Evaluation of Customer Loyalty to Different Format Retailers

Noskova EV; Romanova IM

Evaluation of Customer Loyalty to Different Format Retailers

Noskova EV^1* and Romanova IM¹

Far Eastern Federal University, Suhanova Street, Vladivostok, Russia

Corresponding Author: Noskova EV, Far Eastern Federal University, Suhanova Street, Vladivostok, Russia, Tel: 7471250-48-20; E-mail: noskova0409@mail.ru

Received: 21 September 2015 Accepted: 12 October 2015 Published: 16 October 2015

Citation: Noskova EV, Romanova IM (2015) Evaluation of Customer Loyalty to Different Format Retailers. J Internet Bank Commer S1:007.

Copyright: © 2015 Noskova EV, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

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Abstract

The article notes that at present for different retailers an important strategic objective is to create loyal customers. Under these conditions, the urgency to identify and assess the factors affecting the formation of customer loyalty increases. The purpose of this study is to estimate factors affecting customer loyalty with an average level of income in the context of different formats of retail trade of food specialization in the cities with a population of 1 million people. In the study a methodical approach to customer loyalty and factors it forming is developed. The basic factors of customer loyalty in the context of the marketing mix 7P are discovered (product, price, place, promotion, personnel, physical evidence, and process). A quantitative assessment of the factors of customer loyalty on the basis of the calculation of the index of satisfaction in the context of retail formats (hypermarket, supermarket, and shop near home) is given. The study may be of interest to market operators of retail services in the development of programs to improve customer loyalty to different retailers.

Keywords

Loyalty; Consumer behavior; Methods; Evaluation of loyalty; Loyalty factors

Introduction

The priority of the modern marketing is the formation loyal customers, the implementation of the transition from one-off transactions to establish the long-term partnerships. Creating sustainable partnerships with loyal customers bring more profits than individual transactions and the maximization of profit for each individual transaction. Evaluation of customer loyalty in the retail sector is an important and little known area of the research. Today there are many different even contradictory way to the evaluation of customer loyalty in the retail sector. Often simplified methods of research based on one parameter are used, such as the analysis of the behavioral aspects (regarding the frequency of purchases), that is, there is no single approach to how the level of customer loyalty should be measured. With regard to the retail situation is complicated by the presence of a large number of retailers’ formats that form the special, inherent exactly this type of format consumer values, which in turn affects the formation of customer loyalty. In these circumstances, it requires the study of influence of various factors on the loyalty of consumers to retailers in various formats.

The first attempts to explain the conceptual essence of the concept of “loyalty” were made in the early XX century and based on the emotional component of consumer behavior [1]. At that time, the definition of loyalty was quite simple and was associated with consumers to buy certain goods under a particular brand with absolute certainty. Later definitions consider loyalty in the context of consumer preference of one brand of goods with every purchase, which implies repeat purchase [2]. According to Liesse and Schlueter, repeat purchases are explained by the good needs and personal commitment to the formation of the brand [3,4], which reduce the susceptibility of consumers to the actions of competitors [5]. Further development of the theory and methodology of loyalty led to a connection of a rational component of loyalty, which is reflected in the fact that the consumer can buy in several competing companies [6].

Modern approaches to study the loyalty cover the following subject areas:

a. Assessment of customer loyalty [7-10];

b. Loyalty forming factors (quality of service [11-16], the atmosphere of a trading hall [17,18], the price of goods or services [19- 23], image [24-26];

c. Loyalty forming Programs [27-45];

d. Customer loyalty to the retail formats [46-48].

Analysis of these publications shows the relevance of the investigated problem, debating nature and diversity of the studied issues, indicating the timely research topic of the impact of format retailers on consumer loyalty.

Methodology

The aim of the study is to estimate factors affecting customer loyalty with an average level of income in the context of different formats of retail trade of food specialization in the cities with a population of 1 million people.

Problem formulation

a. Problem to solve - increasing the loyalty of consumers to retailers of different formats.

b. Problem to study - to identify and assess the factors affecting the formation of customer loyalty to the retailers in various formats.

