Dacko S.G. The Advanced Dictionary of Marketing Putting Theory to Use
Подождите немного. Документ загружается.
Little’s law 300
Marketing Ethics
Niebuhr, J. (1998). ‘Target Group: Poor Neighbourhood. The Ethical Implications
of Lifestyle Marketing in Low Income Residential Neighborhoods,’ Business Ethics
(Oxford), 7(3), 182–185.
BIBLIOGRAPHY
Michman, Ronald D., Mazze, Edward M., and Greco, Alan James (2003). Lifestyle
Marketing: Reaching the New American Consumer. Westport, Conn.: Praeger.
Michman, R. D. (1991). Lifestyle Market Segmentation. New York: Greenwood Publish-
ing Group.
lifestyle segmentation see segmentation
Likert scale see scale
liking see buyer influence/readiness
limit pricing see pricing strategies
Little’s law
(also called Little’s result or Little’s theorem)
DESCRIPTION
A queuing formula for a stable system stating that the average number of
customers in a system (over some interval) is equal to their average arrival rate
multiplied by their average time in the system.
KEY INSIGHTS
Based on pioneering research by John D. C. Little, the relationship pre-
sented in Little’s law is demonstrated through his proof of the queuing
formula L = ÎW (Little 1961). While Little’s law may appear to be some-
what intuitive, a key contribution is that it is proven to hold independent
of assumptions about customers’ arrival schedules, service schedules, or
service order. One constraint for the relationship is that the system must
be stable (e.g. not in a transition state of starting up or shutting down).
Applied more broadly to any production system, as opposed to that
for a customer queuing system context, Little’s law can also be used to
support the view that average throughput time through a production
system is directly proportional to average work-in-progress (WIP) inven-
tory. Hence, in the context of a production system for manufacturing, as
capacity utilization increases, WIP inventory increases, throughput time
increases, and delivery performance declines.
Little’s law also has corollary. Again referring to the context of a cus-
tomer queuing system, the corollary statement added to the law is: the
average time in the system is equal to the average time in queue plus the
average time it takes to receive service.
To illustrate Little’s law with an example, assume that customers arrive
at a set of supermarket checkout counters at an average rate of one
customer every 15 seconds. Assume also that each customer ends up
spending an average of 8 minutes in the queue and 4 minutes actually
checking out or receiving service. Little’s law can be used to calculate the
301 local marketing
average number of customers that will be in the system:
Avg. arrival rate = 1 customer every 15 seconds = 4 customers per minute
Avg. time in the system = avg. time in queue + avg. time to receive service
= 8 minute + 4 minutes = 12 minutes
Avg. no. of customers in queue = avg. arrival rate × avg. time in the system
= 4 customers per minute × 12 minutes
= 48 customers
KEY WORDS Queuing, systems, performance, production, service
IMPLICATIONS
The principle embodied by Little’s law has clear implications for cus-
tomer queuing systems as well as most systems of production and man-
ufacturing. When capacity utilization and system performance are of
strategic importance, Little’s law provides valuable insights into how
these systems will function when stable.
APPLICATION AREAS AND FURTHER READINGS
Marketing Management
Hua, Stella Y., and Wemmerlöv, Urban (2006). ‘Product Change Intensity, Product
Advantage, and Market Performance: An Empirical Investigation of the PC Indus-
try,’ Journal of Product Innovation Management, 23(4), July, 316.
Bitran, G. R., and Mondschein, S. V. (1996). ‘Mailing Decisions in the Catalog Sales
Industry,’ Management Science, 42(9), 1364–1381.
Hopp, W. J., and Sturgis, M. L. R. (2000). ‘Quoting Manufacturing Due Dates Subject
to a Service Level Constraint,’ IIE Transactions, 32(9), 771–784.
Berman, O., and Kim, E. (2001). ‘Dynamic Order Replenishment Policy in Internet-
Based Supply Chains,’ Mathematical Methods of Operations Research (Heidelberg),
53(3), 371–390.
BIBLIOGRAPHY
Little, J. D. C. (1961). ‘A Proof of the Queueing Formula L = Î W,’ Operations Research,
9, 383–387.
local marketing
DESCRIPTION
Marketing tailored to the wants and needs of local markets such as cities,
neighborhoods, or stores.
