Customers’ Satisfaction and Brand Loyalty

Subject: Branding
Pages: 11
Words: 3776
Reading time:
15 min
Study level: PhD

Overview

In the past, companies perceived their products as their most significant asset. Thus, it comes as no surprise that companies sought ways to ensure that their products are marketable and better than those offered by others. The focus of companies was how to outsmart other players in the market through a company’s product offering. This kind of method was not meant to last as market dynamics changed because of forces like globalization and telecommunication. However, in recent years, a better approach to marketing has emerged, with companies shifting their focus from products to the customer (Ambler, Bhattacharya, Keller, Lemon and Mittal, 2002). Under this perspective, the market now considers customers as their most valuable asset.

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One way of effective way of drawing customers is to strengthen a brand instead of the product itself. A brand may be defined as a name, a symbol, sign, design, term or a combination of any of them. The main purpose of a brand is to ensure that customers identify the services and goods of a particular company and differentiate it from its competitors. Thus, every time a customer sees the golden arches they expect to experience the same services and products that only a company can provide. Thus the stronger the brand the more likely customers will choose to have themselves associated with it (Stuart, 2011).

In light of these, it will be interesting to discover the factors affecting a customer’s loyalty to a specific brand. With industries increasingly becoming more competitive, retailers for instance do their best to increase their market share and generate higher revenues. Because of this, the idea of promoting a brand is not limited anymore to manufacturers but includes retailers as well. In the context of retailers, one factor that can lead to loyalty is customer satisfaction. By effectively enhancing the brands they carry, retailers will not only improve their relationship with customers but with their suppliers as well. Once retailers’ customers become satisfied with the brands that the former promote, then chances are the retailers will be able to cultivate the trust of both their customers and suppliers (Jensen and Beckman, 2009).

Customer satisfaction is a measure of how a company’s products and services are able to meet or even surpass the expectation of the customer. Studies have shown that customer satisfaction has become a very significant performance indicator for a business. To note, customer satisfaction is not merely the result of having the right brand but is achieved through a combination of different factors. This notion ties in with a company’s efforts to increase its customer base and obtain their loyalty. As such, not only is it a good performance indicator but it has also become an important business strategy. One problem with measuring customer satisfaction is that because it is an abstract concept, the actual state of satisfaction will vary from one customer to another and products or services. A customer’s state of satisfaction will depend largely on a number of variables, both psychological and physical, that correlates with behaviours like return and recommend rate (Ambler, Bhattacharya, Keller, Lemon and Mittal, 2002).

Customer satisfaction with certain brand is usually influenced by the quality. This in turn leads to greater confidence in the company’s ability to provide consistent delivery of services and goods hence satisfying customer expectations and needs. This is achieved externally and internally to attain optimal levels through efficient utilization of available resources whether human, information, material or technological. The results are the achievement of organisation gaol of profitability.

Successful companies are aware of how important customer-defined quality is to their businesses; hence, they consistently raise their quality standards in order to gain competitive advantage. It is important to note that making quality a priority requires companies to place the needs of their customer first. Prioritizing quality means that customer expectations should met and surpassed and this can be achieved if employees closely interact with one another so that as a team they are able to accomplish collective goals. If a company fails in this aspect, the customer is not likely to trust it with its next business (Gronholdt, Martensen and Kristensen, 2000).

Aims and Objectives

The main objective of this research is to ascertain whether Customers’ Satisfaction has effect on brand Loyalty in the Retail Industry. It will also evaluate the effectiveness of brand name in retail industry and customer satisfaction. The study will prove that not only do customers patronize a retailer because of factors like the multiple brands it carries, its location, or it is pricing scheme, but also because of the customers’ satisfaction with the retailer brand itself because the customer has perceived that its relationship with the company provides it with more value for its money. It will be helpful to retailers, because they will be able to plan their marketing strategies using the relationship between customer satisfaction and brand loyalty. Knowledge that will be gained by retailers because of this study will help them develop marketing strategies and plans using the interplay between customer satisfaction and retailer brand loyalty.

