loyalty definition

ANZMAC 2000 Visionary Marketing for the 21st Century: Facing the Challenge

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Loyalty: Definition and Explanation

Robert East and Julie Sinclair, Kingston Business SchoolPhil Gendall, Massey University

AbstractDick and Basus typology has been widely cited as a definition of loyalty but this work would be morecompelling if the model predicted behaviours that are believed to be related to loyalty. We apply the Dick andBasu typology to supermarket customers in Britain and New Zealand. We use the customers loyalty andattitude to their first store to allocate them to the four segments of the typology, and predict advocacy andretention of the store. The analyses produced the pattern of results expected from Dick and Basus model in onlyone of the four cases and rather more understanding of advocacy and retention was provided by regression.

We centre the discussion on the definition of loyalty. We argue that definitions should be simple rather thancomplex and that the different forms of loyalty should be distinguished rather than combined. We demonstratethat this approach helps us to show that different forms of loyalty have little in common.

Descriptions, Definitions and Measures of Loyalty

At a general level, loyalty is shown by different propensities toward the brand, store or service. Thesepropensities may be expressed in behaviour and attitude. In service marketing, work has focused on continuityof purchase, i.e. retention, and advocacy of the brand (e.g. Reichheld 1996). In many service and utility markets,retention can be measured by duration of time as a customer. In grocery market research, where consumers usemultiple suppliers, one behavioural criterion of loyalty has been the share of category expenditure devoted to abrand or store (e.g. Cunningham 1956, 1961, Dunn and Wrigley 1984, McGoldrick and Andre 1997). Anothermeasure is the number of stores or brands used in a period (the larger the number, the lower the loyalty). Also inthe grocery field, modellers have used probability of purchase (e.g. Guadagni and Little 1983) and repeatpurchase (Ehrenberg and Goodhardt 2000). Turning to attitude measures, service researchers have employedsatisfaction and also commitment and trust (e.g. Morgan and Hunt 1994, Ennew and Binks 1996). In grocerymarkets, attitude to the brand or store has been used.

This variety leaves researchers with a choice: either to treat loyalty as having a number of specific forms or tosee it as complex and use definitions that combine more than one meaning. In particular, researchers maychoose between purely behavioural measures of loyalty or attitude-behaviour combinations. Jacoby andChestnut (1978) found that both simple behaviour and combination measures were employed. Tucker (1964)advocated purely behavioural measures while Day (1969) and others favoured measures that included attitudetoward the loyalty object. One definition combined six criteria (Jacoby and Olson 1970), and covered share-of-category spending, retention, attitude to the product and decision-making. This definition is routinely reported intextbooks but is more of a description of the ideas associated with loyalty than a usable definition. As far as wecan see, it has no operational value since it is too cumbersome to be used as the basis of measurement.

Here we suggest that, although descriptions of loyalty can combine meanings, definitions should be singular andclearly related to measurement. We argue that this is necessary because measures of the singular forms ofloyalty may show little association. For example, Dunn and Wrigley (1984) found only a modest correlation (0.44) between number of stores used and the share of expenditure given to the primary store. Also in storeresearch, East et al. (2000) found only a weak link between share loyalty and retention. This is perhaps to beexpected. Conceptually, share of category and retention are quite distinct and there is no necessity that acustomer who buys a large share of a brand should also retain that brand longer than a small-share customer.Weak associations have also been found between the evaluative and behavioural aspects of loyalty. East andHammond (1999) reviewed the link between satisfaction and true retention (i.e. measured as behaviour, notintention); they found that most studies revealed weak associations, despite widespread managerial assumptionsto the contrary. In these circumstances it seems to us to be unwise to produce combination measures of loyaltythat incorporate both evaluative and behavioural elements since the two components appear to have limitedassociation.


