‘Subscription Retailing: Which variables influence the participation intention towards a subscription program?’

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‘Subscription Retailing: Which variables influence the

participation intention towards a subscription program?’

University of Groningen

Faculty of Economics and Business

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Acknowledgement

I would like to take the opportunity to express my gratitude towards the people that made the realization of this thesis possible. Firstly, I would like to thank my supervisor Prof. Dr. Laurens Sloot on his great feedback and the way in which we worked together to produce this thesis. The excitement upon a new development within the retail sector lead to a very

interesting topic in which we worked with a lot of enthusiasm. Second, I would like to thank the respondents of the survey for the investment of their time and effort into the survey. Lastly, I would like to thank the fellow thesis students for their critical view and beneficial remarks regarding the thesis.

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Subscription Retailing: Which variables influence the

participation intention towards a subscription program?

Jorg Eising

University of Groningen, The Netherlands

ABSTRACT

Subscription retailing is a new development in which the retail sector attempts to use

subscription programs into their business model. This study investigated possible influences on the perception towards such a subscription program within the grocery sector. By using self-collected data from a survey, a regression analysis is performed to determine which variables influence the participation intention towards a subscription program. The findings of the study suggest that the privacy trust image in the store, overall store evaluation, and

consumers who are promotional prone and have a high total spend are key aspects of a successful subscription program. Managers of stores in a retail-setting can create an

advantage by targeting this type of consumer who are more open towards participating in a subscription program.

Keywords: Subscription program; loyalty program; retail; subscription retailing; participation intention; privacy trust image; store loyalty; store satisfaction; promotional proneness

1. INTRODUCTION

1.1 Loyalty Programs

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Palmatier, 201). By creating a loyal consumer, a competitive advantage can be created, and therefore a loyal consumer can be viewed as a valuable asset of a firm (Srivastava, Shervani en Fahey, 2000). As an example, Dutch grocery retailer Albert Heijn uses a so-called “Bonus card” to reward their customers for their loyalty. In return, Albert Heijn can create a large database with data of their customer’s buying behavior. These loyalty programs are a form of membership where it says nothing of cost or price, while there can be great benefits that the customer can perceive for being loyal. Approximately 90% of U.S. consumers actively participate in some type of loyalty program with many consumers enrolled in multiple loyalty programs (Berman, 2006).

In addition to this, there is a growing number of wholesalers in the US that offer the consumer a paid membership which gives them discounts and cashback promotion in-store. This can be seen as a selective membership which are “programmes where a company employee invites members and membership is not universally available” (Esmark et al., 2016). The difference between these open and selective loyalty programs is researched in the article of Esmark et al. (2016), which states that selective programmes lead to higher levels of gratitude, especially in mature stages. Another difference of this paid membership is the fact that there is a monthly, quarterly or yearly subscription that the retailer receives. This is part of the ‘subscription economy’, where subscriptions are used as a business model and clever entrepreneurs provide stabile and recurring revenues to their firm (Sprout, 2014). At

American warehouse retailer Costco, they offer a “Gold star membership” for $120 which allows consumers to gain access to the store and are eligible for the 2% “reward” (cashback) on their annual spending. Whereas not everyone is qualified to shop at Costco – you’ll need to be a current or retired employee of firms that fall into certain industries

1.2 Subscription programs

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lot of variety in subscription programs, a few subscription programs into practice have been described below:

Company Subscription Program Main Benefits Online/ Offline

Subscription Fee

Albert Heijn AH Bezorgbundel Free shipping costs Online €10 p/m

Amazon Amazon Prime Free shipping

Amazon Prime Video

Online $119 p/y

Amazon Subscribe&Save Regular delivery of items on Amazon

Online TBD*

Birchbox The Monthly Box Montly box delivery of five beauty samples

Online $10 p/m

Blue Apron Blue Apron Fresh ingredients delivered in a box every week

Online $9.99 p/w

Bol.com Bol Select Free shipping Online €9.99 p/y

Citrus Lane Citrus Lane Monthly box full of products for your children

Online $29 p/m

CostCo Gold Star

Membership 2% Cashback Extra discounts Offline $120 p/y Dollar Shave Club

Dollar Shave Club Razorblades delivered in a box every month

Online $9 p/m

Hello Fresh Originalbox Fresh ingredients delivered in a box every week

Online €39.95 p/m

Sam’s Club Sam ’s Club Plus Membership

2% Cashback Extra discounts Free shipping

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Sephora Sephora PLAY! Monthly beauty box filled with 5 stellar examples

Online $10 p/m

Target Target REDcard 5% discount

Free shipping

Online TBD*

Figure 1: Subscription Programs Examples

* TBD = To be decided: Fee depends on how many products the consumer orders

As can be derived from the table above, subscription programs vary in the type of retailer, costs and what benefits they offer towards the consumer. Three main types of subscription program can be defined:

1. (Surprise) Box Subscription Program

In this subscription program, the consumer can subscribe for a particular weekly/monthly fee and receive a box with products from the retailer. Birchbox, an American beauty-products retailer, has started with this subscription program where they send their consumers a personalized mix of makeup, hair, skincare and fragrance samples for

$10/month. Various retailers have followed this business model and nowadays a consumer can subscribe for almost any kind of (surprise) box filled with products such as razors (Dollar Shave Club) clothes (Citrus Lane) and food (Hello Fresh). This subscription program has the advantage of being very convenient for the consumer while they do not have to go outdoors to get these products and can simply order them with one click on the website. For the retailers this brings the benefit of predictability of demand and the

volume that they have to produce (Retailtrends, 2017).

