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Malgorzata Denoue
Kozminski University

Jan Napoleon Saykiewicz


Duquesne University, Pittsburgh, PA
saykiewicz@duq.pl

Brand Loyalty as a Tool of Competitive


Advantage
Abstract
Brand equity created by customers’ loyalty brings benefits not only to customers, but also to
manufacturers, commercial intermediaries, society, and, of course, brand owners. Customers’
loyal support of a brand may contribute to the creation of competitive advantage for a firm. This
type of competitive advantage based on brand equity may help many global firms overcome the
fading country-of-origin effect.

Brand as a Resource of the Firm company, 57% of Sara Lee, 52% of General
The discussion of the brand concept in Mills (Kapferer 2005).
mainstream literature, in most of the cases,
presents the brand concept from the demand The value of a brand may be the most sig-
side point of view and agrees that the real nificant resource of a firm. Ability to create
reason for brand existence is to enhance value is a very important element of brand
customer value (Aaker 1996; Keller 2008; identity. Indication of a demand side factor
Kotler, Keller 2009). This approach is in in brand definition seems to be important
agreement with the old statement that a because it brings to attention the entire proc-
brand that is not recognized by a buyer is ess of brand creation. The reason for brand
not a brand but just a marked product (Lev- creation and promotion is to bring advantage
itt 1980). In this statement representing the to the firm otherwise the firm would not in-
demand side approach, the importance of a vest time and money just to respond to the
buyer in the process of brand creation and demand side requests. Brand is a business tool
brand strengthening is clearly emphasized and the ultimate objective of the process of
with an inference that a brand mainly fa- brand creation is enhancement of value deliv-
vors the customer. However, it is important ered to the firm and creation of a profitable
to recognize that a brand adds value also to firm (Kapferer 2005; Rust, Zeithaml, Lemon
the supply side and this is underestimated 2005). A brand may create value for the brand
or even neglected in brand definitions cur- owner in a quantitative form such as monetary
rently available. It would be interesting to value, return on investment, income and profit
pay attention to the fact that brand equity, generated by a brand, and also in qualitative
in some cases, comprises a significant part form such as brand esteem, brand imagery,
of the value of a firm: 61% of the Kellogg and brand loyalty.

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Brand Loyalty buys the brand but has no emotional ties to it


Brand loyalty is a very important component and a purchasing decision is not made under
of brand value and it significantly contributes the influence of the brand image. This happens
to the meaning of brand as a resource of the when a purchase is strongly influenced by price
firm. There are various approaches to the or there is no other alternative on the market.
concept of brand loyalty and what makes that This type of loyalty is a very fragile because
the concept may have many different mean- the buyer can easily switch to other brands.
ings. Sometimes the focus is on emotional ties Covetous loyalty is related to no purchase
between the buyer and the brand. In another of the brand, but there is a strong emotional
approach, the focus is on the loyal behavior of relationship to the brand resulting from envi-
the buyer of a branded product – buyer loyalty ronmental/social pressure. In this situation,
repeats purchase of a brand and is resistant to it is difficult to expect loyalty because there
competitive promotion (Rudawska 2005). The is no personal experience with the brand. As
most comprehensive approach presents brand opposite to other determinants of perceived
loyalty as “a deeply held commitment to rebuy brand value (brand awareness, brand image,
or repatronize a preferred product/service con- and brand confidence), an earlier purchase
sistently in the future, thereby causing repeti- and experience with the brand is necessary for
tive same-brand or same-brand-set purchasing, loyalty to come into being. This often happens
despite situational influences and marketing in the case of luxury goods. This situation,
efforts having the potential to cause switching however, is advantageous for the brand owner
behavior” (Oliver 1999). This definition simul- because it contributes to the proliferation of
taneously addresses behavioral and attitudinal the brand image and increases brand aware-
elements of the buyer’s reaction and brand loy- ness. Premium loyalty refers to buyers having
alty emerges only in a situation when behavior strong emotional ties to the brand, buyers who
is supported by attitude. On this basis, Chaud- regularly buy the brand under social pressure
huri and Holbrook developed the concept of situations, and even in the case of limited ac-
purchase loyalty – understood as an interest in cess to the brand, are still ready to search for it.
repeated purchase of a given brand and attitu- This type of brand loyalty is the most desired
dinal loyalty understood as a degree of buyer’s as it creates the highest brand equity.
emotional engagement in a brand (Chaudhuri,
Holbrook 2001). Gounaris and Stathakopoulos Keller (2008) distinguishes four levels of
added social influences as another dimension brand loyalty that are quite similar to the ones
to the concept of brand loyalty and indicated mentioned above:
four types of brand loyalty: premium loyalty, 1. Behavioral loyalty – this level refers to
inertia loyalty, covetous loyalty, and no loyalty buyers purchasing the brand but having no
(Gounaris, Stathakopoulos 2004). special attachment to it. They buy other
significant amounts of a given brand which
A no loyalty situation is the result of no represent a big lifetime value. In Gounaris
purchase and also of total indifference to the and Stathakopoulos’ system, this level is
brand. Inertia loyalty happens when a buyer called inertia loyalty.

