Dacko S.G. The Advanced Dictionary of Marketing Putting Theory to Use
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Averch–Johnson effect 40
Kaserman, David L., and Mayo, John W. (1991). ‘Regulation, Advertising, and Eco-
nomic Welfare,’ Journal of Business, 64(2), April, 255–267.
McKie, James W. (1970). ‘Regulation and the Free Market: The Problem of Bound-
aries,’ Bell Journal of Economics and Management Science, 1(1), Spring, 6–26.
BIBLIOGRAPHY
Averch, H., and Johnson, L. (1962). ‘Behaviour of Firms under Regulatory Con-
straint,’ American Economic Review, 52, 1052–1069.
awareness see adoption process; buyer influence/readiness
B
B2B marketing see business-to-business marketing
B2C marketing see consumer marketing
baby boomer see generational marketing
backward integration see integration
backwash effects
DESCRIPTION
Adverse effects on the growth of a region or regions of an economy as a result
of the growth of another region of the economy.
KEY INSIGHTS
Backwash effects, where the economic growth of certain region(s) of an
economy are adversely affected by the growth of another region, typic-
ally arise from the movement of capital and skilled labor from lagging
region(s) of an economy toward a more prosperous region. Backwash
effects are also viewed as resulting from the increase in production
efficiency that is associated with the geographic concentration of activity
in the growing region.
KEY WORDS Regional economic growth
IMPLICATIONS
Marketers involved in international marketing or other areas of market-
ing where the economic growth of a region is an important consideration
in a firm’s activities may benefit from a greater understanding of the
dynamics of backwash effects on regional economic growth. For retailers,
manufacturers, and service firms alike, backwash effects may lead to
either desirable or undesirable consequences for the firm, depending on
the economic strength of the region in relation to the economic strength
of surrounding areas.
APPLICATION AREAS AND FURTHER READINGS
International Marketing
Cater, E. (2002). ‘Spread and Backwash Effects in Ecotourism,’ International Journal
of Sustainable Development, 5, 1–17.
Retail Marketing
Sullivan, Pauline, Savitt, Ronald, Zheng, Yi, and Cui, Yanli (2002). ‘Rural Shoppers:
Who Gets their Apparel Dollars?’ Journal of Fashion Marketing and Management, 6(4),
December, 363–380.
balance theory 42
BIBLIOGRAPHY
Barkley, David L., Henry, Mark S., and Bao, Shuming (1996). ‘Identifying “Spread”
versus “Backwash” Effects in Regional Economic Areas: A Density Functions
Approach,’ Land Economics, 72(3), August, 336–357.
balance theory
DESCRIPTION
A motivational theory holding that people desire cognitive consistency in their
drive to achieve psychological balance in their thoughts, feelings, and social
relationships.
KEY INSIGHTS
Based on pioneering research by Fritz Heider (1946, 1958), balance theory
provides a means to evaluate and explain how and why attitudes, values,
and behaviors are developed and may or may not be stable and change
given various states or degrees of balance/imbalance. The theory enables
models to be constructed to explain and predict the outcomes of indi-
vidual and interpersonal situations involving specified attitudes, beliefs,
and relationships, where individuals’ motives for cognitive consistency
are instrumental.
KEY WORDS Cognitive consistency, psychological balance
IMPLICATIONS
Balance theory provides a rich framework with which to examine, assess,
and manage many areas of marketing including customer satisfaction,
sales forces, and supply chain relationships. In acknowledging and seek-
ing to understand better individual desires for cognitive consistency
and balance in interpersonal relationships, for example, marketers can
establish stronger relationships with customers to the extent marketing
actions (e.g. persuasive marketing communications) are consistent with
such deep-rooted individual desires and personal motives.
APPLICATION AREAS AND FURTHER READINGS
Marketing Management
Bagozzi, Richard P. (1980). ‘Performance and Satisfaction in an Industrial Sales
Force: An Examination of their Antecedents and Simultaneity,’ Journal of Mar-
keting, 44(2), Spring, 65–77.
Marketing Communication
Perloff, Richard M. (1993). The Dynamics of Persuasion Communication and Attitudes in
the 21st Century, 2nd edn. Mahwah, NJ: Lawrence Erlbaum Associates.
