Weathering product-harm crises.

Product-harm crises can seriously imperil a brand's performance. Consumers tend to weigh negative publicity heavily in product judgments, customer preferences may shift towards competing products during the recall period, and competitors often increase their advertising spending in the wake of a brand's misfortune. To counter these negative effects, brands hope to capitalize on their equity, and often use advertising as a communication device to regain customers' lost trust. We develop a multiple-event hazard model to study how consumer characteristics and advertising influence consumers' first-purchase decisions for two affected brands of peanut butter following a severe Australian product-harm crisis. Buying a recently affected brand is perceived as highly risky, making the trial purchase a first hurdle to be taken in the brand's recovery. Both pre-crisis loyalty and familiarity are found to form an important buffer against the product-harm crisis, supporting the idea that a brand's equity prior to the crisis offers resilience in the face of misfortune. Also heavy users tend to purchase the affected brands sooner, unless their usage rate decreased significantly during the crisis. Brand advertising was found to be effective for the stronger brand, but not for the weaker brand, while competitive advertising delayed the first-purchase decision for both brands affected by the crisis.(pro-environmental) attitudes; Behavior; Claim; Cognitive; Consumption; Control; Control theory; Decision; Decisions; Demand; Ecological consumer behaviour; Effects; Ego depletion; Implications; Marketing; Model; Performance; Research; Self-control; Self-perception theory; Social marketing; Studies; Theory; Product; Judgments; Preference; Recall; Advertising; Brands; Communication; Trust; Characteristics; Loyalty;

Intra- and Interformat Competition Among Discounters and Supermarkets

The price-aggressive discount format, popularized by chains such as Aldi and Lidl, is very successful in most Western economies. Its success is a major source of concern for traditional supermarkets. Discounters not only have a direct effect on supermarkets’ market shares, they also exert considerable pressure to improve operational efficiency and/or to decrease prices. We use an empirical entry model to study the degree of intra- and inter-format competition between discounters and supermarkets. Information on the competitive impact of new entrants is derived from the observed entry decisions of supermarkets and discounters in a large cross-section of local markets, after controlling for a number of local market characteristics. In our modeling framework, we endogenize the retailers’ entry decisions, and allow for asymmetric intra- and inter-format competitive effects in a flexible way. We apply our modeling approach to the German grocery industry, where the discount format has stabilized after two decades of continued growth. We find evidence of intense competition within both the supermarket and discounter format, although competition between supermarkets is found to be more severe. Most importantly, discounters only start to affect the profitability of conventional supermarkets from the third entrant onwards. This may explain why many retailers rush to add a discount chain to their portfolio: early entrants may benefit from the growth of the discount-prone segment without cannibalizing the profits of their more conventional supermarket stores

Essays on competitive structure and product-harm crises.

