Customer loyalty is important to build as a strategic objective for retailers since loyal customers provide the maximum opportunities to increase sales. It is well established that selling to existing customers is far easier than attracting and luring new clients. The basic idea is to concentrate on holding on to customers that buy products and services in the store regularly and these are the customers that form the foundation of the retail store. After having focused on such customers, efforts can be made to convert occasional customers into loyal clients. The objective is to expand on the market share by enhancing customer loyalty in a retail environment that is becoming more and more competitive. This paper will examine the retail scenario in Thailand and the various facets of consumer loyalty and customer satisfaction and how they affect buying decisions of shoppers. All parameters that have a bearing on consumer decision-making in retail stores will be examined. The paper will be written with special emphasis on the buying habits of consumers in the context of consumer loyalty and how it is the focal point of a retailer’s success. The analysis will also be made about the role of customer satisfaction in buying behaviours. Most of the analysis will be in terms of how loyalty and satisfaction determine consumer decisions and choices about buying from Tesco Lotus and Big C, which are amongst the main retail players in Thailand.In only 3 hours we’ll deliver a custom Tesco Lotus and Big C.: Thai Shoppers Buying Decision essay written 100% from scratch Get help
It is rightly said by Ted Hurlbut that “In these challenging economic times, many small and independent retailers find themselves focusing their attention on their most loyal customers, the regulars that make up the core of their business. It seems like common sense” (Hurlbut, 2009). Despite the given circumstances, “over the past few years, customer loyalty has become a retail buzzword that’s taken on a life of its own” (Hurlbut, 2009). Under the circumstances, it becomes important to understand what customer loyalty is, what customer loyalty programs are, and whether customer loyalty is the same as customer satisfaction. It is a matter of debate whether customer loyalty and customer satisfaction can be measured subjectively by way of customer comments and opinion polls or whether they are perceptible in being measured empirically in terms of, for example, measuring the percentage of clients that buy goods and services at least twice a month from a single store. Customer loyalty can be termed as the preference that customers have for a particular store over others for a specific or group of items. For example, a consumer may prefer to go to one store for buying furnishing and clothes while to another for food items and cosmetics. If a customer requires a shirt he may wish to go to a specific store while he would prefer to buy plants from another store. Mostly customer preferences tend to be quite subjective and they do not always act on considerations of price. These are the stores where customers are loyal to their specific needs. But in being a loyal customer at store X where a person buys a shirt, does not imply that he will buy other items also from the same store. It is the marketing efforts of the sales personnel at the store that influence the customer into buying other items (Baldinger et al, 1996).
This research will attempt to ascertain on the basis of retail trade in Thailand, the buying habits of customers in regard to what role loyalty and satisfaction play in terms of their patronizing specific retail stores. The majority of the research has been done in the context of what factors are responsible for consumer choices in regard to buying from Tesco Lotus and Big C, which are the main players in the retail business in Thailand. It is hoped that this research will enable significant help to retailers in Thailand in investigating the factors that enable consumer loyalty and satisfaction in retail supermarkets. Ultimately the retailers will be able to have a better understanding of their customers and hence be better placed in matching up to their expectations.
Overview of previous research
In view of the intense competition that prevails in the retail sector, customers are now having better choices by way of retailers who must compete with each other in order to attract them to their stores. Hence it becomes important to understand the factors that have a bearing on the consumer decision-making process. In view of such an emerging pattern, it becomes necessary to examine the works of different analysts in analysing a large number of evaluative parameters. Important amongst them are the works of Lee et al. (2005), Moschis et al. (2004), Freymann (2002), Hutcheson and Moutinho (1998) and Woodside and Trappey (1992). However in view of the different reasons given by scholars it becomes difficult to ascertain specific explanations for the given pattern of consumer behaviour and hence the need to conduct this research to conclude what makes consumer loyalty and satisfaction important factors in determining the buying patterns of consumers in supermarkets in Thailand.
