Loyalty cards in the apparel industry in Germany and Spain

Is the implementation of a global marketing approach reasonable when operating both in a Southern and a Northern European country?


Master's Thesis, 2011

132 Pages, Grade: 1


Excerpt


Tables of Contents

Index of Tables

Index of Figures

Abbreviations

1. Introduction
1.1. Introduction
1.2. Preface
1.3. Research aim and objectives
1.4. Research problem
1.5. Research questions
1.6. Hypotheses
1.7. Structure of the dissertation

2. Literature Review
2.1. Introduction
2.2. Background information
2.2.1. Marketing stimuli: loyalty cards in Germany and Spain
2.2.2. General consumer characteristics in Germany and Spain
2.3. Apparel retail industry in Germany and Spain
2.4. Theory of global marketing
2.4.1. Definition of global marketing
2.4.2. Discussion
2.5. Theory of consumer behaviour and external influences
2.5.1. Definition and development of consumer behaviour
2.5.2. Theoretical models of consumer behaviour
2.5.3. Stimuli and characteristics affecting consumer behaviour
2.6. Theory of customer loyalty in marketing management
2.6.1. Consumer loyalty
2.6.2. Loyalty programmes and consumer loyalty management
2.6.3. Loyalty cards
2.7. Research design and research tactics
2.8. Conclusion of the literature review

3. Research Methodology
3.1. Introduction
3.2. Research objectives
3.3. Research design and strategy
3.4. Research tactics: Sources of data
3.5. Questionnaire design
3.5.1. Operationalisation of research variables
3.5.2. Questionnaire development
3.5.3. Pilot study and finalised version of the questionnaire
3.6. Respondents and sampling procedure
3.6.1. Target population
3.6.2. Justification
3.7. Data collection
3.8. Problems and limitations
3.9. Conclusion of methodology

4. Research Findings and Data Analysis
4.1. Introduction
4.2. Sample composition
4.3. Research findings and data analysis
4.3.1. General behaviour and attitude towards loyalty cards
4.3.2. Preferences regarding loyalty card features
4.3.3. Store loyalty towards favourite retail store

5. Research discussions, conclusion and recommendations
5.1. Introduction
5.2. Analysis of store loyalty tendencies and success factors
5.2.1. General behaviour and attitudes towards loyalty cards
5.2.2. Preferences regarding loyalty card features
5.2.3. Store loyalty towards favourite retail store
5.3. Review theory used
5.4. Recommendations for apparel retailers
5.5. Recommendations for future research

6. References/Bibliography
6.1. References
6.2. Bibliography

7. Appendices
7.1. Questionnaire

Index of Tables

Table 1: Membership card Hunkemöller

Table 2: Membership card ESPRIT

Table 3: Membership card Promod

Table 4: Arguments for and against standardized marketing

Table 5: Management of cultural diversity in MNCs

Table 6: Matrix of values and customer roles

Table 7: The family cycle: an updated view

Table 8: Complexity of loyalty

Table 9: Different levels of loyalty

Table 10: Types of consumers and sales promotion goals

Table 11: STP variables

Table 12: Operationalisation of Research Variables

Table 13: Average Annual Gross Income by age (2009)

Table 14: Consumer expenditure on clothing and footwear (2009)

Table 15: Composition sample: country of residence

Table 16: Composition sample: possession of loyalty card

Table 17: Relationship between possession of loyalty card and home country

Table 18: Usage of benefits of loyalty cards

Table 19: Change in consumer behaviour after loyalty card possession

Table 20: Negative characteristics of loyalty cards (Country)

Table 21: Negative characteristics of loyalty cards

Table 22: Positive characteristics of loyalty cards (Country)

Table 23: Preferences of promotional techniques of loyalty cards (Country)

Table 24: Preferences of bonus systems of loyalty cards (Country)

Table 25: Behavioural store loyalty: % expenditure (Country)

Table 26: Behavioural store loyalty: Frequency store visit fav. retail store (Country )

Table 27: Behavioural store loyalty: number store visit compet. retail stores (Country)

Table 28: Behavioural store loyalty: per cent expenditure (Possession of loyalty card)

Table 29: Behavioural store loyalty: Frequency store visit favourite retail store (Possession of loyalty card)

Sarah-Mailin Janotta, Dissertation M.Sc. IB 2010/2011 I

Table 30: Behavioural store loyalty: Number store visit competitive retail stores (Possession of loyalty card)

Table 31: Attitudinal store loyalty (Country)

Table 32: Attitudinal store loyalty (Possession of loyalty card)

Table 33: Preferences regarding promotional techniques and bonus systems

Table 34: Attitudinal store loyalty (Country)

Table 35: Attitudinal store loyalty (Possession of loyalty card) Sarah-Mailin Janotta, Dissertation M.Sc. IB 2010/2011 II

Index of Figures

Figure 1: Research question

Figure 2: Hofstede's cultural dimensions: Germany vs. Spain

Figure 3: General consumer purchase attitudes

Figure 4: Europe apparel retail value: $ billion 2005-2009

Figure 5: Top retailers in Western Europe (2010)

Figure 6: Extended model of consumer behaviour by Engle et al (1995)

Figure 7: Extended model of consumer behaviour by Howard and Sheet (1969)

Figure 8: SR model

Figure 9: SR model adapted by Kotler

Figure 10: Shell model of consumer characteristics

Figure 11: Environment differentiation - hierarchy of social groups

Figure 12: Purchase behaviour..