Business-to-Business Marketing
Phillips, J. M., Liu, B. S., and Costello, T. G. (1998). ‘A Balance Theory Perspective
of Triadic Supply Chain Relationships,’ Journal of Marketing Theory Practice, 6(4),
78–91.
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.
43 balanced scorecard
BIBLIOGRAPHY
Scott, William A. (1963). ‘Cognitive Complexity and Cognitive Balance,’ Sociometry,
26(1), March, 66–74.
Heider, Fritz (1946). ‘Attitudes and Cognitive Organization.’ Journal of Psychology, 21,
107–112.
Heider, Fritz (1958). The Psychology of Interpersonal Relations. New York: John Wiley &
Sons.
balanced scorecard
DESCRIPTION
An approach to organizational performance evaluation and monitoring that
involvesusingmultiplemeasuresincludingthosebased on financial,customer,
internal process, and employee learning and growth perspectives.
KEY INSIGHTS
Introduced by Kaplan and Norton (1992), the balanced scorecard aims to
provide managers with a comprehensive view of organizational perfor-
mance rather than a view dominated by a financial perspective. As such,
the approach emphasizes balance with multiple areas inside and outside
the firm that are viewed as potentially influential in achieving successful
business performance over the longer term. While the specific measures
used in a balanced scorecard approach cannot be generalized but rather
are dependent on each organization’s particular goals, the process of
implementing the approach within the firm is typically viewed as the
most beneficial means with which to arrive at useful measures as well as
derive strategic insights into their interrelated influences.
KEY WORDS Organizational performance evaluation, monitoring
IMPLICATIONS
While many firms use multiple indicators beyond measures of financial
performance as part of organizational performance evaluation and mon-
itoring, the balanced scorecard approach aims to formalize and integrate
measures from multiple, important, and interrelated perspectives. As
such, marketing managers may benefit from undestanding what mea-
sures strategic decision makers consider to be important to the long-
term success of the firm to ensure marketing strategies are consistent
with such views. In addition, marketing managers may seek to influence
the nature of the balanced scorecard planning and evaluation approach
within a firm to the extent the approach itself may benefit from refine-
ments drawing upon a stronger marketing perspective.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Cravens, David W. (1998). ‘Examining the Impact of Market-Based Strategy Para-
digms on Marketing Strategy,’ Journal of Strategic Marketing, 6(3), September, 197–
208.
Thomas, M. J. (2000). ‘Marketing Performance Measurement: Directions for Devel-
opment,’ Journal of Targeting Measurement and Analysis for Marketing, 9(1), 70–91.
bandwagon effect 44
Marketing Management
Kim, J., Suh, E., and Hwang, H. (2003). ‘A Model for Evaluating the Effectiveness of
CRM using the Balanced Scorecard,’ Journal of Interactive Marketing, 17(2), 5–19.
Murphy, Brian, Maguiness, Paul, Pescott, Chris, Wislang, Soren, Ma, Jingwu, and
Wang, Rongmei (2005). ‘Stakeholder Perceptions Presage Holistic Stakeholder
Relationship Marketing Performance,’ European Journal of Marketing, 39(9/10),
1049–1059.
Marketing Research
Karmarkar, Uday S. (1996). ‘Integrative Research in Marketing and Operations
Management,’ Journal of Marketing Research, 33(2), May, 125–133.
BIBLIOGRAPHY
Kaplan, R. S., and Norton, D. P. (1992). ‘The Balanced Scorecard: Measures that
Drive Performance,’ Harvard Business Review, January–February, 71–80.
Kaplan, R. S., and Norton, D. P. (1993). ‘Putting the Balanced Scorecard to Work,’
Harvard Business Review, September–October, 2–16.
bandwagon effect
DESCRIPTION
The phenomenon or observation where individual actions or beliefs are
positively influenced and whose adoption is considerably accelerated by the
large-scale popularity of the actions or beliefs among individuals or groups.
KEY INSIGHTS
The bandwagon effect tends to occur when individuals or organizations
believe that it is in their best interest to take action or adopt views on
what has become or is increasingly becoming popular or fashionable.
