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Product support service priorities: developed countries versus developing countries.
Abstract:
Product support services are increasingly becoming useful for brand differentiation as brands in a product category attain parity in quality and attributes. But it has been suggested that product support needs of buyers may differ across national markets with different levels of economic development. This article reports a study that compares product support needs of buyers of durable consumer goods in a developed economy with those of buyers in a developing economy. Using survey data, the study identifies product support services buyers of the two products involved in the study value in each of the two market environments. Findings suggest that the support needs of buyers in developed economies may indeed be different from those of buyers in developing economies in terms of emphasis on specific product support services.

Keywords: product support; cross-national comparison; brand preference

Subject:
Economic development (United States)
Economic development (Forecasts and trends)
Consumer behavior (Analysis)
Author:
Ekeledo, Ikechi
Pub Date:
03/22/2009
Publication:
Name: European Journal of Management Publisher: International Academy of Business and Economics Audience: Academic Format: Magazine/Journal Subject: Business, international Copyright: COPYRIGHT 2009 International Academy of Business and Economics ISSN: 1555-4015
Issue:
Date: Spring, 2009 Source Volume: 9 Source Issue: 1
Topic:
Event Code: 010 Forecasts, trends, outlooks Canadian Subject Form: Consumer behaviour Computer Subject: Market trend/market analysis
Product:
Product Code: 9008000 Economic Programs-Total Govt; 8515300 Development; 9914412 Consumer Behavior NAICS Code: 926 Administration of Economic Programs; 5417 Scientific Research and Development Services
Geographic:
Geographic Scope: United States Geographic Code: 1USA United States
Accession Number:
208535120
Full Text:
1. INTRODUCTION

Advances in technology have resulted in short-lived competitive advantage based on product features or design. Product innovation and quality are no longer sufficient as a basis of competitive advantage (Butz and Goodstein, 1996). Buyers of durable goods, such as automobiles, tractors, combines, computers, electric power generators and large household appliances that require product support services during their use are increasingly viewing brands in the same product category as about the same in attributes, price and quality. When it is not easy for buyers to differentiate among competing brands of durable goods the product support services buyers value may become the basis of brand choice. Valued services for many major consumer durables include delivery, financing, installation, operator training, maintenance and repair, replacement parts, and warranty (Farris, Wittmann and Hasty, 2005). Any of these product support services can be a competitive advantage for a physical goods supplier (Gronroos, 2000; Barney, 2002; Markeset and Kumar, 2005). Even producers of commodity chemicals, products that are made to the same industry standard, have used support services to differentiate their brand from those of their competitors (Robinson, Clarke-Hill and Clarkson, 2002).

It has been suggested that consumers of various categories of durable goods in less developed economies value certain product support services more than others and consider the availability of those valued services in choosing a brand (Ekeledo and Firoz, 2007). However, no empirical investigation has examined product support priorities of consumers of a major durable product in a developed country versus those of consumers of the same product in a developing country. This investigation is important because it provides managers with an insight into consumer motivation for choosing particular brands of durable goods over others. Better understanding of product support needs of consumers in a market enables managers to design a product support program that provides superior customer value to customers in a target market (Lele and Karmarkar, 1983). A support program that does not reflect the services a target market buyers value will be ineffective and a waste of valuable company resources. This paper is concerned with how the level of economic development in a target market may affect the importance buyers place on specific product support services for major consumer durables. The study compares product support service preferences of consumers in a developed country with those of consumers in a developing country. Research hypotheses are presented and tested with a set of data from each of the two economic environments. The aim is to ascertain the importance buyers in each of the two market environments attach to specific product support services. The next section presents a brief discussion of the theory underlying the use of support service as a product differentiation tool and competitive advantage.

