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A research proposal focusing on theRetail sector: Can large companies foster customer loyalty in today’s challenging climate?

A research proposal focusing on theRetail sector: Can large companies foster customer loyalty in today’s challenging climate?

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An essay for the 2012 Undergraduate Awards Competition by Sarah Green. Originally submitted for Business Studies at Jordanstown, with lecturer Mary Boyd in the category of Business & Economics
An essay for the 2012 Undergraduate Awards Competition by Sarah Green. Originally submitted for Business Studies at Jordanstown, with lecturer Mary Boyd in the category of Business & Economics

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Published by: Undergraduate Awards on Aug 30, 2012
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Sarah Green B00440670

Retail sector: Can large companies foster customer loyalty in today’s challenging climate? 1.1 Background Information/ Literature review The supermarket environment, in the UK is one of the most competitive, complex and dynamic sectors in the world, in which standardisation is a strong feature with very little differentiation between competitors and the products they offer. Another feature of the sector that has emerged over the years is the ever increasing demands of customers in terms of overall service and product quality. This has meant competition levels in the sector are intense. Against this back drop the issue of trying to foster and maintain customer loyalty has become of critical value to businesses not just for profitability but for survival. (0’Loughlin and Szimigan, 2006). This has resulted in a global trend by businesses and academics towards the topic of ‘loyalty’. As outlined competition in the food retailing market is intense with competitors seeking to not only boost profits but to maximise a share of a customer loyalty in order to try and ensure / develop repeat business is gained (Aaker . D, 2007).However, how companies can generate and foster loyalty remains a continued challenge to businesses. In recent years the overall retailing environment has had to contend with developments in the external environment including regulation changes, technological advancements and changing consumer dynamics which all have led to a great transformation in the industry. This can have a great impact on a customer’s loyalty towards a company (Durkin & Howcroft, 2003).Within this report I will examine and analyse loyalty strategies. In particular I will focus on Marks & Spencer’s and their attempts to foster and maintain customer loyalty in today’s challenging economic environment.


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1.2 Introduction-customer loyalty There has been considerable research directed at the topic of customer loyalty particularly focusing on trying to define and measure it. However, there is still confusion over what is actually meant by loyalty due to the lack of a universally accepted definition (Dick and Basu, 1994; Lam and Burton, 2006), one of the most popular ways that it can be defined is: “....a deeply held commitment to re-buy or repatronize a preferred products or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behaviour” (Oliver, 1999, p.34). The definition above shows that loyalty has both attitudinal and behavioural dimensions to its construct (Dick and Basu, 1994), which has been the main basis of debate within the loyalty literature (Berry 1995; O’Malley and Tynan, 2000). The benefits of customer loyalty to a provider are numerous for example Beerli et al, (2004) link customer loyalty to an organisation’s profitability, implying that any organisation with loyal customers has considerable competitive advantage. This makes studies on customer loyalty essential for retailers. Other advantages associated with having a loyal customer base are shown in Table 1.2

Benefit  Recruiting a new customer is estimated at 5-10 times more expensive than retaining one

Author Gilbert, 1996


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 Loyal customers are less price sensitive and spend more  Loyal customers are linked to brand equity  Loyal customers are a source of positive word of mouth  Reduces the marketing cost of operating

Doyle, 1998

Dekimpe, 1997

Doyle, 1998

Beerli et al, 2006

Table 1.2: The benefits of loyal customers (Sourced and adapted from Beerli et al 2006)

1.3 Loyalty in the retail sector Due to today’s challenging economic environment supermarkets have had to focus their efforts on maintaining a loyal customer base, which has become an essential activity for survival (Leverin and Liljander, 2006). However as the literature highlights true loyalty must not be mistaken for the factor of inertia (Bennett and Rundle-Thiele, 2004). When the relative attitude is negative but the customer stays with the organisation, it is a question of ‘Brand Loyalty’ (Dick and Basu,1994).