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2. Attitudinal attachment – this level refers not ping process, replaced or repeated purchase
only to a systematic purchase of the brand of the same brand. This type of behavior has
but also personal attachment by the buyer. been described as sole brand loyalty. However,
Customers feel a high level of satisfaction recently the concept of share of requirement or
and pleasure in purchasing this brand. share of wallet has been adopted. This means
3. Sense of community indicates a specific that the customer’s purchase, within a given
level of loyalty related to buyer’s group. The product category, focuses on buying the same
customer feels a part of a particular group brand. This type of behavior is described as
associated with the brand and develops a divided brand loyalty or proportional loyalty
feeling of social belonging. (Falkowski, Tyszka 2003, p. 169). The reasons
4. Active engagement with the brand repre- for this behavior are mixed – variety seeking,
sents “the strongest affirmation of brand quality conformity, and promotional influence.
loyalty, when customers are willing to invest Some research indicates that brand loyalty is
time, energy, money, or other resources in a phenomenon strongly related to product
the brand beyond those expended during type and competitive effort in a given product
purchase or consumption of the brand” category. For example, only selected brands
(Keller 2008). Customers strongly attached of cigarettes or liquor enjoy a high percent-
to the brand organize themselves in fan age of loyal customers, others are subject to
clubs, are proud of the brand, and com- variety seeking behavior (Kall 2001, p. 102).
municate the brand to outsiders. Harley Also, there is no agreement among researchers
Davidson or Mustang clubs are excellent concerning brand loyalty among social groups.
examples of this type of behavior. This is Jacoby and Chestnut noticed that housewives
the highest level of brand loyalty that brings and older customers show stronger brand
unusual value to brand equity. loyalty (Jacoby, Chestnut 1978). On the other
side, Kall’s research showed that the highest
As previously mentioned in Oliver’s defini- propensity to brand switching exists among
tion, a type of customer’s resistance to com- less educated, older and poorer customers
petitive promotional marketing effort was (Kall 2001, p. 105).
emphasized. A loyal customer remains loyal
to his brand even if price changes, innovation, In summary, one can make a statement that
or special promotions. To be a loyal customer it is difficult to indicate a social group’s brand
means that the brand represents the most at- loyalty more than others. Also within a given
tractive alternative in the eyes of the buyer. product category, various consumer group
Loyal behavior is measured by checking if the brand loyalty is not close which indicates a
customer who didn’t find his/her brand in the variety of reasons for brand loyalty among cus-
shop will purchase a competing brand. tomers (Falkowski, Tyszka 2003, 175).

