An executive summary for

managers and executive Assessing the performance of

readers can be found at the
end of this article brand loyalty measures
Sharyn Rundle-Thiele
Senior Researcher, University of South Australia, Adelaide, Australia
Marisa Maio Mackay
Senior Research Associate, School of Marketing, University of South
Australia, Adelaide, Australia

Keywords Loyalty, Service, Markets

Abstract There has long been a requirement for researchers to relate different loyalty
measures in one paper and to compare measures across markets. Explores the
performance of a number of loyalty measures in two service markets, namely a
telecommunications market, and a credit card market. Also explores the performance of a
number of measures across market types. The results indicate that all eight measures can
be considered as indicators of brand loyalty in service markets. Two distinct concepts of
loyalty were apparent in the telecommunications market. A third possible concept, termed
differentiation loyalty, was also evident in the analysis conducted. This suggests that
distinguishing between concepts does matter, specifically in service markets where a
decrease in behavioral loyalty results in a customer defection. There is no difference in
the performance of brand loyalty measures in service markets when compared with a
repeat-purchase market.

Introduction
Loyalty Loyalty is thought to be an important concept for marketing practitioners for
a number of reasons, including:
(1) All profit driven firms are interested in selling to achieve maximum
profit levels. There is a popular belief that customers who exhibit loyalty
reduce the marketing costs of doing business (Uncles and Laurent,
1997). This could occur for a number of reasons:
. Loyalty reduces the need to incur customer acquisition costs
(Reichheld, 1996), which is particularly salient in service markets.
Reichheld (1993) cites a credit card example where in the first year
acquisition costs for a new customer involved credit evaluation, card
issuance and other expenses of setting up a new account on the data
processing system. If the cardholder stays for a second year, profits
improve significantly because account set-up costs are not incurred
in the second year. It is often considerably less costly to keep
existing customers happy and reduce the reasons to change (Aaker,
1992).
. Positive word of mouth, brought about by loyalty, is seen as just one
possible mechanism for enabling a firm to save on marketing costs
(Jones and Sasser, 1995; Aaker, 1991; Arnold, 1992).
. Loyal customers are typically less price sensitive (Reichheld, 1996).
(2) Brand extension, an increasingly preferred vehicle for new product
launches is an attempt, in part, to exploit the loyalty to the parent brand
and supposedly lower the risks of new product failure.

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JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001, pp. 529-546, # MCB UNIVERSITY PRESS, 0887-6045 529
 (3) Loyalty rates have been shown to increase with market share, and market
share, in turn, has been shown to be associated with higher rates of return
on investment (Buzzell et al., 1975; Buzzell and Gale, 1987).
Loyalty provides fewer reasons for consumers to engage in extended
information search[1] among alternatives (Uncles et al., 1998). Solomon
(1994) also indicates that purchase decisions based on loyalty may become
simplified and even habitual in nature and, so supports the assertion that this
may be a result of satisfaction with the current brand(s). For example, there
is little point in considering alternatives when a customer is satisfied with the
performance of a product.
There is little dispute that the concept of brand loyalty is important. The
measurement of brand loyalty has been of enduring concern to both
academics and marketing practitioners (Uncles, 1998). The literature
contains a multitude of different measures, yet there have been few attempts
to consolidate these measures.
Loyalty measures As far as the authors are aware, the relationship between different brand
loyalty measures has not been explored in the same papers and across
industries. The marketing literature has acknowledged that there is a need for
loyalty research to relate different loyalty measures to each other, and to use
more than one measure in the same project. For this reason, our research
focuses on exploring the relationship between a number of loyalty measures
(detailed in following sections) in two service markets and one repeat-
purchase market.
More specifically, this paper is designed to address the following
hypotheses:
H1. Attitude toward the act, brand preference, attitude toward the brand,
verbal probability, share of category requirements, brand allegiance,
price elasticity and price until switching, are all measures of brand
loyalty in a service market.
H2. Attitude toward the act, brand preference, attitude toward the brand,
verbal probability, share of category requirements, brand allegiance,
price elasticity and price until switching, are measures of brand loyalty
in both service and repeat-purchase markets.
Performance The paper explores the performance of loyalty measures in the
telecommunications market, the credit card market and fuel market. The first
section of this paper will commence by defining service markets and by
discussing both the concepts and measures of brand loyalty. The second
section of this paper will present the brand loyalty measures used and the
methodology followed by the results and discussion. The paper will conclude
with limitations and recommendations for future research.

What is a service market?

The rationale for a separate treatment of services marketing centers on
the existence of a number of characteristics of services namely, intangibility,
inseparability of production and consumption, heterogeneity and
perishability.
The output of services now accounts for around 70 per cent of the gross
national product of the economies of nations such as Australia, New Zealand
and the USA. In the next decade 90 per cent of all new jobs created in these
countries are expected to be in the service sector.