This thesis is a collection of three empirical essays focusing on two important research topics, i.e. (i) competitive structure and (ii) product-harm crises. Competitive structure In the first two empirical essays, we study store competition in two local-service sectors, i.e. the video-rental and the grocery industry. In the considered sectors, collecting data on different marketing and/or performance variables for all players in the market is very difficult. Not only are these industries typically very fragmented because of localized competition, more service-related -and often less directly observable- aspects of competition are important as well. Because of these issues, gathering detailed data on all components of competition for all players in a local-service sector quickly becomes impossible. Therefore, we use empirical-entry models that have been developed in the industrial organization literature to evaluate market competition (e.g., Bresnahan and Reis 1991; Berry 1992). The general idea is to infer information on the degree of competition from the observed entry decisions, and its relationship with local market size and other market characteristics. Firms’ strategies are represented by discrete decisions, i.e. whether or not to enter a local market. As we assume that firms are profit maximizing, the actual (observed) market structures are used to uncover information on the underlying (unobserved) profitability. As a consequence, this framework allows us to study profit determinants and the role of competition without directly observing any detailed firm-level information. In the first essay, we study competition in the Belgian video-rental market. This sector is characterized by players offering relatively homogenous products. Therefore, to study competition in this market, we make abstraction from the identity of the particular players in the market, and estimate the relationship between the total number of entrants and the observed market characteristics using an ordered probit model. We find that competition amongst video stores increases with every entry in a local market. However, in contrast to the predictions of most economic theories, the increase in competition is larger when entry occurs in a duopoly than in a monopoly. Apart from the insights on the extent of competition in the video-rental industry, the applied framework also allows us to study the impact on profitability of other characteristics of the local market. As such, we find a significant cannibalization effect of movie theatres nearby, while the proportion of premium cable subscribers has an insignificant impact. In addition, we establish that various socio-demographic characteristics of the trading zone, such as income and household size, have a significant impact on video store performance. The second essay focuses on the German grocery industry. Grocery retailing has undergone an intense transformation during the past decades, including the emergence and growth of several new retail formats and concepts. Especially the discounter format has revolutionized the industry. These low-price low-service grocery stores are a source of considerable concern for supermarkets, as they have now captured a considerable market position in almost all Western economies. We study competition within and between the supermarket and discounter format. We develop a model with format-specific profit functions, while accounting for different socio-demographic and competitive effects. We find evidence for an extensive amount of intra-format competition for both supermarkets and discounters, although the extent of rivalry is more pronounced amongst supermarkets. Also inter-format competition is present for both store types, although the competitive effects only become significant from the third discounter and second supermarket onwards. Contrary to intra-format competition, the extent of rivalry between formats is the same for supermarkets and discounters. Product-harm crises Product-harm crises – defined as “discrete, well publicized occurrences wherein products are found to be defective or dangerous” (Siomkos and Kurzbard 1994) - are prevalent in the marketplace. Recent examples of product-harm crises include the recall of contaminated coca-cola in several European countries, and the Japanese Snow brand milk food-poisoning scandal. The impact of this type of crises on society is huge, while also affected companies may suffer substantially from a product-harm crisis. Despite the enormous impact of product-harm crises on society and on affected companies, research on the topic is still relatively scant. While several experimental studies have demonstrated the important moderating impact of certain consumer characteristics on their reactions to a (hypothetical) product-harm crisis (e.g. Ahluwalia, Burnkrant, and Unnava 2000), these papers suffer from a number of important external validity issues. Researchers in these studies often attract attention artificially to the crisis, and respondent’s stated intentions may not always reflect their real purchase behavior. Moreover, the effect of tactical marketing variables and important marketplace dynamics are typically not accounted for. In the third empirical essay, we use household scanner data that record consumer purchases before, during, and after a real-life product-harm crisis, i.e. the Australian peanut-butter case. Within this context, we use a multiple-event hazard model to study the effect of consumer characteristics and post-crisis advertising on the timing of the first-purchase decision after the crisis of the affected brands. We find that brand equity offers an important protection against a product-harm crisis as both loyal and more familiar consumers repurchase the affected brands sooner. However, this protection decreases over time, as is reflected in a negative interaction effect of loyalty and time. We also observe a decreasing impact with time of a previous experience with the brand. In addition, we show that pre-crisis category usage has a positive impact on the trial probability, although this effect may be cancelled out because of a decreased consumption during the crisis period. Finally, we demonstrate that after-crisis communication can indeed be very effective, although we find this only to be true for the stronger of the two considered brands. In turn, competitive advertising delays the purchase of both affected brands after the crisis.

Growth factors of flemish enterprises: an exploratory study over the period 1993-1997

In this empirical study we investigated which company characteristics and which characteristics of population demography and firm location discriminate strongly and weakly growing firms in the Flemish part of Belgium. At the same time we examined whether existing governmental growth incentives actually are positively related to firm growth. Further, differences in growth between provinces and between industries in Flanders were analysed. Stepwise logistic regression was applied to growth categories identifying the 25% strongest and the 25% weakest growing companies on the investment level (growth in value added and total assets) and on the employment level (growth in the number of employees). The results show that a healthy financial situation is positively related to employment growth and especially investment growth. Governmental efforts to strengthen growth also seem to exhibit a positive relationship with either investment or employment growth. The height of the social security contributions--often indicated as the culprit for the weak international competitive position of Belgian firms--on the other hand seems to be negatively correlated with both growth measures. Further, we found evidence for significant correlations between demographic characteristics of the population as well as firm location and firm growth. Industry wise, the low growth performance of "wholesale trade, retail trade, hotels, restaurants and pubs, repair" (NACE division 6) and "other processing industries" (NACE division 4) became evident. Regionally, the figures show growth to be significantly weaker for firms situated around the central axis Antwerp-Brussels.info:eu-repo/semantics/publishe

