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Copenhagen Business School, 2017

Cand.merc Brand and Communications Management Master Thesis

Author: Patrycja Maria de Teilmann Supervisor: Ole Stenvinkel Nilsson

Date of submission: September 14, 2017

Number of characters: 181.860 (80 pages)


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This master thesis aims to analyze how advanced implementation of digital technologies in the FMCG industry will impact consumers’ shopping experience and the future of Danish grocery retailing.

Motivation for this study was an interest in the intersection of technology and the FMCG industry and and to gain a deeper understanding of Danish customers’ attitudes and perception towards implementation of more technology-drived actitivities in their grocery shopping experience.

Furthermore, the purpose of the study was to establish the Danish grocery retailers’ attitudes towards digital technologies and find out what they are already investing in.

The empirical research includes 2 focus groups with younger and older consumers and 3 individual interviews with representatives of grocery retailers in Denmark (Coop, Dansk Supermarked and Dagrofa), as well as an individual interview with an expert from the Technological Institute.

In order to delimate the scope of the research, the author has chosen to analyze RFiD technology, “Just Walk Out”

Amazon’s technology and Mobile Apps. The findings from the empirical research have shown that from

the presented technologies, mobile apps are the only technology that Danish grocery retailers are currently investing in, which also corresponds to the findings that younger customer’ preferences are to use mobile phones rather than in-store devices facilitated by the retailer. The analysis also revealed that RFiD technology can provide several valuable benefits both to customer and retailer, but economical and technological barriers make the implementation difficult for Danish grocery retailers. The younger customers are more ready to embrace the benefits of digital technologies in their daily grocery shopping, since technology is already a big part of their life than for the older consumers. The older consumers, on the other hand, are curious about and value the benefits of in-store technological solutions, but prefer in- store devices provided by the retailers.

Based on the empirical research it can be concluded that future grocery stores in Denmark will consist

of an increasing involvement of smartphones, personalized customer experience and a focus on

convenience. Nonetheless, retailers can’t forget that technology will never substitute the traditional

elements of a grocery shopping experience such as reasonable prices, good product selection, excellent

service and pleasant physical surroundings and these should not be downgraded in the wake of an

increasing focus on technology.


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1.1. Technology is redefining the grocery shopping experience ... 5

1.2. Purpose of Study ... 7

1.3. Problem Statement ... 7

1.4. Delimitations ... 8


2.1. Research Strategy ... 8

2.2. Research Philosophy ... 9

2.3. Method Choices ... 9

2.3.1. Focus group interviews ... 9

2.3.2. Individual interviews ... 12

2.3.3. Expert interview ... 13

2.3.4. Transcription ... 13

2.3.5. Coding ... 14

2.4. Quality of research ... 14


3.1. Retail Brand ... 15

3.1.1. Attributes ... 17

3.1.2. Benefits ... 18

3.1.3. Attitudes ... 18

3.2. Building a retail brand ... 19

3.2.1. Brand positioning attributes ... 20

3.3. Retail Consumer Behavior ... 26

3.3.1. Consumer and Shopper Journey Framework ... 26

3.3.2. Involvement ... 28

3.3.3. Hedonic and utilitarian shopping motives ... 29

3.3.4. Shopper missions ... 30


4.1. RFID Technology ... 32


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4.2. “Just Walk Out” Technology ... 33

4.3. Mobile Apps ... 34


5.1. RFiD Technology ... 36

5.1.1. Consumer’s perspective ... 36

5.1.2. Retailer’s perspective ... 43

5.2. “Just Walk Out” technology ... 53

5.2.1. Consumer’s perspective ... 53

5.2.2. Retailer’s perspective ... 56

5.3. Mobile Apps ... 59

5.3.1.Consumer’s perspective ... 59

5.3.2. Retailer’s perspective ... 63


6.1. RFiD Technology ... 68

6.2. “Just Walk Out” Technology ... 70

6.3. Mobile Apps ... 70

6.4. Conclusion on VRIO framework ... 71

6.5. The future grocery store ... 72


7.1. Further research ... 76



Appendix 1: Danmarks Statistik ... 84

Appendix 2: Focus Group Guidelines ... 84

Appendix 3: Power Point Presentation for Focus Groups ... 87

Appendix 4: Presentation of interview persons... 88

Appendix 5: Receipt from Kvickly Albertslund ... 89

Appendix 6: Images from Bilka Future in Hundige ... 90

Appendix 7: Mind Maps ... 91

Appendix 8: Transcription of focus group with young consumers ... 95

Appendix 9: Transcription of focus group with older consumers ... 128


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Appendix 10: Transcription of Anneli’s experience with Bip & Betal at Kvickly in Albertslund ... 166

Appendix 11: Transcription of interview with Jan Overgaard from Technological Institute ... 167

Appendix 12: Transcription of interview with Toke Lund from Dansk Supermarked ... 175

Appendix 13: Transcription of interview with Simon Færch from COOP ... 181

Appendix 14: Transcription of interview with Per Ahlmann Andersen from Dagrofa ... 190


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1.1. Technology is redefining the grocery shopping experience

The retail industry has changed rapidly throughout recent years, starting traditionally in a bricks-and- mortal era and now facing new opportunities and challenges from digitalization. The retailers’ ability to implement innovative technologies into their retail format is becoming a significant factor in their competitive position, due to the consumers’ increasing demand of a more exciting shopping experience.

The tendency is to implement technological solutions that shift services from a physical employee to self-service technologies, and to supplement the existing services with new technological features (Pantano & Migliarese, 2014). For retailers, technology can provide an opportunity to improve store operations and customer service, but also be a significant factor in differentiation from other retailers.

By implementing modern technology, retailers can offer new and exciting technology-driven solutions that will improve the grocery shopping experience for their customers.

In 2014 the Nielsen Company, a global

measurement and data company for FMCG (Fast Moving

Consumer Goods) industry and consumer behavior, conducted a global survey regarding e-commerce and digital shopping experiences. The purpose of the study was to understand how digital technology will shape the retail industry in the future. The research showed that digital technology is redefining what it means to “go” shopping (Nielsen, 2015). The offline and online worlds are becoming more connected with each other, as customers expect a seamless shopping experience across multiple channels. Shoppers around the world are becoming used to the benefits of digital technologies and are beginning to expect them in their grocery stores as well.

