Positioning strategy influences managers' beliefs about the impact of atmospheric music on...

Two hundred and twenty-one Australian hotel and pub managers responded to a mail survey containing items concerning (a) the positioning of their establishment in the marketplace, (b) whether they believed that background or atmospheric music influences the financial performance of their establishment,

and (c) the method used to supply atmospheric music in their establishment. Results indicated that (a) managers of up-market establishments reported greater acceptance of the idea that atmospheric music influences revenues, gross margins, and profits than did managers of budget establishments, and (b) managers who believed that atmospheric music affects financial performance were more likely to outsource the supply of atmospheric music to a specialist company. These results are discussed in terms of educating the hospitality industry regarding functional benefits of atmospheric music (i.e., increasing table turnover, managing customer waiting time, facilitating customer-staff interaction, increasing gross margins, etc.) that enhance the "bottom line" performance of an establishment, regardless of its image or positioning strategy.

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   When you turn the lights off, we like to think
   you can't tell the difference between an Econo
   Lodge and a Hilton (Ben Douglas, President,
   Econo Lodge).

But, of course, when you turn the lights on there are considerable differences in the atmosphere of a budget Econo Lodge hotel compared to an up-market Hilton hotel. Bitner (1992) originally noted that commercial environments, "... can serve as a differentiator in signalling the intended target market, positioning the organization, and conveying distinctiveness from competitors," but also that they, "... can assume a facilitator role by either aiding or hindering the ability of customers and employees to carry out their respective activities" (p. 67). Yet, despite a plethora of research demonstrating that atmospheric variables such as lighting, colours, aromas, and especially background music, have numerous functional effects on customers and employees (Turley & Milliman, 2000), managers still seem to view atmosphere mainly in terms of creating the right image. For companies competing at the lower end of the market, atmosphere is often seen as irrelevant, as captured by one of the respondents interviewed by Areni (2001a): "People don't come here for the music, they come for the food" (Anonymous Hotel Manager).

The problem with this simplistic view is that, while it recognises Bitner's notion that atmospheric variables are related to the image and positioning of an establishment, it ignores research demonstrating that atmospheric variables have several functional effects on customers and employees that directly affect profits and gross margins (Kurtz & Clow, 1998). Studies examining the effects of atmospheric music are particularly numerous in this regard (Areni, 2001a; North & Hargreaves, 1997).

As shown in Table 1a and 1b, previous research has manipulated various aspects of atmospheric music (i.e., volume, tempo, key, texture, format, familiarity, likeableness, arousal, and complexity) and found that it affects image-oriented variables such as (a) the overall evaluation of an establishment (Hui, Dube, & Chebat, 1997; Mattila & Wirtz, 2001; Sweeney & Wyber, 2002), (b) specific perceptions of an establishment (North & Hargreaves, 1998; Yalch & Spangenberg, 1993), (c) preferences for the music (Kellaris & Kent, 1992, 1994; North & Hargreaves, 1996; Yalch & Spangenberg, 1990), and (d) perceptions of the music (Kellaris & Kent, 1994).

However, research has also shown that atmospheric music can provide several functional benefits, including: (e) increasing sales and gross margins (Areni & Kim, 1993; Herrington & Capella, 1996; Mattila & Wirtz, 2001; Milliman 1982, 1986; North, Hargreaves, & McKendrick, 1997; Yalch & Spangenberg, 1993), (f) increasing the amount of time customers spend shopping or waiting (Herrington & Capella, 1996; Milliman, 1982, 1986; North & Hargreaves, 1999; Yalch & Spangenberg 1993, 2000), (g) decreasing customers estimates of how long they have been shopping or waiting (Chebat, Gelinas-Chebat, & Filiatrault, 1993; Kellaris & Kent, 1992; North, Hargreaves & Heath, 1998; Yalch & Spangenberg, 2000), (h) influencing dining speed (and hence table turnover) (Roballey et al., 1985; Milliman, 1986), and (i) encouraging customer-staff interaction (Chebat, Vaillant, & Gelinas-Chebat, 2000; Dube, Chebat & Morin, 1995; Hui et al., 1997). These pragmatic effects suggest that atmospheric music can influence "bottom line" performance, regardless of the positioning strategy of an establishment.

