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Tag: American Marketing Association (AMA)

  • Circular take-back programs enhance consumer value and address climate crisis

    Circular take-back programs enhance consumer value and address climate crisis

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    Newswise — Researchers from Boston University published a Journal of Marketing study showing that tapping into consumers’ sense of ownership prompts them to place a higher value on products from a circular economy.

    The study, forthcoming in the Journal of Marketing, is titled “Affording Disposal Control: The Effect of Circular Take-Back Programs on Psychological Ownership and Valuation” and is authored by Anna Tari and Remi Trudel. 

    Governments worldwide view a circular economy as part of the solution to the climate crisis. In the U.S., several states such as California, Connecticut, Maine, Oregon, and Vermont have implemented Extended Producer Responsibility (EPR) laws that hold manufacturers accountable for the entire life cycle of their products, including disposal and repurposing. However, implementing circular take-back programs under EPR regulations faces challenges as policymakers grapple with prioritizing these programs when faced with limited consumer awareness and support. Manufacturers resist these programs due to potential cost escalation, shrinking profit margins, and the perceived burden of passing costs onto consumers, potentially compromising their competitiveness in the market.

    Consumer Interest in Take-Back Programs

    The researchers discover that consumers exhibit a higher willingness to pay for products that are part of a circular take-back program. Tari explains that “the driving force behind this willingness lies in a concept known as psychological ownership. Circular products offer control over the disposal of the product, which taps into consumers’ sense of ownership, prompting them to place higher value on these items. This finding could alter how businesses and policymakers approach the implementation of circular programs.”

    A circular economy can decrease supply chain risk by increasing the security and price stability of a company’s supply chain through the use of recovered materials. Circular programs may also allow firms to develop new markets, gain new customers, and build their brands and reputations as environmentally friendly and innovative organizations.

    Several companies have recognized the benefits of the circular economy. For example, clothing retailer H&M encourages consumers to participate in its circular take-back program by returning their used clothes to the retailer. Depending on the type of clothing and its condition, H&M donates the clothing to charity, recycles it, or reuses it to make new clothing to sell. IKEA has committed to being 100% circular by 2030 and has implemented a take-back scheme promoted extensively in stores. Zara has expanded its “Closing the Loop” initiative to include home collection services.

    Eight experiments that study a variety of products demonstrate that people ascribe more valuation to circular program products. The increase in valuation is due to a factor unique to circular program products: disposal control. This control does not in itself increase valuation; rather, it increases the capacity for a circular economy product to evoke psychological ownership. 

    Lessons for Marketers and Policymakers

    The study offers valuable lessons for chief marketing officers:

    • Manufacturers need to reassess their concerns about cost implications. The study illuminates the potential for consumers to accept price adjustments associated with circular programs.
    • Companies can make take-back programs product-specific and allow consumers to directly return products they no longer need to the manufacturer or retailer. This gives consumers more control over disposal, as opposed to relying on a broader curbside recycling system.
    • Implementation of a take-back program does not seem to require product discounts or the need for companies to offer convenient pick-up services.

    It also emphasizes lessons for policymakers:

    • Foster awareness and understanding among consumers and boost political will for these programs.
    • Focus on policies that can lead to increased investment in regulatory frameworks, infrastructure, and financial incentives to support such programs.
    • Promote policies and encourage companies to participate in these programs by providing them with guidelines on how to do so. When companies are informed that consumers value circular program products, they may be more willing to invest in them, creating a potential positive cycle of engagement where consumer demand and corporate engagement reinforce each other.

    The insights from this research hold important conclusions. Trudel says that “businesses can align their strategies with consumer values; policymakers can foster support for sustainable initiatives; and consumers can make choices that resonate with their values. It is time to embrace the circular economy not just as a theoretical concept, but as a tangible force for positive transformation in our society.”

    Full article and author contact information available at: https://doi.org/10.1177/00222429231196576

    About the Journal of Marketing 

    The Journal of Marketing develops and disseminates knowledge about real-world marketing questions useful to scholars, educators, managers, policy makers, consumers, and other societal stakeholders around the world. Published by the American Marketing Association since its founding in 1936, JM has played a significant role in shaping the content and boundaries of the marketing discipline. Shrihari (Hari) Sridhar (Joe Foster ’56 Chair in Business Leadership, Professor of Marketing at Mays Business School, Texas A&M University) serves as the current Editor in Chief.
    https://www.ama.org/jm

    About the American Marketing Association (AMA) 

    As the largest chapter-based marketing association in the world, the AMA is trusted by marketing and sales professionals to help them discover what is coming next in the industry. The AMA has a community of local chapters in more than 70 cities and 350 college campuses throughout North America. The AMA is home to award-winning content, PCM® professional certification, premiere academic journals, and industry-leading training events and conferences.
    https://www.ama.org

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  • Digital brands opening physical stores: Advantages & channel sales challenges

    Digital brands opening physical stores: Advantages & channel sales challenges

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    Newswise — Researchers from Erasmus School of Economics at Erasmus University Rotterdam, KU Leuven, Universität zu Lübeck, Christian-Albrechts-Universität zu Kiel, and FoodLabs published a new Journal of Marketing article that investigates the multichannel impact of brand stores by digital-native FMCG brands.

