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Effect of sales on brand loyalty

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Author Info

  • Huang, Rui
  • Perloff, Jeffrey M.

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

  • Villas-Boas, Sofia B

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

Abstract

Although many theoretical industrial organization models are based on the existence of a critical mass of exogenously “brand loyal” consumers, we find little empirical evidence supporting these assumptions in the orange juice retail market. There are very few loyal consumers. More importantly, the frequency with which stores conduct sales affects the share of loyal types so that loyalty is endogenous rather than exogenous. Households’ demographics have statistically significant but economically minor effects on switching behavior. Switching across frozen and refrigerated states is very common, leading to more complicated substitution patterns and less loyalty than one observes looking at each state separately.

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Bibliographic Info

Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1011R.

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Length: 34 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:are:cudare:1011r

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Related research

Keywords: brand names; brands; consumers' preferences; multinomial logit; orange juice;

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References

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  1. Farrell, Joseph & Shapiro, Carl, 1988. "Dynamic Competition with Switching Costs," Department of Economics, Working Paper Series qt1h02g9q4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
  3. Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-49, October.
  4. Rajiv Lal, 1990. "Price Promotions: Limiting Competitive Encroachment," Marketing Science, INFORMS, vol. 9(3), pages 247-262.
  5. Richard G. Frank & David S. Salkever, 1997. "Generic Entry and the Pricing of Pharmaceuticals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 75-90, 03.
  6. Richard A. Colombo & Donald G. Morrison, 1989. "Note—A Brand Switching Model with Implications for Marketing Strategies," Marketing Science, INFORMS, vol. 8(1), pages 89-99.
  7. Barry L. Bayus, 1992. "Brand Loyalty and Marketing Strategy: An Application to Home Appliances," Marketing Science, INFORMS, vol. 11(1), pages 21-38.
  8. Beggs, Alan W & Klemperer, Paul, 1992. "Multi-period Competition with Switching Costs," Econometrica, Econometric Society, vol. 60(3), pages 651-66, May.
  9. Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 85-107, Spring.
  10. Deepak Agrawal, 1996. "Effect of Brand Loyalty on Advertising and Trade Promotions: A Game Theoretic Analysis with Empirical Evidence," Marketing Science, INFORMS, vol. 15(1), pages 86-108.
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Cited by:
  1. Mathur, Sameer & Sinitsyn, Maxim, 2013. "Price promotions in emerging markets," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 404-416.
  2. Allender, William J. & Richards, Timothy J., 2009. "Measures of Brand Loyalty," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49536, Agricultural and Applied Economics Association.
  3. Empen, Janine & Loy, Jens-Peter & Weiss, Christoph R., 2011. "Price Promotions and Brand Loyalty: Empirical Evidence for the German Breakfast Cereals Market," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114341, European Association of Agricultural Economists.

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