Economic theory and empirical evidence suggest natural limits to consumption within a purchase category.  But the idea of consumers being satiated -- maxed out with respect to their ability to consume any more -- has not been satisfactorily explored to yield marketing insights. New research by Marketing Professor Glenn Voss and co-authors assesses whether 'consumption knows no limits' to reveal new insights for marketers.  Product categories manifest different satiation effects, and the success of a competitive strategy is influenced by satiation alongside customer and marketplace characteristics. 


Marketing to the Insatiable Consumer

In Confessions of a Shopaholic, the insatiable fashion shopaholic Rebecca Bloomwood is a slave to her emotional need for the latest labels in all manner of clothing, hangbags, and bling. Well, it turns out there is some science that supports her behavior. The research finds that the fashion apparel category displays weak satiation effects, meaning as your income increases you can and will continue to purchase in that product category. Voss says, "If you are an addict to fashion, there's no limit to what you might purchase. The size of the wallet is not fixed." Products that fall into weak-satiation categories are typically discretionary, pleasure-invoking types that may emphasize variety and aesthetic or emotional benefits like fashion apparel, fine-dining restaurants, entertainment, and recreation.

Findings suggest that managers in weak-satiation categories can take a broad approach to their marketing investments. Fashion retailers Brooks Brothers or J. Crew implement such a broad-based strategy. They engage in direct marketing campaigns aimed at involved, affluent customers, train staff to deliver positive in-store experiences, and offer loyalty program gift cards. They attempt to:
o delight customers with gratifying or pleasurable benefits,
o target high-involvement and high-income customers through innovation,
o invest in multi-faceted relationship-building programs, and/or
o reduce barriers to repurchase through increased convenience.


Marketing to the Satiated Consumer

In high-satiation categories, where differentiation is limited, such as auto services, basic groceries and insurance, there are limits to the amount a customer is willing to spend. Take for example food consumed at home; as income levels go up, the proportion of income allocated to food consumed at home goes down. This is the definition of a strong-satiation category.

In strong-satiation categories, the most satisfied customers may already purchase at maximum levels and thus throwing additional marketing dollars will yield little effect. Voss explains, "If your product falls into a high-satiation category, there's relatively little the marketer can do to increase the size of wallet. Instead, the marketer should focus on perhaps taking 100% share of the wallet or a larger share of the wallet," he continues. "But it likely may not be worthwhile spending too much money attempting to do that because there is a limit in terms of how much you'll get for those efforts."

The authors write, "Little can be done to increase repurchase beyond the satiation point.  But less satisfied customers who allocate a greater percentage of their wallet to other sellers represent an opportunity.  These less-satisfied customers can be encouraged to purchase more, up to the point of satiation, either by increasing satisfaction or by leveraging the effects of repurchase rate enhancers." Methods used by marketers to encourage repurchase could include targeting customers likely to repurchase; executing relationship building programs; or increasing convenience for repurchase.

Consider how satiation works in terms of banking services, a high satiation category. A bank's goal is to get 100% of your wallet. "Their many promotions are targeting your wallet because they don't know how much of your wallet they are actually getting," Voss observes. "Their promotions allow them to identify more of your wallet and then exploit that." While larger, resource-rich banks may be over-marketing, they don't worry too much about you leaving because of high switching costs. And, banks have some of the worst customer satisfaction ratings, which is consistent with the authors' argument. "Even if you delight your customers in the banking industry, if that customer is earning $300 a week there's only so much you can do or get in terms of return," he adds.

In many strong-satiation categories, the best strategy may be to generate moderate levels of satisfaction combined with a mix of repurchase-enhancing marketing efforts. Firms can invest resources in identifying and targeting higher-income customers who wouldn't search out offerings rather than by elevating satisfaction through, say, increasing service intensity.  Auto repair and dry cleaners use such strategies.


Satiated Consumers and Economies of Scale & Scope

Although customer repurchase rates face natural limits associated with consumption in strong-satiation categories, opportunities for growth may still exist. Voss advises marketers: "If your product falls into strong satiation categories, you don't want to spend too much on satisfaction and other repurchase enhancers like relationship programs because the consumer's size of wallet is more fixed. The only time these marketing efforts make sense is if the firm can take market share and create economies of scale and scope." Such initiatives will lead to higher seller costs, and customer-level profitability may decline.  But unit costs will also decline and overall profitability can increase as market share increases.

Take the case of Target. It offers grocery basics and other merchandise which fall into strong satiation categories. Managers in high-satiation industries should be tightly focused on the cost-effectiveness of marketing resource allocations. Additionally, economies of scale and scope likely play an important role in determining optimal allocations. Target successfully implemented this strategy and provided higher satisfaction than its competitors while offering location and assortment convenience to drive repeat purchase behavior.  Best Buy's Geek Squad installation and repair service offered customers convenience, value, and an established brand.  The Geek Squad gained market share and built operating and marketing economies by leveraging its base in the Best Buy stores. 

Voss observes this in mass merchandising and supermarkets, with smaller independent retailers going away. "This is a purchase category where you can achieve economies of scale and scope," he notes. "We can see some firms succeeding more than their competitors with respect to satisfaction delivery and focus on repurchase enhancers. The return for them is building market share, size and scope."

The Rebecca Bloomwoods have learned hard lessons in this tough economy. With a more restrained consumer, paying attention to satiation can lead to new approaches for better outcomes in marketing efforts. 


"Does Consumption Know No Limits?  The Moderating Role of Satiation in Determining Customer Repurchase Rates" by Glenn Voss of SMU Cox School of Business, Andrea Godfrey of University of California (Riverside), and Kathleen Seiders of Boston College is under review.

Written by Jennifer Warren.