BUILDING BRAND LOYALTY WITHIN SELECTED SEGMENTS OF THE SOUTH AFRICAN FAST MOVING CONSUMER GOODS MARKET ETIENNE TERBLANCHE SUBMITTED IN FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE MAGISTER TECHNOLOGIAE (MARKETING) IN THE FACULTY OF COMMERCE AND GOVERNMENTAL STUDIES AT THE PORT ELIZABETH TECHNIKON PROMOTER: PROF. L RADDER JANUARY 2002
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BUILDING BRAND LOYALTY WITHIN SELECTED SEGMENTS OF THE
SOUTH AFRICAN FAST MOVING CONSUMER GOODS MARKET
ETIENNE TERBLANCHE
SUBMITTED IN FULFILMENT OF THE REQUIREMENTS FOR THE
DEGREE MAGISTER TECHNOLOGIAE (MARKETING) IN THE FACULTY
OF COMMERCE AND GOVERNMENTAL STUDIES AT THE PORT
ELIZABETH TECHNIKON
PROMOTER: PROF. L RADDER
JANUARY 2002
DECLARATION
I, Etienne Terblanche, hereby declare that:
• the work in this dissertation is my own original work;
• all sources used or referred to have been documented and recognised,
and
• this dissertation has not been previously submitted in full or partial
fulfilment of the requirements for an equivalent or higher qualification at
any other recognised educational institution.
________________
Etienne Terblanche
January 2002
In loving memory of Mom and Dad,
for all the years of support.
ACKNOWLEDGEMENTS
The successful completion of this research would have been impossible
without the support, advice, assistance and encouragement of others. My
sincere appreciation is extended to all those individuals who contributed to
the completion of this study.
In particular, the assistance of the following individuals are acknowledged:
• Professor L. Radder, my promoter, for unselfishly giving of her time,
professional advice, guidance and encouragement during the completion
of my dissertation.
• My wife, Margott, for her encouragement, support and patience during
the completion of this study and in particular, for typing this document.
• Ms Sandy Blunt, for editing the dissertation.
• Port Elizabeth Technikon for financial assistance.
• Jesus Christ, for the talent and opportunity given to me to complete this
study.
EXECUTIVE SUMMARY
The rapidly increasing competitiveness within the fast-moving consumer
goods (FMCG) market compels an organisation within this market to not only
entice consumers to purchase the organisation’s brand, but also to keep
these consumers purchasing the brand. It is therefore essential that an
organisation creates and maintains loyalty among consumers towards its
brand.
The objective of the research was to find out what strategies an organisation
could implement to achieve and sustain loyalty from current and prospective
consumers towards its brand in a highly competitive, FMCG market.
The main areas of focus were as follows:
• Establishing the basis on which consumers differentiate between
homogenous products.
• Determining what strategies an organisation could utilise to ensure that
consumers will differentiate its brand from those of competitors.
• Obtaining relevant information to find out what variables motivate
consumers to be brand loyal within the FMCG market.
• Ascertaining how an organisation could build a brand.
• Determining how an organisation could maintain brand loyalty from its
existing consumers.
The research included a study of relevant literature and an empirical study.
The aim of the literature study was to obtain a solid base of information and
opinions regarding the concepts of brands and building brand loyalty.
Making use of structured questionnaires and through performing personal
interviews, the empirical study consisted of two aspects. The one aspect
was a brand loyalty survey conducted among 303 respondents, and the
second aspect was a brand loyalty survey conducted with nine owners or
marketers of leading brands.
The following were the major findings of the research:
• Relying on being a leader in price and quality is not enough to ensure
that a consumer would continue purchasing an organisation’s brand.
• A brand is an experience and in order for a consumer to become loyal
towards a brand, the consumer should have a host of positive thoughts
regarding past experience with the brand.
• It is essential that organisations within the FMCG market proactively
develop and implement strategies aimed at creating and maintaining
loyalty towards their brands.
KEYWORDS: Brand
Brand loyalty
Brand building
Fast moving consumer goods market
TABLE OF CONTENTS
Executive summary i
Contents iv
List of tables x
List of figures x
CHAPTER 1
INTRODUCTION AND ORIENTATION
1.1 BACKGROUND TO THE STUDY 1
1.2 RESEARCH PROBLEM AND SUB-PROBLEMS 2
1.3 DELIMITATION OF THE RESEARCH 3
1.4 DEFINITION OF CONCEPTS 4
1.4.1 Brand 4
1.4.2 Brand loyalty 4
1.4.3 Marketing strategy 5
1.4.4 FMCG market 5
1.5 THE SIGNIFICANCE OF THE RESEARCH 5
1.6 A REVIEW OF RELATED LITERATURE 6
1.7 METHODOLOGICAL JUSTIFICATION 7
CHAPTER 2
BRANDS AND BRANDING
2.1 INTRODUCTION 10
2.2 WHAT IS A BRAND? 10
2.3 CHARACTERISTICS OF BRANDS 15
2.3.1 The brand states ownership 15
2.3.2 The brand is a product 15
2.3.3 The brand provides information 15
2.3.4 The brand denotes an experience 17
2.3.5 The brand is delicate 17
2.4 THE IMPORTANCE AND VALUE OF BRANDS 18
2.4.1 Consumers 18
2.4.2 Organisations 24
2.5 SUMMARY 27
CHAPTER 3
BRAND LOYALTY
3.1 INTRODUCTION 30
3.2 WHAT IS BRAND LOYALTY? 30
3.3 LEVELS OF BRAND LOYALTY 33
3.3.1 Potential loyals 34
3.3.2 Pseudo loyals 35
3.3.3 Active and committed loyals 35
3.4 PHASES OF BRAND LOYALTY 38
3.4.1 Cognitive loyalty 38
3.4.2 Affective loyalty 39
3.4.3 Conative loyalty 39
3.4.4 Action loyalty 39
3.5 DRIVERS OF BRAND LOYALTY 40
3.6 MEASURING BRAND LOYALTY 46
3.6.1 Guidelines for measuring brand loyalty 53
3.7 THE IMPORTANCE AND VALUE OF BRAND LOYALTY 54
3.8 BRAND LOYALTY AS AN ELEMENT OF BRAND EQUITY 59
3.9 SUMMARY 62
CHAPTER 4
BUILDING BRANDS AND BRAND LOYALTY
4.1 INTRODUCTION 65
4.2 BRAND PLANNING 66
4.2.1 Market definition 69
4.2.2 Market analysis 70
4.2.3 Brand analysis 70
4.2.4 Positioning 71
4.2.5 Setting aims and objectives 71
4.2.6 Combining the elements of a brand plan 71
4.3 CREATING BRAND PREFERENCE 72
4.3.1 Need association 72
4.3.2 Mood association 73
4.3.3 Subconscious motivation 74
4.3.4 Behaviour modification 75
4.3.5 Cognitive processing 77
4.3.6 Model emulation 80
4.4 METHODS AND STRATEGIES FOR BUILDING BRANDS 81
4.5 METHODS AND STRATEGIES FOR BUILDING BRAND
LOYALTY 92
4.5.1 Treat consumers right 93
4.5.2 Stay close to the consumer 94
4.5.3 Measure/manage customer satisfaction 94
4.5.4 Create switching costs 94
4.5.5 Provide extras 95
4.6 STRATEGIES FOR MAINTAINING BRAND LOYALTY 95
4.7 SUMMARY 98
CHAPTER 5
RESEARCH METHODOLOGY AND RESULTS
5.1 INTRODUCTION 102
5.2 RESEARCH METHODOLOGY 103
5.2.1 Research population 103
5.2.2 Sampling 104
5.2.3 Research technique 107
5.2.4 The questionnaire 108
5.2.5 The inspection and editing of the data 112
5.2.6 Coding 113
5.2.7 Transferring and analysis of data 113
5.3 RESULTS AND FINDINGS 114
5.3.1 Consumer survey 114
5.3.2 Survey of brand owners 129
5.4 SUMMARY 147
CHAPTER 6
SYNOPSIS, CONCLUSIONS AND RECOMMENDATIONS
6.1 INTRODUCTION 150
6.2 SYNOPSIS OF CHAPTERS 151
6.2.1 Chapter one 151
6.2.2 Chapter two 151
6.2.3 Chapter three 152
6.2.4 Chapter four 153
6.2.5 Chapter five 154
6.3 CONCLUSIONS 154
6.3.1 On what basis do consumers differentiate between
homogeneous products? 155
6.3.2 What variables motivate consumers to be brand loyal
within the FMCG market? 156
6.3.3 What strategies can an organisation within the FMCG market
utilise to create and maintain loyalty towards its brand? 156
6.3.4 How can an organisation go about building a brand? 161
6.4 RECOMMENDATIONS 163
LIST OF SOURCES 166
APPENDICES 171
LIST OF TABLES
Table 5.1: Age distribution 115
Table 5.2: Respondents’ agreement with the statement: “All brands
give me the same benefits.” 118
Table 5.3: Reasons for mayonnaise preference 123
Table 5.4: Purchases of other brands of regular packet soup 127
Table 5.5: Actions during out of stock situations for coffee 129
LIST OF FIGURES
Figure 2.1: Comparison of distinctiveness 13
Figure 2.2: The Bovril brand 16
Figure 2.3: The importance of added value 23
Figure 2.4: Importance of brands and branding 28
Figure 3.1: The three facets of brand loyalty 34
Figure 3.2: The loyalty pyramid 36
Figure 3.3: Brand value model 42
Figure 3.4: Framework for understanding what people buy 43
Figure 3.5: The satisfaction-loyalty relationship 45
Figure 3.6: The value of brand loyalty 55
Figure 3.7: Performance measures reflecting long term profitability 58
Figure 3.8: Brand equity framework 60
