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1 NEW KID ON THE BLOCK: THE IMPACT OF DIGITAL SIGNAGE AS A RETAIL ATMOSPHERIC TOOL Charles Dennis 1, Richard Michon 2 and Andrew Newman 3 1 Brunel Business School, Brunel University Uxbridge, Middlesex, UB8 3PH, UK Phone: +44 (0) , Fax: +44 (0) charles.dennis@brunel.ac.uk 2 Ted Rogers School of Management, Ryerson University 350 Victoria Street, Toronto, ON, M5B 2K3, Canada Phone: Ext rmichon@ryerson.ca 3 Salford Business School, University of Salford Maxwell Building, Manchester, M5 4WT, United Kingdom Phone: a.j.newman@salford.ac.uk 1

2 NEW KID ON THE BLOCK: THE IMPACT OF DIGITAL SIGNAGE AS A RETAIL ATMOSPHERIC TOOL ABSTRACT Digital signage is a recent addition to the interactive retail atmospheric toolbox. The study evaluates the impact of digital signage, or captive audience network (CAN), on shoppers perception of the retail environment, positive affect, and approach behavior. The research was carried out in a quasi experimental shopping mall setting, comparing a before and after situation against another (unchanged) control shopping center, in order to demonstrate incremental effects. This research has substantial implications for practitioners as it clearly demonstrates from a before-and-after study that digital signage has a positive outcome, improving perception of the mall environment and influencing shopping behavior. The influence of digital signage is significant on actively employed shoppers as opposed to unemployed and retired patrons. Research findings and managerial implications are discussed. Keywords Shopping center, mall, digital signage, captive audience network, plasma screen, retail atmospherics. 2

3 INTRODUCTION According to POPAI (Point of Purchase Association International), more than 70 percent of purchase decisions are made in store. Why not try talking to shoppers while they are captive and in the mood to buy? This is what digital signage tries to achieve. Seeing the opportunity, retailers in the US (Albertson s, Target, Kroger), in the UK (Tesco, Asda, Sainsbury) and even in China (Carrefour) have launched digital signage networks. In addition to pushing merchandise, digital signage also generate hefty advertising revenues. Brand manufacturers pay anywhere from to $60,000 to $293,000 for a four-week campaign on Wal-Mart s TV network connecting more than 2,500 stores (The Economist, 2006). Digital signage is also part of the store atmosphere, contributing to the well-being of shoppers. Leo J. Shapiro & Associates, the firm that conducts store atmospherics surveys for Chain Store Age (Wilson, 2005) categorizes in-store TV along with music and product demonstrations among interactive atmospheric elements helping retailers building a competitive advantage. This paper examines the effect of a digital signage network on shoppers perception of the retail environment and approach/avoidance responses. The research takes place in a shopping mall environment. As outlined by Underhill (2000), the mall is a store of stores, and should enhance the perception of products just as in Theodore Levitt s (1980) augmented product concept. 3

4 CONCEPTUAL FRAMEWORK The Shopping Mall Many undifferentiated shopping malls have difficulty competing against new shopping centers that target fashion-oriented, value-oriented or time constrained shoppers (Kimball, 1991; Lowry, 1997; Reynolds, Ganesh and Luckett, 2002). Mall image, ease of spatial navigation (way finding), and entertainment stimulate shoppers visits. Consumers patronize shopping mall for motives other than mere convenience. Burns and Warren (1995) noticed shoppers need to express their uniqueness from other individuals as a possible cause for out-shopping to suburban malls other the one closest to their place of residence. Personal and shopping values also influence mall visits. Shopping frequency in malls is correlated with deal proneness, recreational motivations and demographic characteristics (Roy, 1994); and propensity for unplanned purchases along hedonist and utilitarian values (Chebat, 1999). Personal life values and ethnic identification also influence mall patronage (Shim and Eastlick, 1998). Shoppers also use malls for other activities than shopping. They patronize shopping centers for walking and exercise (Storer and Cyschoz, 1997, Hangland and Cimbalo, 1997), for public events and for non-commercial social activities (White and Sutton, 2001; Michon and Chebat, 2003). In many instances, the shopping mall is a social and recreation meeting place for youngsters and seniors (Graham, 1988). The shopping mall is considered as a public place for community development among non-shoppers (Lewis, 1990), for the construction of social links 4

