A Study on the Dynamics of Customer Loyalty in

Digital Business Platforms

By

G.W. Bhakth Geemal Chandrasiri

Student ID – 15153223

Southampton Solent University

Management Research Methods – MAN 130/BCM 712

Research Proposal – AE2

Table of Contents
Introduction ........................................................................................ 1

Aims of the Research .............................................................................. 2

Objectives of the Research ....................................................................... 2

Literature Review .................................................................................. 2

Customer Loyalty .................................................................................. 2

Customer Factors .................................................................................. 3

Age ................................................................................................ 4

Gender ............................................................................................ 4

Income ............................................................................................ 4

Switching Cost ................................................................................... 5

Service Provider Factors .......................................................................... 5

Price .............................................................................................. 5

Quality ............................................................................................ 5

Assortment ....................................................................................... 6

Payment Options ................................................................................ 6

Customer Service Culture ...................................................................... 6

Supporting Services ............................................................................. 6

Reputation ....................................................................................... 6

Service Personalization......................................................................... 7

Innovation ........................................................................................ 7

Environmental Factors ............................................................................ 7

Research Methodology ............................................................................ 8

Research Philosophy ............................................................................ 9

 Research Approach............................................................................ 10

Conceptual Framework ....................................................................... 11

Hypotheses Development .................................................................... 11

Strategy......................................................................................... 13

Time Horizon .................................................................................. 13

Techniques and Procedures ................................................................. 13

Conclusion ........................................................................................ 14

References and Bibliography ................................................................... 16

Table of Figures
Figure 1 Factors Determining Customer Loyalty (Vilkaitė-Vaitonė and Skačkauskienė
2020) ................................................................................................. 3

Figure 2 The Research Onion - Formulating the Research Design (Saunders, Lewis and
Thornhill 2015) ..................................................................................... 8

Figure 3 Digital Customer Loyalty - Author Developed ..................................... 11

Figure 4 Timeline of Research Completion Process - Author Developed ................ 13

Introduction

There was a significance improvement took place in the information technology during
last two decades and therefore in modern days, world is connected more than ever in
the history(Press 2020). Therefore, today we live in an era where everything is
accessible at the touch of fingertips. Simultaneously, the e-commerce is also evolved
into a trillion-dollar industry with recorded transactions worth of $3.46 trillion in
2019(Young 2020). In that case the online business platforms like Amazon which started
out from a small garage have become integral parts of modern communities (DePillis
and Shermon 2020). And also, there are millions of small- and large-scale online
businesses around the world(Liedke 2020).

Therefore, the modern-day customers have unprecedented access to all these online
businesses all around the world and they have the ability to select and compare
numerous options and the switching cost for them in between products and online
vendors is absolutely zero. These trends and changes in digital age have directly
engaged with the core of business landscape and caused considerable shifts in those
core dynamics of businesses. One important core element that has taken dramatic shift
is customer loyalty. The very definition of the customer loyalty is “act of choosing one
company’s products and services consistently over their competitors”(Chambers
2020).The definition itself projects the vitality of customer loyalty for a business to
sustain in the long run. This is further proven by a statement from the Gartner group
stating that 80% of their profits are generated from the 20% of existing customers
(Touchdynamic 2020). Further a company can enjoy following benefits also by having a
loyal customer base.

• Loyal customers are protection in the competition.

• Loyal customers act as brand ambassadors.
• Sales process becomes much convenient for loyal customers (Touch Dynamic,
2020).

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Therefore, this study focuses on the dynamics of the customer loyalty in the digital
platforms as it may unveil new insights which are extremely beneficial for the
development of the online businesses as well as the digital customer loyalty knowledge
stack.

Aims of the Research

The aim of this research is to identify and investigate the nature and the factors
influencing on the customer loyalty in digital business platforms in contrary to non-
digital businesses.

Objectives of the Research

• To understand the core and the nature of the customer loyalty with the use of
important theories relevant to this realm.
• To understand the customer loyalty in digital business platforms.
• To Identify the underlying factors which influence customer loyalty.
• To use the findings of the research to improve the knowledge stack of the
customer loyalty realm and to use those for the betterment of the digital
businesses.

Literature Review

Customer Loyalty
Customer loyalty is viewed as the strength between the relative attitude and the
repeated support of an individual towards a product or service (Dick and Basu 1994).
Further is states that the relationship is molded by the situational factors and the social
norms. In some studies, the customer loyalty has been identified as a product of
superior service quality and the trust that service or the product encompasses with
(Gefen 2002). Some scholars viewed customer loyalty as a primarily attitude that leads
towards a relationship with a brand (Uncle, Dowling and Hammond 2003)

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Further, studies have identified that none of the companies can stay in the business
unless it has a satisfied and a loyal customer base (Gould 1995). Loyalty is focal point
of the relationship marketing or the customer relationship management and it results
in low costs of new customer acquiring, increased profitability and improved market
share (Russo and Confente 2017).

