Individual marketing in the grocery industry

(1)

Individual marketing in the

grocery industry

(2)

Individual marketing in the

grocery industry

Master Thesis, MSc Marketing Management

University of Groningen

Faculty of Economics and Business

Department of Marketing

June, 2012

Joyce Gussenhoven

Student number: 2032910

Lierstraat 31

9742 PA Groningen

+ 31 6 49 89 22 04

m.j.gussenhoven@rug.nl

(3)

Preface

This master thesis is the final work of my master Marketing Management within the study Business Administration at the University of Groningen. This makes me aware of the fact that my studies and my time of living in Groningen comes to an end. It is time for new challenges.

The thesis is about individual marketing in the grocery industry. This subject was developed by a cooperation with the Dutch company Culios. I would like to thank Dr. H. Luitjes and Dr. L. Hulzebos from Culios for giving me the opportunity for writing my thesis in cooperation with them. Also thanks for the advices and helping me writing my thesis.

Furthermore, I would like to thank the interviewees and the participants of the questionnaire in this research. In particular I would like to thank my first supervisor Dr. E. van Nierop for all his help and advices during this process. In addition, I would like to thank Dr. L. Sloot for reviewing and providing helpful tips during the last phase of this thesis.

Last but not least, I would like to thank my boyfriend, Daniel Kerkhof, and my family and friends for their support.

Joyce Gussenhoven

(4)

Summary

This thesis is about the purchase intention when people receive individual marketing of their grocery store instead of mass marketing. The subject of this thesis is developed in cooperation with the company Culios. There has already been a lot of research done on different factors that influence unplanned purchases, in-store decisions making, purchase behaviour and profit improvements of a grocery store. However a growing number of companies in the retail industry starts to realize the potential of customized promotions over mass marketing promotions. Therefore the following research question was developed:

What is the effect of individual marketing on the customer purchase intention in the grocery industry?

A qualitative and quantitative research was done. There was chosen for a qualitative research to gain a better understanding of what drives and motivates behaviour and to provide valuable insights in the opinion of people about individual marketing. A quantitative research was done to provide statistical results. The results of quantitative research showed that when a grocery store provides individual marketing the chance that someone buys a product is higher than when they provide mass marketing. Besides that, qualitative research showed that most of the interviewees are open for individual marketing used by grocery stores. Therefore we can say that individual marketing has a positive effect on customer purchase intention in the grocery industry.

(5)

Quantitative research made clear that the purchase intention increases more when individual marketing is based on purchase history instead of flavour preference of customer’s healthiness. Also interviewees mentioned that they prefer individual marketing based on purchase history. It looks like privacy issues play a role in this result. Furthermore, individual marketing based on customer’s healthiness is not very reliable, because one interviewee mentioned for example that he buys his fruit and vegetables somewhere else.

When a grocery store would like to provide individual- or mass marketing actions the best communication channels to use are e-mail or an app. Quantitative research found that these two channels result in the highest purchase intention. SMS and social media have the lowest purchase intention when individual- or mass marketing is provided.

Finally important to mention is that quantitative research showed that the purchase intention increases more when people receive a discount (individual – or mass marketing) instead of an advice. This is in accordance with the reactions of the interviewees. Some interviewees were not really enthusiastic about receiving an advice of their grocery store. Interviewees mentioned that it is important how advice is given, because most of the time people know already that they do something wrong, and when an advice will be given it is possible that it looks like that the grocery store corrects them. And people do not like to be corrected by their grocery store. Interviewees also mentioned that they want to decide what to eat. An advice has no value for an interviewee because it is always about increasing the sales.

(6)

1. Introduction

Nowadays a growing number of companies in the retail industry starts to realize the potential of customized promotions over mass-marketing promotions (Zhang and Krishnamurthi, 2004). This is because literature in advertising found that traditional media and internet are both easily ignored by people, because most of the messages are not relevant for the customer at the time of exposure. Therefore, individual marketing can be an opportunity (Haq, 2009). When a company understand the individual-level behaviour of their customer they will be able to refine and customize marketing activities at fine segments or even at individual customers (Khan, Lewis, Singh, 2009). However in many cases companies are unable to use the individual-level customer data for profitable marketing activities. This result in uncertainty and concern about the potential benefits of individual marketing (Khan et al, 2009).

Individual marketing can provide different benefits for different kind of companies, for example retailers make use of customized promotions because these programs can help increase store visits and build customer loyalty at their stores (Zhang and Wedel, 2009). There has already been a lot of research done on different factors to influence unplanned purchases, in-store decisions making, purchase behaviour and profit improvements of a grocery store. These researches learned us that factors like loyalty programs (Zhang and Wedel, 2009, Zhang and Breugelmans, 2012, Meyer-waarden and Benavent, 2009), in-store displays, gender, household size, use of shopping list, shopping of aisles, time spent shopping (Inman, Winer and Ferraro, 2009), amount of facings (Van Nierop, Fok & Franses, 2008) and shelf positioning (Van Herpen, van Nierop & Sloot, 2010) can influence customer behaviour in a grocery store. However, there is no research done about the effect of individual marketing in the grocery industry.

(9)

problem for the growth of e-commerce. However, personal information can be used to provide customers personalized products/services and other benefits (Malhotra, Kim, & agarwal, 2004). This result in questions like, how open are customers about their personal information? Can this influence the relationship of individual marketing and customer purchase intention? The Dutch company Culios (culineaire ondersteuning) is also interested to find an answer on these questions. Furthermore, Culios is interested in gaining more knowledge about individual marketing in the grocery industry. That is why this research is done in cooperation with Culios.

The company Culios started 3 years ago to help customers with choosing, buying and cooking their food. Their purpose is to decrease the waste of food, using the latest technological developments. In order to achieve this, Culios provides customers with information via their website and/or via apps for grocery stores. Customers can register themselves, fill in their household size and their food preferences. The customer information gives Culios the opportunity to provide a specific food advise per person/household, in order to better meet the customer demands. Customers expect companies to increase customize their products and services to meet better the demands, which can be reached by interactivity (Ramani and Kumar, 2008). Technological developments have increased the interactivity between customers and companies. The increasing profit pressures, the heterogeneity of customers and the development in technology results in a development that provides survival and success in the interactive environment. Interactions help companies to receive a competitive advantage by understanding the individual customer tastes and preferences (Ramani and Kumar, 2008). Culios uses the interaction with their customers to better meet their personal food demands.

