brand loyalty in western and eastern europe

SCHRIVER Nicolas Fall 2004Consumer BehaviorProfessor ATTIA

Individual Research Project

Brand Loyalty in Eastern and Western Europe

Brand Loyalty in East and West Europe

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Table of context

Table of context..........................................................................................................................3Introduction.................................................................................................................................3

Why this issue is important?...................................................................................................3Objectives................................................................................................................................4Organisation............................................................................................................................5

I The Nature of European Market...............................................................................................6a) History of the European Union...........................................................................................6b) The biggest market in the world.........................................................................................7

II The Concept of Brand Loyalty................................................................................................8a) Definition of brand loyalty and the different kind .............................................................8b) Where does the brand loyalty come from?.........................................................................9

How This Concept Can Change from Eastern and Weastern..................................................10a) Why does it exist difference between Western and Eastern consumer behavior?............10b) Brand Loyalty in Western Europe....................................................................................12

Germany............................................................................................................................12United Kingdom................................................................................................................13

c) Brand Loyalty in Eastern Europe......................................................................................13Russia................................................................................................................................13Czech Republic.................................................................................................................14Hungary.............................................................................................................................14Slovenia.............................................................................................................................14Romania............................................................................................................................14

d) Difference between the Two Parts....................................................................................15Conclusion................................................................................................................................16References.................................................................................................................................17

Introduction

Why this issue is important?

According to Kerin, Hartley and Rudelius (2004) “brand Loyalty is a favourable

attitude toward and consistent purchase of a single brand over time” (Marketing the Core). It

is an important issue nowadays in the business world. If a company manage to keep the

loyalty of his consumers, he can assure the stability of his production. This fact explains the

growth and the amelioration year after of the services and after-sale department of the

company.


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The European market is the biggest in the world, attribute to the purchase power

of its inhabitants and its purchase power. According to this fact, it is important for companies

to be present on this market, and to have a loyal consumer. Thus, those consumers can assure

constant revenue and stability for the corporation. As Meyer-Waarden and Benavent (2003)

has shown, the loyal consumers are the main important source of incoming for a company.

This is why we can see the significant development of fidelity cards by distribution firms.

But since the Berlin wall has felt, which marks the end of the communism in Europe,

there are still development inequalities between eastern and western Europe. Also, the ex

communist countries have not developed the concept of brand loyalty in their countries: the

consumers of these countries had never chosen any products, because it existed at this time a

unique product for every product line. How can a Russian or Polish consumer be loyal to a

brand if he has never used a decision making process? Do their experiences change the brand

loyalty in their countries from in the western part of the continent?

This issue is important, because the experience of 40 years of communist has

totally changed the conception of brand for the eastern populations. Thus, the consumer has

to learn how to make a decision process, whereas the company has to adapt its marketing

strategy to consumers who do not have knowledge and understanding.

Objectives

The research had to main objectives:

- How can brand loyalty change from a country to another. Does it exist really a pan

European brand loyalty model?


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- How ex communist consumers experience brand loyalty? Does the fact that eastern

European had no culture of decision making process because of the lack of competition have

change their way to look at brands?

- Are there nowadays differences between brand loyalty in Eastern and Western

Europe? Do the Eastern consumers have specificities in their decision making process that we

can not find in Western Europe?

Organisation

My paper will be divided in three parts:

- At first, I will present the European Market, and try to show its specificities and its

importance.

- Then, I will define the concept of brand loyalty. I will explain the different type of

brand loyalty, and what can influence its.

- At last, I will study the difference between brand loyalty in Eastern and Western

Europe. I will try to find out some concrete differences between Eastern and Western

consumers.


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I The Nature of European Market

a) History of the European Union

On March 1957 the Roma treaty created the European community, which announced

the establishment of a free market between the European nation, which were France,

Germany, Belgium, Luxembourg, Holland and Italy. Thanks to this act, there are no more

custom taxes between those countries. It is the real beginning of the Union.

However it is the Maastricht Act in 1992 that built the European Union as we know

nowadays. This act unified twelve nations, Germany, Belgium, Denmark, Spain, France,

Greece, Ireland, Italy, Luxembourg, Holland, Portugal and United Kingdom. The European

Union is defined by Kerin, Hartley and Rudelius (2004) as “an economic association of

European countries, which seek to create a unified, barrier-free market for products and

services throughout the continent, as well as a common currency with a unified authority over

that currency” (Marketing the Core).

Thus, this act established unified money which would be launched in 2000, and a

creation of a 12 country-market, which was marked out for becoming the biggest market in

the world.