Figure 4.1: Marketing channels for consumer products 84
Figure 4.2: Broad factors that determine the success or otherwise of a
brand 85
Figure 4.3: D.R.E.A.M. model 89
Figure 4.4: Creating and maintaining brand loyalty 93
Figure 5.1: Income distribution 115
Figure 5.2: Gender split 116
Figure 5.3: Population grouping 116
Figure 5.4: Respondents’ agreement with the statement: “I like to try
new brands of mayonnaise.” 119
Figure 5.5: Respondents’ agreement with the statement: “I like to try
new brands of regular packet soup.” 120
Figure 5.6: Respondents’ agreement with the statement: “I like to try
new brands of coffee.” 121
Figure 5.7: Purchases of other mayonnaise brands 124
Figure 5.8: Reasons for soup purchases 125
Figure 5.9: Actions of respondents should their preferred brand of
regular packet soup be out of stock 126
Figure 5.10: Most purchased brands of coffee 128
LIST OF APPPENDICES
APPENDIX A: CONSUMER QUESTIONNAIRE 171
APPENDIX B: MAYONNAISE OPTIONS 180
APPENDIX C: REGULAR PACKET SOUP OPTIONS 184
APPENDIX D: COFFEE OPTIONS 187
APPENDIX E: BRAND LOYALTY SURVEY 191
CHAPTER 1
INTRODUCTION AND ORIENTATION
1.1 BACKGROUND TO THE STUDY
Due to increased competition, locally as well as internationally, organisations
need a distinguishing element that will keep consumers identifying and
buying their products. With competition increasing annually, the traditional
sources of competitive advantage no longer provide long term security for a
company, product or marketer. In other words, leadership in price and
quality is not enough to ensure the success of a product anymore.
Company executives are recognising that the true worth of the organisation
is not the tangible assets it owns, but the value ascribed to the brands it is
developing to satisfy the needs of the consumer (Sinclair, 2000).
Brands are among an organisation’s most valuable assets, and leading
organisations (as in the case of Coca Cola) today realise that capitalising on
their brands is more important than their tangible assets. Doing so can help
them achieve their growth objectives quicker and more profitably (Davis,
2000). Leading organisations know that brands are more than just products:
brands are also an indication of what the organisation does and, more
importantly, what the organisation is. Usually brands are why an
organisation exists; not the other way round (Davis, 2000).
However, most organisations are not maximising their potential financial
returns because they are not maximising the power of their brands. With
proper brand management, organisations can experience exponential
growth, but this will happen only if these organisations take advantage of the
most important growth weapon at their disposal: their brand (Davis, 2000).
Most organisations within the FMCG market believe that they operate in a
‘mature’ industry and therefore use little imagination in marketing and
branding their products. In order to distinguish its brand, an organisation
needs to be innovative. In this way imaginative organisations can rewrite
industry rules and create new futures for themselves (Wileman & Jary,
1997). In the FMCG market, sustainable growth can only be achieved by
companies that are successful in creating good, trusted brands (The
Encyclopaedia of brands and branding in SA, 1999).
1.2 RESEARCH PROBLEM AND SUB-PROBLEMS
Based on the foregoing discussion, the following question, which also
represents the main problem, arises: What strategies can an organisation
implement to achieve and sustain loyalty from current and prospective
consumers towards its brand in a highly competitive, FMCG market? From
the main research problem, the following sub-problems are derived:
• On what basis do consumers differentiate between homogenous
products?
• What strategy/strategies can an organisation utilise to ensure that
consumers will differentiate its products from those of its competitors in a
market where products in the same category are very similar in features,
attributes and benefits?
• What variables motivate consumers to be brand loyal within the FMCG
market?
• How can an organisation go about creating a powerful brand?
• How can an organisation in the FMCG market maintain brand loyalty from
its existing consumers?
1.3 DELIMITATION OF THE RESEARCH
In order to make the research manageable the focus is on consumers
purchasing consumer products within the Port Elizabeth FMCG market. It is
expected that the variables influencing the brand loyalty of these consumers
will be similar to those influencing consumers elsewhere in South Africa.
The focus is also on brand managers and advertising agencies that
represent leading FMCG brands in South Africa, irrespective of where they
are situated. Consumers and organisations outside the FMCG market, for
instance, financial, servicing and industrial industries are not included in the
research.
1.4 DEFINITION OF CONCEPTS
In order to gain a better understanding of the research, it is important to
define the following key terms:
1.4.1 Brand
Davis (2000) believes that a brand is an intangible but critical component of
what a product represents. It is a “set” of promises that implies trust,
consistency, and a defined number of expectations. The strongest brand in
the world “owns” a place in the consumer’s mind, and when it is mentioned,
almost everyone thinks of the same things. Davis (2000) believes that a
brand differentiates products that appear similar in features, attributes and
benefits. All these help bring the brand to life and into consumers’ streams
of consciousness, but in reality they are simply well executed marketing and
selling tactics (Davis, 2000).
1.4.2 Brand loyalty
Lamb, Hair, and McDaniel (1998) state that brand loyalty is “a consistent
preference for one brand over all other brands”.
1.4.3 Marketing strategy
According to McCarthy and Perreault (2000), a marketing strategy specifies
a target market and a related marketing mix. It is a “big picture” of what a
firm will do in a certain market. Two interrelated parts are needed:
• a target market – a fairly homogeneous group of consumers to whom a
company wishes to appeal; and
• a marketing mix – the controllable variables which the company puts
together to satisfy the needs of this target group.
1.4.4 FMCG market
This is the market in which suppliers supply products, which are consumed
by consumers on an on-going, frequent basis.
1.5 THE SIGNIFICANCE OF THE RESEARCH
Due to the influx of global competitors into the South African consumer
market with products with homogenous features, attributes and benefits, it is
important for South African marketing managers and brand managers to
realise that their brands are their companies’ most valuable assets. As a
former chairman of Unilever, Sir Michael Perry, once said, “Buildings
become dilapidated, machines wear out, people die, but what live on are the
brands” (Sampson, 2000).
Database searches reveal only limited sources of information on brand
loyalty within the South African FMCG market. It is expected that the
literature and empirical findings resulting from this research together with
input from the researcher’s own experience will contribute greatly to the body
of knowledge on the topic.
1.6 A REVIEW OF RELATED LITERATURE
As a starting point, the researcher investigated the availability of published
sources of information so as to find a theoretical basis from which to launch
the study.
The Encyclopaedia of Brands and Branding in South Africa (1999) and an
insert that appeared in The Sunday Times newspaper (Top Brands, 2001)
were used to determine the top brands on which the study is based.
Information specific to branding within the FMCG market was obtained from
journals and magazines. Information on brands and branding, in general,
was found mainly in textbooks.
The literature study revealed two studies previously undertaken, namely, a
dissertation by Heyman (1997) entitled Winning strategies for National
brands to gain share leadership in fast moving consumer goods categories
dominated by private labels, and a dissertation by Embleton (1995) entitled
Factors influencing brand loyalty of fast moving consumer goods. The
former focuses mainly on the impact of private labels on the market share
the product enjoys, as well as on increasing market share through optimal
use of private labels. The latter focuses on whether brand loyalty factors
differ between products within the FMCG market and whether levels of
loyalty vary between product classes.