KEY WORDS Action, belief popularity
IMPLICATIONS
In marketing terms, the bandwagon effect may translate into the view
that ‘success breeds success,’ where popular products, brands, and ser-
vices can become even more popular in the market as a result of their
current state of popularity or fashion appeal. The challenge for marketers
is therefore to create a critical level of popularity for a firm’s offerings
so the bandwagon effect may be realized and stimulate even greater
popularity in the marketplace.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Rohlfs, Jeffrey H. (2001). Bandwagon Effects in High Technology Industries. Cambridge,
Mass.: MIT Press.
Hellofs, Linda L., and Jacobson, Robert (1999). ‘Market Share and Customers’ Per-
ceptions of Quality: When Can Firms Grow their Way to Higher versus Lower
Quality?’ Journal of Marketing, 63(1), January, 16–25.
Technology Markets
John, George, Weiss, Allen M., and Dutta, Shantanu (1999). ‘Marketing in
Technology-Intensive Markets: Toward a Conceptual Framework,’ Journal of
Marketing, 63, Fundamental Issues and Directions for Marketing, 78–91.
45 bargaining theory
BIBLIOGRAPHY
Robertson, Thomas S. (1967). ‘The Process of Innovation and the Diffusion of
Innovation,’ Journal of Marketing, 31(1), January, 14–19.
bargaining theory
DESCRIPTION
Theory or theories aimed at understanding and explaining effective interorga-
nizational bargaining in contexts including negotiations and policymaking.
KEY INSIGHTS
While bargaining theory encompasses a broad base of research and
concepts grounded in game theory, much of bargaining theory empha-
sizes examination of the relative bargaining resources (e.g. assets) stakes
of those involved in a given bargaining situation. The scope of enti-
ties which may be involved in a bargaining situation includes firms,
governments, and countries. A focus on resources and stakes as well
as corresponding interests and abilities of participants in a bargain-
ing situation enables strategies and/or approaches to be developed
and pursued that may increase the likelihood of successful bargain-
ing outcomes (e.g. agreements) for situations having particular charac-
teristics including those of one-time bargaining and time-constrained
bargaining.
KEY WORDS Interorganizational bargaining, negotiation
IMPLICATIONS
Marketers involved in strategically important negotiations or policy
development for interorganizational negotiations may potentially benefit
from a greater knowledge of bargaining theory-based research to increase
the effectiveness and/or efficiency of ongoing bargaining efforts of the
firm and its management. For example, certain aspects of the theory can
provide guidance to managers by helping them to understand better the
expected outcomes for a bargaining situation rather than overly focusing
on the processes of negotiation itself, whereas in other instances, certain
bargaining theory-based approaches advocate specific bargaining proce-
dures for effective outcomes.
APPLICATION AREAS AND FURTHER READINGS
Marketing Management
Dwyer, F. Robert, Schurr, Paul H., and Oh, Sejo (1987). ‘Developing Buyer–Seller
Relationships,’ Journal of Marketing, 51(2), April, 11–27.
Iyer, Ganesh, and Villas-Boas, J. Miguel (2003). ‘A Bargaining Theory of Distribution
Channels,’ Journal of Marketing Research, 40(1), February, 80–100.
Hirschman, Elizabeth C. (1987). ‘People as Products: Analysis of a Complex Market-
ing Exchange,’ Journal of Marketing, 51(1), January, 98–108.
Marketing Modeling
McGuire, Timothy W., and Staelin, Richard (1983). ‘An Industry Equilibrium Analy-
sis of Downstream Vertical Integration,’ Marketing Science, 2(2), Spring, 161–191.
Barnum effect 46
Consumer Behavior
Corfman, Kim P., and Lehmann, Donald R. (1993). ‘The Importance of Others’
Welfare in Evaluating Bargaining Outcomes,’ Journal of Consumer Research, 20(1),
June, 124–137.
BIBLIOGRAPHY
Muthoo, Abhinay (1999). Bargaining Theory with Applications. Cambridge: Cambridge
University Press.
Sutton, John (1986). ‘Non-Cooperative Bargaining Theory: An Introduction,’ Review
of Economic Studies, 53(5), October, 709–724.
Barnum effect
(also called the Forer effect)
DESCRIPTION
The tendency for individuals to accept as accurate statements describing their
personality when led to believe such descriptions are tailored for them, when
in fact such descriptions are vague, ambiguous, and general and may describe
the personalities of a wide range of individuals.
