Evaluating Brand Loyalty from Marketing Aspect - Literature review Example

A LITERATURE REVIEW OF BRAND LOYALTY FROM MARKETING ASPECT By and Date of Submission A Literature Review of Brand Loyalty from Marketing Aspect Introduction In marketing, the success of a firm largely depends on its ability to draw more consumers to its branded products and keeping them coming back for more. It is crucial for the current customers and new customers to remain loyal to the company brand to ensure success of the firm. Large organizations worldwide such as LG, Sony, Samsung, Del Monte, Coca-cola and Pepsi spend millions in advertisements and promotions to ensure that there customers remain loyal to there brands. Having loyal consumers ensures a steady flow of the firm’s products and hence the firm has a competitive advantage over any other firm producing similar products (Morrison and Crane 2007). Having loyal customers reduces the firm’s marketing cost by approximately thirty percent, according to Rosenberg and Czepiel (1983), mostly because the cost of retaining old consumers is reduced. In addition, brand loyal clients are less price sensitive thus the are willing to pay more for the products as long as they are from their favourite brand, this is a strategy that Apple Inc has used for many years and is still profiting from their loyal consumers who flood to the Apple stores to get new products (Bennett and Thiele 2005). Generally, a sturdy brand name is the number one tool to control the market and to posses a competitive advantage which is essential for any business growth and thus brand loyalty offers a strategic asset that is identified as the leading source of brand equity (Fullerton 2005). This literature review will solemnly study brand loyalty which refers to maintaining old consumers due to their love, trust and faith in the firm’s products. The objectives of this review are to review the dimensions and measures of brand loyalty, the causes of brand loyalty decline, the root of decline in brand loyalty, the remedies and analyze both the merits and demerits of brand loyalty by bringing together thoughts and experiences from a variety of literature and pragmatic studies conducted in the area of brand loyalty. The notion of brand loyalty Brand loyalty can be defined either conceptually (abstract descriptions) or operationally (measurement methods). Based on research journals and several literatures worldwide, Jacoby and Chestnut (1978), presented the most elaborate conceptual definition of brand loyalty since it covers the most significant features of brand loyalty. Jacoby and Chestnut 1978 presented the most accepted definition of brand loyalty as: “The biased, behavioural response expressed over time by some decision making unit with respect to one or more alternative brands out of a set of such brands and is a function of psychological processes”. (Jacoby and Chestnut 1978, p.80) The Jacoby and Chestnut’s 1978 definition identifies five vital necessities for brand loyalty which are: i) Biased behavioural response Biased behavioural response means that there needs to exist a logical affinity to purchase a particular brand or a collection of brands. Based on this it is clear that the brand choice of the consumer should not be zero-ordered in that the consumer should not choose a brand by a probability that is independent of his past purchase decisions. ii) Expressed over time This means that brand loyalty should not be guaranteed by the number of purchases during one period but by the pattern of purchases over a longer successive purchase period. This is vital to distinguish between consistent loyalty and divided loyalty (Bennett and Thiele 2005). iii) Decision making unit A decision making unit may be a firm, an individual or a household that defined the brand the consumer will purchase. E.g. in a household, the husband might be the decision making unit who decides on the brands that should be purchased and used in his house or a company that ensures that they only use a specific brand of computers dictates that the workers should be loyal to that brand (Fullerton 2005; Bennett and Thiele 2005). iv) Selection of brands This condition state that a consumer may be loyal to one or more brands based on the low involvement of the goods here the consumer discretely classifies the brands as either acceptable or unacceptable leading to a multi-brand loyal consumer. These type of consumers choose the type of brand to purchase differently but in the range of the acceptable brands (Fullerton 2005). v) Function of a psychological process This condition states that brands are selected based on the psychological need or commitment to a particular brand. Consumers may choose a brand due to information that they heard from someone, through advertisements, or certain beliefs concerning a brand. It may also mean that the consumer is committed to a particular brand due to its distinguishing features such as images, colours and design features although it may also be sheer coincidence (Suh and Yi 2006). This feature, however, does not consider that consumers may use simple decisions such as ‘always buy the most bought brand’ or ‘always go for the cheapest brand’. Based on this true brand loyalty