2. Product Subscription Program

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3. Service Subscription Program

Whereas the previous subscription programs focus on products, there are additional subscriptions which focus on providing an extra service to ‘premium users’. The given example of Costco does this by offering additional discounts and cashback which can be earned when a consumer is subscribing towards their membership. Besides that, existing large retailers such as Amazon try to use this type of subscription program likewise. By subscribing to ‘Amazon Prime’ the consumer does not have to pay for shipping costs, gains access towards the movie-streaming Prime Video and get exclusive shopping deals. Especially the free shipping benefit seems to work for Amazon whereas Prime members shop on the site nearly twice as often as non-prime members (Business Insider, 2017).

Currently, there are not many subscription programs in the food retail sector. Albert Heijn has introduced a ‘Bezorgbundel’ subscription (see figure 1) where they offer the

consumer a subscription towards free shipping of their groceries, but this is not a subscription program such as Costco is handling in the US. Therefore, there are still a lot of opportunities that can be taken. Wim Beekman, former owner of a grocery shop C1000 (now Jumbo), gives the example of handling a ‘premium’ card within grocery shops whereas the members have a separate check-out desk, free parking and get access to cash-back promotions. Subsequently, this will lead to “the advantage of building lasting relationships with customers which will form a competitive advantage” (Morschett, Swoboda & Schramm-Klein, 2006).

1.3 Main research question

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program’ where consumers can subscribe towards a membership that offers additional discounts to their groceries, and discounts on a set of partner firms e.g. restaurants. By determining the driving variables and their influence, this paper will provide a good insight on how to develop an efficient subscription program and what the variables are that should be taken into account.

1.4 Managerial relevance

With this thesis, the new development of subscription retailing is discussed and tested among Dutch consumers. Managers of, especially Dutch, grocery markets must understand that this new development is creating a new way of approaching the consumer with benefits on their store and could lower the chance of a consumer switching stores. This study on the variables which influence the participation intention towards subscription programs will support managers on when to implement a subscription program and what type of consumers to look for.

1.5 Structure of the paper

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2. LITERATURE REVIEW

In this section of the article, the existing retail literature is researched, and certain variables will be identified which have an influence on the participation intention of a consumer towards a subscription program. These variables are clustered into 4 different categories which are retailer related, shopping related, shopper related and socio-demographic variables.

2.1 Retailer-related Variables

Retailer-related variables are the variables which are influenced by the different retailers in the retail sector. For this study, the retail stores are primarily supermarket which will be discussed.

2.1.1 Store loyalty, store satisfaction and store proximity

Store loyalty is defined in this study as “The biased (i.e. non-random) behavioral response (i.e. revisit), expressed over time, by some decision-making unit with respect to one store out of a set of stores, which is a function of psychological (decision making and

evaluative) processes resulting in brand commitment” (Bloemer and Ruyter, 1998). Harris & Goode (2004) found that loyal customers would recommend the retailer to others, would shop for a variety of products, would forgive occasional mistakes and would not shop from the competitor. Additionally, respondents with high level of store loyalty are likely to have high purchase intention (Ma’rof et al., 2012). Hence, this high purchase intention is relevant for the current customers of a company and could lead to a more positive attitude towards a

subscription program.

Store satisfaction has been conceptualized as the prime antecedent of store loyalty (Jones et al., 2000), and is defined as “the outcome of the subjective evaluation that the chosen alternative meets or exceeds expectations” (Bloemer & De Ruyter, 1997: 501). With consumers who are very satisfied with the store, it makes sense to assume that also in a grocery retail setting, these consumers would show higher levels of commitment and repurchase behaviour (Noordhoff et al, 2004). By showing this commitment, store satisfied consumers would more likely be committing towards new developments of this store.

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is likely to happen more than once during the week, consumers logically do not want to travel far away for their favourite store and they will seek it close to their homes. Hence, the

following hypotheses are proposed:

H1A: The shoppers’ store loyalty towards a specific store is positively related to the shoppers’ intention to participate in a subscription program of that specific store.

H1B: The shoppers’ store satisfaction towards a specific store is positively related to the shoppers’ intention to participate in a subscription program of that specific store.

H1C: Store proximity is positively related to the intention to participate in a subscription program of that specific store.

2.1.2 Price Image & Brand image

The focus of current firms is centered primarily on the customer and the way the customer perceives this particular firm (Hu, Kandampully & Juwaheer, 2009). Two different variables influence this perception: price image and brand image. The store price image is defined as “a global representation of the relative level of prices” (Mazursky and Jacoby, 1986). In the Netherlands, a growing number of hard-discounters, such as Lidl and Aldi, are emerging and with their extremely efficient supply chain they are able to compete with the prizes of traditional grocery retailers (Steenkamp & Kumar, 2009). This results in a difference in price images between the traditional grocery retailers and new hard-discounters. The same accounts for brand image, which are “perceptions about a brand as reflected by the brand associations held in consumer memory” (Keller, 1993). When these brand associations are positive, consumers might feel that the brand has attributes and benefits that satisfy their needs and wants (Keller, 1993). Therefore, by creating a positive price and brand image, the following hypotheses are proposed:

H2A: Brand image and the participation intention towards subscription programs are positively related.

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2.1.3 Privacy trust image

The perceived benefits of a loyalty program are the “perceived value customers attach to their experience with the program” (Holbrook, 1996). However, since the last few years, there is a growing concern about these loyalty programs with consumers regarding the data that could be valuable for other firms (Savre & Horne, 2000). Sometimes it is not clear

whether a firm handles this data with care, and a consumer might gain a negative privacy trust image upon a certain retailer. Subscription programs are seen as an equivalent (extension) of loyalty programs and therefore might be affected by this privacy effect of how the consumer perceives the firm is handling their privacy. Therefore, the following hypotheses is

formulated:

H3: Consumers who have a positive trust image about a retailer, have a higher participation intention towards a subscription program.