5 (Aubert-Gamet and Cova, 1999), a city within a city (Backes, 1997) and as an ecological habitat for consumers (Bloch, Ridgway, and Dawson, 1994). The importance of the physical environment in a retail setting has long been recognized (Bitner, 1990 and 1992; Baker, Grewal and Parasuraman, 1994; Baker, 1998; Baker, Parasuraman, Grewal, and Voss, 2002). Yet, the research on the retail store environment has only rarely been extended to that of the shopping mall (for an exception, see Chebat and Michon, 2003). Until more research becomes available, the knowledge base must be extrapolated from existing research on store atmospherics. Retail Atmospherics The capacity to alter in-store behavior through retail atmospherics is acknowledged by retailers and researchers. In an exhaustive review of 60 experiments that controlled for parts of a store s atmosphere, Turley and Milliman (2000) observe that each study found some statistically significant connection between the retail ambiance and shopping behavior. The authors conclude that the impact of the store atmosphere on shopper behavior is clear. Retail atmospherics can be adapted to enhance the likelihood of triggering particular shopping behaviors. They also observe that the studies in this area include a wide array and diversity of explained and explanatory variables. Turley and Milliman s paper underscores a wide spectrum of shopping behaviors that can be influenced in a wide assortment of retail formats. These include: manipulation of music styles 5

6 and tempos impact sales in supermarkets (Gulas and Schewe, 1994; Herrington and Capella, 1996; Milliman, 1982); impulse buying in department stores (Yalch and Spangenberg, 1990); waiting responses to waiting in banks (Hui, Dubé and Chebat, 1997); sales in wine shops (Areni and Kim, 1993; North, Hargreaves and McKendrick, 1999); and sales in restaurants (Milliman, 1986). Other examples of patron responses to retail atmospherics include increased sales due to effective exterior store windows (Edwards and Shackley, 1992); the effect of lighting on the number of items handled by shoppers (Areni and Kim, 1995); store layout on price perceptions (Smith and Burns, 1996); and merchandise arrangement on purchase intentions in a wine store (Areni, Duhan and Kieker, 1999). Apart from in-store behavioral response, retail ambiance influences a variety of shoppers emotions and attitudes: the effect of crowding on shopper satisfaction (Machleit, Kellaris and Eroglu, 1994); the mediating effect of the environment on the affective reactions of department store shoppers (Sherman, Mathur and Smith, 1997); the influence of color on furniture store displays (Babin, Hardesty, and Sutter, 2003; Bellizzi, Crowley and Hasty, 1983; Bellizzi and Hite, 1992); the impact of the general environment on store image of a card and gift store (Baker, Grewal and Parasuraman, 1994); and environment redesign on service satisfaction in a dental office (Andrus, 1986). Babin and Darden (1995) also observe that the effect of a store atmosphere might be mediated by a consumer s general shopping style thus producing various reactions from different segments of consumers. The idea of looking at a basket of environmental cues rather than a single cue at a time is fairly recent, and is clearly under-researched (Wakefield and Baker, 1998). Research issues 6

7 explain in part why global retail configurations have not been the objects of many studies. Baker mentions the difficulty and the expense of manipulating elements of the environment in a real store setting. Laboratory experiments become more affordable but certainly less realistic alternatives. As a relative newcomer to the retail environment, digital signage networks are now found in the marketing toolbox. So far, digital signage as a communication medium and digital signage as a component of the retail atmosphere have been neglected by research scholars (for an exception, see Newman and Dennis, 2006). The impact of digital signage on shoppers perception of the environment and shoppers responses falls within the environmental psychology paradigm (Mehrabian and Russell, 1974). Mall Atmospherics We hypothesize that mall atmospherics will not only contribute to building mall traffic, but also promote sales and motivate additional spending. Based on the environmental psychology paradigm (Mehrabian and Russell, 1994; Donovan and Rossiter, 1982), a shopping-congruent atmosphere is expected to put shoppers in a favorable mood, have them stay longer in the mall, and encourage them to spend more. Little is presently known about how consumers perceive or respond to a mall s environment. Studies have noted that the physical facility can have an impact on the shopping center s image (Nevin and Houston, 1980; Finn and Louviere, 1996). Bloch, Ridgway and 7