Figure 13: Self-concept

Figure 14: From customer satisfaction to customer loyalty

Figure 15: First contact to economic success

Figure 16 Monetary benefit from long-term

Figure 17: Relationship NPV retention rate

Figure 19: Relationship between loyal attitude and loyal behaviour

Figure 20: Measurement of customer loyalty

Figure 21: Classification of loyalty cards

Figure 22: Objectives of the instrument loyalty card

Figure 23: Objectives of loyalty card programmes

Figure 24: Segmentation of target groups

Figure 25: Research designs

Figure 26: Comparison: quantitative and qualitative data

Figure 27: Adapted SR model

Figure 28: Adapted SR model

Figure 29: Waterfall illustration of budget

Figure 30: Number of loyalty cards possessed (author ’ s illustration)

Figure 31: Usage of benefits of loyalty cards (author ’ s illustration)

Figure 32: Change in consumer behaviour since loyalty card possession

Figure 33: Preferences of promotional techniques of loyalty cards (Country)

Figure 34: Preferences of bonus systems of loyalty cards (Country)

Figure 35: Behavioural store loyalty: Per cent expenditure (Country)

Sarah-Mailin Janotta, Dissertation M.Sc. IB 2010/2011 III

Figure 36: Behavioural store loyalty: Frequency store visit favourite retail store

(Country)

Figure 37: Behavioural store loyalty: Number store visit competitive retail stores Country)

Figure 38: Behavioural store loyalty: % expenditure (Possession of loyalty card)

Figure 39: Behavioural store loyalty: Frequency store visit favourite retail store (Possession of loyalty card)

Figure 40: Behavioural store loyalty: Number store visit competitive retail stores (Possession of loyalty card)

Figure 41: Attitudinal store loyalty (Country)

Figure 42: Attitudinal store loyalty (Possession of loyalty card)

Figure 43: Attitudinal store loyalty (Possession of loyalty card)

Abbreviations

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1. Introduction

1.1. Introduction

The dissertation with the title ‘Loyalty Cards in the Apparel Retail Industry: A comparative analysis to detect store loyalty tendencies and the success factors of loyalty cards in Germany and Spain is a partial fulfilment of the requirement for obtaining the Master’s of Science degree in International Business at the London South Bank University, London, United Kingdom in the period 2010/2011. The paper examines the efficacy and the success factors of loyalty cards as an instrument of loyalty programmes in global marketing and researches the levels of store loyalty in two countries, Germany and Spain. This dissertation seeks to gather customer data by means of a questionnaire and to compare domestic differences across the countries in the apparel retail industry.

The first chapter of the dissertation firstly introduces the context of the dissertation, leading to the research aim and objectives. In the next step, the research problem is defined, followed by the research questions and hypotheses. Then, the structure of the dissertation is provided, explaining the outline of each chapter of the dissertation.

1.2. Preface

In these times of globalisation and with the popularity of open trade, European retailers are increasingly exploring foreign markets (Noordhoff et al, 2004; Seock and Lin, 2011). This is also true for the apparel retail industry, which has experienced an expansion of apparel retail chains disputing the market share of local and smaller retail stores (Euromonitor, 2009; Euromonitor, 2011b; Datamonitor, 2010a). The ambition and effort to reach new customers beyond national borders implies the need for more complex marketing strategies. Marketers have to be aware of the differences in local values and consumer behaviour across different countries and cultures, and should decide whether they intend to choose a more standardised marketing approach or adapt the strategy to the local environment (Yoo and Zarb, 2009). In fact, culture is regarded as a cause for inconsistency in consumer behaviour and as having a crucial influence on global marketing plans (Seock and Lin, 2011). According to Kawabata and Rabolt (1999), and Lam (2007), the awareness that cultures, and the way customers behave, differ across the different target markets, and the subsequent implementation of adequate strategies factoring in these differences, leads to global success (cited in Seock and Lin, 2011 p. 95).

The retail industry is characterised by strong tendencies toward convergence, homogenisation of the retail outlets and cutthroat competition (Mohme, 1993 pp. 3 f.). Additionally, there are no switching costs for consumers, making it easy for them to change their retail store (Datamonitor, 2010a). Facing these facts, retailers need to distinguish themselves from the competition so that retail outlets are not regarded as interchangeable in the consumer’s mind. An important instrument to survive and to cope with the competition in the long run is the creation of consumer loyalty. The retail sector especially suffers from the threat of losing consumers to the competition, and therefore durable consumer loyalty is of vital importance (Müller- Hagedorn, 2001 p. 15). Consequently, internationally operating retailers have modified their strategic marketing focus from satisfaction-seeking to one that seeks to create long-term customer loyalty (Noordhoff et al, 2004 citing Oliver 1999).

