The U.S. environmental horticulture industry, or green industry, is composed of wholesale nursery; greenhouse; and turfgrass sod producers; landscape design; installation and maintenance firms; and wholesale and retail distribution firms such as garden centers, home stores, mass merchandisers with lawn/garden departments, brokers, and re-wholesale distribution centers; and allied trade suppliers of inputs to the industry. The retail portion of the industry was valued at $50.55 billion (Hodges et al., 2015), including the production and sale of outdoor nursery stock, indoor-potted plants and floral items, cut flowers, fertilizer-lime-chemicals-and other soil treatments, lawn and garden equipment and tools, materials used in landscaping or lawn service, and artificial/silk flowers plants and trees. That study 1also showed that retail firms (102,210) slightly outnumbered landscape service firms (98,857). Although the economic impact of landscape service dollars exceeds the economic impact of retail dollars, retail outlets continue to be a major connection between the industry and consumers (Hodges et al., 2015).
The green industry has historically been a fast-growing segment of the U.S. economy. However, the industry appears to have reached the mature stage of its life cycle, growing slowly or even declining in some segments (Hall, 2010). When an industry reaches the mature stage of its life cycle, promotion and advertising become especially critical to increase market share, maintain the customer base, and generate profit. Promotion and advertising are expected to increase sales (Carlton and Perloff, 1999). According to Bagwell (2005) in his economic analysis of advertising, that effect can be persuasive (alters consumers’ tastes engendering desire for the product), informative (provides information to an imperfect market), or complementary (convinces consumers that products fit their preferences). In fact, a 2012 study based on data from the 2008 Trade Flows and Marketing Practices survey (Palma et al., 2012) showed that most promotion and advertising expenditures were, indeed, effective in increasing green industry sales. Firm size impacted the type of advertising that was most effective. Smaller firms demonstrated a greater impact in the mechanisms for building relationships (e.g., Internet and printed material) compared with larger firms. For larger firms, mass media tended to be more cost-effective (Palma et al., 2012).
Advertising methods vary in their influence on shopping behavior. Ort et al. (1998) studied the effectiveness of advertising and promotional programs at the independent garden center level followed by a validation study conducted by Safley et al. (1999). According to Ort et al. (1998), on average, 91.6% of the survey participants stated that their shopping decisions were influenced by advertising. Among those customers who actually responded to an advertisement, newspaper advertisement (66.9%), newsletter (17.7%), radio advertisement (6.5%), and newspaper insert (4%) were identified as the top four types of advertisements to which they responded. However, in the context of the total survey population, these respondent groups represented small segments, 5.6%, 1.5%, 0.5%, and 0.3%, respectively. Safley et al. (1999) reported a relatively high response rate for newspaper advertisements (91.4% of those who responded to an advertisement did so to a newspaper which equated to 53.2% of the general survey population). Response rates for the newsletter and radio advertisement categories were 4.9% and 1.2%, respectively (or 2.9% and 0.7% of the total survey population). These data, collected more than 15 years ago, reflect a very different digital environment from today.
The sales benefit cost ratio (BCR) is an important statistic that shows how much additional sales are generated per $1 expenditure on each promotion and advertising category (Palma et al., 2012). For small firms, Internet advertising generated the highest BCR at 5.9:1, which implies that for each $1 expended online, $5.90 was generated in sales. In comparison, mass media has a BCR of 4.2:1. The $1.70 difference between Internet and mass media could result in the Internet being a more effective means for small firms to bring in customers. Internet advertising may give the smaller firm a competitive advantage against the larger firm, especially since the larger firms might have more resources for mass media. In regard to printed media for small firms, the BCR was higher for printed materials (4.5:1) compared with mass media (4.2:1). This could be the result of printed materials being more easily targeted to a wider group of consumers, but via a means that is more direct than mass media. Smaller firms potentially have fewer resources thereby leading to fewer mass media spots each with a shorter duration.
As firms increase in size, mass media appears to play a more prominent role in advertising (Palma et al., 2012). For large firms, the BCR for mass media almost doubled that of printed materials while quadrupling that of Internet promotions. As the firm size increased, the Internet volume was only a small part of overall sales, which may be due to the changing clientele of the firm or the challenge of reaching a broader geographic customer base to generate more sales. With respect to very large firms, mass media had the only significant BCR at 5.8:1. When examining the aggregate model with all firms included, sales increased $6.30 and $10.20 in sales for each $1 spent on printed materials (BCR = 6.3) and mass media promotions (BCR = 10.2), whereas Internet promotions were insignificant (Palma et al., 2012).
