Analysis of the Duplication of the Purchase Law

Marketers refer to the market as being ‘dynamic.’ The term refers to the ability of a market to fluctuate in terms of sales percentages from one company to another, either growing or dwindling with time (Heemeijer 2009, p. 212). The table presented indicating the market share held by different companies in the UK market shows dynamic behavior through the shifts in the market shares. For instance, Douwe Egbert gained 6% of the market share between 2004 and 2007. Tesco only gained 1% throughout the period under consideration while Sainsbury list 3% of the market. Lavazza’s market position remained stagnant, showing that the number of new customers equaled those who switched to other brands, or it may have maintained the same customers throughout the period. Tassimo Kenco, which was launched in 2006 attained a market share of 4% and doubled the digit in 2007, indicating quick adoption rates. The trends indicate the characteristics of a dynamic market.

The evidence presented in the table shows a stagnant market position held by Lavazza. It means that the brand experiences one of two scenarios. First, it could be losing and gaining customers at an equal rate. The trend is likely to continue as it is or fluctuate slightly by less than 1% up or down (Sharp, et al. 2002, p. 1). The second is that it could have maintained loyal customers who are likely to continue consuming it. The percentage non-fluctuation indicates no sign of reduction or increase in the subsequent future.

B. Share Category Requirements and Sole Loyalty

The sole loyalty of the biggest brand, Douwe Egbert stands at 41%, which indicates its ability to retain customers over a particular period. While it may not be the highest, it is significant as it is closer to 50% compared to the smaller brands, which range between 27 and 35. Tassimo Kenco has the highest sole loyalty at 67%, which may be attributed to the massive adoption rates, thus making it the most popular brand. Tesco is the second biggest brand. However, its sole loyalty stands at 30, meaning that it sells its products based on availability and size of the brand but not based on popularity. The big brands are favored by factors such as long-term presence in the market hence trust, better brand image compared to smaller counterparts, as well as the economies of scale that create favorable pricing advantages (Uncle & Dow 2003, p. 295; Dawes 2016, p. 479). Other exceptions in the general trend is Sainsbury and Taylors with percentages of 35 and 27 respectively. They have a bigger market share compared to Lavazza, meaning that they are likely to sell more units due to better brand recognition as well as its size, which is a factor that may sway consumers with no brand polarity (Ehrenberg & Goodhardt 2002, p. 41). Deviation from the double jeopardy phenomenon as well as the purchase law are caused by product exclusivity and price incentives (Romaniuk, et al. 2012, p. 243).

C. Duplication of Purchase

An analysis of the table indicates pattern formation across the table, showing the differences in customer sharing between big and small brands. Douwe Egbert has the highest number of customers across the table, meaning that consumers of other brands were more likely to purchase this product as a replacement for their favorite brand. The average duplication rate places Tesco next on the list, meaning that it was also preferred among customers who may have failed to find their usual brand. Douwe Egbert customers were more likely to purchase Tesco products compared to their likelihood to adopt other brands. The smaller brands such as Morrisons and Lavazza had a lower average duplication rating, meaning that consumers of the other brands were less likely to complement or replace their usual products with those from the smaller brands (Bandyopadhyay, et al. 2005, p. 415).

Tesco, Sainsbury, and Morrisons are ranked in the respective order in terms of market share (11%, 9%, and 3%) and average duplication rates (19, 16, and 7). The Kantar Worldpanel 2017 supermarket rankings in the UK placed Tesco  as the most popular brand with a rating of 27.8%. It was followed by Sainsbury at 15.8%, Morrison’s ranked fourth with 10.4%  (BBC, 2017). The popularity rating has remained relatively same in the past decade and half, and so has the market share. The data above indicates that products that bear the brand name of the supermarket are likely to share in the volume of sales ranking due to joint popularity rating. Therefore, product quality does not affect the number of units sold on the market.

The general pattern is that bigger brands attract more customers who seek to replace or supplement their usual brands (Ehrenberg & Goodhardt 2002, p. 40). However, there are certain exceptions presented in the table. Café Direct customers are more likely to purchase Sainsbury products than Tesco or Douwe Egbert. Percol consumers are more likely to purchase Taylors and Café Direct products than Tesco and Sainsbury despite their comparative lower average duplication index. It means that the consumers of the top five brands have a strong influence on the market, which may cause them to be preferred products despite their overall ranking.

