Rev Manag Sci DOI 10.1007/s11846-017-0226-3 ORIGINAL PAPER

Innovation through tradition in the Italian coffee industry: an analysis of customers’ perceptions Michele Gorgoglione1 • Antonio Messeni Petruzzelli1 Umberto Panniello1

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Received: 21 June 2016 / Accepted: 11 January 2017  Springer-Verlag Berlin Heidelberg 2017

Abstract The extant literature reveals how firms may innovate by exploiting past competencies and resources, hence proposing innovation through tradition as an emerging strategy to compete. Previous research largely demonstrates that the effectiveness of an innovation strategy is strictly dependent on the capability of firms to communicate the right message to their customers. Therefore, leveraging products’ attributes becomes fundamental to strategically position their commercial offerings in the minds of the target audience. Nevertheless, despite the well-known relevance of this issue, scant attention has been devoted to investigate the product attributes that consumer’s associate with innovation and with tradition when companies deploy strategies based on ‘‘innovation through tradition’’. Accordingly, our study aims at covering this gap, by empirically analyzing the consumers’ perception of innovation and tradition in the Italian coffee industry through a positioning analysis. Our research allowed us to identify two sets of product attributes that consumers associate with innovation and tradition. The results show that in many cases the innovation-related and tradition-related attributes are strongly negatively correlated, but in some case the correlation is weak or close to zero. These attributes reveal that in some cases innovation and tradition can be combined in the perception of consumers, rather than representing opposite constructs. This result suggests that companies can effectively communicate the strategy of innovation through tradition to the consumers’ minds, but this must be done by choosing the right attributes.

& Umberto Panniello [email protected] Michele Gorgoglione [email protected] Antonio Messeni Petruzzelli [email protected] 1

Politecnico di Bari, Viale Japigia 182, Bari, Italy

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Keywords Innovation
Tradition
Customer perceptions
Positioning Mathematics Subject Classification 91C99

1 Introduction Recent research reveals how firms may innovate and sustain their competitive advantage by relying upon past resources and competencies (Petruzzelli and Albino 2012). Indeed, facing the common view of seeing old as obsolete, scholars empirically show the advantages firms may gain from searching for knowledge over time, being thus able to rediscover old solutions sustaining their capability to both create new value for customers and appropriate it (Capaldo et al. 2017; Katila 2002; Nerkar 2003). Accordingly, De Massis et al. (2016) conceptualize a new strategic approach, called innovation through tradition, which identifies the main capabilities making firms able to profit from leveraging the past, thus combining tradition and innovation into new products. Marketing research [e.g., Kaul and Rao (1995)] shows that consumers’ choices are strongly influenced by the perception of product and brand attributes. These attributes are abstract, limited in number, and are translated into controllable marketing mix and other factors (communication, product characteristics, etc.). Consumers develop preferences and make purchasing choices based on the perception of these attributes. Therefore, the way consumers perceive innovation and tradition, especially referring to how their interplay is managed by firms in positioning a brand, assumes a key role, significantly influencing the economic results of innovation through tradition (Kivenzor 2007). This, in turn, allows firms to distinguish their products from competing ones, hence providing a number of intangible benefits that may enrich their value and enhance the likelihood of gaining acceptance and diffusing within the market (Sherrington 2003; Temporal 1999). Strategically using product attributes may in fact provide firms’ offerings with an emotional meaning, in addition to their functional relevance, thus increasing their overall value (Ghodeswar 2008). With this regard, it has been demonstrated that the adoption of traditional attributes makes firms able to characterize their products with a specific spatial and temporal identity, which addresses consumers’ need to rediscover their roots, hence responding to the so called nostalgia towards better days (Naughton and Vlasic 1998). Nevertheless, to the best of our knowledge, few empirical researches investigate and measure how customers perceive tradition and innovation and which product attributes consumers associate with these two concepts. This issue is not trivial because intuitively tradition and innovation are two opposite constructs. Therefore, a consumer should perceive a brand as either innovative or traditional. If so, how a company can balance tradition and innovation in its strategy? If we represent a brand by a set of product attributes (that a company may use to communicate the brand characteristics), we may expect that some product attributes are associated with innovation and others with traditions. However, the issue remains about how to balance these potentially conflicting sets of attributes in the minds of consumers.

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This issue calls for a positioning analysis. If we measure the way the innovationrelated and the tradition-related product attributes are perceived by consumers, then we can understand whether these attributes are conflicting or not in consumers’ perceptions. Our expectation is that some attributes have strongly negative correlations while other attributes have either positive correlations or their correlations are close to zero. The negatively correlated attributes represent the attributes that a company should leverage to position as either innovative or traditional in a consumer’s mind. The set of attributes with positive or close-to-zero correlations represent those attributes that a company should leverage to balance the innovation and tradition in its strategy. In order to explore these associations, we analyze the consumers’ perceptions of innovation and tradition in the coffee industry through a multi-item scale and conduct a positioning analysis of a set of brands in this industry. Specifically, we analyze the Italian coffee industry, where the balance between tradition and innovation has been proved to significantly influence consumers’ choices (De Massis et al. 2016), and focus the study upon four brands, namely Caffe` Vergnano, Kimbo, Illy, and Nespresso, all playing a leading role in the Italian coffee market (Coffitalia 2015). The analysis is performed through a number of in-depth interviews and two surveys. The paper is structured as follows. In Sect. 2, we present the theoretical background, highlighting how the innovation management and marketing literature has analyzed the view of tradition as an innovation resource. Then, in Sect. 3, we introduce the methodology, while in Sect. 4 we present the main results. Finally, in Sect. 5, we discuss the main implications of the study, as well as the directions for future research.

