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How does a brand build loyalty and relationship with consumers online?

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Short thesis

  1. 1. 1 How does a brand build loyalty and relationship with consumers online? By TERESI Laure ESPEME Business School 2013 Programme Director Professor Guintcheva MSc in Management Marketing
  2. 2. 2 SUMMARY INTRODUCTION................................................................................................................................... 4 Part 1: RELATIONSHIP MARKETING IN THE INTERNET AGE .................................................... 5 Chapter 1: Fundamental concepts ....................................................................................................... 5 1. Customer’s satisfaction and loyalty......................................................................................... 5 1.1. Satisfaction...................................................................................................................... 5 1.2. Loyalty............................................................................................................................. 5 1.3. Satisfaction and loyalty relationship................................................................................ 5 2. Loyalty and brand equity......................................................................................................... 5 2.1. The brand equity.............................................................................................................. 5 2.2. Brand relationship with customers .................................................................................. 5 2.2.1. Brand attachment and self-image congruence......................................................... 5 2.3. Loyalty and brand equity relationship............................................................................. 6 2.3.1. The impact of brand personality on commitment and attitude towards the brand... 6 Chapter 2: Relationship marketing on Internet ................................................................................... 6 1. The Internet revolution............................................................................................................ 6 1.1. Definitions and figures .................................................................................................... 6 1.1.1. Definitions............................................................................................................... 6 1.1.2. Some definitions...................................................................................................... 6 1.2. The consumer online ....................................................................................................... 6 1.2.1. Specificities ............................................................................................................. 6 1.2.2. Word of mouth ........................................................................................................ 7 1.2.3. E-influencers............................................................................................................ 7 2. Internet serving marketing....................................................................................................... 7 2.1. A tool to achieve multiple objectives .............................................................................. 7 2.1.1. E-commerce............................................................................................................. 7 2.1.2. Communicate........................................................................................................... 7 2.1.3. The new tools of loyalty programs.......................................................................... 7 2.1.4. Brand building......................................................................................................... 7 2.2. Relationships between trust, commitment, and satisfaction online................................. 7 PART 2: DIGITAL BRAND EXPERIENCES: building relationship with the customer ...................... 8 Chapter 1: The brand and e-loyalty..................................................................................................... 8 1. The brand on the internet......................................................................................................... 8 1.1. Existence of the brand on social media ........................................................................... 8 1.2. Shared brand.................................................................................................................... 8
  3. 3. 3 2. The e-loyalty framework......................................................................................................... 8 2.1. Brand building................................................................................................................. 8 2.1.1. Image Building........................................................................................................ 8 2.1.2. Community Building............................................................................................... 8 2.2. Trust and security ............................................................................................................ 8 2.3. Customer service ............................................................................................................. 9 2.4. Website and technology .................................................................................................. 9 2.5. Value propositions........................................................................................................... 9 Chapter 2: CASE STUDY................................................................................................................... 9 1. Nike + Running community.................................................................................................... 9 1.1. Brand Building .............................................................................................................. 10 2.1. Trust and security .......................................................................................................... 10 2.2. Customer Service........................................................................................................... 10 2.3. Website and technology ................................................................................................ 10 2.4. Value propositions......................................................................................................... 10 CONCLUSION ..................................................................................................................................... 11 REFERENCES...................................................................................................................................... 12
  4. 4. 4 INTRODUCTION The recent years have seen a rapid increase in Internet consumption. With the development of electronic commerce and online shopping, brands give a greater importance to building relationships and loyalty with consumers online in their marketing strategy. Brand loyalty has become a focal point of interest for marketing researchers. The concept of brand loyalty associated to consumers online is called e-loyalty. E- loyalty refers to the intention from an online customer to visit a website again, or considering a future purchase online (Cyr et al., 2005; Koernig, 2003). It is seen as an important key success factor for brands (Reichheld and Schefter, 2000). Indeed, building relationships and loyalty with the brand is a great asset in establishing sustainable competitive advantage, return on investment and high brand equity. Customer loyalty is the result of successful brand strategy in competitive markets that creates value for consumers. The challenge for brand is how to influence loyalty in an online environment. Understanding how to create customer loyalty in online environment is a complex process. Few studies have established that e-loyalty is related to customer satisfaction (Zeithmal et al., 1996), trust (Anderson and Srinivasan, 2002), commitment (Lee et al., 2001) and design of the website (Simon, 2001). This essay includes research in the field of loyalty and relationships toward the brand in an online environment to understand how brand builds loyalty and relationship with consumers online.