The current study attempts to identify factors that are important in brand
building in general, and to determine how brand building can enhance brand
loyalty and differentiate an organisation’s product from competitor products.
1.7 METHODOLOGICAL JUSTIFICATION
A combination of research methods was used during the study to enable the
researcher to achieve the research objectives. A detailed description of the
methodology used is discussed in Chapter five.
Historical data in the form of market share percentages, relevant historical
market information, product performance and figures related to the following
brands:
• Ricoffy coffee;
• Nescafé coffee;
• Simba chips;
• Crosse & Blackwell mayonnaise;
• Maggi range of products;
• Five Roses tea; and
• Bakers and Pyotts biscuits.
The above-mentioned brands were selected due to the fact that they are all
market leaders within their own segments of the total FMCG market.
The empirical research consisted of personal interviews with brand
managers involved with the above-mentioned brands as well as with
advertising agencies and members of the general public. The objective of
these interviews was to obtain the viewpoints of the brand owners with
respect to brand loyalty and brand building within the FMCG market.
The advertising agencies interviewed were as follows:
• Ogilvy & Mather;
• J. Walter Thompson;
• Optimedia South Africa;
• The Agency; and
• TBWA Hunt Lascaris.
Personal interviews were also conducted with 303 members of the general
public. The purpose of these interviews was to establish what factors
influence consumer loyalty towards a brand.
The information obtained from the research data was used to determine
what factors contribute to successful brand building, what motivates
consumers to become brand loyal and what strategies brand managers
implement to “build” their brands and create and maintain loyalty towards
their brands.
One problem encountered in the research was that there were only a limited
number of literature sources available on brand loyalty and brand building
within the FMCG market. Another problem was that the brand owners of the
leading brands in the South African FMCG market are widely dispersed and
it was not possible to interview all of them, due to cost restraints.
The main focus of chapter two is to investigate the meaning of the concept of
a brand, while chapter three examines the concept of brand loyalty. Chapter
four addresses the strategies used to build brands and loyalty towards
brands. Chapter five deals with the research methodology and results.
Chapter six contains a discussion of the findings, conclusions and
recommendations.
CHAPTER 2
BRANDS AND BRANDING
2.1 INTRODUCTION
According to Hart and Murphy (1998) “the use of brands has developed
considerably, especially in the last century. The words ‘brands’ and
‘branding’ are now such common currency that their original meaning is in
danger of being weakened”. It is therefore important to have a clear
understanding of the meaning of brands and branding, in order to determine
the various roles brands and branding play in today’s highly competitive
business environment.
This chapter commences with a discussion of different viewpoints regarding
the meaning of brands so as to create a clear understanding of these two
concepts. Furthermore, the chapter highlights the characteristics,
importance and value of brands and branding to consumers and
organisations.
2.2 WHAT IS A BRAND?
Much confusion exists about what is to be understood under the term
‘brand’. In this section, a number of interpretations of the concept are
explained. These include the brand as having a position in the consumer’s
mind; brands as a form of distinguishing between products, and brands as a
package of value.
Knapp (2000) comments that it “seems that everyone is talking about brand
this and brand that. Brand is becoming one of the most popular words used
today. But when you ask any group of people what a brand is, the answers
vary widely. Some think a brand is a name or a trademark. Some think it is
a product, or even a commitment”.
During research with thousands of executives, employees, entrepreneurs
and the general public, Knapp (2000) discovered that when most people use
the word brand, they are thinking of a brand name. The Random House
Dictionary of the English Language (in Knapp, 2000) defines a brand as a
“product or service bearing a widely known brand name”. The key aspect
regarding names is familiarity, but familiarity does not necessarily ensure
that a name will be distinctive. A brand name is not necessarily a brand.
Dunphy, business editor for The Seattle Times (in Knapp, 2000), maintains
that a “brand does not mean the same thing to everybody; some
organisations get the concept and others don’t. The key is whether an
organisation ‘walks the talks’ and really understands the necessity for a
brand to be distinctive in a manner that’s beneficial to its customer”. In fact,
it could be argued that many brand names might be well–known, yet not all
that distinctive in the consumer’s mind when compared to other brand
names in their industry. In order to be recognised as a brand, a product or
service must be characterised by a distinctive attribute in the consumer’s
mind (Knapp, 2000).
According to Knapp (2000), it is critical to understand that brands are not
simply the result of the advertising or message that an organisation places in
the market place. A brand is only that which is perceived by the consumer’s
mind (or what is thought of as the ‘mind’s eye’). The consumer’s mind’s eye
is influenced by thousands of impressions daily and changes just as often.
Not only must a brand monitor these impressions constantly; it also has to
occupy a distinctive position in the consumer’s mind to really be a brand.
Knapp (2000) is of opinion that the less distinctive or different a brand is in
the consumer’s mind, the more room there is for competitors to occupy a
position in the consumer’s mind’s eye, and the less genuine a brand
becomes.
Figure 2.1 shows the difference between genuine brands and brand names.
A genuine brand can be defined as the internalised sum of all impressions
received by consumers, resulting in it having a distinctive position in their
‘mind’s eye’ based on perceived emotional and functional benefits. The
primary objective of a genuine brand should be to add value to people’s
lives. A genuine brand is about benefiting the consumers, and the more
differentiated a brand is, the easier it is to communicate efficiently with the
consumer. However, differentiation needs to be focused on the benefits to
the consumer (Knapp, 2000).
Figure 2.1 Comparison of distinctiveness
RELATIVE BRAND DISTINCTION
GENUINE COMMODITIES BRAND NAME BRAND BRAND NO DIFFERENCE Well known Distinctive Perceived by EXCEPT PRICE but similar the consumer as unique
Source: Knapp, 2000: 7
Branding has been around for centuries as a means of distinguishing the
goods of one producer from those of another. The word “brand” is derived
from the Old Norse word “brandr”, which means, “to burn”, as brands were
and still are the means by which owners of livestock mark their animals to
identify them (Keller, 1998). According to the American Marketing
Association (in Keller, 1998), a brand is a “name, term, sign, symbol, design,
or a combination of the intended to identify the goods and services of one
seller or group of sellers and to differentiate them from those of the
competition.” Thus, the key to creating a brand, according to this definition, is
to choose a name, logo, symbol, package design, or other attributes that
identifies a product and distinguishes it from other brands. These different
components of a brand, which identify and differentiate a brand can be
called brand elements (Keller, 1998).
Keller (1998) also believes that these brand elements come in many different
forms. In some cases, the company name is essentially used for all products
(e.g. General Electric). In other cases, manufacturers assign individual
brand names to new products that are unrelated to the company name (for
example as with Procter & Gamble). The name given to products also
comes in many different forms. Brand names can be based on people (for
example Estee Lauder cosmetics), places (for example British Airways),
animals or birds (for example Dove soap), or other things or objects (for
example Carnation evaporated milk). Some brand names use words with
inherent product attributes or benefits (e.g. Beautyrest mattresses). Other
brand names are invented and include prefixes and suffixes that sound
scientific, natural, or prestigious (for example Compaq computers). Like
brand names, other brand elements such as brand logos and symbols may
be based on people, places, objects and abstract images. In creating a
brand, marketers have many choices in the number and nature of the brand
elements used to identify their products.
Mariotti (1999) defines a brand as a “shorthand” description of a package of
values upon which consumers and prospective purchasers can rely to be
consistently the same (or better) over long periods of time. The package of
values distinguishes a product or service from competitive offerings. A
brand is an important asset of a company, its products or services and its
marketing strategy. Often the brand will have a familiar logo associated with
it as its icon. When consumers see the logo (such as the Nike ‘swoosh’),
they think of the brand as the entire package of values and the promises it
carries.
2.3 CHARACTERISTICS OF BRANDS
According to Crainer (1995), a brand has the following characteristics:
2.3.1 The brand states ownership
Branding is a statement of ownership as can be seen in the trademark of
McDonald’s ‘M’. A trademark remains a highly effective prompt for a brand.
2.3.2 The brand is a product
Kotler (in Crainer, 1995) describes a brand as “a name, term, sign, symbol or
design, or a combination of these, which is intended to identify the goods or
services of one group of sellers and differentiate them from those of
competitors”.
2.3.3 The brand provides information
One of the main purposes of a brand is to provide information to consumers.
The information can be physical (the contents, ingredients, calorific content)
and/or abstract information (statements about the user, the associations, the
memories).
