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An investigation of brand choice processes
Full text linkHere a brief recapitulation of the study of brand choice processes is given, and the major conclusions are reported.In chapter 2 we discussed the empirical brand choice data used throughout the study. We saw that these were purchase histories of members of the Dutch Attwood Consumer Panel for the products fopro (a pseudonym), beer and margarine during the years 1967 and 1968. A brief description of the type of information, available for each purchase, was given, and some important characteristics of the markets for each of the 3 products were also reported. In addition some attention was paid to the special brands of the 3 products which are repeatedly distinguished in the study and the source of information for the advertising figures used in the analysis was mentioned.In chapter 3, 5 different brand choice models with the corresponding testing and estimation procedures were presented, viz., the:1. Homogeneous Bernoulli Model (HOBM);2. Homogeneous Markov Model (HOMM);3. Heterogeneous Bernoulli Model (HEBM);4. Heterogeneous Markov Model (HEMM);5. Linear Learning Model (LLM).Of these models (1) and (3) assume no influence of former purchases on current brand choice, i.e. no purchase feedback. In these two models it is assumed that a consumer purchases a certain brand with constant probability, which probability - according to (1) - is equal for all consumers, but - in the case of (3) - may vary over consumers.All the other 3 models assume purchase feedback. In the case of the Markov models (2) and (4) the influence of former purchases is limited to the recent purchase occasions and expressed in so-called transition probabilities. For the HOMM these transition probabilities are equal for all consumers; in the case of the (HEMM); different consumers can have different transition probabilities. According to the Linear Learning Model a consumer is assumed to have - at a given purchase occasion - a probability p of buying a certain brand. After a purchase this probability is transformed in a way dependent on the brand bought at that purchase. This implies that in the LLM quite a number of former purchases have an influence, but the influence of the brand choice at an earlier purchase occasion diminishes with the number of purchases made since that occasion.In chapter 4 it was examined how far the brand choice models just mentioned gave a good description of the empirical brand choice processes of fopro, beer and margarine. This was done by carrying out testing procedures and performing a simulation study.From the test results it became clear that in all cases a definite purchase feedback is present; the Bernoulli models HOBM and HEBM did not give a good fit, and the Markov and Learning models also showed an evident influence of previous purchases. Of the homogeneous Markov models the first order Markov model, which is the brand choice model most discussed in the literature, did not give a good fit. The performance of the second order model was better, but was still not really satisfactory. The Heterogeneous Markov Model (HEMM) also did not give a good description of the brand choice processes observed. The brand choice model which gave the best results, was the Linear Learning Model (LLM). In every case this model was superior to all other models.In the simulation study, where the ability of the various brand choice models to reproduce the original brand choice processes was examined, the superiority of the Linear Learning Model again appeared, while the homogeneous Markov models (first and second order) offered a much worse reproduction. A curious point is that the HEBM appeared to give a reproduction of the original brand choice processes which was almost as good as that of the LLM. At first glance this seemed contradictory, but a closer examination of the LLM-parameters showed that these parameters were such that the LLM-processes concerned exhibited a lot of seeming zero-order behavior. Because the HEBM is a zero-order model, this explains the phenomenon observed. Taking the results of the testing procedures and the simulation study together, it appears, that - of all brand choice models used - the Linear Learning Model evidently gave the best description of the empirical brand choice processes.In chapter 5 we briefly discussed a number of learning models from the viewpoint of their application possibilities to brand choice processes. The non-linear operator models treated appeared to offer no great perspectives. The stimulus sampling models, an example of which was applied to the fopro, beer and margarine data looked more promising. Some further properties of the Linear Learning Model were given, in particular relating to equilibrium behavior, which are useful because they can be used to compute long term market shares. It was also shown that the Linear Learning Model can be generalized, so that brand choice processes can be handled, for which not all assumptions of the ordinary LLM hold.In chapter 6 we analysed the empirical brand choice processes with the aid of the variable 'poolsize' introduced there. Poolsize is defined as the 'number of different brands bought during the last 10 purchases'. An important finding is that - in their purchase histories - consumers show periods of routinized buying alternated with periods of brand switching. This is in agreement with the good fit of the LLM observed in chapter 4, because the parameters of the LLM estimated there are such that in the corresponding brand choice processes there will be long periods during which brand switches are very unlikely, alternated with periods in which the probability of moving to another brand is considerable.Further conclusions resulting from the poolsize approach, are that a consumer simultaneously considers a limited number of brands as potential choice candidates and that consumers do not often straightforwardly switch from one brand to another, but usually exhibit search behavior, which accompanies a transition to another brand.In chapter 7 we examined the relationships between brand choice and a number of environmental variables.With respect to shop choice, it was found that brand choice and shop choice are rather closely related. This interdependence cannot completely be traced back to the fact that the choice of a shop simply limits the set of different brands from which a choice can be made; it seems that an autonomous general proneness-to-change factor exists, which means that some consumers show great variation with respect to shops as well as to brands. Moreover, there can be distinguished specific proneness-to-brand- change and proneness-to-shop-change factors. With respect to the effect of the marketing variables the following can be remarked: by means of a multiple regression analysis it was found that for a number of brands there was a significant influence of price and/or advertising (the latter measured by expenditures made) on market share, repeat purchase probability and on the probability of making a transition from another brand to the brand concerned. Further it was found that deal purchases are relatively often associated with brand switches, so that dealing seems to be an instrument having the ability to induce brand changes.As for the effect of inter-purchase times on brand choice, it was found for fopro that the probability of purchasing the same brand as the previous one (= repeat purchase probability) decreases as inter-purchase times become longer. For beer and margarine no effect of inter-purchase times could be established.In chapter 8 we studied the relationship between brand choice behavior and household variables.It was found that socio-economic variables have only weak relationships with brand choice variables. For all 3 products we observed some influence of size of town, region, children and attitude scores in relation to buying behavior. In incidental cases there was also an influence of family size, age of housewife and the possession of a refrigerator and a television set.Between brand choice variables and other purchase variables the relationships are stronger. It was observed that households which, relatively, show a lot of brand switching pay a lower price, make more deal- purchases, make more purchases in self-service shops or supermarkets, buy more in shops belonging to chains, have more variation in interpurchase times and in volume per purchase occasion and buy more different package sizes.To a certain extent brand choice behavior was found to be transitive over products, i.e. to some extent households showed the same type of brand choice behavior in relation to different products, but not to such a degree that a general brand choice behavior could be spoken of which could serve as an independent basis for market segmentation
Het consumentengedrag met betrekking tot melk
No full textIn this study, consumer behaviour with respect to fluid milk in the Netherlands is examined. The objectives of the study are- to gain insight into the factors that influence buying and consumption be haviour with respect to milk, and- to gain insight into the usefulness of a so called integreated model of consumer behaviour.Chapter 2 presents an analysis of the pattern of milk consumption by Dutch households and the changes that have occurred in it since 1950. First, the trend and seasonal fluctuations in fluid milk consumption are analysed. Next data from a household panel are analysed. Data concerning corresponding periods of the years 1974, 1977 and 1980 were used to investigate the relationships between the per capita quantity of milk that was bought by the household on the one side, and socio-economic variables and buying behaviour (distribution channel, buying frequency, full-cream or (semi-)skimmed milk) on the other side. Further a few analyses are presented of changes in buying behaviour with respect to milk of households that were member of the panel in 1974, 1977 and 1980. The analyses mentioned are on the household level. Individual perceptions, preferences and behaviour are not examined in chapter 2.Therefore, in chapter 3, a model of individual consumer behaviour with respect to milk is constructed. This model is based on the Engel, Blackwell and Kollat (1978) model of consumer behaviour, which includes the Extended Fishbein model. In the model of consumer behaviour with respect to milk, some new aspects are incorporated:- the model is not specified for a buying situation, but for a moment of consumption- the assumption is made that the decision process that precedes the con sumption of a beverage is different in character at distinct point of time in a day (e.g. breakfast, lunch, in the evening)- social influence is split into two components, i.e. influences from out side the household (e.g. doctors, friends) and influences from other members of the own household.The model is summarized by six equations that describe the decision process.In chapter 4 the variables in the model are operationalized. The variables have been measured in a survey. In each of the 1000 households the housewife (as gate-keeper for food products) and, if possible, a randomly chosen other person in the same household were interviewed. The second person was interviewed in order to measure the social infuence within the household.Chapter 5 describes the implementation of the model of consumer behaviour with respect to milk. The six equations are analysed subsequently. Further, a perception analysis is carried out, based on a similarity matrix. A com parison between the Fishbein-like compositional model of consumer behaviour with respect to milk and the decompositional PREFMAP-vector model is made. The main conclusions with respect to the model of consumer behaviour con cerning milk are:- the specification of the model with respect to distinct points of time in a day is very useful- the social influences within the household differ in character from the social influences from outside the household- attention must be paid to the danger of socially desirable responses in measuring the components of the Extended Fishbein model- the decompositional method provides a useful additional insight into the preference structure.In chapter 6, on a small scale, the choice between a number of varieties of milk (differing by package, fat content, heat treatment and price) is investigated. The method of conjoint measurement is used in order to measure intensities of preferences for combinations of the four attributes mentioned. Further, a sensory test was set up in order to investigate whether consumers are able to taste a difference between full-cream/semi-skimmed milk and/or pasteurized/UHT-sterilized milk.Chapter 7 contains conclusions concerning buying and consumption behaviour with respect to milk
Product quality : an investigation into the concept and how it is perceived by consumers
