MKT 344

Section–1

BBA Department

A Report on Customer Loyalty

Instructor’s Name: Md. Anwar Sadat Shimul

Initial: AwS

Team Members:

1. Md. Ehsanul Haque (1130452030)

2. Anika Bushra (1210230030)

3. Jaheen Muntasira (1210999030)

4. Moznoon Quader (1210412030)

5. Md. Moinul Hossain Rahat (1110869030)

 A Report On Customer Loyalty

Introduction:

The ultimate goal of every organization is to be successful financially. Whether it’s by selling
unique products or making a better version of what others are already offering.

It is important to understand that success comes from the positive participation of two parties,
the one who gives the product (retailers) and the one who receives the product (end users).
But here the latter plays a much more significant role since it is based on the e nd user’s post
purchase satisfaction or evaluation that determines whether the product or the whole business
will be successful or not.

Even if the end user is eventually satisfied, it is still no good for the business unless they can
achieve a long term relationship with their customers where the customers will portray a
repetitive pattern in their purchase behavior.

Hence it is important that the retailers provide a set of incentives that will provoke the
customers to be loyal and also perform as a positive buzz marketer. These methods for
gaining customer loyalty consist of many variations and some of the ones that we have
discussed in this report include special offers, loyalty card program, quality and service,
pricing and many more.

All in all we believe that one of the fundamental functions of an organizations is make their
grounds unique, not only to attract customers but also to gain their loyalty so that a long term,
positive and a successful relationship can be established.

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Customer loyalty: Loyalty towards Retail Store

Literature review:

The total conceptualized or expected reinforcement which a person associates with shopping
at a particular store is known as "Retail store image". Based on that principal, the result of
previous differential reinforcement in the context of a store is the retail store image at any one
point in time (Kunkel & Berry, 1968). Traditionally, a consumer’s single behavioral
characteristic describes the consumer’s store loyalty (Lessig, 1973). But in case of
purchasing a given product consumers interact with more than one store. So a single
behavioral measure gives an incomplete expression of store loyalty (Lessig, 1973). Six
predictor variables of which three represents store attributes and three shopping behavior
attributes defines the store loyalty (Miranda, Konya, & Havrila, 2005).

1. Service quality

In marketing, a customer based view of retail service has been developed (Hartman, 113). So
service Quality is the conclusion that a person reaches after making comparison between the
expected and actual service that a person gets from a product.

This concept was strengthened by a number of people. Some of their sayings are:

Service quality is defined as “the level of difference between customer’s expectation of a

particular service and their perception towards that same service (Parasuraman et al, 1988).

Customers who look for service evaluate the production process through the experience they
receive from that service (Zeithaml, 1988).

(Berryetal, 1985) said that customers evaluate the quality of service based on three attributes,
they are search, experience, and credence attributes. For search attribute they look for the
physical qualities, person’s appearance and how the supplier conducts himself. For
experience attributes, customers try to figure out how quickly they respond to a particular
request over a agreed timeframe. Finally for credence attributes, customers try to find
whether their investment is secured or not.
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GroÈnroos (1978) said that service quality consists of 2 dimensions. The first one is the
technical quality which measures the actual outcome of a service. The second dimension is
the functional quality which is concerned with the interaction between the provider and the
recipient of a service.

On the other hand, Lehtinenand Lehtinen (1992) contend that service quality has three
dimensions:

1. Physical quality 2. Corporate quality 3. Interactive quality (Wong & Sohal, 2003)

Service quality dimensions

Reliability: Ability to perform the promised service dependably and accurately

Responsiveness: Willingness to help customers and provide prompt service

Assurance: Employees' knowledge and courtesy and their ability to inspire trust and
confidence

Empathy: Caring, individualized attention given to customers

Tangibles: Appearance of physical facilities, equipment, personnel and written materials

(Wong & Sohal, 2003).