Yet, despite the abundance of research demonstrating that atmospheric music can affect financial performance, little is known about whether hospitality managers perceive that music can produce these results, and whether they consider the music played in their establishments in these terms. Areni (2001a) reported a wide range of variability in the sophistication of the decision processes adopted by managers to select atmospheric music, and Areni (in press) found that hospitality managers possessed a number of implicit theories regarding the effects of music on patrons and staff. However, both of these studies were exploratory in nature, and neither examined the more fundamental question of whether managers believe that atmospheric music actually affects "bottom line" performance.

The research reported in this article assessed the relationship between the positioning strategy of a hospitality-related establishment, and managers' beliefs regarding the effects of atmospheric music on sales and gross margins. Given the managerial bias discussed above, the basic expectation was that managers of "up-market" establishments would place greater emphasis on atmospheric music given the importance of communicating the right image, and would express stronger beliefs that music affects financial performance, than would managers of "budget" establishments.

Method

Sample and Procedure

A mail survey was sent to 1158 members of the Western Australia and South Australia chapters of the Australian Hotels Association. This represented a complete census of all members of the two chapters combined. An accompanying cover letter explained that the purpose of the study was to understand how managers in the hospitality industry made decisions regarding background music. The letter also screened recipients by asking whether they were responsible for the provision of background music in the establishment. In the event that the initial recipient did not make these decisions, they were instructed to give the questionnaire to the manager who was in charge of providing background music.

Potential respondents were offered a copy of the final report and entered into a draw for 10 audio CDs of their choice as an incentive to complete the survey. Two hundred and fifty-four surveys were returned, of which 221 were useable, for an overall response rate of 18.4%. This percentage is relatively low, even for a mail survey (Malhotra, 1993). However, the cover letter indicated that the sponsor of the research was the Australasian Performing Right Association (APRA)--an international organisation responsible for collecting royalty fees for various commercial uses of music. This may have made potential respondents wary of completing the survey, and thereby admitting to using atmospheric music for commercial purposes. Seventy-nine per cent (n = 175) of the respondents provided contact details to indicate their interest in receiving the final report and being entered in the draw.

Independent Variable

The main independent variable was the positioning strategy of the establishment the respondent managed--that is, whether the establishment was positioned at the upper end or lower end of the market. Based on taxonomy of Smith and Lesure (1999), respondents were asked to rate their establishment on the following 7-point scales: exclusive (1)-(7) affordable, up-market (1)-(7) down-market, elegant (1)-(7) basic, and formal (1)-(7) casual. An exploratory factor analysis revealed a single factor solution with each item having a factor loading of .7 or higher. Cronbach's alpha for the items was .8 (Anderson & Gerbing, 1982; Gerbing & Anderson, 1988). Hence, positioning strategy was operationalised as the mean of these four items.

Dependent Variables

Two variables served as indicators of the importance managers placed on the atmospheric music in their establishments. The first measure was a series of items asking managers about the extent to which they agreed that:

* "Background music affects the bottom line financial performance of a business".

* "An establishment will be more profitable if it plays the right background music".

* "Revenues and gross margins are influenced by background music".

* "Playing the wrong background music can hurt the financial performance of a business".

Responses were measured on a 7-point scale anchored by strongly disagree (1) and strongly agree (7). An exploratory factor analysis revealed a single factor solution. However, only the first 3 items had factor loadings greater than .7; the remaining item had a loading of only .58, perhaps due to its negative wording (Friedman, 1988). Cronbach's alpha for the first 3 items was .82; hence, perceived profitability was operationalised as the mean of the first 3 items.