No full textThe objectives of the present work are (1) to review the literature on product quality from different perspectives, (2) to develop a model that describes the way consumers form judgments about product quality, and (3) to investigate the proposed model empirically. In addition, price-perceived quality tradeoffs and the relationship between price and product quality in the marketplace are investigated. The main conclusions are summarized in this chapter.The concept of product qualityThe concept of product quality has received attention in various disciplines. Four major approaches to product quality are identified: the metaphysical approach, the production management approach, the economic approach, and the perceived quality approach. To enhance our insight into the product quality concept, each of these approaches is discussed, the most attention being given to the economic and the perceived quality approaches.The metaphysical approach concentrates on the being of quality. Quality is regarded by many authors as being synonymous with innate excellence. In essence, it is an unanalyzable property that an individual can learn to recognize only through experience. People differ about quality not because quality is different but because people are different in terms of experience.The production management approach differs from the metaphysical approach in that it regards quality as a concept that is objectively measurable. In the production management approach, quality is described in technical specifications. Quality is conformity with these technical specifications. This approach concentrates on producing a product of a given predetermined quality level. This level of quality is achieved by quality of design, quality of production, continuity of service, and customer service after sale. The most important recent development in the production management approach is the emergence of the 'zero defects philosophy'. In the traditional view, very few or no defects are not economical because such perfectionism would cause the costs of preventing defects to exceed the costs of having the defects. However, it has been shown that quality improvement need not lead to higher costs, and increasingly, companies, especially Japanese firms, adopt the zero defects philosophy.The economic approach to quality studies the role of product quality in the market. Important areas of research are quality as a competitive weapon of the firm, the hedonic approach, and the role of quality in consumer behavior, both when consumers are perfectly informed about the market and when they are imperfectly informed. It is remarkable that these areas of research have developed rather independently from each other. Notable exceptions are the widespread adoption of Lancaster's conceptualization of the product as a bundle of characteristics, and the increasing attention in economic theory in general for the notion that consumers are imperfectly informed.The production management approach and the economic approach have in common that they both define quality in terms of objectively measurable product characteristics. The three approaches to quality hitherto mentioned share the notion that quality is an objective property inherent in the product. The perceived quality differs from the other approaches in that it regards quality neither as absolute nor as objective. Quality is a subjective concept, dependent on the perceptions, needs, and goals of the individual consumer. One of its tenets is that people are imperfectly informed about on quality. need cues to form quality perceptions. Since these cues are usually imperfect indicators of quality, quality risk will be experienced. A meta-analysis of studies dealing with the effects of quality cues on perceived quality shows that the cues price, brand name, store name, country of origin, and the physical product (i.e., the physical characteristics of the brand) influence quality perceptions. This does not imply, however, that all of these cues have a significant effect on perceived quality for all products and in all situations. Presently, not much is known about the mediating role of personal and situational characteristics on cue effects. It is important to note that few models of the quality perception process have been proposed in the literature.A development in consumer behavior research that is relevant to the perceived quality approach is the increasing use of descriptively realistic but more limited models. These models usually are empirically testable, which is not the case for the large integrated models, and also stand a better chance of being applied outside the academic setting.The confusion surrounding the concept of quality is largely due to differences in perspective taken by different authors. A consumer behavior researcher and a philosopher have something quite different in mind when they communicate about quality. It is therefore important that a researcher clearly states the view on quality taken by him/her.It cannot be said that any one approach to quality is superior to any other. All four approaches are valuable in their own right. The usefulness of a certain approach is dependent on the issues to be investigated.The four approaches to product quality have developed largely independent from each other. However, it is possible to develop relations between the approaches as was done in this work. Briefly, the results of a study employing the perceived quality approach can be used to develop the technical quality specifications employed in the production management approach. This integration of the perceived quality approach and the production management approach has been called 'quality guidance', the theoretical underpinnings of which are discussed more fully in Steenkamp and Van Trijp (1988a, 1989b). The economic approach can be used, in conjunction with the production management approach and the perceived quality approach to select the quality level that yields the highest profit or market share. The metaphysical approach draws attention to the role of esthetic product aspects in consumer evaluations. A model of the quality perception processIn the remainder of the study, we adopt the perceived quality approach (with the exception of Chapter 12). A model of the quality perception process is developed that integrates concepts developed in information processing, social and cognitive psychology, and economics. Die model is based on a definition of perceived quality developed within the broader context of value. The main elements of this definition are that perceived quality (1) involves preference, (2) involves a subject-object interaction, (3) is relativistic in that it is comparative, personal, and situational, and (4) resides in the consumption of the product.A distinction is made between quality cues and quality attributes. Quality cues can be ascertained by the senses prior to consumption. Quality attributes are benefit-generating product aspects and cannot be observed prior to consumption. It is posited that overall quality judgments are based on quality attribute perceptions. Quality cues are valued because they predict quality attributes. A consumer uses quality cues since direct information about the quality attributes is usually not available to consumers at the point of purchase.Quality cues are categorized as either intrinsic or extrinsic. Intrinsic cues are part of the physical product. Extrinsic cues are related to the product, but are physically not part of it. A distinction is further made between experience quality attributes and credence quality attributes. Experience attributes can be ascertained on the basis of the actual experience of the product, whereas credence attributes cannot be ascertained even after normal use for a long time. The most important process governing the use of quality cues in the formation of (experience and credence) quality attribute perceptions is the process of inferential belief formation. People infer quality attribute beliefs on the basis of cues that are acquired and categorized. It is hypothesized that the magnitude of the effect of a certain cue in inferential belief formation with respect to a certain attribute is (1) positively affected by the strength of the perceived relationship between the cue and the attribute in question, i.e., by the predictive value of the cue with respect to that attribute, (2) positively affected by the confidence an individual has in his/her ability to accurately perceive and categorize the cue, i.e., by the confidence value of the cue, and (3) is usually greater for an intrinsic cue than for an extrinsic cue. Cue confidence value and cue intrinsicness or extrinsicness are independent of the inferred attribute. Further, it is assumed that consumers are homogeneous with respect to their perceptions of a cue's intrinsicness or extrinsicness.Personal and situational variables are hypothesized to influence the quality perception process. The personal variables prior experience, level of education, quality-consciousness, and perceived quality risk, and the situational variables usage goal for which the product is purchased, physical surroundings, social surroundings, and time pressure appear especially relevant. Qualityconsciousness is a new concept developed in this work. It is defined as 'A mental predisposition to respond in a consistent way to quality-related aspects, which is organized through learning and influences behavior'.An empirical investigation into the proposed model of the quality perception processThe proposed model of the quality perception process is tested empirically for two meat products, saveloy and gammon. For each meat product, two usage goals were specified: for saveloy, use on sandwiches and use as snack, for gammon, use on sandwiches and use at dinner. Thus, the empirical investigation into the model of the quality perception process involves four different combinations of products and usage goals. An experimental design was developed to parameterize the relationships between quality cues, quality attributes, and overall perceived quality for each productlusage goal combination separately. Real samples of saveloy and gammon were used instead of verbal descriptions. The products were factorially composed from a set of intrinsic and extrinsic quality cues, using highly fractionated designs, and had been produced by a meat products firm.From the consumer panel of a large Dutch market research agency 600 subjects were sampled. In each of the four experimental conditions (i.e., saveloy for sandwiches or snack, gammon for sandwiches or at dinner) 120 subjects participated. The remaining 120 subjects participated in an information integration experiment concerning price-perceived quality tradeoffs (see below).The most important proposition of the model: 'Quality attributes act as intervening variables mediating the effects of quality cues on perceived quality judgments' receives strong support. For most quality cues, indirect effects exceed direct effects. In line with this result, as hypothesized, perceived quality judgments appear to be predominantly based on the quality attributes. Cues add little to the variance explained in perceived quality judgments when the effect of the quality attributes is controlled for. Cues are valued not for their own sake but because they predict quality attributes.For each product, the results are compared across usage goals to explore the effect of the usage goal for which the product is purchased on the quality perception process. Although some effect of the usage goal on the quality perception process is found, the differences are, in general, modest. It suggests that the quality perception process is not strongly dependent on the usage goal. A number of other hypotheses concerning specific aspects of the model of the quality perception process and the influence of certain consumer characteristics thereupon are tested.Experience attributes taken as a whole are more important in the formation of perceived quality judgments than credence attributes, but this need not be true for every pair of experience and credence attributes. Some credence attributes (e.g., attributes related to health issues) are so important to consumers that this overrules the rather large uncertainty inherent in this type of attributes.Consumers are found to be more able to use quality cues in inference processes with respect to experience attributes than in inference processes with respect to credence attributes. The reason is that credence attributes cannot be ascertained after consumption and that, therefore, the consumer has less opportunity to learn/modify beliefs about the inferential relationships between those attributes and quality cues.The relevance of the predictive value/confidence valuelintrinsic-extrinsic framework for explaining cue importance in the formation of perceived quality judgments was explored. The results are not unequivocal. Partial support is found for the hypothesis that the higher the predictive value of a cue, the more important that cue is in the formation of perceived quality judgments. The hypothesis stating that the importance of a cue in the formation of perceived quality judgments is positively influenced by the confidence value of that cue is rejected. It appears that the measures proposed in the literature to estimate cue predictive value and cue confidence value are of questionable validity (see also below). The hypothesis that intrinsic cues are more important than extrinsic cues in the formation of perceived quality judgments is largely supported. In some cases, however, an extrinsic cue will be more important.No support is found for the hypothesis that the intervening role of quality attributes is greater for consumers having much experience with the product in question than for less experienced consumers. An explanation might be that subjects did not differ enough in experience. This is caused by the sampling procedure adopted. The hypothesis that the intervening role of the quality attributes is greater for quality-conscious consumers than for consumers who are less quality-conscious is supported.It was hypothesized that consumers experiencing high risk in evaluating the quality of the product alternatives have used fewer cues in the quality perception process than consumers experiencing low quality risk. The hypothesis is weakly supported. This result is probably due to the unreliability of the quality risk measure used. The hypotheses stating that higher-educated consumers use more cues and exhibit more cue interactions than lower- educated