Consideration, Choice and Classifying Loyalty

The authors present an approach to classify a brand’s buyers into groups with varying degrees of loyalty along a continuum from “hard-core loyal” to “hard-core switcher.” A classification scheme is developed based on the joint use of stated consideration set and brand switching data. The resulting loyalty taxonomy yields five mutually exclusive segments: Hard-Core Loyal (HCL), Soft Loyal (SL), Soft Switcher (SS), Hard Switcher (HS), and Hard-Core Switcher (HCS). The five classifications from the proposed taxonomy generalize the “loyal” versus “potential switcher” segments derived from previous analyses of brand switching data. In an empirical application to the automobile industry, the authors show that the current switching databased models substantially overstate the number of the hard-core loyals (buyers who repurchase with probability one) versus the taxonomy’s classification, which is based on both consideration and purchase data. These overestimates can mask the relative health or sickness of brands within the product category. The authors also illustrate how the proposed taxonomy can aid managers in understanding markets and addressing and targeting buyers with varying degrees of loyalty.