KEY INSIGHTS
Local marketing emphasizes a perceived net marketing benefit to tailor-
ing certain aspects of a firm’s offerings (e.g. promotions, product prices,
brands) to reflect the wants and needs of local organizations or com-
munities of consumers. Local marketing may vary in the extent of such
tailoring in terms of the firm’s offerings as well as a local area’s size and
other characteristics (e.g. city vs. neighborhood marketing).
KEY WORDS Tailored offerings, local needs, neighborhoods, cities
locality, principle of 302
IMPLICATIONS
Firms with offerings that may vary in their appeal among local mar-
kets may benefit from a greater understanding of local marketing-based
approaches. In the case of firms providing local markets with multiple
offerings, for example, such as where a food and snack foods firm sup-
plies many neighborhood stores, local marketing practices may include
the careful tailoring of the mix of offerings provided to each local retailer.
APPLICATION AREAS AND FURTHER READINGS
Retail Marketing
Byrom J. (2001). ‘The Role of Loyalty Card Data Within Local Marketing Initiatives,’
International Journal of Retail and Distribution Management, 29(7), 333–341.
Fish, K. R. (2001). ‘Fresh Choice Restaurants, Inc.: Good Practices in Neighborhood
Marketing,’ Journal of Restaurant and Foodservicing Marketing, 4(2), 95–98.
International Marketing
Solberg, C. A. (2002). ‘The Perennial Issue of Adaptation or Standardization of
International Marketing Communication: Organizational Contingencies and Per-
formance,’ Journal of International Marketing, 10(3), 1–21.
BIBLIOGRAPHY
Johansson, J. K. (1997). Global Marketing: Foreign Entry, Local Marketing and Global
Management. New York: McGraw-Hill.
locality, principle of
DESCRIPTION
A general principle stating that, when reasoning, an individual does not use all
he or she knows about the world, but only a subset of it.
KEY INSIGHTS
Not to be confused with the physics-based principle of locality (i.e. ‘no
action at a distance’), the sociological-based principle of locality (i.e. the
empowerment of localities to make decisions of local concern and the
acknowledgment and respect of such rights), or the computing-based
principle of locality for local computational resource usage, the principle
of locality emphasizes the role and influence of context in determining
how and to what extent individuals reason in accomplishing tasks or
for achieving goals. Whether acting for themselves or acting as agents
on behalf of others (e.g. managers employed to pursue the goals of the
firm’s owners), the principle of locality indicates that individuals will
draw upon only part of their total knowledge when reasoning, where
such knowledge drawn is heavily influenced by the context in which the
need for reasoning occurs.
KEY WORDS Individual reasoning, decision making
IMPLICATIONS
While the principle of locality is a very general principle of reasoning, it
nevertheless emphasizes the importance of local context in determin-
ing how and to what extent individuals will draw upon their base of
knowledge. Marketing models of consumer behavior can therefore draw
303 location theory
upon the principle of locality in establishing assumptions about decision-
making behavior and implications for consumer action.
APPLICATION AREAS AND FURTHER READINGS
Marketing Modeling
Bouquet, Paolo, and Warglien, Massimo (1999). ‘Mental Models and Local Models
Semantics: The Problem of Information Integration,’ European Conference in Cogni-
tive Science, University of Siena.
Gregory, Aaron L. (2004). ‘Prediction of Commuter Choice Behavior Using Neural
Networks,’ Master’s Thesis, University of South Florida.
Nelson, Bardin H. (1962). ‘Seven Principles in Image Formation,’ Journal of Marketing,
26(1), January, 67–71.
BIBLIOGRAPHY
Giunchiglia, F., and Ghidini, C. (1998). ‘Local Models Semantics, or Contextual
Reasoning = Locality + Compatibility,’ Proceedings of the Sixth International Confer-
ence on Principles of Knowledge Representation and Reasoning (KR’98), Trento: Morgan
Kaufmann, 282–289.
location marketing see place marketing
location theory
DESCRIPTION
Theory aimed at understanding, explaining, and predicting the locational and
spatial choices of economic entitities.
KEY INSIGHTS
Location theory encompasses a broad base of research aimed at under-
standing, explaining, and/or predicting firms’ geographic location choices
in relation to such factors as sources of supply and demand. Taking
into account the nature of the firm’s production processes, for example,
location theory as developed by Weber (1929) supports the view that (1)
firms will locate near raw material sources when the goods produced are
not as heavy, bulky, or perishable as the raw materials from which they
are manufactured, (2) firms will locate near markets for their goods when
the goods produced are heavier, bulkier, or more perishable than the raw
materials from which they are produced, and (3) firms will not locate at
intermediate points as such locations incur additional costs. Theories of
location with more specific emphases include retail location theory, which is
concerned with understanding, explaining, and predicting the locational
and spatial choices of retailers. More broadly, central place theory is an
area of study with theoretical perspectives which are related to location
theory. (See central place theory.)