  5. 5. 5 Part 1: RELATIONSHIP MARKETING IN THE INTERNET AGE The relational marketing refers the marketing activities intended to create, develop and maintain strong relationships (Morgan and Hunt 1994). The ultimate goal of relationship marketing is to strengthen strong relationships and build loyalty towards the brand (Ndubisi and Chan, 2005). Chapter 1: Fundamental concepts 1. Customer’s satisfaction and loyalty 1.1. Satisfaction Customer satisfaction is defined by Day (1984) as a consumer evaluation after a purchase decision. According to Achour (2006), customer satisfaction is “a positive feeling a consumer has after a consumption experience, and springing out of a comparison between the expectations from a product or a service and the performance perceived from it.” 1.2. Loyalty Olivier (1999) defines brand loyalty as “"a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior." Researchers have defined two different dimensions: behavioral and attitudinal loyalty (Oliver, 1999; Zeithaml, 2000). Czepiel and Gilmore (1987) define customer loyalty from an attitudinal dimension as a desire to pursue a relationship with a brand. From the behavioral dimension, Reibstein (2002) define loyalty as repeat patronage. Different loyalty tools are available to attract and retain customers such as software, card programs, points programs, newsletters and e-zines. 1.3. Satisfaction and loyalty relationship Many authors have shown relationship between consumer satisfaction and loyalty to a brand (Magin et al., 2003; Park and Lee, 2005) and have proven that satisfied customer tend to be loyal and dissatisfied customers tend to move to another brand (Heskett et al,. 1993). Loyalty is a consequence of consumer satisfaction and the consumer’s purchase behavior is influenced by the satisfaction of the product he buys (Zeithmal et al., 1996). Thus, the satisfaction of the consumer has a direct effect on loyalty by affecting attitude and purchase intention. 2. Loyalty and brand equity 2.1. The brand equity In the marketing literature, brand equity is defined as the relationship between customer and brand (Wood 1997). Aacker defines the brand equity as “a set of assets linked to a brand’s name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firm’s customers”. He also argues that brand equity is a combination of brand loyalty, brand awareness, perceived quality and brand’s associations. Another definition is that brand equity refers to the added value of a brand to a company (Kotler, 1997). 2.2. Brand relationship with customers 2.2.1. Brand attachment and self-image congruence Today, brands are searching ways to create emotional connections with consumers. Develop strong emotional attachment to the brand among consumers can lead to stronger brand loyalty and brand performance (Park et al. 2010). Self-congruence plays an important role in creating emotional brand attachment (Park et al. 2010), which is defined as the match between the consumer's self and the image of the brand (Aacker 1999). Self-congruence improves attitudes, affection and behavior of the consumer towards the brand (Aaker1999 & Grohmann
  6. 6. 6 2009). Overall, these authors say that greater the attachment to the brand is, greater a consumer will be bound and loyal to the brand. 2.3. Loyalty and brand equity relationship Brand loyalty is considered to be the strongest path which leads to brand equity and has a positive effect on brand equity on it (Atilgan et al., 2005). Products are sold not only about the characteristics and quality of the products but also about beliefs in the brand. Therefore, brand loyalty is emphasized to create and retain loyalty of customers. Consumers who are loyal to a brand are willing to try to adopt brand extensions (Lassar, Mittal & Sharma, 1995). 2.3.1. The impact of brand personality on commitment and attitude towards the brand According to Aaker (1997), brand personality is "the set of human characteristics associated with a brand”. Today every company is trying to build a strong and distinctive brand image to attract the customer. For example, Coca-Cola is considered to be more “honest” by consumer whereas Pepsi is trying to be more “young”. With these own characteristics, consumer may meet their personality traits (Aaker 1996). Brand personality creates value for consumers and brand and impact consumer choices, attitudes and preferences (Biel 1993). Researches have shown that positive attitudes will favor brand commitment, which is defined as the desire to retain value relationship with consumers (Dobscha and Mick 1998). Increase commitment level generates customer loyalty (Lee et al., 2001). Chapter 2: Relationship marketing on Internet 1. The Internet revolution 1.1. Definitions and figures 1.1.1. Definitions Internet represents the center of attention for brands and especially e-marketers. 2.7 billion people are online in 2013, which represents almost 40% of the world’s population (ICT Facts and figures). People get used to online sales, which show the importance of e-commerce sites. Global online sales will reach $963.0 billion at the end of 2013 predict Goldam Sachs. As today’s world becomes independent on technology, internet should be an important part of the marketing strategy. 1.1.2. Some definitions Social network – applications which allow users to build personal website for exchanging personal content with other users (Palmer & Koenig-Lewis, 2009) Blog – online journal where people post images, ideas and links to other websites (Weber) Forum - sites allowing user to exchange information around special interests (Palmer, 2009) RSS – web feed formats which are used to publish frequently updated content Podcast – digital media file available on the Internet using syndication feeds for playback on portable media players and computers 1.2. The consumer online 1.2.1. Specificities Today, e-consumers are hyper connected. They use technology as part of their lives, from laptop to phone to reader to iPad. They have different attitudes when buying online and acquiring information. E-consumers are empowered with transparent prices and more information. They have expectations such as competitive prices service, convenience, speed of delivery and security. We also assist to an emergence of e-influencers such as influential bloggers which publish their opinions online through social media.