consumers are supported for saveloy, but not for gammon.Implications of the proposed model of the quality perception processThe model of the quality perception process is of theoretical as well as of managerial importance. It also has implications for public policy.The model gives a deeper insight into the quality perception process. The model allows the researcher to explain cue effects on perceived quality in terms of the intervening role of the quality attributes. Previous studies were not well able to explain the cue effects found. For example, some studies reported a significant effect of packaging on overall perceived quality but failed to explain why this effect occurred. With the present approach, we are able to explain the effect of packaging through the intervening role of the quality attributes sensory perception and keepability. In this way it is possible to go beyond the simple cue effects found and to explore the causes of these effects. The distinction between quality cues and quality attributes, and the further distinction between intrinsic and extrinsic cues, and between experience and credence attributes is important because it enhances our understanding of the way quality perceptions are formed. The model also highlights the influence of variables such as qualityconsciousness and perceived quality risk on the quality perception process.The model serves as a frame of reference in which future research could be integrated. In this way the results of a particular study are more easily generalized to other products and situations. The model has considerable heuristic potential because it is based upon theories and concepts from the literature and integrates these theoretical elements. Numerous hypotheses can be developed on the basis of the model. Many hypotheses are proposed and some are tested in the present study.This distinction between quality cues and quality attributes is also relevant to the marketing manager. It is instrumental in closing the quality perception gap between the company/marketing manager's perspective and the consumer's view on quality. Further, it assists the marketing manager in developing a marketing strategy based on quality. The model can be used to investigate which quality cues predict which benefits or attributes to consumers. Advertising could concentrate on those cues on which the brand rates favorably and that predict important quality attributes. The message content should be developed in terms of the favorable cues and the attribute(s) they predict. An empirical investigation based on this model can also provide information that is relevant to product development. The results of such a study can be used to identify the quality cues that are prime candidates for modification to enhance the quality image of the brand. It is also possible to identify those quality cues that are not used by consumers, and hence can be modified to reduce costs. Further, the results need not only be used as input for product and communication strategies. The importance of the place of purchase as quality cue in the formation of quality perceptions can be quantified and the results can be used for developing a distribution strategy. It assists the marketing manager in developing a pricing strategy, especially when information is also obtained about price-perceived quality tradeoffs in consumer choices.The potential of the model is illustrated by the results obtained in our empirical study. Let us consider the possibilities for a firm that produces ovate gammon of a variegated pink and red color with little gloss. Shape is the most important quality cue for sensory perception. Ovate gammon rates much higher on sensory perception than rectangular gammon. The color of the gammon is an important quality cue for perceived fatness. Variegated pink and red gammon rates considerably higher on fatness than pink gammon. Gloss has no sigificant effect on any of the quality attributes. Given these results the firm, in view of the quality of its product, should stress the shape of its gammon. In advertisements, the ovate shape should be linked to superior sensory characteristics. Since sensory perception plays a prominent role in perceived quality judgments, such an advertising campaign will enhance the quality image of the product.The quality image can be further enhanced by product modification. Variegated pink and red gammon is perceived to be fatter than pink gammon and rates lower on sensory perception as well. Since perceived fatness has a negative effect on perceived quality, it might be advantageous to modify this cue. Ovate gammon of a pink color has a better quality image. Such a product modification should be communicated to consumers.Possibilities for cost reduction also exist. The quality cue gloss is hardly used by consumers in the quality perception process. The extent of gloss is positively related to the percentage of brine in gammon. Brine is inversely related to costs since more brine means less meat per unit of weight. The firm could save costs by using more brine in its gammon. This recommendation is supported by the results of a sensory experiment. About 50% of the subjects prefer gammon with a relatively large percentage of brine (30%) because of its hearty taste.The results of the empirical study show that the place of purchase is of limited importance in the quality perception process for gammon. The butcher's shop rates only slightly higher than the supermarket. This implies that the firm can sell its gammon through both types of outlets without serious loss of quality image. Such a broad distribution will have a positive effect on sales.As might be expected, a high price contributes to the quality image of gammon. In addition, research on the relative importance of perceived quality vis-à-vis price in consumer decision-making indicates that quality is considerably more important than price (see below). This suggests that the firm can sell its (modified) gammon at a high price (more specifically, in our study, at about Dfl. 2.70 per 100 grams).This example illustrates the potential of the proposed model of the quality perception process to provide marketing managers with concrete recommendations about which marketing actions could be taken. The model also draws attention to the influence of consumer characteristics on the quality perception process. Variables such as level of education and quality- consciousness (these were found to influence the quality perception process; see above) can be used for market segmentation. Currently, quality-consciousness is being used together with other variables to segment the market for meat.The model also has implications for public policy. Credence attribute perceptions are more uncertain than experience attribute perceptions. Further, it was found that people have relatively much difficulty in inferring credence attribute perceptions. Thus, consumers have difficulties
Distribution service : competition within and among retail formats
No full textDistribution service provision is an important instrument for the creation of availability. The book addresses in five parts the role of distribution service in individual channel member decision making in a competitive retailing environment through theoretical and empirical modeling and analysis. The empirical applications all concern the Dutch domestic cut flower market. The book starts in part I with development of a new and integrative conceptualization for distribution service elaborating on views from logistics, economics, and psychology. The second part of the book addresses the theory underlying consumer evaluation of and choice from assortments. It provides a theoretical framework of consumption goals, situational, and contextual variables, including retailer distribution service provision, as determinants of consumer evaluation of and choice from assortments. Several hypotheses are tested in an empirical study. Extended multinomial logit modeling of the experimental choice data has been used as a tool for optimization of retail assortments. Part III investigates the role of retail distribution service provision in consumer post-purchase evaluation processes and extends existing research on consumer post-purchase evaluation. Part IV focuses on the role of distribution service in vertical and horizontal strategic interactions between channel members, particularly between manufacturers and retailers, and its consequences for the emergence of different channel structures and retail formats. A game-theoretic model has been developed for retail competition with respect to price and distribution service and its consequences for the emergence of differentiated retail formats. Finally, part V discusses research implications and future research challenges.</p
Variety - seeking in product choice behavior : theory with applications in the food domain
No full textThe primary objectives of the present work are (1) to review the marketing and psychological literature on variety-seeking behavior, (2) to develop a formal model for variety-seeking in product choice behavior and (3) to investigate elements of the proposed model empirically. The present approach specifically focuses on temporal variety-seeking behavior and addresses some of the key issues that have received inadequate attention in previous work on temporal variety-seeking behavior. The main conclusions of the present work will be summarized and discussed in this chapter, and directions for future research in this area will be suggested.Limitations of previous work on variety-seeking behaviorDespite the fact that during the last few years variety-seeking behavior has received considerable research attention in the marketing literature, there are a number of issues that have not been adequately addressed. To a considerable extent this appears to be due to inadequate and inconsistent use of the terminology in this research area (McAlister and Pessemier 1982; Kahn, Kalwani and Morrison 1986). In particular the term variety-seeking behavior has been used rather informally to denote a number of different phenomena. This seriously hampers theoretical progress in this area as it makes it difficult to directly compare results from different studies and to integrate them into a comprehensive theory for varietyseeking behavior. Therefore, in the present work much attention is given to the terminology being adopted. The term variety-seeking behavior is reserved for those instances of consumer switching behavior that are motivated by the utility inherent in variation per se. The present approach thus explicitly distinguishes variety-seeking behavior from derived varied behavior , that is motivated by the more or less delayed consequences of switching behavior rather than the utility inherent in switching behavior per se.Apart from theoretical inconsistencies in the definition of variety-seeking behavior, much of the previous research has also fallen short in the measurement of this type of behavior. Despite the fact that the distinction between true variety-seeking behavior and derived varied behavior has played a prominent role in conceptual analyses of the phenomenon, both in the psychological (e.g. McReynolds 1971a; Deci 1975) and the marketing literature (McAlister and Pessemier 1982; Hoyer and Ridgway 1984; Raju 1984; Mazursky, LaBarbera and Aiello 1987), few studies on variety-seeking behavior that have incorporated it into empirical analysis. Again, the neglect of this distinction in empirical investigations of the phenomenon seriously hinders theoretical progress in the area, as many of the results attributed to variety-seeking behavior may be confounded by elements of derived varied behavior.In the marketing literature, variety-seeking behavior has been studied from two basic approaches. The implicit approach takes observed variation in purchase or consumption histories as a starting point of their attempts to derive insight into variety-seeking behavior. The explicit approach, on the other hand, takes the individual and psychological processes as a starting point of their analyses in an attempt to explain why and when variety-seeking behavior is likely to occur. Both of these approaches have specific strengths and weaknesses. One of the main strengths of the implicit approach is that these studies model variety-seeking behavior from "real-life" consumption data and thereby implicitly consider variety-seeking behavior in the broader context of consumer choice behavior. However, these studies have also specific problems associated with them. One of the most prominent weaknesses concerns the measurement of true variety-seeking behavior. Many of the models suggested within this approach do not allow for a formal distinction between true variety-seeking behavior and derived varied behavior. Therefore, the variety-seeking parameters obtained from these models primarily distinguish repeat purchasing from variation in behavior, without providing insight into the nature of the observed variation in behavior (true variety-seeking behavior versus derived varied behavior). As a result, many of these models are primarily descriptive in nature without providing a detailed insight into the nature of true variety-seeking behavior. The models developed within this approach are becoming increasingly sophisticated, progressing in a direction that in the long-run may allow for a better distinction between variety-seeking behavior and derived varied behavior.Studies within the explicit approach take the underlying psychological processes for variety-seeking behavior as their point of departure. Building on the psychological theories of exploratory behavior, most of these studies have focused on personality characteristics as an explanation for