A-research-proposal-focusing-on-theRetail-sector-Can-large-companies-foster-customer-loyalty-in-today’s-challenging-climate

1. Sarah Green
B00440670
Retail sector: Can large companies foster customer loyalty in today’s challenging
climate?
1.1 Background Information/ Literature review
The supermarket environment, in the UK is one of the most competitive, complex and
dynamic sectors in the world, in which standardisation is a strong feature with very little
differentiation between competitors and the products they offer. Another feature of the sector
that has emerged over the years is the ever increasing demands of customers in terms of
overall service and product quality. This has meant competition levels in the sector are
intense. Against this back drop the issue of trying to foster and maintain customer loyalty has
become of critical value to businesses not just for profitability but for survival. (0’Loughlin
and 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 to
not only boost profits but to maximise a share of a customer loyalty in order to try and
ensure / develop repeat business is gained (Aaker . D, 2007).However, how companies can
generate and foster loyalty remains a continued challenge to businesses.
In recent years the overall retailing environment has had to contend with developments in the
external environment including regulation changes, technological advancements and
changing 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 particular
I will focus on Marks & Spencer’s and their attempts to foster and maintain customer loyalty
in today’s challenging economic environment.
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2. Sarah Green
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1.2 Introduction-customer loyalty
There has been considerable research directed at the topic of customer loyalty particularly
focusing on trying to define and measure it. However, there is still confusion over what is
actually 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 service
consistently in the future, despite situational influences and marketing efforts having the
potential to cause switching behaviour” (Oliver, 1999, p.34).
The definition above shows that loyalty has both attitudinal and behavioural dimensions to its
construct (Dick and Basu, 1994), which has been the main basis of debate within the loyalty
literature (Berry 1995; O’Malley and Tynan, 2000). The benefits of customer loyalty to a
provider are numerous for example Beerli et al, (2004) link customer loyalty to an
organisation’s profitability, implying that any organisation with loyal customers has
considerable competitive advantage. This makes studies on customer loyalty essential for
retailers. Other advantages associated with having a loyal customer base are shown in Table
1.2
Benefit Author
 Recruiting a new customer is Gilbert, 1996
estimated at 5-10 times more
expensive than retaining one
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 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 sector
Due to today’s challenging economic environment supermarkets have had to focus their
efforts on maintaining a loyal customer base, which has become an essential activity for
survival (Leverin and Liljander, 2006). However as the literature highlights true loyalty must
not be mistaken for the factor of inertia (Bennett and Rundle-Thiele, 2004). When the relative
attitude is negative but the customer stays with the organisation, it is a question of ‘Brand
Loyalty’ (Dick and Basu,1994).
Brand loyalty is the consumer's conscious or unconscious decision, expressed through
intention or behaviour, to repurchase a brand continually. However, this loyalty has come
into question about whether it actually exists in today’s competitive environment. Due to the
recent recession this has caused customer-supermarket relationships to breakdown. The main
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reasons why customers were usually loyal to supermarkets such as Marks and Spencer’s has
changed to great extent, now a day’s customers are more concerned about wherever is closest
and cheapest to fulfil their needs.
One recent innovation in loyalty marketing is the development of technologically-based
loyalty devices. Loyalty devices offer convenience by enabling customers to conduct
transactions both faster and easier than before. However, the real secret of their popularity for
customers 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 can
be with its implementation of club cards to create and foster relationships with their
customers.
1.4 Customer loyalty and gender
In the literature there are conflicting views as to whether consumer demographics are
correlated with loyalty behaviour exhibited by consumers (Patterson, 2007). In particular
does loyalty vary by gender? Research by Fry et al., (1986) argues that there are no
significant distinctions between male and female shopping habits and that both genders can
safely be treated as a homogenous customer grouping. Patterson (2007) supports this
argument as he concludes within his study that gender is not one of the mediating factors
affecting customer loyalty in the context of the service sector.
However, Ndubisi (2005) contrasts this and instead advocates that gender plays an important
role in the customer loyalty and identifies that female customers tend to be more loyal than
male in their behaviour. These opposing arguments show that there needs to be further study
into whether females might exhibit strong service loyalty behaviour than males. This
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represents an area of the literature that has little research and consequently provides an
opportunity 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 the
customer’s needs are not being satisfied by the existing product offerings. This can often
cause a customer to make the decision to look elsewhere, (Sellers 1993). This kind of
disloyalty is often regarded as “unmet needs”. Unmet needs are strategically important
because they represent opportunities for the firm to increase their market share, break into a
market, or to even create and own new markets. They can also establish threats that can be a
lever that enables competitors to disrupt an established position.
Sometimes customers are unaware of their unmet needs because they are so accustomed to
the implicit limitations of existing equipment. Unmet needs are difficult to identify but they
can represent greater opportunities for any business, (Aaker, 2007). Due to the fact that
customers are not satisfied with the quality of the product/service the organisation provides
they often become disgruntled, and begin to look for alternatives which can have a major
effect on the profit of a business, (Hoffman & Bateson, 2006).