Consumer loyalty to stores in the retail industry remains a topical theme and continues to be explored in various empirical research projects (e.g. García Gómez et al, 2006; Gastrock, 2011; Noordhoff et al, 2004; Seock and Lin, 2011; Steyn and Pitt et al, 2010).

The creation of store loyalty has even experienced a rise in strategic importance and has become the prevailing objective of retailers to ensure profits and prosperity (Noordhoff et al, 2004; Seock and Lin, 2011; Steyn et al, 2010). Loyalty affects both tangible and intangible benefits, as it is composed of the consumer behaviour, but also of the attitude of the consumer towards the company (Martínez García and Martínez Caro, 2009). Behavioural store loyalty reflects the purchasing behaviour and the frequency of store visits, but also the purchasing behaviour towards the competition (Noordhoff et al, 2004; García Gómez et al, 2006). This loyalty is objectively observable, in contrast to attitudinal store loyalty which deals with subjective attitudes of the consumer towards a store or retailer (Noordhoff et al, 2004; García Gómez et al, 2006).

Consumer retention and consumer loyalty programmes are spread widely within the apparel retail industry. Nowadays, nearly 80 per cent of buyers throughout Europe are members of minimum one loyalty programme (Loyalty Cards, 2011). Researchers argue that meticulously planned and implemented loyalty programmes enable marketers to have an impact on consumer purchasing behaviour (Ponzoa Casado and Reinares Lara, 2010). According to Wirtz et al (2007), they are a great method for consumer retention. With improvements in technology, loyalty programmes not only become payable to companies, and also offer a more profound basis for strategic relationships and retention marketing (Noordhoff et al, 2004).

Loyalty cards are nowadays an established and oft used instrument of loyalty programmes, especially in mature retail markets (Aßmann and Werk, 2008; Noordhoff et al, 2004). However, the effectiveness of loyalty cards in creating consumer loyalty and retention is often questioned in the literature (e.g. Dowling and Uncles, 1997; Wendlandt, 2009; Noordhoff et al, 2004). Furthermore, there are differences in the development and adoption of loyalty card schemes across countries; this makes it difficult to compare the effectiveness of loyalty cards on an international scale. Various researchers (e.g. Jin and Kim, 2003; Straughan and Albers-Miller, 2001) reveal that the attitude to a store and the corresponding loyalty may not be the same in different countries (cited in Seock and Lin, 2011).

The fact that retail chains increasingly operate on a global scale makes it essential to explore behavioural and attitudinal store loyalty. By investigation, marketers are able to detect local behaviour and preferences in order to adequately serve customers in the respective country or culture (Noordhoff et al, 2004; Seock and Lin, 2011).

Apparel retailers such as ESPRIT, Hunkemöller or Promod run loyalty cards in several countries including the two countries of interest to this paper, Germany and Spain. Mostly, the features are identical in the various countries or differ only slightly (e.g., ESPRIT offers an additional card in Germany which is not offered in Spain (ESPRIT, 2011)). Consequently, an adaptation of the features to the domestic customers, who may behave differently, does not take place at first view (maybe there are differences with regard to frequency or design mailings, events or similar actions which are not obvious when comparing the features and benefits). However, there is the possibility that loyalty cards which work perfectly in one country do not achieve the same success in another country (Steyn et al, 2010). Steyn et al (2010) even argue that there might be a need for adaption across countries or cultures due to local differences in values or preferences.

1.3. Research aim and objectives

Research aim

The aim of this work is to compare German and Spanish consumers regarding their general behaviour and attitudes towards loyalty cards, the different levels of both behavioural and attitudinal store loyalty, and their preferences regarding loyalty card features (promotional techniques and bonus systems). The analysis undertaken in this dissertation should help answer the question if standardised loyalty cards are reasonable in the two countries or if there is a need for local adaptation. If the analysis shows a need for local adaptations, success factors shall be developed.

Dissetation objectives

- Generate research question, and research aim and objectives for the present dissertation. Develop hypotheses that will be analysed throughout the dissertation (Chapter 1: Introduction).
- Undertake research by using journals, reports and governmental publications to gather background information on the external influences of consumer behaviour (external stimuli, marketing stimuli and consumer characteristics of consumers) in the apparel retail industry in Germany and Spain (Chapter 2: Literature Review).
- Critically review the theory of global marketing, consumer behaviour, and loyalty. Determine basic theoretical principles and relevant contemporary approaches and models. Create, on the basis of the reviewed literature, one basic conceptual model for the dissertation (Chapter 2: Literature Review).
- Develop a research plan which contains research design, research tactics, research type and approach (Chapter 3: Methodology).
- Create on the basis of the survey objectives a professional questionnaire which provides a solid basis to analyse the hypotheses (Chapter 3: Methodology).
- Analyse the information gathered from the questionnaire statistically by means of Statistical Package for Social Science (SPSS) and find out if the hypotheses can be supported or not (Chapter 4: Research Findings and Data Analysis).
- Discuss the findings of the questionnaire critically (Chapter 5: Research discussions, conclusion and recommendations).
- Summarise the findings and draw a conclusion. Formulate recommendations for companies running loyalty card programmes in the two countries and for future research (Chapter 5: Research discussions, conclusion and recommendations).