individual differences in variety-seeking behavior intensity. Only recently have these studies begun to consider choice-context related determinants of variety-seeking behavior. Both person-related and context-related determinants have been shown to influence the intensity of variety-seeking in product choice behavior. Thus, these studies are likely to provide a more detailed insight into the psychological processes that may explain why and when variety-seeking behavior will occur. However, studies within the explicit approach also have specific weaknesses associated with them. Many of these studies have used stated behavior rather than actual manifestation of variety-seeking behavior in product choice. Also, the fact than many of these studies have been conducted in controlled experimental settings makes it difficult to capture the phenomenon within the broader context of other consumer choice mechanisms that compete and interact with the desire for variety in determining actual choice behavior.Valid measures for variation in consumption behavior are a prime concern to both approaches to variety-seeking behavior. Although several measures have been proposed, the issue of their validity assessment has largely been ignored. This lack of established validity is problematic as it directly influences the validity of the results obtained, and renders a direct comparison of results from various studies very difficult. Chapter 5 critically reviews measures for variation in consumption that have been proposed in the economics and marketing literatures and provides an empirical investigation into their validity. It is shown that rather than relating to one single underlying construct (variation in consumption), the measures can more accurately be classified into two distinct categories: those that quantify variation at the product level versus those that take into account the attribute composition of the brands switched to and from.Main contributions of the present studyThe variety-seeking modelThe primary aim of the present study is to fill the gaps identified in previous work on temporal variety-seeking behavior. The variety-seeking model developed for this purpose explicitly distinguishes between a static and a dynamic component in consumer evaluation processes of product alternatives. In line with most of the previous research on the phenomenon, variety-seeking behavior is attributed to feedback mechanisms from previous consumption and purchasing, implying that it exerts its influence through the dynamic component of consumers' evaluation processes. The more static component, on the other hand, reflects the consumer's long-term preference for choice alternatives and captures both instrumental and hedonic product attributes.The variety-seeking model allows for a more detailed analysis of the underlying processes of variety- seeking behavior, which relate to changes in perceived hedonic value of choice alternatives under the influence of previous consumption or purchase behavior. Three such underlying psychological processes are identified, Boredom with the choice task is a product-specific decrease in perceived hedonic value of the previously chosen alternative. As a result, the attractiveness of the previously chosen alternative decreases relative to that of all other choice alternatives. In such a situation, another alternative, for which the consumer's unconditional or long-term preference is lower than for the previously chosen alternative, may conditionally become more attractive. Switching behavior in response to this process is a first type of variety-seeking behavior identified in the variety-seeking model (cf. Jeuland 1978). In addition to boredom as an item-specific phenomenon, perceived hedonic value may also decrease under the influence of previous consumption in an attribute-specific manner. Over time, consumers may get satiated not only with repeated consumption of the same item, but also more specifically with certain attributes repeatedly delivered by the product. This process is well documented for sensory attributes, where it is referred to as 'sensory specific satiety' (LeMagnen 1967; Rolls 1986). In such instances, the consumer's evaluative judgment of one or more hedonic attributes changes under the influences of previous consumption. This phenomenon of attribute satiation is identified as the second psychological process underlying variety-seeking behavior (cf. McAlister 1982).Whereas the previous two underlying processes emphasize the reduction in relative attractiveness of the previously chosen alternative vis-à-vis other alternatives, curiosity as an underlying motivation for variety- seeking behavior emphasizes the increase in absolute attractiveness of an alternative not chosen on the previous consumption occasion. Curiosity, the desire to close the information gap between what is known and what one wants to know (Loewenstein 1994), may increase the perceived value of one or more alternatives that have not been chosen on the previous occasion. Switching behavior instigated by the desire to solve product curiosity is identified as the third underlying process for variety-seeking in product choice behavior.The three underlying processes share an important characteristic, namely that they all relate to the stimulation level experienced in choice behavior. Each of these three psychological processes is the result of a discrepancy between the Actual Stimulation Level (ASL) experienced in life and the Stimulation Level that is Optimal (OSL) for the consumer in question. Boredom and attribute satiation reflect sub- optimal levels of stimulation experienced in life (ASL) and variety-seeking behavior in response to these processes is a means of bringing ASL into closer correspondence with OSL. Curiosity on the other hand, is characterized by a mildly supra-optimal level of ASL and variety-seeking behavior to solve curiosity is a means of reducing ASL to bring it into closer correspondence with OSL. Correspondence between OSL and ASL is associated with positive affect. This idea is central to the concept of "Value derived from variety" that summarizes the utility derived from the three types of variety-seeking behavior discussed above. As each of these processes aims at bringing ASL into closer correspondence with OSL, variety- seeking behavior is an inherently pleasurable activity.Variety-seeking behavior as a trade-offThe variety-seeking model states that in actual choice behavior, consumers base their choices on total expected value of consumption of an alternative. This total value assessment comprises a static and a dynamic component, referred to as expected value derived from product-related characteristics (reflected in the hedonic and instrumental long-term value of choice alternatives) and expected variety value (in response to boredom, attribute satiation and curiosity) respectively. In its basic form the variety-seeking model states that at choice occasion t, the consumer's decision to switch from alternative i consumed at t-1 to any other alternative j in the choice set depends on an implicit or explicit comparison of the total expected value of alternatives i and j. If the total expected value associated with consumption of alternative j is higher than that of consuming alternative i again, the consumer is expected to switch. In many instances, the consumer decision to switch or not will depend on a tradeoff between the two sources of total expected value. One of the contributions of the varietyseeking model is that it makes this trade-off explicit, thereby putting variety-seeking behavior into the broader context of consumer choice behavior rather than treating it in isolation.Variety-seeking behavior is conceived of as one of the consumer choice mechanisms that competes and interacts with other relevant choice mechanisms (summarized in value derived from product-related characteristics) in determining choice behavior. Only when the varietyvalue inherent in switching behavior is the decisive motivator for variation in behavior, is the behavior referred to as true variety-seeking behavior. When the value derived from productrelated characteristics is decisive, variation in behavior is referred to as derived or extrinsically motivated varied behavior.By considering variety-seeking behavior in the broader context of consumer choice behavior, the formulation of the variety-seeking model not only allows for a formal classification of observed variation in behavior as either variety-seeking behavior or derived varied behavior, it also provides an explicit framework to structure determinants in choice behavior that may either stimulate or reduce the occurrence of variety-seeking in actual product choice behavior. Determinants of variety-seeking behaviorIn terms of determinants of variety-seeking behavior, the present work extends previous work by considering product-related determinants and their interaction with the person-related determinants are also considered. Central to the hypothesized interaction between person- and product-related determinants is the notion that product-related determinants operate as controlling factors on consumer choice behavior. Building on cognitive evaluation theory (e.g. Deci and Ryan 1985), the variety-seeking model suggests that these product-related determinants put extrinsic pressure on consumer choice behavior, thereby pressuring choice in a certain direction and reducing the consumer's perceived freedom in choice. As a consequence, the controlling factors are hypothesized to limit the expression of the intrinsic desire for variety in consumers who otherwise would be quite likely to engage in varietyseeking behavior. The present approach suggests that consumers with a high intrinsic need for variety will be particularly sensitive to controlling factors in choice behavior, and in addition to main effects for person-related and product-related determinants, hypothesizes that the product-related determinants will interact with consumers' variety- seeking tendency.Person-related determinants of variety-seeking behaviorTwo hypotheses regarding the main effect of person-related determinants of variety-seeking behavior were empirically tested. The first hypothesis states that consumers with a higher variety-seeking tendency are more likely to engage in variety-seeking behavior than those with a lower variety-seeking tendency. A domain-specific scale, VARSEEK, was developed that specifically taps variety-seeking tendency with respect to foods. The construct validity of the measurement instrument was investigated extensively and confirmed. The nomological validity of the VARSEEK-scale was also confirmed, both in terms of more general personality scales to which it is hypothesized to relate (general OSL and OSL in the consumer context) and in terms of manifestations of variety-seeking behavior (both self-report measures and actual behavior). VARSEEK's relationship with variety-seeking behavior confirms that variety-seeking tendency is an important determinant of variety-seeking behavior. Confidence in VARSEEK's predictive validity was further enhanced in a large scale study on consumer panel data that explicitly allowed for the distinction between true variety-seeking behavior and derived varied behavior. On these "real-life" choice data, the role of VARSEEK as a determinant of variety-seeking behavior was confirmed, both relative to repeat purchases and derived brand switches.Our second hypothesis with respect to person-related determinants of variety-seeking behavior states that VARSEEK, as a measure specifically tapping consumers' variety tendency with respect to foods, should have higher predictive validity than both (a) general measures for OSL and (b) consumer specific measures for OSL, when the purpose is to predict variety-seeking in food consumption. The rationale behind this hypothesis is the "principle of measurement correspondence" (Ajzen 1987), which states that higher predictive validity will be achieved when the predictor concept (e.g. personality variables) is measured at the same level of specificity as the behavior purportedly being predicted. Consistent support was found for VARSEEK's predictive superiority vis-à-vis a general personality measure for OSL (CSI; Steenkamp and Baumgartner 1995). However, only weak support was found for VARSEEK's predictive validity vis-à-vis a measure for OSL in the consumer context (EBBT; Baumgartner and Steenkamp 1994), in particular with respect to EBBT's subscale for Exploratory Acquisition of Products (EAP). In its definition, "a consumer's tendency to seek sensory stimulation in product purchase through risky and innovative product choices and varied and changing purchase experiences" (Baumgartner and Steenkamp 1994: 6), the EAP-subscale bears high similarity with our concept of variety-seeking tendency. Empirical results reveal that the two constructs are closely related, as is evidenced by their bivariate correlation of 0.670 (p Product-related determinants of variety-seeking behaviorContext factors as a determinant of variety-seeking behavior intensity have only recently begun to attract attention in the marketing literature. Examples include purchase strategy (Simonson 1990), display format (Simonson and Winer 1992), consumers' mood during decision making (Kahn and Isen 1993) and context variation (Menon and Kahn 1994). The present study extends this stream of research by deriving and testing specific hypotheses for what we refer to as "product-related" determinants of variety-seeking behavior. These hypotheses follow from the variety-seeking model's assumption that whether or not varietyseeking behavior will occur depends of the magnitude of the variety value inherent in switching behavior