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Ideas for Leaders #704

The Relationship of Brand Equity to Behavioural Loyalty

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Key Concept

While higher brand equity products will attract greater loyalty from their customers, new research reveals different ways to strengthen the relationship between equity and loyalty. Such efforts to strengthen the link are worthwhile since the relationship does not always hold true. One customer segment, the study shows, perceives a brand’s equity as high but is not loyal — and surprisingly another segment perceives a brand’s equity as low but still remains loyal.

Idea Summary

For many brand managers, the link between brand equity — the knowledge of and trust in the brand that for consumers differentiates that brand from its competitors — and brand loyalty is unquestioned. The higher your brand equity, it is assumed, the more likely you will be able to attract and keep loyal customers. Brand equity elements include trust in the brand, brand quality, brand personality, value for money and favourable associations (for example, ‘always whitens teeth’ might come to mind when a toothpaste brand is mentioned).

A recent study tested this assumption through in-depth questionnaires sent to households in a U.S. grocery store’s customer database of frequent shoppers. The questionnaires measured brand equity perceptions of 10 different brands in two product categories: toothpaste and tortilla chips. The brand equity results for each household were then compared to the household’s actual shopping behaviour, as recorded through point-of-purchase loyalty card scanners. The questionnaires also surveyed the respondents on a number of potential factors that could strengthen or weaken the relationship between brand equity and behavioural loyalty. 

According to the data collected, higher brand equity does result, generally, in greater consumer behavioural loyalty. However, the link is not automatic. Thus, the researchers were able to divide the consumers in their study into four segments

  • Believing Loyals: consumers who are loyal to a brand whose equity they perceive as being high (i.e. high brand equity = high customer loyalty). 
  • Doubting Switchers: consumers who are not loyal to brands that they perceive as having low brand equity (i.e. low brand equity = low customer loyalty).
  • Doubting Loyals: consumers who perceive a brand’s equity as being low, but who are nevertheless behaviourally loyal to the brand (low brand equity = high customer loyalty).
  • Believing Switchers: consumers who perceive a brand’s equity as being high, but who are still not behaviourally loyal to the brand (high brand equity = low customer loyalty).

While Believing Loyals and Doubting Switchers confirm the link between brand equity and brand loyalty, 40% of the consumers in the study fell into the last two categories (Doubting Loyals and Believing Switchers) in which the equity-loyalty link is broken.

To better understand these last two ‘off-diagonal’ relationships between equity and loyalty, the study researched factors that would either strengthen or weakened the link. The study results identified three factors that influenced the strength of the relationship between brand equity and behavioural loyalty.

  • A brand’s in-store presence — in other words, the consumer’s perception of the brand’s visibility in the store, whether it is usually available and easy to find, and how attractively it might be displayed — strengthened the relationship. 
  • The importance of brand choice decision also strengthened the brand equity – behavioural loyalty relationship. The importance of brand choice decision concerns the importance of a product category — does a consumer believe toothpaste, for example, should be chosen carefully. If so, that consumer is more likely to be loyal to a high-equity brand.
  • In contrast to in-store presence and importance of brand choice decision, the equity of competing brands weakened the relationship between brand equity and behavioural loyalty. If consumers believe competing brands have the same or better brand equity, the study showed, they are less likely to be loyal to a certain brand. 

Business Application

The study results have specific applications for retailers and manufacturers.

First, manufacturers and retailers should focus on in-store presence and importance of brand choice decision in their branding efforts. For example, manufacturers of high equity brands should offer trade promotions and retailer-specific programs to encourage retailers to improve the brand’s availability and increase its visibility (with end-of-aisle displays, for example). Retailers should also seek ways to reinforce the importance of categories in which they sell high equity brands. For example, consumers might find messages about family health (‘Strengthen your family’s teeth with Crest Cavity Protection Fluoride Anticavity toothpaste’) in the path to purchase. 

The equity of competing brands issue presents an interesting problem for retailers. kA big promotion for one high-equity brand might draw loyal customers away from another high-equity brand. Retailers must take this effect into consideration when making inventory decisions during promotions — or even when deciding on which products to focus promotion decisions.

Finally, manufacturers should use the four customer segments to help guide their branding decisions. For example, a brand with a high number of Doubting Loyals — customers who don’t believe the brand equity is particularly high, but tend to be loyal — has less of a problem than a brand with a high number of Believing Switchers — customers who don’t stay loyal despite their perception of the brand’s high equity. This latter brand would benefit from using the results of this study to strengthen the relationship between brand equity and behavioural loyalty! 

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