Dacko S.G. The Advanced Dictionary of Marketing Putting Theory to Use
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free rider effect 220
IMPLICATIONS
Marketers should seek to understand how the framing of particular prob-
lems presented to individuals for their consideration may systematically
influence their decision making. Whether in using persuasive communi-
cations with consumers or internal marketing communications in efforts
to persuade employees within an organization, a better understanding of
the relative influence and importance of framing effects may assist the
marketer in proactively developing effective marketing message content
for both tactical and strategic marketing communications.
APPLICATION AREAS AND FURTHER READINGS
Consumer Behavior
Levin, Irwin P., and Gaeth, Gary J. (1988). ‘How Consumers are Affected by the
Framing of Attribute Information before and after Consuming the Product,’
Journal of Consumer Research, 15(3), December, 374–378.
Marketing Research
Block, Lauren G., and Keller, Punam Anand (1995).‘When to Accentuate the Neg-
ative: The Effects of Perceived Efficacy and Message Framing on Intentions to
Perform a Health-Related Behavior,’ Journal of Marketing Research, 32(2), May, 192–
203.
Levin, I. P., Gaeth, G. J., Schreiber, J., and Lauriola, M. (2002). ‘A New Look at
Framing Effects: Distribution of Effect Sizes, Individual Differences, and Inde-
pendence of Types of Effects,’ Organizational Behavior and Human Decision Processes,
88(1), 411–429.
BIBLIOGRAPHY
Tversky, Amos, and Kahneman, Daniel (1986). ‘Rational Choice and the Framing
of Decisions,’ Journal of Business, 59(4), Part 2: The Behavioral Foundations of
Economic Theory, October, S251–S278.
Tversky A., and Kahneman, D. (1981). ‘The Framing of Decisions and the Psychol-
ogy of Choice,’ Science, 211(4481), January, 453–458.
Kahneman, Daniel, and Tversky, Amos (2000). Choices, Values, and Frames. New York:
Russell Sage Foundation.
free rider effect
DESCRIPTION
A situation where an individual or organization is able to benefit from the
actions of another without contributing to the cost associated with such
actions.
KEY INSIGHTS
The free rider effect, where one outcome of an action is that others are
able to benefit from the action without contributing to its cost, is typically
viewed as a problem for those bearing the cost of the action and an
opportunity for those who are able to benefit from the action. A firm
choosing to be a market pioneer, for example, typically bears a higher
cost to develop a new product than those that follow with a copy of the
product since follower firms can frequently reverse-engineer, or at least
learn from, the pioneer’s product.
KEY WORDS Cost(s), benefits
221 frequency marketing
IMPLICATIONS
Whether involved in new product development efforts or in the manage-
ment of public goods and services, a marketer should be concerned with
the extent to which free rider effects are either created by the actions of
the marketer’s organization or by the actions of others. In doing so, the
marketer will be in a better position to assess the extent that free rider
effects create problems or opportunities for the firm.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Golder, Peter N., and Tellis, Gerard J. (1993). ‘Pioneer Advantage: Marketing Logic
or Marketing Legend?’ Journal of Marketing Research, 30(2), May, 158–170.
Kerin, Roger A., Varadarajan, P. Rajan, and Peterson, Robert A. (1992). ‘First-Mover
Advantage: A Synthesis, Conceptual Framework, and Research Propositions,’
Journal of Marketing, 56(4), October, 33–52.
Green Marketing
Wiser, R., and Pickle, S. (1997). Green Marketing, Renewables, and Free Riders: Increasing
Customer Demand for a Public Good. Berkeley, Calif.: Lawrence Berkeley National
Laboratory, LBNL-40632.
BIBLIOGRAPHY
Groves, T., and Ledyard, J. (1977). ‘Optimal Allocation of Public Goods: A Solution
to the Free Rider Problem,’ Econometrica, 45, 783–809.
freight-absorption pricing see pricing strategies
frequency marketing
DESCRIPTION
Marketing which involves rewarding customers for the volume or frequency
of their purchases in order to enhance customer profitability.