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b) The biggest market in the world

On May, 1st 2004, 10 new countries entered in the European Union. Since the

creation of the Euro, this association of 30 countries (as seen in figure 1) has become the

biggest international market, thanks to three advantages:

• The average incomes of its inhabitants. Countries such as France, Germany,

England, Spain or Italy are some of the most powerful economy in the world.

• The strong euro (one euro = 1, 30 American dollars) makes the purchase power

of Europeans high. The consumers can purchase foreign products cheaper

thanks to the euro.

• The arrival of 10 new countries such as Poland, Lithuania or Slovakia, with a

high demography and growth rate.

Map of the European Union with 30 countries


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II The Concept of Brand Loyalty

a) Definition of brand loyalty and the different kind

Brand Loyalty is a favorable attitude toward and consistent purchase of a single

brand over time. This issue is nowadays fundamental on the global business. Lin, Wu, and

Wang (2000) notice this brand loyalty is based on the experience, and on past experience.

The consumer built its knowledge on a brand during the time.

Gounaris and Stathakopoulosa (2004) recognize four types of brand loyalty:

- No loyalty: The consumer is not loyal. It does not care about the reputation of

the brand. There is no social influence on him. This category is very rare

- Covetous loyalty: There is no purchase also. But there is an attachment to the

brand. Even if those consumers do not buy often the product, they have developed a

knowledge and understanding, which allows him to perceive the brand equity. For example,

even if he will never buy a guitar fender, because the consumer does not have enough money,

or because he does not know how to play, he will develop an attachment to the brand.

- Inertia loyalty: This kind of loyalty is closed from the habit. The consumer

buys a product, because it is used to. The loyalty is not based on the experience.

- Premium allegiance: the social pressure is very important in this case. The

consumer buys the product. The consumer is very attached to the brand, and would suffer not

to find the brand it is seeking. It is for example the case of fashion adept.

For Wangenheim and Bayon (2004), the loyalty includes many aspects as, repeat

buying, repurchasing, or resistance towards price increases. But the authors have found out

two main categories of loyalty:


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- Passive loyalty: it is sensible to the changes of environment, such has the price

increases for example. The consumer has not changed obviously the brand, but brand loyalty

comes from a habit of purchase.

- Active loyalty: the loyalty comes from a willing process. The consumer has decided to

take a brand because of some reasons, such as quality, image of the brand…

b) Where does the brand loyalty come from?

Wangenheim and Bayon (2004) thought out that brand loyalty comes from customer

satisfaction. The degree of satisfaction a consumer will have with a product will affect how it

will consider the brand. There is satisfaction “when performance exceeds expectations,

positive disconfirmation occurs and leads to satisfaction, while performance below

expectations results in negative disconfirmation and dissatisfaction” (Satisfaction, loyalty and

word of mouth within the customer base of a utility provider: Differences between stayers,

switchers and referral switchers). So the level of satisfaction change from a consumer to

another concerning its expectation of a product, and if this product has the attributes the

consumer was looking for. Thus, Wangenheim and Bayon describe three types of

consumers:

- The Stayers: this type of consumer does not change of brand. They have never

been dissatisfied with the product, so they have no reason to switch. They do not

have experience.

- The Switchers: customers who has just changed of brand. They have switched

since they have experienced another product. Thanks to the purchase of another

brand, the consumer has experienced a product which has better performance than

the previous one.


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- The Referral Switchers: they have switch but thanks to the word of mouth. The

reputation of the brand and its image plays an important role in the switch.

Bozzo, Merunka and Moulins (2003) describe the link between the consumer and the

brand as an affective relation, in the case of brand loyalty. However, if the consumer has no

affection for a brand, the brand loyalty can come from the habit of consummation: the

consumer buy always the same product and appreciate it, so it does not want to take the risk to

try another product. Simon (2004) has explained that brand loyalty comes from a positive

psychological process, which makes the consumer appreciate the brand.

Delgado-Ballester and Munuera-Aleman (2001) have also added to the previous factor

which change the brand loyalty the trust that the consumer has in a company. This trust is

fundamental for a long term loyalty. If the consumer do not trust in the quality, or the

statements of the corporation, he can not exist a affective relation create by the buyer.

To sum up, brand loyalty is based on many different components. Thus, a consumer

chooses to be loyal to a brand if (1) he is satisfied of its product, (2) he has affection for it and

(3) if he trusts in its quality.

How This Concept Can Change from Eastern and Weastern

a) Why does it exist difference between Western and Eastern consumer behavior?

At the end of World War 2, Europe was divided in two main part and ideology:

- One liberalist, were the free competition was effective and with great

economic powers such as France, Germany or England

- One communist, with a worse economy, a low income per household and

where there was a unique product per line, because competitors were forbidden.


