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Do Shoppers Choose The Same Brand On The Next Trip When Facing The Same Context? An Empirical Investigation In Fmcg Retailing
Sep 16, 2023 | Aaron Borges
In the ever-evolving world of FMCG retailing, understanding the dynamics of brand loyalty among shoppers is of utmost importance. Brands strive to create a strong bond with their customers, and in order to achieve this, it is crucial to delve deep into the behavior of shoppers in similar contexts. By examining the factors that influence repurchase decisions, retailers can discover valuable insights that can guide them in their efforts to foster brand loyalty. In the fast-paced and highly competitive world of FMCG retailing, brand loyalty remains a pivotal factor for success. The retail landscape is constantly evolving, with new products entering the market and consumer preferences changing rapidly. For retailers and brands alike, understanding the intricacies of brand loyalty becomes paramount to staying ahead in the game. Consumer behavior is influenced by a myriad of factors, both internal and external. Within the realm of FMCG retailing, consumers often face a vast array of choices when it comes to everyday goods such as food, beverages, personal care items, and household products. In such a dynamic environment, creating a strong bond with consumers becomes a challenging yet essential task for brands.
While the research discussed earlier delves into the repurchase behavior of shoppers in similar and different contexts, it only scratches the surface of the broader landscape of brand loyalty. The complexity of consumer decision-making requires a more comprehensive exploration of the many facets that contribute to loyalty.
Overview of FMCG Retailing
FMCG, or fast-moving consumer goods, refers to products that are consumed daily and have a short shelf life. These goods play a pivotal role in the retail industry due to their high demand and frequency of purchase. Key features of FMCG retailing include quick turnover, low-profit margins, and a strong emphasis on branding and marketing strategies to capture the attention of consumers.
Understanding Brand Loyalty
Brand loyalty refers to the tendency of consumers to consistently choose a particular brand over its competitors. In the realm of FMCG retailing, this loyalty holds great significance as it directly influences repurchase behavior. Various factors come into play when it comes to brand loyalty, including the perceived quality of a product, price sensitivity, brand reputation, and the effectiveness of advertising and promotions.
Quality Perception
One of the key drivers of brand loyalty in FMCG retailing is the perception of product quality. Consumers are more likely to repurchase a brand if they have a positive experience with the product in terms of its effectiveness, durability, and overall satisfaction.
Price Sensitivity
Price sensitivity also plays a significant role in shaping brand loyalty. Consumers often evaluate the relationship between price and perceived value, and if a brand consistently offers products at a reasonable price, it can cultivate a loyal customer base.
Brand Reputation
The reputation of a brand is a crucial factor that influences consumer loyalty. Brands that have built a strong reputation for delivering high-quality products and exceptional customer service are more likely to retain customers and encourage repurchase.
Advertising and Promotions
Effective advertising and promotional strategies can greatly impact brand loyalty. Brands that invest in innovative marketing campaigns and compelling promotions can capture the attention of consumers and generate loyalty by positioning themselves as the preferred choice in the market.
Research Methodology
To gain insights into the repurchase behavior of shoppers in similar contexts, an empirical investigation was conducted. The research methodology employed a combination of in-store observations and shopper surveys.
Sample Selection and Data Collection
A representative sample of shoppers was selected to ensure the validity and generalizability of the findings. Data was collected through in-store observations, where researchers observed and recorded shoppers' brand choices and behaviors. Additionally, shopper surveys were conducted to gather qualitative and quantitative data on factors influencing repurchase decisions.
Analysis of Findings
The analysis of the empirical investigation offers valuable insights into shoppers' repurchase behavior in both the same and different contexts.
A. Repurchase Behavior in the Same Context
The percentage of shoppers who repurchase the same brand in a similar context is a crucial metric to evaluate brand loyalty. Factors influencing repurchase decisions include:
Perceived Product Satisfaction: Shoppers tend to stick with a brand if they have had a positive experience with the product in the past. Satisfaction in terms of quality, effectiveness, and overall performance greatly influences repurchase behavior.
Product Availability: The availability of a particular brand significantly impacts whether shoppers will choose to repurchase it. If a brand consistently ensures easy access to its products, it can reinforce loyalty among its customer base.
Price Changes: Changes in pricing can sway repurchase decisions. Shoppers are more likely to repurchase a brand if they perceive it to offer a good value for their money, even in the face of price fluctuations.
