From desert to oasis

From desert to oasis

The adoption of incremental innovations:

is there a chasm in the Dutch specialty beer

industry?

2 Abstract

The goal of this research is to investigate whether or not there is a chasm in the adoption of incremental innovations in the specialty beer industry in the Netherlands. In order to do this, first a literature review is conducted in order to discover the most important variables. This research investigates the influence of marketing efforts, price and buyer characteristics on the sales of specialty beer in the Netherlands. The results are controlled for marketing budget, ownership, sales points, brewing capacity and seasonality of the beers. To investigate the role of the aforementioned variables a comparative case study is used. Four cases of four different breweries are investigated. In order to do this, interviews are held with the different breweries and the sales figures of these breweries are analyzed.

The results show that no chasm is apparent. However, this could be due to the fact that only annual sales data could be obtained. Furthermore, based on the results marketing efforts do not seem to have an effect on the number of sales. Also, the price of the beers does not have a noticeable effect the number of sales. This research shows the existence of a clear group of innovators and early adopters in the specialty beer industry in the Netherlands. There is also an early majority however the late majority and laggards are not yet reached. The final finding of this research is that the economic climate has not affected the sales of the breweries

investigated in this research.

Keywords: Diffusion, Adoption of innovations, The Chasm, Specialty beer, Innovation,

3 Executive Summary

Innovation is among the essential competitive and organizational challenges a firm faces. Innovations are even considered a source of competitive advantage. Often a distinction is made between radical and incremental innovations. Radical innovations are fundamental changes that represent revolutionary change in technology. They represent clear departures from existing practice. Incremental innovations, in contrast, are minor improvements or simple adjustments in existent technology. An incremental innovation is a new or improved product, service or organizational form that builds on existing technologies. Most innovations are of an incremental nature.

Innovations are important for a firm, however, an innovation has no value when it is not adopted by the customers. Therefore, research has been done as to how the adoption process takes place. This research shows that there are five groups of customers: innovators, early adopters, early majority, late majority and laggards (Rogers, 2003). Further research by Moore (2006) suggest that there is a temporary drop in sales when the transition is made from the early adopters to the early majority. This drop in sales is called the chasm. When the chasm is not anticipated on in the right manner, this could have severe consequences for the firm (Moore, 2006). Because the chasm can have possible devastating effects for the firm and because most innovations are of an incremental nature, research on the possible existence of a chasm in incremental innovations is needed. In order to research this, this study will

investigate the following research question:

Is there a chasm in the adoption of incremental innovations in the specialty beer industry in the Netherlands?

This study investigates incremental innovations in the specialty beer industry in the

Netherlands. Specialty beer are all types of beer except pilsners. Specialty beer is a type of product where mainly incremental innovations occur. As said before, an incremental innovation is a new or improved product, service or organizational form that builds on existing technologies. When a new specialty beer is brought to market, it uses, for the largest part, the same ingredients and technologies as other previous specialty beers in the market. However, the specific type of ingredients, the way in which they are used and the brewing techniques are different; creating a new beer. This new beer can be seen as an incremental innovation.

In order to be able to draw any conclusion about the existence of a chasm in the Dutch

specialty beer industry first the adoption process needs to be defined further. As stated before, Rogers (2003) argues there are five categories of adopters: the first people to adopt an

innovation are called the innovators: these people buy the product because it is new. They are followed by the early adopters who buy the product to break with the past and start a new future. The next category is the early majority, people who will buy the product when it is proven to be an improvement. The early majority is followed by the late majority, who buy the product in order not to fall behind. Fifth and finally are the laggards, who will never buy the product. Every category is one standard deviation away from the average time of

adoption. In literature it is argued that in order to stimulate the diffusion of an innovation through an entire market, an organization should first focus its activities on the innovators and early adopters to get them to adopt the innovation. These customers can then act as a

reference for the early majority so they will also adopt the innovation and can then serve as a reference for the late majority (Egmond, Jonkers & Kok, 2006, Rogers, 2003).

4

This will hamper the adoption of the innovation and cause the sales to stagnate or even drop, due to the fact that the innovators and early adopters already have the product while the early majority does not yet buy it. This drop in sales is called the chasm (Moore, 2006).

There can also be other reasons for a sudden drop in sales, which should not be confused with the chasm. A poor price/performance ratio or macro-economic variables could have a

negative effect on the sales of a newly introduced product(Goldenberg et al. 2002).

Furthermore, marketing efforts, especially advertisement through mass media, are positively related to the speed of adoption (Strang & Soule, 1998).

To test the existence of the chasm in the Dutch specialty beer industry a comparative case study approach is chosen. With a comparative case study multiple real life cases are analyzed and compared (Dul & Hak, 2008). In this study, four small Dutch breweries are compared; the brewers are interviewed and the sales figures are analyzed. The focus on small breweries has two main reasons: first, smaller breweries bring out new beers more often than larger

breweries do; second, focusing only on small breweries makes the cases more comparable, as opposed to a study which analyzes both larger and smaller breweries. The focus is only on Dutch breweries because focusing on breweries from both inside and outside the Netherlands would make the scope of the research too broad.

The results indicate that the sales figures of the breweries are growing and that no chasm pattern is witnessed. This could be due to the fact that the chasm is not apparent in the Dutch specialty beer industry. However, it might also be due to the fact that annual sales figures were used. The annual sales figures might not be specific enough to see the chasm. Based on the results, no statements can be made on the effect of the different marketing efforts undertaken by the breweries investigated in this research. The price of the beers does not seem to have a noticeable effect on the sales. Although all brewers state that the price of their product has an influence on the sales, no difference in the development of the sales of the different breweries can be noticed. Even though the chasm pattern is not observed, the different adopter categories as proposed by Rogers (2003) seem to exist in the Dutch specialty beer market. There seem to be innovators, early adopters and an early majority, but the late majority and laggards are not yet reached. The economic climate has varied in the time period this research investigates. This, however, does not seem to have an impact on the sales: the sales have risen constantly in the past year.

These results have several implications for practice. First the buyers of specialty beer do not seem to be influenced by the price of the beer much. The customers, especially those in the early market, are more focused on quality than on price. Furthermore, advertisement through mass media does not seem to have a positive effect on the sales. The results indicate that providing a constant high quality and using word of mouth marketing is an effective marketing strategy. Aside from this, there is a specific group of customers who value local products. These customers will buy the beers mostly because it is a local product. A strong emphasis on the locality of the product could, therefore, improve the sales. Another

5 Preface

In front of you lies my master thesis, written for my graduation as a Msc Business

Administrations, specialization Strategy & Innovation at the Rijksuniversiteit Groningen. I would like to take this opportunity to thank my supervisor René van der Eijk for his time and feedback. Without his sharp comments I would have never been able to write this thesis. Furthermore, I would like to thank the brewers who were kind enough to spend their time at an interview and to provide me with the necessary data for my research.