Determination of research objectives

According to the aim in a research project the following tasks were defined:

a. To define criteria for classifying retailers in different formats;

b. To classify retailers formats;

c. To develop tools to measure customer loyalty to retailers in the different formats;

d. To conduct a survey of consumers;

e. To carry out statistical analysis of questionnaire data;

f. To assess the loyalty of consumers to retailers of different sizes by multiatributional model.

Formation of the study basic hypotheses

H1: The purchases of goods of food appointment consumers are manage d by rational factors (product, price, location, personnel) regardless of format retailers.

H2: The price of food products in the formation of customer loyalty for retailers is the most important factor for companies of any size.

H3: The emotional component of customer loyalty to retailers of different sizes is formed mainly by the elements of the marketing as “natural environment” and promotions.

Determining the type of the research project

Exploratory study with the appropriate empirical methods support (refute) the hypothesis.

The object of the study

It is the attitude of consumers to retailers of different sizes, the subject - factors influencing the formation of customer loyalty for retailers in various formats.

In determining the format of retailers the following main characteristics: the range of goods sold the size of retail space; applied methods of sale of goods are taken into account.

In the study only formats specific to food specialty retailers will be considered:

Hypermarket: Network (much less independent) retailer with 20-50 thousand positions in the range (the range is usually mixed; in the range there are products of their own production subsidiary departments). Location of these hypermarkets in residential areas is not practiced. Material and technical base is mostly private, retail space ranges from 4-5 to 8-10 thousand sq. meters, the relationship between the warehouse and shopping area is about 1: 2, respectively; the average number of calculation nodes is 20-40. According to some commodity groups self-service is used, other (culinary, confectionery) - traditional forms of service, the number of employees can be up to 1000 people.

Supermarket: Network (much less independent) retailer with 5-15 thousand positions in the range ( in the range there are products of their own production subsidiary departments). Material and technical base is private and rented, retail space ranges from 500-600 to 1500- 1800 thousand sq. meters, the relationship between the warehouse and shopping area is about 1: 3, respectively; the average number of calculation nodes is 5-15. Supermarkets are close to transportation hubs, shopping areas. Along with self-service forms of personal service are used. The number of employees can be up to 200 people.

Shop “near home”: A small grocery store, which is located within the walking distance. The range of shops is usually 300-400 positions. Material and technical base is mostly rented, retail space ranges from 20-50 sq. meters, the relationship between the warehouse and shopping area is about 1: 3, respectively; the average number of calculation nodes is 1-3. The main form of service is the service over the counter, at least a combination of (a combination of individual forms of service and self-service) forms are used. Number of employees is up to 15 people.

The used method of the measurement of loyalty and its determining factors

Assessment of satisfaction based on multi-atributional model of format retailers in the context of each format retailers and the factors influencing customer loyalty, the importance factor is calculated, average rating factor and a weighted score for each factor is allocated a weighted score for each of the elements of the marketing mix in section 7P: item (a wide range of goods, assortment diversity within the same product group, product quality, availability of the products of domestic manufacturers, the presence of goods from foreign manufacturers, constant updating of the product; the location of the goods in assortment groups); Price (low cost, availability of price discounts); promotion (advertising on television of the point of sale, advertising point of the sale on the radio, point of sale advertising on billboards in the city, advertising in the internet; availability of the site; constant promotions, the availability of discount programs, the presence of signs with the name of the point of sale, participation in social actions, image and reputation of the point of sale; reviews and recommendations); place (parking, parking spaces, convenient location, proximity to home, work); physical environment (the presence of background music, pleasant smell, the presence of signs indicating the product groups; a well considered price tags and their location under the each item; discounts; racks design; decoration of the hall; lighting of the hall); personnel (the sales consultants, courtesy of the personnel, the presence of security guards; pleasant appearance of the personnel, presence of a large number of operating banks, speed of service, personnel qualifications); additional services (non-cash payment, the availability of ATMs of different banks, the presence of payment terminals service, availability of storage rooms, availability of carts and baskets, the presence of the book reviews and suggestions and accessibility to it).