The increasing number of Internet users and the rising sales of smartphones and tablets worldwide

provide consumers with alternatives ways of shopping and enhances their accessibility to gather

knowledge about retailers and suppliers. Today’s consumers can be described as being “connected”, in

fact 3.5 billion people in the world are using the internet, 7.4 billion have mobile-phone subscriptions

and 1.79 billion is active on Facebook (Nielsen, 2017). Consumers are being transformed from “passive

and invisible” individuals into an “active and connected” group, who are expecting retailers and suppliers

to understand and provide solutions to their particular needs.


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This expectation is particularly prevalent amongst consumers who have grown up with technology, referred to as Generation Y or Millennials, who share a great enthusiasm for integration of digital technologies into their grocery shopping experience (Nielsen, 2015). There are today approx. 1.3 million members of Generation Y consumers in Denmark (Appendix 1: Danmarks Statistik). They were born between 1983 and 2000 and are today 17-34 years old, which means they are at the beginning of their careers and starting their own families. This generation will shape our economy for many years to come, so the retailers need to understand their digital consumer behavior and take this into consideration while creating their retail strategy.

The implementation of digital technologies in FMCG industry is especially visible outside of Denmark.

Amazon has launched checkout-free store in Seattle open to Amazon employees earlier this year, where they can test the new grab-and-go shopping experience before it openes to the public. Walmart’s newest project is to offer their customers free, same-day online grocery pickup. Walmart stores offer customers the possibility to order groceries online and pick them up in-store (Howland, 2016).

Target, the second largest grocery retailer in the U.S, started to implement IBeacon technology in 50 of its stores that locates smartphones or tablets and send them offers, discounts or contextualized information depending on customer localization (Chaleil, 2016). These examples show the digital innovation occuring in the FMCG industry, and demostrates that retailers that do not wish to get left behind, should embrace these new opportunities.

Technology in itself is not enough, retailer’s competencies and efforts they make in the implementation process are crucial to make the best use of the opportunities that technology creates. Many retailers are still struggling to find the best way of implementing the newest technologies to enhance their retail concept, as well as combining online with offline store shopping in order to create a consistent brand experience. The decisions of launching a new technology is associated with substantial expense and risk, hence the retailers must be sure, how relevant it is to their customers, as well as how technology-ready their customers are.

The usage of digital technologies in the Danish FMCG industry is not so extensive as in other countries

(Jan Overgaard, Interview 2017). This however may change soon, as the Technological Institute has

planned to build a demo-physical store ready in November 2017, where they will collect and demonstrate

the newest technologies such as RFID tagging of goods, bluetooth, intelligent cameras, iBeacons and


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acoustic audio sensors. The leader of the project, Jan Overgaard sees a need for a type of demo store that will help Danish retailers gain a better overview of the technological solutions on the market in order to compete internationally (Overgaard, 2017).

1.2. Purpose of Study

Innovation in retail technology, both inside stores and virtually, is one of the major external forces that has an impact on the future of retailing. This master thesis will therefore focus on potential impacts of innovative digital technologies on consumers' grocery shopping experience, as well as uncover the barriers to implementation of more technology-driven solutions. The empirical study in the form of focus group (henceforth abbreviated as FG) interviews with consumers and individual interviews with the representatives of grocery retailers in Denmark, will help to establish how ready the Danish customers are for more technology-driven solutions in their shopping experience. Furthermore, the thesis will analyze the effect of different technologies on consumers' shopping experiences and on the Danish FMCG industry in the future. This master thesis should be of interest, not only to academics in the fields of retail marketing, branding and retail technology, but also grocery retailers that should be aware of how consumers perceive new technologies in their grocery shopping experience. Since the thesis also contains the retailers’ point of view, the suppliers of technological solutions can learn how Danish grocery retailers perceive RFiD, “Just Walk Out” and Mobile Apps technology.

1.3. Problem Statement

Based on the above introduction, the problem statement for this research study is formulated as follows:

How can advanced implementation of digital technologies in the FMCG industry influence consumers’

shopping experience and what effect will this have on the Danish FMCG in the future?

In order to help answer the problem statement, the following research questions will be addressed:

What digital technologies are trending in FMCG industry and what technologies are the Danish grocery retailers investing in?

What are the consumer attitudes and perceptions towards using more digital technology in their grocery shopping?

What opportunities do the digital technologies create for retailers and for customers?


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What are the barriers to the implementation of more technology-driven solutions in the FMCG industry?

1.4. Delimitations

Due to the magnitude and timeframe of this master thesis, certain areas have been delimited. First, the thesis is delimited to the Danish FMCG market. This market is chosen because of author’s interest in the market as well as the accessability to conducting FGs interviews and individual interviews with Danish grocery retailers. However, the author finds it important to underline that some theoretical sources are based on branding or retailing in general. These theories are therefore applied with grocery retailing in mind. Moreover, the technologies analyzed in this thesis are RFiD technology, Amazon’s “Just Walk Out” technology and Mobile Apps. The author is aware that there are other technologies that also might have a significant impact on consumers’ shopping experience which could become a subject for further research. Another delimitation is the location parameter in Retailer’s Parameter Mix (Levy et al, 2014) which is also a crucial attribute for shoppers in choosing their grocery store. However, location parameter can’t be directly influenced by technology, which is why it will not be discussed in this thesis.


2.1. Research Strategy

A qualitative research strategy is chosen as the most appropriate for this thesis. Qualitative research usually emphasizes words rather than quantification in the collection and analysis of data (Bryman &

Bell, 2015). By choosing a qualitative research, the aim was to achieve a deep understanding in

consumers’ thoughts and attitudes about technology usage in grocery shopping in general, how is their

grocery shopping experience and how can technology be a part of that. Furthermore, it was important to

find out about their opinions about the presented technology solutions and how according to them an

optimal grocery shopping experience would look like. A qualitative research method gave the

opportunity to reach answers and opinions that are not measurable and provide answers that are deeper

and contains in-depth insights into the participant’s thoughts. The objective was therefore not to

generalize the results, but to achieve a better understanding of the consumer’s attitude and perceptions

towards more implementation of technology in grocery industry.