Figure 2.2 The Bovril brand
Tradition
Sentiment Physical appearance
Contents Information
Advertising Bold colour
Past experience
Source: Crainer, 1995: 15
Figure 2.2 shows a graphic representation of a brand (in this example,
Bovril). The jar of Bovril contains a large amount of information, which is not
all spelt out. Providing information can come in a variety of forms: the
packaging or physical appearance tells consumers something (Bovril is stout
and substantial, while being of a manageable size); as do consumers’
feelings or sentiment about the product (traditional, warming, savoury). The
Bovril brand, therefore, is a rich mixture of the product (tradition); the
advertising (surprising); the packaging (traditional but not dated); physical
appearance (robust) and consumers’ feelings and expectations.
Bovril
2.3.4 The brand denotes an experience
In today’s world the emphasis is more on the experience than on the item
itself when buying a product. This is illustrated when looking at retail brands
such as Sainsbury and Marks & Spencer in the United Kingdom. The total
Sainsbury and Marks & Spencer brand is made up of the store, its location
and contents as well as the quality of service, range of own-labelled
products, price-competitiveness and even trading hours. The brand
embraces all of these factors and is not only about the product itself. The
product is only part of what a consumer will experience of the total brand.
2.3.5 The brand is delicate
In 1985 Coca-Cola announced that it was replacing its traditional cola with
New Cola, conveniently overlooking the fact that the old version sold millions
of litres every day of the week. Coke’s arch rival, Pepsi, produced
advertising which was extremely gleeful, rubbing in the fact that ‘the real
thing’ remained unchanged. Realising that it was a mistake and a disaster,
Coke backtracked and reintroduced the original Coke.
The above example is an illustration that, nevertheless how big the brand
may be, an organisation must handle brands with care.
2.4 THE IMPORTANCE AND VALUE OF BRANDS
Any member of the general South African public can walk into any individual
Pick & Pay Supermarket or Spar outlet and they will be faced with about
12,000 square metres of product choice. The first challenge, for the
consumer, is to find the general area that has the kind of merchandise they
are looking for. Once the consumer has found the area with the
merchandise, the real selection process starts. Now the power of brands
and branding “takes hold of the individual’s mind (and wallet) like a wet
sponge and tries to wring out the desired behaviour” (Mariotti, 1999).
Contemplating the above scenario led the researcher to investigate the
importance and value of brands and branding (to both the consumer and the
organisation) in today’s highly competitive business environment.
2.4.1 Consumers
Keller (1998) believes that brands serve to identify the source or maker of a
product and allow consumers to assign responsibility as to which particular
organisation should be held accountable for the experience gained by using
the product. Because of past experience with a product and the marketing
programme over a period of time, consumers learn more about a brand.
Consumers collect information to help in the decision making process
regarding which brands satisfy their needs and which do not. As a result,
brands provide a shorthand device or means of simplification for making
product decisions.
Lambin (2000) concurs that a brand identifies the producer and, since the
brand owner commits himself to give a specific and constant level of quality,
it creates a long-term responsibility. A brand provides a simple way to
memorise the brand characteristics and to put a name to a certain
assortment of benefits. This makes routine purchase behaviour possible
and easier. This means that the time spent shopping will be reduced and
consumers attracted by more stimulating activities will prefer this.
In addition, Lambin (2000) feels that the potential buyer perceives the brand
as being a message containing a set of attributes that are both tangible and
intangible. The buyer uses the information contained in this message as a
guide in the decision-making process when being confronted by a needs or
consumption situation. The brand is therefore a signal to potential buyers
who can identify a set of solutions to their problems, at a low personal cost.
From another perspective, brands allow consumers to lower search cost for
products both internally (in terms of how much they have to think) and
externally (in terms of how much they have to look around). Based on what
consumers already know about a brand, such as its quality and product
characteristics, they can make assumptions and form reasonable
expectations about what they may not know about the brand (Keller, 1998).
The relationship between brands and consumers can be seen as a type of
bond or pact. Consumers offer their trust and loyalty with the implicit
understanding that the brand will behave in certain ways and will provide
utility through consistent product performance and appropriate pricing,
distribution and promotional programmes and actions. To the extent that
consumers realise the advantages and benefits from purchasing the brand,
and as long as they derive satisfaction from product consumption,
consumers will continue to buy the brand (Keller, 1998).
According to Kapferer (1999), brands can also serve as symbolic devices,
allowing consumers to project their own self-images. Consumers are social
animals who judge themselves on certain choices. This explains why a large
part of social identity is built around brands.
The brand’s function is to overcome any danger or risk to the consumer in
purchasing that particular brand. Certain brands are associated with being
used by certain types of people and thus reflect different values or traits.
Consuming certain products is a means by which consumers can
communicate to others – or even to themselves – the type of person they are
or would like to be (Keller, 1998).
Central in a market economy is a diversity of taste and preference.
Organisations cater for this in differentiating products on both tangible and
intangible attributes. This product differentiation provides an opportunity to
consumers to claim their difference, demonstrate their originality and
express their personality through their brand choices. In this way,
consumers can also communicate their value system (Lambin, 2000).
Both Keller (1998) and Kapferer (1999) believe that there are three types of
qualities of brand characteristics that are important to consumers:
• Qualities that are noticed by contact before buying. That is, the brand’s
attributes can be evaluated by visual inspection (for example size, colour,
style and ingredient composition).
• Qualities noticed uniquely by experience, thus after buying. Actual brand
trial and experience is necessary (for example service quality, safety, and
ease of handling).
• Credence qualities that cannot be verified even after consumption and
which consumers have to take on trust.
Because of the difficulty in assessing and interpreting product attributes and
benefits through experience and with credence brands, brand names may be
particularly important signals of quality and other characteristics to
consumers.
De Chernatony and McDonald (2000) go one step further in arguing that a
brand is more than just the sum of its component parts. For the purchaser or
user, a brand embodies additional attributes which, while they might be
considered by some to be “intangible”, are still very real and in consumers’
minds, are seen as added values. The added value of a product is created
through the marketing mix of the product, packaging, promotion, price and
distribution and creates a distinctive position within the consumer’s mental
map. Competing products, because they are undifferentiated, occupy
virtually identical positions in the consumer’s mind and are substitutable.
The more distinctive a product position, the less likelihood there is that the
consumer will accept a substitute.
To illustrate the power of added value, consider the results of a blind test
(that is where the brand identity is concealed) in which Diet Pepsi was
compared with Diet Coke by a panel of consumers (De Chernatony &
McDonald, 2000):
• Prefer Pepsi 51 percent
• Prefer Coke 44 percent
• Equal/can’t say 5 percent
When the same two drinks were given as a matched sample in an open test
(that is where the true identity of the brands was revealed), the following
results were produced:
• Prefer Pepsi 23 percent
• Prefer Coke 65 percent
• Equal/can’t say 12 percent
This can only be explained in terms of the added value that was aroused in
the minds of consumers when they saw the familiar Coke logo and pack.
According to De Chernatony and McDonald (2000), the most effective
dimension of competition is the relative added value of competing brands.
Relative value is influenced by the core product and helps to create a
distinctive difference. As can be seen in Figure 2.3, the “core” product is
simply the tangible feature of the offering. The added values that augment
the product and where distinctive differences can be created are to be found
in the “product surround”. The larger the “surround” in relation to the core
product the more likely it is that the offering will be strongly differentiated
from the competition, and vice versa.
Lambin (2000) is of the opinion that, in wealthy societies, the basic needs of
consumers are largely met and there exists a need for change, novelty,
surprise and stimulation. Brands like Swatch, Club Med, Marlboro, Cartier
and Coca-Cola contribute to the fulfilment of those needs through their
branding policies, in the process providing added value.
Figure 2.3 The importance of added value
Source: De Chernatony and McDonald, 2000: 12
2.4.2 Organisations
According to Keller (1998), brands are not only beneficial to consumers, but
also to organisations.
Brand names enable the organisation to simplify product handling and
tracing of brands. Furthermore, brands also assist the organisation in
organising inventory, accounting and other operational functions.
A brand can also offer the firm legal protection regarding its unique features
or aspects. A brand can retain intellectual property rights and give legal title
to the brand owner. Intellectual property rights ensure that the organisation
can safely invest in the brand and reap the benefits of a valuable asset
(Keller, 1998). The brand name can be protected through registered
trademarks, the manufacturing process can be protected through patents,
and packaging can be protected through copyright and designs.
Lambin (2000) agrees with Keller that property rights such as patents, trade
marks and copyrights provides clear legal title and enable the brand owner
to protect the brand names against counterfeiting or imitations.
