Professional Documents
Culture Documents
2.1 INTRODUCTION
The field of customer satisfaction is huge and pass through a number of different
academic disciplines. The twenty first century concepts of customer intimacy, customer
centric and customer focus reconstruct the corporation as an entity that deliver value to
carefully selected market segments (Christopher et al., 2002). The literature review covers the
different literature from other authors and attempts to understand the concepts, the
definitions, theories and solutions. Moreover, it tries to include other concepts and ideas that
may prove useful in this and may help in making a platform for the research.
The literature review assesses the vital concepts of relationship marketing, service
quality and customer loyalty. The focus of these topics is on retaining the customers and to
gain long term profitability for the organisation. The concept of these terminologies in the
context of today’s retailing sector will be discussed. Furthermore, the relationship of all these
with the satisfaction of customers will be examined. The published literatures on UK retailing
sector is also analysed.
(1). Need arousal: The buying process starts with an unsatisfied need. This could be socially,
commercially or physically stimulated and it motivates the individual to act.
(2). Recognition of the need: This is a prerequisite stage where the retailers can have a direct
impact on the stimulation. This could be done using window displays, bill boards, in store
merchandise displays and other sorts of advertising and promotional activities. This could
also help in kindling secondary needs. A smart retailer presents the customer with a total
merchandise package along with training their staff to prompt the customer about their
requirements.
(3). Level of involvement: This is the amount of time and effort spent in the decision process
and will depend upon the complexity of product, individual perceptions and the buying
situations.
(4). Search of information and identification of alternatives: Branding has got a major
influence in this part of the buying process. Advertising, promotional activities and most
importantly word of mouth are also key players here. Sales are one of the largely accepted
promotional activities and are often a very successful driving or motivational factor (Smith &
Taylor, 2004). Internet is aiding a lot in the search for information part. Again, the presence
of competing brands, similar retailers, time and cost also had their voice in this important
process.
(5). Evaluation of alternatives: Comparisons will be made based on the preferences of the
purchaser. The cost, reputation or performance expectation could be the criteria here.
Sometimes customers come up with a ranking of their preferences among the alternatives.
Finally the decision is of the customer as their attitudes are dynamic and unique.
(7). Purchase action: Again, this depends on the availability of the merchandise.
(8). Post purchase feeling/ behaviour: This is a feeling of individual experience and will
differ from customer to customer. This stage could give an assurance if there is any doubt
about the choice in customer’s mind. This psychological stage directly relate to how satisfied
the customer is and his/ her loyalty.
The UK sports goods market is worth £5.6 billion in the year 2007 (Mintel Reports,
2008). The report points to the rise of Sports Direct International as the market leaders as the
driving force for the massive consolidation of sportswear retailing. The UK retailing turnover
of the company was over £1 billion which was more than double than that of 5 years ago
(Sports Direct Annual Report, 2007). Other retailers find it difficult to cope with the discount
based strategy of Sports direct. However, some retailers like JD sports have been successful
while most of the individual players in the market failed to differentiate themselves.
Increased consumer power and complexity pressurise the marketers to switch from
mass marketing approach towards personalisation, interaction and maintaining relations with
customers (Constantinides, 2006) that is from the product oriented approach towards a
customer oriented approach. The author argues this as the reason why the marketers
concentrated more on communicating with their customers and made them vigilant about
changes in customer expectations and to adapt themselves to those changes. Healy et al.
(2001) supports relationship marketing as the future marketing paradigm as it addresses the
elements of the marketing relationship trilogy – relationships, neo-relationship marketing and
networks. While transactional marketing focuses on increasing sales and making customers,
relationship marketing aims at creating client relationships and retaining existing customers
(Vence, 2002).
However, the critics of relationship marketing argue that the traditional 4P’s
marketing concept is not going to be replaced. Rather they support a cross-functional focus
on marketing strategy. Zineldin & Philipson (2007) argues that there is a considerable stake
of customers who prefer to purchase on the basis of price and quality rather than on the basis
of a long term relationships.
