Impact of Price, and Quality on Brand loyalty of Automobiles in Pakistan

Rashid Mateen Khan
rashidmateenkhan@yahoo.com Riphah International University

Khawaja Fawad Arif
fawadrf_khawja@yahoo.com Riphah International University

Abstract
This study is conducted to find out the impact of price, and quality on brand loyalty. The data was collected from one hundred and twenty consumers of automobile industry, through questionnaires, from various cities of the Pakistan. The result shows that quality and price are directly linked with brand loyalty. Companies can enhance large market share by emphasizing on the availability of cheaper spare parts and providing the vehicles which consume less fuel.

Introduction
The true customer is essential element of brand loyalty (Schoenbachler, & Gordon, 2001). If there is a small increase in price it may produce no significant response change in brand loyalty (Monroe, 1976). To lead a better brand loyalty, a high perceived quality in a product is required (Lee, & Wang, 2006). To provide a high quality along with customer satisfaction are equally important for all firms (Fornell. 1992). High prices can be charged for high quality products (Engel. 1963) In launching new products, companies are facing a highly competitive market. It is very challengeable that they capture considerably large market share for their products. But there are still some factors which are wining competitive advantages and generating revenues for companies. Along with some other factors, quality and price make the product highly competitive in a market. Price and quality plays important role to develop the loyalty with a product. If a product is not able to provide a high quality with suitable price, it can lose its loyalty among the target customers. Each brand has a customer intact that makes the product more and more loyal-

able. The firms are always busy in expanding their customer database. Companies in the market have a market share that is shared among different companies supplying the same brand. To maintain their market share, it is necessary to keep on promoting the product. If the price is increased drastically, the company may lose its customers. Quality is major factor that contributes toward brand loyalty. If the customer is fully satisfied while utilizing the product, it is a good sign towards the loyalty with the brand. Automobile industry is one of biggest industries functioning in the Pakistan. There are well known brands of automobiles running their business in Pakistan; like Toyota, Suzuki, Honda, Mercedes, and many more. They are providing different type of vehicles. They also keep on introducing new models in the market, which successfully gain them profit. So brands are considered as status symbol. They have enough market shares. This industry has an emerging potential in Pakistan. To develop more and more loyalty among the customers the industry need to put more emphasis on the factors of price and quality.

1988). images. So we are conducting this research to analyze the impact of quality and price on brand loyalty in automobile industry of Pakistan. For consumers. signifies a person’s devotion or sentiment of attachment to a particular object.There has been no proper study conducted on automobile industry regarding these two elements and their effect on brand loyalty. It occurs because consumers perceive that the brand offers the right product features. This perception becomes the foundation for a new buying habit. But when number of brand increases. brand loyalty play significant role. Ehrenberg. tend to form habits and continue purchasing the same brand. Much of the success of a business depends upon the skills to create and maintain loyalty. Fox. Brand loyalty is very helpful in choosing brand (Swaminathan. or level of quality at the right price. Brand selling to loyal customer reduce cost and high loyalty give companies strong competitive weapons (Ergin…2005). As loyal customers are committed to repurchase the product and there is very less .1974). But they will make strategies to make new loyal customers to deter the entry of competitors in market (Schmalensee. it has various advantages for the consumers and sellers. consumers initially will make a trial purchase of the brand. Brand loyalty creates favoritism for a brand (Anderson. satisfied customers repeat purchases. the loyalty for a particular brand decreases. 2008). When a product is successful in building loyalty. and after satisfaction. & Goodhardt. First the loyalty level decreases and then it becomes level off (Raj. 1974).2006). an ideal. For high market share. Hardman. In a competitive market the first priority of the companies should be to satisfy customers. If there is high brand loyalty. Brand loyalty is a consumer’s preference to buy a particular brand in a product category. 2005). & Guille’. Basically. it becomes easy to select a product. it will result in higher market share (Singh. This is because. It maximizes the profit by double digit. a duty. In other words. Devoted customers are durable assets rather than a threatening liability (Shugan. They become loyal to the firm and are effective communicator in the society for the firm (Lglesia. as the product is safe and familiar. & Keillor. or a cause”. as a general term. & Redy. 2008). Loyalty in term of product or brand is defined by Kotler and Killer “Loyalty is a commitment to re-buy or re-patronize a preferred product or services”. Brand loyalty is in the favor of firms. LITERATURE REVIEW AND RESEARCH HYPOTHESES Brand Loyalty According to encyclopedia Britannica (1971) “Loyalty.1985). which may be another person or group of persons. Companies should concentrate on attracting loyal customers instead of making new customers. it helps consumers to save time in selecting products to purchase. Loyal customers are willing to pay more for a brand (Lau. Loyal consumers are the great assets for a firm because they purchase higher volumes so brand manager must concentrate on loyal consumers (Ownens.2001).

