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IN-STORE PRODUCT DEMONSTRATION THE EFFECT ON BRAND VALUE & BRAND SALES 2013 IN-STORE PRODUCT DEMONSTRATION THE EFFECT ON BRAND VALUE & BRAND SALES Author Arne de Leeuw Student Nr. 344053 Course Master Thesis Supervisor V.G. Hariharan Education Master Economics and Business Specialization: Marketing Erasmus School of Economics Erasmus University Rotterdam PREFACE & ACKNOWLEDGEMENTS This research has been conducted for the completion concerning my Master. The selection of this research topic was primarily based on my personal interest. Alongside my study, I worked for a sales promotion company as a product demonstrator. Demonstrating durable high-end products inside the store constituted my motivation to find more information about the effectiveness of this tool. This interest turned out to be a shared interest involving manufacturers and retailers. They have facilitated product demonstrations, without knowing the actual consequences of this tool. In my opinion, assuming an effect is not sufficient to implement an in-store marketing strategy. Product demonstration, when considering the cost per consumer, is a very expensive in-store marketing tool and, remarkably, no prior research have paid attention towards this tool. Altogether, the lack of understanding practically and the gap of knowledge academically have motivated me to conduct this research. I could not have completed this thesis in its present form without the help of certain people. I would like to use this section to give these people my appreciation. First of all, I would like to thank my supervisor Vijay Ganesh Hariharan for his guidance and advice throughout the process. Even without making an appointment he was willing to listen to my ideas or issues. His feedback and comments were enlightening and therefore I could not wish for a better supervisor. Secondly, I would like to thank my father for his role as coach and for giving me new insights concerning the data collection. Third, I want to thank Simon Oosterom (Manager Mediamarkt Rotterdam), Ronald Hoogeweg (Trade Marketing Manager at Hewlett-Packard) and Egon Diekstra (CEO Hamilton Bright B.V.) in recognizing the need of this research. Thanks to this collaboration, all necessary data for this examination have been accomplished. Rotterdam, November 2013 Arne de Leeuw ABSTRACT This research provides the first step in examining the effect of product demonstration, as an in- store promotional tool, on brand value and brand sales. The collaboration with a giant retailer and a company that facilitates sales promotions enabled the implementation of this research. The effect on brand value has been measured using a field experiment. Data have been analysed using an Independent T-test and Linear Regression Analysis. The results indicates that product demonstration is a valuable and powerful tool that affect consumers’ purchase intentions inside the store. Although product demonstration and brand value perceptions positively relates to purchase intentions, participating in a product demonstration does not affect brand value perceptions. The effect on brand sales have been analysed using weekly point of sales data of the product category navigation systems from 2010, 2011, 2012. Data have been analysed using a Simple and Multiple Linear Regression Analysis. Results indicates that the presence of a product demonstration increases sales of the promoted