  7. 7. 7 1.2.2. Word of mouth Word of mouth is a “Communication not originated by the sender that is passed on to others after the original marketing communication messages have been transmitted” and is referred as word of mouse in an online environment (Pickton & Broderick, 2005). Word of mouth influences the purchase decision because personal sources are considered as trustworthy (Buttle 1998). More precisely, it has an influence on awareness, perceptions, attitudes, and behavior of the consumer. Word of mouse can impact positively on the purchase decisions (Engel et al., 1969) as well as negatively (Tybout et al., 1981), especially by e-influencers. 1.2.3. E-influencers According to Landrevie and Levy (2013), e-influencers are the ideal customers who buy online and then post reviews which can influence a lot of customers. They are central to consumer decision-making. 2. Internet serving marketing 2.1. A tool to achieve multiple objectives 2.1.1. E-commerce According to Vladimir Zwass ‘Electronic commerce is sharing business information, maintaining business relationships and conducting business transactions by means of telecommunications networks’. E-commerce able customers to shop at any time all year round from almost any location. Through internet, consumers have more choices, can compare prices at just one click, get high quality delivery process and can find substantial discounts. 2.1.2. Communicate Several brands encourage the communication with their customers to maintain regular contact and encourage dialogue. According to Woods and Hebron (2001), communication includes word of mouth, phone conversation, email and through internet. The effectiveness of communication between the consumer and the brand influences trust, satisfaction and loyalty. 2.1.3. The new tools of loyalty programs According to Pantea & Veghes (2008), the new tools are: sponsored links, social networks, e- newsletter, blogs, RSS feds, forums and portal. 2.1.4. Brand building As discussed in literature, brand building allows developing brand loyalty (Bhat & Reddy, 1998; Yoo, Donthu, & Lee, 2000). This concept will be explained in the part 2. 2.2. Relationships between trust, commitment, and satisfaction online Brand trust is a relevant factor in the process of developing and maintaining consumer relationships and thus contributes to the success of a brand (Morgan and Hunt, 1994). Brand trust is defined as “the willingness of the average consumer to rely on the ability of the brand to perform its stated function” (Chaudhuri and Holbrook 2001). To create brand trust, reliability and honesty must be provided by the brand to consumers (Doney and Cannon, 1997). Relationship of satisfaction, trust and commitment are components of satisfaction attitudes and future intentions for the consumer (Garbarino & Johnson). These three factors are relevant factors that affect loyalty (Vuuren, Roberts-Lombard & Tonder, 2012). The next part will explain how a brand built itself on Internet and how it builds relationships and loyalty with the consumer online.
