Brand loyalty

Brand loyalty is where an individual buys products fromthe same manufacturer repeatedly rather than from othersuppliers.[1]

In a survey of nearly 200 senior marketing managers, 68percent responded that they found the loyalty metricvery useful.[2]

True brand loyalty occurs when consumers are willing topay higher prices for a certain brand, go out of their wayfor the brand, or think highly of it.[3]

1 PurposeBrand loyalty, in marketing, consists of a consumer'scommitment to repurchase or otherwise continue usingthe brand and can be demonstrated by repeated buyingof a product or service, or other positive behaviors suchas word of mouth advocacy.[4]

Examples of brand loyalty promotions

My Coke Rewards Pepsi Stu Marriott Rewards

2 ConstructionBrand loyalty is more than simple repurchasing. Cus-tomers may repurchase a brand due to situational con-straints (such as vendor lock-in), a lack of viable alterna-tives, or out of convenience.[5] Such loyalty is referred toas spurious loyalty. A recent study showed that cus-tomer loyalty is aected by customer satisfaction, butthe association diers based on customer switching costs(procedural, relational, and nancial)[6] True brand loy-alty exists when customers have a high relative attitudetoward the brand which is then exhibited through repur-chase behavior.[4][7] This type of loyalty can be a great as-set to the rm: customers are willing to pay higher prices,they may cost less to serve, and can bring new customersto the rm.[8][9] For example, if Joe has brand loyalty toCompany A he will purchase Company As products evenif Company Bs are cheaper and/or of a higher quality.From the point of view of many marketers, loyalty to thebrand in terms of consumer usage is a key factor.However, companies should ensure that they are not re-taining loyal, but unprotable customers.[10]

Usage rateMost important is usually the 'rate' of usage, to whichthe Pareto 80-20 Rule applies. Kotlers 'heavy usersare likely to be disproportionately important to the brand(typically, 20 percent of users accounting for 80 percentof usage and of suppliers prot). As a result, suppliersoften segment their customers into 'heavy', 'medium' and'light' users; as far as they can, they target 'heavy users.However, research shows that heavy users of a brand arenot always the most protable for a company.[10]

LoyaltyA second dimension, is whether the customer is commit-ted to the brand. Philip Kotler, again, denes four pat-terns of behaviour:

1. Hard-core Loyals - who buy the brand all the time.

2. Split Loyals - loyal to two or three brands.

3. Shifting Loyals - moving from one brand to another.

4. Switchers - with no loyalty (possibly 'deal prone',constantly looking for bargains or 'vanity prone',looking for something dierent). Again, researchshows that customer commitment is a more nuanceda ne-grained construct than what was previouslythought. Specically, customer commitment hasve dimensions, and some commitment dimensions(forced commitment may even negatively impactcustomer loyalty).[11]

Factors inuencing brand loyaltyIt has been suggested that loyalty includes some degreeof pre-dispositional commitment toward a brand. Brandloyalty is viewed as multidimensional construct. It is de-termined by several distinct psychological processes andit entails multivariate measurements. Customers per-ceived value, brand trust, customers satisfaction, repeatpurchase behavior, and commitment are found to be thekey inuencing factors of brand loyalty. Commitment[11] and repeated purchase behavior are considered asnecessary conditions for brand loyalty followed by per-ceived value, satisfaction, and brand trust.[12] Fred Re-ichheld,[13] One of the most inuential writers on brandloyalty, claimed that enhancing customer loyalty couldhave dramatic eects on protability. However, new re-search shows that that the association between customerloyalty and nancial outcomes such as rm protabilityand stock-market outcomes is not as straightforward as

1

2 5 REFERENCES

was once believed.[14] Many rms may overspend on cus-tomer loyalty, and then do not reap the intended benets.Among the benets from brand loyalty specically,longer tenure or staying as a customer for longer wassaid to be lower sensitivity to price. This claim had notbeen empirically tested until recently. Recent research[15]found evidence that longer-term customers were indeedless sensitive to price increases. However, the claims ofReichheld have been empirically tested by Tim Keining-ham and not found to hold.[16] Byron Sharp showed em-pirically that behaviour aects attitudinal response notthe other way round. Longer term customers are less sen-sitive because it is harder for them to completely stop us-ing the brand.[17] In another study Mittal and Kamakurashowed that though satised customers were more likelyto repurchase their previous brand of car, the relationshipwas not very strong, varied for dierent customer groups,showed non-linear patterns for dierent groups, and wasvirtually non-existent for some customer groups.[7]

Industrial marketsIn industrial markets, organizations regard the 'heavyusers as 'major accounts to be handled by senior salespersonnel and even managers; whereas the 'light usersmay be handled by the general salesforce or by a dealer.Portfolios of brandsAndrew Ehrenberg, then of the London Business Schoolsaid that consumers buy 'portfolios of brands. Theyswitch regularly between brands, often because they sim-ply want a change. Thus, 'brand penetration' or 'brandshare' reects only a statistical chance that the majorityof customers will buy that brand next time as part of aportfolio of brands they favour. It does not guarantee thatthey will stay loyal.Inuencing the statistical probabilities facing a consumerchoosing from a portfolio of preferred brands, which isrequired in this context, is a very dierent role for a brandmanager; compared with themuch simpler one tra-ditionally described of recruiting and holding dedicatedcustomers. The concept also emphasises the need formanaging continuity.

