What does it take to destroy behavioral loyalty? : research on the effects of price, convenience and CSR orientation on behavioral loyalty

WHAT DOES IT TAKE TO DESTROY

BEHAVIORAL LOYALTY?

RESEARCH ON THE EFFECTS OF PRICE, CONVENIENCE AND CSR

ORIENTATION ON BEHAVIORAL LOYALTY

Name Tessa Emilie Versteeg

Student number 10352619

Program MSc Business Administration

Track Marketing

Institution University of Amsterdam – Faculty of Economics and Business

First supervisor Drs. J. (Jorge) Labadie

Second supervisor Drs. R.E.W. (Roger) Pruppers

S T A T E M E N T O F O R I G I N A L I T Y

This document is written by student Tessa Emilie Versteeg who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

P R E F A C E

In front of you is my thesis ‘What does it take to destroy behavioral loyalty’? This thesis was written in the context of my graduation for the Master in Business Administration at the University of Amsterdam. From September to March, I have been occupied with the research and writing my thesis. Applying much of what I have learned during my Master’s programme, I consider it the crowning achievement of my study.

Hereby I would like to thank Drs. Labadie and Drs. Pruppers for the intensive guidance and support during this process. They have a great understanding of the subject and have introduced some interesting ideas. Moreover, they have learned me to be self-critical and make my own choices. With a background in history, conducting a quantitative research has definitely provided some bumps on the road to success. However, for that very reason, I have discovered the process to be extremely instructive both personally and professionally. I also want to thank all the respondents, without whom this research could not have been conducted, and everyone else who has helped me at some point in this process. Finally, I want to thank my family and friends for their wise counsel and sweet words at times when I had lost faith for a moment.

During this thesis process, both of my grandmothers have passed away and therefore I would like to dedicate this thesis to them, because I know how proud they would have been. I wish you happy reading.

T A B L E O F C O N T E N T S

1. Introduction ... 1

1.1 Corporate Social Responsibility in a brand loyalty context ... 1

1.1.1 Corporate Social Responsibility and Brand Loyalty ... 2

1.1.2 The power of CSR brand loyalty ... 4

1.2 Problem definition ... 4

1.2.1 Problem statement ... 4

1.2.2 Subquestions ... 5

1.2.3 Delimitations of the study ... 5

1.3 Contributions ... 5

1.3.1 Theoretical contributions ... 5

1.3.2 Managerial contributions ... 6

1.4 Structure ... 6

2. Corporate Social Responsibility ... 7

2.1 Defining Corporate Social Responsibility ... 7

2.2 CSR activities ... 9

2.2.1 Pyramid of CSR ... 10

2.2.2 CSR in the food industry ... 11

2.3 CSR and consumer behavior ... 13

2.3.1 Consumer purchase motivations ... 14

2.3.2 Behavioral outcomes of CSR initiatives ... 15

3. Brand Loyalty ... 17

3.1 Defining brand loyalty ... 17

3.1.1 Customer-Based Brand Equity model ... 17

3.1.2 Levels of brand resonance ... 19

3.2 Benefits of brand loyalty ... 21

3.3 Behavioral brand loyalty ... 22

3.3.1 Price and behavioral loyalty ... 23

3.3.2 Convenience and behavioral loyalty ... 24

4. Hypotheses ... 26

4.1 Basic brand credentials and loyalty ... 26

4.3 CSR orientation consumers ... 30

5. Method ... 33

5.5.1 Exploratory factor analysis ... 41

5.5.2 Reliability analysis ... 41

5.5.3 Manipulation check ... 42

6. Results ... 45

6.1 Correlations ... 45

6.2 Hypotheses testing ... 46

6.2.1 Brand characteristics and behavioral loyalty... 46

6.2.2 Interaction effects of brand CSR orientation ... 48

6.2.3 Interaction effects of consumer CSR orientation ... 49

7. Discussion ... 52

7.1 Summary of findings ... 52

7.1.1 Relationship between brand characteristics and loyalty ... 52

7.1.2 The moderating effect of brand CSR orientation... 54

7.1.3 The moderating effect of consumer CSR orientation ... 55

7.2 Theoretical implications ... 57

7.3 Managerial implications ... 59

7.4 Limitations and future research directions ... 62

7.5 Conclusion ... 63

References ... 65

Appendices ... 71

Appendix I: Consumer CSR orientation construct ... 71

Appendix II: Behavioral loyalty construct... 72

Appendix IV: Questionnaire ... 75 Appendix V: Factor loadings consumer CSR orientation construct ... 79 Appendix VI: Factor loadings behavioral loyalty construct ... 80

A B S T R A C T

Introduction. Previous research has demonstrated that corporate social responsibility (CSR)

leads to positive consumer responses. However, these positive attitudes might still not translate into behavior. The aim of this research is to gain deeper insights into the relationship between basic brand characteristics, CSR and behavioral loyalty towards brands.

Method. Preceded by a pre-test, an online survey was conducted among Dutch consumers.

Respondents were exposed to one of eight experimental conditions, resulting in a total of 289 completed surveys. Univariate analysis of variance was performed to analyze the data.

Findings. Results show main effects of price, convenience, and brand CSR orientation on

behavioral loyalty. The research also found an interaction effect of brand CSR orientation on the relationship between price and behavioral loyalty. Consumer CSR orientation was found to moderate the effect of brand CSR orientation on behavioral loyalty.

Conclusion. The research emphasized the importance of CSR in terms of consumer loyalty.

The findings have contributed to the existing theory on both CSR and brand loyalty, and provide some relevant implications for managers, as well as some interesting suggestions for further research.

Keywords: Corporate social responsibility, price, convenience, brand characteristics,

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1 . I N T R O DU C T I O N

1.1 CORPORATE SOCIAL RESPONSIBILITY IN A BRAND LOYALTY CONTEXT

In today’s world, Corporate Social Responsibility (CSR) is a hot topic. It is everywhere around us, entering our lives in many different ways. Companies increasingly engage in CSR activities, but consumers also face more pressure to buy more consciously. Today’s society expects us to care more and more about the future environment, health and well-being of humankind. As a result of these increasing concerns about the expiration date of our world, corporations have faced increasing CSR expectations from their societal environment (Balmer & Greysner, 2006). Consumers demand of companies to contribute to the sustainability of this world by ‘managing their firm in such a way that its activities meet the needs of the present, without compromising the ability of future generations to meet their needs’ (‘Our Common Future’ report of the World Commission on Environment and Development, 1987, p. 41).

