Managing brand equity


This thesis is an essential requirement of our degree. The research topic that I have selected is the "Variables affecting Brand Loyalty of Smokers" for different smoking brands. The variables that I would rather consider in my survey while developing a questionnaire are as under.

The prime objective of this research is to find out the brand loyalty if the above factors are changed.

Brand loyalty is not a new concept; it has been an important aspect of marketing for many years. As the world is developing into global village with passage of time, it has resulted in increase in competition in every field. Moreover as the competition is increasing, companies have shifted their focus more towards brand.


Consumer buying behavior is affected by many socio-cultural factors like social class, demographics, personality and beliefs etc. However, besides these, the product itself also makes their decision for them because of the message it transmits, the visual impact it makes, the significant colors and logo of the brand, the brand image and awareness, and the price. Consumer's in Pakistan are not different then consumer's in other part of the world.


The research studies the variables affecting the brand loyalty of cigarette brands.

  • Do they know anything regarding the brand loyalty
  • To determine, whether the brand loyalty exists for the cigarette brands in Peshawar.
  • Are the people loyal to the only brand that they smoke.

To analyze the brand loyalty of consumers for different smoking brands that is upper brands in comparison to lower brands. Though brand loyalty is considered to be very high in brands of cigarettes but I would rather focus on those factors which affects the brand loyalty .i.e Price, Taste, Peer Pressure, Packing.

In this research I am studying "the variables affecting the brand loyalty of cigarette brands".


The subject/content of the study is to analyze the variables affecting brand loyalty of cigarette brands. In order to make research specific, I am going to focus on respondents living in Peshawar from diverse backgrounds, varying ages and professions.

The time frame of the study covers four months. This research is an unbiased research. My data collection will target respondents coming from different backgrounds, in terms of age, gender, social class and education. The scope of my study is restricted to the people who smoke in Peshawar only. The focus of study will include business men, professionals, and Students.


  • Time constraint
  • Data availability
  • Area of the study limited to one city only.
  • Uncooperative respondents
  • Smokers only


I will gather data from respondents with the help of a questionnaire. Original copy of the questionnaire will be attached to the research report in Appendix section. After data has been gathered from the respondents it will be analyzed and will be converted into percentage form. A graphical representation of data for each question is also included in the research report to make life easier for readers.

Research Design:

This research study which is an exploratory study.


Basically in this report two types of data have been used. Both of them are listed below:

Primary Data:

Primary data is the one which is collected from the scratch meaning that the data is collected from the source and it has not changed hands. In this report primary data has been collected directly from the respondents. The data has been collected from the respondents living in Peshawar with the help of a survey. Questionnaires, consisting of 13 questions, were developed to quantify my observations and give study a direction. The questions were structured, placed in a sequence, to understand the consumer's perception. The respondents were chosen randomly and the data obtained from their questionnaires was analyzed to come up with the findings. The data for the study under research was collected once, during time period of about three months, so this is a cross-sectional study. Since the elements in the population, have the same known chance of being selected as the sample subjects, so the findings obtained from the sample can be generalized for the entire population.

Secondary Data:

Secondary data is the one which is collected from the secondary source. This research study also contains secondary data. The secondary data was collected for the purpose of literature review. The secondary data was collected from different research journals and further more different websites were used for this purpose.

Research Instruments:

The instruments that I would rather consider for my survey are questionnaire, informal interviews.

Sampling Design:

The procedure of selecting the sample of respondents is given below:

Target Population:

The subject/content of the study is to analyze the variables affecting brand loyalty of cigarette brands. In order to make research specific, I am going to focus on respondents living in Peshawar only and of varying ages and professions. So my population is consumers/smokers living in Peshawar.

Sample Size:

A sample of one hundred & fifty consumers was chosen on the basis of convenient sampling. The sample size for this research study were 150 respondents out of population.


The report has been divided into different sections, which are in the following shipshape.

Section I

Section I consist of the only chapter that covers the background of the study, purpose, scope, limitations, methodology and scheme of the study.

Section II

Section II consist of two chapters that report incorporates the concept of brand loyalty and literature review of the report.

Chapter 2: It includes the concept and introduction of the brand loyalty.

Chapter 3: It includes the literature review.

Section III

Section III of the report consist of the chapter 4 that contains survey findings including tables and figures and also its analysis.

Section IV

Section IV of the report comprises two chapters

Chapter 5: Conclusions

Chapter 6: Recommendations


CHAPTER 2: Concept of brand loyalty



"Brand is a name, term, symbol, design or combinations of all of these which helps in identifying a seller's product and differentiate them from competitor product." Birkin, (1994).


Branding is a process that is used by the businesses to utilize marketing strategies to enhance their product or service image so that it is more readily recollected by the customers. A brand may also be defined as a marketing identity created for a generic product in order to distinguish it from its competitors.Gregory, (2003).

Brand Image:

The perception of your product or brand by your consumer. Olins, Wally (2003)

Brand Loyalty:

A measure of degree to which a buyer recognizes, prefers and insists upon a particular brand; brand loyalty is a result of continued satisfaction from a product considered important and gives rise to repeat purchase of products with little thought or consideration but with high-involvement.