2. THEORETICAL BACKGROUND

The theoretical underpinning of this study is the market-led view of competitive strategy. The market-led view of competitive advantage focuses on customer value. According to this view, the study and analysis of competitive advantage should focus on the competitiveness of a firm's offerings in the marketplace (Mathur, 1988; Bowmann and Faulkner, 1997; Devlin, 2001). Customer value is a source of competitive advantage, and an effective competitive strategy is one that delivers superior value to consumers (Porter, 1985). Therefore, the key question that a firm must answer when developing a product support service program is which services it offers are valued by buyers. Customer value is reflected in a buyer's preference and evaluation of the attributes of the brand, performance of those attributes, and results of using the brand relative to the customer's goals and purposes in making the purchase (Woodruff, 1997; Parasuraman, 1997). The market-led view suggests that consumers' favorable evaluation of product support for the brand results in brand preference. Therefore, it is necessary for a company that supplies a brand of major consumer durable to ascertain the importance its target customers attach to each support service that comes with its brand. The importance consumers attach to each service offering should influence which support service(s) to offer.

As noted earlier, products could be augmented with service differentiator, making support service an integral part of the product. Because support service adds value to the core product, it can be a major source of competitive advantage for the brand. But to achieve the status of a competitive advantage, the service has to be valuable to customers, and lead to brand preference (Barney, 2002).

3. PRODUCT SUPPORT EXPECTATIONS AND RESEARCH HYPOTHESES

Product support includes everything that can help enhance the benefits and satisfaction the consumer receives from the product. Major consumer durable goods, such as automobiles, motorcycles, personal computers, printers, and home appliances may need routine maintenance, or require repair and replacement parts when they break down. Therefore, buyers have expectations of appropriate level of product support for each category of durable goods (Kotler, 2003).

A buyer's product support expectation is likely to reflect the condition of the product when it was purchased (new versus previously owned item) and the level of economic development in the country where the product will be used. Thus a prospective buyer of a consumer durable is likely to be influenced in her or his choice of a brand by the valued support services that accompany the product. For example, a person looking to buy a pre-owned passenger car is likely to be interested in service contract, access to repair and replacement parts service, and warranty. In developing countries where many major durable goods are previously owned imported goods (Economist, 2004), buyers are likely to be concerned with only a few product support services. Buyers in developed economies are likely to be influenced in their choice of a brand by a higher number of product support services because of a higher level of competition among suppliers.

[H.sub.1]: Compared with buyers in Nigeria (a developing country), buyers in the United States (a developed country) use more support services in judging among competing brands of passenger cars and personal computers.

3.1 Product Support Services

As noted before, service differentiators for manufactured goods include: financing, ordering ease, delivery, repair and replacement parts, and warranty. Hypotheses are developed for each of the afore-listed product support services. Sellers of passenger cars and personal computers often offer these services. Because of low factor loading as explained later, customer training, installation and consulting were dropped. Those services appear not to be relevant to passenger cars or personal computers.

3.2 Financing

To help a customer purchase a major consumer durable, the seller may offer financial support in the form of a loan. Many retailers in the United States offer financial assistance through in-house credit card that allows a customer to charge the purchase and pay it off over time. Alternatively the customer could use her or his credit card (Visa, Master Card, American Express, or some other credit card) to pay for the merchandise. For the purchase of a passenger car, the seller may also direct a buyer to a financial institution to secure a loan to enable the buyer purchase the car. For example, a car dealership may have a representative of a financial institution within its premises where the car buyer can secure financing for the purchase.

Financing methods and systems are advanced and well established in developed countries. As a result, financing has become an integral part of business transactions in most developed economies. The risk of nonpayment is much lower in advanced economies. Defaulting on a loan carries serious consequences for the buyer because it results in low credit rating, which may make future loans difficult to obtain. This situation is not common in many developing countries for reasons that include lack of a good social security numbers system that help keep track of people and ensure that a person does not disappear into the crowd after receiving financing for a purchase. Furthermore, securing a loan in many developing countries is more difficult for ordinary people; loans in those countries often require a guarantor and acceptable guarantors to lenders are not easy to find. So business transactions in developing economies tend to be on the basis of cash and carry. In addition, lenders may not want to finance a purchase that involves a used item because second-hand items suffer very rapid depreciation in value.

[H.sub.2]: Compared with buyers in the United States, buyers in Nigeria do not consider financing very important in judging among competing brands of passenger cars and personal computers.

3.3 Ordering Ease

Ordering ease refers to the amount of effort required to order the product from the supplier. In the United States, major consumer durables, such as automobiles and personal computers, can be ordered online. Thus, ordering ease may be the reason a particular customer buys a Dell computer instead of another brand that is not easy to order online for some reason.