2. Customer Satisfaction

A satisfied customer becomes loyal through exhibiting repeat patronage behavior and
intention (Chen & Quester, 2006). Customers’ loyalty to a store is not significantly
influenced by the overall satisfaction with the store (Miranda, Konya, & Havrila, 2005).
Satisfaction is the resultant feeling that a person gets after evaluating what he has received
and what he expected to receive from the purchase and usage of a particular product or
service (Armstrong & Kotler, 1996).

(Bitner & Zeithaml, 2003) said that customer’s satisfaction is the evaluation of whether a
product or service has met the customer’s needs and expectation. (Boselie, Hesselink, &
Wiele, 2002) said that satisfaction is a positive and affective state of mind resulting from the
evaluation of all aspects of a party’s working relationship with another (Akbar, 2013).
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(Kotler, 1999) stated that satisfaction is a feeling that results from the evaluation of perceived
performance and expectations in relation to his or her expectations.

(Fe & Ikova, 2004) said that the word "satisfaction" controls the activities which we conduct
to achieve it (Parvez, 2005).

Patterns of satisfaction, dissatisfaction and an unemotional pattern of emotional pattern of

emotional experience have also been identified (Oliver, 1991).

3. Customer loyalty

There are various suggested reasons for allegiance, such as lower prices, better range of
products, more advertising, better 'image' and the advantage of being in a larger shopping
Centre. Certainly at the time of the Cardiff consumer panel such large stores did tend to have
lower price (O'Brien, 1983).

When a customer makes a favorable assessment about a company’s service quality then a
customers’ relationship with that company strengthened otherwise a negative assessments
about the service quality weakens it (Sivadas & Baker-Prewitt).

Customers satisfied by service quality are most likely to remain loyal (Wong and Sohal,
2003) and it helps in the retention and patronage of existing customers (Yavas et al., 1997)
(anupam & gaur, 2010).
Store image was a factor in customer satisfaction, but did not have a direct effect on loyalty.
(Esen, 2008)

The most common; generation of “me-too” products (which mimic a similar manufacturer
product which already exists within the chain’s assortment) (Johan & Ulf, 2009). But since
most of the super shop needs to sell these ‘me-too’ products the competitive advantage of
retail private label products is based on other qualities, apart from price (Johan & Ulf, 2009).

Additionally loyal customers are active promoters of the retailer through word of mouth and
can become ambassadors of the business (Butcher et al., 2001) (Ugur & Emin, 2009).Due to
the influence on individuals’ propensity to purchase retail brands customers’ loyalty toward
retail and manufacturer brands is crucial (Allen & Donna, 2011).

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Loyalty is defined as the positive attitude born towards a brand in combination with repeated
purchase of it (Day, 1969). One important argument is that loyalty measures need not to be
market share dependent. The reason is the conceptual definitions of “market share” and
“brand loyalty” are utterly different. Market share is defined, conceptually, as one of the
firm’s proportion of an industry’s total actual volume (Laroch, 1984). It is very much clear
that there is a positive relation between a brand’s user share and its loyalty franchise (Raj,
1985).

(Oliver, 1997) proposed that customer loyalty consists of four steps:

a) Cognitive loyalty;

b) Affective loyalty;

c) Conative loyalty; and

d) Action loyalty.

a) Cognitive loyalty: Customer’s preference of one brand over the other is based on
information and knowledge gathered from various sources but the level of attachment to the
organization’s offerings is low.

b) Affective loyalty: This is based on feelings or emotions that a customer may have attached
to a brand and hence he prefers it over the others.

c) Conative loyalty: These are intentions or goal that a person wants to achieve and can only
achieve through a particular brand.

d) Action loyalty: After the intentions are clarified, customers take the necessary action to
achieve their goal.

(Wong & Sohal, 2003)

(Pearson, 1996) said that customer loyalty is a mindset where the customer has a positive
image about a company, buys their products repeatedly and recommends it to others.