Loyal customers are the foundation of any retail business since they shape the heart of the traffic count. But just being loyal does not imply that they will always go on a buying spree and increase sales in a given store. In essence, customer loyalty entails that customers will visit the store regularly but what motivates them to buy products depends on how they are dealt with once they enter the store, especially in terms of motivating them in seeing the value proposals in buying what is on display. What matters most is the kind of experience they have after they enter the store. What makes the difference in motivating customers to buy from a particular store depends on the ability of the store management to distinguish between customer loyalty as a strategic goal and as a program of customer loyalty. Focusing on loyal customers is already a well-established strategy, but programs of customer loyalty have been newly introduced in the sector. Initiatives for enhancing customer loyalty include the offering of inducements to frequent customers whereby it becomes possible to collect their personal details such as phone number, address and email addresses. Having compiled such a data bank, retailers can target special promotional offers aimed at providing price incentives to increase customer traffic and to follow the purchasing pattern of loyal customers.
Structure of the study
This study, after having reviewed the previous literature in regard to what influences consumer buying behaviour in retail stores, a review is made of the different types of shoppers. Subsequently, a common understanding will be gained in regard to the decisions of Thai shoppers for the different stores that they visit. The study will focus on the evaluation of factors that affect the store choices of shoppers in relation to the marketing efforts of retailers. The study will examine the satisfaction levels of shoppers based on different evaluative measures in the context of the two retailers.
Customer Loyalty programmes as adopted by retailers exploit customer aspirations and expectations to economically promote the store to customers that have already identified themselves in having some relationship with the retailer. In essence, such programs are for marketing instead of being solely to enhance customer loyalty. From a marketing angle, these programs fulfill the same objectives as were once served by credit cards issued by department stores in order to have exhaustive information about customers and their purchasing habits. But customer loyalty is not built by just targeting given promotional messages. Such programs can assist in driving more business in the store but do not certainly result in the creation of additional loyal customers. Customer loyalty is created by building one customer at a time by giving them extra value from visiting the store. If such experiences exceed the customers’ expectations and give them the satisfaction they will return and will also recommend the store to others in their circle. Hence, what matters most is the action that takes place in the stores for customers to experience. This is not only true for loyal customers but for all those who visit the store to purchase, and this is how customers become loyal. Indeed customer loyalty and customer satisfaction are the best indicators of customer retention (Dick et al, 1994).Academic experts
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Factors affecting customer’s store choice
With the enhancement of the competitive environment in the retail industry, shoppers are constantly being offered a variety of choices in regard to their shopping decisions. Retailers need to understand what makes shoppers decide in favour of a particular retailer so that they can better manage their marketing in order to attract customers. Customers invariably decide in favour of a retail store which gives them maximum satisfaction in terms of their evaluation of the different services, prices and items on sale.
In Thailand, four major supermarket chains are visited by the majority of the shoppers in the cities. They are Tesco Lotus, Carrefour, Tops and Big C. Each supermarket has its own advantages of being able to attract customers from different segments and for different items. Tesco Lotus is a supermarket chain from the UK and has supermarkets in every corner of Thailand. The supermarket sells almost everything required by families and households that vary from clothes to household goods, confectionery, home furnishings and electronic goods. There are twenty-four Tesco Lotus stores in Bangkok and most of them sell twenty-four hours. Some are located in the compounds of gas stations and sell items such as vegetables, magazines, snacks, cosmetics and products of general use. Other Tesco Lotus supermarkets are located within shopping malls and mini-malls. Tesco Lotus is the largest supermarket chain in Thailand and continues to grow at a steady pace with new stores being added frequently. The shopping convenience that it offers and the wide variety of products that are on sale in its stores have consistently increased its customer base and the number of loyal customers (James, 2008).
Consumer’s decision-making process
To ascertain as to what influences shoppers to decide in favour of a particular store, it is important to understand the process by which they make their purchase decisions. In this regard, Assael (2004) has demonstrated a model that makes shoppers decide about specific stores. Important factors in this regard are branding evaluation, post-purchase evaluation, store choice, and processing of information.
