A research into loyalty
A communication strategy focused on consumers: Establish long-term contact and enhance loyalty.
The author is responsible for the content of the thesis. The copyright of this thesis rests with the author.
University of Groningen
Faculty of Management and Organization
Department of Marketing
Martine van Hoff
Title page
Title: Company X; a research into loyalty
Subject: A communication strategy focused on consumers: establish long-term
contact and enhance loyalty.
Place and date: Utrecht, December 2006
Author: Martine van Hoff
Student number: 1272047
Institute: University of Groningen
Faculty: Management and Organization
Department: Marketing
First supervisor: Drs. J. Berger
Second supervisor: Mr. Drs. H.A. Ritsema By order of:
Company X
Supervisor: Marketing Communication Manager
The author is responsible for the content of the thesis. The copyright of this thesis rests with the author.
Preface
“Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.”
W. Edwards Deming
This thesis is about a communication strategy focused on consumers in order to establish long-term contact and to enhance loyalty. It was very interesting to jump into loyalty, communication strategies and the company itself. It is due to my enthusiasm about these topics that I could successfully write this thesis.
Another period has come to its end. This thesis is the final result of seven months of internship at Company X Consumer Electronics Benelux. During my internship at Company X, I have been able to develop and practice my skills in a business environment. I was finally able to put my theoretical knowledge into practice. In this period I have learned a lot personally as well as professionally.
Besides all that, and probably even more important, this thesis is the final work of my Business Administration studies at the Faculty of Management and Organization at the University of Groningen. All good things come to an end and after five and a half years, this is the end of my fantastic student life in Groningen.
At this point there are some people I would like to thank, these people made it possible for me to write this thesis and therefore to complete my study.
I would like to thank the people at Company X Consumer Electronics Benelux for giving me the opportunity to work on this research project within their organization. Special thanks go out to A, B and C for their helpful insights and guidance during my research process.
I am also thankful to my supervisors of the faculty of Management and Organization, Drs. J. Berger and Mr. Drs. H.A. Ritsema for their useful comments and constructive feedback, which made it possible to successfully finalize this thesis.
I would also like to thank Willemien Vereijken for her time to correct my English. She made this thesis as faultless as possible in English and pleasant to read for everybody. Last but certainly not least, warm and special thanks go out to my parents and boyfriend Bram, for their help in every respect, encouragements and for their unconditional love and support. Without you it would not have been possible to make this thesis into what it is now, thank you!
Finally, although this period has come to its end, it is also a start of a new beginning to which I am looking forward!
I hope you will enjoy reading this thesis. Martine van Hoff
Executive Summary
Nowadays Company X is one of the world’s biggest consumer electronics companies. Recently there have been a lot of changes in consumer behavior and the consumer electronics landscape which all have their impact on Company X. Despite these changes Company X wants to strengthen its position in the market and to establish future growth. In order to deal with those changes Company X has to understand its (high profitable) consumers and has to facilitate direct contact in such a way that Company X can attract, retain and expand the right consumers to strengthen its position in the market. A good possibility to achieve that is by creating loyalty. The problem is that at the moment Company X has only minimal direct contact with its consumers. Therefore the objective of this thesis is:
“To give recommendations to Company X CE Benelux about how to establish long-term contact with the consumer and how to enhance loyalty, in order to gain more insight in the consumer, to strengthen its position in the market and to accomplish future growth.”
A consumer contact strategy is a coherent stream of marketing communications. These communications are adjusted as well as possible to fit each consumer or prospect. Therefore the focus in this thesis is on the design of a marketing communication strategy to achieve the objectives.
Designing a communication strategy in order to establish long-term contact and to enhance loyalty requires several steps. These steps have to provide the information that is needed to design the marketing communication strategy. With the help of desk and field research, literature, company information, interviews and a survey the information that was needed is obtained. General information that has to be taken into account is discussed first and after specific information for the interpretation of the marketing communication strategy will be acquired.
First of all insight in loyalty is obtained. Loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchases, despite situational influences and marketing efforts having the potential to cause switching behavior. For Company X products loyalty depends on product (quality), image and some kind of X-factor. Communication and incentives in this case can be seen as one part of that X-factor and as a possibility to create loyalty. For the consumer electronics market it is important to focus on the attitudinal dimension of loyalty. For Company X emphasis on service is required and the loyalty strategy should be focused on direct communication. One way to make loyalty measurable in the consumer electronics market is by asking consumers how likely they are to recommend the brand.
Next, market developments that are of influence on the design of a marketing communication strategy are discussed. At the moment a positive economic situation for Company X exists and a focus on brand experience is increasingly more important, as for the design of a value-adding marketing communication strategy. ICT is fully used and accepted by most consumers and thereby limitations to privacy are more and more accepted. This implies that the internet can play an active role in the strategy. An online platform that offers the possibility to communicate with consumers already exists, namely Club Company X.
Subsequently, characteristics of Company X that are of influence are discussed. First of all, designed around you, easy to experience and advanced, are three pillars that lead to the overarching sentiment, simplicity. Thereby the slogan “” is constantly tried to deliver. Hereby the brand experience is very important, but also the communication about the quality of products. At the moment no specific loyalty actions or programs exist.
In the next phase of the thesis specific interpretations for the strategy are obtained. The first parts of a communication strategy are market segmentation, market choice and target audience. The consumer characteristics are explored in order to segment the market, to define the target segments and the target audience. The segments are designed by using behavioral segmentation. The segments are: Tech innovators, Hip innovators, Selectives, Classics, Wannabes, Basics and Uninvolved. The target segments selected for Company X are chosen on the bases of emphasis on home and personal entertainment and the way that they represent goals and objectives for Company X. The target segments are: Tech innovators, Hip innovators, Selectives and Classics. The target audience is first time buyers and repeat-buyers of the four target segments.
The second part of a communication strategy is delivering additional value. Through interviewing several drivers are discovered that, when activated by communications and incentives, are able to create loyalty for Company X and thus to deliver additional value. Those drivers are risk aversion, involvement, commitment, reputation and brand image, approachability and responsiveness, peers recommendation and social groups. Next possible communications and incentives for Company X are discovered that are able to activate those drivers. Those communications and incentives will be implemented in the communication strategy. The most important extra services for current Company X consumers are online product support, announcement and downloading of soft/firmware updates, tips and tricks for product use, price guarantee and independent reviews of products. Other important services are independent reviews, personal exclusive service system and participation in events, enhanced warranty, exclusive offers/process and promotions, message/discussion boards and an interactive 24h (chat) helpdesk. No significant differences with a more than medium effect size between target segments are discovered. It is common knowledge that the most differences exist between tech innovators and classics, it seems useful for the future to classify members of a possible loyalty program according to their risc profile.