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2.2. Research Philosophy

In the light of the problem statement, an interpretivist approach is chosen including qualitative data such as FGs and individual interviews. The purpose of the interpretivist approach is to achieve an understanding of the social world through an examination of the interpretation of that world by its participants (Bryman & Bell, 2015). The knowledge is gained through the empirical data and is characterized by own interpretations of the participants’ subjective thoughts and meanings. Theory is in this research something that emerges out of data collection and data analysis, which indicates the inductive approach. Researcher is not imposing any predetermined ideas, but rather tries to uncover inherent patterns (Bryman & Bell, 2015). Moreover, the data interpretation is influenced by the researcher and therefore objectivity is impossible to achieve.

2.3. Method Choices

The empirical research in this thesis consists of two FGs interview and four semi-structured interviews, where one was conducted with an expert on digitalization from Technological Insitute and three of individual interviews were with the representatives of the Danish grocery retailers – Dansk Supermarked, Coop and Dagrofa. In the following, the method choices will be explained further.

2.3.1. Focus group interviews

The purpose of FG interview was to get a deep understanding of the consumers attitudes and perceptions towards technology-driven solutions in grocery shopping in order to find out how technology-ready they are. The author was particularly interested in the interactions and contradictory responses of representative consumers in order to understand their attitudes towards the presented technologies and a FG format supports that more. The main advantage of FGs is the possibility to observe a large amount of interaction on a topic in a limited time. Moreover, interesting issues can be revealed in the participants’

interactions e.g. through discussion, questions, various experiences, arguments etc. (Bryman & Bell, 2015). In comparison to individual interviews, the main ability of FG discussions is to uncover the direct similarities and differences in the participants’ preferences and experiences with digital technology and its implementation in grocery shopping. Conducting individual interviews with each interviewee would result in analyzing and gaining conclusions from single statements based on a single person’s opinion.

FG are limited to only verbal behavior and consists of interaction in the group, and because of the

discussions are managed by the moderator, the limitation is that the researcher can never be sure of the


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naturalness of the interactions (Morgan, 1997). Moreover, the fact that the researcher creates and directs the FG makes the participants less naturalistic than if it was a participant observation, which can create uncertainty about the accuracy of participants’ statements. The way, in which the author tried to secure the accuracy of the participants’ opinions was by being flexible and not disturbing the conversation dynamics too much, as well as creating a comfortable atmosphere that encourage the participants to share their views and beliefs.

Focus Group Format & Process

In order to increase the reliability of the research and to uncover the attitudes and perceptions towards technology-driven solutions in the grocery industry amongst various groups of consumers, the choice was to conduct two FG interview. The first FG consisted of younger consumers "Generation Y", born between 1983-2000 (17-34 years old). The next FG consisted of the older consumers who have not been raised with technology as much as Generation Y. These participants represent Generation X (born 1965- 1979) and Baby Boomers (1946-1964). Dividing these consumers into two different age groups was the main segmentation criterium to find out the differences and similarities in their opinions and experiences within technology usage in grocery shopping. The homogeneity of age within the FG should ensure that the participants feel comfortable with talking to each other, as well as an ability to understand each other’s experiences and to relate to them. In addition to the age requirement, all the participants must be living out of their familiy home and has experience with grocery shopping. The FGs were mixed in terms of gender, which created a good dynamic and ensured that both feminine and masculine opinions can be analyzed.

The FG approach was direct, since the topic of the FG interview was revealed already when selecting the candidates and therefore obvious to the participants on the day of the interview. By revealing the topic of the interview when asking the participants to join, the author ensured that the participants felt comfortable knowing what the FG would be about. On the other hand, the participants weren’t informed about the process of the interview and of specific themes in order to make sure that their responses were not influenced and that their creativity and open-mindedness was not constrained.

The FG interviews took place in an independent office meeting room with circled seatings to foster an

intimate and comfortable environment and a willingness to discuss. The participants agreed with a

recording of the interview and everyone was positive about using the transcribed discussions in the thesis.


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Both FGs consisted of 6 participants with different educational backgrounds. The participants from the younger FG didn’t know each other previously, whereas there were some members of the “older” FG that knew each other. The FG has shown that participants with some familiarity to each other was not a problem as it eased the mood, thus creating a comfortable atmosphere for respondents. In each FG, there were one or two participants that were more passive than the others, where the moderator as well as some of the other participants tried to get the respondent to speak more and elaborate on his/her opinions. The two-two activity at the end proved to be a success in terms of participation, as working in a smaller group makes also the rather passive participants be engaged.

When developing interview questions it was emphasized that they will be formulated in everyday language, this supports clarity and detailed answers from the participants and supports validity (Kvale &

Brinkmann, 2009). At the beginning of the FG, it was emphasized and recommended to speak freely and that all opinions and perspectives were equally important and welcomed. Each FG took approx. 2 hours with approx. 15 minutes break in between. The structure of the FG interviews can be divided into the following parts (See Appendix 2 for details):

1) General introduction and motivation for the research 2) Presentation and warm up question

The participants are asked to present themselves and to tell about their typical grocery shopping

3) Video about RFiD technology

A youtube video called “The Future Store”


is shown to the participants, where the most relevant features of RFiD technology are presented. The sequences about inventory management and backoffice activities were not shown to the FGs, as these consider the retailer’s perspective.

4) Thoughts and discussion about RFiD and the particular RFiD features 5) Video - Amazon Go

The video is called “Introducing Amazon Go and the world’s most advanced shopping technology”

on Youtube.


6) Discussion about Amazon Go concept

1 https://www.youtube.com/watch?v=rBXJ9Razofw

2 https://www.youtube.com/watch?v=NrmMk1Myrxc


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The participants shared their experiences and thoughts on mobile Apps and discussed the usage of these in their grocery shopping experiences.


Two-two discussions about “The Future Grocery Experience” their wishes and suggestions

The participants sat working in pairs, where they thought of and discussed their ideas about a future grocery shopping experience. Their wishes and suggestions were later presented to the moderator and the other pairs in the room.

2.3.2. Individual interviews

Besides two FG interviews, 4 individual interviews were conducted in order to answer the problem statement. Individual interviews are the dominant technique in qualitative research. According to Steinar Kvale (2007) the qualitative interview is “a construction site for knowledge (..) an interview with the

purpose of obtaining descriptions of the life world of the interviewee with respect to interpreting the meaning of the described phenomena” (Kvale, 2007, p. 7-8). The individual interviews are a siginificant

part of this thesis, since they provide us with the knowledge and the explanation on how the interviewees experience the problem statement, which is the focus of this thesis.

