Dacko S.G. The Advanced Dictionary of Marketing Putting Theory to Use
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wheel of retailing theory 570
Monroe, Kent B. (1971). ‘The Information Content of Prices: A Preliminary Model
for Estimating Buyer Response,’ Management Science, 17(8), Application Series,
April, B519–B532.
Promotion
Ailawadi, K. L., and Neslin, S. A. (1998). ‘The Effect of Promotion on Consump-
tion: Buying More and Consuming it Faster,’ Journal of Marketing Research, 35(3),
390–398.
BIBLIOGRAPHY
Fechner, G. T. (1964). Elemente der Psychophysik (Elements of Psychophysics). Amster-
dam: E. J. Bonset. (Original work published 1860.)
Weber, E. H. (1996). ‘On Touch and on the Sense of Touch and Common Sensibility,’
in H. E. Ross and D. J. Murray (eds. and trans.), E. H. Weber on the Tactile Senses, 2nd
edn.), Hove: Erlbaum.
Cooper, P. (1969). ‘Subjective Economics: Factors in a Psychology of Spending,’ in
B. Taylor and G. Wills (eds.), Pricing Strategy. London: Staples, 112–121.
wheel of retailing theory
(also called the wheel of retailing or the wheel of retailing hypothesis)
DESCRIPTION
A theory of change among retail institutions putting forth the view that retail
institutions follow a consistent and predictable cycle of evolution in the way
they compete strategically in the retail environment.
KEY INSIGHTS
Developed in pioneering research by McNair (1957) and Hollander (1960),
wheel of retailing theory proposes that retail institutions evolve sys-
tematically. In particular, the theory argues that new retailers are able
to gain a foothold in the retail market and compete successfully with
existing retailers by offering lower prices that are achievable as a result
of productivity gains and certain reductions in customer service. As such
firms become established, however, there is a tendency for them to lose
their competitive edge as a result of their raising prices, moving up-
market in their product mixes and in the customers they wish to attract,
and increasing levels of customer service. Such actions, however, result
in strategic problems for the firms as new, low-priced retailers attack the
firms from below.
KEY WORDS Retailing, evolution, institutional change
IMPLICATIONS
The wheel of retailing theory and its associated concepts can potentially
help strategic marketers to understand, explain, and predict better how
particular retail organizations may evolve given their particular stage of
evolutionary development. While it may be difficult to identify exactly
when retail organizations may undergo certain evolutionary changes, the
theory is nevertheless useful in supporting analyses of one’s own retail
organization as well as competitor organizations in an effort to identify
predictable evolutionary paths.
571 wholesale marketing
APPLICATION AREAS AND FURTHER READINGS
Retail Marketing
Brown, Stephen (1991). ‘Variations on a Marketing Enigma: The Wheel of Retailing
Theory,’ Journal of Marketing Management, 7(2), 131–155.
Izraeli, D. (1973). ‘The Three Wheels of Retailing: A Theoretical Note,’ European
Journal of Marketing, 7(1), 70–74.
BIBLIOGRAPHY
Hollander, Stanley C. (1960). ‘The Wheel of Retailing,’ Journal of Marketing, 24, July,
37–42.
McNair, M. (1957). ‘Significant Trends and Developments in the Postwar Period,’
in A. Smith (ed.), Competitive Distribution in a Free High Level Economy and its
Implications for the University. Pittsburgh: University of Pittsburgh Press, 1–
25.
white goods see goods
wholesale marketing
DESCRIPTION
Marketing involving the sale of offerings intended for resale and where
customers may be retailers or other marketing intermediaries.