Since the 2008 Trade Flows and Marketing Practices survey, technology use by businesses has increased (Dukes, 2014). More people use technology in their daily lives and therefore technology-based marketing has become a more viable avenue for retailers to reach consumers. Current research shows that 81% of American adults use the Internet; over half of them are using two or more social media sites (Duggan et al., 2015). Technology from an advertising and promotion standpoint can include webpages, online newsletters, blogs, quick response codes on products, and a wide variety of social media. In the Paid Social Media Report (Nielsen, 2013), social networks and blogs are the top online destinations, accounting for the majority of time online and reaching 80% or more of active Internet users.
Social media in the broadest sense of the term is defined as any online service through which users can create and share a variety of content. Although social media have existed from the birth of generation Y (Gen Y beginning in 1981), they were most widely adopted after 2003 (Boyd and Ellison, 2008). They encompass user-generated services (such as blogs), social networking sites, online review/rating sites, virtual game worlds, video sharing sites, and online communities, whereby consumers produce, design, publish, or edit content (Krishnamurthy and Dou, 2008). Gen Ys use of social media is already changing the marketplace, workplace, and society; it may ultimately lead to new business models, processes, and products (Bolton et al., 2013). Interaction through social media sites is a way for organizations to build relationships (Waters et al., 2009), particularly among digital natives (people who grew up in a digital era).
Chaffey (2016) reported that, in 2014, a higher number of persons access the Internet from mobile devices compared with desktop devices, making mobile devices an important means of connectivity to other persons and businesses. Mobile marketing, defined as “a set of practices that enables organizations to communicate and engage with their audience in an interactive and relevant manner through any mobile device or network” (Mobile Marketing Association, 2009) is another relatively new technology available to retailers. Mobile marketing has grown rapidly, in part because of its ability to offer highly personalized, interactive communication that is more specific to a consumer’s location or consumption context than traditional advertising messages (Rohm and Sultan, 2006).
Mobile devices represent a fruitful avenue for advertisers and consumers. For advertisers, mobile devices offer another way to reach potential consumers with interactive, persuasive messages. For consumers, mobile devices can empower would-be shoppers by giving them greater access to useful, product-relevant information on demand and in the retail environment. This potential is even more promising as consumers adopt technologically more advanced mobile phones, such as smartphones and other mobile devices with web-browsing capabilities (Lane, 2010). Consumer needs for reliable, context-specific information about sustainable products can be met by mobile advertising campaigns that harness the potential of QR codes (Atkinson, 2013).
The adoption of social media, either from a desktop or mobile device, has affected how companies communicate with consumers. Companies and organizations use online social marketing programs and campaigns in an effort to reach consumers where they “live” online. However, as companies develop social media strategies, platforms such as YouTube (San Bruno, CA), Facebook (Menlo Park, CA), and Twitter (San Francisco, CA) are too often treated as stand-alone elements rather than part of an integrated system (Hanna et al., 2011).
A QR code, another type of mobile marketing, is a type of matrix bar code or two-dimensional code designed to be read with smartphones. The code consists of black modules arranged in a square pattern on a white background. The information encoded may be a text, a uniform resource locator (URL), or other data. The popularity of QR codes is growing rapidly all around the world, particularly in Korea, Japan, and the United States (Shin et al., 2012). QR codes are rapidly gaining high levels of acceptance due to the wide adoption of smartphones. Comscore in June of 2011 found that 14 million smartphone users in the United States, representing 6.2% of the total mobile audience, had scanned a QR or bar code on their smart device. The study reported that users are most likely to scan codes found in newspapers, magazines, and on product packaging, and that they do so while at home or in a store. That is, they were responding to advertisements, discount coupons, or looking for information about products, all of which are conventional uses for QR codes.
For the 2008 Trade Flows and Marketing Practices survey, results were used in a model to estimate the effects of three promotion and advertising categories: printed materials, mass media, and Internet promotions. A 100% increase in promotion and advertising expenditures in printed materials and mass media increased sales 16.25% and 28.54%, respectively. Internet promotions had no statistically significant effects on green industry sales. Internet promotion expenditures were likely small relative to average sales of all firms combined and therefore may not have shown a statistically significant impact in increasing sales (Palma et al., 2012).
Given the importance of retailers in the green industry and with little research documenting their advertising practices and impacts, the 2014 Trade Flows and Marketing Practices survey added new questions to capture data for retail-only firms (Hodges et al., 2015). These questions related both to advertising practices as well as methods of consumer research. The objectives of this paper are to provide a baseline analysis of 1) the percentage of sales retailers allocate to promotion and advertising, including a breakdown of media used; 2) POS materials and how they are acquired; 3) how green industry retailers are using social media and mobile marketing (in particular, QR codes); 4) the methods retailers use to collect customer demographic information; 5) CLP and how they are managed by retailers; 6) the comparison of retail firms’ advertising practices by size of firm.
We hypothesized that the use of digital advertising grew significantly since the previous survey in 2008. We intend to explore if greater adoption of new technologies has impacted green industry retailers’ methodologies for marketing.
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