Last, but not least, I want to thank Alice Wubbels, Diederik de Ceuster, Ronald de Ceuster and Marieke Stafleu for their constant feedback, support and motivation.

Karel de Ceuster

6 Abstract ... 2 Executive Summary ... 3 Preface ... 5 1. Introduction ... 8 1.1 Relevance ... 8 1.2 Research Question ... 9

1.3 Scope of the Research ... 10

1.4 Overview of the Paper ... 11

2. Literature Review ... 12 2.1 Innovation ... 12 2.2 Diffusion ... 13 2.3 The Chasm ... 15 2.4 Summary ... 21 3. Methodology ... 22

3.1 Research Aim and Type ... 22

3.2 Case Selection ... 22

3.3 The Cases ... 22

3.4 Data Collection ... 23

3.5 Variables ... 23

3.6 Validity, Reliability & Generalizability ... 26

7

5.5 The Chasm ... 44

5.6 Summary ... 45

6. Conclusion ... 46

6.1 Main findings ... 46

6.2 Implications for theory ... 48

6.3 Implications for practice ... 48

6.4 Limitations ... 48

6.5 Suggestions for Future Research ... 49

8 1. Introduction

Last November, the 3rd annual Northerly Specialty Beer Festival was held in Groningen. At this festival ten Dutch breweries were present. These breweries all brought a selection of their specialty beers, ranging from their well-known beers to new try-out recipes. During the tasting of one of these delicious new beers, a conversation occurred with the brewer who brewed the beer. He asked if the beer tasted right and if there were any remarks or things that should be different in his beer. Later on, he told he was working on this beer for quite a while and he was fine-tuning it to match the taste of the public.

This was an immediate reminder of the subject of the adoption of innovations. It was striking to see that even a small brewer, with no experience in the field of strategy and innovation, was busy to try to appeal to the early adopters of his innovation. In this case: the visitors of a specialty beer festival adopting the new beer. The beer of this particular brewery tasted very good, so there was no doubt that the early adopters at the festival would like it. However, the question remained if the beer would sell to a larger public (the early majority) or that it would never leave the early market. In other words, the question is whether or not this beer would have to deal with a chasm, a drop in sales during the transition from the early market to the early majority, and if so, if it would be able to cross the chasm.

In order to investigate this, the subject of this research is the adoption of incremental innovations. This research will investigate whether or not there is a chasm with incremental innovations. That is, is there a (large) drop in sales during the transition from the early adopters to the early majority?

1.1 Relevance

There has already been done some research on the chasm. This research, however, is all done in high-tech, often radical, innovations; see for example Börjesson, Martinsson & Timmeras (2006) and Moore (2006). However, to the author’s best knowledge, there has been no research done so far on the possible existence of a chasm with incremental innovations. This is a surprising finding since most of the innovations that occur are of an incremental nature (Galvin & Morkel, 2001). Because of this, one would expect there to be research done on the chasm within the adoption of incremental innovations. This is especially the case given the fact that the chasm can have devastating consequences for the firm (Moore, 2006). If a firm is to encounter the chasm without knowing it, the firm might invest at the wrong moment, might follow the wrong strategy, and might see the sales drop (Moore, 2006). This can lead to the discontinuation of the product, which entails a lot of money loss, or even bankruptcy, for the firm (Moore, 2006).

Since the existence of a chasm has significant consequences for the firm, and the strategy which a firm should pursue (Moore, 2006), and because most innovations are of an incremental nature, it is important to know whether or not there are chasm issues with incremental innovations.

9

popularity all around the world. As of today, there are almost one hundred and thirty

breweries located in the Netherlands, brewing all kinds of specialty beer. Furthermore, there are still more breweries starting up and introducing new beers. These newly introduced beers can be seen as incremental innovations. An incremental innovation is a new or improved product, service or organizational form that builds on existing technologies. Since the underlying technology of specialty beer (brewing process, ingredients etc.) does not change when a new beer is brought to market, but the performance (flavor) of the beers does improve, a new specialty beer can be seen as an incremental innovation.

1.2 Research Question

As stated before, there has been done research on the chasm in high-tech, radical, innovations, but not within incremental innovations. As was pointed out, the existence of a chasm has significant consequences for a firm; the chasm represents a significant drop in sales which could, if not anticipated on in the right manner, be the end of the firm (Moore, 2006). In addition, most innovations are incremental (Galvin & Morkel, 2001). Because of this, the existence of a chasm with incremental innovations could influence a great number of firms. Therefore it is important to find out whether or not there are chasm issues with incremental product innovations.

In order to do this, it is necessary to find a product market where incremental innovations occur. As said before, an incremental innovation is a new or improved product, service or organizational form that builds on existing technologies. Specialty beer is such a product. Every year new specialty beers appear on the market. When a new specialty beer is brought to market, it uses, for the largest part, the same ingredients and technologies as other previous specialty beers in the market. However, the specific type of ingredients, the way in which they are used and the brewing techniques are different; creating a new beer. This new beer can be seen as an incremental innovation.

It already has been stated that this research will investigate the existence of a chasm in the adoption of incremental innovations within the specialty beer industry in the Netherlands. Therefore, the goal of this research is as follows:

To investigate whether or not there is a chasm in the adoption of incremental innovations in the specialty beer industry in the Netherlands.

To be able to investigate the possible existence of a chasm in the specialty beer industry in the Netherlands, the following research question is proposed:

Is there a chasm in the adoption of incremental innovations in the specialty beer industry in the Netherlands?

In order to be able to answer this research question, it is important to know what causes the chasm. In addition, other possible explanations for a sudden drop in sales ought to be examined. Beside this, it should be made clear what incremental innovations are.

Furthermore, it is needed to define the adoption process. When all of this is clear, a closer look at the specialty beer industry in the Netherlands is necessary in order to see if the chasm is apparent in this industry.

10

What are incremental innovations? What characterizes the adoption process? What causes the chasm?

What are other possible causes of a sudden drop in sales? Which of these factors play a role in the specialty beer industry? 1.3 Scope of the Research

As stated before, this paper will focus on the specialty beer industry in the Netherlands. In order to do this, it is necessary to define what specialty beer is. The Dutch dictionary defines specialty beers as all types of beer except pilsners (Van Dale, 2005). In the Netherlands, the term specialty beer is indeed associated with all kinds of beer as long as it is not a pilsner. In other languages, the term specialty beer does not exist as much. There is no scientific

literature on the subject of specialty beer. Since this paper focuses on the Dutch market, and since there is no scientific literature on this matter, the definition of specialty beer used in this paper will be the same as that of the Van Dale dictionary: specialty beer are all beers except pilsners.