The designed interviews were semi-structured, where topics and main questions are defined in advance, but there is room for deviating from the interview guide when an interviewee brings up something interesting (Justesen & Mik-Meyer, 2010). It was important to let the experts elaborate as much and as freely as possible so that their expertise and passion for the topic would be expressed and transferred to the interview. The interview guides were constructed on prior research within the problem statement and the research about the interviewee in order to get a deeper insight into retailers’ recent activities. The interviews are considered to be very useful data material and add reliability to the thesis.

Three of the interviews were conducted with the aim to get three independent views on digital technology

and its opportunities and challenges from representatives of the three grocery retailers in Denmark. The

purpose for these interviews was also to come closer to understanding of why some of the presented

technologies (e.g. RFiD) are not yet implemented in Denmark and to find out, which technologies are

Danish grocery retailers investing in instead. The choice of semi-structured interviews was shown to be

effective in gaining rich knowledge, as for instance the pre-determined questions have considered the

popular technologies such as RFiD and Mobile Apps, but if the interviewees named other technologies


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that they are working on and it was naturally for the interviewer to investigate deeper and to follow up on new emerging issues.

The representatives of grocery retailers in Denmark are the following:


Toke Lund: Head of Digital Growth Center at Dansk Supermarked


Simon Færch: Head of Digital Product Innovation at Coop


Per Ahlmann Andersen: IT Director, CIO at Dagrofa and member of the board at GS1 Denmark

A more detailed presentation of the interview persons can be found in Appendix 4. All three interviewees took approx. 30 minutes, the interviews with Toke Lund and Per Ahlmann Andersen were conducted through Skype because it was more convenient for the interviewee, as well as to the interviewer, since Dansk Supermarked’s headquarters is located near Aarhus.

2.3.3. Expert interview

The last individual interview was with an expert in digitalization and Internet of Things, Section Manager in Digitalization and Logistics at Teknologisk Institut, Jan Overgaard. His name came to the author’s knowledge when researching the implementation of technology solutions in the Danish grocery industry.

The author found out then that the Technological Institute with Jan Overgaard as a leader of the project, has planned to build a demo-physical store in November 2017 that will collect and demonstrate the newest technologies on the market. It became clear that an interview with Jan Overgaard will give the thesis another perspective, since his opinion and experiences are not coming from a retailer’s perspective, but on the contrary, from an industry expert, whose work is to promote digital technologies among Danish companies. According to Overgaard, it is important to give the retailers a better overview of the technological solutions and explain them the benefits that can be achieved though technology implementation (Jan Overgaard, Interview 2017).

2.3.4. Transcription

Transcriptions were done with as much detail as possible, without rewording the participants’ responses

(Kings & Horrocks, 2010). Both FGs and individual interviews were conducted in Danish, as it was the

first language of all participants. Speaking in your native language gave the participants the chance to

speak as freely as they want, with the first words that come to mind. In this way the meaning of the

statements won’t be lost. The transcription was made in Danish as well (Appendix 8-14). The single


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quotes used in analysis and discussion are translated to English and this may create a risk of meaning distortion and thereby may challenge reliability (Kings & Horrocks, 2010).

2.3.5. Coding

In qualitative research, it is crucial to provide analyses that are rich and deep (Kings & Horrocks, 2010).

The analysis of the transcribed FGs and individual interviews followed the system presented by Kings and Horrocks (2010). Kings and Horrocks (2010) acknowledges the “theme” as referring to the patterns in the data that reveals something interesting to the research topic. Identifying themes consists of making choice about what is relevant to include and what to discard, as well as making the choice about interpreting the statements of the participants (Kings and Horrocks, 2010). The thematic analysis for this thesis has followed a hierarchical structure, where in the first stage the descriptive coding was developed.

The purpose of the descriptive coding was to describe in a more condensed manner what the participants have said. This has been done by highlighting and commenting on the interesting parts of the transcription. In the second stage, the interpretative codes were developed, which are clusters of the descriptive codes and the goal was to capture the meaning of what was being said (Kings & Horrocks, 2010). At the last stage, the overarching themes were created that grouped the interpretive codes under a theme that took foundation in the theoretical part of the project (Kings & Horrocks, 2010). The Mind Map technique was used to visually illustrate the findings. Mind Map is made for each of the analyzed technologies and presents both consumer and retailer perspective (Appendix 7).

2.4. Quality of research

In order to assess the quality of the research it is important to look into the criteria of validity and reliability. Validity measures whether the chosen method investigates what it is supposed to investigate.

Reliability refers to the consistency and trustworthiness of the research results and often answers the

question if the same result can be produced at another time and another researcher (Kvale, 2007).The

above presentation of the chosen methods is aimed to explain and define the thoughts behind this research

and make it more transparens for the reader in order to secure the reliability of the research. It is important

to mention that when conducting a qualitative interview, there is a concern that the FGs’ participants and

the interviewees’ statements that are based on their own views and perceptions may change over time,

which challenges the reliability. Moreover, when a different person will analyze the transcribed data, the

coding and the findings may not be similar, which creates another reliability concern. Validity is found


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to be obtained, because the methods used in this research have helped to answer the research question.

Moreover, there has been made an attempt to explain the choice of methods and theory and how these contribute to answering the problem statement. In order to ensure the validity of this research, the problem statement has always been taken into consideration throughout theory, analysis and discussion.


The purpose of this theoretical framework is to establish a solid theoretical foundation on which this research can be built upon. This theoretical framework is divided into three parts: Retail Brand, Building a Retail Brand and Retail Consumer Behavior. The first part will provide a deeper understanding of relevant retail brand concepts, the second part will consider the concept of differentiation and how a retail brand can position themselves in a competitive FMCG industry. The last part will explore the relevant factors of consumer behavior in the retail environment.

3.1. Retail Brand

Since many retailers are offering the same brands and all are competing for customer’s purchasing power, it has become even more important for them to build their brand and position themselves in the mind of the customers. Therefore, today’s retailers are not only distributors of manufacturer brands and a middleman in a distribution channel, but also can and should be perceived as brands themselves. This relates to specific tasks in order to manage and create a profitable business focusing on fulfilling customer needs, delivering the brand promise and building trust and relationships with customers.