Brand loyalty is the consumer's conscious or unconscious decision, expressed through intention or behaviour, to repurchase a brand continually. However, this loyalty has come into question about whether it actually exists in today’s competitive environment. Due to the recent recession this has caused customer-supermarket relationships to breakdown. The main

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reasons why customers were usually loyal to supermarkets such as Marks and Spencer’s has changed to great extent, now a day’s customers are more concerned about wherever is closest and cheapest to fulfil their needs. One recent innovation in loyalty marketing is the development of technologically-based loyalty devices. Loyalty devices offer convenience by enabling customers to conduct transactions both faster and easier than before. However, the real secret of their popularity for customers and marketers alike is their ability to create a sense of belongingness, (Arnold, 2002). The key is to often reward the loyal customers by living up to expectations, consistently, providing ongoing relationships and offering extras that surprise and delight, (Sellers 1993). Tesco’s is a good example of how successful this type of loyalty strategy can be with its implementation of club cards to create and foster relationships with their customers. 1.4 Customer loyalty and gender In the literature there are conflicting views as to whether consumer demographics are correlated with loyalty behaviour exhibited by consumers (Patterson, 2007). In particular does loyalty vary by gender? Research by Fry et al., (1986) argues that there are no significant distinctions between male and female shopping habits and that both genders can safely be treated as a homogenous customer grouping. Patterson (2007) supports this argument as he concludes within his study that gender is not one of the mediating factors affecting customer loyalty in the context of the service sector. However, Ndubisi (2005) contrasts this and instead advocates that gender plays an important role in the customer loyalty and identifies that female customers tend to be more loyal than male in their behaviour. These opposing arguments show that there needs to be further study into whether females might exhibit strong service loyalty behaviour than males. This

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represents an area of the literature that has little research and consequently provides an opportunity to improve the knowledge of this issue.

1.5 What causes disloyalty? One of the main reasons why disloyalty happens within a retail business is when the customer’s needs are not being satisfied by the existing product offerings. This can often cause a customer to make the decision to look elsewhere, (Sellers 1993). This kind of disloyalty is often regarded as “unmet needs”. Unmet needs are strategically important because they represent opportunities for the firm to increase their market share, break into a market, or to even create and own new markets. They can also establish threats that can be a lever that enables competitors to disrupt an established position. Sometimes customers are unaware of their unmet needs because they are so accustomed to the implicit limitations of existing equipment. Unmet needs are difficult to identify but they can represent greater opportunities for any business, (Aaker, 2007). Due to the fact that customers are not satisfied with the quality of the product/service the organisation provides they often become disgruntled, and begin to look for alternatives which can have a major effect on the profit of a business, (Hoffman & Bateson, 2006). Research into service loyalty has found that by improving customer retention, large increases in profitability can be achieved (Reicheld and Sasser, 1990). The answer that has been proposed to tackle disloyalty has been relationship-marketing theory by a study by Stewart (1998) advocates the use of intelligent relationship building in order to generate customer loyalty and helps reduce customer defection.


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1.6 Is Relationship marketing the answer? There has been great plethora of debate regarding relationship marketing. However like customer loyalty it also lacks a definitive definition for example (Muherjee and Nath, 2003; Moorman et al, 1992 and, 2004) all offer various viewpoints to this literature on the underpinnings of relationship marketing. Factors such as trust, commitment, conflict handling, and technology all have attributes that are linked to the relationship marketing process.

1.7 Research Aims As a consequence of today’s market conditions many retail companies have had to adapt their strategies to suit the continuous change of customer needs, and to focus all their efforts towards strategies which focus on not only brings in new customers but also help to maintain the loyalty they have with their existing customers. This dissertation will try to provide insight into the behaviour of consumers within the retail sector and look at the validity of applying a relationship marketing strategy to increase loyalty. Overall this will help us to understand how retailers like Marks & Spencer’s use these strategies to achieve higher levels of loyalty among their customer’s.


Sarah Green B00440670

1.8 Research Objectives  Explore loyalty behaviour within Marks and Spencer’s  Analyse disloyal behaviour– what main factors cause customers to look elsewhere to shop.  Assess relationship marketing and how this can be used to predict loyalty amongst consumers.  Is inertia the main reason for repeat purchases or does true loyalty still exists?  Can Marks and Spencer’s improve their strategies to improve loyalty in customer’s.

1.9 Need for further research This literature review suggests that customer- supermarket relationships are no longer as secure as they have been in the past due to the recent recession. So by looking to explore the current attitudes of customers regarding Marks & Spencer’s and by relating this loyalty/ disloyalty behaviour and relationship marketing, valuable insight and knowledge will be gained. The researched gained within this area of loyalty strategies has potentially important implications for marks & Spencer’s, as they seek to create durable and long-term relationships and protect their customers base within an increasingly competitive market. My methodology and research has been adopted to ensure that these issues are addressed to help fill in the gaps in the literature.