But ordering ease may be affected by level of economic development in the country where the market is located. For example, the Internet and good telephone infrastructure enhance ordering ease, but Internet readiness and telephone services differ between developed countries and developing countries (Siegel, 2004). Many developing countries, such as Nigeria, lack the infrastructure needed to order products online and deliver them to the customer. Because buyers are accustomed to waiting for their order in less developed countries, ordering ease is not likely to be an important issue for buyers. Besides, markets for imported goods in many less developed countries tend to be sellers' markets because of the paucity of suppliers (Sternquist, 2007). So sellers in this type of market environment tend to offer fewer product support services, especially those services that do not generate additional revenue like repairs and replacement parts.

[H.sub.3]: Compared with buyers in Nigeria, buyers in the United States attach greater importance to ordering ease in their brand choice of passenger cars and personal computers.

3.4 Delivery

Delivery refers to transferring the purchased product to the buyer's custody with speed, accuracy, and care (Kotler and Keller, 2006). Delivery service may also include helping the customer get rid of the old product being replaced, such as when the delivery people pick up the old item being replaced or a car dealership takes the buyer's old car as a trade-in. Cemex of Mexico, an international cement company, uses speed of delivery as a competitive edge in the cement business; the company promises to deliver concrete promptly or give a discount of twenty percent if the delivery is more than ten minutes late (Slywotzky and Morrison, 2000).

Delivery is likely to be an important support service in selecting a brand in developed countries than in developing countries. In developing countries, there is likely to be many people on the seller's waiting list of buyers because of fewer local producers and dependence on imported second-hand products. Second-hand goods, which are often imported from developed countries, may not be available in large numbers to make delivery an important issue: customers are happy and willing to invest the time and energy to pick up their order from the supplier.

[H.sub.4]: Compared with buyers in the United States, buyers in Nigeria attach less importance to delivery service in selecting a brand of passenger cars and personal computers.

3.5 Warranty

A warranty is a formal statement by the manufacturer of a product expressing confidence in expected product performance within the warranty period. In the warranty, the manufacturer may promise repair, replacement, or refund if the product does not meet buyer's performance expectations while the item is under warranty. Thus a manufacturer uses a warranty to express confidence in the quality and reliability of its product. Warranties take many forms, but our interest here is basic types of warranties such as those that come with a new product and extended warranty. For many durable goods, such as automobiles, major home appliances, and electronic products, manufacturers in developed countries, or a third party service provider, offer extended warranties covering repair and parts replacement needs that may occur after the expiration of the initial manufacturer warranty period. Extended warranty may be worthwhile for a brand that is not well established (Grant, 2007).

Warranties are standard service offerings for most new durable goods sold in developed countries in that products are legally required to meet buyer's normal or reasonable expectations in the early stages of the product's life. So, extended warranty is likely to have greater influence on brand preference in developed countries because of high cost of labor. Also, one would expect extended warranty to be popular in developing countries because of the average age of products in use in those countries. However, cost of labor is much lower in most developing countries. Cost of replacement part is a greater worry for buyers in most developing countries; hence repair service contract, the common form of extended warranty, may not have much impact on brand preference.

[H.sub.5]: Compared with buyers in Nigeria, buyers in the United States place greater importance on extended warranty service in selecting a brand of passenger cars and personal computers.

3.6 Repair and Replacement Parts

Repair service focuses on restoring the product to working condition when it fails, while replacement parts often accompany maintenance or repair. Consumers worry about product reliability (reflected in failure frequency and good performance), dependability (reflected in adequate repair and parts services), and cost of repair (Lele, 1997). A buyer is likely to consider these concerns when choosing a brand of major durable goods to purchase.

In developing countries, where most buyers of major durables depend on imports, many of which are used goods (Economics 2004), buyers are likely to worry about availability of repair and replacement parts services for a brand being considered for purchase. Also usage condition may influence the importance of repair and replacement parts as leading product support worries in developing countries. For example, the abundance of unpaved and poorly maintained roads in many developing countries often result in greater number of repairs of passenger cars than is the case in developed countries where most roads are paved and better maintained. The age of the item when purchased increases the importance of repair and replacement parts in selecting among brands. Because many consumer durables in developing countries are imported pre-used products, as noted earlier, access to adequate repair and parts services for a brand is likely to be a top concern of buyers. Thus the most valued product support in a developing country will be repair and replacement parts.