This definition also fits the purpose of this research because it makes it easy to determine which beers are specialty beers and which ones are not. This makes the study easier to generalize across countries. Pilsner is the most consumed type of beer in the Netherlands (Datamonitor, 2011). According to the study by Datamonitor (2011) in 2011 pilsner

accounted for a little over eighty-two percent of the beer consumption in the Netherlands. The total beer consumption in the year 2011, pilsners and specialty beer combined, was just over 1140 million liters.

11

Because this research will focus on the specialty beer industry in the Netherlands, it is useful to investigate if there has been research done on the beer industry in general.

There has been done some research on the beer industry in general. Most of this research focuses on the United States or Germany. The focus of these papers, however, is not on the adoption of innovations. These papers are primarily concerned with financial issues in the beer industry; see for example Rojas (2008) and Tremblay, Iwasaki & Tremblay (2005). One paper, however, deals with the effect of online reviews on the sales of craft (or specialty) beers in the United Kingdom. The findings from this paper suggest that the strength of

positive reviews plays a significant role in determining which new products grow fastest in the marketplace (Clemons, Gao & Hitt, 2006). This paper thus touches the subject of the adoption of specialty beers. Although the paper focuses on the influence of reviews on sales, this concept can be translated to the adoption of innovations. This is because the early

majority often uses the experiences and opinions of other customers in the early majority as a reference in order to determine whether or not to buy the new product (Rogers, 2003). The influence of online reviews on the number of sales of specialty beer in the U.K. might indicate the existence of an early majority looking for advice from fellow customers. This could indicate that the adoption of specialty beers in the U.K goes through the phases of new product adoption described by Rogers (2003).

1.4 Overview of the Paper

The remainder of this paper shall be built up as follows. In the next chapter a review of the literature on the most important concepts of this research is presented. After the literature review, in the methodology section, the beer industry will be defined and the relevant

variables for this research will be introduced, resulting in a conceptual model. Next to this, the research strategy and research method will be explained in the methodology section.

Following the methodology chapter, in the results chapter the results of the research will be presented. After the presentation of the results, these results will be discussed in the

12 2. Literature Review

In this section the literature on the most important concepts of this study is reviewed. First the concept of innovation will be analyzed. Thereafter, the diffusion of innovations shall be explained, followed by the chasm theory. At last a brief look shall be taken at the literature concerning the beer industry.

2.1 Innovation

The term innovation is defined differently by various authors throughout the years. For example; Veryzer (1998) states that innovation refers to the creation of a product, service or process. This definition is a very broad one, basically everything that is new is called an innovation. A narrower, and more often used, definition is that of Garcia & Calantone (2002). These authors differentiate between an invention and an innovation. They state that an

invention is a new product, process or idea. An invention does not become an innovation until it has processed through production and marketing tasks and is diffused into the marketplace. This definition is in line with that of Van de Ven (1986), who states that innovation is defined as the development and implementation of new ideas by people who over time engage in transactions with others within an institutional context. Furthermore, Bhaskaran (2006), Ziggers (2005) and Dewar & Dutton (1986) all define an innovation as an idea, practice or object that is perceived as new by an individual or other unit of adoption. Finally, in his book ‘Diffusion of Innovations’, Rogers (2003) also defines innovation as an idea, practice or object that individuals or other units of adoption perceive as new. This definition is broad enough to capture all sorts of innovations in its scope, but it is narrow enough to leave out inventions that never leave the lab, or even the drawing board. Since the focus of this paper is on the diffusion of innovations, the definition of innovation used in this paper is in line with the definition Rogers (2003) uses in his book on the diffusion of innovations.

As stated above, in this paper innovation is defined as an idea, practice or object that is perceived as new by an individual or other unit of adoption.

According to Ettlie, Bridges & O’Keefe (1984), a distinction can be made within innovations between radical and incremental innovations. The difference between radical and incremental innovations shall be explained below.

Radical innovations are fundamental changes that represent revolutionary change in

technology. They represent clear departures from existing practices (Dewar & Dutton, 1986). Ziggers (2005) and Damanpour (1991) also use this definition of radical innovations.

According to Jacobs (2007) a radical innovation is a product, process or service with either unprecedented performance features or familiar features that offer potential for significant improvements or cost. Radical innovations create such a dramatic change in products, processes or services that they transform existing markets or industries, or create new ones. Incremental innovations, in contrast, are minor improvements or simple adjustments in existent technology (Dewar & Dutton, 1986). On the definition of incremental innovations is fewer consensus in the literature. Next to Dewar & Dutton, Jacobs (2007) states that

incremental innovations are small changes in existing products. Ziggers (2005) considers incremental innovations as those that cause only slight or modest adaptations or

13

& Calantone (2002) incremental innovations are products that provide new features, benefits or improvements to the existing technology in the existing market.

This is in line with Christensen (1992) who states that incremental innovation refers to improvements in component performance that build upon the established technological concept or refinements in system design that involve no significant changes in the technical relationships among components. Finally, Henderson & Clark (1990) state that incremental innovations introduces relatively minor changes to the existing product and exploit the potential of the established design.

From these definitions it can be derived that an incremental innovation is a new or improved product, service or organizational form that builds on existing technologies.

As is stated by several authors, innovation is important for an organization. Drazin &

Schoonhoven (1996) insist innovation is among the essential competitive and organizational challenges a firm faces. According to Easingwood, Moxey & Capleton (2006) innovation is an important determinant of wealth, creation and economic growth. This is in line with Greve (2009) who argues that innovations are a source of competitive advantage. Besides this, Johannessen, Olsen & Lumpkin (2001) state that innovation is a critical activity that is vitally important for most firms to embrace in order to create and sustain a competitive advantage. Both radical and incremental innovations can be important for a firm. Radical new products play an important role in building competitive advantage and can contribute significantly to a firm’s growth (Veryzer, 1998). According to Kleinschmidt & Cooper (1991) highly

innovative products help the firm fare well. These authors furthermore state that incremental innovations also help the firm fare well. O’Reilly & Tushman (2004) emphasize that to flourish over the long run, most companies need to maintain a variety of innovation efforts. They must constantly pursue incremental innovations in order to deliver ever greater value to customers. According to Garcia & Calantone (2002) incremental innovations are important for two reasons. First, as an important competitive weapon in a technologically matured market. Second, streamlined procedures based on existing technology can help alert a business in good times to threats and opportunities associated with the shift to a new technological plateau.