2.1.4 Perceived assortment variety

“Retailers vary in terms of the attractiveness of the items they carry” (Chernev & Hamilton, 2009). Especially in the grocery sector this is of importance, where a consumer shops a variety of different items of different categories at a supermarket every week. Though not always a large assortment has a positive influence on consumers. Chernev (2003), state that large assortment sets may also decrease consumes’ confidence in having made a good decision. In addition to that, they may not even subjectively perceive options to be better when options come from a larger rather than a smaller assortment (Benartzi and Thaler 2002). However, larger assortments of certain retailers can offer a greater variety of options, which increases the probability of a better fit between the consumer preferences and the choice alternatives (Cherney & Hamilton, 2009). This positive aspect can have an influence on the participation intention for a subscription program, whereas a consumer wants to buy all of their groceries at the same store, so this particular retailer has to offer this whole ‘shopping list’. Therefore, the following hypotheses is proposed:

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2.2 Shopping-related variables

Next to retailer-related variables, shopping variables might influence the participation intention towards a subscription program. Shopping variables include the variables that are encountered when shopping for groceries, and thus are certain characteristics of shopping.

2.2.1 Shopping frequency, Total Spend, Evoked Set & Shopping Type

Firstly, the shopping frequency of consumers is the rate of visits to a particular retail store in a week. One of the characteristics of the grocery shopping experience is the repetition at regular time intervals (Park, Iyer and Smith, 1998). It is expected that when a household goes for a shopping trip more than once a week, the chance of participating a subscription program which offers benefits with every visit, will go up. This is in line with the total spend of the household, whereas when a household is spending more, the attractiveness of a

subscription program will be higher. This due to the paid fee that is asked in advance of the received benefits, and when the total spend is low this advanced payment will be relatively high compared to the invested money.

The evoked set of consumers is defined by Howard and Sheth (1969; p.416) as: “those brands the buyer considers when he (or she) contemplates purchasing a unit of the product class”. When consumers have more brands in mind when thinking of a particular product or supermarket, the possibility that they will visit more stores than one in a period will be higher. Therefore, when this evoked set is more complex and has more brands, the possibility that this consumer will participate in a subscription program towards one supermarket is expected to be lower. In the article of Hunneman, Verhoef and Sloot (2017), three different shopping trips are distinguished: major (large) trips performed on a preferred day, regular (small) trips that satisfy “daily” needs, and special trips which arise from infrequent occasions. These major (large) shopping trips is where the subscription program will be of interest, whereas it can be imagined that a household who does more and larger shopping trips, will gain more benefits from the subscription program.

H5A: Shopping frequency positively relates to a higher participation intention towards a subscription program.

H5B: Total spend positively relates to a higher participation intention towards a subscription program.

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H5D: Larger shopping trips relates to a higher participation intention towards a subscription program.

2.3 Shopper-related variables

In addition to shopping-related variables, characteristics of the shopper itself may also be of importance. In this section certain characteristics of the shopper will be discussed.

2.3.1 Hedonic & Utilitarian shopper motives

In the article of Arnold and Reynolds (2003), the hedonic reasons that people go shopping are investigated. Hedonic consumption is where a shopper seeks fun, entertainment, fantasy and enjoyment aspects in their consumption (Hirschmann and Holbrook, 1982). This hedonic characteristic of a shopper benefits from the in-store experience of retail stores. However, grocery shopping is frequently seen as a necessary, useful and practical shopping trip. These characteristics seem to be the opposite of a hedonic shopper and is defined as a utilitarian shopper. These utilitarian aspects of shopping include task-related and rational characteristics (Batra and Ahtola, 1991). “In the utilitarian view, consumers are concerned with purchasing products in an efficient and timely manner to achieve their goals with a minimum of irritation (Childers et al., 2001). This “efficient and timely manner” relates more to the subscription program as where the consumer can receive benefits with simply shopping their own groceries and where no additional efforts are required. Obviously, this is the case for when the type “service subscription program” where these benefits arise from. Hedonic shoppers might feel more related towards the “(surprise) box subscription programs” as to where the aspect of experience and fun are more the case. Hence, the following hypotheses can be proposed:

H6A: Hedonic shopper motives and the participation intention towards a subscription program are negatively related.

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2.3.2 Promotional proneness & Price consciousness

“Consumers are confronted with all kinds of promotional activities when visiting various retail outlets such as supermarkets” (Dekimpe et al, 2005). As a result of this, there has been a lot of studies on the effectiveness of these promotional activities (Chandon et al, 2000; Epstein et al, 2016; de Pechpeyrou & Odou, 2012). The consumer undoubtedly plays a big role in this effectiveness. As they tend to be wary of advertising claims, sceptical

consumers have a more unfavourable attitude toward advertising messages and are less influenced by them, even avoiding them completely (Cottet, Ferrandi and Lichtlé, 2009). These sceptical consumers can therefore be a harm towards any promotional activity as they seem less sensitive to these activities than other consumers.

Price consciousness is defined in this study as “the degree to which the consumer focuses exclusively on paying low prices” (Lichtenstein, Ridgway en Netemeyer, 1993). This could be a benefit towards the subscription program regarding the fact that this program offers lower prices (for a certain fee). However, Dowling and Uncles (1997), mention that loyal customers are less price sensitive. Nevertheless, price conscious consumers may be very attractive towards implementing a subscription program, given that these consumers receive additional discounts on their groceries and this is wat they are looking for.

H7A: Consumers who are promotional sensitive have a higher participation intention towards a subscription program.

H7B: Consumers who are price conscious have a higher participation intention towards a subscription program.