Tesco Lotus in Thailand has a large number of loyal customers that favour buying its House Brand Products. House Brand products comprise a long list of products under the Tesco brand and include detergents, baby products, cleaning products, and premium adult dog food, and premium home furnishings. There is evidence by way of customer feedback that the House Brand products are gradually being preferred by more and more customers in Thailand who are also increasingly demanding that House Brand products should include more product lines within its scope. Tesco Lotus conducts regular satisfaction surveys amongst customers and keeps introducing, changing, and altering its product line in keeping with the aspirations of consumers. If customer satisfaction is found to be faltering in any area, Tesco Lotus develops new formulae and techniques to address the needs of clients. Tesco Lotus believes that in order to survive the increasing competition in Thailand it has to always be alert to the needs of its customers. In meeting the expectations of consumers, the company has been able to pass the crucial test in maintaining an already strong consumer base of loyal customers (Tesco Lotus, 2009).
According to Clottey (2008), “Organizations work hard to build the brand image of their firm and its goods and services. Marketing processes such as advertising and sales attempt to create a long-term commitment by the customer that increases brand awareness and repeat purchases, and therefore, customer loyalty. Superior day-to-day management of store operations also contributes to brand image, repeat purchases, and customer loyalty. In the retail industry, customers’ brand loyalty often outweighs their store loyalty” (Clottey, 2008). Tesco Lotus works under the same assumptions and has achieved considerable success in winning a major share of the retail market in Thailand which is evident from a large number of its stores in the country.
Tesco Lotus in Thailand is able to attract more and more customers for its House Brand products since it has set a quality policy in place which ensures that production standards are maintained in keeping customers confident of receiving the best quality products. The company provides a guarantee for all sold products in terms of quality whereby customers have the option to exchange or take a full refund if not satisfied with the product. Customers seek convenience and in Tesco Lotus they find almost everything that they need. Tesco Lotus supermarkets in the country prove to be convenient for shoppers since they mostly occupy two or three floors with different departments selling different products. The supermarket usually comes up with a number of bargain offers on electronics which make a large percentage of the youth to regularly visit the supermarket. This segment has the knack to frequently buy electronic goods such as mobile phones, computers, washing machines, and televisions which are sold by Tesco Lotus at very competitive prices. Tesco Lotus is the favourite haunt for children and parents in view of the wide choice it provides for toys that are sourced from across the globe. Toys and games are cheaply available and the supermarket also addresses the need of Thai people for cheap DVDs and CDs from America. A wide selection of specially released movie CDs for the Thai market are conveniently available at Tesco Lotus thus making it a favourite place for movie and music buffs.
Common evaluative factors
According to Hutcheson and Moutinho (1998), there are five different factors that consumers evaluate in making shopping decisions. They are:15% OFF Get your very first custom-written academic paper with 15% off Get discount
- Quality of product and services offered by staff
- Supplementary services in the supermarket such as banks, ATMs, restaurants and babysitting areas
- Parking facilities
- Location and convenience in terms of transportation, fast check out, etc.
- Value for money in terms of prices and promotions
The higher the satisfaction achieved by customers, the more they will become prone to patronize a particular supermarket. In the case of Tesco Lotus, excellent services and the resulting customer loyalty have enabled it to strongly establish itself in Thailand. Shari Altman has rightly concluded in his research that:
“Customer retention can be achieved by loyalty schemes and programmes all these activities involve developing strong customer relations, greater attention to details and customer expectations. All customer retention programmes should focus on a particular customer base. It has been argued that loyalty schemes take time to produce immediate benefits for customers hence many customers move out of these schemes very quickly. “Formal loyalty programmes can be challenging to implement and may not be an optimal way to achieve retention and profitability goals but when they are done right loyalty programmes can help to convert more prospects into buyers” (Altman, 2005).
Customer Loyalty (Tesco Lotus)
Customer loyalty for Tesco Lotus has also resulted because of its popularity amongst families because of the large variety and competitively priced household items offered on sale. For example, a good quality sofa pillow is available for about $4 only and items like storage containers and wooden drawer sets are also available extremely cheap, the likes of which were never witnessed by Thais in the recent past. Although the quality of bed sheets and pillow covers is not very good they are in demand because of the extremely low prices. In Thailand, there is a considerably large market segment for which such products have a high sense of appeal, and clients from these segments are regulars in Tesco Lotus supermarkets thus providing the store a huge potential to tap for its large number of products that are newly introduced. The supermarket also appeals to the aspirations of those who are quality conscious. The store regularly launches high-quality furnishings including bed linen, bathroom accessories, towels and cushions. There is a large customer base for the store in regard to those who wish to buy at reasonable prices from a wide choice of modern and stylish products.
