The effect of location based advertising types and location based advertising message content on purchase behavior and the moderating role of consumer loyalty and consumers’ consumption habits

The effect of location based advertising types and location based advertising message content on purchase behavior and the moderating role of consumer loyalty and consumers’ consumption habits.

Stephanie A.M. Immerzeel

Universiteit van Amsterdam

Stephanie Immerzeel (10578668) Master’s Thesis

Graduate School of Communication

Research Master’s program Communication Science supervisor: dr. S.F. Bernritter

Abstract

Mobile loyalty applications enable retailers to target consumers with advertisements tailored to consumers’ locations and interests. However, research –taken into account factors relating to the message, consumer and location to maximize the effectiveness of location based mobile advertisements– is scarce. Two quasi-experimental field studies were conducted, using real data of an international fashion retailer, in which these three core constructs were integrated. The results of the first study (N = 4,732) indicated that consumers spent more money on purchases after exposure to price (vs. inspirational) promotions. This effect is dependent on the degree of consumer loyalty, meaning that less loyal consumers spent more money on purchases after exposure to price promotions, and more loyal consumers spent more money on purchases after exposure to inspirational promotions. The second study (N = 3,277) revealed that consumers spent more money after exposure to advertisements in the store, compared to exposure to advertisements outside of the store. By taking into account

consumers’ consumption habits, the results indicated that –in situations when the advertised product was non-habitual for the consumer– consumers spent more money after exposure to advertisements in the store. However, when the advertised product was habitual for the consumer, there was no significant difference in the amount of money the consumer spent after exposure to an advertisement in the store compared to exposure to an advertisement outside of the store.

Introduction

Nowadays, more and more retailers have an own mobile application which includes, besides an e-commerce platform, a loyalty program (Lim, Widdows, & Park, 2006). The aim for retailers to implement those loyalty programs is trying to promote repurchases, encourage costumer relationships and to collect useful data, such as consumers’ demographics and purchase preferences (Ziliani & Bellini, 2004, Smith, Sparks, Hart, & Tzokas, 2003). The integration of loyalty programs in mobile applications enables retailers to determine consumers’ location, whether they are in store or in close proximity of stores (Chen, Zhu, Jiang, & Soh, 2015).

Hence, with these tools retailers can target consumers with advertisements tailored to consumers’ individual needs, interests, and their location. In scientific research and marketing practices this form of advertising has been appointed as location based advertising (LBA), which is defined as high consumer focused messages offered at the right time and in the right place (Kuo, Chen, & Liang, 2009). This highlights that LBA is based on three core constructs: the message, the location and the consumer. Although scientific research considering LBA have taken into account message design (Ketelaar et al., 2015, Unni & Harmon, 2007, Katz & Byrne, 2013) and location (Luo, Andrews, Fang, & Phang, 2013, Hühn, 2016), the

consumers’ needs and interests are understudied.

Therefore, in the current study we are interested in how consumers’ needs and

interests contribute to the workings and limits of LBA. We will do this by choosing consumer related factors relating to loyalty programs and will use a framework in which we also take into account factors relating to the message and the location. We are interested in how the core constructs of LBA together influence purchase behavior and will do this by building upon the construal level theory (CLT) of Liberman and Trope (2008), that stated that the more psychologically close (vs. distant) an object is perceived, the more concretely (vs. abstract) it

is construed in one’s mind, which in turn could influence purchase behaviour (Katz & Byrne, 2013, Fujita, Henderson, Eng, Trope, & Liberman, 2006).

Consequently, based on these considerations, we identified predictors for the current study. Relating to literature and practice, we identified inspirational promotions and price promotions as relevant message content for LBA. Price promotions contain concrete

temporary price (monetary or non-monetary) reductions (Blattberg, Briesch, & Fox, 1995,Yi & Yoo, 2011). On the other hand, there are inspirational promotions that are not linked to such concrete incentives but are used for brand building, or to raise brand awareness and brand salience (Barwise & Strong, 2002, Okazaki, 2005). For example, a message which informs consumers about a recently launched product could be seen as an inspirational promotion. It is important to examine whether consumers respond differently to price promotions and inspirational promotions on the account of the fact that for marketers price promotions are more expensive and possibly more difficult to integrate (Unni & Harmon, 2007).

With regards to location, we identified LBA types which are gradually becoming more common in marketing practices and differ in location where consumers receive LBA (Chen, et al., 2015). Simply two types can be distinguished. The first type of LBA can be received in the store and the other type outside of the store. Important to emphasize is that we define in store advertisements when they are sent by using beacon sensors, which means that

consumers are present in the store or looking at the stores’ window (Berman, 2016). Out store advertisements are sent when consumers have entered a geofenced area, which means that consumers receive this LBA type when being a couple of meters distant from stores. Although both LBA types are tailored to consumers’ location they differ in the proximity of products during the moment of exposure which is important to investigate taken into account CLT (Liberman & Trope, 2008).

Lastly, due to the fact that retailers put a lot of effort in cultivating consumer loyalty to compete with other brands, and do this most importantly by implementing a loyalty program, we define this construct to represent the consumer factor of the framework. Consumer loyalty means: “a deeply held commitment to repurchase or patronize a preferred product or service consistently in the future, thereby causing repetitive, same brand or same set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior” (Oliver, 1999, p.34). Taken this definition into account, we can establish that the effect of LBA message content is dependent on the consumers’ degree of loyalty.

Furthermore, with loyalty programs retailers are aware of consumers’ consumption habits (Rossi, McCulluch, & Allenby, 2015). In particular, we show that the effect of where an LBA is received (in store vs. out store) is dependent on whether the advertised product is habitually or non-habitually bought by the consumer.