8 Dawson (1994) observed that while in malls, consumers undertake activities unrelated to the acquisition of goods and services that can be described as experiential consumption. Wakefield and Baker (1998) found that the physical environment of the mall generates an emotional response in shoppers and can positively influence both the excitement consumers feel and their desire to stay in a mall. Their research indicates that all environmental factors, with the exception of the ambient lighting and temperature factor are positively associated to excitement or desire to stay at the mall, or to both. To date, very few studies have been published on consumers responses to manipulation of atmospheric cues in a shopping mall. RESEARCH HYPOTHESES Environmental stimuli, one of which being digital signage, induce emotions that in turn influence approach/avoidance behavior (Donovan and Rossiter, 1982). Alternatively, Chebat and Michon (2003) suggest that the effects of atmospheric cues on shopper s emotions and behavioral responses are initially mediated by cognition (e.g. Lazarus, 1991). Irrelevant of the competing emotion-cognition (Zajonc, 1984) or cognition-emotion (Lazarus, 1991) theories, marketers can manipulate atmospherics to improve shoppers images of a location and increase spending (Turley and Milliman, 2000). The study posits that the effect of digital signage on shoppers affect and behavioral response will be mediated by cognition. The digital signage network is expected to enhance shoppers perception of the retail environment. In line with the principle of cognitive mediation 8

9 (Lazarus, 1991), it is expected that the digital signage stimulus will be a significant component of the mall environment: H 1 Digital signage providing information to shoppers will be positively associated with perceptions of a mall s environment. The influence of the retail environment on pleasure has been previously demonstrated in a retail setting. The perception of a pleasant shopping environment (Dubé and Morin, 2003) should elicit positive emotions such as pleasure (Ang, Leong and Lim, 1997) and arousal (Newman, 2002), and result in higher spending (Spies, Hesse and Loesch, 1997). Pleasure predicts shopping response consistently but the effect of arousal is not as clear-cut (Donovan, Rossiter and Marcoolyn, 1994; Newman and Nesdale, 2002). Few prior studies are available for malls (for an exception, see Chebat and Michon, 2003) so we therefore seek to confirm the relationship in the mall context. Thus: H 2 Favorable perceptions of the mall environment will positively influence shoppers emotions (pleasure and arousal) H 3 Shoppers positive emotions will impact on shoppers mall approach behaviors such as spending and time spent shopping. H4 The effect of digital signage on shoppers approach behaviors will be fully mediated by the perception of the mall environment and shoppers emotions. 9

10 Research propositions are summarized in Figure 1. [Insert Figure 1 here] METHODOLOGY Research Setting The quasi experimental research took place in the vicinity of two similar and comparable shopping malls in West London (UK), one being used as control. It was carried out in two phases, six months apart, before and after the introduction of a digital signage network in the mall under study. The role of the control mall was to neutralize the effects of other exogenous variables such as seasonality and validate measurement changes attributable to the introduction of digital signage. Changes in the test mall were compared against the control mall. This method improves validity by overcoming the serious flaw of standard before and after longitudinal studies possible changes in uncontrollable confounding conditions. With this quasi-experimental design, incremental changes in perceptions are measured more precisely by comparison with the (unchanged) control mall (Cook and Campbell, 1979). Participants living within a 6 mile radius from both malls were selected from various sources for adequate representation of people patronizing both malls. First, a random postal sample (n= 1,000 before and 1,000 after) obtained from a registered voters list was expected to 10

11 be representative of residents in the trading area. Second, a random sample from a permission-based list (n= 1,000 before and 1,000 after) targeted shoppers. Participants were offered a chance to win a shopping voucher worth $200 as an incentive to respond within five days. Finally, some 32 face-to-face questionnaires were administered in and near the two shopping malls. The responses total 389 usable questionnaires. Response rate was 8 percent from lists and 9 percent from mailing lists. Seventy-six percent of the responses were received back within three days of the first response arriving. Participants profiles of early and late responses were compared, showing no significant differences. The sample achieves a profile approximately matching that of a typical upper socioeconomic suburban mall with 70 percent females, median age of 44 years, 76 percent actively employed, and a median household income of $69,000. There are no significant differences between the before and after samples in key characteristics such as gender, age, socioeconomic status, income and whether earning vs. retired / not earning (see Table 1). [Insert Table 1 here] Models and Measurement Scales Two models are used to assess the effect of digital signage on shoppers perception of the environment and the subsequent behavioral response. Initially, ANOVA captured the change in shoppers perception following the introduction of the digital signage in the test mall. Observed 11