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Dick and Basus Typology of Loyalty

Despite these problems, recent work has continued to support definitions of loyalty that combine behaviour andevaluation. For example, Bloemer and Ruyter (1998) combined commitment and claimed probability of use (asa retention proxy) and Dick and Basu (1994) have offered an attitude-behaviour typology of loyalty that isshown as Figure 1. This divides consumers into four segments using two levels of behavioural loyalty and twolevels of attitude toward the brand. Dick and Basu state that customer loyalty is viewed as the strength of therelationship between an individuals relative attitude and their repeat patronage.

Repeat purchase

High LowRelative High True loyalty Latent loyaltyattitude Low Spurious loyalty No loyalty

Figure 1. Dick and Basus (1994) model of loyalty

Dick and Basu give attention to the appropriate measure of attitude. To be chosen, a brand must be liked morethan alternatives and therefore the attitude measure should be relative. Supporting this, Mgi (1999) found thatattitude to the store was more closely associated with store loyalty when it was measured as a relative concept.

In portfolio markets repeat purchase is measured as a rate. This is raised when customers buy more of thecategory (weight) and give more share loyalty to the brand in a period of time. Since weight-of-categorypurchase is not a form of loyalty, we argue that repeat purchase should not be used as a criterion of loyalty inportfolio markets. In the study reported later, we used share loyalty in place of repeat purchase.

The practical value of a typology such as Dick and Basus depends on whether the customers in the segmentsdiffer with regard to other loyalty behaviours. Dick and Basus approach implies that, normally, the most loyalbehaviour will be observed in the True loyalty segment and the least loyal behaviour in the No loyaltysegment. If the customers in the cells are not differentiated in this way on related variables, we may question thevalue of the typology. Despite wide citation in textbooks (e.g. Antonides and van Raaij 1998, Sheth, Mittal andNewman 1999), Dick and Basus loyalty segmentation does not appear to be used in research. Our study sets outto remedy this omission. We classify customers according to Dick and Basus typology using attitude and shareloyalty and then find out whether other loyalty behaviours occur in the frequencies that would be expectedaccording to the model, i.e. most often with True loyaltyand least often with No loyalty.

Investigation

We conducted supermarket loyalty surveys in 1998 in both Britain and New Zealand. In 1999, the respondentswere re-surveyed. In Britain, a sample of 2000 names and addresses was drawn from the electoral registers ofEngland and Wales. In New Zealand, 2200 names were drawn from the electoral rolls. In both cases, at eachaddress, the first womans name was selected; if the household did not contain a woman, the first mans namewas used. Responses were sought from the person who usually did the shopping in the household. In all cases, atwo-wave postal survey was used but an intervening reminder card was also used in New Zealand. Afterremoving post office returns from the sample, the usable response rates were 46 per cent (Britain) and 61 percent (New Zealand) in 1998.

Store attitude, category share loyalty and store advocacy were measured in the 1998 survey. Attitude to the mainstore was measured by:

Compared with other Poor [1]stores, would you rateAdequate [2] Low relative attitude = poor and adequateyour main store as ...? Good [3]

Excellent [4] High relative attitude = good and excellent


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Share loyalty was measured as first-store loyalty by the item:

What proportion of 50% or less [1]your total grocery 51 - 80% [2] Low loyalty = 80% or lessspending is made in your 81 - 95% [3]main store? More than 95% [4]High loyalty = More than 80%

Advocacy was measured by the item:

Have you ever Rarely or never [1]recommended your main Occasionally [2] Low loyalty = occasionally or lessstore to others? Quite often [3]High loyalty = quite often

Retention of the main store over twelve months was established in 1999 by comparing the claimed main storewith the 1998 entry. Those still using the same main store were treated as high loyalty.

Results

We used the attitude and share loyalty measures to segment respondents in the Dick and Basu typology and thenexamined advocacy and retention over 12 months in Britain and New Zealand. Tables 1 and 2 show the results.