1.4. Research problem

With globalisation arises the need for complex marketing strategies for companies operating in different countries. Companies have to find the right balance between acting globally and adapting locally. Consumer behaviour is influenced by external stimuli (PEST1 ) and also by consumer characteristics based on cultural, social and personal determinants. Being aware of these influences on domestic consumer behaviour lets marketers find the right methods to implement marketing stimuli that attract the consumers in their domestic market places.

German and Spanish consumers may show different attitudes and behaviours, but also different preferences regarding loyalty card features or levels of store loyalty. Despite these differences, several companies offer loyalty cards with the same features in both countries, which may lead to inefficient and ineffective usage of marketing stimuli, because they are not adapted to the local consumer. The features of loyalty cards may appeal to the consumers of one country but not necessarily, or not as much, to those from another. This situation needs investigation to examine the degree of store loyalty and the success factors of loyalty cards among the two countries, in order to determine whether or not it is justified to adapt loyalty card features locally to the customers in Germany and Spain.

1.5. Research questions

The research question that shall be answered in the present dissertation is whether or not there should be adaptations to the features of loyalty cards in the two countries, Germany and Spain. In order to answer this question, two previous stages have to be explored. Firstly, the external influences have to be determined. In the next step, the actual behavioural and attitudinal patterns and preferences of customers as well as their store loyalty tendencies will be analysed. The exact stages and respective questions gathered from figure 1.

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Figure 1: Research question (author ’ s illustration)

The secondary questions according to the corresponding dissertation chapters are listed here:

- What are the research questions, and research aim and objectives for the present dissertation? Which hypotheses can be derived? (Chapter 1: Introduction).
- What are the external influences that impact consumers in their behaviour and attitudes in the two countries, Germany and Spain? (Chapter 2: Literature Review).
- What is the relevant literature in this context, and are the models and theories applicable to the present dissertation? Can one basic conceptual model be developed for this dissertation? (Chapter 2: Literature Review)
- Which research design, tactics, type and approach are appropriate for this investigation? (Chapter 3: Methodology).
- How shall the survey be developed? (Chapter 3: Methodology).
- What are the findings of the research? Can the hypotheses be supported? (Chapter 4: Research Findings and Data Analysis).
- On the basis of reviewed literature and previous studies on this subject matter, what information does the present analysis provide? (Chapter 5: Research discussions, conclusion and recommendations).
- What is the final conclusion, and does the research provide any recommendations for the apparel retailers? (Chapter 5: Research discussions, conclusion and recommendations).

1.6. Hypotheses

In accordance with the research aim, the behavioural and attitudinal impact of loyalty cards will be analysed in this dissertation and the preferences regarding promotional techniques and bonus systems will be reviewed. In addition, behavioural and attitudinal store loyalty will be analysed and compared between loyalty card holders and non-holders in the two countries, referring to the favourite retail store of the respondents.

The hypothesis may be divided into three different research objective sections. The first section deals with the general behaviour and attitude towards loyalty cards. According to the information from background information (chapter 2.2.), which will provide general information about the external influences, Spanish consumers purchase more price-consciously since the economic downturn and the associated slump in income levels. Therefore, Spanish consumers are expected to make greater use of loyalty cards and their benefits. The second part deals with personal preferences and the third with the behavioural and attitudinal store loyalty of respondents regarding their favourite retail store.

1. General behaviour and attitude towards loyalty cards
1.1. General consumer behaviour regarding loyalty cards
a. Spanish consumers tend to have more loyalty cards than German consumers
b. Spanish consumers make significantly greater use of the benefits offered by loyalty cards.
c. Loyalty cards endorse a positive change in consumer behaviour in both countries.
1.2. General attitude towards loyalty cards
a. The overall attitude towards negative characteristics of loyalty cards differ in the two countries and between loyalty card holders and non-holders.
b. The overall attitudes towards positive characteristics of loyalty cards differ amongst loyalty card holders in the two countries.

2. Preferences regarding promotional techniques and bonus systems
2.1. The preferences regarding promotional techniques differ in the two countries.
2.2. The preferences regarding bonus systems differ in the two countries.