Considering this, the aim of the current study is to investigate the effect of LBA message content and LBA types on purchase behavior and to examine what the moderating roles of consumer loyalty and consumers’ consumption habits are. Subsequently, the present research has three contributions. First, LBA research and theory will be extended by showing conditions under which LBA affects purchase behavior, taken into account tailoring LBA to the needs and interests of the consumer. This is important because the more personal an advertisement feels to the consumer, the easier it is for marketers to connect with them. Mobile advertising enables the marketers to reach and interact with consumers in such an individualized and personalized way (Kenny & Marshall, 2000). By using this customer-centric type of marketing, marketers are able to meet the individual needs of the consumer and as a result of this the traditional product centered marketing would be replaced or less frequently used (Sheth, Sisodia, & Sharma, 2000, Watson, Pitt, Berthon, & Zikhan, 2002).

Second, this paper is the first which integrates all core constructs of LBA in one framework to investigate the workings and limits of LBA. This enables us to investigate so many aspects of both consumer and purchase behavior taken into account their location, their purchase history, their loyalty and the effect of personalized marketing. When combined, all of these constructs could lead to the advanced targeted marketing while using modern techniques.

Third, this study is one of the first studies conducting a field study using real world data of an international fashion retailer, thereby solving problems around small sample sizes and ecological validity while at the same time retrieving actual insights of LBA impact on users.

The remainder of this paper is organized as follows. First, the fundament of the conceptual framework will be provided. Next, two studies will be described to test made predictions. In the first study the effect of LBA message content on purchase behavior is demonstrated, taking into account the consumers’ degree of loyalty. In the second study the effect of LBA types on purchase behavior will be demonstrated and will reveal the

moderating role of consumers’ consumption habits.

Theoretical background

Location based advertising

Several studies have investigated LBA. A separation of those studies could be made with regards to different theories the studies are built upon. Firstly, there are scientific papers that rest on the CLT (Liberman & Trope, 2008). The CLT stated that the more psychologically close (vs. distant) an object is perceived, the more concretely (vs. abstract) it is construed in one’s mind (Fujita, Henderson, Eng, Trope, & Liberman, 2006, Rim, Uleman, & Trope, 2009). Perceptions of psychological distance of objects are formed by spatial distance,

temporal distance, social distance and hypothetical distance. To clarify this, an example for an object perceived as psychologically close could be: eating cereals in front of you (spatial close), within a minute (temporal close), with your son (socially close), and because it is close by reality also hypothetically close. Besides psychological distance the theory separates two forms of construal levels: low construal levels and high construal levels (Liberman & Trope, 2008). The concrete features of an object are defined in a state of low level construals, whereas abstract features of an object being present in one’s mind is related to high level construals. More specifically, low level construals tend to highlight “how” to accomplish a goal and high level construals put focus on “why” actions should be taken (Kim, Rao, & Lee, 2008). When psychological distance and construal levels are congruent (close and low; far and high), cognitive processing is more fluent than when they are incongruent (close and high; far and low) (Katz & Byrne, 2013). Human brains anticipate congruency between both habituality and automatism (Liberman & Trope, 2008, Liberman, Trope, Mccrea, & Sherman, 2007). How the CLT relates to LBA research is as follows. Empirical studies grounded in the CLT show that LBA can affect purchase behaviour (Liberman, Trope, & Wakslak, 2007, Luo et al., 2013, Hühn, 2016). Their explanation for this is that because advertisements tailored to consumers’ location are received spatial close to the object, people might form more concrete construals and through these concrete thoughts they might be higher involved to consider the offer in the advertisement (Luo et al., 2013). This could increase perceived relevance which in turn could affect the consumers’ purchase intentions (Luo, Andrews, Fang, & Phang, 2013, Hühn, 2016).

Second, there is LBA research built upon the Relevance Accessibility Model (RAM) of Baker and Lutz (2000). According to the RAM (Baker & Lutz, 2000) advertisements tailored to consumers’ location can increase purchases, because in such situations perceived

relevant for the consumer and being received at a time and place where the product is accessible (Riet et al., 2016, Heinonen & Strandvik, 2007).

A third theoretical explanation why LBA could influence purchase behaviour is its effect on cognitive processing. Tailoring a message to a consumers’ location could lead to change in evaluations and behaviour by decreasing perceived advertising intrusiveness, as ongoing cognitive processes will be less interrupted (Hühn et al., 2012, Li, Edwards, & Lee, 2002, Lee, Kim, & Sundar, 2015). Moreover, the congruency-accessibility approach (Perry, College, Jenzowsky, & King, 1997) takes context and cognitive processing into account. This approach argues that LBA is better understandable than advertisements not tailored to

consumers’ location, because familiar knowledge structures are activated, which in turn leads to more positive reactions and thus can affect purchase behaviour (Perry et al., 1997).

Furthermore, with regards to the effects on cognitive processing there is the processing-fluency model (Winkielman & Cacioppo, 2001). This model suggests that, because of more easily processing, persons will form a positive attitude towards stimuli when presented in a congruent context (Lee & Labroo, 2004). Thus attitudes towards LBA are more positive than towards advertisements that are not tailored to consumers’ location, and these positive attitudes towards the advertisement might influence purchase intentions, which in turn can effect consumers’ buying behaviour (Ajzen & Fishbein, 1980, Hühn, 2016).

Lastly, it is demonstrated that the advantages of LBA, compared to traditional point-of-sales advertising, lie in situations in which the advertisement is not tailored to consumers’ location. This is caused by the effect of the attention to LBA being higher than for point-of-sales advertisements (Ketelaar et al., 2015). This could be explained with the Zeigarnik effect (Liu, 2008) which argues that people tend to remember interrupted tasks better than tasks that are not interrupted. Therefore, because of to the possibilities to add sounds and vibrations to mobile advertisements, LBA could interrupt tasks more than point-of-sales advertising. This

leads to the fact that LBA is being remembered, which in turn might influence consumers’ purchase decisions (Ketelaar et al., 2015).