relative to the magnitude of the difference in value derived from productrelated characteristics (hedonic and instrumental value) associated with the alternatives switched from and to. Product-related determinants of variety-seeking behavior may exert their influence through both of these value-components. Consequently, the variety-seeking model suggests three classes of product-related determinants:1. those that affect value derived from variety2. those that affect the difference in value derived from product-related characteristics3. those that simultaneously affect value derived from variety and difference in value derived from product-related characteristicsThe present work further extends previous work in this area in that it not only considers the main effect of these product related determinants of variety-seeking behavior, but in addition hypothesizes that these product-related determinants will interact with the person-related determinants. Consumers low in variety- seeking tendency are not likely to derive value from variety and thus are not likely to engage in variety- seeking behavior, irrespective of the product-related characteristics. Consumers high in variety-seeking tendency, on the other hand, are quite likely to express their intrinsic desire into actual variety-seeking behavior unless product-related determinants exert a controlling effect on the choice task.Several hypotheses with respect to product-related determinants of variety-seeking behavior and their interaction with variety-seeking tendency were empirically tested in a large-scale consumer panel. In addition to recording brand choice behavior over time, the data collection procedure also identified underlying motivations for brand switching, thus allowing for a distinction between true variety-seeking behavior and derived varied behavior. The data collection procedure adopted thus permitted a test of the hypothesized determinants of variety-seeking behavior relative to both repeat purchasing and derived varied behavior. Empirical support was found for the hypotheses with respect to low product-category involvement, small perceived differences among the choice alternatives, low brand loyalty and high hedonic features as product-related determ
Product quality : an investigation into the concept and how it is perceived by consumers
No full textThe objectives of the present work are (1) to review the literature on product quality from different perspectives, (2) to develop a model that describes the way consumers form judgments about product quality, and (3) to investigate the proposed model empirically. In addition, price-perceived quality tradeoffs and the relationship between price and product quality in the marketplace are investigated. The main conclusions are summarized in this chapter.The concept of product qualityThe concept of product quality has received attention in various disciplines. Four major approaches to product quality are identified: the metaphysical approach, the production management approach, the economic approach, and the perceived quality approach. To enhance our insight into the product quality concept, each of these approaches is discussed, the most attention being given to the economic and the perceived quality approaches.The metaphysical approach concentrates on the being of quality. Quality is regarded by many authors as being synonymous with innate excellence. In essence, it is an unanalyzable property that an individual can learn to recognize only through experience. People differ about quality not because quality is different but because people are different in terms of experience.The production management approach differs from the metaphysical approach in that it regards quality as a concept that is objectively measurable. In the production management approach, quality is described in technical specifications. Quality is conformity with these technical specifications. This approach concentrates on producing a product of a given predetermined quality level. This level of quality is achieved by quality of design, quality of production, continuity of service, and customer service after sale. The most important recent development in the production management approach is the emergence of the 'zero defects philosophy'. In the traditional view, very few or no defects are not economical because such perfectionism would cause the costs of preventing defects to exceed the costs of having the defects. However, it has been shown that quality improvement need not lead to higher costs, and increasingly, companies, especially Japanese firms, adopt the zero defects philosophy.The economic approach to quality studies the role of product quality in the market. Important areas of research are quality as a competitive weapon of the firm, the hedonic approach, and the role of quality in consumer behavior, both when consumers are perfectly informed about the market and when they are imperfectly informed. It is remarkable that these areas of research have developed rather independently from each other. Notable exceptions are the widespread adoption of Lancaster's conceptualization of the product as a bundle of characteristics, and the increasing attention in economic theory in general for the notion that consumers are imperfectly informed.The production management approach and the economic approach have in common that they both define quality in terms of objectively measurable product characteristics. The three approaches to quality hitherto mentioned share the notion that quality is an objective property inherent in the product. The perceived quality differs from the other approaches in that it regards quality neither as absolute nor as objective. Quality is a subjective concept, dependent on the perceptions, needs, and goals of the individual consumer. One of its tenets is that people are imperfectly informed about on quality. need cues to form quality perceptions. Since these cues are usually imperfect indicators of quality, quality risk will be experienced. A meta-analysis of studies dealing with the effects of quality cues on perceived quality shows that the cues price, brand name, store name, country of origin, and the physical product (i.e., the physical characteristics of the brand) influence quality perceptions. This does not imply, however, that all of these cues have a significant effect on perceived quality for all products and in all situations. Presently, not much is known about the mediating role of personal and situational characteristics on cue effects. It is important to note that few models of the quality perception process have been proposed in the literature.A development in consumer behavior research that is relevant to the perceived quality approach is the increasing use of descriptively realistic but more limited models. These models usually are empirically testable, which is not the case for the large integrated models, and also stand a better chance of being applied outside the academic setting.The confusion surrounding the concept of quality is largely due to differences in perspective taken by different authors. A consumer behavior researcher and a philosopher have something quite different in mind when they communicate about quality. It is therefore important that a researcher clearly states the view on quality taken by him/her.It cannot be said that any one approach to quality is superior to any other. All four approaches are valuable in their own right. The usefulness of a certain approach is dependent on the issues to be investigated.The four approaches to product quality have developed largely independent from each other. However, it is possible to develop relations between the approaches as was done in this work. Briefly, the results of a study employing the perceived quality approach can be used to develop the technical quality specifications employed in the production management approach. This integration of the perceived quality approach and the production management approach has been called 'quality guidance', the theoretical underpinnings of which are discussed more fully in Steenkamp and Van Trijp (1988a, 1989b). The economic approach can be used, in conjunction with the production management approach and the perceived quality approach to select the quality level that yields the highest profit or market share. The metaphysical approach draws attention to the role of esthetic product aspects in consumer evaluations.A model of the quality perception processIn the remainder of the study, we adopt the perceived quality approach (with the exception of Chapter 12). A model of the quality perception process is developed that integrates concepts developed in information processing, social and cognitive psychology, and economics. Die model is based on a definition of perceived quality developed within the broader context of value. The main elements of this definition are that perceived quality (1) involves preference, (2) involves a subject-object interaction, (3) is relativistic in that it is comparative, personal, and situational, and (4) resides in the consumption of the product.A distinction is made between quality cues and quality attributes. Quality cues can be ascertained by the senses prior to consumption. Quality attributes are benefit-generating product aspects and cannot be observed prior to consumption. It is posited that overall quality judgments are based on quality attribute perceptions. Quality cues are valued because they predict quality attributes. A consumer uses quality cues since direct information about the quality attributes is usually not available to consumers at the point of purchase.Quality cues are categorized as either intrinsic or extrinsic. Intrinsic cues are part of the physical product. Extrinsic cues are related to the product, but are physically not part of it. A distinction is further made between experience quality attributes and credence quality attributes. Experience attributes can be ascertained on the basis of the actual experience of the product, whereas credence attributes cannot be ascertained even after normal use for a long time. The most important process governing the use of quality cues in the formation of (experience and credence) quality attribute perceptions is the process of inferential belief formation. People infer quality attribute beliefs on the basis of cues that are acquired and categorized. It is hypothesized that the magnitude of the effect of a certain cue in inferential belief formation with respect to a certain attribute is (1) positively affected by the strength of the perceived relationship between the cue and the attribute in question, i.e., by the predictive value of the cue with respect to that attribute, (2) positively affected by the confidence an individual has in his/her ability to accurately perceive and categorize the cue, i.e., by the confidence value of the cue, and (3) is usually greater for an intrinsic cue than for an extrinsic cue. Cue confidence value and cue intrinsicness or extrinsicness are independent of the inferred attribute. Further, it is assumed that consumers are homogeneous with respect to their perceptions of a cue's intrinsicness or extrinsicness.Personal and situational variables are hypothesized to influence the quality perception process. The personal variables prior experience, level of education, quality-consciousness, and perceived quality risk, and the situational variables usage goal for which the product is purchased, physical surroundings, social surroundings, and time pressure appear especially relevant. Qualityconsciousness is a new concept developed in this work. It is defined as 'A mental predisposition to respond in a consistent way to quality-related aspects, which is organized through learning and influences behavior'.An empirical investigation into the proposed model of the quality perception processThe proposed model of the quality perception process is tested empirically for two meat products, saveloy and gammon. For each meat product, two usage goals were specified: for saveloy, use on sandwiches and use as snack, for gammon, use on sandwiches and use at dinner. Thus, the empirical investigation into the model of the quality perception process involves four different combinations of products and usage goals. An experimental design was developed to parameterize the relationships between quality cues, quality attributes, and overall perceived quality for each productlusage goal combination separately. Real samples of saveloy and gammon were used instead of verbal descriptions. The products were factorially composed from a set of intrinsic and extrinsic quality cues, using highly fractionated designs, and had been produced by a meat products firm.From the consumer panel of a large Dutch market research agency 600 subjects were sampled. In each of the four experimental conditions (i.e., saveloy for sandwiches or snack, gammon for sandwiches or at dinner) 120 subjects participated. The remaining 120 subjects participated in an information integration experiment concerning price-perceived quality tradeoffs (see below).The most important proposition of the model: 'Quality attributes act as intervening variables mediating the effects of quality cues on perceived quality judgments' receives strong support. For most quality cues, indirect effects exceed direct effects. In line with this result, as hypothesized, perceived quality judgments appear to be predominantly based on the quality attributes. Cues add little to the variance explained in perceived quality judgments when the effect of the quality attributes is controlled for. Cues are valued not for their own sake but because they predict quality attributes.For each product, the results are compared across usage goals to explore