530 JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001


Characteristics
Market-specific contexts
JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001
In terms of service loyalty, purchasing behavior in service markets tends to
exhibit the following characteristics:
. Buyers do not regularly switch back and forth between competing
brands.
. In any given time period, a buyer typically does not share purchases for a
product, i.e. hairdressing or accounting services, among a repertoire of
brands. Customers typically have 100 per cent share of category with a
given brand.
. Because services are performances, rather than objects, they cannot
be seen, felt, tasted or touched in the same manner in which goods
can be sensed (Zeithaml, 1985). Since services are intangible and
heterogeneous, most consumers will perceive higher risk in services than
in goods (Javalgi and Moberg, 1997). As perceived risk increases, the
likelihood of loyalty to one brand increases (Javalgi and Moberg, 1997).
These characteristics indicate that in a service market many consumers
would be considered loyal according to the behavioral definition of loyalty
(due to 100 per cent share of category requirements) despite their intentions
to change to a competing service during the next month. This indicates that
attitudinal loyalty measures would be useful in service markets. Collecting
behavioral loyalty statistics can be difficult in service markets, as long time
periods are needed to examine brand-switching patterns.
The concept of loyalty
The concept of loyalty has not been uniquely defined. In marketing literature
the term loyalty has often been used interchangeably with its operational
(measurement) definition to refer to:
. repeat purchase (Ehrenberg, 1988);
. preference (Guest, 1944);
. commitment (Hawkes, 1994);
. retention;
. allegiance.
In addition, loyalty has been referred to in a variety of market-specific
contexts, for example, service, store and vendor loyalty and contexts that
reflect the nature of the measure used: customer and brand loyalty. In fact,
the terms brand loyalty and service loyalty have been used to refer to the
same concept. The authors expect that one definition would be suitable for
loyalty in all contexts and we refer to this concept as brand loyalty. However,
the context will influence both the measures and analysis used and the
variables, which influence loyalty, and we expect the influencing variables to
differ with market type. The consensus among researchers is that loyalty is a
very complex construct (Javalgi and Moberg, 1997).
The authors acknowledge that there is no consensus on the conceptual
definition of loyalty. For the purpose of this paper the authors will adopt the
classification proposed by Mellens et al. (1996) and we will focus on brand
loyalty. It is commonly acknowledged in the literature (see Jacoby and
Chestnut, 1978) that the majority of brand loyalty measures can be
categorised as either behavioral or attitudinal (Mellens et al., 1996). These
will now be briefly defined:
531
 . Behavioral loyalty measures define brand loyalty in terms of the actual
purchases observed over a time period (Mellens et al., 1996).
. Attitudinal loyalty measures are based on stated preferences, commit-
ment or purchase intentions (Mellens et al., 1996). Attitudinal measures
are usually based on surveys.
Positive correlations Attitudinal and behavioral loyalty should be related and this should be
demonstrated through positive correlations. We do not expect a perfect
correlation otherwise there would be little need for different concepts (Sharp
et al., 1997). If behavioral loyalty were being considered we would expect
that behavioral loyalty measures would be more highly inter-correlated than
correlations with attitudinal loyalty measures.
An increase in attitudinal loyalty should result in an increase in behavioral
loyalty if it is to be meaningful, in terms of purchasing, to marketers of that
brand. For example, an increase in attitudinal loyalty would suggest that
behavioral loyalty should increase in the next measurement period for a
practitioner tracking both attitudinal and behavioral loyalty. This is also
expected to occur in the opposite direction, where customers who are
increasingly using a brand (becoming more behaviorally loyal) become more
attitudinally loyal to the brand.

Loyalty measures
Key measures Table I categorizes some key measures that have been proposed in the
loyalty literature as either attitudinal or behavioral. This is by no means an
exhaustive summary of loyalty measures. Jacoby and Chestnut's (1978)
review of the loyalty literature revealed over 80 loyalty measures proposed
by various researchers. Each measure analyzed in this paper has been widely
used in marketing practice in Australia and New Zealand.
The results of this study should provide further support to determine whether
each measure captures the proposed loyalty concept. For example, can share of
category be considered a suitable indicator for the concept of behavioral loyalty?

Methodology
In this paper survey data were analyzed across three industries and two
geographical markets in Australia and New Zealand. The exact details of
each market will not be identified as some data were collected in commercial
confidence. The data sets are summarized in Table II.

Telecommunications study
The data collected in the telecommunications market were sponsored by a
commercial organisation. Data were collected at the end of 1997 in Australia

Attitudinal loyalty Behavioral loyalty

Attitude toward the loyal/dis-loyal act Market share loyalty (Cunningham, 1956)
(Sharp et al., 1997) also referred to as preferential purchase
Brand preference (Guest, 1944, 1955) Brand allegiance
Commitment (Hawkes, 1994) or attitude Exclusive purchase (Jacoby and Chestnut,
toward the brand measures (Sharp et al., 1978)
1997)
Probability of purchase (Danenberg and Elasticity's (Sharp et al., 1997)
Sharp, 1996; Jacoby and Chestnut, 1978)
Price until switching (Pessemier, 1960)