2.3.3 Privacy concern

In line with the previously mentioned privacy trust image, consumers may have a privacy concern as their own characteristic. Dorotic et al (2012), state that privacy concerns are a strong obstruction regarding loyalty programs participation. Therefore, this privacy concern is not affected by the firm itself, but if a consumer has privacy issues of their own and would therefore not participate in any form of loyalty program at all. This “two-faced perspective” on privacy may lead to interesting results on whether the privacy issues regarding a

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H8: Privacy concern among consumers relates negatively with the participation intention towards a subscription program.

2.3.4 Perceived time pressure

As mentioned earlier in this literature review, grocery shopping is characterized by the repetition at regular time intervals (Park, Iyer and Smith, 1998). Consumers may perceive time pressure when performing these repetitive shopping trips within their active working life. The time available for shopping is defined as: “consumers' perceptions of the time required to perform the intended shopping tasks relative to the actual time available to perform such tasks” (Park, Iyer and Smith, 1998). When consumers feel this time pressure, they may feel less empathy for the subscription program due to simply having less time to gain interest in this new phenomenon. Hence, the following hypotheses is proposed:

H9: Consumers who perceive a higher time pressure have a lower participation intention towards a subscription program.

2.4 Sociodemographic variables

2.4.1 Household size, Income level & Educational level

The household size of a consumer is in this study indicated as the number of persons living together in one house. “Large purchase volumes are related to household size and it is possible that larger households have less time to shop and thus tend to concentrate purchases to one store” (Mägi, 2003). This can be of an advantage for a subscription program while large purchase volumes will mean that benefits of the program such as a cashback action can be ‘earned back’ by the household.

The educational level of consumers refers to the highest level of education they have completed. As this study will take place in the Netherlands, this will range from single secondary education (HAVO/VWO), towards a higher educational degree (HBO/WO). Educational level is seen as an influential variable due to the fact that a subscription program is relatively new and therefore consumers might not understand the benefits.

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of influence in participating in the subscription program. According to Shankar et al. (2003), an individual’s income level may influence his/her loyalty to a service provider. They state that “customers with lower discretionary incomes would be willing to do more price-comparisons and be less loyal to a service provider than those with higher incomes”. This would lead to a consumer with higher income levels to be more loyal towards a service provider as a subscription program and is expected to have a higher participation intention. However, consumers with a high-income level have enough financial resources to buy products at normal rates and tend to overlook promotions. Hence, the following hypotheses can be formulated:

H10A: Household size is positively related with the participation intention towards subscription programs.

H10B: Consumers with a higher educational level have a higher participation intention towards subscription programs.

H10C: The income level of consumers positively affects the participation intention towards subscription programs.

2.4.2 Control variables

In addition to the independent variables that are described in this literature review,

characteristics of certain consumers could also affect the participation intention towards a subscription program. To ensure that there is consumer heterogeneity, the variables of gender and age are therefore added as control variables.

To conclude this literature review, all hypotheses which are tested in this study are shown below.

Hypothesis

1A The shoppers’ store loyalty towards a specific store is positively related to the shoppers’ intention to

participate in a subscription program of that specific store

1B The shoppers’ store satisfaction towards a specific store is positively related to the shoppers’

intention to participate in a subscription program of that specific store.

1C Store proximity is positively related to the intention to participate in a subscription program of that

specific store.

2A Brand image and the participation intention towards subscription programs are positively related

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3 Consumers who have a positive trust image about a retailer, have a higher participation intention towards a subscription program

4 Larger assortment size of a retailer positively affects the participation intention towards a

subscription program.

5A Shopping frequency positively relates to a higher participation intention towards a subscription

program

5B Total spend positively relates to a higher participation intention towards a subscription program

5C The evoked set of consumers negatively affect the participation intention towards a subscription

program

5D Larger shopping trips relates to a higher participation intention towards a subscription program

6A Hedonic shopper motives and the participation intention towards a subscription program are

negatively related.

6B Utilitarian shopper motives and the participation intention towards a subscription program are

positively related.

7A Consumers who are promotional sensitive have a higher participation intention towards a

subscription program.

7B Consumers who are price conscious have a higher participation intention towards a subscription

program

8 Privacy concern among consumers relates negatively with the participation intention towards a

subscription program

9 Consumers who perceive a higher time pressure have a lower participation intention towards a

subscription program

10A Household size is positively related with the participation intention towards subscription programs.

10B Consumers with a higher educational level have a higher participation intention towards subscription

programs.

10C The income level of consumers positively affects the participation intention towards subscription

programs.

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3. STUDY – CONCEPTUAL MODEL & METHODOLOGY

3.1 Conceptual Model

Following the literature review, the conceptual model is based on the variables that influence the participation intention towards the subscription program.

Figure 2: Conceptual Model

3.2 Data collection

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not answer this correctly have been deleted from the data set. In addition to this, to receive a large and relevant group of respondents, flyers with the link of the web-based survey were distributed among the four different supermarket which are mentioned in the survey.

3.3 Design

As mentioned earlier, this study was designed with the web-based survey platform Qualtrics. By questioning the respondents on the variables discussed in the theoretical background and providing an example of a subscription program (in a retail context) the participation intention of the respondents can be measured. Firstly, the survey started with some general questions upon which supermarket they go to, and what their favorite

supermarket is. To make sure that this subscription program was not biased by the favorite store of the respondent, a randomization was added into the survey. This lead to the result that after the first general questions, every respondent got linked to one of four supermarkets: Albert Heijn, Jumbo, Aldi and Spar. This supermarket would then appear in questions for the whole survey, including the question upon whether the respondents would take part in a subscription program. This subscription program was an example of where consumers can opt-in and receive 5% discount on their groceries which will be €25, - per quarter of the year (€100, - yearly). This subscription program focuses the type of “service subscription

program” which was mentioned in the introduction of this article. After the general questions, all independent variables as stated in the conceptual model were tested upon different

questions. Lastly, all respondents were asked, without randomization, about some sociodemographic characteristics.

