does demarketing increase intention to retain and improve

International Journal of Arts and Sciences 3(2): 1 - 22 (2009)

CD-ROM. ISSN: 1944-6934 © InternationalJournal.org

Does Demarketing Increase Intention to Retain and Improve the Relationship? Focus on Customers’ Characteristics Munshik Suh, Pusan National University, Republic of Korea Jinwoo Ahn, Dong-Eui University, Republic of Korea Taeseok Rho, Pusan National University, Republic of Korea, Corresponding author Abstract: The purpose of this study is examining the customer response against demarketing stimulation. To verify why customers decide to exit, retain and develop the relationship with service provider, several moderating factors were selected from prior studies. The moderating effects of consumer factors such as attribution, access driver, and involvement on the relation between stimulation and response were investigated by conducting T-tests. Additionally, An Effect of involvement on access driver was also examined. We outlined implication for theory and practice and suggested research limitation and future research based on research conclusion.

Keywords: demarketing, relationship marketing, customer response

1. Introduction In recently, many organizations are trying to improve their profits by acquiring and sustaining customers based on the relationship-marketing concept. However, oversupply of products and services is becoming more intensified all around the world, and the cost of acquiring and sustaining customers has decreased organizations’ profitability. Thus, many firms pursue profit-centric management by conducting demarketing strategy rather than just enlarging the scale of the company. These movements of organizations could be considered as the realization of ‘true relationship marketing’ through sustaining good customers. To achieve this goal, reduction of unnecessary oversupply and elimination of customers who generate additional costs are required. These activities can be defined as profitability promotes demarketing, and it should be conducted with various efforts. The goals of organizations which are conducting demarketing could be explained in two ways; reduction of cost for relationship management for non-profitable customers, and retention of customers with low cost. In the case of retention of non-profitable customers, making them profitable should be an additional goal for a demarketing strategy. These kinds of demarketing activities seem to have purpose of efficient use of a firm's resources rather than managing demand in limited supply condition caused by a bad coin of business environment(Park 2004). Actually, restriction of amount on cash advance services for 'bad' customers is plentiful in the credit card industry. Even though many companies' primary purpose to conduct demarketing is reducing the cost for relationship management, the actual goal should be making low-profitable customers into high-profitable customers without any additional cost. In short, in the case of retention of customers who have lower-profitability, how a firm can make them productive could be an issue for both marketers and scholars. Thus, a serious examination of demarketing for the recovery of relationships with customers is needed to adopt the demarketing concept on this issue to change the paradigm of demarketing research.

Prior researches about demarketing have focused on the conceptual side or non-profit sectors including conceptual study(Kotler and Levy 1971; Cullwick 1975; Gorden 2006), and issues in the public sector(alcohol, smoking, abuse, environmental problem(Wall 2007; Edward, Louise, and Gianfranco 2009; Grinstein and Nisan 2009)). The focus of this research, however, is the actual application of demarketing stimulation in a profit-organization such as service differentiation, additional fees, changing in the ranks of membership to decrease costs for maintaining customers. So far, very little has been done in this direction. In brief, this study empirically examines the relationship between demarketing stimulation which is presented by a service provider and a customer's perception and responses. Due to customers’ responses against demarketing strategy depending on various factors, service providers need to understand adequate situations for their application of a demarketing strategy. To verify why customers decide to exit, retain, and develop the relationship with a service provider, several moderating factors were selected from prior studies. The moderating effect of consumer factors including attribution tendency, access driver, and personal involvement on the association between stimulation and response was investigated by conducting T-tests.

2. Literature Review

2.1 Demarketing 2.1.1 Definition of Demarketing According to Kotler and Levy(1971), demarketing is basically defined as: "....an attempt to discourage customers in general or a certain class of customers in particular on either a temporary or permanent basis." Demarketing is considered to be the reverse of marketing. The version of demarketing became a very hot issue in the early period of the 1970's especially with the well-known incident when supply of a variety of items became very limited. In general, demarketing may be intended to decrease demand either for a shorter period or for a particular market such as one that is considered to be less profitable than others(Kotler and Levy 1971). They also described "creative demarketing" as a solution for an oversupply situation. Furthermore, they emphasized that demarketing is not just an activity to eliminate demand, but an activity to manage demands which thereby increase profitability. Of course, although it is true that demarketing researches in a government or social context has been conducted based on the basic concepts of demarketing, considering the increasing benefits between companies and customers is an essential part of the demarketing. Therefore, profit organizations could improve their profitability through changes in the relationship caused by demarketing. In other words, it is possible that decreasing cost for relationship management and turning non-profitable customers into profitable customers. Since these could be included in the broad definition of demarketing, there is no reason to restrict the application of demarketing concept to a government or social context. In this research, we describe demarketing as enlargement for both organizations and customers through adequate demand management not limited to the suppression of demand in a relationship marketing context. Kotler and Levy(1971) identify three different types of demarketing such as general demarketing, selective demarketing, ostensive demarketing, and a brief definition is presented in Table 1. Among these concepts, this study focuses on selective demarketing to achieve our research purpose.