B. Repurchase Behavior in Different Contexts
The percentage of shoppers who switch brands in different contexts sheds light on the factors influencing brand switching. These factors can include:
Changes in Product Needs: If a shopper's needs or preferences change, they may opt for a different brand that better aligns with their new requirements.
Competitor Promotions: Promotions and special offers by competing brands can tempt shoppers to try out different options, especially if they perceive greater value or benefit.
Personal Preferences: Individual preferences play a significant role in brand switching. Some shoppers may simply have a desire for variety or are influenced by external factors such as recommendations.
C. Comparison of Repurchase Behavior
By contrasting repurchase behavior in the same and different contexts, a comprehensive analysis can be made. Demographic factors may also emerge as influencers of brand loyalty, including age, gender, and socioeconomic background.
Empirical Analysis
This research aims to investigate the factors that influence repurchasing behavior among consumers in the FMCG retailing sector, specifically focusing on the context of car brand loyalty. Prior studies have shown conflicting results regarding the impact of age and household size on store and private-label loyalty. Hence, in this study, the researchers have no specific expectations regarding the effects of age and household size on repurchasing.
The researchers also control for other variables, such as social class and category purchase frequency of the household. Additionally, they account for inertia by examining whether the first brand chosen in a purchase pair has been purchased previously by the shopper. Past brand purchasing has been found to be a strong predictor of future buying behavior.
To analyze the data, the researchers used binary fixed effects models and transformed the original datasets into datasets of purchase pairs. Each observation in the dataset contains two consecutive purchases by a panelist in the same category. The model estimates the log odds of repurchasing the same brand on two consecutive occasions.
The independent variables in the model include retailer stability, basket size stability, day stability, promotion choices, assortment size ratio, inter-purchase time, market share, unit price, private label purchase, purchase volume, age, household size, social class, category purchase frequency, and brand inertia.
The results indicate positive correlations between repurchasing and inertia, suggesting that past brand purchasing strongly influences future repurchase behavior. Additionally, repurchasing is higher among consumers who visit the same retailer, maintain stable basket sizes, and shop on the same day of the week on consecutive occasions. Promotions and assortment size also impact repurchasing, with consumers more likely to repurchase when they consistently choose promotions or when the assortment size remains stable.
Overall, this research provides valuable insights into the factors that influence brand loyalty in the context of car purchases in the FMCG retailing sector. The findings highlight the significance of brand inertia and contextual factors in shaping repurchase behavior, and they contribute to the broader understanding of consumer decision-making and brand loyalty in retailing. However, further research may be needed to explore additional variables and their interactions to gain a more comprehensive understanding of brand loyalty in this dynamic industry.
D. Effects of assortment index on log odds of repurchasing
The excerpt discusses the effects of the assortment index on the log odds of repurchasing and its significance for manufacturers and retailers in the FMCG retailing sector.
The assortment index is a measure used to compare the variety of products available between different retailers. The study suggests that repurchasing behavior can be influenced by the assortment index, meaning that the variety of products offered by a retailer can impact whether consumers choose to repurchase the same brand.
Manufacturers can use repurchasing rates as a performance monitoring tool. By benchmarking repurchasing rates across different contexts, they can demonstrate their market orientation and performance to their retail partners. This objective foundation allows them to show the value of their joint proposition, supporting a collaborative relationship and enhancing channel member satisfaction.
The Table in the study shows repurchasing levels for a specific brand in each country and benchmarks the repurchasing rates for a leading retail banner. For example, a trade marketing manager for a brand like Melitta may want to investigate why repurchasing for their brand suffers when consumers revisit a specific retailer (e.g., Edeka) as opposed to choosing a different retailer. This investigation can help identify potential issues such as assortment gaps, suboptimal shelf placement, or the effectiveness of competitive brands' promotional strategies.
Both manufacturers and retailers would benefit from stimulating visits to the same retailer on the next category purchase occasion. However, existing attempts to encourage loyalty often fall short of this objective. Retailers may offer incentives like rebates based on shopper expenses during visits, but they rarely restrict these incentives to specific categories or brands. On the other hand, manufacturers may reward brand re-buying with coupons but have little incentive to link these offers to revisiting the same retailer.
To address this challenge, the study suggests that suitable promotional schemes would require joint efforts between brand manufacturers and retailers. Such schemes could leverage unique packaging coupons or other collaborative initiatives to encourage repurchasing and revisiting the same retailer.