2000). & Baumgartner. it makes the brand very competitive. 2006). & Raj. & Stodnick. For example. the high quality brand gives favorable benefits as relative to low quality brands (Kumar. If he is inspired by the performance of the product he will decide to repurchase whatever circumstances are. For marketer the quality of the product offering is the intervention point and to create loyal consumers. first loyalty level decline and gradually it become level off. Quality plays an imperative role in making brand loyalty.1997). Due to long period of usage and performance. The sales of high quality brands are less affected by increase in prices. They offer new features and make innovations. Logistic regression model supported that product quality is one of the important driver of consumer loyalty followed by services quality and brand image (Clottey. When consumers acquire . Simply he perceive the quality first (Wonglorsaichon. it becomes more favorable for the firms as they give tangible benefits (Dranove 1999). High level quality can lead commitment of the consumers to repurchase the product (Thurau. results in decrease of loyalty level. 2008). Loyal customers are essential elements for companies. because of competition. quality is one of the first variables which are tartan by consumers. quality has great importance (Darsono. & Sathainrapabayut. if the company has a huge number of loyal customers. they reduce promotion cost for the company by communicating brand effectiveness of the brands they are mostly inspired from.chance for switching from one brand to other so it give companies high level of profits and this increase their market share by making the product competitive in the market. “The degree to which a product meets the expectations of the consumer”. As monition in literature. But this is also a fact that the increase in the number of brands. When a consumer wants to buy any product. They are helpful in minimizing lot of expenses of the company. So company should concentrate on the satisfaction of loyal customers. highly functional products are assumed as having higher quality (Page. When companies improve quality of the product. quality is one of the first variables to inspire and make the consumer decide to repurchase the product. they can easily sell out their products without wasting their energies. Hence. But when prices are falling. when brands in a market increase. & Herr. Secondly. consumers analyze internal standards of the product (Kirmani. & Junaedi. & Klee. One can be aware of quality while using the product. Whether prices are Quality Stanton defines quantity as. consumer will examine standards and features of the product. awareness about a brand.1997). 2008). 2002). Other brands are also trying to capture market share. Collier. For quality evaluation.

Here.409 0. A total of 150 questionnaires were distributed out of which 120 were received back with response rate of 80%.409) Regression Analysis ` Price Quality R2 = . which is. 2000). The questionnaire was personally filled and received from the respondents. we want to see the relationship of quality and brand loyalty. 1991). The collection related from various cities of Pakistan and the total sample size was 120. that high quality products make loyal consumers. We want to see the effect of change in quality on brand loyalty. Available literature also shows that high price products and long performer emerge high quality. 1999). So this is understood. Increase and decrease strategy of price results in increase or decrease of brand loyalty of the product (Gedenk. that is (. which is (0. But our findings do not support our . 1999).004 Adjusted R square= significant= 0.026 . H1 Quality is significantly proportional to brand loyalty. Sample Discussion We proposed the hypothesis that quality is significantly proportional. and price has converse relationship with brand loyalty. Results Correlation Analysis Correlation analysis of our research is showing in the table below: Brand Price Quality loyalty Brand 1 Loyalty Price 0.68). Price promotions. services or resource.230 .305 t 2.368 1 Quality 0. as price increases loyalty must be decreases. but loyal consumers don’t care about high price. the quality and brand loyalty also show a positive relationship. The population for Data collection was regular users of automobile sector of Pakistan. He will prefer to purchase at any cost.701 Beta .455 1 Finding Correlation analysis indicates a relative strong relation between the Price and the brand loyalty. & Raj. & Neslin.988 Significant .255 2. High brand loyalty is associated with high level price brands (Chauduri. & Papatla. Price The amount of money needed to buy particular goods.209 0.193 F= 12.increasing or decreasing. Further more. The sensitivity of price in loyal customers is very less as compared to non loyal customers (Krishnamurthi. reduce brand loyalty (Mazumdar.000 H2 Price has converse relationship with brand loyalty Research Methodology Questionnaire was adopted from (George Bali) it contained three parts. especially temporary price reductions.

There are reasons behind these results. that when prices are economical and are within the range of customer’s purchasing power. vol 27(2). As we mentioned earlier. Anderson. The results show that. is purchasing power of the consumers. Infact due to high quality. Conclusion and Future Research In our research. they are satisfied with every aspect of the brand and this makes the people brand loyal. Evan E. (1963). Our findings are very much supportive for our hypothesis about quality. One of the factors. Are Automobile Purchasers Dissonant Consumers?. then brand loyalty will increase as a result. we found that both quality and price are positively linked with brand loyalty in automobile industry of Pakistan. Some brands are said to be status symbols like Suzuki is compared with middle class and other brand like Toyota. The first one according to our observations is that the people who are the users of automobile of different companies are most loyal to their brand. American Marketing Association. that in Pakistan automobile brands are considered as status symbol. They are satisfied with the performance of the vehicles. Purchasing power of the users is another observable fact. The sample that we were analyzing showed a perception. 55-58. which maintains the loyalty of the users. The Measurement of Buyer Brand Preference and Indifference under Changing Terms of Trade. companies must be aware of purchasing power while launching new models in the market. And they wanted to purchase the same brand in future. Hence. Vol 56(1). So. for its maintenance and fuel consumption. And each class has their own behavior of choice. Here purchasing power plays an important role in buying behavior of customer. So this mean the companies are providing good services to their customers in Pakistan. We find people arguing that within their range of making purchase of vehicle. loyalty for these brands is measured to be more then the others. American Journal of Agricultural Economics. customers are loyal and they want to repurchase particular loyal brand’s vehicles at any cost. Engel. The maximum size of our sample consists of the people who are using Suzuki and suggests that they purchase only the brand which has economically suitable price. But there are some other factors which can be influencing on purchasing behavior of the customers and also making them loyal. They also mentioned Suzuki cars are cheaper then other brands. which lead to the basis for future research. Honda and Mercedes are suppose to be related with higher class. there will be no effect on brand loyalty in case of automobile industry of Pakistan. then they attract customers. 122-128. References James F. if prices are increasing. The trend of purchasing vehicles is found in middle class and upper class of society in Pakistan.hypothesis for price. In the light of our findings we can predict that when companies provide good quality and long time performance products. . (1974). As well as consumers are intended to re purchase the product.

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