KEY INSIGHTS
While wholesale marketing is most often associated with the sale of
offerings to retailers for subsequent resale to consumers, it may also
involve the provision of the firm’s offerings to any number of marketing
intermediaries or business organizations who may also be wholesalers
themselves. Thus, the firm’s customers may be industrial, institutional,
commercial, and professional organizations. Wholesalers may also act
as agents or brokers facilitating exchanges among such organizations. A
common practice in wholesale marketing is to supply goods to customers
in relatively large quantities and at bulk prices, where such customers, in
turn, offer them to their customers in smaller quantities and at marked-
up prices. Wholesale marketing may add value to a firm’s offerings in
any number of ways including providing storage for the firm’s customers,
sorting, repacking, and redistributing offerings, and delivering offerings
to the firm’s customers. Marketing communication methods may vary
as well, although sales promotions and personal selling are common
approaches in wholesale marketing.
KEY WORD Reselling
IMPLICATIONS
As wholesale marketing can involve interactions with any number of
channel members, marketers involved in wholesale marketing may ben-
efit from a greater knowledge of wholesale channel strategies as well
as approaches for establishing effective relationships wth channel mem-
bers. Understanding, too, the range of opportunities a wholesaler has to
provide value-added services can further benefit the wholesale marketer
seeking to enhance firm profitability.
willingness to pay 572
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Hanson, J. C., and Rada, D. J. (1992). ‘Developing a Wholesale Marketing Strategy
for Produce in the Mid-Atlantic Region,’ Informational Series No. 209201, Depart-
ment of Agricultural and Resource Economics, University of Maryland at College
Park.
Cadilhon, J. J., Fearne, A., Hughes, D., and Moustier, P. (2003). ‘Wholesale Markets
and Food Distribution in Europe: New Strategies for Old Functions,’ Discussion
Paper no 2, Centre for Food Chain Research, Imperial College, London.
Marketing Management
Lusch, Robert F., and Brown, James (1996). ‘Interdependency, Contracting, and
Relational Behavior in Marketing Channels,’ Journal of Marketing, 60, October, 19–
38.
Retail Marketing
Balderston, E. (1956). ‘Assortment Choice in Wholesale and Retail Marketing,’
Journal of Marketing, 21, October, 175–183.
Marketing Research
Kent, W. E., Meyer, R. A., and Reddam, T. M. (1987). ‘Reassessing Wholesaler
Marketing Strategies: The Role of Travel Research,’ Journal of Travel Research, 25(3),
31–33.
BIBLIOGRAPHY
Eggland, Steven A. (1984). Wholesale Marketing. Austin, Tex.: Extension Instruction
and Materials Center, Div. of Continuing Education, University of Texas.
Roe, Robert G. (1969). ‘Short Course in Wholesaling,’ Journal of Marketing, 33(3),
102–103.
wikimarketing see online marketing
willingness to pay
DESCRIPTION
The maximum amount a consumer would pay for an offering based on the
consumer’s perception of the offering’s value.
KEY INSIGHTS
Willingness to pay (or WTP) for an offering, being an indicator of the
offering’s perceived value by a consumer, can be viewed as the con-
sumer’s valuation of the gross benefits the consumer perceives in the
offering, quantified in monetary terms. In marketing research, WTP can
be a practical measure of the strength of a brand as it is indicative of
consumers’ attachment to the branded offering.
KEY WORDS Perceived value, product worth
IMPLICATIONS
Willingness to pay is an important consideration in research into the
demand for a wide range of offerings and consumer products in partic-
ular. Marketers should seek to understand better consumers’ willingness
to pay for their offerings in an effort to manage the demand of such
offerings through means not only including pricing but other areas of
marketing that are able to enhance and communicate value that is to be
perceived by customers.
573 winner’s curse
APPLICATION AREAS AND FURTHER READINGS
Marketing Research
Cameron, T. A., and James, M. D. (1987). ‘Estimating Willingness to Pay from Survey
Data: An Alternative Pre-Test-Market Evaluation Procedure,’ Journal of Marketing
Research, 24, 389–395.
Services Marketing
Goett, A., Hudson, K., and Train, K. (2000). ‘Consumers’ Choice among Retail
Energy Suppliers: The Willingnes-to-Pay for Service Attributes,’ Energy Journal,
21, 1–28.