KEY INSIGHTS
Pioneering empirical research by Bertram Forer (1949) quantifiably
demonstrated the existence and prevalence of the effect, which includes
a tendency to accept such statements as true or revealing the basic
characteristics of one’s personality.
KEY WORDS Personality assessment
IMPLICATIONS
As the Barnum (or Forer) effect as a phenomenon is pervasive among
individuals, it offers a possible explanation for the popularity of certain
pseudosciences among consumers, where individuals or organizations
provide services to such consumers purporting to explain or predict
personality-related characteristics by linking them to seemingly unre-
lated phenomena (e.g. planetary alignments). The effect may also provide
a means for unscrupulous marketers to establish greater rapport with var-
ious individuals through claims of superior knowledge or understanding
of their personalities.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Mitchell, Vincent-Wayne, and Haggett, Sarah (1997). ‘Sun-Sign Astrology in Market
Segmentation: An Empirical Investigation,’ Journal of Consumer Marketing, April,
14(2), 113–131.
Consumer Behavior
Mitchell, V.-W., and Tate, Elizabeth (1998). ‘Do Consumers’ Star Signs Influence
What They Buy?’ Marketing Intelligence & Planning, July, 249–259.
Sjöberg, Lennart, and Engelberg, Elisabeth (2005). ‘Lifestyles, and Risk Perception
Consumer Behavior,’ International Review of Sociology/Revue Internationale de Sociolo-
gie, 15(2), July, 327–362.
47 base-rate fallacy
BIBLIOGRAPHY
Dickson, D. H., and Kelly, I. W. (1985). ‘The Barnum Effect in Personality Assess-
ment: A Review of the Literature,’ Psychological Reports, 57(2), 367–382.
Forer, B. R. (1949). ‘The Fallacy of Personal Validation: A Clasroom Demonstration
of Gullibility,’ Journal of Abnormal and Social Psychology, 44, 118–123.
barriers to entry see entry barriers
base-rate fallacy
DESCRIPTION
The failure of an individual to consider information about the effects of prior
probabilities or base rates in making judgment of conditional probabilities,
where instead the individual relies upon extraneous or irrelevant information.
KEY INSIGHTS
While information on prior probabilities may be readily available and
highly relevant to a conditional probability judgment, such as in a con-
sumer’s estimate of the probability that a particular weekly airline flight
will depart late when it departed late in 70 of 100 past instances, the
consumer may ultimately overlook such information and focus instead
on other factors such as the mood of the check-in staff. In doing so, the
individual’s judgment involves a logical fallacy in that it includes a view
that the situation is insensitive to prior probabilities.
KEY WORDS Judgments, probabilities
IMPLICATIONS
When marketing actions or events are sensitive to prior probabilities
(e.g. as when determining the probability that products will fail under
warranty), marketers should strive to objectively consider and incorpor-
ate such information in their analyses, forecasts, and marketing plans.
Otherwise, the result may be unwarranted optimism or an irresponsible
marketing analysis.
APPLICATION AREAS AND FURTHER READINGS
Retail Marketing
Cox, Anthony D., and Summers, John O. (1987). ‘Heuristics and Biases in the
Intuitive Projection of Retail Sales,’ Journal of Marketing Research, 24(3), August,
290–297.
Marketing Research
Hogarth, Robin M., and Makridakis, Spyros (1981). ‘Forecasting and Planning: An
Evaluation,’ Management Science, 27(2), February, 115–138.
Consumer Behavior
Baumgartner, Hans (1995). ‘On the Utility of Consumers’ Theories in Judgments of
Covariation,’ Journal of Consumer Research, 21(4), March, 634–643.
BIBLIOGRAPHY
Novemsky, Nathan, and Kronzon, Shirit (1999). ‘How are Base-Rates Used, When
They are Used: A Comparison of Additive and Bayesian Models of Base-Rate Use,’
Journal of Behavioral Decision Making, 12(1), 55–67.
Baumol’s cost disease 48
basement effect see floor effect
basing-point pricing strategy see pricing strategies
Baumol effect see Baumol’s cost disease
Baumol’s cost disease
(also called the Baumol effect)
DESCRIPTION
The phenomenon observed in certain primarily labor-intensive industries
where there is little or no gain in productivity over time, resulting in rising
production costs.