The information for the communication strategy concerning market segmentation and market choice, the target audience (Selecting the right consumers), communication objectives and delivering additional value (What to say to consumers) is known now. They can be made on a regular time basis, combined with the way value can be added for the targeted consumers, several moments of contact can be distinguished regarding the moments of contact. The services which Company X has to initiate contact are: announcement and downloading new soft/firmware updates, tips and tricks for product use, participation in events and exclusive offers/prices/promotions. The medium that can be used to facilitate these extra services is Club Company X. Club Company X offers all the possibilities to perform as a platform to facilitate the preferred extra services.
XXX
Club Company X is an excellent platform that can be used for the communication strategy and loyalty program that are designed. In order to use Club Company X as platform for the communication strategy and loyalty program adjustments must be made and implemented. The main adjustment that must be made can be categorized as database updates, redesign of the club Company X website and redesign of emails. Service can be seen as one of the most important issues of the loyalty program. In order for the program to be successful the service must be excellent. The service system must be changed in order to implement Club Company X as part of the service system. This is also an issue for further research.
For a company it is often better to start with just a few elements and add on to the program over time. This implies that the program should start small.
Finally some general issues that are important are a dedicated team and one entry point, supporting ease of experience and simplicity must be offered. The presence of a Wow- factor will increasingly create a successful loyalty program. Finally, it is important to nurture the relationship over time, to track responses and to fine-tune the program.
Table of contents Title page ...2 Preface...3 Executive Summary...4 Table of contents ...7 Chapter 1: Company X ...10 1.1 Introduction... 10
1.2 Company X Consumer Electronics Benelux... 10
1.2 Company X Consumer Electronics Benelux... 11
1.3 Problem description... 11
Chapter 2: Research Plan ...14
2.1 Problem definition... 14
2.2 Theoretical framework... 14
2.2.1 Definitions... 15
2.2.2 Relationships between variables... 16
2.3 Marketing Communication Plan... 17
2.4 Conceptual model... 20
2.4.1 Sub questions... 21
2.5 Research model... 21
2.5.1 Typology of the research... 21
2.5.2 Research and data collection... 22
Chapter 3: Loyalty...25
3.1 Introduction... 25
3.2 Loyalty in the consumer electronics landscape... 26
3.3 Consequences of loyalty... 27
3.4 Conclusion... 28
Chapter 4: Market developments...29
4.1 Macro-environmental analysis... 29 4.1.1 Demographic factors... 29 4.1.2 Economic factors... 29 4.1.3 Social-cultural factors... 30 4.1.4 Technological factors... 30 4.1.5 Physical environment... 30 4.1.6 Political-juridical factors... 30
4.2 Specific developments in the consumer electronics market... 30
4.3 Loyalty trends... 30
4.4 Conclusion... 31
Chapter 5: Company X’ characteristics ...32
5.1 Marketing strategy... 32
5.2 Marketing Plan... 32
5.2.1 Brand positioning... 32
XXX... 33 5.2.4 Product... 33 XXX... 33 5.2.5 Promotion... 33 XXX... 33 5.3 Loyalty instruments... 33 5.3.1 Loyalty Programs... 33 5.3.2 Loyalty Actions... 33 5.3.3 Service system... 33 5.4 Conclusion... 34
Chapter 6: Consumer characteristics and value creation...35
6.1 Segmentation... 35
6.1.1 Behavioral segmentation... 35
6.2 Consumer segments... 36
6.2.1 Profiling the segments... 37
6.2.2 Validation of the segments... 40
6.3 Targeting... 40
6.3.1 Selection of the target segments... 41
6.3.2 Target criteria Company X... 41
6.3.3 Judgment of the market segments... 41
6.4 Target audience... 42 6.5 Loyalty drivers... 45 6.5.1 Introduction... 45 6.5.2 Consumer drivers... 45 6.5.3 Brand drivers... 46 6.5.4 Social drivers... 48 6.5.5 Driver research... 49
6.5.6 Specific drivers for Company X... 50
6.6 Value creation, incentives and communications... 51
6.6.1 Communicate for loyalty... 52
6.6.2 Influence the selected drivers... 52
6.6.3 General benefits... 55
6.7 Conclusion... 55
Chapter 7: Communications and incentives ...56
7.1 Introduction... 56
7.2 Preferences and differences... 57
7.2.1 Important extra services... 57
7.2.2 Recommendation... 58
7.3 Conclusion... 59
Chapter 8: Loyalty program ...60
8.1 Loyalty programs... 60
8.1.1Characterization and objectives... 60
8.2 Effectiveness of loyalty programs... 61
8.2.2 Value creation... 62
8.2.3 The design... 63
8.2.4 Success factors... 63
8.3 The Company X loyalty program... 64
8.3.1 Description of the elements of the loyalty program... 64
8.4 Description of the strategy... 67
8.5 Expenses and revenues... 67
8.5.1 Expenses... 67
8.5.2 Revenues... 67
8.6 Conclusion... 67
Chapter 9: Communication strategy ...68
9.1 Adjustments... 68 Chapter 10: Conclusions...70 Chapter 11: Recommendations ...74 Chapter 11: Recommendations ...74 11.1 Club Company X... 74 11.2 Service... 74
11.3 Steps towards implementation... 75
11.4 Time schedule... 75
11.5 General... 75
Chapter 12: Discussion ...77
Chapter 1: Company X
The foundations for the thesis are laid in this chapter. The company for which the research is executed is introduced and the description of the problem is given. Like this a solid foundation for the preceding part of the thesis is created.
1.1 Introduction XXX
1.2 Company X Consumer Electronics Benelux
The focus in this thesis is on Company X Consumer Electronics Benelux. As with all product divisions, Consumer Electronics is split into four regions, and Company X Consumer Electronics Benelux is part of the region Europe. The products of Company X CE Benelux are categorized into five business portfolios: XXX. Involved business processes, like marketing, finance, logistics, HRM and IT for example, are managed centrally over the different business portfolios.