The influence and power of large retail chains have increased dramatically
over the last ten years. This means that the world’s leading grocery
manufacturers would have been at the mercy of these retail chains had it not
been for their brands that enabled the grocery manufacturers to
communicate directly with end-consumers regardless of the actions of the
middlemen (Lambin, 2000).
A brand also signals quality levels to satisfied consumers. At Volvic, 10
percent of the buyers of this brand of mineral water are regular and loyal
consumers and represent 50 percent of the brand’s sales. The image of
superior quality and added value is justified by the purchase reputation of its
consumers and also reflects a source of demand and lasting attractiveness
(Kapferer, 1999). It therefore appears that brands can signal a certain level
of quality so that satisfied consumers can easily choose the product again.
This brand loyalty provides predictability and security of demand for the
organisation and creates barriers of entry that make it difficult for other
organisations to enter the market (Keller, 1998).
In today’s highly competitive business environment, the manufacturing
processes and product designs are very similar and easily duplicated.
Lasting impressions in the consumers’ mind from years of marketing activity
and product experience may not be so easily reproduced. Branding can be
seen as a powerful tool to secure a competitive advantage (Keller, 1998).
Furthermore, Lambin (2000) feels that a brand gives the organisation the
opportunity to position itself within the market and to claim its distinctive
characteristics. The brand is therefore a competitive weapon, which
contributes to increasing the market transparency. This is particularly useful
in markets where comparative advertising is legalised.
According to Kapferer (1999), financial value can be added to an
organisation as a result of additional revenues that are generated by the
presence of a strong brand. Consumers may be attracted to a product which
appears identical to another, but which has a brand name with a strong
reputation. The strong brand may command a premium price in addition to
providing an added margin due to economies of scale and market
domination.
Brands are also seen as being of strategic importance to organisations and
are increasingly regarded as assets in their own right, and subject to
investment and evaluation in the same way as other organisational assets.
Just as other organisational assets can be bought and sold, brands’ features
occupy centre stage in some of the biggest public transactions. Nestlé, for
example, paid £5 billion for the Rowntree brand in 1988, a price that was five
times the disclosed net assets and twice the previous market capitalization
of the company. The reason for the high premium was the desire for
ownership of such famous brands as Aero, Smarties and Kit-Kat, brands
which Rowntree could not afford to exploit adequately on its own (Blackett &
Boad, 1999).
The brand provides a method of capitalising past advertising investment put
into the brand as well as the capital of satisfaction generated by the brand. It
therefore introduces stability into businesses, allowing planning and
investment in a long-term perspective (Lambin, 2000).
Crainer (1995) believes that a strong brand can make a positive contribution
towards the credibility of a new product introduction or a line extension. A
good reflection of Crainer’s belief is when a brand like Microsoft Windows
introduces a new version of the product. People line up well before the new
version goes on sale.
As can be seen from the above discussion of the importance and value of a
brand, it is clear that a brand is a valuable asset to an organisation and an
aid to the consumer. A brand is a capital to be managed, maintained and
developed, as the result of the perception of consumers and the signals
produced by the brand owner.
2.5 SUMMARY
This chapter has focused on the meaning of brands and branding in order to
create a clear understanding of the concepts. The latter part of the chapter
explained the characteristics, importance and value of brands and branding
to consumers and organisations.
During the research study, the researcher discovered that many definitions
and meanings of brands and branding exist. A brand is more than a logo, a
name or an advertisement, it refers to the total experience and mental picture
a consumer has of a product. A brand is a promise, an expression of
potential benefits (both tangible and intangible), a distillation of beliefs and
values of the product and has the following characteristics:
• The brand states ownership.
• The brand is a product.
• The brand provides information.
• The brand is an experience.
• The brand is delicate.
Brands and branding are important to both consumers and organisations.
Once consumers have decided to purchase a particular type of product, they
then have to decide on the brand. Figure 2.4 summarises the advantages
consumers and organisations derive from the existence of brands and
branding.
Figure 2.4 Importance of brands and branding
CONSUMERS
• Identification of product source • Assignment of responsibility to product manufacturer • Providing guidance in the decision-making process • Risk and cost reducer • Promise, bond or pact with product manufacturer • Symbolic device • Signal of quality • Added value • Fulfilment of specific needs ORGANISATIONS
• Simplify handling or tracing of products • Legally protects unique features • Direct communication with consumers • Signal of quality level to satisfy consumer needs • Secure competitive advantage • Positioning tool • Ensure source of financial returns • Preserve organisational assets • Provides credibility for further brand development
As the meaning of the concept of a brand was discussed in this chapter, it
establishes a base from which to go further to obtain an understanding of the
meaning of brand loyalty, which is the main focus of chapter three.
CHAPTER 3
BRAND LOYALTY
3.1 INTRODUCTION
In chapter two the meaning of brands and branding and its characteristics,
value and importance were discussed. The purpose of chapter three is to
examine the concept of brand loyalty and also provide useful insights into
various issues related to brand loyalty.
Chapter three begins with an explanation of what brand loyalty is and, with
the aid of theoretical and commercial models, discusses various important
components of brand loyalty. The chapter concludes by explaining the
concurrence between brand loyalty and brand equity.
3.2 WHAT IS BRAND LOYALTY?
Literature on branding and brand loyalty contains many different approaches
to defining the concept of brand loyalty. These range from preference, to
repeat purchase, to various degrees of commitment.
Keller (1998) maintains that loyalty is a distinct concept that is often
measured in a behavioural sense through the number of repeat purchases.
Consumers may be in the habit of buying a particular brand without really
thinking about why they do so. Continual purchasing of a preferred brand,
may simply result because the brand is prominently stocked or frequently
promoted.
When consumers are confronted by a new or resurgent competitor providing
compelling reasons to switch, their ties to the brand may be tested for the
first time. The attachment a consumer has to a brand is a measure of brand
loyalty and reflects how likely the consumer is to switch to another brand,
especially when the brand is changed, either in price or product features
(Aaker, 1991).
If consumers purchase a brand repeatedly without attachment it is then
called behavioural loyalty. When a consumer purchase repeatedly and with
attachment then the consumer is both behaviourally and attitudinally loyal
(Hofmeyr & Rice, 2000).
Loyalty towards buying or using a specific brand of product is created when
a brand becomes a consumer’s preferred choice. Consumer brand loyalty is
what makes brands worth millions or billions of dollars (Mariotti, 1999).
Many top brands have been market leaders for years despite the fact that
there undoubtedly have been many changes in both consumer attitude and
competitive activity over a period of time. Consumers have valued these
brands – what they are and what they represent – sufficiently enough to stick
with them and reject the overtures of competitors, creating a steady stream
of revenue for the firm. Academic research in a variety of industry contexts
has found that brands with a large market share are likely to have more loyal
consumers than brands with a small market share (Keller, 1998).
Aaker (1991) believes that it is relatively inexpensive to retain consumers;
especially if they are satisfied with and/or like the brand. In many markets
there is substantial inertia among consumers even if there are relatively low
switching costs and low consumer commitment to the existing brand. It is
expensive for any business to gain new consumers in today’s highly
competitive business environment. Some authors define brand loyalty
further by stating that brand loyalty can also be defined in terms of
commitment.
Oliver (1999) defines loyalty in this context as “a deeply held commitment to
rebuy or repatronize a preferred product or service consistently in the future,
thereby causing repetitive same-brand or same brand-set purchasing,
despite situational influences and marketing efforts having the potential to
cause switching behaviour”. According to Keller (1998) “the bottom line is
that repeat buying is a necessary, but not sufficient condition for being a
brand loyal buyer in an attitudinal sense”. In other words, someone can
repeat-buy but not be brand loyal in a literal sense.
Researchers define brand commitment as the “clinch facet” of brand
preference and brand loyalty as the “attitudinal facet’. Commitment though
is a stronger expression of brand preference and brand loyalty. Someone
may favourably evaluate a brand and repeat - buy the brand, but still not be
truly committed to the brand (Keller, 1998).
Oliver (1999) describes the consumer who fervently desires to rebuy a
product and will have no other product. At still another level, he posits a
consumer who will pursue this quest “against all odds and at all costs”. This
latter condition defines ultimate loyalty.