In terms of competition, Lavazza may be grouped together with Percol and Morrison in terms of average duplication capacity. The three brands are the least popular on the UK market (Romaniuk 2001, p. 111). However, they compete in the same category. In order for Lavazza to scale to a higher competition zone, it needs to increase its level of brand recognition to boost its sales, thus raising the chances of being adopted as a more preferred brand than it is according to the ranking under consideration (Wright 1996, p. 19).

If Lavazza was to lose its customers, the table indicates that the most likely winners would be Douwe Egbert, Tesco, Sainsbury, and Taylors respectively. The three are categorized as the top-tier brands (Romaniuk 2001, p. 111; Dawes 2016, p. 479). Taylors and Café Direct may be categorized as second tier while the rest are placed under third tier, based on the average duplication ratings with respect to Lavazza. However, the general classification as per the overall duplication ranking places Douwe Egbert far ahead of the rest of the brands by at least 7 points. Tesco, Sainsbury, and Taylors come next followed by Café Direct, Percol, Lavazza, and Morrisons in the lower segment.

Lavazza has been placed in the third-market segment relative to the other brands among those under consideration. It means that it is more likely to gain customers from competitors within its market segment than it is to take away the consumers of the bigger brands at a higher market segment (Romaniuk 2001, p. 111). Therefore, it is likely to take a part of the market shares of Café Direct, Percol, and Morrisons. In this category, Morrisons is the most endangered because it has the lowest market share as well as average duplication ranking.

Coffee is a beverage whose consumption is based on factors such as culture and personal behavior, which are can hardly be manipulated by company marketing strategies (Sharp, et al. 2012, p. 204). The Dirichlet model of repeat-purchase behavior states that certain consumption trends dictate the rate of consumption of a product and, therefore, the number of times that a consumer may purchase the same over a specified period (Sharp & Driesener 2000, p. 1144). Therefore, making the existing customers purchase more of the product may not make any difference because the consumption rates are likely to remain the same. The first logical step towards increasing sales is by formulating strategies that will lower the duplication rates by purchasing other brands of premium coffee. Consolidating the customer loyalty not only has the benefit of establishing a base profit level but also creates an impression on the market that Lavazza is a trusted brand (Nord & Peter 1980, p. 37). The impression may serve to increase the duplication rates of other brand’s customers purchasing Lavazza product, which may subsequently raise the customer base exponentially.

Recommendations on Practices to Increase Brand Loyalty and Market Share

A. Market Share

Marketers use the term ‘dynamic’ in the description of markets, which is defined by the purchase law as the randomness of customer behavior in the selection of products meant for consumption (Heemeijer 2009, p. 212). All markets are dynamic. However, there are certain principles that determine the differences in market share and the ability to gain or lose customer from or to competitors (Uncles, et al. 2003, p. 296). Some of the factors include loyalty, size, and performance of a brand as well as the market perception among others. In a pool of brands of a similar products, the rating of a particular brand and its market share depends on consumers’ perception (Winchester, et al. 2008, p. 553). For instance, in the case study, Douwe Egbert has a better consumer rating and trust compared to other products, hence its dominance of the coffee market despite selling the same product. A positive image of a company over the other represents desirable qualities such as exclusivity, price advantage, or higher quality of the product or packaging and other components that define the purchase law (Dawes 2016, p. 479), all of which influence the decision of a customer in a dynamic market. In order to stay competitive, managers need to determine the major driving factors in a particular industry in order to appeal to a greater customer base. Some of the ways in which a company could promote quick adoption of its product is by providing certain incentives such as discounts, loyalty reward programs and exclusivity. Discounts and loyalty programs ensure that the cost of the product is lowered in such a manner that a manufacturer still makes profits and the customer gets more value for money (Uncle & Dow 2003, p. 295). The two techniques drive the sales rates higher compared to exclusivity, which inspires brand following based on the rarity of the product.

