-commerce, 3(2), 149–61.
International Marketing
Adam, S., Mulye, R., Deans, K., and Palihawadana, D. (2002). ‘E-marketing in Per-
spective: A Three Country Comparison of Business Use of the Internet,’ Marketing
Intelligence & Planning, 20(4), 243–251.
Marketing Education
Granitz, N., and Greene, C. (2003). ‘Applying E-marketing Strategies to Online
Distance Learning,’ Journal of Marketing Education, 25(1), 16–30.
BIBLIOGRAPHY
Shapiro, Carl, and Varian, Hal R. (1999). Information Rules. Boston: Harvard Business
School Press.
Chaston, Ian (2001). E-marketing Strategy. Maidenhead: McGraw-Hill.
end effect see serial position effect
endowment effect
(also called status quo bias)
DESCRIPTION
The phenomenon whereby individuals tend to value objects more when they
are owned than when not owned.
185 Engel’s law
KEY INSIGHTS
Based on pioneering research by Thaler (1980), an individual’s ownership
of an object tends to lead the individual to demand more for the object
to give it up in comparison to the amount that the individual is willing
to pay to acquire it. The phenomenon suggests that evaluations of prefer-
ences should give consideration to reference points of the status quo.
KEY WORDS Ownership, valuation
IMPLICATIONS
Marketers seeking to understand and influence consumer choices and
preferences for any number of objects or items of personal property
should consider how the status quo situation of a consumer may ulti-
mately be influential in product valuations and choices. For example,
a marketer may find that consumers seeking to acquire prints created
by a popular artist will be willing to pay lesser amounts for the prints
in comparison to prices demanded by individuals who already own the
prints and who are asked to sell them.
APPLICATION AREAS AND FURTHER READINGS
Consumer Behavior
Strahilevitz, Michal A., and Loewenstein, George (1998). ‘The Effect of Ownership
History on the Valuation of Objects,’ Journal of Consumer Research, 25(3), December,
276–289.
Dhar, Ravi, and Simonson, Itamar (1992). ‘The Effect of the Focus of Comparison on
Consumer Preferences,’ Journal of Marketing Research, 29(4), November, 430–440.
Simonson, Itamar, and Tversky, Amos (1992). ‘Choice in Context: Tradeoff Contrast
and Extremeness Aversion,’ Journal of Marketing Research, 29(3), August, 281–295.
BIBLIOGRAPHY
Thaler, R. (1980). ‘Towards a Positive Theory of Consumer Choice,’ Journal of Eco-
nomic Behavior and Organization, 1, 39–60.
Engel’s law
DESCRIPTION
The economic observation that individuals tend to spend a lesser proportion
of their income on food as their income rises.
KEY INSIGHTS
Originally formulated by Ernst Engel in 1857, the law or tendency is based
on observations that lower-income individuals tend to spend a relatively
greater proportion of their income on food in comparison to higher-
income individuals whose incomes also tend to be spent across a wider
range of goods and services.
KEY WORDS Income, spending, food, forecasting
IMPLICATIONS
The observation embodied in Engel’s law provides one basis on which
marketers may seek to establish predictions or forecasts of consumer
food expenditures relative to consumer incomes.
enlightened marketing 186
APPLICATION AREAS AND FURTHER READINGS
Forecasting
Loeb, Benjamin S. (1955). ‘The Use of Engel’s Laws as a Basis for Predicting Con-
sumer Expenditures,’ Journal of Marketing, 20(1), July, 20–27.
Burk, Marguerite C. (1962). ‘Ramifications of the Relationship between Income and
Food,’ Journal of Farm Economics, 44(1), February, 115–125.
BIBLIOGRAPHY
Engel, Ernst (1857). ‘Die Productions- und Consumptionsverhaltnisse des König-
reichs Sachsen,’ Zeitschrift des Statistischen Bureaus des Koeniglich Saechsischen Min-
isteriums des Inneren, 8 and 9 (reprinted in: Bulletin de l’Institut International des
Statistiques, 9, 1895).
enlightened marketing
DESCRIPTION
A marketing philosophy which holds that a company’s marketing should
optimally support the long-run performance of the overall marketing system.
