Dacko S.G. The Advanced Dictionary of Marketing Putting Theory to Use
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affect 20
characteristics and lifespan of a particular ad, especially with regards to
cost effectiveness of advertising, it may not be easy to predict when such
an effect will become evident to a large extent, if at all, in the life of an
advertising campaign due to the many factors of influence including the
ad’s likeability and consumer attitudes toward the subject of the ad.
KEY WORDS Advertising, effectiveness, wearout
IMPLICATIONS
Periodic market research studies on consumer reactions to an ad over
time is one way in which consumer sentiment can be established to
determine if the advertising wearout effect is becoming or has become
a significant issue in the life of an ad within a broader advertising
campaign.
APPLICATION AREAS AND FURTHER READINGS
Advertising
Tellis, Gerard J. (1988). ‘Advertising Exposure, Loyalty, and Brand Purchase: A Two-
Stage Model of Choice,’ Journal of Marketing Research, 25(2), May, 134–144.
Calder, Bobby J., and Sternthal, Brian (1980). ‘Television Commercial Wearout:
An Information Processing View,’ Journal of Marketing Research, 17(2), May, 173–
186.
Simon, Hermann (1982). ‘ADPULS: An Advertising Model with Wearout and Pulsa-
tion,’ Journal of Marketing Research, 19(3), August, 352–363.
BIBLIOGRAPHY
Craig, C. Samuel, Sternthal, Brian, and Leavitt, Clark (1976). ‘Advertising Wearout:
An Experimental Analysis,’ Journal of Marketing Research , 13(4), November, 365–
372.
affect
DESCRIPTION
Subjectively experienced feeling or emotion.
KEY INSIGHTS
While there are numerous subjectively experienced feelings or emotions,
such as happiness, anger, sadness, and fear, it is also clearly recognized
that individuals may also experience emotions in varying intensity. For
example, some individuals may experience particular emotions with
reduced intensity while still others may demonstrate a complete or near-
absence of emotional expression altogether. Among others and under
certain conditions, experienced emotions may also be unstable and fluc-
tuate.
KEY WORDS Emotion, feeling
IMPLICATIONS
As there are many product and service offerings that have a strong emo-
tional appeal to consumers, e.g. the brand of a sports car to be considered
for purchase or the particular music that the individual considers for
purchase, marketers should seek to know how and to what extent con-
sumers relate to particular product and service offerings through their
21 affiliate marketing
feelings and emotions. Seemingly tame improvements to products, such
as the attempt by Coca-Cola to introduce New Coke to consumers as a
better-tasting cola beverage, may ultimately lead to unexpected and even
severe emotional responses by consumers if such emotional relationships
and attachments to products are not fully understood or appreciated by
the marketer.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Baker, Julie (1996). ‘The Effects of the Service Environment on Affect and Con-
sumer Perception of Waiting Time: An Integrative Review and Research Propo-
sitions,’ Journal of the Academy of Marketing Science, 24(4), 338–349.
Chaudhuri, Arjun, and Holbrook, Morris B. (2001). ‘The Chain of Effects from Brand
Trust and Brand Affect to Brand Performance: The Role of Brand Loyalty,’ Journal
of Marketing, 65(2), 81–93.
Westbrook, Robert A. (1987). ‘Product/Consumption-Based Affective Responses and
Postpurchase Processes,’ Journal of Marketing Research, 24(3), August, 258–270.
Consumer Behavior
Oliver, Richard L. (1993). ‘Cognitive, Affective, and Attribute Bases of the Satisfac-
tion Response,’ Journal of Consumer Research, 20(3), December, 418–430.
BIBLIOGRAPHY
Bagozzi, Richard P. (1999). ‘The Role of Emotions in Marketing,’ Journal of the
Academy of Marketing Science, 27(2), 184–206.
affiliate marketing
(also called referral marketing, many-to-many marketing, partner mar-
keting, pay-for-performance marketing, performance-based marketing,
or revenue-sharing marketing)
DESCRIPTION
The use of a revenue sharing partnership between a merchant and one or more
affiliated or partner firms where the affiliates are paid for referring or leading
consumers to the merchant and/or when consumers subsequently purchase
from the merchant.
