MKT4050 – Consumer Behaviour

Week 18 – Brand Loyalty

In groups create a definition

What is Brand Loyalty?

Aaker (1991)

Brand ◦ A distinguishing symbol, mark, logo, name,

word, sentence or a combination of these items that companies use to distinguish their product from others in the market.

Brand Awareness ◦ The likelihood that consumers recognize the

existence and availability of a company's product or service. Creating brand awareness is one of the key steps in promoting a product.

Brand Equity ◦ The value premium that a company realizes

from a product with a recognizable name as compared to its generic equivalent. Companies can create brand equity for their products by making

Definitions

The American Marketing Association (2011) defines brand loyalty as:◦ Consumer Behaviour Definition

"The degree to which a consumer consistently purchases the same brand within a product class"

◦ AMA - Sales Promotion Definition "The situation in which a consumer

generally buys the same manufacturer-originated product or service repeatedly over time rather than buying from multiple suppliers within the category"

Brand Loyalty Defined

Is Brand Loyalty more than simple repurchasing?◦ Customers may repurchase a

brand due to situational constraints; e.g.1. Vendor lock-in2. Lack of viable alternatives,3. Convenience

Such loyalty is referred to as "spurious loyalty".

Farris et al: (2010). Marketing Metrics

"Spurious Loyalty"

Loyalty CardsIs created loyalty true or

spurious?

Exists when customers have:◦ “a high relative attitude toward the

brand which is then exhibited through repurchase behaviour”

Dick and Kunal (1994)

Great asset to a firm:◦ Customers:

Willing to pay higher prices, Cost less to serve, Bring new customers

From marketers viewpoint ◦ Loyalty a key factor in terms of

consumer usage

True Brand Loyalty

Usage Rate / Rate Of Usage◦ Suppliers often segment into

Heavy Medium Light Users

◦ Pareto 80-20 Rule applies. 'Heavy Users' - disproportionately

important 20% of users accounting for 80% of

usage / profit

Key target = heavy users.

Kotler (1991)

Key Factors

Loyalty - Is customer is committed to brand?

Hard-core loyals Buy the brand all the time.

Split loyals Loyal to two or three brands.

Shifting loyals Moving from one brand to

another. Switchers

No loyalty Deal-prone - looking for

bargain Vanity prone - looking for

something different

Philip Kotler (1991)

Key Factors

Other Factors◦ Pre-dispositional commitment toward a brand

BL a Multidimensional construct Entails multivariate measurements: e.g.

Customers' perceived value Brand trust Customer satisfaction Repeat purchase behaviour Commitment

Commitment and = necessary conditioRepeated Purchase Behaviour ns ◦ followed by Perceived Value, Satisfaction, And Brand Trust

Reichheld (1996) /Punniyamoorthy & Raj (2007)

Key Factors

Dramatic effects on profitability

Longer tenure as a customer

Lower sensitivity to price increases.

Benefits From Brand Loyalty

Consumers Buy 'Portfolios of Brands◦ Switch regularly between brands

often because they simply want a change

◦ 'Brand Penetration' or 'Brand Share' A statistical chance that majority of

customers will buy that brand next time as part of their portfolio of favoured brands

◦ Emphasises a need for managing brand continuity

Ehrenberg, Uncles and Goodhardt (2004)

Portfolios of Brands

Managing Brand Continuity

Most markets show overall stability ◦ Change slow - decades / centuries

Two major implications

1. Clear brand leaders well placed re: competitors Still requires regular minor changes to

stay abreast of changes in consumer taste

2. Someone wishing to change market (or position) Massive investment needed

◦ Despite normal stability -sudden changes can occur

Environmental scanning

Market Inertia

Brand Loyalty As A Hypothetical Construct Brand Loyalty As A Multidimensional

Construct◦ Measured by several distinct psychological

processes ◦ Entails multivariate measurements.