KEY INSIGHTS
Frequency marketing emphasizes the development and implementation
of marketing strategies and tactics aimed at increasing the frequency of
customer purchases, visits, orders, and the like in an effort to maximize
the profit contributions of customers. Frequency marketing can there-
fore involve a process of identifying ‘best,’ or most valuable customers,
recognizing that the Pareto principle may apply to customer profitability
(where, for example, 80% of the firm’s profits may be attributed to 20% of
the firm’s customers). The practice of frequency marketing by many firms
is typically through formal loyalty programs, which aim to encourage
repeat purchase and increase customer retention.
KEY WORDS Purchase frequency, loyalty, customer retention
IMPLICATIONS
Marketers concerned with increasing repeat purchases by customers val-
ued by the firm may benefit from a greater understanding of the benefits,
costs, and limitations associated with the practice of frequency market-
ing. For example, marketers should recognize that, while customers may
fundamental attribution error 222
increase their purchase frequency in response to a marketer’s frequency
program and ultimately become habitual or steadfast buyers, it is also
possible that customer loyalty may be short-lived among other customers,
particularly if the frequency marketing programs of competitors become
relatively more attractive to such customers.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Barlow, R. G. (1995). ‘Five Mistakes of Frequency Marketing,’ Direct Marketing,57
(11), 16–18.
Pruden, D. (1995). ‘There’s a Difference between Frequency Marketing and Rela-
tionship Marketing,’ Direct Marketing, June, 30–31.
Barlow, R. (1999). ‘Frequency Marketing: The Shift from First to Second Generation
Programs will Challenge our Ingenuity as Marketers,’ Brandweek (New York),
40(7), 20–21.
Consumer Behavior
Kivetz, Ran, and Simonson, Itamar (2002). ‘Earning the Right to Indulge: Effort as
a Determinant of Customer Preferences towards Frequency Program Rewards,’
Journal of Marketing Research, 39, May, 155–170.
BIBLIOGRAPHY
Barlow, Richard (1990). ‘Building Customer Loyalty through Frequency Marketing,’
Bankers Magazine, May–June, 73–76.
Mohs, Julia (1999). ‘Frequency Marketing,’ Retail Report, 12(4), 3.
functional area strategy see marketing strategy
functional theory of attitudes see attitudes, functional theory of
fundamental attribution error
DESCRIPTION
The common tendency for individuals to underestimate the influences of
external circumstances in interpretations of others’ behaviors as well as to
overestimate the importance of others’ dispositions in such interpretations.
KEY INSIGHTS
The pervasive phenomenon of the fundamental attribution error is a
major area of focus in the broader area of attribution theory. The phe-
nomenon is a form of dispositional bias which may result in significant
misjudgments of others’ attitudes and behaviors.
KEY WORDS Causality, circumstances, behavioral explanations
IMPLICATIONS
Particularly in service encounters, marketers must be aware of how con-
sumers may fail to consider sufficiently how external circumstances have
influenced particular individual behaviors (as in explaining the slowness
of a department store cashier) as well as how the same consumers may
also give excessive attention to the influence of other’s personality char-
acteristics and related dispositions. Adjusting marketing communications
to draw attention to the influences of external conditions may be a means
223 fusion marketing
to counter individual tendencies for making a fundamental attribution
error.
APPLICATION AREAS AND FURTHER READINGS
Consumer Behavior
Cowley, Elizabeth (2005). ‘Views from Consumers Next in Line: The Fundamental
Attribution Error in a Service Setting,’ Journal of the Academy of Marketing Science,
33(2), 139–152.
International Marketing
Krull, D. S., Loy, M. H.-M., Lin, J., Wang, C.-F., Chen, S., and Zhao, X. (1999). ‘The
Fundamental Fundamental Attribution Error: Correspondence Bias in Individ-
ualist and Collectivist Cultures,’ Personality and Social Psychology Bulletin, 25(10),
1208–1219.