As studies find out, the customer loyalty is based on three main factors which are
customer, service provider and environment (Vilkaitė-Vaitonė and Skačkauskienė
2020). It can be further elaborated as in the figures one as follows.

Figure 1 Factors Determining Customer Loyalty (Vilkaitė-Vaitonė and Skačkauskienė 2020)

Vilkaitė-Vaitonė and Skačkauskienė (2020) Further supported their findings as follows.

Customer Factors
As Vilkaitė-Vaitonė and Skačkauskienė (2020) suggest, the customer factors comprise
of gender, age, socioeconomic status, income and switching cost.

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Age

Vilkaitė-Vaitonė and Skačkauskienė (2020) argue that loyalty is not the same during the
various stages of the customers’ life span. According to their argument it’s easier for
the competitors to snatch the younger customers compared to the mature customers.
As they have found, mature customers have more loyalty compared to younger ones
and those senior customers are less interested in switching the service or a product due
to the strong relationship and trust, exceptional customer service etc. also the matured
customers are satisfied with the product or service they get.

Further in this study the scholars have found an interesting fact that the loyalty of a
mature customer increases as their social network narrows down in terms of retirement,
children leaving home etc. The ratification behind that is that there will be a social gap
as a result of social network narrowing down. Therefore, the mature customers are
more lenient towards their service providers as they value connections opposed to the
younger generation. At the same time the researches argue that this statement cannot
be applied all the services and products since some of the services and products such
as educational institutions, night clubs etc. entail younger generation.

Gender

As Vilkaitė-Vaitonė and Skačkauskienė (2020) suggest that there are significance

differences in customer behavior between men and women. As they have found women
are more engaged in shopping compared to men and apparently women enjoy and active
in the shopping process more than men as seek for better deals and as it’s a part of
their social identity. This argument was further supported by a study that founded
women are more customer loyal than men(Ndubisi 2006).

Income

As founded by Vilkaitė-Vaitonė and Skačkauskienė (2020) customer income plays a

pivotal role in determining the customer loyalty towards a product or service. This
argument is further supported by the studies of Crask and Reynolds 1978, Korgaonkar
et al.,1985 Zeithaml, 1985 (Srivastava 2015) Vilkaitė-Vaitonė and Skačkauskienė (2020)

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founded that the customers with lower income levels are more loyal towards a product
or service in contrast to the high-income earning customers since high earning
customers have multiple opportunities compared to the less income earning customers
.This finding was further supported by a study conducted by Homburg and Giering
(2001) and they have noticed that lower income level positively moderate customer
satisfaction which is crucial in customer loyalty(Homburg and Giering 2001).

Switching Cost

According to the studies the higher switching costs create false customer loyalties
(Jones and Sasser 1995). At the same time studies by some other scholars argue that
even with the less switching costs, a dissatisfied customer is highly unlikely to stay with
the products or services due the anticipation of future dissatisfactions (Aydin et al.,
2005; Lam et al.,2004; Yang and Peterson, 2004).

Service Provider Factors

Price

Price can be viewed as an important factor as it’s associated with the purchasing power
of the customers as mentioned in the previous section. This argument was supported
by as it identified price as a dominant factor in determining customer loyalty (Assegaff
and Pranoto 2020). In another study also findings support that the prices strongly
influence on the decision to repeat the purchases (Lucy, Darko and Novixoxo 2018).

Quality

The more the service or the product quality, higher the customer loyalty is. This was
identified in several studies conducted by scholars. First one is an empirical study
conducted in Benin city Nigeria to determine the relationship between customer loyalty
and quality dimensions such as assurance, tangibility, responsiveness & reliability and
the study has proven a significance relationship between these quality factors and
customer loyalty (Agbi, Adekunle and Ayo 2020). Leninkumar (2016) concludes that

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three quality dimensions namely reliability, tangibility, and empathy positively
effecting on customer loyalty and further states that service quality dimensions alone
accounts for 43.9% variances in customer loyalty.

Assortment

It’s believed that an organization with wide array of products is highly appealed by
customers compared to a company with a narrow array of products since a company
with wide assortment has a higher probability to offer the required product or service
against the company with smaller assortment (Vilkaitė-Vaitonė and Skačkauskienė
2020).