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Review of the relevant literature

Brand Loyalty

A company’s brand is often considered as the reflection of its spirit and soul (Afzal, Khan, Rehman, Ali and Wajahat, 2010). What this means is that a brand is not entirely limited to a company’s trademark or products. Brand is actually a show of loyalty from the end user because after continuously using the brand, the customers become part of it.

Brand loyalty, which signifies the customer loyalty, is very important since it has been acknowledged a determinant in a company’s long-term success. It is beneficial for companies to cultivate the loyalty of their customers because numerous studies evidence that it costs six times more to attract new customers than retaining one (Bowonder, Dambal, Kumar and Shirodkar, 2010). Thus, marketing not only aims now to attract customers, but to retain their existing ones (Xuehua and Zhilin, 2010).

Under the relevant company’s perspective, retaining a customer relies on three factors. These are brand competence, constituent, and reputation (Afzal, Khan, Rehman, Ali and Wajahat, 2010). Before purchasing a product or acquiring a company’s services, customers often judge a brand through these three factors. In the mind of customers, a brand has a high reputation if there is a high demand for it, believing that the reputation of a brand means that it is trustworthy, honest and has integrity. This reputation is a result of the experiences of a customer. Thus, a good brand means it is reliable. A brand is said to be competent if it is able to solve the problem of a customer and meet his or her needs. Hence, a company should make sure that it meets the demands of the customer and the market.

Meanwhile, in terms of customer behaviour, a customer’s loyalty is divided into three groups (Kuusik 2007). These groups are being forced to be loyal, functionally loyal or becoming loyal due to inertia. There are instance when a customer is forced to be loyal, that is, customers continue to support a company even if they do not want or expect to. This could be due to a monopoly of the company or the financial status of the customer. Concerning functional loyalty, what this means is that a customer is loyal to a specific company or brand because the customer has a reason for doing so. A number of ways that a company can create functional loyalty is through price and quality, among others. Customer loyalty resulting from inertia means that a customer does not switch brands due to comfort or low importance. What this means is that the customer does not want to spend any effort or time in looking for other brands. As such, the customer continues to remain loyal to a brand without even looking at other brands or the competitors (Stuart, 2011).

Brand equity reflects that correlations and attitudes of consumers with a branded product, and these typically generate certain outcomes such as increasing volumes, “price premiums and profit” (Slotegraaf & Pauwels, 2008, p. 294). These outcomes are very significant because they are inevitably associated with market forces. To note, a measure that is based on revenue is useful in demonstrating how valuable a brand is to an organization.

Slotegraaf & Pauwels state that brands possessing higher equity are able to achieve higher and long-term sales elasticity because of their price schemes, features and displays (Slotegraaf & Pauwels, 2008). It is believed that consumers respond in a different manner to the marketing-mix endeavors for a branded product as compared to the unbranded one. Moreover, consumers perceive brands that have strong equity more favorably and they correlate these with power and distinction as compared to the unbranded products.

Customer Satisfaction

According to service management literature, customer or brand loyalty is influenced by customer satisfaction (Lam, Shankar, Erramilli and Murthy, 2004). Ultimately, customer loyalty influences the profitability of a company. A number of studies have already discussed the links that are present between satisfaction and loyalty. However, it also argued that the satisfaction of the customer is directly due to the perception received from a transaction. Customer loyalty has also been found to increase the scale of the relationship between a customer and the company. Thus, a customer satisfied with a brand means that the customer feels that the value obtained from one brand is essentially greater compared to other brands. Because of this, a company’s profit is increased due to enhance revenues and decreased cost, among many others. Costs are further reduced if a brand manages to retain customers.

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Customer Value

Customer value can be thought of as comparing weighted attributes between “to get” and “to give” (Stuart, 2011). Customer value can also be seen as the ratio of a customer’s trade-off between the sacrifices made and the benefits received. In the retail industry for example, the benefit that a customer receives is through the purchase of a product. The sacrifices however are not limited to the price of the product but can also include other events like how long it took the customer to find the product, how long it took to pay, etc.

