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Group Assignment Cover Sheet

Customers Behaviours
Subject Name
Le Nhat Hanh
Lecturers Name
Title of Assignment THE ANTECEDENTS OF BRAND LOYALTY
BBUS6.1
Class
5
Group Number
1. Tran Thanh Mai

2. Au Thi Ngoc Hau

Student Number and Name 3. Truong Thanh Tung

4. Nguyen Thi Kim Ngan

5. Tran Hoang Ha My

01234265025 / 31151022289@student.isb.edu.vn
Contact Number or Email
2191
Length
March 21th 2017
Due Date
March 21th 2017
Date Submitted

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THE ANTECEDENTS OF BRAND LOYALTY

Group member:

Tran Thanh Mai

Truong Thanh Tung

Tran Hoang Ha My

Au Thi Ngoc Hau

Nguyen Thi Kim Ngan

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Abstract

In this era of cutthroat competition between companies, constructing brand loyalty among
customers by provide maximum satisfaction to such loyal customers is crucial for the purpose of
staying on top. In addition, emotional brand loyalty is the ultimate achievement for marketers
building brands. Consumers who are emotionally bonded to your brand are much more likely to
stay loyal, repeat purchase or cross-purchase, happily recommend the brand to others and accept
no substitutes. The outcome of this situation - more custom and lower acquisition costs -
determines business success. Hence, this essay aims to investigate determinants and display the
result getting from developing brand loyalty.
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Introduction

In the increasing competitive environment of this era, establishments are building up an

assortment of methodologies so as to exceed their rivals and to end up distinctly attractive by
purchasers, and are endeavoring for this goal. One of the most vital rivalry weapons of
establishments against their rivals is their image brand. If establishments manage to create
brand loyalty among consumers, they can outperform their rivals with the least expenses.
Accordingly, establishments will have the capacity to achieve their here and now and long haul
objectives with lower costs, less exertion and in a shorter timeframe compared to their
competitors.

In particular, brand loyalty influences customer buying behavior (Palumbo and Herbig,
2000), customer satisfaction (Oh and Fiorito, 2002) and market share (Ha, 1998: Jensen and
Hansen, 2006). A number of studies measuring the impact of brand awareness on brand loyalty
support the idea that spending on advertising to create brand awareness enhances brand loyalty
(Nguyen, Barrett and Miller, 2011, Clark, Doraszelski, and Draganska, 2009). Aduloju,
Odugbesan and Oke (2009) are of the opinion this advertising spending should be fully
integrated into the communication mix of marketing so as to get the best results from it. A good
strategy for advertising is supposed to determine the most favorable media mix and identify the
most suitable vehicles needed to efficiently communicate the message. This should be within a
budget that is good enough to do the job (Rotfeld, 2007). Tai (2007) is of the view point that
companies having low market share should increase their advertising budget in order to aid their
marketing communication efforts. These efforts will ultimately help in expanding the market
share.

Brand loyalty definition

The idea of brand loyalty has a close association with consumers preferences, in other
words, their buying behaviors. The measurement of this uncertainty may increase or decrease
relying upon whether the related brand exhibits the expected performance (functional risk),
whether the expected benefit will be obtained in return for the time and money spent (financial
and physical risk), whether it is favored by the general population (social risk), or whether the
brand has fulfilled the buyers command or not (psychological risk). The consumer will always
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prefer the same brand if the risk rate increases. Nevertheless, particularly in times where
monetary hazard is low or when the brand neglects to fulfill the customers desire as it once did,
preferences may differ.

Furthermore, brand loyalty is a psychological commitment similar to fellowship. Brand

loyalty is a conscious act and cannot be formed by coincidence. Brand loyalty can be perceived
as a behavioral reaction. It is developed in a certain period of time and is produced in a specific
timeframe. Also, it occurs in cases where more than one brand alternatives are involved, which is
a circumstance that happens after the basic leadership and assessment phases. As indicated by
Palumbo and Herberg (2000), brand loyalty is the situation where consumers constantly search
for and buy only a certain brand regardless of competitors lower prices and sales promotions.
Moreover, brand loyalty brings in sales advantages in terms of reducing marketing costs,
gaining more new customers and establishing a better financial leverage effect (Aaker, 1991).
In particular, loyal customers consistently purchase products from their favored brands, despite
convenience or price. Organizations regularly use different marketing strategies to enhance
customers loyalty, including loyalty programs like rewards program, or trials and incentives
such as samples and free gifts, et cetera.