Retail Marketing
Krystallis, A., and Chryssohoidis, G. (2005). ‘Consumers’ Willingness to Pay for
Organic Food: Factors that Affect it and Variation per Organic Product Type,’
British Food Journal, 107(5), 320–343.
Consumer Behavior
Prelec, Drazen, and Simester, Duncan (2001). ‘Always Leave Home without it: A
Further Investigation of the Credit-Card Effect on Willingness to Pay,’ Marketing
Letters, 12(1), February, 5–12.
BIBLIOGRAPHY
Wertenbroch, K., and Skiera, B. (2002). ‘Measuring Consumers’ Willingness to Pay
at the Point of Purchase,’ Journal of Marketing Research, 39, May, 228–241.
window of opportunity see strategic window
winner’s curse
DESCRIPTION
The tendency for the highest bid at an auction to exceed the true market value
of the item or lot being auctioned.
KEY INSIGHTS
Originally discussed by Capen, Clapp, and Campbell (1971) and sub-
sequently developed in research by Thaler (1992), the winner’s curse
phenomenon arises when bidders’ estimates of the true market value
of an auctioned item (or lot) are unreliable as a result of incomplete
information and when each bidder independently estimates the value
of the item before bidding. In such circumstances, some bidders will
underestimate the item’s value while others will overestimate its value.
While the average bid for an auctioned item is often less than its true
market value, reflecting risk averseness among bidders, the bidder over-
estimating the item’s true market value to the greatest extent among
all bidders becomes the victim of the winner’s curse. In general, the
severity of the winner’s curse increases as the number of bidders at an
auction increases. When an auctioned item is sought for its private value,
however, as when a bidder desires an object of art to complete his or her
art collection, the winner’s curse is not said to apply as private valuation
is more important to the bidder than market valuation. Bidders seeking
to avoid the winner’s curse tend to make efforts to revise downward their
ex ante estimations of an item’s value to explicitly take into account the
effect of the winner’s curse.
word-of-mouth communication 574
KEY WORDS Auctions, valuation, bidding
IMPLICATIONS
Marketers involved in auction bidding should seek to understand the
extent the winner’s curse phenomenon may occur as a result of incom-
plete information concerning an item’s value and knowledge of the
number of an auction’s participants. Marketers may then more judi-
ciously make efforts to avoid the winner’s curse by revising their ex
ante value estimates downward as one possible practice. On the other
hand, marketers running auctions should seek to understand the extent
that a consumer participating in an auction may become a victim of the
winner’s curse and, while contributing positively to auction profitability,
how such an outcome may influence the consumers’ subsequent auction
participation and bidding behaviors.
APPLICATION AREAS AND FURTHER READINGS
Auctions
Samuelson, W., and Bazerman, Max H. (1985). ‘Negotiation under the Winner’s
Curse,’ in V. Smith (ed.), Research in Experimental Economics, vol. iii. Greenwich,
Conn.: JAI Press.
Ferris, Kenneth R., and Pécherot Petitt, Barbara S. (2002). Valuation: Avoiding the
Winners Curse. Upper Saddle River, NJ: Prentice-Hall, Inc.
Chua, Clare, and Luk, Peter (2005). ‘Be a Winner Not a Loser: Experimental Evi-
dence of Winner’s Curse,’ Marketing Review, 5(4), Winter, 303–314.
BIBLIOGRAPHY
Capen, E. C., Clapp, R. V., and Campbell, W. M. (1971). ‘Competitive Bidding in
High-Risk Situations,’ Journal of Petroleum Technology, June, 641–653.
Thaler, Richard (1988). ‘Anomalies: The Winner’s Curse,’ Journal of Economic Perspec-
tives, 2(1), 191–202.
Thaler, Richard (1992). The Winner’s Curse. New York: The Free Press.
wireless marketing see mobile marketing
word-of-mouse marketing see viral marketing
word-of-mouth communication
DESCRIPTION
Communication by and among consumers about particular product or ser-
vice offerings, promotions, firms, or markets that is generally informal and
frequently person to person.