Respondents were also asked to specify how they provided atmospheric music by ticking the following response categories: radio, television (music channel), private cassette collection, private audio CD collection, private video CD collection, cassettes supplied by a specialised music company, audio CDs supplied by a specialised music company, and satellite-delivered music provided by a specialised music company. These categories were not mutually exclusive, and many respondents ticked more than one category. But respondents who indicated that they out-sourced the supply of atmospheric music to a specialised company (i.e., ticked one of the last three categories), were classified as "out-source," while the remaining respondents were placed in the category "in-house". Hence, method was operationalised as whether a respondent provided atmospheric music in-house or out-sourced it to a specialised music company.

Results

Prior to examining the relationships proposed above, basic analyses were performed on the data. An analysis of means revealed a skew toward the "budget" end of the positioning strategy continuum. The mean value of 5.61 (SD = 1.5) was substantially above the mid-point of the 7-point scale. There was also a slight tendency to agree with the idea that atmospheric music affects profits. The mean value of 4.54 (SD = 1.4) for perceived profitability was slightly above the mid-point of the scale. Frequency data revealed that 41% of the respondents out-sourced atmospheric music. This percentage is almost certainly higher than the percentage for all hospitality establishments, but the sampling frame of the Australian Hotel Association may not be representative of the population. In particular, members of this professional organisation may comprise a relatively progressive subset of hospitality managers who have a greater appreciation of the effects of atmospheric music, and as a result, have decided to outsource the function to "experts".

To test the prediction that the positioning of an establishment affects a manager's belief regarding the impact of atmospheric music on financial performance, a regression analysis was performed with positioning strategy as the independent variable and perceived profitability as the dependent variable. As shown in Figure 1, results of a statistical analysis using Version 7 of the SAS statistical software package revealed that, as expected, the more up-market an establishment, the more the manager of that establishment agreed with the notion that atmospheric music drives financial performance [beta] = -0.18, t(1, 190) = -2.6, p < .009.

[FIGURE 1 OMITTED]

Logistic regression was used to test the prediction that positioning strategy influences the method selected to provide atmospheric music. Positioning strategy was, again, the independent variable, and method was the dependent variable. Figure 2 shows that the results revealed little or no relationship between positioning strategy and method ([beta] = .016, [[chi-square].sub.1] = .03, p < .88). Hence, while positioning strategy drives perceived profitability, it does not apparently influence the decision to outsource atmospheric music to a specialist. Interestingly, as shown in Figure 3 a second logistic regression revealed a relationship between perceived profitability and method ([beta] = .29, [[chi-square].sub.1] = 7.1, p < .008). The greater a manager's belief that atmospheric music influences profits, the more likely he or she was to outsource the supply of music to a specialist. There are several possible explanations for this pattern of results, as discussed in the following section.

[FIGURES 2-3 OMITTED]

Discussion

The results reported above suggest that hospitality managers believe that atmospheric music is important for creating an up-market image, but managers of budget establishments apparently fail to appreciate the potential impact of atmospheric music on revenues, gross margins, and profits. The explanation offered here is that hospitality managers tend to view music in terms of image-oriented benefits rather than functional benefits. Since image management is more relevant for an upscale establishment, managers of upscale establishments ascribe greater value to atmospheric music in terms of bottom line performance.

The relationship between perceived profitability and method suggests that the more a manager believes music drives financial performance, the more he or she is likely to outsource the supply of atmospheric music to a specialist company. In light of this, it is not immediately obvious why the expected relationship between positioning strategy and method was not detected. One possible explanation is that upscale establishments have better resources to provide an effective atmospheric music system in-house. Hence, although up-market managers believe that atmospheric music is important, they may not always "risk" outsourcing it to a specialist company that may not understand the image or positioning of their establishment.

Given that this research did not involve experimental manipulations, it is difficult to draw conclusions about the causal relationships among positioning strategy, perceived profitability, and method. It appears that both positioning strategy and method are related to perceived profitability quite independently of one another. On practical grounds, it is hard to envision positioning strategy as anything but an antecedent of perceived profitability. Presumably, management decides on a positioning strategy well before any decisions are made about operational details like the provision of atmospheric music. So, the fundamental conclusion of this research, that positioning strategy influences managers' beliefs about the effects of atmospheric music on financial performance, seems justified even in the absence of a causal research design (Tull & Hawkins, 1993).