the effect of the usage goal for which the product is purchased on the quality perception process. Although some effect of the usage goal on the quality perception process is found, the differences are, in general, modest. It suggests that the quality perception process is not strongly dependent on the usage goal. A number of other hypotheses concerning specific aspects of the model of the quality perception process and the influence of certain consumer characteristics thereupon are tested.Experience attributes taken as a whole are more important in the formation of perceived quality judgments than credence attributes, but this need not be true for every pair of experience and credence attributes. Some credence attributes (e.g., attributes related to health issues) are so important to consumers that this overrules the rather large uncertainty inherent in this type of attributes.Consumers are found to be more able to use quality cues in inference processes with respect to experience attributes than in inference processes with respect to credence attributes. The reason is that credence attributes cannot be ascertained after consumption and that, therefore, the consumer has less opportunity to learn/modify beliefs about the inferential relationships between those attributes and quality cues.The relevance of the predictive value/confidence valuelintrinsic-extrinsic framework for explaining cue importance in the formation of perceived quality judgments was explored. The results are not unequivocal. Partial support is found for the hypothesis that the higher the predictive value of a cue, the more important that cue is in the formation of perceived quality judgments. The hypothesis stating that the importance of a cue in the formation of perceived quality judgments is positively influenced by the confidence value of that cue is rejected. It appears that the measures proposed in the literature to estimate cue predictive value and cue confidence value are of questionable validity (see also below). The hypothesis that intrinsic cues are more important than extrinsic cues in the formation of perceived quality judgments is largely supported. In some cases, however, an extrinsic cue will be more important.No support is found for the hypothesis that the intervening role of quality attributes is greater for consumers having much experience with the product in question than for less experienced consumers. An explanation might be that subjects did not differ enough in experience. This is caused by the sampling procedure adopted. The hypothesis that the intervening role of the quality attributes is greater for quality-conscious consumers than for consumers who are less quality-conscious is supported.It was hypothesized that consumers experiencing high risk in evaluating the quality of the product alternatives have used fewer cues in the quality perception process than consumers experiencing low quality risk. The hypothesis is weakly supported. This result is probably due to the unreliability of the quality risk measure used. The hypotheses stating that higher-educated consumers use more cues and exhibit more cue interactions than lower- educated consumers are supported for saveloy, but not for gammon.Implications of the proposed model of the quality perception processThe model of the quality perception process is of theoretical as well as of managerial importance. It also has implications for public policy.The model gives a deeper insight into the quality perception process. The model allows the researcher to explain cue effects on perceived quality in terms of the intervening role of the quality attributes. Previous studies were not well able to explain the cue effects found. For example, some studies reported a significant effect of packaging on overall perceived quality but failed to explain why this effect occurred. With the present approach, we are able to explain the effect of packaging through the intervening role of the quality attributes sensory perception and keepability. In this way it is possible to go beyond the simple cue effects found and to explore the causes of these effects. The distinction between quality cues and quality attributes, and the further distinction between intrinsic and extrinsic cues, and between experience and credence attributes is important because it enhances our understanding of the way quality perceptions are formed. The model also highlights the influence of variables such as qualityconsciousness and perceived quality risk on the quality perception process.The model serves as a frame of reference in which future research could be integrated. In this way the results of a particular study are more easily generalized to other products and situations. The model has considerable heuristic potential because it is based upon theories and concepts from the literature and integrates these theoretical elements. Numerous hypotheses can be developed on the basis of the model. Many hypotheses are proposed and some are tested in the present study.This distinction between quality cues and quality attributes is also relevant to the marketing manager. It is instrumental in closing the quality perception gap between the company/marketing manager's perspective and the consumer's view on quality. Further, it assists the marketing manager in developing a marketing strategy based on quality. The model can be used to investigate which quality cues predict which benefits or attributes to consumers. Advertising could concentrate on those cues on which the brand rates favorably and that predict important quality attributes. The message content should be developed in terms of the favorable cues and the attribute(s) they predict. An empirical investigation based on this model can also provide information that is relevant to product development. The results of such a study can be used to identify the quality cues that are prime candidates for modification to enhance the quality image of the brand. It is also possible to identify those quality cues that are not used by consumers, and hence can be modified to reduce costs. Further, the results need not only be used as input for product and communication strategies. The importance of the place of purchase as quality cue in the formation of quality perceptions can be quantified and the results can be used for developing a distribution strategy. It assists the marketing manager in developing a pricing strategy, especially when information is also obtained about price-perceived quality tradeoffs in consumer choices.The potential of the model is illustrated by the results obtained in our empirical study. Let us consider the possibilities for a firm that produces ovate gammon of a variegated pink and red color with little gloss. Shape is the most important quality cue for sensory perception. Ovate gammon rates much higher on sensory perception than rectangular gammon. The color of the gammon is an important quality cue for perceived fatness. Variegated pink and red gammon rates considerably higher on fatness than pink gammon. Gloss has no sigificant effect on any of the quality attributes. Given these results the firm, in view of the quality of its product, should stress the shape of its gammon. In advertisements, the ovate shape should be linked to superior sensory characteristics. Since sensory perception plays a prominent role in perceived quality judgments, such an advertising campaign will enhance the quality image of the product.The quality image can be further enhanced by product modification. Variegated pink and red gammon is perceived to be fatter than pink gammon and rates lower on sensory perception as well. Since perceived fatness has a negative effect on perceived quality, it might be advantageous to modify this cue. Ovate gammon of a pink color has a better quality image. Such a product modification should be communicated to consumers.Possibilities for cost reduction also exist. The quality cue gloss is hardly used by consumers in the quality perception process. The extent of gloss is positively related to the percentage of brine in gammon. Brine is inversely related to costs since more brine means less meat per unit of weight. The firm could save costs by using more brine in its gammon. This recommendation is supported by the results of a sensory experiment. About 50% of the subjects prefer gammon with a relatively large percentage of brine (30%) because of its hearty taste.The results of the empirical study show that the place of purchase is of limited importance in the quality perception process for gammon. The butcher's shop rates only slightly higher than the supermarket. This implies that the firm can sell its gammon through both types of outlets without serious loss of quality image. Such a broad distribution will have a positive effect on sales.As might be expected, a high price contributes to the quality image of gammon. In addition, research on the relative importance of perceived quality vis-à-vis price in consumer decision-making indicates that quality is considerably more important than price (see below). This suggests that the firm can sell its (modified) gammon at a high price (more specifically, in our study, at about Dfl. 2.70 per 100 grams).This example illustrates the potential of the proposed model of the quality perception process to provide marketing managers with concrete recommendations about which marketing actions could be taken. The model also draws attention to the influence of consumer characteristics on the quality perception process. Variables such as level of education and quality- consciousness (these were found to influence the quality perception process; see above) can be used for market segmentation. Currently, quality-consciousness is being used together with other variables to segment the market for meat.The model also has implications for public policy. Credence attribute perceptions are more uncertain than experience attribute perceptions. Further, it was found that people have relatively much difficulty in inferring credence attribute perceptions. Thus, consumers have difficulties in forming 'complete' quality judgments, i.e., judgments based on both short-term and long-term benefits. This situation is undesirable from a public policy point of vie
The market for hedging services : a marketing - finance approach with special reference to rights futures contracts
No full textDue to the recent and proposed reductions in price support for agricultural products, as a part of the European Union's common agricultural policy, an increase in price volatility for agricultural raw materials is perceptible. This causes an increase in price risk, both for the primary agricultural company and the affiliated agribusiness. For a risk-averse entrepreneur, the higher price volatility in the market of agricultural raw materials will increase his or her need for price risk management instruments, such as futures contracts.Not only does an increased price volatility further the use of existing futures contracts for raw materials, it also leads to the introduction of new ones. Moreover, the introduction of production and environmental rights forms an additional impulse to the development of futures contracts as well. Recent developments in computer-guided trading systems will further enhance the attractiveness and accessibility of the futures contract as a price risk management instrument.In addition, the introduction of a single European currency will give an extra impulse to trade in (commodity) futures contracts, since it obliterates one of the traditional difficulties in futures contract specification, standardization after currency and thus makes national futures markets more attractive for participants from other European countries. The developments mentioned above - increased price volatility in the spot market of agricultural raw materials, the introduction of negotiable production and environmental rights, the rise of computerized trading systems and the introduction of a single European currency - all add to the great interest in agricultural futures markets which exists among financial institutions. For several European futures markets, among which the Amsterdam Exchanges, the London International Financial Futures & Options Exchange and the Marché à Terme International de France, this has been the cause for the development of new agricultural futures contracts. However, futures contracts involve a substantial risk of failure. Of the 40 futures contracts launched around the world in 1995, only a few were successful in their first year. The development and introduction of futures contracts is an expensive and time-consuming process, especially when it concerns entirely new contracts. For this reason, insight into the market for hedging services is desirable.In this doctoral thesis we will focus on those aspects of the risk reduction services provided by futures exchanges which lie in the interdisciplinary field between marketing and finance. The services offered by futures contracts will be investigated from two approaches: the finance approach and the marketing approach .The finance approach to financial services is a normative approach: it answers the question 'which necessary conditions will have to be met to make a particular financial service successful?' Fulfilling these necessary conditions, however, does not guarantee the market success of financial services. Their success also depends on the extent to which they succeed in meeting the needs of (potential) customers at a competitive price. The latter point of view stems from the marketing tradition, which holds that customer needs occupy a central position in the development of products and services.The marketing approach conducts qualitative and quantitative