Retailer Attitudes Towards Manufacturers

Nikolaus Franke, Ludwig-Maximilians-Universitat, Munich *

Abstract

We build a testable model that separates retailer attitudes towards manufacturers into sub- attitudes (retailer's role as partner, observer and user) and considers their impact on retailer behaviour. An empirical test confirms the model and indicates that retailer attitudes must be seen as a key determinant of the manufacturer's marketing action.

Attitude as a key mediating construct?

In many industries, retail controls the channel of distribution (Bell et al. 1997; Borghesani et al. 1997; Beam 1997; Krishnan & Soni 1997). As a consequence, manufacturers focus their marketing activities not only on consumers but also on retailers in order to induce the retailer to permit and to support contact to the consumer.Research on that issue concentrates mainly on constructs such as power (e.g. Kumar et al. 1998; Brown et al. 1995), conflict (e.g. Gaski 1984; Rawas et al. 1997) and trust (e.g. Anderson and Narus 1986; Morgan & Hunt 1994). It is remarkable that many empirical studies emphasise the subjectivity of the retailer's perception and consequently apply attitude- research methods (Dwyer 1980; Hunt & Nevin 1974; Stern et. al. 1973; Tomczak & Gussek 1992).

This focus on the subjective nature of retailer perceptions can be justified on several grounds. Just like other individuals, even purely rational retailers do not decide on the basis of the objective informational content itself but on perceived information. For several reasons, information itself and perceived information can differ.

One striking reason for subjectivity is the complexity and multitude of information that reaches the retailer and leads to incomplete perception. For example there are 24,000 new products in the food market and over 50,000 new books in Germany each year (Franke 1998). Obviously it is impossible to handle that amount of information (situation of information-overload). The result is a selective (and not objective) perception of reality.

Some information like product quality is difficult to assess. Considering the amount of information, the retailer probably relies like the consumer on indicators that serve as product quality signs like price or market share.

Generally, the biggest part of relevant information requires valuation and interpretation. E.g. the perceived quality of the manufacturer's training or information policy is quite

* Nikolaus Franke, Institut fur Innovationsforschung und Technologiemanagement, Ludwig-Maximilians- Universitat Munchen, Ludwigstr. 28 RG, 80539 Munchen, Germany. E-Mail: franke@bwl.uni-muenchen.de. Phone: ++49/89/2180-3684. Fax: ++49/89/2180-6284.

i/i McLoughlin, Damien. and C. Horan (eds.), Proceedings of The 15th Annual IMP Conference,University College, Dublin 1999

Page 1 of 10

subjective it results from a combination of the retailer's aims, expectations and ia^ie> on the one hand and concrete perception on the other.

Finally, some information given from the manufacturer seems untntsnvorthy as one retailer's statement points out: "In recent years Mars and Suchard had nothing better to do than put the 23rd taste variety on the market with absolute positive proof that this is the thing everybody was waiting for" (Feige 1996, p. 169).

Altogether, the retailer's attitude towards a manufacturer appears to be an important factor in vertical marketing (Frazier & Sheth 1985, Narus & Anderson 1988). There have been a number of practice-oriented studies emphasising the relevance of retailer attitudes (Huppert, 1976; and the studies quoted by Feige 1996, pp. 84-92). But somewhat surprisingly, there is no explicit theory-based empirical study on this phenomenon [1].

Given the paucity of studies that study the impact of retailer attitudes on outcomes that are of relevance to the manufacturer, this study attempts to build a theoretically grounded model of retailer attitudes towards the manufacturer and to test it empirically.

A general model of the retailer f s attitude towards the manufacturer

The concept of attitude is central to the analysis of consumer behaviour (Peter and Olson 1990, p. 191). An attitude is widely accepted as "a learned predisposition to respond in a consistently favourable or unfavourable manner" (Fishbein & Ajzen 1975, p. 5; Assael 1992, p. 176, Hawkins et al. 1992, p. 433). It is an overall evaluation of an object that results from stimuli, has a specific structure and can cause a certain behavioural reaction.