Dick and Kunal (1994)


  1. Hard Core Loyals - who buy the brand all the time.
  2. Soft Core 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 different).

Brand loyalty, in marketing, consists of a consumer's commitment to repurchase the brand and can be demonstrated by repeated buying of a product or service or other positive behaviors such as word of mouth advocacy. True brand loyalty implies that the consumer is willing, at least on occasion, to put aside their own desires in the interest of the brand. Brand loyalty has been proclaimed by some to be the ultimate goal of marketing.

Brand loyalty is more than simple repurchasing, however. Customers may repurchase a brand due to situational constraints, a lack of viable alternatives, or out of convenience. Such loyalty is referred to as "spurious loyalty". True brand loyalty exists when customers have a high relative attitude toward the brand which is then exhibited through repurchase behavior. This type of loyalty can be a great asset to the firm: customers are willing to pay higher prices, they may cost less to serve, and can bring new customers to the firm. For example, if Joe has brand loyalty to Company A he will purchase Company A's products even if Company B's are cheaper and/or of a higher quality.

An example of a major brand loyalty program that extended for several years and spread worldwide is Pepsi Stuff. Perhaps the most significant contemporary example of brand loyalty is the fervent devotion of many Mac users to the Apple company and its products.

From the point of view of many marketers, loyalty to the brand - in terms of consumer usage - is a key factor:

Factors Influencing Brand Loyalty

It has been suggested that loyalty includes some degree of pre-dispositional commitment toward a brand. Brand loyalty is viewed as multidimensional construct. It is determined by several distinct psychological processes and it entails multivariate measurements. Customers' Perceived value, Brand trust, Customers' satisfaction, Repeat purchase behavior and Commitment are found to be the key influencing factors of brand loyalty. Commitment and Repeated purchase behavior are considered as necessary conditions for brand loyalty followed by Perceived value ,satisfaction and brand trust .

Industrial Markets

In industrial markets, organizations will regard the `heavy users' as `major accounts', to be handled by senior sales personnel and even managers; whereas the `light users' may be handled by the general sales force or by a dealer.

Portfolios of Brands

Reichheld, (1993), then of the London Business School said that consumers buy 'portfolios of brands. They switch regularly between brands, often because they simply want a change. Thus, 'brand penetration' or 'brand share' reflects only a statistical chance that the majority of customers will buy that brand next time as part of a portfolio of brands they favour. It does not guarantee that they will stay loyal.

Influencing the statistical probabilities facing a consumer choosing from a portfolio of preferred brands, which is required in this context, is a very different role for a brand manager; compared with the - much simpler - one traditionally described, of recruiting and holding dedicated customers. The concept also emphasises the need for managing continuity.

Market Inertia

On the other hand, one of the most prominent features of many markets is their overall stability - or inertia. Thus, in their essential characteristics they change very slowly, often over decades - sometimes centuries - rather than over months. This stability has two very important implications. The first is that if you are a clear brand leader you are especially well placed in relation to your competitors, and should want to further the inertia which lies behind that stable position. This will, however, still demand a continuing pattern of minor changes, to keep up with the marginal changes in consumer taste (which may be minor to the theorist, but will still be crucial in terms of those consumers' purchasing patterns - markets do not favor the over-complacent.). But these minor investments are a small price to pay for the long term profits which brand leaders usually enjoy. Only farm-hands make a career out of milking cows, and only fools jeopardise the investment contained in an established brand leader.

The second, and more important is that if you want to overturn this stability, and change the market (or significantly change your position in it), then you must expect to make massive investments to succeed. Even though stability is the natural state of markets, however, sudden changes can still occur and the environment must be constantly scanned for signs of these.

Brand Equity:

A term used in reference to the value of a well-known brand; brand equity can greatly affect the buyout price of a company.

Brand Familiarity:

The awareness consumers have of a particular brand.

Brand Strategy:

Brand strategy involves five choices, which are line extensions, brand extensions, multi-brands, new brands and co-brands.

Brand Recognition:

It is that stage of brand loyalty at which the buyer is aware of the existence of a particular brand but has no preference for it.

Brand Repositioning:

Changing the appeal of brand to attract new segment of consumers. It is not necessary that in repositioning process should include product modifying.



According to Agung I.G.N (2002), Brands act as a distinctive factor that distinguishes one product from the other. For example, consumers are no longer buying coffee but choosing brands in the market, i.e. Nescafe, Torabika, ABC, Kapal Api, etc. Consumer sensitivity is the sensitivity or perceptiveness of consumers towards an object (brand) that builds their pattern of behavior towards the object. Producers of the various instant coffee brands can provide a detailed explanation on the differences of the brands. Consumers see the differences in the package, logo, color, even the shape of fonts used by the brands. This is called consumer sensitivity. Therefore, it is very important for producers to manage their brand to make their products a success in the market. A highly, professionally managed brand will attract consumers, drive and stimulate them to buy, and even to buy repeatedly.

