Direct Marketing : An Analysis of Consumers' Characteristics and Their Perceptions of, and Attitudes to Mail-Order Speciality Food in the UK NEWCASTLE UNIVERSITY LIBRARY 097 50103 6 --1-h-esn s L5c13ct by Li-Wei (Donna) Mai August 1997 A thesis submitted to the University of Newcastle upon Tyne for the Degree of Doctor of Philosophy in the Department of Agricultural Economics and Food Marketing ACKNOWLEDGEMENTS First of all, I would like to thank my supervisor Dr Mitchell Ness. He has been very supportive not only in guiding me to find my own research-path throughout this study, but also in establishing the initial contact with the mail-order practice in the UK in the beginning of the empirical research. I also would like to thank the assistance from the Department of Agricultural Economics and Food Marketing, especially to, Miss Caroline Faddy and Miss Lisa Jamieson for helping me send out the survey material, Mr Andrew Moxey for his assistance with data entry, and Mr George Philippidis for proof-reading. Most importantly, I am very grateful to my family in Taiwan. Acknowledging the importance of education, my parents have been encouraging and have provided me with everything they could to help with my development in both intellectual and personal aspects. If there is any success in my life, it belongs to them. Also, the moral support from my sisters, brother, and friends both here and at home mean a lot to me, too. Thank you all. ABSTRACT The objectives of this thesis are to establish a profile of the characteristics, perceptions, and attitudes of mail-order customers. In particular it identifies the differences between mail- order shoppers and non mail-order shoppers, investigates the structure and level of perceived risks associated with mail-order, and identifies the prime benefits provided by mail-order foods from the perspective of the consumer. Hypotheses are established to search for a profile of consumer behaviour in association with the objectives of this study. Both qualitative and quantitative research methodologies are employed. Regarding qualitative method, it involves interviews with eight mail-order speciality food company's managers and focuses on examining their current direct marketing practice. The quantitative research is based upon a mail survey of approximately 1600 mail-order food customers and non mail-order food customers. Based on the result of analysis, mail-order food shoppers are identified as self-indulgent in food, having higher level of education, qualification, and media exposure, and being more loyal in comparison with non mail-order shoppers. They tend to have negative opinions towards shopping and shopping environment or get less enjoyment from shopping. Moreover, for mail-order food shoppers, shopping is not seen as a social activity nor assistance from the shop is important. With respect to perceived risk, consumers perceived higher level of risk when they purchased through mail-order. Moreover, 'risk relievers' are found to reduce the level of the perceived risk although mail-order food shoppers and non mail-order food shoppers attach different levels of importance to these factors. In addition, this study also discovers consumers who purchase food from mail- order are attracted to either the product or to certain advantages associated with mail-order buying behaviour. As such, mail-order food shoppers are clustered into to sub-groups. Based on the results, marketing implications are addressed that minimise the perceived risks and maximise the product perceived value. Finally, the recommendations focus on the issues of the competitiveness of the product and the effectiveness and efficiency of direct marketing. CONTENTS ABSTRACT ACKNOWLEDGEMENT PART I BACKGROUND CHAPTER 1 INTRODUCTION TO THE STUDY 1.1 Introduction 1 1.2 Objectives of the study 2 1.3 The Research Process 4 1.4 Structure of the Thesis 6 1.5 Summary 7 CHAPTER 2 DIRECT MARKETING & MAIL-ORDER 2.1 Introduction 8 2.2 Definition of Direct Marketing 9 2.2.1 Common Perspecitves 2.2.2 Database in Direct Marketing 2.3 Definition for the Purpose of This Research 13 2.4 Features of Direct Marketing 14 2.5 The Evolution and Development of Direct Marketing 16 2.5.1 Mail-order Evolution 2.5.2 Focus Shift 2.5.3 Media Development 2.6 Forms of Direct Marketing 18 2.6.1 Direct Mail 2.6.2 Direct Response Advertising 2.6.3 Mail Order/Catalogue Sale 2.6.4 Door-to-door 2.6.5 Tele-marketing 2.6.6 Vendor Machine/Vendor Ordering Computer 2.7 The Performance of Direct Marketing 22 2.7.1 The Size and Growth 2.7.2 Home Shopping Market 2.7.3 UK Catalogue Industry Report 2.7.4 Special Timing for Direct Marketing 2.8 Driving Forces of Direct Marketing 26 2.9 The Legal Constraints of Direct Marketing 28 2.9.1 Industry Self-regulation 2.9.2 