BRAND LOYALTY

Brand loyalty and marketing strategy

S. Ramesh Kumar
Aalap Sharma

BRAND loyalty in fast moving consumer goods categories is a topical issue, with several brands resorting to price cuts across categories. More
importantly, price cuts or sales promotion by themselves do not seem to have done much for brands in terms of sustaining brand loyalty. They
may attract consumers in the short run: consumers may stock the brands and consumers new to the brand may try it. But over a period of time, a
brand's value may get diluted in consumers' psyche, and will eventually lose a strong base of consumers. The following are some aspects of
marketing mix elements and consumer behaviour which could contribute to brand loyalty.

Product differentiation

If the products are differentiated in their characteristics and this difference is perceivable, there are chances of brand loyalty being formed based
on satisfaction with greater performance or fit of product with needs. In this case, loyalty is driven by functional or symbolic benefits.
Functional benefits would be specific tangible features of the product whereas symbolic benefits would be intangibles such as brand personality
and `hedonistic' value of purchase.

Price differentiation

If the price differentiation in the market is perceivable, price-led loyalty might exist in the market. Price-led loyalty is practised by
supermarkets, airline companies and FMCG brands, which come out with frequent sales promotions based on freebies. Alternatively, price
might be taken as an indicator of brand quality, and the customer might go in for higher priced options. Price-led loyalty has to be carefully
considered with other marketing mix elements and the consumer should never perceive dilution, especially in low-priced bands. Hence, lower
prices should create a sense of value through the product offerings as well as through communication.

Branding activity

If the category is organised and there is branding activity, there will be greater loyalty than there would have been if the category were
unorganised. Branding activities can differentiate between brands on name, symbol, images and associations. Branding activity in this context
refers to creating strong associations which will influence the consumers not only with regard to functional attributes but also with symbolism.
Hamam soap's portrayal of its pure ingredients with the child and mother imagery is a good example of one of these dimensions. Ruf and Tuf's
campaign using a personality-oriented concept to create a belief in products made in one's own country is another new approach to branding
activity (especially in a category with Western origins). Creating an association through sponsorship too is a branding activity. Branding
activities in a broad sense could range from advertising to sales promotion and public relations involving several aspects.

Level of risk

The perceived risks that typically occur are functional, social and psychological risks.

These kinds of risks are perceived in several products ranging from personal care products to electric cars. A pioneering brand in a category
which offers a good product and addresses the perceived risks associated with the product is likely to get a loyal base of consumers.
Amazon.com, one of the global pioneers in the business of online marketing which initially involved traditional categories, books and music,
addressed and successfully overcame "the perceived risk" barrier to have a large group of loyal consumers. Smaller brands which compete with
mega brands in the area of personal care (for example) can approach loyalty with this dimension. How does a good but lower-priced fairness
cream ensure that consumers do not perceive health or usage risks?

Involvement of consumer

A high brand involvement would mean a greater search intention, and satisfaction of the customer could lead to repeat purchase and then
loyalty. Low involvement could lead to brand habit. Researching the involvement levels of consumers helps to decide which of the marketing
mix elements will be useful to create a trial, and hence loyalty. Dettol floor cleaner advertises that children will fall sick less frequently as it
kills bacteria. Dettol with its germ-killing association may be trying to create involvement in a category in which penetration levels are low and
in which there are a number of local brands which belong to the unorganised sector.

Sales promotions

The more the number of price-discount led sales promotions, the lesser the likelihood of brand loyalty in the category/segment which is the
focus of such efforts. This is because the consumers are inducted into the price war mind set. Sales promotions by themselves as a concept is
not a bad idea provided they are used well with the overall strategy of the brand. A premium brand which gets into frequent sales promotion has
the risk of losing its premiumness — a permanent damage to a brand which has spent years creating the premium aura.

The Indian context

The following were the observations from the literature survey and the examples chosen from the Indian context.

The factors in Table 1 indicate that there will be a large segment of consumers for whom price-led loyalty will dominate. Hence there will be
strong behavioural loyalty in the segment and only weak attitudinal loyalty. There is thus spurious loyalty in this sector.

There is a moderate level of symbolic and functional differentiation which has been exploited by strong brands to build a loyal following.
Examples of this include brands such as Dove, Pond's Dreamflower talcum powder, Gold Flake, Will's Navy Cut, Amul and Cadbury. These
brands have probably built strong attitudinal loyalty through their brand personality and other brand building efforts.

In the FMCG sector, brand habit is high whereas attitudinal loyalty is low. As creating attitudinal loyalty based on functional differentiation is
difficult, symbolic differentiation is the key. Building strong brand personalities and associated symbolic benefits is important for crafting
customer loyalty.

The factors discussed cannot be treated in isolation: they are to provide a synergy to result in brand loyalty. The combination of these factors
and the timing of the combination is the topical challenge which marketers face in an environment where loyalty is slowly eroding.