Weathering product-harm crises

To counter the negative effects of a product-harm crisis, brands hope to capitalize on their equity, and often use advertising as a communication device to regain customers’ lost trust. We study how consumer characteristics and advertising influence consumers’ first-purchase decisions for two affected brands of peanut butter following a severe Australian product-harm crisis. Both pre-crisis loyalty and familiarity are found to form an important buffer against the product-harm crisis, although this resilience decreases over time. Also heavy users tend to purchase the affected brands sooner, unless their usage rate decreased significantly during the crisis. Brand advertising was found to be effective for the stronger brand, but not for the weaker brand.status: publishe

Weathering product-harm crises

Product-harm crises can seriously imperil a brand's performance. Consumers tend to weigh negative publicity heavily in product judgments, customer preferences may shift towards competing products during the recall period, and competitors often increase their advertising spending in the wake of a brand's misfortune. To counter these negative effects, brands hope to capitalize on their equity, and often use advertising as a communication device to regain customers' lost trust. We develop a multiple-event hazard model to study how consumer characteristics and advertising influence consumers' first-purchase decisions for two affected brands of peanut butter following a severe Australian product-harm crisis. Buying a recently affected brand is perceived as highly risky, making the trial purchase a first hurdle to be taken in the brand's recovery. Both pre-crisis loyalty and familiarity are found to form an important buffer against the product-harm crisis, supporting the idea that a brand's equity prior to the crisis offers resilience in the face of misfortune. Also heavy users tend to purchase the affected brands sooner, unless their usage rate decreased significantly during the crisis. Brand advertising was found to be effective for the stronger brand, but not for the weaker brand, while competitive advertising delayed the first-purchase decision for both brands affected by the crisis.status: publishe

Intra- and inter-format competition among discounters and supermarkets

The price-aggressive discount format, popularized by chains such as Aldi and Lidl, is very successful in most Western economies. Its success is a major source of concern for traditional supermarkets. Discounters not only have a direct effect on supermarkets’ market shares, they also exert considerable pressure to improve operational efficiency and/or to decrease prices. We use an empirical entry model to study the degree of intra- and inter-format competition between discounters and supermarkets. Information on the competitive impact of new entrants is derived from the observed entry decisions of supermarkets and discounters in a large cross-section of local markets, after controlling for a number of local market characteristics. In our modeling framework, we endogenize the retailers’ entry decisions, and allow for asymmetric intra- and inter-format competitive effects in a flexible way. We apply our modeling approach to the German grocery industry, where the discount format has stabilized after two decades of continued growth. We find evidence of intense competition within both the supermarket and discounter format, although competition between supermarkets is found to be more severe. Most importantly, discounters only start to affect the profitability of conventional supermarkets from the third entrant onwards. This may explain why many retailers rush to add a discount chain to their portfolio: early entrants may benefit from the growth of the discount-prone segment without cannibalizing the profits of their more conventional supermarket stores.status: publishe

What is the impact of a conflict delisting on firm value? An investigation of the role of conflict and firm characteristics

Negotiations between manufacturers and retailers often go sour. In an attempt to stand their ground, firms increasingly exercise coercive power and decide to delist products until the conflict is resolved. Using an event study, this paper provides knowledge on the performance implications of these so-called conflict delistings. While the results show that, on average, conflict delistings severely damage firm value, the direction and magnitude of the stock market reaction is contingent upon conflict and firm characteristics. Conflict delistings are more harmful to firm value if the focal party is a manufacturer (versus a retailer) or the initiator of the delisting. They also harm firm value more when more brands were delisted and when the size of the focal firm is much larger than the opponent’s size. A conflict delisting is more beneficial if the focal party has a strong brand and if the opponent’s brand strength is weak