Sarah GreenB00440670    Retail sector: Can large companies foster customer loyalty in today’s challenging                 ...
Sarah GreenB004406701.2 Introduction-customer loyaltyThere has been considerable research directed at the topic of custome...
Sarah GreenB00440670            Loyal customers are less price                        Doyle, 1998               sensitive...
Sarah GreenB00440670reasons why customers were usually loyal to supermarkets such as Marks and Spencer’s haschanged to gre...
Sarah GreenB00440670represents an area of the literature that has little research and consequently provides anopportunity ...
Sarah GreenB004406701.6 Is Relationship marketing the answer?There has been great plethora of debate regarding relationshi...
Sarah GreenB004406701.8 Research Objectives     Explore loyalty behaviour within Marks and Spencer’s     Analyse disloya...
Sarah GreenB00440670                                          MethodologyThe target survey population for this dissertatio...
Sarah GreenB00440670    H2. There exists a significant and positive relationship between unmet needs and       switching ...
Sarah GreenB004406702.2 Quantitative or Qualitative ApproachIn light of the aims and objectives and the hypothesis identif...
Sarah GreenB00440670respondents (Kent, 1999) which the researcher felt could reduce the response rate of thesurvey.2.4 Que...
Sarah GreenB00440670sample as possible, as it helps to make the results more generalised to the target population(Brace, 2...
Sarah GreenB00440670                                         ReferencesJournalsBeerli A., Martin, J.D. and Quintana, A.(20...
Sarah GreenB00440670Leverin, A. And Lijander, V. (2006), “Does relationship marketing improve customerrelationship satisfa...
Sarah GreenB00440670Patterson, P.G. (2007), “ Demographic Correlates of Loyalty in a service context”, Journal ofService M...
Sarah GreenB00440670Oppenheim, AN (1992) Questionnaire design, interviewing and attitude measurement. Pinter,London.Hoffma...
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104412868 a-research-proposal-focusing-on-the retail-sector-can-large-companies-foster-customer-loyalty-in-today’s-challenging-climate

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104412868 a-research-proposal-focusing-on-the retail-sector-can-large-companies-foster-customer-loyalty-in-today’s-challenging-climate

  1. 1. Sarah GreenB00440670 Retail sector: Can large companies foster customer loyalty in today’s challenging climate?1.1 Background Information/ Literature reviewThe supermarket environment, in the UK is one of the most competitive, complex anddynamic sectors in the world, in which standardisation is a strong feature with very littledifferentiation between competitors and the products they offer. Another feature of the sectorthat has emerged over the years is the ever increasing demands of customers in terms ofoverall service and product quality. This has meant competition levels in the sector areintense. Against this back drop the issue of trying to foster and maintain customer loyalty hasbecome of critical value to businesses not just for profitability but for survival. (0’Loughlinand 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 tonot only boost profits but to maximise a share of a customer loyalty in order to try andensure / develop repeat business is gained (Aaker . D, 2007).However, how companies cangenerate and foster loyalty remains a continued challenge to businesses.In recent years the overall retailing environment has had to contend with developments in theexternal environment including regulation changes, technological advancements andchanging 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 particularI will focus on Marks & Spencer’s and their attempts to foster and maintain customer loyaltyin today’s challenging economic environment. 1
  2. 2. Sarah GreenB004406701.2 Introduction-customer loyaltyThere has been considerable research directed at the topic of customer loyalty particularlyfocusing on trying to define and measure it. However, there is still confusion over what isactually 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 serviceconsistently in the future, despite situational influences and marketing efforts having thepotential to cause switching behaviour” (Oliver, 1999, p.34).The definition above shows that loyalty has both attitudinal and behavioural dimensions to itsconstruct (Dick and Basu, 1994), which has been the main basis of debate within the loyaltyliterature (Berry 1995; O’Malley and Tynan, 2000). The benefits of customer loyalty to aprovider are numerous for example Beerli et al, (2004) link customer loyalty to anorganisation’s profitability, implying that any organisation with loyal customers hasconsiderable competitive advantage. This makes studies on customer loyalty essential forretailers. Other advantages associated with having a loyal customer base are shown in Table1.2Benefit Author  Recruiting a new customer is Gilbert, 1996 estimated at 5-10 times more expensive than retaining one 2