KEY INSIGHTS
Affiliate marketing is a form of marketing that is based on a pay-for-
performance approach. While the approach often involves a complex
process of tracking, monitoring, and payments, the process has become
easier as a result of many organizations now providing such support
services to firms seeking to engage in affiliate marketing. Affiliate mar-
keting has become an increasingly common practice among Web-based
businesses in particular, where compensation may be on a pay-per-click,
pay-per-lead, or pay-per-sale basis. Many organizations with websites
containing advertising, for example, use pay-per-click marketing, which is
where an advertiser compensates the affiliated organization based on the
number of times website visitors click on an ad that takes them to the
website of the advertiser.
KEY WORDS Revenue sharing, pay-for-performance
affinity marketing 22
IMPLICATIONS
Affiliate marketing provides a firm with a relatively efficient means
to promote its offerings in a way where the firm pays for the results
obtained. As many marketers view affiliate marketing as an approach
that will become increasingly mainstream in e-commerce, marketers
may benefit from a greater understanding of how and to what extent
the approach may have strategic value to the firm as a means of cost
effectively exposing potential customers to the firms’ offerings with the
aim of encouraging subsequent purchase.
APPLICATION AREAS AND FURTHER READINGS
Online Marketing
Hoffman, D. L., and Novak, T. P. (2000). ‘How to Acquire Customers on the Web,’
Harvard Business Review, 78, May–June, 179–183.
Duffy, Dennis L. (2005). ‘Affiliate Marketing and its Impact on E-commerce,’ Journal
of Consumer Marketing, 22(3), 161–163.
Libai, Barak, Biyalogorsky, Eyal, and Gerstner, Eitan (2003). ‘Setting Referral Fees
in Affiliate Marketing,’ Journal of Service Research, 5(4), 303–315.
Gummesson, E. (2004). Many to Many Marketing. Malmo: Liber.
BIBLIOGRAPHY
Goldschmidt, Simon, Junghagen, Sven, and Harris, Uri (2003). Strategic Affiliate
Marketing. Northampton, Mass.: Edward Elgar.
affinity marketing
DESCRIPTION
An approach to marketing that involves the teaming together of organizations
to attract customers with particular interests.
KEY INSIGHTS
As part of affinity programs, firms aim to find customers of particular
products or services who also have an interest in, or affinity to, certain
other areas or topics to allow such customers to be presented with
products or services associated with those areas. While affinity marketing
originated in the credit card industry, its scope and application now
extends well beyond the area to markets ranging from financial services
to charities and other non-profit organizations.
KEY WORDS Organizational teaming, customer interests
IMPLICATIONS
Affinity marketing provides a means for marketers to cost effectively
leverage their brand and customer base assets by providing an expanded
set of offerings to customers through strategic partnerships with other
firms rather than through potentially more costly internal development.
Marketers seeking to reach new customers with current products as
well as current customers with new products may potentially benefit
from strategic use of an affinity marketing approach to the extent there
exists a common consumer interest on which organizations can build
and partner to provide a set of offerings of increased value to consumers
identified as sharing common interests.
23 agency theory
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Worthington, Steve (2001). ‘Affinity Credit Cards: A Critical Review,’ International
Journal of Retail and Distribution Management, 29(11), 485–512.
Consumer Behavior
Laing, Angus, Harris, Fiona, and Mekonnen, Aster (2004). ‘Deconstructing Affinity
Relationships: Consumers and Affinity Marketing,’ Journal of Customer Behavior,
3(2), July, 215–228.
Non-Profit Marketing
Cowton, C. J., and Gunn, C. J. (2000). ‘The Affinity Credit Card as a Fundraising Tool
for Charities,’ International Journal of Nonprofit and Voluntary Sector Marketing, 5(1),
11–18.