    The study, forthcoming in the Journal of Marketing, is titled “Assessing the Multichannel Impact of Brand Store Entry by a Digital-Native Grocery Brand” and is authored by Michiel Van Crombrugge, Els Breugelmans, Florian Breiner, and Christian W. Scheiner.

    Multichannel retailing has become crucial to the sales strategy of any brand, including digital-native brands that started retailing as online-only. Digital-native brands like Quip in the U.S. and Myprotein in Europe have partnered with independent retailers to offer consumers an in-person retail option. But some brands—especially those in the fast-moving consumer goods (FMCG) category—have opened their own brand stores to create a bigger physical footprint.

    Brand stores are brick-and-mortar stores owned and operated by the manufacturer. They carry only the brand’s products and are designed to sell them profitably in a brand-centric environment. Van Crombrugge explains that “these stores offer physical exposure, which digital-native brands might struggle to attain on supermarket shelves given the steep competition from mass-market brands.” Brand stores increase brand awareness, which in turn can increase sales in the company-owned online channel and independent supermarkets. “Brand stores can also spark distributor interest and prompt supermarkets to distribute more of the brand on their shelves. Since the number of brand stores that a digital-native FMCG brand can open is limited, increasing breadth and depth of supermarket distribution can further drive brand sales,” adds Breugelmans.

    Yet brand stores also entail risks. Sales in this channel may cannibalize sales in the incumbent channels if consumers migrate to the newly opened brand store. If brand stores signal the manufacturer’s encroachment, supermarkets might reduce their distribution of the brand. Finally, opening and operating brand stores is expensive and these substantial operational costs put pressure on profits.

    The Supermarket Effect

    This research uncovers a substantially different impact of brand store entry on own-online channel sales than on sales in independent supermarkets. In areas in the vicinity of brand stores, the brand’s online channel sales decreased, yet its supermarket sales increased. This is because for customers seeking a more elevated consumption experience, brand stores offer an interesting alternative, which causes cannibalization of its own online channel. In supermarkets, on the other hand, buyers are mainly concerned with price and convenience. For them, brand stores offer an opportunity to discover a digital-native brand that otherwise would have remained anonymous between bigger mass-market brands, which in turn causes supermarket sales to increase.

    The research team also discovers that brand stores spark distributor interest and prompt supermarkets to start distributing the brand on their shelves. Indeed, part of the supermarket sales increase that brand stores bring about is driven by brand stores’ positive effect on the number of supermarkets that carry the brand. This increase in distribution breadth is an important component to drive sales since brands cannot open brand stores everywhere.

    “We find that brand stores generate an influx of own brand store sales that more than make up for any online losses. This is not necessarily surprising because their strong local visibility, typically in locations with high foot traffic, and their appeal to customers who lack opportunities or motivations to visit the online channel or supermarket make brand stores an attractive sales channel on their own,” Scheiner says. Despite the cannibalizing impact on their own online channel, brand stores are an effective means to increase a brand’s top-line sales. Digital natives in startup or growth markets that aim to draw investors’ attention can try to improve their valuation through brand stores and the corresponding sales growth.

    However, opening and running brand stores is a capital-intensive operation due to factors such as store rental cost and sales staff wages. Breinder warns that “our analyses show that nearly half of the brand stores under study were not able to turn a profit. Brands therefore need to carefully weigh brand stores’ top-line gains against their high operational expenses to justify the investment financially.”

    These findings offer important insights and caveats to digital-native brands that consider opening brand stores to increase their physical footprint beyond supermarkets. The upside is that brand stores can help digital natives reach potential consumers and gain additional physical exposure that FMCG brands especially require. Yet brand stores are not without risks: they may hurt the brand’s sales in the online channel where the digital native started and further impact brand profitability if the influx of new sales is not great enough to cover those online losses and the brand stores’ own substantial operating costs.

    Full article and author contact information available at: https://doi.org/10.1177/00222429231193371

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  • Do acquisitions harm the acquired brand? Identifying conditions that reduce the negative effect

    Do acquisitions harm the acquired brand? Identifying conditions that reduce the negative effect

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    Newswise — Researchers from University of Leeds, University of Vienna, and University of Pennsylvania published a new Journal of Marketing article that examines why consumers develop negative reactions towards acquired brands and explains conditions that attenuate that negative effect.

    The study, forthcoming in the Journal of Marketing, is titled “When and Why Consumers React Negatively to Brand Acquisitions: A Values Authenticity Account” and is authored by Alessandro Biraglia, Christoph Fuchs, Elisa Maira, and Stefano Puntoni.