“Following years of cruel captivity, one of the Beirut hostages stumbled down
the road after being released by his captors in the middle of the war-torn city
and was eventually picked up by a passing car. He explained who he was
and added: ‘I could really do with a Heineken’” (Crainer, 1995). The point
being focussed on in the above quote is that after being held captive for a
lengthy period, the former hostage still remembered the brand name. All
thoughts of the product were secondary to the brand name. This can be
regarded as a triumph for Heineken. The foregoing example illustrates the
ultimate aim of brand loyalty.
3.3 LEVELS OF BRAND LOYALTY
Kapferer (1999) believes that there are three levels of brand loyalty (see
Figure 3.1).
Figure 3.1 The three facets of brand loyalty
Source: Kapferer, 1999: 167
3.3.1 Potential loyals
According to Kapferer (1999) particular brands may receive favourable
attitudes from consumers. These consumers are potentially loyal to a
specific brand. Potential loyal consumers are loyal only if a tailor-made
programme is devised to increase their rate of purchase of a particular
brand.
3.3.2 Pseudo loyals
Pseudo loyals, also known as repeat-buyers, do not hold strong attitudes
towards a brand and only purchase a brand because of the brand’s price or
availability. Reinforcement of choice and increased perception of the
brand’s superiority will ensure brand preference by a consumer.
3.3.3 Active and committed loyals
Kapferer (1999) comments that “active and committed loyals should be
induced to try more and more new products, whether line or brand
extensions”.
Aaker (1991) follows a somewhat different approach to describing the levels
of brand loyalty (see Figure 3.2). The bottom level of the pyramid in Figure
3.2 represents the price buyers or switchers. The brand name does not
influence the purchase decision of these consumers and each brand is
perceived to be adequate to satisfy the consumer’s need. The consumer
purchases whatever is on sale, or is convenient to purchase. This particular
level consists of non-loyal buyers who are completely indifferent to the
brand.
Figure 3.2 The loyalty pyramid
Source: Aaker, 1991: 40
The second level consists of habitual buyers, which includes consumers who
are satisfied, or at least not dissatisfied with a brand. There is no degree of
dissatisfaction that is sufficient to stimulate a change especially if the change
involves effort. Loyalty of consumers who form part of this level can be
vulnerable to competitive offerings especially if competitors can create a
benefit that is visible to the consumer. If the benefit is not visible,
competitors may find it difficult to reach the habitual buyers since there is no
reason for these buyers to be on the lookout for more alternatives as these
alternatives do not show more visible benefits if compared with the existing
brand.
Level three represents satisfied buyers (also known as switching-cost
loyals). Should the satisfied buyer consider switching to another brand it will
be coupled with switching cost, that is, cost in terms of time, money or
performance risk. For competitors to convince a satisfied buyer to switch a
brand, the competitive brand needs to overcome the switching cost by
offering an inducement to switch or by offering a benefit large enough to
compensate.
The fourth level of Aaker’s pyramid is made up of those consumers who truly
like the brand. The consumer’s preference may be based upon an
association such as a symbol, experience, or perceived high quality.
Sometimes consumers struggle to identify reasons why loyalty exists toward
a brand, especially if the relationship has been a long one. Sometimes just
the fact that there has been a long-term relationship can create a powerful
effect, even in the absence of a friendly symbol or other identifiable
contributor to liking.
Finally, the top level of the pyramid represents the committed buyers who
are proud users or discoverers of a brand. The brand is very important to
them either functionally, or as an expression of whom they are. The
consumer possesses so much confidence in the brand that the brand will be
recommended to other consumers.
Aaker (1991) notes that there will be consumers who will exhibit some
combination of the above five loyalty levels, and other consumers who might
have profiles somewhat different from the above levels. The five levels do,
however, provide a feeling for the variety of forms that loyalty can take and
how it impacts upon brand equity.
3.4 PHASES OF BRAND LOYALTY
Oliver (1997) argues that there are different attitudinal phases of loyalty and
that consumers can become “loyal” at each attitudinal phase of the attitude
development structure. In theory, consumers first become loyal in the
cognitive sense, followed by loyal in the affective sense, then by loyal in the
conative manner and finally, in the behavioural sense. The final stage is
also called “action inertia”.
3.4.1 Cognitive loyalty
In this stage loyalty is based on brand belief only. The brand attribute
information available to the consumer determines whether one brand is
preferred above its alternatives. Loyalty to the brand in this stage is
therefore based on the brand’s attribute performance levels and the
available information about the brand. This loyalty is, however, of a very
shallow nature and applies mostly to transactions of a routine nature, for
example, utility provision trash pick-up. During these routine transactions
satisfaction is hardly ever processed and the depth of loyalty is no deeper
than mere performance. If satisfaction is processed, it becomes part of the
consumer’s experience and begins to take on affective overtones.
3.4.2 Affective loyalty
At this phase of loyalty development, a number of satisfying usage
occasions results in the development of a liking, or attitude towards the
brand. The consumer becomes loyal due to the pleasurable satisfaction
derived from using the brand. Whereas cognition is directly subject to
counter argument, affect is not easily dislodged. However this form of loyalty
remains subject to switching, as evidenced by data that show that large
percentages of brand defectors claim to have been previously satisfied with
their brand. It would be more desirable, for the organisation, if consumers
were loyal at a deeper level of commitment.
3.4.3 Conative loyalty
Conation, by definition, implies a brand - specific commitment to repurchase.
This stage of loyalty is brought about by repeated episodes of positive affect
towards the brand. Conative loyalty is a loyalty state that, at first, appears to
result from a deep commitment to rebuy. However, this commitment is more
to the intention to rebuy the brand and not to the brand itself.
3.4.4 Action loyalty
In the action loyalty phase, the motivated intention in the previous loyalty
state is transformed into readiness to act. In addition to the intention to
rebuy the brand, the consumer is also motivated by a desire to overcome
obstacles that might prevent the action. If this is repeated, an action inertia
develops, thereby facilitating repurchase.
The various phases of loyalty can therefore be summarised as follows:
cognitive loyalty focuses on the brand’s performance aspects, affective
loyalty is directed towards the brand’s likeableness, conative loyalty is
experienced when the consumer focuses on wanting to rebuy the brand, and
action loyalty is commitment to the action of rebuying.
3.5 DRIVERS OF BRAND LOYALTY
Once consumers have decided to buy a particular type of product, they have
to decide on the brand. Consumers typically consider only a restricted set of
brands out of the many available (known as a consideration set). By
identifying the factors that influence consumer brand loyalty, suppliers and
marketers will have a clear understanding of a consumer’s consideration set,
and can nurture their loyalty and attract new consumers based on it (Davis,
2000).
Davis (2000) has identified a list of factors that is important in driving the
brand loyalty of consumers. Accordingly, a brand deserving of loyalty:
• Provides high-quality performance.
• Performs dependably and consistently.
• Ensures the brand has been used for a long time.
• Provides high value for the price.
• Fits the consumer’s personality.
• Effectively solves the consumer’s problems.
• Delivers unique benefits.
• Supports the brand with good customer service.
The above list of factors indicates that the benefits and values consumers
receive from a brand are the major drivers of brand loyalty and will ultimately
lead to a premium price for a brand (Davis, 2000).
Consumers that are considering purchasing a brand, scan the brand options
and develop a consideration set. Within the consideration set, consumers
develop a hierarchy of brands based on their own value assessment and
then select the brand at the top of the value hierarchy (Neal, 1999).
Srinivason, Kamakura and Russel (in Neal, 1999) developed the brand value
model (see Figure 3.3) that can serve as a key tool for developing a deeper
understanding of what will keep consumers loyal to a brand. The value
model has three elements, namely, price, the bundle of tangible deliverables
(product attributes) and the bundle of intangible attributes (imagery drivers
as seen in Figure 3.3). Collectively they are called the brand equity. Brand
equity is discussed in detail in section 3.8. Each element and sub-element
of this model can be viewed as having a weight. Each individual purchaser
has his/her own set of weights that is called their preference structure, or
more accurately, their value structure. Each purchaser has a unique
valuation equation for each product or service category in which they have
some experience. This valuation equation provides the purchaser with a
preference structure in order to make a choice among a set of competing
products or services. Rational purchasers would choose the best value. It is
therefore clear that choice is driven by value. If the organisation knows the
purchaser’s value equation, it can very accurately predict their choice among
a set of competing products/services in a category.
Figure 3.3 Brand value model
VALUE
Price Product/Service Company/Brand
deliverables equity
Purchase price Attribute 1 Image driver 1
Operating cost Attribute 2 Image driver 2
Attribute 3 Image driver 3
Source: Neal, 1999: 23
Davis (2000) concurs with Neal (1999) that value is the most simple and
accurate answer to what drives consumers to be brand loyal. Incremental
improvements in consumer satisfaction may improve consideration, but there
is overwhelming evidence that they do not improve loyalty - value does.