Brands should be considered as a soul Aaker (1991). This statement suggests that brand should not be viewed as product or service, but as an organization, person, or symbol that distinguishes them. Nevertheless, not every strong brand delivers brand loyalty. Popular brands sometimes bring damage as they can transform to generic product. For example, many people see Aqua1 as identical to mineral water products, not as a brand. This brings a negative effect to Aqua as consumers fail to see the difference between the brand and the product. Additionally, they do not mind if they are offered other brands besides Aqua. Consequently, if Aqua does not want to loose its market, at least it should ensure the availability of its products.

The brand actually makes the personification of the products or companies. This condition goes along with an old Latin saying "on est omen" (the name is the mark, identification or identity). The product brand forms or possesses identity or image and integrity of the product/company through a perception process within the very mind. In words, the brand is related to how the potential consumer perceives the products'/services' attribute through its brand. For examples Coke is not only known as a brand of soft drink inside the mind of the consumers, but also a promise of a good performance related with the values of refreshment, fun and good times. The brand is considered something which is very important to the company. The brand, which owns that extra value on the sight of the consumers, will be favored by the consumers and has its own place within the consumers' mind. Another example is "Odol". It is a tooth paste brand, which used to be produced by the Dutch but it can no longer be found in the market today. However, when people are buying or ordering tooth paste now in the present day, they still use "Odol" as the name of the tooth paste, even though the brand is not Odol.

The above arguments document the evidence that brand affect and brand trust play a vitaal role to brand management and further brand loyalty. The brand stated above able to give meaningful impressions to the consumers and can easily earn special attention from consumers. That means, a brand has to truly understand what the consumers desire most (utilitarian and hedonic value). By doing this consumers would feel that the brand is actually a part of them and could result brand loyalty. This phenomenon motivates the writer to see the relation between the brand trust and brand affect towards brand performance.

Brand loyalty is identical with the consumers' brand commitment (Afuah, A. & Tucci, C. L. (2001); Fournier, (1998) added an opinion saying that consumers' brand loyalty or commitment is the result of trust. This is because loyalty or commitment is the willingness to keep or maintain a high quality relationship.

Brand affect, which exists as the results of a strong and positive affective respond would positively relate to the consumers' loyalty and commitment towards the brand (Dick, S. and Kunal, B. 1994). Thus, there is a positive relationship towards the attitudinal loyalty to initiate purchasing activity. Gardner, B. and Sidney, J. (1955), tried to explain the significance within the scope of brand loyalty. This research states the direct and indirect relations between the loyalty aspects, such as: quality value, hedonic and utilitarian value, with the brand loyalty itself. One of the aspects is emotional, where the positive emotional is directly related to brand loyalty, vice versa.

The brand that able to offer an added value to the consumers would urge the consumer to be loyal (Aaker, 1996). This consumers' brand loyalty is definitely able to improve the market share Fournier, S. (1998), where consumer brand consumption will be influenced by the number of affective factors. A positive affective factor will give a positive effect towards brand loyalty.

Halowell, R. (1996) defined brand loyalty as a deeply held commitment to consume product or service in the future. The brand, which can create consumer commitment, will result to consumer trust in the consumers' decision making, which eventually would determine brand loyalty (Morgan & Hunt, 1994). This brand trust and brand affect will provide a significant contribution to the brand performance, through attitudinal loyalty and purchase loyalty (Chaudhuri & Holbrook, 2001). The conceptual frame of this study is to explain the relationship among brand trust, brand affect and brand loyalty, and also the relation between brand loyalty and brand performance.



Consumers' trust towards brand (brand trust) and a positive brand affect will also influence the attitudinal loyalty or consumer behavior towards the brand (Goodyear, M 1996). These studies emphasized that there are several levels of consumer commitment towards the brand in the context of brand loyalty. The commitments are (among others): trust, continual purchase, reluctant to switch brand (brand switching) and the joy or happiness (affect) when consuming that brand. Brand trust will determine brand loyalty or consumer commitment towards the brand because trust is potential in creating highly valued relationship. The trust towards the brand will influence the intention to continue purchasing and stimulate the high attitudinal loyalty. In the relation between consumer loyalty and commitment found that there is a relationship between loyalty and positive affect accepted by the consumers. Dick & Basu (1994) emphasized that brand loyalty will be even better if the brand is placed in a positive emotional mood/affect. Strong and positive brand affect will also cause a positive impact towards the consumer brand loyalty, in both purchase loyalty and attitudinal loyalty.


Kapferer, J (1997), suggested that there is a positive relation between brand loyalty (purchase and attitudinal loyalty) and brand performance (relative price and market share). They argue that a high purchase loyalty will increase the market share. This research is supported by The Double Jeopardy Theory which said that the brand which owns a small market share will have only few buyers and the purchasing frequency will also be small, vice versa. Other researchers, Young,R. (1994), discovered that brand which owns a high purchase loyalty will increase the market share of the brand. Furthermore, a high attitudinal loyalty, according to Gardner, B. and Sidney, J. (1955), will also increase relative price of the brand itself. Aaker (1996) stated that brand price is an important aspect in building brand equity. Brand equity is driven by the premium price which is related to the name of the brand itself. This is obviously contradictory with the research which was conducted by Miller & Muir (2004), who discovered that the consumer's perception towards brand price does not determine brand loyalty. Keller (1991) said that consumer who has strong brand attitude, will be willing to pay the price over that particular brand, more than the price of any other brand.