Company X CE Benelux has a differentiated business model in which the focus is on improving profitability and strengthening the competition power. The attention is on a focused product portfolio and an integral approach towards the customers by using differentiated business models. The businesses are designed for increased customer focus and response. The starting point in this business model is that differentiating on costs and margin depends on the amount delivered to the value chain. Innovative products with a relatively low rotation speed ask for a different approach concerning sales-efforts by the dealer, logistics and (after-sale) services when compared to high volume products with a high rotation speed. Business-to-business and PACP also have their specific market approach. Internet (online) is planned to be increasingly more important for potential end-consumers and by the use of www.Company X.com consumers will be directed to the websites of retailers. In this business model the products of the five business groups are divided into the different divisions, as described below. For example in the connected displays category, high end, slow moving, high margin televisions are located in the Premier Divisions, whereas low-end, fast-moving and low-margin televisions are located in the Mainstream division.
XXX
1.3 Problem description
Recently, there have been a lot of changes in consumer behavior and the consumer electronics landscape. All these have an impact on Company X CE Benelux.
First of all, brand loyalty among consumers is decreasing. Overall brand trust among consumers has diminished over the last two years, because price has become a much stronger deciding factor in a purchase than brand loyalty. (Consumer Electronics Daily, April 04, 2006) Furthermore the consumer in general is changing as well. Consumers nowadays are unpredictable, illogical. It is difficult to define needs for, well informed, subject to trends, always busy, sensitive to peer groups and they have a need for personalized information. (GfK Jaarcongres non-food, 2006) Furthermore brand loyalty is not what it used to be in the consumer electronics (CE) space, according to ABI Research, which noted in a recent report that purchasers of home electronics devices face a market flooded with ever-cheaper products from manufacturers few have even heard of. Product lifecycles even from vendors that are household names - have grown extremely short, and when devices break, repair costs often equal replacement. Under these conditions it is not surprising that jaded consumers increasingly buy on price and features alone. Unable to compete with prices with thousands of agile startups, producing commodity goods in low-wage markets that are just as good and much cheaper than name-brands. The established vendors have a problem: how to leverage their brand recognition to retain customers. (Reed Business Information, November 7, 2005)
The second change that has had its influence on Company X is the shift from analog to digital. This completely changed the competitive game in the CE landscape. The product
percent annually to 1 to 3 percent monthly. Last, but certainly not least, the competitive landscape changed from 2 or 3 competitors to 5 to 10 competitors. Those competitors came from unexpected directions. Traditional players such as Sony and Panasonic still exist, but there are also new competitors from the IT domain. Dell, for example, publicly stated that they want to create a $20 billion business in consumer electronics over the coming years. They consider the market Company X operates in a high-volume market. Apple has entered the digital audio space in a way and at a speed which Company X could never have imagined. Microsoft and Intel see a clear opportunity in home entertainment networks. And finally there are the Asian players, who are all trying to commoditize business and drive down prices. In the world of CE the concept of the product is not just the physical product anymore, but a product/software/service combination. The consumer is looking for a total concept, not only the product.
Another change in the environment is retail. Retail has an enormous impact on sales for Company X. Historically Company X has built relationships with retailers, not consumers. This has led to vulnerability as competitors get closer to consumers, and retailers have been able to switch brands at will. Company X has a brand preference lower then the market share which implies that retailers have a positive impact on Company X on the buying behavior of the consumer. Therefore retailers can be seen as Company X’ best friends. Nowadays, distribution shift is taking place. In earlier days consumers chose to buy their consumer electronics at the independent retailer, for example specialty stores like Expert. Nowadays more and more people are buying their consumer electronics at the big chains, like the Mediamarkt. Most of the time, floor personnel at the big chains, is not as competent and involved in the Company X brand anymore as the floor personnel in the specialty stores used to be. And this results in a smaller distance between preference and market share, which implies negative impacts for Company X. So here, increasing the brand preference among the Dutch consumer for Company X is extremely important.
Apart from all these changes Company X has a strong market position in the Netherlands. It is a homemade brand and in the Netherlands there is a lot of awareness (96%!), preference, market share, and dominance of the Company X brand. Nevertheless, Company X will certainly lose the interest of the more involved consumers if they lag competition on time to market and breadth of offering. The more involved consumers are especially important for Company X because the products in which those consumers are interested are the products with the high margins. And also new market opportunities and expansion can be realized out of these consumers. This, and everything said before makes it of major importance to have insights in the needs and wants of the (high profitable) consumers in such a way that Company X can handle with all the competitive powers and changes that are present nowadays. The constantly changing market environment, coupled with actions by competing firms to gain market advantage, requires companies to understand their consumers. Getting closer to the consumer requires direct contact with buyers (…) (Cravens and Shipp, 2001) In that way Company X can attract, retain and expand the right consumers to strengthen its position. One good possibility to achieve that is by creating loyalty. It is preferable to develop a close relationship with the consumer, because that will lead to consumers that are loyal to the brand in the long term. (Huber, 2001)
In this situation it is striking that until now only minimal direct contact with the consumers exists. The only contact this division has with its consumers is through their customers, the retailers. Right now, no direct and continue contact with the consumers exists, although in this changing situation it is of incredible value to gain insight in the consumer
to create loyalty and then to attract, retain and expand consumers, everything in such a way that Company X can retain its position in the market and growth of Company X CE Benelux can be accomplished. One possibility to establish contact with the consumer is a loyalty program. Loyalty programs have two aims; to increase sales revenues and to build a closer contact with the consumer to maintain the current consumers. (Uncles and Dowling, 2003) A loyalty program could be a good way to set up a consumer contact strategy. Loyalty programs have a lot of benefits for companies with poor data of their consumers. (Dowling and Uncles, 1997)
Everything described above emphasized the importance of consumer contact for Company X CE Benelux. A consumer contact strategy is a coherent stream of marketing communications that are adjusted as well as possible to fit each consumer or prospect. (Kestnbaum and Kestnbaum, 1998) For this thesis the focus will be on a marketing communication strategy in order establish consumer contact. This will be managed in such a way that loyalty is created to acquire, retain and expand consumers in order to establish consumer value growth.
Chapter 2: Research Plan
In this chapter the research and its backgrounds will be described. First the problem definition with the research objective, research question and the prerequisite constraints will be given. Next the theory that is important for this research will be discussed, first some general definitions and relationships among the main variables will be given. After that, theory about the main concept in this thesis, designing a communication strategy, is discussed. The conceptual model is discussed afterwards, which forms the basis for the research. Finally, the sub questions will be described, the research model together with the typology of the research is presented and the data collection method will be discussed.