KEY WORDS Physical locations, spatial locations
IMPLICATIONS
Marketers in firms evaluating choice of firm location may benefit from
a greater knowledge of location theory-based research. In addition, the
theory may also provide marketers with insights into the possible and
likely locational choices of industry and market competitors as a result of
low-ball technique 304
a greater understanding of the different factors influencing firm location
choice.
APPLICATION AREAS AND FURTHER READINGS
Retail Marketing
Brown, S. (1989). ‘Retail Location Theory: The Legacy of Harold Hotelling,’ Journal
of Retailing, 65(4), Winter, 450–470.
Brown, S. (1993). ‘Retail Location Theory: Evolution and Evaluation,’ International
Review of Retail, Distribution, and Consumer Research, 3(2), 185–229.
Grether, E. T. (1983). ‘Regional-Spatial Analysis in Marketing,’ Journal of Marketing,
47, 36–43.
Business-to-Business Marketing
Olson, F. L. (1959). ‘Location Theory as Applied to Milk Processing Plants,’ Journal of
Farm Economics, 1546–1559.
BIBLIOGRAPHY
Weber, Alfred (1929). Theory of the Location of Industries. Chicago: Chicago University
Press.
Francis, R. L., and Goldstein, J. M. (1974). ‘Location Theory: A Selective Bibliogra-
phy,’ Operations Research, 22, 400–409.
loss leader pricing see pricing strategies
low-ball technique
(also called the low-ball procedure)
DESCRIPTION
A technique for persuading an individual to accept or adopt a particular course
of action, where the individual is first induced to agree to the action through
presentation of a favorable proposition which, soon after but before final
commitment, is then disclosed less favorably.
KEY INSIGHTS
Based on pioneering research by Cialdini, Cacioppo, Bassett, and Miller
(1978), the low-ball technique (or procedure) was observed to be more
effective in obtaining individuals’ commitments to volunteer under con-
ditions disclosed subsequently as less desirable than initially disclosed
relative to instances where individuals were sought as volunteers for the
immediately disclosed less desirable condition. The technique therefore
involves obtaining a commitment to an action prior to disclosing the
full and true cost, where the initial commitment acts to increase the
likelihood of sustained agreement, and likewise reduce the likelihood
that the individual will subsequently reverse his or her initial decision,
even under conditions of greater cost or other less favorable conditions.
KEY WORDS Persuasion, compliance, negotiation, selling
IMPLICATIONS
While the technique clearly has ethical implications which should be
examined by marketers in considering its use, its effectiveness neverthe-
less suggests it may be an alternative that marketers may wish to explore
in personal selling, negotiation, and other forms of persuasion.
305 loyalty effect
APPLICATION AREAS AND FURTHER READINGS
Negotiation
Evans, Kenneth R., and Beltramini, Richard F. (1987). ‘A Theoretical Model of
Consumer Negotiated Pricing: An Orientation Perspective,’ Journal of Marketing,
51(2), April, 58–73.
Non-profit Marketing
Lindahl, W. E., and Conley, A. T. (2002). ‘Literature Review: Philanthropic Fundrais-
ing,’ Nonprofit Management and Leadership, 13(1), 91–112.
Marketing Research
Hornik, J., Zaig, T., Shadmon, D., and Barbash, G. I. (1990). ‘Comparison of Three
Inducement Techniques to Improve Compliance in a Health Survey Conducted
by Telephone,’ Public Health Reports, 105(5), September–October, 524–9.
Consumer Behavior
Joule, R. V. (1987). ‘Tobacco Deprivation: The Foot-in-the-Door Technique versus the
Lowball Technique,’ European Journal of Social Psychology, 17(3), 361–365.
BIBLIOGRAPHY
Cialdini, R. B., Cacioppo, J. T., Bassett, R., and Miller, J. A. (1978). ‘Low-Ball Procedure
for Eliciting Compliance: Commitment then Cost,’ Journal of Personality and Social
Psychology, 34, 366–375.