In the current business world, customer care has got a major influence on a
company’s long term profitability. Cook (2000) identifies customer as the foundation of
business and as the factor to keep the business in existence. As a result, there is considerable
attention is being taken into account of maintaining a relationship between the service
providers and customers (Barnes, 1997; Reinartz & Kumar, 2002; Coulter & Coulter, 2002).
Relationship marketing focuses on maintaining and managing a long term marketing
relationship. The focal point of relationship marketing is customer retention rather than
customer creation. This aims to increase the customer life time value. Sheth & Parvatiyar
(1995) identify consumer choice reduction as the fundamental principle of relationship
marketing. Customer driven marketing practises, profitability and strategic marketing
practises are the three important features of relationship marketing (Shajahan, 2006).
Relationship marketing within the context of a retailing industry can be viewed as the
relationship the customer maintain with the organisation, its branches, several departments,
and the sales associates (Buttle, 2009; Beatty et al., 1996). Especially in the retailing industry,
customer is more likely to preserve a rapport with individuals and company itself rather than
the goods they purchase (Bendapudi & Berry, 1997; Parasuraman, 2002). However, the
customer and retail sales associates’ relationship is referred to as relationship selling and is
highly effective where the customers are looking for personalised services (Johnston &
Marshall, 2007). The success of relationship marketing depends on two key drivers: the
human interactions and the interaction between human and computer and software system
(Williams et al., 2009). Relationship selling summarises the human interactions part of the
above.
Adjei & Clark (2010) suggest that the quality of relationship is being driven by
overall satisfaction and these two lead to customer loyalty. Hence in this context, satisfaction
can be viewed as the customers’ affective response to the relationships (Palmatier et al.,
2006). Wong & Hogg (2009) argue that relationships always tend to change over time
because of the changes in trust and the experiences. To preserve the relationship with the
customer the retailer needs to continue their contacts and characterise themselves according
to customer needs. However, it is difficult to maintain or create a relationship with the
customer in such a way as to develop a first name friendship with the staff as in the case of a
hairdresser or dry cleaner (Barnes, 1997). Though, employees play the main part in creating
and maintaining the relationships, management must be committed to the employees and to
the customers for the relationship marketing to work (Beatty et al., 1996).
Every service organisation is built around a core service (Berry, 1995), though the
customers evaluate the service quality based on this core service and the peripheral services
along with their expectations (Gronroos et al., 2000). Since services are simultaneously
provided and consumed, the time in which the customer interacts with the employee becomes
critical (Baker et al., 2009; Bitner et al., 1994; Hartline & Ferrell, 1996). Baker et al. (2009)
conclude that the customer contact employees can thus directly impact the customers’
perception of service quality and customer satisfaction.
According to the opinion of various scholars, the service quality from a single
experience can significantly impact the overall customer satisfaction and loyalty. A single
negative service encounter or service failure not only could result in a permanent lessening of
overall customer satisfaction but also the other reactions of the dissatisfaction including
negative word of mouth (Hocutt et al., 2006). Ranaweera & Prabhu (2003) and Barlow &
Moller (2009) warn that the more dissatisfied the customer is the more likely they to use
negative word of mouth. In this case the process of service recovery becomes important. Bell
& Zemke (1987) proposed five ingredients for a successful service recovery: apology, urgent
reinstatement, empathy, atonement, and follow-up. Moreover, Hocutt et al. (2006) observe an
additional interaction between courtesy and tangible rewards can also effectively function as
a service recovery method.
In online retailing, the degree to which the retailers are able to satisfy the customers is
a vital factor in service quality. Especially in today’s business environment where more and
more companies are going online to do their businesses service quality is becoming very
important. Providing the information to meet the requirements of individual consumer is the
key for the success of an online retailer (Park & Kim, 2003; Szymanski & Hise, 2000). So in
this context, retailers have to think differently to succeed in the business. Seiders et al. (2000)
gives the example of one stop shopping. However, this selection a retailer offering to the
customer makes them a potentially powerful force in the competitive retailing industry
(Berry, 1996).