CSR is the way leading companies do business nowadays, not only because it is clearly the right thing to do, but also because it is accompanied with long-term benefits, such as enhancing brand image and reputation. CSR to various stakeholders (customers, shareholders, employees, suppliers, and community) has a positive effect on global brand equity (Torres, 2012). However, as Nigel Hollis puts it in a blog post (MillwardBrown, 2010), some companies try to use CSR as something to hide behind, while others sincerely are committed to making a difference. This same distinction also applies to consumers. Whilst some consumers buy products to hide behind the image of doing good, others are sincere in their intentions to buy CSR products, thereby contributing to the benefits of the environment or society. As a result of the increasing importance of CSR, companies need to implement different CSR activities. Not performing CSR activities, when competitors do, can damage a company’s reputation. On the other hand, knowing of a company engaging in CSR activities causes consumers to develop a more positive attitude towards a brand or company, which increases the value of a brand (Becker-Olsen et al., 2006). However, a

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positive attitude towards a brand might still not translate into behavior. Hollis (MillwardBrown, 2010) illustrates this as follows:

“Until recently I had no clue just how many charities are supported by Hershey’s, or even that Milton Hershey School for children in social and financial need is the company’s largest stakeholder and beneficiary. That knowledge does, however, make me think more positively about choosing a Hershey’s product next time I fancy some chocolate. […] As an ex-Brit addicted to Cadbury Dairy Milk chocolate from childhood, I am not that keen on the taste of Hershey’s products. And therein lies the other confounding factor. CSR cannot trump basic brand credentials. A brand must meet your needs of the category before it can successfully appeal to any higher order values.”

Research has demonstrated that effectively communicating CSR activities to consumers can enhance the value of the brand. Moreover, CSR efforts increasingly provide competitive advantage in an evolving business environment. As a result, consumers are paying more attention to the consequences of using a specific product and whether companies perform activities that are good for society (Sen & Bhattacharya, 2001). This shows that CSR activities can be a brand asset. However, it does not tell us whether consumers will increasingly use CSR activities as a means to choose between companies. It could also be that getting the best product at the best price will always trump good intentions. Consumers constantly make trade-offs between brand loyalty and category or CSR loyalty. Therefore, it seems interesting to test the power of consumer loyalty to a brand in terms of a brand’s CSR efforts.

1.1.1 CORPORATE SOCIAL RESPONSIBILITY AND BRAND LOYALTY

In recent years more attention is being paid to CSR and sustainability. These ideas have converged to convey a unified sense that a company’s long term success is inextricably tied to its stewardship of not just its own well-being, but also that of the natural and social environment in which it operates (Hildebrand et al., 2011). Moreover, we see the terms “brand” and “sustainability” mentioned together more often today than ever before. Since brands usually function as the connection between business and people, their role has evolved beyond marketing to also represent corporate social responsibility (CSR) efforts.

3 Corporate social responsibility efforts increasingly provide competitive advantage in an evolving business environment. As a result, consumers are paying more and more attention to the consequences of using a specific product and whether companies perform activities that are good for society (Sen & Bhattacharya, 2001). When effectively communicated to the consumer, CSR activities can enhance the value of the brand.

The existing literature on CSR in marketing has shown that CSR can determine which brand consumers prefer and will choose, over and above economic or rational considerations such as product attributes. Additionally, CSR has a spillover or halo effect on otherwise unrelated consumer judgments, such as the evaluation of new products. Attributions that are influenced by CSR mediate the impact of product-harm crises on consumers’ brand evaluations. These mediation effects are only found for consumers that are CSR-sensitive (Klein & Dawar, 2004). The study of Klein & Dawar (2004) contributes to a better understanding of the role of CSR in consumer behavior. They suggest that CSR effects on attributions and brand evaluations provide a promising avenue for further exploration. In particular, experimental research on consumers’ contingent use of CSR information can build on the moderation effects reported here to help define conditions under which CSR will or will not affect consumer behavior in non-routine settings.

In today’s world, CSR is everything and everything is CSR. Due to increasing stakeholder pressure, companies fulfill their corporate social responsibility, but to what extent do they sincerely care about the cause? The same applies to consumers, who claim to purchase from social responsible brands because it is the right thing to do, while they might as well only do this to enhance their image and the way people look at them. At this moment, it is difficult to say whether consumers care more about a brand’s CSR cause or about basic brand characteristics, such as price and quality. Nigel Hollis (MillwardBrown, 2010) illustrates this with the questions ‘Do you want to buy from a company that puts its money where its mouth is and sells a good product, made and marketed in a socially responsible way? Or do you just want to get the cheapest price and to hell with the rest?’ This thesis will discuss what the power of loyalty to a CSR brand is when a trade-off should be made between price, quality and convenience of purchasing the CSR product. It will therefore help define conditions under which CSR will or will not affect consumer behavior.

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1.1.2 THE POWER OF CSR BRAND LOYALTY

The existing literature has paid little attention to the extent to which consumers remain loyal to a brand when other product attributes, such as price, quality and the convenience of purchasing the product, change. Marketing practitioners should know how much consumers are willing to give up with regard to price, quality and convenience in order to remain loyal to a CSR brand or product. It is not only important for a company to consider their own positioning strategy, but also to observe competitors’ strategic choices and the degree to which they differ in product attributes. In the existing literature attention has already been paid to the damage that can be done to the brand resonance of customers when a company engages in behaviors that tarnish the values and attributes of the brand (Werther & Chandler, 2005). However, there has been little focus on the strength of brand resonance when a company is socially responsible. This research will therefore focus on specific conditions where consumers’ loyalty to a CSR brand does not hold.

1.2 PROBLEM DEFINITION 1.2.1 PROBLEM STATEMENT

Previous studies extensively discussed the topics of Corporate Social Responsibility and its effects on brands. Some of them focused on the positive effects of CSR activities on brand image and brand performance. Others paid attention to the negative effects for brands when not engaging in CSR activities. Loyal consumers are important for brands, so it will be interesting to find out how whether consumers are loyal to a brand or to a cause. This results in making a distinction between loyal CSR consumers that do not really care about a brand and consumer who are willing to give up on CSR engagement in order to buy a specific brand. Little research has been done on the extent to which consumers remain loyal to a CSR brand when price and convenience, with respect to competitors’ strategies, are changing. Therefore, the research question of this paper is:

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1.2.2 SUBQUESTIONS

The research aims to investigate how different brand characteristics can contribute to behavioral loyalty and is therefore divided in different subquestions. Questions that will be covered include: ‘Do price, convenience and brand CSR orientation have an effect on behavioral loyalty?’ And, if so: ‘Is this effect influenced by the level of consumer CSR orientation? The research will also investigate the main effect of consumer CSR orientation on behavioral loyalty. These questions will be answered in order to discuss the overall research question.