The effects of LBA message content and consumer loyalty

The content of LBA messages largely differs. Some scholars already investigate the effect of LBA message content on purchase behaviour and their focus was, for example, on open vs. close messages content and text vs. multimedia messages (Ketelaar et al., 2016, Xu, Oh, & Teo, 2009). In the current research we focus on price promotions and inspirational promotions. Price promotions are associated to clear incentives, as they contain temporary price (monetary or non-monetary) reductions (Blattberg, Briesch, & Fox, 1995,Yi & Yoo, 2011). The difference between price promotions and inspirational promotions is that

inspirational promotions are not linked to such concrete incentives (Barwise & Strong, 2002, Okazaki, 2005). This because inspirational promotions are used by retailers to inform

consumers about the brand, for example about a recently launched product, and thus the content does provide more abstract content and does not provide a concrete reason why the product should be purchased shortly after being exposed to such message content. Similarly, empirical studies investigating inspirational message content showed short term effects on cognitive dimensions, such as brand awareness and brand knowledge, and find less support for its effect on consumers’ purchase behaviour (Rahmani, 2012, Mela, Gupta, & Lehmann, 1997, Keller, 2007). Furthermore, there is a considerable amount of marketing studies that examined price reductions on consumer behaviour (Kotler, 2000, Fang, Gu, Luo, & Xu, 2015 , Gupta, 1988). These scholars showed that lowering the price of products is a stimulant for consumers to purchase the product shortly after being exposed to persuasive message communicating such price reductions (Kotler, 2000, Kamakura & Russel, 1989). Based on

these considerations, we thus expect that price promotions are stronger in influencing consumers’ purchase behaviour than inspirational promotions.

In our study, price promotions and inspirational promotions are tailored to consumers’ locations and thus consumers are being in close proximity of the advertised products during the moment of exposure. Building upon the CLT (Liberman & Trope, 2008), people process messages of location based advertisements in a detailed oriented and concrete manner. This means that the concrete incentives being part of price promotions match the way in which location based advertisements are processed. Empirical studies have shown that in situations of low level construals, messages containing concrete appeals will be more fluently processed (Kim et al., 2008, Fujita, Eyal, Chaiken, Trope, & Liberman, 2008, Katz & Byrne, 2013). Therefore, we argue that price promotions will be more fluently processed than inspirational promotions, as the low level of abstraction in people’s brains when matches the concrete cues of price promotions. Taken into account the processing-fluency model (Winkielman &

Cacioppo, 2001) we argue that more easily processing will form a more positive attitude towards the advertised product, which finally can positively affect consumers’ purchase decisions (Ajzen & Fishbein, 1980, Hühn, 2016). This leads to the following hypothesis:

H1a: Consumers will spend more money on purchases after exposure to price promotions compared to exposure to inspirational promotions.

Moreover, we suggest that the degree of consumer loyalty could change the effect of LBA message content on the likelihood of purchasing the advertised product or brand. These expectations are based on empirical studies that show that, as loyal consumers are more satisfied with a brand’s products and therefore are insensitive to price changes, less loyal consumers will purchase more often based on price reductions than more loyal consumers do (Brown, 1974, Webster, 1965, Massy & Frank, 1965, Kanghyunm & Thanh, 2011).

According to these scholars, this means that less loyal consumers are sensitive to such price reductions when they make a decision to purchase a certain product. For the current study this means that this price sensitivity of less loyal consumers could imply that price promotions will be more effective to influence their purchase behavior compared to inspirational promotions.

On the other hand we expect that inspirational promotions could be more effective to increase the likelihood of purchasing products of the advertised brand for the more loyal consumer. Consumers appear to be positively responsive to advertisements when they are familiar with the brand (Ciacioppo & Petty, 1985). This is an effect of exposure, attention, comprehension and retention of persuasive messages being selective processes, operating in favor of relevant behavior (Cox & Cox, 1988). This is the case for the more loyal consumer, because the brand is frequently purchased by the consumer before being exposed to the LBA message content. Moreover, cognitive consistency theories suggest that individuals may further bias these processes to support continued use of preferred brands (Calder, 1981, Albarracín & Mcnatt, 2005). Furthermore, cognitive elaboration on persuasive messages is likely to be initially richer when consumers have extensive existing experiences (Cacioppo, & Petty, 1985). In line with the low level abstraction of the consumers’ brains when being exposed to LBA, this means that because of the richer level of cognitive elaboration on persuasive messages for the more loyal consumers they could also process a message with more abstract cues and thus for more loyal consumers inspirational promotions will be more effective to influence consumers’ purchase behavior than price promotions would.

Another theoretical perspective on why inspirational promotions could be more effective to influence purchase behavior of more loyal consumers, compared to price

promotions, is that loyalty is associated with the willingness to spend more money on trying new products of services of the brand to which consumers are committed (Roselius, 1971,

Bauer, 1960). Scholars show that this willingness is a result of positive affection of the consumer towards the brand (Mellens, Dekimpe, & Steenkamp, 1996). Based on this we argue that, as loyal consumers are more willing to spend more money on trying new products of committed brands, inspirational promotions containing information about new products will be more effective to influence their purchase behavior, compared to price promotions that not contain such information. This leads to the following expectation:

H1b: The effect of inspirational (vs. price) promotions is dependent on consumers’ degree of loyalty: Less loyal consumers will spend more money on purchases after exposure to price promotions and more loyal consumers will spend more money on purchases after exposure to inspirational promotions.