12 changes in the test mall (M) are adjusted for any change in the control mall (C) (e.g. Cook and Campbell, 1979): (M t M t-1 ) (C t C t-1 ) > 0 For measurement purposes, the equation was algebraically modified to: (M t C t ) (M t-1 C t-1 ) > 0 The next step investigates if and how digital signage influences shoppers positive affect and approach behavior. This is done through a latent path SEM model using AMOS (Arbuckle, 2006). Whilst it might be argued that our H 2 and H 3 have previously been tested in retail settings, the SEM analysis illustrates mediation and the indirect effects of the digital signage on shoppers emotional and behavioral responses. Four scales were used in this study: shoppers perception of digital signage, perception of the mall environment, positive affect, and approach behavior. All scales are taken from the literature and are based on multiple-item measurements. Scales were first subjected to exploratory factor analysis before being re-screened through confirmatory analysis and introduced in the structural model. In accordance with Bollen (1989, p. 244) and Kline (2005, p. 314) a limited number of the latent variable indicators were kept in the path analysis. Table 2 outlines the measurement scales with selected items, alpha coefficients, factor loadings and sources. Latent constructs were used in two different ways. First, the before and after comparisons between the test and the control malls were derived from factor scores and 12

13 subjected to ANOVA (Table 3). Second, the relationship between latent variables representing shoppers perception of the mall environment, positive affect, and approach behavior was investigated in a path analysis (Figure 2). [Insert Table 2 here] RESEARCH FINDINGS Digital signage has a positive direct effect on income earning shoppers perception of the mall environment, F (1, 292) = 6.078, p= 0.014; affect, F (1, 292) = 5.089, p =.025; and shoppers approach behavior F (1, 292) = 4.944, p =.027. This positive effect is not significant with unemployed or retired shoppers (Table 3). [Insert Table 3 here] The latent variable path analysis outlines the relationships between the environmental cue (digital signage) and shoppers response (Figure 2). The SEM exhibits an excellent goodness of fit (χ 2 = 83.80, df = 59, CFI =.99, RMSEA =.033). Digital signage has a significant direct influence on shoppers perception of the mall environment (Standardized Coefficient =.18, C.R. = 3.45). Shoppers perception of the mall environment influences shoppers emotions (Coefficient =.78, C.R. = 13.84). In turn, shoppers affect impacts approach behavior (Coefficient =.75, C.R. = 12.86). 13

14 Testing for mediation (Baron and Kenny, 1986), the SEM shows that the influence of digital signage on shoppers emotions is totally mediated by shoppers perception of the mall environment. Similarly, the effect of digital signage on shoppers behavior, as outlined in the ANOVA, is mediated by shoppers perceptions and emotions. The structural model does not hint at the possibility of any partial mediation. All research hypotheses are supported. [Insert Figure 2 here] DISCUSSION The S-O-R paradigm is not new to retail atmospherics. Ample research has shown that environmental cues will impact shoppers cognition and emotion, and trigger some approach behavior (Turley and Milliman, 2000). What is new here is the advent of digital signage or digital communications networks the retail atmospheric toolbox. Plasma screens have a dual usage: they convey information when and where shoppers are in the mood to shop, and they have a strong entertainment component. The research shows that digital signage is particularly effective with actively employed shoppers, shoppers who have jobs and families, and are generally in a hurry to complete their shopping chores. Digital signage may facilitate their tasks and inform them about product offerings and promotions. These shoppers might also be more familiar with plasma screen technology. On the other hand, digital signage does not enhance the perception of the mall environment among non-working or retired patrons. The latter are already spending time in the 14

15 mall for other purposes than shopping, namely entertainment or passing time (e.g. Bloch, Ridgway and Dawson, 1994). It might be said that the digital signage in this mall is used to convey commercial information (prices, promotions and specials) and has no or little entertaining effect on those just spending time in the mall. Mediation testing (e.g. Baron and Kenny, 1986) has been carried out through the combined use of ANOVA and SEM. The ANOVA (Table 3) measures the unmediated effect of digital signage on emotions and shoppers approach. The latent path analysis model illustrates that the impact of digital signage on shoppers emotion and approach behavior is fully mediated by shoppers perception of the mall environment and positive affect (Figure 2). Direct and indirect standardized effects on approach are shown in Table 4. The total effect of digital signage on approach behavior (.11) and emotions (.15) is significant. [Insert Table 4 here] The impact of the digital signage network in the mall was cross-validated by traffic counting. Twelve months before the installation of the digital signage network traffic tracking was undertaken. Footfall traffic (vs. the benchmark) was 6.1 percent higher after the installation of the digital signage compared with the same period in the previous year. 15