1.2.3 DELIMITATIONS OF THE STUDY

CSR is everywhere in the business environment these days, which makes it easy for consumers to engage in CSR activities and contribute to the benefits of the environment or society. Therefore, this study examines the power of CSR brand loyalty from a consumer perspective, thereby excluding factors that influence CSR activities from a brand perspective. Another delimitation of the research is that it examines the behavioral loyalty for a specific industry in order to provide relevant managerial contributions. It has been decided to investigate the supermarket industry, as most consumers regularly visit a supermarket and because CSR is reflected in various aspects of the supermarket industry. 1.3 CONTRIBUTIONS

1.3.1 THEORETICAL CONTRIBUTIONS

CSR in relation to brand loyalty is an underexposed concept in the marketing literature, yet so important to address. This research adds to our understanding of brand loyalty and its determinants by examining CSR and its moderating effect on behavioral loyalty. It helps to gain insight in the moderating effect of CSR orientation in the relationship between price, convenience and behavioral brand loyalty. The aim of this study is to gain knowledge about and a deeper understanding of how brand loyalty of consumers is related to a brand’s CSR activities. In other words, this research will discuss the power of loyalty and examines whether consumers are loyal either to a brand or to a cause with regard to CSR activities. The study also anticipates to a suggestion for further research proposed by Green and

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Peloza (2011) by examining how consumers prioritize different forms of CSR and their associated value when choosing between products.

1.3.2 MANAGERIAL CONTRIBUTIONS

This research examines to what extent consumers remain loyal to a brand when price, convenience and brand CSR orientation change. From a managerial perspective, it is of great interest to know till what price increase or convenience decrease consumers will stick to the brand. This could prove to be useful when considering marketing strategies as to determining the price of the products sold, as well as the location where the brand should be located. While some consumers are willing to pay more for a CSR brand, other consumers might find it too much trouble to buy their products somewhere special in order to contribute to society. Green and Peloza (2011) state that ’positioning the product solely on its CSR attributes may in fact have unintended consequences’. Therefore, it is highly relevant for managers to know whether consumers will remain loyal to the brand, even when the price of a highly CSR-oriented brand is significantly higher (or the convenience significantly lower) than the price of the low CSR-oriented alternative.

1.4 STRUCTURE

This research consists of different paragraphs, each aiming at giving an answer to the research question. In the first section, the study elaborates on the concepts of CSR (1) and brand loyalty (2) by reviewing the existing literature on these specific subjects. This part gives an overview of the general theories of and relationships between CSR and brands. The second part of the research develops the research framework hypotheses and pays attention to different variables that could influence the power of CSR brand loyalty. The methodology section describes the measures, sample, and structure of both qualitative and quantitative data. The following section presents the statistical results of the experiment. Finally, the last section discusses the results and proposes both theoretical and managerial implications as well as the limitations of the research and direction for future research.

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2 . C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y

This section reviews the existing literature about Corporate Social Responsibility (CSR). The first part addresses different definitions of CSR in order to paint a broader picture of the topic. The following subsection will pay attention to the existing literature about different CSR activities. In the last part, the relationship between CSR and consumer behavior will be set out, as this might influence the impact on brand loyalty.

2.1 DEFINING CORPORATE SOCIAL RESPONSIBILITY

In recent years more attention is being paid to Corporate Social Responsibility and sustainability. These ideas have converged to convey a unified sense that a company’s long term success is inextricably tied to its stewardship of not just its own well-being, but also that of the natural and social environment in which it operates (Hildebrand et al., 2011). The increasing importance of performing CSR activities for the consumer has also led to high attention of marketers (Hsu, 2012). Consequently, there has been a lot of research on this topic, leading to multiple definitions and a broad conceptualization by different researchers (Sen & Bhattacharya, 2001). In short, the existing literature has not agreed on a general accepted definition of CSR. However, most research and definitions about CSR use the manager or the company as a starting point and not the consumer itself.

Aguinis & Glavas (2012) defined CSR as ‘context-specific organizational actions and policies that take into account stakeholders’ expectations and the triple bottom line of economic, social and environmental performance’ (Aguinis & Glavas, 2012, p. 933). CSR can also be defined as ‘devoting unprecedented efforts and resources to creating and maximizing what Porter and Kramer (2011) in their Harvard Business Review article have called “shared value” (i.e. value for the company and for society) (Hildebrand et al., 2011, p. 1353-1354). Bronn and Vrioni (2001) distinguish multiple categories of corporate social responsibility, including the key definitions associated with corporate social responsibility in these categories. From the corporate philanthropy perspective, CSR is defined as ‘an activity above and beyond what is required of an organization and which can have a

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significant impact on the communities in which a company operates’ (Bronn & Vrioni, 2001, p. 210). The environmental CSR category suggests that ‘pro-social positioning of many firms is identified with their pro-environment policies that affect air and water. This increasing concern with environmental issues is explained through (1) the influence that consumers’ environmental concerns have on product offering, (2) the multidimensional character of these issues’ (Bronn & Vrioni, 2001, p. 210). McWilliams and Siegel (2001) state that the definition of CSR is not always clear, as a result of many conflicting goals and objectives. Yet, they define CSR as ‘actions that appear to further some social good, beyond the interests of the firm and that which is required by law’ (McWilliams and Siegel, 2001, p. 117). Just as many other definitions, this one underscores that CSR is more than just to obey the law (i.e. avoiding discrimination against minorities is not engaging is CSR activities).

CSR can relate to all aspects of a firm’s activity that produce social and environmental effects, such as employee work conditions, the quality of products and the characteristics of production processes. CSR can assume numerous meanings for different groups of consumers. This results in varied expectations of stakeholders about a company’s social responsibility, painting ‘a complex picture of multidimensional social responsibility factors, which are linked to economic, environmental and social issues’ (Popoli, 2011, p. 423). CSR expectations are increasing, in the sense that a firm assumes a proactive (versus defensive) approach towards environmental and social issues, and not limit itself to mere respect of laws and regulations (Popoli, 2011).

This research will use a definition of CSR as described by the International Organization for Standardization (ISO). They consider CSR ‘a balanced approach for organizations to address economic, social and environmental issues in a way that aims to benefit people, communities and society’ (Leonard & McAdam, 2003, p. 27). CSR actions should contribute to some social good, beyond the interests of the firm and legal requirements. However, CSR activities should not only be considered from a firm’s perspective, but also from stakeholders’ point of view. Firms can engage in numerous CSR activities to meet the increasing expectations of different stakeholders and their possible conflicting goals and objectives. This research will focus on the extent to which consumers

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behave in socially responsible ways. The following paragraph will discuss different kinds of CSR activities that can be performed.

