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Brand loyalty - Assignment Studio

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Brand loyalty refers to the extent by which consumers become faithful to a particular brand. This is expressed by their repeated purchases, regardless of the marketing pressure brought by other competing brands. In this case the customers will stick to that particular brand irrespective of the prices even if there are similar brands in the market. Brand loyalty is a consumer behavior depicted by loyal customers and will therefore be affected by personal preferences. In this regard therefore, brand loyalty will have an effect on purchases made of the product. It may also affect the customer’s ability to decide whether or not to buy that particular product. This essay therefore, is based on the influence brand loyalty has on the customer behavior and the product. The relationship between brand loyalty and customer preference has made companies to use different strategies to cultivate and get the attention of loyal customers. Some of these strategies include: the use of loyalty programs (e.g. rewards) or trials and incentives. The main argument in this paper is therefore, geared towards answering the question: Is the use of rewards and loyalty cards an effective way to build brand loyalty?

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Brand loyalty - Assignment Studio

  1. 1. 1 Brand Loyalty
  2. 2. 2 Introduction Brand loyalty refers to the extent by which consumers become faithful to a particular brand. This is expressed by their repeated purchases, regardless of the marketing pressure brought by other competing brands. In this case the customers will stick to that particular brand irrespective of the prices even if there are similar brands in the market. Brand loyalty is a consumer behavior depicted by loyal customers and will therefore be affected by personal preferences. In this regard therefore, brand loyalty will have an effect on purchases made of the product. It may also affect the customer’s ability to decide whether or not to buy that particular product. This essay therefore, is based on the influence brand loyalty has on the customer behavior and the product. The relationship between brand loyalty and customer preference has made companies to use different strategies to cultivate and get the attention of loyal customers. Some of these strategies include: the use of loyalty programs (e.g. rewards) or trials and incentives. The main argument in this paper is therefore, geared towards answering the question: Is the use of rewards and loyalty cards an effective way to build brand loyalty? Theoretical concepts of brand loyalty The principle behind loyalty programs believe that if certain behaviors are rewarded chances are very high that they will be repeated. Loyalty programs have therefore been used a tools to promote marketing by encouraging repeated purchase of certain products. Such programs have evolved externally and operate independently of the traditional strategies of store, pricing, and quality decisions. Two types of rewards offered by loyalty programs can be distinguished based on whether they have hard or soft benefits. Hard rewards are generally tangible e.g. discounts while soft rewards include special communication and good treatment. Soft benefits are in most
  3. 3. 3 cases emotion based. A lot of research has been done to emphasize on the use of the right choice of rewards for a loyalty program (Bridson, Evans, & Hickman, 2008). Store satisfaction refers to the consumer’s fulfillment response. It is a personal judgment of whether a product or service provides a certain level of fulfillment to the consumer. Therefore, the consumer maybe under fulfilled or over fulfilled by the product or service. Store loyalty is a biased behavioral response by some customers towards one store out of a number of stores. This is usually a function of certain psychological processes e.g. decision making that makes a customer be committed to a certain brand. It refers to more than just the commitment to a store but rather brings in some extent of preference and dedication (Chaudhuri, 1995). Loyalty was mainly measured by the number if times a customer makes repeated purchases to a given product. Therefore it mainly incorporated the behavioral aspect if the customer. Loyalty if directly linked to sales which is the main goal of most business organizations. However, the concept of loyalty has evolved, with people recognizing the fact that loyalty is more than just behavior alone. Loyalty consists of both behavioral and attitudinal aspects. In this regard loyalty has been linked to repeated purchase and positive word of mouth by the customers (Jain & Srinivasan, 1990). Brand loyalty can also be used to imply both the consistent pattern of purchase of a certain brand and a favorable attitude towards that particular brand. This results in two approaches to develop brand loyalty. One is related to creating consistence purchase of the brand while the other develops a favorable attitude towards the brand in the consumer. Brand loyalty is therefore, a personal attachment between the consumer and the brand (Quester & Lim, 2003)