3 CautionsOne of the most prominent features of many markets istheir overall stability or marketing inertia. Thus, intheir essential characteristics they change very slowly, of-ten over decades sometimes centuries rather thanover months.This stability has two very important implications. Therst is that those who are clear brand leaders are es-pecially well placed in relation to their competitors andshould want to further the inertia which lies behind thatstable position. This, however, still demands a continuingpattern of minor changes to keep up with the marginal

changes in consumer taste (which may be minor to thetheorist but will still be crucial in terms of those con-sumers purchasing patterns as markets do not favour theover-complacent). These minor investments are a smallprice to pay for the long term prots which brand leadersusually enjoy.The second, and more important, is that someone whowishes to overturn this stability and change the market (orsignicantly change ones position in it), massive invest-ments must be expected to be made in order to succeed.Even though stability is the natural state of markets, sud-den changes can still occur, and the environment must beconstantly scanned for signs of these.

4 See also Brand architecture Brand aversion Brand equity Brand management Brand language Brand tribalism Customer engagement Employer branding Evangelism marketing Visual brand language

5 References[1] American Marketing Association Dictionary. Retrieved

2011-07-09. The Marketing Accountability StandardsBoard (MASB) endorses this denition as part of its ongo-ing Common Language: Marketing Activities andMetricsProject.

[2] Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; DavidJ. Reibstein (2010). Marketing Metrics: The DenitiveGuide to Measuring Marketing Performance. Upper Sad-dle River, New Jersey: Pearson Education, Inc. ISBN 0-13-705829-2. The Marketing Accountability StandardsBoard (MASB) endorses the denitions, purposes, andconstructs of classes of measures that appear inMarketingMetrics as part of its ongoing Common Language: Mar-keting Activities and Metrics Project.

[3] What is brand loyalty?". Market Business News. July2015.

[4] Dick, Alan S. and Kunal Basu (1994), Customer Loyalty:Toward an Integrated Conceptual Framework, Journal ofthe Academy of Marketing Science, 22 (2), 99-113.

3[5] Jones, Michael A., David L. Mothersbaugh, and SharonE. Beatty (2002), Why Customers Stay: Measuring theUnderlying Dimensions of Services Switching Costs andManaging Their Dierential Strategic Outcomes, Journalof Business Research, 55, 441-50.

[6] Blut, Markus and Frennea, Carly and Mittal, Vikas andMothersbaugh, David L., How Procedural, Financial andRelational Switching Costs Aect Customer Satisfac-tion, Repurchase Intentions, and Repurchase Behavior:A Meta-Analysis (January 20, 2015). International Jour-nal of Research in Marketing, Forthcoming. Available atSSRN: http://ssrn.com/abstract=2553402

[7] Vikas Mittal and Wagner Kamakura. (2001) Satisfac-tion, Repurchase Intent, and Repurchase Behavior: Inves-tigating the Moderating Eect of Customer Characteris-tics. Journal of Marketing Research, 38(1): 131-142.Available at SSRN: http://ssrn.com/abstract=2344925

[8] Reichheld, Frederick F. and W. Earl Jr. Sasser (1990),Zero Defections: Quality Comes to Services, HarvardBusiness Review (SeptemberOctober), 105-11.

[9] Reichheld, Frederick F. (1993), Loyalty-Based Manage-ment, Harvard Business Review, 71 (2), 64-73.

[10] Reinartz, Werner J., and Vita Kumar. The impact of cus-tomer relationship characteristics on protable lifetimeduration. Journal of marketing 67.1 (2003): 77-99.

[11] Keiningham, Timothy L. and Frennea, Carly and Ak-soy, Lerzan and Alexander and Mittal, Vikas, A Five-Component Customer Commitment Model: Implicationsfor Repurchase Intentions in Goods and Services Indus-tries (2015). Journal of Service Research, 1-18, 2015 .Available at SSRN: http://ssrn.com/abstract=2593914

[12] Punniyamoorthy, M and Prasanna Mohan Raj, An em-pirical model for brand loyalty measurement, Journal ofTargeting, Measurement and Analysis forMarketing, Vol-ume 15, Number 4, September 2007 , pp. 222-233(12)

[13] Reichheld, F. The Loyalty Eect 1996

[14] Reinartz, Werner, and V. I. S. W. A. N. A. T. H. A. N.Kumar. The mismanagement of customer loyalty. Har-vard business review 80.7 (2002): 86-95.

[15] Dawes, J. The Eect of Service Price Increases on Cus-tomer Retention: The Moderating Role of CustomerTenure and Relationship Breadth. Journal of Service Re-search, Vol 11, 2009.

[16] A longitudinal examination of Net Promoter and FirmRevenue Growth (PDF). Journal of Marketing 71. July2007.

[17] Byron Sharp. How Brands Grow.

P. Kotler, 'Marketing Management ' (Prentice-Hall,7th edn, 1991)

Jacoby, J. and Chestnut, R.W., 1978, Brand Loy-alty: Measurement Management (John Wiley &Sons, New York).

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