The loyalty concept: brand and store purchase propensity

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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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(No Transcript)
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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

• 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)

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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 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!)

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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
Promotion
Preferences
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 incomeHousehold sizeChildrenAgeEmplo
ymentStore accessibilityPersonality, past
historyCulture, local environment
Car useBrand LoyaltyTrip expenditureHome
storage capacityTime pressureAttitude to
storeBeliefs about store/shoppingShopping
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
(Horizontal) market penetrationor coverage index
Loyalty (exclusivity) index
Vertical penetration
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.)
Expectation, attitude, loyalty and consumption
are affected
RESPONSE(word of mouth, complaint, switch,
nothing)
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Satisfaction and loyalty
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IncreasedLoyalty
Surprise
Satisfaction
Interest
Recommend product to others
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