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Thus, while the Berlin wall felt, the ex communist countries such as Poland, Slovakia,

Russia, Rumania, or Hungary discovered the liberalism, and the free competition on the

market. This idea of product choice was a real shock for consumers because they never have

to do a real decision making process, since it existed no alternative to the unique product

present in stores. As seen in the figure 2, people used to queue for hours to purchase

physiological needs such as bread or milk. Thus international and multinational companies

which came to conquer these markets were confronted to an original consumer culture,

which had no knowledge, understanding and experience of how to choose a product.

Therefore, brand loyalty was a concept which has never been since the end of the

communism.

Many researches have been done about brand loyalty on specific European

countries. I will now present the main aspects of them, and try to describe the difference

between Eastern and Western side of the continent.

figure 2

People queuing in the USSR.


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b) Brand Loyalty in Western Europe

Germany

Walsh, Mitchell and Hennig-Thurau (2001), has studied the brand loyalty of German

consumers. Thanks to their research, we can find out 7 different specificities of the German

buyers:

- Brand Consciousness: German consumers buy well known brand. They are very

attracted by the prototypical brands. They usually choose the most expensive product, because

they trust in its quality.

- Perfectionism: Like it is said above, Germans are ready to pay expensive products,

because they are seeking perfection. They need a high level of quality, no matter what is the

price.

- Recreational/hedonism: In Germany, the shopping is not considerate as a hobby or a

pleasure. People buy when they need a product.

- Confused by over choice: Some German consumers are lost because of the size of the

offer. There are too many brands and products, which complicate the decision making

process.

- Impulsiveness: Most of the time, these consumers purchase without premeditation.

This means they do not really need the good or service, but do it by impulsion. The high

purchase powers of the German population allow it to purchase easily, without thinking

of expenses issue for example.

- Novelty-Fashion Consciousness: German people try to keep up to date their products.

- Variety Seeking: they are looking for experience. Even if there are satisfied of a

brand, they will try to change, to find a better brand. They easily switch of brand.


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Thus, German consumers have an important purchase power. Thanks to it, they are

not very sensible about the price, and are looking for experience. Also, they have a good

knowledge about the different brand equity, but they do not develop a real loyalty for brands.

They like to switch often.

United Kingdom

Datta (2003) has done a research to try to explain the brand loyalty in the United

Kingdom. He has found out that “product performance, satisfaction, price, habit & history,

brand name, and risk & involvement of the consumer with the brand” (the determinants of

brand loyalty) are the main factors which will convince a consumer to be loyal. The British

consumers are very loyal, when they appreciate a brand, they do not want to switch them.

Moreover, they are very sensible to the reputation of a brand. The brand loyalty, and so the

trust they have in a brand, allows them to limit the perceived risk of purchase. We can also

notice that brand loyalty hand down from generation to generation.

c) Brand Loyalty in Eastern Europe

Russia

The Russian consumers are not loyal at all. According to the article “Russia: Trying

to succeed in the land of brand disloyalty” (1997), Russian like to switch often brands.

Even if they have a good knowledge about brand reputations, they like to experience, maybe

probably because they have never did before, because of the communist system. Their lack of

experience pushes them to try, even if they are satisfied of a product.


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Czech Republic

Rojsek (2001) has studied brand loyalty in this country. Thus, local brands are more

known and appreciate than international one. For example, in Czech Republic, the brands

which were present during the communist era have a very strong image. This is why

consumers in this country had developed a brand loyalty for those national companies. They

prefer the local companies because these people know them, and are very loyal to them.

Hungary

According to the same study of Rojsek (2001), on the contrary of the Czech Republic

consumers, the Hungarian people buy easily international brands. As Coulter, Price and

Feick (2003) has noticed on a Hungarian consumer, this people trust in the quality of western

brand, and try to develop a brand loyalty to them. The western world is better perceived than

in Czech Republic.

Slovenia

Rojsek (2001) has found out the older consumers in this country are more loyal

than young one. Thus, the young consumers, who have not lived the communism era,

experience more the western products, and switch often of brand. This fact shows that the

habits of buying national brands have made people loyal to them. Because the older people do

not know the Western brand, the perceived risk to buy them is too big for them. They prefer

to buy brands and products they already know the quality and the performance.