2.1 Problem definition
The definition of the problem clarifies what you want to know and why. On the one hand the problem definition has a strong connection with practice and on the other hand the problem definition has a connection with theory. The problem definition contains prerequisites related to restrictions for the method being used and to restrictions for making the research feasible. (De Leeuw, 2001) The problem definition as stated below
is the result of the problem description described in the previous chapter. Research objective:
To give recommendations to Company X CE Benelux about how to establish long-term contact with the consumer and how to enhance loyalty, in order to gain more insight in the consumer, to strengthen the company’s position in the market and to accomplish future growth.
Research question:
How does Company X CE Benelux have to design its marketing communication strategy, in order to establish long-term contact with the consumer and to enhance loyalty, to strengthen its position in the market and to accomplish future growth?
Prerequisite constraints:
The thesis has to meet the requirements of the Rijksuniversiteit Groningen as well as the requirements of Company X CE Benelux.
The research has to take place within seven months, therefore the possibilities for data collection and the size of the research are limited.
Because of the time restriction and the lack of knowledge, financial calculations will not be executed in detail in this thesis; only in roughly perspective.
Because of requirements of Company X a design for the implementation of a loyalty program will be given.
2.2 Theoretical framework
The theory that is of importance to answer the research question will be introduced. This is a short overview of the issues that lay the foundations for the conceptual framework and the sub questions that follow from the conceptual framework. First some definitions are given to prevent any misunderstandings from happening. The most important ones for the thesis are explained. Then the theories that are of importance for understanding the conceptual model receive minor attention and afterwards the relations between those core variables are reproduced.
2.2.1 Definitions Long-term contact
A longitudinal contact strategy can plan consumer contacts over a long time horizon, and can be in the form of a loyalty program. A consumer contact strategy can be seen as a coherent stream of marketing communications that are adjusted as well as possible to fit each consumer or prospect. (Kestnbaum and Kestnbaum, 1998) Therefore the focus in this thesis is on designing a communication strategy.
Communication Strategy:
These are means by which firms attempt to inform, persuade, and remind consumers- directly and indirectly- about the brands that they sell. In a sense marketing communications represent the voice of the brand and are the means by which the brand can establish a dialogue and build relationships with consumers. (Keller, 2003) The focus in this thesis is on designing marketing communications to establish long-term contact with the consumer and to enhance consumer loyalty. Percy, Rossiter, Elliot (2001) and Floor and van Raaij (2002) give descriptions of how to design a marketing communication plan. In the right order they describe the development of a marketing communication plan for obtaining the following information: consumer and product research, marketing and communication target (audience), communication objectives, budget, communication strategy, communication options, creative development and media choice. This research is focused on obtaining the specific interpretation of these issues for this research.
“One must be more careful than ever not to confuse the words consumer and customer. (…) A major class of customers are all those types of marketing intermediaries or channel members who buy for resale to their customers including wholesalers and retailers of all types as well as business customers who integrate products into the products they manufacture.” (Pasuraman and Grewal, 2000) Therefore in this thesis a distinction is made between customers and consumers. To prevent any misunderstandings from happening, in the thesis and in citations when needed, customer will be replaced by consumer, so that the meaning of the word is clear.
Customers:
A customer is someone who makes use of the paid products of an individual or organization. Typically this is through purchasing or renting goods or services. In this thesis, a customer of Company X CE Benelux is a business or a retailer that buys products from Company X and sells those products to consumers.
Consumers:
Consumers are individuals or households that actually consume goods and services generated within the economy. This for direct use or ownership rather than for resale or use in production and manufacturing. In this thesis Company X CE Benelux has no contact with the consumer. So the objective is to establish log term contact with the consumer with as final objective to achieve business growth.
Business Growth:
Consumers can be seen as an important asset of businesses, and businesses can realize growth by developing and exploring this asset. From a consumer point of view growth can be realized by (1) acquiring new consumers; (2) increasing the chances of consumer retention; (3) accomplishing expansion with existing consumers. (Verhoef, 2006).
Consumer Value (Management):
attract new consumers and to influence consumer behavior, in such a way that the value of all present and future consumers is optimized. (Verhoef, 2006)
Loyalty:
Loyalty is a strong commitment of a consumer to buy a product again, despite situational influences and marketing efforts of competitors that make switching easier. (Oliver, 1997) The strongest affirmation of brand loyalty is when consumers are willing to invest, time, energy, or other resources in the brand beyond those expended during purchase or consumption of the brand. (Keller, 2003: 93)
2.2.2 Relationships between variables
The important issue at Company X CE Benelux is that only minimal direct and continue contact with the consumers exists, although in the changing situation it is of great value to gain insight in the consumer. This in order to attract, retain and expand consumers in such a way that the value of the consumers is optimized and growth of Company X CE Benelux can be accomplished. The most important thought behind the theory of customer lifetime value is that consumers can be seen as an important asset of businesses, and businesses can realize growth by developing and exploring this asset. From a consumer point of view, growth can be realized by (1) acquiring new consumers; (2) increasing the chances of consumer retention; (3) accomplishing expansion with existing consumers. (Verhoef, 2006). The link between acquisition and retention of consumers to consumer profitability is also addressed by Rust, Lemon and Zeithaml (2004).
Bügel (2002) points out that an increase in loyalty leads to an increase of the commitment of consumers to continue buying products of the company. The increase in this commitment of consumers results in repeat purchases and the continuing relationship with the company. So when loyalty increases the three axes of consumer value (number of consumers, lifetime of consumers and profitability of consumers) are influenced. In other words, new consumers are acquired and present consumers are retained and expanded. Achieving loyalty by obtaining insights about the consumer is extremely important.
Several authors point out the importance of a customer contact strategy for achieving loyalty. “Generating a positive return on your loyalty marketing requires developing a consumer contact strategy”. (Johnson and Leger, 1999) One way in which judgments about service quality and satisfaction are formed, is contact management.” (Jones and Farquhar, 2003).
This can be reproduced in a scheme to show how the different variables are interacting with each other. This is the foundation of the thesis because it shows the importance of a consumer contact strategy for achieving business growth.