3.4 Measurement constructs

To increase the validity of the results of the survey, several measurement scales from previous research have been used for measuring several variables. This section provides an overview of the measurement scales used in previous literature and the

3.4.1 Measurement Perceived time pressure

In order to measure the perceived time pressure respondents feel when doing their groceries, a scale developed by Herrington & Capella (1995) has been used. This scale

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a seven-point Likert scale (from (1) completely disagree to (7) completely agree). The complete items of the study are described in Appendix 2.

3.4.2 Measurement Store loyalty

A scale developed by Bridson, Evans, & Hickman (2008) is adapted to measure the independent variable store loyalty. In this article, 6 items which are based on a 7-points Likert scale (from (1) completely disagree to (7) completely agree) are used to measure this

construct, of which 3 have been adapted in this study. The complete items of the study are described in Appendix 2.

3.4.3 Measurement Price consciousness

A scale developed by Alford & Biswas (2002) on the variable of price consciousness has been adapted to measure this construct. This scale consists of five items on a 7-points Likert scale (from (1) completely disagree to (7) completely agree) where three items are used in this study. The complete items of the study are described in Appendix 2.

3.4.4 Measurement Privacy image

In the study of Liu, Marchewka, Lu & Yu (2004), a scale has been developed on the privacy image towards the retailer “Husky Virtual Bookstore”. Based upon this study, three items are developed whereas the only change is that the supermarket used in this study are replacing the “Husky Virtual Bookstore”. These items are measured on a 7-points Likert scale (from (1) completely disagree to (7) completely agree). The complete items of the study are described in Appendix 2.

3.4.5 Measurement Assortment variety

A scale developed by Bauer, Kotouc, & Rudolph (2012) has been adapted to measure the construct of perceived assortment variety. This scale consists of four items on a 7-points Likert scale (from (1) completely disagree to (7) completely agree). The complete items of the study are described in Appendix 2.

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Table 1: Overview of key constructs and their measurement

Construct Measurement Based on

Participation

intention Three items on Likert scale (1=strongly disagree, 7=strongly agree) Store satisfaction Three items on Likert scale (1=strongly disagree,

7=strongly agree)

Store loyalty Three items on Likert scale (1=strongly disagree,

7=strongly agree) Bridson, Evans, & Hickman (2008)

Store proximity Three items on Likert scale (1=strongly disagree, 7=strongly agree)

Perceived

assortment variety Four items on Likert Scale (1=strongly disagree, 7=strongly agree) Bauer, Kotouc & Rudolph (2012). Price image Three items on Likert scale (1=strongly disagree,

7=strongly agree)

Brand image Three items on Likert scale (1=strongly disagree, 7=strongly agree)

Privacy trust

image Three items on Likert Scale (1=strongly disagree, 7=strongly agree) Liu, Marchewka, Lu & Yu (2004). Shopping frequency Number of visits to supermarket per week Total spend Amount in Euro’s spend on groceries per week Evoked set Number of different supermarket per month Shopping type Three dummy variables with 0=no and 1=yes Hedonic shopper motives Three items on Likert scale (1-5) Utilitarian shopper motives Three items on Likert scale (1-5) Price

consciousness Three items on Likert scale (1=strongly disagree, 7=strongly agree) Alford & Biswas (2002). Promotional

proneness Three items on Likert scale (1=strongly disagree, 7=strongly agree) Privacy concern Three items on Likert scale (1=strongly disagree,

7=strongly agree) Perceived time

pressure Three items on Likert scale (1=strongly disagree, 7=strongly agree) Herrington & Capella (1995). Household size Number of persons living in one household Income level Income level compared to average income on Likert scale (1=strongly disagree, 7=strongly agree) Educational level Highest level of education Willingness-to-pay One item on Likert scale (1=Very cheap, 7= Very expensive) 3.5 Data analysis

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steps have been taken to create a clean and screened data set. When all respondents were gathered for the data analysis, this raw data has been exported to the statistical analysis program SPSS statistics 25.

The first step that has been taken towards preparing the data for analysis is clearing out all respondents who did not finish the whole survey, and those who did not answer the attention check correctly. Thereafter, outliers and missing values have been detected and removed from the dataset. Additionally, the data was checked for normality, which can be found in Appendix 1.

To prepare the data for the analysis process, various dummy variables were added to the data set which were used in the analysis that followed. Next, in order to get to the variables which are used during the linear regression, a factor analysis is necessary. This factor analysis will be done for the items which are not based upon a scale found in previous literature. Afterwards, the computed variables should be tested upon reliability with the Cronbach’s Alpha.

In the final step of this data analysis, the model that is hypothesized will be tested. The model fit will be assessed, and an analysis of the proposed hypotheses and their significance level will be discussed. The hypothesis will be tested using a multiple linear regression. The total model of this study is equated as followed:

PIi = β0 + β1AsVar + β2BrImr + β3PrImr+ β4StPrr + β5StLor+ β6StSar + β7PrTrImr + β8ShFri+ β9ToSpi + β10EvSei+ β11ShTyir + β12HeShMoi+ β13UtShMoi+ β14PriCoi+ β15ProPri + β16PrivCoi + β17PeTiPri + β18HhSizei + β19EdLei + β20IncLevi + β21Agei + β22Genderi + β23FaShoi + β24GroAHi + β25GroJui + β26GroAli + β27GroSpi + εi

Where:

PI = Purchase Intention ToSp = Total Spend HhSize = Household size AsVar = Assortment Variety EvSe = Evoked Set EdLe = Educational Level BrIm = Brand Image ShTy = Shopping Type IncLe = Income Level PrIm = Price Image HeShMo = Hedonic Shopping Motives FaSho = Favorite Store StPr = Store Proximity UtShMo = Utilitarian Shopping Motives GroAH = Groceries at AH StLo = Store Loyalty PriCon = Price Consciousness GroJu = Groceries at Jumbo StSa = Store Satisfaction ProCon = Promotional Proneness GroAl = Groceries at Aldi PrTrIm = Privacy Trust Image PrivCon = Privacy Concern GroSp = Groceries at Spar ShFr = Shopping Frequency PeTiPr = Perceived Time Pressure

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4. RESULTS

In this chapter, the results of the data analysis will be provided, including the steps that were taken to get to this result.