  8. 8. 8 PART 2: DIGITAL BRAND EXPERIENCES: building relationship with the customer Chapter 1: The brand and e-loyalty 1. The brand on the internet 1.1. Existence of the brand on social media Social media becomes a dominant key in marketing strategies. Kaplan and Haenlein (2010) define this term as “a group of internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user- generated content”. Social media includes social network, forums, blogs, podcasts, video, and pictures (Weber, 2009). It is essential to exist on social networks appropriately: develop corporate blog, communicate through Facebook and Twitter, use video sharing sites and launch viral campaigns (Landrevie & Levy, 2013). 1.2. Shared brand Online reputation refers to the opinion issued - accessible through search engines, information websites, and social network - on the qualities of a brand which can lead to trust or mistrust. A monitoring system must be implemented to control ‘digital footprints ', reduce the negative comments, engage e-users and influence e-influencers. A shared brand must develop a personal relationship with its community and public to influence them, which is part of the experience it creates with its customers (Landrevie & Levy, 2013). 2. The e-loyalty framework Understand how the e-loyalty consists will help brands to build good relationship and loyalty. The e-loyalty framework (Gommans et al., 2001) presents different factors of e-loyalty which are brand building, trust and security, customer service, website and technology, and value proposition. 2.1. Brand building 2.1.1. Image Building In the literature, brand image building is presented as a strategic element for establishing loyalty to the brand (Yoo, Donthu & Lee, 2000). The Internet offers unique possibilities of interactive brand building which are not available through traditional mass media such as virtual communities. Website content and domain names are important factors in enhancing brand image. Indeed, customers prefer well known and simple website names and URL. 2.1.2. Community Building Internet should not be an impassive network but as a means of creating global and dynamic conversations (Levine et al. 2000). By organizing virtual communities, brands will get impressive returns from e-consumer and will faster customer loyalty. Community should be customer-centred communications such as the company Napster which has successfully implemented a network community allowing music fans to exchange music files. Well-run communities allow brand creating and strengthening relationships, trust and loyalty with consumers online. They allow maintaining brand awareness which is essential to retain consumers. 2.2. Trust and security Transactional security and privacy have an important role in generating e-loyalty (Hoffmann et al., 1999). Ratnasingham (1998) states that fear of online credit card fraud impacts customers and leads to a refusal to purchase online. Trust is also an important factor in the online buying process (Gommans, 2001). Brand trust leads to a reduction of uncertainty and usually conducts to attitudinal loyalty. Brand trust in particular can help a brand to be seen as
  9. 9. 9 safe, honest, and reliable. In addition, a “third party approval” is a god way to enhance brand trust. 2.3. Customer service Logistic system should be able to guarantee an order fulfillment and a fast delivery as this will lead to customer satisfaction and loyal behavior. Moreover, it is important that the logistic system allow different ways of delivering products in order to meet the preferences of consumers. According to Helmsley (2000), customer service is an important element to consider for e-marketers. The customer service should include frequently asked questions to help customer in the buying process and provide online representative phone numbers. By buying a product online, the e-consumer cannot experience the product, which provides an effect of insecurity. To overcome this, e-business should offer a well-known brand. 2.4. Website and technology According to Smith (2000), the first impression given when visiting a website as well as its ease of use is an important factor. Fast page loads, easy navigation, personalized interface, server reliability, fast response times, checkout and quick shopping represent all the elements which lead to loyalty toward the website. Convenience and site design, such as style site, colours, graphics, layout and typography lead to customer satisfaction, which influence the loyalty towards the website (Szymanski, 2000). According to Gommans & Krishnan, the content of the website must match consumer needs and especially fit the preferences of its targeted customer group. Many languages must be available to allow access to all and the change of the content must be adapted to local conditions and culture. Amazon has perfectly implemented this concept. 2.5. Value propositions In addition to ease of use, update and good content, websites should have strong online value propositions. Product customization and interactivity are two important components of e- loyalty in e-commerce. According to Modem Media survey, 52% of online consumers said “I prefer Web sites that have information or products customized to my preferences”. Dell is a perfect example of company which proposes product customization by providing an instance of choice board (Slywotzky, 2000). The choice board system allows customer designing their own computer by choosing components, attributes and different options from a menu. Customers which customize their own products to their meet increase customer satisfaction for the product. Moreover, the online consumer involvement in product design creates strong relationship with the brand which leads to brand loyalty. Chapter 2: CASE STUDY 1. Nike + Running community Nike + Running support and connect customers around the world. Nike+ Running community empowers athletes to measure and share their experience across the globe. It is a community of information and an online shop. Nike + Running application for iPhone and Android are available for free with faster performance allowing customers to share their experience. Social sharing is enhanced with the integration of Nike + Running in Facebook. Nike + Running is a multi-channel with a mix of Nike and Apple technologies. Nike represents a truly connected community of sport. James Martin, Vice President of Nike, said: “We are introducing a new chapter that will take the running experience to a new level in terms of connectivity, community, social sharing and data-driven insights.” Nike + Running community is thus an interesting case study due to the unique way the brand market itself.