1.1 Problem statement

(10)

revenue and profitability (Khan et al. 2009). However there is still a theoretical lack in the grocery industry on individual marketing, like some fashion retailers already do. Montgomery (1997) showed already that customizing everyday prices by using grocery store scanner data increased the profits of the store. But can individual marketing also provide grocery stores the same benefits as the fashion retailers? Can individual marketing increase purchase intention? Also the company Culios wants to have some more clarity about the possibility of individual marketing in the grocery industry. This proves the need for investigating the following research objective and problem statement.

1.1.1 Research objective

The objective of this paper is to provide information about the possibility and the benefit(s) of using individual marketing in the grocery industry. This will result in recommendations for Culios and other companies in the food business. An example of such a recommendation could be that if grocery stores want to increase customer purchase intention they need to use individual marketing (or not).

1.1.2 Research question

In order to accomplish this research objective, the following research question will be answered:

What is the effect of individual marketing on the customer purchase intention in the grocery industry? During theoretical research, probably some interesting (moderating) factors will be

found.

1.2 Relevance of thesis

1.2.1 Scientific relevance

(11)

1.2.2 Practical relevance

The practical relevance of this research is versatile. Probably, a lot of food retailers would like to make use of individual marketing but they do not know exactly how. This research will provide a better insight of the opportunities for individual marketing in the food business. Furthermore the company Culios will be able to use this research for their app and website development and can decide how they should increase the use of individual marketing themselves.

1.3 Research structure

This paper consists of five chapters (see figure 1). Chapter one is the introduction which includes some information about individual marketing, the problem statement, the theoretical- and empirical research questions and the relevance of this research. Chapter two consist of a theoretical framework which describes the theoretical research questions and will describe the conceptual model and hypotheses. Chapter three describe the research design to make clear how the research is done to investigate the relationship between individual marketing and customer purchase intention. Chapter four will give the results of the research and accept or reject the hypotheses. The final chapter, chapter five, contains the conclusion, recommendations and future research.

FIGURE 1 Thesis design

Introduction (chapter 1)

Providing insight in the relevance of the problem statement of the thesis.

Theoretical framework (chapter 2)

Describes the theoretical research questions according to scientific literature (conceptual model).

Research design and results

(chapter 3 + 4 + 5)

Investigate the relationship between individual marketing and customer purchase intention.

Conclusions, recommendations, further research (chapter 6)

(12)

2. Literature

This chapter consists of the theoretical research in which we investigate the relationship between individual marketing and customer purchase intention in the grocery industry to create a marketing success. A key element for ensuring companies’ success is the creation of superior customer value (Porter, 1996; Khalifa, 2004; Huber et al, 2001). With the use of individual marketing a company can better meet the needs of customers (Ramani and Kumar, 2008), which creates customer value. This can lead to satisfaction and results in customer loyalty and this can drive a better financial performance (Reichheld, 2001).

Already a lot of research has been done about different factors that have an effect on unplanned purchases, in-store decisions making and purchase behaviour in the grocery industry, but the development of the content of individual marketing is still unclear (Zhang and Krishnamurthi, 2004). What is the effect of individual marketing on customers purchase intention in the grocery industry? Which (moderating) factors have an affect on individual marketing and customer purchase intention? This chapter provides a theoretical research about individual marketing in the grocery industry.

2.1 Definition of individual marketing

The central theme in this research is individual marketing. In marketing literature some synonyms can be found for individual marketing, like ‘one-to-one marketing’, ‘mass-customization’, ‘market-of-one marketing’ (Neeraj, Arora, Dreze, et al., 2008) or ‘database marketing’ (Gregurec, et al., 2011). Individual marketing can be defined „as a marketing

strategy in which marketing programs and products meet the needs of individual customers‟.

Klabjan and Pei (2010) describe one-to-one marketing as follows: ‘In one-to-one marketing,

marketing material is targeted and customized for a particular customer and it therefore takes into account his or her particular individual needs‟. According to Neeraj et al. (2008) „one-to-one marketing advocates tailoring of one or more aspects of the firm‟s marketing mix to the individual customer‟. One-to-one marketing is the most differentiated type of marketing

and consist of two forms: personalization and customization. In paragraph 2.2.1 these terms will be explained.

(13)

environment.” Montgomery (1997) defines micro-marketing as: ”Micro-marketing refers to the customization of marketing-mix variables to the store level.” Campo and Gijsbrechts

(2004) consider micro-marketing as follows: ”Micro-marketing refers to the strategy where

the marketing-mix is adjusted to local market characteristics.” Kotler and Armstrong (2006)

consider that micro marketing consist of local marketing and individual marketing. They give the next definition: ”Micro-marketing is the practice of tailoring products and marketing

programmes to suit the taste of specific individuals and locations. Micro-marketing includes local marketing and individual marketing. Local marketing involves tailoring brands and promotions to the needs and wants of local customer groups, cities, neighbourhoods and even specific stores.” As can be seen, local marketing focuses on individual customers and

customer segments.

Database marketing can be defined as „a form of direct marketing using databases of existing

or potential customers to generate personalized communications in order to promote a product or service for marketing purposes‟ (Brown, 2006). According to Blattberg et al.

(2008) database marketing can be defined as „the use of customer databases to enhance

marketing productivity through more effective acquisition, retention and development of customers‟.

Because in this research we would like to look only at marketing based on individual customers and not based on a segment, we will use the term individual marketing with the following definition: „Individual marketing is a direct marketing strategy where marketing

material is targeted and customized for existing or potential customers, in order to meet the specific needs of individual customers‟.

2.2 Benefits of individual marketing

(14)

result in uncertainty and concern about the potential benefits of individual marketing (Khan et al, 2009). But what are the benefits of individual marketing?