According to Aaker, J.L. (1997), the paper argues that greater awareness of the connections between the traditions and conventions of visual art and the production and consumption of images leads to enhanced ability to understand branding as a strategic signifying practice. It forms part of a larger call for inclusion of art historical issues within the marketing research canon and joins in the contention that art history can provide a necessary contextualizing counterpoint to information processing views of branding's interaction with consumer behavior and visual perception. Artists offer exemplary instances of image creation in the service of building a recognizable look, name, and style - a brand, in other words. Successful artists can be thought of as brand managers, actively engaged in developing, nurturing, and promoting themselves as recognizable "products" in the competitive cultural sphere. Brands are inherently visual - brand logos, product design, packaging, brand identity, and brand marketing campaigns each draw upon visual materials to create distinctive brand images - yet marketing scholars have seemed reluctant to embrace art history and visual studies as critical fields with potential contributions to branding knowledge. In this paper, several prominent, successful artists serve as case studies to illuminate the potential for insights into the interconnections between art, branding, and consumption. This article places brands firmly within culture to look at the complex underpinnings of the branding, linking perceptual and cognitive processes to larger social and cultural issues that contribute to how brand images work.

Recent research has shown that brands work in multiple ways, prompting an important and illuminating reconsideration of branding processes and shifting attention from brand producers toward consumer response to understand how branding creates meaning (e.g., Aaker 1997; Firat and Schultz 1997; Fournier 1998;. Cultural codes, ideological discourse, consumer's background knowledge, and rhetorical processes have been cited as underlying influences of consumer's relationships to advertising, brands and mass media. Consumers are seen to construct and perform identities and self-concepts, trying out new roles and creating their self-image within and in collaboration with, brand culture (e.g., Reichheld (1993),. In other words, neither managers nor consumers completely control branding processes - cultural codes contribute to, and constrain, how brands work to produce meaning. Brands are inherently visual; brand logos, product design, packaging, brand identity, and brand marketing campaigns each draw upon visual materials to create distinctive brand images, yet marketing scholarship has seemed reluctant to embrace the art world's potential contributions to branding knowledge (see e.g., Brown and Patterson 2000; Witkowski 1999). This paper forms part of a larger call for inclusion of art historical issues within the marketing research canon (Schroeder and Borgerson 2002), and joins in the contention that art history can provide a necessary contextualizing counterpoint to information processing views of branding's interaction with consumer behavior and visual perception. This is not to claim that brands are wholly visual, rather to point attention to the visual aspects of branding that might benefit from an art-based approach. In this paper, several prominent, successful artists serve as illustrative examples of the interconnections between art, branding, and consumption, placing cultural brands firmly within culture to look at the complex underpinnings of the branding process. This paper argues that greater awareness of the connections between the traditions and conventions of visual art and the production and consumption of images leads to enhanced ability to understand branding as a strategic signifying practice. Artists offer exemplary instances of image creation in the service of building a recognizable look, name, and style - a brand, in other words. Successful artists can be thought of as brand managers, actively engaged in developing, nurturing, and promoting themselves as recognizable "products" in the competitive cultural sphere. However, the intellectual, disciplinary, and semiotic separation of art and business has obscured the potential of studying the art market as an exemplar of image-based branding. An art-centered approach suggests augmenting the branding research tradition to acknowledge both the commercial mechanisms inherent in the art market and brands prominent place in visual culture. Three leading artists will serve as case studies: Andy Warhol, Barbara Kruger, and Cindy Sherman. Warhol provides a stunning example of artist as brand - he was extremely articulate about his ambition to become famous - and his work reflectively comments on brands and consumer culture. Aaker, J.L. (1997),

According to Aaker,(1991), Nowadays, brands are companies' most valuable assets, adding both economic andstrategic value to its proprietors. During the last years, brand valuation has been anintensively analyzed subject among marketing specialists. The value of this asset isoften referred to as brand equity which is the marketing and financial value associated with a brand's strength in the market or the added value a given brand name provides toa product beyond the functional benefits. Besides the actual proprietary brand assets, such as patents and trademarks, other major elements underlie brand equity: brand awareness, perceived quality, brand associations and others, but, above all, brand loyalty, which represents the core of a brand's value. This paper will try to position brand loyalty among other descriptive dimensions of brand equity, analyze the effects of a high degree of loyalty among customers, identify several typologies of customers considering their level of loyalty and finally establish a framework for creating, maintaining, enhancing, and assessing brand loyalty.