BIBLIOGRAPHY
Heider, Fritz (1958). The Psychology of Interpersonal Relations. New York: John Wiley &
Sons.
Ross, L. (1977). ‘The Intuitive Psychologist and his Shortcomings,’ in L. Berkowitz
(ed.), Advances in Experimental Social Psychology, 10. New York: Academic Press, 173–
220.
Ichheiser, Gustav (1943). ‘Misinterpretations of Personality in Everyday Life and the
Psychologist’s Frame of Reference,’ Journal of Personality, 12(2), December, 145.
fusion marketing
DESCRIPTION
Marketing involving the use of multiple forms of promotion, communication,
and/or interactivity.
KEY INSIGHTS
The emphasis on fusion marketing is that of combining alternate means
of marketing to enhance overall marketing effectiveness. In an online
marketing environment, a fusion marketing approach may therefore
involve a coherent mix of e-mail advertising, banner ad presentations,
and relevant web page-based content in an effort to achieve a firm’s
marketing objectives. The approach may also involve efforts to coordinate
and profit from marketing performed across firms, as where two firms
endorse or promote each other’s products. As the term is used by practi-
tioners to indicate marketing activities that vary in their emphasis (e.g. as
part of online marketing, as part of guerrilla marketing), the actual scope
of fusion marketing remains relatively vague and certainly overlaps with
hybrid marketing and convergence marketing (see hybrid marketing;
convergence marketing).
KEY WORDS Multiple marketing approaches
IMPLICATIONS
While conceptually vague, fusion marketing nevertheless provides the
marketers with a perspective suggesting the possibility of increased mar-
keting effectiveness as a result of the adoption of multiple marketing
methods. In addition, given that the term is used in certain contexts (e.g.
guerrilla marketing) to achieve increased cost effectiveness, the concept
fuzzy set theory 224
also lends itself to the notion that there may be multiple low-cost meth-
ods that the marketer can employ given limited marketing resources.
APPLICATION AREAS AND FURTHER READINGS
Online Marketing
Koogle, Tim (2000). ‘Building Yahoo!’ Business Strategy Review, 11(4), April, 15–20.
Services Marketing
Crandall, Richard C. (1998). 1001 Ways To Market Your Services—Even If You Hate To Sell.
New York: McGraw-Hill.
BIBLIOGRAPHY
Levinson, Jay Conrad, and Rubin, Charles (1996). Guerrilla Marketing Online Weapons:
100 Low-Cost, High-Impact Weapons for Online Profits and Prosperity. Boston: Houghton
Mifflin Co.
fuzzy set theory
DESCRIPTION
Theory relating to fuzzy sets, where elements’ membership in relation to a set
is viewed as gradual or continuously graded.
KEY INSIGHTS
The notion of fuzzy sets was developed in pioneering research by Zadeh
(1965) as a result of the observation that many phenomena (e.g. attractive-
ness, newness) involve categories with indistinct boundaries. In contrast
to a view that elements either are or are not members of a set, fuzzy sets
enable elements to have graded degrees of set membership ranging from
zero to one, where zero indicates non-membership and one indicates full
membership.
KEY WORDS Sets, models, membership
IMPLICATIONS
Fuzzy set theory has potential for use in the development and application
of marketing models where categories are viewed as having indistinct
boundaries, as in categorizations of products or in characterizations of
consumer choice behavior.
APPLICATION AREAS AND FURTHER READINGS
Marketing Modeling
Viswanathan, Madhubalan, and Childers, Terry L. (1999). ‘Understanding How
Product Attributes Influence Product Categorization: Development and Valida-
tion of Fuzzy Set-Based Measures of Gradedness in Product Categories,’ Journal of
Marketing Research, 36(1), February, 75–94.
Wu, Jianan, and Rangaswamy, Arvind (2003). ‘A Fuzzy Set Model of Search and
Consideration with an Application to an Online Market,’ Marketing Science, 22(3),
Summer, 411–434.