The clothing section of Tesco Lotus in the country provides clothes that are cheap although the quality is not always good. But clothes in these stores are typically Thai sizes that will not fit westerners. All Tesco Lotus hypermarkets and supermarkets have a section for monks only where items are specifically available that are used by monks in Thai temples. Local people also buy their requirements of temple contributions from this section since the choice is good and prices are reasonable as compared to other places. This section of the population comprises loyal customers in view of convenience in purchasing their required items. This also provides Tesco Lotus with the opportunity to further motivate and influence these customers into making additional purchases from other departments. All Tesco Lotus supermarkets have well-equipped bakeries and pharmacies where customers can purchase the required medications. Every supermarket has a well-stocked seafood section. In attracting clients, the supermarket offers to cook the selected fish free of cost as instructed by the customer. Indeed Tesco Lotus has established a considerable extent of customer loyalty in providing an excellent single-stop shopping experience. It appeals to almost all sections of consumers and provides value and satisfaction to all consumer segments. Customers can visit the store for performing a whole lot of functions including banking, pharmacy, visiting food courts, and buying items of entertainment and daily needs. Convenience provides for more customers to become loyal to the supermarket, and in keeping with its foreign origins, Tesco Lotus provides immense value for shoppers who always seek a bargain for their hard-earned money.
Customer Loyalty (Big C)
Big C is a chain of hypermarkets and supermarkets in Thailand and Vietnam. Big C supermarkets in Thailand have large formats and the customer can buy almost anything from the store in view of the large selection of items on sale. The first Big C outlet in Thailand was opened in 1994 and the company entered into an agreement with Groupe Casino of France and bought over Auchan hypermarket in 2001. In order to enhance customer loyalty, Big C introduced a number of programs to attract customers to its superstores. In 2006 it spent over 26 million baht in campaigns that attempted to bring in as many potential customers as possible to its stores. Customers could win a bumper prize of a house worth four million baht and weekly draw prizes of gold necklaces. The company also declares prizes for customers by arranging scratch and win contests whereby winners are given prizes on the spot thus making visits to the store something good to look forward to. Big C super centres adopt energy-saving strategies which enable them to reduce energy costs considerably, and some of the resultant savings are passed on to consumers in the form of lower prices on some commodities. Such measures temporarily increase customer loyalty in view of the hopes generated amongst consumers to get added advantage upon visiting the store. In motivating thousands of consumers to visit its stores on a daily basis, Big C increased its chances of benefiting from increased sales from such consumers (Newswit, 2009). According to Jason (2006), “As the grocery market in Thailand becomes saturated, some major grocery stores differentiate themselves by using high technology or innovative ways to attract new customers and also retain the old ones. One of the attempts is to develop a customer relationship management (CRM) program to gain more insight into customer behaviors that lead the stores to provide them value-added products and services in order to increase their satisfaction. Loyalty card program is one of the CRM programs that is widely used by grocery stores in Thailand and has become relatively successful as indicated by the positive feedback from customers” (Jason, 2006).
