A Two-Dimensional ConceptOf Brand Loyalty

GEORGE S. DAYStanford Umversity

There is more to brand loyalty than just consistentbuying of the same brand—attitudes, for instance.

ATTEMPTS TO DESCRIBE biand-Ioyal buyers appear.̂ to have reached a temporary impasse. For ex-

ample, Frank (1967) recently concluded, "Brandloyal customers almost completely lack identifiabil-ity in terms of either socioeconomic or personalitycharacteristics . . . (they) do not appear to havedifferent average demand levels , . . (and they) donot appear to have economically important differ-ences in their sensitivity to either the short-runeffects of pricing, dealing, and retail advertising orto the introduction of new brands."

The studies cited by Frank were of product classeswhere brand loyalty is both measurable and highlyreliable (Massy, 1966). The principal variables usedto identify brand-loyal buyers also are widely usedto guide specialized advertising and promotionefforts toward definable market segments. The net

These data have been described in greater detail in Day(1967). They were eollected as part of the Columbia Uni-versity Research Project on Buyer Behavior, and the authoris grateful to Professor John Howard for the opportunity touse them in this study and to the Ford Foundation and theUniversity of Chicago for supporting the collection andpreparation of the data.

RESEARCH, VOL. 9, NO. 3

result is that very little can be said about brandloyalty as a phenomenon or as a basis for marketsegmentation despite the fact that nurturance o£brand loyalty is one of the chief objectives of pack-aged goods brand advertising and promotion. How-ever, many suggestions have been made for overcom-ing shortcomings in both brand loyalty measuresand descriptive variables. The purpose of this paperis to empirically explore several of these suggestedimprovements. !

GEORGE S. DAY is an assistantprofessor of marketing in tbeGraduate School of Business atStanford Uaiveniity. He is agraduate of the University ofBritish Columbia, University ofWestern Ontario and ColumbiaUniversity. Before getting a Ph.D.from Columbia in 1967 he was alecturer in tbe Scboot of BusinessAdministration at tbe Universityof Western Ontario. He has pub-lished several articles on attituderesearcb methodology and its ap-plication to marketing problems

and a book, Buyer Attitudes and Brand Choice Behavior.

29

Realistic Measures of Brand Loyalty

The usual loyalty measures are derived in oneway or another from Lhe proportion of total productpuiclKises devoted to the brand most often pur-chased. Although these measures are based on re-jx)rted purchase behavior, there has been a tendencyto regard them as evidence of lelative brand prefer-ence (Carman and Stromberg, 1967).

The equating of behavior patterns with prefer-ences to infer loyalty has been challenged directly(Newman, 1966). And a closely related criticism isthat loyalty measures, based on reports of purchasedecisions, do not distinguish between true or "in-tentional" loyalty and "spurious" loyalty associatedwith consistent purchasing of one brand becausethere are no others readily available or because abrand offers a long series of deals, had a better shelfor display location, etc. (Moulson, 1965).

The key point is that these spuriously loyal buy-ers lack any attachment to brand attributes, andthey can be immediately captured by another brandthat offers a better deal, a coupon, or enhancedpoint-of-purchase visibility through displays andother devices.

One immediate implication of this view is thatloyalty should be evaluated with both attitudinaland behavioral criteria. However, once attitudinalcriteria are imposed, loyalty becomes a brand-spe-cific concept and not a general concept describingthe over-all behavior pattern in the product class.In practical terms this means a buyer has a brandloyalty score for each brand purchased in a givenperiod based on share of total purchases and atti-tude toward the brand.

Better Descriptive Variables

Socioeconomic and demographic variables pro-vide relatively standardized information which canbe applied to many different problems. But for thespecific problem of describing brand loyalty withina product class, this degree of generality becomes asignificant weakness. These descriptive variables atbest are remote proxies for important individualdifferences in buying styles, decision processes, orsensitivity to promotional influences. This problemis most severe when single choice decisions are rela-tively unimportant to the buyer (a situation thatencompasses many o£ the products where loyalty isanticipated and has been studied).

Despite these limitations, there has been littleexperimentation using variables which are specificto tlie product class. Exceptions are measures of

30

deal buying, store switching activity within theproduct class, etc. Among reasons for the lack ofattention are cost and difficulty of collecting infor-mation so it can be related to a loyalty measurebased on purdiase patterns. Even if expense was nota consideration, there always is uncertainty aboutwhich variables should be collected.