The effects of LBA types and consumers’ consumption habits

Advertised products are accessible at different levels of proximity when receiving different LBA types. In the current study we focus on receiving LBA in the store and outside of the store. The efficacy of an advertisement is facilitated when the consumer is at the same location as the target product at the moment of exposure to the advertisement, because the advertisement is consistent with consumers’ present goals (Van ’t Riet et al., 2016). An advertisement tailored to the consumers’ location could be perceived as intrusive, when incongruent activities taking place due to cognitive mismatch (Banerjee & Dholakia, 2008, Hühn, 2016). A receivers’ location does not disclose the consumers’ true intentions (Hühn, 2016). For advertisements received in close proximity of the store, location is a weaker proxy than for advertisements received while being in the store. The moment of exposure to an advertisement in the store is in a more certain degree consistent with consumers’ present goals or tasks because consumers are in store or looking at the stores’ window. However, less surely

is the consistency between consumers’ goals or tasks and the moment of exposure to an advertisement outside of the store. Thus because in store advertisements are congruent with consumers’ context and goals, the perception of intrusiveness might be lower than for out store advertisements (Baker & Lutz, 2000). More cognitive capacity is required to process a message in situations when there is incongruence between consumers’ present goals and the message. This explains why out store advertisements have more possibility to be perceived as intrusive than in store advertisements.

Furthermore, in line with the CLT (Liberman & Trope, 2008) in store advertisements are perceived at closer psychological distance than out store advertisements due to closer spatial distance, temporal distance, but also close hypothetical distance. More specifically, the advertised products are present at the moment of exposure (temporal), in front of the receiver –because the receiver is located in the store– (spatial), which makes it more likely that the receiver will buy the product (hypothetical). Because of this close psychological distance people form more concrete construals and through these concrete thoughts they are higher involved to consider the offer in the advertisement (Luo et al., 2013). Similarly, empirical studies building upon CLT (Liberman & Trope, 2008) have demonstrated that people evaluate products and purchase decisions differently as their levels of construals vary (Wang, Wu, & Teo, 2014). With regards to location based advertisements it is shown that these

advertisements are more effective to influence purchase behaviour, compared to

advertisements that are not tailored to the consumers’ location (Luo, Andrews, Fang, & Phang, 2013, Hühn, 2016). These scholars have argued that higher involvement due to low level construals could increase perceived relevance, which in turn leads to higher purchase intentions. Therefore, we expect that consumers exposed to advertisements in store form lower concrete construals than consumers exposed to advertisements outside of the store. This

in turn might increase perceived relevance of the advertisement, which finally can influence purchase behaviour. This knowledge leads to the following expectation:

H2a: Consumers will spend more money on purchases after exposure to

advertisements in the store compared to exposure to advertisements outside of the store.

Furthermore, we suggest that the effect of LBA types on purchase behavior is dependent taken into account consumers’ consumption habits. In the current study we consider whether the advertised product is habitual for the consumer or non-habitual (Verwijmeren, Karremans, Stroebe, & Wigboldus, 2011). For this expectation we rely on research that demonstrates that consumers base their choices on different consideration sets when they are in the store or outside of the store (Nedungadi, 1990). This stream of research defined a consideration set as a set of brands or products brought to mind during a particular choice situation (Nedungadi, 1990, Alba & Amitava, 1985).

A store is a stimulus based environment where all relevant information is available for consumers (Lynch & Scrull, 1982). Consumers consider their choices based on such present external stimuli, which typifies a stimulus based consideration set (Ratneshwar & Shocker, 1991, Shocker, Akiva, Boccara, & Nedungadi, 1991). Thus, for the current study this means that consumers present in the store consider choices for purchases based on external stimuli present in their environment.

On the other hand, consumers could consider certain products or brands based on memory, as they are outside of such stimulus based environments (Nedungadi, 1990, Shocker, Akiva, Boccara, & Nedungadi, 1991). Empirical studies show that in such situations

retrieval plays an important role (Park, Whan, & Smith, 1989, Rottenstreich, Sood, & Brenner, 2007). With regards to the current study this means that consumers outside of the store will consider choices for purchases based on memory.

With regards to consumers’ consumption habits, habitual products are experienced by the consumer and thus encoded in the consumers’ memory, including a certain evaluation (Braun, 1999, Hoch, 2002). With regards to the distinction of consideration sets, the possibility to retrieve brands from memory to consider choices for purchases is important when consumers are being outside of the store (Nedungadi, 1990, Shocker, Akiva, Boccara, & Nedungadi, 1991). Therefore we expect that advertisements containing habitual products for consumers can influence purchases when the consumer is being exposed to such

advertisements outside of the store.

Furthermore, as non-habitual products are not encoded in memory, because the consumer has no direct experience with the product (Braun, 1999, Hoch, 2002),

advertisements containing non-habitual products are not expected to be possible to influence purchase behavior when consumers are being exposed to advertisements outside of the store.

Marketing research suggests that choices for non-habitual products are based upon external sources (Shiv & Fedorkhin, 2002, Rathneshwar & Chaiken, 1991). This matches the situation in which consumers base their purchases on stimulus based consideration sets when being present in such stimulus based environments (Ratneshwar & Shocker, 1991, Shocker, Akiva, Boccara, & Nedungadi, 1991). A considerable amount of research demonstrates that when consumers are in the store, they base their choices on external stimuli (Rook & Fisher, 1995, Hawkins, et al. 2001, Kotler, et al. 2009). Thus because receiving advertisements containing non-habitual products are not in the consumers’ memory, exposure to such

advertisements need an environment in which consumers could base their choices on stimulus based consideration sets. According to the literature this happens to be the case when

consumers are in the store (Nedungadi, 1990, Shocker, Akiva, Boccara, & Nedungadi, 1991). Therefore we argue that advertisements containing non-habitual products are more effective to influence purchase behavior when consumers will be exposed to such advertisements in the store. This leads to the following expectation:

H2b: The effect of out store (vs in store) advertisements is dependent on whether the advertised product is non-habitual (vs. habitual): When the advertised product is habitual, consumers will spend more money on purchases after exposure to

advertisements outside of the store, and when the advertised product is non-habitual consumers will spend more money on purchases after exposure to advertisements in the store.