4.1 Sample characteristics and Descriptive statistics

The total amount of respondents that entered the survey on the web-based survey were 389. However, 142 of these respondents did not finish the whole survey and therefore this amount was extracted from the dataset (n=247). As mentioned earlier, every survey contained an attention check in which the respondents were tested on actually reading the statements provided. This resulted in 51 observations which did not answer the attention check correctly. Therefore, the total amount of respondents that was used for this study is n=196.

Of the total sample, 83 respondents (42.3%) are male and 113 (57,7%) are female, with an average age of 38 (Mage=38.32, SD=14.363). The randomization of the supermarket condition in the survey lead to the result that the distribution of supermarkets in the survey was: Albert Heijn (44), Jumbo (51), Spar (49) and Aldi (52). Table 2 provides descriptive statistics of the independent variables.

Table 2: Descriptive statistics

Supermarket formula N Sample mean Price Image Sample mean Brand Image Sample mean Participation intention Sample mean Willingness-to-pay Albert Heijn 44 3.55 (0.91) 5.19 (1.09) 3.36 (1.63) 5.16 (1.06) Jumbo 51 4.48 (0.78) 4.73 (0.83) 3.45 (1.66) 5.53 (0.89) Spar 49 3.34 (1.02) 3.03 (0.89) 3.18 (1.34) 5.31 (1.16) Aldi 52 5.35 (0.77) 3.87 (1.26) 2.87 (1.38) 5.56 (1.18)

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As for the participation intention, the sample means are all around 3 (= Somewhat disagree), where the respondents who got Jumbo in their survey had the highest with 3.45. This does not seem to be very high, however since the subscription program which was mentioned in the survey is something rather new to these respondents. The sample mean of willingness to pay was around 5, which indicates that the price of 100 euro’s that was stated in the survey as a yearly fee is “somewhat too expensive”.

As mentioned earlier, a randomization of four different supermarkets was implemented in the supermarket to take out the biased effect of a higher participation intention among the favorite supermarket of the respondent. Before this randomization, respondents were asked as to which of the four supermarkets they occasionally do their groceries (more answers possible), and which of the supermarkets they do most of their groceries and can be seen as their favorite store (only one answer possible). Since this question was presented beforehand they did not know what supermarket they were about to see in the survey, and therefore it is interesting to see the results as to whom did see a store they shop at or not. The results are depicted in table 3 below. We can conclude from this that respondents who had to review Spar in the survey, did not shop occasionally at Spar, while the respondents who reviewed Jumbo almost all shop at the Jumbo. Overall the favorite store is Jumbo who holds the majority of respondents who do most of their groceries at their store.

Table 3: Randomization statistics survey

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4.2 Initial Reliability and Validity Measurement

In the next section, a multiple lineair regression analysis will be conducted with all independent variables of the conceptual model to test the hypotheses. A factor analyses is necessary to see if the validities of the items measuring multi-item constructs can be assessed. The constructs that were based upon a scale taken from previous literature (perceived time pressure, store loyalty, price consciousness, privacy image and assortment variety), were not part of this factor analyses as from the literature these multi-item scales were already tested upon validity. Therefore, all multi-item scales were input for the factor analyses of the remaining nine independent variables.

The first factor analyses that was performed was an Explanatory factor analysis (EFA) with the Principal-Component-Analysis (PCA) technique determining the number of factors on their eigenvalue. The first check to see if PCA is appropriate, is to see if the Kaiser-Meyer-Olkin (KMO) measure is adequate. For this PCA the KMO was 0.749, which is appropriate following the threshold value of 0.5. In addition to this, the Bartlett’s Test of Sphericity was significant (p < 0,001). Consequently, the items communalities should have a value of above 0.5 which constitutes the amount of variance that is shared with other variables. In this PCA all the item communalities met this threshold and therefore it can be concluded that PCA is appropriate (Malhotra, 2008).

With the results of the factor analyses, it can be determined that there are eight different factors with a bigger eigenvalue than one. The total variance that is explained by these factors was 70.5% which is above the threshold of 60%. In the Varimax-rotated eight-factor matrix it is shown that only the utilitarian and hedonic multi-items load on the same factor. Whereas in the conceptual model nine different factors are derived from the theory, but these factors only have an eigenvalue of 0.898. However, this eigenvalue of nine factors is very close to the threshold of one, which therefore is decided to continue with nine factors. To control for this decision, a second factor analysis is necessary.

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By using the Cronbach’s Alpha measure, the multi-item measures reliability can be measured. This was done for all nine constructs that were computed during the data analysis, which are presented in Appendix 3. Here it is shown that only for the utilitarian construct, the Cronbach’s Alpha was 0.365 which is under the threshold of 0.6 according to Malhotra (2008). When the second item was removed from the construct, the Cronbach’s Alpha would be 0.407. Although this still not meets the required threshold, the interpretation of the two items left to measure the utilitarian shopper motives, is in such a way convincing that it has been decided to continue with these two items.

