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The Concept of Loyalty Research Paper


Introduction

Customer satisfaction, though an important quotient for service or hospitality industry, does not ensure that the customers will return for repurchase . Therefore, the important question that businesses face is what would ensure the customers to return to them. This brings the marketers to the concept of loyalty. One must note that both the concepts are attitudinal and therefore, largely theoretical.

However, such attitudinal commitment on part of the customers ensures that the profits of the organization would return. For the success of a company in the service sector, organizations must ensure customer satisfaction and nurture brand loyalty among its consumers. Brand loyalty will ensure repeat purchase, which in turn establishes the profit of the company.

In case of a company like Starbuck, operating in the service hospitality retail business, this is of great importance, since it faces high competition as well as has to satisfy customers in order to ensure repeat purchase. Further, as this sector does not have a switchover cost therefore, developing brand loyalty is the only way to ensure sustainability of profit.

Starbuck

Starbuck is a coffee company established in 1971. The main products that the Starbuck stores offer are various types of hot and cold beverages such as coffee and tea and food. The company operates globally, though it originated in the United States. The products are competitively priced and Starbuck maintains a standardized store ambience for all its chains. This paper tries to understand the link between satisfaction and loyalty of Starbuck’s customers.

Significance of the Study

A well-established axiom in marketing literature is, satisfied customers lead to brand loyalty. In other words, customer satisfaction has a direct influence on brand loyalty. This prevalent axiom makes creation of customer satisfaction a very important aspect for producers of every product (goods or services).

The probability of a customer buying a product more if he/she is satisfied with the product is higher. In this connection, one can intuitively deduce that higher the degree of customer satisfaction, higher is the degree of loyalty towards the product, as higher satisfaction would prompt higher repeat purchase. Therefore, greater is the amount of customer satisfaction, greater is loyalty.

Consequently, this conjecture makes brand loyalty one of the most important aspects of a firm’s continuity and/or future profit. From a different angle, it can be observed that customer satisfaction is not only beneficial to the firm but also to the customer.

Satisfaction to the customer actually indicates that he or she has found the product that he/she requires and that through consumption of the acquired product the need is satisfied without any negative outcome that would have precipitated harsher step like complaining. Therefore, customer satisfaction actually indicates to the customers that their need for the product is satisfied on consuming the specific brand.

Though many researchers have tried to establish a relationship between consumer satisfaction and loyalty, the relationship is not always perfect and not always positive . However, a strong relationship between the two is yet to be established. This paper undertakes a case study of Starbucks. The aim of the paper is to understand the effect of customer satisfaction and brand loyalty specifically in case of Starbucks.

In order to do this, this paper will study the two different kinds of brand loyalty – spurious and true brand loyalty, find a relationship between the two different kinds of customer satisfaction – latent, and manifest customer satisfaction.

Further, the paper will also establish a hypothesis to establish a relationship between the two different kinds of customer satisfaction and brand loyalty. Finally, the paper will make recommendations to the marketers regarding the suitable marketing practices for Starbuck and areas for future study.

Hypotheses

From the above literature review, we come across two hypotheses:

H1: A higher degree of customer satisfaction will lead to a higher degree of brand loyalty.

H2: The relation between customer satisfaction and brand loyalty is moderated by personal character of the customer.

Purpose of the Study

The purpose of the paper is to understand the relationship between customer satisfaction and brand loyalty. The paper will gauge the influence of customer satisfaction or dissatisfaction on repeat purchase and loyalty. The study will be directed towards Starbucks and the satisfaction that consumers of Starbucks products and services feel and how that influences their brand loyalty.

Literature Review

Customer satisfaction

Customer satisfaction is defined as a comparative evaluation of a consumer’s post-purchase appraisal of the product purchased to her pre-purchase expectations . Engel, Blackwell, and Miniard defined customer satisfaction as “the outcome of the subjective evaluation that the chosen alternative (brand) meets or exceeds the expectation.”

Literature on customer satisfaction provides various definitions of customer satisfaction. However, what is more important is that there must be a perfect understanding of why satisfaction is important. Hill and Alexander point out that 10 to 30 percent of the loss in customer is due to dissatisfaction which is a high cost for service business, as this not only includes the cost of lost customers but also the cost of attracting new customers.

Literature has shown two different measures of customer satisfaction – first, is the difference between product expectation and performance and second is based only on performance. However, one must keep in mind that satisfaction is relative in nature and varies with the situation and circumstances.

Therefore, satisfaction research must be aimed at understanding the variations in perception of satisfaction with the changes in situations . It is also believed that the customers must cross the “psychological barriers” in order to undertake an explicit understanding of the brand . The different types of satisfaction that literature has delineated are manifest and latent satisfaction.