Figure 2: relationships between variables
Communicati on Strategy Business Growth Expansion Loyalty Acquisitio n Retention Customer Value Growth
2.3 Marketing Communication Plan
Percy, Rossiter, Elliot (2001) and Floor and van Raaij (2002) give clear overviews of how to design a marketing communication plan which is needed for a communication strategy. There is a lot of overlap between their approaches and they can easily be put together as one plan. The following produced framework tends to guide the reader throughout the thesis. The end objective of this thesis; “to design Company X’ marketing communication strategy, in order to establish long term contact with the consumer and to enhance loyalty, to strengthen its position in the market and to accomplish future growth,” will be met by using this research scheme for the design of the communication strategy. Next will be described what is to be expected from the marketing communication. The choice for different instruments will be done in such a way that all the activities match and achieve synergy.
A strategic marketing communication plan, according to Floor and van Raaij (2002) contains the components that can be seen in the model. The way the plan is used and the way the components are implemented and connected in this thesis will be described shortly here and is extensively described in the rest of this thesis.
The first step of all is the research about consumer and product. All marketing communication must be consistent with and in support of the overall marketing plan. Therefore it is important to review the marketing plan first, research about consumer and product is the base of the communication strategy. Markets are changing so rapidly and the competition is so heavy that it is almost impossible to trust upon intuition. Information has to be gathered about a lot of topics. This can be about the choice process of the consumer and the place of the different consumers and products in their life cycle. The involvement of the consumer and the characteristics of the products are important as well. To achieve the research objective, longitudinal contact must be achieved and loyalty must be enhanced. From this point of view, theory underlines a couple of general variables that have an influence on the creation of the communication strategy for contact. That is why this component will exists of research with relation to consumer characteristics, company characteristics and market characteristics. (Reinartz, Thomas and Kumar, 2005)
The second step is research about the marketing communication target audience. A lot of information has to be gathered about this component. In this part of the research there will be a focus on the relationship between trial and repeat purchase objectives and which user groups to target. Percy Rossiter and Elliot (2001) also mention determining a positioning, although the basic brand positioning is probably already established, the strategic planning process must address the particular communication positioning for a brand. This positioning issue also requires looking for differential advantages of a brand. The search is for target segments and a target audience which makes it extremely profitable to enhance loyalty.
The third step is establishing communication objectives. Communication objectives are defined as the communication effects that are looked for. The general communication objectives that are distinguished by several authors are category need, brand awareness, brand attitude and brand purchase intention. The end objective of loyalty is especially important here and some more specific objectives will be the communication objectives as well. The next component is budget. First of all the budget is not taken into consideration very detailed. This is because budget is seen as a restrictive condition, in such a way that the solution only can be executed when it strikes with the budget. Furthermore, during the research decisions are made keeping in mind the budget. In those two ways the budget acts as a restrictive condition for this thesis. After the
expenses are compared with the cumulative revenue. At that point financials become more important. The cumulative revenues must exceed the cumulative expenses in order to be a successful communication strategy or loyalty program. Therefore after the communication strategy is given a creative implementation, a weigh up will have to be made between the revenues and the expenses of the communication strategy/loyalty program.
What follows is the development of a communication strategy. The communication strategy can be defined when the target audience and communication objectives are known. Important here is that there is agreement about the message that has to be communicated. The message has to address the target audience. Also it is important to focus on what you want the target audience to do, because this provides some of the detail necessary for developing an effective communication strategy. The objective is to make the target audience loyal so it is important to know how to make them loyal. It is of importance to take into account the drivers of loyalty. Those drivers directly influence the loyalty of consumers. (Bügel, 2002). The communications and incentives have to activate those drivers.
The next step is choosing marketing communication mix options. On the bases of the chosen communication strategy the communication instruments that best fit will be chosen to communicate the message. Here choices have to be made and also the creative development will play a role. The possibilities of the different instruments have to be taken into consideration as well. Generating a positive return on your loyalty marketing investment requires developing a strategy that includes value creation, incentive design and the proper communication. (Johnson and Leger, 1999) (Banasiewicz, 2005) (Verhoef, 2006) So these elements are especially important at this point.
One of the final steps in the development of a communication plan is the creative development. The creative development has to do with the way the message is delivered and whether it is distinguishable from other communication strategies. It is about how the concept is implemented. Because of requirements of Company X a design for the implementation of a loyalty program will be the creative implementation. Finally the media that will be used are chosen. For every marketing communication instrument the best media to communicate the message has to be chosen. All the different media types can be part of this. Especially important here are the visual content, the time to process the message and the frequency.
Figure 3: marketing communication plan based on Percy, Rossiter, Elliot (2001) and Floor and Van Raaij (2002).
Several authors point out the value of a marketing communications strategy in order to develop loyalty. Above, the items in italic are the specific interpretations of the different variables in the marketing communication plan for this research. These variables are needed in order to develop the communication strategy in this thesis. The academic theory described below describes the relationship between these variables.
As said before the focus in this thesis is on designing a communication strategy. A communication strategy has communication objectives; the objective of this communication strategy is establishing contact with the consumer and to enhance consumer loyalty. Data analysis can be used to determine what to say to the consumer, when to make contact and how much to spend. (Kestnbaum and Kestnbaum, 1999). A communication strategy must be based on consumer needs and desires and do more to enhance consumer trust. (Duffy, 2005)
Generating a positive return on your loyalty marketing investment requires developing a contact strategy that includes targeting the right consumers, delivering additional value
Research consumer and product Marketing communication target audience Communication objectives Budget Communication Strategy Media choice Creative development Communication options Consumer characteristics Company characteristics Market characteristics Target segments and target audience Loyalty and specific measures
Loyalty drivers and
communication messages Value creation
Incentive design Communication instruments
Loyalty program Media choice
General research communication
Specific interpretation for this
and Leger, 1999) A consumer strategy based on acquisition, retention and expansion is focused on the consumer and has acquisition activities, consumer driven activities, consumer service and multi-channel management. (Verhoef, 2006) Johnson and Leger fill in these aspects with help of targeting, value creation and communication. Banasiewicz (2005) describes these activities as consumer assessment and valuation (targeting) and incentive type and level identification (value creation). Putting together a communication strategy to establish long-term contact requires targeting the right consumers, create value for these consumers with help of the incentives and effective communications. Besides that there are a couple of general variables that are of influence on the creation of the communication strategy for contact. The first ones are consumer and competitor actions and consumer characteristics. (Reinartz, Thomas and Kumar, 2005) Thereby in order to create loyalty, what is of influence on acquisition, retention and expansion, it is important to take into account the drivers of loyalty. Those drivers directly influence the loyalty of consumers. (Bügel, 2002). So the communication strategy, with help of value-adding benefits, has to impact those drivers in order to create loyalty.