[H.sub.6]: Compared with buyers in the United States, buyers in Nigeria attach greater importance to repair and replacement parts services in selecting a brand of passenger cars and personal computers.

3.7 Brand Preference

As noted before, product support service is an important brand differentiator especially in an industry where producers have achieved parity in the core product (Sheth and Mittal 2004). Brands that offer more valued product support are likely to do very well in the marketplace. The presence of a large number of service providers for a brand is an indication that most buyers prefer that brand (Ekeledo and Firoz, 2007). Thus popular brands create more support service providers for the brand, which in turn attract more buyers to the brand. Furthermore, product support service providers are an important source of advice to potential buyers of durable goods regarding brand choice. Popular brands have a band wagon effect on new buyers. Imitation of other consumers creates a bandwagon effect that strengthens brand preference and enhances the brand's performance in the marketplace (Hunter, 2002). In developing economies, brand preference for passenger cars and personal computers should be associated with valued product support services.

[H.sub.7]: For passenger cars and personal computers, there is a positive relationship between product support services consumers value and brand preference.

4. METHOD

To verify the hypotheses developed in the section before, passenger cars and personal computers were used to collect data in two countries, the United States for a developed economy and Nigeria for a developing economy. Passenger cars and personal computers were selected for this exploratory study because they appear to be available in large numbers in the two countries to allow some meaningful comparison between buyers in the two market environments. Because of difficulty in obtaining a useable sample frame in most developing countries, research studies involving consumer behavior in less developed countries often rely on a convenience sample (Cateora and Graham, 2005). To keep research methodology the same for both countries, a convenience sample of owners of passenger cars and personal computers was also used to collect data in the United States.

The survey data were collected using self-administered face-to-face survey. The questionnaire was handed to owners of passenger cars and owners of personal computers to complete while the research assistant waited to collect the completed questionnaire and answer questions the respondent might have about completing the questionnaire. This data collection exercise is similar to the method used by airlines to administer questionnaires during a flight; passengers are asked to rate their satisfaction with various aspects of the airline's service on the questionnaire. Malhotra (1988) and Kumar (2000) recommend this method of data collection in developing countries because of the difficult in obtaining a good sample frame for market research and conducting telephone or mail surveys in those countries. Again, to keep research methodology the same for the two countries, the same method of data collection was used in the United State. The questionnaire was administered to eighty respondents (forty owners of passenger cars and forty owners of personal computers) in each country.

4.1 Measures and Their Validation:

The important predictor variables based on factor analysis, which is discussed later, were delivery (deliver), financing (finance), ordering ease (orders), repair and replacement parts (repair), and warranty. These operational measures were based on established measurement items or, where appropriate question items were not readily available, were developed from theoretical information from previous research that defines brand preference and product support services, using guidance for developing measures for a construct when there is no existing measures for the construct (see Churchill, 1979; Nunnally, 1978 and Nunnally and Bernstein, 1994). The criterion variable was brand preference.

The first draft of the questionnaire was pilot tested on twenty owners of the two products involved in the survey (ten from the U.S.A. and ten from Nigeria). Feedback from the twenty respondents was used to refine and improve the final draft of the questionnaire. Two predictor variables, installation and operator training, were dropped because of low factor loading and the belief that the variables may not have much relevance to the two products involved in the study.

Confirmatory factor analysis, using the principle component analysis with varimax rotation was conducted to assess the underlying structural relationships among the constructs. As recommended, items with a factor loading of 50 or higher were retained (Hair et al., 1998). Cronbach (1951) reliability analysis was used to select the measurement items used for testing the hypotheses. Measures with a coefficient alpha of 70 or higher were retained for data analysis as recommended (Nunnaly, 1978). Table 1 is a summary of the result of the measure validation, showing factor loading and coefficient alpha for the multiple-item scales in the study.