Marketers could make use of the model (Figure 3.3) to predict the drivers
that create consumers’ loyalty towards a brand.
Desire and availability also drive brand loyalty. Years ago Coca-Cola
formulated a slogan saying that Coke should always be within an arm’s
length of desire. Both desire and availability were important to Coke.
(Hofmeyr & Rice, 2000).
Two more drivers of brand loyalty include relationship and market presence.
According to Hofmeyr and Rice (2000) “relationship and market presence
lead to lots of loyalty and they establish a framework for understanding what
drives people to buy what they do”. Figure 3.4 highlights these factors and
their elements.
Figure 3.4 Framework for understanding what people buy
What a consumer buys
Relationship with each brand Each brand’s market presence
Everything the consumer associates Distribution, size of sales force,
with, thinks or feels about each brand share of voice, relative price,
in-store position.
Source: Hofmeyr & Rice, 2000: 90
(a) Relationship
The relationship between a consumer and a brand will determine to what
extent a consumer will consider purchasing the same brand over and over.
Consumers will develop a desire to purchase the brand or to use the brand.
This desire may be of varying strengths based on the different options that
are available in the consumer’s mind. This will then lead to a psychological
attachment between the consumer and the brand that will result in a positive
or negative relationship (Hofmeyr & Rice, 2000).
(b) Market presence
The market presence of a brand is everything about the brand that is
external to the consumer’s mind, namely, distribution, in-store position,
relative price, et cetera. It does not help a brand if the consumers are looking
to purchase a brand, but it is unavailable (Hofmeyr & Rice, 2000).
Mariotti (1999) lists a few more factors that drive brand loyalty. These
include:
• value (price and quality);
• image (both the brand’s own personality and its reputation);
• convenience and ease of availability;
• satisfaction;
• service; and
• guarantee or warranty.
Lambin (2000) believes there is a link between satisfaction and loyalty and
illustrates this by using the real-life example of research conducted at Rank
Xerox. According to conventional wisdom, the relationship between
satisfaction and loyalty should be a simple linear one: as satisfaction
increases, so does loyalty. A research conducted at Rank Xerox and
replicated by Jones & Sasser (in Lambin, 2000) showed a much more
complex relationship.
Figure 3.5 The satisfaction-loyalty relationship
Source: Lambin, 2000: 221
The two extreme curves of Figure 3.5 are representative of two different
competitive situations:
• In non-competitive markets – the upper-left zone – satisfaction has little
impact on loyalty. This is typical in markets where regulated monopolies
exist, such as electricity supply, telecommunications and transport; or in
markets where the switching costs are very high. The consumers do not
have a choice. This situation changes dramatically when the source of
monopoly disappears.
• In competitive markets – the lower-right zone – where competition is
fierce and switching cost is low, there is a big difference between the
loyalty of ‘satisfied’ consumers (score of 4) and ‘completely satisfied’
consumers (score between 4 and 5). This was the discovery made at
Rank Xerox: the totally satisfied consumers were six times more likely to
repurchase Rank Xerox products over the next 18 months than its
satisfied consumers (Jones & Sasser in Lambin, 2000).
This has profound implications in that it is not enough to merely satisfy
consumers who have the freedom to make choices, but that the only truly
loyal consumers are totally satisfied consumers.
3.6 MEASURING BRAND LOYALTY
Previously in this chapter the concept, levels, phases and drivers of brand
loyalty were explained in detail in order to provide a clear understanding.
Once there is a clear understanding of brand loyalty, it is important to know
how to measure brand loyalty.
According to Aaker (1995), one of the most valuable assets of an
organisation is the loyalty of the consumer base the organisation serves.
The measurement of market share and sales is very useful for an
organisation, but is an incomplete indicator of how consumers really feel
about a brand. Furthermore, Aaker (1995) believes that “such measures
reflect market inertia and are noisy, in part, because of competitor actions
and market fluctuations”. Measures of consumer brand loyalty are much
more sensitive and provide diagnostic value to an organisation.
Mariotti (1999) concurs with Aaker’s belief that brand loyalty measurement is
a very important exercise. Mariotti (1999) highlights the different
measurement tools used to determine consumer loyalty towards a brand:
• Point-of-sales (POS) systems: building POS databases that collect data
regarding consumers’ purchasing patterns, for example, recording repeat
purchases of the same brand.
• Post-purchase surveys: checking consumers’ brand loyalty via an online
registration, a mail-in survey card (included in the product), or via a
personal follow-up.
• Non-specific retail audits: providing data regarding a consumer’s loyalty
towards a brand.
The total market can be divided into three, namely, consumable goods
market including fast moving consumer goods; durable goods market and
service market. The measurement of brand loyalty will be determined by the
nature of the market that is being measured. It is important to determine the
market type because the nature of the market affects the measurement
period and the type of measurement used. Another reason to determine the
market type is due to the differences in purchasing and the drivers of loyalty
(Rundle-Thiele & Bennett, 2001).
Attitudinal and behavioural measures should be included in all brand loyalty
research as they are both complementary aspects of the one construct.
Normally only one of the above measures can be included, due to resource
and logistical constraints. In consumable markets, where the market is
stable and where there is high switching and low involvement and risk,
behavioural measures are appropriate for predicting brand loyalty levels
(Rundle-Thiele & Bennett, 2001).
Aaker (1991) divides brand loyalty measurement into five components:
(a) Behaviour measures
Actual purchase patterns are one of the direct ways to determine a
consumer’s loyalty towards a brand. These can be measured in three ways:
• Repurchase rates, for example, what percentage of Nescafé users
purchase Nescafé on their next coffee purchase?
• Percentage of purchases, for example, of the last five purchases made
by a consumer, what percentage went to each brand purchased?
• Number of brands purchased, for example, what percentage of coffee
buyers bought only a single brand? Two brands? Three brands?
The nature of a product and the number of competing brands can influence a
consumer’s loyalty widely among some product classes.
Aaker (1991) points out that although behaviour data is objective it still has
limitations. Mariotti (1999) concurs noting the limitations, as a preferred
brand may be out of stock, a competing brand may be selling at a lower
price, or the competing brand may not be merchandised at the same store.
(b) Switching cost
Switching cost indicates the cost involved should a consumer switch to
another brand. The extent to which switching cost provides a base for
consumers’ brand loyalty can be determined via an analysis of switching
cost. Two types of switching costs are involved, namely, the risk (of the new
brand not meeting your needs) to change and cost involved in changing to
another brand. An organisation should value the switching cost that it enjoys
and should work on increasing the dependence of its consumers upon its
brands.
(c) Measuring satisfaction
Measuring consumers’ satisfaction toward a brand can be seen as a key
diagnostic of every brand’s loyalty levels. It is not just satisfaction that needs
to be measured, but very importantly, the dissatisfaction with a brand. When
satisfaction or dissatisfaction is measured it is important that it should be
current, representative and sensitive.
The following key questions can be asked to determine the satisfaction or
dissatisfaction levels of consumers towards a brand:
• What problems are consumers having?
• What are the sources of irritation?
• Why are some consumers switching brands?
• What are the precipitating reasons?
(d) Liking the brand
Receiving positive feedback from the following questions can reflect
resistance to competitive entries or the unlikelihood of consumers switching
to opposition brands. Do consumers like the brand? Is there a feeling of
warmth towards the brand? Are there feelings of respect or friendship
towards the brand? Do consumers perceive the brand as reliable or
trustworthy?
Sometimes consumers like a specific brand without explaining completely
their perceptions and beliefs regarding its attributes. Attributes of brand
liking can be determined from these questions and from the concepts below:
• respect;
• friendship; and
• reliability/trust.
Another measure of liking resulting in high brand loyalty is when consumers
are prepared to pay a premium price for their preferred brand. The
dollarmetric method is one way to determine what a consumer would pay to
get the preferred brand. This means that this method measure the amount a
consumer is prepared to pay in order to obtain the preferred brand.
(e) Commitment
The strongest brands will have a large number of committed consumers.
High brand commitment can be manifested in various ways: consumers will
talk about the brand, recommend the brand to others, and will also find the
brand useful and enjoyable to use.
