Building a positive relationship with a customer is a vital effort in customer loyalty which will require that a company work in a broader context that extends beyond itself
Building a positive relationship with a customer is a vital effort in customer loyalty which will require that a company work in a broader context that extends beyond itself, as no company can be world class at everything (McDonlad & Keen 2000). Gremler and Brown (1999) divide customer loyalty into three different categories; behaviour loyalty, intentional loyalty, and emotional loyalty. Behaviour loyalty is repeating purchasing behaviour while intentional loyalty is the possible buying intention. Emotional loyalty is achieved when a customer feels that a brand coincides with their value, ideas, and passion.
2.3.1 Factors influencing Customer Loyalty
22.214.171.124 Complaint Handling
Yap et al (2012) defined complaint handling as a degree in which complaints are tackled by a company which is embedded in service quality to the customer. As Heskett, Sasser and Hart (1990) stated, complaint handling strategies are applied by firms to deal with a failure of the services or products for the purpose of rebuilding reliability in the heart of the customers. Michel et al., (2009) defined complaint handling as the organization’s capability to avoid potential issues, handle conflicts, and figure solutions out publicly when a problem arises. Complaint handling is a critical point in developing customer loyalty (Berry and Parasuraman, 1991). Phol (2002) also claimed that good complaint handling is a critical element of a service, and any company could save many unwanted costs by avoiding chaotic information management. In addition, Metwally (2013) stated that as recognizing the value of keeping a long period connection with customers, more and more organizations treat complaint handling as part of most companies’ marketing strategies.
Further, Metwally (2013) mentioned that handling the complaints of customers properly could also positively affect customer loyalty to a significant degree.
Trust is a level of one’s confidence in another party’s competence and his performance based on predictable ethical principles (Errol et al., 2005). It is defined as the willingness to rely on an exchange partner in whom one has confidence (Moorman et al. 1993) or confidence in an
exchange partner’s reliability and integrity (Morgan ; Hunt 2004). Chaudhuri ; Holbrook (2002) define brand trust as customers willingness to rely on the ability of the brand to perform its stated function. Liang and Wang 2006 states in this context that trust is “the perceived level of confidence in transaction partners? reliability and honesty”.
Morgan ; Hunt (1994) additionally recommend that brand trust prompts brand loyalty and commitment. So as to build the levels of trust, organizations must spotlight on keeping guarantees to their clients and reliably convey their best enthusiasm at heart (Hocutt, 1998). Particularly, trust lessens uncertainty in an environment where clients feel powerless in light of the fact that they know they can depend on the trusted association (Aydin ; Ozer 2005: 146).
2.3.2 Benefits of loyalty
Duffy (2003:480) indicates the following benefits of loyalty:
• Duffy identified cost saving as one of the benefits of customer loyalty. The cost of acquiring new customers cannot be undermined. Companies lose customers through a number of ways; death, change of location and some are driven away by competition because they may perceive you may not care about them which might not be true. The financial reality dawns on a company when they realize the cost of convincing a new customer to buy into the brand, through marketing and sales, the emails and he claimed that customers are already familiar with the brand and they also use the resources more efficiently.
• Referrals – they mention their preferred brand to their friends and associates (also called word-of-mouth), which is a major focus area of this study, and which will be discussed later in more detail.
• Complain rather than a defect – because they consider themselves as stakeholders, they will give the organization a second chance in case of a service failure and report it. They might even offer advice on how to prevent a recurrence of the problem. This is an extremely valuable early warning system and should never be ignored or detested, but always welcomed. It provides an opportunity to rectify a problem that could have led to several customers terminating their relationships if it was not reported and identified.
• Channel migration – they are more likely to buy through alternative channels from their preferred brand (like the Internet). Cersosimo et al. (2001:21) refer to this as a seamless customer experience. They state that an organization must first understand the customers’level of brand loyalty and how much brand equity they have in the marketplace. This Brand Equity Pyramid is shown later in this chapter (Figure 3.4).
• Unaided awareness – loyal customers are more likely to have the preferred brand top of their minds. This is what any organization should strive to achieve, as it illustrates a very high level of satisfaction, loyalty, and awareness.
• Greater awareness of band assets – they are more aware of the auxiliary benefits or hidden assets.
2.4 Relationship between Customer Satisfaction and Customer Loyalty
Scholars in this line of research have speculated that customer satisfaction is an important factor in explaining loyalty behaviour (Bendapudi and Berry, 1997; Eriksson and Vaghult, 2000; Rahim et al., 2012). However, within the same firm or industry, different customers could have different perceptions, needs and experiences that influence their expectations; this
be the reason why, Pizam and Ellis (1999) maintain that customer satisfaction is an individual psychological impression and not a universal occurrence, which suggests that customers acquire different satisfactory level based on related purchase or service encounter.
Dickie 2008 explains customer satisfaction as a certain psychological satisfaction, which is an attitude shown purchasing a product. However, customer loyalty is a behaviour of continue or repetitive purchase of a product/service. Woodcock et al. 2003 by a research carried out is of the view that customer satisfaction could be determined through the display of feeling or emotional feedback by customers but cannot predict future behavioural purchase, however, customer loyalty can predict future behavioural repurchase.
Gitomer (1998) also emphasizes the fact that customer satisfaction is not necessary to factor in service providing because a satisfied customer can still decide to purchase another company’s product or service. Most at times, a customer may not be entirely satisfied with a particular product or service, however, he or she still chooses it based on a lower price or a location. There is no doubt that customer satisfaction is the key element which can cause repeating purchasing behaviour but it is not the most essential factor of customers.
The view that customer satisfaction leads to loyalty is established on the evidence that by improving customer satisfaction, the likelihood to remain loyal to the service provider is high (Eriksson and Vaghult, 2000). Similarly, it is also not out of context to expect that dissatisfied customers are more prone to terminate a business relationship than satisfied customers, however, some researchers have developed that satisfaction alone is enough to evaluate customer loyalty (Andreas, 2010). According to Shaw (cited in Ferreira, Faria, Carvalho,
Assuncao, Silva and Ponzoa, 2013), loyalty is a seductive manifestation or rationality, which may not automatically reflect reality. In line with the above claims, Yu-Kai (2009) explains that the relationship that exists between customer satisfaction and loyalty makes it clear that it is possible in some occasions for customers to display loyalty tendency without being exceedingly satisfied; on the other hand customers can also be extremely satisfied and yet not loyal. Against the aforementioned backdrops, a number of scholars have questioned the declaration that customer satisfaction is a driver of customer loyalty and instances have been documented where customer satisfaction and loyalty do not always relate positively (Oliver, 1997; Egan, 2004; Pritchard and Silvestro, 2005). For instance, Oliver (1999) notes that despite customer satisfaction many businesses still experience a high rate of customer turnover. Hence, satisfaction alone does not produce customer loyalty, because it may not sufficiently expose how vulnerable company’s customers are to switching behaviour (Coyles and Gokey, 2002).
On this note, Reichheld (2006) appeals that until all available options are considered; it can be rightly argued that existing customers can only express their disposition towards an organization’s product/service, but not their loyalty status in totality. Consequently, the notion that customer satisfaction leads to loyalty hold in some situation, but the affirmation seems less reassuring in some context and is therefore, far from being considered a worldwide conception (Egan, 2004).