Brand loyalty and price promotion strategies: an empirical analysis

Brand loyalty and price promotion strategies: an empirical analysis

Article Type: Abstracts From: Strategic Direction, Volume 29, Issue 2

Allender W.J. and Richards T.J. Journal of Retailing, September 2012, Vol. 88 Issue: 3, Start Page: 323, No of pages: 20

States that, although brand loyalty has been studied extensively in the marketing literature, the relationship between brand loyalty and retail pricing strategies is not well understood. Suggests that, 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. Discusses how 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. Finds that 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. Tests how brand loyalty impacts promotion strategies for two frequently purchased consumer packaged good categories. Results confirm that retailers promote strong brands shallower and more frequently compared to brands with weak loyalty. Highlights the importance of carefully modeling wholesale prices when testing behavioral models on retail pricing. Article type: Research paper ISSN: 0022-4359 Reference: 41AX324

Keywords: Brand loyalty, Carbonated soft drinks, Discrete choice model, Ice cream, Price promotion