2.4 Conceptual model
Conceptualization is developing valid conceptual definitions and/or conceptual models that enable us to understand the problems and are able to make the problems operational. To divide the research question into sub questions can be done with help of the conceptual model. The answers to the sub questions together, have to answer the research question. For developing a conceptual model of several tools can be used. These tools can be brainstorming, insights of involved persons, and documentation about the situation and general scientific knowledge. (De Leeuw, 2001: 140)
The conceptual model as outlined below is based on the theory and the problem definition as described above. With help of theory and the knowledge of involved persons certain relationships are assumed. The aim of this conceptual model is to assist the research objective of the thesis in order to answer the research question in a satisfying manner. Communication/Ince ntive Communication/Ince ntive Communication/Ince ntive Communication/Ince ntive Driver Driver Driver Driver Consumer Characteristics Market developments Organizational characteristics Loyalty
2.4.1 Sub questions
Based on the conceptual model, several sub questions can be distinguished. When the research question is split up in different sub questions, the sub questions together have to answer the research question. (De Leeuw, 2001: 151)
1. What is loyalty and which loyalty drivers can influence design of a consumer contact strategy?
2. Which market developments influence the design of a communication strategy? 3. What are the characteristics of Company X CE Benelux that influence the design of a
communication strategy?
4. What are the characteristics of the possible CE consumer and what segments can be distinguished in the consumer electronics market?
5. Which segments should be targeted?
6. How to create value for the targeted consumers with what incentives? 7. What does the communication for the targeted consumers look like?
8. How is the communication strategy, to establish long-term contact and to enhance loyalty for Company X CE Benelux, designed?
9. What are the design requirements of a loyalty program?
10. How to design a loyalty program that fits in the communication strategy?
11. Which adjustments have to be made in the Company X CE Benelux organization to implement the communication strategy/loyalty program?
2.5 Research model
In order to do the research in a satisfying manner and to achieve the research objective it is important to classify the research and to design a research model. To achieve a proper fit between the research and management, typology of the research is extremely useful. To classify the research helps to achieve a good fit between the research result and the knowledge need of the management. The typology of the research helps to choose a suitable research method. In this way the research will be done in an effective and structured manner.
2.5.1 Typology of the research
The typology of the research assists in acquiring a good fit between the result of the research and the knowledge need of the management. (De Leeuw, 2001: 69) The research in this thesis is one of practical origin. The research is to support the policy because it aims to deliver knowledge that is usable in a specific situation of a specific customer (Company X CE Benelux) and satisfies a part of the total knowledge need. (De Leeuw, 2001: 76) So the research is partly practical and partly theoretical. Therefore several practical and theoretical sources will be used in the research.
The research model below is used as guideline for this thesis. The model is a brief overview of the specific subjects that will be discussed in order to answer the research question in a satisfying manner.
Figure 5: research model
2.5.2 Research and data collection
In this thesis desk research as well as field research is executed. Desk research is focused on tracking data that is already stored. Field research is focused on collecting data by interviewing and observation. To answer the different sub questions primary as well as secondary data is used. Primary data is collected specifically for this research and by the researcher; secondary data is already collected for other objectives. (Malholtra, 1996) In this thesis primary data is obtained by interviews and a survey and secondary data is obtained by consulting several resources. In business management research a lot of sources can be used to obtain knowledge. De Leeuw (2001) distinguishes six kinds of resources in how primary and secondary can be obtained: documents, media, reality, imitated reality, databases and the experience of the researcher.
The different methods of data collection and the used resources for every sub question will be described next.
Sub question one: What is loyalty and which loyalty drivers influence design of a communication strategy?
Theory will be used obtained by desk research. This will be done by the use of several documents. In this case scientific literature and articles are the sources of the information. Value Creation/ Incentives (6) Targeting (5) Communicati on Communication Strategy (8) Implementation (11) Loyalty Program (10) Loyalty (Drivers)(1) Characteristics of Company X Market Developments Consumer Characteristics Design Requirements (9)
Sub question two: Which market developments influence the design of a communication strategy?
First documents in the form of scientific literature will be used to see what kind of developments are of influence on the development of a communication strategy. Next, documents as well as several databases will be use to interpret the question. This will be documents that are present in the company and can be used as database e.g. CBS. Sub question three: What are the characteristics of Company X CE Benelux that influence the design of a communication strategy?
Especially desk research will be executed to answer this question. Documents like scientific literature and different articles will be used to see what kind of characteristics are of influence on the strategy. Documents that are present in the company will be used to fill in these characteristics. Reality in the form of interviews with employees will also be used to obtain this kind of information.
Sub question four: What are the characteristics of the possible CE consumer and what segments can be distinguished in the consumer electronics market?
For this question information will be used out of desk research. First documents like scientific literature about segmenting will be used to answer this question. Thereby internal documents will be used to gain insight in the characteristics of the consumer. Sub question five: Which segments are to be targeted?
Documents like academic theory and internal documents will be used to examine which of the segments described in the previous sub question have to be targeted for a communication strategy.
Sub question six: How to create value for the targeted consumers with which incentives? In this case field research will be done to obtain information about reality. But first it is important to have an insight in the drivers of loyalty. Those drivers will be discovered by the use of documents in the form of academic literature and articles. Then, to obtain insights in the needs and wants of the targeted segments and the preferred incentives, interviews with the sales force (rayon managers) and customers (retailers) will be held to provide a clear overview of which value the strategy has to deliver and what the preferred incentives are to activate the drivers. Thereby a lack of information will be completed with help of a consumer survey.
Sub question seven: What does the communication for the targeted consumers look like?
This question will be answered in the same way as the sub question before. Here literature about communication for different needs and wants will be used before and after, interviews will be held so that it becomes clear when and what to communicate to the consumer.
Sub question eight: How is the communication strategy, to establish long-term contact and to enhance loyalty, for Company X CE Benelux designed?
This sub question gives a short summary of questions five, six and seven, to give a good overview of how the communication strategy, to establish long-term contact and to enhance loyalty, is designed.
Sub question nine: What are the design requirements of a loyalty program?
This question will be answered by desk research to choose the literature about what design requirements for a loyalty program are and thereby information and requirements of Company X will provide information as well.