KEY INSIGHTS
Word-of-mouth (or WoM) communication among consumers regarding
a particular product or service offering, promotion, firm, or market
typically involves verbal and informal person-to-person communication.
However, the scope of word-of-mouth communication also includes com-
munication by electronic means such as e-mail, blogs, and message
boards on the World Wide Web. Such communication may emphasize
users’ experiences with products or services, opinions of them, recom-
mendations, or it may consist solely of unbiased information. Word-of-
mouth communication may be characterized as being positive/negative,
575 word-of-mouth effect
favorable/unfavorable, or indifferent. Positive word-of-mouth communi-
cation can be viewed as the addition of a free flow of information which
augments the flow of information provided by advertising. Negative
word-of-mouth communication may take many forms including commu-
nication of unsatisfactory experiences or adverse rumors about a brand,
offering, firm, or industry.
KEY WORDS Verbal communication, informal communication
IMPLICATIONS
Knowledge of the type of information communicated via word of mouth
is often considered important to marketers since, for many products
and services, negative word-of-mouth communication is more common
than positive communication. In addition, since unfavorable information
tends to carry more weight than favorable information among prospec-
tive consumers for many products and services, marketing managers
should strive to actively monitor as well as influence both the type and
level of word-of-mouth communication.
APPLICATION AREAS AND FURTHER READINGS
Services Marketing
Mangold, W. G., Miller, F., and Brockway, G. R. (1999). ‘Word-of-Mouth Communi-
cation in the Service Marketplace,’ Journal of Services Marketing, 13(1), 73–89.
Harrison-Walker, L. Jean (2001). ‘The Measurement of Word-of-Mouth Communi-
cation and an Investigation of Service Quality and Customer Commitment as
Potential Antecedents,’ Journal of Service Research, 4(1), 60–75.
Marketing Research
Godes, D., and Mayzlin, D. (2004). ‘Using Online Conversations to Study Word-of-
Mouth Communication,’ Marketing Science, 23(4), 545–560.
BIBLIOGRAPHY
Ellison, G., and Fudenberg, D. (1995). ‘Word-of-Mouth Communication and Social
Learning,’ Quarterly Journal of Economics, 110, 93–126.
Engel, James F., Kegerreis, Robert J., and Blackwell, Roger D. (1969). ‘Word-of-
Mouth Communication by the Innovator,’ Journal of Marketing, 33(3), July, 15–19.
word-of-mouth effect
DESCRIPTION
Any effect resulting from word-of-mouth communication among consumers.
KEY INSIGHTS
The effects of word-of-mouth communication may be positive, negative,
or neutral depending on its magnitude and content. The effects may also
be limited to a particular brand, product, service, promotion, or firm but
may also encompass entire industries or markets. The strategic impor-
tance of word-of-mouth communication effects may also vary, where,
for some firms and some products (e.g. a local manufacturer of a new
popcorn snack), its positive effect is counted upon as the sole means to
spread awareness and interest in the product, while for other firms and
products (e.g. Coca-Cola) its positive effect may be dwarfed by ongoing
advertising by the firm.
word-of-mouth marketing 576
KEY WORDS Informal communication effects
IMPLICATIONS
Marketing strategists often have an opportunity to create and leverage
positive word-of-mouth communication for new offerings or promotions
to achieve significant effects on the awareness, interest, evaluation,
and/or purchase of a particular offering, where word of mouth can be gen-
erated either to augment other marketing communication approaches
or to substitute for them. At the same time, marketers should seek to
understand how and to what extent possible negative word-of-mouth
communication may be generated through a strategy relying upon the
approach and be prepared to weather responses that are unexpectedly
negative.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Mahajan, Vijay, Muller, Eitan, and Kerin, Roger A. (1984). ‘Introduction Strategy for
New Products with Positive and Negative Word-of-Mouth,’ Management Science ,
30(12), December, 1389–1404.