Incorporating the Improvements

The equation below satisfies the requirementsthat the brand loyalty score be brand specific andpositively related to the degree of favorableness to-ward the brand:

k A"! (1)

where:

Li

P[B]i

k, n

= the brand loyalty score for the i**"buyer of brand m,

= proportion of total purdiases ofthe product that buyers devoted tobrand m over the period of thestudy,

— the attitude toward brand m at thebeginning of the study (scaled sothat a low value represents a favor-able attitude),

r= descriptive variables to be fitted toLl by least squares,

= constants whose values are variedby trial and error to maximize thefit between Lj and X ,̂ X ,̂ . . . X,.

This approach is not without problems. First, itis not obvious what weights should be given to therelative influence of the attitude and behavior com-ponents in the loyalty score. For lack of better cri-teria, it is assumed that the weights are defined bythe best fit between the loyalty score (see equation1) and the descriptive variables used in the multipleregression equation. There is a further problem thatis a consequence of combining a one-time estimateof brand attitude (with a certain degree of responseunreliability and some likelihood of true changesubsequently) with an interval estimate of purchaseprobability. Thus, there is a possibility that the atti-tude component of the brand loyalty score may notbe accurate during some of the time period requiredto estimate the purchase probability.

This paper gives empirical backing to the sug-gestions for improvement. In confirming the reason-ableness of a two-dimensional brand loyalty concept

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compared to a purely behavioral definition, the firstconcern is with the extent of spurious loyalty andthe degree of improvement in identifiability whenusing standard socioeconomic and demographic var-iables. The second concern is to appraise the useful-ness of descriptive variables which relate to actualrespondent purchasing activity, exposure to per-sonal and impersonal sources of information, andstyle of buying. The buying style variables areessential to understanding individual differences inresponse to deals, price changes, point-of-purchasepromotions, etc. (Day, 1967). The usefulness ofthese descriptors will be their ability to explain ameaningful proportion of the variation in house-hold loyalty scores (Lj), over and above that ex-plained by socioeconomic and demographic vari-ables.

RESULTSAn empirical test of the brand loyalty model was

conducted by collecting a large number of descrip-tive and attitudinal variables at the beginning of afive-month diary purchase panel of 955 households(See Table I).

Because of the nature of the design, there wasconsiderable opportunity for bias due to sensitiza-tion. The results of a comparison of the manipu-lated panel with a parallel control panel indicated

TABLE 1

INDEPENDENT VARIABLE DESCRIPTIONSA. Socioeconomic and demographic variables

1. Size of city2. Size of household3. Age of housewife4. Presence of children5. Education of housewife6. Occupation of head of household7. Household income8. Hours housewife employed

B. Demand, price and store response variables9. Total number of units purchased

10. Average price paid per unit11. Range from highest to lowest price paid12. Dealing dummy variable

(0 — no purchases on deal)13. Store activity dummy variable

(0 =: all purchases of product made in one store)C. Exposure to information

14. Number of visitors to house15. Number of invitations to visit friends16. Television viewing (hours per week by respondent)

D. Determinants of "buying style," or reaction to the pur-chasing environment17. Perceived impulsiveness in buying18. Economy consciousness19. Perceived time pressure20. Interest in the differences among brands in the product

class21. Confidence in judgments about brands in the product

class.

RESEARCH, VOL. 9, NO. 3

a significant upward bias in the number of productusers but a lesser bias in the proportion of house-holds buying the analysis brand. These biases hadno apparent effect on key relationships (such asbetween attitude and behavior) but reduce theprojectibility of the results.

The analysis focuses on one of two majorbrands of a frequently purchased convenience foodproduct. There were 225 buyers who made at leastfive purchases of the product during the period ofthe panel, and 148 of these buyers made at leastone purchase of the brand under study.

The product class lends itself to an exploratorystudy of brand-loyal behavior for several reasons.Both major brands were reported to have obtainedbetween 90 and 95 per cent all-commodity distribu-tion in the area sampled for the panel. Thus, buyerswere usually confronted with a genuine choicesituation. At the same time, each brand emphasizeddifferent product attributes so there were validgrounds on which a buyer could make a choice. Theproduct class also oflEered several methodologicaladvantages: (1) There were no new brands intro-duced during the period of the test nor was there asignificant increase in primary demand. (2) Thehousewife, who was the source of the attitude rat-ings and subsequent purchase reports, was invari-ably a product user. (3) The typical purchase cyclewas two weeks, so during the test period there wasan average of about eleven distinct brand choicedecisions and 21 units purchased on which to basereliable estimates of brand choice probability. (4) Astudy of potentially related products showed thatthere were no direct substitutes for the product tobias estimates of choice probabilities.