Kellers (2003) argues that developing insight about whether consumer promotion schemes are helpful in building brand equity or not. Besides advertising, there are other consumer promotional schemes that help companies to develop brand equity and help in building consumer loyalty and avoids consumer switching from one brand to other. There are numbers of consumer promotional schemes that companies use like free gifts, buy one get one free, coupons, lotteries etc. Consumer promotions play a key role in the life cycle of a brand. The role varies according to the stage in the life cycle, market situation and competitive scenario. Promotions can have a significant impact on penetration build for new brands and for stimulating growth in existing brands provided they are anchored on a well defined activation platform that builds brand equity. In this paper, we have analyzed companies that have used various promotional schemes and also whether all these promotional schemes were successful or a failure and reason behind that. The data collected for the research is basically secondary data gathered from websites, books and journals on marketing. The overall definition of brand equity incorporates the ability to provide added value to your company's products and services. This added value can be used to your companies' advantage to charge price premiums, lower marketing cost and offer greater opportunity to customer purchase. A badly mismanaged brand actually have negative brand equity, means that customers have such a low perception of brand image that they prescribe less value to the product than they would if they objectively assess its attributes and features.

One of the best examples of brand equity is the soft drink industry. Without the brand name, coca cola would be nothing more than flavored water. Due to company's long-term marketing efforts and protection, enhancement and nurturing of their brand name, coke is one of the most recognizable brand names in the world. If some company suddenly took away their brand name and brand equity, coke would lose billions dollars. This includes lost sales, lost money and promotions, additional cost to promote new brand, and significantly lower awareness and trial rates for their new brand.

Monetary value:

The amount of additional income that is expected from the branded product to generate as compared to unbranded products.

Intangible value:

The intangible value associated with the product that cannot be accounted for by price or features. Nike has created many intangible benefits for its product by associating it with star athlete. Consumers buy these shoes to associate themselves with the image of the shown athletes. Thus, it is not the physical feature that created demand for its product but the marketing image that has been created.

Perceived quality:

The overall perception of quality and image attributed to a product, independent of its physical features. Mercedes and BMW have established their brand image as high quality, luxurious automobiles.

P. Kotler, 1991 explains loyalty A second dimension, however, is whether the customer is committed to the brand. Philip Kotler, again, defines four patterns of behaviour:


  1. Hard Core Loyals - who buy the brand all the time.
  2. Soft Core 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 different).

Andrew Ehrenberg, then of the London Business School said that consumers buy 'portfolios of brands' They switch regularly between brands, often because they simply want a change. Thus, 'brand penetration' or 'brand share' reflects only a statistical chance that the majority of customers will buy that brand next time as part of a portfolio of brands they favour. It does not guarantee that they will stay loyal.

Influencing the statistical probabilities facing a consumer choosing from a portfolio of preferred brands, which is required in this context, is a very different role for a brand manager; compared with the - much simpler - one traditionally described, of recruiting and holding dedicated customers. The concept also emphasises the need for managing continuity. Kotler, P (1991)

Lindstrom, M, (2005) About a year ago, I attended what I thought was going to be a quiet weekend at Harvard Business School to discuss that institution's strategy. We looked at three case studies that, together, posed three questions. Should the school set up a campus in California to respond to issues of technology and entrepreneurialism? Should the school set up a campus in Hong Kong to deal with glob- alization? And how should the school deal with distance learning and persuade restless students who could study for an MBA on the World Wide Web to spend two years at Soldiers Field? Instead of a quiet weekend away from the hurly-burly of our business, I found myself becoming even more paranoid about the changes that we face. It seems that no industry or institution is safe. In representing our clients, we are confronting a few powerful trends repeatedly. Almost every industry faces overcapacity. In automobiles, for instance, there is worldwide productive capacity for more than 70 million units, but the current level of consumer demand is 50 million. Overcapacity goes hand in hand with increased competition. Thanks in large part to the Web, every business today faces disintermediation-that is, the development of new, often high-tech or new-media competitors, with none of the inertia, history, or legacy of their traditional competition. These new competitors are held to different standards than estab- lished firms. Venture capitalists and investment institutions are investing money in these new start-ups on the basis of concept, future promise, and revenue growth; they are unconcerned with profit growth, cash flow, earnings per share, or traditional investment standards. In a way these investment institutions are disintermediating their own traditional investments. They are effectively destroying value in the businesses they have already funded and helped build. This situation is particularly painful for traditional companies-the stock market is devaluing their traditional approaches. Disintermediation has made the scramble for talent more furious than ever. The new companies being born and bred offer more flexi- ble, less bureaucratic, and more attractive employment opportunities. They also offer untold and unproven riches. Investment banks and management consultancies are being plundered. Intriguingly, our own businesses now offer more attractive opportunities, relatively, than they used to. To ambitious young men and women, we seem to be more closely wired to new technologies and the Web. As a result of overcapacity, increased competition, and scarce talent, branding-the differentiation of firms and their products-is more important than ever before. But it is increasingly difficult to differentiate products and services tangibly. Technological progress ensures that competitors can copy developments quickly, so product advantages are temporary; where it once took five years to introduce a car, it now takes 18 months. Therefore, emotional, psychological, and lifestyle differences are critical. What a product says about you is as important as its performance.

