Lisa Brüggen and Bram Foubert, both Assistant Professors at the Department of Marketing and Supply Chain Management, this year won the SERVSIG’s Best Services Article Award 2011 for their study “Extreme Makeover: Short- and Long-Term Effects of a Remodeled Servicescape”.
The award by the American Marketing Association Services Special Interest Group honoured the best article in Services Marketing for 2011.
Released in September 2011 in the Journal of Marketing, the study by Lisa Brüggen and Bram Foubert in collaboration with Dwayne Gremler, offered valuable insights of the effects of retail makeovers on customers.
Using survey and transaction data from a natural experiment in a fast-food chain, the authors investigated the effects of store remodeling. They tested:
– short- and long-term effects on customers’ cognitions, affect, and behavioral intentions;
– the moderating impact of spontaneous versus planned and group versus single-customer store visits;
– the differential effects on two store performance measures: average customer spending and store traffic.
The results showed that, in line with adaptation-level theory, short-term remodeling effects lose strength in the long run (i.e., after six months).
Furthermore, customers on a spontaneous trip or in a group tend to be more responsive to store remodeling than customers on a planned trip or alone.
Finally, whereas average spending increases in the short run and then returns to the baseline, store traffic initially remains unaffected and even shows a dip in the long run.
These findings imply that ignoring the time-variant character of remodeling effects, the nature of customers’ store visits, or the impact on store traffic may lead to inappropriate allocation of marketing resources.
Extreme makeover: Short- and long-term effects of a remodeled servicescape
Retailers spend millions of dollars each year to design, build, and furnish their establishments. Cutthroat competition prompts them to employ the store environment as a source of differential advantage.
For example, in 2007, Victoria’s Secret announced that it would remodel 80 percent of its stores over a five-year period. Even though existing research has shown that the physical store environment, also called “servicescape,” influences consumers, no research to date has systematically investigated the cross-time effects of a major store makeover on managerially relevant measures like perceived service quality or customer spending.
The authors study a remodeled fast-food store in Europe and compare its performance before and after the remodeling with that of a carefully matched control store whose servicescape remained unaltered.
The authors analyze survey data from 2997 customers and transaction data on average customer spending (weekly average amount per transaction) and store traffic (weekly number of transactions), up to a year after the remodeling.
The analyses yield several crucial insights with important managerial implications.
First, store remodeling has a positive short-term effect on cognitive measures, such as store image, and behavioral intentions, such as word-of-mouth communication. Also, consumers spend more shortly after the remodeling. Yet, interestingly, the short-term effects lose strength in the long run (i.e., after six months) and most measures return to their baseline levels as the remodeled store becomes the new frame of reference. If companies fail to realize this, they may overstate the total impact of the remodeling.
Laboratory test stores or pilot stores are only appropriate if possible remodeling effects are observed for a relatively long time period (about one year for the fast-food industry).
Second, the authors find that customers on a spontaneous trip or visiting with a group tend to be more responsive to store remodeling than customers on a planned trip or visiting alone. As a result, remodeling the servicescape may lead to greater effects in sectors in which store visits are spontaneous, or in locations where consumers come in a group rather than alone.
Third, whereas customers spend more in the short run after a store makeover, store traffic does not increase and even shows a negative dip in the long run. Therefore, companies should apply other marketing tactics (e.g., advertising) to stimulate consumers to come in and, once exposed to the new servicescape, spend more money.
Finally, to validate the cross-time effects, the authors analyze the revenue pattern of 18 stores, 6 of which were remodeled. In the short run, revenues increase by up to 3 percent but then return to the baseline.
For a franchise chain of some thousand stores, the short-term impact may translate into an incremental income of a few million Euros. However, for individual franchisees, who typically shoulder the lion’s share of the remodeling costs and want to recoup their investment within a reasonable amount of time, remodeling may appear less rewarding.
To align the interests of both parties, the authors recommend a careful allocation of remodeling costs.
Elisabeth Brüggen works as an Assistant Professor at the Department of Marketing & Supply Chain Management at Maastricht University. She holds an MSc in Economics and a PhD in Marketing from Maastricht University. In fall 2004 she was a visiting scholar at Arizona State University. She has published in the Journal of Service Research, the Journal of Interactive Marketing, and Marketing Letters, among others. Her research focuses on services marketing and Internet-based marketing research.