Evidence of Spurious LoyaltyLoyal segment is often defined as a buyer who

devotes at least 50 per cent of his product purchaseto a single brand. In this study, 108 of 148 buyerswould be classified as brand loyal on that basis.However, if loyal buyers were required to have anextremely favorable or a very favorable initial atti-tude toward the brand as well as buying the brandon a majority of occasions, then the brand-loyalsegment is reduced to 76 buyers. By this arbitrarydefinition, spuriously loyal buyers comprised almost30 per cent of the total loyal group. However, therelative size of the spuriously loyal segment is tosome extent a function of time—that is, a longertime period would provide spuriously loyal buyersa greater opportunity to switch. Defining segmentsin this way also conceals a great deal of individual

31

variability, which means a continuum is more prac-tical for pinpointing true brand-loyal buyers.

True Brand-Loyal Buyers

Data in Table 2 summarize a series of multipleregression equations in which various weights forthe continuous brand loyalty score (Lj)̂ were fittedto two different sets of descriptive variables.

Key results are found in the contrast betweenequations 1(A) and 1(B) in which the additionaldescriptive variables raised the R^ from .035 to .158when the usual measure of brand loyalty was used,and between equations 1(B) and 2(B) in which thetwo-dimensional measure of brand loyalty raisedthe R2 from .158 to .270 when the full set of de-scriptive variables was used.

The next step identified specific variables thatcontributed most to the description. The relativecontribution of each variable, expressed as a Betacoefiicient in equation 2(B), is summarized in Table3.

DISCUSSIONImprovements in brand loyalty and descriptive

measures, taken singly and in combination, havecontributed significantly to improving the explana-tion of individual variability in brand loyalty. Infact, without the improvements, the proportion ofvariability explained is insignificant. The resultsin Table 3 also provide a reasonably consistent pic-ture of the true brand-loyal buyer as:

• Very conscious of the need to economize whenbuying

• Confident of her brand judg^nents• A heavy buyer of the product• An older housewife in a smaller than average

sized household (who needs to satisfy the pref-erences of fewer family members)

• Apparently less influenced by day-to-day pricefluctuations, as evidenced by the fact that whilethe price paid per unit is close to average, therange of prices is quite narrow, and fewer pur-chases tended to be made on deal.

Other less significant findings which help to focusthe picture of the true brand loyal buyer indicatethat buyers are less impulsive and patronize fewerstores. There is some evidence that these buyersalso have less exposure to personal sources of infor-

TABLES

TW'O DIMENSIONAL BRANI> LOYALTY SCORES

(Coefficients for Equation 2B in Table 2)

Variable Ranked Beta Coefficients

1. Economy consciousness —1.00'2. Confidence in brand judgments _ .95'3. Household size _ .86^4. Total number of units purchased .80'5. Range of prices paid _ .75*6. Presence of children _ .647. Dealing _ .63'8. Age of housewife _ ,59"9. Invitations to visit ,59'

10. Impulsiveness .54"11. Store activity ,42Notes:(a) The largest Beta coefficient was set equal to 1.00 and the

rest of the coefficients were scaled proportionately.(b) The stepwise addition of the remaining ten variables lead

to an increase in the standard error of estimate.a = Significant < .01 level; b — Significant < .05 level

mation (at least through visits to friends). Nothingconclusive can be said about media exposure be-cause of the gross nature of the variable used.

A plausible interpretation is that true brand loyalbuyers are committed to the value and price appealof the brand by being confident that they havejudged the brand correctly, coupled with a per-ceived need to economize. This interpretation issupported by an independent correlation of .331(r2 = .110) between loyalty measure (Li) and a

TABLE 2

EFFECT OF CHANGES IN BRAND LOYALTY MEASUREAND DESCRIPTIVE VARIABLES ON REGRESSION RESULTS

Descriptive Variables

Weighting Scheme(A) Socioeconomic and

Demographic only(B) All Descriptive

Variables

EquationNumber

Ri Standard Errorof Estimate

R'(ADJ.)

Standard Errorof Estimate

I. k = I : n = 0[Usual measureof brand loyalty]

k=i/2; n = lk = 2; n = lk = 1; n = 1/4

a = Significant at < .01 level

34

2.3.4.5.

.035

.068JQ06^ 8.052

28.70

3S.6567.2318.0930.01

.158

.27O'

.270'

.221".232"

28.05

30.6061.2017.0828.50

b z= Significant < .05 level

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semantic differential scale with opposite poles read-ing "good buy for the money—not a good buy forthe money."