2.2 Diffusion

As is shown above, innovation is important to a firm. However, the innovation has no value if it is not adopted by the customers. Hence, the innovation needs to be diffused in the market. Diffusion refers to the spread of something within a social system (Strang & Soule, 1998). The home territory of diffusion is the innovation. Innovations are novel (at least to the

adopting community), making communication a necessary condition for adoption. Moreover, since innovations are risky and uncertain, adopters carefully weigh the experience of others before acting (Strang & Soule, 1998).

14

Rogers (2003) explains there are several characteristics that decide in which category a person falls. He states that earlier adopters generally have a higher socioeconomic status than later adopters do. Furthermore, personality traits play a role; earlier adopters have, among other traits, greater intelligence, a more favorable attitude toward change and a greater ability to cope with uncertainty and risk. Also, earlier adopters have more social participation, are more highly interconnected in the interpersonal networks of their system and engage in more active information seeking. A last characteristic which differentiates earlier adopters from later adopters is the communication behavior.

Moore (2006) adds to this the concept of risk aversion. Risk aversion is the degree to which a person is willing to take risks. The author states that the first people to adopt an innovation (the innovators) are less risk averse than the people who adopt the innovation in a later stage, with the laggards as the most risk averse adopters.

Below a short overview of the characteristics of each group of adopters is given. Innovators

These are people who are fundamentally committed to new technology on the ground that, sooner or later, it is bound to improve our lives. They are the first customers for anything that is truly brand new.

Early adopters

These are the revolutionaries in companies and government who want to use the discontinuity of any innovation to make a break with the past and start a new future. Their expectation is that by being the first to exploit the new capability they can achieve a competitive advantage.

Early majority

These people make the bulk of all technology infrastructure purchases. They are neutral about technology and look to adopt innovations only after a proven track record.

Late majority

These people are pessimistic about their ability to gain any value from technology; they eventually adopt it because they fear the rest of the world will pass them by. Laggards

These are not customers, but ever present critics.

Börjesson et al. (2006) explain the different categories of adopters a little further. According to them the first group, innovators, tends to seek out the new technology before it is formally marketed. Innovators are typically very technology focused. The second group, early

adopters, accepts new products very early in the technology life cycle. Early adopters find it easy to imagine, understand, and appreciate the new technology’s potential benefits. The third group, early majority, is driven by a strong sense of practicality. People in the early majority want well-established references from relevant market segments before committing

themselves. The fourth group, late majority, shares all of the early majority’s concerns and feels uncomfortable in their ability to manage the new technology. They therefore wait until a new technology has become a well-established standard. The fifth and last group, laggards, simply want nothing to do with the new technology. When they do accept a new technology, they typically do so without realizing it.

15 Figure 1. The Adoption Life Cycle.

The above suggest that in order to stimulate the diffusion of an innovation through an entire market, firms should first focus their activities on the innovators and get them to adopt the innovation (Egmond, Jonkers & Kok, 2006, Rogers, 2003). When this happens the early adopters will start to adopt the innovation. Thereafter, the early and late majority will follow (Egmond et al., 2006,).

This line of reasoning suggests that when you win over the innovators and early adopters, you can win over the entire market. This proposition is based on the thought that each adopter segment will use its predecessors as a reference to decide whether or not they will adopt the innovation. Steenkamp & Gielens (2003), however, argue that it depends on the context whether or not this process occurs. Moore (2006) is also skeptical about the influence of the early adopters on the early majority. The reason for this skepticism is that the early majority adopts the new product for other reasons than the early adopters do. As said before, the innovators and early adopters buy a new product because it is new and they want to try new products. They hope these new products will improve their life or give them an advantage of some sort. The early majority, however, will only buy the new product if they see the new product actually has benefits (Börjesson et al., 2006, Moore, 2006, Rogers, 2003).

2.3 The Chasm

Since the early majority adopts a product for other reasons than the early adopters, the early majority cannot use the early adopters as a reference (Moore, 2006). This reference would be worth little since the aspects of the product that are important to the early adopters are not necessarily the same for the early majority. The early majority, however, needs to see the benefit (or value added) of the new product, but they cannot use the early adopters as a proper reference. This has as a consequence that the early majority will be hesitant to adopt the product until they have enough references that it is beneficial for them to adopt it (Moore, 2006). The hesitance of the early majority will cause the sales to stagnate or even drop, due to the fact that the innovators and early adopters already have the product while the early

16

visionaries (early adopters) together form the early market. As said before, Moore argues there is a drop in sales when the transition is made from the early market to the early majority. The transition period during which the sales drop appears he calls the chasm (Moore, 2006). In the figure below is an illustration of the chasm shown.

Figure 2. The Chasm.

Apart from the early majority not using the early market as a reference, there can be other causes of a drop in sales. One reason for a drop in sales could be a poor price/performance ratio. Goldenberg et al. (2002) state that a poor price/performance ratio can have a negative effect on the adoption of a product. Also, macro-economic variables should be taken into account when investigating the chasm (Goldenberg et al., 2002). It should be clear that in an economic recession the sales of most products will tend to drop. When the recession nears its end, the sales will grow. As stated before, Moore (2006) claims the chasm is caused by the difference in characteristics of the adopters in the early market and the early majority. Other authors have followed Moore in this assumption. See for example Börjesson et al (2006) and Easingwood & Harrington (2002).

Strang & Soule (1998) state that that advertisement through mass media is positively

17

The chasm concept is originally thought of as a theory for the adoption of radical innovations. As Moore (2006) states: whenever truly innovative high-tech products are first brought to market, they will initially enjoy a warm welcome in an early market made up of innovators and early adopters, but then they will fall into a chasm, during which sales will falter and often plummet.

Several authors have investigated the possible existence of the chasm. These authors state that the existence of the chasm depends on the product (Chandrasekaran & Tellis, 2011, Lehman & Esteban-Bravo, 2006). Goldenberg et al. (2006) state the chasm exists for six out of the seven products they studied. A similar study done by Golder & Tellis (2004) indicates that, across thirty products studied, there is an initial peak in demand followed by a decline and after that a recovery of demand. Furthermore, Goldenberg, Libai & Muller (2002) find that between one-third and one-half of the sales cases involved in their study showed the

following pattern: an initial peak, then a trough, and eventually sales levels that exceeded the initial peak. At last Van den Bulte & Joshi (2007) argue that product diffusion can experience the chasm between the early market and the early majority, however, this is depending on the product.