3. Store loyalty towards favourite retail store
3.1. Behavioural store loyalty
a. Spanish and German consumers show significantly different levels of behavioural store loyalty.
b. In both countries, the possession of loyalty cards is positively related to behavioural store loyalty.
3.2. Attitudinal store loyalty
a. Spanish and German consumers show significantly different levels of attitudinal store loyalty.
b. In both countries, the possession of loyalty cards is positively related to attitudinal store loyalty.

1.7. Structure of the dissertation

This dissertation is composed of seven chapters. The first chapter is the introduction, presenting the subject matter of the dissertation and the problem emerging from the current situation. In addition, research aim and objectives as well as research questions are developed in this section. Designing research hypotheses in order to provide a guideline for the primary research is also part of this chapter. The second chapter provides an overview of background information and the apparel retail industry as well as a review of relevant literature. The background information are about general external influences on domestic customers of Germany and Spain such as loyalty cards (marketing stimuli), and general consumer characteristics. Moreover, the critical review of literature deals with global marketing, consumer behaviour and loyalty. The relevant literature for this dissertation is combined into one model which will display the theoretical framework of the dissertation. The third chapter ‘Methodology’ shows how and what research will be undertaken in the present dissertation. On the basis of the research aim, suitable research strategy and tactics will be explained in greater detail throughout this chapter. Besides, the creation description of the questionnaire will be part of this chapter as well as the respondents and sampling procedure. In the end of this chapter, potential research problems and limitations will be mentioned. The actual results of the research will make up chapter four. The discussion in chapter five evaluates the findings in light of previous research, reviewed literature and chosen approaches. This chapter concludes the dissertation and will develop recommendations for apparel retailers arising from the present research. References and bibliography will make up the sixth chapter of this dissertation. Eventually, the last chapter ‘Appendices’ is composed by the questionnaire, research proposal and by the weekly reflective diary.

2. Literature Review

2.1. Introduction

The literature review provides a general overview of all relevant background information and theoretical concepts. Hereby, prevailing theoretical concepts are explained, presented and critically analysed. In this chapter, developments and models will be defined and explained. Moreover, objectives and boundaries will be discussed. Background information is composed by marketing stimuli and general consumer characteristics which affect the domestic consumer in the two countries of interest for this dissertation.

The chapter is divided into seven subchapters. The first subchapter provides background information and the second one presents relevant parameter of the apparel retail industry. Subchapter three until five deal with relevant theory. The fourth subchapter hereby deals with global marketing and the difficulty of multinational companies (MNCs) to develop global marketing strategies which are successful in all countries. Different perspectives and models will be presented and critically reviewed in this part. The fifth subchapter reviews the literature about consumer behaviour. Models and theories regarding consumer behaviour will be explained, as well as determinants that influence consumer behaviour. The sixth subchapter addresses loyalty, loyalty programmes and loyalty cards. Commonly used models and theories will be reviewed from both the business’ and the consumer’s point of view. The overall concept of loyalty, loyalty programmes and loyalty cards will be analysed critically in terms of the objectives, the advantages and the disadvantages for the different parties involved. In the seventh chapter, one conceptual model for the present dissertation is generated on the basis of the previously reviewed theoretical concepts.

2.2. Background information

This and the following subchapter provide an overview of the external influences that impact individual consumer behaviour shopping in apparel retailers in Germany and Spain.

2.2.1.Marketing stimuli: loyalty cards in Germany and Spain

Loyalty cards are an instrument of loyalty management and are used as marketing stimuli to influence the consumer in behaviour and attitude. The adoption of loyalty cards was faster in Spain than in Germany. In 1998, about 25 per cent of the Spanish population already participated in a loyalty programme whereas the participation in Germany was only at 3 per cent (Glusac, 2005). Today however, loyalty cards are widely spread in both countries.

Examples of loyalty cards in Spain and in Germany

This section presents three loyalty cards from the internationally operating apparel retail chains Hunkemöller, ESPRIT and Promod. Research has shown that in both countries of interest, the benefits and features of the loyalty cards are almost identical. An overview of the benefits will be provided.

Hunkemöller

Hunkemöller/Bodique offers a loyalty ‘Club card’ in both Germany and Spain which can be acquired for 1 Euro. It offers a range of monetary benefits such as discounts and vouchers, as well as non-monetary benefits like additional information and access to events. In general, the benefits do not differ between the two countries.

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Table 1: Membership card Hunkemöller/Bodique, 2011; Hunkemöller, 2011)

ESPRIT

ESPRIT offers its customers three different types of loyalty cards, namely the Red Card, the Platinum Card and ESPRIT Visa Card. The latter is an ordinary credit card which can be acquired for an annual fee; it is not offered in Spain. Upgrading from the red to the platinum card takes place automatically when a certain amount of ‘e- points’ in a certain period of time is gathered. An upgrade brings additional benefits to the customer. The benefits do not differ between the two countries under study. They are both monetary and non-monetary in nature. The whole loyalty card programme seems rather complex and may be even confusing to the consumer.