According to Ailawadi & Keller (2004) a retail brand identifies the goods and services of a retailer and

it differentiates them from those of competitors. They acknowledge that retailers can be seen as brands

and that brand management principles can be applied to them (Ailawadi & Keller, 2004). Moreover,

according to Keller (2003) retailer’s brand equity is revealed in consumers responding more favorably

to its marketing actions than they do to competitors (Ailawadi & Keller, 2004). In Doyle’s (1989)

research paper on defining successful brands, a successful brand is “a name, symbol, design, or some

combination, which identifies the "product" of a particular organisation as having a sustainable

differential advantage”(Doyle, 1989, p. 78). "Differential advantage" means simply that customers have

a reason for preferring that brand to competitors' brands. "Sustainable", meaning an advantage that is not

easily copied by competitors.


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According to Keller (1993) and Hartman & Spiro (2005), both product and store brand equity are built on the brand/store knowledge consisting of the awareness and the image built over time. The concept of store images was introduced by Martineau already in 1958, and later on more researchers have paid more attention to the idea that consumers hold images of particular stores in their minds (Hartman & Spiro, 2005). The way the store image is defined in the customer’s mind is based both on the functional and psychological attributes of the store. The researchers have acknowledged the importance of store images as useful to both academia and business practitioners, and introduced a concept of store equity (Hartman

& Spiro, 2005). The concept was building upon the brand equity work that Keller (1993) has made in his paper “Conceptualizing, Measuring, and Managing Customer-Based Brand Equity”. The store equity can be defined as “the differential effect of store knowledge on customer response to the marketing activities of the store” (Hartman & Spiro, 2005, 1113). Differential effect is determined by comparing consumer responses to the marketing of a store/brand with the response to the same marketing of another store/brand. Differential effect is based upon the subjective perceptions of the store knowledge that customers may hold in their memory.

Store/brand knowledge is conceptualized according to an associative network memory model in terms

of two components: brand awareness and brand image (e.g. in the form of brand associations). Consumer

response to marketing is defined in terms of the perceptions, preferences, and reactions a customer is

having as a result of a specific marketing mix activity (Hartman & Spiro, 2005). Store knowledge is

crucial to this definition. As retailers can be perceived as brands themselves, it can be rewarding to make

use of Keller’s brand concept in order to better understand the concept. Using Keller’s brand arguments

store knowledge can be conceptualized in terms of two components: store awareness and store image

(Keller, 1993). Store awareness refers to the strength of the store name in memory. In other words, store

awareness is related to consumers’ ability to identify the store’s brand under different conditions in

sufficient detail to choose the store. There are two ways that a store’s brand can be identified - brand

recognition and brand recall. Recognition happens when the awareness of the brand reminds him/her of

a need. Brand recall occurs when a consumer remembers the store name as something that will satisfy

their need in a particular purchase situation (Percy & Rosenbaum-Elliott, 2012). It is crucial that a

customer is reminded of the store when he/she thinks about the store category, and it is important that

the store is included in the consideration sets when choosing a place to make a purchase. Moreover, store

awareness will influence the formation and strength of the store associations in store image by the


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consumer, which effects how easily the associations can be connected to store name (Hartman & Spiro, 2005).

Store image can be defined as a set of associations linked to the store’s brand that consumers hold in their memory. Brand associations are the other informational nodes linked to the memory of the store’s name. The strength, uniqueness and favorability of these associations can vary and these dimensions play an important part in creating positive or negative customer-based brand equity (Keller, 1993). Store’s brand associations can be classified into 3 categories: attributes, benefits and attitudes.

3.1.1. Attributes

Attributes refers to the descriptive features of a product or service. Many researchers have studied the

influence of retailers’ attributes on the retailer’s brand. These attributes can vary from researcher to

researcher e.g. Manolis et al (1994) finds the general attribute as being the merchandise itself, rather than

store appearance and service (Hartman & Spiro, 2005). Ailawadi & Keller (2004) find the significant


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attributes as being access (location), in-store atmosphere, price and promotion, cross-category product/service assortment and within-category brand/item assortment. Ailawadi & Keller distinguishes between cross-category (breadth) and within category assortment (depth) and acknowledges their influence on the store image separately. Whereas, Levy, Weitz & Grewal deals with the assortment of depth and breadth within one attribute. Furthermore, according to them, attributes that can influence store image as well as differentiate the retail brand are: price, location, assortment, customer service, store layout and communication mix (Levy et al, 2014). Retailers’ attributes will be examined further in the next part of the theoretical framework.

3.1.2. Benefits

Benefits refers to the personal values consumers attach to the product or in this research case, a store.

The most distinguished are functional benefits, experiential benefits and symbolic benefits. Functional benefits usually correspond to the product-related attributes, which are often linked to basic motivation such as Maslow’s physiological and safety needs. Functional benefits could also be linked to Percy &

Rosenbaum-Elliott (2012) negative motives, which covers the individuals’ desire for problem-solving and problem-avoidance. Grocery shopping can for many be considered as a task that needs to be solved in order to cover the negative motives e.g. get food or cleaning supplies etc. In opposition, the experiential benefits relate to emotions and what it feels like to be in the store and making the purchase.

The experiential benefits correspond to Percy & Rosenbaum-Elliott (2012) positive motives such as sensory gratification, where a consumer emphasizes the enjoyment of making a purchase. Symbolic benefits are more extrinsic benefits of the product in relation to the previous types of benefits. They are referring to the external attributes of the product and consumer’s needs for social approval or self-esteem (Keller, 1993, p. 4). The symbolic benefits of the product that are coherent with the consumers’ values will highly relate to their self-perception. In the next part of the theoretical framework, it will be examined how a grocery retailer can cover the experiential benefits of the consumer e.g. by focusing on the store atmosphere and thereby give consumers a unique shopping experience.