Burger, J. M., and Petty, R. E. (1981). ‘The Low-Ball Compliance Technique: Task or
Person Commitment?’ Journal of Personality and Social Psychology, 40, 492–500.
loyalty effect
DESCRIPTION
Beneficial effects to a firm and its marketing efforts that are attributed to brand
loyalty by customers.
KEY INSIGHTS
Research by Reichheld (1996) argues that marketing costs for serving
loyal customers are lower than those for attracting new customers
because loyal customers are familiar with the firm’s products or services
and are less dependent on the firm and its employees for assistance and
information. As a result, loyal customers contribute much to the bottom
line of a firm. In quantifying the contribution of loyalty, Reichheld’s
(1996) research suggests that in certain industries such as automobile and
life insurance and credit cards, attracting new customers can cost up to
five times the cost associated with retaining current customers.
More broadly, effects of increases in customer loyalty to a firm include:
increases in the long-term and continuous profit accumulation from
individual customers, reduced marketing costs as a result of less market-
ing effort to attract new customers, increases in per-customer revenue
growth as loyal customers tend to increase their spending over time,
lower operating costs as a result of less employee time spent on answer-
ing the queries of loyal customers, increases in referrals by loyal cus-
tomers to friends and others, a greater willingness to pay and a reduced
sensitivity to price increases as a result of loyal customers’ perceptions of
unique value in the brand.
loyalty marketing 306
While there are many benefits associated with customer loyalty, the
two major dimensions of the loyalty effect according to Reichheld (1996)
are the ‘customer volume effect’ (also called the ‘volume effect’) and the
‘profit-per-customer effect.’ The customer volume effect is the effect on the
growth rate of a firm resulting from adding new customers each year
while also reducing the rate at which it is losing customers. Thus, while
two firms may have identical customer acquisition rates, the firm with
the lower customer attrition rate has the advantage in terms of increasing
its installed base is of customers more quickly over time. The profit-per-
customer effect is the effect of increasing profits the longer a customer
stays with a company, where such increasing profits are due to greater
customer spending and lower operating costs in serving loyal customers.
KEY WORDS Loyalty, growth, profit, value
IMPLICATIONS
Marketers should not underestimate the beneficial effects of customer
loyalty to a firm and its marketing efforts. Marketing aimed at main-
taining and increasing customer loyalty is likely to produce far greater
rewards than marketing of a similar financial expenditure that is aimed
at attracting new customers.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Oliver, R. L. (1999). ‘Whence Consumer Loyalty,’ Journal of Marketing, 63(SPI/1), 33–
44.
Reichheld, F. F., Markey, R. G., and Hopton, C. (2000). ‘The Loyalty Effect,’ European
Business Journal, 12(3), 134–139.
Sheth, J. N., and Sisodia, R. N. (2002). ‘Marketing Productivity, Issues and Analysis,’
Journal of Business Research, 55, 349–362.
Online Marketing
Reichheld, F. F., and Schefter, P. (2000). ‘E-Loyalty: Your Secret Weapon on the Web,’
Harvard Business Review, 78(4), 105–113.
BIBLIOGRAPHY
Reichheld, Frederick F. (1996), The Loyalty Effect: The Hidden Force behind Lasting
Growth, Profits, and Lasting Value. Boston: Harvard Business School Press.
loyalty marketing
DESCRIPTION
Marketing that is aimed at encouraging or increasing customer loyalty to a
firm and its branded offerings.
KEY INSIGHTS
Loyalty marketing seeks to create and take strategic advantage of the
loyalty effect (see loyalty effect) and/or the loyalty ripple effect (see
loyalty ripple effect). As such, a firm may make loyalty marketing central
to the firm’s marketing efforts, such as when a new airline opts to
compete by offering highly favorable terms to its frequent flyers, or in
combination with other marketing approaches, such as a supermarket
307 loyalty ripple effect
offering shoppers a loyalty program to encourage repeat shopping but
also to learn about ongoing customer purchase behavior.
KEY WORDS Loyalty, competitive advantage
IMPLICATIONS
Given that customer loyalty can have strategic value to a firm operating
in a highly competitive industry, marketers may benefit from a greater
understanding of loyalty marketing approaches. While in some markets,
loyalty marketing may simply provide a firm with a means to achieve
and maintain competitive parity, in other industries the approach may
provide the firm with a competitive advantage that is not easily eroded
over the longer term.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Duffy, D. L. (1998). ‘Customer Loyalty Strategies,’ Journal of Consumer Marketing, 15(5),
435–448.