KEY INSIGHTS
Identified and developed in research by Baumol and Bowen (1966) on the
performing arts sector, the phenomenon is generally attributed to condi-
tions where labor intensiveness in the provision of services, combined
with other constraints for the provision of services (e.g. desirable ser-
vice provider-to-customer ratios) make it difficult for productivity gains
to be achievable. As a result, increasing labor costs lead to increasing
production costs within such industries which may include education,
the performing arts, and certain public services such as public hospitals.
KEY WORDS Service productivity, service production costs
IMPLICATIONS
Marketing managers involved in the provision of service-related offerings
that tend to be labor-intensive and which have demonstrated little or
no gain in productivity over time may benefit from a greater under-
standing of the causes and consequences of Baumol’s cost disease (or the
Baumol effect) in order to develop and evaluate strategies for addressing
the phenomenon. For example, marketing managers faced with such
challenges may therefore need to consider actions and strategies includ-
ing reductions in offering quality or supply, increases in offering price,
complements or alternatives to wage compensation of service providers,
or means of increasing productivity through outsourcing, etc., where
possible.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Heshmati, A. (2003). ‘Productivity Growth, Efficiency and Outsourcing in Manufac-
turing and Service Industries,’ Journal of Economic Surveys, 17(1), 79–112.
Nordhaus, W. D. (2002). ‘Productivity Growth and the New Economy,’ Brookings
Papers on Economic Activity, 2, 211–265.
Services Marketing
Harker, Patrick T. (1995). The Service Productivity and Quality Challenge . Dordrecht:
Kluwer Academic Publishers.
Blaug, M. (2001). ‘Where Are We Now on Cultural Economics?’ Journal of Economic
Surveys, 15(2), 123–144.
49 Bayesian decision theory
BIBLIOGRAPHY
Baumol, W. J., and Bowen, W. (1966). Performing Arts: The Economic Dilemma.
Cambridge, Mass.: MIT Press.
Baumol, W. J. (1997). ‘Baumol’s Cost Disease: The Arts and Other Victims,’ in W. J.
Baumol and R. Towse (eds.), Baumol’s Cost Disease. Northampton, Mass.: Edward
Elgar.
Bayesian decision theory
DESCRIPTION
Decision theory involving a fundamental statistical approach to pattern recog-
nition, classification, and conditional probabilities.
KEY INSIGHTS
Bayesian decision theory is well-suited to marketing problems where
a decision is required but where there is considerable uncertainty or
limited information on which to base a decision. The theory involves
the application of probabilities to each of the decision-related elements,
where probabilities are typically established as a result of opinion rather
than established by fact. The aim of the approach is to arrive at an
understanding of an optimal outcome for a decision-making process.
KEY WORDS Decision making, uncertainty, limited information, pattern
recognition
IMPLICATIONS
Marketers involved in strategic decision making where there is a high
degree of uncertainty or limited information may draw upon Bayesian
decision theory-based research to increase the robustness of the strategic
decision-making process used as well as to obtain clearer insights into
optimal outcomes. At the very least, the approach can be valuable to
understand better the relationship between various outcomes and mar-
keting actions involving varying degrees of risk.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Anderson, Eugene W., and Sullivan, Mary W. (1993). ‘The Antecedents and Con-
sequences of Customer Satisfaction for Firms,’ Marketing Science, 12(2), Spring,
125–143.
Pricing
Green, Paul E. (1963). ‘Bayesian Decision Theory in Pricing Strategy,’ Journal of
Marketing, 27(1), January, 5–14.
Marketing Research
Rossi, Peter E., McCulloch, Robert E., and Allenby, Greg M. (1996). ‘The Value of
Purchase History Data in Target Marketing,’ Marketing Science, 15(4), 321–340.
Carroll, J. Douglas, and Green, Paul E. (1995). ‘Guest Editorial: Psychometric Meth-
ods in Marketing Research: Part I, Conjoint Analysis,’ Journal of Marketing Research,
32(4), November, 385–391.
Marketing Modeling
Putler, Daniel S., Kalyanam, Kirthi, and Hodges, James S. (1996). ‘A Bayesian
Approach for Estimating Target Market Potential with Limited Geodemographic
Information,’ Journal of Marketing Research, 33(2), May, 134–149.