The loyalty concept: brand and store purchase propensity

Brand loyalty

• Brand attitude
• Feel positively disposed towards the brand
• Brand preference
• Buy the brand more than other brands in the category
• Brand allegiance
• Continue to buy the brand over long periods of time

The “new coke case”

Brand loyalty

Degree to which the customer will purchase certain brands without considering the alternatives

• It is easier to charge higher prices

Key concepts

Brand: name, term, symbol, and/or special design (packaging) that is intended to identify the goods or services of one seller or group of sellers. It differentiates the seller’s products from those of the competitors

• Manufacturer brands
• Own-label (distributor) brands

Key concepts (East, 1997)

• Brand awareness
• The recognition and recall of a brand and its differentiation from other brands in the same category
• Brand image
• The ideas and feelings associated with a brand
• Brand equity (strength)
• The control on purchase exerted by a brand and, by virtue of this, the brand as an asset that can be exploited to produce revenue

Measuring loyalty

• Is it possible to separate attitude, preference and allegiance?

A somewhat more complex definition was provided by Jacoby and Chestnut (1978):

The biased behavioural response expressed over time by some decision-making unit with respect to one or more alternative brands which is a function of psychological processes.

Jacoby and Chestnut definition

• Biased
• Non random
• behavioural response
• Actual purchase
• expressed over time
• Allegiance
• by some decision-making unit
• Measured on households or persons
• with respect to one or more alternative brands
• Preference
• which is a function of psychological processes.
• Attitude

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Incomplete loyalty

• Spurious loyalty (Inertia)
• Repeated purchase without positive attitude
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Attitude and loyalty

• Where attitude is not relevant
• Brand is liked, but there is no need or opportunity to buy it
• Purchase can happen without any feeling (garlic?)
• Attitude might be a consequence of loyalty rather than a cause. This is especially true for frequently purchased brands (foods)
• Why attitude is relevant
• It will probably direct future purchase
• Avoiding to purchase brands that led to an upsetting experience (brand avoidance)

Consumer loyalty status

Suppose there are 5 brands (A,B,C,D,E)

Hard-core loyals AAAAAAA

• Undivided loyalty to one brand

Soft-core loyals ABABBAA

• Divided between two or more brands

Shifting loyals AAAAABBBB

• Brand-switch at some stage

Switchers loyals CDBAE

• No brand loyalty at all

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Empirical research

• Most households are “hard-core” or “soft-core” loyals
• Switching loyals are the most interesting under a marketing perspective
• Causes for brand switching
• Weak brand awareness (salt?)
• Search (situational) for variety
• Price promotions / special displays
• Unavailability of preferred brand (product recalls)
• Households with different preferences
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Loyalty proneness

• Is there a general level of loyalty? How much loyalty a characteristic of the consumer or of the consumption category?
• Little evidence of generalised loyalty proneness (Cunningham)
• However, if we remove the “discount factor” (East), loyalty across categories can be found (deal proneness!)

Indirect measures of brand loyalty

• The more a consumer is loyal to a product, the largest quantity he will buy in a single trip to the supermarket
• Hard-core loyalty is less likely to hold when purchases (in different trips) increase
• Sole-brand buyers are usually “light buyers”

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Which buyer is relevant to marketing?

• Is it better to target someone that exclusively drinks coca-cola, but is a light buyer (2 cans a month) or a consumer who buys 10 cans of soft drinks a month, 3 of which are coca-cola?

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Grocery purchasers and “high brand” loyalty

• About 60% of grocery purchases go to the top brand (Hammond and Ehrenberg, 1994)
• Brand loyalty could be associated with (East et al., 1995):
• Demographic characteristics (age)
• Income (ignoring promotions)
• Total expenditure on the product
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Allegiance

• Brand loyalty is not only detected through high proportion of expenditure
• Most expensive (durable) goods require an analysis of repeat purchases
• Turnover / erosion for frequently purchase goods (East and Hammond, 1996)
• Leading brands have a smaller percentage of erosion
• Does it depend on advertising?
• Erosion falls after one year (habit)

Measures of brand loyalty

• First brand loyalty
• The mean of the individual percentage of expenditure devoted to the first preference brand. It is calculated on a category of products (e.g. soft drinks) and then it can be evaluated on a single brand by selecting those cases where the brand is the first preference

Measures of brand loyalty

• Share of category requirement (SCR)
• Percentage of category sales accounted for by a particular brand among those who purchased it, not just those who put it first as in First Brand Loyalty.