BIBLIOGRAPHY
Macchiette, B., and Abhijit, R. (1993). ‘Affinity Marketing: What is it and How Does
it Work?’ Journal of Product and Brand Management, 2(1), 55–67.
affordable method see promotion budget setting methods
age segmentation see segmentation
agency theory
DESCRIPTION
Theory aimed at explaining how and why organizations or individuals are best
empowered to act as representatives or agents for other organizations or
individuals as principals given that the principals have incomplete information
regarding the agents and where the agents may have different motives than
the principals.
KEY INSIGHTS
Agency theory is concerned with the problems associated with motiv-
ating one party (an agent) to act on behalf of another (a principal).
Specifically, under conditions where an agent is compensated by a prin-
cipal for performing certain tasks which are useful to the principal and
costly to the agent, and where there are elements of the performance
which are costly to observe, the principal often does not know enough
about the extent that an agent’s performance is in accord with the
principal’s demands or expectations. The theory is therefore concerned
with ways to align better the interests of the agent with those of the
principal. Examples of mechanisms for doing so include certain financial
incentives such as profit sharing, commissions, and piece-rate compen-
sation. On the other hand, disincentives for an agent acting counter to
a principal’s interest may include a fear of firing. While agency theory
research is considerable, the concepts and issues involved can provide
important guidance for contract design and related activities in terms of
characteristics including the nature of information involved and used as
well as the intensity of incentives and monitoring and the equality of
compensation.
KEY WORDS Agents, principals, empowerment, incentives
agglomeration economies 24
IMPLICATIONS
Agency theory’s broad scope means it may help us to understand, explain,
or predict better principal–agent actions in widely varying contexts
including between firms as well as within firms. For example, agent
firms or individuals may interact with the firm as employee, supplier,
subcontractor, selling agent, franchisee, or other distributor. Beyond its
benefits for identifying and evaluating the desirability of various agent
incentives, the principles and practices suggested by agency theory may
find strategic use by marketers in shaping planning efforts involving any
form of agent role for, or on behalf of, the marketer’s organization.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Anderson, Paul F. (1982). ‘Marketing, Strategic Planning and the Theory of the
Firm,’ Journal of Marketing, 46(2), Spring, 15–26.
Heide, Jan B. (1994). ‘Interorganizational Governance in Marketing Channels,’
Journal of Marketing, 58(1), January, 71–85.
Bergen, Mark, Dutta, Shantanu, and Walker, Orville C., Jr. (1992). ‘Agency Relation-
ships in Marketing: A Review of the Implications and Applications of Agency and
Related Theories,’ Journal of Marketing, 56(3), July, 1–24.
Franchising
Lafontaine, Francine (1992). ‘Agency Theory and Franchising: Some Empirical
Results,’ RAND Journal of Economics, 23(2), Summer, 263–283.
BIBLIOGRAPHY
Eisenhardt, Kathleen M. (1989). ‘Agency Theory: An Assessment and Review,’ Acad-
emy of Management Review, 14(1), 57–74.
Sappington, David E. M. (1991). ‘Incentives in Principal–Agent Relationships,’ Jour-
nal of Economic Perspectives, 5(2), Spring, 45–66.
Milgrom, Paul, and Roberts, John (1992). Economics, Organization and Management.
London: Prentice-Hall.
agglomeration economies
DESCRIPTION
Cost savings or benefits realized as a result of firms clustering together.
KEY INSIGHTS
By locating near one another, some firms and consumers can achieve
desirable cost savings and benefits. For example, when retail outlets
cluster together, it is easier for consumers to make price and prod-
uct comparisons with less travel, thereby reducing consumers’ acquisi-
tion costs and increasing the likelihood of product purchase. In other
instances, cost savings can be achieved by firms through the sharing
of infrastructure including that for communications and other support
services. A characteristic of agglomeration economies is that the activ-
ities of any one firm also result in benefits to the other firms in the
agglomeration.