Payment Options

Convenient payment options play a pivotal role in customer loyalty. One study shows
that customer prefer methods such as cash on delivery over conventional ways (Jana
2017). Another study also reveals that customer prefer convenient transactions such as
online payments, bank transfers in the shopping process (Rs 2020).

Customer Service Culture

A study by Panchapakesha and Wagenseil (2018) suggest that customer service is set of
guidelines of employees on treating customers. And the order placement quality, on
time delivery, accuracy in orders, billing and returns procedure plays a pivotal role in
excellent customer service. (Vilkaitė-Vaitonė and Skačkauskienė 2020).

Supporting Services

Supporting services add value to the main product and often acts as a leverage in the
competition (Vilkaitė-Vaitonė and Skačkauskienė 2020).

Reputation

A recent study shows that there is a positive correlation between corporate reputation
and customer loyalty (Martínez García de Leaniz, Patricia and Bosque 2016).
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Service Personalization

As a Study reveals customization of service increases customer loyalty and it should

focus on five attributes which are, process, assortment, price, communication &
location (Vilkaitė-Vaitonė and Skačkauskienė 2020). At the same time the study states
that non personalization has no effect on loyalty as well.

Innovation

A study has revealed that having an attractive and innovative web design complements
company as it provides necessary information to satisfy a potential buying information
and therefore there will be an influx of traffic flow the respective website or the online
store among online clientele (Din, Putit and Naqib 2016).

Environmental Factors
Scholars suggest that macro environmental factors such as gross domestic production
and social security levels of a country are affecting on customer loyalty. For an example
if the if the social values are high there will be a higher tendency to try new services
and risk taking whereas average social support will result in opposite (Vilkaitė-Vaitonė
and Skačkauskienė 2020).

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Research Methodology
Research design and the development will take place based on the research onion
concept as following in the figure 2 (Saunders, Lewis and Thornhill 2015).

Figure 2 The Research Onion - Formulating the Research Design (Saunders, Lewis and
Thornhill 2015)

Before reaching the philosophies, the researcher should consider on three type of
research assumptions as follows to distinguish the research philosophies (Saunders,
Lewis and Thornhill 2015).

• Ontology – This type refers to the assumptions about the nature of the reality.
In other words, it is a part of metaphysics which is the study of what exists (West
2011).

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 • Epistemology – This domain focuses on acceptable and legitimate knowledge.
This includes different types of knowledge such as numerical, visual and textual
data.
• Axiology – This realm refers to the values and the ethics which are involved in
the process of research. And it focuses on how the researchers deal with both,
own values and the research participants’ values.

Research Philosophy

With the consideration of above mentioned three main assumption types, according to
the outer or the first layer of the research onion the researcher must adapt a research
philosophy to pursuit the research as follows (Saunders, Lewis and Thornhill 2015).
Further the studies state that there is no one best philosophy and in modern days the
pluralist approach is evident as it enriches the research by adding unique and valuable
things from each philosophy (Saunders, Lewis and Thornhill 2015).

• Positivism – This approach focuses on a strictly scientific method and aimed at

mining data and facts which are not influenced by the biasness and the
interpretations of humans. This method takes the stance of a natural scientist
works with observable social realities to make law like generalizations. This
method promises definite and impeccable knowledge.
• Critical Realism – This realm focuses on explaining what we are able to see and
experience. According to this method there are two steps in perceiving the world
namely, first the sensations and events and secondly the mental processing after
the experiences and sensations.
• Interpretivism – This realm stresses that human beings are different from
physical phenomena since they are able to create meanings. Interpretivist
researches focus on creating novel and enriched understandings and
interpretations of social and world contexts.
• Postmodernism – This domain focuses on the role of language and of power
relations often seek to expose and question power relations that sustain

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 dominant realities and open dismantle conversations, data, images, numbers
etc. to gain an insight on a phenomenon.
• Pragmatism – This approach focuses on concepts which are only relevant to the
research question. Often the pragmatistic research starts with a problem and the
pragmatists are more interested towards in practical outcomes than abstract
distinctions.

Having considered above mentioned assumption types and philosophies. The researcher
intends to make assumptions in all three domains namely Ontological, Epistemological
an axiological in the research process as those vital in the process of determining
customer loyalty aspects. In terms of research philosophies there will be a combination
of positivism and pragmatism as those two realms strictly focuses on as aspects such as
scientific methods, data, facts and practical applications which are essential in
addressing the research problem.