5. RESULT

Multiple regression analysis was conducted on each set of responses to ascertain the product support services passenger car owners and personal computer owners took into consideration in making their purchase decision. Previous research on similar issues involving developing countries employed multiple regression data analysis (for an example, see Aulakh, Kotabe and Teegen, 2000; Ekeledo and Firoz, 2007). Tables 2 and 3 summarize the regression results for respondents in the United States and Nigeria respectively. As Table 2 shows, the linear combination of the predictor variables for respondents in the United States was significantly related to brand preference [F(5,74) = 116.18, p < 0. 0001]. The sample multiple correlation coefficient was 0.89, indicating that approximately 89 percent of the variance of brand preference for the two products can be accounted for by the linear combination of the predictor variables. Similarly, the linear combination of the predictor variables for respondents in Nigeria was significantly related to brand preference [F (5, 74), p < 0.0001]. The sample multiple correlation coefficients for respondents in Nigeria was 0.82, suggesting that about 82 percent of the variance of brand preference for the two products can be accounted for by the linear combination of the predictor variables.

The regression results support [H.sub.1], [H.sub.4], [H.sub.5], [H.sub.6] and [H.sub.7]. For [H.sub.1], Table 2 indicates that respondents in the United States considered four product support services (delivery, financing, repair and replacement parts, and warranty) in judging among brands, while respondents in Nigeria used only two services (financing and repair and replacement parts) in judging among brands; thus supporting the prediction of H1 that consumers of major consumer durables in the United States, standing for a developed economy, are likely to use a greater number of product support services in choosing among competing brands. Table 2 also suggests that delivery, [H.sub.4], is a valued support service for respondents in the United States (p < 0.05), while Table 3 suggests that delivery is not important to respondents in Nigeria (p > 0.10), just as [H.sub.4] posits. Consistent with [H.sub.5], buyers of the two products in the United States place a higher value on warranty (p < 0.05) than buyers in Nigeria (p > 0.10). Hypothesis six ([H.sub.6]) posits that buyers of major consumer durables in Nigeria, standing for a developing country, will attach greater importance to repair and replacement parts services. Table 3 regression results indicate that repair and replacement parts rank number one for respondents in Nigeria (p < 0.0001). Although repair and parts (repair) also rank high for respondents in the U.S., they rank second to financing for this group. And hypothesis seven ([H.sub.7]) suggests a positive relationship between product support services consumers value and brand preference for passenger cars and personal computers. The regression models support this hypothesis also. The results also indicate a strong positive relationship between the predictor variables and the criterion variable, brand preference (p < 00001 for each regression model) as expected. Two hypotheses, [H.sub.2] and [H.sub.3], are not supported. Hypothesis two ([H.sub.2]) posits that financing is not important to buyers in Nigeria. Regression results indicate that buyers of passenger cars and personal computers value financing just as their counterparts in the United States do. While financing is the number one product support service for respondents in the United States, it is one of the only two significant product support needs for buyers in Nigeria. The implication is that sellers in Nigeria who do not offer financing should consider such a service for prospective buyers of the two products. Ordering ease, H3, is not a significant product support need for buyers in either the United States or Nigeria. Perhaps the reason for this result is that buyers in the United States have many competing brands to choose from and will not bother with a brand that is difficult to order. In the case of Nigeria, there are fewer vendors to buy from, resulting in a seller's market as noted before.

6. MANAGERIAL AND RESEARCH IMPLICATIONS

6.1 Managerial Implications

The results of this exploratory study suggest that passenger car and personal computer buyers in both the United States and Nigeria consider product support services in selecting a brand to buy. Buyers of these products in the sample from the United States used more support services in making their brand choice than their counterparts in the sample from Nigeria did. To provide adequate and effective product support in a market, managers must identify the services that buyers in that market value most and the level of importance those buyers attach to each of those services. Managers must also consider usage condition in the market environment and the average age of the product in use when developing support programs in each market.

Managers should be aware of the fact that product support services have become a way to add value to physical products with a significant support service component in their use. As such, many companies will benefit from product support program that focuses on the important needs of their customers. The study reported here suggests that there is a positive relationship between product support services and buyer preference for a brand. Hence, effective product support services can result in a competitive edge for the brand.