Brand loyaltys determinants

1. Product quality and brand loyalty

Brand loyalty is known as an important dimension of brand equity whose customer base
represents entry barriers, time to face to competitor development, and a great wall against
reductive price challenge. So, what is one of the factors has strong impact on the brand loyalty?
Product quality is. The connection between product quality and companies' brand loyalty process
is easily to observe since researchers have shown that issues with negative quality inconsistency
in different categories can influence brand loyalty. Talking about Fast Moving Consumer Goods
(FMCG) segment in food market, attracting and keeping consumers' loyalty have become the
crucial concern for all producing companies and retailers. People have to notice that food
consumption has direct effect on human health, yet the process of building food brand loyalty is
not possible, or it can be hard, if the food brands' product quality is not at the expectation and
reached food quality standards. Moreover, results also show that the core reasons for certain food
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brand or product loyalty are based on mostly positive experience, extraordinary and stable
product quality, a unique taste. It can be summed up that long-term satisfaction of consumers
depends on stabile product quality; therefore, food producers or food brand owners should
concentrate on avoiding or relieving the cases of negative quality problems. According to
"Economic and Business Review for Central and South - Eastern Europe - Impact of negative
quality inconsistency on brand loyalty - case of Croatian food market" by Ferencic, Martina,
during 2013, consumers in Croatia usually response to various types of food products extraction
from the market caused by different kinds of quality mistakes. For instance, from the first few
months of 2013 Konzum's private label - Rial tuna cans were forced to be distant from the
market because of too much histamine. Furthermore, the biggest food matter in Croatia in past
few years happened when in just a small period of time, the three milk manufacturers Dukat,
Vindija and Meggle had to remove plenty of production chains of their milk because they
contain towering level of aflatoxin. Consumers could be scared that those products may seriously
harm their nutritious system. Food is directly connected to human health, so these fears are easy
to understand. Nowadays, consumers are as aware of the significance of product quality as one
of the major aspects in constructing brand loyalty. For decades, branded products in FMCG
became a synonym for upper stage of quality and consumers have stronger expectations. To
conclude what researchers have shown and the connection between product quality and brand
loyalty, quality is closely related to product's ability to satisfy certain consumer needs or
expectations, so the more satisfy the customers is to the product, the more loyalty the brand can
gain.

2. Social media and brand loyalty

Social media is the collective of online communications channels, exist along with the
internet technology to create or share information, ideas and many forms of impression such as
Facebook, Twitter, Instagram. Companies nowadays try to integrate social media along with
their marketing strategy to build customers loyalty to the company.

According to Khaleej Times (Dubai, 28 June 2014), In a span of less than 10 years, what
started out as a tool for communication has become one of the smartest, fastest and most cost-
efficient branding and marketing tools. It is obvious that most industries are following this trend
of marketing through social media to keep their old customer closed, share their value to new
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markets in a cheaper way than old ways. Facebook became a worldwide service in 2005, before
that, it was restricted to use for only university student across the US and Canada. Brands dont
just want to communicate with their customers, they want to recognize and give back to the loyal
customer base, said Dushyant Bhatia, managing director and co-founder of Gozoop, Dubai.

Hristo Borisov, product line manager, Telerik Platform, said It is cost-effective or a key
alternative and for a lot of agencies, marketing is cheaper than online advertising. Companies are
advised to allocate a budget for this.

Social media create a free space for fans and users of brands to follow and easy sharing
information, which keep the customers close to brands as they see pop-ups frequently. It
provides a detailed engagement summary of the fans on various social platforms, in the form of
likes, shares, comments, tags, follows. Fan/users get loyalty points as social actions can
connect them to brands and brands actions. In late 2007, Facebook had 100,000 business pages
all around the world, which to be seen, opportunities for them to promote and attract customers.
These pages, first started as group pages, then began to extend to businesses, then became hot
trends.