(S. Ramesh Kumar is Professor of Marketing, IIM Bangalore; Aalap Sharma is a student of the post-graduate programme in management at
the same institute.)

Is brand loyalty a myth?

S. Ramesh Kumar

Do all brands benefit from loyalty programmes? Could they affect a brand's image and eat into its profits rather than help it?

TRADITIONAL marketing paradigms have always stressed the importance of brand loyalty; and marketers have always believed that brand
loyalty would lead them to customer relationships, which would enable them to make the best use of customer lifetime value. While academic
literature has several articles on some of these latest concepts, practical considerations suggest certain cautious ways of applying these concepts.

Marketers may have to probe deeper into the concepts of loyalty to understand consumers' buying patterns before they embark on loyalty
schemes. Traditional approaches to brand loyalty have stressed the importance of the fact that it is less expensive to maintain existing
consumers than to get new ones. Consumers who are loyal to a brand are likely to spend more on it and also likely to spread the positive word
of mouth to other consumers, thus becoming advocates of the brand.

While these may be true in today's context, there may have to be certain changes in the environment to be taken into consideration before a
policy on loyalty is formulated. If the soap category is considered, there may be a propensity for consumers to try out many brands. A consumer
may frequently purchase a herbal brand but may keep alternating with other moisturiser brands. The detergent category too may have such
patterns. Even with a cut-throat price war on, not all consumers may prefer top-end brands every time they make a purchase in the category. A
significant number of consumers may alternate between top-end offerings and middle-end offerings on several occasions.
This is very probable in markets where the income flow is unpredictable or not uniform as with urban markets. Weekly paid and even hourly
paid consumers form a substantial portion of the target segments for such brands in semi-urban and rural markets. Even in urban markets,
consumers shopping in departmental stores may alternate between national brands and store brands, especially when promotional schemes are
announced by the departmental stores.

Challenges of brand loyalty

Some of the loyalty-based challenges faced by today's marketers are:

• How should loyalty be created and sustained?

• Are there different approaches for fast moving consumer goods and durable categories?
• How should retail networks be used to build loyalty at the retail outlet level?
• How should loyalty programmes be floated so that they are profitable to companies too unlike several programmes which do not get
much value for the brand?

The global example of frequent flier programmes is one in which several billion miles are logged by frequent fliers and several companies are
apprehensive about profits from loyalty programmes. It is a good case of how the bandwagon effect has created problems for companies who
have had to jump into it because of competitive demands. To make things complex a sizable cross-section of consumers are members of more
than one frequent flier programme as they patronise several airlines across their routes.

While there are no easy answers to the challenges on brand loyalty, it is at least worthwhile to be aware that loyalty programmes do not have
`fairy tale' endings. In consumable categories, companies attempt to bring out brand variants with limited success. Toothpaste brand Close-Up
attempted several variants but has been able to only sustain a few. Introducing variants at the same price points serve to hold consumers who
may need variety with regard to their consumption. This is different from product-line strategies which attempt to upgrade the consumers to a
higher price point by offering variants (though there may be some similarities in both these approaches).

Britannia has a number of variants on some of its offerings at the same price points. This strategy is useful in a category like biscuits which is
amenable to variety-seeking because of the hedonistic experience associated with the consumption of biscuits. If it is detergents, perhaps
consumers would look for functional benefits and the company too may have to think of differentiated price points to convey the value (like a
scented version of a detergent brand).

Both the approaches in both the categories aim at loyalty but the segments of consumers and the buying motives are different. The company,
depending on the scale of operation, has to not only take into account the profitability aspects of the brand but also those associated with its
range of offerings.

A1 brand of tea may have had a number of loyal buyers, but the company, with its string of offerings would have to also take into account the
profitability associated with its overall offerings in a competitive context of regional brands and entry of multinationals in the category. Fair &
Lovely has several variants and even a niche soap like Pears has an oil control variant. Managing the product line to sustain loyalty and
profitability is a delicate strategy.

In the case of durable categories, repeat buys of the brand could depend on how well service has been provided. Beyond this, consumers may
also require feature-rich offerings when they update. For example, a consumer who has bought a brand of washing machine ten years ago would
like to replace the machine with updated features rather than buy the same model. The brand should be in a position to offer such features to
ensure that the consumer is not lost to competition. It may be interesting to research if consumers desire updated features because they require it
or because competitive brands offer them. This would enable a brand to define what value is all about for a loyal consumer.

Having an ongoing relationship with the buyer is another strategy to keep the brand on top of consumers' minds. The Passport scheme of Hero
Honda related to service after the purchase is a good example where the consumer may perceive a value after the purchase is made as there are
privileges which could be put to use while using the product. Retail outlets augment loyalty in a variety of ways. Shopping experience is one.
Offering value on the merchandise with sales promotion bundling is another. Loyalty programme is also one of the ways of developing retail
loyalty. Shoppers' Stop has one which is run in synchronisation with consumer preferences strengthened by a good supply chain system which
would enable the company to save on procurement. A good information technology system is a prerequisite for any retail chain which has a
good database of consumer purchase patterns.