According to the author Birgelen & Ruyter (1997) Brand loyalty is a fundamental concept in strategic marketing. It is generally recognized as an asset (Aaker, 1996), the reason being that it increases pricing flexibility. There may be some debate over the extent of the phenomenon, but the consensus is clearly that loyalty is a concept of major importance (Jacoby and Chestnut 1978). Given this, it is not surprising that a lot of consumer behavior literature is concerned with the sources of loyalty and the mechanisms through which it comes about (Kuehn 1962 is an early such paper). Similarly, there is a market level literature on how a firm, primarily through advertising, can foster brand loyalty (see, e.g., Day 1984, p. 105). And yet, at the market level, the cornerstone in our knowledge is missing. Conceptually the simplest and most basic problem is: "How can a firm exploit brand loyalty once it has it?" This question is not answered in the literature. The literature on strategic pricing (e.g., Dolan and Jeuland 1981 ) goes part of the way, but is typically confined to a mo- nopolistic setting. The meaning of brand loyalty for such firms is clearly very different than that for firms facing competitors. With rational or learning competitors only those strategies which form a market equilibrium can be sustained. Accordingly, it is crucial that a game theoretic perspective is adopted. The purpose of this paper is to examine the market level implications to two types of brand loyalty. More specifically, one type of brand loyalty is due to time lags in awareness, and the other is due to costs of switching. Brand loyalty of the first type is called "inertial" and brand loyalty of the second type is called "cost-based".

The empirical literature documents a strong cross-sectional correlation between market share and performance (Gale 1972; Buzzell, Gale and Sultan 1975), along with a negligible time-series correlation (Jacobson and Aaker 1985; Rumelt and Wensley 1981; explains that the empirical evidence is an attractive feature of the theory put forward in this paper, it is important to be aware that several other theories can explain the same "stylized facts". The theory suggested here is demand-based and independent of product differentiation. An alternative demand-based theory, due to Prescott and Visscher (1977), is that firms dominate seg- ments of different sizes. The argument in supply-based theories is that different firms have different cost structures, such that some find it profitable to produce more (Demsetz 1973; Jacobson 1988). These theories all suggest positive cross-sectional and flat time-series relationships between market share and performance. The theories are not mutually inconsistent, so discriminating empirical tests are not necessarily in order. However, relative importance can be assessed from the share-margin correlation, which is positive in the presence of economies of scale, but negative if only demand-based forces operate. In the aggregate, the evidence clearly favors the supply-based theories. Several studies (e.g., Buzzell, Gale, and Sultan 1975) report a positive correlation between margin and share. This should not lead to the absurd conclusion that brand loyalty does not exist. Brand loyalty has been observed in numerous micro level studies and some possible market level implications have been found in the PIMS data by Fornell, Robinson, and Wernerfelt ( 1985 ). Most likely, both supply and demand factors operate simultaneously, in varying degrees, in different industries. Hence, it seems fair to conjecture that supply-based effects on the average dominate demand-based effects, but that the latter effects are important in specific industries. (ii) The last point is indirectly supported by the widely held view that market share is an asset in itself. The supply-based theories mentioned above either portray market share as a result of an asset (a favorable cost position) or as a creator of an asset (production experience). Only in the brand loyalty mechanism developed in the present paper is market share an asset in itself. Since shares have to sum to one, it immediately follows that there are first mover advantages from getting it early. Conversely, later entrants face an entry barrier because they lack market share. In sum, a large number of standard phenomena from the field of marketing strategy can be described and explained in the model presented below. The paper is organized as follows. I define the two types of brand loyalty in ? 2 and formally derive their market level implications in ? 4. Because the model is very com- plicated, ? 3 is devoted to its introduction and ? 5 contains a discussion of the robustness of the results. Some strategic implications are highlighted in ? 6 and suggestions for further theoretical and empirical research are given in ? 7. A short conclusion, ? 8, ends the paper.