3.1.3. Attitudes

The last form of brand associations are brand attitudes. Attitudes have a pervasive impact on consumer

behavior, as they have a motivational quality which can push a consumer towards a behavior or drive the

consumer away (Schiffman et al, 2008). Attitudes are not directly observable but must be inferred from

what people say and what they do. Schiffman et al (2008) defines an attitude as being “a learned


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predisposition to behave in a consistently favorable or unfavorable way with respect to a given object”

(Schiffman et al, 2008, p. 248). Attitudes are learned, which means that these can be formed based on previous experience with the “object” itself, by exposure to advertisement or by hearing word-of-mouth from others. The “object” of attitude can be broadly interpreted e.g. product, brand, service offering, retailer, marketing medium etc. Attitudes can also be assumed to be consistent, as we can expect consumers to act accordingly to their attitudes, when they are free to act as they wish (Schiffman et alt, 2008). However, it is important to mention that circumstances often can disable a consumer from being consistent with his/her attitudes. For instance, a matter of affordability can prevent a consumer from being true to his/her attitudes. Events or circumstances can influence the relation between an attitude and a behavior, which can cause consumers to behave inconsistently in relation to their attitudes (Schiffman et al, 2008).

3.2. Building a retail brand

In order to differentiate themselves from competitors and create customer loyalty every brand must be built on a strong foundation of brand identity. A strong brand identity must have both functional and emotional characteristics and consists of three pillars, which are also the same for a manufacturer brand.

First pillar, a clear and differentiating brand position is needed. Brand positioning is the mix of the

functional and tangible attributes that a retail store has to offer to the consumer. Brand personality is the

second pillar and is strongly connected to the emotional characteristics of a retail brand. The last pillar

is brand communication, where a retail brand consistently must inform the consumer about its attributes

and personality (Floor, 2006). These three components of brand identity are the same for manufacturers

and retailers, but the implementation is strongly different as a retailer can use its physical store to build

the brand (Floor, 2006). This way, communication with the customer is much more direct and intense

than it is for a manufacturer. The retailers can benefit from their store because the store can help them to

determine the consumer’s desires and needs, since they are in directly contact. On the other hand, retailers

are also very vulnerable in their stores because every touch point within the store and encounter with

their customers is a moment of truth where the customers can either be pleased or disappointed. The

brand performance and brand promise must therefore be aligned. It is more difficult for a retailer because

they don’t have the same degree of “product” and quality control a manufacturer has and therefore the

chance that a mistake can happen within a store is bigger (Floor, 2006).


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Brand positioning, brand personality and brand communication are related to each other (see Figure 2).

When establishing a certain brand position, it is crucial to align the two other pillars accordingly, as well as secure consistency between all brand touch-points (Floor, 2006).

As mentioned previously, brand positioning is the mix of functional and tangible attributes, these attributes can be easily observed by customers in the store through the senses and a positive or negative image can be formed about the store’s brand proposition even though the customer may not

buy anything. The positioning won’t be enough and without strong attributes a retail brand can’t achieve success. In relation to positioning, it is also important to have a clear focus, which means that a retailer must choose which target group to focus on, as well as which attributes it wants to differentiate itself among the competition. The attributes must therefore match the values of the target group, as well as providing consumer benefits (Floor, 2006).

3.2.1. Brand positioning attributes

According to Floor (2006), it is important to have a clear focus on one attribute of positioning in order to make sure that the consumer knows what the retail brand stands for. This way a consumer will directly associate the brand with the attribute which will secure a more clear and strong store image. Focusing on one attribute, however, doesn’t mean that a retailer shouldn’t engage in other positioning attributes.

Every retail positioning should be a mix of Price, Assortment, Convenience and Store experience (Floor, 2006, p. 86). In this competitive retail environment it is therefore crucial to involve and remember all of the attributes. Today, offering a fair price is standard because consumers are very price-concious. This means that in order to succeed, a retail brand needs to combine the most important positioning attributes and make its brand unique (Floor, 2006).

Based on the above and on the review of the attributes that researchers find significantly important in

building store image, the author choose to further examine the following attributes: Price, Assortment,

Convenience, Store Atmosphere and Service. As a differentiated brand positioning is a significant part of

winning a strong position in the minds of consumers, each attribute will be uncovered according to their


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relevant aspects and elements. Moreover, it is relevant to learn more about the essence of these attributes in order to formulate a relevant themes and questions for FGs and individual interviews. Finally, understanding of these attributes will be a good foundation to later on analyze how digital technology can be used to improve them.


Price presents a monetary expenditure that the consumer must incur in order to make a purchase (Ailawadi & Keller, 2004). Price has a major influence on a customers' choice of retailers, therefore positioning on price can give a retail brand an important competitive advantage. Customers can choose from many different store concepts, but also among many different retailers on the market. Because of the internet and TV, consumers also have an opportunity to get information about the current price of a specific product and investigate price levels of different stores. This makes it an absolute precondition to have a fair price when being a grocery retailer in order to secure the position on the market. Customers choose the retailer that gives the most value for money. This value can be determined as the relationship between what benefits a customer receives from the product or service (the perceived benefits) in relation to what they have to pay for it as depicted in the equation below.

𝑉𝑎𝑙𝑢𝑒 =𝑅𝑒𝑐𝑒𝑖𝑣𝑒𝑑 𝑏𝑒𝑛𝑒𝑓𝑖𝑡𝑠 𝑃𝑟𝑖𝑐𝑒

Retailers can increase value and thereby achieve more revenue by either increasing the perceived benefits

that customers gain from purchasing their product or by decreasing the price (Levy et al., 2014). There

are two basic retail strategies: high / low pricing (HILO) and everyday low pricing (EDLP). The first

price strategy is characterized by offering customers frequent offers, which are often highlighted. The

advantages of this pricing strategy are that you increase profits, generate excitement and sell less popular

products. The disadvantage is that consumers expect frequent sales and they wait to buy the product until

it's on sale. EDLP strategy is typically used in discount stores where the chain has a fixed low price every

day. The price level of the products typically lies between the regular nonsale price and the hard discount

price. Advantages to this strategy are to assure consumers of consistent low prices and thereby the store

has less high advertising costs regarding weekly sales. Moreover, EDLP reduces high variations in

demand and ensures a more efficient and stable inventory management.


