A Behavioral View of Promotions Effects on Brand Loyalty

Michael L. Rothschild, University of Wisconsin
ABSTRACT - Brand loyalty is felt to be declining in many product classes where there is a high level of sales promotions dealing and where there are few perceivable brand differences. Behavioral learning theory suggests that deals reinforce the search for more deals and lead to deal prone behavior rather than new loyalty.
[ to cite ]:
Michael L. Rothschild (1987) ,"A Behavioral View of Promotions Effects on Brand Loyalty", in NA - Advances in Consumer Research Volume 14, eds. Melanie Wallendorf and Paul Anderson, Provo, UT : Association for Consumer Research, Pages: 119-120.

Advances in Consumer Research Volume 14, 1987       Pages 119-120

A BEHAVIORAL VIEW OF PROMOTIONS EFFECTS ON BRAND LOYALTY

Michael L. Rothschild, University of Wisconsin

ABSTRACT -

Brand loyalty is felt to be declining in many product classes where there is a high level of sales promotions dealing and where there are few perceivable brand differences. Behavioral learning theory suggests that deals reinforce the search for more deals and lead to deal prone behavior rather than new loyalty.

THE PAPER

In this session on new perspectives toward brand loyalty, we were asked to begin with Jacoby and Kyner's (1973) definition of brand loyalty. That definition, "the biased (nonrandom) behavioral response (purchase) expressed over time by some decision making unit with respect to one or more alternatives ... is a function of a psychological process' (p. 2), is acceptable to me if I can add that such a response can be toward a benefit or a deal in the same way it could be toward a brand.

When we discuss brand loyalty we generally are considering frequently purchased goods and these are often referred to as low involvement. Perhaps brand loyalty is a low involvement mechanism that makes life easier for consumers; it is easy to choose the same brand, the same benefit or the same deal. A key unique benefit for convenience goods may be price, and, therefore, loyalty to price or deal may be the most viable low involvement behavior.

Returning to Jacoby and Kyner's definition, I would suggest that a psychological process that may explain brand loyalty is that of behaviorism. The central concept of behavioral learning theory is that behavior that is positively reinforced is likely to reoccur while that which is not reinforced, or punished, will be extinguished. Consumers become loyal to brands that are reinforcing to them; good decisions are reinforced while poor decisions Are not.

When we look at the impact of sales promotions deals we see the same influences. Consumers learn to try brand B for fifty cents off its normal price; the deal reinforces the behavior and, therefore, the consumer learns to repeat the behavior. What is the lesson that is learned? Is it to repeat using B, or is it to repeat using a deal? If B has its own unique benefit, then it is likely to be repurchased, but, if B is not very different from brand A, then the consumer learns two things. The consumer learns that using a deal is reinforcing, and that A and B are similar enough such that the deal that is offered outweighs the slight benefit advantage held by either brand.

At one time the major purpose of sales promotions was to aid a new brand during its introduction by helping to break old loyalties. In 1981 I discussed behavioral learning theory in that context, and tried to show strategies that could break old loyalties and create new ones (Rothschild and Gaidis, 1981).

The world has changed rapidly and now the large majority of promotions are used by existing brands to defend share from encroachment. With so many competitors using deals, my current view is that sales promotions can break old loyalties, but new loyalties are created for price and deals, rather than for the dealer's brand.

What is happening to brand loyalty? While it is alive and well in some product classes where brands have perceivable differences (either real or image created), brand loyalty is slowly dying in other classes where the main perceivable difference is in the price, and where consumers have learned, via deals, that there are no other differences that matter.

In putting this presentation together, I spoke to fifteen practitioners; fourteen felt that loyalty is declining. Following are some data from Information Resources, Inc. that support this view.

1. Data from one food category show that heavy deal users are also heavy product users. These consumers buy 40% of all product and make 80% of their purchases on deal.

2. There is a significant negative correlation (-.52) between amount of deal and brand loyalty. As the value of the deal increases, loyalty decreases.

3. In a second foot category, when purchases are made without a deal, 64% of buyers repurchase; when purchased on deal, 37% repurchase. Without a deal, consumers learn brand benefits and repurchase; with a deal consumers learn the benefit of the deal and look for another deal.

4. Double coupons lead to a 300% increase in redemptions for retailers using this promotion, but there is no change in retailer market share or loyalty. Why? When one store offers double coupons, others respond and there is no change in store usage. This is a case where deals do not seem to erode loyalty.

I believe that sales promotions are ruining brand loyalty and that behavioral learning theory can explain why. When we offer a deal we often reinforce the wrong behavior. Figure 1 shows that the stimulus of the coupon leads to the response of awareness of the coupon. This is cognitive learning but generally does not help brand learning because there is already high awareness for the established brand.

FIGURE 1

A BEHAVIORAL VIEW OF PROMOTIONS

Later, the response of purchase (aided by the coupon) is reinforced by the stimulus of the product (at a lower price). This is behavioral learning and is repeated often across many product classes.

There are at least two possible long run outcomes. One is that consumers learn to look for deals; this will occur if price is more salient than other benefits. The other outcome is that brand loyalty towards the new brand will emerge. This will occur if some other benefit is more salient than price and no better deal emerges to interfere with this new loyalty.

Behavioral learning theory also shows that immediate reinforcement is more powerful than delayed. The deal is reinforcing immediately at the cash register but the product does not reinforce until it is later consumed at home. Therefore, the deal may be stronger.

Previously reinforced behaviors are extinguished when there is a removal of the correlation between the response and the reward. If the promotion is the greatest reinforcer, its removal breaks down the correlation; there is no longer reinforcement. Extinction also occurs with the introduction of a new reward that is not correlated with the desired response. This occurs when the competition offers a better deal, and is an easy strategy for a competitor to adopt. These are just a few of the behavioral concepts that aid in predicting the impact of deals on brand loyalty.

How big a deal does it take to break down loyalty? Shoemaker and Tibrewala (1985) ask that question about four convenience grocery products and use a survey to elicit responses. A low valued coupon (15+) only attracts current customers and therefore lowers margin. A high valued coupon (50+) brings in new users and breaks old loyalties, but does not lead to new repeat purchases. Perhaps the coupon does not lead to brand loyalty because consumers are learning to become deal loyal.

There is a new brand in many convenience goods product classes. This brand is called 'deal" and it has growing loyalty and growing market share. We can no longer study brand loyalty without considering "deal," and behavioral learning theory provides useful insights for studying this threat to existing brands.

REFERENCES

Jacoby, J. and D. B. Ryner (1973), "Brand Loyalty vs. Repeat Purchasing Behavior," Journal of Marketing Research X (February), 1-9.

Rothschild, M. L. and W. C. Gaidis (1981), "Behavioral Learning Theory: Its Relevance to Marketing and Promotions," Journal of Marketing, 45 (Spring), 70-78.

Shoemaker, R. W. and V. Sibrewala (1985), "Relating Coupon Redemption Rates to Past Purchasing of the Brand," Journal of Advertising Research, 25 (October/November),

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