  3. 3. Sarah GreenB00440670  Loyal customers are less price Doyle, 1998 sensitive and spend more  Loyal customers are linked to Dekimpe, 1997 brand equity  Loyal customers are a source Doyle, 1998 of positive word of mouth  Reduces the marketing cost of Beerli et al, 2006 operating Table 1.2: The benefits of loyal customers (Sourced and adapted from Beerli et al 2006)1.3 Loyalty in the retail sectorDue to today’s challenging economic environment supermarkets have had to focus theirefforts on maintaining a loyal customer base, which has become an essential activity forsurvival (Leverin and Liljander, 2006). However as the literature highlights true loyalty mustnot be mistaken for the factor of inertia (Bennett and Rundle-Thiele, 2004). When the relativeattitude is negative but the customer stays with the organisation, it is a question of ‘BrandLoyalty’ (Dick and Basu,1994).Brand loyalty is the consumers conscious or unconscious decision, expressed throughintention or behaviour, to repurchase a brand continually. However, this loyalty has comeinto question about whether it actually exists in today’s competitive environment. Due to therecent recession this has caused customer-supermarket relationships to breakdown. The main 3
  4. 4. Sarah GreenB00440670reasons why customers were usually loyal to supermarkets such as Marks and Spencer’s haschanged to great extent, now a day’s customers are more concerned about wherever is closestand cheapest to fulfil their needs.One recent innovation in loyalty marketing is the development of technologically-basedloyalty devices. Loyalty devices offer convenience by enabling customers to conducttransactions both faster and easier than before. However, the real secret of their popularity forcustomers 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 canbe with its implementation of club cards to create and foster relationships with theircustomers.1.4 Customer loyalty and genderIn the literature there are conflicting views as to whether consumer demographics arecorrelated with loyalty behaviour exhibited by consumers (Patterson, 2007). In particulardoes loyalty vary by gender? Research by Fry et al., (1986) argues that there are nosignificant distinctions between male and female shopping habits and that both genders cansafely be treated as a homogenous customer grouping. Patterson (2007) supports thisargument as he concludes within his study that gender is not one of the mediating factorsaffecting customer loyalty in the context of the service sector.However, Ndubisi (2005) contrasts this and instead advocates that gender plays an importantrole in the customer loyalty and identifies that female customers tend to be more loyal thanmale in their behaviour. These opposing arguments show that there needs to be further studyinto whether females might exhibit strong service loyalty behaviour than males. This 4
  5. 5. Sarah GreenB00440670represents an area of the literature that has little research and consequently provides anopportunity 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 thecustomer’s needs are not being satisfied by the existing product offerings. This can oftencause a customer to make the decision to look elsewhere, (Sellers 1993). This kind ofdisloyalty is often regarded as “unmet needs”. Unmet needs are strategically importantbecause they represent opportunities for the firm to increase their market share, break into amarket, or to even create and own new markets. They can also establish threats that can be alever that enables competitors to disrupt an established position.Sometimes customers are unaware of their unmet needs because they are so accustomed tothe implicit limitations of existing equipment. Unmet needs are difficult to identify but theycan represent greater opportunities for any business, (Aaker, 2007). Due to the fact thatcustomers are not satisfied with the quality of the product/service the organisation providesthey often become disgruntled, and begin to look for alternatives which can have a majoreffect on the profit of a business, (Hoffman & Bateson, 2006).Research into service loyalty has found that by improving customer retention, large increasesin profitability can be achieved (Reicheld and Sasser, 1990). The answer that has beenproposed 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 customerloyalty and helps reduce customer defection. 5
  6. 6. Sarah GreenB004406701.6 Is Relationship marketing the answer?There has been great plethora of debate regarding relationship marketing. However likecustomer 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 theunderpinnings of relationship marketing. Factors such as trust, commitment, conflicthandling, and technology all have attributes that are linked to the relationship marketingprocess.1.7 Research AimsAs a consequence of today’s market conditions many retail companies have had to adapt theirstrategies to suit the continuous change of customer needs, and to focus all their effortstowards strategies which focus on not only brings in new customers but also help to maintainthe loyalty they have with their existing customers. This dissertation will try to provideinsight into the behaviour of consumers within the retail sector and look at the validity ofapplying a relationship marketing strategy to increase loyalty. Overall this will help us tounderstand how retailers like Marks & Spencer’s use these strategies to achieve higher levelsof loyalty among their customer’s. 6