Table 1. Advocacy. Percentage of segment recommending store quite often (n=number in segment)UK NZ

Share loyalty Share loyaltyHigh (81%+) Low (


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Table 4. Factors related to retention of main store over 12 monthsBritain New Zealand

Log. coeff. Significance Log. coeff. SignificanceShop around for best prices .6 0.009 - -Weekly spend 0.3 0.004 - -Attitude to store - - 0.5 0.001Out-of-stock - - 0.4 0.004Share loyalty - - 0.4 0.000Cox and Snell adjusted pseudo-R2: Britain 0.03; New Zealand 0.04

From these analyses we see that advocacy is not related to share loyalty but is consistently related to attitude. Inboth countries, those who look out for bargains are particularly likely to recommend stores. The latter findingshows a benefit of price competition: that it leads to recommendation and thus to customer recruitment.

There is no predictor of retention that is shared by the two countries. In New Zealand, both first-store loyaltyand attitude to the store relate to retention but neither of these are significant in Britain. This was unexpectedsince previous work in Britain has shown evidence that both first-store loyalty and attitude are related toretention (East et al. 2000). In New Zealand we also see that out-of-stocks are positively related to retention.This may be because the stores that are safe from defection by virtue of their location can afford to be lesscareful about stocking. The British evidence shows that heavier spenders are more likely to be retained, thusadding to their attraction as customers. We also see that those who try different stores in search of better pricesare more prone to defection.

Discussion

The Dick and Basu typology implies that the attitudinal and behavioural aspects of loyalty work together toproduce loyalty effects but only one of the four analyses gave support to this. It appears that recommendationand retention are based selectively on the attitudinal and behavioural components of loyalty, while the regressionanalyses show other bases.

In the physical sciences, definitions of concepts are made in terms of other concepts so that dimensionalcoherence is maintained. For example, force must always have the dimensions of mass x acceleration. Inmarketing, where multi-causal models rather than functional relationships apply, this approach is lessappropriate. The multi-causal model is typically under test, rather than accepted like the equations of physics,and attempts to provide definitions that include possible causes vitiate investigation of these causes. At best,these are attempts to describe existing knowledge. In these circumstances, definitions should be chosen usingcriteria of simplicity, linkage to measurement and research fertility.

The argument that complicated definitions impede research echoes an earlier and related controversy in theattitude-behaviour field explored by Fishbein and Ajzen (1975). These researchers were faced with a widelyaccepted hybrid model of attitude that linked together evaluative, cognitive and behaviour-tendency variables.Fishbein and Ajzen stripped attitude back to its evaluative meaning and treated cognitive and behavioural factorsas separate concepts, which were linked to attitude in a causal model. The resulting theory (reasoned action,later planned behaviour) has been most fertile and has become one of the major explanations in socialpsychology.

Definitions need more attention in marketing. They should not be chosen to represent the range of currentunderstanding. This is description. Specific definitions, clearly related to measurement, should help us to assesscausal links and to produce better predictions, explanations and applications.

References

Antonides, Gerrit and van Raaij, W.Fred (1998), Consumer Behaviour: A European Perspective, Chichester, J. Wiley &Sons.

Bloemer, Jose. and de Ruyter, Ko (1998), On the Relationship between Store Image, Store Satisfaction and StoreLoyalty, European Journal of Marketing, 32 (5/6), 499-513.


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Cunningham, Ross M. (1956), Brand Loyalty - What, Where, How Much? Harvard Business Review, 34 (Jan/Feb), 116-128.

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----, ----, Harris, Patricia and Lomax, Wendy (2000), First-Store Loyalty and Retention, Journal of MarketingManagement, 16 (4), 307-325.

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Guadagni, Peter M. and Little, John D.C. (1983) A Logit Model of Brand Choice Calibrated on Scanner Data, MarketingScience, 2 (3), 203-238.

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Jacoby, Jacob and Olson, J.C. (1970), An Attitudinal Model of Brand Loyalty: Conceptual Underpinnings and InstrumentationResearch. Purdue Paper in Consumer Psychology, No 159.

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