The globalization of competition, saturation of markets, and development of information technology have enhanced customer awareness and created a situation where long-term success is no longer achieved through optimized product, price, and qualities. The arguments in support of loyalty are simple to understand. Loyal customers are reported to have higher customer retention rates, commit a higher share of their category spending to the firm, and are more likely to recommend others to become customers of the firm. (Reichheld and Sasser, 1990; Zeithaml, 2000, Keiningham, et al. 2007) Traditionally, marketing activities have focused on success in the product marketplace by examining the physical aspects of products and services such as quantity, quality, functionality, availability, accessibility, delivery, price, and customer support. More recently, marketing managers have shifted their emphasis to creating value for their customers (Clutterbuck and Goldsmith, 1998; McAlexander et al.2002, Mascarenhas et al. 2006). This research focused determine the effects of brand value, which is perceived by customers based on the services offered by the insurance company preferred, on the level of loyalty towards insurance companies.
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This study was carried out based on descriptive research model. Analysis was employed in the study so that the extent to which the level of customer satisfaction about each of the services offered by insurance companies influences the level of customer loyalty to insurance companies can be determined.
Keywords: Brand loyalty, Brand value, Insurance Company, Service
This paper examines brand loyalty in Insurance Industry from the consumers' perspective. The central thrust of the marketing activities of a firm is often viewed in terms of development, maintenance, or enhancement of customers' loyalty toward its products or services (Dick and Basu, 1994). According to research studies, it can cost as much as 6 times more to win a new customer than it does to keep an existing one.(Rosenbarg et al. 1984)
Given that the marketplace is increasingly characterised by unpredictability, diminishing product differentiation and heightened competitive pressure, brand loyalty becomes all the more important. Discovering the reasons why loyalty develops is essential, if sound marketing strategies in the pursuit of that loyalty are to be developed. There is a large volume of extant literature on brand loyalty; however the investigation of brand loyalty development from the consumers' perspective has been given scant attention. This paper therefore, presents new empirical evidence on the development of brand loyalty in Insurance markets, and draws particular attention to the role of bonds in loyalty development in order to bridge that gap.
2. Brand loyalty
According to Aaker (1991) brand loyalty reflects how likely a customer will be to switch to another brand, especially when that brand makes a change, either in price or product features. David Aaker also suggests that brand loyalty leads to brand equity, which leads to business profitability. Aaker divides brand equity into five major asset categories: brand name awareness, perceived quality, brand associations, brand loyalty and other proprietary brand assets. Figure 1 shows a general overview of how brand equity spawns value and provides the different ways in which the brand equity assets create value. Moreover, brand equity creates value not only for the customer but also for the firm. Finally, for assets or liabilities to inspire brand equity, they must be linked to the name and symbol of the brand, and if there is a change in name or symbol, this may cause some or all assets and liabilities to be affected. Customer-based brand equity is defined as the discrepancy effect of brand knowledge on consumer reaction to the marketing of the brand.
Other Proprietary Brand Assets
Provides Value to Firm by Enhancing: Efficiency & effectiveness of Marketing Programs
Anchor to which Other Associations Can be Attached Familiarity- Liking Signal of Substance/ Commitment Brand to be considered
Reduced Marketing Costs
Attracting New Customers
Time to Respond to Competitive Threats
Provides Values to Customers by Enhancing Customers': Interpretation/ Processing of information
Confidence in the purchase decision
Help Process/ Retrieve Information Reason-to-Buy Create Positive Attitude/ Feelings Extensions
Always on Time
Marked to Standard
Reason-to-Buy Differentiate/ Position Price Channel Member Interest Extensions
Figure 1: How brand equity generates value. (Adapted from Aaker)
Brand and customer loyalty is a buyer's overall attachment or deep commitment to a product, service, brand, or organization (Oliver 1999). The loyalty concept is similar in meaning to relationship commitment, which is described by the relationship marketing literature as an enduring desire to be in a valued relationship (Morgan and Hunt 1994). Loyalty manifests itself in a variety of behaviors, the more common ones being recommending a service provider to other customers and repeatedly patronizing the provider (Fornell, 1992).
Loyalty is a prime determinant of long-term financial performance of firms (Jones and Sasser, 1995). This is particularly true for service firms where increased loyalty can substantially increase profits (Reichheld, 1996). Service firms focus on achieving customer satisfaction and loyalty by delivering superior value, an underlying source of competitive advantage (Woodruff, 1997). For service firms the challenge is identifying the critical factors that determine customer satisfaction and loyalty. (McDougal, Levesque, 2000).
There are many advantages of brand loyalty. According to Delgado-Ballester and Munuera-Aleman (2001) the interest in brand loyalty derives from the value that loyalty generates to companies in terms of:
A substantial entry barrier to competitors
An increase in the firm's ability to respond to competitive threats
Greater sales and revenue
A customer base less sensitive to the marketing efforts of competitors
Further, Rowley (2005) identifies the benefits of brand loyalty as:
Lower customer price sensitivity
Reduced expenditure on attracting new customers
Improved organizational profitability
Caudron (1993) and Olsen (1997), however, argue that the ever-increasing proliferation of brands, price competitiveness, and the strength of own label brands have all worked to drive down brand loyalty. It has been suggested that a loyal customer is an oxymoron in today's market place. Research has shown that there is a 50% chance that a consumer will switch from their normal brand to a competitor's brand, which is on promotion, and furthermore that two thirds of shoppers claim to always compare prices before choosing a product (Pressey and Mathews, 1998).
Keller proposes a model of brand equity by brand knowledge, which is shown in Figure 2. This model is comprised of brand awareness (brand recognition and recall achieved through marketing stimuli) and brand image. Brand image is detailed largely in the model as it has a complex nature. Thus, brand image results from the favourability, strength, uniqueness and types of brand associations held by the customer. In the model, Keller depicts various types of brand association: attributes (product-related and non-product related), benefits (functional, experiential and symbolic) and attitudes.
Favourability of Brand Associations
Feelings & Experiences
User/ Usage Image
Uniqueness of Brand Associations
Strength of Brand Associations
Types of Brand Associations
Figure 2: Brand knowledge. Adapted from Keller
When developing an understanding of loyalty, it is essential to describe what loyalty is not (Fournier and Yao, 1997) to enable the true dynamics of brand loyalty to be understood. Essentially brand loyalty is not satisfaction with a brand nor is it repeats purchase behaviour.
It is argued that as bonds grow in intensity, the attachment that the customer has for the brand deepens (Vincent and De Chernatony, 1999). Connections such as these demonstrate the powerful emotional attachments that can form when brands connect with customers in deep and significant ways. Fournier (1998) proposes that bonds can range in intensity from superficial to liking, friendly affection, passionate love, and addictive obsession, and where these bonds exist the brand contributes to the customers' life in significant ways. According to Uncles et al. (2003), marketers must understand why bonds exist and attempt to nurture them to enhance the strength of the consumers' attitudes towards a brand and thus strengthen the loyalty that exists.
Thus, it is apparent from the literature that bonds can lead to loyalty and can strengthen the loyalty that exists, however it is also possible that bonds can exist without the presence of loyalty. For example, a customer may have trust in a brand and be satisfied with a brand and yet switch to an alternative brand on offer for a variety of reasons.
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Interestingly however, while bonds can exist without the presence of brand loyalty, it is evident that loyalty cannot be present without the existence of bonds. For example, if a customer is loyal to a brand and engages in consistent repurchasing of a preferred brand, bonds such as satisfaction are inevitably present.
It is argued that the development of effective marketing strategies is dependent on knowing if and why loyalty does/can exist, and the type and nature of bonds that lead to the development of loyalty. In this context therefore, there is a necessity to discover from the consumers' perspective the types of bonds that exist in Insurance companies and the role of bonds in the development of loyalty.
3 Research Methodology
One random sampling frame of adult-aged individuals who reside within India was used to recruit participants to this web survey. Randomly selected sampling frames were selected from different industry professionals. The survey was completed within 30 days with a sample size of 104.
3.1 Objective of the study: The aim of this study is to determine the effects of brand value, which is perceived by insurance customers based on the services offered by the insurance company preferred, on the level of loyalty towards insurance companies.
3.2 Reliability Analysis of the Research: It is possible to say that the research is reliable as a whole, according to the coefficient of reliability Î± = 0,884
4 Research Findings:
4.1: Demographic details
As can be seen Table 1, 59.6 % of male, and 40.4 % of them are female customers. When the distribution of the subjects according to their age range is analyzed it can be seen that 13.5% of them are aged between 15-25, 53.8 % of them are aged between 26-35, 23.07 % of them are aged between 36-45, 5.77 % of them are aged between 46-55, and 3.8% of them are aged 56 or more than it. Consequently it is seen that customer intensify between "26-35". When the distribution of the members related to their education background is examined, it can be seen that 57 % of the members are graduates, 9.6% of them are master's degree graduates, and 5.8 % of them are doctor's degree graduates. When the proportion of the members who are graduates and postgraduates is analyzed in terms of the general sum a high proportion has been occurred as 82.1 %.
When the monthly incomes of the members are examined, it has been seen that 36.54 % of them have monthly income as Rs 20000-29999, 35.58% of them have monthly income as Rs 30000-39999, 9.6 % of them have monthly income as Rs 40000-49999, 8.6 % of them have monthly income as Rs 50000- more than it.
Table 1: Demographic Profile of Participants (n= 104)
55 and above
Monthly income (Rs)
50000 and above
4. 2: Insurance companies' meeting of expectations
As can be seen Table 2, customers were asked if the services provided by an insurance company met their expectations in terms of value for money, and 78.8% of the customers stated that their expectations were met while 21.2% of them gave negative response to this question. As can be seen in Table 2, the money spent by customers meet their expectations to a great extent. On the other hand, the 21.2-percent negative response points out that identifying customers' wants and needs accurately and meeting them has become really important for insurance companies.
Therefore, insurance companies should increase communication channels with their customers and also become involved in studies aimed at measuring customer satisfaction and value by using techniques like questionnaires.
Apparently, customers attach a great deal of importance to fulfillment of their wants and needs. In this respect, insurance companies have to provide their customers with services designed to create higher values for their customers and to increase customer loyalty to insurance companies. Thus, it seems obligatory for insurance companies to provide various options in value-oriented services such as insurance cover, increasing sales promotions, reminders for the payment of premium, add-on services. Furthermore, communication channels with customers should be increased so that customer wants and needs can be identified more accurately and services should be provided continuously through a strategy from which all customers in the market can benefit.
Table 2: Insurance companies' meeting of expectations of Participants (n= 104)
Meeting of expectations
Table 3: Experiencing negative situations of Participants (n= 104)
Experiencing negative situations
Too much experience
4. 3: Efficiency of Insurance Company's attitude towards negative situations
As can be seen Table 4, those customers who had stated that they had had a negative experience concerning the insurance firm chosen (n=29) were inquired about the extent to which they found companies' attitude towards problems efficient. The responses indicate that 51.7% of the customers regard the insurance firms' attitude towards the problems experienced as efficient. On the other hand, 24.1% of them provided neither positive nor negative responses while 17.2% of them stated that they found the insurance firms' attitude towards the problems inefficient. This situation shows that the personnel of the companies should receive more training and there should be more effort about the management of customer relations. Also, insurance companies should ensure that their personnel have a feeling of satisfaction and contentment about their job. It is only natural that a member of staff with a complete training and a feeling of contentment about his or her job will adopt a more positive attitude towards customers. Furthermore, a well-qualified employee could help increasing customers' level of loyalty to insurance firms by creating more customer value on behalf of firms.
Table 4: Efficiency of Insurance Company's attitude towards negative situations (n= 29)
Efficiency of company's attitude towards negative situations
Neither agree nor disagree
4. 4: Communicating suggestions and complaints
As can be seen Table 5, customers participating in the survey were asked whether they thought their suggestions and complaints were conveyed to the relevant departments of insurance companies or not. According to the results, 51.0% of the customers stated that they thought their suggestions and complaints were conveyed to the concerning departments of insurance companies. On the other hand, the percentages of those providing negative responses for this question and those giving neither positive nor negative responses were 18.27% and 24.04 % respectively. This situation points out that the units of insurance where suggestions and complaints are evaluated prove inefficient. Customers may have the opinion that when their remark about a negative situation is conveyed to the relevant unit it is ignored. In this respect, it becomes critical that customers' suggestions and complaints be evaluated by the relevant unit and immediate feedback is communicated to customers. Resolving an issue and providing feedback about that may lead to a change of negative opinions about insurance companies even if customers have experienced a negative situation.
Table 5: Communicating suggestions and complaints of Participants (n= 104)
Communicating suggestions & complaints
Neither agree nor disagree
4. 5: Determinants of Insurance Choice and Satisfaction level
As can be seen Table 6, in terms of services and criteria, the questions in the first and second parts of the study were aimed at the services provided and factors affecting customer value such as brand image, insurance cover, safety of premium paid and human resources management. It is considered that each of the services and criteria questioned is included simultaneously by one or more factors affecting customer value. When the order of importance assigned by customers to the services provided by the insurance they prefer is examined, it can be seen that the services of "great importance" are, in a descending order," less calls from sales team (O=4.86) and am I getting what I was promised (O=4.74) followed by safety of premium paid (O=4.54). Other services following them are reminders for the payment of premium (O=4.49), minimum charges (O=4.46) and timely payment at the time of mishappening (O=4.37). These are followed by "How is the salesperson explaining the nitty-gritty of the insurance plan" (O=4.34), which indicates that service factors also may play a more significant role. The importance assigned by customers is followed by Insurance cover (O=4.33), brand image of insurance (O=4.27) and Effective insurance policy (O=4.19).
When the factors satisfying customers about the services of the insurance they choose are examined, it can be seen that customers are satisfied most by less calls from sales team (O=4.62) and am I getting what I was promised (O=4.51) followed by ease of claiming the money (O=4.13), minimum charges (O=4.11) and availability of on-line services (O=4.08). How is the salesperson explaining the nitty-gritty of the insurance plan is lower (O=3.68) than that for other service factors, which plainly reveals the fact that insurance firms should become engaged in more actions to create more customer value in their activities.
As Table 6 demonstrates, the satisfaction and importance levels assigned by customers vary significantly for all the services of the insurance preferred except for add-on services and availability of online services. The least satisfying factors based on level of importance are how is the salesperson explaining the nitty-gritty of the insurance plan (OO=4.34; OT=3.68), safety of premium paid (OO=4.54; OT=3.93) and insurance cover (OO=4.33; OT=3.81).
Apparently, customers express dissatisfaction with the insurance company chosen particularly in terms of the satisfaction levels they expect from these services. In other words, it seems that their expectations are not met and the value created by Insurance Company for customers cannot be perceived.
Table 6: Determinants of Insurance Choice and Satisfaction level (n= 104)
Insurance choice & satisfaction level
Matched z test
Effective insurance policy
How is the salesperson explaining the nitty-gritty of the insurance plan
Ease of claiming the money
Reminders for the payment of premium
Add on services
Timely payment at the time of mishappening
Am I getting what I was promised
Safety of premium paid
Less calls from sales team
Availability of online services
Minimum charges(% deducted from premium)
Meeting special requests
4. 6: Loyalty towards Insurance
As can be seen Table 7, when customers were asked if they would think of not having a lifelong loyalty to the insurance company they preferred or not, 36.8% of them stated that they would be loyal to the insurance they preferred while 33.8% stated they wouldn't. On the other hand, the percentage of those customers providing neither positive nor negative response for that question was 29.5%.
As Table 7 clearly shows, the percentage of customers thinking of being loyal to their insurance (36.6%) and the percentage of customers not thinking this way (33.65%) are very close. This situation demonstrates that customers may feel loyal to a particular insurance in direct proportion to the service value offered to them by insurance companies. As customers' value perceptions are formed in line with their relative decisions, any value component to be created by an insurance company can be perceived in a different way by any customer. Customers form their preference criteria based on the comparisons among insurances offering the services which create value for them. Customers show preference to the insurance which creates most value for them. However, this does not necessarily mean that a feeling of loyalty to the insurance company preferred is created within customers because a customer may show different preferences among the insurance companies creating most values for him or her. The percentage of those customers providing neither positive nor negative responses for this question (29.8%) seems to support this suggestion. Habits deriving from previous experiences may be a strong determinant for customers' insurance choice. However, this habit for an insurance company does not again mean loyalty to that insurance.
The concept of loyalty to be formed for an insurance company can be shaped by improving value oriented services and presenting them to customers continuously. Therefore, insurances operating should keep up with developing technology, improve the services creating most value for customers, and provide these series continuously throughout a year except for certain intervals.
Table 7: Loyalty towards Insurance products (n= 104)
Loyalty towards insurance
Neither agree nor disagree
Today's insurance companies have started to employ various marketing methods and strategies in an intensely competitive environment where product and service differentiation is becoming harder and harder, the number of rival companies is increasing and a new notion of customer whose wants and expectations are increasing day by day is emerging. In order for insurance companies to determine methods and strategies appropriate for themselves, they have to identify accurately the characteristics of the market in which they provide service. They particularly have to ensure customer value, which is defined as providing products and services with qualities different from rival insurances and with most benefit. It is clear that, in addition to insurance cover, criteria such as convenience of paying premium, services and criteria related to comfort such as online services and behavior and attitude of personnel and other service features such as reminders for the payment of premium and meeting special requests are also influential in creating value for customers and ensuring customer loyalty.
In conclusion, in marketing strategies aimed at creating value for customers, insurance companies have to determine the services and criteria regarded important by customers accurately and in line with customer expectations.
Thus, satisfaction level of customers about the services and criteria offered should continuously be measured. As well as creating a benefit for customers, the services and criteria to satisfy the customers and regarded important by them also create a value and loyalty for customer.
The research findings indicate that brand-customer bonds grow stronger as the commitment of the customer for the brand intensifies. Evidence of very high levels of commitment to brands was found among some respondents.
Indeed, Fournier and Yao (1997) describe the nature of that commitment as lying in the "emotional bond" that the customer has for a brand. It is important for marketers to understand the reasons why these bonds exist and to attempt to nurture them to enhance the strength of the consumers' attitude towards a brand.
The current research confirms that, where loyalties develop as a result of emotional attachments, strong bonds can form where the brand becomes established in the life of the consumer. The research also indicates that bonds can form where consumers are loyal for cognitive reasons. It could be argued given the research findings that bonds are likely to be stronger where consumers are loyal for cognitive reasons. It is probable that it is for this reason, coupled with the swing in loyalty studies from behavioural to attitudinal, that bonding at an emotional level has received more attention in the literature over the past decade, than bonding at a cognitive level. Researchers have predominantly explored the nature of bonds that are present for deep, emotional reasons. This study however, indicates the necessity to refocus attentions at bonding at a cognitive level, given the many cognitive reasons given for loyal behaviour by respondents to the research.
Progressing this thinking even further, the research findings also indicate that future thinking on brand loyalty would benefit from consideration of cognitive and emotive reasons for loyalty as interdependent determinants. It can be argued that cognitive reasons for loyalty such as quality and security preference might over time develop into an emotional attachment to a brand, where the consumer develops affection for that brand. Similarly it can be argued that if a consumer has affection for a brand or buys a brand for reasons of tradition it is probable that they like the security of it and believe of its quality. In this context it can be argued that cognitive reasons underpin emotional reasons for loyalty. Building on this argument, this research further proposes that cognitive reasons for loyalty can also incorporate an attitudinal perspective. As such it can be argued that the polarisation of cognitive and emotive determinants of loyalty might be replaced with a study of brand loyalty that moves to a more central position. This model is illustrated in figure 3.
Building on figure 3, it can be argued that where bonds develop at a cognitive level, they can develop in intensify if the reasons for loyalty become more emotional as the consumer becomes more attached to the brand. For example, over time 'liking' a brand for reasons of trust in and satisfaction with that brand might develop into 'love' for a brand if the reason for loyalty becomes more emotional. Further to this, it is argued that similar bonds support loyalty at both a cognitive and emotional level. For example, a consumer might be loyal because of the quality of the brand and thus be satisfied with the brand; similarly a consumer might be loyal for reasons of nostalgia and also be satisfied with the brand. As illustrated in the figure 3, it is also possible that the presence of loyalty might lead to the development of bonds that initially did not underpin that loyalty. Thus, a consumer might have trust in a brand, and as the loyalty that exists to that brand strengthens, other bonds such as empathy and fulfillment might develop. In this context it must be remembered that while bonds underpin loyalty, further bonds can also develop where consumers are loyal. Thus, both consumer behaviour and marketing literatures should benefit from an in-depth exploration of the nature of brand-customer bonding that recognises that bonds develop for different reasons and in different contexts. In this way, the important and complex area of customer-brand bonding might receive more attention that it has hitherto, paving the way for an informative insight into the determinants of loyalty. As a result, those interested in nurturing customer loyalty might be better positioned for such endeavours.
Findings from this research indicate that future studies of brand loyalty should focus on both the cognitive and emotional reasons for loyalty, and move away from the either or approach that has dominated recent brand loyalty literature. The research also indicates that cognitive and emotional reasons for brand loyalty are interdependent and so naturally lend themselves to the study of brand loyalty where they are regarded as such. Consequently, the development of emotional loyalty to a brand that is founded on cognitive reasons should receive attention in future research studies.