2 Theoretical background Innovation has been always considered as a tremendous source of competitive advantage for firms (Birkinshaw et al. 2008; Roberts 1999; Schumpeter 1939). Scholars discuss the strategies firms may follow to innovate, highlighting how the development of novel products is often a function of how organizations search for knowledge across a wide arrays of dimensions and recombine this knowledge in the attempt to innovate (Fleming 2001; Laursen 2012; Nelson and Winter 1982; Savino et al. 2017). Technological, industrial, organizational, and geographical boundaries are the most critical dimensions along which firms may move for accessing the required knowledge and competencies, hence sustaining and feeding their innovation process (Miller et al. 2007; Phene et al. 2006; Stuart and Podolny 1996). More recently, however, facing the conventional view of seeing old as obsolete and useless, scholars recognize the strategic benefits of searching over time (Capaldo et al. 2017; Katila 2002; Nerkar 2003), thus emphasizing how temporal search may allow firms to explore tradition for discovering still valuable knowledge, competencies, processes, values, and beliefs pertaining to the past (Petruzzelli and Albino 2012). Indeed, innovation through tradition (De Massis et al. 2016) allows firms to employ more reliable knowledge and solutions, than recent ones, since these have been largely tested over time, hence increasing the benefits of using

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them, while decreasing their costs (Heeley and Jacobson 2008). Furthermore, this strategy favors the legitimacy and acceptance within the market of the resulting innovations (Hargadon and Douglas 2001), by influencing consumers’ perceptions and expectations. Following this assumption, Kivenzor (2007) demonstrates that brands following an innovation through tradition strategy (also called heritage brand or retro brand in the marketing literature) generate greater product sales at higher prices and that consumers demonstrate a greater propensity to buy these brands rather than new ones. These strategies are useful especially during chaotic and unstable times when consumers search for guidance in the past (Brown 1999; Davis 1982; Wiedmann et al. 2011), hence minimizing the perceived risk of a purchase decision (Leigh et al. 2006). The heritage aspect of these strategies represents longevity and sustainability as a promise to the stakeholders that the core values and performance of the brand are authentic and true (Urde 2003). These strategies tend to be useful when the rate of new product launches increases (Brown et al. 2003), thus gaining a competitive edge by tapping into the trust and loyalty that consumers hold toward old brands. These advantages are particularly relevant in certain sectors, such as the case of food and beverage, where consumers’ needs tend to be satisfied by offering products being able to balance tradition and innovation (Petruzzelli and Savino 2014). Indeed, the previous literature clearly shows how in this specific sector consumers appreciate products characterized by the balance between the concepts of novelty and tradition (Guerrero et al. 2009), hence making the necessity for firms to develop commercial solutions that are both different from competing offers but at the same time exhibit a certain similarity with past and well-known proposals for being legitimate. In addition, especially in the food and beverage sector, consumers tend to demand products presenting placespecific characteristics (Bessie`re 1998) and the so so-called ‘‘nostalgia boom’’ towards less chaotic and cultural unstable times makes them inclined to search for products that are rooted into the past (Brown 2001). Therefore, relying upon traditional elements may enhance market consensus by creating a sense of continuity with the past that facilitates new products’ legitimacy and the likelihood to gain acceptance within the market (Petruzzelli and Savino 2015; Reinders et al. 2010). Prior studies (Kuznesof et al. 1997; Tellstrom et al. 2006) indicate the existence of an important relationship between food culture and the contemporary commercialization of traditions (Hobsbawm 1983), revealing how the consumers’ perception of a brand strongly affect how they judge food quality. The effectiveness of innovation through tradition strategies is largely dependent on how consumers perceive innovation and tradition, especially referring to how their interplay is managed by firms in their brand positioning. Specifically, the focus should be on adding psychological value to products in the form of intangible benefits (Temporal 1999). Indeed, the ability to strategically positioning a product/ brand in the minds of the target audience with an emotional significance over and above its functional value is a substantial source of value creation (Sherrington 2003) and it helps to distinguish the brand in customer’s mind in comparison to competitors’ offerings (Ghodeswar 2008). However, despite the evident popularity of old-style products among contemporary consumers, Aaker (1996) suggests that managing retro brands is a complex issue. She finds that it is not simply a matter of