To capture the specific context of manufacturer-retailer interactions the model is comprised of four parts:

(1) Stimuli to retailer's attitude

(2) Structure - attitude as dependent variable

(3) Behaviour attitude as independent variable

(4) Impact on consumer behaviour

(I) Stimuli to retailer's attitude

It is assumed here that most important stimuli derive from the manufacturer's marketing activities. This source can be differentiated by direction: Push marketing aims to attract the retailer directly, while pull marketing focuses on the consumer but is being perceived by the retailer as well. Thus it has an indirect impact on the retailer.

(2) Structure attitude as dependent variable

The result of the perceived stimuli is the retailer's attitude. Due to the fact that there are direct and indirect stimuli, it has a complex structure. Generally, an individual can form different attitudes to an object depending on the specific situation and it's impact. "When mv colleagues ask about my ideal cigarette, I am tempted to ask them whether they mean ... ideal for the

in McLoughlin, Damien. and C. Horan (eds.), Proceedings of The 15th Annual IMP Conference,University College, Dublin 1999

Page 1 of 10

beginning of the month when I'm rich or ideal for the end when I'm poor." (example taken from Assael 1992, p. 481). In the context of a retailer forming an attitude to a manufacturer the task definition seems to be the most important situational variable (Hawkins et al. 1992, pp. 516-517). Thus, for a retailer the manufacturer plays different roles: The manufacturer is a good (or bad) business partner, he enables the retailer to earn his living (or does not), and finally he offers products the retailer personally likes (or does not). The following classification of sub-attitudes seems appropriate [2|:

The "push-stimulus" leads to the first sub-attitude. It is named the attitude u.vbecause it describes the perceived qualit\ of the direct business relation to a certain manufacturer. For example, a retailer can consider a manufacturer to be reliable, accurate and fair.

As mentioned above, the retailer not only perceives the manufacturer's push marketing but also marketing activities that are addressed towards the consumer i.e. pull marketing (Farris et al. 1989). Combined with the retailer's assumptions about and experience with the consumer this leads to the second attitude. We call it the attitude as observer because it has an indirect origin: It refers to the perceived quality of the manufacturer's marketing competence concerning the consumer. E.g. a manufacturer can have a negative attitude towards a manufacturer because he only slowly reacts to fashion trends and therefore generally is not a successful innovator. Note that the retailer's perception of what the consumer thinks and wants can differ from what the consumer really thinks and wants (Pathaketal. 1975).

A retailer is not only a retailer, Of course he is also (or at least can be) a parent, a voter, a sports club member, etc. One role besides that of retailer can be extremely important for the manufacturer; The retailer's role as a private user of the manufacturer's products. Similar to other consumers he perceives product quality and other pull marketing elements and adds them to his attitude towards the manufacturer, the attitude c/.s uxer A slight difference to "ordinary consumers" may only be that he is more involved in the product, and that therefore his attitude may have stronger cognitive elements (Hawkins et al. 1992, pp. 433-437).

These attitudes can be logically separated. However, they need not be independent from each other. Indeed, theories of cognitive dissonance (Assael 1992, pp. 195-196) postulate mutual influence of each attitude. In situations where the object is important for the subject, contradictions in the system of attitude disturb the cognitive harmony. As a result, an attitude change can be expected:

Hypothesis 1: There is a positive correlation between the attitude as partner, the attitudeas observer and the attitude as user.

(3) Behaviour attitude as independent variable

Attitude theory says there is or might be a causal influence of attitude to behaviour (attitude -» behaviour) (Assael 1992, p. 191). This is one reason for the popularity of the attitude concept in marketing theory and practice: If this hypothetical causal relation really exists, then it is possible to explain and forecast a person's behaviour by analysing a his attitude. Furthermore it is possible to use this relation technologically: In order to change a person's behaviour it is

in McLoughlin, Damien. and C. Horan (eds.), Proceedings of The IS"1 Annual IMP Conference,University College, Dublin 1999

Page 2 ofl 0

only necessary to change his attitude. Obviously, it is essential to proof this nexus (Frazier & Sheth 1985).

Therefore the following hypotheses are proposed:

Hypothesis 2: The attitude as partner affects the retailer's (purchasing and selling)behaviour.

Hypothesis 3: The attitude as observer affects the retailer's (purchasing and selling) behaviour.