brand in the same product category. However the analysis did not support the negative relationship between the presence of a product demonstration and sales of non-promoted brands. In addition, a decrease in price sensitivity was not found significant in this research. The findings of this study determine sufficient insights that can be used in the practical field, however, are limited in several ways. In order to overcome these limitations, further research concerning the effect of in-store product demonstration is required. TABLE OF CONTENTS LIST OF TABLES AND FIGURES PAGE 8 INTRODUCTION PAGE 9 PRACTICAL RELEVANCE PAGE 10 ACADEMIC RELEVANCE PAGE 11 RESEARCH QUESTION PAGE 12 THESIS STRUCTURE PAGE 13 CHAPTER 1: LITERATURE REVIEW PAGE 14 1.1 IN-STORE SALES PROMOTION & TOOLS PAGE 15 1.2 SALES PROMOTION & BRAND SALES PAGE 18 PURCHASE ACCELERATION PAGE 18 BRAND SWITCHING PAGE 18 CROSS-ELASTICITIES PAGE 19 1.3 SALES PROMOTION & BRAND VALUE PAGE 20 THE CONCEPT OF CBBE PAGE 20 MARKETING ACTIVITIES & CBBE PAGE 21 DIMENSIONS OF CBBE & PURCHASE INTENTIONS PAGE 22 INTRODUCTION TO THE THEORY PAGE 25 CHAPTER 2: THEORY PAGE 26 2.1 CONCEPTUAL FRAMEWORK PAGE 26 2.2 THEORY PAGE 27 PRODUCT DEMONSTRATION PAGE 27 CUSTOMER-BASED BRAND EQUITY PAGE 27 INTERACTION EFFECTS PAGE 29 BRAND SALES PAGE 30 CROSS-PRODUCT SALES PAGE 30 CHAPTER 3: METHODOLOGY & DATA PAGE 31 EXTERNAL CONTRIBUTION PAGE 31 3.1 STUDY 1 PAGE 32 RESEARCH DESIGN PAGE 32 RESEARCH VARIABLES PAGE 33 CONCEPTUALIZATION PAGE 34 OPERATIONALIZATION PAGE 35 INSTRUMENTS PAGE 37 FIELD OF RESEARCH PAGE 37 PRODUCT DEMONSTRATION PAGE 38 RESPONDENTS PAGE 38 DATA PROCESSING PAGE 38 LIMITATIONS PAGE 39 3.2 STUDY 2 PAGE 40 RESEARCH DESIGN PAGE 40 RESEARCH VARIABLES PAGE 41 OPERATIONALIZATION PAGE 41 FIELD OF RESEARCH PAGE 41 DATA & PROCESSING PAGE 42 LIMITATIONS PAGE 43 CHAPTER 4: ANALYSIS & RESULTS PAGE 44 4.1 STUDY 1 PAGE 44 DATA DESCRIPTION PAGE 44 RESULTS & ANALYSIS PAGE 44 SIMPLE STATISTICAL TESTS PAGE 45 TESTING NORMALITY PAGE 46 COMPARING MEANS PAGE 46 LINEAR REGRESSION ANALYSIS PAGE 47 PRODUCT DEMONSTRATION & PURCHASE INTENTIONS PAGE 47 CBBE & PURCHASE INTENTIONS PAGE 49 REGRESSION MODEL & COEFFICIENTS PAGE 50 EXPLORATORY FACTOR ANALYSIS PAGE 51 LINEAR REGRESSION BASED ON FACTORS PAGE 53 PRODUCT DEMONSTRATION AS MODERATOR PAGE 54 INVOLVEMENT AS MODERATOR PAGE 56 4.2 STUDY 2 PAGE 59 DATA DESCRIPTION PAGE 59 RESULTS & ANALYSIS PAGE 61 TESTING NORMALITY PAGE 61 LOG TRANSFORMATION PAGE 62 EXPLORING NORMALITY PAGE 62 COMPARING MEANS PAGE 63 PRODUCT DEMONSTRATION & SALES PAGE 64 LINEAR REGRESSION ANALYSIS PAGE 65 SUBSTITUTION EFFECT PAGE 65 ADJUSTMENTS PAGE 67 REGRESSION MODELS & COEFFICIENTS PAGE 67 CHAPTER 5 GENERAL DISCUSSION & IMPLICATIONS PAGE 69 5.1 MAIN QUESTION & HYPOTHESES PAGE 69 5.2 THEORETICAL INTERPRETATION PAGE 70 BRAND VALUE PAGE 70 BRAND SALES PAGE 71 COMPARISON WITH PRIOR RESEARCH PAGE 72 5.3 PRACTICAL IMPLICATIONS PAGE 73 CHAPTER 6: LIMITATIONS & FURTHER RESEARCH PAGE 74 6.1 LIMITATIONS PAGE 74 STUDY 1 PAGE 74 STUDY 2 PAGE 75 6.2 FURTHER RESEARCH PAGE 76 REFERENCES_____________________________________________________ PAGE 77 APPENDIXES______________________________________________________ PAGE 83 APPENDIX A TEMPERAL EFFECTS OF PRICE PROMOTIONS PAGE 83 APPENDIX B DIMENSIONS OF BRAND KNOWLEDGE PAGE 83 APPENDIX C HOW BRAND EQUITY GENERATES VALUE PAGE 84 APPENDIX D FIELD-BASED QUESTIONNAIRE PAGE 85 APPENDIX E FREQUENCY TABLE PAGE 87 APPENDIX F PRE-ANALYSIS PAGE 88 