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rebroadcasting an old advertisement, relaunching a long-delisted brand, or boasting about an organization’s illustrious heritage, rather it is more complex than this, because the brand is reanimated jointly by the interplay among the various stakeholders. In other words, the brand is a milieu, where marketing management and consumer commitment coexist, and the communities that coalesce around retro brands differ from other brand communities (McAlexander et al. 2002; Muniz and O’Guinn 2001). In addition, to manage brands effectively, managers have to monitor the response of consumers to their branding activities (McEnally and Chernatony 1999). Every brand exists by virtue of a continuous process whereby managers specify core values, and these values are interpreted and redefined by customers (Kay 2006). Within this perspective, managers need to find a consistent fit with the business decisions that could potentially affect consumer-initiated brand meaning (Kay 2006). Hatch and Rubin (2006) studies the relationship between managerial intent and stakeholder reception, and how elements of past and present interpretations play a role in a brand’s meaning. The authors suggest that the role of history in brand meaning is one of the central issues in the interpretation of brands. They also highlight that much work needs to be done to understand the ‘reception history’ of a brand. Accordingly, Brown et al. (2003) also state that although brand meanings might be ascribed and communicated to consumers by marketers, consumers in turn uncover and activate their own brand meanings, which are communicated back to marketers and the associated brand community. Despite the fact that customers’ perceptions are critical to the success of an innovating through tradition strategy, very few studies have faced the problem of measuring the way customers perceive tradition and innovation. Most of these studies discuss the broader issue of measuring brand personality. Aaker (1997) introduces the concept of brand personality, defined as the set of human characteristics associated with a brand. The author states that these characteristics are conveyed by the company to customers through product-related attributes, symbols and logos, advertising style, price, and distribution channels. Among the various psychological traits she introduces, some are clearly related to tradition and innovation, such as contemporary, nonconforming, and unique. In a subsequent study, Aaker et al. (2001) update the initial multi-item scale built to measure brand personality. Again, tradition and innovation are mentioned among the values that can drive the perception of brand personality traits, such as conservatism and autonomy, which can vary depending on consumers’ culture. A relevant stream of research was focused on the definition of the concept of traditional food products. In particular, Guerrero et al. (2009) obtained a consumer-driven definition for the concept of traditional food products and innovation. The authors found that habitnatural, origin-locality, processing-elaboration and sensory properties are dimensions associated with the concept of traditional food, while novelty-change, variety, processing-technology, origin-ethnicity and convenience are dimensions associated with the concept of innovation. In addition, they found that traditional foods are perceived similarly across countries while some differences were detected for innovation. The authors explored the customers’ definition of traditional food products and innovation while they did not measure the customers’ perceptions of innovation and tradition (or the consumers’ perceptions of innovation through

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tradition strategies). In addition, as they state, they proposed a qualitative research, which calls for a quantitative analysis applied to specific product categories. The authors further explored the meaning of the concepts ‘‘traditional’’ and ‘‘innovation’’ in following studies (Guerrero et al. 2010, 2012). After these studies, a general definition of traditional food was provided (Vanhonacker et al. 2010; Verbeke et al. 2016). Another relevant research stream was focused on the exploration of the consumers’ innovation acceptance in food industry. In particular, it was largely demonstrated that consumers are open towards innovations in traditional food products and the innovation acceptance is related to a reinforcement of the traditional characters of the food products or to the benefits that either outweigh the importance of the traditional character or improve negative attributes associated with the traditional character (Ku¨hne et al. 2010; Vanhonacker et al. 2013). An interesting contribution is provided by Kunz et al. (2011). The authors develop a scale for measuring a brand’s ‘‘perceived firm innovativeness’’. The study is an important reference in this area. However, it does not suggest any product attribute to be associated with innovation and tradition. As a result, we know from prior research that innovation through tradition strategies allow firms to create value and improve their positioning in customers’ mind. However, very little research has been done to explore how different strategies based on innovation and tradition are perceived by consumers especially in the food and beverage domain, where it has been proved that these strategies are particularly relevant, and what attributes are associated with innovation and tradition in customers’ perceptions. Accordingly, the present research aims at filling this gap.

3 Methodology The research goal is to identify the product attributes that consumers associate with innovation and tradition in their perceptions in the Italian coffee market. To this aim, our first step is the development of an ad-hoc multi-item scale. The purpose of this stage is to define a set of product attributes through which customers are able to express their opinions in a measurable scale about the latent constructs of tradition and innovation in the coffee industry. Accordingly, we conduct a number of indepth interviews to let several attributes emerge, and then refine the list and validate the scale by qualitative and quantitative methods (Dagger et al. 2007; Reynolds and Olson 2001). Secondly, we perform an attribute-based positioning analysis of a set of brands by using the developed multi-item scale. The research issue of this stage is to reveal how the innovation- and the tradition-related attributes are perceived by consumers when they look at competing brands in the coffee industry. We collect the opinions of customers through a survey and perform a factor analysis to position the brands with respect to attributes. The positioning analysis is useful to reveal the relationships between the various attributes, as well as the relationships between innovation and tradition. Each research stage is described in the paragraphs below.

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3.1 Research setting The research setting is represented by the Italian coffee industry. We select this specific setting since consumers present an enduring need, thus making the interplay between tradition and innovation a relevant issue influencing the diffusion and success of novel products within the market (Hargadon and Douglas 2001). Coffee is a very common beverage, whose production and consumption is extensively spread over the world (Ponte 2002). Indeed, as indicated by the International Coffee Organization (International Coffee Organization 2015) production is estimated at around 141.9 million bags in crop year 2014, while the world coffee consumption in the same comes to about 149.3 million bags, hence revealing an average annual growth rate of 2.3% over the last four years. The most relevant growth characterizes emerging markets, as the case of Russia, South Korea, Algeria, and Turkey; exporting countries have also shown an increased demand, with Brazil becoming the largest coffee consumer with 20.8 million bags for 2014, followed by Indonesia (4.2 million), Ethiopia, (3.7 million), and Mexico (2.4 million). Traditional consuming markets, such as the EU, USA, and Japan, represent over 50% of the world total, although they have revealed a moderate growth in 2014 (1.5%). In terms of the geographical distribution of coffee consumption, Africa and Asia have recorded the most dynamic growth in 2014, with 5 and 4.5% respectively, although they account for only 7 and 19% of the world total demand. Central America and Mexico are mostly unchanged over time with around 5 million bags, about 3% of the world consumption. Europe has shown modest growth with 0.8% increase per year, while North America has registered 2.6% over the time period. Finally, coffee consumption in South America has grown at a steady 2.0% to reach 25.4 million bags, 17% of the world total (International Coffee Organization 2015). Italy is the seventh largest coffee consumer in Europe, consuming about 5.8 kilograms per capita or 37 kilograms per year per household, hence resulting into approximately 600 cups of coffee per capita per year. Between half to threefourths of coffee is consumed for breakfast and at the mid-morning break, and Italians prefer dark roasted coffee, mostly from Arabica-type coffee, which serves as the basis for most types of coffee consumed in Italy (Coffitalia 2015). Italy, with 8.3 million bags (60 kg bags), is the second largest EU-27 importer after Germany. In particular, Italy imports mainly from Brazil and Vietnam, although the Dominican Republic, Congo, Madagascar, Uganda, Ethiopia, and Indonesia have significantly increased their share in the Italian market during the last years. Furthermore, Italy also exports coffee. Specifically, more than 90% of exports consists of roasted espresso coffee, in response to the increasing popularity of Italian espresso, mainly in Germany (15.3%), France (14.5%), and Austria (5.5%). Indeed, the most important export markets for roasted coffee are the EU-27 (70%), with significant increases in the Balkans and Eastern Europe (USDA 2010). The coffee sector is one of the most dynamic in the Italian food and beverage industry, with more than 700 companies employing about 7000 people. The market is however dominated by a few large manufactures with their private brands (Coffitalia 2015). Accordingly, our analysis is conducted on a sample of four brands operating in the Italian market, as Caffe` Vergnano, Kimbo, Illy, and Nespresso. This choice is