BIBLIOGRAPHY
Zimmermann, H.-J. (1991). Fuzzy Set Theory and its Applications. Boston: Kluwer Acad-
emic.
Zadeh, L. A. (1965). ‘Fuzzy Set,’ Information and Control, 8, 338–353.
G
gain–loss effect
DESCRIPTION
An effect characterizing situations whereby an outcome is more dependent
on the degree of increase or decrease of an influencing factor than the overall
level of the influencing factor.
KEY INSIGHTS
Based on pioneering experimental research by Aronson and Linder
(1965), the gain–loss effect is embodied in the finding that an individual’s
attraction to another is commonly observed to be more dependent on
the degree that the other individual’s liking of them has increased or
decreased rather than the overall level of the other’s degree of liking.
In such a context, an individual’s attraction to another tends to be high
when the other’s liking of the individual has appeared to increase and
low when the other’s liking of the individual has appeared to decrease.
KEY WORDS Decision making, gains, losses
IMPLICATIONS
Marketers should consider how gains or losses associated with a cus-
tomer relationship or product or service offering, whether experienced
or simply perceived by a consumer or other individual, may have more
influence on the individual’s behaviors or decisions than the overall level
of a factor of influence. As such, the gain–loss effect may embody itself
in elements of marketing relationships with consumers as well as in
decision-maker evaluations of problems involving gains or losses.
APPLICATION AREAS AND FURTHER READINGS
Consumer Behavior
Huston, T. L., and Levinger, G. (1978). ‘Interpersonal Attraction and Relationships,’
Annual Review of Psychology, 29, January, 115–156.
Putler, Daniel S. (1992). ‘Incorporating Reference Price Effects into a Theory of
Consumer Choice,’ Marketing Science, 11(3), Summer, 287–309.
Decision Making
Fischer, Gregory W., Kamlet, Mark S., Fienberg, Stephen E., and Schkade, David
(1986). ‘Risk Preferences for Gains and Losses in Multiple Objective Decision
Making,’ Management Science, 32(9), September, 1065–1086.
BIBLIOGRAPHY
Aronson, E., and Linder, D. (1965). ‘Gain and Loss of Esteem as Determi-
nants of Interpersonal Attractiveness,’ Journal of Experimental Social Psychology,1,
156–172.
gambler’s fallacy 226
gambler’s fallacy
DESCRIPTION
The misconception that future occurrences of a repeating random event
are influenced by past occurrences.
KEY INSIGHTS
The gambler’s fallacy characterizes an error in understanding proba-
bilities where an individual believes that the frequency or recency of
repeated random events of the past is influential in determining the
outcome of a future random event. The fallacy is therefore present in
believing that a random event is more or less likely to occur because
it has not happened for a long time or because it recently happened. A
common example is when believing that not winning a jackpot on a slot
machine after playing it for a long period of time means that the next
time the slot machine is played, the chances of winning a jackpot are
greater.
KEY WORDS Probabilities, random events
IMPLICATIONS
Consumers who fail to understand the nature of random events
may make an error of reasoning in the form of the gambler’s
fallacy. Such a misconception may influence consumer behavior in
activities such as gambling. Marketers and consumers should seek
to understand the nature of random events to ensure that actions
are consistent with actual probabilities as opposed to misconceived
probabilities.
APPLICATION AREAS AND FURTHER READINGS
Decision Making
Armstrong, J. S., Coviello, N., and Safrane, B. (1993). ‘Escalation Bias: Does it Extend
to Marketing?’ Journal of the Academy of Marketing Science, 21(3), 247.
Consumer Behavior
Johnson, Joseph, Tellis, Gerard J., and Macinnis, Deborah J. (2005). ‘Losers, Winners,
and Biased Trades,’ Journal of Consumer Research, 32, 324–329.
Roshwalb, Irving (1975). ‘A Consideration of Probability Estimates Pro-
vided by Respondents,’ Journal of Marketing Research, 12(1), February, 100–
103.