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Table 2: Membership card ESPRIT (ESPRIT, 2011)

Promod

Promod offers a loyalty card called ‘Ma Carte’ in both Germany and Spain. The design differs between the countries. As table 3 shows, the benefits offered are not many and absolutely identical across the two countries.

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Table 3: Membership card Promod

(Promod, 2011a, Promod, 2011b)

2.2.2.General consumer characteristics in Germany and Spain

Consumption preferences, attitudes and customs differ across countries and cultures and shape consumer behaviour and lifestyles. Reasons for the differences include the domestic climate and the availability of resources. This leads to different consumption patterns and preferences (e.g. food, entertainment) (Solomon et al, 2002). This section provides a general overview of consumer characteristics affecting the consumers in the two countries, Germany and Spain. A more concise analysis of the characteristics of the target population will take place in chapter ‘Methodology’.

Cultural differences

Hofstede (2003) developed cultural dimensions to compare different cultures. A more profound review of Hofstede’s approach will follow in chapter 2.5.3.

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Figure 2: Hofstede's cultural dimensions: Germany vs. Spain

(Hofstede, 2003)

Germany ranks higher than Spain in individualism and masculinity. Spanish inhabitants are regarded as being more collectivistic. This is recognisable by close relationships to family and friends. German consumers on the contrary are more self-oriented. Therefore, the social environment might have a greater influence on Spanish consumers. Spain scores higher in power distance and uncertainty avoidance than Germany. A high score in uncertainty avoidance might imply an unwillingness to adopt unknown things, like a new loyalty card, without recommendation.

Trends and developments in consumer behaviour

Current world-wide trends impact the consumer behaviour. Consumers increasingly demand for integrated installation of more marketing channels (e.g. online) and for corporate-responsible images of companies. They spend a considerable time reserved for shopping making online researches and comparing products. In addition, emotional shopping is becoming more and more important when going shopping. (Interbrand report, 2011)

Germany is an affluent country with a total GDP of € 2,397 billion (Euromonitor, 2011b). “Its citizens enjoy a high standard of living and sizeable disposable incomes, providing most with financial security and comfortable lifestyle” (Euromonitor, 2011b). The overall purchasing climate continues to be good in Germany (Euromonitor, 2009). German consumers generally refuse to place ‘blind’ trust in brand quality and increasingly purchase at mid-priced apparel chains such as H&M or C&A (Euromonitor, 2009). In addition, discounters (e.g. Takko) have experienced an increase in popularity, and online purchasing is also increasingly popular (Euromonitor, 2009).

Spanish consumers are suffering from the financial crisis and the high unemployment rate which resulted in a decrease of income levels. This obviously has had an impact on the purchasing behaviour in the apparel retail industry. “Between 2008 and 2009, real annual per capita disposable income fell by 5,8 per cent, but the effects of this decline were still apparent in apparel in 2010” (Euromonitor, 2011b). As a result of the economic slump, consumers changed their purchasing behaviour. They reduced their shopping quantity, and are also expected to spend more of their disposable income on savings in the future, even if the economic situation improves (Euromonitor international, 2011b).

Consumer purchasing attitudes

According to market research carried out for the Deutsche Post Global Mail GmbH, the general purchase attitudes in Germany and Spain show differences. Spanish consumers are for instance more price-conscious (Krafft et al, 2005 pp. 254, 344).

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Figure 3: General consumer purchase attitudes (Kraft et al, 2005 pp. 254, 344)

2.3. Apparel retail industry in Germany and Spain

In this subchapter, the current situation of the apparel retail industry, being an external stimulus relevant for this dissertation, will be presented. This part describes the current situation and the developments within the apparel retail industry internationally and in Europe generally, and eventually more specifically in the two countries of interest.

Apparel retailing is grouped in the soft product category. This category incorporates fabrics, whereas the hard product category includes goods such as electronics or furniture (Investopedia, 2011). In the year 2011, three trends continue to shape and impact the international retail market, namely

- “The demand for a more seamless retail experience
- The need for more human touch in all interactions and
- An increasingly global market” (Interbrand report 2011).

The first trend requires for more integration of the shopping experience from retailers by extending their marketing channels. For instance, adding or extending innovative online elements in the marketing portfolio (e.g. e-commerce, social media) would be a reasonable expansion. The role of the retail stores itself has also experienced changes due to the fact that shopping is no longer centralised. Retail stores shall provide a unique and special atmosphere (e.g. by a creative or unique architecture) instead of solely offering ready-made products. The second trend deals with transparency and corporate responsibility, as well as with emotional shopping (‘feeling good’) which are increasingly demanded by customers. The globalisation of the retail market place describes the third trend, which implicates increased speed and competition. Besides the global orientation, leading retailers seek to meet the local consumer needs. (Interbrand report 2011)

The European apparel retail industry experienced a slump in growth, but an overall compound annual growth rate (CAGR) of 1.7 per cent over the whole considered period. In spite of the economic downturn, the industry is expected to grow in the future. With this CAGR, the industry is expected to grow from $ 384,195.8 million (2009) to an industry value of $ 417,494.1 million in 2014 (Datamonitor, 2010a). Germany accounts for a 19.5 per cent by value of the overall European apparel retail industry, and Spain for 6.2 per cent (Datamonitor, 2010a). While Spain’s apparel retail industry suffered from the economic crisis and the industry’s value decreased by 5.6 per cent, Germany’s industry managed to achieve a slight growth of 0.5 per cent in the reviewed period (Datamonitor, 2010b; Datamonitor, 2010c).