Online Marketing
Sindell, Kathleen (2000). Loyalty Marketing for the Internet Age: How to Identify, Attract,
Serve and Retain Customers in an E-commerce Environment. Chicago: Dearborn Finan-
cial Publishing.
Marketing Research
Dick, A. S., and Basu, K. (1994). ‘Customer Loyalty: Toward an Integrated Concep-
tual Framework,’ Journal—Academy of Marketing Science, 22(2), 99.
Shoemaker, S., and Lewis, R. C. (1999). ‘Customer Loyalty: The Future of Hospitality
Marketing—Determining and Measuring Customer Value,’ International Journal of
Hospitality Management, 18(4), 345–370.
Dowling, G. R., and Uncles, M. (1997). ‘Do Customer Loyalty Programs Really
Work?’ Sloan Management Review, 38(4), 71–82.
BIBLIOGRAPHY
Woolf, Brian (2002). Loyalty Marketing: the Second Act. Greenville, SC: Teal Books.
loyalty ripple effect
DESCRIPTION
Direct and indirect influences that customers have on a firm as a result of
their generating interest in the firm by encouraging patronage from new
customers as well as any other of their actions or behaviors that create value
for the organization.
KEY INSIGHTS
Conceptually developed by Gremler and Brown (1999), the loyalty ripple
effect conveys the notion that there is a gradually spreading effect or
influence of customer loyalty to an organization. Beyond loyal customers’
influence on a company’s ongoing revenues, actions including positive
word-of-mouth communication add further value to a firm and reduce
the firm’s costs.
KEY WORDS Loyalty, value, word-of-mouth communication
loyalty ripple effect 308
IMPLICATIONS
Marketers concerned with developing customer loyalty should not under-
estimate its ripple effect, which can include not only generating more
customers but also more customers that are also loyal. Appreciating and
understanding better the loyalty ripple effect may therefore help firms to
exploit more of the true value of loyalty.
APPLICATION AREAS AND FURTHER READINGS
Online Marketing
Ribbink, Dina, van Riel, Allard C. R., Liljander, Veronica, and Streukens, Sandra
(2004). ‘Comfort your Online Customer: Quality, Trust and Loyalty on the Inter-
net,’ Managing Service Quality, 14(6), 446–456.
Marketing Strategy
Uncles, M. D., Dowling, G. R., and Hammond, K. (2003). ‘Customer Loyalty and
Customer Loyalty Programs,’ Journal of Consumer Marketing, 20(4/5), 294–316.
BIBLIOGRAPHY
Gremler, D. D., and Brown, S. W. (1999). ‘The Loyalty Ripple Effect: Appreciating
the Full Value of Customers,’ International Journal of Service Industry Management,
10(3), 271–291.
luxury goods see goods
M
m-marketing see mobile marketing
macro marketing environment see macroenvironment
macroenvironment
DESCRIPTION
Theset of societalforces that have a major influence on industries and markets.
(also called macro marketing environment)
KEY INSIGHTS
The macroenvironment can be considered to consist of multiple forces of
influence to industries and markets. Examples of such forces, or pressures
on the firm, include political, economic, social, cultural, demographic,
technological, legal, regulatory, environmental, and natural forces. To
ensure that a firm’s marketing efforts are compatible with these and
other broad societal forces, an analysis of the macroenvironment is
recommended, where the implications for the firm’s marketing efforts
receive critical attention. Aside from the general term environmental
analysis, there are a number of generally equivalent terms used for
such an analysis, including PEST analysis (also called STEP analysis), which
involves an analysis of political (including legal and regulatory), eco-
nomic, social, and technological forces of the macronenvironment, and
PESTLE analysis, which also involves analysis of the same set of forces
as for PEST but makes legal forces distinct from political forces and
further includes environmental forces. What is most important in the
environmental analysis is not so much the precise categorizations used
but the identification of important forces of influence, both current and
potential, to the firm’s marketing efforts. For example, a firm involved in
developing new teleworking products may find that there are numerous
important influences in the area of technological forces, which may
further include influences associated with technological advances in both
communications hardware and software. At the same time, the firm
would not want to neglect analyses of cultural forces and economic
forces, both of which may be important in the firm’s plans to offer the
product in multiple countries.
KEY WORDS Societal forces