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Effect of sales on brand loyalty

  • 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)

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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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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  1. Joseph Farrell & Carl Shapiro, 1988. "Dynamic Competition with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 123-137, Spring.
  2. 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.
  3. Beggs, Alan W & Klemperer, Paul, 1992. "Multi-period Competition with Switching Costs," Econometrica, Econometric Society, vol. 60(3), pages 651-66, May.
  4. Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 493-510, October.
  5. 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.
  6. Richard G. Frank & David S. Salkever, 1995. "Generic Entry and the Pricing of Pharmaceuticals," NBER Working Papers 5306, National Bureau of Economic Research, Inc.
  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. 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.
  9. Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-49, October.
  10. Rajiv Lal, 1990. "Price Promotions: Limiting Competitive Encroachment," Marketing Science, INFORMS, vol. 9(3), pages 247-262.
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