An In-depth Analysis assessing factors influencing brand loyalty towards purchase decision making: The Next Retail.

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TABLE OF CONTENTS

CHAPTER 5: CONCLUSION1

Marketing and Communication Mix4

What influences brand value?7

REFERENCES9

APPENDICES12

Questionnaire12

CHAPTER 5: CONCLUSION

Despite the prevalence of retail price promotions it is not well understood why supermarket retailers periodically offer products at discounted prices. Theoretical models have been developed that explain this phenomenon, but there are no rigorous tests of their hypotheses. Thus, this study develops a theoretical brand loyalty model and tests its implications on a differentiated products consumer packaged goods. We develop and test a theoretical model of brand loyalty that resembles fundamental characteristics of many theoretical brand loyalty studies. Specifically, we develop a model of brand loyalty that considers the strategic pricing of retailers. Furthermore, consumers are assumed to have a degree of loyalty for one brand, but can be persuaded to switch given large enough incentives. These assumptions are common throughout many brand loyalty studies and provide a model that is an excellent foundation for empirical tests. Using such sufficient empirical data to determine how a brand loyalty affects a retailer's equilibrium promotional strategy for differentiated products.

Our study is estimated in two stages. In the first stage we model Next retail demand using a random coefficient legit specification. A random coefficient model allows for a flexible utility specification that accounts for marketing mix signals, structural state dependence, habit persistence, and Next retail heterogeneity. Thus, we are able to obtain accurate estimates of Next retail's brand loyalty. We calculate the size of the loyal cohort using the Next retail specific brand loyalty estimates. The second stage of the model determines how the strength of brand loyalty, and the loyal cohort size, influence equilibrium promotional strategies for differentiated products. In particular, we model the breadth and depth of retail promotions as functions of the brand's strength and size. Using these results we test the applicability of the theoretical model to a specific differentiated products food category.

The first stage demand results have several interesting findings for practitioners and researchers alike. First, we find a high degree of brand loyalty. Second, the results of Next retail's brand loyalty measure have implications for the definition of a switcher population used in other academic studies. Namely, a segment may exist in which consumer's make their brand selection based on price, but choose the brand they prefer most if prices are the same. Third, our demand model results suggest that the average retail price of a brand should correlate positively with the strength of brand loyalty. This result suggests overpricing weaker brands may cause a loss in market share. This also suggests manufacturers and retailers should continually monitor the degree of brand loyalty for individual brands.

Finally, our model indicates that Next retail generally prefer purchasing one brand per shopping trip, and have a high degree of brand inertia which makes brand loyalty more important. The second stage empirical model only partially corroborates existing theoretical predictions of the relationship between brand loyalty and price ...