Loyal customers are unlikely to switch to other brands and will continue to buy their products

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in high quantities compared to customers who are less loyal (Baldinger & Rubinson, 1996).

4. Price Perceptions

(Schiffman & Kanuk,2004) stated that price perception how a consumer see a product’s price
to be wither high, low or fair. They also stated that unfair pricing affects consumer’s
perception of value and their willingness to buy the product.

(Moore et al, 2003) stated that research have shown that pricing projects both positive and
negative perceptions which serves as marketplace cues.

Different studies have shown that price perception acts as a function of success (Jiang and
Rosenbloom, 2004).

(Haq, 2005)

When pricing causes a positive vibe, it indulges the product to be perceived as that of high
quality, prestigious and of high status in the mind of the consumers (Moore et al, 2003).

(Alvarez & Casielles, 2005) said that if pricing creates a favorable perception, the consumer
will be greatly satisfied and with purchase the product again. Pricing perception plays a
significant role in the evaluation of post purchase satistaction (Jiang & Rosenbloom, 2005).

5. Store loyalty

(Leszczyc, Sinha & Sahgal, 2004) have stated that one-stop shopping provides the idea
whether the consumers get an opportunity to buy different products or services from a single
visit to a retail store. The more familiar loyalty programs are usually preferred by the
consumers rather than those at an alternative shop with different loyalty program (Miranda,
Konya, & Havrila, 2005).

Shoppers appreciate wide product assortment without considering retailers, whereas the retail
operators want to assort exclusively those products that will be sold quickly and in large
volume. So there is a certain degree of incongruence in defining an ideal product asso rtment
considering the point of view of both parties (Hansen, 2003).

It is generally accepted that real behavior acts as an end variable in customer behavior models

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(Engel, 1995).

(East et al, 1995) defined store loyalty as the percentage of purchases of a specified product
category at a chosen store. However, behavioral conceptualizations and operationalization are
often inadequate to explain how and why store patronage occurs. In fact, these merely reflect
the outcome of a decision process in which internal dispositions play a role. Therefore, while
repeat visitation is important, attention should be paid also to the antecedents that may
account for the occurrence of certain behavior.

The relationship between loyalty and satisfaction has also been tested. Satisfaction has been
demonstrated to moderate the relationship between performance of the product and loyalty
(Selnes, 1993).

Commitment is defined as the element that blind consumers to their choice of store (cf.
Kiesler, 1968; Lastovicka and Gardner, 1977).

(Osman, 1993) said that the loyal customers of a specific retail store will make it his or her
priority to attend any event that is held in that shop (Bloemer & Ruyter, 1997)

6. The relationship between service quality and customer loyalty

In case of purchasing a given product consumers interact with more than one store. So a
single behavioral measure gives an incomplete expression of store loyalty (Lessig, 1973). The
strength of the relationship found leads one to suspect that information on the images which
shoppers have of alternative retail outlets should be useful in the prediction of a consumer's
loyal-ties across the various stores. (Lessig, 1973)
Promotional techniques for specialty stores are grass roots marketing, word-of- mouth, and
community support (e.g. recycling events and cooking classes) (patricia, judith, & rachel,
2009).

Recent research supports the notion that the interaction between the customer and the contact
person influences service quality (Mittal & Lassar, 1996), customer satisfaction, (Andreassen
& Lindestad, 1998), and purchase intentions (Macintosh and Lockshin, 1997). Therefore,
service quality appears to be a basic preceding activities of consumer satisfaction, which
differentiates the relationship between service quality decisions and behavioral intentions

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(Taylor and Baker, 1994).

Upon the inspection of five different industries, a positive relationship was found between
service quality and customer loyalty (de Ruyter et al., 1998). This view is exemplified by a
study which found that positive perceptions of service quality increased the likelihood of
customers engaging in loyalty behaviours beneficial to the strategic health of the firm
(Boulding etal, 1993).