Customer Value and Customer Satisfaction

Although studies have shown that value influences satisfaction, majority of them mainly look at benefits and oftentimes ignore the sacrifices made by the customer ((Lam, Shankar, Erramilli and Murthy, 2004). Thus in looking at customer satisfaction it is just as important to look at the sacrifices made. Thus while a customer may have been able to find what he needs at a particular retailer for a low price, the time it took the customer to get in and out of the retailer can be considered as a factor in the overall satisfaction. This is turn could affect how the customer perceives the brand and may opt to change brands in the future. Thus looking into customer satisfaction must include the negative aspects as well.

Customer Satisfaction and Brand Loyalty

Studies have already shown that customer satisfaction is an important driver in determining the long-term relationship between a supplier and a buyer (Geyskens, Steenkamp, & Kumar 1999). It has also been already shown that customer satisfaction can affect a number of variables, which are considered as indicators of a customer’s loyalty. A satisfied customer becomes not only a returning customer but may also entice other people to become customers as well. It has also been found out that customer satisfaction and brand loyalty may have a nonlinear relationship. What this means is that customers will continue to patronize a brand with low quality as long as the variance between the qualities is lower compared to a brand with higher quality but with a higher variance (Kumar, 2002). It has been suggested that brand loyalty can increase rapidly once a certain threshold for customer satisfaction is reached. Thus brand loyalty may likely increase even if a customer is merely “highly satisfied” and not “very satisfied.”

Theoretical Framework

Customer’s satisfaction
Figure 1. Customer’s satisfaction

As the model shows, a customer’s satisfaction is dependent mainly on how the customer perceives the retailer’s value. Once the customer becomes satisfied then loyalty to the retailer brand increases. The customer continues to be loyal since it now perceives the value of the brand in a higher level.

Research Design/Methodology

The research looks to investigate the Effect of Customers’ Satisfaction on Brand Loyalty in the Retail Industry. The study is meant to be descriptive in nature with a positivist theoretical perspective. The best way to accomplish these is to utilize the mixed methods approach. A mixed methods study is done when a researcher has both quantitative and qualitative data and combined, both data sets provide a better understanding of the research problem (Creswell, 2005). Moreover, mixed methods are an effective design because this researcher wants to “build on the strengths of both qualitative and quantitative data” (Creswell, 2005). Quantitative data, including scores on instruments, generate specific numbers that may then be analyzed statistically that can lead to results that enable the assessment of magnitude of trends and frequency. On the other hand, qualitative data such as those that will be generated by the open-ended interviews will provide the actual words used by the study participants, which will offer numerous perspectives on the research topic and can provide a complex perspective on the study. In combining the quantitative outcomes as well as the qualitative processes, this research will be able to develop a complex picture of brand sustainability through innovation.

Mixed Methods Research Design- This study will use the triangulation mixed methods design, under which quantitative and quantitative data are simultaneously collected. Both sets of data are merged and the results are used to understand the research problem. The fundamental rationale for the triangulation design is that one set of the data collected provides “strengths that offset the weaknesses of the other form” (Creswell, 2005). In a triangulation design, the researcher collects the qualitative and quantitative data and then makes an interpretation as to whether the results from either data contradict or support each other. When the researcher makes a direct comparison of the two sets of data, then a triangulation forms between the data sources. There are three things to keep in mind when undertaking a triangulation design. The missed method investigator:

  • Accords the same priority to both the qualitative and the qualitative data and considers them as equal sources of information:
  • Gathers the qualitative and quantitative data simultaneously;
  • Makes a comparison on the results of the quantitative and qualitative analyses in order to discern whether the two databases generate similar or different results (Creswell, 2005)

The advantage in using the triangulation mixed methods design is that it integrates the generalization of the quantitative data and the contextual information that may derive from qualitative data. One challenge in undertaking this design is the requirement of translating one data form into another, such that when qualitative themes have been identified in interviews are “quantified” and designated score concerning their frequency (Creswell, 2005). Even if integration is possible, there is also the chance that inconsistent results would come out, and it will be necessary to collect additional data so that the discrepancies are reconciled.

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Thus, for this particular study, there will be 50 respondents. For the quantitative data, a questionnaire containing 10 close-ended questions will be administered to the participants, and the data analyzed will be in the form of numeric scores. The basic goal here is to quantify information and to generalize the findings to a larger population. In all of the quantitative data, a five-point Likert Scale will be used, wherein: (1) Strongly Agree; (2) Agree; (3) Disagree; (4) Strongly Disagree; (5) Have No Opinion (Jamieson, 2004).

