The persistence of excess brand loyalty over multiple years
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The persistence of excess brand loyalty over multiple years Vipul Pare & John Dawes
Published online: 29 July 2011 # Springer Science+Business Media, LLC 2011
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. Keywords Brand loyalty . Private labels . Double jeopardy . Dirichlet model
1 Introduction Brand loyalty is of intense interest to academic researchers as well as marketing practitioners. Hundreds of research studies have been published on the topic, and V. Pare (*) : J. Dawes Ehrenberg–Bass Institute for Marketing Science, University of South Australia, 70 North Terrace, Adelaide, South Australia, Australia 5000 e-mail: [email protected] J. Dawes e-mail: [email protected]
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Mark Lett (2012) 23:163–175
each year large sums are spent building, maintaining, and studying brand loyalty in industry (e.g. Baldinger and Rubinson 1996; Farr and Hollis 1997). The present study concerns behavioural brand loyalty, that is, the repetitive buying of a brand by its customers over time. A widely observed pattern in competitive markets is that large brands tend to enjoy more loyalty, and smaller brands tend to have lower loyalty, called the double jeopardy pattern (Ehrenberg et al. 1990; McPhee 1963). The double jeopardy pattern is reported in numerous consumer goods categories (Ehrenberg et al. 1990), in different geographic markets (Ehrenberg et al. 2004; Keng et al. 1998), for television shows (Barwise and Ehrenberg 1987; Barwise 1986; Ehrenberg et al. 1988), radio stations (McDowell and Dick 2005), forestry products (Michael and Smith 1999) and even for politicians (Ehrenberg 1991). While the double jeopardy effect is ubiquitous, some brands deviate f
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