Customer relationship management programs as adopted by Big C have proved to be immensely helpful in getting information about customers which can be further used in gaining customer loyalty from them. Such information can be utilized in guiding the development of the store’s strategy for the effectiveness of its marketing strategies which eventually benefits both the customers and the stores (Nattharika et al, 2009). Big C uses loyalty cards which have proved to be very helpful to the company in ascertaining the pattern of purchase decisions of customers. As compared to Tesco Lotus, demographic factors play a major role in making customers loyal to Big C. In the context of research conducted by Vaughn Clair,
“The overriding message from this research is that retail customer loyalty programs, as they are today, are on the whole underwhelming customers” (Clair, 2009). Clair has also outlined that “this is because of the low perceived value of rewards from existing loyalty programs. Customers want more tangible recognition and rewards from loyalty programs, which is one area in which modern retail technology can help. Technology allows retailers to recognise customers when they enter their stores and personalise offers to them based on purchase history, while they shop. It also improves retailers’ ability to ensure products are available where and when the customers want them, which as the research demonstrates, is one of the key grievances consumers have with the current shopping experience” (Clair, 2009).Get your customised and 100% plagiarism-free paper on any subject done for only $16.00 $11/page Let us help you
The unique selling proposal that Big C provides to its customers is not stocking too many imported items but primarily selling Thai products. The supermarket stocks and provides for the needs of local Thais and also offers good value for money along with a wide variety of products. Customers in this segment throng the supermarket to buy their requirements of prepared Thai food, snacks, and Thai sausages in addition to the local bakery, desserts and baked products. Big C attracts customers that wish to purchase excellent seafood and meat products. The seafood is fresh and the prices of meat and chicken are very good as compared to other supermarkets. Big C specializes in the sale of crab, fish and shrimp. A lot of customers have become loyal to Big C in view of its convenient locations in different places. Big C mostly operates in hyper strip malls where the customer can enjoy a sumptuous pizza for lunch, enjoy a choice of the best ice creams and purchase DVDs at competitive prices from several DVD shops. There is almost everything at the supermarket that a customer requires to do in performing his daily chores. One can find bank branches and ATMs of several banks at Big C that greatly enhance convenience for shoppers. Such facilities enable them to have the required satisfaction thus developing loyalty for the supermarket. Customer loyalty obviously makes consumers repeatedly visit the supermarket because they get satisfaction from the same (Alibaba, 2009).
Satisfaction versus Loyalty
The success of retailers primarily depends upon building a strong and consistent relationship with loyal shoppers. In this regard, Berman and Evans (1998) have pointed out that loyal customers are the backbone of successful retail chains, especially in an increasingly competitive environment. Previously shops and business establishments focused their efforts on retaining customers by satisfying their needs, but with increasing competition, the limited resources of customers have to be sought by offering them extra value and choice for their money. Customer satisfaction is no longer the sole criteria for retaining customers since customers will switch stores at the slightest indication of getting better offers in another store.
According to Levy and Weitz (1995), a retail chain can sustain customer loyalties by putting forth a transparent picture of its stores and then matching the same with the aspirations of consumers. If such a relationship can be sustained even on a limited basis to start with, by focusing on the right customers and right strategy, retailers can gradually build upon the customer loyalty for their stores.
Retailing in Thailand is gradually becoming a difficult business. With the onset of the global economic crisis and recession, competition has increased tremendously, spending by consumers has slowed considerably, disposable incomes have declined and their value reduced due to increasing rates of interest. Higher prices have resulted due to higher prices of fuel and the overall speed of the economy has slowed down. In combating the given challenges retailers have to introduce innovative methods in encouraging customer loyalty. Most supermarkets have approached the problem by adopting customer loyalty programs. Supermarkets recognize and give incentives to customers, but the success of such efforts is not always positive. Ideally, customer loyalty programs aim at making the customer come back to the store and to make him or her spend while they are present in the store. According to Altman, “Customer loyalty can be defined as a behavior or attitude of a customer to purchase a particular product of a specific brand over others which available in the market for a particular need. The packaged good industry defines this consumer attitude as ‘Brand Loyalty’. Brand loyalty is the degree to which a customer is loyal to a given brand in that they are likely to re-purchase/re-use in the future. The level of loyalty indicates the degree to which a brand is protected from competitors” (Altman, 2005).
Brand equity is symbolized by the value that is attached by consumers to the different products that carry the name of a specific brand. Brand equity is considered to be strong and positive if customers place trust in a brand and if it does not enjoy a good reputation, the brand equity for that product becomes depressing. According to Kellar (1993), “consumer-based brand equity arises from a more favorable differential response to the firm’s marketing efforts. The concept of brand equity is associated with the financial and accounting perspective like estimating the value of a brand also this concept is studied while working on strategic marketing activities” (Kellar, 1993).