Study 1: LBA message content and consumer loyalty

Method

Data

For the studies we have conducted we have used a mobile application from an international fashion retailer. The mobile application (available for Android and iOS devices) includes the retailers’ loyalty program, their e-commerce platform and a push message function. The data we have used to conduct the analyses consists of time and date information when users received LBA, and of online and in store purchase data.

Design and participants

In this study, a single factor between-subjects quasi experiment with two levels (inspirational vs. price promotion) was conducted, with purchase behaviour as the dependent variable and consumer loyalty as the moderator. Due to that we interfere with retailers’ daily business, there was no option for randomization and therefore a quasi experiment was conducted.

The recipients were app users, who possess the retailers’ loyalty program card, and who entered geofenced areas of stores located in the Netherlands. In total, 4,732 unique loyalty program card holders were part of the experiment. Of those 3,414 card holders received the inspirational promotion and 1,318 card holders received the price promotion. With regards to privacy restrictions we were not able to relate the data with background characteristics of the recipients.

Procedure

Both LBA message content types were sent using geofencing, which means that a virtually delimitation is defined of a geographic area through Global Positioning System and Wi-Fi-based Positioning System (Parise, Guinan, & Kafka, 2016). For the studies we have conducted, a geofenced area around every store was set with a radius of 100 meters. Users received the message when entering the geofenced area1 and were staying there for longer than five minutes in order to prevent that users received the message when only passing the stores. Irrespectively passing multiple stores, the message is send to users only once.

Furthermore, users’ permission was required for sharing location information on their device and only for iOS devices “opt in” (informed consent) was required to receive push

notifications.

Manipulation

LBA message content. The LBA message content types were on-screen push notifications and consisted of text only. The message content was as follows:

 Inspirational promotion:

“Finally! (Name of new collection)2

now available in all stores. See you soon!”

 Price promotion:

“Only today: buy (name of new collection)2

and get double (name of loyalty program) points2. See you soon!”

Measurements

Moderator.

Consumer loyalty. In line with Chaudhuri and Holbrook (2001), the behavioural degree of consumer loyalty was measured by computing the frequency of purchases3 within a certain period. We have chosen for the total frequency of purchases within a year, backwards from the day the LBA was received. Since this variable had a positively skewed distribution (skewness = 4.41, SE = .04; kurtosis = 31.45, SE = .08), for the analyses this variable was log-transformed4.

Dependent variable.

Purchase behaviour. The main dependent variable was the total amount paid to products in store and online from the time recipients received the LBA message content type until seven days after reception. Negative amounts and amounts below € 2,50 were defined as missings, because prices of the retailers’ products are not below this price.

2

Due to privacy restrictions, this information is kept anonymous.

3 _{Furthermore, the total sum of money of purchases is analysed as a moderator and shows similar conditional} effects.

4

The natural logarithm of consumer loyalty contains only recipients who have a certain degree of loyalty which means that 0 scores were ignored. Similar results were found when including 0 scores into the analyses.

Covariate.

Day of week. Because the LBA message content types might have been received at different week days, we include the day on which the LBA was sent as a covariate. The reason for this was to avoid bias of the days, because it seems plausible that advertisements received at weekend days are more effective than advertisements received on week days.

Results

To test the hypotheses 1a and 1b, a linear regression analysis was conducted. The regression model with purchase behaviour as dependent variable, LBA message content (inspirational promotion = -.5; price promotion = .5), consumer loyalty, the LBA message content X consumer loyalty interaction as predictors, and day of week as covariate is significant, F(4, 4110) = 21.69, p < .001. The regression model can therefore be used to predict purchase behaviour: 2 per cent of the variation in purchase behaviour can be predicted on the basis of LBA message content, consumer loyalty, the LBA message content X consumer loyalty interaction and day of week (R2 = .02). The results show no significant main effect of the day when the LBA type was received, b* = .02, t(4, 4110) = .78, p = .435. This means that the effect of other predictors is not confounded by the day when the LBA type was received. LBA message content, b* = .12, t(4, 4110) = 2.95, p = .003, 95% CI [1.85, 9.14], and consumer loyalty, b* = .17, t(4, 4110) = 6.33, p < .001, 95% CI [3.90, 6.04], have a significant

association with purchase behaviour. In line with hypothesis 1a, the analysis revealed that, on average, consumers spend 5.50 (SE = 1.86) more after exposure to a price promotions than after exposure to inspirational promotions. Also, when consumers’ frequency of purchases increases with 1, on average, consumers spend 3.33 (SE = .53) more after exposure to LBA message content. This means that consumers who purchase more frequent within a year, are

spending more money after exposure to LBA message content, than consumers who purchase less frequent within a year. Furthermore, there was an interaction effect of LBA message content and consumer loyalty as predicted by hypothesis 1b, b* = -.13, t(4, 4110) = -3.13, p = .002, 95% CI [-5.34, -1.22], In other words, the main effect of LBA message content was moderated by consumer loyalty.