Grewal, Rajdeep, Cline, Thomas W., and Davies, Antony (2003). ‘Early-Entrant
Advantage, Word-of-Mouth Communication, Brand Similarity, and the Con-
sumer Decision-Making Process,’ Journal of Consumer Psychology, 13(3), October,
187–197.
Marketing Modeling
Bemmaor, Albert C. (1994). ‘Modeling the Diffusion of New Durable Goods: Word-
of-Mouth Effect versus Consumer Heterogeneity,’ in Gilles Laurent, Gary L.
Lilien, and Bernard Pras (eds.), Research Traditions in Marketing. Boston: Kluwer
Academic, 201–223.
Services Marketing
Wangenheim, Florian V., and Bayón, Tomás (2004). ‘The Effect of Word of Mouth
on Services Switching: Measurement and Moderating Variables,’ European Journal
of Marketing, 38(9–10), September, 1173–1185.
BIBLIOGRAPHY
Robertson, Thomas S. (1971). Innovative Behavior and Communication. New York: Holt,
Rinehart & Winston.
word-of-mouth marketing
(also called buzz marketing, grassroots marketing, peer-to-peer mar-
keting, person-to-person marketing, evangelism marketing, or referral
marketing)
DESCRIPTION
An approach aimed at leveraging the use of personal recommendations and
referrals in the marketplace as a major basis for the firm’s marketing efforts
and where a desirable effect is a marketplace buzz, or intense and interactive
word-of-mouth communication in the marketplace.
KEY INSIGHTS
A word-of-mouth marketing approach often involves identifying and cul-
tivating opinion leaders for the firm’s offerings and encouraging them
577 word-of-mouth marketing
to spread positive information about the offering to others. While buzz
marketing is frequently used interchangeably with word-of-mouth mar-
keting, a similar but little-used term is that of evangelism marketing, which
may be viewed as a somewhat more extreme version of word-of-mouth
marketing characterized by a marketing emphasis on developing cus-
tomers with exceptionally strong convictions in the firm’s offerings—
to such an extent that such customers actively and voluntarily persuade
others to adopt the offerings. As a word-of-mouth marketing approach
benefits from source credibility and may involve little marketing expen-
diture, the approach is considered to be valuable by many marketers. A
variation of word-of-mouth marketing is viral marketing, which makes
use of the internet for its effectiveness (see viral marketing).
KEY WORDS Verbal communication, informal communication
IMPLICATIONS
As the intent of marketers using word-of-mouth marketing is to pro-
duce highly beneficial and dramatic word-of-mouth effects (see word-
of-mouth effect) through word-of-mouth communication (see word-of-
mouth communication), marketers should seek to understand better
how and to what extent such effects may be produced by the firm’s
efforts relative to its particular product offerings in order to leverage such
knowledge in the firm’s strategies and tactics. For example, a firm’s word-
of-mouth marketing strategy may involve use of traditional informal
communication channels as well as communication via the internet.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Rosen, Emanuel (2000). The Anatomy of Buzz: How to Create Word of Mouth Marketing.
New York: Doubleday.
Consumer Behavior
Goldenberg, J., Libai, B., and Muller, E. (2001). ‘Talk of the Network: A Complex
Systems Look at the Underlying Process of Word-of-Mouth,’ Marketing Letters,
12(3), 211–224.
BIBLIOGRAPHY
Dichter, Ernst (1966). ‘How Word-of-Mouth Marketing Works,’ Harvard Business
Review, 44 (6), 148.
World Wide Web marketing see online marketing; Web marketing
worldwide marketing see global marketing
WWW marketing see online marketing; Web marketing
X
X, theory
DESCRIPTION
A theory of human motivation that views individuals as inherently lazy and
selfish.