For most of the 20th century in literature Determinants of Brand Loyalty


and marketing practice, a loyal customer was The search for an answer as to why the
considered the customer who, in the shop- customer feels attached to a particular brand

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and systematically purchases it is related to In all, one can make a statement that satis-
one of the fundamental issues of marketing faction makes a positive influence on customer
management. Among academe as in business attachment to the brand, makes necessary con-
practice, there is an overwhelming agreement ditions to create loyalty, but it is not enough.
that among the most important determinants An important determinant in this stage of
of brand loyalty is customer satisfaction (Ol- loyalty is perceived superiority of a product
iver 1999, 33). Customer satisfaction can be or service resulting from the quality of the
defined as a conclusion related to the use of a product, quality of service and quality of the
brand based on the difference of earlier expec- marketing communication process.
tations and perceived achievements after brand
use (Suh, Yi 2006, 146). So, satisfaction is a A traditional approach to brand loyalty was
result of an earlier experience with the brand product quality which was the major reason
and depends on a degree of expectations. for brand loyalty (Oliver 1999, 38). Perceived
Research indicates that only strong satisfac- high product quality often resulted from pro-
tion may be converted into loyalty and mild longed brand positioning based on quality
feelings of satisfaction do not lead to brand associations. Also customer personality may
loyalty (Chandrashekaran, Rotte, Tax, Gre- contribute to brand loyalty, e.g. risk aversion
wal 2007). Not only meeting but exceeding discouraging new brands trials (Gounaris,
customers’ expectations is the key to building Stathakopoulos 2004).
emotional ties to a brand and creating loyalty.
The relationship between loyalty and customer Other determinants of brand loyalty also
satisfaction, however, is not just a linear equa- play an important role. Oliver (1999) includes
tion. Increased satisfaction is not enough to an individualistic determinism of a customer
enforce loyalty and brand equity. The reasons and also institutional or personal social at-
are as follows: tachment to the brand. An individualistic
a) Even satisfied customers switch brands. determinism of a customer means a degree of
The reason may be brand indifference or intensity with which the individual customer
conviction that another brand equally or defends his own perception and resists com-
even better responds to customer needs. petitive influence of marketers (Oliver 1999,
b) Unsatisfied customers may stay loyal be- 37). This is strong motivation to stay loyal to
cause it is their belief there is no better the brand. Brand confidence and attitudinal
alternative on the market or making the attachment are signs of the individualistic
decision regarding switching is too com- determinism and as such are accepted as
plicated. determinants of brand loyalty (Chaudhuri,
c) Some customers, despite dissatisfaction, stay Holbrook 2001).
with the brand because the earlier brand re-
lationship was important to them and they An individualistic determinism in its emo-
will give the brand another chance. tional part functions also in social dimension.
d) Formal restrictions, e.g. long-term agree- It is related to the need of group belong-
ment, discourage brand switch. ing and sharing certain common behavior

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Table 1. Brand Loyalty as an Element of Competitive Advantage

Brand Loyalty:
• Lower marketing costs
o Higher effectiveness of marketing communication
o Guarantee of a right choice for new customers Competitive Advantage
ĺ • Higher margins
o Favorable word-of-mouth • Increased market share
o Intensive purchase by existing customers • Higher return on investment
• Entry barrier for rival competitors
• Better access to distribution channels
• Better resistance to competitive moves
• More time to respond to competitive moves
• Lower risk of brand extension
• Higher price elasticity of demand
Source: Authors, based on Urbanek 2002, p. 44–45, Kall 2001, p. 98–101.

and consumption patterns. The practice of • percentage participation of a given brand


marketing management made an effort to in a product category purchase – share of
institutionalize this need in a form of loyalty wallet.
programs giving a loyal individual a feeling of • number of brands purchased within a prod-
belonging. Various frequent customer or pre- uct category.
ferred customer cards are aimed at increased
frequency of purchase of a given brand, and Some authors suggest a customer loyalty
frequent purchases are rewarded. Similarly, indicator which would give information about
marketing clubs offer frequent customers the intent to buy a particular product or service
various services and benefits not available to in relation to the total number of customers
average customers. It is aimed at making a researched (Kozielski 2004).
brand a part of an individual’s identity and
organizes it into various forms of social ex- When addressing measurement of attitudi-
istence. It emerges as fun clubs supporting nal dimensions of brand loyalty, one can refer
sport, cultural and even political events. Loyal to the measurements of brand confidence,
fans are ready to support their icons even in customer satisfaction, brand “likeness” or
situations of defeat. other measures indicating customers’ interest
or even fascination with a brand. Attention
Effective management of brand loyalty re- should be focused on frequency of customer
quires proper metrics and systematic measure- interaction with a brand, expression of opin-
ments. The measure of brand loyalty should ions about a brand or even involvement in
take into consideration two factors previously brand fun-club activities.
discussed – attitude and behavior. Among be-
havioral measures the most important seems Brand loyalty creates a lot of advantages to
to be (Kall 2001, p. 101): the brand owner. All advantages such as in-
• percentage of repeat purchases (what per- creased market share, premium prices, higher
centage of customers repeat purchase of a margins and, finally, higher return on invest-
given brand) ment lead to the emergence of competitive