Concluding, it can be stated that the chasm is a drop in sales which, after some time, is followed by a recovery to beyond the original peak level of sales. This drop in sales can be caused by a poor price/performance ratio or by macro-economic variables (Goldenberg et al. 2002). Most authors, however, follow the reasoning of Moore (2006), who states that the chasm is caused by the difference between the characteristics of the adopters in the early market and the early majority. Due to this difference, the early majority cannot use the early market as the much needed reference. This in turn causes the early majority to be hesitant to adopt the product. A niche market strategy is then needed to overcome the chasm by

providing the early majority with references of their own.

Authors who investigated the chasm came to the conclusion that the chasm does not appear with all products. Whether or not the chasm appears is dependent on the product. However, all these studies have focused on high tech products. If the chasm exists with low tech products is yet to be seen.

18

Author(s) Concept Definition Implications for the Adoption of

Innovations

Strang & Soule (1998) Diffusion Diffusion is the spread of something within a social system.

A very broad definition of both diffusion and innovation are used.

Rogers (2003) Diffusion Diffusion of innovations is the process by which an innovation is communicated through certain

channels over time among the members of a social system.

Personal characteristics define the rate of adoption by customers. There are five adopter categories; each is one standard deviation away from the average time of adoption.

In order to win over the market, the innovation should be adopted by the innovators and early adopters. The later adopters will use these groups as a reference for their buying decision.

Steenkamp & Gielens (2003) Diffusion Use the definition of Rogers (2003). Argue that not in every case the adopter segments use their predecessors as a reference. Whether or not this process occurs depends on the context.

Moore (2006) The Chasm Builds on the diffusion model of Rogers (2003). Moore adds to this model the concept of risk aversion as a determinant for adopter categories. Furthermore, he labels the adopter categories a different name. Moore states that the innovators and early adopters together form the early market. He also states that the early majority does not use the early market as a reference for their buying decision. Therefore, there will appear a drop in sales between these two segments, called the chasm.

19

Author(s) Concept Definition Implications for the Adoption of

Innovations

Börjesson et al. (2006) Diffusion / The Chasm

Use the same definitions as Rogers (2003) and Moore (2006). They have tested the chasm concept in the software industry.

Also state that a niche strategy is the preferred method to win the early majority over.

Easingwood et al. (2006) The Chasm Also use the definition of Moore (2006). Agree with Moore that a niche strategy is needed to get the early majority to adopt the product.

Egmond et al. (2006) The Chasm Use the definitions of Rogers (2003) and Moore (2006). This paper investigates the diffusion of energy related innovations.

Also state that attacking a niche market in the early majority and then

conquering this niche in order to use it as a reference point for other niches is the proper way to cross the chasm. Easingwood & Harrington (2002) The Chasm Use the definition proposed by Moore (2006). Also argue that a niche strategy is the

appropriate method in order to cross the chasm.

Chandrasekaran & Tellis (2011) The Chasm Define the chasm as a sudden, sustained, and deep drop in sales of a new product, after a period of rapid growth following takeoff, followed by a gradual recovery to the former peak. The authors tested for the generalizability of the chasm across products and countries.

They find that the chasm is not apparent in the adoption of all products. The authors state that the existence of a chasm depends on the product. Lehman & Esteban-Bravo (2006) The Chasm In this paper the definitions of Rogers (2003) and

Moore (2006) are used.

Also state that existence of a chasm depends on the product.

Goldenberg et al. (2006) The Chasm Investigated the existence of the chasm in seven home electronic products. They use the definitions of Rogers (2003) and Moore (2006).

State the chasm exists for six out of the seven products they studied.

Golder & Tellis (2004) The Chasm Investigated the chasm across multiple product categories. They use the definitions of Rogers (2003) and Moore (2006).

Indicates that, across thirty products studied, there is an initial peak in demand followed by a decline and after that a recovery of demand.

20

Author(s) Concept Definition Implications for the Adoption of

Innovations

Goldenberg, Libai & Muller (2002) The Chasm Use the definitions of Rogers (2003) and Moore (2006).

Find that between one-third and one-half of the sales cases involved in their study showed the following pattern: an initial peak, then a trough, and eventually sales levels that exceeded the initial peak Van den Bulte & Joshi (2007) The Chasm Also use the definitions of Rogers (2003) and

21

2.4 Summary

In this chapter the most important concepts of this research are discussed. First innovation is defined as an idea, practice or object that is perceived as new by an individual or other unit of adoption. A distinction can be made between radical and incremental innovations. Radical innovations are fundamental changes that represent revolutionary change in technology. Incremental innovations, on the other hand, are new or improved products, services or organizational forms that build on existing technologies. Organizations must constantly pursue incremental innovations in order to deliver ever greater value to customers. However, the innovation has no value if it is not adopted by the customers. The adoption (or diffusion) of innovations is the process by which an innovation is communicated through certain

channels over time among the members of a social system. According to Rogers (2003) there are five categories of adopters. The first people to adopt an innovation are called the

innovators, these people buy the product because it is new. They are followed by the early adopters who buy the product to break with the past and start a new future. The next category is the early majority, people who will buy the product when it is proven to be an

improvement. The early majority is followed by the late majority, who buy the product in order to not fall behind. Fifth and finally are the laggards, who will never buy the product. Every category is one standard deviation away from the average time of adoption.

Several authors state that in order to stimulate the diffusion of an innovation through an entire market, firms should first focus their activities on the innovators and get them to adopt the innovation (Egmond, Jonkers & Kok, 2006, Rogers, 2003). When the innovators are won over, they serve as a reference for the early adopters. The early adopters in turn provide a reference for the early majority and so on (Egmond et al., 2006,).

Moore (2006), however, is skeptical about the influence of the early adopters on the early majority. The reason for this skepticism is that the early majority adopts the new product for other reasons than the early adopters do. This difference in motivations causes a hesitance with the early majority to buy the product. The hesitance of the early majority will cause the sales to stagnate or even drop, due to the fact that the innovators and early adopters already have the product while the early majority does not yet buy it. This drop in sales is called the chasm (Moore, 2006).

This drop in sales, however, could also be caused by a poor price/performance ratio or by macro-economic variables (Goldenberg et al. 2002). Most authors, however, follow the reasoning of Moore (2006), who states that the chasm is caused by the difference between the characteristics of the adopters in the early market and the early majority. Due to this

difference, the early majority cannot use the early market as the much needed reference. This in turn causes the early majority to be hesitant to adopt the product. A niche market strategy is then needed to overcome the chasm by providing the early majority with references of their own.

22 3. Methodology

This chapter will start with the research aim and the type of research. Thereafter, the selection of the cases will be explained. Following the case selection, a short overview of the cases analyzed in this study will be given. After the presentation of cases the method of data collection will be explained. Thereafter, an overview of the different variables and their possible influence on the number of sales of specialty beer will be presented. This chapter will end with a paragraph on the validity, reliability and generalizability of this study.