Moderation analysis. To gain more insight into this interaction effect, a 5,000

bootstrap resamples using Hayes’ (2013) PROCESS macro for SPSS was performed. The interaction was probed by testing the conditional effects of LBA message content at three levels of consumer loyalty, one standard deviation below the mean, at the mean, and one standard deviation above the mean. As shown in Table 1, LBA message content was

significantly related to purchase behaviour when consumer loyalty was one standard deviation below the mean (p = .03), but not when consumer loyalty was at the mean (p = .77) or one standard deviation above the mean (p = .09). The floodlight test of Johnson-Neyman showed that the relationship between LBA message content and purchase behaviour was significant when consumers’ scores on consumer loyalty were less than 1.07 and higher than 2.42 (Figure 1). In other words, the effect of LBA message content on purchase behaviour is dependent on consumers’ degree of loyalty. Thus, less loyal consumers spent more money on purchases after exposure to price promotions, and more loyal consumers spent more money on purchases after exposure to inspirational promotions.

Table 1

Conditional Effects of LBA message content and consumer loyalty (log transformed) Consumer loyalty

(log transformed) b p

95% CI

One SD below mean 2.44 .03 .29, 4.59

At the mean .25 .77 -1.45, 1.95

One SD above mean -1.94 .09 -4.17, .29

Note: LBA message content: -.5 = inspirational promotion and .5 = price promotion.

Figure 3. Consumers purchase behaviour as a function of LBA message content and

consumer loyalty (log transformed). Significant when consumers’ scores on consumer loyalty were less than 1.07 and higher than 2.42.

Discussion

Hypotheses 1a and 1b are supported by the results of Study 1. Consumers spend more money on purchases after exposure to the price promotion than after exposure to the inspirational promotion. Moreover, this study demonstrated the interaction effect of LBA message content and consumer loyalty. Less loyal consumers spent more money on purchases after exposure to

0 2 4 6 8 10 12 0,75 1 1,25 1,5 1,75 2 2,25 2,5 2,75 3 Pu rchas e b eh av ior (in Eu ro' s)

Consumer loyalty (natural logarithm)

Inspirational promotion Price promotion Series3 Series4

the price promotion and more loyal consumers spent more money after exposure to the

inspirational promotion. In the following study the effect of LBA types on purchase behaviour is investigated, including the interaction effect of LBA types and consumers’ consumption habits.

Study 2: LBA types and consumers’ consumption habits

Method Data

To conduct this second experiment we have used the mobile application that was also used in Study 1. The data we have used to conduct the analyses consists of time and date information when users received LBA, and of online and in store purchase data.

Design and participants

A 2 (LBA types: out store vs. in store advertisement) by 2 (consumers’ consumption habits: non-habitual vs. habitual product) between-subjects quasi experiment was conducted to examine the role of consumers’ consumption habits on the effect of LBA types on purchase behaviour. Identical to the argument in Study 1, randomization was not possible because we interfered with retailers’ daily business, and therefore a quasi experiment was conducted.

The recipients were app users, who possess the retailers’ loyalty program card, and who entered geofenced or beacon sensor areas of stores located in the Netherlands. In total, 3,277 unique loyalty program card holders were part of the experiment. Of those 3,249 card holders received the advertisement out store and 28 card holders received the advertisement in store. As in Study 1, we were not able to relate the data with background characteristics of the recipients considering privacy restrictions.

With regards to the unequal sizes of conditions, is important to emphasize that it seems plausible that this is reality, because consumers only receive LBA in store when Bluetooth has been activated on their device. Practical insights vary in how many smartphone users use Bluetooth5.

Procedure

Due to that both LBA types contain the same message content, they were sent during different weeks. This was done in order to ensure that receivers only received one of both LBA types. In the first week, the out store advertisements by using geofencing were sent from Monday until Thursday, during stores’ opening times. A week later, the in store advertisements were sent by using beacon sensors from Monday until Friday, also during stores’ opening times.

All retailers’ stores located in the Netherlands have beacon sensors installed. Those beacon sensors are “devices equipped with Bluetooth technology to transmit data with other mobile devices and beacon sensors within a close proximity” (Parise, Guinan, & Kafka, 2016, p. 417). Advertisements were sent in store when such beacon sensors were triggered, which is only possible when Bluetooth is activated on devices. Users received advertisements in store when they entered and remained within the beacon sensors’ range for longer than 2 minutes. Irrespectively visiting multiple stores, the advertisement is being sent to users only once. Furthermore, for iOS devices “opt in” (informed consent) was required to receive push notifications. The procedure for advertisements received outside of the store, by using geofencing, was identical to that in Study 1.

5

https://www.bloomberg.com/news/articles/2015-11-24/apple-s-failed-retail-revolution-beacons-still-won-t-be-big-on-black-friday

Manipulation

LBA types. The LBA types were on-screen push notifications and consisted of text only. The message content was as follows:

 Out store advertisement: “Baby it’s cold outside! Get 30% discount for 3 (name of items)5 and 20% discount for 2. See you soon!

 In store advertisement: “Baby it’s cold outside! Get 30% discount for 3 (name of items)6 and 20% discount for 2.

The reason why we have chosen for a price promotion in this experiment, is that the results of Study 1 have shown that price promotions are more effective to influence purchase behaviour compared to inspirational promotions.

Measurements

Moderator.

Consumers’ consumption habits. In line with Verwijmeren, Karremans, Stroebe, and

Wigboldus (2011) consumers’ consumption habits were measured as whether the advertised product was habitual or non-habitual for the receiver. When a product of the advertised product category was bought by the consumer, than the product was habitual for the

consumer. When a product of the advertised product category was never before bought by the consumer, than the product was non-habitual. Purchase data (online and in store) were used to find out whether the receivers bought the advertised product within a year backwards from the moment of reception. The advertised product was habitual for 33.3% of all consumers who received the advertisement outside of the store and for 46.4% of all consumers who received the advertisement in store.