  4. 4. 4 Brand loyalty and product involvement are two important concepts that can be use to explain consumer decision making processes. Brand loyalty leads to business profitability thus providing competitive advantage to the owner of that particular brand (Kambiz, Mahsa, & Afshin, 2011). Brand loyalty develops when the brand fit the unique personality of the consumer. In order to effectively capture and define brand loyalty three components of attitude have to considered; cognitive, affective ad conative components. Loyalty programs are therefore developed to create this loyalty among customers. However this can range from repeated purchase to hardcore advocates of the store. Kerrie Bridson indicates in the literature that there have been attempts to study whether loyalty programs really encouraged repeat purchase form buyers. The results showed that not all retailers were making repeated purchases, but a trend towards excess loyalty was recorded. However contrasting studies showed that 76percent of card holders had not changed their shopping behavior (Bridson, Evans, & Hickman, 2008). Findings from a study of how consumer’s perception of loyalty programs changed over time suggested that program members spent more time and money in the store and were inclined to visit. Other studies indicated that consumers who received benefits such as gifts or discounts were more loyal than those who merely received a complementary ‘Thank you’ note. In addition, consumers who received branded gifts were also more loyal than those who were given a discount of similar value (Bridson, Evans, & Hickman, 2008). Other studies showed that there is a link between relationship commitment and behavioral loyalty as well as the use of rewards. These theoretical aspects reinforce on the fact that different types of rewards offered different degrees of loyalty. It can therefore be hypothesized that loyalty programs lead to customer loyalty.
  5. 5. 5 Linking purchase and product involvement to brand loyalty The concept of consumer involvement has been studied for a long time by many researchers and has provided a way in which certain consumer choices can be understood (Kambiz, Mahsa, & Afshin, 2011). The concept has been well exhibited in consumer behavior. Consumer decisions are mainly influenced by the concepts of product involvement and brand loyalty. Several studies have done to elucidate the relationship between these two concepts. All in all, the relationship between brand loyalty and product involvement is centered on the fact that consumers who are more involved with a particular brand tend also to be more committed and more loyal to that brand. High involvement with a brand will therefore lead to loyalty to that brand (Quester & Lim, 2003). Studies have found an interaction between brand loyalty and product involvement. Repeat purchase behavior for a high involvement produced was a sign of loyalty to that brand while repeat purchase on a low involvement product is just habitual purchase behavior. Highly loyal people will therefore, show high levels of involvement. Transformation into a loyal consumer of a certain brand is therefore, a sequential process (Quester & Lim, 2003). What is clear from this literature is that involvement in a particular brand is related to being loyal to that particular brand. Other work for instance Traylor suggested that brand commitment is not related to product involvement. He argued that there are scenarios where low brand commitment is coupled with high product involvement and also where high brand commitment is linked to low product involvement (Quester & Lim, 2003). Product involvement can be defined as a commitment exhibit by the consumer as a result of thoughts, feelings, and behavioral response to a particular category. Consumers with high product involvement would find products interesting and this would occupy their minds.