KEY WORDS Clustering, location, cost savings, benefits
25 ambush marketing
IMPLICATIONS
In deciding where to locate an organization, marketers should evaluate
the nature and extent of agglomeration economies in both lowering
costs and providing added benefits to the organization. The sharing of
infrastructure may reduce operating costs or facilitate mutually beneficial
communication in some instances, while in other instances, co-locating
with complementary or even similar outlets may increase consumer
traffic as well as make it easier for consumers to purchase by lowering
their product search and acquisition costs.
APPLICATION AREAS AND FURTHER READINGS
Retail Marketing
Gautschi, David A. (1981). ‘Specification of Patronage Models for Retail Center
Choice,’ Journal of Marketing Research, 18(2), May, 162–174.
Marketing Strategy
Pouder, Richard, and St. John, Caron H. (1996). ‘Hot Spots and Blind Spots: Geo-
graphical Clusters of Firms and Innovation,’ Academy of Management Review, 21(4),
October, 1192–1225.
Dwyer, F. Robert, and Welsh, M. Ann (1985). ‘Environmental Relationships of the
Internal Political Economy of Marketing Channels,’ Journal of Marketing Research,
22(4), November, 397–414.
Lyons, D. (1995). ‘Agglomeration Economies among High Technology Firms in
Advanced Production Areas: The Case of Denver/Boulder,’ Regional Studies, 29,
265–278.
Karlsson, C. (1997). ‘Product Development, Innovation Networks, Infrastructure
and Agglomeration Economies,’ Annals of Regional Science, 31(3), 235–258.
BIBLIOGRAPHY
Rosenthal, Stuart S., and Strange, William C. (2004). ‘Evidence on the Nature
and Sources of Agglomeration Economies,’ in Vernon Henderson and Jacques-
François Thisse (eds.), Handbook of Regional and Urban Economics, 4, Amsterdam:
North-Holland.
Lambooy, J. G. (1997). ‘Knowledge Production, Organisation and Agglomeration
Economies,’ Geojournal, 41(4), 293–300.
AIDA see buyer influence/readiness
AIDCA see buyer influence/readiness
AL theory see adaptation-level theory
alternative evaluation see buyer decision process
ambient marketing see out-of-home marketing
ambush marketing
DESCRIPTION
Marketing intending to give an impression to consumers that a firm or brand
is officially associated with an event or cause when, in fact, it is not.
KEY INSIGHTS
The aim of ambush marketing is to obtain more of the gains associated
with an official or formal association, as through event sponsorship, but
without incurring the same extent of its costs. While another organiza-
tion may own the legal right to be the official sponsor of an event, for
anchoring and adjustment 26
example, a firm engaged in ambush marketing may locate or promote
itself in ways that give consumers the impression that it, too, is a sponsor
of the event.
KEY WORDS Sponsorship, events
IMPLICATIONS
While the ethics of the ambush marketing approach may be debated, it
nevertheless is an approach that firms can and do use in their marketing
efforts to associate with events and causes without incurring the full cost
of a formal association with them. Marketers must therefore evaluate
carefully the benefits and risks of its use by the firm and, should the firm
choose to be formally associated with events or causes through means
such as official sponsorship, marketers must then seek to identify and
implement means to deter other firms from using an ambush marketing
approach.
APPLICATION AREAS AND FURTHER READINGS
Marketing Ethics
Meenaghan, T. (1994). ‘Point of View: Ambush Marketing—Immoral or Imaginative
Practice?’ Journal of Advertising Research, 34 (3), 77–88.
Sponsorship Marketing
Meenaghan, T. (1996). ‘Ambush Marketing—A Threat to Corporate Sponsorship,’
Sloan Management Review, 38, 103–113.
Marketing Strategy
Meenaghan, T. (1998). ‘Ambush Marketing: Corporate Strategy and Consumers
Reaction,’ Psychology and Marketing, 15(4), 305–322.
BIBLIOGRAPHY
Sandler, Dennis M., and Shani, David (1989). ‘Olympic Sponsorship vs. “Ambush”
Marketing: Who Gets the Gold,’ Journal of Advertising Research, 29, 9–14.
anchoring and adjustment
DESCRIPTION
An effect relating to the heuristic or commonsensical approach to problem
solving that involves making an initial judgment and then adjusting the
judgment to arriving at a final judgment, but where the final judgment tends
to be biased by the value of the initial judgment.