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dependent upon two main reasons making these companies suitable for studying the consumer’s perception of innovation- and tradition-related brand attributes. First, these brands play a leading role in the Italian coffee market, as revealed by their market shares (Coffitalia 2015), making them as the biggest coffee brands in Italy. Second, the new product development strategy of these brands may be well described by their capability to recombine tradition and innovation (De Massis et al. 2016), as also confirmed by a panel of experts, including entrepreneurs, critics, and journalists, we interviewed in the sample selection stage. 3.2 Data collection We collect data by employing different methods. First, we use in-depth interviews to identify an initial set of potential attributes that may represent the latent constructs of innovation and tradition. Second, we deploy a first survey to build and validate a multi-item scale to describe the customers’ perception of innovation and tradition in the coffee industry. Third, we deploy a further survey to investigate the positioning of a set of prominent brands in the coffee industry in the perceptual space defined by the innovation- and tradition-related attributes. The first two collection efforts are described in the section below (Scale Development). The third survey is instead presented in the following section (Positioning Analysis). 3.3 Scale development Multi-item scales are a common tool in marketing studies when the purpose is the measurement of constructs that are latent and perceptual. In our research, the latent constructs are represented by innovation and tradition. Therefore, in order to measure the latent constructs of innovation and tradition, we need to identify a set of attributes or items that allow consumers to express a subjective rating and/or opinion on innovation and tradition and then let us assess consumers’ perceptions. According to the marketing literature (Bearden and Netemeyer 1999; Klaus et al. 2013), the method is based upon the following three stages: (1) scale generation, (2) initial purification, and (3) validation. 3.3.1 Scale generation We explore the perceptual items/attributes of innovation and tradition through indepth interviews, using a soft laddering technique (Reynolds and Olson 2001). The constructs’ definitions are based on the literature reviewed in Sect. 2 (Theoretical background). Accordingly, during the interview the subjects are led to talk about the marketing mix four p’s (place, product, communication and price) and brand personality. In the case of brand personality, we did not propose a predefined list of items taken from one of the brand personality scales developed by prior research, such as that developed by Aaker (1997), for several reasons. First, we found several brand personality scales that we could potentially use in our case, with only few overlapping items (Aaker 1997; Aaker et al. 2001; Azoulay and Kapferer 2003; Geuens et al. 2009). Therefore the number of items we should propose to subjects

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would be too high. Second, only few of the predefined brand personality items could be used in our case without adapting them to our setting by talking to the interviewed subjects. Third, only few of the items could be easily associated with either innovation or tradition. Therefore we should investigate the association during the interview. For these reasons, we did not use a predefined brand personality scale, but rather we identified some ad-hoc items related to brand personality in the development of the scale. Our purpose, in fact, is not testing a general brand personality scale in a specific industry, but rather identifying product/ brand attributes that one can associate with tradition and innovation. We use university students as subjects. This choice is quite common in this kind of studies, because of the relative ease of reaching the subjects and having a sufficient response rate in all the research stages (Bearden and Netemeyer 1999). In this specific case, the choice is consistent to the research purpose since students are coffee consumers, they know brands, and have opinions about them. Moreover, they represent a relevant segment for companies. We interview eleven subjects over a period of two weeks. Each interview lasts around 30 min. Subjects are asked to elaborate opinions on the characteristics that define an innovative coffee brand and on the ones that instead define a traditional brand. We also question the subjects about the brands they normally buy. The reason for these additional questions are clarified later on in the section Positioning Analysis. The interviews are transcribed and an initial large set of items and statements is generated. The broad dimensions derived from the interviews are related to the following seven categories: places (where to have coffee), preparation (the way coffee should be prepared and served), advertising (characteristics of TV commercials), communication (how the offerings is presented to customers except advertising), production (the way producers make coffee), packaging (the way coffee is presented on the store shelves) and brand personality (human personality traits that consumers mention when describing brands). 3.3.2 Initial purification In order to maximize the content and face validity of the items generated, a panel of experts review the item pool (Dagger et al. 2007). The panel, including researchers and managers (in the coffee industry), assesses the similarity of items, the clarity of phrasing and terminology, the relevance of each item with respect to the constructs’ definitions, and suggests the scale dimensionality. Moreover, the panel reviewed the opinions included in the interviews on the characteristics defining an innovative coffee brand versus a traditional one. This allowed the panel to associate a set of items with innovation and another set with tradition. The final list includes 24 items, 13 items associated with innovation, and 11 related to tradition. All the items are grouped into the categories identified in the previous step. In particular, we have five items for places category (three innovation- and two tradition-related items), two items for preparation category (one innovation-related and one tradition-related items), two items for advertising category (one innovation- and one traditionrelated), two items for communication category (one innovation-related and one tradition-related items), two items for production category (one innovation-related