Sub question ten: How to design a loyalty program that fits into the communication strategy?
This question gives a description of how the loyalty program is designed and information from of the other questions will be used to answer this question.
Sub question eleven: Which adjustments have to be made in the Company X CE Benelux organization to implement the communication strategy/loyalty program?
Information from all the other sub questions provides the input for answering this question and academic literature will be used as well.
Chapter 3: Loyalty
In this chapter the concept of loyalty will be discussed more extensively. First a description of loyalty in general is given, to provide an impression of what loyalty is and what kinds of loyalty exist. Also special issues of loyalty are discussed that are important in the consumer electronics market. Finally, the consequences of loyalty show the importance of a loyal consumer for Company X.
3.1 Introduction
Loyalty is a term that is widely used in a lot of different manners. Loyalty, as a general term, signifies a person’s devotion or sentiment of attachment to a particular object, which may be another person or group of persons, an ideal, a duty, or a cause. It expresses itself in both thought and action and strives for the identification of the interests of the loyal person with those of the object. (Encyclopedia Britannica, 1971) In business terms no universal agreed up on definition is used. Yi and Jeon (2003) define loyalty as repeated purchases of particular products or services during a certain period of time. Comparing this definition with loyalty in terms of Oliver (1997), this last one seems to be more complete. There loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchases, despite situational influences and marketing efforts having the potential to cause switching behavior. Many authors frequently cite this definition. In this definition an attitudinal element is added and a two-dimensional conceptualization of loyalty is used (Yi and Jeon, 2003). This definition implies that consumer loyalty is constructed out of two dimensions. The behavioral dimension of loyalty is a consumer with a high lifetime value. That is a high value of all direct contributions and indirect contributions to overhead and the profits during the whole relationship lifetime cycle. The attitudinal dimension of loyalty is the way the company and the consumer experience the relationship, in other words the value they attach to the relationship. (Hoekstra, 2003) The attitudinal dimension adds cognitive, affective and co native elements. (Yi and Jeon, 2003) To these two dimensions a social dimension can be added. According to that dimension, social pressures can influence consumer behavior. Consumers do not take decisions isolated from social influences. Rather they are subjected to heavy social control over the attitudes they have and the behavior they develop. (Gounaris and Stathakopoulos, 2004)
Based on the distinction between the dimensions mentioned before, different categories of loyalty can be distinguished. As O’Malley (1998) points out the categories are based on repeat patronage and relative attitude. Nevertheless the social dimension have to be taken into account as well and with these three dimensions four types of loyalty can by distinguished:
No loyalty: Low relative attitude, combined with low repeat patronage. There are also no social influences to be even cognitively loyal to the brand.
Latent loyalty: High relative attitude, but a low repeat patronage. Theree is a strong positive predisposition towards the brand, which is developed out of the social environment. So the consumer is strongly discouraged to be loyal to a certain brand by social influences.
Spurious loyalty: Represents a low relative attitude, with a high repeat patronage. The individual buys the brand out of habit, convenience or for some other reason, but not as
a consequence of emotional attachment to the brand or a real social motive. So this is a very fragile relationship.
(Premium) loyalty: This form of loyalty signifies a favorable correspondence between relative attitude and repeat patronage. An individual exhibits a high degree of relative attachment to the brand, a high instance of repeat purchases, and appears to be highly influenced by social pressures. This form of loyalty is more or less similar to the definition of Oliver as mentioned above. (Rowley, 2005; Gounaris and Stathakopoulos, 2004)
With help of the loyalty categories consumers can be segmented on this basis, and any one individual is likely to exhibit the characteristics of each of these categories in relation to different products, services, outlets, and their associated brands. (Rowley, 2005) For Company X premium loyalty is the most preferred one and managerial efforts should be continually focused on reinforcing attitude and behavior, in particular as the consumer is likely to be targeted by competitors.
Premium loyalty and loyalty in general are difficult to measure. It is especially so at Company X because of the nature of the products, the purchase frequency is very low. Company X can use the net promoter score to measure loyalty. Consumers are asked how likely they are to recommend Company X. They are asked to state their preference on a scale from zero to ten. The value from zero to six is a detractor, from seven and eight a passive and nine and ten a promoter. A promoter actively promotes Company X to others. This is the most ultimate way of loyalty as described before. When a consumer is a promoter he or she is likely to recommend Company X to other consumers (attract), he will stay a Company X consumer (retain), and is likely to buy more other Company X products (expand). Therefore the promoter score will be used throughout this thesis when judgments about loyalty are needed or when loyalty has to be measured.
3.2 Loyalty in the consumer electronics landscape
Loyalty is not the same in every market. Different markets, for different kinds of products, should handle loyalty in a different way. Company X sells durable consumer goods; this has several implications for loyalty. These implications will be discussed next in order to manage the loyalty in the best way for this market.
Rundle-Thiele and Bennett (2001) discuss loyalty in different markets and give a clear overview of loyalty issues that are important for different kind of markets. First of all it is important to keep in mind is that there is no ideal, cure-all notion of brand loyalty but a number of appropriate measures, which are context specific and are all appropriate for the situation. It is also important to notion that the nature of loyalty varies between different markets and especially between consumable goods, durable goods and services.
First it is important to have an insight in the durable goods market. A durable good is a manufactured product capable of long, useful life, such as the Company X products (televisions, dvd-players etc.). Durable goods are those that survive many uses. This implies that once the consumer purchases the goods, he/she is temporarily out of the market until the product needs replacement. So buyers do not frequently switch back and forth between competing brands and in any given period of time, buyers are sole loyal or perhaps dual loyal. In this durable consumer market loyalty can already be seen when a consumer only buys his/her next product at the company.
Rundle-Thiele and Bennett make the distinction between attitudinal and behavioral loyalty as well. This distinction connects with the market type in that the degree of switching, involvement and risk indicates which of the measures is most appropriate. For Company X products switching is low because these products have a long life,
involvement is high and the risk involved when buying such a product is also high. All these variables require an attitudinal approach of loyalty, according to Rundle-Thiele and Bennett. These kinds of categories require more emphasis on service elements, like the product, service, software combination, since more direct contact with consumers can then be expected. A loyalty strategy therefore should focus on communication directly with these consumers rather than on more generalized brand promotions. Bijmolt (2002) describes that investments in loyalty are important in this kind of (mass)markets, especially when switching costs are low, because the consumer is not locked in by a certain production technique or contract.