BIBLIOGRAPHY
Jarvik, M. E. (1951). ‘Probability Learning and a Negative Recency Effect in the
Serial Anticipation of Alternative Symbols,’ Journal of Experimental Psychology, 41,
291–297.
game theory
DESCRIPTION
Theory relating to the study of decision making, strategy, and competition in
situations typically characterized by interaction and interdependence among
rival players under conditions of imperfect information about other rivals’
intentions.
227 game theory
KEY INSIGHTS
Game theory, based on pioneering research by von Neumann and Mor-
genstern (1944), draws upon principles and concepts in mathematics and
economics and aims to understand, explain, and predict how and why
interdependent rival players will choose from among different courses of
action in an effort to maximize their returns under specific conditions
and rules for interaction. As such, models based on game theory involve
player interaction and are concerned with optimal decisions and strat-
egies under situations where costs and benefits are not fixed but rather
are dependent on other players’ choices. For example, one outcome of a
game-theoretic model involving several interacting players may be that of
Nash equilibrium, where there exists a stable state in which no participant
can gain by a change of strategy as long as the strategies of all the other
participants remain unchanged.
Particular characterizations of game theory can be a focus of further
theory in the study of games, as in the cases of cooperative and non-
cooperative game theory, where cooperative game theory involves the study
of games where cooperative behavior through coalitions of groups of
players is allowed and enforceable and non-cooperative game theory where
such behavior is not allowed. Games within game theory can be charac-
terized in many other ways as well, including whether the game is zero
sum vs. non-zero sum (where a zero-sum game is one where a player’s gain
is at the equal expense of others), sequential vs. simultaneous (where
sequential indicates a player has knowledge of earlier actions as opposed
to no knowledge), symmetric vs. asymmetric (where symmetric indicates
that payoffs are dependent only on strategy and not on who is playing),
and fixed duration vs. infinitely long.
One of the better-known games within game theory is the Prisoner’s
Dilemma, which in game theory terminology is a two-person, non-
zero-sum, symmetric, fixed duration, simultaneous game of cooperative
behavior. The game involves an intriguing tension through the incentives
presented to the players. Specifically, two persons suspected of a crime
are caught and interrogated, but there is not enough evidence to convict
them unless one of them confesses. If both remain silent, they both will
be released. But if one confesses and the other is silent, the one who
confesses will be released while the other will be sentenced to prison for
a long time.
A major contribution of game theory research, models, and particular
games such as the Prisoner’s Dilemma is in making sense of particular
situations where costs and benefits for various courses of action are not
fixed but rather are dependent on the choices of other competitors.
KEY WORDS Games, decision making, strategy, uncertainty, competition,
cooperation
IMPLICATIONS
Research into game theory provides a rich set of principles and con-
cepts that may be drawn upon to model areas of marketing including
generalizability theory 228
competitive dynamics and strategic choices. Marketers can benefit from
understanding how game theory can potentially provide useful insights
through modeling to assist with decision making, strategy formulation,
and understanding, explaining, and predicting competitive responses and
other behaviors.
APPLICATION AREAS AND FURTHER READINGS
Marketing Modeling
Moorthy, K. Sridhar (1985). ‘Using Game Theory to Model Competition,’ Journal of
Marketing Research, 22(3), August, 262–282.
McAfee, R. Preston, and McMillan, John (1996). ‘Competition and Game Theory,’
Journal of Marketing Research, 33(3), August, 263–267.
Marketing Strategy
Brandenburger, A. M., and Nalebuff, B. J. (1995). ‘The Right Game: Use Game Theory
to Shape Strategy,’ Harvard Business Review, 73(4), 57.
Corfman, K. P., and Lehmann, D. R. (1994). ‘The Prisoner’s Dilemma and the Role
of Information in Setting Advertising Budgets,’ Journal of Advertising (Utah), 23(2),
35.