The relationship between positioning strategy and perceived profitability, however, is more complicated in this regard. It could be the case that these respondents made rational decisions to outsource the supply of atmospheric music because they believe that music drives the financial performance of their establishment, and therefore, that it is important to consult a specialist. However, it could also be the case that respondents have rationalised their decision to outsource the supply of atmospheric music by reporting that music affects the financial performance of their establishment, hence justifying their investment. Both explanations are plausible, and unfortunately, the survey method adopted here is incapable of distinguishing between them.

If the explanation for the relationship between positioning strategy and perceived profitability offered above is correct, then it seems reasonable to ask why managers are biased toward understanding the benefits of atmospheric music solely in terms "image" as opposed to "function." Perhaps the relationship between atmospherics and the image or positioning of an establishment is more intuitive to managers than specific effects of music on perceptions and behaviours of customers and employees. That music is related to the image of an establishment (Areni & Kim, 1993), distinct customer age groups (Yalch & Spangenberg, 1990, 1993), and the overall mood and atmosphere on an environment (North & Hargreaves, 1998), may be more obvious to managers based on their day-to-day experiences in the hospitality industry. By contrast, the notion that music can be managed to control the speed of behaviour, customers' perception of time, and patterns of social interaction, all for purposes of enhancing financial performance, may not be obvious, even to experienced managers.

This suggests that the Australian hospitality industry would benefit from educational programs regarding the effects of atmospheric music on functional aspects of customer and employee behaviour. Although the ethics of systematically manipulating atmospheric variables to influence customers and employees may be questionable in many instances (Areni, 2001b), hospitality managers should at least be made aware of the potential of music to have precise and predictable effects of perception and behaviour.

Limitations

There are some limitations of the survey-based research design that warrant discussion. Demand effects could explain why there was general agreement with the notion that atmospheric music influences financial performance. The topic of the study would have been immediately obvious to respondents, who may have felt obligated to conform to the anticipated hypothesis that music does indeed influence sales and gross margins. Socially desirable responding might also account for the relationship between perceived profitability and method--any respondent reporting that music affects bottom line performance might also wish to appear intelligent by indicating that he or she out-sources the supply of atmospheric music to an expert. But it is not obvious how demand effects or social desirability would account for the relationship between positioning strategy and perceived profitability. Why would managers of up-market establishments feel more pressure to support the research hypothesis, unless they actually do believe that atmospheric music drives the bottom line?

A related concern is that the response rate of 18.4% was well below expectations. The resulting small sample size is not so much a concern as the likelihood that managers who decided to respond to the survey differed in their attitudes and opinions about atmospheric music compared to those who did not respond. First, it is likely that managers who believed atmospheric music was important were more likely to respond to the survey. Second, since the sponsor of the research was identified in the cover letter, managers holding antagonistic attitudes regarding the payment of music royalty fees may have been less likely to respond to the survey. Both sources of non-response error would explain the general agreement with the idea that music drives financial performance and the large proportion of respondents who outsourced the supply of music to a specialist. In short, respondents with the most favourable attitudes may also have been the most likely to respond to the survey.

Another limitation of research is that only one aspect of positioning--price point--was examined as a predictor variable, despite numerous other dimensions on which hotels differ in the marketplace (Beirne, 1999). The most obvious distinction is among (a) hotels that offer primarily lodging, (b) hotels that function mainly as pubs or taverns, and (c) hotels that offer a variety of services like dining, health and fitness, business functions, and so on. It is likely that the importance of atmospheric music is more obvious to managers of hotels in the latter two categories compared to the first (Areni, in press). That is, atmospheric music has obvious effects on customers in pubs, restaurants, and health and fitness centres, but it would not be clear how atmospheric music would affect guests in a pure lodging situation.

