Comparing the Effect of Store Remodeling on New and Existing Customers

Topics: Environment, Sales, Natural environment Pages: 20 (15068 words) Published: October 9, 2014
Tracey S. Dagger & Peter J. Danaher

Comparing the Effect of Store
Remodeling on New and Existing

Although retailers invest millions of dollars in redesigning, refreshing, and remodeling their stores, it is unclear that such large investments are worthwhile. Prior research has indicated that remodeling has only a short-term effect. However, a previously unexplored area is its effect on those who visit the store for the first time after it is remodeled (new customers) versus those who had visited before the remodeling (existing customers). This study contrasts the effect of store remodeling on new and existing customers in two field experiments with stores that underwent a major remodeling. Treatment and control stores are used in both experiments. The authors measure sales before and after the remodeling for new and existing customers; in one store, they also measure customers’ psychological responses. In both cases, sales increased after the remodeling effort. However, sales for new customers are significantly higher than sales for existing customers after the remodel, and this difference persists for a year. Higher sales to new customers are primarily due to more new customers being drawn to the remodeled store, their higher spend per visit, and their subsequent increased visit frequency.


Keywords: servicescape, store remodeling, field experiment, sales, store environment

store remodeling should be regarded as a marketing investment, designed to retain and attract customers, similar to mainstream advertising. As they do for various marketing
investments, managers aim to determine whether remodeling is financially worthwhile. According to Weitzel (2010), “the average total store remodel today costs $3.5 million for decor, equipment, fixtures and labor. Add in lost sales during the remodel period and the loss from markdowns and remodels ends up costing approximately $3.7 million per

store.” For retail chains with hundreds of stores, the cumulative costs are substantial. A shortcoming of prior store environment studies is that
they tend to examine changes to discrete environmental factors such as the effect of music (Chebat, Chebat, and Filiatrault 1993; Yalch and Spangenberg 1993), color (Babin, Hardesty, and Suter 2003; Bellizzi and Hite 1992), crowding (Mattila and Wirtz 2008), or shelf space (Cox 1970) on customer responses rather than the impact of an entire store remodel. Whereas early studies of store atmospherics have

focused heavily on the effect of changes in the environment
on unit sales (e.g., Cox 1964, 1970; Frank and Massey
1970), more recent studies have tended to focus on attitudes and intentions (Dubé and Morin 2001; Morin, Dubé, and
Chebat 2007; Wirtz, Mattila, and Tan 2007). An exception
is Brüggen, Foubert, and Gremler (2011), who examine
psychological responses and sales after a large-scale store
remodel and find that short-term cognitions and behavioral
intentions improve, as does average customer spending.
However, in the long run, these positive effects lose strength, making investments in store remodeling questionable.
Whereas Brüggen, Foubert, and Gremler (2011) consider the effects of remodeling on all customers, a hitherto

hopping is an everyday element in most people’s
lives. Because the in-store experience continues to
have high relevance, retailers must keep their servicescapes modern, fresh, and in line with competitors’. The look, feel, and mood of a firm’s retail or service environment are unique and crafted purposefully to contribute to the “persona” of the brand and, ultimately, its profitability. Retailers spend millions of dollars annually to create and/or remodel their store environment to influence customer perceptions and choice (Bitner 1992; Harris and Ezeh 2007). In purchase decisions, the place where the product is bought or consumed is often more influential than the product itself (Hightower, Brady, and Baker 2002). Thus, Apple has...