Page 22 of 196 Assortment

A assortment is mentioned in many papers with regards to retailing and store attributes, as a retailer’s key function is based on providing an assortment of products and services for consumers (Levy et al, 2014). Assortment is a major part of a retail strategy and one of the main components of a retail marketing mix (Koelemeijer and Oppewal, 1999). The choice of assortment is also a foundation that determines which type of retailer it is, for instance hardware market, grocery store, appliances store. The assortment can be characterized by different factors, but the most frequently discussed in the literature are quality and the depth and breadth of the assortment. Early definitions view assortment as the “total number of items which can be sold by a firm in given transactions” (Balderston, 1956, p. 175). Later on, assortment has been related to the selection (Berman and Evans, 2001).

Assortment has several roles in retailing. An economics perspective views the assortment as a link between supply and demand. According to Koelemeijer and Oppewal (1999), assortments are collections of goods and services that give consumers the opportunity to fulfil their various needs at the same time (Koelemeijer & Oppewal, 1999). Moreover, the assortment has also a strategic role as it is a key element of the retail marketing mix in attracting consumers into the store (Koelemeijer & Oppewal, 1999).

Consumers’ perception of the assortment being the breadth and depth offered by a retailer highly influences the image of the store. When a product assortment is broad, then there are more different shopping missions when a consumer will recall and consider going to the particular store (Ailawadi &

Keller, 2004). Depth of retailer’ assortment is also important to the store image and a significant driver

of store choice. Consumers with various preferences have an opportunity to find a great range of brands,

flavors and variants of products, which gives them flexibility and a greater chance to satisfy their specific

desire. Furthermore, they will gain a feeling of instant gratification when finding the specific item they

were looking for without a need to go to another store. However, offering an extensive assortment is

costly and can be inefficient, since typically not every item will be selling. On the other hand, too broad

and deep assortment can also tend to affect the consumers in a negative way. First of all, consumer can

feel overwhelmed and confused entering a store with too many different products which might make it

difficult for the consumer to navigate and find the needed item. Secondly, the amount of information

about too many alternatives may lead to cognitive overload and higher levels of uncertainty when

choosing an item (Ailawadi & Keller, 2004). This can actually have a negative impact on the overall


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purchasing experience and the likelihood of a completed purchase, therefore the right balance in assortment planning is crucial.


Time has become a very important driver for retailing. Consumers experience a lack of time because of the many responsibilities they have in their everyday life and they are concerned with minimizing their effort to get their need for groceries fulfilled. Therefore, visibility, accessibility and location are important factors for consumers when they are shopping. Convenience can become a differentiating attribute for a retail brand, as it can provide customers with a time-efficient and time-saving solution for their problems. Especially in replenishment and on the go shopping missions, convenience is a crucial driver. According to Floor (2006), a retailer can take different approaches to focus on convenience. First, to offer the customer accessibility to the store, website and/or customer service. Second, engage in efficient technologies and work flows that will optimize the speed and ease of the purchasing process.

Lastly, focus on offering service that will make the shopping process easier and more convenient for the customer (Floor, 2006). Convenience can be conceptualized into five dimensions consisting of: decision convenience, access convenience, benefit convenience, transaction convenience and post-benefit convenience (Trenz, 2015, p. 31).

A retailer that wants to focus on convenience as its differentiating attribute must secure that it is always easily accessible to its target group. 24 hours accessibility has become very common and because of the internet the ways of getting information and service are many. In regard to this, the concept of omnichannel retailing is being popular. When using an omnichannel approach a company is providing the customer with an integrated shopping experience that provides the customer with a seamless shopping

experience across all channels. This is a highly convenient way for the customer, as he/she can access the product and services on many devices, as well as at the physical store (Kongsholm & Frederiksen, 2014).

Store Atmosphere

Philip Kotler was one of the first researchers to acknowledge that consumers in their purchase decision-

making respond to more than simply the physical products or service offered (Kotler, 1973). Consumers

are influenced by the total product experience including the place and atmosphere where the product is

bought or consumed. Atmospherics is the “effort to design buying environments to produce specific


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emotional effects in the buyer that enhance his purchase probability” (Kotler, 1973, p. 50). The store's atmosphere, store layout and the presentation of the merchandise have a major effect on customers' shopping behavior, hence it offers the customer something more in the form of experiential benefits.

According to Ailawadi & Keller (2004), an appealing store atmosphere creates high potential for gaining differentiation among competitors as well as creating a unique store image. Especially for retailers that have a similar range of products, store atmosphere can be crucial to creating in-store personality that will stand out among competitors and will be positively remembered by the customer (Ailawadi & Keller, 2004). Floor (2006) claims that a store is a significant communicative tool with a lot of opportunities to a stimulate customer’s senses.

Appealing store interiors may attract customers to visit the store as well as affect the time that customers spend there, which in the end can influence how much money is spent. The store atmosphere also has a long-term effect on customer loyalty, since providing an enjoyable shopping experience can encourage customers to visit the store again (Levy et al., 2014). An offline retailer has an opportunity to differentiate themselves from their online competitors by providing customers with a multisensory experience within the store. In order to create a memorable atmosphere, the retailer can try to stimulate consumers' main sensory channels: scent, sound, touch, sight and taste. A good lighting system can help create visual attention, set focus on specific merchandise and set a specific mood of the customer (Levy et al, 2014).

A creative use of colors can enhance a retailer’s image and influence the atmosphere. Warm colors appear emotional, activating and gives energy. Cold colors have a calming, gentle and peaceful effect. Scent also has a large impact on customer’s emotions and mood and it can be easily used in grocery stores, as many of the stores now have their own bakery connected. This way customers can get stimulated and tempted to purchase (Levy et al., 2014).

Signage and graphics are also an important part of creating a store environment. They help consumers to

locate specific products, provide information about products and offers. Furthermore, they should

communicate the desired brand personality, but messages should not be long. When shopping, customers

are more product-oriented and looking for relevant information that is concise and clear (Floor, 2006).


Page 25 of 196 Service

Customer service is “the set of activities and programs undertaken by retailers to make the shopping experience more rewarding” (Levy et al., 2014, p.516). The service activities provided by retailers can increase the value customers receive both from merchandise or services that customers purchase. A customer service can be a strategic advantage because it can be difficult for competitors to copy and customers that receive a superior customer service tend to return (Levy et al., 2014; Parasuraman &

Grewal, 2000). Moreover, Parasuraman & Grewal (2000) also acknowledge the importance of service quality in regards to customer perceived value and later on to the contribution of increasing customer loyalty. According to them, many researchers focus on product quality and price as the main components of perceived value, but service is also a key driver of perceived value and more important, more difficult to imitate (Parasuraman & Grewal, 2000).