  10. 10. 10 1.1. Brand Building The website address, Nikeplus.nike.com, holds the name of the brand, which makes the website more credible to new online customers and allow them to know what quality to expect through the website. The website creates dynamic conversations between e-customers and employees through a forum, which creates and strengthens relationships between customers and the brand. By this way, the brand controls what is posted in the forums, avoid negative world of mouth and create some kind of credibility by providing expert advises and help to e-customers. Nike uses the same concept of social network for Facebook and Twitter by posting a link on the front page to join these social networks. These social networks allow friends of customers to be exposed to the brand and get them to visit the website. By engaging e-consumers, brand enhances brand awareness, trust, and loyalty with e-consumers. 2.1.Trust and security Nike is a well-established brand, which can bring some credibility turned into trust towards Nike + website. Chaffey (2009) states that consumer risk perceptions should be reduced whereas trust should be increased to generate positive belief towards online reputation. The website Nike + is secured by Entrust Digital Security in terms of payment and passwords, a trustworthy third-party which create credibility. Bowen and Shoemaker (1998) said trust is one of the most important elements of customer's commitment. Commitment is claimed to be a necessary condition for loyalty. 2.2.Customer Service By respecting e-consumers’ needs and giving them a chance to participate to the forum, the loyalty towards the brand is improving. Nike + offers multiple delivery choices, free shipping on returns products, and provides online representative phone numbers for different countries. According to Chaffey (2009), customer service should be high quality because if consumers need and expectations are not satisfied, this will not lead to customer satisfaction, which makes it hard to create online relationships. Nike should keep a clear consistency between their image and customer service they provide. Nike + offers the opportunity to consumers online to personalize their own products and provides high quality customer service which lead to customer satisfaction (Helmsey, 2000). Nike + provides a customer service that perfectly meet the requirements established in the e-loyalty framework. 2.3.Website and technology Nike + community and website areas are separated, which makes it is easier to navigate the website. According to Nielsen and Tahir (2001) argue that elements with different objectives should be separated so that it does not create confusion for the consumer. The visual aspects of Nike websites are consistent such as fonts, colors, navigation bars, which makes a reliable brand image and offers a complete experience for the consumer online. 2.4.Value propositions Athletes can visit nikeplus.com to access to their data including accumulated points from Nike Fuel, devices from Nike + and comments from friends. Nike offers customized information as well as customized products which create relationships between e-consumers and Nike. Consumers can see the community as an additional value by providing knowledge of how to best possible utilize the products, which can lead to loyalty toward the brand. Sivadas and Baker-Prewitt (2000) argued that “there is an increasing recognition that the ultimate objective of customer satisfaction measurement should be customer loyalty”. Nike is already an established brand with e-consumers that have experience with products.
  11. 11. 11 CONCLUSION This study sought to discuss the concept of brand loyalty and how this can be built in an online environment. There is a growing influence and importance in the relationship between e-service quality, e-satisfaction, e-trust and loyalty in online businesses. This essay validates the framework of e-loyalty (Gommans et al., 2001), shows the importance of loyalty in an online environment and validates new relationships such as usefulness and social presence on e-loyalty. This essay also shows that social presence has a direct impact on e- loyalty. The concept of brand loyalty was examined in the context of Nike +Running online community through the e-loyalty framework and has shown that loyalty can be created in multiple ways. The variables include brand image, customer service, security and trust, technology and website, and value propositions, which are related to customer satisfaction and customer loyalty. Firstly, an online forum creates long-term relationships by engaging e-customers and employees in an interactive dialogue and thereby increase brand loyalty. Secondly, this community give reliability towards the brand by giving expert advises, which is also seen as a supplementary service and conduct to brand loyalty. Finally, this community allows consumers online to customize their own products, which has been seen as a component of e- loyalty. The case of Nike + Running is considered successful due its singular way of creating interaction with consumers online. Due to the limitations of this essay, recommendations are suggested for further research for the purpose of enhancing the study of the customer online loyalty. Establishing a survey to a representative and appropriate group could allow observing behaviors and attitudes towards Nike + Running Website.
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