The long-term erosion of repeat-purchase loyalty

Abstract

Purpose This study aims to investigate the long-term erosion of repeat-purchase loyalty among consumers who purchase brands in a one-year base period. Design/methodology/approach The study uses a five-year consumer panel of continuous reporters. This paper identifies brand buyers in a base year, then calculates the proportion that fails to buy the brand in later years. This paper analyses the top 20 brands in 10 consumer goods categories. Findings This paper finds pronounced erosion in repeat-buying over the long-term. The proportion of buyers from a base year that fails to buy the brand in a later year increases steadily over time, from 57% in year 2 to 71.5% by year 5. Moreover, this paper identifies brand and marketing mix factors linked to this over-time customer loss or erosion. Research limitations/implications The study provides evidence that consumers’ propensity to buy particular brands changes over a period of years, even though those brands continue to exhibit a stable market share. This evidence provides a different interpretation than the literature to date, which has viewed purchase propensities as fixed. Practical implications The study finds that store brands and niche brands exhibit lower levels of erosion in their buyer base that a broad range is associated with lower erosion and that high price promotion incidence is associated with lower erosion for manufacturer brands. Originality/value Loyalty erosion has been reported before (Ehrenberg, 1988; East and Hammond, 1996) but only over short periods. This study examines the phenomenon over five years, confirms that the rate of erosion does diminish over time and that it is related to category and brand characteristics, as well as marketing mix decisions.

Investigating Undercurrents of Stationarity and Growth With Long-Term Panel Data

“…Over a five-year period, both brands maintain near-stationarity, with penetration maintained at 36% for Brand A and 27% for Brand B. Consistent with the findings of Dawes et al (2020), we observe an undercurrent of erosion in repeat buying rates from the first year. Taking the example of Brand A, 70% of the brand buyers from the Year 1 buy the brand again in Year 2.…”

“…These examples reflect findings from a recent study by Dawes et al (2020), which used a long-term continuous panel to examine the erosion of annual repeat purchase loyalty for stable brands over five successive years. Continuous losses in repeat buying rates were consistently balanced by gains in attracting new buyers, resulting in no reduction in overall share.…”

“…This indicates that purchase propensities are not fixed, but change over time, and that these changes are related to category and brand characteristics, as well as marketing mix factors such as range and promotions. Dawes et al (2020) is another example of how continuous panel datasets can extend marketing knowledge to the long-term. Erosion of repeat buying had been previously documented (East & Hammond, 1996; Ehrenberg, 2000), but only at quarterly aggregations and never for more than 18 months.…”

Digital Loyalty Programmes

“…Such analysis is crucial for marketers better to understand the nature of competition in their market. The NBD fits well in extended time periods of continuous buying (Dawes et al, 2020), and this warrants extension from B2C into B2B.…”

“…While the use of the NBD has been tested across various domains (e.g. Dawes et al, 2020;Trinh et al, 2014;2016;, its application in the B2B context has been limited to only a few studies. Some of these have suggested that since B2B customer behaviour is less random (especially within membership contexts), it may constitute a boundary condition (Sharp et al, 2002); thus, the model may not explain B2B behaviour well.…”