Meanwhile, the qualitative data will be collected through open-ended questions in the survey. The purpose of the qualitative portion is to determine, first, the participants’ attitudes towards product brand; and second, strategies adopted by the companies to maintain brand loyalty. The qualitative data is meant to reinforce the numerical data, which will be derived from quantitative research and provide the participants to comment on dimensions that have not been tackled in the close-ended questions. The type of data that will be derived from the qualitative portion will be text data coming from transcribed interviews. In order to analyze the results, emerging themes will be identified. The survey will consist of questionnaires that will be distributed through e-mail. There will be 100 questionnaires distributed, so that a response rate of 50 participants will be ensured. Prior to the sending out of the questionnaires, a pre-test involving 20 people will first be conducted. This is to discern whether the questions are fully understandable – particularly in the process of e-mail answering.

Hypothesis- In the service and manufacturing industries, it has been evidenced that customer or brand loyalty is influenced by customer satisfaction (Hallowell 1996). Ultimately, customer loyalty influences the profitability of a company. A number of studies have already discussed the correlation between customer satisfaction and brand loyalty, but there is a dearth in extant literature as to the interplay of these two concepts in the perspective of the retailer. This industry is ideal for the study, because brand switching occurs most in the retail industry.

This study intends to determine the impact of customer satisfaction on brand loyalty. Here, customer satisfaction is the independent variable and brand loyalty is the dependent variable. To this end, it is hypothesized that:

H1: Customer satisfaction has a positive impact on brand loyalty.

Participants- The experiment does not require any active participants; however, it may require consent from the passive participants, if the law requires it.

Procedure-Once the data is obtained, it will be checked for skewness. If the any skewness is found in, the data will be adjusted accordingly in order to present an unbiased result. After removing any biasness from the data, the data will be analyzed used various statistical analysis methods including Venn Analysis and Chi-Square Distribution. Depending on the quality of the data, other methods may also be used to verify the accuracy of the preliminary results. The quantitative data will be processed using SPSS software so that accurate results will be generated.

Ethical Consideration

This study does not involve any participant that is unable to give informed consent and all of the participants will undergo the appropriate process for informed consent. None of the participants will be exposed to risk of any kind. To note, this research is not likely to cause psychological stress or anxiety, or any harm or adverse consequences beyond the normal risks a person regularly experiences in daily life. Absolute confidentiality will be maintained all throughout the study, and all data will be stored under secure environments and databases. This study will not entail the obtaining and processing of personal data – including of third parties, nor will it encompass repetitive or prolonged testing. There will be no financial inducements for the participants, nor is it anticipated that the study will encompass sensitive personal issues.

A Statement of possible Outcomes

The purpose of the study is to determine if there is a relationship between customer satisfaction and retailer brand loyalty. To determine the relationship between the two variables, regression will do by calculating the mean values of variables. Brand loyalty is treated as a dependent variable while customer satisfaction is treated as an independent variable.

There are various ways to get loyalty, such as (i) offering a continuous discounting scheme for bulk and scheduled orders, (ii) brand exclusivity, and (iii) putting benefit to the customer’s shopping experience. This last factor is the most difficult to achieve but the most effective in retaining both individual and corporate customers.

Loyalty not only to the brand is possible when customers are satisfied with the retailer or the company it is dealing business with. There are those people whose loyalty is based on the service they receive from their retailers aside from the traditional means enumerated above. Even if other retailers would offer the same product for a much lower price or same discounting scheme, this loyal customer is not likely to change its venue for shopping considering that he or she has received an excellent service. Transferring to a new retailer may result to an unpleasant experience and most customers avoid being treated shabbily by sales persons. Of course, the competitor may be able to change the customer’s mind if the company surpasses the current retailer’s customer relation, products, and after-sales service.

Costs and Resources resource management

This research is a very resource intensive and following are the resources that are necessary for the implementation of the research.