Hypothesis 4. The retailer's attitude as user affects the retailer's (purchasing and selling)behaviour.

Ad (4) Impact on consumer behaviour

The impact of the retailer's attitude on the retailer's behaviour is practically relevant only if the retailer's behaviour has economic consequences. This is obviously the case for the retailer's purchasing behaviour. The focus of this study, however, is on the retailer's selling behaviour. Selling behaviour seems more general because it includes purchasing behaviour: Usually only purchased products can be sold. Several empirical studies indicate that retailers are able to influence the consumer's decisions massively by shelf space, merchandising, promotional activities, sales-talk etc. (Curhan 1974; Cox 1970; Leone & Schultz 1980; Bemmaor & Mouchoux 1991) [3].

Hypothesis 5: The retailer's selling behaviour affects the consumer purchasing behaviour.

The model of retailer attitudes towards manufacturers

The five hypotheses can now be integrated into a model of retailer attitudes towards manufacturers (figure 1). In the figure, the distinction is made between hypotheses (that will be empirically proven below) and assumptions that serve as axioms.

Method

Research design

As the research design we used a sample of paper-back retailers in Germany. Two reasons lead to this decision: First, experts [4] considered this market to be meaningful for research issues since retail controls the channel of distribution, and although there are only relatively few manufacturers (publishing houses), the number of product innovations is high (approx. 6,000 a year) which makes it impossible for the retailer to gain an objective overview of all the relevant information. Second, the relatively small number of manufacturers [5] made it possible to survey retailer attitudes towards those publishers. The study began with exploratory field work. 12 retailers were interviewed using a repertory grid technique (Kelly 1955; Latta 1992) that resulted in 205 items describing retailer attitudes towards publishers. Then a questionnaire was sent to 15 retailers (response rate 100%) in order to select the most important, non-redundant, and discriminating items (method: importance rating, factor analysis, and discriminant analysis). The best 18 items were picked and a draft questionnaire was constructed. After a pretest with 10 retailers, experts, and manufacturers, some (small) modifications were made.

in McLoughlin, Damien. and C. Horan (eds.), Proceedings of The 15th Annual IMP Conference.University College, Dublin 1999

Page 3 of 10

Model of retailer attitudes towards manufacturers

push

vertical marketingpush pull

H1 ©

attitude as partner

attitude as observer

H2 H3 retailer's ' assumptions about

'consumer behaviour ^«^—

H5

consumers pur­ chasing behaviour/^.

manufacturer

retailer

pull

consumer

= hypothesis - - - = assumption

Figure 1: Model of retailer attitudes toward manufacturers

Measures

Each attitude (as partner, as observer, as user) towards the 10 biggest publishing-houses was separately measured by 6 items. Selling behaviour was measured by the share of shelf space with which the retailer provided the manufacturer and the share of recommendations the books from the publishing house received from the retailer.

Data collection

A random sample of n = 800 book retailers who (also) sold paper-backs was executed on a fixed day, September 20th 1995. The sampling frame used was the list of customers from the publishing house Goldmann, which included 3,912 retailers. The questionnaires were mailed to the persons responsible for paper-backs. Within six weeks (a reminder was sent out after the first two weeks 273 questionnaires were returned in total, a response rate of 34.1%. Tests showed the general applicability of the sample [6]. In the analysis each assessment of one manufacturer by one retailer was taken as a case. Thus, the total number of cases is 2730 [7].

AnalysisThe major part of the causal model (hypotheses 1 to 4) was tested using LISREL. For methodological reasons, the variable "consumer purchasing behaviour" could not be included in the model and therefore the causal relation between retailer behaviour and consumer

i/i McLoughlin, Damien. and C. Horan (eds.), Proceedings of The 15th Annual IMP Conference,University College, Dublin 1999

Page 4 of 10

purchasing behaviour could not be measured [8]. Therefore, this relation was only analysed in an exploratory manner.

Results

Testing the LISREL model

Table 1 shows the most important findings. For more detailed information about measurement and results see Franke (forthcoming).