  6. 6. 6 Product involvement differs from purchase involvement in the sense that purchase involvement measures the relevance of purchasing activities to the individual. Product involvement on the other hand, refers to the relevance of the product category to the individual on a continual basis (Quester & Lim, 2003). There are multiple reasons why consumers repeatedly purchase a specific brand in a certain product category. One reason to explain this behavior is that repeat purchase involves less effort and makes consumer decision making process simplified (Quester & Lim, 2003). Consumer behavior and decision making process For a long period of time Literature on consumer behavior has been based on two major assumptions. First is that consumer behaviors can be influenced by many other factors e.g. environmental, individual and psychological factors. Second is that consumers are just human being who can make rational decisions therefore, have the ability to go through a decision making process and make a choice among optimal alternatives (Lee, 2005). Various models have been developed for decision making processes. However, all these models recognize five similar decision making stages. They include: problem/need recognition, information search, alternative evaluation, purchase, and outcomes/post-purchase (Lee, 2005). Need/problem is the most crucial stage because it determines whether the purchase will happen or not. This stage can be triggered by consumer’s state and is related to other consumer decision making stages. Information search involve the consumer trying to recall information about the product from their memory as well as fetching for information from word of mouth or mass- market communication. In the alternative stage, the consumer evaluates an alternative product to the one in question. This is where brand name and brand loyalty has significant effect on the
  7. 7. 7 overall decision making process. The purchase stage involves buying the product while the post- purchase is the where the consumer evaluates the product after purchasing it. This will influence the consumer decision making process in the next purchase (Lee, 2005). Application of the concepts of product involvement, brand loyalty and consumer decision making process in supermarket reward systems Organizations have been using rewards and loyalty cards to develop brand loyalty among the consumers. This is a step to increase the number of purchases made by the consumers thus these organizations will definitely record increased sales. The approach of developing brand loyalty gives competitive advantage to these organizations in the market place where competition is very stiff. A good example is Australian supermarket chain Coles. Coles introduced its flybuys loyalty card scheme in 1994 as a method to strengthen consumer loyalty. The method allows members to collect points from purchase and their card use and exchange these points for gift cards, merchandise, flights and other rewards. Coles went ahead and revised the scheme to offer more areas to earn points and a faster way to get saving through buying groceries. The use of loyalty programs to rewards consumers is not only being used on Coles alone but also in other supermarkets. Woolworths is also using reward cards to pull consumers towards buying their products. Woolworth recently appointed a new agency to handle its loyalty program. Appointment of the new agency is a step to counter Coles’ new flybuys and My5 offering in the loyalty war. Loyalty programs in these two organizations has increased their sale thus making them the largest retailers in Australia From the theoretical aspects discussed earlier the use of the right choice of rewards for a loyalty program was emphasized (Bridson, Evans, & Hickman, 2008). It was also shown that brand
  8. 8. 8 loyalty and product involvement are two important concepts that can be use to explain consumer decision making processes especially the alternative stage (Lee, 2005). It was also seen that brand loyalty leads to business profitability thus providing competitive advantage to the owner of that particular brand (Kambiz, Mahsa, & Afshin, 2011). These concepts form the basis upon which Coles and Woolworths are using to establish brand loyalty and product involvement as a measure to pull consumers towards buying more of their products. Examples from these two retailers can be used to answer the thesis statement of this paper and indeed conclude that rewards and loyalty cards can be used to achieve brand loyalty (Jacoby & Chestnut, 1978). Conclusion Consumers can develop a certain degree of faithfulness for a given product based on their level of loyalty to the product. This brand loyalty can be achieved by applying different approaches. This paper acknowledges the use of rewards and loyalty cards as a way of building brand loyalty. Through brand loyalty organizations can record increased sales and therefore gain competitive advantage over their competitors. This is true for Coles and Woolworths supermarkets. These are Australia’s two major retailers who have taken huge steps towards winning the hearts and loyalties of their customers through the use of brand loyalty programs. These awards programs have been used successfully by Coles and Woolworths to build brand loyalty and finally be successful marketers.
  9. 9. 9 Bibliography Bridson, K., Evans, J., & Hickman, M. (2008). Assessing the relationship between loyalty program attributes, store satisfaction and store loyalty. Journal of Retailing and Consumer Services 15, 364-374. Chaudhuri, A. (1995). Brand Equity and Double Jeopardy. Journal of product and brand management, 26-32. Jacoby, J., & Chestnut, R. (1978). Brand loyality measurement and management. John Wiley & Sons. Jain, K., & Srinivasan, N. (1990). An empirical Assessment of multiple operationalisations of. Journal of marketing research, Vol.17, 594-602. Kambiz, H., Mahsa, K., & Afshin, R. (2011). Evaluation of product invlovement facets on brand loyalty. African Journal of Business Management, Vol 5(16), 6964-6971. Lee, S. H. (2005). An Application of a five-Stage Consumer Behaviour Decision Making Model: An Exploratory Study of Chinese Purchasing of Imported Health food. Simon Fraser University. Quester, P., & Lim, A. L. (2003). Product Involvement/Brand Loyalty: Is there a link? Journal of Product & Brand Management, Vol 12 Issue 1, 22-38.

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