TY - JOUR
T1 - Brand Loyalty and Price Promotion Strategies
T2 - An Empirical Analysis
AU - Allender, William J.
AU - Richards, Timothy
PY - 2012/9/1
Y1 - 2012/9/1
N2 - Though brand loyalty has been studied extensively in the marketing literature, the relationship between brand loyalty and retail pricing strategies is not well understood. Designing promotion strategies involves two key decisions: the percentage reduction in price from the existing price point (depth), and the frequency with which a product is promoted. These decisions, in turn, are critically dependent upon how many consumers can be convinced to switch to a brand by temporarily reducing its price, and how many are instead brand loyal. Theoretical models of how the strength of brand loyalty influence optimal promotion strategies have been developed, but there are no rigorous tests of their hypotheses that take into account wholesale price variation. We test how brand loyalty impacts promotion strategies for two frequently purchased consumer packaged good categories. Our results confirm that retailers promote strong brands shallower and more frequently compared to brands with weak loyalty. Our results highlight the importance of carefully modeling wholesale prices when testing behavioral models on retail pricing.
AB - Though brand loyalty has been studied extensively in the marketing literature, the relationship between brand loyalty and retail pricing strategies is not well understood. Designing promotion strategies involves two key decisions: the percentage reduction in price from the existing price point (depth), and the frequency with which a product is promoted. These decisions, in turn, are critically dependent upon how many consumers can be convinced to switch to a brand by temporarily reducing its price, and how many are instead brand loyal. Theoretical models of how the strength of brand loyalty influence optimal promotion strategies have been developed, but there are no rigorous tests of their hypotheses that take into account wholesale price variation. We test how brand loyalty impacts promotion strategies for two frequently purchased consumer packaged good categories. Our results confirm that retailers promote strong brands shallower and more frequently compared to brands with weak loyalty. Our results highlight the importance of carefully modeling wholesale prices when testing behavioral models on retail pricing.
KW - Brand loyalty
KW - Carbonated soft drinks
KW - Discrete choice model
KW - Ice cream
KW - Price promotion
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U2 - 10.1016/j.jretai.2012.01.001
DO - 10.1016/j.jretai.2012.01.001
M3 - Article
AN - SCOPUS:84865432608
SN - 0022-4359
VL - 88
SP - 323
EP - 342
JO - Journal of Retailing
JF - Journal of Retailing
IS - 3
ER -