AccessMyLibrary provides FREE access to millions of articles from top publications available through your library.
Much has been written about the importance of brand loyalty as a key determinant of brand choice and brand equity. David Aaker (1991) wrote, "The brand loyalty of the customer base is often the core of a brand's equity. If customers are indifferent to the brand and, in fact, buy with respect to features, price, . . . there is likely little equity."
From a modeling point of view, all articles known to the authors written about predicting an individual's choice or market share state that loyalty, usually measured in the form of repeat-buying patterns, is the most important factor to consider. Modeling of price elasticity effects also demonstrate the importance of loyalty (Guadagni and Little, 1983; Starr and Rubinson, 1978). More loyal consumers, as measured by probability of purchase or "share of requirements" from past purchase panel data, are less likely to switch due to a given price inducement; as a corollary a loyal buyer usually needs a bigger discount to switch than would a less loyal buyer. Consistent with this point of view, Larry Light said in 1989, "You need product volume to be a dominator. You need brand loyalty to be a profitable dominator."
Reviewing the marketing literature reveals that loyalty is almost always defined behaviorally, either as a share of requirements measure, or as a pattern in choices (often using an experimental design).
Yet, the marketing community's knowledge of the role of brand loyalty remains incomplete. For example, one could ask, "If loyal buyers are loyal, why do they sometimes switch away?" Secondly, a well-respected academic, Professor Andrew Ehrenberg, has concluded that the road to building market share is through increasing penetration, arguing that loyalty (i.e., repeat buying) is a by-product of having a big market share (Ehrenberg, 1990, 1993). This is the "Double Jeopardy Effect" a construct which was originated by McPhee (1963) and defined by Ehrenberg as follows:
that small brands generally attract less "loyalty" among their buyers than large brands do among theirs . . . In comparison with a popular comic strip, one that was read by fewer people was usually also liked less by those few who read it. McPhee thought it unfair for less popular items to suffer in two such ways. Hence, he named the phenomenon double jeopardy.
Actually, this phenomenon that loyal-share brands exhibit more brand loyalty (as measured by repeat-purchase rates) has been well documented by the Hendry Corporation (Butler, 1975).
The authors believe that the importance of brand loyalty can be better understood by extending the typical definitions and measurement approaches of loyalty. The authors have done extensive work with an innovative approach that simultaneously considers behavior and attitudes to measure loyalty.
This paper will describe the concepts and measurement approaches of a technique called BrandBuilder that was developed by The NPD Group, Inc. in 1992. Results of a longitudinal study that validate this method will be described. We will use these results to argue against the Ehrenberg contention that marketers should exclusively focus on building penetration. Finally, a vision of measuring the "health" of a brand will be delineated based on these findings.
Why Integrate Attitudes and Behavior to Measure Loyalty?
Over the past 20 years, observational data, in the form of more and more timely measures of sales, profits, trial, and repeat, have slowly eroded the marketer's historical reliance on attitudinal measures, such as measurements of awareness, recall of advertising, or brand imagery. Thus, researchers have often been relegated to the role of contracting for behavioral data one day, and attitudinal data the next, with little thought being given to the chasm that lies between the two.
The BrandBuilder model was developed by NPD in 1992 to bridge this gap. The key concept is that buyers who are behaviorally loyal to a particular brand are expected to rate that brand attitudinally much more favorably than brands they either never buy or buy less often. Such loyal buyers we have termed "real loyals." Some loyal buyers, however, do not exhibit attitudes that tie them to the brand and we term them "vulnerables." It is believed that a higher percentage of real loyals stay loyal to a brand over time than do vulnerables. Furthermore, a vulnerable who has highly favorable attitudes toward a particular competitive brand is termed a "prime prospect" to that brand; we believe that prime prospects convert at higher rates to becoming high loyals (to the brand they rate highly) over time. Using this concept, a brand's loyal core is not just its behaviorally high loyal customers but those who are behaviorally plus attitudinally high loyal, i.e., the "real loyals."
In 1994, we decided to conduct a major R&D initiative. The primary purpose of this initiative was to validate, and improve if necessary, the predictive component of the model. The ultimate result of this work is to attempt to improve the value of the brand to its corporate owners (Baldinger, 1993; Lefton and Anson, 1996).
In order to understand the data on …