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and one tradition-related items), three items for packaging category (two innovation-related and one tradition-related items) and eight items for brand personality category (four innovation-related and four tradition-related items). For the sake of brevity, we do not report the complete description of this initial set, but only the description of the final refined set (see ‘‘Appendix’’). 3.3.3 Scale validation and refinement According to the marketing literature (Klaus et al. 2013), the list of 24 items coming from the previous step needs a quantitative validation. Given the nature of in-depth interviews, the initial list is likely to include items that are relevant only for some of the interviewed subjects. The validation is carried out through a survey submitted to a sample of consumers much larger than the initial pool of subjects. The typical result is a shorter, refined list of items, all of which turn out to be relevant for a very large portion of the sample. The survey that we develop for validating and refining the initial item list asks the respondent to state her/his agreement (or disagreement) with 16 statements referring to the marketing mix categories (places, preparation, communication, production, and packaging). The response options are arranged in a five point symmetrical verbal scale (from I do not agree at all to I agree at all). Referring to the brand personality category, the respondent is asked to choose which ones of the ten items she/he would associate with innovation and tradition, respectively. The association is not constrained to a predefined number of items that could be associated with each construct. In this case, the response options are arranged as a set of binary variables. The survey is submitted to a group of students with homogeneous characteristics with respect to those involved in the interviews. We obtain 303 qualified responses. As a result, the 24 items are codified by 16 ordinal variables (taking five values from one to five), and eight binary variables. The statistical validation of the 16 items codified as ordinal variables is performed by checking the statistical significance of the difference between each average value and the middle value of the scale. In fact, a response associated with the value three means that the consumer states that she/he neither agree nor disagree with the statement. Therefore, only the items showing to be significantly greater than three are retained that is those for which respondents show a statistical significant agreement with the statement. We also perform a factor analysis to check possible correlations between the items represented by an ordinal scale (belonging to the first five categories) and the possibility of representing them by a lower number of factors. In the case of the ten brand personality items, a Chi squared test is performed, in order to retain only the items significantly associated with one construct, either innovation or tradition. This process reveals that six items (among the 16 ordinal variable) have to be rejected because they are not significantly different than 3. These items are the five items in the places category and one of the items in the packaging category. The result is a final list of 18 items, nine innovation- and nine tradition-related items:

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1. 2. 3. 4. 5. 6.

Preparation (the way coffee should be prepared and served), two items: one innovation-related and one tradition-related items; Advertising (characteristics of TV commercials), two items: one innovationand one tradition-related; Communication (how the offerings is presented to customers except advertising), two items: one innovation- and one tradition-related items; Production (the way producers make coffee), two items: one innovation- and one tradition-related items; Packaging (the way coffee is presented on the store shelves), two items: one innovation- and one tradition-related items; Brand personality (human personality traits referred to brands by consumers), eight items: four innovation- and four tradition-related items. Appendix reports the complete description of the items in the final list.

3.4 Positioning analysis The final list of 18 items gives us a measurable tool to represent and study the consumers’ perception in the coffee industry. The next step is to understand the way consumers perceive these constructs when considering different brands in the market. To this aim, we carry out a positioning analysis following a consumeroriented approach (Kaul and Rao 1995). We first identify the set of alternatives to be positioned. During the interviews, we ask the subjects to identify the coffee brands they normally include in their choice set, among the four brands we identified (Illy, Kimbo, Nespresso, and Vergnano). We limit the number of brands to four in order to make the survey short. In fact, the number of questions in a positioning analysis survey is given by the number of attributes multiplied by the number of brands. The shorter the survey the lower the burden for respondents, the more reliable their responses. We design a second survey to perform the positioning analysis. We use the four brands and the 18 items identified by the previous analysis as brand attributes. The survey should then include 72 statements (corresponding to 18 items multiplied for 4 brands). In order to shorten the survey we presented the personality questions in a more concise way. The statements about the marketing mix attributes (see Table 6 in the Appendix) are presented in the following form: I believe that Brand i is characterized by Attribute j, where i varies from 1 to 4 and j varies from 1 to 10 (amounting to 40). The subjects are asked to express their agreement in a 1–5 scale. The questions about brand personality (see Table 6 in the Appendix) are presented in the following form: Which ones of these personality traits would you associate with Brand i?, where i varies from 1 to 4. Each of these questions was followed by eight possible response options corresponding to the eight personality items (multiple responses were allowed) that we had identified in the previous step. We added five additional questions about the subject age, gender, consumption, brand knowledge, and favorite brands. Again, we focus on university

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students to keep the positioning analysis consistent to the previous steps. We obtain 167 qualified responses. We analyze the dataset by factor analysis (Lilien and Rangaswamy 2004). By using the principal component method, we extract two factors that account for the 94.1% of the explained variance. Then, we plot the results in the plane defined by the two factors, where the four brands are represented by four points (their coordinates being each one of the 2-component vectors in the factor-score matrix), while the 18 attributes are represented by 18 vectors (their correlations with the axes being the 2-component vectors in the factor-loading matrix). We do not employ any rotation algorithm after the factor analysis. The reason is that our goal is investigating the way consumers perceive innovation and tradition when they are associated with brands and, therefore, assessing the correlations between vectors. We are not interested to describe each brand positioning. This solution is reported and commented in the next section.