Table 1. Type of Demarketing[Kotler and Levy(1971)]

General Demarketing

General Demarketing occurs in situations including temporary shortage, chronic over-popularity, and product elimination. General demarketing is required when a company wants to shrink the level of total demand.

Selective Demarketing

Selective Demarketing, which is required when a company wants to discourage the demand coming from certain customer classes.

Ostensible Demarketing

Ostensible Demarketing, which involves the appearance of trying to discourage demand as a device for actually increasing it.

Source: Kotler and Levy(1971), "Demarketing, Yes, Demarketing," Harvard Business Review, Nov-Dec, pp. 74-80.

2.1.2 Researches related with demarketing Of special interest to marketers and marketing scholars is the effectiveness of demarketing(Grinsten and Nisan 2009). As we state above, demarketing first defined by Kotler and Levy(1971) in the 1970's and demarketing campaigns typically include Advertising, PR, and sponsorship(Deutsch and Liebermann 1985; Pechman et al. 2003; Wall 2005), which are considered to be traditional marketing efforts. However, empirical research on demarketing is scarce. Marketing scholars have studied demarketing primarily in the context of smoking(Andrews et al. 2004; Pechmann et al. 2003), drug use(Kelly, Swaim, and Wayman 1996), and energy conservation(Deutsch and Liebermann 1985; Kasulis, Huettner, and Deikeman 1981), often focusing on government, not business, demarketing(Gerstner et al. 1993). Almost all demarketing researches conducted so far deal with the public sector based on conceptual studies of demarketing, and these researches focus on general demarketing which is presented by Kotler and Levy(1971). Namely, there are few researches that concentrate on selective demarketing because it is considered as strategic method for profit organizations. In this paper, with the extension of the concept of selective demarketing we intend to focus on the changing of non-profitable customers into profitable customers and decreasing the cost of relationship management in the relationship marketing context. Also, there are little empirical test results, and it means that a practical application of a demarketing strategy has many obstacles. In conclusion, whereas conceptual, governmental, or societal researches have been the mainstream research related with demarketing, it is time to extend the scope of research for profit organizations, and an empirical approach should be conducted to add practical application.

2.1.3 Relationship Demarketing Companies should differentiate customers and have plans for interacting with, engaging, transacting, and satisfying them. With the development of CRM(customer relationship management), some companies identify their worst customers by name and by consideration such as contact history, RFM(recency, frequency and monetary value of purchase), demography, behavior profile, share of customer expenditure, and customer satisfaction measure(Gorden 2006). In companies where relationship marketing concepts are well developed and technology investments have made it possible to individualize customer

treatment, the opportunity exists to discourage the "wrong" customers from doing business with the company. Gorden(2006) defined this concept as relationship demarketing. According to his study, relationship demarketing(including de-emphasizing) target customers those who have low-profitability and low-strategic value. The customer portfolio that was described in his study is below (Table 2).

Table 2. Gorden(2006)'s customer portfolio

Source: “Relationship Demarketing: Managing wasteful or worthless customer relationship.”, Lan Gorden(2006), Ivey Business Journal, 2006, Mar/Apr Thus, empirical researches on the effect of demarketing are sincerely needed, because organizations are trying to raise their profitability by adopting the concept of demarketing and customer relationship management. Especially, in the situation where relationship marketing has a dominant position in a marketing paradigm, application of demarketing might be useful from the perspective of quality improvement in the relationship.

2.1.4 Marketing Mix(4P) in Demarketing To achieve purpose toward their customers, firms can deal with one or more factors that decide marketing strategy including reducing advertising or promotion cost, and changing price or product(Kotler and Levy 1971). Indeed, by changing conditions for product, price, place, promotion, marketing mix, demarketing strategy can be realized. Drawing on the demarketing mix stated by some researchers including Kotler and Levy(1971), Cullwick(1975), Edward, Louise and Gianfranco(2009) are given in Table 3.

MMaannaaggee ffoorr GGrreeaatteerr

SSttrraatteeggiicc vvaalluuee

BBuuiilldd ddeeeeppeerr RReellaattiioonnsshhiippss

DDee--eemmpphhaassiizzee OOrr

DDeemmaarrkkeett

MMaannaaggee FFoorr ggrreeaatteerr CCuussttoommeerr

PPrrooffiittaabbiilliittyy

LLiiffeettiimmee PPrrooffiittaabbiilliittyy

SSttrraatteeggiicc VVaalluuee

HHiigghh

HHiigghh LLooww

LLooww

Table 3. Demarketing Mix

Product

Restrict availability of products

Place

Decrease consumption space

Increase availability of alternatives

Decrease distribution space

Highlight product harm

Impede purchase Decrease product attractiveness

Price Increase fees

Promotion Decrease advertising space

Increase pricing Mandatory warning labels Source: Kotler and Levy(1971), Cullwick(1975), Edward, Louise and Gianfranco(2009)

2.2 Relationship Dissolution and Retention Behavior By conducting demarketing, customers could not only dissolve their relationship with firms but make efforts for relationship retention in specific situations. The result of demarketing could not be concluded as relationship dissolution, and an important purpose of demarketing could be improvement of an organization's profit caused by the customers' effort to retain or improve the relationship. Thus, the results of customer behavior resulted by demarketing stimulation need to be examined as two sides; relationship dissolution and relationship retention behavior.

2.2.1 Relationship Dissolution Relationship dissolution behavior is a customer’s response which occurs when they have a problem with service providers (Rusbult et al. 1988). In this overall perspective, then, Sheth and Parvatiyer(1995) presented factors that mainly cause relationship dissolution, including repulsion, dissatisfaction, superior alternative, and conflict with service providers. In other words, it could be explained that customers’ relationship dissolution behavior might occur when they perceive service outcomes as negative. Many efforts to classify customer responses about both satisfaction and dissatisfaction have been conducted by several researchers(Day and Ash 1979; Resnik and Harmon 1983). Especially, four types of customer responses; neglect, switching, decrease of brand loyalty, voice to service providers or others, and negative word-of-mouth, were revealed in a research that concentrated on the response of dissatisfied customers(Day 1980; Krapfel 1991; Richins 1983a). Also, Suh and Suh(2002) classified relationship dissolution behavior as four types; loyal, voice, exit and neglect, to verify correlation between the attitude of service providers and customers’ relationship dissolution behavior in internet marketing context. According to the results of that study, they tried to examine the relationship between correspondence of service providers and dissolution behavior empirically, in the case of customers who satisfy with recovery strategy that conducted by service providers, the possibility of loyal or voice is higher than others, while neglect is lower. Therefore, although it can be generalized in all fields, we could have a conclusion that service recovery strategy might moderate the relationship dissolution behavior on the web.

In the psychology field, Rusbult et al.(1982) proposed a type of response about relationship as exit, voice, neglect, and they tried to examine the response type of job dissatisfaction for employees in another research(1988). Four types of classification that were suggested in this research were based on two dimensions; activeness and construction. Namely, active and constructive displeasure behavior was described as voice, and exit was explained as an active and destructive one. Passive and constructive behavior was considered as loyal and neglect was defined as passive and destructive behavior. In conclusion, as we reviewed in prior researches, relationship dissolution behavior can be defined as four types of classification; voice, loyal, neglect, and exit. Voice is customers’ expressions of dissatisfaction to service providers or requesting help from others to improve their current situation both directly and indirectly. Passive waiting for solving problems regarding the relationship can be defined as loyal. Behavior that reduces their interests or efforts on the relationship to prevent worthless of relationship is neglect. Lastly, exit is the behavior including breaking off relations and preparing it with current service providers. In this research, whereas we explain relationship dissolution behavior with the concept claimed by Rusbult et al.(1988), ‘loyal’ is considered as the factor that is included in relationship retention behavior which will be explained in next section because of its conceptual similarity.

2.2.2 Relationship Retention(Loyal, Relationship Retention) Relationship retention intention is the factor that mainly dealt with outcomes between firms and customers caused by relationship development, and since this includes various concepts such as revisiting intention, service loyalty, and positive word-of-mouth, it is renowned as a suitable factor for verification of relationship outcomes(Yang, 2007). In the research conducted by Beatty et al.(1999), they examined some concepts; loyalty and positive word-of-mouth, to show customers’ intention for relationship retention. Thus, in this research we intend to adopt relationship retention intention as revisiting intention and service loyalty as well as ‘loyal’ which is already mentioned above. The concrete shape of the three factors in relationship retention intention is as follows: First, customer intention to use a specific product or service repeat is called revisiting intention. We can understand the possibility of customers’ revisiting for services by measuring the revisiting intention of customers. In the perspective of service, the stronger the relationship built is, the higher the repurchasing possibility could be(Frazier 1983). Secondly, service loyalty is the level of repurchasing behavior for a specific service provider(Czepiel and Gilmore 1987; Gremler and Brown 1996). Thus, in perceiving the need for service with a positive attitude, a customer might consider using a specific service provider they currently have a relationship. Additionally, Dick and Basu(1994) define service loyalty with a complex perspective about both attitude and behavior, in other words, if a customer develops a friendly relationship with a service firm, their perception of service quality could be increased, and through this, recognition of service loyalty and relationship retention intention might occur. Therefore, in this research, we would like to discuss service loyalty as important factor which is can explain the concept of relationship retention intention.

Lastly, as described above, as loyal is a passive waiting behavior for solving relational problems(Rusbult et al. 1988; Suh and Suh 2002), it is clearly discriminated with service loyalty. An important fact about loyal is that it could not be classified as a concept explaining relationship dissolution behavior in this research in that there is an assumption which is

customers want to remain in a current relationship. Hence, with the overall framework of this research, relationship dissolution and retention which are a behavioral response against demarketing stimulation, we decided to include loyal into relationship retention intention to explain retention behaviors.

2.2.3 Relationship Improvement Relationship improvement intention in this research means customers’ willingness to develop the relationship with a specific service provider. Unfortunately, there is no relative construct which can correctly measure this concept in the relationship marketing field, thus we used following factors; up-buying intention, cross-buying intention, and price premium, to adopt them for the purpose of our research. Up-buying intention is the willingness to accept higher priced or better versions of products or services that are recommended by service providers, and cross-buying intention also has a similar concept, the difference is that offers from service providers are complimentary one not higher. Crosby et al.(1990) also used these two concepts as indexes to measure outcomes of relationships between customers and service providers. As we described above, these two are known as useful tool and they are still getting attention and are used be a lot of companies which are applying the relationship marketing concept and CRM to sustain their customers. For a better understanding of relationship improvement behavior, Zeithmahl et al.(1996) measured an outcome of relationships with a price premium, and customers’ willingness to pay for additional fee, and the result revealed that the more customers perceive higher relationship quality, the more customers tend to pay, even in specific situations such as increase of price and imposition of additional cost. Thus, since customers are satisfied and want to maintain their relationship with the service firm, they would gladly take those offers. In brief, up-buying, cross-buying intention, and price premium could be regarded as relationship improvement intention that could explain customers’ response caused by demarketing stimulation.

2.3 Customer Factors 2.3.1 Attribution Theory Attribution theory assumes that human beings are rational information processors and their behavior is influenced by inference cause. The major principle of the attribution theory is that individuals want to reveal why specific events or results took place(Heider 1958; Kelley 1967; Weiner 1980; 2000). The reason of various attributions is composed of three dimensions; locus of causality, stability, and controbability. Prior researches revealed that those dimensions affect intention to complain, repurchase, WOM, and anger toward organization(Folkes 1984; Folkes et al. 1987; Richens 1983b). Again, if customers judge that locus of causality lay on the firm’s side, they might complain or perceive anger. In the case of exposure of demarketing stimulation, customers might experience information processing about why this result occurred and then could respond differently according to their judgment about the locus of causality, stability, and controbability. For example, a customer perceives the result of demarketing stimulation is his/her own fault, he/she might accept the result properly and vice versa. Thus, in this research, we apply attribution tendency(internal and external) as a results of specific stimulation(demarketing) and perception of locus of causality perceived by customers.

2.3.2 Access Driver and Reactance Theory Reactance theory is a social psychological theory explaining how individuals respond when their freedom to decide what they want is restricted. In other words, this theory claims that there are specific directional factors including ‘attraction’ and ‘repulsion’ response to achieve their goals when individuals were prohibited from their behavior. Therefore, whereas individuals might give up their task because of an obstacle, resistance or opposition against that situation could occur. Lewin(1935) and Clee and Wicklund(1980) verified that in a restricted situation, individuals could be motivated to achieve their behavior or goals. Jeong(2009) presented ‘accessibility’ and ‘access driver’ as important mediating factors in acquiring experience intention in consumption situations by her quantitative research. Results of this research describe that perception of access driver make customers more motivated in trying specific experiences. As we described above, demarketing stimulation includes the reduction of benefits, modification of service quality and contents, and these could be interpreted as disturbances to customers in using or choosing the service they want. Thus, access driver could be perceived and an effect of demarketing might depend on the degree of access driver. In this research, we considered access driver as motivation with repulsion caused by specific stimulation based on the reactance theory.