Cable, D. M., and Shane, S. (1997). ‘A Prisoner’s Dilemma Approach to
Entrepreneur-Venture Capitalist Relationships,’ Academy of Management Review,
22(1), 142–176.
BIBLIOGRAPHY
Von Neumann, J., and Morgenstern, O. (1944). Theory of Games and Economic Behavior.
Princeton: Princeton University Press.
Kreps, David M. (1990). Game Theory and Economic Modeling. Oxford: Clarendon Press.
Rapoport, Anatol, and Chammah, Albert M. (1965). Prisoner’s Dilemma: A Study in
Conflict and Cooperation. Ann Arbor: University of Michigan Press.
gatekeepers see industrial buyer behavior
gender segmentation see segmentation
general systems theory see systems theory
generalizability theory
DESCRIPTION
Atheoreticalapproachinquantitativemeasurementwhereanalysisofvariance
is used to estimate the extent that derived results are applicable beyond the
specific conditions under which they were obtained.
KEY INSIGHTS
Generalizability theory as a theory of measurement focuses on the iden-
tification and quantification of multiple sources of measurement error.
As such, generalizability theory enables a researcher to examine the
influences of sources of error within the context of a measurement
situation and use such information to tailor the measurement conditions
of subsequent studies to maximize reliability within the constraints of
the measurement situation.
KEY WORDS Measurement, generalizability, analysis of variance, reliability
229 generational marketing
IMPLICATIONS
Generalizability theory provides a basis for the development and appli-
cation of measurement analysis frameworks and methods in the area of
testing (e.g. psychometric testing) and other approaches to data collection
for an array of measures. In particular, marketers concerned with assess-
ing or improving the reliability or dependability of marketing measures
in data analyses may benefit from understanding the principles and
elements of generalizability theory.
APPLICATION AREAS AND FURTHER READINGS
Marketing Research
Hughes, Marie Adele, and Garrett, Dennis E. (1990). ‘Intercoder Reliability Esti-
mation Approaches in Marketing: A Generalizability Theory Framework for
Quantitative Data,’ Journal of Marketing Research, 27(2), May, 185–195.
Rentz, Joseph O. (1987). ‘Generalizability Theory: A Comprehensive Method for
Assessing and Improving the Dependability of Marketing Measures,’ Journal of
Marketing Research, 24(1), February, 19–28.
Peter, J. Paul (1979). ‘Reliability: A Review of Psychometric Basics and Recent
Marketing Practices,’ Journal of Marketing Research, 16(1), February, 6–17.
BIBLIOGRAPHY
Shavelson, Richard J., and Webb, Noreen M. (1991). Generalizability Theory: A Primer.
Newbury Park, Calif.: Sage Publications.
Brennan, Robert L. (1983). Elements of Generalizability Theory. Iowa City: American
College Testing Program.
Brennan, R. L. (1994). ‘Variance Components in Generalizability Theory,’ in C.
R. Reynolds (ed.), Cognitive Assessment: A Multidisciplinary Perspective. New York:
Plenum Press, 175–207.
Kane, M. (2002). ‘Inferences about Variance Components and Reliability-
Generalizability Coefficients in the Absence of Random Sampling,’ Journal of
Educational Measurement, 39(2), 165–181.
generation X/Y/Z see generational marketing
generational marketing
DESCRIPTION
Marketing to a group of individuals who are born and live at the same general
time.
KEY INSIGHTS
Generational marketing emphasizes the tailoring of marketing
approaches to appeal to the characteristics of particular generations of
individuals. Of relevance to marketers are generations given particular
names, even though such generational cohorts are not always well
defined. Popularly named generations include: baby boomers—individuals
born in a period of increased birth rates (e.g. 1946–64); generation X
(or X-generation)—the generation following the baby boom generation,
comprising individuals born in the 1960s and 1970s (with definitions
including 1965–75, 1965–76, and 1963–78); generation Y (or Y-generation)—
the generation following generation X (with definitions including
1976–85, 1977–94, and 1977–97); and generation Z (or Z-generation)—the