Loyalty: A customer s perspective

Loyalty: A customer’s perspective ABSTRACT While loyalty has been researched for nearly a century marketers are still faced with the challenge of winn...
Author: Madlyn McKinney
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Loyalty: A customer’s perspective ABSTRACT While loyalty has been researched for nearly a century marketers are still faced with the challenge of winning loyal customers. Understanding loyalty from a customer viewpoint may offer additional insights for marketers seeking to maintain and/or build customer loyalty. This paper commences by seeking to understand what contemporary customers think loyalty is. A qualitative approach was employed in this research and respondents were asked to write down everything that came to mind for the word loyalty. A total of 282 respondents were surveyed. Data was analysed using Leximancer software. Our research identified the objects that people can be loyal to including family, friends, employees, companies, brands and products. A customer viewpoint also enabled us to identify factors such as trust that are required for loyalty formation. This research proposes that the theoretical bases underpinning loyalty research require further development by academics. According to the results of this research our theories must clearly emphasize the multiple foci that can exist, the requisite condition of trust and the relational aspect of loyalty. KEYWORDS Loyalty, trust, critical incident technique, Leximancer

TRACK Marketing psychology

Submitted to the Academy of Marketing Annual Conference at the Coventry University Business School, Coventry, 6th-8th July 2010 0

Loyalty: A customer’s perspective Introduction Loyalty has long been researched in the marketing literature (e.g. Hotchkiss & Franken 1923; Cunningham 1961; Massey & Frank 1965) and its popularity has yet to wane (Davis-Sramek et al, 2009). The popularity of researching customer loyalty arises from its proven positive effects on company‟s success (Dowling & Uncles 1997; Reichheld & Sasser 1990; Bennett & Rundle-Thiele 2005). Loyal customers are considered as a company asset (Shugan 2005). Our understanding of customer loyalty is not straightforward and many different aspects are emphasized in loyalty definitions suggesting that loyalty may be a complex phenomenon (Jacoby & Chestnut 1978; Oliver 1999; Rundle-Thiele 2006). Myriad studies aim to define loyalty and loyalty antecedents using different perspectives, such as: behavioural (e.g. Hoyer 1984) and attitudinal (Gwinner et al., 1998), and also a static (Jacoby & Chestnut 1978), process (Dick & Basu 1994) or relational (Fournier & Yao 1997) approach. To date loyalty has largely been approached from a company rather than customer viewpoint (e.g. Hoyer 1984, Merisavo & Raulas 2004). Few studies aim to understand loyalty from customer‟s perspective (e.g. Rundle-Thiele 2006; Rosenbaum 2005). Understanding loyalty from a customer viewpoint may offer additional insights for marketers seeking to maintain and/or build customer loyalty. This paper commences by seeking to better understand what contemporary customers think loyalty is. Literature review Myriad studies have sought to define and distinguish different dimensions of loyalty and loyalty antecedents (Dick & Basu 1994; Zeithmal et al., 1996; Oliver 1999; Bennett & Rundle Thiele, 2002). Many researchers approach loyalty using a behavioural perspective (e.g. Bass 1974; Hoyer 1984; Ehrenberg & Uncles 2000) while others approach loyalty using an attitudinal perspective (e.g. Jacoby 1971; Gwinner et al., 1998; Bowen & Chen 2001) or both (Day 1969; Rundle-Thiele et al., 1998; Jacoby & Kyner 1973). Loyalty has been researched in a wide array of contexts, including different market types B2B (e.g. Davis-Sramek et al., 2009; Naumann et al., 2009) or B2C (e.g. Patterson 2007; Fournier & Yao 1997); different markets, such as: professional services (e.g. Martenson 2008), personal services (e.g. Rundle-Thiele 1998; Patterson 2007), fast moving consumer goods (e.g. Day 1969; Jacoby & Kyner 1973; Merisavo & Raulas 2004), consumer durables (e.g. Peter & Ryan 1976), involving (e.g., Patterson 2007) and non-involving (e.g. Hoyer 1984) product and services; and different objects such as: brand (e.g. Merisavo & Raulas 2004), company‟s personnel (e.g. Martenson 2008), product category (e.g. Johnson 1984); and intensiveness of loyalty, which means partial or total loyalty (Ehrenberg 1988; Oliver 1999). Finally loyalty has been considered using both a static (e.g. Dick & Basu 1994; Jacoby and Chestnut 1978) or relational approach (Fournier & Yao 1997; Rundle-Thiele 2006; Rosenbaum et al., 2005). A static approach is dominant in loyalty publications. The notion that loyalty is a relational concept was presented by Fournier and Yao (1997). The relational approach recommends that researchers must understand interactions between consumer and marketer as these interactions influence loyalty (in terms of attitude and behaviours). Several authors defining loyalty have acknowledged that loyalty develops over time, identifying loyalty stages (Dick & Basu 1994; Oliver 1999). This „loyalty ladder thinking„ provides a practical means to segment customers, but it might be far from reflecting customers loyalty.