Dependent variable.

Purchase behaviour. The main dependent variable was the total amount paid to products in store and online after exposure at the day of receiving LBA types. Identical to the argument in Study 1, negative amounts and amounts below € 2,50 were defined as missings, because prices of the retailers’ products are not below this price.

Covariate.

Day of week. Comparable with study 1, because the LBA types might have been received at different week days, the covariate in this study was the day on which the LBA was sent.

Results

A two-factor analysis of variance was carried out to assess the influence of exposure to LBA types, in conjunction with the effect of consumers’ consumption habits and controlling for the day on which the advertisement was received. To deal with the heteroscedasticity, due to the unequal sample sizes in this current study, we have used 5,000 bootstrap replicates (Efron & Tibshirani, 1993). With regards to the results no significant main effect was found for the day on which the LBA types were received, F(4, 2853) = .52, p = .471. A significant main effect of LBA types on purchase behaviour has been found, F(4, 2853) = 23.33, p < .001, η2 = .008. Thus supporting hypothesis 2a, which means that consumers spent more money on purchases after exposure to an advertisement in the store (M = 12.18, SD = 33.87), than exposure to an advertisement outside of the store (M = 1.99, SD = 10.47). Furthermore, we found a

significant main effect of consumers’ consumption habits on purchase behaviour, F(4, 2853) = 26.36, p < .001, η2 = .009. Resulting in that, after exposure to an advertisement containing a habitual product the consumer spent more money on purchases (M = 2.32, SD = 11.05), than when the advertised product is non-habitual for the consumer (M = 1.94, SD = 10.83). Also, there was a significant, interaction effect between LBA types and consumers’ consumption

habits, F(4, 2853) = 28.95, p < .001, η2 = .01. In other words, the main effect of LBA types on purchase behaviour was moderated by consumers’ consumption habits, which supports

hypothesis 2b.

Moderation analysis. To gain more insight into this interaction effect, a 5,000

bootstrap resamples using Hayes’ (2013) PROCESS macro for SPSS was performed. The interaction was probed by testing the conditional effects of LBA types at the two levels of consumers’ consumption habits. As shown in Table 2, LBA types were significantly related to purchase behaviour when the advertised product was non-habitual (p < .001), but not when the advertised product was habitual (p = .69). In other words, when the advertised product was non-habitual for the consumer, the consumer spent more money on purchases after exposure to advertisements. However, when the advertised product was habitual for the consumer, there was no significant difference in the amount of money the consumer spent after exposure to an advertisement in the store compared to exposure to an advertisement outside of the store.

Table 2

Conditional effects of LBA types and consumers’ consumption habits

Consumers’ consumption habits b p 95% CI

Non habitual 22.24 .000 16.09 4.59

Habitual -1.20 .69 -7.13 4.73

Figure 4. Consumers purchase behaviour as a function of LBA types and consumers’ consumption habits

Discussion

Hypothesis 2a is supported by the second study. Consumers spent more money on purchases after exposure to an advertisement in store than exposure to an advertisement outside of the store. With regards to hypothesis 2b, this is partly demonstrated by Study 2. The interaction effect revealed that when the advertised product was non-habitual for the consumer, the consumer spent more money on purchases after exposure to an advertisement in the store, than to exposure to an advertisement outside of outside of the store. However, the expectation was that in situations in which the advertised product was habitual for the consumer, the consumer would spend more money on purchases after exposure to an advertisement outside of the store than after exposure in the store. The results have proven this expectation to be false. 0 5 10 15 20 25 30

Non-habitual product Habitual product

Pu rch ase b eh av ior (in Eu ro 's )

Consumers' consumption habits

Out store LBA In store LBA

General discussion

The aim of the current study was to examine the effect of location based advertising message content and location based advertising types on purchase behavior, taken into account the moderating role of consumer loyalty and advertisement relevance. With regards to consumers exposed to advertisements outside of the store, price promotions are more effective to

influence purchase behavior, than inspirational promotions. Furthermore, consumer loyalty moderates this effect. This means that less loyal consumers spend more money after exposure to price promotions, and the more loyal consumer spends more money on purchases after exposure to inspirational promotions. Subsequently, we demonstrated that consumers spent more money on purchases after exposure to advertisements in the store, compared to exposure to advertisements outside of the store. Furthermore, we expected that this effect would be dependent on whether the advertised product is habitual or non-habitual for the consumer. The results reveal that when the advertised product is non-habitual for the consumer, consumers spent more money on purchases after exposure to an advertisement in the store. However, the expectation was that in situations in which the advertised product was habitual for the consumer, the consumer would spend more money on purchases after exposure to an advertisement outside of the store than after exposure in the store. However, we can draw the conclusion only for the scenario that we mentioned.

This is the first study that disentangled how consumers’ interests contribute to the working and limits of LBA. We found support to the idea that consumers’ interests can contribute to the effectiveness of LBA, by using a framework in which we also took into account factors relating to the message and the location. We demonstrated that the consumers’ degree of loyalty is important to take into consideration by in investigation of LBA. The results show that exposure to price promotions is more effective to influence purchase behaviour in situations when the receiver is less loyal. This is in line with traditional

marketing research that argues that less loyal consumers are sensitive to price changes by making a decision to purchase a certain brand (Brown, 1974, Webster, 1965, Massy & Frank, 1965, Kanghyunm & Thanh, 2011). In line with cognitive consistency theories (Calder, 1981, Cacioppo, & Petty, 1985) it is argued that cognitive elaboration of persuasiveness is richer when the receiver is loyal, due to existing experiences with the brand. Moreover, this finding relies on another theoretical approach that implies that loyalty is associated with the

willingness to spend more money on trying new products of services of the brand to which consumers are committed, because of positive affection of the consumer towards the brand (Roselius, 1971, Bauer, 1960, Mellens, Dekimpe, & Steenkamp, 1996). Inspirational promotions contain information about new products, this explains why for loyal consumers inspirational promotions are more effective to increase purchase behaviour than price promotions.