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Figure 4: Europe apparel retail value: $ billion 2005-2009 (Datamonitor, 2010a p. 10)

The apparel retail industry has experienced changes in general trends within the past decades. Whereas smaller specialised retail stores were common in the past, they are increasingly being squeezed out of the market by the leading international apparel retail chains (Euromonitor, 2009; Euromonitor, 2011b; Datamonitor, 2010a p. 19).

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Figure 5: Top retailers in Western Europe (2010) (Euromonitor, 2011a)

The top retail chains in Western Europe according to company share are H&M, Inditex and adidas (Euromonitor, 2011a).

2.4. Theory of global marketing

2.4.1. Definition of global marketing

Today’s world has turned into a ‘global village’ in which domestic borders are no longer a barrier preventing customers from purchasing products and services from other countries (Keegan and Schlegelmilch, 2001). According to Keegan and Schlegelmilch (2001 p. 4), “two decades ago, the phrase global marketing did not even exist.” Today however, the phrase is commonly used, and companies seek to conduct global marketing in order to reach their full profit potential. Hollensen (2007 p. 7) defines global marketing as “the firm’s commitment to coordinate its marketing activities across national boundaries in order to find and satisfy global customer needs better than the competition.” The difficulty in successfully implementing global marketing is recognising the degree to which marketing strategies may be reasonably implemented on a global scale and where local adaption is indispensable (Keegan and Schlegelmilch, 2001 p. 11).

2.4.2. Discussion

Since the beginning of the 1980s, marketing researchers have been discussing the concept of worldwide integrated (global) marketing for the same brand (or store) (Trommsdorff, 2009 p. 207). Companies do business across different countries and, for the purpose of convenience, seek to follow one unique marketing strategy. If and to what degree this strategy should be adapted to the local culture, however, is still a highly debated topic in the literature. In this context, the expression ‘think globally, act locally’ is often used (Solomon et al, 2002 p. 549).

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Table 4: Arguments for and against standardized marketing (adapted and translated from Trommsdorff, 2009 p. 20; Solomon et al, 2002 pp. 549 f.)

Marketers who argue for adopting standardised marketing strategies have an etic perspective. This perspective concentrates on the similarities between cultures. In contrast, the perspective that seeks to utilize a localised marketing strategy is called emic and concentrates on the differences between cultures (Solomon et al, 2002). As a matter of fact, marketers have to be aware of cultural differences as well as of national beliefs and values when implementing a marketing strategy in a specific country. Intercultural differences may end up being crucial factors for the failure of international or global marketing, depending on their importance for product specific consumer goods and norms (Trommsdorff, 2009 p. 207). There are several cases of marketing strategies failing in countries as a result of marketers not factoring in the cultural differences (e.g. IKEA2, McDonald and Coca-Cola3 ).

With regard to Perlmutter‘s EPRG-model4, Segal-Horn and Faulkner (1999) present a matrix dealing with the local integration of globally operating MNCs.

Table 5: Management of cultural diversity in MNCs (Segal-Horn and Faulkner, 1999 p. 100)

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Any MNC has to decide to what degree the headquarters should dominate the marketing strategy and whether or not a local integration should take place. If there is domination by the parent, but no integration takes place, there is the danger of a cultural clash. Consequently, companies operating in different countries should factor in the cultural differences between domestic markets when developing marketing strategies in order to meet domestic demands and needs effectively and efficiently and to avoid culture clashes.

2.5. Theory of consumer behaviour and external influences

2.5.1. Definition and development of consumer behaviour

Consumer behaviour is a core element of the science of marketing, which belongs to business administration. This core element has developed into an independent discipline and is an empirical science dealing with social economic behaviour (Trommsdorff, 2009). According to Tauber (1972 p.46), consumer behaviour consists of three different activities, namely “shopping, buying and consuming”.

In the past 40 years, research on consumer behaviour has experienced an intense development in the area of academic research (Kuß and Tomczak, 2007). Whereas the image of the rational consumer was prevalent at first, the explanation of consumer behaviour shifted towards motive research and away from the idea of the purely rational consumer in the 1950s and 1960s. Modern research on consumer behaviour, which started in the 1960s, is characterised by a variety of different theoretical concepts and empirical research methods, considering for instance economic, psychological and sociological areas (Kuß and Tomczak, 2007). In the 1970s and 1980s, consumer research was one of the most active fields in international marketing research. Since the 1990s, problems of strategic marketing and relationship marketing have come to the fore (Kuß and Tomczak, 2007).