Customers very often develop their perceptions about the customer service based on their interaction with the store personnel. As they are humans it can be challenging to manage that everyone is providing an excellent service for the customers. A retailer should ensure that the employees understand how important their own behavior is in delivering their brand promise and make sure that the employees know, what the retail brand stands for. “A strong retail brand is one where the employees really live the brand values” (Floor, 2006, p. 316).

A retailer can offer two types of service approaches or a combination of them both. Standardized service that is consistently the same to all types of customers in order to achieve consistent service quality and avoiding additional costs associated with training employees in providing personalized service (Levy et al., 2014). Personalized service is less consistent and depends on the capabilities of the retailer or other service provider. In the past, when employees in the local stores knew their customers personally, it was easier for them to add a personal touch to their service. In the era of the internet, customers can get information and reviews of many products online, however the personal service is harder to provide (Levy et al., 2014).

Retailers increasingly provide technology-based self-service options to their customers (Anitsal & Flint,

2005; Levy et al, 2014). With these options, customers can provide service for themselves by using self-

service technologies offered by retailers, with or without the assistance of employees. Examples of

technology-based self-service options in retail are price checkers, self-checkout systems, electronic


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information kiosks, ATMs, self-scanners etc. (Anitsal & Flint, 2005). Self-service creates customer value by providing the customer with the convenience to check items themselves which many times is faster than waiting on an employee. Moreover, it gives them the opportunity to check out faster and in overall might lead to a higher perceived service quality (Antisal & Flint, 2005; Dabholkar, 1990).

3.3. Retail Consumer Behavior

This section will provide the basics of retail consumer behavior. The topic will be approached from a retail context to give a solid background for the research.

Retailing has always been highly interconnected with consumers’ behavior and market trends.

Consumers both influence and react to the environmental conditions in which retailing operates by making purchases which reflect and impact upon the dominant political, economic, societal and technological factors of the time (Berman & Evans, 2013).

Retailers recognize that greater understanding of customers can enhance customer satisfaction and retail performance. Understanding customer needs and buying behavior is therefore significant in formulating and implementing an effective retail strategy (Levy et al., 2014). Kotler (2012) writes that today we are living in a new economy where consumers have greater purchasing power than before, but also that they require far more than before and have access to more information. On the other hand, companies also can target their audience more precisely through available technology and media. This way, consumers receive stimuli through the company's marketing mix or other external stimuli created by the outside factors such as political, economic, societal or technological (Kotler et al, 2012).

3.3.1. Consumer and Shopper Journey Framework

The Consumer & Shopper Journey (C&SJ) represents an idea that the success of marketing and retail activities must be based on an understanding of how consumers and shoppers behave during their shopping journey. The framework identifies that it is important to gather consumer and shopper insights before planning marketing programs in order to positively influence the consumer and shopper behavior, as well as secure that the benefits are fulfilled (The Partnering Group, 2011).

The Consumer & Shopper Journey is a cycle that begins with current or aspired consumption behavior.

The consumption behavior is being trigged by a need for a shopping mission and shopping behavior (The

Partnering Group, 2011). Various stimuli can trigger the need to shop. It can be family or friends, as well


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as traditional advertising and social media. The need for shopping shaped by these influences creates a particular shopping mission. Shopping missions will be examined below in part 3.3.4. The particular shopping mission a shopper is on defines the next steps and choices in the shopping journey. The shopper can choose between bricks-and-mortar shopping and online shopping, as well as multi-channel shopping, which involves a shopper using a combination of bricks-and-mortar and online shopping before deciding on an actual purchase (The Partnering Group, 2011). The actual purchase decision is the choice of categories, brands and specific products. The choice is influenced by various point of purchase promotions, as well as price, product information, availability and customer service. The last phase in the Consumer & Shopper Journey is the actual experience with the product. The consumer decides whether the product met her/his expectations and has an opportunity to review the product and retailer online, as well as do it in a more traditional way by Word of Mouth by telling friends or family. Based on the outcome of this evaluation, the shopping journey repeats itself or is adapted based on the experience (The Partnering Group, 2011). When considering grocery shopping, the likelihood of consumers engaging in reviewing the products online will be lower than if it was shopping for clothes or electronics. Consumers tend to make a review when the purchase is more high-involvement and when the perceived risk of choosing wrong is higher. The different levels of involvement will be described in the next part.

Edelman (2010) emphasizes the importance of the last post-purchase phase in the shopping journey.

During this phase, consumers develop attitudes and potentially loyalty towards the brand and retailer based on satisfaction and enjoyment of their purchase and shopping experience. Focusing on consumer satisfaction could lead to loyalty while dissatisfaction can distort the bonding with the brand or worse (Edelman, 2010). According to Edelman (2010), if a consumers' bond with a brand is strong enough, they repurchase it without cycling through the earlier decision-making stages. The same can be applied to a retailer. An enjoyable and valuable experience will be a step further to creating loyalty and next time the consumer may go on a shopping mission, the retailer will be placed in the top of mind in the consumer’s consideration set.

The Consumer & Shopper Journey identifies five key questions that should be considered in order to

understand and influence the behavior and outputs that take place during the shopping journey. The key


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questions can provide the necessary insights that can be used to develop value propositions for target consumers and shoppers (The Partnering Group, 2011).

3.3.2. Involvement

Kotler et al (2012) defines consumer involvement in terms of the level of engagement and active

information processing that a consumer is investing when responding to a marketing-related stimulus

(Kotler et al, 2012). Consumers with a high level of involvement are more interested in the information

about the product and are likely to process a larger amount of cognitive information before making a

purchase. Highly involved consumers will therefore rather spend more time in a purchase situation

because of the concern of making the right decision. Consumer may be highly involved in a purchase for

various reasons, e.g. product may have significant personal relevance, may be expensive and/or is

attached to high perceived risk (Kotler et al, 2012). Furthermore, consumers who shop on behalf of others

and are accountable to others for their decisions may often have high involvement behavior (Puccinelli

et al, 2009). Grocery shopping for special occasions as guests visit can be considered as a shopping

mission with a relatively high level of involvement compared to an ordinary weekly grocery shopping.



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