2.3.3 Involvement Involvement is a well-known concept in marketing, especially in the consumer behavior field, and it can explain various phenomena. Antil(1984) tried to integrate concepts of involvement by examine involvement compositions, and then deducting ‘personal importance’. He defined involvement as individuals’ perceived importance and interest caused by stimulation under specific conditions. In demarketing situations, degree of involvement can have a pivotal role because responses of high or low involved customers regarding the service might be different. In detail, if a customer is in a high involved situation, they can not exit or dissolute their relationship with their service providers easily even they received demarketing stimulation and vice versa. In this research, we considered involvement as a customer’s personal importance to a service provider affecting response in demarketing situations.

3. Research model and Hypothesis Development

3.1 Research Model To achieve the purpose of this research, at first, we present a conceptual framework Figure 1. Once customers receive demarketing stimulation, their attitude be change, and then the perception of access driver or internal/external attribution could have an effect on relationship behavior with service providers. Based on the conceptual framework Figure 1, we recommend research model Figure 2 representing relationship behavior after demarketing stimulation might vary due to several factors such as involvement, access driver, and attributions.

Figure 1. Framework for Research

Figure 2. Research Model

3.2 Hypothesis Development 3.2.1 Change of Attitude by Demarketing Stimulation In this research, demarketing stimulation includes service differentiation, additional fees, and degradation. These might cause a change in attitude toward a service provider customers have, of course, if there is no change in customers’ attitudes, the following analysis can not explain what we want to describe. Thus, as a precondition of other hypotheses for research, we developed the following hypothesis.

H1: After demarketing stimulation, customers’ attitudes will be decreased more than before.

3.2.2 Effect of Customer Factors on Behavior Intentions 1) Attribution Tendency Locus of causality, one of the dimensions of attribution, affects a customer’s complaining intention, and perception of anger toward a firm(Folkes 1984; Folkes et al. 1987; Richens 1983). Then, after exposure to demarketing stimulation, customers might do information processing about why this result was caused. Namely, they might try to identify what the reason of the stimulation is, and why this stimulation occurred to them. In the case of internal attribution (if customers think it is their fault), individuals relatively endure, try to recover from this situation and vice versa. Therefore, since we assumed that customer attribution tendency might have an effect on the response against demarketing stimulation, developed the following hypotheses. H2: Customer attribution tendency might have an effect on response against demarketing

stimulation. H2-1: The higher(lower) internal(external) attribution tendency is, the lower(higher) exit

intention will be represented. H2-2: The higher(lower) internal(external) attribution tendency is, the lower(higher) voice

intention will be represented. H2-3: The higher(lower) internal(external) attribution tendency is, the higher(lower) loyal

and retention intention will be represented. H2-4: The higher(lower) internal(external) attribution tendency is, the higher(lower)

relationship improves intention will be represented.

2) Access Driver As we discussed earlier, demarketing stimulation includes the reduction of benefits, and modification of service quality and contents(Gorden 2006), and these could be interpreted as disturbance to customers in using or choosing the service they want. Based on the reactance theory(Lewin 1935; Clee and Wicklund 1980), when customers are in this situation, they might perceive motivation with resistance. And they try to improve their current situation. Thus, we assume that perception of access driver might affect relationship behaviors.

H3: A customer’s perception of access driver will have an effect on response against demarketing stimulation.

H3-1: The higher(lower) perception of access driver is, the lower(higher) intention to exit might be represented.

H3-2: The higher(lower) perception of access driver is, the higher(lower) intention to voice might be represented.

H3-3: The higher(lower) perception of access driver is, the higher(lower) intention to loyal, retain might be represented.

H3-4: The higher(lower) perception of access driver is, the higher(lower) intention to improve might be represented.

3) Involvement ‘Personal involvement’ which is an individual’s personal importance and interest caused by stimuli under specific conditions(Antil 1984) can be adopted in demarketing situations. If a customer highly involved in a service or with a service provider, they can’t dissolve their relationship without hesitation even in a demarketing situation. In other words, if a service is important to a customer, there is a possibility that they might show various positive relational behaviors.

H4: A customer’s personal involvement might have effect on response against demarketing

stimulation. H4-1: The higher(lower) the customer’s involvement is, the lower(higher) intention to exit

might be represented. H4-2: The higher(lower) the customer’s involvement is, the higher(lower) intention to

voice might be represented. H4-3: The higher(lower) the customer’s involvement is, the higher(lower) intention to loyal

and retain might be represented. H4-4: The higher(lower) the customer’s involvement is, the higher(lower) intention to

improve might be represented. Additionally, because the focus of this research is the perception of access driver which is anticipated to change customers’ responses toward demarketing stimulation, we examine how the degree of perception of access driver is changed. Even if the strength of the stimulation is the same, it is manifest in such a way that individuals might differently perceive access driver. As Antil(1984) stated, involvement can be interpreted as individual’s personal importance and interest caused by stimuli under specific conditions, and response against stimuli is changed by various factors. Therefore, because we assume that perceived access driver caused by demarketing stimulation might be affected by the level of involvement, we developed the following hypothesis. H5: The higher(lower) the customer’s involvement is, the higher(lower) the perception of

access driver will be represented.