16 MANAGERIAL IMPLICATIONS AND FURTHER RESEARCH This study introduces the new kid on the block of retail atmospherics: digital signage. The quasi-experiment setting outlines that this new atmospheric cue significantly enhances the perception of the mall environment and approach behavior among actively employed busy shoppers. Results are in line with expectations that the cognitive construct of mall perception mediates the effects of stimulus-emotion links. The results demonstrate that customer information strategies can be useful and effective for mall managers, with particular regard to the role of the digital signage. In this research, the shopping center initially appealed more to seniors and non-employed shoppers than to the higher spending ones who are actively employed. After installation of the digital signage network, evaluations of shoppers with employment income matched those of the non-earning segment. The results can be used to model the likely effects of similar changes at other malls. Manipulating a stimulus such as digital signage can increase shoppers approach behavior towards a mall, thus acting as a marketer-controlled atmospheric stimulus variable. In a parallel with cognitive mediation theory, the effect of the stimulus is not direct but mediated by the perception that shoppers hold of the environment. 16

17 Pleasant emotion is the dominant influence on approach behavior but the mall environment is an antecedent to positive affect. The before and after results suggest that the digital signage stimulus enhances shoppers evaluations of the retail environment. Shoppers assessment of their environment triggers positive emotions which in turn influence shoppers approach behaviors, including additional spending. The results support the S-O-R paradigm from environmental psychology: Stimulus Perception Emotion Response. Future research may extend the generalization of digital signage to other retail situations. 17

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23 Figure 1: Research Hypotheses H 4 Digital signage H 1 Perception of Mall Environment H 2 Positive Affect H 3 Approach Behavior The effect of digital signage on shoppers approach behavior will be mediated by shoppers perception of the mall environment and shoppers resulting positive affect. Figure 2: Latent Path Analysis Welcoming atmosphere Layout Happy Satisfied Spending Items Bought.70 (13.35).73 (14.38).81 (NA).86 (19.00).72 (13.84).66 (12.30) Digital Signage.19 (3.45) Perception of Mall.78 (13.84) Affect.75 (12.86) Approach Behavior.72 (13.68).85 NA.82 (18.12).78 (17.00).83 (NA).64 (12.01) Signage Poor/Good Signage Dislike/Like In-Place/ Stylish Nice place to be Contended Stimulated Time Shopping Freq. of Visits Standardized coefficients (Z-value) Method: ML, Chi-Square = 83.80, df = 59, CFI =.99, RMSEA =

24 Table 1: Sample Characteristics Before digital After digital Overall signage signage Percent female Age: percent up to 59 years Percent higher socio-economic employment: managerial, administrative, professional, supervisory or clerical Income: percent over $ Percent earning Table 2: Measurement Scales Perception of Digital Signage Perception Mall Environment Positive Affect Approach Behavior Explained Variance 15.40% 24.30% 25.50% 14.30% Alpha Affect (Mehrabian and Russell, 1974) Melancholic / Contented 0.82 Unhappy / Happy 0.81 Dissatisfied / Satisfied 0.86 Unstimulated / Stimulated 0.78 Perception of Mall Environment (Dennis, 2005, McGordrick and Thompson, 1992) Nice place to spend time 0.81 General layout 0.81 An 'in-place' to go (stylish) 0.80 Welcoming atmosphere 0.79 Perception of Digital Signage (Newman and Dennis, 2006) Digital signage very poor/very good 0.95 Digital signage dislike or like very much 0.94 Approach Behavior (Adapted from Donovan and Rossiter, 1982) Spending (non-food) 0.72 Time spent shopping 0.83 Number of items bought 0.66 Frequency of visits 0.64 Based on five-point questionnaire scales (except for Approach: scale variables) 24

25 Table 3: Impact of Digital Signage Variables Before After df F p Perception of environment (1, 292) Affect (1, 292) Approach (visits, spending, items bought and time spent shopping) (1, 292) Before n=127 vs after n=167, income earning shoppers only Table 4: Standardized Total Effects Digital signage Mall environment Pleasant emotion Mall environment 0.19 Emotions Approach behavior