Another important finding of the current study is that the effect of LBA types is dependent on consumers’ consumption habits. We were able to establish that advertisements containing non-habitual products for the consumer are more effective when consumers are exposed to it in the store, compared to exposure outside of the store. Through this information we can conclude that consumers who are being located in stimulus based environments –at the time of exposure to the advertisement– are more triggered to purchase products when normally externally driven (Nedungadi, 1990). Thus, when consumers base their choices on a stimulus based consideration set, they need a certain stimulus that can influence their

purchase behaviour (Nedungadi, 1990, Alba & Amitava, 1985). Thus, in stimulus based environments price promotions relating to non-habitual products that are not encoded in memory, are an external cue for consumers which might influence their purchase behaviour. Price promotions containing habitual products that are encoded in memory are less effective in such environments to influence purchase behaviour.

Furthermore, with this study we were able to demonstrate that exposure to

advertisements in the store is more effective to influence consumers’ purchase behavior than exposure outside of the store. These findings are in line with the CLT (Liberman & Trope, 2008), which explains that closer psychological distance leads to lower construal levels which in effect could increase involvement and higher purchase intentions (Luo, Andrews, Fang, & Phang, 2013, Hühn, 2016). Furthermore, these insights are in line with the RAM (Baker & Lutz, 2000) which complies that perceived usefulness of a persuasive message could be increased when the product in the message is both accessible and relevant for the receiver. Advertisements in the store are, besides congruent with the location, also more congruent with receivers’ present goals.

Lastly, this study reveals important results with regards to message content designs. In line with research of Katz and Byrne (2013) this study shows that price promotions in LBA have a stronger effect on purchase behaviour than inspirational promotions. With regards to CLT (Liberman & Trope, 2008) it can be concluded that LBA persuasiveness increases when LBA message design content matches the detailed-oriented and concrete manner in which people process LBA. This leads to fluent processing of the persuasive message and thus might decrease perceptions of intrusiveness which in effect influences purchase behaviour.

Strengths, limitations and directions for further research

The present study has some limitations. Firstly, the quasi-experimental design of our study lacks internal validity, however this design does result in higher external validity. Given that the experimental design was applied to data from existing mobile application of an

international fashion retailer we were limited in obtaining focused information which could be randomized across the population. This pre-designed application data could be a limitation, however, since our field experiment used real world data the lack of ecological validity is

solved resulting in a good reflection how LBA works in real marketing practices. Further research can replicate the current study by randomly assigning the treatments to all participants to increase the internal validity.

Furthermore, the disability to randomly assign consumers to all conditions resulted in unequal sample sizes in the second study. By analyzing the data we have taken this into account and therefore it is important that our results are a reflection of reality. The reason for the difference in sample size is consumers only receiving advertisements in the store when they have activated Bluetooth on their devices. With this real life data we have shown that not many consumers have capitalized it. A possible solution for this is running the campaign for a longer period of time. Since the international fashion retailer has short duration campaigns by nature, we were not able to implement this solution. This is a suggestion to include in further studies.

Interestingly, we found no evidence for the assumption that, in situations when consumers are outside of the store, advertisements containing habitual (vs. non-habitual) products, are more effective to influence purchase behavior. We based this expectation on the idea that choices outside of the store are being considered based on memory based consideration sets (Nedungadi, 1990, Alba & Amitava, 1985). In such situations brand or product retrieval play important roles, and habitual products are encoded in memory thus can be retrieved more easily from memory (Lynch & Scrull, 1982). Therefore it seems that when consumers consider choices based on memory, and are located in close proximity of stores, consumers’ consumption habits do not matter. This is the first study in LBA research that investigate the interaction of LBA message types and consumers’ consumption habits, and therefore for further research it is suggested to replicate this to control whether the same results will be found.

This is the first study taken into account consumers’ interests by the investigation of LBA. Because of privacy concerns we were not able to take into account demographics of

consumers. For further research this could be interesting to investigate as, for example, younger consumers use mobile phones more often than older consumers which contribute to the working and limits of LBA. Moreover, it would be interesting for further research to investigate how these findings relate to other businesses, such as hospitality- or travel-business.

Managerial implications

This paper demonstrates that consumers spent more money after exposure to

advertisements in the store, compared to exposure advertisements outside of the store. For this reason retailers should consider the deployment of this LBA type, even though the number of consumers exposed to advertisements in the store is lower compared to the number of

consumers exposed to advertisements outside the store. Another interesting finding is that when the advertised product is non-habitual for the consumer, the consumer spent more money on purchases after exposure to advertisements in the store, compared to exposure to advertisements outside the store. For retailers this means that in store LBA is useful to target consumers with new products or recently launched products.

Furthermore, consumers spent more money on purchases after exposure to price promotions outside of the store, than after exposure to inspirational promotions. Additionally, we demonstrated that less loyal consumers spent more money on purchases after exposure to price promotions outside of the store. Furthermore, loyal consumers spent more money on purchases after exposure to inspirational promotions outside of the store. Therefore, it is advisable to lure loyal consumers to the store by targeting them with inspirational promotions, and for the less loyal consumer it is better to use price promotions.

In conclusion, mobile loyalty applications enables retailers to target their consumers with personalized and location based offers. This research shows that it is important to use such tools and unique data as it turns out to be a huge opportunity to increase effectiveness of marketing campaigns.

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