  7. 7. Sarah GreenB004406701.8 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 researchThis literature review suggests that customer- supermarket relationships are no longer assecure as they have been in the past due to the recent recession. So by looking to explore thecurrent attitudes of customers regarding Marks & Spencer’s and by relating this loyalty/disloyalty behaviour and relationship marketing, valuable insight and knowledge will begained. The researched gained within this area of loyalty strategies has potentially importantimplications for marks & Spencer’s, as they seek to create durable and long-termrelationships and protect their customers base within an increasingly competitive market. Mymethodology and research has been adopted to ensure that these issues are addressed to helpfill in the gaps in the literature. 7
  8. 8. Sarah GreenB00440670 MethodologyThe target survey population for this dissertation will be the customers who shop withinMarks & Spencer’s. By obtaining and analysing customer’s opinion this will help to explorecustomer behaviour and whether customer loyalty is evident. Secondly by targetingcustomers 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 utilisedby Marks &Spencer’s. Matzler et al (2006) highlight that it is advantageous to use ahomogenous sample, such as customers within a survey as it helps to reduce the impact ofnon-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 areawith a high chance of gaining the required numbers of respondents as well as a varied sampleof population.From investigating a number of crucial topics raised within the literature in the previouschapter a number of hypotheses have been developed to be tested to help achieve theobjectives 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. 8
  9. 9. Sarah GreenB00440670  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 TechnologyAll the factor of hypothesis 4 are shown in the research framework below Trust Commitment Customer Loyalty Conflict Handling TechnologyFigure 2.1 : The research framework source from Ndubishi et al, (2005) 9
  10. 10. Sarah GreenB004406702.2 Quantitative or Qualitative ApproachIn light of the aims and objectives and the hypothesis identified earlier a quantitative surveyhas been selected for the purpose of this dissertation. This dissertation involves looking at theextent to which certain behaviours and attitudes prevail within the consumer population,which makes qualitative methods less appropriate ofr this investigation study, as they focuson gathering more in-depth and richer data from a smaller sample (Kent 1999). Alsocompared with qualitative methods, surveys methods allow the collection of significantamounts 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 ofopen questions enables the collection of knowledge on people underlying motivations forexhibiting certain behaviours (Brace, 2004). It was felt that due to the pressures associatedwith the difficulty of coding open responses and its large time consumption, that narrowingthe questions into closed response format would be preferred for this survey.2.3 Instrument of data collectionFor this survey questionnaires will be used in preference to that of other instruments such asdiaries or recording devices as these methods exclude the possibility of collecting ranges ofnecessary data required to meet the aims and objectives of this dissertation. Using aquestionnaire was the only plausible method that prohibited the collection of informationsuch as the likert scaled questions that were used to gauge general attitudes. In addition theother available methods of collection would have required higher levels of commitment from 10
  11. 11. Sarah GreenB00440670respondents (Kent, 1999) which the researcher felt could reduce the response rate of thesurvey.2.4 Questionnaire designThe questionnaire will be designed to ensure that it will be suitable for both the interviewerand the respondent. The questionnaire will consist of three sections with the first sectionasking general questions pertaining to customers and Marks & Spencer’s, which will generatefindings for the loyalty and disloyalty of students. The second section will be designed togather respondent’s opinion on the importance of the constructs mentioned above and finallya third section will consist of the respondents demographic characteristics.2.5 PilotPiloting a questionnaire has been recognised as fundamental to the success of the overallstudy (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 pilotedamongst 12 random customers to test its effectiveness in achieving the aims that wereidentified. Brace (2004) highlights that is important to improve the reliability of aquestionnaire through testing it with members of the targeted survey population.2.6 SamplingA quota sampling will be employed rather than a selected sample due to time costs associatedwith these techniques. (Kent, 1999). Also it was necessary to obtain as representative a 11