3.1 Research Aim and Type

Research can have different goals to achieve. According to Dul & Hak (2008) there is exploratory, theory building and theory testing research, each with its own specific goal. The aim of this research is to investigate whether or not there is a chasm in the adoption of incremental innovations in the specialty beer industry in the Netherlands. This research thus tests the chasm theory by Moore (2006). This type of research is what Hak & Dul (2008) call theory testing research.

In order to test the chasm theory within incremental innovations, a case study approach is chosen. According to Dul & Hak (2008) a case study is a good way to do theory testing research. Also, because the population that is investigated is small, a case study with interviews is preferred over a survey approach (Dul & Hak, 2008).

3.2 Case Selection

In this research, the cases will exist out of four small Dutch breweries.

There are multiple reasons for this study to focus only on small Dutch breweries, as opposite to larger breweries and/or a more international perspective. First, smaller breweries bring out new beers more often than larger breweries do. This has as a result that more sales figures of different beers will be available, increasing the reliability of this research. A second reason for choosing only small breweries is, that doing this will make the cases more comparable, as opposed to a study which analyzes both larger and smaller breweries. When the cases are more comparable, the results will become more reliable. The third, and final, reason to choose for merely small Dutch breweries is, that the scope of this research would become too broad when beers and breweries from outside the Netherlands would be taken into account.

3.3 The Cases

As stated above the cases investigated in this study will be four small Dutch breweries. The size of the breweries varies, but they are all considered small. The market share of each brewery is below one percent of the total market for specialty beer in the Netherlands. All the breweries are privately owned. A privately owned brewery does not have automatic access to the distribution channels of the large brewing conglomerates (Heineken, Inbev and

SABMiller). Below a short overview of the cases is given. On request of some of the breweries, all breweries are anonymous.

23

a fourth beer, which will be a seasonal beer. At the moment, however, they only sell three types of beer. This brewery has a capacity of around 1000 liters per week, although this capacity is not necessarily used to its full potential.

Brewery B is a slightly larger and older brewery. The brewery exists for about ten years now and sells four different kinds of beers. One of these beers is a seasonal beer. This brewery rents capacity in another brewery and thus has, in theory, no maximum capacity. The beers are brewed in batches of 3000 liters.

Brewery C is the largest brewery investigated in this research. It sells ten types of beer, five of which are seasonal products. This brewery also rents capacity at other breweries. The beers are, depending on the type, brewed in batches of either 3000 or 5000 liters.

Brewery D is the second largest brewery in this study. It is slightly younger than Brewery B. This brewery sells ten different beers. Five of the sold beers are seasonal beers. This brewery has its own brewing facility, but it also rents capacity at another brewery. The beers are brewed in batches of 450 or 4500 liters.

3.4 Data Collection

The sales figures of the different beers these breweries bring to market will be analyzed in order to see if there is a drop in sales, and if so, how deep it is and if this drop in sales is followed by a recovery beyond the original sales level. Furthermore, interviews will be held with the brewers in order to investigate the role of the independent variables; marketing efforts, price, and buyer characteristics. Of course the interviews will also determine the role of the control variables mentioned in the following section of this chapter.

The interviews will be recorded on tape and transcribed. Thereafter, the interviews will be analyzed and the answers will be labeled. After labeling, the interviews are analyzed and per case statements will be made about the different concepts tested in this research. After the analysis of all the cases, the different cases will be compared. Based on this comparison, conclusions can be drawn about the different concepts investigated in this study.

Because the sales figures of the participating breweries need to remain confidential, the participating breweries shall not be named. They will be referred to as Brewery A, B, C and D. The beers of these breweries will not be named as well, because naming the beers would make the breweries identifiable. The beers will be named Beer A1, A2, B1, B2 and so forth. Here the letter stands for the corresponding brewery and the number identifies the specific beer.

3.5 Variables

To identify the chasm it is necessary to analyze the sales figures. Authors who tested the existence of a chasm have stated that there is a chasm when there is a drop in sales of over ten percent compared to the initial peak in sales (Chandrasekaran, & Tellis, 2011, Goldenberg et al., 2002).

24

products compared need to be comparable not only in type of product, but also in type of producer. The Dutch beer market is dominated by roughly eight large beer brands, owned by three large brewing conglomerates (Datamonitor, 2011). These large breweries have a vast distribution network and a large marketing and advertising department and budget. This will probably cause the adoption to be relatively smooth compared to small breweries, which do not have these (financial) resources. The large breweries can make sure their beer is for sale in all supermarkets and liquor stores in the Netherlands, whereas the small breweries have to convince the public to buy their product in order to get their beer for sale in a liquor store or bar. Therefore, in order to have comparable cases, the breweries interviewed need to be of similar size. In order to make sure the breweries are comparable, and a possible found chasm is caused by the theory proposed by Moore (2006), the following variables will be taken into account:

Number of Sales

The number of sales is the main variable needed to investigate whether or not there is a chasm. In order to be able to see if there is a chasm, annual sales will be reviewed.

Marketing Efforts

Marketing efforts are all efforts the brewery undertakes to get its products under the attention of the public. These efforts include advertising, but also window display in stores and the selling of related articles (like beer glasses or bottle-openers). Marketing efforts have a positive effect on the adoption rate of an innovation. Especially advertisement through mass media is positively associated with the speed of adoption (Strang & Soule, 1998).

Price

The price of the beer is important as well. One can imagine that a beer costing one euro will be more easily tried out by the early majority than a beer costing three euros. Next to this, Goldenberg et al. (2002) state that a poor price/performance ratio can have a negative effect on the adoption of a product.

Buyer Characteristics

As mentioned by Rogers (2003) and Moore (2006) the innovators and early adopters buy a new product for other reasons than the early majority. When there is no apparent chasm this could be, among other reasons, because the product has not left the early market yet. In order to determine whether or not the beers are still in the early market phase it is necessary to know the characteristics of the customers.

Macro-economic

According to Goldenberg et al. (2002) macro-economic variables should be taken into account when investigating the chasm. When the economy is going into a recession the sales of most products will go down and after a recession the sales will tend to grow. This pattern in sales should not be confused with the chasm as proposed by Moore (2006).

Marketing Budget

The marketing budget is important, because the more money available for marketing there is, the more marketing efforts can be undertaken. As explained above, marketing efforts have a positive effect on the speed of adoption.