The positive effect of social media can be seen through statistic in the Arab world :

> Facebook has close to 82 million active Arab users, while Twitter has 5.8 million

> Saudi Arabia accounts for 40 per cent of the Arab Twitter users, while Egypt
constitutes 24 per cent of Facebook users in the region

> Over 17 million tweets are recorded daily in the Arab world

>The UAE leads in LinkedIn penetration, while Qatar has the highest Facebook
penetration and Kuwait the highest Twitter penetration

For todays business world, along with the internet technology, social media is a crucial
factor for companies enhance their marketing strategy. Users around the world now can easily
find information, review, ads for products that companies produce, increase the connection with
their customers.
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3. Sales Promotion and Brand Loyalty

Sales promotion is an inevitable aspect of marketing communication of any business to

survive and thrive in a competitive market. Sales promotion is initiative carried out by business
enterprise to stimulate sampling and purchase of the brand products or service, which is also a
method to solidify the connection between customers and brand. It can be executed under many
forms such as free gifts, free samples, joint promotions, discounted prices, vouchers and
coupons, competitions and prize draws, etc. In today vigorous market, the application of sale
promotion were utilized efficiently by companies to help increase brand loyalty as it generates
purchase frequency as well as retains current customers through rewarding policies. According
to a General Interest Periodicals article tittled Sales promotions can build customer loyalty
written by Lichti, sales promotion can be used as a long-term strategy to build and reinforce
customers loyalty to the brand. The articles gave out many examples of the various ways that
different brands increase their sales through promoting strategies. In order to make consumers
more aware of how M&M Meat shop products efficiency in preparing family meals, the shop ran
the Save the Day contest at the time they launch five new TV ads. Consumers was invited
through an online microsite to view the commercials and answer five related multiple choices
questions. Participants who answer the questions correctly were entered in a draw to win $1,000
worth of M&M gift cards as well as were able to win another $500 gift cards by sharing their
own stories on how the retailer save their days. The contests outcome was 62 percent of
microsite visitors entering the contest and 11 percent sharing their own stories, which clearly
exhibits the success in obtaining more media exposure as well as drawing customers attention
and awareness to M&M products efficiency in daily life. Another example of an effective
promotion program is from Home Hardware Stores Ltd. Who has run numerous contests for the
retailers, one of which is a campaign for the contest included points of purchase and ballot boxes
in every store across Canada. Customer gain entries to the contest by watching a tag at the end
of television commercials, and a promotional piece in flyers and catalogue then filling out
ballots at stores or enter online at www.homehardware.ca. The promotion offered the total
prize that is worth $50,000 including $5,000 Home Hardware gift cards, generated about
500,000 entries. This campaign result in attracting more customers arrive to the store as well as
the visitors that sign up for Home Hardware e-communications. Through the program, the brand
was able to enhance credibility with consumers and tightened the company-customer
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relationship. Sales promotion have been widely used in many firms among various industries as
a useful tool to encourage brand loyalty.

Brand loyalty The Result

Its difficult to have a discussion about brand loyalty without mentioning Apple. The
iPhone 6 was released in September, 2014 marked another success of Apples product. Both
regular and plus models combined exceeded 4 million pre-orders within 24 hours and sales of
more than 10 million units in the first three days following release (Apple, 2014). The regular
iPhone 6 retailed for $ and the Plus model for $749, it would be reasonable to accept that such
premium-level costs would be reflected in premium details. However, when we compared with
another product launched a few months before: Galaxy S5 of Samsung, iPhone 6 has lower
resolution front and rear-facing cameras, a lower capacity battery, a lower resolution display and
half as much RAM. The most important factor lead to the success of Apple is brand loyalty
which most companies can only dream of.

A huge advantage to companies is that loyal consumers will not give a second thought if
the price increase and still feel that brand can fulfill their requirements. At the point when there
is brand loyalty, purchasers dont focus on price because they know that specific brand is of
better esteem and give them what different brands cant. This allows brands to have pricing
power. When retaining customers, companies end up spending less on advertising, marketing
and distribution. In diminishing marketing and promotional costs, brands can make more profit.
That is the biggest benefit for all the companies can gain the brand loyalty.

