Brand loyalty

INTRODUCTION

What is brand loyalty? It can be said that brand loyalty is the degree to which consumers refer and continue to purchase the same brand within a product or service category. The most commonly conceptual definition of brand loyalty comes from Jacoby and Chestnut (1978, B80): "The biased behavioural response, expressed over time, by some decision making unit, with respect to one of more alternative brands out of a set of such brands, and is a function of psychological (decision making, evaluative) processes."

The effect of loyalty is improved sales and the ability to charge premium prices. In other words, brand loyalty is the degree to which a consumer will repeatedly purchase a brand. Brand loyalty is complex and many factors influence brand loyalty, such as consumer attitudes, family or peer pressure, and friendship with a sales person. The degree of brand loyalty that is, the brands market share, is known as the brand franchise. Brand loyalty in marketing consists of a consumers commitment to repurchase or otherwise continue using the brand and can be demonstrated by repeated buying of a brand or service or other positive behaviour such as word of mouth support. According to all the resources advised, brand loyalty is more than a simple repurchasing. Customers may repurchase a brand due to situational constraints, a lack of viable alternatives, or out of convenience. Such loyalty is referred to a unauthentic loyalty. True brand loyalty exists when customers have a high relative attitude towards the brand, which is then exhibited through repurchase behaviour. This type of loyalty can be a great asset to the firm if customers are willing to pay higher prices, they may cost less to serve, and can bring new customers to the firm.

BEHAVIOUR

Phillip Kotler defines four patterns of behaviour:

1. Hardcore loyals - who buy the brand all the time.

2. Soft-core loyals - who buy two or three brands.

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

4. Switchers - with no loyalty (possible dual pro, constantly looking for bargains or vanity buyers, looking for something different.)

FACTORS INFLUENCING BRAND LOYALTY.

It has been suggested that brand loyalty includes some degree of pre-dispositional commitment towards a brand. Customers' perceived value, brand trust, customer satisfaction, repeat purchase behaviour, and commitment are found to be the key influencing factors of brand loyalty. Commitment and repeated purchase behaviour are considered as necessary conditions for brand loyalty, followed by perceived value, satisfaction and brand trust. Punniyamoorthy, M and Prasanna Mohan Raj, "An empirical model for brand loyalty measurement", journal of targeting, measurement and analyses for marketing, volume 15, nr 4, September 2007, pp. 222 - 233 (12). Fred Reichheld, one of the most influential writers on brand loyalty, claimed that enhancing customer loyalty could have dramatic effects on profitability. (Reichheld, F. The loyalty effect, 1996). Among the benefits from brand loyalty, specifically, longer tenure or staying as a customer for longer, was said to be lower sensitivity to price. This claim had not been empirically tested until recently. Recent research found evidence that longer-term customers were indeed less sensitive to price increases.

WHY IS BRAND LOYALTY IMPORTANT

There are three main reasons why brand loyalty is important:

1. Higher sales volume. According to ? The average company loses half of its customers every five years, equating to a 13% annual loss of customers. This statistic illustrates the challenges companies face when trying to grow in competitive environments. Achieving even one percent annual growth requires increasing sales to customers, both existing and new by 14%. Reducing customer loss can dramatically improve business growth and brand loyalty, which leads to consistent and even greater sales since the same brand is purchased repeatedly.

2. Premium pricing ability. Studies show that as brand loyalty increases, consumers are less sensitive to price changes. Generally, they are willing to pay more for their preferred brand, because they have received some unique value in the brands that other alternatives do not provide. Additionally brand loyalists buy less frequently on sense off deals; these promotions only subsidise planned purchases.

3. Retain rather than seek. Brand loyalists are willing to search for their favourite brand and are less sensitive to competitive promotions. The result is lower costs for advertising, marketing and distribution. Specifically, it costs four to six times as much to attract a new customer as it does to retain an old one. (AG Decision maker)

In other words selling to brand loyal customers is far less costly than converting new customers (Reichheld, 1996). In general, brand loyalty is a reflection of brand equity, which for many businesses is the largest single asset. Brand equity reflects the value added (or subtracted) to a product that the results from brand knowledge.

MEASUREMENT

There seem to have emerged considerable agreement on the conceptual definition of brand loyalty since the work of Jacoby and Chestnut (1978), but no unified perspective has been determined to measure it. Still, a valid measure is essential for a better understanding of the concept by marketing researchers and marketing managers alike. (M Mellens, MG de Kimpe en JBEM Steenkamp).

According to dr Joseph Plummer of McCan Ericson Admap www.warc.com/admap indicates the seven universal marketing drivers for brand loyalty:

1. Brand awareness: Keeping the brand name on people's minds.

2. Emotional bond: Forging a connection with people's hearts and feelings.

3. Product _____: Creating new relevance through news and innovation.

4. Activation: Encouraging immediate purchase via incentives or sampling.

5. Loyalty: Rewarding customer relationships and retention.

6. Product experience: Enabling prospects to get to know experience or use a brand without purchase.

7. __________: Building credibility through third party sources industry, government, word of mouth.

Mellens et al identifies six criteria in the conceptual definition that can be used to evaluate the specific operational measures of brand loyalty. Mellens et al also classified the characteristics into four groups based on the following two dimensions:

1. Attitude ____ vs. behavioural measures; and

2. Brand oriented vs. individual oriented measures.

These dimensions are used since they appear frequently in the marketing literature and are related to specific requirements of the conceptual definition and provide a workable distinction for marketing managers.

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