4.3 Control Variables

In this study, the variables age and gender are used as control variables to account for the heterogeneity of the sample. The influence of the control variables that are included in the regression analysis therefore have to be account for. In order to analyze whether or not the average participation intention of men is different from the average participation intention of women, an independent samples t-test has been performed with gender and participation intention. The independent samples t-test was not significant, t (194) = 0,73 , p = 0,461. Therefore, the average participation intention of men (M = 3,30, SD = 1,47) does not differ from the average participation intention of women (M = 3,14, SD = 1,54).

To test whether the age of respondents influence the participation intention, a regression analysis with age regressed on participation intention has been conducted. The regression analysis was not significant, R2 = 0,000, F(1,194) = 0,015, p = 0,903. The age of respondents does not influence the participation intention towards a subscription program, B = 0,001, t = 10,278, p = 0,903.

4.4 Participation intention model

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supermarket assigned in their survey, dummies of these conditions are used as control variables.

Table 3: Parameter estimates purchase intention model

Model

Socio-demographic (1)

Retailer (2) Shopping (3) Shopper (4) Total model (5)

Par. Est. (St. Er)

Par. Est. (St. Er) Par. Est. (St. Er) Par. Est. (St. Er) (Constant) 4,156 (,892) 1,869 (,696) 2,691 (,673) 3,26 (1,002) 1,301 (1,461) Control variables Age -,008 (,010) ,003 (,008) -,002 (,008) ,000 (,008) -,008 (,011) Gender -,234 (,224) -,188 (,215) -,136 (,224) -,286 (,219) -,353 (,224) Randomizer AH -,257 (,315) -,137 (,390) ,263 (,327) ,205 (,318) -,005 (,402) Randomizer Jumbo -,284 (,305) -,166 (,367) ,327 (,330) ,262 (,302) -,029 (,379) Randomizer Aldi -,276 (,304) -,763*_(,411) _{-,259 (,309)} _{-,243 (,306)} _{-,573 (,415)} Independent variables Household size ,113 (,086) -,037 (,099) Educational level -,142 (,094) -,069 (,092) Income level ,023 (,071) -,038 (,073) Assortment variety -,208 (,130) -,200 (,134) Brand image ,087 (,132) ,095 (,134) Price image ,088 (,132) ,108 (,134) Store proximity ,021 (,071) -,030 (,072) Store evaluation ,248**_(,117) _,324**_(,120) Privacy trust image ,227***_(,084) _,238**_(,088) Shopping frequency -,039 (,070) -,063 (,072) Total spend ,006**_(,002) _,007**_(,003) Evoked set ,092 (,108) ,067 (,104) Shopping type -,015 (,240) -,215 (,243) Hedonic ,165 (,195) ,137 (,193) Utilitarian -,215 (,249) -,138 (,247) Price consciousness -,135 (,104) -,149 (,105) Promotional proneness ,305***_(,099) _,244**_(,098) Privacy concern -,047 (,089) ,078 (,091) Time pressure ,146 (,089) ,133 (,087) R2 _,049 _,134 _,060 _,092 _0,241 Note: *_p<0.1;**_p<0.05;***_p<0.01

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be discussed after this, the correlation between the variables are well below 0,4. In addition to this, the variance inflation factors (VIF) for all the variables have been taken into account, and all are below the threshold of 4,0. However, the variables store loyalty and store satisfaction both had a VIF store of around 3 and were therefore checked independently. The two variables were not significant in the total model, while when they were added to the model separately they would both be significant independently from each other1_{. In addition to this,}

when checking the correlation between these variables it is clear that they have a very high correlation of ,729 (Appendix 3). This points out that these variables are in such a way closely related that they cannot be in the model together. Therefore, a ‘proxy variable’ has been computed using these two variables which is called ‘store evaluation’. Regarding the fact that the two variables were significant in the model when they were independent, the proxy variable can be used to explain both variables.

Unfortunately, models 1 and 3 were not significant and can therefore not be

interpreted. However, the model where solely the retailer related variables are added (model 2) in the regression, was significant with a p-value of 0,004. In line with H3, this model reveals that a positive privacy trust image of the retailer has a positive effect on their

participation intention in a subscription program (β = 0,227, p = 0,007). The proxy variable of store evaluation is significant with a p-value of 0,035. This is in line with H1A and H1B, which indicates that the ‘store evaluation’ of a particular store (which encompasses the store loyalty and store satisfaction) is positively related with the intention to participate in a

subscription program by that store (β = 0,248, p = 0,035). The R2 _{of this model is ,134 which}

indicates that not a lot of the variance is explained by the independent variables.

The fourth model that was performed had solely the shopper variables and proved to be significant with a p-value of 0,079. Conforming H7A, promotional proneness among consumers is positively related to the participation intention in a subscription program (β = 0,248, p = 0,035). The R2_{of this model is relatively low with the value of 0,092.}

The total model, with all independent variables, has proven to be significant with a p-value of 0,005 and a R2_{of 0,236. This is relatively higher than model 1 and 4, and therefore it}

can be said that the total variance that is explained by all the variables together is substantially higher. The model reveals that, in line with model 1, privacy trust image and store evaluation

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are still positively related to the participation intention towards a subscription program (β = ,214, p = 0,008; β = ,324, p = 0,008). In addition, the total spend of a consumer reveal a significant effect on the participation intention (β = ,007, p = 0,010) which gives evidence for H5B. Lastly, the promotional proneness of consumers proved to be of a significant positive effect (β = ,245, p = 0,014) on the participation intention towards the subscription program. This proves support for H7A.

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5. DISCUSSION AND CONCLUSION

The aim of this study was to identify which variables have an influence on participating in the upcoming subscription retailing environment. With regard to

supermarkets, this development is rather new (especially in the Netherlands) and is therefore providing managers with a first insight on how consumers perceive these subscription programs.

