PhD News. Modeling the Impact of Marketing Drivers on Consumer Behavior. An Example from the Fast-Moving Goods Category

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1 PhD News 83 PhD News Modeling the Impact of Marketing Drivers on Consumer Behavior. An Example from the Fast-Moving Goods Category Iluta Skruzkalne Presentation of Doctoral paper took place at the Faculty of Economics and Management of University of Latvia in Riga, Aspazijas Boulevard 5, on 13 th of May, 2008 The Doctoral paper is available at the Library of the University of Latvia in Riga, Kalpaka Boulevard 4 This dissertation received a University of Latvia Award for Achievements in Science in category Outstanding dissertation in social, humanitarian and pedagogy sciences The aim of this work is to study the impact of marketing drivers on consumer behavior and brand value in the fast-moving goods category. In dynamic, competition-saturated markets, especially in conditions of shortage of financial resources, company managers continuously face the strategic problem of how to justify and assess growing marketing expenses, how to predict the future market success of products, services and brands, and also how to determine marketing effectiveness. Marketing effectiveness is the capability of a company, through use of the financial and intellectual resources at its disposal, to create products, services, and brands that arouse interest, attract and retain consumers, and that objectively result in market share indicators. In order to achieve the aim of the work, the author proposed the following research tasks: 1. study the scientific literature and summarize the conceptions of measurements of marketing effectiveness; 2. analyze econometric models of marketing effectiveness used in academic literature; 3. approve the applicable econometric model of the effect of marketing drivers on consumer behavior in the fast-moving goods category; 4. build and test a measurement scale suitable for the model of effectiveness of marketing drivers; 5. analyze drivers of marketing success influencing consumer behavior in the fast-moving goods category by using methods of econometric analysis; 6. analyze and model to what degree marketing drivers explain the brand choice of consumers; 7. using methods of econometric analysis, model brand possibilities to retain or risk losing consumers, taking into account the integrated effect of marketing drivers of several brands;

2 84 Baltic Journal of Economics 9(1) (2009) assess whether different brands have different marketing drivers and constituent elements influencing consumer behavior; 9. through use of multifactor econometric models of behavior, predict existing brand equity and the expected customer life-time value of potential consumers The model chosen by the author for approval (Return on Marketing, Rust, Lemon, Zeithaml, 2004) 1 is among the most progressive because it embraces a multi-stage model system, which uses the most significant indicators of marketing effectiveness brand equity, utility, and consumer lifetime value. With the help of this model it is possible to answer the research questions and model the effectiveness of marketing activities, by using both secondary data significant for a company or a branch, as well as primary data or data on consumer attitude and behavior. For the thesis the author proposed several hypotheses that were accepted for research (see Table 1). Table 1. Answers of empirical study to the proposed hypotheses Research hypotheses Results Hypothesis 1: All marketing drivers have a positive impact on the consumer s Accepted choice of brand Hypothesis 2: Integrated marketing drivers in the fast-moving goods category Accepted can explain consumers choice of brand Hypothesis 3: In low-involvement goods categories, brand equity can have a Accepted significant impact on the consumer s choice of brand Hypothesis 4: Consumer lifetime value can be determined in the fast-moving Accepted goods category Hypothesis 5: Customers who would buy the respective brand on the next purchases most often are regular buyers of the respective brand (who have bought the brand on the last purchase) Hypothesis 6: In the fast-moving goods category, consumer lifetime value increases with time Hypothesis 7: The average equity of consumers loyal to the brand is comparatively higher than the average equity of all consumers of the brand s category Hypothesis 8: Attitude and behavior of different consumer groups (according to the language used) do not significantly differ Accepted Accepted Accepted Neither rejected nor accepted Source: Empirical study carried out by the author in August-November 2006 by use of random sampling method Methods of statistical analysis are used in the study for data processing and analysis indicators of central tendency and variance, as well as methods of econometric analysis t-test (for testing of hypotheses), factor- and principal component analysis, correlation- and logit regression analysis, Markov chain probability determination model for different periods of time. 1 Rust R., Lemon K., Zeithaml V., Return on Marketing: Using Customer Equity to Focus Marketing Strategy, Journal of Marketing, Vol. 68, 2004 January, pp