Within the framework of the research, we adopted the assumption that the importance of factors, influencing satisfaction of consumers, is unequal, that is some factors influence to a greater extent, and some – to a lesser extent. That is why in order to determine the satisfaction, firstly, the weight coefficient (W) of each factor is calculated by the formula 2. The average weight of the factor (p) is calculated by the formula 1. Weight indicators for each factor (q) are determined by the respondents in the course of the survey on a scale from 1 to 3, and the number of respondents (n) is the volume of a representative sample.

The calculation of the average weight of each factor is made as:

(1)

where p - the average weight for each indicator;

q - the weight value for the each factor;

n- the total number of the interviewed

Calculation of the weighting factor is made as:

(2)

where W - weighting value;

p - the average weight for each indicator;

It should be noted that the values of weight coefficients of each factor (W), calculated by the research results by the formulas (1 and 2) can be extended within the boundaries defined in the statement of research goals, i.e. in Russian cities with a population under 1 million people, as such cities have similar characteristics of consumer behavior, which is due to geographic and demographic features. When the results of this research are applied to other regions, there may be some deviations from the obtained results; additional research will be required to correct them.

The calculation of the average weight of the each factor is made as:

(3)

where T - the average score for each of the factors;

r - assessment on the each factor on a scale from 1 to 10;

n - the total number of the interviewed

The calculation of the weighted assessment (Satisfaction Index) is made by the formula:

(4)

where H - the weighted score for each of the factors;

Where W - weighting coefficient value;

T - the average value assessment of each of the factors.

After receiving the weighted assessments their summation is made.

Results

Based on the developed methodology authors conducted a questionnaire survey of consumers of retailers of different formats, the results of which allowed to identify and assess the factors affecting customer loyalty on the elements of the marketing complex (Table 1).

The study found that the loyalty of hypermarkets consumers is largely determined by the elements of the marketing complex as an offer additional services (1st place - satisfaction index is 19.1), the price of the offered goods (2nd place - satisfaction index 18.1), physical environment, products and personnel (3rd place - satisfaction index 17.4-17.5). Supermarkets services customer loyalty largely depends on the price (1 place - satisfaction index 18.8), location (2nd place - satisfaction index 17.8), good (3 place - satisfaction index 17.4). To that format retailers like shop near home the determinants of loyalty are such elements of the marketing complex as the price (1 place - satisfaction index 19.4), good (2nd place - satisfaction index 13.4), the personnel (3rd place - satisfaction index 11.7). It should be noted that these results were obtained empirically during the survey among respondents in the representative sample (n=738 respondents).

The significance of the results of assessing the impact of the elements of the marketing complex in the customer loyalty increases when considering the structure of these elements. So the good in the marketing complex in this study was considered in the context of 7 products: a wide range of products, a variety of product groups; assortment diversity within the same product group; product quality; availability of goods of domestic producers; availability of goods of foreign producers; constant renew of the product; the location of the goods by the assortment groups (Table 2).

The results of the assessment of customer satisfaction indicate the importance of different factors in the formation of customer loyalty. In terms of format retailers the importance of the factors varies slightly. For all formats of retailers in the formation of customer loyalty in the first place we should pay the attention to the quality of the goods, constant renewal of goods, the presence of an assortment of goods, both domestic and foreign manufacturers.

The impact of such an element of the marketing complex as the price on the formation of customer loyalty compared with the goods is greater (Tables 1 and 3).

The evaluation results confirmed the hypothesis that for Russian consumers format of retailers of food specialization does not affect the significance of commodity prices in the formation of consumer loyalty. This is due to the fact that the Russian consumers with an average income the cost of purchasing food products gets a significant proportion of their budget.

The study found that the promotion is not the dominant factor in the formation of loyalty (Tables 1 and 4). At the same time, for the larger sizes of retailers such as hypermarkets and supermarkets, more and more elements of the complex promotion are used (Table 4).

The leaders in the formation of customer loyalty for the hypermarket and the supermarket are such elements of a complex promotion as discount programs, advertising of the space sales on billboards in the city, reviews and recommendations of friends, acquaintances, and so on. For the format “shop near home” a limited number of elements of complex promotion is used (the signs with the name of the point of sale, the discount cards, promo-actions), respectively, the effect of these factors on the formation of consumer loyalty is not essential.