2.2.1 Personalization and customization

Greater customer satisfaction, higher profits and differentiation (or competitive advantage) are important benefits of individual marketing (Neeraj et al 2008). Neeraj et al. (2008) divided one-to-one marketing in personalization and customization. Amazon.com uses, for example, personalization. Amazon.com knows which book or music to recommend to which user, which result in greater customer satisfaction and higher profits. This can be called marketing productivity, because there is a reduction of marketing activities and this increases return on investment (Gregurec et al. 2011). Also customization creates greater customer satisfaction, but more important, is the potential advantage of differentiation. Customization is most of the time active in highly competitive industries. Customization differentiate the product and makes the product itself unique. Dell Computer is an example of customization in the computer industry. The customer can order a custom-made computer at his or her needs and likes and this increases customer utility (Neeraj et al., 2008). But today the technological ingredients for product customization are accessible at all companies. This implies that customization can not guarantee a competitive advantage. Only early adopters may achieve a first-mover advantage (Neeraj et al., 2008) and they are the leading companies in an industry (Petrison and Blattberg, 1997). Personalization and customization are also possibilities for grocery stores. Paragraph 2.3.3 and 2.3.4 explains this more.

2.2.2 Purchase intention, revenue and profitability

(15)

purchases and lead to profit improvements. Khan et al. (2009) found the benefits of customizing promotions based on individual-level information. They estimated a joint model of purchase incidence and expenditure to make clear the impact of different promotion incentives on purchase decisions. The results showed an important benefit of customized promotions, namely an increase in revenue and profitability (Khan et al. 2009, Neeraj et al. 2008 and Chen, Narasimhan, Zhang, 2001). This can be maximized when individual preferences and the purchase cycle information is used as a guideline for marketing tactics. This result is interesting for traditional and online groceries, because they are struggling with a changing competitive dynamic (Khan et al. 2009).

Important benefits of customized promotions used by retailers are an increase in shopping basket size, store visit and build customer loyalty at their stores (Zhang and Wedel, 2009). Also the profit of the company increases more when individual marketing is used instead of mass marketing. Figure 2 will clarify the difference in profits between a company that uses individual marketing and a company that uses mass marketing (Chen et al. 2001).

FIGURE 2

Individual marketing company competes with mass-marketing (Chen et al. 2001)

0,3 0,32 0,34 0,36 0,38 0,4 0,42 0,44 0,46 0,48 0,5 1 2 3 4 5 6 7 8 9 10

Targetability of the individual-marketing firm

P

rof

it

However, what about the purchase intention of customers when individual marketing is used? Purchase intention of a customer refers at specific scales which permit verbal indications of likely buying behaviour (Gruber, 1970). Buying behaviour in a store is driven by value perceptions and value perceptions of customers are based on price (the nonmonetary and

Profit of the Individual-Marketing company

(16)

monetary aspects of what customers give up in an exchange) and perceptions of product quality (what customers get from an exchange) (Zeithaml, 1988). Using individual marketing, a company has better possibilities to meet the need and expectations of their customers (Ramani and Kumar, 2008). This creates value for the customers and expected is that this has a positive effect on customer purchase intention. This leads to the following hypothesis.

H1: Compared to mass-marketing, individual marketing is associated with a higher customer purchase intention in the grocery industry.

2.2.3 Customer - firm relationship

(17)

H2: When a customer makes more use of the services of a company, the purchase intention will increase more when this customer receives individual marketing instead of mass marketing, than when a customer makes less use of the services of a company.

2.3 Customer information

2.3.1 Openness of customers about their personal information

(18)

H3: When a customer is more open about personal information (less worried about their privacy), the purchase intention will increase more when this customer receives individual marketing instead of mass marketing, than with a customer that is less open about personal information (more worried about their privacy).

2.3.2 Purchase history

As paragraph 2.2.1 already described is it possible to divide individual marketing in personalization and customization (Neeraj et al 2008). Implementation of customization can be based on transaction history, so previous purchases of customers are known (Khan et al. 2009). According to Neeraj et al. (2008), also personalization is mainly based on previous behaviour. Search engines like Google and Alta Vista remember the types of searches that can be undertaken over time. Returning to one of these sites and searching on a similar topic will result in a faster and more efficient response (Neeraj, et al. 2008). Also some other researches showed that individual marketing is mainly based on previous purchases and behaviour. For example Zhang and Krishnamurthi (2004) stated that „the rapid growth of the internet

provides an opportunity for personalized promotions at individuals and update offerings based on the most recent purchase data‟. Also Chen et al. (2001) stated that „in many individual-marketing situations, information about individual customers is obtained from the records of their previous purchases‟. And the purpose of the article of Heilman et al. (2003) is

‘to demonstrate the importance of determining the optimal amount of purchasing information

to use when classifying consumers in consumer packed goods categories for direct marketing purposes‟. Concluded can be that previous purchases of customers and search behaviour is

important for individual marketing.

2.3.3 Flavour preferences

(19)

flavour classification can be important to use for individual marketing some information about this will be provided.

Klosse found that when we classify flavours it is important to do this by using three dimensions; contracting, coating and flavour richness. Contracting and coating are the two main dimensions for mouth feel where contracting is about the acidity and coating is about the creamy or fatty substances that leaves products behind. Flavour richness is the relative intensity on the level of flavour. These three dimensions form a basic structure of a three dimensional model: the Flavor Style Cube (see figure 3).

FIGURE 3

Flavor Style Cube (Klosse, 2004)

As can be seen, 8 different flavour styles arise with each their own level of coating, contracting and flavour richness. Table 1 shows for every flavour style its own typical food and drinks.

Table 1. Characterization of flavour styles and examples of products (Klosse, 2004)

Flavour Coating Contracting Flavour Food Drinks

style richness

Neutral Low Low Low Rice, white bread, Water poached/steamed

fish, boiled egg

(20)

melon, avocado, of sweet Gouda cheese,

Balance High High Low Vinaigrette, creamy Yoghurt,

low tomato sauce balanced

daily wines

Fresh Low High Low Apple, orange, Orange juice lemon, salad, acidic white oysters, vinegar, wines fresh goat cheese

Robust Low Low High Biscuits, toast, nuts, Coffee, red Chips, grilled meat, wines French fries

Rich High Low High Vanilla, caramel, Sweet, full- Whipped cream, bodies wines Peanut butter, mush-

Rooms, braised meat

Balance High High High See flavour rich see flavour rich

high

Pungent Low High High Peppermint, onion Champagne Mustard, horseradish,

Red pepper, ginger

Experiences based on the model of flavour styles show that this concept is useful in the selection of flavours that fit the individual preference of customers. Flavour styles may facilitate customers in selecting foods that correspond to their expectation (Klosse, 2004). From this we can conclude that there is a relation between flavour styles and the individual preference of customers. However, how can we use this information for individual marketing?