Research within Company X has demonstrated that loyalty is constructed out of three cornerstones. These are the product(quality), image of the product and some kind of X-factor. What this X-factor is is still unknown. This justifies the choice for communications and incentives to influence loyalty drivers in order to create loyalty. Communication and incentives in this case can be seen as one part of that X-factor and therefore possible to create loyalty.
3.3 Consequences of loyalty
The question is why a company would want a loyal consumer. The answer to this question is often described in literature. A loyal consumer has a lot of positive consequences for a company. Consumers, who are loyal, are familiar with the brand. They know how to facilitate a transaction with the company and the assistance they need is specific, thereby they are more efficient in terms of the way they use resources of the company. A loyal consumer complains rather than defects. Consumers who are loyal feel like they are stakeholders in the retail brand. When they have a bad experience they complain, which is a second chance for the company. Loyal consumers are also more likely to have the brand of the company as top of mind in the category. This translates itself in an increase in share of consumer and an improvement in retention. But it also results in positive word of mouth. Another benefit is that there is a greater awareness of brand assets; so loyal consumers tend to be more aware of some of the supplementary benefits the brand offers. And also that has an impact on retention and share of consumer. Those consumers have a perception of better value and that is the result of understanding the services offered by the relationship managers and taking advantage of those services. Finally, a brand choice is most of the times made at the last moment. Loyalty facilitates a psychological reluctance to defect. (Duffy, 2003)
Also Bügel (2002) clearly points out what the general consequences of loyal consumers are. As mentioned before, loyalty is of influence on the acquisition, retention and expansion of consumers and as a consequence creates consumer value growth which results in business growth. (Verhoef, 2006) Loyalty can be seen as growth strategy by remembering the way loyalty can increase the profitability of the company. Increasing profitability can, first of all, be accomplished by increasing the lifetime of the current consumers, retention in terms mentioned before. As Oliver (1997) stated in his definition of loyalty, an increase in loyalty of a consumer results in an increase of commitment of consumers to remain buying products of this company. This increase in commitment of consumers results in re-purchases and the continuation of the relationship with the company. So when loyalty increases the average lifetime of consumers is heightened as well.
The second effect of the increased lifetime of consumers is that consumers become more profitable, in other words expanding the consumer. There are several reasons why
satisfied generally keep on buying the product. This can be in the form of cross selling or up selling. Secondly, the average costs per consumers decrease the longer the consumer is customer. This is because decreasing operating and acquisition costs. Furthermore a loyal consumer often spreads positive word of mouth which is of influence on the acquiring of new consumers. The last thing is that loyal consumers are less sensitive to price. So in these ways consumers are acquired and expanded.
3.4 Conclusion
In this part of the thesis the concept of loyalty is discussed in detail. With help of a communication strategy loyalty has to be enhanced. A profound knowledge of the loyalty concept is needed. In this way the first sub question, about what loyalty is, is answered as well.
The following conclusions can be drawn according to this topic:
Loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchases, despite situational influences and marketing efforts having the potential to cause switching behavior.
Loyalty is constructed out of three dimensions the attitudinal, the behavioral and the social dimension. The most preferred form of loyalty is premium loyalty and exhibits a high degree of relative attachment to the brand, a high instance of repeat purchases, and appears to be highly influenced by social pressures.
For Company X products loyalty depends on product(quality), image and some kind of X-factor. Communication and incentives in this case can be seen as one part of that X-factor and therefore possible to create loyalty.
For Company X it is important to focus on the attitudinal dimension of loyalty. Therefore emphasis on service is required and the loyalty strategy should be focused on direct communication. One way to make loyalty measurable in the consumer electronics market is by asking consumers how likely they are to recommend the brand.
Loyalty is of influence on the acquisition, retention and expansion of consumers, and as a consequence creates consumer value growth which results in business growth. That is the main reason why Company X should want a loyal consumer.
Chapter 4: Market developments
In this chapter developments in the market will be discussed that are of influence on the design of the communication strategy. To give an extensive insight in the developments of the market, the developments will be discussed from different perspectives. This will be from a very wide towards a narrow perspective.
First an overview of the general characteristics of the market will be given with help of the so-called DESTEP-method. In this way environmental trends will be scanned, this is of importance to develop effective management systems for market-driven organizations. (Cravens and Shipp, 2001) Floor and Van Raaij (2002) point out, other information has to be collected as well before a marketing communication strategy can be formulated. These data are of different natures. It is about the consumer and the product. (Floor en van Raaij, 2002: 95) The characteristics of the consumer will be discussed in detail in the next chapter. And the details of the product are also discussed in earlier parts. This chapter ends with an overview of the trends related to loyalty. This because the communication strategy is focused on creating loyalty and therefore these trends can serve as guidepost for the communication strategy.
4.1 Macro-environmental analysis
The macro-environmental variables are the variables that Company X and other players on the market cannot control. (Alsem, 2001) Nevertheless they are able to influence the performance of Company X and therefore Company X has to take these variables into account when designing a communication strategy. In that way Company X can anticipate on these trends so that the strategy is the most effective. Strategies must be directed at constantly changing market targets. (Cravens and Shipp, 2001)
The DESTEP-method scans the environmental trends in the Netherlands with help of six factors.
4.1.1 Demographic factors
The Dutch population in 2006 exists of more or less 16,3 million people. Over 60 percent of the population is between 20 and 65 years old. The last couple of years the amount of people living alone has increased. One quart of the men between 18 and 62 does not live together with a partner. For women this is one fifth. Another trend is the aging of the population. This is the result of a combination of the baby boom-generation, the medical sector getting more and finally more advanced through which people become older and an increasing prosperity with lower birthrates. (www.cbs.nl)
4.1.2 Economic factors
Economic factors are important for companies because these variables are of influence on the way people are tended to buy certain products. At the moment the Gross Domestic Product of the Netherlands is 2,9 percent higher than in the same quarter last year. The employment is increasing faster as well. There are 85 thousand more jobs than one year earlier. The increase in export was the main reason of the economic growth of last year, followed by the increasing consumption of the households. Households spent 2,9 percent more than a year before and that is the greatest increase in years. They spent 8 percent more on durable consumption goods, like consumer electronics. (www.cbs.nl) All these trends, visible in the first quarter of 2006, are probably of positive influence on Company X. This is because durable consumption goods, like the Company X products, are sensible to economic developments. (Alsem, 2001)