25 Ownership

As stated before, the ownership of the brewery is important. When a brewery is owned by a large brewing conglomerate it has access to a vast distribution network and more marketing expertise. This can influence the rate of adoption. Therefore all the cases that will be

compared should be either beers that are brewed by brewers with access to these assets, or beers brewed by breweries that are privately owned.

Sales Points

The sales points of the beers also have an impact on the adoption rate. One can imagine that the adoption of a beer will go faster if the beer is for sale in a large number of liquor stores and bars, as opposed to a beer that is only for sale in a few liquor stores and bars.

Brewing Capacity

The effect of brewing capacity is quite straightforward. When the sales stagnate this could be an indication of the hesitance of the early majority to buy the beer. However, it could also be the case that the maximum brewing capacity is reached, and therefore sales stop growing, even when the early market has not fully adopted the beer yet. When the brewing capacity is later expanded, the early market could continue adopting the beer, increasing the sales. This increase in sales could seem to be a dramatic increase, for example when the brewing capacity goes from one hundred to two hundred liters and all the extra brewed beer sells almost

instantly to the early market. This increase in sales could be mistaken for the chasm, although the end of the early market is not yet reached.

Seasonality

Some beers are typical season beers, for example Bockbier is a typical beer for the autumn and is rarely sold outside the season. When reviewing the sales data this should be taken into account. It would be preferable not to compare season-bound beers, but if these beers would be compared it is important to only focus on the sales during the season. Otherwise, there would appear to be a very clear chasm (the part of the year when the beer is not sold). The dependence of each variable is shown in the table below.

Variable Independent / Dependent / Control

Number of Sales Dependent

Marketing Efforts Independent

Price Independent

Buyer Characteristics Independent

Macro-economic Control

Marketing Budget Control

Ownership Control

Sales Points Control

Brewing Capacity Control

Seasonality Control

26

In the table below an overview of which variable is introduced by which author is given.

Variable Author(s)

Marketing efforts Strang & Soule, 1998

Price Goldenberg et al., 2002

Buyer characteristics Moore, 2006 and Rogers, 2003

Macro Economics Goldenberg et al., 2002

Table 3. Variables and authors.

The relationships between the aforementioned variables will be graphically displayed below.

Figure 3. Conceptual Model.

3.6 Validity, Reliability & Generalizability

Both the internal and external validity are insured in this study. The interview questions are based on a thorough review of the scientific literature on the important concepts of the adoption of innovations and the chasm theory. This increases the internal validity of this study. Next to this, the results are controlled for other factors that might influence the results, further increasing the internal validity of this research.

This is a comparative case study which compares four breweries and their beers. A

comparative case study is a case study whereby several real life cases are compared (Dul & Hak, 2008). A comparative case study insures the external validity of the results, because multiple cases are analyzed. This increases the external validity of the results because the results are not based on one case, which could be an exception, but on multiple cases. The exception than can be recognized as such.

Focusing on multiple cases in the same study does not only improve the validity, it also improves the reliability. Increasing the number of cases investigated, increases the reliability of the results stemming from these cases. The chance of an observation that is actually an exception to the norm within the investigated area decreases when the number of investigated

Marketing Efforts Price Buyer Characteristics

Number of Sales Independent Variables

Macro-economic Marketing Budget Ownership Sales Points

27

cases increases. Therefore, the reliability of the study increases with the number of cases investigated.

According to Dul & Hak (2008) the generalizability of a case study is improved when the case study is repeated several times. A good way to do this is by performing a comparative case study, a case study whereby several real life cases are compared (Dul & Hak, 2008). By analyzing multiple cases at the same time, the same effect is reached as is reached by

repeating a single case study. As stated before, this study investigates four cases, making it a comparative case study. This, thus, increases the generalizability of the results.

3.7 Summary

In this chapter the research aim, type and method are described. Furthermore, the variables measured in the research and the validity, reliability and generalizability are discussed. The aim of this research is to test whether or not the chasm theory of Moore (2006) holds for incremental innovations. This research, therefore, is a theory testing research. To test if the theory of Moore holds for incremental innovations, a case study approach is used. The cases consist of small Dutch breweries. This has several reasons: first smaller breweries bring out new beers more often than larger breweries do. Second, focusing only on small breweries makes the cases more comparable, as opposed to a study which analyzes both larger and smaller breweries. The third, and last, reason to focus on small Dutch breweries is that focusing on breweries both in and outside of the Netherlands would make the scope of the research too broad. The cases consist out of four different breweries. The breweries differ in both size, age and location. However, they are all considered as small breweries and can be considered comparable.

The data is collected through interviews with the brewers. Furthermore, the sales data of the breweries is analyzed in order to investigate the possible existence of the chasm.

In order to draw any conclusions about whether or not the chasm exists multiple variables are taken into account. First the sales figures will be analyzed as the dependent variable. The independent variables are the marketing efforts undertaken by the breweries, the price of the beers and the characteristics of the customers. There are also control variables, these are: macro-economic variables, marketing budget, ownership, sales points, brewing capacity and seasonality of the beers.

28 4. Results

In this section the results of the interviews with the different breweries are given. First the results per brewery will be presented. Thereafter, the results obtained from the different breweries are combined to make statements about the different concepts of this study.

Since the macro-economic variables are equal for all four breweries, this variable will only be presented in the overall analysis.

4.1 Brewery A

Number of Sales

As stated before, brewery A is a small brewery that started up in January 2011. They sell three types of beer, none of which are seasonal beers. This brewery only has a few sales so far. They sold a total of 360 liter, which is a very low number, even if compared to other small breweries. The explanation for this is simple: the brewery only exists for a short period of time, and just started to sell their beers. At the moment no seasonal beers are sold, but there are plans of brewing a seasonal beer next year. The sales are low, but the demand for the beers is high. According to the brewery the demand exceeds the supply. The sales of the first brewed beers went very fast due to the high demand. Because the demand is so high, the output is increased. At the moment, 1000 liters are brewed, and this amount is expected to sell rather quick.

Independent Variables

Because the demand for the beers is higher than the supply the brewery can provide at the moment, the brewery does not undertake much marketing efforts. When asked what

marketing efforts were undertaken the brewer replied: “Nothing, they [the customers] come to us”. Although the brewer states no marketing efforts are undertaken, there are clearly some efforts put into the marketing of the product. These are, however, not big efforts, but rather marketing efforts one would expect with a startup company. The brewery has his own website, there are posters present in local pubs that serve specialty beer, there are beer coasters and there are plans to make beer glasses with the logo printed on them. At the moment, however, most efforts are aimed towards unifying the different styles of the logo, website and poster towards one recognizable style. Also, the brewery is present at specialty beer festivals. Although visiting all the specialty beer festivals would be too time consuming, some festivals are visited by this brewery. According to the brewer, a lot of customers know the brewery thanks to specialty beer festivals. Next to this, the brewery had one of their beers as an ABT “beer of the month” in 2007, even before the official startup was even made (ABT, Alliantie van BierTapperijen, is an alliance of specialty beer bars/cafes). According to the brewer, five years later people still know the brewery from that beer. At this moment, the brewery wants to focus on positioning all three of their beers in the market before trying to become an ABT “beer of the month” again.