In summary, the assortment index can impact repurchasing behavior, and manufacturers and retailers can use repurchasing rates as a performance metric to strengthen their collaborative relationships and improve customer loyalty. By working together to create effective promotional schemes and addressing potential issues, both parties can enhance their performance in the competitive FMCG retailing market
Implications for FMCG Retailers
The findings of this empirical investigation hold several implications for FMCG retailers who aim to
foster brand loyalty among their customers.
Strategies to Foster Brand Loyalty
Retailers can enhance brand loyalty by implementing various strategies, including:
Enhancing Product Quality and Reliability: Continuously improving the quality and reliability of products is key to retaining customer trust and loyalty.
Implementing Loyalty Programs and Rewards: Offering loyalty programs and rewards can incentivize customers to choose a particular brand consistently.
Effective Advertising and Brand Positioning: Investing in well-crafted advertising campaigns and strategic brand positioning can increase brand awareness and loyalty among consumers.
Limitations of the Study
Limitations and directions for further research mentioned in the study:
1. Limited Sales Indicator: While repurchasing is a strong indicator of sales in many cases, it is neither necessary nor sufficient for high sales. A brand can achieve high market share without consumers exhibiting repurchasing behavior. Further research could explore additional factors that contribute to sales and market share beyond repurchasing.
2. Data Availability: Data availability can be a limitation in some industries where detailed purchase data is not readily accessible. Researchers in other contexts may need to develop innovative approaches to study repurchasing behavior.
3. Multibrand Loyalty: The study does not address the issue of multibrand loyalty, which is behavior that involves choosing multiple brands. Future research could disentangle multi-brand loyalty from brand switching and explore its impact on repurchasing behavior.
4. Additional Contextual Measures: While the study incorporates various contextual cues, future research could include additional measures, such as attribute-based assortment variety, to better account for the composition of retailers' assortments and their influence on repurchasing.
5. Context Stability: Distinguishing between returning to the same banner (brand) and returning to the same outlet of that banner may provide insights into the importance of context stability in repurchasing behavior.
6. Mix of Behavioral and Attitudinal Data: Combining behavioral data with attitudinal consumer data could provide a more comprehensive understanding of repurchasing behavior and its underlying motivations.
7. Factors Driving Brand Growth: Investigating factors that foster a brand's ability to become the focus of switching behavior could enhance our understanding of brand growth beyond repurchasing.
8. Repurchasing as a Loyalty Measure: Most research on retailer loyalty focuses on a shopper's share of wallet going to a specific retailer. Incorporating a repurchasing angle and studying the probability of returning to the same retailer while considering contextual factors may help retailers better understand important drivers of loyalty.
In conclusion, while the current study provides valuable insights into brand repurchasing behavior in FMCG retailing, there are several avenues for further research to deepen our understanding of brand loyalty, sales drivers, and the impact of contextual factors on consumer decision-making. Addressing these limitations can lead to more comprehensive and actionable insights for retailers and brands seeking to foster brand loyalty in a dynamic and competitive market.
While the empirical investigation provides valuable insights, it is essential to acknowledge the limitations of the study.
Sample Size and Generalizability of Findings: The study's sample size may limit the generalizability of the findings to a broader population. Further research with a larger and more diverse sample could provide a more comprehensive understanding of shopper behavior.
Influence of External Factors on Repurchase Behavior: The study focused primarily on internal factors influencing repurchase behavior, but external factors such as market trends, socio-economic changes, and cultural shifts may also play a significant role.
Future Research Directions
To further deepen our understanding of brand loyalty in FMCG retailing, future research directions can explore:
The Impact of Social Media on Brand Loyalty: Investigating the role of social media platforms in shaping brand loyalty can provide insights into the influence of online interactions and recommendations on consumers' repurchase behavior.
The Role of Packaging in Repurchase Decisions: Assessing the impact of packaging design and aesthetics on brand loyalty can help retailers understand the importance of visual appeal in attracting and retaining customers.
Conclusion
In conclusion, understanding the dynamics of shoppers' repurchase behavior in similar contexts is critical for FMCG retailers. By exploring the factors that influence brand loyalty and analyzing repurchase decisions, retailers can implement effective strategies to foster loyalty, such as enhancing product quality, implementing loyalty programs, and effective advertising. However, it is important to acknowledge the study's limitations and consider further research directions to gain a comprehensive understanding of brand loyalty in FMCG retailing.
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