Measures of Brand Loyalty

Though brand loyalty has been studied extensively in the marketing literature, the re-lationship between brand loyalty and equilibrium pricing strategies is not well understood. Designing sales pricing strategies involves two key decisions: the percentage reduction in price from the existing price point, and the number or frequency of promotions within a category or for a speci\u85c product. 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 size and strength of brand loyalty inuence optimal promotion strategies have been developed, but there are no rigorous tests of their hypotheses. We test how brand loyalty impacts promotion strategies for a frequently purchased consumer package good category. Our results largely con\u85rm that retailers often promote many brands simultaneously and that depth and breadth can be complementary