2.3.4 Purchase history, flavour preference or customers‟ healthiness?

(21)

download sites can provide over 2.000.000 songs. Because of this amount of songs it becomes a problem to find out favourite songs. Therefore a music recommendation system is developed. This system can recommend the right songs when an user specifies his/her music genre or music emotion category. For example, someone wants to enjoy classical songs that makes him calm. The only thing that needs to be done is to press two buttons and the system will list all the songs with classical genre and a calm emotion. It is also possible that an user select a song and that the system find songs that ‘sound similar’ with the given song (Zhu, Shi, Kim, Ki-Wan, 2006). This is a good example of what is meant with using flavour preference for individual marketing in the grocery industry. For example when someone likes a ‘fresh flavour’ (see table 1) a recommendation system list products that have a similar flavour. Individual marketing based on personalization is used. However, also custom-made dishes based on flavour preference can be recommended. This is an example of customization. Expected is that customers like products in the same flavour category. The recommendations can provide a variety of products and dishes, because Thiele and Weiss (2003) implies that customers have an inherent preference for variety. Because a recommendation system can provide a lot of variety it can be compared with a competitive customized promotion. This is a promotion on another product than someone bought last time, in order to stimulate buying a variety of products. A competitive customized promotion is more profitable for offline stores (Zhang and Wedel, 2009). Because of this information and the popularity of recommendation systems, like the music example, the following hypothesis is made.

H4a: When individual marketing is based on customer flavour preference, which is rated by using data of previous purchases, a higher purchase intention will be obtained, compared to individual marketing based on purchase history only.

Furthermore, variety in food consumption is important for nutrition and in protecting against chronic diseases (Thiele and Weiss, 2003). For example, nowadays an increasing number of people are obese (Baum, 2007)1. Is it an opportunity for grocery stores to advise theses people to eat more healthy by using individual marketing? A customers’ trust is important for an advisor. Trust can be build by connecting deeply with those someone advise. This can increase value, because the advisor support their customer in opening to new perspectives and

(22)

define and support their goals. Through this connection the role as advisor transforms into a highly value ‘trusted advisor’. A trusted advisor has a deeper, more meaningful, more rewarding and a long term relationship with a customer (Keffeler, 2009). When more information is known about customers it will be easier to advise these people in their food choice and keeps people healthy. This is not only for people that are obese, but also for example for people that eat too much salt or too less vegetables or fruit. Nowadays, most of the time customers make their food choices more conscious than in the past (Trendstyle, 2011) and 41% of all customers like to eat healthier in the Netherlands (Paulussen and Temminghoff, 2010). Therefore, the following hypothesis is made.

H4b: When individual marketing is based on customer’ healthiness , which is rated by using data of previous purchases, a higher purchase intention will be obtained, compared to individual marketing based on purchase history only.

Thiele and Weiss (2003) found that variety purchases, the number of different products a household is consuming in a specific time period, in food increases more when income is higher. This meant that when customers have an higher income they buy more different food products. Customers that have a lower income buy less different kind of food products and therefore variety is less important. Also Mead, Gittelson, Roache and Sharma (2010) found that people with a low socioeconomic status in general have a less healthy dietary behaviour. This meant that financial resources have a significant impact on peoples ability to engage in healthier dietary behaviours. Therefore, the following hypotheses are made.

H5a: When a customer has a lower income, the purchase intention will increase more when this customer receives individual marketing based on customer’s purchase history versus mass marketing, than the increase in purchase intention when a customer has an higher income.

(23)

H5c: When a customer has an higher income, the purchase intention will increase more when this customer receives individual marketing based on customer’s healthiness, which is rated by using data of previous purchases, versus mass marketing, than the increase in purchase intention when a customer has a lower income.

2.4 Channels for individual marketing

Individual marketing became popular in grocery stores through loyalty programs. These programs prescribe promotions to households by using the information of the shopper card data. The promotions are usually delivered printed, by coupons or sent by direct mail (Zhang and Wedel, 2009). Retailer-customized coupon campaigns are defined according to Venkatesan and Farris (2012) as ‘campaigns that, unlike sales promotions and free standing

inserts coupons, retailers provide only to their best customers and include offers that are customized to consumers‟ preferences‟. They found that retailer-customized coupon

campaigns have a positive exposure and redemption effect on customer purchases. However, nowadays we live in a digital world. At this moment, approximately two billion people use the internet and about five billion people use mobile phones. It becomes increasingly difficult to go somewhere without any digital technology and a place where no digital technology is used will be hard to find (Greengard, 2011). For this reason the possibilities of mobile phones, e-mail and social media will be explained for individual marketing.

2.4.1 E-mail marketing

(24)

Watjatrakul and Drennan, 2005). For example, customers that sign up for the newsletter of their favourite companies.

E-mail marketing can also damage business image when unsolicited commercial or ‘spam’ e-mail is used. Morimoto and Chang (2006) showed that participants found commercial e-e-mail (spam) much more intrusive than postal direct mail due to inappropriate content and the amount of spam every day. Also the participants perceived spam to be more annoying than postal direct mail. Concluded can be that unsolicited commercial e-mail is a problem in direct marketing and negatively influence customers’ attitudes.

Ansari and Mela (2003) found an approach for customizing the information on the internet. They used click stream data to optimize the design and content of the communication for each user. The model was applied to permission based e-mail marketing. They found that the order of content matters and that there is a great difference between users in what they like in terms of effectiveness in design and content. The results showed that it is possible to increase the response rates (expected clickthroughs) by 62% when the e-mail’s design is customized. There is a theoretical lack about the use of e-mail marketing in the grocery industry. However, the following hypothesis is derived by using the literature about the benefits that are described about e-mail marketing in general and the results of the research of Ansari and Mela (2003)

H6: E-mailing as communication channel for individual marketing is associated with a higher purchase intention, compared to e-mailing as communication channel for mass marketing.