Organisations should not presume that individual customers who comprise the global
market are identical in nature (Ueltschy et al., 2007). They have to develop their products and
services in such a way to satisfy these diversified customers and to remain competitive in the
global market (Ueltschy et al., 2007). With an increased competition and a variety of
products and services, the customers are forced to compare their alternatives rather than just
selecting a product or service (Cronin et al., 2000; Olsen, 2002). Therefore an important role
of customer service has turned out to be helping the customer selecting from his/her
alternatives, to provide valuable information and to help them make decisions and thus
boosting their satisfaction level towards the product and to the retailer.
Gilbert & Veloutsou (2006) argue that customer satisfaction is derived from the
customer’s comparison of the expected and actual experience. Such expectations are obtained
from both ideal and comparative principles. Ideal principle is what the service should actually
be; while, comparative is what customer can realistically expect on the basis of their previous
experiences. However, there is no real means for measuring the customer satisfaction as it is
completely characteristic – that is it is defined uniquely from individual to individual.
Again, there are certain characteristics that have an unhelpful impact on customer
satisfaction on not delivering them, but still only have negligible positive impact even if they
are improved to a satisfactory level (Conklin et al., 2004). These features known as the “must
be” attributes have a multiplicative relationship with the overall customer satisfaction as the
failure of delivering these “must be” attributes could cause decline in the overall satisfaction
(Conklin et al., 2004). Hence these could be considered as key dissatisfiers. It is a major
challenge for marketing managers to identify these and nullify the effects or reduce it.
Jones & Sasser (1995) grouped three different ways for measuring customer loyalty:
(1). intend to repurchase: It is about asking the customer about the future intentions of
repurchasing. Even though these are mere indications of future and there is no assurance,
these could be used as important factors while measuring customer satisfaction.
(2). Primary behaviour: Companies have often access to transaction information of customers
and can measure factors such as recency, frequency, amount, retention and longevity. These
are indicators of genuine repurchasing actions.
(3). Secondary behaviour: Word of mouth is one of the most significant aspects in attracting
new customers. Also, customer referrals and endorsements are also part of this secondary
behaviour. However, these ‘soft’ measures of behaviour are difficult to evaluate and to link
with the actual customer loyalty and satisfaction.
According to Gremler & Brown (1996), customer satisfaction is not the only factor
which directly influences the customer loyalty; switching costs and interpersonal
relationships has also got their voice in the process. However, the authors argue that the
loyalty begins only after a certain level of customer satisfaction is reached. Reinartz &
Kumar (2002) claims that it costs less to serve loyal customers while they are willing to pay
higher prices for the same bundle of goods; and the authors identify the loyal customers can
market the company in an effective way.
Another important term associated with customer satisfaction and customer loyalty is
the profitability of the firm. Profit is an accounting figure and is revenue minus cost in simple
mathematical terms. King & Geursen (2001) developed a three domain model of cash flow in
organisation and in that the author argues the significance of cash flow from operations act as
a catalyst for other functions in the firm. Customers are the main source of cash flow in most
of the organisation and increasing them by obtaining new customers or retaining the existing
customers becomes very crucial. Hence customer satisfaction becomes an important part in
the profitability of a firm. Customer satisfaction raises the future cash flow and reduces its
variability (Gruca & Rego, 2005). A loyal customer is more likely to involve in repeat
purchasing (Mittal & Kamakura, 2001; Olsen, 2002). Also, pricing can be used to enhance
profitability if the firm have loyal and satisfied customers. Research proves that highly
satisfied customers are willing to pay premium prices (Luo & Homburg, 2007; Homburg et
al., 2005).