KEY INSIGHTS
Enlightened marketing reflects business actions toward socially respon-
sible marketing. In the pursuit of its broad aim, enlightened marketing
advocates the adoption of five key principles or organizational philoso-
phies: consumer-oriented marketing—where the firm is committed to view-
ing and organizing marketing activities from the consumer’s perspective;
innovative marketing—where the firm is committed to pursuing substan-
tive product and marketing improvements; sense-of-mission marketing—
where the firm emphasizes objectives having broad social implications as
opposed to ones which are product focused; societal marketing—where the
firm is committed to making marketing decisions which are based not
only on interests of the firm but on the long-run interests of consumers
and society; and value marketing—where the firm commits itself to actions
and investments which create and build marketing value.
KEY WORDS Social responsibility
IMPLICATIONS
While much of marketing in many firms is clearly profit driven and mar-
ket share focused over the short term, marketers should recognize how
the adoption of an enlightened marketing philosophy may ultimately
benefit the firm, consumers, and society over the long term. In particular,
marketers should seek to understand and examine critically each of the
philosophy’s five supporting principles if the aim of the enlightened
marketer is to move the firm’s marketing efforts more in the direction of
enlightened marketing.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Laczniak, Gene R., and Murphy, Patrick E. (2006). ‘Normative Perspectives for
Ethical and Socially Responsible Marketing,’ Journal of Macromarketing, 26, 154–
177.
187 entrepreneurial marketing
Abratt, R., and Sacks, D. (1988). ‘The Marketing Challenge: Towards Profitable and
Socially, Responsible,’ Journal of Business Ethics, 7(7), 497–507.
Services Marketing
Gronroos, Christian (1983). ‘Innovative Marketing Strategies and Organization
Structures for Service Firms,’ in Leonard L. Berry, G. Lynn Shostack, and Gre-
gory D. Upah (eds.), Emerging Perspectives on Services Marketing. Chicago: American
Marketing Association.
BIBLIOGRAPHY
Kotler, Philip, and Armstrong, Gary (2006). Principles of Marketing, 11th edn. Upper
Saddle River, NJ: Pearson Education, Inc.
entrepreneurial marketing
DESCRIPTION
Marketing adapted to small and medium-sized enterprises and particularly
where the entrepreneur has a pivotal role in the firm’s marketing activities.
KEY INSIGHTS
In general terms, entrepreneurial marketing seeks to integrate the best
of entrepreneurial and marketing perspectives, e.g. entrepreneurship’s
emphasis on opportunity identification and marketing’s emphasis on
value creation. Thus, entrepreneurial marketing emphasizes the set of
approaches to marketing that acknowledge the resource-constrained
nature of small and medium-sized enterprises and additionally focuses
on the role of the entrepreneur in both marketing and entrepreneurial
success. For example, entrepreneurial marketing recognizes a need for
such firms to often pursue more creative and less sophisticated marketing
approaches relative to those of larger firms. In such a context, one area
which entrepreneurial marketing has focused on is that of the marketing
networks, where a firm’s relationships with other firms enable it to par-
tially overcome resource constraints in its pursuit and accomplishment
of marketing objectives.
KEY WORDS Small firms, medium-sized enterprises
IMPLICATIONS
Marketers concerned with the constraints faced by small and medium-
sized firms as well as the opportunities afforded entrepreneurs in such
firms may benefit from a deeper understanding of entrepreneurial mar-
keting’s scope and range of practices. In addition, to the extent marketers
in larger organizations have some degree of autonomy and are interested
in proactively pursuing marketing efforts that involve some degree of
innovation and risk taking, a greater knowledge of entrepreneurial mar-
keting may also provide insights to actions and processes not previously
considered within the organization.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Bjerke, B., and Hultman, C. M. (2002). Entrepreneurial Marketing: The Growth of Small
Firms in the New Economic Era. Cheltenham: Edward Elgar.
entry barriers 188
Gilmore, A., and Carson, D. (1999). ‘Entrepreneurial Marketing by Networking,
New England,’ Journal of Entrepreneurship, 2(2), 31–38.
Morris, M., Schindehutte, M., and LaForge, R. (2002). ‘Entrepreneurial Marketing:
A Construct for Integrating Emerging Entrepreneurship and Marketing Perspec-
tives,’ Journal of Marketing Theory and Practice, 10(4), 1–20.
Stokes, David (2002). ‘Entrepreneurial Marketing in the Public Sector: The
Lessons of Headteachers as Entrepreneurs,’ Journal of Marketing Management, 18,
397–414.