The relationship between service quality and customer preference loyalty has been examined,
among others, by (Boulding et al, 1993) and (Cronin & Taylor, 1992). Cronin and Taylor
(1992) focused solely on repurchase intentions, whereas Boulding et al. (1993) focused on
the elements of repurchasing and willingness to recommend. In the study by Cronin and
Taylor service quality did not appear to have a significant (positive) effect on repurchase
intentions (in contrast to the significant positive relation between satisfaction and repurchase
intention), while Boulding et al. (1993) found positive relationships between service quality
and repurchase intentions and willingness to recommend. Furthermore, it has been argued
that actually responding to dissatisfaction (e.g. complaining directly to the company or
complaining to a third party) is negatively related to the level of service quality (Beardon et
al., 1979; Yi, 1990).

Rust and Zahorik (1993) related service quality perceptions to consumer loyalty in banking,
Crosby and Stephens (1987) investigated loyalty in the insurance industry and
 with regard
to retailing, customer patronage was investigated in relation to service encounter failures by
Kelley et al. (1993).

(Parvez, 2005)

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Works Cited
Akbar, M. M. (2013). Senior Lecturer. Dhaka: iJCRB.

Allen, R., & Donna, T. (2011). Customers’ comparative loyalty to retail and manufacturer
brands. Journal of Product & Brand Management, 205-215.

anupam, v., & gaur. (2010). Retail service quality in context of CIS countries. International
Journal of Quality &, 658-683.

Bloemer, J. (1997). Belgium, Belgium: Limburg University Centre.

Chen, S.-C., & Quester, P. G. (2006). Modeling store loyalty: perceived value in market
orientation practice. Journal of Services Marketing, 190.

Engel, A. (1995). tionship between Consumers' Unethical Behaviorand Customer Loyalty in

a Retail Environment. Journal of Business Ethics, 4.

Esen. (2008). Retail store branding in Turkey: its effect on perceived quality, satisfaction and
loyalty. EuroMed Journal of Business, 286-304.

Haq, M. M. (2005). Student. Dhaka: Independant University Bangadesh.

Hartman. (113). Managing in-store logistics: A fresh perspective on retail service . Managing
in store logistics, 200.

Johan, & Ulf. (2009). Third generation of retailer brands – retailer expectations and consumer
response. British Food Journal, 717-734.

Kunkel, J. H., & Berry, L. L. (1968). A Behavioral Conception of Retail Image. Journal of
Marketing, Vol. 32, No. 4, 22.

Lessig, V. P. (1973). Consumer Store Images and Store Loyalties. Journal of Marketing, Vol.
37, No. 4, 74.

Laroch, D. a. (1984). Event History Analysis Measures of Brand Loyalty. Journal of

Marketing Research, 485.

Miranda, M. J., Konya, L., & Havrila, I. (2005). Shoppers’ satisfaction levels are not the only
key to store loyalty. Marketing Intelligence & Planning Vol. 23 No. 2, 230.

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O'Brien, G. a. (1983). Store loyalty for grocery products: an empirical study. Store loyaltyf or
groceryp roducts, 312.

Oliver, W. a. (1991). Beyond loyalty: customer satisfaction, loyalty and fortitude. Journal of
Services Marketing, 335.

Parvez, M. (2005). Student. Dhaka: Independant University Bangladesh

patricia, judith, & rachel, s. (2009). Customer satisfaction in food retailing: comparing
specialty and conventional grocery stores. International Journal of Retail & Distribution
Management, 63-80.

Ruyter, K. d. (1997). The Neatherlands: Maastricht University.

Raj. (1985). Event History Analysis Measures of Brand Loyalty. Journal of Marketing
Research, 486.

Selnes. (1993). Beyond loyalty: customer satisfaction, loyalty and fortitude . Journal of sevice
marketing, 335.

Sivadas, E., & Baker-Prewitt, J. (n.d.). An examination of the relationship between

quality,satisfaction and loyalty. International Journal of Retail & Distribution Management.

