Academic journal article International Journal of Management and Marketing Research

Customer Loyalty: Influences on Three Types of Retail Stores' Shoppers

Academic journal article International Journal of Management and Marketing Research

Customer Loyalty: Influences on Three Types of Retail Stores' Shoppers

Article excerpt

Customer loyalty is a major factor for a firm's success. Loyal customers are less price sensitive. Furthermore, these customers are likely to purchase more frequently, try the firms' other products and bring new customers to the firm. This study examines the relationship of shoppers' characteristics and behavior, and customers' perception of marketing strategy (product, price, place, promotion), customer value (quality, sacrifice) and relationship quality on customer loyalty. Depending on the type of retail store, convenience, department and hypermarket stores' loyalty is influenced by several factors, including different marketing strategies (price deals, distribution intensity) and relationship quality (customer satisfaction, trust, commitment). The results have particular implications for further research and for marketing managers.

JEL:M31

KEYWORDS: Customer loyalty, marketing strategy, perceived value, relationship quality

INTRODUCTION

Loyal customers provide companies a consistent revenue base and reduced expenses. An improvement of 5% in customer retention leads to an increase of 25% to 75% in profits (Reichheld and Sasser, 1990). Furthermore, a firm spends more than five times as much to obtain a new customer than to retain an existing one (Wills, 2009). Moreover, companies can increase revenues with loyal customers. For example, loyal customers are less price sensitive (Reichheld and Teal, 1996). In addition, loyal customers are likely to purchase more frequently, try the firms' other products, and bring new customers to the firm (Reichheld and Sasser, 1990). Thus, loyalty is linked to the success and profitability of a firm (Eakuru and Mat, 2008). Customer loyalty provides a foundation to examine the relationship between customer relationship activities, value creation programs and marketing strategies (Reichheld and Teal, 1996).

Relationship quality reduces buyers' uncertainty and strengthens the relationship between customers and the firm. Relationship quality includes (1) customer satisfaction, (2) trust and (3) commitment (Caceres and Paparoidamis, 2007). Customer satisfaction is an important driver to customer loyalty and to the success of businesses (Oliver, 1997). Studies have found positive evidence showing the direct relationship between customer satisfaction and loyalty (repeat purchase) as being less price sensitivity, having cross-buying behavior and increasing profit (Bloemer and Odekerken-Schröder, 2002; Ibrahim and Najjar, 2008; Oliver, 1997). However, several studies show that satisfied customers do defect (Dimitriades, 2006; Jones, 1996; Woodruff, 1997), and some customers say they are satisfied, but they still purchase elsewhere (Jones, 1996). Customer satisfaction defection is attributed to two factors. First, firms do not deliver enough or the appropriate value to satisfy customers' needs or wants (Roig, Garcia, Tena and Monzonis, 2006). Thus, customer satisfaction measurement without fulfillment of customer perceived value (customer needs and wants) cannot really meet the customer's expectations (Woodruff, 1997). Second, customers can feel a great deal of uncertainty concerning their relationships with firms.

Trust and commitment are two critical factors that enable customers to overcome uncertainty and strengthen their relationship with the firm (Morgan and Hunt, 1994), and in turn, these lead to customer loyalty.

Marketing, as a purpose, is to deliver more value to satisfy customers as well as to build a long-term and mutually profitability relationship with a customer (Kotier, 2005). Lemon, Rust and Zeithaml state that, "value is the keystone of the customer's relationship with the firm" (2001, p. 22). Value is delivered from three key factors: (1) quality, (2) price and (3) convenience (Lemon et al., 2001). Quality is viewed as goods and services quality. Price is the monetary sacrifice. Convenience (non-monetary sacrifice) relates to all the benefits customers received, such as time saved and effort to do business with the firm (Lemon et al. …

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