2.2 CSR ACTIVITIES

The terms sustainability and brand are mentioned together more often today than ever before. Since brands usually function as the connection between business and people, their role has evolved beyond marketing to also represent corporate social responsibility (CSR) efforts. Corporate social responsibility efforts increasingly provide competitive advantage in an evolving business environment. As a result, consumers are paying more and more attention to the consequences of using a specific product and to whether companies perform activities that are good for society (Sen & Bhattacharya, 2001). When effectively communicated to the consumer, CSR activities can enhance the value of the brand. Consumers’ perceptions of CSR activities have a positive influence on their trust toward the company, directly and indirectly through the influence of perceived quality of the products offered and consumer satisfaction (Swaen & Chumpitaz, 2008). However, little attention has been paid to other items to measure this aspect of CSR activities.

Nowadays, corporate social responsibility is a hot topic, as a result of which companies increasingly engage in CSR activities to enhance their brand image and competitive position. In recent years, CSR has evolved from ‘just’ doing good for society to being part of firms’ strategic, marketing and branding policies and is increasingly used as a branding tool. As Bhattacharya and Sen (2004) put it, ‘the lure of greater consumer profits has contributed significantly in recent years to the strengthening of the business case for CSR activity, shifting the debate about CSR from “whether” to “how”’ (p. 10). Consequently, companies are facing increased pressure to operate in socially responsible ways (Mohr et al., 2001). CSR initiatives help a company to differentiate its product and service by creating a positive brand image and this safeguards the firm’s reputation. Performing CSR activities as a company can also create brand differentiation in the consumers mind (Hsu, 2012). Moreover, CSR can be used to enhance brand evaluation, brand image and brand trust (Klein & Dawar, 2004; Baghi, Rubaltelli, & Tedeschi, 2009; Swaen & Chumpitaz, 2008). The investment in CSR initiatives, combined with effective use of CSR by a brand

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manager, is viewed as a source of competitive advantage (Porter & Kramer, 2006). However, business leaders are struggling with the appropriate goals guiding the formulation and deployment of CSR initiatives that will reap the greatest benefits for their companies (Bhattacharya & Sen, 2004).

When CSR activities are used to differentiate products, it is important to distinguish between two types of product differentiation. First, vertical differentiation occurs when, other things being equal, most consumers prefer (1) a product with CSR characteristics to another product or (2) a product offered by socially responsible companies to another company. This type of differentiation can strengthen or maintain corporate reputation and allows socially responsible companies to charge price premium. Second, horizontal differentiation occurs when only some consumers prefer a product with CSR characteristics or offered by socially responsible companies to a product without such characteristics, but the preference is based on taste, rather than quality. This type of differentiation does not contribute to corporate reputation and does not allow the company to charge a premium price (Hsu, 2012; McWilliams et al., 2006). Horizontal differentiation fits well on the idea of Bhattacharya and Sen (2004) that managers should think about CSR initiatives from a consumer perspective, noting that ‘one size does not fit all’.

2.2.1 PYRAMID OF CSR

Archie Carroll (1991) developed a pyramid of corporate social responsibility, based on a four-part perspective of CSR that included the idea that the corporation has ethical and philanthropic responsibilities in addition to economic and legal obligations. These four kinds of social responsibilities together form Carroll’s pyramid of corporate social responsibility. From top to bottom, philanthropic (be a good corporate citizen), ethical (be ethical), legal (obey the law) and economic (be profitable) responsibilities are depicted in the pyramid. First, economic responsibilities demand firms to be as profitable as possible, maintain a strong competitive position and a high level of operating efficiency and be, and be consistently profitable. Second, legal responsibilities for firms include performing in a manner consistent with expectations of government and law, complying with various

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federal, state, and local regulations, being a law-abiding corporate citizen, fulfilling its legal obligations, and provide goods and services that at least meet minimal legal requirements. Third, the ethical components in the pyramid highlight the importance of performing in a manner consistent with expectations of societal mores and ethical norms, recognizing and respecting new or evolving ethical/moral norms adopted by society, preventing ethical norms from being compromised in order to achieve corporate goals, doing what is expected morally or ethically, and recognizing that corporate integrity and ethical behavior go beyond mere compliance with laws and regulations. Finally, philanthropic responsibilities demand firms to perform in a manner consistent with the philanthropic and charitable expectations of society, to assist the fine and performing arts, for managers and employees to participate in voluntary and charitable activities within their local communities, to provide assistance to private and public educational institutions, and to assist voluntarily those projects that enhance a community’s “quality of life” (Carroll, 1991). The total corporate social responsibility of business entails the simultaneous fulfillment of these responsibilities by a firm.

2.2.2 CSR IN THE FOOD INDUSTRY

McWilliams and Siegel (2001) suggest that CSR activities may include developing non-animal testing procedures, recycling, abating pollution, supporting local businesses, and embodying products with social attributes or characteristics. Sen & Bhattacharya (2001) divide CSR initiatives undertaken by companies into six broad domains: (1) community support, (2) diversity, (3) employee support, (4) environment, (5) non-U.S. operations, and (6) product. Community support includes support of arts and health programs, educational and housing initiatives for the economically disadvantaged and generous/innovative giving. Diversity concerns sex-, race-, family-, sexual orientation-, and disability-based diversity record and initiatives, or lack thereof, within and outside the firm. Employee support entails concern for safety, job security, profit sharing, union relations and employee involvement. The environmental domain includes developing environment-friendly products, hazardous-waste management, the use of ozone-depleting chemicals, animal testing, pollution control and recycling. The domain of non-U.S. operations deals with overseas labor practices and operations in countries with human right violations.

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Finally, the product domain considers product safety, research and development/innovation, marketing/contracting controversies and antitrust disputes.

Maloni & Brown (2006) specifically examined CSR in the food supply chain, as ‘CSR appears to be gaining importance in the food supply chain due to not only the nature of the product as animal/plant based consumables that are required for existence, but also the complex, labor intensive nature of food supply chains’ (p. 38). The authors develop a framework that details CSR applications in the food industry. This comprehensive framework consists of eight dimensions. The first dimension is animal welfare, including humane approaches to handling, housing, transport, and slaughter to prevent animals from unnecessary suffering. Other research found that animal welfare is increasing in significance with respect to meat consumption (Verbeke & Viaene, 2000), and that consumers perceive higher levels of animal welfare as an indicator of food safety and quality (Harper & Makatouni, 2002; Phan-Huy & Fawaz, 2003). The second dimension is biotechnology, representing the use of biological production processes applied to plants or animals. The third dimension is community, referring to activities that provide support for the local community, such as educational support, economic development, and employee volunteering.