can, therefore, only be achieved if and only if a) The consumers have an elevated attitude towards the products from the brand that is then exhibited through consistent repurchase behaviour and b) The commitment the consumers have towards the brand in any given situation. Types of brand loyal consumers In credit of Kotler’s (2003) argument, he based on the types of purchase behaviours; four types of brand loyal consumers can be enumerated Hardcore Loyal - This group under any circumstance will always buy the same brand Split loyal -This group presents split loyalty between two or three brands. Shifting loyal -This group is not consistent and will move from one brand to another. Switchers - This group lacks loyalty possibly because they are constantly looking to get a bargain and always go for the cheapest or are constantly looking for something different to try. The loyalty Pyramid Fig 1. Source: Aaker, David A., 1991. Managing Brand Equity: Capitalizing on the Value of a Brand Name. (The Free Press, New York) p. 40 Measures of brand loyalty Bloemer 1993 states that the five features of brand loyalty stated under notions of brand loyalty can be used to enumerate four operational measurements based on two vital dimensions which are: ii) Attitudinal measurement verses Behavioural measurement and iii) Individual-oriented versus brand –oriented measurement. Behavioural versus attitudinal measures Most operational measures can be easily classified as either attitudinal or behavioural based on the emphasis on the purchasing and /or the cognitive components respectively (Bennett and Thiele 2005: Aaker 1991). Brand loyalty is defined according to the actual purchases that have been observed over a period of time under behavioural measures. Advantages of the measurement Limitations Behavioural They are based on the actual number of purchases made They are mostly behavioural and not incidental incidents. They are by far easier to collect and analyse compared to attitudinal data. They do not clearly distinguish between brand loyalties and repeat buying thus may contain errors as stated by Fullerton 2005. It is difficult to pick the right decision making unit It is also more susceptible to short-run flux Attitudinal Repeat buying and brand loyalty are easily distinguishable. It less susceptible to short-run flux It is easier to pick and single out the decision making unit in the group They are mostly incidental since they lack the behavioural features They are harder to collect compared to behavioural data It does not guarantee the vivid depiction of reality. Based on the two dimensions, four main classes of measurements can be distinguished. That is: i) Brand-oriented attitudinal measures ii) Individual –oriented attitudinal measures iii) Brand-oriented behavioural measures iv) Individual-oriented behavioural measures Merits of Brand Loyalty Lower marketing costs Having loyal customers reduces the firm’s marketing cost by approximately thirty percent, according to Rosenberg and Czepiel, 1983, mostly because the cost of retaining old consumers is reduced. Higher effectiveness of marketing communication Having loyal consumer increases the efficiency of marketing communication as established by Bennett and Thiele 2005, since the consumers will communicate among themselves and hence enhance the communication. Guarantee of a right choice for new customers Due to word to mouth advertising and a segregation of same monochromatic group of brand loyal consumers anyone who identifies with the group instantly needs to join the brand to join it. Better resistance and time to respond to competitive moves Since the firm has loyal consumers, it does not need to concentrate resources and time on advertisement campaigns thus it has more time to concentrate on analysing and responding to their competitors moves. Repeat customers/ rigorous purchase by loyal customers Brand loyalty promotes psychological attachments to products in their consumers meaning that the consumers will go out of their way in order to purchase goods from that particular brand each time hence increase in sale for the company. Lower sensitivity to price/ higher price elasticity Since the brand loyal consumers are psychologically attached to a brands goods, according to studies, they tend to ignore any increase in the price of the commodity. Overall increase in the firms’ value Aggressive price competition between brands Kapferer 2005 states that firms will aggressively compete pricewise by lowering their product prices in an attempt to win over the consumers of their rival firm. As experienced in brands such as Del Monte and Chiquita Bananas. Free word of mouth advertising Through there love for the brand and constant interactions with people, a brand loyal consumer will always try to persuade his friends to purchase the same brand and thus offering free advertising which increases the number of brand loyal consumers and overall increase in the firms sales (Brakus, Schmit and Zarantonello 2009). Brand loyalty generally increased a firm’s competitive advantage over its competitors leading to: Higher sales margins Higher return on investment Increased market share resulting to more investors Lower chances for entry of rival