Resource Estimated cost $
Assistant 100
Papers 50
Typing 100
Photocopying 50
Transport 100
Lunch 250
Sub-total 650
Miscellaneous (10%) 65
Total 715

Risk Assessment and Risk Management

Risk assessment is one area that within risk management which is more involved with the identification and rating of risks that can be incurred during the whole research. This step is important in order to reduce any chances of complete failure of the research due to unforeseen circumstances, which would otherwise have been avoided in the first place. Risks may manifest themselves through the lack of proper planning of the whole research and requires much emphasis in the course of the project. Risks can result in projects total failure, late implementation, poor quality service delivery, and suspension of research activities. It is therefore imperative that project risks are managed through a pre-planned alleviation plans. For the effective alleviation of risks, the research has classified risks into three classes; highly expected, most expected and unexpected. Highly expected risks are those whose probability of happening is more than 50% hence the researcher has to put in place, alleviation measures. For the most expected risks, their chances of occurrence are less than 50% but their effects might be substantial hence requiring proper alleviation plan. For the unexpected risks, no alleviation measures are put in place. The project is susceptible to numerous risks and the table below indicates these risks and their vulnerabilities. It also indicates the counter active measures that can be undertaken in order to mitigate the risks.

Risk Probability of occurrence Alleviation measures
Choice of the topic Most expected The research has identified the relevant topic.
Proper literature review Most expected Identification of proper sources
Late submission of proposal Most expected Preparation of proposal earlier than required date
Failure to get responses Most likely Inform respondents about the research and assure them of confidentiality
Inappropriate results Most likely Use SPSS in the analysis of the results
Late Most likely Start draft writing earlier
Failure to submit final report Most likely Prepare the report two days before the date submission

Reference List

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  2. Ambler, T., Bhattacharya, C., Keller, K., Lemon, K. & Mittal V. 2002. ‘Relating brand and customer perspectives on marketing management. Journal of Service Research , 5 (1), p. 13-25.
  3. Bowonder, B., Dambal, A., Kumar, S., & Shirodkar, A. 2010. Innovation strategies for creating competitive advantage. Research Technology Management, 53 (3), p. 19-32.
  4. Creswell, J., 2005. Educational Research: Planning, Conducting, and Evaluating Quantitative and Qualitative Research. New Jersey: Prentice-Hall, Inc.
  5. Geyskens, I., Steenkamp J. & Kumar N. 1999. ‘A meta-analysis of satisfaction in marketing channel relationships,’ Journal of Marketing Research, 36 (2), p. 223-238
  6. Gronholdt, L., Martensen, A., Kristensen, K. 2000. ‘The relationship between customer satisfaction and loyalty: cross-industry differences,’ Total Quality Management. 11, (5&6), p. 509–514.
  7. Jamieson, S. 2004. Likert scales: How to (ab)use them. Medical Education. 38, p. 1212-1218
  8. Jensen, M. & Beckman, S. 2009. Determinants of innovation and creativity in corporate branding: Findings from Denmark. Brand Management. 16 (7), p. 468-479
  9. Kumar, P. 2002. ‘The impact of performance, cost, and competitive considerations on the relationship between satisfaction and repurchase intent in business markets.’ Journal of Service Research, 5 (1), pp. 55-68.
  10. Kuusik, A. 2007. ‘Affecting customer loyalty: do different factors have various influences in different loyalty levels.’ Faculty of Economics and Business Administration, University of Tartu.
  11. Lam S., Shankar V, Erramilli M., & Murthy B., 2004. ‘Customer value, satisfaction, loyalty, and switching costs: An illustration from a business-to-business service context.’ Journal of the Academy of Marketing Science, 32 (1), p. 293-311.
  12. Slotegraaf, R., & Pauwels, K. 2008. ‘The impact of brand equity and innovation on the long-term effectiveness of promotions’. Journal of Marketing Research, 45 (3), p. 293-306.
  13. Stuart, H. 2011. ‘An identity-based approach to the sustainable corporate brand’. Corporate Communications: An International Journal, 16 (2), p. 139 – 149
  14. Xuehua, W., & Zhilin, Y. 2010. ‘The effect of brand credibility on consumers’ brand purchase intention in emerging economies: The moderating role of brand awareness and brand image’. Journal of Global Marketing, 23(3), p. 177-188.