Research into service loyalty has found that by improving customer retention, large increases
in profitability can be achieved (Reicheld and Sasser, 1990). The answer that has been
proposed 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 customer
loyalty and helps reduce customer defection.
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1.6 Is Relationship marketing the answer?
There has been great plethora of debate regarding relationship marketing. However like
customer 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 the
underpinnings of relationship marketing. Factors such as trust, commitment, conflict
handling, and technology all have attributes that are linked to the relationship marketing
process.
1.7 Research Aims
As a consequence of today’s market conditions many retail companies have had to adapt their
strategies to suit the continuous change of customer needs, and to focus all their efforts
towards strategies which focus on not only brings in new customers but also help to maintain
the loyalty they have with their existing customers. This dissertation will try to provide
insight into the behaviour of consumers within the retail sector and look at the validity of
applying a relationship marketing strategy to increase loyalty. Overall this will help us to
understand how retailers like Marks & Spencer’s use these strategies to achieve higher levels
of loyalty among their customer’s.
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1.8 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 research
This literature review suggests that customer- supermarket relationships are no longer as
secure as they have been in the past due to the recent recession. So by looking to explore the
current attitudes of customers regarding Marks & Spencer’s and by relating this loyalty/
disloyalty behaviour and relationship marketing, valuable insight and knowledge will be
gained. The researched gained within this area of loyalty strategies has potentially important
implications for marks & Spencer’s, as they seek to create durable and long-term
relationships and protect their customers base within an increasingly competitive market. My
methodology and research has been adopted to ensure that these issues are addressed to help
fill in the gaps in the literature.
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8. Sarah Green
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Methodology
The target survey population for this dissertation will be the customers who shop within
Marks & Spencer’s. By obtaining and analysing customer’s opinion this will help to explore
customer behaviour and whether customer loyalty is evident. Secondly by targeting
customers 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 utilised
by Marks &Spencer’s. Matzler et al (2006) highlight that it is advantageous to use a
homogenous sample, such as customers within a survey as it helps to reduce the impact of
non-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 area
with a high chance of gaining the required numbers of respondents as well as a varied sample
of population.
From investigating a number of crucial topics raised within the literature in the previous
chapter a number of hypotheses have been developed to be tested to help achieve the
objectives 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.
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9. Sarah Green
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 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 Technology
All the factor of hypothesis 4 are shown in the research framework below
Trust
Commitment
Customer
Loyalty
Conflict
Handling
Technology
Figure 2.1 : The research framework source from Ndubishi et al, (2005)
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2.2 Quantitative or Qualitative Approach
In light of the aims and objectives and the hypothesis identified earlier a quantitative survey
has been selected for the purpose of this dissertation. This dissertation involves looking at the
extent to which certain behaviours and attitudes prevail within the consumer population,
which makes qualitative methods less appropriate ofr this investigation study, as they focus
on gathering more in-depth and richer data from a smaller sample (Kent 1999). Also
compared with qualitative methods, surveys methods allow the collection of significant
amounts 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 of
open questions enables the collection of knowledge on people underlying motivations for
exhibiting certain behaviours (Brace, 2004). It was felt that due to the pressures associated
with the difficulty of coding open responses and its large time consumption, that narrowing
the questions into closed response format would be preferred for this survey.
2.3 Instrument of data collection
For this survey questionnaires will be used in preference to that of other instruments such as
diaries or recording devices as these methods exclude the possibility of collecting ranges of
necessary data required to meet the aims and objectives of this dissertation. Using a
questionnaire was the only plausible method that prohibited the collection of information
such as the likert scaled questions that were used to gauge general attitudes. In addition the
other available methods of collection would have required higher levels of commitment from
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respondents (Kent, 1999) which the researcher felt could reduce the response rate of the
survey.
2.4 Questionnaire design
The questionnaire will be designed to ensure that it will be suitable for both the interviewer
and the respondent. The questionnaire will consist of three sections with the first section
asking general questions pertaining to customers and Marks & Spencer’s, which will generate
findings for the loyalty and disloyalty of students. The second section will be designed to
gather respondent’s opinion on the importance of the constructs mentioned above and finally
a third section will consist of the respondents demographic characteristics.
2.5 Pilot
Piloting a questionnaire has been recognised as fundamental to the success of the overall
study (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 piloted
amongst 12 random customers to test its effectiveness in achieving the aims that were
identified. Brace (2004) highlights that is important to improve the reliability of a
questionnaire through testing it with members of the targeted survey population.
2.6 Sampling
A quota sampling will be employed rather than a selected sample due to time costs associated
with these techniques. (Kent, 1999). Also it was necessary to obtain as representative a
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12. Sarah Green
B00440670
sample 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 sampling
size will be met and relevant data will be collected, which will guarantee that the right data
will be used for analyses, which has been problematic for other samples gathered (Kent,
1999).