Foscht and Swoboda (2005) distinguish between the terms customer behaviour and consumer behaviour. According to them, customer behaviour in the narrower sense deals with the behaviour of demanders when purchasing and using economic goods or services; meanwhile, consumer behaviour in the narrower sense deals with the behaviour of persons when purchasing and consuming economic goods and services. However, within this dissertation the two terms will be used interchangeably. Shet and Mittal (2004 p. 12) define consumer behaviour as “the mental and physical activities undertaken by household and business customers that result in decisions and actions to pay for, purchase, and use products and services.” This definition will be used in this dissertation.

2.5.2. Theoretical models of consumer behaviour

Consumer behaviour has become more dynamic which is due to the self-concepts of consumers such as “I am what I am”, “I am how I live” and “I am how I am at the moment” (Foscht and Swoboda, 2005 p. 5). While consumer behaviour used to be more consistent, nowadays consumers follow several behavioural principles at the same time (e.g. by changing behaviour according to group affiliation) and therefore display a rather multi-optional or even paradoxical behaviour (Foscht and Swoboda, 2005). The occasional declaration of facts such as market share, market volume or distribution of buying power is not part of the theory of consumer behaviour. However, these declarations are needed to make the theory usable in practice (Trommsdorff, 2009).

There are diverse models of consumer behaviour. The model of Engel, Blackwell and Miniard (1995) for instance demonstrates the net of influences of theoretical constructs that explain the buying behaviour as comprehensively as possible by breaking the process of consumer behaviour down into different phases. In their model, consumer behaviour has three main phases, namely the phase of decision making, information processing and evaluation (Foscht and Swoboda, 2005). It is often used in literature to provide a general overview of the complex and interlinked processes of consumer behaviour (e.g. Raab et al, 2009, cited in Trommsdorff, 2009).

Figure 6: Extended model of consumer behaviour by Engle, Blackwell and Miniard (1995) (in Foscht and Swoboda, 2005 p. 26; Emerald, 2011)

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Howard and Sheet (1969) also developed a rather comprehensive model which is, according to Foscht and Swoboda (2005), a classic and one of the most cited comprehensive models of consumer behaviour.

Figure 7: Extended model of consumer behaviour by Howard and Sheet, 1969 (in Foscht and Swoboda, 2005 p. 26)

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A more concise model of consumer behaviour is the stimulus-response model (SR model). This paper will utilize this simplified model as a basis for understanding consumer behaviour. Attempts towards researching and analysing profound human psychological interrelations will not be part of this dissertation. According to the research objective, this dissertation aims to analyse domestic attitudes and behaviour, preferences, and store loyalty tendencies in order to detect differences and success factors. Therefore, external influences and the final response of the domestic customer are of greater interest than the personal psychology influencing the consumer. Thus, the SR model presented in figure 8 serves perfectly for the present approach.

Figure 8: SR model (adapted from Foscht and Swoboda, 2005 p. 29)

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[...]


1 Political, Economic, Social, Technological

Sarah-Mailin Janotta, Dissertation M.Sc. IB 2010/2011 6

2 Model developed by Howard V. Perlmutter (1969) about different internationalisation strategies of MNCs and the degree to which the corporate culture (of the headquarters) should be adapted to the local culture of subsidiaries. Hofstede, 2011

3 Soccer World Cup 1994: Both companies reprinted “the Saudi Arabian flag, which includes sacred words from the Koran, on disposable packaging used in promotions. Despite their delight at having a Saudi team in contention for the cup, and the satisfaction with Coca Cola sponsoring the team, Muslims around the world protested at this borrowing of sacred imagery, and both companies had to scramble to rectify the situation.” (Gillespie & Hennessey, 2011, p. 550 citing from ‘Packaging Draws Protest’, Marketing News (4th July 1994))

4 Internationalisation of IKEA in America: Differences in consumer behaviour between Europe and America (e.g. size of sofas, glasses, etc.) were ignored when entering the American market, leading to failure and losses (Kotler & Keller et al, 2009, p. 519).

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Details

Title
Loyalty cards in the apparel industry in Germany and Spain
Subtitle
Is the implementation of a global marketing approach reasonable when operating both in a Southern and a Northern European country?
College
South Bank University London  (Faculty of Business)
Grade
1
Author
Year
2011
Pages
132
Catalog Number
V195046
ISBN (eBook)
9783656204619
ISBN (Book)
9783656206576
File size
5424 KB
Language
English
Notes
1 (UK: 70)
Keywords
loyalty card, kundenkarte, loyalty, retension, card, loyalität, kundenbindung, relationship, marketing, crm, customer, consumer, kunde, apparel, textile, textil, mode, bekleidung
Quote paper
Sarah-Mailin Janotta (Author), 2011, Loyalty cards in the apparel industry in Germany and Spain, Munich, GRIN Verlag, https://www.grin.com/document/195046

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