4 Results The positioning analysis is represented by the attribute-based perceptual map reported in Fig. 1. The next paragraphs discuss the main findings of the analysis. According to the aim of this research, we do not comment the brand positioning, rather we focus our analysis on the correlations between couples of attributes.

Fig. 1 Positioning analysis represented by an attribute-based perceptual map

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4.1 Correlations between couples of tradition-related and innovationrelated attributes If we consider any couple of attributes, as one tradition-related and the other innovation-related, their correlation is always negative. Table 1 reports the values of the Pearson correlation coefficients computed for each of these couples, revealing that these ranges between -0.99 and -0.04. As both Table 1 and Fig. 1 show, in most cases the tradition-related attribute is opposed to the innovation-related one. This result suggests that the consumers in our sample tend to perceive tradition and innovation as two opposite constructs. Indeed, it seems to emerge that when a brand is rated highly on some tradition-related attribute, it is rated poorly on the innovation-related ones. Thereby, this seems to reveal that balancing tradition and innovation in consumer perceptions is not straightforward, because consumers tend to perceive a brand either traditional or innovative along most characteristics. An important exception to the above mentioned finding is represented by two tradition-related attributes, namely tra-packaging vacuum sealed (i.e., This brand uses the typical vacuum-sealed package) and tra-self-confident (i.e., I think that the personality of this brand is self-confident). These attributes show a weak negative correlation with some of the innovation-related attributes. In fact, the values in the corresponding columns of Table 1 are smaller than -0.5 and the two corresponding vectors in Fig. 1 form an angle of 75–120 (approximately) with the innovationrelated vectors. Thereby, these attributes may allow managers to combine tradition and innovation, since customers tend to perceive that a brand uses the typical vacuum-sealed package and, at the same time, shows a young personality or that the coffee of that brand is produced via new and highly automated processes. In addition, a brand can be perceived as self-confident, and therefore be associated with tradition and, at the same time, be perceived as innovative according to other characteristics, such as using recyclable and biodegradable packaging materials or having a dynamic personality. Therefore, if a company wants to effectively communicate to consumers the idea that the brand innovates through tradition, it has to identify the right attributes that make it possible. On the contrary, if the company does not identify these attributes, it may fail in balancing the innovation and tradition concepts thus resulting in a just innovative or just traditional product and, in turn, losing the business opportunity coming from the combination of these two concepts. 4.2 Correlations among tradition-related attributes and correlations among innovation-related attributes The correlation between any couple of tradition-related attributes varies from negative to positive, ranging in the interval [-0.85; 0.99], as revealed in Table 2. The correlation between any couple of innovation-related attributes is strongly positive, ranging between 0.83 and 1.00, as Table 3 reports. This finding suggests that the consumers in our sample tend to perceive innovation as a characteristic that embraces all the aspects that an innovative brand communicates through the marketing mix and its personality. In fact, if a brand is

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-0.96

-0.97

Inn-extrov.

Inn-open

-0.98

-0.99

-0.97

Inn-young

Inn-dynamic

-0.93

-0.97

-0.99

Inn-pack. bio

Inn-comm. blends

-0.95

-0.91

-0.89

-0.92

-0.98

-0.92

-0.99

-0.97

Inn-advert. locat.

-0.98

Tra-advert. family

Inn prod. auto

-0.97

Inn-prep. capsules

Tra-prep. moka

-0.68

-0.72

-0.91

-0.76

-0.80

-0.61

-0.91

-0.82

-0.62

Tra-comm. logo

-0.83

-0.85

-0.99

-0.92

-0.92

-0.84

-0.99

-0.94

-0.84

Tra-prod. manual

-0.07

-0.06

-0.43

-0.33

-0.20

-0.30

-0.44

-0.28

-0.27

Tra-pack. vacuum

Table 1 Pearson correlation coefficients between tradition-related and innovation-related attributes

-0.98

-0.99

-0.88

-0.92

-0.97

-0.87

-0.87

-0.95

-0.89

Traserious

-0.89

-0.90

-0.99

-0.97

-0.96

-0.91

-0.99

-0.98

-0.91

Trafamiliar

-0.70

-0.74

-0.93

-0.79

-0.82

-0.65

-0.93

-0.84

-0.66

Tracalm

-0.46

-0.48

-0.10

-0.21

-0.34

-0.22

-0.09

-0.26

-0.25

Tra-self conf.

M. Gorgoglione et al.

Innovation through tradition in the Italian coffee… Table 2 Pearson correlation coefficients for each couple of tradition-related attributes Traprep. moka Tra-prep. moka

Trapack. vacuum

Traserious

0.93

0.32

0.93

0.98

0.81

0.23

0.90

0.45

0.83

0.95

0.73

0.07

0.94

0.44

0.72

0.87

0.99

0.00

0.51

0.82

0.99

0.96

0.00

-0.04

0.48

0.49

-0.85

0.86

0.73

0.56

0.90

0.06

Traadvert. family

Tracomm. logo year

Traprod. manual

0.97

0.78 0.69

Traadvert. family

0.97

Tracomm. logo

0.78

0.69

Tra-prod. manual

0.93

0.90

0.94

Tra-pack. vacuum

0.32

0.45

0.44

0.51

Traserious

0.93

0.83

0.72

0.82

-0.04

Trafamiliar

0.98

0.95

0.87

0.99

0.48

Trafamiliar

0.86

Tra-calm

0.81

0.73

0.99

0.96

0.49

0.73

0.90

Tra-self conf.