2.7 Methodological limitations
There may be a limited size to the sample this represents a limitation, as a larger sample size
would improve the reliability and validity of the results however it will be as large as
resource constraints will allow. As questionnaires will be employed to collect the data some
customers may not be willing to spend the time filling in a questionnaire, so the example can
be 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 for
this study.
2.8 Conclusion
Once the primary research will be obtained through the form of questionnaires, the SPSS
package will be used to assist the analysis of the collected raw data. This will help to
represent the findings of the study in different forms of statistical analysis i.e. bar charts, pie
charts. In the next part of this assignment I will present the findings, analysis and
interpretation of results of my research.
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References
Journals
Beerli A., Martin, J.D. and Quintana, A.(2004), “A model of customer loyalty in the retail
market” , European Journal of Marketing, Vol. 38 No. 1-2, pp.253-275
Bennett, R. And Rundle- Thiele, S. (2004), “Customer satisfaction should not be the only
goal”, Journal of services Marketing, Vol.18 No.7, pp.514-524
Berry, L. (1995), “Relationship Marketing of services- growing interest, emerging
perspectives”, Journal of the Academy of Marketing science, Vol.23 No.4, pp.236-245
Colgate, M., Stewart, K. And Kinsella, R. (1996), “ Customer defection: a study of the
student market and Ireland”, International journal of bank marketing, Vol.17 No.1, pp. 36-43
Dick, A.S., and Basu, K. (1994) “Customer Loyalty: Toward and integrated conceptual
framework”, Journal of the Academy of Marketing Science, Vol 22 No.2, pp99-113
Durkin, M., Howcroft, B. (2003), “ Relationship marketing retail sector: the impact of new
technologies”, Marketing Intelligence & Planning, Vol.22, No.1,pp67-71
Fry, J.N., Shaw, D.C., Lauzenauer, C.H., and Dipchand, C.R., (1986), “Customer loyalty: A
longitudinal study”, Journal of Business, Vol.12, pp517-525
Lam, R. And Burton, S. (2006), “Loyalty/Disloyalty: a qualitative study in Hong Kong”,
International journal of marketing, Vol.24 No1, pp 37-52
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Leverin, A. And Lijander, V. (2006), “Does relationship marketing improve customer
relationship satisfaction and loyalty”, International journal of marketing, Vol.24 No.4, pp
232-251
Matzler, K., Wurtele, A. And Renzl, B. (2006), ‘Dimensions of price satisfaction: a study in
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Moorman, C., Zaltman, G. And Despande, R. (1992), “Relationship between providers and
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marketing research, Vol.21 No.1, pp, 5-16
Ndubisi, N.O. (2005), “Effect of Gender on Customer loyalty: A relationship marketing
approach”, Marketing Intelligence and Planning, Vol.24 No1, pp. 48-61
Ndubisi, N.O. (2007), “Relationship marketing and customer loyalty”, Marketing Intelligence
and Planning, Vol.25 No.1.pp. 98-106
O’ Laughlin and Szimigan (2006), “Customer Relationship Typologies and the nature of
loyalty in Irish retail financial service”, Vol.22 No.3-4 pp.26-293
Oliver, R.L, (1999), “Whence consumer loyalty?”, Journal of Marketing, Vol.63, pp.33-44
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Patterson, P.G. (2007), “ Demographic Correlates of Loyalty in a service context”, Journal of
Service Marketing, Vol.21, No2, pp112-121
Stewart, K. (1998), “An exploration of customer exit in retail”, International journal of
Marketing, Vol.16 No.1,pp.6-14
Reichheld, F.F. and Sasser, W.E.(1990). “Zero defections: quality comes to services”,
Harvard Business Review, Vol.68, No.5, pp.105-111
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services”, International Journal of Quality and Reliability Management, Vol.23 No3, pp.
244-264
Books
Aaker. D, (2007) ‘Strategic market management’, 8th edition, California, John Wiley and sons
inc.
Brace, I. (2004), ‘Questionnaire Design’, Kogan Page Ltd, London
Burns, A.C. and Bush R.F. (2006) ‘Marketing Research’, fifth edition, Pearson Education
Ltd, New Jersey
Kent, R (1999) ‘Marketing Research: Measurement, Methods and Application’, International
Thompson Business Press, London
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Oppenheim, AN (1992) Questionnaire design, interviewing and attitude measurement. Pinter,
London.
Hoffman, K., and Bateson, J. (2006) ‘Services Marketing: Concepts, strategies,& cases’ 3rd
edition, South Western: Thompson.
Saunders, M,. Lewis, P. And Thornhill, A. (2007) ‘Research methods for business students’
4th edition, England: Pearson Education Ltd
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