    When Unilever acquired GROM, an Italian gelato company, 83% of consumers polled by a newspaper described the acquisition as “bad news.” This reduced consumer interest led to the closure of several GROM retail outlets, including the ice cream maker’s first store, four years after the acquisition. Similarly, consumer ratings for The Body Shop, a cosmetic brand, plummeted after L’Oréal acquired it.

    Companies often engage in mergers and acquisitions to expand their portfolio and generate growth – the global value of acquisitions amounted to $2.3 trillion in 2019, according to JP Morgan – but there is plenty of anecdotal evidence suggesting that brand acquisitions can potentially generate negative reactions among consumers. Yet little is known about when and why brand acquisitions might trigger these negative reactions.

    This new study explains why consumers develop negative reactions towards acquired brands in terms of lower brand choice and reduced purchase likelihood. As Biraglia explains, “We find that, across product categories, consumers often see an acquired brand as having compromised the authentic values upon which it was founded. This perception is triggered not only when a big company acquires a smaller one, but also when the sizes of the acquirer and acquired brand are comparable. Furthermore, the negative effect appears even in the case of partial acquisition such as 15% of ownership.”

    Conditions that Attenuate the Negative Effect of Acquisitions

    Across ten studies using different methods, research designs, product categories, and brands, the researchers demonstrate that negative brand reactions can be explained by the perceived loss of a brand’s unique values. “Building on this values authenticity account, we find that the negative effect of acquisitions depends on the acquired brand’s values, brand age, leadership continuity, and the alignment between acquiring and acquired brands,” says Fuchs. The conditions that attenuate the negative effect of acquisitions are as follows:

    • Consumers develop a lower purchase intention when a previously acquired brand is acquired again by another company, as the original values may have already been diluted during the first takeover.
    • Consumers seem less concerned when the original leadership team remains in charge after the acquisition because this may act as a reassurance that the authentic values are retained.
    • Consumers react less negatively if the values of the acquirer brand align with those of the acquired brand. The negative effect is mitigated if a brand that produces sustainable products is acquired by a brand with sustainability as a core value.
    • Consumers react less negatively when the acquired brand has been established with a strategic orientation towards growth. In these cases, they don’t see the takeover as a loss of the brand’s authentic values. For instance, many start-ups are founded with the desire to get bigger and many communicate this in their statements (e.g., Bill Gates often mentioned his vision to have a “PC on every desk in every home”). Sometimes founders even invoke growth values as the reason for selling the company (e.g., the founder of Dot’s Pretzels explained the acquisition by Hershey’s in November 2021 by saying she had “built the business with the idea of sharing them with everyone.”)
    • Consumers react less negatively if a young brand is acquired. Consumers consider the acquisition of a younger company less disruptive of values authenticity. Conversely, for older companies with a set of values crystallized over decades – or even centuries – we find a more severe negative effect.

    Managerial Implications

    Before the acquisition:

    • “Managers should examine the target brand’s communications and identify whether the vision statement, advertising, social media accounts, and other forms of branding contain any references to growth or reaching a broader range of customers. Such cues may make the acquisition process more favorable in the eyes of consumers,” explains Maira. Targeting brands aligned with the acquiring company’s core values and making this alignment salient can benefit the acquisition process.
    • Similarly, scouting for young, promising brands could prove beneficial, potentially giving the acquirer an aura of patronage and a reputation for investing in nascent businesses.

    After the acquisition:

    • “Managers should carefully plan how to effectively frame acquisition announcements. If the founders/original owners will not be involved after the acquisition, managers may want to consider retaining long-term employees and highlighting this in communications,” suggests Puntoni.
    • When the acquirer has values that align with those of the acquired brand, highlighting this can boost perceptions of the acquisition and nurture the acquired brand.
    • If there is no strong alignment of values between the acquirer and the acquired brand, the research team suggests that managers focus on other aspects that can benefit from the acquisition. For example, an acquirer could highlight an increase in R&D facilities or a potential increase in product quality.

    Full article and author contact information available at: https://doi.org/10.1177/00222429221137817

    About the Journal of Marketing 

    The Journal of Marketing develops and disseminates knowledge about real-world marketing questions useful to scholars, educators, managers, policy makers, consumers, and other societal stakeholders around the world. Published by the American Marketing Association since its founding in 1936, JM has played a significant role in shaping the content and boundaries of the marketing discipline. Shrihari Sridhar (Joe Foster ’56 Chair in Business Leadership, Professor of Marketing at Mays Business School, Texas A&M University) serves as the current Editor in Chief.
    https://www.ama.org/jm

    About the American Marketing Association (AMA) 

    As the largest chapter-based marketing association in the world, the AMA is trusted by marketing and sales professionals to help them discover what is coming next in the industry. The AMA has a community of local chapters in more than 70 cities and 350 college campuses throughout North America. The AMA is home to award-winning content, PCM® professional certification, premiere academic journals, and industry-leading training events and conferences.
    https://www.ama.org

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