De Chernatony & McDonald (2000) confirm that there are numerous ways to
measure consumer loyalty towards a brand. Their first measurement tool
concurs with Aaker’s (1991) concerning the actual purchasing behaviour
measurement over a period of time which reflects the degree of satisfaction
existing consumers derive from a brand. By asking the following questions
consumer loyalty can be measured:
• Next time you buy this product category, would you buy this brand again?
• Thinking about the few brands in this product category that you often buy,
is the brand one of your more frequently bought brands?
• If someone were thinking of buying this product, which brand would you
recommend?
It is important to remember that the response to the above questions may be
influenced by the following (De Chernatony & McDonald, 2000):
• past behaviour rather than intended future behaviour; and
• the favourableness of replies may be more a reflection of brand size than
loyalty.
Another tool used to measure consumer brand loyalty is a concept called
Share of Category Requirement (SCR) (De Chernatony & McDonald, 2000).
In the SCR the volume of a specific brand is expressed as a share of the
total category volume during a specific period. An alternative is to establish
the consumer’s purchasing patterns by determining whether the consumer
will buy the same brand at the next purchasing opportunity. The analyses
should also include data on price variations, as most patterns are strongly
influenced by promotions.
Market share and distribution data is the third measuring tool suggested by
Davis (2000) and De Chernatony and McDonald (2000). “A good approach
for this metric is to ask consumers what other brands they considered
purchasing since their last purchase and then why they chose your brand”
(Davis, 2000).
In order to generate realistic results it is important to define the market and
the competitor from the consumer’s perspective and to recognise that market
share indicators are often distorted by short-term price and promotional
activities. Through the use of brand-driven customer retention and loyalty
metrics it is possible to measure the number of consumers who have been
lost as a result of not implicating a brand asset management strategy.
Davis (2000) says, “a good approach for this metric is to ask consumers
what other brands they considered purchasing since their last purchase and
then why they chose your brand”.
3.6.1 Guidelines for measuring brand loyalty
Aaker (1995) identifies four guidelines in order to measure consumer brand
loyalty:
• Firstly, organisations should identify the problems and causes of
dissatisfaction that motivate consumers to change brands.
• Secondly, an exit interview should be arranged with consumers who have
switched brands. Often sensitive and insightful information comes from
these exit interviews.
• Thirdly, the size and intensity of the consumer group whom truly “likes” a
brand should be known.
• Lastly, measures should be tracked over a period of time and compared
with those of competitors.
3.7 THE IMPORTANCE AND VALUE OF BRAND LOYALTY
Kapferer (1999) and Aaker (1995) confirm the importance and value of brand
loyalty:
• “Many firms have taken their consumers for granted, only to see them
dissipate when competitors attack” (Aaker, 1995).
• “A brand can only be strong if it has a strong supply of loyal consumers”
(Kapferer, 1999).
• “With a high level of brand loyalty, a firm can allow itself the luxury of
pursuing a less risky follower strategy” (Aaker, 1995).
Kapferer (1999) believes that an existing base of loyal consumers provides
important, sustainable, competitive advantages to an organisation, because:
• Loyal consumers are more profitable.
• Loyal consumers spend more.
• Loyal consumers are less sensitive when it comes to the price they
should pay for the brand.
• Loyal consumers are also a positive word-of-mouth source.
• Loyal consumers are five times less costly to contact than non-
consumers.
Figure 3.6 shows several ways in which brand loyalty contributes as a
strategic asset to an organisation should it be managed and exploited
properly (Aaker, 1991).
Figure 3.6 The value of brand loyalty
Reduces marketing costs
Ensures trade leverage
BRAND LOYALTY
Attracts new consumers:
• Brand awareness created
• Reassurance to new
consumers
Allows time to respond to
competitive threats
Source: Adapted from Aaker, 1991: 47
(a) Reduces marketing cost
It is well known that the higher the consumer’s brand loyalty towards and
satisfaction with a brand, the easier it is to retain the consumer. The high
level of brand loyalty and satisfaction, in turn, leads to a reduction in
marketing costs. This is due to the fact that prospective consumers are
reluctant or lack motivation to change and it will thus be costly to try and
persuade them to change to another brand. It is thought to be much less
costly to retain existing consumers. However, should the problems and
concerns of existing consumers not be addressed, the risk is that they will
switch to other brands. The challenge an organisation faces is to reduce this
risk.
The loyalty of existing consumers also represents a substantial entry barrier
to competitors. The profit potential for an entrant can be reduced because of
the resources required to convince a loyal or satisfied consumer to switch.
Thus, signals of strong consumer loyalty, such as advertisements about
documented customer loyalty or product quality, can be useful, if sent to
consumers.
(b) Trade leverage
Products such as Ricoffy, Coca-Cola and Simba Chips receive preferred
shelf space in supermarkets mainly because of the strong loyalty consumers
have towards these brands. This brand loyalty leads to trade leverage with
the support of supermarkets in providing leading brands with preferential
shelf space because supermarkets are well aware that the leading brands
are on the shopping lists of consumers. Consumers are likely to shop at the
supermarkets that stock the brand to which these consumers are loyal.
(c) Attracting new consumers
A decision to purchase by a new consumer will always be accompanied by
uncertainty and/or risk. A satisfied consumer base can reduce uncertainty
and risk, because it provides proof that a brand is accepted, successful and
enduring.
A customer base can also provide brand awareness. To see a brand on the
supermarket shelf, or in action, or being used by a friend or colleague can
also generate brand awareness that can attract new consumers.
(d) Time to respond to competitive threats
Customer brand loyalty creates a breathing space for the producers of
existing brands should a competitor introduce or launch a new brand onto
the market. This brand loyalty would allow an organisation the time needed
for the new brand’s improvements to be matched, or neutralised. With a
high level of brand loyalty, an organisation can allow itself the luxury of
pursuing a less risky follower strategy.
According to Burgess and Harris (1998), the value of brand loyalty is also
found in an organisation’s profitability and long term survival dependence on
the level of loyalty the organisation’s brand receives from consumers.
Aaker (1995) concurs with Burgess and Harris (1998) that brand loyalty is
one of the factors that helps an organisation in its current performance and
results in long term profits. Figure 3.7 shows those performance measures
that affect long term profit.
Figure 3.7 Performance measures reflecting long term profitability
Source: Aaker, 1995: 138
Figure 3.7 can be best explained in terms of an example. It is assumed that
Sara, now 70, drinks a Coke (costing R2-50) a day and started drinking
Coke when she was fifteen years old. It is also assumed that a Coke cost
fifty cents when she was fifteen. Every year she spends R913 on Coca-
Cola. This is a seventy-year habit, so she has spent R63,910 over that time.
In addition, as a parent she has reared another two Coke drinkers whose
lifetime value may be similar, giving a total of R191,730. Moreover, Coke
has consistently raised its price so that R191,730 is actually R210,000.
According to Davis (2000) ”the lifetime value of a customer illustrates the
importance of keeping consumers loyal to your brand and the power they
may have in influencing others to become loyal to your brand too”.
Customer Satisfaction/ Brand Loyalty
Product/Service Quality
Brand/Firm Associations
Relative Cost
New product activity
Manager/Employee Capability and Performance
CURRENT PERFORMANCE
LONG-TERM PROFITS
3.8 BRAND LOYALTY AS AN ELEMENT OF BRAND EQUITY
Now that the term brand loyalty has been discussed in detail, it is important
to understand in what way brand loyalty fits into the bigger picture of brand
equity. Aaker (1991) defines brand equity as “a set of brand assets and
liabilities to a brand, its name and symbol, that add to or subtract from the
value provided by a product or service to a firm and/or to that firm’s
consumers. For assets and liabilities to underlie brand equity they must be
linked to the name and/or symbol of the brand”.
Brand equity consists of five categories of assets (see Figure 3.8) and it
creates value for both the consumer and the organisation (Aaker, 1991).
Brand loyalty is an important element in the brand equity framework, both as
an influencer of brand equity and as a method of enhancing value.
Figure 3.8 Brand equity framework
Perceived
Quality
Name Brand
Awareness Associations
Brand Other Proprietary
Loyalty Brand Assets
Source: Aaker, 1991: 17
Keller (1998) quotes from The Market Facts that “brand equity is the
willingness of someone to continue to purchase your brand or not. Thus, the
measure of brand equity is strongly related to loyalty and measure segments
on a continuum from entrenched users of the brand to convertible users”.
BRAND EQUITY
Name Symbol
Provides value to customer by enhancing customer’s: • Interpretation/
Processing of information
• Confidence in the purchase decision
• Use satisfaction
Provides value to firm by enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty