A Path Analysis Study of the Relationships among Consumer Satisfaction, Loyalty, and Market Share in Retail Services

Article excerpt

INTRODUCTION

An accurate description of the basic consumer model, along with the relative influence of that model on firm performance, has interested marketing theorists for decades. The basic premises in marketing are straightforward: (a) better value for the buyer should lead to consumption and satisfaction, (b) a satisfied buyer will eventually and for various reasons become a repeat purchaser and/or loyal buyer, (c) this buyer loyalty and satisfaction should result in improved marketing performance for a variety of reasons, and (d) the improved marketing performance should lead to better overall firm performance (Leverin & Liljander 2006, Story & Hess 2006, Cooil et al 2007).

However, these general premises do not hold for every industry or under every condition. There are multitudes of examples that better mousetraps do not always result in higher sales or share, usually as the result of poor marketing, poor relative value, or a variety of macro-firm factors. Plus, satisfaction does not always lead to improved firm performance even when it does lead to improved market shares (Pleshko & Cronin 1997). Satisfaction is also not always enough to ensure customer loyalty, even though satisfaction leads to loyalty in many instances (Mitchell & Kiral 1998, Reichheld & Sasser 1990). Buyer loyalty generally does lead to improved marketing performance, but not in all investigations (Ehrenberg & Goodhardt 2002, Knox & Denison 2000). Therefore, the specific conditions for which the marketing premises hold are still under investigation.

The purpose of this study is to partially investigate the premises mentioned above. In particular, the interrelationships among consumer satisfaction, consumer loyalty, and market share are studied in four types of retailers: fast-food burgers, convenience stores, health clubs, and medical clinics. This study will initially address the literature related to the primary constructs under study. This will be followed by a discussion of the data collection and measurement, analyses, results and discussion, as well as any limitations of the study.

CUSTOMER SATISFACTION

Customer satisfaction and retention are generally considered among the most important long term objectives of firms (Cooil et al 2007). The marketing concept suggests that a satisfied buyer will likely return to purchase again, or at least, consider purchasing again (Keith 1960, Leavitt 1960). According to Reichheld and Sasser (1990) repeat customers cost less to serve than new buyers, benefiting a firm's cost structure. Additionally, maximizing customer retention rates and minimizing customer defections are primary strategic objectives for most firms, as evidenced by companies' emphasis on customer relationship management (Ching et al 2004, Verhoef 2003). Thus, previously satisfied buyers may help firms both reduce marketing costs and develop more stable levels of sales when a large number of satisfied buyers are retained to purchase again in the future.

There are several definitions of customer satisfaction in the marketing literature. It is generally accepted that satisfaction is a psychological state that a consumer experiences after consumption (Oliver 1980). Additionally, the basic conceptualizations focus on either or both of two aspects: (i) of the buyers' initial expectations in relation to the product and (ii) the buyers' perceptions of the product performance in relation to these expectations (Turan 2002, Churchill & Suprenant 1982, Oliver 1980). The general idea is that a potential buyer has specific expectations about a product before purchasing: such as, health club 'A' will provide superior customer service and maybe excellent facilities. If, after using health club "A", the buyer feels that these salient criteria are met, then he/she will be satisfied, and vice versa. The measurement of satisfaction generally focuses on the product performance aspect rather than expectations. …