The fourth dimension represents the environment, characterized by problems in the food industry with manure disposal, soil and water damage, deforestation, and packaging. ‘Subsequently, food industry retailers must not only be prepared to offer environmentally friendly products to consumers, but also demonstrate responsible environmental care practices in their supply chains’ (Maloni & Brown, 2006, p. 41). The fifth dimension is fair trade, including the premise that ‘food retailers should support prices to the suppliers that allow these suppliers to not only avoid poverty but also sustain business longevity’ (Maloni & Brown, 2006, p. 41). The sixth dimension represents health and safety challenges that have major supply chain implications, such as the mad cow disease. It is the food industry’s responsibility to identify these problems in the supply chain before products reach retail levels. The seventh dimension, labor and human rights issues, presents ‘international labor standards relative to key issues such as child and forced labor, health and safety, collective bargaining, grievances, discrimination, discipline,

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and compensation […]’ (Maloni & Brown, 2006, p. 43). The last dimension represents transgression and impropriety in the procurement process. This process faces many ethical issues, such as favoritism and preferential treatment, bribery, and obscure contract terms (Carter, 2000a, b; Maloni & Brown, 2006). The current research builds upon the CSR dimensions discussed by Maloni & Brown (2006). These are food industry-specific dimensions and therefore the most relevant for this research.

CSR activities can only influence consumer attitudes and purchase intentions if consumers are aware of these initiatives. Pomering and Dolnicar (2008) did research on consumers’ level of awareness of CSR activities, when facing real consumption decisions. They suggest that the effect of CSR initiatives on purchasing behavior is only of theoretical, not practical, relevance if consumer awareness is low. In sum, investing in and effective use of CSR by the brand manager can result in a competitive advantage for a firm. However, in order to gain competitive advantage, firms should be aware of consumers’ sincere motivations for purchasing CSR brands. Different consumers’ motivations may have a different effect on brand loyalty. In the following subsection, different consumer motivations will be discussed.

2.3 CSR AND CONSUMER BEHAVIOR

A growing body of research on Corporate Social Responsibility (CSR) in marketing has shown that CSR plays a role in consumers’ brand and product evaluations, over and above economic or rational considerations such as product attributes. Additionally, CSR has a spillover or halo effect on otherwise unrelated consumer judgments, such as the evaluation of new products. Attributions that are influenced by CSR mediate the impact of product-harm crises on consumers’ brand evaluations. These mediation effects are only found for consumers that are CSR-sensitive (Klein & Dawar, 2004). The study of Klein & Dawar (2004) contributes to a better understanding of the role of CSR in consumer behavior. They suggest that experimental research on consumers’ contingent use of CSR information can build on the moderation effects reported to help define conditions under which CSR will or will not affect consumer behavior in non-routine settings. Sen & Bhattacharya (2001) examined when, how, and for whom specific CSR initiatives work. Their findings implicate

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two key moderators of consumers’ responses to CSR. First, they consider company-specific factors, such as the CSR issues a company chooses to focus on. Second, they distinguish individual-specific factors, such as consumers’ personal support for the CSR issues and their general beliefs about CSR. Under certain conditions, they also found that CSR initiatives could decrease consumers’ intentions to buy a company’s products.

2.3.1 CONSUMER PURCHASE MOTIVATIONS

In a more recent research, Bhattacharya & Sen (2004) studied when, why and how consumers respond to corporate social initiatives. They found that perceived interdependencies between a premium price and CSR initiatives also affect consumers’ intentions to purchase the company’s products. There are numerous factors that determine whether a firm’s CSR activities translate into consumer purchases. For example, some consumers were found to be unwilling to trade-off CSR for product price, even if they view the CSR initiatives positively. ‘As one respondent noted: “I felt guilty about it, but I just couldn’t get myself to [pay more for the socially responsible product]”’ (Bhattacharya & Sen, 2004, p. 18). Mohr & Webb (2005) found that price significantly inversely affected purchase intent. The effect of price was slightly stronger when CSR was low than when CSR was high.

However, companies that engage in CSR-related activities seem to enjoy a segment of loyal customers. One of the respondents hinted at the idea that this consumer-company loyalty is a symbiotic relationship: ‘What brings me back to their stores is the feeling that every purchase from them is in a way a contribution to the improvement of life in places where their product comes from and, at the same time, a way to take care of myself. Even though their product is not unique, I am very loyal to them. If their prices went up relative to the similar product, I would still buy it, even if I had to cut down on the total amount’ (Bhattacharya & Sen, 2004, p. 19). Brown and Dacin (1997) show that CSR’s effect on consumers’ preference for a new product occurs through their overall evaluation of the company itself, rather than through the provision of information about the attributes of its products.

15 Just as firms, consumers have various reasons to contribute to CSR. A difference in motivations for purchasing specific CSR brands is likely to influence the power of brand loyalty. With regard to CSR brands, consumers might have biological reasons for purchasing CSR brands, meaning they buy products that are beneficial for their selves in the sense that these are naturally made products that do no harm to your body. Moreover, they could think of the environment when specifically buying from a CSR brand, which is beneficial to both themselves and their surroundings. Last, they could purchase fair-trade products with the intention of making farmers’ better off. Mohr et al. (2001) investigated the impact of CSR on consumers’ buying behavior. They concluded that most of the consumers are positive toward socially responsible companies, although they are also aware of companies’ selfish incentives to engage in CSR activities. Moreover, they found that most of their respondents do not regularly use CSR as a purchasing criterion. A small group of consumers feel CSR is important and they consider purchasing ‘not simply an activity undertaken for oneself or one’s family; instead, every purchase has implications for the larger society, both in terms of environmental impact and rewarding or punishing companies that are seen as more or less socially responsible’ (Mohr et al., 2001, p. 67). Additionally, previous research found that ‘consumers believe that CSR can be beneficial for their loyalty towards a brand when CSR strategies are transparent, when there is a fit between the brand and the supported social cause and when there is a personal fit of a CSR campaign’ (Popescu, 2012, p. 24).

2.3.2 BEHAVIORAL OUTCOMES OF CSR INITIATIVES

In order to understand consumer responses to CSR initiatives, firms should think about CSR activities from a consumer perspective, thereby considering not only external outcomes (purchase and loyalty), but also internal ones (consumers’ awareness, attitudes and attributions about firms’ motives for performing CSR activities. Also, companies should make a distinction between the mere impact of CSR initiatives on the brand and company and the additional outcomes regarding the partner organizations and the cause or social issue at the core of the company’s CSR activities. Positive CSR activities result in various consumer behavioral outcomes. For example, even consumers who acknowledged not using a company’s CSR activities as a determinant for purchase decisions per se, often

16 showed a willingness to talk positively about the socially responsible company (Bhattacharya & Sen, 2004). Moreover, ‘while most consumers […] appeared to be unwilling to pay a price premium for the products of a socially responsible company, certain consumers did acknowledge a willingness to pay more […]. [A] company’s CSR efforts are most likely to result in consumers’ willingness to pay a higher price when the additional money, or at least part of it, is clearly earmarked for CSR-specific activities’ (Bhattacharya & Sen, 2004, p. 20).