While the concept of brand loyalty has been used extensively in the marketing literature, the field has not reached consensus on a single definition. In fact, Jacoby and Kyner (1973, p. 1) assert that, "there are at least 8 major approaches to operationally defining brand loyalty", but "there are no conceptual definitions of brand loyalty". Recently, Colombo and Morrison (1989, p. 90) wrote that "only the researcher's imagination limits the number of plausible definitions for [brand loyalty]". The tension between behavioral and cognitive approaches has been a contributing factor to the above problem. Until Day (1969) and Jacoby (1971), the field looked at brand loyalty in terms of outcomes (repeat purchase behavior), rather than reasons. The advantage of the cognitive approach is that one can distinguish between different mech- anisms leading to repeat purchase behavior. In particular, one can differentiate between timeless qualities of preferences and truly dynamic effects. This involves a conceptual distinction between brand purchase due to fit between personal tastes and brand attributes and brand purchase due to past purchase. Operationally, this corresponds to a distinction between the unconditional choice probability and the incremental choice probability obtained by conditioning on past choice. Despite the seemingly natural distinction between static and dynamic measures, the field appears to have adopted the view that "the best measure in any case is ... situation specific" (Colombo and Morrison 1989, p. 90). In fact, the segmentation literature rou- tinely defines brand loyalty in terms of high unconditional purchase probabilities (Grover and Srinivasan 1989). The purpose of the present paper is to look at the implications of brand loyalty for market equilibria. Since the effects of heterogeneous preferences is well known, I here focus on the dynamic effects only. So I define a consumer as brand loyal if his purchasing pattern depends positively on the last brand purchased. In terms of dynamic choice models, this is then a markov effect. A consumer is brand loyal if his probability of buying a particular brand at time t, conditional on identical purchase at time t - 1, is larger than the corresponding unconditional probability (Frank 1962; Massy 1966; Kahn and Meyer 1989). To characterize equilibria we need to know how this dependency is affected by mar- keting variables. As a first cut, I here distinguish between pure awareness effects and utility effects. Specifically, I define two types of brand loyalty. "Inertial brand loyalty": when brand utilities have no intertemporal dependence but consumers may be slow to become aware of the most attractive values. "Cost-Based Brand Loyalty": when brand utilities have positive intertemporal inter- dependence, such that the brand last purchased has an advantage. It is not the practice of the behavioral literature to define concepts in terms of utilities. However, in his classification of habitual purchasing behavior, Assael (1987) draws a very similar distinction. Specifically, he presents "brand loyalty" as a commitment due to favorable attitudes learned from past purchases. In contrast, "inertia" is defined as lack of search due to low involvement. So consumers who are "brand loyal" in Assael's terms may search actively, but require a substantial price differential before they switch brands (1987, p. 57). On the other hand, consumers who are "inert" will exhibit very low search activity, but could well change in response to very small price differences once they become aware. Blackett, T. (1998).


This study was designed to investigate " the variables affecting the brand loyalty of cigarette brands" in Peshawar. The Questionnaire was distributed in sample of 150 among the total population.


After conducting this research study it can be deduced that brand loyalty for cigarette brands is at peak among the consumers/smokers of Peshawar. The sample I have taken while conducting this research were the people of Peshawar in order to make it convenient and more accurate. The sample size was only 150 people from the total population that includes people from diverse background and demographics such as students, employed class, business executives. Most of them were the students as far as I had convenient reach to them. I distributed a questionnaire of almost twelve different questions in order to conduct the survey among the smokers of Peshawar. These questions were quite simple just for the convenience of respondents and to reduce the chance of error. The variables that I have considered while conducting a survey are price, taste, peer pressure, and packaging. Apart from this I asked some introductory questions before going through the core questions. I had an idea that what are the customer preferences in cigarette brands, when did they start smoking, whom they get inspired in order to start smoking, why do you smoke, When do you smoke, what are the factors that influence your choice of cigarette brand. After going through these questions I got to know about their choices, taste, preferences.

Here comes the questions regarding the loyalty; when they were asked are you loyal to your current brand. Most of the respondents were loyal to their brand and none of them were willing to switch the brand unless and until the taste went bad or beyond their expectations. The four variables that may affect the brand loyalty were Price, Taste, peer pressure and packing. These were the core questions on which my research study was based.

These were the core questions of research study and questionnaire. According to the respondents these variables had a little impact on the brand loyalty except quality of taste. The only variable i.e taste has huge impact on the brand loyalty. I would rather conclude that producers of tobacco like Pakistan tobacco company and lakson tobacco company should concentrate more on the quality assurance of taste.


What I mean to say is that producers should too recognize the importance of brand loyalty and carefully choose the brand for their product. After doing this research I think that producers should do the following:

  • The producing firm should plan for the brand, what image it wants the consumers to have of the product, how it wants to make its logo so that its just the right kind for the message that the firm is trying to convey to the consumers and the customers and more over the firms image that the firm wants the consumers to have in their mind, whenever they want to buy the product or come across the firms product.
  • There are certain tools through which a brand loyalty could be attained are as under
  • They should focus on the taste of their cigarette as it matters a lot to the smoker according to my research survey in Peshawar.
  • Secondly the company should focus on the packing.
  • Pricing should be set in such a way so that It justifies the quality, taste, packing and image of the brand.
  • There is still a lot of room for improvements in Pakistan and firms can do a lot in this area as far as brand loyalty is concerned.
  • First of all firms should focus more on creating awareness among the consumers and the customers about the brand, for this purpose advertising is one of the options. Through this way brand loyalty could be attained from customers side.
  • Brand loyalty is very important in today's competitive world in order to survive. So existing firms should focus more on increasing brand loyalty.
  • Firms should be more innovative, meaning that firms should strive for introducing innovative methods in order to attain the customers and their loyalty towards the brand.
  • Although many firms in Pakistan pay a lot of attention to branding and use it to their benefit like Pakistan Tobacco Company (PTC), there might still be room for innovation and research in this field especially since, in this competitive world marketing is very important aspect. Due to excess of products available in the market, good marketing strategies are required in order to get the loyalty from the customers/smokers.
  • The final recommendation which I am going to give is that producers of tobacco like Pakistan Tobacco Company and Lakson Tobacco Company should concentrate more on the quality assurance of taste.
  • Producing firms should focus more on conducting research, similar to this one or of any other nature but it should be much more comprehensive and advance in nature , so that they can learn more about the consumer perceptions. More over it will help them in understanding new ways to attain the brand loyalty.
  • The producing firms should be capable enough to differentiate their brands in terms of taste, quality, and packing. This is the best tool in the company's interest.