4. Method

4.1 Research Method and Design 4.1.1 Demarketing Stimulation Demarketing stimulation conducted by service providers is largely divided into three types; increasing cost, decreasing benefit, and partial restriction of service. Cost increasing strategies such as increase of fees, adopting a payment system is additional service charge to increase profit, and benefit decreasing strategy used to achieve purposes including differentiated service compared with paid member, rationalization of service provider’s increased cost. Lastly, restriction of service means that service providers restrict a customer’s right coercively, elimination of customer ID, and termination of authority are examples of that strategy(Park 2004). In this research, we presented demarketing stimulation including adopting payment system, increase of fees, and differentiated services to customers who use a credit card service. 4.1.2 Sample and Research Method Respondents were credit card service customers who stay in Pusan and Ulsan. A sample size of 216 was collected during two weeks(Mar 5, 2009 ~ Mar 19, 2009), and to sort out customers who frequently use their credit service, samples that amount to payments of above 100,000 Won(about $100) were eliminated. 174 samples were finally used in the analysis. At first, we asked about their attitude toward their service provider and the involvement the customer has, then demarketing stimulation was presented and other questions were asked

We conducted EFA, CFA, and reliability analysis using cronbach’s alpha value and t-test to verify the research purpose and utilized SPSS 14 and LISREL 8.3 to analyze collected data from respondents.

A detailed order of survey and experiment is in Figure 3.

Figure 3. Order of Survey and Experiment

4.2 Measure Respondents were asked about the degree of their internal attribution, three items were used to measure perception of internal attribution, each suggested by Folk(1984)’s previous research. To measure access driver, respondents were asked about their perception about access driver which is caused by demarketing stimulation. Four items were used to measure, each suggested by previous research(Jeong 2009). Involvement was measured by adopting the scale developed by Lee(1990) a revised version of Zaichkowky(1985)’s Personal Involvement Index(PII). Respondents were asked about the degree of their personal involvement with the service. To measure relationship dissolution intention, respondents were asked about their intention of voice or exit. Eight items were used to measure, each suggested by previous researches(Rusbult et al. 1988; Ping 1995; Suh and Suh 2002). Relationship retention intention was measured by using scales recommended by Oliver(1980), Reynold and Beatty(1999)’s including WOM, revisiting intention, and service loyalty. As described in literature review, whereas loyal(Rusbult, 1988; Ping, 1995; Suh and Suh 2002) is a concept dealt in relationship dissolution, we measured it with relationship retention intention because of the purpose of this study. Relationship improvement intention was measured by up-buying and cross buying intention used in researches conducted by Homburg, Koschate and Hoyer(2005), Zeithmahl et al.(1996). Lastly, scales for measurement of attention was adopted from Abelson et al.(1982), Matheison(1991)’s researches. Each scale was given on seven-point scales anchored by “Strongly disagree~ strongly agree.”

5. Analysis and Results

5.1 Validity and Reliability Analysis 5.1.1 Exploratory factor analysis and Reliability analysis We described the existing scales and the modification of existing scales. To examine validity and reliability, we conducted exploratory factor analysis and reliability analysis using Cronbach’s alpha. The result of the exploratory factor analysis of all constructs and reliability analysis is presented in Table 5. Each eigen value was found to be above the level of 1 and factor loading was also above the recommended level (0.5). Thus, all reliability and validity were sufficient and indicate adequate value. 5.1.2 Confirmatory Factor Analysis A confirmatory factor analysis was conducted to determine the reliability and validity of the measurements. The results were suggested in <Table 6> and <Table 7>. As a result of the analysis, the fit index for the ideal item component indicates that the model has overall fit the data. Overall, GFI above .9 and other indexes were found to be above the recommended level of .9.

Space intentionally left blank

Table 5. Exploratory Factor analysis of all constructs Factor(α ) 1 2 3 4 5 6 7 8 9

Attitude (Before) (.823)

Attitude(B)1 .737

Attitude(B)2 .854

Attitude(B)3 .802

Involvement (.921)

Involvement1 .816

Involvement2 .854

Involvement3 .832

Involvement4 .856

Involvement5 .815

Involvement6 .653

Involvement9 .600

Involvement10 .753

Attitude (After) (.926)

Attitude(A)1 .851

Attitude(A)2 .899

Attitude(A)3 .887

Attribution (.953)

Attribution1 .872

Attribution2 .904 Attribution3 .881

Access Driver (.829)

Access Driver1 .755

Access Driver2 .828

Access Driver3 .657

Access Driver4 .713

Access Driver6 .754

Voice (.900)

Voice1 .888

Voice2 .874

Voice3 .692

Voice4 .821

Exit (.885)

Exit1 .763

Exit2 .758

Exit3 .815

Loyal /Retention

(.923)

Loyal1 .722

Loyal2 .828

Loyal3 .810

Retention1 .869

Retention2 .856

Retention3 .777

Retention4 .655

Improvement (.878)

Improvement1 .766

Improvement2 .858

Improvement3 .817 Improvement4 .766

Eigen value 9.105 6.588 3.606 2.501 2.159 2.013 1.852 1.453 1.116 Cumulative 22.762 39.232 48.248 54.501 59.898 64.932 69.563 73.194 76.108

Table 6. Confirmatory Factor Analysis(Moderators) Factors

(cronbach's α ) Numbers Estimates Standard Loading T-Value Items

(EFA)

Attitude(Before) (.823)

X1 0.71 0.073 9.75 3

(3) X2 0.83 0.071 11.73 X3 0.80 0.071 11.24

Involvement (.881)

X4 0.79 0.068 11.55 4

(8) X5 0.85 0.066 12.97 X6 0.83 0.067 12.41

X11 0.77 0.069 13.57

Attitude(After) (.926)

X12 0.86 0.063 13.57 3

(3) X13 0.92 0.061 15.17 X14 0.92 0.061 15.15

Attribution (.953)

X15 0.87 0.062 14.05 3

(3) X16 0.98 0.057 17.16 X17 0.96 0.058 16.51

Access Driver (.757)

X18 0.77 0.080 9.69 3

(5) X19 0.80 0.080 10.01 X20 0.58 0.080 7.32

=132.29.(df=94), p=0.0057, GFI=0.91, AGFI=0.87, NFI=0.93, NNFI=0.97, CFI=0.98, IFI=0.98, RMSEA=0.047, RMR=0.046

Table 7. Confirmatory Factor Analysis (Dependent Variables) Factors

(cronbach's α ) Numbers Estimates Standard Loading T-Value Items

(EFA)

Voice (.915)

X1 0.88 0.063 14.03 3

(4) X2 0.94 0.060 15.70 X4 0.84 0.064 12.99

Exit (.885)

X5 0.82 0.066 12.29 3

(3) X6 0.83 0.066 12.50 X7 0.91 0.063 14.54

Loyal / Retention (.854)

X8 0.79 0.068 11.53 4

(7) X9 0.83 0.067 12.41

X10 0.82 0.067 12.11 X14 0.66 0.073 9.07

Improvement (.831)

X15 0.63 0.073 8.57 3

(4) X17 0.95 0.065 14.46 X18 0.81 0.069 11.75

=87.47(df=59), p=0.0094, GFI=0.93, AGFI=0.89, NFI=0.93, NNFI=0.97, CFI=0.98, IFI=0.98., RMSEA=0.047., RMR=0.049

5.2 Hypothesis Tests 5.2.1 Research Hypothesis Tests 1) Change of Attitude by Demarketing Stimulation as manipulation check To verify change between attitudes(before, after) caused by demarketing stimulation, paired samples t-test was conducted. The decrease of mean was about 1.4 and the t-value(13.311) was also significant as presented in <Table 8>. Therefore, since it is examined that demarketing stimulation affects customer’s attitude, H1 was supported. This result is important because it can be a precondition of others. Demarketing stimulation used in this research could affect customers as negative stimuli, and manipulation check was also sufficient.

Table 8. Change of Attitude by Demarketing Stimulation

Factors Average T-value

Attitude(Before) 4.4438

13.311

Attitude(After) 3.0602

2) Effect of Customer Factors on Behavior Intentions The factors affecting customers’ relationship dissolution, retention, and improvement was examined by conducting independent sample t-test and the results are briefly described in Table 8, 9, 10. First of all, the effect of attribution tendency was analyzed. Almost all hypotheses were supported, however, H2-2(The higher (lower) internal (external) attribution tendency is, the lower (higher) voice intention will be represented.) was rejected. Although the hypothesis was rejected, the direction of the result was same as our intention. In other words, customers who perceive relatively higher internal attribution show a little low voice intention. Secondly, we could confirm the results that in perceiving access driver, customers complain more, try to improve. The fact that after demarketing stimulation, higher perception of access driver causes relationship improvement intention is the most important result in this research. Thirdly, highly involved customers show a high voice and improvement intention. It seems that since they can not easily stop using a service which is important to them, they try to voice and improve their current situation. However, H4-1(will show lower exit intention) was rejected. We assumed that since highly involved customers might anticipate higher levels of service and satisfaction, they are disappointed with the treatment(demerketing) they receive, and then exit with dissatisfaction. In addition, highly involved customers also show higher levels of access driver. Thus, we could confirm the importance of involvement again.