2.4.2 Mobile marketing

In this paper the definition of Leppäniemi et al. (2006) is used to define mobile marketing:

„the use of a mobile medium as a means of marketing communications‟. Communication is

(25)

and it is a new marketing activity that can reach potential customers, which will result in more revenues (Friedrich et al. 2009).

According to Kotler and Armstrong (2006) a marketing mix is a combination of tactical marketing tools that a company uses to satisfy the target market. When we take the four P’s into account and look at the mobile industry we can conclude that mobile marketing has a lot of impact on the four elements, because a new service is created (product) that can yield higher profits (price), increase efficiency of product distribution (place) and enhanced the communication in existing and new communication tools (promotion). Furthermore mobile marketing has impact on the four C’s, where the essence of customer needs is much more important (Lauterborn, 1990). Mobile marketing allows marketers to build up to-date customer databases, to better meet the needs of customers (customers), the costs can be reduced by providing more convenience to customers (cost and convenience) and mobile marketing is an effective communication tool. Finally it allows customers to reach (or be reached by) companies anywhere and anytime (communication) (Smutkupt et al., 2010).

(26)

H7a: Mobile phones as communication channel for individual marketing is associated with a higher purchase intention, compared to mobile phones as communication channel for mass marketing.

SMS advertising is a part of mobile marketing and it allows marketers to send text messages at customers by using a mobile phone. It is a form of individual marketing. Goods and services can be promoted through personalized messages that are sent to individual customers. A lot of businesses already implemented SMS advertising to update their customers (Amin, Amin, Patel, 2011). Customers find SMS advertising more favourable when it provides them entertainment and information. However, a lot of customers hold negative attitudes toward SMS advertising, because of negative experiences. Customers want to control the types of SMS advertising they receive. Some ads are personally intrusive and customers delete these SMS ads without reading them (Amin, et al. 2011). Nowadays mobile app advertising is a new business opportunity. App is an abbreviation for application and is a piece of software that can run for example on a mobile phone. A survey showed already that 43% of the 82% of people who has a cell phone in the U.S. have apps on their phones. This trend will continue until 2014 (Gina, 2010). The advantage of apps is that they are free or inexpensive and it is easy to acquire them or getting rid of them. Advertising into mobile apps is finding it’s way. The ad-clicking issue in an app is investigated by Gina (2010). The results showed that 33% of Android users clicked on an ad within the app, in contrast with 15% of BlackBerry users. However, a free app is a challenge for the developer to generate revenue (Gina, 2010). According to the negative results of the SMS research of Amin et al. (2011) and the positive results of the use of apps by Gina (2010) the following hypothesis is derived.

H7b: An app as communication channel for individual marketing is associated with a higher purchase intention, compared to the use of SMS as communication channel.

2.4.3 Social media

(27)

opportunities for purchase decisions (Hamill et al. 2010) and personalization (Neeraj et al. 2008).

The biggest internet trend in the 21st century are social networks. This media provides a lot of information that people are revealing about themselves. Users are part of a large international community and share opinions, information and interests with other members. This customer information is an opportunity for marketers for building relationships and for advertising on social networks (Gregurec et al. 2011). In 2011 the investment in worldwide social networks advertising increased with 8,7% in comparison of 2009. This information proofs that marketers nowadays pay extra attention to social networks. They use data from social network users to target them individually (Gregurec et al. 2011).

A relevant example of a social network that shows individual promotions is Facebook. This is the most popular social network. Facebook is used amongst friends, family and co-workers to communicate with each other. In 2004 Facebook started as an on-line database, but today it has more than 500 million active users worldwide. More than 250 million people are active each day and more than 190 countries advertise on Facebook. This is a large number of countries and much more companies are active on facebook already. However, thanks to the database of Facebook the ad of a company only appears on profiles that are relevant for individuals (Gregurec et al. 2011). From this we can conclude that social networks are an important channel for collecting individual information which can be used for individual marketing. Mathur, Black, Jiangmei, Berger, Weinberg (2012) did a research about the impact of the use of social media on customer buying behaviour. They found that the usage of social-media has a statistically significant incremental effect on purchasing behaviour. There is a theoretical lack about the use of social media by grocery stores, but the information of Gregurec et al. (2011) and the research of Mathur et al. (2012) leads us to the following hypothesis.

(28)

2.5 Conceptual model

After theoretical research and the hypotheses the conceptual model is created and can be found in figure 4. The main effect is between individual marketing and purchase intention (the bold arrow). Due to the theoretical research results we can expect other independent factors to also have an influence on purchase intention. Because individual marketing is a relatively new subject, especially in the grocery industry, less information can be found. Moderator effects were only used when already interesting results were found in previous research. Moderator effects that were not found in literature were left out. Therefore, for instance we found that income level can have a moderator effect on individual marketing based on purchase history, flavour preference or customer healthiness on purchase intention. We did not found that income can have an effect on individual marketing via e-mail, mobile phone or social media and purchase intention. The same applies to openness about personal information and customer-firm relationship. Therefore the different moderators are not used for every relationship between independent and dependent variable.

FIGURE 4

Conceptual model

H1

Individual marketing via: - Email

- Mobile phone - Social media Openness about

personal information

Individual marketing Purchase intention

Customer-firm relationship

Income H3

H2

(29)

3. Research design

In chapter two we explained different aspects of individual marketing according to scientific literature. Chapter three and four consist of the empirical part of this research in which we will explore the possibilities of individual marketing in the grocery industry. The purpose of this empirical research is to provide insight in the effect of individual marketing on the customer purchase intention and different factors that can influence this effect.

This chapter consists of the research design. First, the research methods will be explained. Secondly, the stimuli for measuring the dependent and the independent variable and the moderators will be given. Finally an analysis plan will be made. Chapter four and five provides the results of this research.

3.1 Research method

The research methods that are used for this research are a qualitative research, interviews, and a quantitative research, questionnaire, to gain the best customer insights. These two methods result in primary data (Malhotra, 2007).