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The target survey population for this dissertation will be the customers who shop within Marks & Spencer’s. By obtaining and analysing customer’s opinion this will help to explore customer behaviour and whether customer loyalty is evident. Secondly by targeting customers this will provide greater insight into whether or not strategies used by Marks & Spencer’s to create loyalty are effective. By using quantitative (questionnaires) I will be able to evaluate the loyalty strategies utilised by Marks &Spencer’s. Matzler et al (2006) highlight that it is advantageous to use a homogenous sample, such as customers within a survey as it helps to reduce the impact of non-controllable intervening variables. The choice of location for this study will be outside the Marks & Spencer’s branch in Belfast. This location was chosen as it is a good catchment area of varied people and provides an area with a high chance of gaining the required numbers of respondents as well as a varied sample of population. From investigating a number of crucial topics raised within the literature in the previous chapter a number of hypotheses have been developed to be tested to help achieve the objectives within this dissertation. 2.1 Research Hypotheses  H1. The occurrence of switching supermarkets will be higher within this sample than that of other studies (Colgate, 1996 and Lewis and Bingham 1991) who have conducted similar studies.


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 H2. There exists a significant and positive relationship between unmet needs and switching supermarkets.

 H3. There is negative correlation between gender and loyalty.

 H4. Customer loyalty will have:

(A) A significant positive relationship with Trust (B) A significant positive relationship with Commitment (C) A significant positive relationship with Communication (D) A significant positive relationship with Conflict handling (E) A significant positive relationship with Technology All the factor of hypothesis 4 are shown in the research framework below


Commitment Customer Loyalty Conflict Handling


Figure 2.1 : The research framework source from Ndubishi et al, (2005)

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2.2 Quantitative or Qualitative Approach In light of the aims and objectives and the hypothesis identified earlier a quantitative survey has been selected for the purpose of this dissertation. This dissertation involves looking at the extent to which certain behaviours and attitudes prevail within the consumer population, which makes qualitative methods less appropriate ofr this investigation study, as they focus on gathering more in-depth and richer data from a smaller sample (Kent 1999). Also compared with qualitative methods, surveys methods allow the collection of significant amounts of data in an economical and efficient manner (Burns and Bush, 2006). Whilst it is recognised that the inclusion of qualitative data within the survey in the form of open questions enables the collection of knowledge on people underlying motivations for exhibiting certain behaviours (Brace, 2004). It was felt that due to the pressures associated with the difficulty of coding open responses and its large time consumption, that narrowing the questions into closed response format would be preferred for this survey.

2.3 Instrument of data collection For this survey questionnaires will be used in preference to that of other instruments such as diaries or recording devices as these methods exclude the possibility of collecting ranges of necessary data required to meet the aims and objectives of this dissertation. Using a questionnaire was the only plausible method that prohibited the collection of information such as the likert scaled questions that were used to gauge general attitudes. In addition the other available methods of collection would have required higher levels of commitment from


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respondents (Kent, 1999) which the researcher felt could reduce the response rate of the survey.

2.4 Questionnaire design The questionnaire will be designed to ensure that it will be suitable for both the interviewer and the respondent. The questionnaire will consist of three sections with the first section asking general questions pertaining to customers and Marks & Spencer’s, which will generate findings for the loyalty and disloyalty of students. The second section will be designed to gather respondent’s opinion on the importance of the constructs mentioned above and finally a third section will consist of the respondents demographic characteristics.

2.5 Pilot Piloting a questionnaire has been recognised as fundamental to the success of the overall study (Kent, 1999). Conducting a pilot study does not guarantee success in the main study, but it does increase a likelihood of success. The questionnaire will be subsequently piloted amongst 12 random customers to test its effectiveness in achieving the aims that were identified. Brace (2004) highlights that is important to improve the reliability of a questionnaire through testing it with members of the targeted survey population.

2.6 Sampling A quota sampling will be employed rather than a selected sample due to time costs associated with these techniques. (Kent, 1999). Also it was necessary to obtain as representative a

Sarah Green B00440670

sample as possible, as it helps to make the results more generalised to the target population (Brace, 2004). In addition the sampling method adopted will ensure that the right sampling size will be met and relevant data will be collected, which will guarantee that the right data will be used for analyses, which has been problematic for other samples gathered (Kent, 1999).

2.7 Methodological limitations There may be a limited size to the sample this represents a limitation, as a larger sample size would improve the reliability and validity of the results however it will be as large as resource constraints will allow. As questionnaires will be employed to collect the data some customers may not be willing to spend the time filling in a questionnaire, so the example can be biased. So this must be taken into account when considering the validity of the results. However despite these limitations it was felt that the survey design will be appropriate for this study.