Some critical factors for loyalty-based strategies

 Past purchase patterns would provide several insights into the behaviour of consumers. In a number of cases, there may be more than one
pattern of purchase and hence different programmes required for different consumer groups. A group of consumers may be interested in the
discounts obtained through bundling of products in a retail chain. Another group may be more interested in the variety of brands being offered
by the outlet, especially in the case of cosmetics, personal care, apparel and commodities.
 RFM: How recently a consumer has bought from the retail outlet, how frequently he/she buys from the store, and monetary value, is a good
pointer to arrive at various groups of consumers for a reward programme. But the limitation of this approach is that it does not take into
consideration the profits per consumer and for a given period does not take into consideration the probability of purchase. For example, an
infrequent purchaser could shop just after the time period considered and the analysis is likely to miss the probability (a consumer buying once
in five months as against one buying once in four months for a time period of one year).

 There is a concept known as `double jeopardy effect' which essentially mentions that smaller brands (in terms of market share) have few
buyers and even fewer repeat buyers. This means that smaller brands are likely to have a loyalty propensity lesser than large brands. In several
categories in the organised sector a category may be dominated by large brands and checking for the presence of this effect may open up new
avenues to probe loyalty and the motivation for the buyers. For example, in the category of fairness creams dominated by large brands, a small
brand may find that consumers are reluctant to try out new brands because of perceived risk associated with product formulation or because
they are used to a formulation which they do not want to change. Communication campaigns or even personalised communication (as
appropriate) may be useful based on the insight.

 The bandwagon effect discussed earlier makes an interesting point with regard to loyalty-based strategies. A profitability analysis as well as
the analysis of the brand's strength is required before a brand decides to follow competition for initiating loyalty programmes. A brand offering
a strong product differentiation (which has to be backed up by the organisation) may not need a mundane loyalty programme simply because
the competition has one; in fact, it has the competitive advantage of developing a segment of consumers who value the product rather than the
undifferentiated loyalty programme which is offered by competitive brands.

 Firms should examine the product category before firming up loyalty programmes. In a category like atta where only 3 per cent of the
market accounts for branded offerings, there is immense potential to get new consumers besides retaining existing consumers who may have
tried a branded offering. Hence the pros and cons of investing in a loyalty programme should be weighed.

A good loyalty programme has to offer profitability and add equity to the brand rather than direct it towards a price war which would dilute its
equity.

(The writer is Professor of Marketing, Indian Institute of Management, Bangalore.)

BRAND AMBASSADOR

Am I a brand ambassador?

R. Shekar

Thanks to traffic congestion from Kollam to Thiruvananthapuram, I missed my return flight to Chennai necessitating an unscheduled overnight
halt at a 3-star hotel owned by the uncle of one of the students. With compliments of course!

With great reluctance, I accepted an invitation to a reunion of MBA alumni drawn from diverse backgrounds and schools of management that
evening. The ‘war stories’ drawn from their accumulated experience of five-plus years since their leaving college yielded an interesting pattern
for me that I quickly labelled along the coordinates of:

The brand equity of the employer they served (X-axis); and

The value perception they held-out for their employers in the role they claimed to perform (Y-axis).

Interesting pattern

I am the brand: The most colourful, humorous and spontaneous accounts emerged from a few who felt wanted by their employers. They saw
themselves making a visible difference to the lives of their customers and colleagues by virtue of living the ‘brand promise’ held out by their
employer, at daily work.

Disengaged lot represented some of their fellow-colleagues who found no significant purpose being served by them. Perhaps they felt the
‘brand promise’ implied by their employers to be a mere ‘hype’. Apprehensions of being passed up by the former were not hard to detect. They
felt vulnerable in their roles and nursed doubts in private about the appropriateness of continuing with a branded employer on engagements that
progressively questioned their importance or eroded their self-worth.

Eclipsed segment felt that the responsibility they shouldered was disproportionately higher than the importance the industry and company
attached to them. They had elected to be a big fish in a small pond. However the ‘joy’ was no longer sustainable because of the threat to their
positions arising out of an impending takeover by bigger rivals or conceding hard won market share to branded upstarts.

Oblivion characterised the lot whose roles meant nothing meaningful for the employer and the employee alike. They were passive and
perfunctory in their participation through out an otherwise ‘spirited’ evening!

Employers embarking on a search for premium talent are under pressure to be explicitly articulating the ‘employer value proposition’ held out
by them. Wonder why the subject of ‘employee value proposition’ does not merit an equally serious consideration.