Attitude as partner

Attitude as observer

Attitude as user

Selling behaviour

Attitude as partner

.73***

.60***

17***

Attitude as observer

.71***

.64***

Attitude as user

.10***

Selling behaviour

Maximum-likelihood estimates, n = 2186, GFI = .837

Table 1: Path coefficients of the LISREL model

The paths between the attitude as partner, the attitude as observer, the attitude as user and the retailer's selling behaviour were significant at the p<.001 level. Thus hypotheses 1 to 4 were clearly supported, suggesting that different retailer attitudes towards manufacturers are closely correlated and have considerable influence on retailer selling behaviour. Especially the attitude as observer (which reflects the retailer's perception of pull marketing and his assumptions and experience about the consumer) seems to have a strong causal impact on the retailer's behaviour.

Exploratory analysisWe saw two possibilities for the exploratory analysis of hypothesis 5. First, we correlated the averages of (1) share of shelf space and (2) share of recommendations for each publishing house with the publisher's total market turnover. Of course, this macro-correlation neglects the individual retailer and therefore draws only a rather rough picture. Second, we explicitly asked the retailers whether they agree that shelf space and recommendations have an impact on paper-back sales to consumers, and if so to what degree. Table 2 shows the findings.

Obviously share of shelf space and share of recommendations have a strong correlation to the publishing houses' market success [9]. However, the explanatory power of this finding is limited due to the reasons mentioned above and the low number of cases. The answers to the explicit questions also indicated that both variables are likely to have an impact on consumer's purchasing behaviour. Although hypothesis 5 could not be thoroughly tested, there is some evidence for it.

Discussion

The exploratory findings in this study show that retailer selling behaviour is essential for a manufacturer's market success. In particular the share of shelf space dedicated to a particular manufacturer's products is strongly affected by retailer selling behaviour which in itself is impacted by retailer attitudes towards manufacturers. Particularly striking is the impact of the

in McLoughlin, Damien. and C. Horan (eds.), Proceedings of The 15th Annual IMP Conference,University College, Dublin 1999

Page Sot'10

attitude as observer (perception of pull marketing combined with assumptions about consumer). Much weaker is the impact of the attitude as partner (perception of business relation) and the attitude as user (private opinion about the manufacturer's products)

... correlated with total market turnover fr/

... has an important impact on selling [1 = strongly agree; 5 = strongly disagree]

Shelf space

.78

1.65

Recommendation

-\2

3.30

Table 2: Exploratory analysis of hypothesis 5

One should not conclude, however, that onl> the attitude as obsener was a key target variable and the other attitudes (as partner and as user) could be neglected. Findings indicate that there is a strong correlation between these three attitudes. This means that there is a probability of indirect effects. E.g. if one manufacturer neglected a retailer's private preferences completely, the retailer's resulting bad attitude as user could affect the retailer's attitude as observer which could in turn have a negative effect on the manufacturer's market performance.

Therefore, it must be reasoned that all three sub-attitudes are important target variables in the paper-back market. Publishers should take this into consideration when developing long-term vertical marketing strategies and should try to establish a positive business relationship (attitude as partner), convince retail of their pull-marketing quality (attitude as observer) and take retailers' private preferences into consideration (attitude as user).

The results also allow us to draw some conclusions for further theoretical work. It is well- known that the application of concepts from attitude research has been quite successful in analysing consumer behaviour. This study suggests that such concepts can also be a promising foundation for analysing retailer behaviour. Such an application can do much to increase the understanding, prediction and control of a retailer's selling behaviour. Channel management theory could therefore benefit from employing attitude theory to a greater extent than has been used so far.

The results presented here are encouraging, but they need further refinement. For example, the data used here were purely cross-sectional. An extension of this study to a dynamic framework in which panel data are gathered would be a major improvement. Such a design would also allow us to determine the direction of causality between the attitude constructs

used here.

Further studies also need to include those determinants of retailer behaviour that are traditionally emphasised in this literature, such as power, conflict, trust or marketing spending. These may have significant exploratory power even after the attitudinal dimension has been

accounted for.

Footnotes

[1] A CD-ROM investigation of ABI-inform, SSCI, ECONIS, HWWA, IFO, BUSS, FTTT, SOLIS, FORIS using the search string "retail* and (attitude* or image*)", resulted in 495 hits which mainly referred to the attitude of consumers towards stores and store images. None referred to retailer attitudes to manufacturers.

in McLoughlin, Damien. and C. Horan (eds.). Proceedings o] The 15<h Annual IMP Conference,University College, Dublin 1999

Page 6ot 10

[2] The different attitudes must not be confused with the components of attitude (cognitive, affective, behavioural component, Hawkins et al. 1992, pp. 433-441). Each retailer sub- attitude towards a manufacturer can be seen as a system of these components.

[3] The way a retailer's selling behaviour influences consumer purchasing behaviour will not be analysed in detail in this paper. The relationship is treated as a black box.

[4] Eight retail experts from academic circles, market research practice, and consultancies were interviewed.

[5] The top 10 publishers have a market share of 70% (Osten 1996).

[6] The null-hypothesis "there is a difference between early and late respondents" was rejected significantly (p < .05) with all variables used (t-tests).

[7] Treating within-subject variables as between-subject variables ignores the possibility of dependence of observations. Positively correlated within-subject variables lead to an overestimation of the t-value (LaTour & Miniard 1983). Thus, a second L1SREL analysis was performed on a reduced data set (n = 223) that only contained one randomly chosen observation per retailer. Obviously such a procedure leads to very conservative estimates of t-values which can be seen as a lower bound for the correct t- values. This procedure resulted in t-values for the structural model of 6.251 (attitude as partner - attitude as observer), 5.757 (attitude as observer - attitude as user), 5.398 (attitude as partner attitude as user), 4.881 (attitude as partner - retailer's selling behaviour), 3.713 (attitude as observer - retailer's selling behaviour), 1.845 (attitude as user - retailer's selling behaviour).

[8] Exploratory interviews showed that retailers refused to answer questions concerning the individual publishing-houses' share of turnover.

[9] No significance levels are displayed because the data was not a probability sample.

References

Anderson, J.C., Narus, J.A. (1986) "Toward a Better Understanding of Distribution Channel

Working Relationships", in Backhaus, K. and Wilson, D. (eds.), /lu/ustnul Marketing a German-American Perspective p. 320-336.

Assael, H., (1992) Consumer Behavior and Marketing Action Boston: Kent.

Beam, C. (1997) "Retailer's Rule." Folio v26 i4 p. 24-26.

Bell, R., Davis, R., Howard, E. (1997) "The Changing Strucure of Food Retailing in Europe:

the Implications for Strategy." Long Range Planning v30 i6 p. 853-861.

Bemmaor, A.C., Mouchoux, D. (1991) "Measuring the Short-Term Effect of In-Store

Promotion and Retail Advertising on Brand Sales. A Factorial Experiment." Journal of

Marketing Research v28 i2 p. 202-214.

Borghesani, W.H., de la Cruz, P.L., Berry, D.B. (1997) "Controlling the Chain: Buyer Power,

in McLoughlin, Damien. and C. Horan (eds.). Proceedings of The 15th Annual IMP Conference,University College, Dublin 1999

Page 7ol 10

Distributive Control, and New Dynamics in Retailing." Business Horizons, v40 i4 p.

17-24.

Brown, J.R., Lusch, R.F., Nicholson, C.Y. (1995) "Power and Relationship Commitment:

Their Input on Marketing Channel Member Performance." Journal of Retailing v71 p.

363-392.

Cox, K.K. (1970) "The Effect of Shelf Space Upon Sales of Branded Products", Journal of

Marketing Research v7 p. 55-58.

Curhan, R.C. (1974) "The Effects of Merchandising and Temporary Promotional Activities on

the Sales of Fresh Fruits and Vegetables in Supermarkets", Journal of Marketing

Research vll p. 286-294.

Farris, P., Olver, J., de Kluyver, C (1980) "The Relationship Between Distribution and

Market Share" Marketing Science v2 (Spring) p. 107-132

Dwyer, F.R. (1980) "Channel-Member Satisfaction: Laboratory Insights", in: Journal of

Retailing v56 p. 45-65.

Feige, S. (1996) Handelsorientierte Markenfuhrung. Strategien zur Profilierung von

Konsumguterherstellern beim Handel, Frankfurt a.M.: Peter Lang.