3.1.1 Qualitative research

A total of 6 interviews were done for qualitative research. This research provides data that is obtained from a relatively small group of respondents, and the results are not analyzed with inferential statistics. This differentiates qualitative research from quantitative research, which is analyzed for statistical significance. Furthermore, qualitative research gives us a better understanding of what drives and motivates behaviour (Malhotra, 2007). Another reason to choose for qualitative research, is because at the moment not much is known about individual marketing in the food industry. Also the opinion of customers about individual marketing in the grocery industry is not known. Therefore, qualitative research can provide valuable insights.

(30)

indicates it is just a guideline. This means that during interviewing also a lot of other questions and subjects were asked and discussed.

The people that participated in these interviews were relatives and friends. The participants were between 24 and 55 years old. An appointment was made with the participants to reserve some time for the interview. Every interview took about 30 till 45 minutes. The most important results of these interviews can be found in chapter 4 and an extensive report can be found in appendix 2.

3.1.2 Quantitative research

Besides a qualitative research also a quantitative research, a questionnaire (see appendix 3), was done to analyze the results for statistical analysis. In order to gather quantitative data, a questionnaire was made, which is a structured way of getting results. Paragraph 3.2 provides more information about the creation of the questionnaire. The questionnaire could be found online on thesistools.com. At first the company Culios has sent out the link of thesistools.com at their members by using their newsletter (see appendix 4). 47 Culios members participated in the questionnaire, but the results of 10 participants were deleted because of missing values. This resulted in a total of 37 Culios members that participated in this questionnaire. This is a small amount and therefore we choose to send the link of the questionnaire also to friends, family, acquaintances and students to gather more results. To approach these people e-mail, facebook and hyves were used. A total of 114 friends, family, acquaintances and students participated in this questionnaire. The results of 5 participants were deleted because of some missing values. This resulted in a total of 109 participants. The two samples together include 146 participants. In chapter 5 a descriptive of the sample is given and the hypotheses will be tested.

3.2 Stimuli

By creating the questionnaire different stimuli were used for measuring the independent and dependent variable and the moderators.

3.2.1 Independent variable

(31)

questionnaire described different situations. In every situation individual marketing was based on another factor (purchase history, flavour preference or customer healthiness) and in every situation people received individual marketing in another way (e-mail, mobile phone (SMS or app) or social media). In this way 12 different situations were created were individual marketing was presented at a participant of the questionnaire (see table 2). In comparison to these 12 situations, 4 situations were made when mass marketing was used via e-mail, mobile phone (SMS or app) and social media (see table 3). Each situation can influence the dependent variable, purchase intention, separately and provides information which situation influences the purchase intention the most.

Table 2. The possibilities of individual marketing

Possibilities of individual marketing Via e-mail based on purchase history Via e-mail based on flavour preference Via e-mail based on customers’ healthiness Via SMS based on purchase history

Via SMS based on flavour preferences Via SMS based on customers’ healthiness Via app based on purchase history

Via app based on flavour preference Via app based on customers’ healthiness Via social media based on purchase history Via social media based on flavour preference Via social media based on customers’ healthiness

Table 3. The possibilities of mass marketing

Possibilities of mass marketing Via e-mail

Via SMS Via app

(32)

3.2.2 Dependent variable

The dependent variable is purchase intention. The measurement question of Juster (1966) was used for measuring purchase intention. This question includes: ‘What do you think the chances are that you or someone in the household will buy a …… ?’ Ordinal data, by using a 7 point likert scale from ‘absolutely no chance’ till ‘absolutely certain to buy’, was used to measure the purchase intention of customers (Juster, 1966) in the 16 different situations that are described earlier.

3.2.3 Moderators

There are three moderators in this research, openness about personal information, customer-firm relationship and income. The conceptual model and hypotheses 2, 3 and 5A, 5B and 5C makes clear which relationships are expected.

Some questions were made to measure the three moderators. The moderator, customer-firm relationship, was only measured by the Culios members. This meant that the question for measuring customer-firm relationship could be found in the questionnaire for the Culios members, but not in the questionnaire to friends, family and students. The rest of the questionnaire was exactly the same for the Culios members as for friends, family and students. To measure the customer-firm relationship a matrix was made were participants of the questionnaire could fill in which services of Culios they use, for example searching dishes, using shopping list, searching preparation of the dishes, etc. and how often people use these services, for example, every day, once a week, once a month, etc. In this manner we know how often and what people use their Culios account for. To measure the openness of customers about their personal information 7 statements of the researches of Malhotra, Kim, & Agarwal (2004) and Gao, Rohm, Sultan and Huang (2012) were used. On a 7 point likert scale a participant of the questionnaire fills in if he/she agrees or not agrees with these statements. Finally, the income of the participants was asked to find an answer for hypotheses 5A, 5B and 5C.

3.2.4 Procedure

(33)

subject what means that it is important that the participants read these questions carefully to understand what was meant, and to see the differences between the questions.

In the first questions the participants of the questionnaire were asked to complete some questions that measured the purchase intention when the 4 possibilities of mass marketing were used and when the 12 possibilities of individual marketing were used. These first questions included just an advise and no discount was given. There was chosen for an advise instead of a discount because often price discounts damages brand equity and erodes profit margins. Furthermore customers develop low expectations and they will fixate on price and lose their interest in marketing communications (Marco and Luc, 2010). However, price discounts or for example a bonus pack can be very effective for groceries, because customers are sensitive for this kind of promotions (Mishra and Mishra, 2011). Therefore, after the questions where only an advice was given a question was made where individual marketing and mass marketing included a 10% price discount to see how people respond to this. After these questions, the participants had to fill in some more questions that measured the moderating effects, openness about personal information and customer-firm relationship. Only the Culios members had to fill in the question about customer-firm relationship. Finally, also some general questions were asked like gender, age and income which provides some information about the sample. After these general questions the respondent finished his/her participation in this research.

3.3 Analysis plan

In this research we are interested in the relationship between different independent variables and the dependent variable, purchase intention and the effect of three moderators. All hypotheses will be analyzed with statistical tests with a significance level of 5%. As mentioned already there are 4 different channels used for individual marketing (e-mail, SMS, app and social media) and individual marketing is based on 3 different factors (purchase history, flavour preference or customer healthiness). Together they form 12 possibilities for providing individual marketing (see table 2).