competitors in the market Disadvantages of brand loyalty Rise in cost of goods/ poor cost discipline Brand loyal consumers, due to their insensitivity to prices, end up paying more for the products. This is because they make their decisions based on the brand they want not the cost of the product compared to other brand. A good example is Apple Inc whose loyal consumers will pay high prices for a product despite there being other cheaper alternatives (Morrison and Crane 2007). Lack of variety Instead of enjoying the variety of goods available from different brands, brand loyal consumers only experience what that particular brand in that category has to offer. This can be witnessed in the war between gaming consoles, that is, the Xbox, the Play station and the Nintendo Wii. Lack of convenience Since a brand loyal consumer will only purchase goods from one brand and will not accept substitutes, he may face difficulties and inconveniences leading to unnecessary expenditure of funds if the product is not locally available (Algesheimer, Dholakia and Herrmann 2005). Brand “Tribalism” This occurs when consumer begin identifying with other brand loyal advocates and exclude other people. A company may hire people based on the brand they identify with and reject others hence creating sameness; a group of monochromatic consumers who act think and look alike (Algesheimer, et al 2005). Roots of Brand Loyalty Decline A decline in brand loyalty has always been experienced by firms but over the last ten years the decline has increased rapidly. Consumer behaviourists describe this as choice repertoire which states that currently a consumer can only be identified by a group of brands that he/she chooses and not a particular brand (Kapferer 2005). According the works of Ehrenberg, the words we use to describe a particular brand or the words we generally speak are not simply words but they refer to certain concepts and they carry with them underlying nuances and connation of meaning and some history leading to scrutiny of a brand and hence a decline in the number of loyal brand consumers (Hess and Story 2005). Therefore, in accordance with Andrew Ehrenberg research, today’s consumers are keen and will always opt to purchase a portfolio of brands that they can regularly switch between them mostly due to the need of a change. Due to this, brand share and brand penetration emerge reflecting that only a small group of consumers will purchase that exact brand next time as it is part of the portfolio of brands and thus a decrease in consumer loyalty towards a brand. Ways of Increasing Brand Loyalty Due to the decline in brand loyalty as exhibited by Ehrenberg, there are diverse ways of countering brand share and brand penetration have been suggested. Ehrenberg (1972) suggests that companies should not use mere advertisement campaigns but should try and win back the customers loyalty by creating and encouraging them to participate in promotions and loyalty programs (Hess and Story 2005). The firms should offer incentives such as prizes to lure back their customers. This has been observed to work as most consumers are attracted to the campaign to either participate or are just lured by the catchy slogans (Suh and Yi 2006). The most popular loyalty programs include: Social media applications, Contests, Customer reward programs Emails clubs Gift cards, Mobile apps Conclusion Extensive studies regarding brand loyalty have been carried out for both practical and academic reasons since it ensures that a firm has a competitive advantage over its competitors. Due to these, most of the researches carried out tend to agree on the behaviours that each group of brand loyal consumers’ exhibit and the specific actions that must be considered in order to effectively manage brand loyalty (Brakus, Schmit and Zarantonello 2009). The measures may include:- Understanding the customer service qualities that the consumers value and focus on making it better to maintain acceptable service values that the consumers regard to as less valuable. Recognizing and emphasizing the significance of logistics to the firms overall goals and objectives which are to retain old consumers, recruit new and build a larger market share. Encouraging inter-functional harmonization to allow the logistics and marketing departments to work together when planning and implementing. This is done to ensure that the consumers receive optimal marketing services and customer service (Bennett and Thiele 2005). . Using customer service as an aspect of strategy to aid the firm attain a distinguishable advantage over the competitors (Suh and Yi 2006). In conclusion, as the competitions between organizations increases, brands turn out to be more consistent, and product quality increases, consumer brand loyalty is the vital factor for success of any firm willing to be successful. However, the increasing range of brands and the similarity between brands combined with and increase in suspicion has forced consumers to be more price aware and rarely loyal to any brand but a achieving a differential in a particular brand will win over the loyalty of the unsure consumers (Suh and Yi 2006; Bennett and Thiele 2005). 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