Clearly this interpretation is subject to qualifica-tion because of the large unexplained proportionof variability in the loyalty scores. Some error cer-tainly can be attributed to inadequacies in the vari-ables and the statistical limitations of the regressionmodel as well as reporting and coding mistakes. Ofmore serious consequence are the known shortcom-ings in the brand loyalty measure, particularly theinability of the measure to cope with attitudechange over time. Finally, there is evidence that themost important basis for commitment to the brandwas not represented in the set of descriptive vari-ables. This was uncovered when an independentscale representing food value (the actual attributeis disguised) had a simple correlation of .502(r̂ = .252) with the loyalty measure (Lj). Had thisscale been adequately represented by a descriptivevariable in the same way that the "good buy for themoney" scale was represented by the economy con-scious variable, the over-all correlation would havebeen much higher and the information about thebasis of loyalty to the brand being studied wouldhave been more complete.

IMPLICATIONSThere are several immediate implications from

this study, notably that brand loyalty can be prof-itably studied as a brand-specific concept and thatmeasures of brand loyalty based solely on purchasedata conceal considerable spurious loyalty. In ageneral sense, the results of this study help to clarifyvarious unrelated or competitive hypotheses aboutbrand loyalty. Any comments must necessarily betentative because the study focused only on onebrand (which means that switchers cannot be un-ambiguously identified), and one particular productclass which is not necessarily similar to other fre-quently purchased products.

According to this study, any one or all of the fol-lowing hypotheses about the nature of brand loyaltymerit serious consideration; (I) Loyalty is based ona rational decision made after an evaluation of thebenefits of competing brands. This decision is, ineffect, a commitment to the brand. Such decisionslikely are made on an infrequent basis, and oncemade the buyer either, (2) feels that such an explicitdecision is no longer necessary before each pur-chase, in which case the process becomes habitual,or (3) his strong affective orientation toward thebrand narrows his perceptual judgment, and he is

RESEARCH, VOL. 9, NO. 3

less likely to see competitive promotional activity(Bieri, 1967). Obviously, the commitment is nevertotal, and the decision is reviewed when competitiveor other circumstances change.

There is nothing in the descriptive findings ofthis study that contradict any of the above hy-potheses. Evidence for an initial rational decisionis particularly compelling, given the fact that truebrand-loyal buyers have the greatest degree of con-fidence in their ability to judge between brands.Because loyal buyers are heavier than average buy-ers of the product, we also can infer that they havemore experience on which to base an explicit de-cision. Heavy buyers also have more to gain byadopting an habitual pattern which will permitthem to economize on the effort of repeated de-cisions. The habit hypothesis is further supportedby the finding that true brand-loyal buyers tend tobe older and presumably have developed greaterrigidity in their preferences. Of course, it was easierfor older buyers of this product to maintain an ha-bitual pattern since they typically represented smallhouseholds with fewer competing preferences toconsider.

The evidence for a perceptual bias against com-peting stimuli (whether packaging, promotion, oradvertising) is tentative but very suggestive becausethere would be a direct contradiction in true brand-loyal buyers being economy conscious while at thesame time paying prices that are close to average.This hypothesis is supported from a different di-rection in a recent study (Bogart, 1967) that foundthe highest level of ad readership for a productoccurred among users who were brand loyal, "butnot among the most brand loyal."

' REFERENCESBlERi, JAMES. Attitudes and Arousal: Affect and Cognition

in Personality Eunctioning, in Carolyn and MuzaferSherif (eds,). Attitude, Ego-Involvement and Change,New York: John Wiley, 1967.

BOGART, LEO. Strategy in Advertising. New York: Harcourt,Brace, and World, 1967.

CARMAN, JAMES M. AND JOHN L. STROMBERG. A Comparisonof Some Measures of Brand Loyalty. Unpublished work-ing paper. Institute of Business and Economic Research,University of California, Berkeley, July 1967.

DAY, GEORGE S. Influences on the PredictixK Value of BrandAttitudes. Unpublished working paper. Graduate Schoolof Business, Stanford University, 1967.

FRANK, RONALD E. IS Brand Loyalty a Useful Basis forMarket Segmentation? Journal of Advertising Research,Vol. 7, No. 2, June 1967, pp. 27-33.

MASSY, WILUAM F. Brand and Store Loyalty as Bases forMarket Segmentation, in Joseph W. Newtnan (ed.). OnKnowing the Consumer. New York: John Wiley, 1966.

MOULSON, T . J. Danger Signals: How to Spot Erosion inBrand Loyalty. Printer's Ink, March 12, 1965, pp. 55-61.

NEWMAN, JTOFPH W . An Overview, in Joseph W. Newman(ed.). On Knowing the Consumer. New York: JohnWUey, 1966.