Effects of Sales Promotion on Brand Loyalty, a Case Study of Globacom Nigeria Limited

Only available on StudyMode
  • Download(s) : 463
  • Published : May 30, 2012
Open Document
Text Preview

CHAPTER ONE
INTRODUCTION
1.0Background to the Study
Every firm aims to make profit. It is generally agreed that one of the keys to making profit is boosting sales. To boost sales, a substantial number of consumers must choose one’s product over and above that of its competitors on a substantial number of occasions. One of the surest way of ensuring this happens is to cultivate brand loyalty to one’s product or service. Brand loyal consumers are more likely to choose their preferred products and/or service over its competition on a consistent basis. Considering the fact that consumers tend to be finicky with their choices, producers of rival brands tend to be uncompromising with product quality while being relentless with their marketing, wiggle room for products in a highly competitive environment is little or non existent and the margin for error is narrow. Brand loyal consumers tend to serve as a crucial even if sometimes unconscious support base for products and/or services in the fierce battle for patronage. For any organization therefore broadening and deepening the base of brand loyal consumers is a key objective in fashioning out any marketing strategy for the brand. Indeed brand loyalty has been proclaimed by some as the ultimate goal of marketing (Reicheld &Sasser 1990) To underscore the importance of brand loyalty a study in the United States showed that The average United States Company loses half its customers every five years equating to 13% annual loss of customers. This statistic illustrates the challenges companies face when trying to grow in competitive environments. Achieving even 1% annual growth requires increasing sales to customers both new and old by 14%. Reducing customer loss can dramatically improve business growth, and brand loyalty which leads to consistent and even greater sales since the same brand is purchased repeatedly. The import of this is that with brand loyal consumers there is the benefit of higher sales volume. As Larry Light so succinctly put it in 1989 ‘You need product volume to be a denominator. You need brand loyalty to be a profitable denominator’ Much has been written about the importance of brand loyalty as a determinant of brand choice and equity. Aaker (1991) wrote ‘The brand loyalty of a customer base is often the core of a brand’s equity if customers are indifferent to the brand and in fact buy with respect to features, prices, there is little equity’. Put simply brand loyalty consists of a consumers commitment to repurchase the brand and can be demonstrated by repeatedly buying a product or service and other positive behaviour such as advocacy of mouth. (Dick & Bassu, 1994). A brand loyalist has the following mindset

. I am committed to this brand
. I am willing to pay a higher price for this brand or forgo added incentives from competitor brands . I will recommend this brand to others.
Studies show that as brand loyalty increases consumers are less sensitive to price changes. Generally they are willing to pay more for their preferred brand because they perceive some unique value in the brand that other brands in their view do not have. Brand loyalists buy less frequently on cost centred promotional deals. These promotions only subsidize planned purchases. Furthermore brand loyalists are willing to search for their favorite brand and are less sensitive to competitive promotions. The result is lower costs of advertising and distribution. Specifically it costs four to six times more to attract a new customer than it does to retain an old one. As a result of this every firm seeks to cultivate brand loyalty. The customer’s perception of the brand’s marketing strategies i.e. promotional mix along with perception of quality and accessibility and a host of other ‘tangible’ and ‘intangible’ factors add up to the brand’s image and play a role in determining brand loyalty. Sales promotions is one of five constituents of the promotional mix. The others are direct...
tracking img