0.23

0.07

0.00

0.00

-0.85

0.56

0.06

Tracalm

Traself conf.

-0.03 -0.03

perceived as innovative, than consumers tend to associate every characteristic of that brand with innovation. For instance, if a consumer perceives that the brand’s commercials are innovative then she/he will believe that the production processes are highly automated. We do not claim that there is any causality between these perceptions, but only a strong correlation. On the contrary, the consumers in the sample perceive tradition in a more elaborated fashion. Indeed, a brand can be perceived traditional on certain aspects, while not on others. For instance, a consumer may think that the brand’s packaging is traditional, but not necessarily that the coffee is prepared in the traditional way. Therefore, if a company wants to effectively communicate to consumers the idea that the brand innovates through tradition, it has to leverage on traditional attributes thus making it possible to also introduce some innovative ones. On the contrary, leveraging the innovative attributes would reduce the perception of the traditional attributes. 4.3 Correlations of couple of attributes in each category Taking into account each category of marketing mix items and considering the couples of attributes belonging to the same category preparation, advertising, communication and production, the attributes in each category are strongly negatively correlated (from -0.80 to -0.99). Only the couple of attributes in the packaging shows a weak correlation, equal to -0.30 (see Table 4). If we observe the brand personality items, the correlations between innovationrelated items are all strongly positive, as well as those between tradition-related

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M. Gorgoglione et al. Table 3 Pearson correlation coefficients for each couple of innovation-related attributes Inn-prep. capsules

Inn-prep. capsules

Innadvert. locat.

Innprod. auto

Innpack. bio

Inncomm. blends

Innyoung

Inndynamic

Innextrov.

Innopen

0.95

0.89

0.99

0.95

0.98

0.89

0.94

0.96

0.98

0.95

0.99

0.99

0.98

0.97

0.97

0.89

0.96

0.96

1.00

0.90

0.89

0.94

0.98

0.88

0.93

0.95

0.98

0.96

0.99

0.98

Innadvert. locat.

0.95

Inn-prod. auto

0.89

0.98

Inn-pack. bio

0.99

0.95

0.89

Inncomm. blends

0.95

0.99

0.96

0.94

Inn-young

0.98

0.99

0.96

0.98

0.98

Inndynamic

0.89

0.98

1.00

0.88

0.96

0.96

0.96

Innextrov.

0.94

0.97

0.90

0.93

0.99

0.96

0.91

Inn-open

0.96

0.97

0.89

0.95

0.98

0.96

0.89

0.96

0.96

0.90

0.89 0.99

0.99

Table 4 Pearson correlation coefficients for each couple of attributes in the marketing mix categories Tra-prep. moka Inn-prep. capsules Inn-advert. locat. Inn-comm. blends Inn-prod. auto Inn-pack. bio

Tra-advert. family

Tra-comm. logo

Tra-prod. manual

Tra-pack. vacuum

-0.97 -0.95 -0.80 -0.99 -0.30

items, and traditional personalities are opposed to innovative. A notable exception is represented by the self-confident personality. Indeed, this attribute is almost orthogonal to all the other personality items, both traditional (correlations from -0.03 to 0.56) and innovative (from -0.48 to -0.10). Table 5 reports the correlation coefficients. Therefore, if a company wants to effectively communicate to consumers the idea that the brand innovates through tradition, it has to carefully select the right elements of the marketing mix because only some of them can balance the concepts of tradition and innovation in the consumers’ perception. For example, it is possible to balance tradition and innovation using specific brand personality traits, such as self-confidence.

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Innovation through tradition in the Italian coffee… Table 5 Pearson correlation coefficients for each couple attributes of brand personality Innyoung Inn-young Inn-dynamic

Inndynamic 0.96

0.96

Inn-extrov.

0.96

0.91

Inn-open

0.96

0.89

InnExtrov.

Innopen

Traserious

Trafamiliar

Tracalm

Tra-self conf.

0.96

0.96

-0.92

-0.97

-0.79

-0.21

0.91

0.89

-0.88

-0.99

-0.93

-0.10

0.99 0.99

Tra-serious

-0.92

-0.88

-0.99

-0.98

Tra-familiar

-0.97

-0.99

-0.90

-0.89

-0.99

-0.90

-0.74

-0.48

-0.98

-0.89

-0.70

-0.46

0.86 0.86

Tra-calm

-0.79

-0.93

-0.74

-0.70

0.73

0.90

Tra-self conf.

-0.21

-0.10

-0.48

-0.46

0.56

0.06

0.73

0.56

0.90

0.06 -0.03

-0.03

5 Conclusions Several studies demonstrate that innovating by using old competencies and resources, that is innovation through tradition, may result in significant gains for companies (Capaldo et al. 2017; Katila 2002; Nerkar 2003). In addition, the literature also shows that the effectiveness of an innovation strategy depends on how the firm communicates its offering and on how customers perceive it (Kivenzor 2007). Therefore, we aim at shedding new light on how firms may effectively balance tradition and innovation, by empirically analyzing the customers’ perception of innovation- and tradition-related brand attributes in the Italian coffee industry. This, in fact, contributes to increase our understanding of innovation through tradition, hence responding to a recent call for investigating the practices managers may employ to make their new products based upon the exploitation of past resources as a market success (De Massis et al. 2016). To cope with this goal, we first build a multi-item scale through a number of in-depth interviews, thus defining a set of attributes through which customers express their opinions about tradition and innovation in the Italian coffee industry. Then, we perform an attribute-based positioning analysis through a survey to assess how the innovation- and tradition-related attributes are perceived by consumers when looking at different brands. Several interesting results emerge. In particular, we show that tradition and innovation are perceived as two opposite constructs, although some attributes are in the middle between these two constructs and can be used to combine the perception of tradition and innovation. We also show that when a brand is perceived as innovative, consumers tend to associate every characteristic of the brand with innovation. On the contrary, when a brand is perceived as traditional, consumers may associate some characteristics of the brand with tradition, while other characteristics with innovation. Furthermore, we show that different elements of the marketing mix communicate different balance of tradition and innovation in the consumers’ perception. Specifically, in our case, we show that only the packaging can be used to communicate both tradition and innovation. Finally, we show that different brand personality traits, as self-confidence, can be combined to balance tradition and innovation. Our results have relevant implications for academia because we give the first empirical evidence of the fact that consumers may perceive innovation through