BIBLIOGRAPHY
Stokes, David (2000). ‘Entrepreneurial Marketing: A Conceptualisation from
Qualitative Research,’ Qualitative Market Research: An International Journal, 3(1),
47–54.
Lodish, L., Morgan, H. L., and Kallianpur, A. (2001). Entrepreneurial Marketing. New
York: John Wiley & Sons, Inc.
entry barriers
(also called barriers to entry)
DESCRIPTION
Factors which make it more difficult for a firm to begin operating in an industry
or market.
KEY INSIGHTS
Entry barriers, whether natural or ones created by firms already operat-
ing in an industry or market, generally have the effect of putting new
or would-be entrants at a cost disadvantage relative to an industry’s or
market’s established firms. Large initial capital requirements and estab-
lished firms’ economies of scale (leading to lower costs) are examples of
two common entry barriers that can put smaller firms desiring industry
or market entry at a significant disadvantage. When such conditions are
combined with an incumbent strategy of sufficiently low product pricing,
for example, it can be very difficult for would-be entrants to profit from
their entry.
KEY WORDS Industry entry, market entry
IMPLICATIONS
As part of an ongoing effort to assess the firm’s competitive environment,
marketers in incumbent firms should understand carefully how and to
what extent natural entry barriers, as well as those created by strategic
actions, can deter other firms from entering (or competing profitably in)
an industry or market. The dynamic nature of many markets is such that
entry barriers will change over time as well, leading marketers at both
would-be entrant firms and incumbent firms to constantly look for barri-
ers that are sufficiently low to provide an opportunity for firms’ market
entry. Advances in technology that decrease the investment required for
industry entry, for example, as shown in the desktop publishing industry,
may lead to relatively rapid changes in the levels of certain key entry
barriers.
189 equity theory
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Han, Jin K., Namwoon, Kim, and Hong-Bumm, Kim (2001). ‘Entry Barriers: A
Dull-, One, or Two Edged Sword for Incumbents? Unraveling the Paradox: A
Contingency Perspective,’ Journal of Marketing, 65, January, 1–14.
Baumol, William J., and Willig, Robert D. (1981). ‘Fixed Costs, Sunk Costs, Entry
Barriers, and Sustainability of Monopoly,’ Quarterly Journal of Economics, 96(3),
August, 405–431.
Caves, R. E., and Porter, M. E. (1977). ‘From Entry Barriers to Mobility Barriers:
Conjectural Decisions and Contrived Deterrence to New Competition,’ Quarterly
Journal of Economics, 91(2), May, 241–262.
Orr, Dale (1974). ‘The Determinants of Entry: A Study of the Canadian Manufactur-
ing Industries,’ Review of Economics and Statistics, 56(1), February, 58–66.
BIBLIOGRAPHY
Karakaya, Fahri, and Stahl, Michael J. (1991). Entry Barriers and Market Entry Decisions:
A Guide for Marketing Executives. New York: Quorum Books.
environmental marketing see green marketing
environmentally responsible marketing see green marketing
equity theory
DESCRIPTION
A theory of social justice suggesting that individuals strive toward social equity
where inputs and outputs are considered by individuals to be fair in relation to
those with whom they compare themselves.
KEY INSIGHTS
Based on pioneering research by Homans (1950) and developments by
subsequent researchers, equity theory includes the view that fairness is
perceived by individuals to the extent that the ratio of outcomes to inputs
for a social interaction or exchange is the same as others with whom they
are making comparisons. The theory further suggests that inequities felt
by individuals, even if in their favor, tend to lead individuals to behaviors
which try to restore equity.
KEY WORDS Fairness, social justice
IMPLICATIONS
As a key tenet of marketing involves the creation of mutually benefi-
cial exchanges, equity theory principles and concepts can be applied by
marketers in an array of situations where a marketing aim is to create
mutually satisfying and equitable exchanges and exchange relationships
between specific buyers and sellers in a variety of contexts.
APPLICATION AREAS AND FURTHER READINGS
Marketing Research
Huppertz, John W., Arenson, Sidney J., and Evans, Richard H. (1978). ‘An Applica-
tion of Equity Theory to Buyer–Seller Exchange Situations,’ Journal of Marketing
Research, 15(2), May, 250–260.