Multiple Measures of Loyalty: Validity and Reliability Tests in Two Retail Settings

Article excerpt

ABSTRACT

The author employs multiple indicators to measure retailer brand loyalty in consumers of fast-food burger outlets and health clubs. Validity tests and reliability tests are performed. The authors find that the six measures are coherent regarding construct validity, exhibiting high relationships to each other in two dimensions: preferences and usage. The findings are very similar in both retail settings, providing evidence for external validity. Additionally, regarding reliability, support is provided that the different measures can be considered equivalent alternative forms for which to measure loyalty. Also a selected loyalty indicator exhibits criterion validity, being related to other variables as might be predicted. The use of these multiple loyalty indicators should provide more confidence in the outcomes of future studies pertaining to relationships with brand loyalty.

INTRODUCTION

General business wisdom suggests a company focus at least a proportion of marketing efforts on the development, maintenance, or enhancement of customer loyalty (Dick & Basu 1994). This emphasis is important because a company with a large number of brand loyal buyers will be more secure in its markets and should have a higher market share than other firms without this asset (Raj 1985; Robinson 1979; Smith & Basu 2002). Having more brand loyal buyers than competitors has many advantages, including a greater response to advertising (Raj 1982), larger purchase quantities per occasion (Tellis 1988), and reduced marketing costs (Rosenberg & Czepial 1983). Brand loyal buyers are important because, as markets become more mature, increases in share become more expensive and improving customer loyalty is a means of increasing and maintaining share (Gounaris & Stathakopoulos 2004).

The purpose of this study is twofold. First, the authors offer and describe six parallel forms of measurement for store loyalty. Second, the validity and reliability of these loyalty indicators are tested in samples of consumers who use fast-food burger outlets and health clubs. In particular, the study addresses concept validity, construct validity, criterion validity, external validity, and parallel forms reliability. Ideally, multiple indicators should provide more reliable and valid measures and, therefore, more confidence in the conclusions drawn from any statistical analysis.

LOYALTY

Firms must find ways to keep current customers, attract new customers, and to retain these buyers over the long term. A firm must therefore continuously battle with competitors to maintain or increase both the number of buyers and the loyalty of these customers. When a firm fails to hold a strong relative competitive position, it runs the risk of a widespread phenomenon called "Double Jeopardy" (DJ), where small-share brands attract somewhat fewer loyal consumers buying in smaller quantities than large-share brands which have a larger loyalty base purchasing larger quantities (Ehrenberg & Goodhardt 2002; Donthu 1994; Martin 1973; McPhee 1963; Michael & Smith 1999). Therefore, brand loyalty is a critical strategic issue since it directly affects firm performance and customer behaviors.

McDowell and Dick (2001) postulate that a brand's performance is driven by both the number of individuals buying a particular brand and the frequency of repeat purchases from these customers. A firm's ability to manage these two factors dictates the extent to which it maintains and sustains its customer base, as well as its market share. Indeed, Lehmann and Winner (1997) suggest that cultivating repeat business is a prerequisite for maintaining a firm's market share. Likewise, Robinson (1979) and Raj (1985) state that the larger the number of loyal customers, the more secure will be the brand's market share. With estimates regarding the number of'truly1 brand loyal buyers for certain retailers hovering around twenty-five percent, one can begin to imagine the importance of the battles for the consumer that we witness every day in consumer markets (Pleshko & Heiens 1996, 1997). …