5.1 Privacy trust image

The first insight of this study is that the privacy trust image of consumers in a firm is positively related with the participation within a subscription program offered by this firm. This can be a result of many modern organizations using ‘cookies’ and tracking software to follow a consumer online and therefore gain information about their personal interest and preferences (Liu et al, 2004). This sensitive information seems very important to a part of consumers and can therefore influence their trust in how this particular firm handles their privacy. This is in line with the earlier mentioned growing concern regarding the data that could be valuable for other firms (Savre & Horne, 2000). With the new regulation of General Data Protection Regulation (GDPR) in the EU, consumers will gain more control over what happens with privacy-sensitive information and what firms use this information for.

Alongside this growing control in this privacy issue, firms somehow have to proof that they are handling this personal information with care. While doing so, this can create a positive trust image among their consumers, who might be more willing to engage in a subscription program.

5.2 Promotional proneness

In addition to this, the model reveals that consumers who tend to look for promotions in-store and appreciate promotions, have a higher participation intention towards a

subscription program. This may seem as a very odd result, regarding the fact that a

subscription program is not a form of promotion but rather has the framework of a loyalty program. However, one may not exclude the other. The subscription program may be

perceived by the consumer as a ‘long-term price cut’ which they will profit on as long as they shop at this particular store. As a result, it is key to overlook the ‘sceptical consumers’

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is a form of promotion to particularly target these consumers who are promotional prone. The firm in return will benefit them with price-cuts on certain products and an ‘overall promotion’ on all of their groceries.

5.2 Total spend

According to the theoretical framework, it is expected that the total spend of a household will influence the degree of participation in a subscription program. The model proves that this relationship is significant. This seems to be a very logical explanation, given the paid fee that is asked in advance. Consumers who have a higher total spend, might perceive this paid fee as a lower entry barrier to the subscription program and tend to participate more often.

5.3 Store evaluation

Lastly, this study demonstrates that the ‘store evaluation’, which encompasses store loyalty and store satisfaction, influences the participation intention towards a subscription program. These results contribute to prior research on these concepts which state that satisfaction and loyalty towards the store create a higher purchase intention and level of commitment (Ma’rof et al., 2012; Noordhoff et al, 2004). Loyal and satisfied consumers have positive feelings towards a particular store, and for that reason they might participate in a subscription program more often. Creating a relationship with the consumer is essential and this subscription can function as the first handheld towards keeping consumers close to the store and make sure that they have repetitive purchase behaviour.

5.4 Managerial relevance

A variety of variables have been discussed in this study which possibly affect the success of implementing a subscription program. From this study, we can conclude that the above-mentioned variables of privacy trust image in the store, promotional proneness of consumers, total spend of the household and the overall ‘store evaluation’ contribute

significantly to the intention to participate in such a subscription program. Therefore, it is key that managers in the retail sector target consumers with these characteristics when

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6. LIMITATIONS AND FURTHER RESEARCH

Within this study certain limitations have been identified, which will be discussed in this section. Additionally, directions for further research will be presented.

Firstly, it has been mentioned in chapter 4.2 that the Cronbach’s Alpha for the construct utilitarian shopper motives was not above the threshold according to Malhotra (2008). Nevertheless, it has been determined that the two items were still added in the regression. This has been a choice based on the interpretation of the construct items and can therefore be of influence on the results.

Second, there was proven to be a relatively low number of respondents which indicate that they were occasionally shopping at the Spar, which might be of influence on the results of the study. The survey contained some in-depth questions on aspects of the various

supermarkets and when a respondent had not been to this supermarket, this could negatively influence the answers that were given. This might be a good point for further research, as to know beforehand that the respondents who fill in the survey have been to all of the

supermarkets that are in the survey.

Third, the number of respondents of the survey with 196 might be rather low to draw conclusions on the reliability of the data. Concerning the large difference in the number of respondents that initially started with the survey, and those who actually finished it, there might be some lack of clarity in the survey which caused this difference.

The study on subscription programs in a retail environment is a rather new

development. Hence, this study might function as a starting point for further research where additional variables may be tested towards the participation intention. This study only shed light upon the ‘service subscription’ based program, whereas further research may test the other forms of subscription programs in a retail setting. In addition to this, the aspect of ordering online was not part of this study as the market share of the expenses on the

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8. APPENDICES

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APPENDIX 2: Survey constructs, Items and scales

Construct Items Scale Source Cronbach’s

Alpha

Participation intention

- Als Albert Heijn deze klantenkaart aanbiedt dan sta ik daar positief tegenover. - Als Albert Heijn met dit programma begint, dan zal ik zeker deelnemen. - Ik vind dit klantenkaart programma van Albert Heijn een heel goed idee.

7-point Likert scale (1=Completely disagree, 7= Completely agree) - 0,885

Store proximity - Albert Heijn is voor mij goed bereikbaar - Het kost mij weinig tijd om naar de Albert Heijn te reizen

- Albert Heijn is voor mij een van de dichtstbijzijnde supermarkten. 7-point Likert scale (1=Completely disagree, 7= Completely agree) - 0,895 Perceived assortment variety

- Het assortiment van Albert Heijn biedt een variatie van verschillende merken om uit te kiezen

- Het assortiment van Albert Heijn biedt een variatie van verschillende smaken om uit te kiezen

- Het assortiment van Albert Heijn biedt een variatie van verschillende verpakking hoeveelheden om uit te kiezen

- Het assortiment van Albert Heijn biedt een variatie van verschillende kwaliteiten om uit te kiezen 7-point Likert scale (1=Completely disagree, 7= Completely agree) Bauer, Kotouc & Rudolph (2012). 0,917

Price image - Albert Heijn heeft een ruim aanbod van laaggeprijsde producten

- Als ik boodschappen bij Albert Heijn doe dan kan ik heel wat geld besparen