Fishbein, M., Ajzen, I. (1975) Belief, Attitude, Intention and Behavior: an Introduction to

Theory and Research^ Reading (Mass.): Addison-Wesley,

Franke, N. (1998) "Verhalten in innovativen Situationen. Eine Studie zum handelsbezogenen

Innovationsmarketing," in Innovationsforschung und Technologiemanagement. Konzepte, Strategien, Fallbeispiele , N. Franke and C.-F. von Braun, eds., Berlin, Heidelberg, New York: Springer 1998 p. 261-274.

Franke, N. (forthcoming) "Getting Past the Gate-Keeper: Retailer Attitudes towards

Manufacturer ", Working Paper, Munich.

Frazier, G.L., Sheth, J.N. (1985) An Attitude-Behavior Framework for Distribution Channel

Management Journal of Marketing v49 (Summer) p. 38-48.

Gaski, J. F (1984) The Theory of Power and Conflict in Channels of Distribution. "Journal

of Marketing v48 (Summer) p. 9-29.

Hawkins, D.I., Best, R.J., Coney, K.A. (1992) Consumer Behavior, Implication for \Lirkcnng

Strategies, Homewood: Irwin, 1992,

Hunt, S. Nevin, J.R. (1974), Power in a Channel of Distribution: Sources and Consequences,

Journal of Marketing Research vll p. 186-193.

Kelly, G.A. (1955) A Theory of Personality New York 1955.

Huppert, E. (1976) Image offhet Regale Absatzwirtschaft i8 p. 46-49.

Krishnan, T.V., Soni, H. (1997) Guaranteed Profit Margins: a Demonstration of Retailer

in McLoughlin, Damien. and C. Horan (eds.), Proceedings of The 15th Annual IMP Conference*University College, Dublin 1999

Page 8 of 10

Power." InternationalJournal of Research in Marketing v 14 p. 35-56.

Kumar. N., Scheer, L.K., Steenkamp, J.B.E. (1998) Interdependance. Punitive Capability, and

the Reciprocation of Punitive Actions in Channel Relationships.",./<;/// //<// «l

Marketing Research v35 p. 225-235

LaTour, S.A., Miniard, P W (1983) The Misuse of Repeated Measures Analysis in Marketing

Research, Journal of Marketing Research v20 (February) p. 45-57.

Latta, G.F. (1992), Validation of the Repertory Grid for Use in Modeling Knowledge"

Journal of the American Society for Information Science v43 p. 115-129.

Leone, R.P and Schultz, R.L. (1980) A study of marketing generalizations, Journal of

Marketing v44 (Winter) p. 10-18.

Morgan, R.M. and Hunt, S.D. (1994) The Commitment-Trust Theory of Relationship

Marketing, Journal of Marketing v58 (July) p. 20-38.

Narus, J.A. and Anderson, J.C. (1988) Strengthen Distributor Performance through Channel

Positioning, Sloan Management Review v30 (Winter) p. 31-40.

Osten, J. (1996) Buchmarkt: Hohe Schule der Verpackung Focus i5 p. 88-91

Pathak, D.S., Crissy, W.J.E., Sweitzer, R.W (1975) Customer Image Versus the Retailer's

Anticipated Image. "Journal of Retailing v50 p. 21-28, 116.

Peter, J.P,, and Olson, J.C. (1990) Consumer Behavior Marketing Strategy Perspectives,

Irwin, Homewood: Irwin.

Rawas, M.Y.A., Vitell, S.J., and Barnes, J.H. (1997) Management of conflict using individual

power sources: a retailer's perspective." Journal of Business Research v40 p. 49-64.

Stern, L.W., Sternthal, B. and Craig, C.S. (1973) Managing Conflict in Distribution Channels:

a Laboratory Study, Journal of Marketing Research vlO p. 169-179.

Tomczak, T. and Gussek, F (1992) Handelsorientierte Anreizsysteme der

Konsumguterindustrie, Zeitschrift fur Betriebswirtschaft v62 p. 783-806.

in McLoughlin, Damien. and C. Horan (eds.), Proceedings oj The 15th Annual IMP CoUniversity College, Dublin 1999

Page 9 of 10