Whereas managers respond differently to the increased stakeholder interest in CSR, so do consumers. As a result of this divergence in response, it will be of great interest to know to what extent consumers are loyal to CSR brands when other product attributes change. Only then, an effective marketing strategy can be implemented and result in net profits and loyal consumers.

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3 . B R A N D L O Y A L T Y

This chapter reviews the existing literature about brand loyalty, in particular within the larger framework of brand equity and brand resonance in particular. The first subsections aim at defining the concept of brand loyalty. The following subsection will discuss the benefits of achieving brand loyalty. The last section will pay attention to behavioral brand loyalty in specific.

3.1 DEFINING BRAND LOYALTY

Brand loyalty has been an important topic in the marketing literature for the past decades. Despite the importance of brands and consumer perceptions of them, marketing researchers have had difficulty using a consistent definition or measurement technique to assess consumer perceptions of brands. Findings of Low & Lamb (2000) confirm the efficacy of the brand image protocol and indicate that brand associations differ across brands and product categories. These findings support the conclusion that brand associations for different products should be measured using different items. Dimensionality of brand associations was found to be influenced by brand familiarity. Consumers develop company brand associations rather than product item brand associations. Attention should be paid to the implications of this difference for brand association measurement.

3.1.1 CUSTOMER-BASED BRAND EQUITY MODEL

When reviewing the existing literature on brand loyalty, one model that definitely should be included is Keller’s (2001) Brand Equity model, or Customer-Based Brand Equity (CBBE) model. The main idea of this model is to shape consumers’ thoughts, feelings, images, beliefs, perceptions and opinions about a product in order to build a strong brand. For brands, one of the possible benefits that arises from building a strong brand with great equity is greater customer loyalty. Keller suggests that it takes four consecutive steps to build a strong brand. First, the proper brand identity should be established, by creating an

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increased sense of deep and broad brand awareness. This level is called brand identity or brand salience. Second, strong, favorable, and unique brand associations should be used to create the appropriate brand meaning. This is the brand meaning level, subdivided in brand performance and brand imagery. Third, brands should elicit positive, accessible brand responses. These brand responses can be subdivided in brand judgments and brand feelings. The final step is to convert brand response to create intense, active loyalty brand relationships with consumers. Brand relationships are mainly characterized by brand resonance. This process of brand building involves establishing six brand-building blocks, namely brand salience, brand performance, brand imagery, brand judgments, brand feelings, and brand resonance.

Within his Brand Equity model, Keller considers brand resonance the most valuable, and therefore most desirable, level to reach. This final step in brand building focuses on the relationship and level of personal identification the customer has with the brand. Brand resonance is at the top of the pyramid, meaning that it occurs when all the other five brand-building blocks are achieved (Keller, 2001). The brand resonance model considers how to build a strong brand that elicits much consumer loyalty (Keller, 2009). ‘Brand resonance is characterized in terms of intensity or depth of the psychological bond that customers have with the brand as well as the level of activity engendered by this loyalty’ (Keller, 2001, p. 15). The intensity dimension of brand resonance refers to the depth of the psychological bond that customers have with the brand (Keller, 2009). The activity dimension of brand resonance refers to the frequency of customer purchases and usage of the brand, as well as engaging in other activities not related to purchase and consumption (Keller, 2001). Keller (2001) states that, with true brand resonance, ‘customers express a high degree of loyalty to the brand such that they actively seek means to interact with the brand and share their experiences with others’ (p. 1). Achieving brand resonance means for consumers to have reached the ultimate relationship and level of identification with the brand. Brand resonance tells us something about the nature of the customer-brand relationship and the extent to which customers feel they are on the same line as the brand. In other words, brand resonance is the most ultimate form of brand loyalty. However, due to limited time, this research will only focus on the first level of brand resonance, behavioral loyalty.

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3.1.2 LEVELS OF BRAND RESONANCE

The first category within the brand resonance block considers behavioral loyalty. The main attributes of behavioral loyalty are repeat purchases and the amount or share of category volume attributed to the brand. In other words, this category deals with the frequency and monetary value of customers’ brand purchases. Behavioral brand loyalty is an important aspect of brand building, as it is the starting point for brand resonance to occur. (Keller, 2001). The second dimension of brand resonance is attitudinal attachment. A stronger and deeper personal attitudinal attachment is required to create greater loyalty and brand resonance. Developing marketing programs, products and services that fully satisfy consumer needs, can generate attitudinal attachment (Keller, 2009). ‘Customers should go beyond having a positive attitude to viewing the brand as being something special in a broader context’ (Keller, 2009, p. 53). Attitudinal attachment is achieved when customers choose for a brand because they “love” the brand, describe it as one of their favorite possessions, or view it as a “little pleasure” that they look forward to (Keller, 2009). In other words, the brand should not only be purchased because it is the only product readily accessible (Keller, 2001).

The third level of achieving brand resonance is for the brand to take on a broader meaning to the customer in terms of a sense of community. ‘Identification with a brand community may reflect an important social phenomenon whereby customers feel a kinship or affiliation with other people associated with the brand’ (Keller, 2009, p. 53). This brand community may involve fellow brand users or customers as well as employees or representatives of the company, and may occur both online and offline. ‘A stronger sense of community among loyal users can engender favorable brand attitudes and intentions’ (Keller, 2009, p. 53). The fourth and final dimension of brand resonance is active

engagement, perhaps the strongest affirmation of brand loyalty. Active engagement is

established ‘when customers are willing to invest, time, energy, money, or other resources into the brand beyond those expended during purchase or consumption of the brand’ (Keller, 2001, p. 15). Examples of active engagement are customers choosing to join a club centered on the brand, to follow the brand on social media and receive updates, and exchange correspondence with other brand users or formal or informal representatives of

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the brand itself. When this happens, ‘customers themselves become brand evangelists and ambassadors on behalf of the brand, communicate about the brand, and strengthen the brand ties of others’ (Keller, 2001, p. 16). However, strong attitudinal attachment or social identity or both are typically necessary for active engagement with the brand to occur. Only then strong brand resonance can be established.