Table I. Loyalty measures and their concepts

532 JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001

 Number of Year Number of
Market respondents collected brands Survey method
Telecommunications 1,966 1997 8a Telephone
Credit cards 383 1997 7 Mail and telephone
Fuel 383 1997 4 Mail and telephone
Note: a The telecommunications market consisted of more than 18 brands at the time
of this study. Only eight were analyzed as the remaining brands accounted for less
than 2 percent of the telecommunications market at this time

Table II. Summary of data sets used

using customer lists from the sponsoring organisation. The data for this study
were collected via telephone using Interviewer Quality Control Australia
(IQCA) accredited telephone-interviewers and involved a total of 1,966
respondents. This study was conducted in a business-to-business market and
the questionnaire was administered to key telecommunication decision-
makers in each organisation surveyed. The survey was administered to
businesses of all sizes. The survey covered topics including awareness,
perceptions, service satisfaction, current and intended future purchasing and
loyalty. The Australian business-to-business telecommunications was
deregulated in 1994, two years before data collection. In 1997 there were
more than 20 brands competing in the business-to-business
telecommunications market. One brand continued to dominate the market,
and there were two other large brands. Most remaining brands held an
average 0.5 per cent share of the business-to-business telecommunications
market.

Credit card and fuel study

Research agenda The data for this study were collected as part of a larger research agenda. The
sample for the credit card and fuel markets consisted of respondents from
members of a short-term consumer-purchasing panel that had recently ended.
The New Zealand panel had run for 11 weeks and was set up on behalf of a
consortium of clients, two of which represented the fuel retail outlets and
bank credit card markets. The data collected included the purchase behavior
of the respondents, which allowed market shares to be calculated. This was a
requirement of the larger research agenda.
Approximately two months after the panel had ended panel members were
re-contacted and asked for their involvement in a separate study. The original
panel had 501 respondents. The sample was drawn from the national New
Zealand population and consisted of respondents that were: 18 years and
over; held a drivers license; owned or had access to a car; and had a credit
card from a major bank. The final sample size for this research was 383
respondents.
The survey methodology involved a telephone and mail survey. The
telephone interviews were conducted by IQCA accredited interviewers and
were approximately eight minutes in length. The only data relevant to this
study, which were collected by telephone were the screening questions. The
sample characteristics of the original panel suggested that respondents
should have owned or had access to a car, which would imply they purchased
petrol on a regular basis. Additionally respondents should have had a credit
card from a major bank. In order to eliminate those respondents whose
circumstances had changed since their initial recruitment to the panel, the
respondents were asked screening questions to re-establish their eligibility.

JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001 533

 Respondents had to buy car fuel at least once a month to be eligible to
answer the fuel retail related questions. It was felt that the purchase of car
fuel at least once a month would mean that they would feel comfortable
answering questions about this product category and that they could draw on
relatively recent and personal experiences when answering the questions.
The screening question used for the bank credit card product category was
whether respondents owned a bank issued MasterCard, Bankcard or Visa or
whether they were planning to apply for any of these cards in the next month.
Respondents who answered no to this screening question were eliminated. It
was assumed that respondents that owned or were likely to apply for a card
in the very short term would be comfortable answering the questions.
Questionnaires The written questionnaires were mailed to the panel members within two
weeks of being contacted by phone. The mail questionnaire should have
taken respondents approximately 20 minutes to complete. The questionnaire
was designed to collect the information used in this study (see to Table III).
Our findings are divided into two sections, according to H1 and H2. The first
hypothesis that will be addressed is the performance of brand loyalty
measures in service markets. This will include two markets, namely
telecommunications and credit cards.
The second hypothesis that will be addressed is whether the performance of
loyalty measures that are frequently used in marketing practice differ in a
non-service market, namely a repeat-purchase market. The fuel market will
be analyzed and the results will be compared to the service market results.
To address each of the hypotheses both descriptive and analytical statistics
have been carried out for each of the three markets. The descriptive statistics
are important because they facilitate an understanding of brand loyalty
measures by providing an assessment of each brand across the measures.
That is, descriptive statistics provide an opportunity to relate different loyalty
measures to each other.
Analytical results The analytical results will be presented at the aggregate (brand) level.
Aggregate level analysis was performed in this paper because most brand
loyalty measures discussed in the literature (see Jacoby and Chestnut, 1978)
are analyzed at the brand level. It is important to note that results analyzed at
the aggregate level are typically more consistent (see Brown, 1985;
Dall'Olmo Riley et al., 1997).
The analytical results include correlation analysis and factor analysis.
Correlation analysis provides an indication of the convergent validity of the
measures. A measure can adequately represent a concept when it correlates
or ``converges'' with other supposed measures of that concept, showing that
a concept is not just an accident of a particular measure (Heeler and Ray,
1972). More specifically, the correlation coefficient can give an indication of
the extent to which large values of one loyalty measure are associated with
large (or small) values of another loyalty measure (Croucher and Oliver,
1993). We can have greater confidence in the fact that each is an appropriate
measure of loyalty where the proposed operational measures are (positively
and strongly) inter-correlated (Jacoby and Chestnut, 1978). That is,
correlation analysis will enable us to determine:
. Whether large values of one loyalty measure are associated with large
values of another loyalty measure. That is whether each measure behaves
in the same way and is a measure of the same concept, namely brand
loyalty.

