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The results of this research suggest a new mandate for discriminant validity testing in marketing. Specifically, the authors demonstrate that the AVE-SV comparison (Fornell and Larcker 1981) and HTMT ratio (Henseler et al. 2015) with 0.85 cutoff provide the best assessment of discriminant validity and should be the standard for publication in marketing. These conclusions are based on a thorough assessment of the literature and the results of a Monte Carlo simulation. First, based on a content analysis of articles published in seven leading marketing journals from 1996 to 2012, the authors demonstrate that three tests—the constrained phi (Jöreskog 1971), AVE-SV (Fornell and Larcker 1981), and overlapping confidence intervals (Anderson and Gerbing 1988)—are by far most common. Further review reveals that (1) more than 20% of survey-based and over 80% of non-survey-based marketing studies fail to document tests for discriminant validity, (2) there is wide variance across journals and research streams in terms of whether discriminant validity tests are performed, (3) conclusions have already been drawn about the relative stringency of the three most common methods, and (4) the method that is generally perceived to be most generous is being consistently misapplied in a way that erodes its stringency. Second, a Monte Carlo simulation is conducted to assess the relative rigor of the three most common tests, as well as an emerging technique (HTMT). Results reveal that (1) on average, the four discriminant validity testing methods detect violations approximately 50% of the time, (2) the constrained phi and overlapping confidence interval approaches perform very poorly in detecting violations whereas the AVE-SV test and HTMT (with a ratio cutoff of 0.85) methods perform well, and (3) the HTMT .85 method offers the best balance between high detection and low arbitrary violation (i.e., false positive) rates.

Loyalty programs (LPs) are marketing investments designed to foster behavioral loyalty among a firm’s best customers and, ultimately, increase firm performance. Surprisingly, the effectiveness of introducing LPs on firm performance in the short and long term has not been thoroughly evaluated. This research examines the extent to which introducing an LP can increase both firm sales and gross profits. Leveraging data from 322 publicly-traded firms that introduced an LP between 2000 and 2015, the authors demonstrate that introducing an LP can increase sales and gross profits in the short term (within the first year), and these positive effects are sustained long term (for at least three years). However, the effects on gross profits do not become significant until the second quarter after LP introduction, and their overall impact on performance lags substantially behind sales. Complementing these primary findings, the results reveal that offering an LP with tiers or earning mechanisms can provide firms with significant increases in sales and gross profits. Taken together, this research demonstrates that introducing strategically designed LPs can dramatically increase firm performance in both the short and long term.

Fostering attachment between consumers and organizations is developing into a cornerstone of relationship marketing strategy. However, little is known about how an organization can develop strong emotional ties with consumers. Our research addresses one aspect of this gap by showing that in atmosphere dominant service firms, sense of place leads to place attachment, which in turn plays a critical role in driving desirable customer behaviors. In Study 1 we demonstrate that sense of place influences the strength of consumers’ attachment to a service location, which ultimately has positive effects on consumers’ behaviors. In Study 2, we identify characteristics that influence the sense of place dimensions and extend the model to better account for the dynamics of social relationships that develop within a service firm. This research provides an initial investigation into how organizations can better manage the service place and provides a rich framework for future research on managing attachment with service consumers.

Etailers have been losing market share to brick and mortar retailers that also sell products online. Two related studies investigate means by which etailers can convey trustworthiness to consumers and thereby increase purchase intentions relative to hybrid firms. Study 1 examines whether consensus information (i.e., the extent of satisfaction agreement among previous customers) and brand familiarity exert independent or interactive effects on consumer perceptions across retailers that possess, or lack, a physical presence. Study 2 tests a potential boundary condition of the effects of consensus information and brand familiarity by introducing generalized suspicion, which is a common condition for online buyers. Results suggest that consensus information provides a broad cue that conveys trustworthiness and leads to greater purchase intentions for both familiar and unfamiliar brands, as well as hybrid and etailer firms. In comparison, the effects of physical presence and brand familiarity were somewhat narrower in scope. However, we find that consensus information alone is not sufficient to buffer against active, generalized suspicions online. Instead, a combination of high consensus and brand familiarity is necessary for this purpose. The paper concludes with recommendations on how etailers can convey trustworthiness in online exchanges and how future research can build upon these findings.

[Display omitted] ► We develop an Other Customer Perception (OCP) scale for use in service organizations. The scale dimensions are Similarity, Physical Appearance and Suitable Behavior. ► A service consumer's OCPs can explain variation in outcomes beyond that explained by just modeling the effects of service quality. ► The OCP scale effectively predicted customers’ approach and avoidance behaviors to a retail service experience. ► An age comparison suggests that physical appearance plays a more prominent role in the appraisal process for younger consumers. During most consumer exchanges, particularly in service and retailing settings, customers are “in the factory” and, as a result, the presence of other customers can have a profound impact on customer experiences. Despite studies demonstrating the importance of managing the customer experience and customer portfolios, the marketing literature lacks a comprehensive scale that can be used to assess individuals’ perceptions of other customers during commercial transactions. This study conceptualizes a three-dimension, Other Customer Perception (OCP) scale to address this gap. Using a seven-step scale development process, the multi-dimensional conceptualization is supported and validated and the research demonstrates the impact of the OCP dimensions on consumers’ approach and avoidance intentions. The findings provide a clearer understanding of how other customers can indirectly influence assessments of a customer exchange and can assist in the measurement of other customer perceptions in future research efforts.

Customer reviews, price discounts, and free shipping are powerful drivers of online purchases. Prior research demonstrates their direct effects on consumer behavior, usually with the assumption that they operate independently. By examining the interplays of online reviews and marketing promotions, this study offers a richer, more comprehensive perspective on how these drivers work together to shape consumers’ preferences and influence product sales. The authors examine these effects using both an online experiment (Study 1) and an analysis of a secondary data set (Study 2). Results demonstrate that when developing promotional schedules for e-commerce sites, managers must account for both the volume and valence of their products’ reviews; failing to address these dynamics may lead to reduced profit margins. A key insight is the limited performance of price discounts when a critical number of reviews accumulates, resulting in margin erosion without demand creation. The implications of these results are discussed.

In response to increased avoidance of traditional banner advertising, publishers have turned to a subtler form of display advertising called native advertising. Unlike traditional banner ads, native ads are intentionally designed to be cohesive with editorial content and assimilated into the design of the publisher’s website. We examine the performance of native advertising placements across three studies. In Study 1, we use a large dataset from a native advertising platform to examine the interplay of ad placement and ad content. We find that clicks are higher when ads are (1) delivered in-feed and (2) contain lower levels of selling intent, highlighting the interplay between the ad content and delivery. Study 2 confirms that in-feed placements experience higher clicks, but they also result in more bounces relative to in-ad placements. As a result, their effect on net visits is similar to in-ad placements at a higher cost. To further understand this phenomenon, we conducted a lab study (Study 3), which shows that when consumers are redirected to an advertiser’s site from an in-feed (versus in-ad) placement they experience higher annoyance and, ultimately, higher bounce intentions and reduced advertiser purchase intentions.

Purpose – This research aims to provide insight on the interactive effects of service quality and e-service quality on perceptions of retailer brand equity and also extend and test the efficacy of Baker ' s service environment typology in both offline and online service experiences. Design/methodology/approach – A within-subjects, simulated shopping experience immerses consumers in both offline and online shopping environments and, subsequently, consumers are surveyed regarding both offline and online quality as well as aggregated evaluations of retailer brand equity. Findings – Results demonstrate that consumer perceptions of offline and online service quality have a positive effect on retailer brand equity and service quality and e-service quality interact, such that e-service quality has a stronger effect on brand equity offline quality is low. The results also support the application of offline service environment frameworks for online retailing. Research limitations/implications – The results demonstrate the applicability of Baker ' s typology in both online and offline environments and reveal that customer perceptions of offline and online operations can interact to affect global attitudes toward the retailer. Practical implications – The results suggest that retailers can improve quality perceptions by enhancing both their offline and online service environments and that these quality improvements can result in enhanced consumer perceptions of brand equity. Originality/value – This study provides a first look at the applicability of offline frameworks for the service environment in an online context. Moreover, the results provide an initial assessment of how consumers update global attitudes toward a brand by consolidating perceptions across both offline and online interactions.

Firm rebranding efforts are inevitable; however, we have a limited understanding of the nature and performance implications of those rebranding decisions. This research contributes to our understanding of this process by identifying two fundamental dimensions of rebranding decisions: brand identity change and brand strategy change. More importantly, we identify and empirically test the conditions under which brand identity change and brand strategy change have either strong or weak (even negative) influences on firm value. Specifically, the results from analyzing 215 rebranding announcements suggest that (1) rebranding decisions, on average, are associated with positive abnormal stock returns in the (−5, +5) event window, and (2) investors use cues, like the fit among rebranding dimensions, firm competitive position, and industry competitive intensity, to make informed evaluations of firm future cash flows.

This research is the first to examine service sweethearting, an illicit behavior that costs firms billions of dollars annually in lost revenues. Sweethearting occurs when frontline workers give unauthorized free or discounted goods and services to customer conspirators. The authors gather dyadic data from 171 service employees and 610 of their customers. The results from the employee data reveal that a variety of job, social, and remuneration factors motivate sweethearting behavior and several measurable employee traits suppress its frequency. The results from the customer data indicate that although sweethearting inflates a firm's satisfaction, loyalty, and positive word-ofmouth scores by as much as 9%, satisfaction with the confederate employee fully mediates these effects. Thus, any benefits for customer satisfaction or loyalty initiatives are tied to a frontline worker that the firm would rather not employ. Marketing managers can use this study to recognize job applicants or company settings that are particularly prone to sweethearting and as the basis for mitigating a positive bias in key customer metrics.