KEY INSIGHTS
The anchoring and adjustment heuristic effect is a phenomenon of
individual problem solving which shows how final judgments can be
influenced—and potentially inaccurate—as a result of an individual’s ten-
dency to anchor on the initial judgment and subsequently make adjust-
ments which are ultimately insufficient when arriving at a final judg-
ment. First studied by Slovic and Lichtenstein (1971), the heuristic effect
has been shown to lead to significantly different final judgments when
substantially different values for initial judgments are also suggested in
the formulation of the problem. Thus, if consumers are asked how many
hours of television they watch in a year where they are first asked to
27 anchoring effect
indicate whether an initial number suggested by an interviewer is too low
(e.g. 20) or too high (e.g. 2000), and where they are subsequently asked to
estimate a final number, those consumers given a low initial number will
tend to provide significantly lower final estimates than consumers given
a high initial number.
KEY WORDS Problem-solving heuristic, bias
IMPLICATIONS
As is suggested by the above example, the anchoring and adjustment
effect is a phenomenon that may potentially lead to inaccurate or biased
responses by consumers in research including survey research where
individuals’ initial judgments are given or suggested by others. Alterna-
tively, consumer judgments may be biased when they themselves use
the heuristic and make estimates which are too low or too high initially.
As such, marketers must be aware of, and attempt to compensate for,
the possibility of biased judgments when individuals may be applying an
anchoring and adjustment approach in problem solving.
APPLICATION AREAS AND FURTHER READINGS
Consumer Behavior
Wansink, Brian, Kent, Robert J., and Hoch, Stephen J. (1998). ‘An Anchoring and
Adjustment Model of Purchase Quantity Decisions,’ Journal of Marketing Research,
35(1), February, 71–81.
Davis, Harry L., Hoch, Stephen J., and Easton Ragsdale, E. K. (1986). ‘An Anchoring
and Adjustment Model of Spousal Predictions,’ Journal of Consumer Research, 13(1),
June, 25–37.
Yadav, Manjit S. (1994). ‘How Buyers Evaluate Product Bundles: A Model of Anchor-
ing and Adjustment,’ Journal of Consumer Research, 21(2), September, 342–353.
BIBLIOGRAPHY
Tversky, A., and Kahneman, D. (1974). ‘Judgment under Uncertainty: Heuristics and
Biases,’ Science, 185, 1124–1130.
Lichtenstein, Sarah, and Slovic, Paul (1971). ‘Reversals of Preference between Bids
and Choices in Gambling Decisions,’ Journal of Experimental Psychology, 89, 46–55.
anchoring effect
DESCRIPTION
Any effect on judgment resulting from consideration of a reference point or
anchoring position of judgment.
KEY INSIGHTS
The anchoring effect may be present when individuals make evaluations
or comparisons based on a reference point or frame. Thus, consumer
evaluations of a new product’s overall quality may be influenced by
judgments resulting from their knowledge of particular existing products
which may be of worse or better quality than that of the new product.
KEY WORDS Judgment, reference points
IMPLICATIONS
As it may be common for individual judgments of product and service
offerings to be influenced by earlier points of reference, marketers must
ancient mariner effect 28
recognize how individuals may perceive new information as a result of
prior information and current views on which they are anchoring. Price
comparisons, features, and benefit comparisons are but a few examples of
areas where marketers must aim to understand how and why consumers
may systematically respond to particular offerings as a result of anchoring
effects.
APPLICATION AREAS AND FURTHER READINGS
Consumer Behavior
Simonson, Itamar, and Drolet, Aimee (2004). ‘Anchoring Effects on Consumer’s
Willingness-to-Pay and Willingness-to-Accept,’ Journal of Consumer Research, 31,
December, 681–690.