Lavazza is a company that suffers the double jeopardy phenomenon, a situation in which the size of its brand denies it the leverage required to attract a large number of loyal consumers which translates to low sale volumes compared it its competitors (Ehrenberg & Goodhardt 2002, p. 40). It explains the stagnation of market share by Lavazza as indicated on the table in the case study (Sharp, et al. 2002, p. 1). One of the ways that a company may overcome the effects of the ceiling that comes with the size of its brand includes the consolidation of the market by offering exclusivity of the product as well as other incentives such as price cuts and discounts to potential customers (Nord & Peter 1980, p. 36). In this way, the company makes lower profits per unit, which is compensated by increased volumes in sales, thus avoiding the double tragedy trap (Bandyopadhyay, et al. 2005, p. 416).

B.  Share of Category Requirements (SCR) and Sole Loyalty

The differences in the sole loyalty between small and big brands is explained by the double jeopardy phenomenon, which dictates that smaller brands are less trusted and considered compared to the bigger counterparts (Ehrenberg & Goodhardt 2002, p. 41). Even in the case of a dynamic market that is devoid of buyer preferences, the size of the brand is likely to influence the market due to the pricing strategy that could be adopted while maintaining profitability. Economies of scale favor the bigger brands due to the larger market share, which means that the large volumes are likely to compensate for price discounts that may not be readily available for smaller counterparts (Sharp, et al. 2002, p. 3). It means that the ability of the bigger brands to entice new customers and keep existing ones is comparatively higher, hence the ability to compete favorably within the market. This phenomenon locks smaller companies in the double jeopardy trap, which may be avoided only by creating brand exclusivity through revamping of the image of the brand as well as the incentives available for customers such as rewards for loyalty (Romaniuk, et al. 2012, p. 243).

C. Duplication of Purchase

Duplication of purchase is a phenomenon that affects products whose availability is guaranteed by various brands with different specifications. As stated before, some companies may have advantages over others due to the size of their brands, market share, price positioning and positive consumer perspective (Dawes 2016, p. 479). The law of purchase dictates that a larger variety of products on the market favor the customer in the sense that he or she can select a product that most suits his or her needs from the wide range available (Uncles, et al. 2003, p. 296). In this situation, brands with a bigger market share, image and reputation have a competitive advantage over smaller brands that may be trapped in the double jeopardy phenomenon that costs them both customer loyalty and sales volumes. As stated before, smaller companies need to offer incentives and exclusivity in order to lock in their customer base, which may trigger a deviation from the normal purchase laws, thus inspiring loyalty and better brand recognition.

Big box stores such as supermarkets and grocery chains may choose to use their brand identity on certain products that they process and sell to customers. In the case study, the coffee sold by Tesco, Sainsbury, and Morrisons bears their brand names. The effect, as documented on the related table is that the brand positioning of the company affects the popularity, and hence, sales of the products associated with them. A report by Kantar Worldpanel indicated that the brand recognition and size of UK’s biggest supermarkets reflected the order of products of the three supermarkets in terms of brand power (McKevitt, 2017). Supermarkets with a lower brand power ought to explore ways that could boost sales of its products, such as pricing strategies or loyalty rewards.

In the race for market dominance, certain goals may be deemed realistic for various companies within a particular niche based on the market segmentation as well as the strategies adopted for approaching the market (Wright 1996, p. 19). Small companies are likely to lose parts their market share to bigger brands that have better recognition and image. In this regard, any industry or niche may be categorized by brand sizes, which may determine formidable competitors for companies of that suit each classification. Top tier companies may be defined by exclusivity (in terms of specifications, taste, or any other feature), long time market presence that invokes consumer trust and strong brand image, which make price considerations insignificant. Middle tier brands are those that have significant brand recognition but are easily passed over for the exclusive counterparts, meaning that they have a relatively weaker brand image (Romaniuk 2001, p. 111). Lower tier brands are those with minimal or no leverage over the market in terms of brand image, exclusivity, or trust. In the latter case, price strategy may work to keep its market share and entice new consumers.

Conclusion

The factors that determine the sales of a brand in terms of volumes include the market share, brand positioning in terms of performance and image, price strategies, and consumer perception. Other factors such as exclusivity, quality of product, and others that satisfy consumer needs control loyalty. All these parameters are significant indicators of the position of a company’s product in its niche and its ability to compete favorably. In this case study, Lavazza is a lower-tier coffee brand that suffers double jeopardy, which denies it fair competitiveness in a dynamic market. In order to overcome this limitation, the company needs to formulate strategies that will increase its exclusivity and introduce price incentives as well as loyalty rewards for its customers.

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