  12. 12. Sarah GreenB00440670sample 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 samplingsize will be met and relevant data will be collected, which will guarantee that the right datawill be used for analyses, which has been problematic for other samples gathered (Kent,1999).2.7 Methodological limitationsThere may be a limited size to the sample this represents a limitation, as a larger sample sizewould improve the reliability and validity of the results however it will be as large asresource constraints will allow. As questionnaires will be employed to collect the data somecustomers may not be willing to spend the time filling in a questionnaire, so the example canbe 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 forthis study.2.8 ConclusionOnce the primary research will be obtained through the form of questionnaires, the SPSSpackage will be used to assist the analysis of the collected raw data. This will help torepresent the findings of the study in different forms of statistical analysis i.e. bar charts, piecharts. In the next part of this assignment I will present the findings, analysis andinterpretation of results of my research. 12
  13. 13. Sarah GreenB00440670 ReferencesJournalsBeerli A., Martin, J.D. and Quintana, A.(2004), “A model of customer loyalty in the retailmarket” , European Journal of Marketing, Vol. 38 No. 1-2, pp.253-275Bennett, R. And Rundle- Thiele, S. (2004), “Customer satisfaction should not be the onlygoal”, Journal of services Marketing, Vol.18 No.7, pp.514-524Berry, L. (1995), “Relationship Marketing of services- growing interest, emergingperspectives”, Journal of the Academy of Marketing science, Vol.23 No.4, pp.236-245Colgate, M., Stewart, K. And Kinsella, R. (1996), “ Customer defection: a study of thestudent market and Ireland”, International journal of bank marketing, Vol.17 No.1, pp. 36-43Dick, A.S., and Basu, K. (1994) “Customer Loyalty: Toward and integrated conceptualframework”, Journal of the Academy of Marketing Science, Vol 22 No.2, pp99-113Durkin, M., Howcroft, B. (2003), “ Relationship marketing retail sector: the impact of newtechnologies”, Marketing Intelligence & Planning, Vol.22, No.1,pp67-71Fry, J.N., Shaw, D.C., Lauzenauer, C.H., and Dipchand, C.R., (1986), “Customer loyalty: Alongitudinal study”, Journal of Business, Vol.12, pp517-525Lam, R. And Burton, S. (2006), “Loyalty/Disloyalty: a qualitative study in Hong Kong”,International journal of marketing, Vol.24 No1, pp 37-52 13
  14. 14. Sarah GreenB00440670Leverin, A. And Lijander, V. (2006), “Does relationship marketing improve customerrelationship satisfaction and loyalty”, International journal of marketing, Vol.24 No.4, pp232-251Matzler, K., Wurtele, A. And Renzl, B. (2006), ‘Dimensions of price satisfaction: a study inthe retail banking industry’, International Journal of Banking Marketing, Vol. 24 No.4,pp.216-231Moorman, C., Zaltman, G. And Despande, R. (1992), “Relationship between providers andusers of market research: the dynamics of trust within and between organisations”, Journal ofmarketing research, Vol.29 No.3, pp.314-328Mukherjee, A. And Nath, P. (2003) “A model of trust in online relationships”, Journal ofmarketing research, Vol.21 No.1, pp, 5-16Ndubisi, N.O. (2005), “Effect of Gender on Customer loyalty: A relationship marketingapproach”, Marketing Intelligence and Planning, Vol.24 No1, pp. 48-61Ndubisi, N.O. (2007), “Relationship marketing and customer loyalty”, Marketing Intelligenceand Planning, Vol.25 No.1.pp. 98-106O’ Laughlin and Szimigan (2006), “Customer Relationship Typologies and the nature ofloyalty in Irish retail financial service”, Vol.22 No.3-4 pp.26-293Oliver, R.L, (1999), “Whence consumer loyalty?”, Journal of Marketing, Vol.63, pp.33-44 14
  15. 15. Sarah GreenB00440670Patterson, P.G. (2007), “ Demographic Correlates of Loyalty in a service context”, Journal ofService Marketing, Vol.21, No2, pp112-121Stewart, K. (1998), “An exploration of customer exit in retail”, International journal ofMarketing, Vol.16 No.1,pp.6-14Reichheld, F.F. and Sasser, W.E.(1990). “Zero defections: quality comes to services”,Harvard Business Review, Vol.68, No.5, pp.105-111Wong, A. And Sohal, A.S, (2004), “Understanding the quality of relationships in consumerservices”, International Journal of Quality and Reliability Management, Vol.23 No3, pp.244-264BooksAaker. D, (2007) ‘Strategic market management’, 8th edition, California, John Wiley and sonsinc.Brace, I. (2004), ‘Questionnaire Design’, Kogan Page Ltd, LondonBurns, A.C. and Bush R.F. (2006) ‘Marketing Research’, fifth edition, Pearson EducationLtd, New JerseyKent, R (1999) ‘Marketing Research: Measurement, Methods and Application’, InternationalThompson Business Press, London 15
  16. 16. Sarah GreenB00440670Oppenheim, AN (1992) Questionnaire design, interviewing and attitude measurement. Pinter,London.Hoffman, K., and Bateson, J. (2006) ‘Services Marketing: Concepts, strategies,& cases’ 3rdedition, South Western: Thompson.Saunders, M,. Lewis, P. And Thornhill, A. (2007) ‘Research methods for business students’4th edition, England: Pearson Education Ltd 16

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