  • Aaker, D. A. (1991) - Managing Brand Equity: Capitalizing on the Value of a Brand Name, The Free Press, New York;
  • Aaker,D.A.(1996), Managing Brand Equity, The Free Press, New York
  • Aaker, J.L. (1997), "Dimensions of brand personality", Journal of Marketing Research,
  • Afuah, A. & Tucci, C. L. (2001). "Internet business models and strategies", McGraw Hill: New York, USA.
  • Ackerman, M., and Weitzner D. (2001). "Privacy in Context. Human-Computer Interaction", 16(167 - 176).
  • Agung I.G. (2002), " Statisitika : Analisis Hubungan Kausal Berdasarkan Data Kategorik",
  • Bauer, R. And Greyser S. (1968). "Advertising in America: The Consumer View", Boston: Harvard University.
  • Blackett, T. (1998).Trademarks.Basingstoke:Macmillan
  • Beatty, S. E., Kahle, L. R., Homer, P. and Shekar, M. "Alternative Measurement Approaches to Consumer Values: The List of Values and the Rokeach Value Survey", Psychology and Marketing 2(3), 1985, pp. 181 - 200.
  • Balasubramanian, S., Peterson R. A. and Jarvenpaa S. L. (2002). "Exploring the Implications of M- Commerce for Markets and Marketing", Journal of the Academy of Marketing Science, 30(4), 348 - 361
  • Birkin, M. (1994). "Assessing Brand Value," in Brand Power.
  • Birgelen, M., Ruyter, K. (1997) - Commitment in Service relationships: an Empirical Test of its Antecedents and Consequences, EMAC Conference Proceedings, University of Warmick;
  • Bauer, R.A., & Greyser, S. (1968). "Advertising in America: The Consumer View",Boston: Harvard University, Graduate School of Business Administration, Division of Research.
  • Chernatony, L. and Francesa, D. (1998), An Assessment of the "Atomic Brand Model", In Academy of Marketing Conference Proceedings, Page 289-300 (Manchester: Academy of Marketing)
  • Dick, S. and Kunal, B. (1994), "Customer Loyalty: Toward an Integrated Conceptual Framework," Journal of the Academy of Marketing Science, 22 (2), 99-113.
  • Fournier, S. (1998), "Consumer's & Their Brands: Developing Relationship Theory in Consumer Research", Journal of Consumer Research, Vol.24, Page 343-373.
  • Fan, Y. (2002) "The National Image of Global Brands", Journal of Brand Management, 9:3, 180-192,
  • Goodyear, M (1996), "Divided by a Common Language: Diversity and Deception in World of Global Marketing," Journal of The Market Research Society, 38 (2), Page 105-122
  • Gregory, J. (2003). Best of Branding.
  • Gardner, B. and Sidney, J. (1955), "The Product and The Brand". Harved Business Review, 33, (March-April), Page 33-39
  • Halowell, R. (1996) - The Relationship of Customer Satisfaction, Customer Loyalty and Profitability: an Empirical Study, International Journal of Service Industries Management, Vol.7, No.4;
  • Kapferer, J (1997), Strategic Brand Management: Creating and Sustaining Brand Equity Long Term, Kogan Page, London
  • Kotler, P. (2003) - Marketing insights from A to Z : 80 Concepts Every Manager Needs to Know, John Wiley & Sons Inc., New Jersey;
  • Kotler, P (2002) - Marketing Management, Millenium Edition, Prentice Hall Inc., Upper Saddle River, New Jersey;
  • Kotler, P. 'Marketing Management ' (Prentice-Hall, 7th edn, 1991)
  • Kotler, P. and Pfoertsch, W. (2006). B2B Brand Management,
  • Klein, N. (2000) No logo, Canada: Random House,
  • Kotler, P., Gary, S,. John, W.(1999) -Principles of Marketing, Second European Edition, Prentice Hall Europe of Prentice Hall Inc., Upper Saddle River, New Jersey;
  • Lindstrom, M, (2005) - Brand Sense Build Powerful Brands through Touch, Taste, Smell, Sight, and Sound, The Free Press, New York;
  • Miller & Muir (2004). The Business of Brands,
  • Reichheld, Frederick F. (1993), "Loyalty-Based Management," Harvard Business Review, 71 (2), 64-73.
  • Wernick, A. (1991). Promotional Culture: Advertising, Ideology and Symbolic Expression (Theory, Culture & Society S.), London: Sage Publications,
  • Young, R. (1994), Brand Asset Valuation, London: Young & Rubican The Free Man : Ideas on Liberty - (William G., 1993) Vol. 43, No.7

Website References:

This report includes information which has been taken from the following websites:


Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!