(34)

differences in the means of paired samples. With paired samples we mean that the two sets of observations relate to the same respondents (Mahotra, 2007).

(35)

4. Results qualitative research

This chapter contains the results of qualitative research. A total of 6 people participated in the interviews. The most important findings of the qualitative research, the interviews, will be given. An extensive report of the interviews can be found in appendix 2.

4.1. Experiences and associations with individual marketing

All interviewees already had some experience with individual marketing. Examples of individual marketing actions that were mentioned by the interviewees are the following:

- A subscription on a motor magazine provides some interesting discounts on motor clothes and events.

- Specific e-mails via booking.com for hotels. - Telephone calls of the bank or the auto dealer.

- Discounts via NS on a route that a interviewee travels a lot.

- E-mails with (possible) interesting products from companies where an interviewee bought something before.

These experiences resulted in both positive and negative associations with individual marketing.

Positive associations are for example that individual marketing is a marketing action that is really interesting for a specific person, because the action connect perfectly with his/her interests. Interviewees also mentioned the ease of use of individual marketing, because long searching for a product is not necessary anymore because companies provide already interesting products for a specific person. An interviewee also said that individual marketing is better for the environment. At the moment leaflets are spread out to everyone, by using individual marketing, only interesting groups of people will receive this leaflet.

(36)

does not want a company to help her. As can be seen most of the interviewees see two sides of the coin, the positive and negative aspects of individual marketing. Some interviewees are more positive and some are more negative towards individual marketing. Most of the times this is a result of previous experiences or associations with individual marketing.

4.2 Openness about giving personal information

When we continue with analyzing the interviews, openness to giving personal information is the next important point to mention. The interviewees know that companies have a lot of information about their customers and that the amount of information is growing. The interviewees react differently to the fact that companies have a lot of information about their customers. One interviewee mentioned that he thinks it is no problem when a company has some information about him, but not too detailed. He says it is a disturbing thought when a company has a lot of information about him. For him it is no problem when a grocery store knows what he bought in the past, and that a grocery store uses this information for individual marketing. However, that is enough, a grocery store should not have more information. Another interviewee has the same opinion, and said that it is no problem when a grocery store has some knowledge about her. However, a grocery store do not have to analyse her lifestyle. It is fine when a grocery store knows what she spends for groceries, but she thinks there is no need for a grocery store to know what she spends for holidays or luxuries. On the other hand, two other interviewees have a Bonus-card of the Dutch grocery store Albert Heijn and they know that this provides the Albert Heijn with information about them. However, they choose to use this card. These interviewees do not see any danger in the fact that a grocery store has this personal information. We can conclude that the interviewees do not have a problem with the idea of grocery stores having some knowledge about their customers. For instance that the grocery store knows what the customers bought already. However, a grocery store should not go too far or too detailed into their personal information.

4.3 Individual marketing used by grocery stores

(37)

Furthermore, he only likes to receives this individual marketing actions when he asks for it, and he does not want a grocery store to send him anything without his approval. Also another person said she likes the idea that grocery stores would implement individual marketing, but she is not sure if she really wants to use it. Of course it can provide ideas for dishes or products, but people will need to get used to it.

Also someone is really curious about individual marketing currently used by grocery stores. However she is not sure if she would make use of it all the time. Another important fact is that one interviewee said that he probably will make use of individual marketing when it really adds something to the service of the grocery store. He likes cooking, so when a grocery store would give him some good advices for a nice dish, with a lot of variation, it is a nice addition for him. However, he said that he also likes the freedom of making his own decisions. Therefore he also agrees with the previous made comment that he only likes to receive individual markets on his own request. Someone else is not interested in individual marketing at all. She wants to make her own decisions and thinks of individual marketing as spam. When she wants a special dish she likes to search on a website, and she does not want to receive messages from a grocery store about it. Just one person is more enthusiastic about individual marketing used by grocery store, and thinks of it as an interesting opportunity that grocery stores would implement individual marketing. We can say that most of the interviewees are open for individual marketing used by grocery stores, but most of the times only when they ask for it, and not when a grocery store sends them individual marketing without approval. Interviewees also think it is important to make their own decisions and keep their own freedom.

4.4 Individual discount versus individual advise

(38)

receive an advise they will granted it for knowledge but probably do nothing with it. Two people said that when an advise will be given it is possible that it looks like that the grocery store knows it better. It is important how advise is given. Most of the time people know already that they do something wrong, and that a grocery store does not have to teach them something. Only one person said that he also likes an individual advise, because it can help people in deciding what to eat. When we see the reactions most of the time people are not really enthusiastic about receiving an advise of their grocery store.

4.5 Communication channels

The communication channels a grocery store will use for individual marketing can be important. Most of the interviewees said that receiving an e-mail or receiving a message via mobile phone (SMS and app) are the most useful. Two interviewees mentioned that when a company is calling this is distracting and annoying. Also some interviewees said that receiving an individual message via only one channel is enough. When a grocery store will send individual messages via different channels interviewees think of it as spam and this is annoying. One of the interviewees already uses the website of a grocery store to see the discounts. She also uses this website sometimes for searching a nice dish. This interviewee does not like to receive messages by e-mail or mobile phone, but she prefers a good and easily used website to search for something when she is looking for it.

4.6 Other interesting results

Some other interesting results of the interviews are the following:

- When a grocery store provides individual marketing based on products someone bought in the past they know also which products this person does not buy at the grocery store. A grocery store can do something with this information. For example when someone never buys toilet articles this person probably buys this somewhere else. A grocery store can give this person some interesting discounts or advises to make it more interesting to also buy these products in the grocery store.

- Most of the people do not know exactly what a grocery store does with personal information. Therefore, it can be important that a grocery store makes more clear were they use their customer information for. Grocery stores also need to communicate to their customers that they are really careful with personal information.

(39)

marketing. Furthermore, grocery stores will need to dose their marketing actions and not overload their customers.