A final concern is that the perceived importance of atmospheric music may depend on the particular function or area of a hotel in the third category noted above. Large hotels would have a variety of different functions, each with distinct designated space (e.g., reception, lounge, restaurant, gift shops, etc.) (Goss-Turner, 1996). Atmospheric music would have very different effects in each of these areas; hence a manager's response to the items regarding financial performance might depend on which of these functional areas was most salient. This concern is reflected in the finding that hotel managers frequently talk about different music "zones" in their establishments (Areni, 2001a).

Table 1a

Academic Research on the Functional and Image-oriented Effects of
Music: Objective Characteristics of Music

         Functional Effects

                           Volume            Tempo            Key

Functional Effects
  Purchase Behaviour                     Milliman (1982)
                                         Milliman (1986)
  Actual Shopping
  or Waiting Time

  Perceived Shopping
  or Waiting Time                         Chebat et al.     Kellaris
                                             (1993)         and Kent
                                             North,          (1992)
                                           Hargreaves
                                           and Heath
                                             (1998)
  Actual Dining Time

  Interaction with
  Retail Sales Staff

Image-Oriented Effects
  Overall Evaluation
  of an Establishment

  Specific Perception      Yalch and
  of an Establishment     Spangenberg
                            (1993)
Music Preferences          Yalch and      Kellaris and      Kellaris
                          Spangenberg     Kent (1994)       and Kent
                            (1990)                           (1992)
                                                            Kellaris
                                                            and Kent
                                                             (1994)
Music Perceptions                         Kellaris and      Kellaris
                                          Kent (1994)       and Kent
                                                             (1994)

  Functional Effects

                            Texture                     Format

Functional Effects
  Purchase Behaviour                       Areni & Kim (1993)
                                                Yalch and
                                           Spangenberg (1993)
                                          North et al. (1997)
                                          North and Hargreaves
                                                 (1998)
  Actual Shopping
  or Waiting Time                         Yalch and Spangenberg
                                                 (1993)
  Perceived Shopping
  or Waiting Time

  Actual Dining Time                         Roballey (1985)
                                             Milliman (1986)
  Interaction with
  Retail Sales Staff

Image-Oriented Effects
  Overall Evaluation                           Sweeney and
  of an Establishment                          Wyber (2002)

  Specific Perception                           Yalch and
  of an Establishment                          Spangenberg
                                                 (1993)
                                          North and Hargreaves
                                                 (1998)
Music Preferences         Kellaris and
                          Kent (1994)

Music Perceptions         Kellaris and
                          Kent (1994)

Table 1b

Academic Research on the Functional and Image-oriented Effects of
Music: Subjective Characteristics of Music

                              Familiarity           Likeableness

Functional Effects
  Purchase Behaviour                               Herrington and
                                                   Capella (1996)
  Actual Shopping              Yalch and           Herrington and
  or Waiting Time          Spangenberg (2000)      Capella (1996)

  Perceived Shopping           Yalch and
  or Waiting Time          Spangenberg (2000)

  Actual Dining Time

  Interaction with
  Retail Sales Staff                             Hui et al. (1997)
                                                 Dube et al. (1995)

Image-Oriented Effects
  Overall Evaluation                             Hui et al. (1997)
  of an Establishmeny                            Sweeney and Wyber
                                                      (2002)

  Specific Perception
  of an Establishment
  Music Preferences

  Music Perceptions

                                Arousal              Complexity

Functional Effects
  Purchase Behaviour          Mattila and
                              Wirtz (2001)
  Actual Shopping                                    North and
  or Waiting Time                                Hargreaves (1999)

  Perceived Shopping
  or Waiting Time

  Actual Dining Time
  Interaction with

  Retail Sales Staff       Dube et al. (1995)

Image-Oriented Effects
  Overall Evaluation          Mattila and
  of an Establishmeny         Wirtz (2001)
  Specific Perception
  of an Establishment

  Music Preferences                                  North and
                                                 Hargreaves (1996)
  Music Perceptions

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Charles Areni, Professor and Chair of Marketing, School of Business, the University of Sydney, Sydney NSW 2006, Australia. Email: c.areni@econ.usyd.edu.au