In order to obtain higher levels of brand resonance, firms should define the proper role for the brand (Keller, 2001). It is impossible for consumers to experience an intense, active loyalty relationship with all the brands they purchase and consume (Keller, 2009). In other words, some product categories will be more meaningful, and consequently permit stronger brands, to consumers than others (Keller, 2001). For example, some brands will be more meaningful because of the nature of the associated product or service or the characteristics of the consumer. Creating a varied set of feelings and imagery associations may be difficult in those cases. Consequently, marketers might not be able to achieve the “deeper” aspects of brand resonance, such as active engagement. Nevertheless, by taking a broader view of brand resonance, they may be able to gain a more holistic appreciation for their brand and how it connects to consumers (Keller, 2009). Thus, defining the proper role for a brand is important to achieve higher levels of brand resonance. Summarized, the concept of brand resonance is the highest level to achieve in the brand equity pyramid in order to build a strong brand. However, brand resonance in its own right does also have a hierarchy of four different categories with a clear ordering. ‘Behavioral loyalty is a starting point, but attitudinal attachment or a sense of community is almost always needed for active engagement to occur’ (Keller, 2001, p. 24).

The CBBE model is one of the most relevant models of brand equity. It was designed to be comprehensive, cohesive, well-grounded, up-to-date, and actionable. The CBBE model subsumes dimensions, concepts and measures from various other models and ideas on brand equity. However, Keller’s CBBE model provides much additional substance and insight to previous concepts and models. His most useful contribution for this research is ‘the importance it places on brand resonance as the culmination of brand building and a more meaningful way to view brand loyalty’ (Keller, 2001, p. 25). The brand resonance model discusses how a brand should be positioned in order to build a strong brand that

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elicits much consumer loyalty (Keller, 2009). This research puts emphasis on the behavioral loyalty category, as it is most relevant for brands to know what they should and should not do in terms of price, convenience, and CSR activities to achieve repeat customer purchases. The first category forms the basis for further improving and extending relationships with customers. Keller (2009) contributes to the literature on behavioral brand loyalty in terms of possible measures of the different brand building blocks, including behavioral loyalty. These possible measures will be discussed in the section on behavioral brand loyalty.

3.2 BENEFITS OF BRAND LOYALTY

The ability to achieve brand loyalty is important and beneficial for firms in numerous ways. Gordon et al. (1993) found that ‘changes for one individual product may affect perceptions of all products and cause a distributor to switch suppliers in all categories after a poor experience with an individual good’ (in: Kuhn et al. 2008, p. 44). This stresses the importance of brand loyalty as it is, in some respects, firm loyalty (Gordon et al., 1993; Kuhn et al. 2008). Hutton (1997) found that some organizational buyers had developed such a strong relationship with the brand they were willing to extend to other products with the same brand name.

Brand resonance is the most difficult level to reach within Keller’s (2001) Brand Equity model, but it also offers the greatest benefits. First of all, when brands have strong brand equity, consumers will buy more and will also recommend the brand to their relatives. Moreover, customers will become loyal to your brand, which will strengthen your competitive position (Keller, 2001). Firms that are able to achieve brand resonance and affinity with their customers should benefit from, for example, a more efficient and effective marketing strategy and greater price premiums. Once true brand resonance is achieved, customers will show a high degree of loyalty, thereby actively interacting with the brand and others regarding the brand. The strength and the ultimate value of the brand are intrinsic to customers, as benefits can only be reaped through customers’ learning about and experiences with the brand. In other words, ‘although marketers must take responsibility to design and implement the most effective and efficient brand-building

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marketing programs possible, the success of those marketing efforts depends ultimately on how consumers respond. This response, in turn, depends on the brand knowledge that has been created in their minds’ (Keller, 2001, p. 17).

Chaudhuri & Holbrook (2001) suggested that ‘brand-loyal consumers may be willing to pay more for a brand because they perceive some unique value in the brand that no alternative can provide. This uniqueness may derive from greater trust in the reliability of a brand or from more favorable affect when customers use the brand’ (p. 81). Moreover, when the same brand is repeatedly purchased by loyal consumers, brand loyalty leads to greater market share. The authors distinguish two aspects of loyalty, which lead to different brand performance outcomes. Purchase loyalty leads to greater market share, whereas attitudinal loyalty leads to a higher relative price for the brand. In sum, greater consumer loyalty may lead to superior brand performance outcomes, such as greater market share and a premium price (Chaudhuri & Holbrook, 2001). Dick & Basu (1994) describe certain marketing advantages as a consequence of customer loyalty, such as resistance among loyal customers to counterpersuasion and positive word-of-mouth communication. Aaker (1991) suggests other marketing advantages, stating that brand loyalty leads to reduced marketing costs, more new customers, and greater trade leverage. 3.3 BEHAVIORAL BRAND LOYALTY

Many researchers have defined brand loyalty from a behavioral perspective (e.g. Ehrenberg et al., 1990; Kahn et al., 1986), with the main assumption that ‘repeat purchasing could capture the loyalty of a consumer towards the brand of interest’ (Bandyopadhyay & Martell, 2007, p. 36). Behavioral loyalty is the first dimension of brand resonance in terms of repeat purchases and the amount or share of category volume attributed to the brand. This level is focused on customers’ purchase frequencies and monetary value. For bottom-line profit results, the brand must generate sufficient purchase frequencies and volumes. Experts have estimated that the lifetime value of a behaviorally loyal customer can be enormous, and even twice as large as the lifetime value of non-loyal customers. Nevertheless, behavioral loyalty is necessary, but not sufficient for brand resonance to occur, as some customers may buy out of necessity, in terms of the brand being the only

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product being stocked or readily accessible, or the only one that customers can afford to buy (Keller, 2009).

Yim & Kannan (1999) study consumer behavioral loyalty as evidenced by two types of loyalty based on consumers’ brand switching behavior. The first type is hard-core loyalty, representing consumers who exclusively repeat purchase one product alternative. The second type is reinforcing loyalty, characterized by consumers who may switch among product alternatives, but predominantly repeat purchase one or more product alternatives to a significant extent. Additionally, Baloglu (2002) distinguished four loyalty levels based on the cross-classification of behavioral and attitudinal loyalty. For this research only the high behavioral loyalty levels are relevant. The level of true loyalty is characterized by both high behavioral loyalty and high attitudinal loyalty. These consumers are characterized by a high repeat patronage, as well as a strong attitudinal attachment towards a brand. The level of spurious loyalty is represented by consumers who show high behavioral loyalty, whilst having low attitudinal loyalty. These consumers make frequent purchases, even though they are not emotionally attached to a brand. The high repeat purchase levels of this group of spuriously loyal consumers ‘can be explained by factors such as habitual buying, financial incentives, convenience, and lack of alternatives, as well as factors relating to the individual customer’s situation’ (Baloglu, 2002, p. 49). These factors seem to be likely determinants in supermarket behavior and therefore relevant for this research.