534 JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001


Attitudinal loyalty
JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001
NZ
Aust. NZ credit
Measure Scale/question T/C fuel card
Behavioral loyalty measures
Price until The preferred brand was established and the Yes Yes No
switching average specified price reduction was calculated
for the markets
Brand allegiance Respondents were asked to indicate the length Yes No No
of time they had been with the main brand
purchased in the telecommunications market
Price elasticity Elasticity records how demand changes (in Yes No No
percentage terms) in response to a percentage
change in price (Sharp et al., 1997)
Share of Respondents were asked to estimate their total Yes Yes Yes
category spend with each supplier used at the time in all
markets. This is distinct from share of category
calculation in repeat-purchase markets where
share of category is a function of how many
times a given brand is purchased in a given time
period
Attitudinal loyalty measures
Attitude toward Two 0-10 scales, where zero was ``totally Yes No No
the loyal act disagree'' and 10 was ``totally agree'' in
response to the following statements: ``I would
feel uncomfortable moving to another supplier''
and ``I would not like to change suppliers''
Brand preference Respondents were asked to indicate the brand Yes Yes No
they most preferred
Verbal 0-10 scale, where zero was ``no chance or Yes Yes Yes
probability almost no chance'' and 10 was ``certain,
practically certain''. Respondents would not
change from a given brand in a given time
period in all markets
Attitude toward (1) Respondents indicate which of three Yes No Yes
the brand statements best described their feelings toward (1) (2)
each brand. Statements included ``There are
many good reasons to continue to use and no
good reasons to change'', ``There are many good
reasons to continue to use but also many good
reasons to change'' and ``There are few good
reasons to use but many good reasons to change''
(2) Two five point scales were used in response
to statements such as ``How much do you like
each brand?'' and ``How highly does the
community regard this brand?''
Table III. Measures by paper
. Whether attitudinal loyalty measures are capturing attitudinal loyalty,
e.g. attitudinal loyalty measures are more highly correlated with other
attitudinal loyalty measures than they are with behavioral measures.
. Whether behavioral loyalty measures are capturing behavioral loyalty
e.g. behavioral loyalty measures are more highly correlated with other
behavioral loyalty measures than they are with attitudinal loyalty measures.
The Spearman rank-correlation procedure was used to study the association
between loyalty measures, which is a non-parametric method (see Berensen
and Levine, 1986 for discussion of this technique) as some attitudinal data
were ordinal. To confirm the results of the correlation analysis, factor analysis
535
 was carried out on the brand loyalty measures at the aggregate level. It is
important to note that sample size can impact statistical testing, as statistical
tests become more insensitive with small sample sizes (Hair et al., 1995).
Therefore, any interpretation of the correlation coefficient must take into
account the small size of the samples used in this study (i.e. no higher than 8).
Survey items Table III summarises both the measures used and details of the survey items
for each market. It is important to note that all measures were not used in
each market surveyed. The actual measures used for each market are
reported in Table III.
A total of eight loyalty measures were captured in the telecommunications
market, four measures in the fuel market and three measures were captured
in the credit card market.

Results
Performance of brand loyalty measures in service markets
Table IV presents the aggregate descriptive statistics with standard
deviations in brackets for the telecommunications market. Results have been
grouped so that measures of attitudinal loyalty and measures of behavioral
loyalty can be first compared. Once again, the measures of attitudinal loyalty
are attitude toward the act, attitude toward the brand, verbal probability and
preference. The measures of behavioral loyalty are elasticity, share of
category, allegiance and price until switching.
The measures displayed in Table IV illustrate the following:
. The price until switching measure indicates that T1 and T5 customers
will switch to another brand for a 5 per cent price reduction, while T4,
T7 and T8 customers will switch away for a 2 per cent price discount.
. The verbal probability measure indicates an approximate 75 per cent
probability that customers will not switch from T1, T2, T4 and T5 in the
next six months.
. The attitude toward the act measure indicates an approximate 50 per cent
agreement for T1, T2, T4 and T5 with statements relating to the loyal act
(behavior).
. The brand preference measure indicates that 80 per cent of customers
prefer T1, while no customers prefer T7 and T8. The brand preference
measure reflects share of category and hence market share.

Concept Attitudinal loyalty Behavioral loyalty

Attitude Attitude Verbal Share of Price until
toward (see probability Preference category Allegiance switching
Brand act (%) footnotes) (%) n (%) Elasticity (%) (years) (%) n
T1 52 2a 77 29 80 ± 6.1 82 < 5 yrs 5 5
T2 51 2 77 28 13 ± 6.4 9 App. 1 4 5
T3 42 2 67 29 3 ± 9.0 2 App. 1 4 5
T4 49 1b 75 20 1 ± 20.0 1 >1 year 2 4
T5 53 1 75 32 1 ± 10.7 1 >1 year 5 6
T6 26 1 69 24 0 ± 2.6 1 >1 year 3 4
T7 31 2 56 38 0 ± 9.0 0 >1 year 2 3
T8 27 2 69 38 0 ± 16.9 0 >1 year 2 3
Notes: aThere are many good reasons to continue to use and no good reasons to change
b
There are many good reasons to continue to use but also many good reasons to change

