Brand Loyalty (in behavioural terms) is defined as the brand’s share of total category sales — but only among those households that buy the brand. Or simply brand share among brand buyers.
In the example in Exhibit 7.10, House 1 bought 3 apples and 2 oranges. Its loyalty for apples is 60%, and its loyalty for oranges is 40%. Similarly for House 2, loyalty for apples is 66.7% and for House 3 it is 100%. For all three homes, the combined loyalty for apples is 75%. While computing loyalty for oranges, House 3 is not taken into account — it is not a buying household. The base of buyers for oranges only comprises Houses 1 and 2, and their combined loyalty is 3/8 or 37.5%.
For a deeper understanding of the loyalty profile of a brand, it is useful to breakdown brand buyers into buyer groups, based on extent of loyalty and heaviness of buying. The brand’s buyers are grouped as solus/core/non-core where, over the specified time frame, solus buyers are those buyers who only buy that brand, and core buyers are those who primarily buy that brand — their loyalty to the brand is greater than 50%.
In general there is strong correlation between brand share and brand loyalty. Large, well-established brands experience relatively high brand loyalty. Short term shifts in loyalty however must be viewed in conjunction with other indicators of brand health.
Increases in brand loyalty are not always an indication of improvement in the brand’s health. Sometimes when a brand is declining, the buyers who remain with the brand tend to be more loyal than those that exit the brand. This leads to increase in brand loyalty even as its volume declines. Conversely, a growing brand attracts new customers who are not as committed or loyal to the brand as its existing customers. In such instances, growth in brand volume results in decrease in brand loyalty.
It is important that the researcher examines loyalty in the context of other measures such as the share, %buyers and brand switching trends. Note also that brand loyalty is dependent on time frame; it will increase as the time frame is reduced. For small time periods, there are fewer purchase trips and consequently less opportunity for the brand buyers to buy other competing brands.
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