Table 9. Effect of Attribution on Behavior Intentions F a c t o r s

A v r T -

v a l u e

H I n t e n t i o n Internal

Attribution

2-1 Voice High 3.9357

.714 Low 3.7631

2-2 Exit High 4.3815

-2.298 Low 4.9036

2-3 Loyal /

Retention High 4.0422

5.401 Low 3.1566

2-4 Improvement High 4.4578

3.631 Low 3.7992

Table 10. Effect of Access Driver on Behavior Intentions Factors

Avr T-value

H Intention Access

Driver


3.276 Low 3.4178


.650 Low 4.5600

3-3 Loyal /


2.115 Low 3.3967


2.463 Low 3.8765

Table 11. Effect of Involvement on Behavior Intentions Factors

Avr T-

value

H Intention Involvement


3.782 Low 3.2573


2.463 Low 4.8502

4-3 Loyal /


1.186 Low 3.3947


4.018 Low 3.6433

Table 12. Effect of Involvement on Perception of Access Driver

Factors

Avr T-

value

H Perception Involvement

5 Access

Driver

High 3.6984

1.965

Low 3.2967

※ : Supported : Rejected

6. Discussion and Implication

6.1 Summary The purpose of this study is to understand customers’ response against demarketing stimulation in the relationship between service providers and customers. Even if customers receive demarketing stimulation, they might not exit without any consideration. The desirable results of demarketing for organizations are customers’ perceptions of improvement intention through proper stimulation. So that firms can understand, they need to know how customers react against demarketing and it is the focus of this research. To achieve these goals, we verified how consumer factors(attribution tendency, perception of access driver, involvement) affect behavior(response; relationship dissolution, retention, improvement) after demarketing stimulations, and how perception of access driver occurred. The higher internal attribution is, the higher retention and improvement were rather than exit. Also, customers who perceive access driver show higher voice to their situation, improvement intention and highly involved customers show more positive result than others. In conclusion, an organization wants to utilize demarketing stimulation, as a strategic tool has to present enough explanation for internal attribution, stimulate consumers to perceive access driver, and understand that highly involved customers are more sensitive. Based on additional analysis about perception of access driver, we could assume that demarketing stimulation in high involvement services or products is a more effective way to make customers profitable.

6.2 Implication In the current business environment, whereas demarketing is conducting in various fields, researches dealing with this phenomenon are rare. Expansion of the research objective from non-profit sectors including alcohol, smoking, abuse, and environmental problems to the business sector especially, the relationship-marketing field is the most important implication of this research. This could mean that the results can provide a demarketing strategic

alternative for service providers. Additionally, because prior studies about demarketing were conceptual, as an empirical test for demarketing, it could be used as a practical reference. Many companies are applying CRM based on the relationship-marketing concept. They segment customers by using a lot of analysis techniques, and offering customized services. It means that it is easier to find unprofitable customers than in previous ways. Thus understanding the various responses of customers who have received demarketing stimulation can give benefits to developing demarketing strategies, and conducting them. Firms could also get the actual benefits of relationship marketing by screening out unprofitable customers, and making them profitable. In conclusion, we believe that if there is more attention given demarketing research, it can contribute to increased profit and a sound relationship for many companies.

6.3 Limitation and further research Although this research has several implications, some limitations also exist. First of all, we could not collect data from customers who actually received demarketing stimulations from service providers. Although we screened out customers who use service a lot or frequently, it seems not enough to refine the sample. Thus, solving sample problems could be a task for further research. Also, as stated in Kotler and Levy(1971)’s study, there are several types of demarketing stimulation and response also varies in service or stimulation type. Because this research adopted single stimulation(price), it has limitations on generalization of research results. Therefore, examination in various service types and stimulation is needed. Thirdly, we could not exactly verify the psychological process before and after demarketing stimulation. Causality among psychological factors needs to be confirmed. Fourthly, other factors that could affect customers’ response such as the reputation of service providers, switching costs, and relationship development level were not considered in this research. Additional research should be considered. Lastly, demarketing is continual activities and a customers’ attitude or response could be changed with time; from positive to negative and vice versa. It seems that longitudinal research is needed. We anticipate more meaningful research by overcoming these limitations in near future.

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does demarketing increase intention to retain and improve

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