Brand Loyalty and Marketing Mix strategies

Inertia

Price

Attitude

Promotion

Preferences

Product

Consumer satisfaction

Brand awareness

• Recognition of the brand
• Recall of the brand

Measures to increase awareness:

• Promotion
• Steady advertising (long-term memory effect)
• Flight advertising (recognition)
• Not suitable for low-awareness categories
• Packaging (coca-cola bottle)
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• “hoovering”
• “fairy”

Brand image

• Ideas and feelings associated with a brand
• Social and psychological nature of products
• Symbols
• Brand personality
• Brand meaning
• Positive image leads to purchase
• …but negative images exist
• Advertising (but need, time and wealth on the consumer side are needed)

Brand equity

• Value of a brand beyond the physical assets associated with its manufacture or provision
• It increases profits
• It makes acquisitions easier
• Brand awareness and brand extension (Porsche sunglasses… and Swatch car!)
• It leads to higher perceived quality (higher prices)
• Brand associations (“Quality street” biscuits)
• Brand assets (patents)
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Brand extension

• New brand names are not easily found
• McDonald and the Mc prefix
• Reduced launch costs
• Parent brands can gain / lose value
• Parent brands may suffer a sale loss

Factors of success of a category extension

• Fit with parent brand
• E.g. Pampers baby food?
• Virgin cola?
• Swatch car?
• Relevance of fit depends on the level of involvement
• Strength
• Prominence of the brand
• Effective marketing

Store loyalty

• Sequence of purchases at the same store
• Number of times
• Proportion of purchase or expenditure that a given store takes in the retail category
• Intensity
• Repeat patronage frequency
• % of customers that return regularly
• Duration of patronage or store allegiance
• How long does store loyalty last

Characteristics of loyal shopper

• Social circumstances
• Demographic factors
• Brand loyalty
• Total expenditure in the retail category
• First store loyalty: in UK about 65-70% of the expenditure takes place in the favourite shop (over a year)

Theories of store loyalty

• Resource constraint
• Negative: limited resources (car, money)
• “Non-shopping” lifestyle
• Lack of interest
• Discretionary loyalty
• Resources used to raise store loyalty
• Car allows to do one-stop shopping

Demographic correlates

Household income�Household size�Children�Age�Employment�Store accessibility�Personality, past history�Culture, local environment

Car use�Brand Loyalty�Trip expenditure�Home storage capacity�Time pressure�Attitude to store�Beliefs about store/shopping�Shopping frequency/regularity

Store loyalty

Some basic marketing indicators: notation

• Definitions:

P_b number of purchasers for brand b

P_c number of purchasers for product category c

V_bb volume of brand b purchased by purchasers of brand b

V_cc volume of product purchased by purchasers of the product category p

V_cb volume of product purchased by purchasers of the brand b

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Key brand indicators

(Horizontal) market penetration�or coverage index

Vertical penetration

Loyalty (exclusivity) index

Market share

The post-purchase phase of consumption

• Customer satisfaction and dissatisfaction (CSD)
• Quality of goods (services)
• Actual or perceived?
• High quality product: more profits
• Better margins
• Easy sale and brand extension
• Higher loyalty
• Customer complaining behaviour

Two models of consumer satisfaction

• Confirmation model (CM)
• Familiarity/habit with unsatisfactory product
• Confirmed negative expectation
• Low arousal
• Disconfirmation model (DM)
• High arousal
• Disconfirmed expectation
• Exceeding expectation (satisfaction)
• Not fulfilling expectation (dissatisfaction)
• Simple confirmation

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The confirmation model

Consumption

Expected negative outcome

Discontent

Little complaint or product avoidance

What is consumer (dis)satisfaction?

• The buyer’s cognitive state of being adequately or inadequately rewarded for the sacrifice he has undergone (1969)
• Oliver (1981) definition (disconfirmation)
• Summary psychological state
• Disconfirmed expectations (prior feelings)
• Short duration of surprise/excitement
• Change of attitudes

Consumer satisfaction

• It is a post-consumption evaluation that a chosen alternative at least meets or exceeds expectations

Engel et al., 1995

Disconfirmation model (unsatisfactory case)

Consumption

Perception of actual attributes

Expectation about attributes

Disconfirmation�(perception-expectation)

Dissatisfaction (modified by explanations such as bad luck, responsibility, etc.)

RESPONSE�(word of mouth, complaint, switch, nothing)

Expectation, attitude, loyalty and consumption are affected

Satisfaction and loyalty

Surprise

Interest

Satisfaction

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Increased�Loyalty

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Recommend product to others

Try line extensions

Is it good to receive complaints?

• Reduce negative comments to other potential customers
• After complaining (if it is satisfactory) it is more likely to repeat purchase (?)
• Good complain-handling raise loyalty

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Belief management

• Influence relevant expectation
• Forewarning customers about problems (price increase)
• Reveal hidden benefits
• Focus on certain characteristics (GM free, organic produce)
• Cue negative beliefs about competitors
• Competitive advertising
• Don’t draw attention to the unnoticed
• Do not apologise for minor shortfall…
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