References: Advertising Age (2013), “J.C. Penney Opts for Toned Down Renovation Plan,” (June 4), (accessed February 6, 2014), [available at].
Alba, Joseph W. and J. Wesley Hutchinson (1987), “Dimensions
of Consumer Expertise,” Journal of Consumer Research, 13
Anderson, James C. and David W. Gerbing (1988), “Structural
Equation Modeling in Practice: A Review and Recommended
Ariely, Dan, George Loewenstein, and Drazen Prelec (2003),
“Coherent Arbitrariness: Stable Demand Curves Without Stable Preferences,” Quarterly Journal of Economics, 118 (1), 73–
Avery, Jill, Thomas J. Steenburgh, John Deighton, and Mary Caravella (2012), “Adding Bricks to Clicks: Predicting the Patterns of Cross-Channel Elasticities Over Time,” Journal of
Marketing, 76 (May), 96–111.
Avis, Ed (2013), “How Much Is a Facelift Worth?” Retail Leader,
(accessed February 6, 2014), [available at http://www.retailleader.
Babin, Barry J., David M. Hardesty, and Tracy A. Suter (2003),
“Color and Shopping Intentions: The Intervening Effect of
Baker, Julie (1987), “The Role of the Environment in Marketing
Services: The Consumer Perspective,” in The Services Challenge: Integrating for Competitive Advantage, J
Bellizzi, Joseph A. and Robert E. Hite (1992), “Environmental
Colour, Consumer Feelings, and Purchase Likelihood,” Psychology and Marketing, 9 (5), 347–63.
Bhattacharya, C.B. and Ruth N. Bolton (2000), “Relationship
Marketing in Mass Markets,” in Handbook of Relationship
Bitner, Mary Jo (1992), “Servicescapes: The Impact of Physical
Surroundings on Customers and Employees,” Journal of Marketing, 56 (April), 57–71.
Bolton, Ruth N. (1998), “A Dynamic Model of the Duration of the
Customer’s Relationship with a Continuous Service Provider:
— —, P.K. Kannan, and Matthew D. Bramlett (2000), “Implica—
tions of Loyalty Program Membership and Service Experiences for Customer Retention and Value,” Journal of the Academy of Marketing Science, 28 (1), 95–108.
— — and Katherine N. Lemon (1999), “A Dynamic Model of

Brady, Michael K. and J. Joseph Cronin (2001), “Some New
Thoughts on Conceptualizing Perceived Service Quality: A
Brüggen, Elisabeth C., Bram Foubert, and Dwayne D. Gremler
(2011), “Extreme Makeover: Short- and Long-Term Effects of
Cervone, Daniel and Philip K. Peake (1986), “Anchoring, Efficacy, and Action: The Influence of Judgmental Heuristics on
Self-Efficacy Judgments and Behavior,” Journal of Personality
Chapman, Gretchen B. and Eric J. Johnson (1999), “Anchoring,
Activation, and the Construction of Values,” Organizational
Chebat, Jean-Charles, Claire Gelinas Chebat, and P. Filiatrault
(1993), “Interactive Effects of Music and Visual Cues on Time
Cheng, Andria (2012), “Best Buy’s Moves Meet with Investor
Skepticism,” MarketWatch, (March 29), (accessed February 6,
Chernev, Alexander (2011), “Semantic Anchoring in Sequential
Evaluations of Vices and Virtues,” Journal of Consumer
Corporate Design Foundation (2010), “Starbucks: A Visual Cup o’
Joe,” @issue Journal, 1 (1), (accessed February 6, 2014),
Cowley, Elizabeth and Andrew A. Mitchell (2005), “What Do
Novice Consumers Remember?” in Advances in Consumer
Cox, Keith R. (1964), “The Responsiveness of Food Sales to Shelf
Space Changes in Supermarkets,” Journal of Marketing
— — (1970), “The Effect of Shelf Space upon Sales of Branded

Dubé, Laurette and Sylvie Morin (2001), “Background Music
Pleasure and Store Evaluation: Intensity Effects and Psychological Mechanisms,” Journal of Business Research, 54 (2),
Energy Information Administration (1995), “Commercial Buildings
Energy Consumption Survey,” (accessed February 6, 2014),
Englich, Birte (2008), “When Knowledge Matters—Differential
Effects of Available Knowledge in Standard and Basic Anchoring Tasks,” European Journal of Social Psychology, 38 (5),
— — and Thomas Mussweiler (2001), “Sentencing Under Uncer—
tainty: Anchoring Effects in the Courtroom,” Journal of
Applied Social Psychology, 31 (7), 1535–51.
— —, — —, and Fitz Strack (2006), “Playing Dice with Crimi—
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Operational It for New Clothing Stores Essay
  • Effects of the New Era Essay
  • Effects of the New Technologies in People Essay
  • CutePet Store: Identifying Its Customer Base Essay
  • Effects of News Media Essay
  • The 5 Types of Customers on Retail Stores Essay
  • The Effect of New Media on Society Essay
  • Effects of the New Deal Essay

Become a StudyMode Member

Sign Up - It's Free