2.8 Conclusion Once the primary research will be obtained through the form of questionnaires, the SPSS package will be used to assist the analysis of the collected raw data. This will help to represent the findings of the study in different forms of statistical analysis i.e. bar charts, pie charts. In the next part of this assignment I will present the findings, analysis and interpretation of results of my research.


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References Journals Beerli A., Martin, J.D. and Quintana, A.(2004), “A model of customer loyalty in the retail market” , European Journal of Marketing, Vol. 38 No. 1-2, pp.253-275

Bennett, R. And Rundle- Thiele, S. (2004), “Customer satisfaction should not be the only goal”, Journal of services Marketing, Vol.18 No.7, pp.514-524

Berry, L. (1995), “Relationship Marketing of services- growing interest, emerging perspectives”, Journal of the Academy of Marketing science, Vol.23 No.4, pp.236-245

Colgate, M., Stewart, K. And Kinsella, R. (1996), “ Customer defection: a study of the student market and Ireland”, International journal of bank marketing, Vol.17 No.1, pp. 36-43

Dick, A.S., and Basu, K. (1994) “Customer Loyalty: Toward and integrated conceptual framework”, Journal of the Academy of Marketing Science, Vol 22 No.2, pp99-113

Durkin, M., Howcroft, B. (2003), “ Relationship marketing retail sector: the impact of new technologies”, Marketing Intelligence & Planning, Vol.22, No.1,pp67-71

Fry, J.N., Shaw, D.C., Lauzenauer, C.H., and Dipchand, C.R., (1986), “Customer loyalty: A longitudinal study”, Journal of Business, Vol.12, pp517-525

Lam, R. And Burton, S. (2006), “Loyalty/Disloyalty: a qualitative study in Hong Kong”, International journal of marketing, Vol.24 No1, pp 37-52


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Leverin, A. And Lijander, V. (2006), “Does relationship marketing improve customer relationship satisfaction and loyalty”, International journal of marketing, Vol.24 No.4, pp 232-251

Matzler, K., Wurtele, A. And Renzl, B. (2006), ‘Dimensions of price satisfaction: a study in the retail banking industry’, International Journal of Banking Marketing, Vol. 24 No.4, pp.216-231

Moorman, C., Zaltman, G. And Despande, R. (1992), “Relationship between providers and users of market research: the dynamics of trust within and between organisations”, Journal of marketing research, Vol.29 No.3, pp.314-328

Mukherjee, A. And Nath, P. (2003) “A model of trust in online relationships”, Journal of marketing research, Vol.21 No.1, pp, 5-16

Ndubisi, N.O. (2005), “Effect of Gender on Customer loyalty: A relationship marketing approach”, Marketing Intelligence and Planning, Vol.24 No1, pp. 48-61

Ndubisi, N.O. (2007), “Relationship marketing and customer loyalty”, Marketing Intelligence and Planning, Vol.25 No.1.pp. 98-106

O’ Laughlin and Szimigan (2006), “Customer Relationship Typologies and the nature of loyalty in Irish retail financial service”, Vol.22 No.3-4 pp.26-293

Oliver, R.L, (1999), “Whence consumer loyalty?”, Journal of Marketing, Vol.63, pp.33-44

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Patterson, P.G. (2007), “ Demographic Correlates of Loyalty in a service context”, Journal of Service Marketing, Vol.21, No2, pp112-121

Stewart, K. (1998), “An exploration of customer exit in retail”, International journal of Marketing, Vol.16 No.1,pp.6-14

Reichheld, F.F. and Sasser, W.E.(1990). “Zero defections: quality comes to services”, Harvard Business Review, Vol.68, No.5, pp.105-111

Wong, A. And Sohal, A.S, (2004), “Understanding the quality of relationships in consumer services”, International Journal of Quality and Reliability Management, Vol.23 No3, pp. 244-264

Books Aaker. D, (2007) ‘Strategic market management’, 8th edition, California, John Wiley and sons inc.

Brace, I. (2004), ‘Questionnaire Design’, Kogan Page Ltd, London

Burns, A.C. and Bush R.F. (2006) ‘Marketing Research’, fifth edition, Pearson Education Ltd, New Jersey

Kent, R (1999) ‘Marketing Research: Measurement, Methods and Application’, International Thompson Business Press, London


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Oppenheim, AN (1992) Questionnaire design, interviewing and attitude measurement. Pinter, London.

Hoffman, K., and Bateson, J. (2006) ‘Services Marketing: Concepts, strategies,& cases’ 3rd edition, South Western: Thompson.

Saunders, M,. Lewis, P. And Thornhill, A. (2007) ‘Research methods for business students’ 4th edition, England: Pearson Education Ltd


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