Chapter 2

Question 1

Three forms of loyalty

Answer 1

There are three key types of loyalty: Attitudinal loyalty and two types of Behavioural loyalty (Share and Tenure).

Question 2

Explain: Attitudinal loyalty

Answer 2

Attitudinal loyalty is desiring or intending to behave loyally towards the brand (i.e. – I like Brand A and only want to buy Brand A, I intend to buy brand A).

Question 3

Explain: Share Loyalty

Answer 3

Share loyalty includes a range of measures related to how much is bought, how much of the category buying, the buying of a single brand makes up etc. A common measure of Share loyalty is ‘Share of Category Requirements – or SCR’.

Question 4

Explain: Tenure Loyalty

Answer 4

a measure of how insensitive buyers are to the enticements of other brands. Tenure loyalty is part of this concept of loyalty based on the premise that length of time with a provider makes a buyer less likely to switch away. Tenure is measured as a length of time with a particular brand, particularly relevant for subscription markets where buyers subscribe to the one brand for an extended period.

Question 5

Are buyers 100% loyal to a brand?

Answer 5

• 100% loyal buyers of a brand are, in the majority, light buyers of the category and of the brand - 100% loyal buyers only buy from you very occasionally.
• How do we know that 100% loyals are very occasional buyers? Say if data is collected in a one year time period, and a buyer only bought once within that year, then they are solely loyal to whatever brand they bought. From this perspective it could be said that they aren’t very valuable because they only make a small contribution to a brand’s bottom line in comparison to those who buy a range of brands.
• Sole loyal buyers make up a very small percentage of a brand’s customer base. Therefore not only do they make a small contribution to a brand (small amount of sales) but there is a very limited number of these types of customers who purchase your brand.

Question 6

List the 6 Brand Performance Metrics (BPMS)

Answer 6

Market Share
Penetration
Average Purchase Frequency Category Buying Rate
Share of Category Requirements Sole Loyalty

Question 7

What Brand Performance Metrics measure size?

Answer 7

Market Share

Penetration

Question 8

What Brand Performance Metrics measure loyalty?

Answer 8

Average Purchase Frequency Category Buying Rate

Share of Category Requirements Sole Loyalty

Question 9

What is Market Share?

Answer 9

Market share is the proportion of sales obtained by a brand in comparison to the whole category
Formula:
MS (%) = (total sales of a brand / total sales of the category) x 100

Question 10

What is Penetration?

Answer 10

The proportion of people that bought your brand at least once in the given time period
Formula:
Pen (%) = (number of brand buyers / number of shoppers) x 100

Question 11

Average Purchase Frequency

Answer 11

The average number of times customers of a particular brand purchased that brand in the given time period
Formula:
APF = total number of purchases of a brand / number of brand buyers
m,

Question 12

Category Buying Rate

Answer 12

The average rate at which a brand’s buyers buy from the category
Formula:
CBR = number of category purchases made by those brand buyers / number of brand buyers

Question 13

Share of Category Requirements

Answer 13

The share of the customers’ purchases that were devoted to a brand out of all the purchases they made from the category in the time period
Formula:
SCR (%) = (APF / CBR) x 100

Question 14

100% (or Sole) Loyalty

Answer 14

The proportion of a brand’s buyer that only buy that one brand in the time period
Formula:
100% Loyals = (number of brand buyers who only purchased that particular brand / number of brand buyers) x 100

Question 15

Subscription and Repertorie

Answer 15

• Sharp, Wright and Goodhardt (2002), AMJ, “Share loyalty is polarised into either subscription or repertoire patterns”
• Repertoire markets - polygamous loyalty is the norm
• Subscription markets - 100% loyalty is the norm

Question 16

Subscription

Answer 16

• Managers are concerned with metrics like acquisition and
defection rates
• And churn rates (ratio of defections to acquisitions)
• And cross selling - making customers buy more products from the one firm

Question 17

Repertoire

Answer 17

• Share loyalty is the focus - share of category requirements
• Defection is hard to see

Question 18

Brand store loyalty

Answer 18

• The link between brand and store loyalty is widely believed to be because certain brands (e.g., store brands) enhance store loyalty.
• No real evidence for this.
• Instead high store loyalty reduces the choice of available brands.
• And there may be common causes, busy people use routines to simplify their lives.

Question 19

Sole loyals

Answer 19

In repertoire markets these customers are unusual.
• But perhaps that makes them uninteresting for marketers because they are rare, inconsequential.
• Generally light buyers
• Or are they really interesting - how can we get more of them ?

Question 20

Customer defection rates

Answer 20

East & Hammond (1996) looked at groceries

• defection about 15% pa
• little variation between product categories
• light & heavy buyers showed similar defection rates

Question 21

Stochastic

Answer 21

• Loyalty varies a lot between customers
• And for any individual their loyalty varies a lot across product categories
• Mostly influenced by external factors, of which there are a myriadAt aggregate (category or brand) level we should be able to
say a lot about patterns of loyalty
• Predicting whether an individual will be loyal or not - that seems a much harder task

Question 22

Reasons someone is likely to be a sole buyer

Answer 22

If you have less choice then you are likely to be more loyal (share and tenure)
– people who live in small towns – light buyers of the category