Table IV. Telecommunications market ± descriptive statistics (n = 1,966)

536 JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001

 . The elasticity measure indicates that the market is inelastic for all brands
in the telecommunications market. For an inelastic market, price
increases proportionally more than quantity decreases. If the curve is
inelastic, price, for example, does not have much affect on the quantity
demanded. This is interesting considering the emphasis of marketing
communications on price in this telecommunications market, at the time
the study was carried out.
Comments Other comments:
. T1 dominates the telecommunications market.
. In terms of rank T1 has the highest loyalty according to the share of
category, brand allegiance, brand preference, price until switching, and
verbal probability measures. That is, T1 customers had been with the
brand for more than five years and they spent an average 82 per cent of
every telecommunications dollar with T1. In addition, it would take a
larger price discount to induce T1 customers to switch when compared
with competitors.

Convergent validity of the measures

Interesting points Table V presents the aggregate (brand level) correlations statistics of the
measures in the telecommunications market.
A number of interesting points are evident from the convergent validity
analysis:
. The verbal probability measure is (significantly) strongly associated with
both the attitude toward the act and the attitude toward the brand loyalty
measures. These results suggest these three attitudinal loyalty measures
are convergent.
. In addition, the verbal probability measure is moderately associated with
the price until switching and price elasticity measures. However, price
elasticity is not (strongly) associated with any of the remaining loyalty
measures, and this may have important implications.
. The attitude toward the act measure is significantly correlated with the
price until switching measure, which is not surprising, as both are
indicators of intentions toward the loyal or disloyal act.

Attitude
toward Verbal Price until Share of
act Attitude probability switching Elasticity category Preference Allegiance
Attitude
toward act 1.0
Attitude 0.5 1.0
Verbal
probability 0.7* 0.8* 1.0
Price until
switching 0.7* 0.3 0.5 1.0
Elasticity ± 0.3 0.4 ± 0.6 0.0 1.0
Share of
category 0.4 0.1 0.3 0.4 0.1 1.0
Preference 0.4 0.1 0.3 0.4 0.1 1.0* 1.0
Allegiance 0.5 0.1 0.3 0.5 0.1 1.0* 1.0* 1.0
Note: * Significant at the p < 0.05 level

Table V. Telecommunications market correlation analysis (n = 8)

JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001 537

 . The preference measure is (significantly) strongly associated with the
share of category and brand allegiance measures, which is not surprising
given the descriptive statistics.
. The attitude toward the brand measure is weakly associated with
measures of behavioral loyalty, such as share of category requirements,
brand allegiance, price until switching and price elasticity.
. The share of category and brand allegiance measures were weakly
associated with the attitudinal loyalty measures, namely attitude toward the
act, attitude and verbal probability measure. These results suggest there is
an imperfect relationship between attitudinal and behavioral loyalty.
Factor analysis The expected factor analysis result for both studies was that share of
category, brand allegiance, price elasticity and price until switching would
load on a ``behavioral loyalty'' factor, while verbal probability, attitude
toward the brand and attitude toward the act would load on an ``attitudinal
loyalty factor''. The results are shown in Table VI.
Due to the small sample size analyzed (n = 8) and the large numbers of
measures analyzed, only a factor loading of 0.8 or above, will be deemed
significant (see Hair et al., 1995 for further discussion). A factor analysis
revealed two factors explaining 79 per cent of the variance[2]. A number of
points are notable and, largely, supportive of the loyalty concept categories:
. Share of category requirements, brand preference and brand allegiance
load on Factor 1, which is not surprising given the descriptive statistics
and the similar variation in the measures between the eight brands. This
result suggests that brand allegiance and share of category requirements
could be considered measures of behavioral loyalty.
. Verbal probability, attitude toward the brand and attitude toward the act
load on Factor 2. This suggests that these measures can be considered as
indicators for the attitudinal loyalty concept.
. The elasticity and price until switching measures do not load on Factor 1
or Factor 2, which suggests these measures, are not indicators of
behavioral loyalty, or attitudinal loyalty.
Table VII presents the aggregate (mean) scores and the standard deviation,
for each of the seven brands in the credit card market.
The measures displayed in Table VII indicate the following:
. The verbal probability measure indicates a 90 per cent probability that
CC1, CC2, CC3, CC4 and CC6 customers will not change their credit
card to another credit card provider in the next three months.
Factor 1 Factor 2
Share of category 0.97* 0.0
Preference 0.96 ± 0.0
Allegiance 0.98 0.0
Verbal probability 0.3 0.9
Attitude 0.2 0.9
Attitude toward act 0.5 0.8
Elasticity 0.2 ± 0.7
Price until switching 0.6 0.5
Notes: *Significance is based on a 0.05 level. A factor loading of 0.75 (or above) is
significant

Table VI. Telecommunications market ± factor analysis (n = 8)