Chapman, G. B., and Johnson, E. J. (2002). ‘Incorporating the Irrelevant: Anchors
in Judgments of Belief and Value,’ in T. Gilovich, D. W. Griffin, and D. Kah-
neman (eds.), Heuristics and Biases: The Psychology of Intuitive Judgment. New York:
Cambridge University Press, 120–138.
BIBLIOGRAPHY
Leefland, P. S. H., and Wittink, Dick R. (2000). Building Models for Marketing Decisions:
Past, Present, and Future. Rijksuniversiteit te Groningen: Research School Systems,
Organization and Management.
Strack, F., and Mussweiler, T. (1997). ‘Explaining the Enigmatic Anchoring Effect:
Mechanisms of Selective Accessibility,’ Journal of Personality and Social Psychology,
73(3), 437–446.
ancient mariner effect
(also called the passing stranger effect)
DESCRIPTION
The tendency for individuals to disclose personal information more freely or
openly to strangers than to closer acquaintances.
KEY INSIGHTS
While the psychology behind the effect may be quite involved, believing
that one is unlikely to relate to an individual on an ongoing basis may
potentially lead one to be more open to such an individual as a result of
the situation contributing to the belief that one is immune to confronta-
tions of long-term judgment by the individual and that the likelihood that
personal information will be disclosed inappropriately will be minimal.
KEY WORDS Personal disclosure
IMPLICATIONS
Such an effect may be useful by a marketing researcher seeking personal
and sensitive information from an individual consumer to the extent that
the consumer views the researcher as a non-judgmental stranger whom
he or she will not be acquainted with over the longer term. At the same
time, marketers must be aware of the possibility that an organizations’
employees may, particularly while traveling to infrequent destinations,
inadvertently disclose sensitive information to passing strangers who just
might be associated with a competing organization.
29 announcement effect
APPLICATION AREAS AND FURTHER READINGS
Online Marketing
Ellison, N., Heino, R., and Gibbs, J. (2006). ‘Managing Impressions Online: Self-
Presentation Processes in the Online Dating Environment,’ Journal of Computer-
Mediated Communication, 11(2), article 2.
Resnick, P., and Zeckhauser, R. (2002). ‘Trust among Strangers in Internet Trans-
actions: Empirical Analysis of eBay’s Reputation System,’ in M. R. Baye (ed.),
Advances in Applied Microeconomics: The Economics of the Internet and E-commerce, 11,
127–157. Amsterdam: Elsevier Science.
BIBLIOGRAPHY
Rubin, Z. (1975). ‘Disclosing Oneself to a Stranger: Reciprocity and its Limits,’
Journal of Experimental Social Psychology, 11(3), 233–260.
announcement effect
DESCRIPTION
Any effect on consumer, market, or firm behavior resulting from an announce-
ment by an organization where effects are evident before the action indicated
by the announcement actually takes place.
KEY INSIGHTS
Effects stemming from announcements, whether by firms, industry orga-
nizations, or governmental institutions, can be immediate and influential
to consumer, firm, and market behaviors to the extent that the indi-
vidual or organization making the announcement has credibility. For
example, a new product pre-announcement, where a firm announces
its intention to introduce a particular new product on a particular date,
sends signals to both potential customers and current competitors, where
the announcement encourages potential customers to wait for the new
product to be available and where the announcement also acts to dis-
courage current competitors from entering with a similar new product
by signaling that they will be pre-empted. Credibility of the organization
making the announcement is often key in determining the extent of its
effect.
KEY WORDS Pre-announcements, behavior
IMPLICATIONS
Marketers must be ready to respond to immediate, significant changes
in market conditions and consumer behavior that may result from
announcement effects. At the same time, marketers may be able to use
announcements to create immediate consumer and market effects as
well as provide strategic signals to deter or encourage certain competitive
actions. Marketers must also recognize how the announcement effect
may work against the firm as well, as when announcing the date for a
planned introduction of the firm’s next-generation product can lead to a
dramatic slowing, or even halt, in sales of its current product and produce
an excess current product inventory for the firm having immediately
reduced resale value.