Romania

According to Seitz and Razzouk (2003), the problem of loyalty in Romania comes

from the commercials provided in this country: The multinational brands have not adapted


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their communication to the regional specificities of Romania. Thus, Romania is not familiar

with the brand, because they do not trust the company. There is no affective relation between

the brand and the consumer.

d) Difference between the Two Parts

The East European consumers, as it is described by Rojsek (2001), are switching very

easily of brands. But not for the same reasons than in the Western part of the continent: they

nedd to experience. Their lack of choice during the communist era has pushed them to try,

and to build themselves a knowledge structure they never had. We can also notice that

attribute to the habits to purchase national brands, consumers in these countries has developed

a brand loyalty, not based on satisfaction, but because they used to buy them. Moreover, since

people are used to buy these local brands, they do not want to take the risk to switch of

brands.

To sum up, Eastern European consumer are not loyal with international brand. They

prefer the local one, because they are used to. Only the old population is loyal to their brands.

In Western Europe, it appears consumers are not also loyal to their brand, as the

German example can show. They switch brand but not for the same reason. They have a

great purchase power, so there is no risk to change brand. They have also an important

knowledge, which allows them to choose the brands with the more brand equity. Thus, the

purchase power of the Western European consumers is the key factor which allows them to

switch of brand.


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Conclusion

After the study of many examples of brand loyalty around Europe, we can considerate

there is no Pan European brand loyalty. Every country got it same culture, and even in the

Eastern or in the Eastern bloc, all the countries got their own specificities. However we can

notice there is all around Europe less brand loyalty that it used to. But this research has

shown that the reasons differ from Eastern and Western Europe.

Thus, there is difference of attitude between both sides, due to their different

experiences and region specificities. When Eastern European people switch brands seeking

to experience, the Western Europeans look for variety.

To summarize, the communism era has changed the purchase custom of their

populations. Even if there are no real relations between the brand loyalty in the different

European countries, because of their diverse social cultures, the brand switcher population

in Europe becomes bigger and bigger. This is why companies try to launch fidelity cards, to

keep their loyal consumer away of this fashion.


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References

Bozzo, C., Merunka, D. & Moulins J-L. “FIDÉLITÉ ET COMPORTEMENT D'ACHAT: Ne pas se fier aux apparences; Fidélité et comportement d'achat répété La différenciation des clients fidèles Application empirique Mise en oeuvre de l'étude Méthodologie de l'étude Résultats obtenus Conclusion Références” Décisions. (2003) : 9 – 18.

Coulter R., Price, L., Feick, L. “Rethinking the origins of involvement and brand Commitment: Insights from postsocialist Central Europe” Journal of Consumer Research. Vol. 30 (2003): 151.

Delgado-Ballester, Elena & Munuera-Aleman, José Luis. “Brand trust in the context of Consumer loyalty” Europan Journal of Marketing. Vol.35 (2001): 1238 – 1260.

Datta, Palto R. “The determinants of brand loyalty” Journal of American Academy of Bussiness. Vol. 3 (2003): 138.

Gounarius, Spiros & Stathakopoulos, Vlasis. “Antecedents and consequences of brand loyalty: An empirical study” Journal of the Brand Management. Vol.11(2004): 283 – 307

Kerin R., Hartley, S. & Rudelius, W. Marketing the Core. The McGraw-Hill Companies: New York, 2004.

Lin, Chinho, Wu Wann-Yih, Wang Zhi-Feng. “A study of market structure: Brand Loyalty and brand switching behaviours for durable household appliances”. International Journal of Market Research. Vol.42 (2000) 277 – 303.

Meyer-Waarden, Lars & Benavent, Christophe. “Les Cartes de fidélité comme outils de Seggmentation et de ciblage” Décis. (2003) : 19 – 31.

Russian: Trying to succeed in the land of brand disloyalty. London: Emerging European 1997.

Rojsek, Ica. “A comparison of the purchasing and consumption behaviour of Slovenian and other Eastern European consumers” International Marketing Review. Vol.18 (2001): 509 – 531.


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Seitz, Victoria & Razzouk, Nabil “Strategic market planning in Romania: Implications for practitioners” Journal of American Academy of Business, Cambridge. Vol.3 (2003): 123.

Simon, Patrick “La <force> de l’attitude : clarification du concept et mise en évidence son rôle modérateur sur la relation engagement—comportement effectif de fidélité. Revue. Vol.197 (2004): 79 – 94.

Wangenheim, Florian & Bayon, Tomas “Satisfaction, loyalty and word of mouth within

the consumer base of a utility provider: Differences between stayers, switchers and referral switchers” Journal of Consumer Bahvior. Vol.3 (2004): 211 – 221.

Walsh, G., Mitchell, V-W., Henning-Thurau, T. “German consumer decision-making Styles” The Journal of Consumer Affair. Vol.35 (2001): 73 – 96.


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brand loyalty in western and eastern europe

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