Comparing the Effect of Store Remodeling on New and Existing Customers

Tracey S. Dagger & Peter J. Danaher

Comparing the Effect of Store
Remodeling on New and Existing
Customers

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.

S

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

References: Advertising Age (2013), “J.C. Penney Opts for Toned Down Renovation Plan,” (June 4), (accessed February 6, 2014), [available at http://adage.com/article/news/j-c-penney-opts-toned-renovationplan/241849/]. 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— —