- Coaching can be a problem, For instance one interviewee buys always his fruit and vegetables somewhere else, and not in the grocery store. Therefore the grocery store does not know this, and can not coach this person correct.

- When an individual marketing action is given via an app or website the content of the app or the website from the grocery store is important. For example it can be useful to have a feedback button. People can give their feedback when they made some dishes. A grocery store can use this feedback. It also can be handy when an advise gives the amount of calories in the dish. Finally the choice between a simple and a luxury dish is important, because when someone has only 20minutes for cooking and they advise this person a dish that takes one hour this person will probably not use this advise. - It is also important that the advises are different every time to provide variation.

However, the advises need to perfectly match the preferences of a person otherwise this person is not interested in the advises anymore.

- Also the time of receiving individual marketing can be important. Some interviewees decide what to eat when they are in the grocery store and some interviewees decide before they go shopping what to eat.

- Some people say that also individual marketing and mass marketing can go together, because someone can make use of both actions, and buy food for two days instead of one.

(40)

5. Results quantitative research

This chapter will describe the results of quantitative research. First an analysis of the sample will be given. After this the Cronbach’s alpha will be computed and the hypotheses will be tested.

5.1 Descriptive data

A total of 37 Culios members (=sample 1) participated in the questionnaire and a total of 109 friends, family and students (=sample 2) participated in the questionnaire. Both samples will be described separately to clarify the differences and agreements.

The participants of sample 1 are between 27 and 84 years old, with an average age of 53.1 (SD = 14.930). The participants of sample 2 are between 18 and 79 years old, with an average age of 34.2 (SD = 12.597). This means that there is a difference in age between these two groups, the average age of the participants in sample 2 is lower than the average age of the participants in sample 1. The results of an independent sample t-test shows us that this difference is significant with t (2, 146) = -7.528 and p = .000. The distribution of gender is in both groups almost the same. The females predominate with 67.6% in sample 1 and with 66.1% in sample 2. These percentages gave a nice overview of the representativeness of the sample, because most customers of the retailer are female (Kumar, Shah, Venkatesan, 2006). See table 4 for an overview.

Table 4. Age and gender of the two samples

Sample 1 Sample 2 N Percentage N Percentage Male 12 32.4% 37 33.9% Female 25 67.6% 72 66.1% Years Years Average age 53.1 34.2

(41)

Table 5. Overview of the two samples about communication channels Sample 1 Sample 2 N Percentage N Percentage E-mail 37 100% 109 100% Mobile Phone 33 89.2% 109 100% Social media 24 64.9% 90 82.6%

When we look at mobile phones 60.6% of sample 2 already has a Smartphone, and 40.5% of sample 1 has a Smartphone. One participant of sample 1 said that he/she would like to have a Smartphone after more than 6 months. In sample 2 two participants said that they would like to have a Smartphone after more than 6 months, and eight participants would like to have a Smartphone within 6 months. This means that more participants of sample 2 would like or have already a Smartphone than sample 1 (see table 6).

Table 6. Overview of the two samples about Smartphones

Sample 1 Sample 2

N Percentage N Percentage

Smartphone 15 40.5% 66 60.6%

Within 6months 0 0% 8 7.3%

After 6months 1 2.7% 2 1.8%

Finally we can say something about the income level of both samples. As can be seen in table 7 most of the participants of sample 1 have an income between €2700-€5400 per month. For sample 2 most of the participants have an income less than €2700 per month. This difference in income level can be explained by the fact that there is a difference in average age between these two groups, sample 2 includes younger people and also for instance students who will have a smaller income than people with a (full time) job.

Table 7. Overview of the two samples about income level

(42)

As can be seen there are some differences but also some agreements between these two samples. For testing the hypotheses we will combine these two samples to increase the amount of data for a more reliable result. However a disadvantage of taking these two samples together is that the results of the hypotheses will not show any differences between these two groups. Besides that, maybe on certain situations these two groups reacted differently, and what we will see in the results will be the average of those two groups. However because of the larger amount of data used to test the hypotheses the results will now be more reliable than when keeping the groups separated.

5.2 Cronbach’s alpha

The questionnaire included multiple questions that measured the same subject. We would like to decide if these different questions are consistent in what they indicate. Therefore it is important to measure the internal consistency of these items with a reliability analysis. This is done by using the Cronbach’s Alpha. The coefficient varies between 0 and 1 and when the coefficient is 0.6 or higher there is satisfactory internal consistency reliability (Malhotra, 2007). As can be seen from the table below (table 8) the different questions measured by using a 7-point likert scale show a satisfactory internal consistency reliability above 0.6 (without deleting any item).2 In further analysis, the average of the different questions that are asked were used to represent this construct.

Table 8. Cronbach’s Alpha

Measures CAa Deleted item CAa

Mass marketing by using e-mail, app, SMS and social media 0.807 Via SMS 0.808 Individual marketing based on purchase history provided by 0.859 Via SMS 0.880 using e-mail, app, SMS and social media

Individual marketing based on flavour preference provided 0.819 Via SMS 0.856 by using e-mail, app, SMS and social media

Individual marketing based on customer healthiness 0.899 Via SMS 0.923 Provided by e-mail, app, SMS and social media

Individual marketing provided by e-mail based on purchase 0.750 Customer healthiness 0.783 history, flavour preference and consumer healthiness

Individual marketing provided by an app based on purchase 0.804 Customer healthiness 0.836 history, flavour preference and consumer healthiness

Individual marketing provided by SMS based on purchase 0.934 Customer healthiness 0.938 history, flavour preference and customer healthiness

Individual marketing provided by SMS and an app based on 0.875 - - purchase history, flavour preference and customer healthiness

Individual marketing in the grocery industry

Individual marketing in the

grocery industry

Individual marketing in the

grocery industry

Master Thesis, MSc Marketing Management

University of Groningen

Faculty of Economics and Business

Department of Marketing

June, 2012

Joyce Gussenhoven

Student number: 2032910

Lierstraat 31

9742 PA Groningen

+ 31 6 49 89 22 04

m.j.gussenhoven@rug.nl

Preface

Summary

Table of Contents

1. Introduction

2. Literature

3. Research design

4. Results qualitative research

5. Results quantitative research