research into the need for financial services and the market potential of a particular financial service. In many cases, alternative products or services will be available to satisfy the entrepreneur's needs. For this reason, the marketing approach pays a lot of attention to the entrepreneur's decision making process. In our particular case the entrepreneur's decision making process concerning price risk management instruments. Insight into the way in which an entrepreneur reaches a decision and why he or she decides the way he or she does, provide the marketer with clues on how to market the hedging service. Given the necessary conditions imposed by the finance approach, the results from the marketing approach may serve to compose the characteristics of a particular financial service.When creating a particular service, the marketing approach, in its preoccupation with customer needs, tends to pay only limited attention to issues of technical feasibility, whereas the finance approach tends to undervalue customer needs in favor of the technical aspects of a particular service. A combination of the marketing approach (with its stress on desirability from a customer perspective) and the finance approach (with its focus on the technical feasibility of a service) seems to offer a solution to this problem. Therefore, the development of new futures contracts would be served by a combined use of the marketing and the finance approach.Apart from the integration of both approaches, a further deepening of each approach would be beneficial. This thesis elaborates on a number of aspects which stem from the finance approach, e.g. hedging efficiency and liquidity. The perspective has been shifted from portfolio to exchange management. Furthermore, the optimal hedge ratio and optimal "commodity product spread" have been deducted for rights futures. The marketing approach has also been elaborated upon, in that an investigation has taken place of the how and why of the choices which entrepreneurs make concerning the covering of price risk and, more particularly, concerning futures contracts.This study consists of three parts. Part I systematically discerns the different sources of risk that emerge from transactions on the futures market. This classification has been used to develop new measures for a futures market's hedging effectiveness and liquidity, which provide both the exchange management and the hedger with insight into the risk-reducing capacity of futures contracts. Moreover, a conceptual model for over-all risk reduction has been developed, on the basis of which a measure for hedging effectiveness has been developed. Contrary to the existing measures, this one does not focus on portfolio performance, but on the hedging function of a futures contract. This measure, as opposed to others, takes into account the fact that futures contracts on the one hand realize a reduction of price risk in the spot market, and on the other hand, introduce a risk of their own, which is inherent to the futures trade. Our measure discerns basic risk and market-depth risk. Moreover, it takes into account the costs of commission. Let this measure be the distance between the hedging service offered by the futures exchange and the 'perfect hedge', an ideal situation where the hedging service eliminates risk in the spot market without introducing an additional risk of its own, then this distance can be subdivided into a systematic and a non-systematic part.The systematic part, caused by the specifications of the futures contract and the structure of the futures exchange, can be managed by the futures exchange, whereas the non-systematic part is beyond the exchange's influence. The measure for hedging effectiveness provides the hedger with a means to compare the competitiveness of different futures contracts. It incorporates not only the characteristics of the futures contract, but also the spot market risks. The measure's futures market risk component indicates the hedging quality of the futures contract. The spot market price risk component emphasizes the need for price risk reduction. The empirical results, based on data from the Amsterdam Exchanges (Agricultural Futures Markets), show the measure's usefulness for an exchange management.As an important determinant of the hedging effectiveness of futures contracts, liquidity, or, more accurately put, market depth has been studied more closely. Contrary to earlier investigations into market depth, we show that the price path is non-linear due to market order imbalances. The market depth measure developed consists of two dimensions, which can be related logically to the futures market's toolbox. Our findings indicate that market depth is preferably to be valued along the two dimensions that constitute its basis.Not just motives of a financial-economic nature play a part in the entrepreneur's decision to trade on the futures market. Therefore, it is of the utmost importance to study the decision making behavior of entrepreneurs concerning price risk management instruments. To this study, Part II of this book has been devoted. In this part, a decision making model has been developed which tells us how entrepreneurs decide and why they decide the way they do, concerning price risk management instruments. In this context, risk attitude is an important concept. Methodological research was conducted into the way in which risk attitude is measured within economics (the "expected utility framework") and within marketing-psychometrics (risk attitude scales). During large-scale experiments, the risk attitude measures developed were tested for construct validity by checking for convergent validity and nomological validity. The different risk attitude measures correlate significantly, indicating convergent validity. Moreover, the value function (obtained using the rating technique) does not correlate with the risk attitude measures, indicating discriminant validity. The psychometric risk attitude scale performs well on the self-report measures, contrary to the measure obtained from the lottery technique and the intrinsic risk attitude obtained through relating the utility function (itself obtained using the lottery technique) and the value function. However, the risk attitude measure and the intrinsic risk attitude greatly outperform the psychometric scale where the relation with actual behavior is concerned.After having gained more insight into the risk attitude construct, the decision making behavior of entrepreneurs was modeled. Important elements affecting his or her decision making behavior were: the extent to which the entrepreneur feels that the use of futures will enhance his or her entrepreneurial freedom (as compared to other price risk management instruments), his or her understanding of the functioning of futures contracts (compared to his or her understanding of other relevant price risk management instruments) and the performance of futures contracts in the field of price risk reduction (compared to that of other relevant price risk management instruments).The decision making process of entrepreneurs appears to have a two-phase structure. During the first phase, the entrepreneur decides whether futures contracts constitute a relevant alternative and should thus be in his or her toolbox. In this phase the aforementioned elements entrepreneurship, understanding and performance are of great importance.During the second phase of the decision making process, when futures contracts are already a part of the entrepreneurs toolbox, the difference between the entrepreneur's psychological reference price and the actual futures market price becomes an important factor in the decision for or against entering the futures market. The components entrepreneurship and performance remain of importance during this phase of the decision process, whereas understanding no longer plays a part in the second phase.Due to the structure of futures markets, the process of disseminating information about innovative futures contracts, henceforth the information dissemination process , is of great influence on the success of a futures contract. This has been investigated for an information dissemination process in which the brokers from the exchange spread the information among the potential users of a futures contract.Part III of this study is devoted to an investigation into the feasibility of futures contracts on rights. First, an overview and a taxonomy are presented of the different environmental and production rights in agriculture and outside of it. The prices of these rights reflect the production rent. We show that the specific characteristics of rights increase hedging effectiveness. From this point of view, rights futures seem an interesting instrument for eliminating spot market price risk. We further show that the use of rights futures may be highly effective in situations of "spreading", where production has been restricted by rights.By integrating the marketing and finance approach, the insight into the market for hedging services is increased. On the one hand a marketing-finance approach broadens our knowledge of existing markets, on the other hand it improves the development process of hedging services. By using both approaches, potential problems, as well as opportunities, can be discovered in an early stage. Thus, our investigation into rights futures yields that, from a finance perspective, these new futures contracts have highly convenient features and are therefore efficient instruments to cover price risk. The marketing perspective, however, reveals that potential users perceive futures markets as very complex and therefore do not perceive futures contracts as alternative price risk management instruments.The marketing-finance approach is an integral approach which contains all aspects relevant to draw conclusions about the viability of a futures market. The marketing-finance approach yields insight into the policy measures which a futures market might take to create and secure a viable futures market. In this book much attention has been paid to subjects pertaining to one of both approaches which demanded further deepening in order to reach a fruitful integration of both approaches. Further elaboration of this marketing-finance approach is of great importance to an efficient and effective futures market policy.</p
Agricultural marketing in a country in transition : case of sweetpotato products in Sichuan, P.R. China
No full textChina's achievements in its reform from a centrally planned economy toward a marketing economy during the last two decades are substantial. Although it still has a long way to go to reach its targeted aims, half of China's economy is now 'marketised, or is responsive to market forces (Lawrence, 1998). The influence of the transition on agricultural marketing is significant, particularly when the reforms were initiated by farmers and started in rural areas. The sweetpotato sector, one of the earlier crops to move away from centrally controlled planning, is particularly suitable for a transitional marketing study. Sichuan is chosen as the study area since it is the largest sweetpotato producing and processing province in China. This study investigates the role of agricultural marketing in a transitional economy and how agricultural marketing functions in a transitional economy in terms of market structure, market institutions and market orientation.After an introduction about the research objectives in the first chapter, relevant aspects of the theory of Institutional Economics are applied to agricultural marketing in China's transitional economy in chapter 2. Using a framework of New Institutional Economics as discussed by Williamson (1998), we focus on getting the institutional environment right and getting the governance structure right. The institutional environment is concerned with the rules of the game while the governance structure concerns the actual play of the game. Institutional environment changes in China's agricultural marketing started in 1978 with the advent of new agricultural institutions: the Household Responsibility System (HRS), which replaced the central planning authority. It was then followed by both deregulation of agricultural production and price liberalisation. These transformations abolished the rigid central planning system and redefined the rules of the marketing game. As the institutional environment changed, the corresponding government structure also had to be adjusted, particularly for the traditional marketing institutions, such as the Grain Bureau and Supply and Marketing Co-operatives. The new institutional environment not only required the transformation of the traditional government controlled marketing institutions, but also called for new marketing institutions, such as open markets, wholesale markets and so on.Chapter 3 is devoted to the sweetpotato economy in Sichuan Province from a historical perspective: how sweetpotato production, processing and marketing have changed during the 20 thcentury. At the beginning of this century, sweetpotatoes were mainly used as a staple food for fresh consumption. Processing and marketing of sweetpotato was constrained by the presence of a subsistence economy in that period. After the communist took over power in 1949, sweetpotato production in Sichuan Province was greatly increased in order to meet the rising demand for food. As a Category 1 crop, sweetpotato production, processing and marketing were strictly controlled by the government. Private sector involvement in sweetpotato processing and marketing was forbidden. At the end of the 1970s, beginning with the introduction of the Household Responsibility System and the deregulation of agricultural production, sweetpotato, a less