Ugur, & Emin. (2009). Retail store loyalty: a co mparison of two customer segments.
International Journal of Retail & Distribution Management, 477-492

Wong, A., & Sohal, A. (2003). Department of Management. Claufield East, Victoria,
Australia: Emerald.

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Loyalty Program Strategy for Super Shop

When a consumer plans to go to any super shop, he/she creates a mental image of a place
where he/she can purchase not one, but rather products of different categories. This is one of
specialty of a super shop that makes it a very attractive place for consumers.

But it is important to realize that in order to create long term conative behavior; these super
shops must create incentives or programs to make their customers more loyal specific to their
shop because loyal consumers unlike others are always willing to buy products in larger
quantities and from the same shop.

Some consumer loyalty programs that can be very effective are:

1. Special Offers: Super shops can make special offers with respect to many different
aspects. Firstly, the most common one is seasonal, where products that is of high demands
during a particular season and be offered at a discount price or in a “buy one and get one
free” but only for a limited time during the season.

Secondly, super shops can create a customer data base and introduce the loyalty card
program. This can help create a more positive image about the shop to these customers and
on the other hand, these customers, due to their higher level of satisfaction are likely so
spread positive word of mouth, which in turn can help the super shop raise awareness about
their brand.

2. Loyalty Card Program: Now-a-days customer loyalty cards have become a common way
of retaining customer loyalty in super shops so differentiating and creating a super shop’s
unique policy of rewarding loyal customers through loyalty cards has become a challenge. To
identify loyal customers, it is necessary to keep a track on their purchase and other stuffs such
as

» Number of visits

» Time elapsed since last visit

» Taka spent

» Demographic data
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After Identifying loyal customer, we can introduce few unique ways of differentiating
benefits and offerings through our loyalty card program. Such as:

i. Cash Free Purchase:

Members will be able to charge the card with money to make cash-free purchases. This will
reduce the hassle of carrying big amount of money for shopping as well as ensure safety.

ii. Coupons and Discounts:

Customers holding the loyalty card will be given points for their purchase and depending on
their points, they will be given discounts and coupons on specific products.

iii. Birthdays and on Special Events:

A database containing customer information will be made and on special occasions such as
birthdays, Ramadan, Independence Day, greeting e- mails will be sent to customers along
with other special offers and benefits which will make the customers happy. Happy and
satisfied customers are always the sources of loyal customers.

iv. Automated Cash Rewards Right to The Card:

Through this Customer Loyalty Program the customer will be given the ability to
automatically accumulate cash rewards right to the loyalty card; turning it into a personal gift
card. When the card holder has reached the designated reward level as set by the super shop,
the system will automatically convert those points to a cash value and print a unique and
customized message on their receipt to notify them.

v. Increase Business during Off-Peak Periods With Extra Reward Points:

Offering the customers an extra incentive to come in during periods when business is
normally slow will enhances its ability to produce verifiable results. Specific times of day
and/or days of the week will be given during which the customers will be able to earn double
points or more.

Benefit for customer for using loyalty cards:

 Saving Money
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 Convenience Factor – Ease of Payment (Speed and Simplicity)

 Special Offers / Discounts for Holders

 Feeling Of Belonging and Membership

Benefits for Super Shops for offering loyalty card schemes:

 Identification of Customers (enabling deeper relationship marketing)

 Reason for More Contact with Customer

 Identification of Customer Behavior – who buys what, when, where how much, how,
etc.

+Identification of Trends.

