The loyalty concept: brand and store purchase propensity

Week 8 18 June 2003

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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
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The new coke case

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Brand loyalty
Degree to which the customer will purchase certain brands without considering the alternatives
It is easier to charge higher prices

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Consumer Behaviour and Food Marketing AE 613

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 sellers products from those of the competitors
Manufacturer brands Own-label (distributor) brands
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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
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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.

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Jacoby and Chestnut definition

1.

Biased
Non random

2.

behavioural response
Actual purchase

3.

expressed over time

Allegiance

4.

by some decision-making unit

Measured on households or persons

5.

with respect to one or more alternative brands

Preference

6.

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)
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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 softcore 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!)
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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)

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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
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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.

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Brand Loyalty and Marketing Mix strategies

Inertia Price

Attitude
Preferences

Promotion
Product

Consumer satisfaction
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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
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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)
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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
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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
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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
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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)
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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
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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
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Some basic marketing indicators: notation

Definitions: Pb number of purchasers for brand b Pc number of purchasers for product category c Vbb volume of brand b purchased by purchasers of brand b Vcc volume of product purchased by purchasers of the product category p Vcb volume of product purchased by purchasers of the brand b
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Key brand indicators

Pb HPb Pc Vbb LR b Vcc Vcb VPb Pb Vcc Pc
(Horizontal) market penetration or coverage index Loyalty (exclusivity) index

Vertical penetration

Vbb MS b HPb LRb VPb Vcc

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Market share

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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

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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

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What is consumer (dis)satisfaction?

The buyers 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
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Consumer satisfaction
It is a post-consumption evaluation that a chosen alternative at least meets or exceeds expectations Engel et al., 1995

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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)
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Expectation, attitude, loyalty and consumption are affected

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Satisfaction and loyalty

??????????????????????? Surprise Satisfaction Interest Increased Loyalty

Recommend product to others

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Try line extensions

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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

Dont draw attention to the unnoticed

Do not apologise for minor shortfall
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