Researchers calculate the cost of recruiting a fresh customer is five times more than
the cost of preserving an existing customer (Barsky, 1994; Reichheld & Sasser, 1990). That is
why, even the market leaders never compromise on delivering quality services so that they
can maintain their customer loyalty (Zeithaml et al., 1996). Continuing business with retained
customers is profitable as they could save spending on a bunch of recruitment costs, such as
costs on advertising to persuade fresh customers, the costs of personnel selling to field to new
prospects; the costs of setting up new accounts; the costs of explaining business procedures to
new clients, and the costs of unproductive dealings during the customer’s learning process
(Peppers & Rogers, 1993). Moreover a larger base of satisfied customers can prove to be an
asset by bringing in cost savings through reduced customer turnover expenses; positive word-
of-mouth; increased cross-selling success; providing a major ‘percentage’ of customers; and
reducing failure costs (Griffin, 1998). Moreover, there is substantial value lying in building
and keeping the relationship with customers as it helps boost the trust and commitment that
customer feels towards the business organisation (Sheaves & Barnes, 1996). The superior
levels of trust and commitment in turn are linked with higher levels of customer retention and
without doubt, organisational profitability (Crutchfield, 2001). On the other hand, from the
customers point of view, a long term relationship with the service provider lessen risk,
simplify selection, and provides a feeling of optimal satisfaction for the customer (Gremler &
Brown, 1996). Therefore, an organisation’s long term success is determined by providing
customer satisfaction and thus expanding and maintaining a significant and loyal customer
base.
Employees have got a major part in customer satisfaction in the retailing industry.
This critical role of employees is mainly because of their direct interaction with the customer.
In a retailing sector, the front staff or the sales associates represent the whole company or
brand to the customer. Hence a highly motivated and well trained employee is becoming an
integral part of the organisation. According to Bowers & Martin (2007), the concept of
employee as customer is a framework the firm’s could adapt. In this concept the employee is
treated or considered as a customer and all the process of attracting, developing, motivating
and retaining them becomes important in the agenda of the company (Bowers & Martin,
2007). Again, wages are not just pounds and pence to an employee. An incentive, recognition
or job promotion could act as motivating factors for an employee.
If you want to measure the customer satisfaction, you need to have a clear idea of
what is to be measured. For that the researcher need to know and feel like a customer – in a
shopping mall, on a public transport, in the bank – or anywhere. Hill et al. (2003) view
customer satisfaction as the measure of how an organisation’s total product and service
performance in the scale set by the requirements of the customer. So to measure the customer
satisfaction it is important to measure both the expectation part and the satisfaction part.
Similar to other projects, the process of measuring customer satisfaction also should
start with setting the objectives. Identifying the customer requirements is the most important
factor in this. There will be a lot of important things from the perspective of a customer, but
the key is to recognising the critical ones. The next step is to measure the satisfaction – that is
how satisfied the customers are with the performance of the organisation comparing with the
requirements. Comparing themselves with a competitor can provide a benchmark in
performance as the customers will do this either consciously or subconsciously. Hence
carrying out a customer satisfaction measurement in isolation is never complete as the results
or conclusions will not be conveying the clear picture. However, this comparison should not
necessarily be with the direct competitors, it should be with other organisations that the
customers deal with more often (Hill et al., 2003). For example: customers going to a
particular supermarket in their neighbourhood out of three or four supermarkets; not usually
compare it with the other supermarket where they not go, but with other organisations and
services which is used to them.
2.6 CONCLUSION
The literature review examined the significance of relationship marketing, service
quality, customer satisfaction and customer loyalty. The relationship between these was also
discussed. And it became clear that they are very important for the health and wealth of an
organisation to survive in the present business world. With this information, the research is
trying to find out the customer satisfaction level in the sports retailing industry. For this the
researcher will concentrate on the Sports Direct retailing store in Liverpool One and a
quantitative survey will be carried out. The results from the survey will be used to analyse the
service standards, and quality provided and how it is tallying with the customer expectations.