Research Approach

According to the second layer of the research onion, there are three types of
approaches that the researcher can embrace as follows (Saunders, Lewis and Thornhill
2015).

• Deductive approach - This method follows the scientific approach which is

theory driven. Usually it begins with reviewing a theory. Then based on that
theory, the researcher forms a hypothesis which guides to data collection and
analysis. Ideally the researcher will use tools such as surveys, questionnaires to
collect data and those data will be analyzed and will add feedback to the theory.

• Inductive approach - In this realm, the researcher will begin the research with
a research question and that guides the collection empirical data which is used
to generate a tentative hypothesis. Then the researcher confirms that hypothesis
with additional data which will eventually form a theory.

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 • Abductive approach – Instead of going from theory to data or data to theory,
this method uses of a combination of deductive and inductive approaches to
tackle the research question.

After considering above three methods the researcher determines to use the deductive
approach which follows a scientific method. Based on that, the conceptual framework
of the research will be as follows with the dependent and independent variables. And
the hypotheses are developed based on those variables.

Conceptual Framework

Figure 3 Digital Customer Loyalty - Author Developed

Hypotheses Development

Based on the above conceptual framework the null and the alternative hypotheses are
developed as follows.

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• H0 – Age has an impact on customer loyalty
H1 – Age has no impact on customer loyalty

• H0 – Gender has an impact on customer loyalty

H2 – Gender has no impact on customer loyalty

• H0 – Income has an impact on customer loyalty

H3 – Income has no impact on customer loyalty

• H0 – Switching cost has an impact on customer loyalty

H4 - Switching cost has no impact on customer loyalty

• H0 – Price has an impact on customer loyalty

H5 – Price has no impact on customer loyalty

• H0 – Quality has an impact on customer loyalty

H6 – Quality has no impact on customer loyalty

• H0 – Assortment has an impact on customer loyalty

H7 – Assortment has no impact on customer loyalty

• H0 – Payment options have an impact on customer loyalty

H8 – Payment options have no impact on customer loyalty

• H0 – Customer service culture has an impact on customer loyalty

H9 – Customer service culture has no impact on customer loyalty

• H0 – Supporting services have an impact on customer loyalty

H10 – Supporting services have no impact on customer loyalty

• H0 – Reputation has an impact on customer loyalty

H11- Reputation has no impact on customer loyalty

• H0 – Service personalization has an impact on customer loyalty

H12 – Service personalization has no impact on customer loyalty

• H0 – Innovation has an impact on customer loyalty

H13 – Innovation has no impact on customer loyalty

• H0 – Environmental factors have an impact on customer loyalty

H14 – Environmental factors have no impact on customer loyalty

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Strategy

According to the fourth layer or research onion following strategies are available for
the researcher (Saunders, Lewis and Thornhill 2015).

• Survey
• Archival research
• Case study
• Ethnography
• Action research
• Grounded theory

In this research the researcher will use a combination of survey and archival records.
In the pursuit of obtaining primary data the researcher will use a survey and for the
secondary data the archival resources will be utilized accordingly.

Time Horizon

Fifth layer as in the research onion, following is the Gantt chart for the research

Figure 4 Timeline of Research Completion Process - Author Developed

Techniques and Procedures

The target population of the research will be the customers who are in the general
public who make online purchases. And the simple random sampling method (Saunders,
Lewis and Thornhill 2015) will be used to draw a sample from the target population.

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The statistical tools such as R & SPSS will be used to analyze date with relevant
statistical models depending on the necessity.

Conclusion
This research aims at unveiling the factors effecting customer loyalty in digital business
platforms as the world is gradually moving towards a digital economy (Cassar, Heath
and Micallef 2020). Therefore, the findings of this research will help for the betterment
and the development of the online related businesses and it will be important for the
for researcher himself as he is already operating an online business venture. In order to
test on the research, the researcher has developed following 14 independent variables
in three main areas.

• Customer related factors

o Age
o Income
o Gender
o Switching cost
• Service Provider Factors
o Price
o Quality
o Assortment
o Payment options
o Innovation
o Reputation
o Customer service culture
o Supporting services
o Service personalization
• Environmental Factors

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The expected data collection method for the research is survey and with those data the
researcher intends to formulate a quantitative research. Also, the researcher intends
to carry out a regression analysis to identify the factors with a high impact on customer
loyalty determination towards product, service or and organization.

Furthermore, the insights of the research will be elaborated by a descriptive analysis

process for a better understanding and applications in future for the online businesses.
At the end of the research, the researcher intends to improve the knowledge stack in
the realm of customer loyalty for improvement of digital businesses in future.

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