important crop compared with rice and wheat, enjoyed an earlier start towards the market economy. The main benefits farmers gained from the economic reform were due to the liberalisation policy towards sweetpotato processing and marketing. The government policy of sweetpotato processing has changed from 'forbidden' (before the reform), to 'allowed' (beginning of the reform) and finally to 'encouraged' (currently).In order to investigate the evolution of sweetpotato marketing in a transitional economy, we have analysed consumer behaviour, and the structure and functioning of marketing channels. These are crucial factors in the change of marketing from a planned towards a market economy. Surveys were executed, including two structured questionnaires, one for processing households and one for individual consumers in two counties and one city of the province Sichuan. Unstructured interviews were conducted with actors in the sweetpotato industry, including government officers, crop breeders, processing experts, and market actors (wholesalers, retailers and collectors). The questionnaire design, sampling and data collection procedures are discussed in Chapter 4.Sweetpotato noodle consumption is investigated on the basis of a consumer behaviour model. It is assumed that consumer choice is influenced by three sets of characteristics: individual characteristics, product-related characteristics and environmental characteristics. A series of variables are defined for each of the three sets and a number of hypotheses based on the specified variables are formulated. Is noodle consumption significantly influenced by attitude and by relevant demographic variables? The test result shows a significant relationship between attitude and noodle consumption.We also have studied the impact of a number perceptual variables on noodle consumption. Fifteen perceptual variables are reduced by factor analysis to four factors labelled 'convenience', 'market situation', 'sensory quality' and 'image'. Regression of consumers' noodle consumption on these four factors and on relevant demographic variables shows that 'convenience' and 'market situation' are significant in influencing consumers' noodle consumption. Noodle consumption was also regressed on six important perceptual variables selected on the basis of the importance of their factor loadings. It appears that 'packaging' is the most significant variable in influencing consumers' noodle consumption. Other significant variables include market distance, noodle elasticity and noodle nutritional value. However, no significant relationships are found for demographic variables, such as age, income, region and household size.We also investigated whether variety seeking is important for noodle consumption. Several results show that variety seeking does not significantly influence noodle consumption. However, additional tests show that urban consumers have a higher variety-seeking tendency than rural consumers, and that younger, more highly educated and higher income consumers also have a higher variety-seeking tendency than lower ones.Consumers' preference with respect to sweetpotato noodles is analysed using Conjoint analysis. Four attributes (noodle colour, noodle shape, noodle packaging and price) are used to profile noodle products. The results show that 'price' is the most important attribute while 'noodle colour' is the least important. There is a preference difference for noodle packaging between rural consumers and urban consumers. Urban consumers value 'packaging' more than rural consumers do.So it appears that marketers in the sweetpotato economy in transition will have to pay serious and long-term attention to efficiency of production and marketing in order to keep prices competitive. In addition, they can serve consumers better by improving packaging, nutritional value (no white colour), access to markets and sensory properties. Clearly, the marketing system should adapt in order to serve consumers' needs. Consequently the structure and performance of the marketing system is analysed in Chapter 7 and 8.In Chapter 7, the structure of the sweetpotato marketing system is discussed. This includes all market actors (producers/processors, collectors, wholesalers and retailers) in the sweetpotato sector and their external environment, such as government, R&D institutions, competitors, consumers and others. The rising number of sweetpotato processors, newly emerged noodle collectors, wholesalers and retailers characterise the transition from a centrally planned to a market economy. These new marketing actors actively carry out different marketing functions, such as buying and selling, transportation, storage and processing. Less attention is paid to the facilitating functions, particularly standardisation, grading and marketing information.Another feature of the sweetpotato market in transition is the change of co-ordination mechanisms in the market channel. Co-ordination by government policy is replaced by the conventional marketing channel, whose functions are mainly co-ordinated by market price. In some cases, further co-ordination by administrative procedures can be observed. Sometimes, they are strengthened by family links between actors in the market channels. The external environment of the sweetpotato industry is also described, particularly the relevant R&D institutions and government organisations. Finally, the competitive position of sweetpotato processing in Sichuan is analysed vis à vis Shandong's sweetpotato industry, using Porter's 'diamond' model as a framework. It is concluded that the Sichuan sweetpotato industry is competitive in the domestic Chinese market, but that Shandong has a transport advantage in exporting to Japan and South Korea.The marketing performance of the sweetpotato industry is analysed on effectiveness and efficiency. The assessment of service outputs of the marketing channels suggests that some aspects of distribution outlets for sweetpotato noodles are less effective than those for other types of noodles. Consumers have to travel a longer distance to purchase sweetpotato noodles, which are offered almost exclusively at open markets. Also, the product is not always available.Since wholesalers play very important roles in the market channel, their market performances are is investigated. Three wholesalers deemed typical for small, medium and large-scale wholesalers were analysed with respect to profitability and marketing efficiency. The results show that wholesalers' profit margins vary considerably. Large-scale wholesalers seem to enjoy economies of scale and to make better use of storage capacity than the small ones, which contributes to a higher profit margin. So it might be expected that in the further transition toward a market economy, wholesalers will become bigger.An investigation is also made of which factors enhance integration of noodle processing households into the markets. In this analysis, two groups were first determined by cluster analysis, Cluster 1 being more market integrated and Cluster 2 less market integrated. Compared with Cluster 2, processors in Cluster 1 purchase more starch for noodle processing purposes. They also tend to have long term relationships with traders, do more business with wholesalers and search for more information for price setting. Results from logistic regression show that more educated processors and processors from regions with well-organised markets (e.g. Anyue) have a higher probability of being more integrated in the markets.Changes of marketing channels in a transitional economy contribute directly to marketing effectiveness and efficiency. They also contribute indirectly to the rural economy as a whole. This topic is analysed from the point of view of employment generation, income generation and sweetpotato utilisation. The impact on employment is two sided. On the one hand a market economy enhanced by a more effective and efficient marketing system brings new problems, such as unemployment and reallocation of millions of laid-off rural labourers. On the other hand, new opportunities and demand for more labour are created. Generating new employment is one of the contributions of the expansion of sweetpotato-processing activities.The results of our study are integrated in Chapter 9 using the concept of market orientation (Kohli and Jaworski, 1990). The three dimensions of market orientation: market intelligence generation, dissemination and responsiveness, also seem key dimensions to be considered in changing marketing policies and marketing structures in the transition from a planned to a market economy. Firstly, it appears that consumers' preference and perception are not well understood by marketers (e.g. noodle packaging and noodle colour), and consumers' wants and needs are not always served well because of too great market distance and product unavailability. A market intelligence system at the industry level will have to assist market orientation, since most actors (individual farmers) are still too small to bear the costs of a market intelligence system at the company level. Also, effective dissemination of market intelligence will have to be handled at the industry level in addition to information flows generated by individual actors, such as wholesalers.The responsiveness of the sweetpotato market system to the generated intelligence has to be handled carefully in order to establish effective channels. Effective response to market intelligence will remain difficult for individual households yet because of the small company size, e.g. product development is too expensive. Co-ordination of activities, like by co-operatives, as well as market-oriented government research on product development are still important for a smooth transition of agricultural marketing systems entering into an open market economy.</p
Decision making under risk. A study of models and measurement procedures with special reference to the farmers' marketing behavior
No full textThe objectives of the study were: a) to review, discuss and test a number of theories on individual decision making under risk; much attention is specifically given to the definition and empirical testing of the concept of relative risk attitude, b) to investigate in a large scale survey the validity, reliability and practical feasibility of measurement procedures for measuring subjective probability distributions, risk attitude, and strength of preference, and c) to develop and test a model which describes the farmer's decision making process with respect to the choice of a marketing strategy for ware potatoes
Market impact on cassava's development potential in the Atlantic Coast region of Colombia
No full textThe impact of markets on agricultural development was analyzed by means of a case study on cassava in the Atlantic Coast region of Colombia. In the development process, the demand for agricultural products changes considerably. Traditional food products, such as roots and tubers, face a decreasing demand in the course of urbanization and income growth. Feed grains and animal products face a growing demand. The agricultural sector is often not able to adapt to these demand changes and imports result. In case the structure of agriculture is dualistic, small farmers might be harmed and large farmers benefitted by these changes. This leads to unbalanced agricultural development. Market improvement strategies directed to small farm products might correct part of the unbalanced development.Cassava in the Atlantic Coast region is a small farm crop which faces severe market(ing) problems in the development process. Fresh cassava consumption, the traditional utilization, decreases because it has a high marketing margin, because it has to be bought on the day of consumption and because other products become more widely available.Two market improvement strategies for cassava are evaluated: improvement of the traditional fresh cassava market by means of improved storage; opening the market for dried cassava as an animal feed in order to replace sorghum. To study the impact of these strategies the role of cassava in the Atlantic Coast region is analyzed within a systems framework. The interactions that are found between production, marketing and consumption are strong. Cassava production will be stimulated by the price stabilization that the establishment of a cassava drying industry will cause. The improvement of cassava's storage characteristics will decrease marketing costs, increase consumer convenience and, therefore, stimulate cassava consumption.Because of the interactions encountered, the impact of cassava market improvements cannot be measured in the market alone. An analysis of the cassava system that integrates production, marketing and consumption is needed. The integrated analysis is made by means of a multi-market, multi-farm type simulation model. The model forecasts the impact of market improvement strategies given different assumptions on the development of the Atlantic Coast economy and on the cassava systems behavior. Cassava drying for animal feed is a strategy, which explicitly benefits cassava producers. Additionally Colombia could save on sorghum imports. Improvement of the fresh market would most benefit urban consumers. Considering the rural-urban migration problems of Latin America, cassava drying appears the most attractive strategy.Both market improvement strategies have very favorable rates of return. Market improvement projects might serve additionally as a diving board for further rural development efforts. Increased attention to the role of markets could contribute to fulfilling the goals of agricultural development and to balancing overall economic growth
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