APPENDIX G TESTING NORMALITY PAGE 88 APPENDIX H COMPARING MEANS PAGE 89 APPENDIX I SIMPLE LINEAR REGRESSION PAGE 90 APPENDIX J CHECKING ASSUMPTIONS PAGE 91 APPENDIX K MULTIPE LINEAR REGRESSION ANALYSIS PAGE 91 APPENDIX L EFA: PRINCIPLE COMPONENT ANALYSIS PAGE 95 APPENDIX M LINEAR REGRESSION BASED ON FACTORS PAGE 96 APPENDIX N MODERATION: PRODUCT DEMONSTRATION PAGE 96 APPENDIX O MODERATION: INVOLVEMENT PAGE 97 APPENDIX P DATA EXPLORATION PAGE 98 APPENDIX Q TESTING NORMALITY PAGE 100 APPENDIX R COMPARING MEANS PAGE 104 APPENDIX S CHECKING ASSUMPTIONS PAGE 109 APPENDIX T MULTIPLE REGRESSION ANALYSIS PAGE 112 LIST OF TABLES & FIGURES Table 1 Academic Literature: In-store Promotional Tools Page 15 Table 2 (In) Dependent Variable Description Page 33 Table 3 Operationalization of (in) Dependent Variables Page 36 Table 4 Study 2: (In) Dependent Variable Description Page 41 Table 5 Simple Statistical Measures Page 45 Table 6 Regression Model: Product Demonstration Page 48 Table 7 Regression Coefficients: Product Demonstration Page 48 Table 8 Regression Model: Brand Equity Page 50 Table 9 EFA: KMO & Bartlett’s Test Page 52 Table 10 EFA: Total Variance Explained Page 52 Table 11 Regression Model Based on Factors: Brand Equity Page 53 Table 12 Regression Coefficients: The Factor Brand Equity Page 54 Table 13 Regression Model: Brand Equity & Product Demonstration Page 55 Table 14 Regression Coefficients: Brand Equity & Product Demonstration Page 55 Table 15 Regression Model: Product Demonstration & Involvement Page 56 Table 16 Regression Coefficients: Product Demonstration & Involvement Page 57 Table 17 Mean Price & Sales in 2010-2012 Page 60 Table 18 Normality Tests: P-values of sales Page 63 Table 19 Simple Linear Regression: The effect of PD on Sales Page 64 Table 20 Variable Explanation Page 66 Table 21 Regression Model: Market-Share Page 67 Table 22 Regression Coefficients: Market-Share Page 68 Table 23 Hypotheses Page 69 Figure 1 Structure Literature Review Page 14 Figure 2 Marketing Activities and Brand Equity Page 21 Figure 3 Marketing Efforts and Brand Equity Page 22 Figure 4 Conceptual Framework Page 26 Figure 5 Network of Companies Related to In-store Product Demonstrations Page 31 Figure 6 Study 1: Methodology & Data Page 32 Figure 7 Study 2: Methodology & Data Page 40 Figure 8 Field of Research: Preliminary Steps Page 42 Figure 9 Percentage of Total Sales Page 59 Figure 10 Brand Sales Over Time Page 60 THE EFFECTIVENESS OF IN-STORE PRODUCT DEMONSTRATION 8 INTRODUCTION Beggars, artist and street traders typify the center of Amsterdam on a normal weekday in the 19th century. It was a time where craftsman continued the traditional work of their ancestors. Trading took place in the middle of the city, where traders and merchants shouted the latest prices of their traditional made products on informal markets. In a time where people bought their basic necessities on these informal street markets, enormous crowds can be imagined. Every now and then, merchants from outside the city introduced new and unfamiliar products and received much of attention. Mainly they stand on a crate to look over the audience, where the public curiously listened to their product demonstration. This way of selling changed over time and became more formal and permanent. The majority of merchants and traders changed their stand for a store. This became generally known as ’retailing’.

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