Store Loyalty a Category Specific Trait

Abstract

The literature on grocery store loyalty views a consumer as possessing store loyalty toward a particular store for her or his overall shopping needs. In this study, we examine store loyalty as a category-specific trait, i.e., a consumer could be loyal to Store A in category 1, but loyal to Store B in category 2. We call this store-category loyalty (SCL). We enumerate 10 key influencing variables - 8 of which are variables related to product assortments and prices of categories at the stores, and 2 are category characteristics - of SCL and their expected effects. In addition, we also discuss the effects of 2 consumer characteristics (demographics) on SCL. We use a Hierarchical Bayes Multinomial Logit (HB-MNL) model to test our hypotheses using an in-home scanning panel dataset of 1321 households in 284 grocery categories across 16 retail chains over a 53-week period. The results show that a variety of category, store and consumer characteristics affect SCL in line with our predictions. We detail how the findings can help retailers make strategic decisions. We conduct managerial exercises to further illustrate the managerial implications of our study to retailers, for example, by deriving revenue consequences from changing some of the marketing levers, i.e., variables related to product assortments and prices, which are in their control.

Keywords: Store Loyalty, Store-Category Loyalty, Multinomial Logit, Hierarchical Bayes

JEL Classification: C11, C23, C51, M31