Antecedents of Brand Loyalty: the Role of Perceived Risk

ABSTRACT - Dick and Basu (1994) postulated certain hypotheses concerning product class effects on brand loyalty. Specifically, they envisaged that product involvement, positive emotional experiences and perceived differences between alternatives would be positively related to brand loyalty. These hypotheses were tested in this study and, additionally, the effect of negative emotion was also tested. The direct and indirect effects of product involvement, positive and negative emotion and perceived differences between alternatives were tested with the indirect paths routed through the mediating construct of perceived risk. Information search and brand loyalty were both modelled as purely endogenous variables since perceived risk has previously been found to produce both these consequences (Cox 1967; Cunningham 1967; Dowling and Staelin 1994).



Citation:

Arjun Chaudhuri (1998) ,"Antecedents of Brand Loyalty: the Role of Perceived Risk", in E - European Advances in Consumer Research Volume 3, eds. Basil G. Englis and Anna Olofsson, Provo, UT : Association for Consumer Research, Pages: 32.

European Advances in Consumer Research Volume 3, 1998      Page 32

ANTECEDENTS OF BRAND LOYALTY: THE ROLE OF PERCEIVED RISK

Arjun Chaudhuri, Fairfield University, U.S.A.

[This research was partly funded by a research grant from Fairfield University.]

ABSTRACT -

Dick and Basu (1994) postulated certain hypotheses concerning product class effects on brand loyalty. Specifically, they envisaged that product involvement, positive emotional experiences and perceived differences between alternatives would be positively related to brand loyalty. These hypotheses were tested in this study and, additionally, the effect of negative emotion was also tested. The direct and indirect effects of product involvement, positive and negative emotion and perceived differences between alternatives were tested with the indirect paths routed through the mediating construct of perceived risk. Information search and brand loyalty were both modelled as purely endogenous variables since perceived risk has previously been found to produce both these consequences (Cox 1967; Cunningham 1967; Dowling and Staelin 1994).

Products were used as the units of observation in this study. This level of analysis is appropriate in order to make generalizations at the level of product categories and not at the individual level. For instance, we might be able to arrive at a conclusion that products that are high in involvement are also high in perceived risk and, consequently, also high in loyalty.

Thus, the "individual" level responses of consumers was replaced in this study by an "aggregate" level response (aggregated across groups of consumers) which may be attributed to the product rather than to the individual. More specifically, in the first phase of data collection, in order to collect data on the purely exogenous variables in the model, 30 users for each of 146 products were surveyed and the mean of the 30 responses was accepted as the aggregate "score" for each variable for a particular product. In the second phase of data collection, in order to collect data on brand loyalty, perceive risk and information search, the same procedure was employed for a total of 89 products from the original set and an aggregate data set was, thus, compiled in which products were the units of analysis. The sample of products was randomly selected for analysis from the Standard Industrial Classification Manual. Only commonly used consumer products were used.

Covariance structure analysis (using Lisrel VII) was employed to test the data for the direct and indirect paths from the four purely exogenous variables to the measures of brand loyalty and information search with the indirect paths occurring through perceived risk. It was found that:

(a) None of the purely exogenous variables were directly linked to brand loyalty.

(b) Of the purely exogenous variables, only perceived differences was directly linked to information search.

(c) Of the purely exogenous variables, only perceived differences and negative emotion were related to perceived risk. Product involvement and positive emotion were not related to any of the dependent variables.

(d) Perceived risk was related to both brand loyalty and information search. Thus, negative emotion and perceived differences were indirectly related to brand loyalty and information search, with the indirect path occurring through perceived risk.

The results of the study suggest that negative emotion is related to perceived risk. Specifically, products which evoke negative emotions are also associated with increased perceptions of risk. Products which are high in perceived risk, in turn, are also high in information search and brand loyalty. Note that negative emotions are not directly related to information search and brand loyalty. Instead, the effect of negative emotions on search behavior and loyalty is mediated by the concept of perceived risk. This is an important finding since it explains the nature of the effect of emotion on behavioral outcomes and, thus, improves the prediction of these behavioral outcomes. Negative feelings about a product result in preference for a particular brand because these negative feelings create perceptions of risk about the product and this perception, in turn, leads to the preference for a favored alternative.

The same is true for the construct of perceived differences between alternatives. In this study, as in others, perceived differences between alternatives leads to perceived risk (Bettman, 1973) and perceived risk leads further to a preference for a particular brand (Cunningham, 1967). There is no direct relationship between perceived differences and brand loyalty, as suggested elsewhere (Dick and Basu, 1994). The results of this study show that the linkage between the constructs is indirect and only through the intervention of the perceived risk construct.

REFERENCES

Bettman, James R. (1973), "Perceived Risk and Its Components: A Model and Empirical Test," Journal of Marketing Research, 10 (May), 184-90.

Cox, Donald F. (1967), Risk Taking and Information Handling in Consumer Behavior, Cambridge, MA: Harvard University Press.

Cunningham, Scott M. (1967), "Perceived Risk and Brand Loyalty," in Risk Taking and Information Handling in Consumer Behavior, ed. Donald F. Cox, Cambridge, MA: Harvar University Press, 507-523.

Dick, A. S., and Basu, K. (1994), "Customer Loyalty: Toward an Integrated Conceptual Framework," Journal of the Academy of Marketing Science, 22, 99-113.

Dowling, Grahame R. and Richard Staelin (1994), "A Model of Perceived Risk and Intended Risk-Handling Activity," Journal of Consumer Research, 21 (June), 119-134.

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Authors

Arjun Chaudhuri, Fairfield University, U.S.A.



Volume

E - European Advances in Consumer Research Volume 3 | 1998



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