Brand Loyalty and Variety-Seeking within a House of Brands
20 Pages Posted: 30 May 2017
Date Written: May 24, 2017
Brand managers are concerned with maintaining customer relationships through brand loyalty. Previous research has shown that customer loyalty is fairly prevalent in the face of competitors (Koschmann and Sheth 2016a) and even when the choice is sibling brands (i.e., a ‘branded house’ in which branded variants share the same core brand name: Koschmann and Sheth 2016b). Given the focus on brand equity – while also appealing to differing consumer segments – the company may launch differently named brands within the same category so as to not diminish any existing brand equity (i.e., a ‘house of brands’). This research examines whether the use of multiple brands maintains consumer loyalty or encourages variety-seeking across brands. Using household panel data of five brands – all owned by the same parent company – in a commonly purchased consumer good (laundry detergent) over a two-year period, the results show that switching rates vary by brand from 41.8% to 90.7% in the next shopping occasion. Furthermore, switching rates are asymmetric: any switching from another brand is most likely to go towards one brand in particular (Tide). The research concludes with implications for managers and academics alike.
Keywords: house of brands, brand loyalty, variety-seeking, Markov chain
JEL Classification: M31
Suggested Citation: Suggested Citation