KEY INSIGHTS
Developed as one of two competing theories by McGregor (1960), with the
other theory being theory Y (see Y, theory), theory X views individuals
as uninterested in work and eager to avoid responsibility. Based upon
a pessimistic view of human nature, the theory provides a basis for
a set of management practices for workforce motivation that includes
the use of a more authoritarian management style, close supervision,
and comprehensive controls where there is a threat of punishment for
undesirable behaviors. Organizations adopting a theory X perspective
are generally command-and-control organizations, where compliance is
achieved through a combination of employee rewards and punishments.
While many employee behaviors and corresponding management prac-
tices are not as extreme as those characterized by theory X, the theory
nevertheless is influential in facilitating managements’ understanding of
the scope and range of management practice.
KEY WORDS Employee motivation, management practice
IMPLICATIONS
While many managers and employees discount the extreme views advo-
cated by theory X, understanding the perspective can be beneficial to
evaluate current and desired marketing management practices in an
organization. Whether a marketing manager is seeking to evaluate a
prospective organization with which to work or manage the firm’s mar-
keting workforce, greater knowledge of the theory can help in identifying
and understanding pessimistic management perceptions of employees at
the very least.
APPLICATION AREAS AND FURTHER READINGS
Marketing Management
Sirgy, M. Joseph (1991). ‘Quality-of-Life Studies in Marketing and Management: An
Overview,’ Journal of Business and Psychology, 6(1), September, 3–7.
Buijs, J. (1998). ‘Viewpoint: Towards a New Theory X,’ Creativity and Innovation
Management, 7(1), 17–22.
International Marketing
Herbig, P., and Genestre, A. (1997). ‘International Motivational Differences,’ Man-
agement Decision, 35(7–8), 562–569.
579 x-inefficiency
BIBLIOGRAPHY
McGregor, Douglas (1960). The Human Side of Enterprise. New York: McGraw-Hill.
McGregor, Douglas (1966). Leadership and Motivation. Cambridge, Mass.: MIT Press.
X-generation see generational marketing
x-inefficiency
(also called x-[in]efficiency or the theory of x-inefficiency)
DESCRIPTION
Inefficiency in a firm arising when the average cost of producing a product
at a particular level of output exceeds the lowest possible average cost of
producing that output.
KEY INSIGHTS
Developed in pioneering research by Leibenstein (1966), x-inefficiency,
or the theory of x-inefficiency, contrasts with x-efficiency (or allocative
economic efficiency) where price equals marginal cost. While owners of
firms seek to maximize profits, x-inefficiencies may arise when manage-
ment practices of firms conflict with such a goal (e.g. where management
practices are aimed at increasing salaries, departmental power, etc.) and
where the result is that the firm produces at an average cost above the
average total cost where price equals marginal cost.
KEY WORDS Economic efficiency, production costs, price
IMPLICATIONS
In highly competitive industries, the survival of a firm may be jeopar-
dized if it is x-inefficient. Marketing managers must therefore be aware
of the pursuit and implementation of management practices that are
likely to result in excessive costs that ultimately become the source of
x-inefficiency.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Stigler, George J. (1976). ‘The Xistence of X-Efficiency,’ American Economic Review,
66(1), March, 213–216.
Lang, Mahlon G. (1980). ‘Marketing Alternatives and Resource Allocation: Case
Studies of Collective Bargaining,’ American Journal of Agricultural Economics, 62(4),
November, 760–765.
Tefula, Moses (2002). The Implications of X-Inefficiency on the Banking Sector in Africa.
Manchester: Institute for Development Policy and Management, University of
Manchester.
Anderson, R. I., Fok, R., Zumpano, L. V., and Elder, H. W. (1998). ‘The Efficiency of
Franchising in the Residential Real Estate Brokerage Market,’ Journal of Consumer
Marketing, 15(4), 386–396.
BIBLIOGRAPHY
Leibenstein, Harvey (1966). ‘Allocative Efficiency and X-Efficiency,’ American Eco-
nomic Review, 56, 392–415.