Manifest satisfaction is the “outcome of the explicit subjective evaluation that the chosen alternative (brand) meets or exceeds the expectations.” In other words, when a consumer explicitly evaluates a product based on which she chooses the brand with full understanding and awareness is referred to as manifest satisfaction. When the consumer undertakes an implicit evaluation of the alternatives available to him, and it exceeds to meets his expectations out of the product, it is called latent satisfaction.

Latent satisfaction is the outcome of implicit evaluation while manifest satisfaction is that of explicit evaluation of the brand. In case of latent satisfaction, the consumer is not completely aware of his expectations and merely accepts the brand. The study of satisfaction is based on four criteria as has been observed through previous literature are expectation, performance, satisfaction and disconfirmation.

Expectation related to customer satisfaction relates to the estimated performance of the product. According to Miller , expectation is of four types namely desirable, minimum, expected, and ideal. Day distinguished expectation based on product or service, the cost of the product, and the benefits obtained after using it.

Performance has been used as a standard for evaluation of satisfaction by many researchers. Olshavsky and Miller and Olson and Dover manipulated the actual performance of a product to gauge performance, however, their study concentrated more on the change in expectation due to change in performance rather than estimating the change in satisfaction due to change in performance.

Churchill and Surprenant that though, one may argue that an increase in performance would only lead to an increased satisfaction, but the argument is plausible only when one considers expectations and disconfirmation effects on satisfaction. According to them, if performance of a product is constrained by expectation, then one would expect little increase in satisfaction even though performance increases considerably, if the expectation of the consumer remains constant.

Disconfirmation, meaning discrepancies, arises from the difference between earlier expectation and actual performance of the product or service . The magnitude of the disconfirmation that is derived determines the satisfaction or dissatisfaction of a consumer on consumption of a particular product or service.

Measuring disconfirmation has been stresses by many scholars like Oliver and Churchill and Surprenant who believe that it is important to measure disconfirmation as the measure has a specific additive effect on satisfaction. If one followed traditional literature it would be difficult to distinguish between expectation, performance, and disconfirmation as the third is the difference between the first two .

Satisfaction is the outcome that a consumer faces once he/she consumes the product/service. Satisfaction is the difference between the rewards he/she receives with the price paid. Pfaff believes that both cognitive and affective models may be used in describing satisfaction while LaTour and Peat posits that the attitude one has towards a product is a pre-consumption state of the consumer while satisfaction is the post-consumption state.

Recent research on customer satisfaction has determined customer satisfaction using the performance model and has shown that satisfaction of the customer is the end-state of consumer and an antecedent of the consumption process . These new studies also consider the four parameters discussed earlier such as expectation, performance, disconfirmation, and satisfaction.

Brand Loyalty

Brand loyalty is defined as the “positively biased emotive, evaluative, and/ or behavioral response tendency toward a branded, labeled, or graded alternative or choice by an individual in his capacity as the user, the choice maker, and/or the Purchasing agent.” Aaker presents another, more recent definition of brand loyalty, which states that, the possibility of a customer’s intentions to switch a brand when certain changes are incorporated to the product/services provided by it.

Brand loyalty is important for firms as it brings forth new customers, repeat purchase, and good publicity to the brand . Aaker (2009) distinguishes brand loyalty into three levels –

  1. Non-loyal buyers who are indifferent to the brand,
  2. Customers who are satisfied or rather are not dissatisfied with the product/service, and
  3. Are completely satisfied with the product and face a switching cost to change over to some other product.

Aaker points out that for brand loyalty to exist it must have “prior purchase and use experience” of the customer. Some other characters of brand loyalty as has been delineated by Sheth & Park are:

  1. Brand loyalty is not constrained to the point where a purchase is made.
  2. Brand loyalty may not be asserted by repetitive buying behavior, as this is believed to be a purely emotive quality.
  3. Brand loyalty is present at nonverbal level.
  4. Further, the role of the consumer as brand loyal as a buyer, decision-maker, or consumer has to be determined in order to understand brand loyalty more specifically.
  5. Brand loyalty differs between products/services and classes of products.

Bloemer & Kasper points out that there are two different types of brand loyalty is based on commitment to the brand and “spurious brand loyalty”. Many other studies on brand loyalty has been seen that show that when consumers show their satisfaction with the performance of the product/service provided by the brand, it enhances the loyalty he/she feels . This actually shows an emotional bond that a consumer feels towards the brand and positively affects the repurchase intention of the consumer .

Relation between Customer Satisfaction and Brand loyalty

The relationship between brand loyalty and customer satisfaction of product and services has been conducted by many researchers . Of these Bloemer and Kasper (1994) presented a complete and detailed study the relationship between the manifest and implicit satisfaction of the customer with that of brand loyalty.