Sheth & Park (1974) - Advances in Consumer Research Volume 1, 1974, pp. 449-459

Multi-dimensional Theory Of Brand Loyalty

Brand Loyalty As A Hypothetical Construct◦ positively biased emotive, evaluative and/ or

behavioural response tendency toward a branded, labelled or graded alternative or choice by an individual in his capacity as the user, the choice maker, and/or the purchasing agent.

Multi-dimensional Theory

No restrictions of repeated overt behaviour◦ Consumers may be brand loyal even though never

bought the brand May arise by learning from information, imitative

behaviour, generalization and consumption behaviour and not from buying behaviour experiences.

Consumer may have no evaluative (cognitive / attitudinal) structure underlying loyalty◦ Emotive tendencies (affect, fear, respect,

compliance, etc.) Related to loyalty

MDT - Behavioural & Cognitive Factors

Bl can exist at the non behavioural level ◦ Emotive or evaluative level - for products or

services which same consumers never buy Biased non-behavioural (non purchase) tendencies –

E.g. BL to cars, airplanes, boats, etc.

◦ Specific role consumer performs - loyal as: Consumer Buyer (purchasing agent) Decision-maker All three?

MDT - Non Behavioural Level

Source: Sheth & Park (1974)

Defined as a positively biased tendency that contains three distinct dimensions1. Emotive tendency toward the brand2. The affective (like-dislike) - fear, respect, compliance 3. Value-expressive or ego-defensive attitudes - Katz (1960)

Emotive tendencies learned from ◦ Prior experiences with brand ◦ Non-experiential or informational services.

Evaluative tendency ◦ Positively biased evaluation on a set of relevant criteria

The brand's utility to the consumer

Value-expressive or ego-defensive◦ Instrumental, utilitarian, attitudes - Katz (1960) ◦ Perceived instrumentality - Rosenberg (1956) /Howard and Sheth (1969)

Overview – MDT

Learned by the consumer ◦ Prior experiences ◦ Non-experiential/informational

sources.

Behavioural tendency towards the brand.◦ Positively biased responses

Primarily from buying and consuming experiences Procurement, purchase and

consumption activities Shopping, search, picking up

from the shelf, paying, consuming

Overview – MDT...

Social Media and Internet ◦ May be weakening influence of brand loyalty

Despite importance of brand awareness, growth of search engines can reduce the influence of branding. Consumers influenced by products that rank highest in

search engines, rather than by traditional brand awareness.

◦ Social networking having a similar effect User generated product reviews, etc

Salem-Baskin (2011)

Thoughts – New Research

Power of "Advocacy". ◦ Consumer actively talks and listens to other ‘loyal’

consumers Moves back and forth the traditional purchase funnel

◦ Forms a consideration set -“from listening” May change the consideration set Narrows choice to 1-2 brands

Kumar (2011)

Preference◦ If Families are Price Sensitive Then They will be So

Regardless of the Product Two main factors -sensitivity to price and brand

preference Consumers who are brand loyal tend to shop by brand

rather than price in other categories. Consumers who shop by price will tend to look for

bargains in all categories Peral (2011)

Thoughts – New Reseach

Reinforcement◦ Raising brand awareness helps to reinforce brand

loyalty ‘Tweens’ 9 -12 year olds exposed to over 20,000

commercials annually difficult for brand messages to stand out.

◦ Repetition through regular advertising is important

Reed (2011)

Thoughts – New Research

Habit◦ Consumers make choices based on names and

positive brand-associated images In retail outlets where consumers face choices for

same type of product - strong brand has a clear competitive advantage Difficult to copy v. Copycat products???

Pekala (2008)

Thoughts – New Research

Emotional Attachment ◦ Likely to top whatever market research a consumer

does before purchase Rely on 'rules of thumb' -leads to a persistent bias in how

they think. Consumer cherry-picks to reinforce existing viewpoint,

convincing themselves that they were right

◦ Smart companies use advocates to spread the word Brands with an emotional connection are placed in the

purchase pathway

Cunniffe & Sng (2012)

Thoughts – New Research