538 JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001

 Behavioral loyalty Attitudinal loyalty
Concept -> Share of category Verbal probability Attitude toward the act
brand (%) (%) SD (%) SD
CC1 24 90 10 4 1
CC2 22 90 10 4 1
CC3 21 90 10 4 1
CC4 14 90 20 4 1
CC5 12 99 10 4 1
CC6 5 90 10 2 1
CC7 2 99 10 2 1

Table VII. Credit card market ± descriptive statistics (n = 383)

. The attitude toward the brand measure indicates little difference between
CC1-5. That is, attitude is relatively consistent across the five credit card
brands. The attitude toward the brand measure does not move with the
share of category measure (and hence market share).
. The share of category measure indicates that CC1, CC2 and CC3 have an
approximate market share of 20 per cent each.
. There are three big brands, two medium and three smaller brands in the
credit card market.
Terms of rank It is important to note that in terms of rank CC1 has the highest loyalty
according to the share of category requirements measure while CC5 and
CC7 have the highest loyalty according to the verbal probability measure.
CC6 and CC7 have the lowest loyalty according to the attitude toward the
brand measures. According to the verbal probability measure customers are
more loyal in the credit card market than in the telecommunications
market.
The next section will continue to address H1, which was to assess the
performance of brand loyalty measures in service markets. This was
addressed by analyzing the convergent validity through correlation analysis
of brand loyalty measures, in the credit card market. Table VIII presents the
aggregate (brand level) correlations statistics of the measures in the credit
card market.
Both verbal probability and the attitude toward the brand measures correlate
with the share of category requirements' measure.

Performance of brand loyalty measures in a non-service market

This section will focus on a non-service market, specifically a fuel market in
order to assess H2. This hypothesis was concerned with determining whether
the performance of loyalty measures that are frequently used in marketing
practice differ in a non-service market.
Table IX presents the aggregate descriptive statistics for the four brand
loyalty measures collected in the fuel market.

Share of category Verbal Attitude toward

requirements probability the brand
Share of category requirements 1.0
Verbal probability 0.6 1.0
Attitude toward the brand 0.9 0.3 1.0

Table VIII. Credit card market-correlation analysis (n = 7)

JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001 539

 Attitudinal loyalty Behavioral loyalty
Brand Price until Share of
Verbal probability preference switching category
Brand (%) n (%) (%) n (%)
F1 45 30 28 7 12 30
F2 43 27 23 6 9 28
F3 43 29 26 8 12 25
F4 27 27 23 5 5 17

Table IX. Fuel market ± descriptive statistics (n = 383)

The measures displayed in Table IX indicate the following:

. The price until switching measure indicates that F3 customers will
switch away for an 8 per cent price reduction, while F4 customers will
switch away for a 5 per cent price reduction.
. The verbal probability measure indicates a 40-45 per cent probability
that customers will visit F1, F2 and F3 the next time they stop at a fuel
company outlet.
. The share of category measure indicates that customers spent almost 30
per cent of their total fuel expenditure with F1 and F2.
. The brand preference measure indicates that more than 25 per cent of
customers prefer both, F1 and F3.
. Once again, brand preference reflects share of category requirements.
Other comments:
. In terms of rank F1 has the highest loyalty according to the share of
category requirements, and brand preference measures.
. F3 has the highest loyalty according to the price until switching measure.
. According to the verbal probability measure customers are less loyal in
the fuel market than in the service markets.
Table X presents the aggregate (brand level) correlation statistics for the fuel
market.
Verbal probability Once again, the verbal probability measure is strongly and positively
associated with the share of category requirement measure.
To confirm the results of the correlation analysis, factor analysis was carried
out on the four brand loyalty measures collected in the fuel market. The
factor loadings are displayed in Table XI.
A factor analysis revealed two factors explaining 79 per cent of the variance,
which can be considered a satisfactory solution. Once again, only a factor
loading of 0.8 or above was deemed significant due to the small sample size.
Brand preference, share of category requirements and verbal probability load

Verbal Brand Price until Share of

probability preference switching category
Verbal probability 1.0
Brand preference 0.7 1.0
Price until switching ± 0.6 0.2 1.0
Share of category 0.9 0.7 ± 0.5 1.0

Table X. Fuel market ± correlation analysis (n = 4)

540 JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001

 Factor 1 Factor 2
Brand preference 0.97 0.2
Share of category 0.9 ± 0.4
Verbal probability 0.8 ± 0.5
Price until switching ± 0.1 0.99

Table XI. Fuel market ± factor analysis (n = 4)

on Factor 1, indicating that all measures can be considered indicators of

brand loyalty.

Discussion
This section summarises key findings from the analysis and in turn will
address each of the two hypotheses.