They tried to establish a relationship between the two types of satisfaction (manifest and implicit) with the two types of loyalty (spurious and true). The research found support for two of its hypothesis, which showed that manifest satisfaction had a positive relationship with brand loyalty. The second finding of the research was that manifest satisfaction had a stronger influence on gaining true brand loyalty than latent satisfaction. Their research therefore concluded:

Consumer satisfaction positively affected brand loyalty. However, it appeared that it is important to differentiate between the impact of the manifestation on true brand loyalty and the impact of latent satisfaction on true brand loyalty. The impact of manifest satisfaction on true brand loyalty was larger than the impact of latent satisfaction.

Homburg and Giering studied the relationship between customer satisfaction and loyalty of brands. They found a gap in the satisfaction and loyalty research and believed that the research has been neglected the inclusion of a moderator variable in the research.

They conducted a multi-group causal analysis to see the effect of personal moderators on satisfaction-loyalty relation and found that the relation is strongly affected by the personal characters of the customer such as age and income. In other words, this relation varied from person to person.

Bloemer and Ruyter studied the relationship between store image and the customer satisfaction and loyalty. This study was done in a retail setting. Again, a distinction was made between the true and spurious loyalty of the customer and a relation was found between the manifest and latent satisfaction of customers. Their study showed no effect of store image on store loyalty, but a strong relation between satisfaction and store loyalty.

Sivadas and Baker-Prewitt studied a random sample survey over the telephone of 542 shoppers. The aim of the research was to examine the relationship between quality of “service, satisfaction, and store (brand) loyalty” . The research findings show that service quality and customer satisfaction had a positive relationship.

Further, satisfaction led to repurchase decision, and recommendation to other probable customers. Therefore, satisfaction fostered loyalty towards the store or brand. This research also showed satisfaction and loyalty as attitudinal factors. Bowen and Chen developed a model for hospitality industry to identify the attributes that increase loyalty.

Their research used the “database of a hotel to draw the samples and uses group as well as mail survey” . They received 564 completed surveys and an analysis of these showed that customer satisfaction and brand loyalty had a non-linear relation.

Theory for establishing Link between Satisfaction and Loyalty

Theory of Satisfaction

From the above literature review, it is clear that customer satisfaction is defined as a post-purchase attitude/emotional state based on an evaluation of pre-purchase expectations and post-purchase performance. The theory that is used for analyzing the satisfaction in this paper is based on Disconfirmation theory, which is the satisfaction derived by a comparison of the expectations, perceptions and performance of the product .

The three satisfactions that is derived following this theory are – 1) neutral satisfaction when the expectation and performance tally, 2) disconfirmation when performance betters expectations, and 3) negative disconfirmation when performance is lower than expectations leading to dissatisfaction.

The dimensions used for customer satisfaction in this research are price, quality of the product, quality of service, and location. Literature on satisfaction suggests that the most important factor determining satisfaction is the tangible factors such as quality of service. These help in measuring responsiveness of the employees in the store, assurance, and empathy .

Repeat purchase is one of the most salient indicators of overall satisfaction . Therefore, the effect of satisfaction is also an indicator of the involvement of the customer with the brand as well as the loyalty the he or she has towards the brand. In this paper, we further study satisfaction and its effect on involvement and loyalty.

Theory of Involvement

Involvement is demonstrated as purchase involvement, which shows the reasons that triggers purchase intentions, and comprises of “time, effort, and cost” . In this study, we will consider primarily purchase intentions, which are based on factors such as service failure and ego involvement .

Theory of Loyalty

Loyalty is the deep commitment that the consumer experiences to repurchase the services/product of the brand. It is a “deeply held commitment to re-buy or re-patronize a proffered product or service consistently in the future, thereby causing repetitive same-brand-set purchasing, despite situational influences’ and marketing efforts’ having the potential to cause switching behavior.” .

Loyalty towards a brand may be both attitudinal commitment such as insensitivity to the price of the product as well as a implicit loyalty behavior as had been observed in previous researches by Bloemer and Kasper (1994). Further, loyalty also reflects through positive word of mouth promotion of the brand and a positive comparison of the brand with that of the other brands is also available in loyalty literature .

As the literature review has shown, satisfaction helps a consumer decide the standard on which one may determine whether a product/service is satisfactory and if one should or should not switch from the product. Hence, whether the consumer should switch or remain with the brand is explained in the satisfaction-loyalty link literature. One must understand, the consumers look at the next best alternative in appraising a service experience.

The experience of purchasing and having coffee at a Starbuck store is largely dependent on the store experience that the consumer may have. When the current level of expectation from the consumed service drops from the comparison with the next-best alternative, the customer decides to switch over to another brand.

Therefore, customers who are satisfied with the product (i.e. coffee or other eatables) and the service (store ambience and purchase experience) at a Starbuck store are more likely to continue their purchase at the store vis-à-vis dissatisfied customers. Therefore, when guests are dissatisfied they are more likely to be motivated to discontinue the relationship with the brand.