29

According to the brewer the customers are all kinds of people, differing in age, gender,

income etc. However, there is a specific group of fanatic specialty beer drinkers. These people are the first to buy a new beer, and are constantly looking for new beers. These customers are also the ones who will buy specialty beer at a liquor store to drink at home. Specialty beer drinkers who do not belong to the category of fanatics usually drink specialty beer in a bar/cafe.

Below a short overview of the independent variables of Brewery A is given.

Marketing Efforts Price Buyer Characteristics

Website, posters in bars/cafes and beer coasters. The most effort is towards creating a uniform, recognizable, style. Also, specialty beer festivals are visited.

€1.95 at the liquor store. €3.50 at bars/cafes.

Buyers differ in age, gender etc.

There is one specific group of specialty beer lovers. These people will be the first to buy new beers and are constantly looking for new beers.

Table 4. Independent Variables Brewery A.

Control Variables

This brewery does not have a marketing budget. If money is left over, this might be invested in marketing, but there is no upfront budget. The brewery is privately owned, so it has no access to a vast distribution network. This shows as the number of sales points is not high. Most sales are in bars/cafes, only a few liquor stores are selling the beers of this brewery at the time. As stated above, the brewing capacity is 1000 liters. In the sales so far no seasonal beers are included.

4.2 Brewery B

Number of Sales

Brewery B is a slightly larger and older Brewery than brewery A. Brewery B sells four types of beer, one of which is a seasonal beer. One of these beers is a pilsner. As stated before pilsners are not considered specialty beer. Therefore, the pilsner sales are not taken into

30 Figure 4. Sales figures of Brewery B.

As can be seen in figure 4, the sales increased from 2008 to 2010 and stabilized in 2011. In 2011 the sales did not grow. According to the brewer, this could be caused by the poor

economic climate. Based on the sales made so far in 2012, the owner of the brewery estimates that the sales for 2012 will be around 10% above of those of 2011. The increase in sales are partly due to a distributor who is selling more of the beers. This distributor is focused on the sales of all kind of regional products and is increasing the number of sales points, which in turn leads to more sales.

Independent Variables

Next to the sales through the distributor, the brewer sells his beers in his own café. This cafe is an important marketing instrument. The cafe is so important, because visitors of the cafe automatically come in contact with the beers of this brewery. Since the main marketing communication channel for this brewery is by word of mouth, increasing the number of people who come in contact with the beers, increases the reach of the brand. Another marketing effort the brewer undertakes, is to regularly visit bars/cafes to promote his beer. The brewer does not, however, visit a lot of specialty beer festivals. This is mostly due to the fact that these festivals are usually held in weekends and the brewer’s cafe is opened in the weekend, so there is no time to visit the festivals. Besides this, the brewer notes that after visiting the festivals there is no noticeable increase in sales, making visiting these festivals not preferable over opening the cafe. Further marketing efforts are the more standard efforts; the brewery has its own glasses, beer coasters, posters and of course a website.

The prices of the beers are lower than those of the other breweries in this study. Beer B1 and B2 sell for €1.35 for a bottle, and Beer B3 only costs €1.05. In a bar/cafe all three beers have the same price of €2.25 per glass. The price is based on the cost price plus a margin.

However, the brewer does believe that the price effects the sales. He states that an increase in price would lead to a decrease in sales. Also, he believes that his prices are fair and not based on the quality of the beers. He states that although the quality of the beers is good, the prices should not be any higher. According to the brewer, there is a group of customers who are not sensitive to the price of the beers. These people can be characterized as specialty beer lovers,

31

who love, and know a lot about, the product beer. These customers will be the first ones to try out a new beer and are constantly on the lookout for new beers. This is an important group of customers because these people tend to tell other people about the beers they drink. Also, the specialty beer lovers take friends, family and/or colleagues to visit the brewery, introducing them to the beers. According to the brewer, the specialty beer lovers are one of the two main groups of customers. The other group consists of people who buy the beer for “chauvinistic reasons”. They see the beer as a local product and buy it just because it is a local product. Also, they like to give the beers as a present to people who are not from the region to promote their region.

Below a short overview of the independent variables of Brewery B is given.

Marketing Efforts Price Buyer Characteristics

Main marketing

communication channel is word of mouth. Furthermore, there are beer coasters, glasses, posters and a website. The brewery does not visit a lot of specialty beer festivals.

Beer B1 and B2 sell for €1.35 in a liquor store. Beer B3 costs €1.05

In bars/cafes all three beers sell for €2.25.

There are two main types of customers. One group are the specialty beer lovers. These people will be the first ones to try out a new beer and are constantly on the lookout for new beers.

The second group of customers are people who buy the beer because it is a local product.

Table 5. Independent Variables Brewery B.

Control Variables

This brewery does not have a marketing budget. The brewery is privately owned, but it does not have a brewing facility. The brewing capacity is rented in another brewery. Therefore, the capacity is in theory unlimited. The beers are brewed in batches of 3000 liters. Most of the sales outside the brewery and the cafe owned by the brewer are done through a distributor. This has as a consequence that the number of sales points varies. As stated before, one of the beers is a seasonal beer.

4.3 Brewery C

32 Figure 5. Sales figures of Brewery C.

In the sales of all the beers a drop can be noticed. This drop is particularly large with beer C9. This beer was for sale in two important retail chains. When this type of beer became more popular, a large brewery negotiated a price below the cost price with these retail chains. This led them to abandon the beer from Brewery C. The drop in the other beers is due to the loss of two important distributors. When these distributors discontinued purchasing and reselling the beers a large part of the sales disappeared. According to the brewer, a second reason for the reduced number of sales is the economic crisis. In figure 5 it can be seen that the sales are recovering from the drop. Although most sales are not yet back at the level they were, an upward trend can be noticed.

Independent Variables

The recovery of the sales can be attributed to a change in strategy. The focus shifted towards wholesale organizations and new people were hired that reestablished the contacts with customers. The customers in this case being wholesalers, retailers and bar/cafe owners. Contact with the customers is an important marketing tool. The brewer states: "contact with the customer is the key". Next to maintaining contact with customers, the brewery does other marketing efforts. These are mainly focused towards the retail sector. Retailers can win a