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advantage and even may be a barrier to entry higher standard of living). Well recognized,
of competitive brands. Considering the above, strong brands followed by loyal customers
brand loyalty should be considered as a strate- contribute to and create benefits for various
gic asset of the firm; an asset that contributes stakeholders in the business process, and ulti-
to brand equity. mately help in the emergence of a competitive
advantage for a firm supplying that brand to
Contribution of Brand Equity to the market.
Competitive Advantage of a Firm
Brand strategy is not the only strategy Consumer benefits, emerge from various func-
in product management. Many firms suc- tions performed by a brand (Aaker 1992, p.
cessfully apply generic (non-brand) product 31–32; Atlkorn 1999, p. 13–14, Kapferer 2005,
strategy which is effective especially when the p. 20–24). One of these is the identification
product has a very weak emotional appeal or function. A brand helps the buyer to identify,
belongs to a product category that is difficult retrieve and process information about the
to differentiate. It refers to many agricultural product which helps to identify it at the point
consumer products, some industrial supplies of sale. Thanks to the brand, a customer is
or raw materials; however, in some cases one able to distinguish a particular product from a
will notice existence of well established brands competitive offering and is able to attach to it a
like Chiquita bananas or Del Monte pineap- specific functional or emotional value experi-
ples. Generic product strategy allows for ag- enced earlier or acquired from advertising.
gressive price competition since firms, in this
case, do not invest in the brand building or A practical function of the brand means
brand strengthening process (Altkorn 1999, easiness in locating it during a purchase which
p. 55). Another reason for following generic saves time and effort. A satisfied customer usu-
product strategy may be because of low pur- ally repeats the purchase of an accepted brand
chasing power of the population or fragmented which shortens the decision-making process.
economy. Consumers existing in this type of This is particularly important when a choice
market, often in poor countries, are not ready among hundreds of generic products would be
to pay the cost of adding emotional value to an irritating experience. To be a loyal customer
products so an investment in brand building means shopping easiness, buying process ac-
does not create additional value. celeration and overall effort savings.

In developed countries with more sophisti- Separate functional benefits offered by a


cated markets, firms decide to develop brands brand are related to consumer risk reduction.
because brand equity building strategy is ad- Guarantee function supports the quality of a
vantageous not only for the brand owner and brand regardless of time or place of purchase.
buyer but also adds value in distribution and Guarantee function attached to a brand has
supply chain, i.e. business partners, suppliers, special significance in the case of services.
intermediaries, investors, and even society Most services are produced and consumed
(creating the impression of a real or imaginary at the same time and it is difficult to assess

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the quality earlier. The buyer must trust the ability), the customer develops a feeling of
seller. Offer of a branded service facilitates participation in ethical behavior and, to some
trust building. degree, contribution to social programs or
responsibility.
In the case of tangible products, a brand
has the meaning of a “signature” which helps In addition to consumers, commercial distrib-
to identify a manufacturer; and also economic utors enjoy various benefits related to carrying
and legal responsibility which is important for products of well known brands. A strong and
customer questions, dissatisfaction or com- well accepted brand supported by advertising
plaints. and promotion contributes to better inven-
tory turnover. Well known brands reduce
Another important function performed by business risk which is used as an argument in
a brand is the optimization function. Purchase filling up shelf-space. Strong brands appeal
of a selected brand often means choice of the and respond to customer expectations and
best solution for a customer’s need. A brand make a business or retail outlet more attrac-
also reduces social and psychological risk by tive for buyers. A brand contributes so many
helping in the selection of a product that is benefits to distributors that many of them
most accepted by a reference group. Also, a develop distributor brands or private brands.
particular brand choice suggests the existing Many supermarket chains or department store
or desired personality of the buyer and helps chains have developed well known, attractive
establish self-esteem. and respectable brands.