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tradition strategies but only if these are accurately tuned. Accordingly, we add to the emerging literature on innovation through tradition (De Massis et al. 2016; Petruzzelli and Savino 2014) by focusing on the downstream side of the innovation process and showing the importance of carefully selecting and managing products’ attributes for communicating to customers both their traditional and innovative value. Indeed, previous studies have mainly studied how firms may create new products by leveraging traditional resources (Capaldo et al. 2017; Katila 2002; Nerkar 2003), devoting however scant attention towards how they may communicate this strategy and on how this strategy is perceived by customers (Brown et al. 2003; Hatch and Rubin 2006). Findings discussed in this paper have also relevant implications for practice. In fact, they suggest that balancing innovation through tradition in consumers’ perception is not straightforward and managers should accurately select the attributes to consider for combining these constructs. Hence, managers should be warned that trying to combine tradition and innovation through different attributes might be very complex, since consumers may tend to consider those attributes as two opposite constructs. Some attributes make it possible to combine the two concepts thus perceiving a product as both innovative and traditional, while some other attributes result in a just innovative or just traditional product thus losing all the business opportunities of an innovation through tradition strategy. For example, our study reveals that if a company focuses on only one marketing mix category, this should refer to packaging, which can be effective in communicating both tradition and innovation in the consumers’ perceptions. Indeed, a coffee brand packaging may be perceived by consumers as both traditional (e.g., vacuum sealed) and innovative (including recyclable and biodegradable materials). This is important because focusing on one characteristic only may be an efficient strategy of positioning. Similarly, a self-confident personality may be combined with other personality items, both traditional and innovative. In addition, this result may assume a strategic relevance for companies, since designing the right combination of personality traits, for example using a self-confident, young, dynamic character in a commercial, can be efficient and effective in communicating the balance between tradition and innovation. In addition, managers have to carefully choose whether to leverage on innovative or traditional attributes. In fact, our study reveals that leveraging on innovative attributes would reduce the perception of the traditional ones, while leveraging on traditional attributes make it possible also to introduce innovative attributes. As with most studies, this work has some limitations that may lead to future research opportunities. First our results may be influenced by the specific market culture and by industry-specific constraints (such as, the industry life cycle stage), as the perception of what is innovative and what is not may vary across countries and industries. Therefore, it would be interesting to replicate our analyses in different geographical areas and with different industries (such as, industries operating in more, or less, mature markets). Second, we limit the goal of our positioning analysis to the correlations between couples of attributes, thus not investigating on the brand positioning. However, it would be interesting to deepen into the practical initiatives pursued by brands for implementing their innovation through tradition strategies.

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Innovation through tradition in the Italian coffee…

Third, future studies may also enhance our comprehension by measuring the direct effects of marketing actions on consumers’ perceptions of innovation strategies leveraging the past. Fourth, our analysis may be dependent upon the current temporal-context, imprinted by the global and national crises, which may in turn affect how consumers appreciate and differently evaluate products balancing tradition and innovation. Thus, a further interesting line of inquiry may be devoted to conduct longitudinal analyses, verifying how these perceptions vary over time or in different industrial settings. Finally, our sample was limited to about 300 university students and therefore it would be interesting to extend our analysis with a bigger and different (from students) sample.

Appendix Table 6 reports the description of the attributes. The label shows their relationship with Tradition and Innovation and the Category they belong to. Table 6 Description of the brand attributes Description Marketing mix items Tra-preparation w moka

This brand is the ideal coffee to be prepared with the Moka pot

Inn-preparation w capsules

This brand is the ideal coffee if you prepare it with capsules for espresso machines

Tra-production manual

The coffee of this brand is produced mainly through manual/handcraft processes

Inn-production automated

The coffee of this brand is produced via new and highly automated processes

Tra-packaging vacuum sealed

This brand uses the typical vacuum-sealed package

Inn-packaging bio

This brand uses recyclable and biodegradable materials for packaging

Inn-communic. diff. blends

This brand proposes always different tastes and blends

Tra-communic. logo year

The logotype of this brand reports the year of foundation

Tra-advertising family

The commercials of this brand depict the family and the rite of making coffee

Inn-advertising locations

This brand commercials display fascinating locations and coffee as an object of desire

Personality traits Tra-calm

I think that the personality of this brand is calm

Tra-serious

I think that the personality of this brand is serious

Tra-Self confident

I think that the personality of this brand is self-confident

Tra-familiar

I think that the personality of this brand is familiar

Inn-extroverted

I think that the personality of this brand is extroverted

Inn-open

I think that the personality of this brand is open

Inn-young

I think that the personality of this brand is young

Inn-dynamic

I think that the personality of this brand is dynamic

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