Exhibit 7.10 Brand loyalty is brand share among brand buyers. This metric features in the
analysis of consumption, where you get to read
consumption alongside brand loyalty and buying index.
Brand Loyalty (in
behavioural terms) is defined as the brand’s share of total category sales —
among 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 combined, the loyalty for apples is 75%.
While computing loyalty for oranges for this population of 3 homes, House 3 is excluded —
it is not a buying household. The base of buyers for oranges comprises Houses 1 and 2,
and their 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 the 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. Often when a brand is
in decline, 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.
As can be seen from the examples above, it is important for
the researcher to consider loyalty in relation to other metrics, such as
market 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.
