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Marketing Gag or Value Creating Strategy: What is the Customer Value of Sustainability in Retail?
Type
applied research project
Start Date
01 February 2009
End Date
31 December 2009
Status
completed
Keywords
retail
sustainability
store choice
consumers
choice-based conjoint (CBC) analysis
Description
These days many companies like retailers pay much attention (and money) to loudly communicate their sustainability activities. Sustainability reports are everywhere and companies like the Swiss Migros and Coop, the German Metro Group or British Marks and Spencer do not only provide detailed information concerning their sustainability strategies on their homepages but also promote their activities expensively in other channels. The British company Tesco announced to spend £25m for a centre of sustainability consumption research (www.tescocorporate.com) and the worlds biggest retailer Wal Mart concentrates it's activities in this direction under the roof of an ambitious program called "Sustainability 360" (Meliton, 2007). The CEO of the German REWE-Group even called for a revolution in retail to overcome associated challenges of environmental and social problems to ensure future competitiveness (LZ, 2008). In this context it is hardly surprising that recently a survey revealed aspects of sustainability claiming high priorities on the agenda of retail managers (CIES, 2007). But although according to theory sustainability strategies could increase firm value (Dyllick, 2003; Hart & Milstein, 2003), there is in a retail context no empirical evidence on that.
Although most scholars report a positive relationship between different sustainability activities and different value measures (Dowell, Hart, & Yeung, 2000; Husted & Allen 2007; Klassen & McLaughlin, 1996; Klassen & Whybark, 1999; Margolis & Walsh, 2003; Orlitzky, Schmidt, & Rynes, 2003) one will also see opposite findings (Walley & Whitehead, 1994). Additionally managers still seem to be sceptic about the value creating potential sustainability has and so sustainability sometimes appears to be more of a marketing gag rather than a value creating strategy. Hence, studying return on sustainability in general is still a research gap for itself. Especially for the retail industry no research applies which would elaborate on whether and how sustainability strategies impact economic value creation. We intend to contribute to that shortcoming and take a customer value perspective (Belz & Bieger, 2006; Parasuraman, 1997; Slater, 1997; Woodruff, 1997). Supported by preliminary research we conducted, we assume that in retail the value creation potential of traditional product market strategies (like price, product or service strategies) and sustainability strategies (like sustainability operations or sustainability value propositions) are best evaluated out of a customer perspective.
We conduct an online choice-based conjoint (CBC) experiment with customers to find out which value they owe sustainability compared to other product market strategy components (Ben-Akiva et al., 1994; Louviere, Hensher, Swait, & Adamowicz, 2003; Louviere, Islam, Wasi, Street, & Burgess, 2008; McFadden, 1986; Sammer & Wüstenhagen, 2006b; Sawtooth, 2007; Train, 2003). We will be led by the following research question: What is the customer value of sustainability driven strategies in retail?
We contribute to strategy research in retail, sustainability research and to research on customer value. Implications for practice and further research apply.
Although most scholars report a positive relationship between different sustainability activities and different value measures (Dowell, Hart, & Yeung, 2000; Husted & Allen 2007; Klassen & McLaughlin, 1996; Klassen & Whybark, 1999; Margolis & Walsh, 2003; Orlitzky, Schmidt, & Rynes, 2003) one will also see opposite findings (Walley & Whitehead, 1994). Additionally managers still seem to be sceptic about the value creating potential sustainability has and so sustainability sometimes appears to be more of a marketing gag rather than a value creating strategy. Hence, studying return on sustainability in general is still a research gap for itself. Especially for the retail industry no research applies which would elaborate on whether and how sustainability strategies impact economic value creation. We intend to contribute to that shortcoming and take a customer value perspective (Belz & Bieger, 2006; Parasuraman, 1997; Slater, 1997; Woodruff, 1997). Supported by preliminary research we conducted, we assume that in retail the value creation potential of traditional product market strategies (like price, product or service strategies) and sustainability strategies (like sustainability operations or sustainability value propositions) are best evaluated out of a customer perspective.
We conduct an online choice-based conjoint (CBC) experiment with customers to find out which value they owe sustainability compared to other product market strategy components (Ben-Akiva et al., 1994; Louviere, Hensher, Swait, & Adamowicz, 2003; Louviere, Islam, Wasi, Street, & Burgess, 2008; McFadden, 1986; Sammer & Wüstenhagen, 2006b; Sawtooth, 2007; Train, 2003). We will be led by the following research question: What is the customer value of sustainability driven strategies in retail?
We contribute to strategy research in retail, sustainability research and to research on customer value. Implications for practice and further research apply.
Leader contributor(s)
Member contributor(s)
Funder(s)
Topic(s)
retail
sustainability
store choice
consumers
choice-based conjoint (CBC) analysis
Method(s)
choice-based conjoint (CBC) analysis
Range
Institute/School
Range (De)
Institut/School
Division(s)
Eprints ID
53231
2 results
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PublicationMarketing Gag or Value Creating Strategy: How does Sustainability Impact Store Choice in Retail?( 2010-06-17)Sustainability is getting more ground in the food retail industry. But empirical studies on sus-tainability strategies in retailing are rare, and even more when it comes to highlight the cus-tomers' perspective and their willingness to pay. This paper investigates the impact of sus-tainability initiatives on store choice and on consumers' willingness to pay by conducting a web-based conjoint experiment with customers from Austria, Germany and Switzerland. We report from 1,224 choice-decisions conducted between June and October 2009. We find that price is not of highest importance when it comes to store choice. If different sustainability aspects are fulfilled customers are prepared to pay a price premium. In particular we show that (1) if a meat-assortment of standard and organic products is complemented by products from the region, customers are ready to pay a price premium of €0.99, which constitutes a premium of 51 percent on the lowest price in our study; (2) if retailers decrease the distance to their customers from 2-5 km to below 2 km, customers are prepared to pay a premium of €0.88 (45 percent on the lowest price); (3) we find that if retailers switch their power mix from conventional power to mainly renewable power, customers are ready to pay a price pre-mium of €0.91, which equals a premium of 47 percent on the lowest price. Finally, we show that bad employee treatment can lead to a real discount of €1.67 (83 percent of the lowest price). We state important implications for retail management practice and further research.Type: presentation
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PublicationMarketing Gag or Value Creating Strategy: How does Sustainability Impact Store Choice in Retail?Sustainability is getting more ground in the food retail industry. But empirical studies on sus-tainability strategies in retailing are rare, and even more when it comes to highlight the cus-tomers' perspective and their willingness to pay. This paper investigates the impact of sus-tainability initiatives on store choice and on consumers' willingness to pay by conducting a web-based conjoint experiment with customers from Austria, Germany and Switzerland. We report from 1,224 choice-decisions conducted between June and October 2009. We find that price is not of highest importance when it comes to store choice. If different sustainability aspects are fulfilled customers are prepared to pay a price premium. In particular we show that (1) if a meat-assortment of standard and organic products is complemented by products from the region, customers are ready to pay a price premium of €0.99, which constitutes a premium of 51 percent on the lowest price in our study; (2) if retailers decrease the distance to their customers from 2-5 km to below 2 km, customers are prepared to pay a premium of €0.88 (45 percent on the lowest price); (3) we find that if retailers switch their power mix from conventional power to mainly renewable power, customers are ready to pay a price pre-mium of €0.91, which equals a premium of 47 percent on the lowest price. Finally, we show that bad employee treatment can lead to a real discount of €1.67 (83 percent of the lowest price). We state important implications for retail management practice and further research.Type: conference paper