Abstract
This study examines the extent to which packaged-goods brands exhibit excess loyalty over a multi-year period. Brand loyalty for 300 brands in 20 UK product categories are compared to theoretically expected loyalty levels calculated using the Dirichlet model. Results show that while many brands show excess loyalty in a particular year (31%), fewer of them (25% and 22%) exhibit excess loyalty over 2 and 3 years, respectively. Almost all the brands that do show persistent excess loyalty are private-label brands or are market-share leaders (either the biggest or the second-biggest brand in the market). Therefore, excess loyalty over multiple years is a rare occurrence for a brand unless it is a market leader or a private-label brand. The study also shows that 38% of all high-share brands have consistent excess loyalty, and 37% of all private-label brands have consistent excess loyalty. These results suggest that existing explanations in the literature as to the sources of excess loyalty need further investigation. The reason is that those explanations relate to distribution effects, which should be similar across such brands. They therefore imply that most high-share and private-label brands should exhibit excess loyalty. The study suggests several avenues for further research to identify the reasons why some high-share or private-label brands show excess loyalty and others do not.
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Notes
Note these figures relate to bottled beer and ale sold through grocery outlets.
Distribution coverage was measured as the number of retail chains that stock the brand.
Using only the Dirichlet estimates produces an R 2 of 0.84. While the dummy variables add a small increment to the adjusted R 2 of 2%, they are statistically significant at p < 0.001. The regression equation is Loyalty = −0.6 + 1 × Dirichlet estimate + 0.9 × PL + 0.8 × High Share.
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Pare, V., Dawes, J. The persistence of excess brand loyalty over multiple years. Mark Lett 23, 163–175 (2012). https://doi.org/10.1007/s11002-011-9144-3
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DOI: https://doi.org/10.1007/s11002-011-9144-3