3 PhD News 85 Patterns of Learning Organization Estonian Experiences Made Torokoff The public defence of this dissertation was on 30th of June, 2008, at the University of Tartu. Publication of this dissertation is approved by the Faculty of Economics and Business Administration, University of Tartu. The full version of the dissertation is available at > RESEARCH > Dissertations and The subject of this dissertation arises from the increasing role of organizational learning in optimizing an organization s capacity to respond more effectively to changes in the environment and the conditions of a knowledge-based economy. The objective of this dissertation is to identify the features of learning organizations, and to map and generalize patterns on the example of Estonian organizations. This dissertation is based on three published peer-reviewed research papers, including a thorough theoretical and empirical background of the subject, presenting various concepts of learning organization, and general methodology of exploratory approach. Application of Senge`s theoretical model has yielded various empirical models with different structures describing the features of the learning organization in a number of prior surveys. This general method ensured openness to various methodical approaches, results, and interpretations. The exploratary research approach was selected for studying Estonian organizations. To map the features of the learning organization in Estonian educational establishments and companies, several questionnaires were developed based on the five disciplines of the learning organization by Senge and the three-dimensional framework model of organization by Mets. Data obtained from these questionnaires were processed using factor analysis. The features of the learning organization are seen as patterns. When applying factor analyses to data from production companies, two distinct patterns emerged: managers patterns and workers patterns. By contrast, in the study of teaching staff in schools and employees in general education, the pattern of the learning organisation had three components, and the same occurred in a group of managers from production companies. None of the patterns fully correspondended to Senge`s model but the features of this model were represented at different strength levels in most samples. It thus appeared that Estonian

4 86 Baltic Journal of Economics 9(1) (2009) organisations are positioned between the learning (according to Senge) and non-learning organisation. The current study confirmed the earlier conclusions of many authors, including Senge and Pedler, on the versatile features of the learning organization; however, the current study, unlike others, emphasizes these three components first and foremost: creating a shared vision and team learning; the main process; and shared values. This result corresponds best to Mets` three-dimensional organization development framework model. The practical value of the study derives from its contribution to improvement of management practices and creation of further opportunities for achieving higher performance in these organizations. A primary result of the study is a unique tool in the form of a questionnaire for assessing learning organization in companies. The tool can be used by managers to identify current learning within the organization, to support purposeful planning of long-term learning systems, and to assist them in systematic analysis and management of the processes in the company.

5 PhD News 87 Sources of Knowledge Used in Innovation: the Example of Estonian Wood Industries Kadri Ukrainski Faculty of Economics and Business Administration, University of Tartu, 2008 Full version available at: This research explores the knowledge used for innovation taking Estonian wood sector firms as an example of a traditional industry. Theoretical concepts leading to the formulation of a framework for analysing this problem are found to be rooted in the resource-based theory of the firm, which sees firms as knowledge reservoirs, and in evolutionary economics, which sees innovation as an outcome of (path-dependent) knowledge production and use. In-depth analysis of the characteristics and determinants of knowledge is used in this study to identify relevant knowledge sources for innovation processes in Estonian wood sector firms. In doing so, the content and characteristics of knowledge used for industrial innovation are identified, as well as the different sources that carry the knowledge relevant for innovation processes in firms, and underlying factors. The specific features of knowledge used in wood sector firms have been brought out to develop empirical models describing the choices firms make when using different knowledge sources for innovation processes and empirically analyse the factors influencing choice of different knowledge sources. In addition, the complementarity and substitutability of knowledge sources in innovation processes are assessed. The results are applied in some policy simulations. As an empirical basis, both CIS 3 and CIS 4 data and interviews with industry managers are used. Sectoral differences are mostly found in the different relative importance of internal sources compared to external sources, but also in the relative intensity of the use of business vs. public sector research as knowledge sources. The specifics of wood-related sectors is mainly revealed in the close relationship between product and process innovation, the importance of architectural capabilities in firms, and the relevance of technological gatekeepers within the firm. Estonian wood sector firms have responded to changed competitiveness conditions in export markets, but also to increased labour cost pressure in the domestic market with intensified innovative activities and increased investment in new technologies. The strongest remaining barriers to innovation are lack of internal finances and lack of competent personnel, as well as high innovation costs. The overall intensity of knowledge use was identified as being lower regarding most innovation sources compared to the Finnish forest and wood cluster. Internal and external business sources predominate with similar intensity, but the use of R&D institutions and universities

6 88 Baltic Journal of Economics 9(1) (2009) as information sources was low, on the one hand presumably because of the low absorptive capacity of firms, and on the other because of shortcomings in research in Estonian universities in this field, and hence, weak potential for science-industry bridging in such low-tech sectors. The research conducted shows that core innovation processes (product and technological process innovation) for the wood sector are currently primarily embedded in business networks. Public sector actors are only participating in soft innovations and mostly in an extremely weak manner. Given the fact that the success of the sectors has primarily been in technological development and not so much in advances within the value chain; besides generally supporting networking for innovation, the public sector s role in this sectoral innovation system needs to be addressed. In addition, according to the leading firms, as the technological base achieves an international standard, it also becomes crucial how firms start to develop and advance technologies in use. They might be seriously constrained by factors such as lack of theoretical knowledge or testing facilities. The analysis also showed strong complementarity between knowledge sources. This result holds an important policy implication for developing a sectoral innovation system. It indicates the irreplaceability of different types of players in the innovation system (one cannot rely on supporting some actors while ignoring others). In the case of under-development of some actors, others try to fill these gaps, but with less success (because knowledge corresponds to their core competences).

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