3.3.1 PRICE AND BEHAVIORAL LOYALTY

Previous research has shown that incorporating reference prices and gain/loss variables in the models of brand choice is beneficial. In other words, consumers are sensitive to price in their brand choice (Han et al., 2002). Moreover, research has shown that price significantly inversely affects purchase intent (Mohr & Webb, 2005). When Dutch supermarket chain Albert Heijn suffered from an unfavorable and deteriorating price image in the early 2000s, more and more shoppers could no longer afford paying such high prices, despite their continued belief in the retailer’s quality and service. Consequently, Albert Heijn decided to cut its prices for thousands of products, resulting in a price war in the Dutch retailing industry. Both store visit probabilities and spending were affected by this price war among

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Dutch grocery retailers. Albert Heijn succeeded in improving its price image among consumers. Therefore, the price war has been good for Albert Heijn’s market share. However, this price resulted in bad consequences for their competitors, because they were also affected by smaller spending without having enjoyed an enhanced price image. Consequently, firms may go bankrupt, thereby reducing consumer choice. For example, the Dutch price war forced the Edah supermarket chain to go out of business (van Heerde et al., 2008). In sum, behavioral loyalty of consumers, in terms of purchase frequencies, seems to be largely dependent on price. The example of Albert Heijn shows that consumers are sensitive to price in their brand choice and, consequently, in their behavioral loyalty towards a brand.

3.3.2 CONVENIENCE AND BEHAVIORAL LOYALTY

There are several categories of loyal customers. Rowley (2005) distinguishes four loyalty categories and discusses the behaviors and attitudes that can be expected of customers in these different categories. This study will only focus on behavioral loyalty and therefore only the behaviors of the different categories will be discussed. The first loyalty category consists of captive customers, whose behavior is characterized by the continued purchase or use of a product or service because they have no choice. The second loyalty category are the convenience-seekers, customers who are often associated with routine and low involvement purchases. This group of customers is loyal to a brand in the sense that they engage in regular repeat purchase transactions associated with the brand. The third loyalty category are the contented customers, who evaluate products on their merits, but provides the brand owner with an opportunity to build the relationship through previous and existing engagement with the brand. The fourth loyalty category consists of the committed customers, who barely consider other brands and are willing to add value to the brand by participating in supportive customer-to-customer interaction, for example.

This research distinguishes convenience as one of the predictors for behavioral loyalty. Therefore, the focus in this study will be on the convenience-seeking customers. Convenience-seekers’ loyalty is driven by a range of convenience factors, such as convenience of access (location, opening hours). Convenience-seeking customers are

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susceptible to promotions from other brands, such as 2 for 1 offers. If a change occurs in either external circumstances, such as the opening of a new store, or personal circumstances, such as a move, the convenience offer has changed as well. Convenience driven loyalty may extend to both store and products brands. In other words, ‘supermarkets that are increasingly unable to differentiate themselves on other dimensions such as price, quality and product range, compete for convenience of store location. […] For most customers there is a range of frequently purchased products for which convenience is of prime concern, and thereby determines their buying habits and loyalty’ (Rowley, 2005, p. 578).

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4 . H Y P O T H E S E S

The aim of this research is to understand the different effects of price and purchase convenience on brand loyalty for high oriented supermarkets rather than low CSR-oriented supermarkets. The previous chapters have laid the theoretical base required to approach the research part of this paper by reviewing the existing literature about the concepts of CSR and brand loyalty.

In the second chapter, multiple definitions, meanings and implications of CSR have been discussed. Moreover, this chapter emphasized the growing number of companies that engage in CSR activities as a result of the increasing importance of CSR in various ways. Additionally, the second chapter provides insight into the different CSR activities a firm can perform and the benefits these activities could create for companies. At last, different consumer motivations for purchasing CSR brands have been examined.

The third chapter discusses the concept of brand loyalty, which is mainly defined by Keller’s Customer-Based Brand Equity model. Moreover, the benefits of brand loyalty are briefly examined, focusing on increasing net profits, strengthened competitive position and greater price premium. The existing literature will be extended by looking explicitly at the moderating effect of high CSR-oriented brands versus low CSR-oriented brands in the relationship between basic brand credentials and brand loyalty. In this chapter, resulting from the variables discussed in the previous chapters, the research hypotheses will be developed.

4.1 BASIC BRAND CREDENTIALS AND LOYALTY

In order to examine what it takes to destroy behavioral loyalty in terms of product price and purchase convenience, the main effects (ceteris paribus) of this relationship should be discussed first.

Previous research has shown that consumers’ choices are affected by prices. Moreover, incorporating reference prices and gain/loss variables in the models of brand choice is beneficial. In other words, consumers are sensitive to price in their brand choice (Han et al.,

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2002). Furthermore, Mohr & Webb (2005) found that price significantly inversely affected purchase intent. Van Heerde et al. (2008) found that when leading Dutch supermarket chain Albert Heijn suffered from an unfavorable and deteriorating price image in the early 2000s, fewer and fewer shoppers could justify paying such high prices, despite their continued belief in the retailer’s service. Consequently, Albert Heijn decided to slash its prices for thousands of products, resulting in a price war in Dutch retailing. This price war among Dutch grocery retailers has affected both store visit probabilities and spending. It has enhanced consumers’ sensitivity to both weekly store prices and chain price image. Albert Heijn succeeded in improving its price image among consumers without doing significant harm to its quality and service images. The price war has been good for the initiator’s market share, whilst having bad consequences for their competitors because they were also affected by smaller spending without having enjoyed an enhanced price image. Consequently, firms may go bankrupt, thereby reducing consumer choice. For example, the Dutch price war forced the Edah supermarket chain to go out of business (van Heerde et al., 2008). The caveats notwithstanding:

H1: Behavioral loyalty is stronger for brands (i.e. supermarkets) with low prices than for brands (i.e. supermarkets) with high prices.

The convenience of product purchase can be another criterion for consumers to increase their purchase frequency of a brand, leading to greater commitment in the form of attitudinal loyalty. Moreover, ‘brand trust […] toward a particular favored brand may be greater when the utilitarian value in the product category is high in terms of tangible product attributes, such as quality or convenience’ (Chaudhuri & Holbrook, 2001, p. 85). In other words, the convenience of purchasing a product can co-create greater brand trust, which in turn, combined with brand affect, determine purchase loyalty and attitudinal loyalty (Chaudhuri & Holbrook, 2001). Rowley (2005) distinguishes four categories of loyal customers. One of these categories entails the convenience-seekers, customers who are often associated with routine and low involvement purchases. This group of customers is loyal to a brand in the sense that they engage in regular repeat purchase transactions associated with the brand. The convenience-seeker’s attitude about the brand is irrelevant, because convenience dominates the choice. Convenience-seekers’ loyalty is driven by a