In most instances, a brand influences the A valuable brand also creates benefits for em-
frame of mind of a buyer – the purchase of ployees of a business (de Charnatony 2003, p. 79).
a Patek Philippe watch brings about different Working with a well known brand stimulates
feelings than the purchase of a Swatch watch. productivity, contributes to job satisfaction and
Driving a Mercedes Benz gives a different feel- develops professional pride. A strong brand sup-
ing of satisfaction than driving a Fiat. A strong ports motivation of the employees and makes
brand contributes a lot of satisfaction derived many of them identify with the brand they
from product ownership and makes a status produce or deal with. In the case of corporate
suggestion. Hedonistic function of a brand brands such as Microsoft, Citibank or Philips,
refers to customer’s infatuation with a brand. brand represents overall value of the organiza-
In this case, brand experience is perceived as tion and helps the employees act in a common
a kind of premium. Some brands are continu- and consistent manner which is especially valu-
ously purchased not only by individuals but able in the case of global corporations. The value
also by generations – in this case a feeling of of a brand very often reflects on organizational
continuity and even familiarity emerges. In culture and attracts the attention of many pro-
the case of brands considered socially respon- spective employees. For many who work for a
sible or socially engaged (an image attached brand, this represents values shared with each
to a currently fashionable concept of sustain- other and increases job satisfaction.

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Well known and valuable brands bring ben- customers are less sensitive to the marketing
efits to the society. According to Kotler, branding efforts of competitors which enforce the ef-
products result in increased product quality ficiency of the brand owner’s marketing pro-
and stability (Kotler, Armstrong-Saunders, grams (Keller 2008, p. 60–67).
Wong 2002, p. 630). The value of a brand
contributes to manufacturers’ innovativeness A valuable brand may contribute to in-
since it stimulates the search for such product creased cash flow resulting from higher mar-
features that can be protected against copying gins and higher prices and also due to higher
by the competition. This often contributes promotional effectiveness (Farquhar 1989,
to new product development which benefits 25). A strong brand also contributes to higher
society. Certain well known brands enjoy sales profitability (Kall 2001, p. 62). These
broad acceptance which benefit society and advantages, if properly managed, may result in
the planet. Greenpeace is a brand name that increased market share which builds additional
achieved general acceptance as an organization competitive advantage for a firm.
engaged in environmental protection.
Considering brand owner relations with
Due to delivered value perception in the retailers, a valuable brand helps to establish a
eyes of the consumers, benefits to distributors, stronger position in dealing with intermediar-
employees and society, a brand adds value to ies since it reduces the risk of failure within
the business of the brand owner. However, in distribution channels (Witek-Hajduk 2001, p.
the process of value adding the customer is the 80). It facilities the negotiation of the terms of
key. Without a customer’s acceptance, a brand sale and saves expenses. The owner of a brand
wouldn’t get wide-range recognition and will does not have to apply intensive business pro-
not benefit the owner. motion tools, and even can limit or narrow
promotional marketing. An American grocery
The value of the brand for the brand owner market is characterized by lower placement
may be analyzed from various perspectives. costs and more shelf space for well known
From a customer’s perspective, a brand cre- brands (Farquhar 1989, 26). Usually a valuable
ates benefits for a brand owner by influencing manufacturers’ brand successfully protects
the buyer’s attitude toward the product and itself against private brands. It is especially
attitude is considered a major determinant of important in situations where supermarket
product purchase intention (Farquhar 1989, p. chains and their private brands expand into
27). The high value of the brand represents the the retail market.
product’s historical reputation which strongly
influences customer choice. High brand value A valuable brand facilitates relations with
perception creates high brand loyalty and suppliers, investors, employees, and other co-
readiness to pay a premium price for the prod- operating public. Decreased risk and stable
uct. Usually the favorite brand is rather price brand position in the market helps the owner
inelastic as customers are reluctant to resign to negotiate stable and balanced business
from its value. In the case of favorite brands, terms. A strong brand extends the product