In 1997, the newspaper Los Angeles Times published an article called Brand Loyalty
Is the New Holy Grail for Advertisers; Marketing: Making sure the customer keeps coming back
is viewed as path to maximum profit to discuss about how can the brand make profit from brand
loyalty. This famous quote of Larry Light, chairman of the Coalition for Brand Equity can
summarize this article, bring us the whole view. "There's no such thing as product loyalty or
trademark loyalty, only brand loyalty. Studies show that as brand loyalty goes up, consumers
grow less sensitive to changes in the brand's price. And loyal customers are less likely to be
sensitive to competitive promotions, driving down the brand's marketing costs. As brand loyalty
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goes up, so does consumers, interest in trying new products or services from that brand and most
importantly, so does the brand's profitability," Light said (Los Angeles Times, 1996).

Building brand loyalty saves companies money. It costs four to six times to attract new
consumers as it does to hold an old one. Companies can boost up their revenues almost 100%
just by retaining 5% more of their customers. Dennis Detzel, co-author with Robert Desatbick of
Managing to keep the customer said that In the car industry, lifetime loyalty is worth average
revenue of $140,000. In appliance manufacturing it's worth $2,800, and in local supermarkets
$4,440 a year. It takes more than providing consumers with a good product or experience to
build loyalty.

Information Resources analyzed 400 brands more than eight years and figured out that
increase spending on advertisements will increase loyalty in existing customers more than they
attracted new ones. For the average successful brand, Information Resources found, only 30% of
a sales increase attributed to new advertising came from new customers; 70% of it came from
increased loyalty of existing customers. Discounts and other promotions may be
counterproductive, by making the brand seem to have less quality than others less promoted.
"Consumers often become loyal to the deal rather than to the brand. Promotions often pump up
sales in the short run but cause a real decline in brand loyalty by shifting the consumer's focus
from quality to price, from value to volume," Light Larry said. Brand loyalty is an essential part
to brand domination. And that is the profitable place to be. James C. Crimmins, executive vice
president of Omnicom Group's DDB Needham ad agency, notes that the No. 1 brand enjoys a
price premium of 10% over the No. 2 brand, and a 40% premium over store brands. Top brands
not only sell more product; they sell them at higher prices. It leads to pricing power.

Starbucks is the best case to make us more clearly. In the third quarter of 2015,
Starbucks net income of $4.9 billion reflected an increase of 18% for the year. The success can
be attributed to new digital project, for example, the My Starbucks Rewards program. It started
in 2009 and had extremely grown. Joining the club, clients would get free beverages or food 3
rewards based on the number of stars that had been collected. The active users number reached
10.4 million. Within this, there were 6.2 million gold members, which was a 32% increase from
the third quarter of 2014.
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Conclusion

Finally and perhaps foremost, it was recognized that other determinants of brand loyalty and
performance outcomes might supplement the variables included here. As researchers
increasingly probe the area of relational exchanges between brands and their consumers
(Fournier 1998), different develops that are pervasive in the writing on interpersonal
connections, for example, comparability, fascination, love, nature, or power, ought to be
inspected for their potential pertinence to brand steadfastness and brand results (e.g., Ahuvia
1999).

This report has shown main determinants of brand loyalty and its consequences. Furthermore,
additional aspects of brand affect abound with research potential. For example, now that the role
of emotions has been energetically researched in advertising studies related to marketing and
consumer behavior, there remains a need to examine emotional experiences that arise from other
product- and brand -related aspects of consumption (Holbrook 1995, p. 14; Mano and Oliver
1993). The results indicate that when the item and brand-level factors are controlled for, brand
trust and brand affect consolidate to decide purchase loyalty and attitudinal loyalty. Purchase
loyalty, in turn, leads to greater market share, and attitudinal loyalty leads to a higher relative
price for the brand. Hence, the higher brand loyalty is from customers, the more successful the
brand is.
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References

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coming back is viewed as path to maximum profit. (1996, Jul 18). Los Angeles Times
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Chaudhuri, A., & Holbrook, M. B. (2001). The chain of effects from brand trust and brand affect
to brand performance: The role of brand loyalty. Journal of Marketing, 65(2), 81-93.
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Ferencic, M., & Wlfling, A. (2015). IMPACT OF NEGATIVE QUALITY INCONSISTENCY

ON BRAND LOYALTY - CASE OF CROATIAN FOOD MARKET. Economic and
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Sharpe, M. E. (1996). The loyalty effect: The hidden force behind growth, profits, and lasting
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LICHTI, S. (2007, Aug 15) .Sales promotions can build customer loyalty. The Record Retrieved
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Building brands through social media. (2014, Jun 28). Khaleej Times Retrieved from
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