Legislation 2.9.3 Data Protection 2.10 SUMMARY 30 CHAPTER 3 DIRECT MARKETING STRATEGY 3.1 Introduction 31 3.2 Objectives and Strategies 33 3.3 Direct Marketing Strategy 37 3.3.1 The Strategic Role of Direct Marketing Strategy 3.3.2 Media Selection 3.3.3 Strategic Direct Marketing Elements 3.3.4 Advantage And Disadvantage of Direct Marketing 3.4 Direct Marketing and Marketing Channel 45 3.4.1 Marketing Channels 3.4.2 Distribution Strategy 3.4.3 Channel Conflicts 3.5 Summary 49 CHAPTER 4 MAIL-ORDER FOOD MARKET & ENVIRONMENT 4.1 Introduction 50 4.2 The Retailing Revolution 52 4.3 Industry Environment: Mail-Order Food Market 53 4.4 Competitive Environment: Mail-Order Speciality Food 56 4.5 Corporate Internal Environment 58 4.5.1 Qualitative Research 4.5.2 The Results 4.6 Summary 75 PART II EMPIRICAL RESEARCH CHAPTER 5 REVIEW OF THE LITERATURE 5.1 Introduction 78 5.2 Consumer Behaviour 81 5.3 Perception 84 5.3.1 Perceived Risks 5.4 Motivation 91 5.5 Segmentation Factors 92 5.5.1 Innovation Theory and Profile 5.5.2 The Profile of In-Horne Shoppers 5.5.3 Comparison of the Literature 5.6 Situational Influence 108 5.7 Hypotheses 109 5.7.1 Perceived Risks 5.7.2 Motivation 5.7.3 Consumer Segmentation 5.8 Review Summary 114 5.8.1 Perceived Risks 5.8.2 Motivation 5.8.3 Consumer Profile CHAPTER 6 METHODOLOGY 6.1 - Introduction 117 6.2 Quantitative Research 118 6.2.1 The Measuring Instrument 6.2.2 Formulation of The Questionnaire 6.2.3 Vriable Derivation 6.2.4 Questionnaire Test 6.2.5 Survey Sampling 6.2.6 Choice of Survey Methodology: Mail Survey 6.3 Statistical Analysis of Data 126 6.3.1 Nonparametric Tests 6.3.2 Multivariate Analysis 6.3.3 Correlation Coefficient 6.3.4 Reliability Test 6.4 Summary 134 CHAPTER 7 THE RESULTS OF MAIL-ORDER FOOD SURVEY 8.1 Introduction 135 7.2 Response Rate 136 7.3 Description of the Samples 138 7.3.1 Consumer Profile 7.3.2 Mail-order Shoppers vs. Non-shoppers 7.3.3 Frequency of Mail-ordering and Usage 7.4 Testing of Hypotheses 144 7.4.1 Testing Hypothesis 1 144 7.4.2 Testing Hypothesis 2 149 7.4.3 Testing Hypothesis 3 151 7.4.4 Testing Hypothesis 4 163 7.4.5 Testing Hypothesis 5 166 7.4.6 Testing Hypothesis 6 170 7.4.7 Testing Hypothesis 7 175 7.4.8 Testing Hypothesis 8 177 7.4.9 Testing Hypothesis 9 180 7.4.10 Testing Hypothesis 10 183 7.5 Summary 186 PART III SUMMARY CHAPTER 8 FINDINGS & MARKETING IMPLICATIONS 8.1 Introdution 188 8.2 Customer Characteristics 190 8.2.1 Self-Indulgence in Food 8.2.2 Higher Level of Education/Qualification 8.2.3 Media Exposure 8.2.4 Summary of the Profile of Mail-Order Food Shoppers 8.3 Consumers' Perceptions & Attitudes to Mail-Order Shopping 196 8.3.1 Use Mail-Order Shopping as a Personal Choice/Preference 8.3.2 Perceived Risks 8.3.3 Problems Encountered in Mail-Order Purchase 8.3.4 Risk Relievers 8.3.5 Shopping Loyalty 8.3.6 Shopping Attitudes 8.4 Customers' Satisfaction and Future Purchases 202 8.5 Marketing Implications 204 9.5.1 Identification of Customers & Market Segment 9.5.2 Direct Marketing Strategy 9.5.3 Competitiveness of Mail-Ordering and the Product CHAPTER 9 CONCLUSIONS 9.1 Introduction 209 9.2 Recommendations 210 10.2.1 Competitiveness of Product 10.2.2 Superior Effectiveness and Efficiency 10.2.3 Direct Marketing Promotion 9.3 Future Research 215 REFERENCES 217 APPENDICES 228 List of Figures Figure 1.1 Research Process Figure 2.1 Direct Marketing - In Relation to Transaction Figure 2.2 Market Share of the Catalogue Industry Figure 3.1 Various Business Objectives Figure 3.2 Strategic Hierarchy Figure 3.3 Ansoffs Product/Market Expansion Grid Figure 3.4 The Primary Components of Direct Marketing Figure 3.5 Importance of the Elements in Generating Response Figure 3.6 Business Opportunities Figure 4.1 Business Environmental Scanning Figure 4.2 The Strategic Triangle Figure 4.4 Company List Figure 4.5 International Mail Probibitions and Restrictions Figure 4.6 Customer Characteristics Figure 5.1 A Stimulus Response of Buyer Behaviour Figure 5.2 Most Often Used Criteria for Segmentation in Direct Marketing Figure 5.3 Adopter Categorisation on the Basis of Innovativeness Figure 5.4 Comparison Chart of the Findings Figure 6.1 Conceptual Framework of Perceived Risks on Mail-Order Shopping Figure 7.1 Sample Groups. Figure 8.1 Consumer Survey Feedback System Figure 8.2 Value Chain of Mail-Order Speciality Food List of Tables Table 2.1 Use of the Marketing Database Table 6.1 Chi-square Test Contingency Table Table 6.2 One-Sample Chi-Square Test Table 6.3 Median Test Contingency Table Table 7.1 Response Rate Table 7.2 Description of the Sample Table 7.3 Group Differences in Characteristics Table 7.4 Frequency of Ordering Table 7.5 Product Usage Table 7.6 Time for Mail-order Food Purchase Table 7.7 One-Sample Chi-Square Test of Perceived Risks - Mail-order vs.