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life cycle and, to some degree, protects the ers’ market share or coverage. The technique
firm against business shake-ups or cyclical of umbrella branding, in the case of a strong,
sales fluctuations. Even in the case of some valuable brand, may help to broaden product
high value brands that in the past enjoyed assortment which is sold under the same brand
high awareness and recognition, the cost of and also to introduce a new product under a
bringing that brand to life again is lower than well known brand name. The catalyst here is
new brand introduction (the case of Mustang previous brand awareness and also a general,
and Volkswagen Beetle). As a result of solid, positive attitude to the brand. In this case
stable brand ownership, the attractiveness of the owner’s cost of new product launching is
that brand significantly increases in the eyes of usually lower than a new brand introduction
investors, business partners and also prospec- situation. The case of licensing may contrib-
tive employees. ute to the broadening of brand awareness and
its marketing impact should be under strict
The advantages and benefits of a strong, control, however, since the relaxed use by the
valuable brand mentioned above may contrib- licensee may result in significant brand value
ute to the creation of an attractive competi- and brand position depreciation. This certainly
tive advantage for a firm. Often this type of will result in the weakening or sometimes the
competitive advantage related to customers’ loss of competitive advantage of a firm build-
loyalty based on brand attractiveness helps ing brand equity.
the firm to dominate the market in a given
product category and achieve above average Competitive advantage built and based on
profitability. In some cases the well known, brand equity is less sensitive to various crisis
valuable brand name can be used as a synonym situations and has a strong ability to survive
of a product category which happened to Jeans difficult times (Farquhar 1989, 26; Keller
or Adidas. These brands are understood as 2008, 60–67). This is because a strong and
product categories in many markets and have well accepted brand benefits from customer
a global meaning. loyalty even in situations of quality problems
or failures in new product introduction (Kall
Another strategic aspect of a strong, valu- 2001, 69).
able brand is the possibility to successfully
introduce new product under the same brand The research and discussion of customer
umbrella and brand licensing. Also, a strong brand loyalty and competitive advantage cre-
brand can be used as market segmentation ated by brand equity is especially important in
criterion by helping the marketer to reach par- the age of global corporations and globaliza-
ticular target markets requesting product vari- tion of various aspects of marketing programs.
ations that best fit their needs. Various brands Today as a result of offshoring and outsourcing
of chocolate, for instance, can reach various business especially manufacturing operations,
consumers’ groups such as children, diabetics, there is confusion in the minds of buyers re-
or others who have specific needs. This ap- lated to the country of origin concept. As a
proach may significantly increase manufactur- result of this, it seems that the old “made in”

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Oliver, R.L. (1999) Whence Consumer Loyalty. Journal of


image starts fading in the perception of buy- Marketing. Vol. 63, Iss. 4, October, pp. 33–44.
ers and is gradually replaced by brand image Rudawska, E. (2005) Lojalność klientów. Warszawa: PWE.
Rust, R.T., Zeithaml, V.A., Lemon K.N. (2005) Zarządzanie
concept. The importance of brand image is not marką musi być podporządkowane interesom klienta. Harvard
a new issue today; however, its importance is Business Review, Poland. March, pp. 108–118.
Suh J.-C., Yi, Y. (2006) When Brand Attitudes Affect the
growing and takes a special place in the process
Customer Satisfaction – Loyalty Relation: The Modern Role
of creating a competitive advantage of global of Product Involvement. Journal of Consumer Psychology, 16(2),
organizations. Thus the ability to differenti- pp. 145–155.
Urbanek, G. (2002) Zarządzanie marką. Warszawa: PWE.
ate the brand name and brand positioning in Witek-Hajduk, M.K. (2001) Zarządzanie marką. Warszawa:
markets and also the ability to use it effectively Difin.

in creating brand image and brand loyalty is


critical in international and global marketing
management.

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