Performance of brand loyalty measures in service markets

H1 was concerned with determining whether the eight measures of loyalty
could be used as measures of loyalty in services markets. The results indicate
that all eight measures may be considered as indicators of brand loyalty in
service markets, but not all as indicators of attitudinal or behavioral loyalty.
Two distinct concepts of loyalty, namely attitudinal and behavioral loyalty,
were apparent in the telecommunications market, where more measures were
collected. There is an imperfect relationship between attitudinal and
behavioral loyalty. It is important for practitioners in service industries to
monitor both concepts of loyalty because at an individual level a practitioner
will only become aware of decreasing behavioral loyalty when a customer
has defected. Attitudinal measures can provide service-marketing
practitioners with an insight into possible future behaviors. That is,
attitudinal loyalty measures may help to identify those customers who are
becoming disillusioned with a brand before the dis-loyal behavior occurs.
Collection of data Given the costs involved in the collection (tracking) of data, this study can be
useful for marketing practitioners as it highlights a range of indicators that
can be useful for monitoring loyalty in a service market. For example, there
was higher behavioral loyalty for T1 in the telecommunications market, but
lower attitudinal loyalty, which may suggest customers are becoming
dissatisfied with T1 and hence less attitudinally loyal.
The attitude toward the act measure is (significantly) strongly associated
with verbal probability and the price until switching measure. This supports
the proposition by Solomon (1994) that measures of attitudinal loyalty
should concentrate on attitudes toward the act of loyal type behaviors toward
the brand rather than just general attitude toward the brand.

Performance of brand loyalty measures in a non-service market

H2 was concerned with determining whether the performance of loyalty
measures that are frequently used in marketing practice differ in a non-
service market, namely the fuel market. There is little difference between the
performances of brand loyalty measures in a non-service market. This is
reflected by the following relationships:
. The relationship between the verbal probability and the share of category
requirements did not differ in this non-service market.
. Brand preference reflects share of category requirements (and hence
market share) in both the service and non-service markets. This may

JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001 541

 suggest that there is little advantage in collecting brand preference data
in both service and repeat-purchase markets as preference reflects
market share.
. The verbal probability measure was strongly associated with price until
switching in both the telecommunications and fuel markets. Price until
switching remained weakly associated with the remaining loyalty
measures in both markets. This supports research defining an additional
concept of loyalty termed differentiation loyalty. Differentiation loyalty
exists when a firm/ brand insulates buyers from competing brands (Sharp
et al., 1997). Buyers are unlikely to be insulated from a brand
indefinitely and the exact time period may differ. The results from this
study suggest that verbal probability and price sensitivity measures may
be considered indicators of the differentiation loyalty concept. Further
research is required to determine if price until switching and price
elasticity measures can be considered as measures of brand loyalty and
specifically differentiation loyalty. The price until switching and price
elasticity measures did not correlate with the attitudinal and behavioral
loyalty concepts. If these price sensitivity measures are indeed measures
of loyalty and the concepts of loyalty are indeed correlated then we
would expect some correlation between the price sensitivity and
attitudinal and behavioral loyalty measures.

Conclusions, limitations and future directions

Additional concepts of Distinguishing between loyalty concepts (and their measures) does matter.
loyalty Researchers need to understand the domain and implications of these
research findings, and this cannot occur without an understanding of exactly
what type of loyalty is being studied. This research supports the notion for at
least a third concept of loyalty termed differentiation loyalty. Future research
will be required to determine if there are any additional concepts of loyalty.
The precise nature of the relationships between loyalty concepts and the
circumstances that affect the nature of the relationship is something, which
demands empirical attention (East, 1997). This is particularly important for
marketing practitioners who seek to understand and more importantly, build
loyalty in both service and repeat purchase markets. Research is required to
assess whether increases in attitudinal loyalty can also increase behavioral
loyalty, as this is most important for marketing practitioners who are seeking
to reduce the marketing cost of doing business.
Behavioral loyalty The verbal probability measure converged with the share of category
measures requirement measure in both the credit card and fuel markets. This is
important because behavioral loyalty measures, such as share of category
requirements are important, on the basis that actions speak louder than
words. Danenberg and Sharpe (1996) have shown that the verbal probability
measure is capturing not only past behavior, but also the probability of
switching and, thus, the loyalty of the respondent. More research is required
to assess the predictive validity of the verbal probability scale. That is, can
the verbal probability measure be used to predict share of category
requirements and, hence, market share? Or, is market share driving
probabilistic estimates?
It has been argued by Fishbein (Fishbein and Ajzen, 1975; Ajzen and
Fishbein, 1980) that attitudes, which had been used to predict behavior, were
often incorrectly chosen. This research supported the proposition by
researchers such as Solomon (1994) that operationalisations of attitudinal
loyalty should concentrate on attitudes toward the act of loyal type behaviors

542 JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001

 toward the brand, rather than just general attitude toward the brand, if we are
going to improve the predictive ability of attitudinal loyalty measures. Future
research must focus on determining whether measures concentrating on
attitudes toward the act can improve the predictive ability of attitudinal
loyalty measures.
Limitations for this research were related to the data collected. The data for
the telecommunications market were collected commercially and this did not
enable the addition of further loyalty measures. Three markets were used and
not all measures were analyzed in each of the three markets.