 Customer Tie-In

 Customer Satisfaction

3. Partnerships with othe r Companies: Strategic partnerships for customer loyalty, also
known as coalition programs, can be extremely effective for customer retention and company
growth. Again, fully understanding the super shop’s customer’s every-day lives and their
purchase process will help determine which company is a good fit as a partner. A supplier of
the super market can be a partner company to provide benefits. Like; buy ‘k’ company’s
products from ‘y’ super shop and get 5% discount. This will help to earn profit both the
particular company and super shop

4. Community and Social Media Presence: The power of social media in marketing is well
known, yet seriously underused when dealing with customer loyalty. Social media (such as
Face Book and other websites) is a great tool to boost visibility o f a loyal customer. By
offering contests, mentioning customers personally, praising loyal, long term customers
directly through highly visible social media pages – works amazingly well in boosting
customer sense of appreciation as well as inviting other customers to participate in offerings
and to establish stronger relationship with the business.

We can also introduce free WI-FI network inside our super shop area which will be very
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much beneficial for customers as internet has become an inseparable thing in our life.

5. Easy Navigation within the Shop: There are can be hundreds of super shops in a city, but
amongst them it can be seen that only a few are very popular. One of the fundamental factors
that affect consumer’s cognitive attitude in a positive ma nner is when they think of a super
shop where things are easy to navigate. If a consumer goes to a super shop and figures out
that everything is very congested and it takes a lot of time for him or her to locate a product
he/she is looking for, then it is very unlike that, that person will be willing to come back to
that shop again even if that shop has very good offerings. All in all, the super shop must be
set up in such a way so that consumers can locate the products easily because this makes both
the shop an attractive place to visit and increases the frequency of consumer visit.

6. Location of the Super Shop: Whether the super shop is in a convenient location or not
can play an important role in gaining customer loyalty. When entrepreneur decide to establish
a shopping mall, it is very important that they keep in mind that the location where they plan
on placing their establishment is convenient to their target audience. If a super shop is located
in an inconvenient place, consumers will be struck with instant negativity, whenever they will
think of visiting it and hence it will be almost impossible to gain their loyalty even if the
super shop has the best collection of products.

7. Quality Product and Service: Providing the best quality of all the products and service
possible should be one of the prime aims of the super shop. Only the trust worthy companies
should be the suppliers of the shop. This will help the customers to be loyal to the shop,
because they will always know that this shop provides the m the best products. Loyalty
program like this kind will help to build a brand also.

8. Offe ring Unique Products for Gaining “Competitive Advantage”: As our country is
getting more and more multinational, keeping an eye on the needs of foreign people might
give the super shop company a competitive advantage. Different kinds of foreign food items
such as tofu, sea weed, different kinds of rice, foreign spice etc will give the super shop a
unique identity and it will become more preferable to those foreign citizens in the country.

9. Pricing: Pricing is one of the factors that affect the cognitive, affective and conative part
of human behavior in a very strong manner. Consumers always want to go to the shop where
they would get the product at the cheapest price. Hence it is important that the owner of a
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super shop has a through idea of the relative pricing products and services in competing super
shops and establish a competitive rate which will be both profitable and gain customer
loyalty.

10. Surprises: This can become a very different way to make customers loyal. In this case a
random customer might have a chance to win some attractive prizes or suppose a customer
who visits the store for 1000th time or 100,000th customer of the month can be offered some
gifts or a free shopping time. With proper marketing this kind of initiative can attract a lot of
customers as well as create some loyal ones.

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Conclusion:

A loyal customer leads to repetitive customers and builds brand value and it is found in
various researches that loyalty programs are on the tip of most retailers strategy map than any
other single marketing program. The commercial benefits of loyal customers are well known
by companies and business people. Experts also estimate it costs betwee n two to 10 times
more to win a new customer than to retain an existing one. With all the different companies
offering new strategies for loyalty programs, it is very important not to lose sight of the basic
strategy behind implementing the loyalty program. It is also very important to create a unique
strategy of retaining customer loyalty so that customers choose the particular super shop over
any other super shops. It is well documented that the majority of a firm's/super shop’s sales
come from a small proportion of repeat customers. Targeting these loyal customers can help
boost the sales and gather more names to the company. Through these strategies it really
allows the company to connect to their customers and give them a reason to come back and
become true brand advocates.

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