The study found that among the factors that determine a convenient location of retailers the most important is the availability of parking and the number of parking places (1st place for three formats - hypermarkets, supermarkets, “shop near home”) (Table 5).

The analysis (Table 1) showed that the “physical environment” plays an important role in the formation of consumer loyalty in all retail formats. However, the significance of “physical environment” in the formation of customer loyalty for retailers larger formats is higher (by sales area, the breadth and depth of the range), for hypermarkets and supermarkets, which supports the hypothesis.

Among the factors that affect the customer loyalty as a part of a component of the marketing complex “physical environment”, the most important are lighting the room (for the hypermarket and supermarket), the presence of background music and pleasant smell (for the hypermarket format), the presence of signage (for the supermarket format), the presence of a well-considered price tags - for all formats (Table 6).

It should be noted that the elements that make up the “physical environment” influence the formation of the emotional component of the customer loyalty, although rational factors (good, price) are dominated. Skilled and courteous personnel is an important factor in shaping consumer loyalty to a particular format of the retail trade enterprise. Among the characteristics of the personnel the most important are courtesy, skills and pleasant appearance (Table 7).

According to the importance of factors influencing the formation of customer loyalty for retailers in various formats such factor as the additional services is the most significant for the hypermarket format (Tables 1 and 8). Among the additional services the payment terminals, ATMs and cashless payments are more demand.

Thus, when evaluating the loyalty through the use of the multiatributional model the hypothesis that when buying goods of food appointment consumers are managed by rational factors (product, price, location, personnel) is completely confirmed. Hypothesis that the price of food products in the formation of customer loyalty for retailers is the most important factor for companies of any size is completely confirmed. Hypothesis that the emotional component of customer loyalty to retailers of different sizes is formed mainly by the elements of the marketing as “natural environment” and promotions is confirmed for the retails of the large formats (hypermarket and supermarket).

Discussion

In modern scientific publications devoted to research consumer loyalty considerable attention is paid to factors of loyalty forming [11- 26]. However, the consideration of these factors is usually performed without the use of a systematic approach, without taking into account the mutual influence of factors. Such approach often leads to a distortion of the real market situation. The present study attempted to integrated presentation and evaluation of the factors of 7P marketing complex (product, price, place, promotion, personnel, physical evidence and process).

Existing studies of customer loyalty on the format retailers tend to be fragmented and focused on a specific format retailers [46-48]. In this study the analysis of the factors influencing the formation of customer loyalty, carried out with regard to the formats of food retail enterprises (hypermarket, supermarket, shop near home). Such results may be of interest to large retail chains, having in it enterprises in various formats to develop the ways of increasing customer loyalty.

Areas for further research within the designated problem to increase the loyalty of consumers to retailers in various formats can be associated with the assessment of loyalty and its determining factors for the non-food retail expertise, as well as in the context of cities with populations over one million. Of great interest might be the study of consumer loyalty to retailers in various formats with the rational and the emotional component of the loyalty.

Conclusion

As part of this study:

1. The methodical approach to assessing the impact of various factors on the loyalty of consumers to retailers of food specialization in various formats (hypermarket, supermarket, shop near home) for towns with a population of 1 million people is developed.

2. Main factors influencing the formation of customer loyalty for retailers in various formats are found. For hypermarkets the determining factors are: additional services (availability payment terminals, ATMs, bank transfer), price, product (product quality, availability of the products of domestic manufacturers, the breadth and depth of the range) and the personnel (the presence of sales consultants, courtesy and qualification of personnel) For supermarket - price, location (parking available and the number of parking spaces) and the product (the location of the goods assortment groups, the availability of products of foreign manufacturers, the depth and breadth of the range). For the shops near home the following factors are price, product (availability of goods of domestic and foreign manufacturers, constant updating of the goods), the personnel (the speed of service, pleasant appearance and politeness of the personnel).

3. It was found that when buying food products consumers are mainly controlled by the rational factors (product, price, location and personnel) regardless of format retailers. The price of foodstuffs in the formation of customer loyalty for retailers is the most important factor for companies of any size. The emotional component of customer loyalty to retailers of different formats is formed mainly by the elements of such marketing complex as “natural environment” and promotions.