Managerial implications
Research findings These research findings will assist managers in interpreting the meaning of
empirical studies now that specific measures can be more clearly associated
with concepts. Empirical analysis indicates that there are at least three
concepts of loyalty that can be used to capture loyalty. The use of these
alternate loyalty concepts should provide additional explanatory potential for
both practitioners and researchers in distinguishing between types and
intensities of loyalty. There is value in considering loyalty as a multi-
concept, i.e. it is more than one thing, and there is value in specifying what
these different loyalty concepts are.
It would be useful to consider an analogy. In the physical sciences strength is
measured using a number of concepts. For example, strength can be
measured using tearability, bendability and compressibility. The use of
concepts for measurement and testing of the strength of materials would be
entirely dependent on the situation at hand. For example, an engineer testing
the strength of material for a bridge would test bendability and
compressibility. While in other situations, engineers would need to test
tearability, and bendability. The use of loyalty concepts for monitoring and
measuring loyalty is much the same for marketing practitioners. Where
differentiation is important in a market, marketing practitioners would find it
most useful to monitor differentiation loyalty, rather than attitudinal loyalty.
While in services markets, practitioners may be better off monitoring
differentiation and attitudinal loyalty rather than behavioral loyalty.
Framework This research provides a framework from which it is possible to compare the
results of the considerable number of loyalty studies. As detailed in Jacoby
and Chestnut's (1978) review of the literature more than 80 measures exist
for brand loyalty in the marketing literature. This research helps us to
synthesize loyalty findings. That is, managers will be able to more clearly
understand what concept their loyalty measure is capturing.
Increases in attitudinal loyalty must logically result in lower rates of
customer defection. The results would be that customers stay with brands for
longer periods, which in effect should reduce the costs of doing business (if
loyal customers provide positive word of mouth and reduce acquisition
costs) and improve brand profitability. Understanding loyalty is crucial for
marketing practitioners as loyal customers are less price sensitive
(Reichheld, 1996). That is, loyal customers are willing to pay more, ensuring
improved marketing contributions if brand loyalty can be increased.
Research can now be undertaken to determine if the drivers and
consequences of alternate loyalty concepts are different or the same (Sharp
et al., 1997). Loyalty is a useful dependent variable against which to assess
the impact of changes in service quality perceptions, satisfaction, image
perceptions, advertising, distribution changes etc. and is an area requiring

JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 7 2001 543

 further research. This is particularly important for marketing practitioners.
For instance, would increasing the perceived quality of the service provided
be more beneficial in increasing loyalty and hence purchasing than
increasing expenditure on advertising? Answers to such questions will
enable marketing practitioners to prioritize marketing actions.

Notes
1. Information search is the process in which the customer surveys his or her environment
for appropiate data to make purchasing decisions (Solomon, 1994).
2. This can be considered a satisfactory solution as it accounts for 79 per cent of the total
variance (see Hair et al., 1995 for further discussion).

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 This summary has been
provided to allow managers
and executives a rapid
appreciation of the content
of this article. Those with a
particular interest in the
topic covered may then read
the article in toto to take
advantage of the more
comprehensive description
of the research undertaken
and its results to get the full
benefit of the material
present
546
Executive summary and implications for managers and
executives
The importance of brand loyalty
In today's highly competitive business world, companies strive harder than
ever to keep their customers loyal. The costs of acquiring new customers ± as
opposed to retaining existing ones ± is generally high, especially in the
service sector. For a new credit-card customer, for example, a bank must
check credit worthiness, open the account, manufacture and distribute the
card. Loyal customers are usually less price-sensitive than new ones, and
more likely to speak positively about the company to friends and relations.
Through brand extensions, companies can exploit loyalty to the parent brand
and possibly lower the risks of a new product failing. Moreover, loyalty rates
have been shown to increase with market share and market share, in turn, is
associated with higher rates of return on investment.
Because services are performances, rather than objects, they cannot be seen,
felt or tasted in the same way in which goods can be sensed. Most consumers
therefore perceive that buying services is riskier than buying goods. And as
perceived risk increases, so, too, does the likelihood of loyalty to one brand.
Behavioural, attitudinal and differentiation loyalty
There are at least three measures of brand loyalty ± behavioural, attitudinal
and differentiation loyalty.
Behavioural loyalty measures define brand loyalty in terms of the actual
purchases observed over a period of time.
Attitudinal loyalty measures are based on stated preferences, commitment or
purchase intentions. Attitudinal measures are usually based on surveys.
Attitudinal loyalty is a particularly valuable measurement to take in service
markets. A hairdresser's client, for example, may be behaviourally loyal,
because he or she is currently visiting the salon for a haircut, but
attitudinally disloyal, because he or she has already decided to go elsewhere
for haircuts in the future. Attitudinal loyalty measures may therefore help to
identify customers who are becoming disillusioned with a brand before the
disloyal behaviour occurs.
Differentiation loyalty exists when a firm or brand insulates buyers from
competing brands. But, of course, buyers are unlikely to be insulated from a
competing brand indefinitely and the exact period of time for which the
customer remains loyal may differ.
Rundle-Thiele and Mackay explore the relationship between measures of
brand loyalty in two service markets (telecommunications and credit cards)
and one repeat-purchase market (petrol).
(A preÂcis of the article ``Assessing the performance of brand loyalty
measures''. Supplied by Marketing Consultants for MCB University Press.)
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