Methodology

Research Design

For this research, I propose to contact 2 to 3 Starbuck stores in my locality and examine the relation between customer satisfaction and loyalty in these stores. These stores will be located in the heart of the city’s main business areas and would have a large customer group. The data would be collected from the customers who make a purchase at these Starbuck stores.

A survey questionnaire will be developed to collect data from the customers of Starbucks asking questions related to:

  1. The use of Starbucks’s services (such as frequency of visit to Starbuck, the length of their use of Starbuck’s services, factors that they considered important for choosing Starbuck as their brand, type of service taken from Starbuck (i.e. coffee or food), and if they opt for any other café and why).
  2. Overall satisfaction of the customer from the service experience at Starbucks
  3. Satisfaction that the customer derived from his/her interaction with the sales people at the store and with the tangible ambience of the store
  4. The reasons that were responsible for his/her decision making in choosing Starbucks
  5. The degree of loyalty that the customer feels towards Starbucks, and
  6. Moderating factors which are the demographic factors like age, gender, income, etc.

The research design that is opted for the research is presented below in figure 1.

Figure 1: Customer satisfaction and loyalty among Starbuck’s customers – research design

Customer satisfaction and loyalty among Starbuck’s customers

 

Construct for the Research

Satisfaction of the customer in using Starbucks products and services were measured using thirteen items. These evolved around various products and services that Starbuck provided. Responses were measured in five-point Likert scale ranging from very satisfied to very dissatisfied.

In order to measure involvement, a few questions related to ambience of the Starbuck store, convenience, timelines, and other measures as adopted by Ganesh et al. The measures as demonstrated in the literature are self-image, intention of familiarity, and effort of the store salespersons.

Brand loyalty was judged using various parameters such as price insensitivity, which indicated attitudinal loyalty, intention of repeat purchase, and the inclination to spread positive word of mouth promotion of the company. These items were adapted in the questionnaire for Starbuck and seven items were included to understand brand loyalty adapted from Ganesh et al. (2000). Both involvement and loyalty were measures in five-point Liker scale.

Sampling

Random sampling of the customers visiting Starbucks stores will be used for data collection. The customers making purchase at the Starbuck stores will be asked questions.

Data Collection

Data will be collected through survey questionnaire from customers of Starbuck stores.

Statistical Analysis

Regression modeling will be done to understand the relationship between satisfaction, involvement, and loyalty. Further, the effect of the moderating factors will also be considered on this relation.

Questionnaire Development

The questionnaire will be divided into four sections. The first would capture the demographic information; the second would have questions related to customer satisfaction, then involvement, and in the end, customer loyalty. The questionnaire pattern for the different sections is presented below.

Starbuck Survey Questionnaire
Gender Male Female
Age 18-30 31-50 51-70 >70
Income (Annual) Low Middle High
How often do you visit Starbuck? Once Daily More than Once Daily Weekly Monthly Never
What products do I purchase most? Drink Food Other
Strongly Disagree Disagree Neutral Agree Strongly Agree
Customer Satisfaction
Overall, I am highly satisfied with Starbuck’s services and product
The employees at Starbuck are friendly
The staff/manager at the store know me well
My needs are properly heard
The convenience of the store and the ordering system is high
During busy times the ordering time is still not very high
The prices of the products is not high
The location of the store is convenient for me
The ambience of the Starbuck stores are pleasing
The quality of service is very good at Starbuck
Involvement
The relationship I share with Starbuck is important to me
The relationship I maintain with Starbuck requires a lot of effort to maintain from my part
I seldom try new/different things
I would remain steady with a brand than try to try something novel
I like to try new things and in purchasing new brands
I constantly compare the prices and rates of Starbucks and other cafes
I love the taste of the coffee at Starbucks
I love the ambience of the store
My association with Starbuck shows a lot about who I am
A bad coffee may bring grief to me
Loyalty
I consider myself to be a loyal customer of Starbuck
If the price of the products/service of Starbuck increases even then I will continue purchasing from it
If a competing café provides discounts or lower prices than Starbuck I would switch
In future I intend to use Starbuck often
AS long I travel/reside to this locality I do not see any reason to switch to a different café
I would highly recommend Starbucks to my friends and family
I may comment negatively about Starbuck to my friends and family

Limitation of the Research

The study is limited to the case study of Starbuck and analysis of the satisfaction and loyalty of its customers, and generalization of the results to others establishments may not be possible. However, the methodology may be replicated to suit the purpose of the researchers.

The study lacks scope, as it does not make any difference between the two types of satisfaction and the two types of loyalty. No relation is derived between the types of satisfaction and loyalty. The research would gain greater depth had this been done. Another limitation of the research is that it makes no comparison of the customer’s satisfaction and their intention to defect to the closest competitors of Starbuck.

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