It is not easy to have competitive advantages on a sustained basis in view of the ferocious competition that prevails in the current business environment. Every company vies with one another to prove the superiority of its products and services by providing exceptional customer services so as to retain customers in order to have the required competitive edge. It is important to retain a customer since the cost of retaining is very less as compared to adding a new customer to one’s list of loyal customers. Customer retention is of vital importance for retailers in view of the fact that a small increase in the number of loyal customers can make a considerable difference in profitability (Horowitz, 2006). Customer retention is possible by introducing loyalty schemes and programs that use strategies of strong customer relations, higher attentiveness towards details and meeting customer aspirations.
Customer loyalty has a strong bearing on the success of the retailer. In order to retain the present customers, the company can adopt proactive measures and create positive brand equity by introducing policies that encourage the expansion of the consumer base. Although it can be said that customer loyalty is extremely important in the current competitive environment, it is more vital to encourage and control customer loyalty. All loyalty schemes that retailers introduce must focus on the expectation of customers and should enable efficient customer relations in order to achieve high levels of customer satisfaction. Tesco Lotus has made rapid strides in appealing to the aspirations of consumers by attracting them for what inspires them and what creates a pleasant feeling and a memorable shopping experience (Nielsen, 2009). An article in the publication of Quick Frozen Foods International beautifully described how Tesco Lotus presents a pleasant and exciting experience in its stores, “In the grocery store proper, a colourful fish and seafood section contains everything from previously frozen shrimp and imported salmon, to flesh squid and cuttlefish sourced locally. Elsewhere on the premises, a well-stocked freezer section boasts a large assortment of value-added Thai and Asian food specialties such as spring rolls and dim sum. A rich line of ice cream is offered, ranging from Magnolia brand Sugar Palm and Durian to Haagen-Dazs Cookies and Cream and Swensen’s Chocolate Chip” (Farlex, 2009).
Retailers in Thailand are now increasingly becoming more interested in bringing about customer satisfaction and loyalty programs, especially in view of the immature retail market in the country. As compared to western markets there is immense scope for tapping into the metrics of retail operations to win customer loyalty. Although both Tesco Lotus and Big C are making efforts in this direction and have made positive strides towards attracting customers, there is a need for both to gain competitive advantages mainly through loyalty programs. It is interesting to note that there is a significant difference between requirements of measuring and bringing value to the retail business. Although both these metrics are loosely interdependent, they have different implications and need to be handled differently. This implies that customer satisfaction and customer loyalty are different from each other. Customer satisfaction relates to the requirement of the retail business while customer loyalty connotes the beginning of continued success and growth (University Essays, 2009).
Research has proved that over 70% of customers prefer high standards of customer service in order to exhibit loyalty towards a particular retail brand. It is unfortunate that retailers still view customer service as a cost and a deviation from their core business activities. They also wrongly assume that pricing is the prime factor in deciding customer turnover. In essence, customer loyalty and customer satisfaction are directly related to customer retention. Customer satisfaction implies the consumer’s sense of satisfaction in being a measure of how well his expectations are fulfilled in the store. It is wrongly believed by retailers that in making customers satisfied they are winning their loyalty. In fact, customers will stay with the store until they get better options and their expectations are surpassed. There is no emotional attachment with a particular store and customers simply leave because they get better deals elsewhere where they may get more satisfaction.
Conversely, loyal customers are a different lot in that they will remain with the provider of the goods and services through whatever problems that may come up with the store. Therefore, customer loyalty connotes an emotional attachment and the retailer can be said to be deeply embedded in the customer’s mind and heart. The difference between customer loyalty and customer satisfaction lies in the emotional levels of the consumers. For the retailers to gain customer loyalty they must appeal to the customers emotionally and make them feel a part of the business in making them think that they care about the business. Customers can be made loyal by emotionally appealing to them in terms of different parameters. The loyalty of customers is also determined by the experiences they have with the products and services in the store.
The experiences that customers have with services, products, and people in the organization will establish the extent to which they get emotionally involved with the organization. It is known that an increase of 5% in customer retention will lead to a 100% increase in profits (Christensen, 2006). The behaviours and decisions of customers eventually rally with the feelings generated in regard to people, goods and services. Hence the extent of customer loyalty is ascertained by the extent to which customer satisfaction is managed.
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