With regard to level of economic development, buyers of passenger cars and personal computers in the United States considered more support services in their brand choice than buyers of the same products in Nigeria, a developing economy. Thus managers' appraisal of product support strategies should include recognition of the market's level of economic development as a possible determinant of valued product support services for buyers.

6.2 Research Limitations and Directions for Future Research

One limitation of this study is that the data in the study came from two countries, a developed country and a developing country. Therefore, the reported findings must be viewed with caution when generalizing the findings to other developed or developing economies. The United States is one country out of many developed countries to which the study refers and Nigeria is also one country out of many developing countries. Besides, developing countries are at different levels of economic development; hence, Nigeria may not be representative of some emerging markets in Asia and South America with a higher level of economic development. A similar concern is that passenger cars and personal computers do not represent all major consumer durable goods that require support services in their use. For example, installation and operator training dropped out of the initial list of predictor variable perhaps because the two products involved in the study do not lend themselves to those services.

Another limitation is that the results are based on convenience samples, again limiting the generality of the findings. It is inappropriate to generalize results from a no probability (convenience) sample beyond the sample itself (Zikmund, 1997). However, convenience samples continue to be used in many international marketing research studies involving surveys of buyers because of the difficulty of obtaining reliable probability sample, especially when the study involves a developing country (Kumar, 2000). Nevertheless, this study provides a useful foundation for a more comprehensive future study of cross-national comparison of product support services.

Notwithstanding the contribution of the findings presented in this report, future research focusing on product support services, which should include more durable consumer goods and countries, is recommended. Such a study will provide more understanding of the issues examined in this study. Also, future research should be large enough to isolate the products studied to ascertain product-specific factors that need to be recognized in developing product support service programs in various national markets.

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Ikechi Ekeledo, Montclair State University, Montclair, New Jersey, USA

Dr. Ikechi Ekeledo earned his Ph.D. at the University of Illinois, Chicago, in 2000. At the present, he is an associate professor of marketing and international business at Montclair State University, New Jersey, U.S.A.
TABLE 1: RESULTS OF MEASURE VALIDATION

Item                            Factor Loading       Coefficient
                                                        Alpha

Brand Preference                    0.73-0.83           0.96
Delivery                            0.75-0.84           0.92
Financing                           0.63-0.85           0.97
Ordering Ease                       0.63-0.85           0.66
Repair and Replacement Parts        0.75-0.84           0.97
Warranty                            0.68-0.70           0.94

TABLE 2: SUMMARY OF REGRESSION RESULTS FOR RESPONDENTS IN THE U.S.A.

Criterion Var. Brand preference

Predictor Var.        Deliver      Finance      Orders

Beta Coef.            0.145        0.466        0.034
  T Statistic         2.116        6.979        0.758
  Sig. T              0.037      < 0.000        0.451
Cor.                  0.81         0.87         0.47
Part Cor.             0.83         0.27         0.03

Adjusted [R.sup.2]    0.88
F Statistic         116.180
  Sig. F            < 0.0001

Predictor Var.        Repair       Warranty

Beta Coef.            0.242        0.190
  T Statistic         4.098        2.408
  Sig. T            < 0.001        0.019
Cor.                  0.76         0.86
Part Cor.             0.16         0.09

Adjusted [R.sup.2]
F Statistic
  Sig. F

TABLE 3: SUMMARY OF REGRESSION RESULTS FOR RESPONDENTS IN NIGERIA

Criterion Var. Brand preference

Predictor Var.        Deliver      Finance      Orders

Beta Coef.            0.125        0.194        0.026
  T Statistic         1.518        3.207        0.404
  Sig. T              0.133      < 0.002        0.687
Cor.                  0.75         0.65         0.59
Part Cor.             0.07         0.35         0.02

Adjusted [R.sup.2]    0.82
F Statistic           74.718
  Sig. F              < 0.0001

Predictor Var.        Repair       Warranty

Beta Coef.            0.602        0.101
  T Statistic         7.279        1.578
  Sig. T            < 0.0001       0.119
Cor.                  0.88         0.65
Part Cor.             0.34         0.07

Adjusted [R.sup.2]
F Statistic
  Sig. F
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