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There are few studies that seek to understand loyalty from customers‟ perspective. Rundle Thiele (2006) interviewed marketers and consumers to consider loyalty in the beer product category. Her study found that many marketing initiatives were eroding rather than contributing towards consumer loyalty and that consumers felt their loyalty could not be bought, rather it had to be earned. Consumer views of loyalty are consistent with the views expressed by East et al. (2006, p.11) who state that loyalty “… is shown when persons do not undermine others by what they say or do. A person who has undisclosed misgivings, yet still behaves supportively, is seen as loyal.” RESEARCH METHODOLOGY Data was collected in four countries, including three European countries, namely Poland, Byelorus, Portugal and in Australia at the end of 2008 and the beginning of 2009. Respondents were asked to write down everything that came to mind for the word loyalty. Demographic data was also collected. Questions were translated by an experienced translator from English into the required language and back again to ensure that meaning was correct. A convenience sampling method was used to collect data for this study. Respondents were recruited from different professional fields, in equal proportions of age cohorts and gender within each age cohort to gain maximum diversity. A total of 282 respondents participated in this research. Data from Australia and Portugal was originally in English and data from Poland and Byelorus was transcribed into English and all of the data was written as plain text in a Microsoft Excel document and then entered and analysed using Leximancer Version 3.0 for analysis. Leximancer (Smith, 2003) is a text analytic tool that analyses the content of collections of textual documents visually. Concepts are the emphasis of the analysis and are defined as the collections of words that co-occur frequently are weighted together and stored in a thesaurus in Leximancer (Smith & Humpreys, 2006). These maps demonstrate the interconnectedness of the concepts within the data set where overlaps in themes are indicative of a close association between the concept groups (Hepworth & Paxton, 2007; Huber, Michael & McCathie, 2007). The strength of the relationship depends on the number of times concepts co-occur directly with each other (Stockwell, Colomb, Smith & Wiles, 2009). Larger concepts on the map indicate greater interconnectivity between these ideas and other concepts (Hepworth & Paxton, 2007; Leximancer Manual, 2009; Smith & Humpreys, 2006) 1. Smith and Humphreys (2006) provided a detailed overview of Leximancer, discussing validity and reliability testing. Importantly, Leximancer is not influenced by human biases in the coding process or by the expectation bias from the coder‟s personal knowledge (Dann, in press; Smith & Humpreys, 2006). Following the recommendation of Smith (2003), the number of concepts Leximancer was asked to find was set automatically at less that 100 concepts and stop words were removed automatically. Rational content analysis (Weber, 1990) was applied for data consisting of episodic co-occurrence of records. No concepts were remodeled or removed to ensure researcher bias was not present (Dann, in press; Leximancer Manual, 2009). In the concept mapping phase, the visual output was set at 50% based on the researchers‟ previous experience with the program. The stability of the map was checked up to 3000 iterations and it proved to be stable.

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For a further review of Leximancer, please refer to Smith and Humpreys (2006).

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RESULTS Figure 1 represents the themes identified by the analysis of the transcripts of the respondent‟s perception on loyalty concept. Eight themes were identified for respondents associations with loyalty phenomenon when answered the question “Please write down everything that comes to mind for the word loyalty.” Figure 1: A customer’s view of loyalty

The most salient and dominant theme was trust, which is representing in the Leximancer map with the largest circle and interconnections with other themes. For many respondents trust is requisite for loyalty: “loyalty is a word that means trust and not to betray” and “to be loyal is to always be trustworthy”. Leximancer referred to trust using several relational connotations, including: faithfulness, honesty, respect, word, sincerity, and conduct. Other respondents clearly revealed that loyalty is relational with trust dominating as the most important condition to gain and maintain loyalty. One respondent stated that “Loyalty relates to a form of trust experienced between two or more people. This trust is so extreme that it would be inconceivable to betray it. Concepts like honor and sacrifice can also be linked to loyalty as it is sometimes necessary to make personal sacrifices in order to remain loyal.” Themes important and use overlapped the themes trust and person. The interconnectedness of these themes is clearly evident (see grey dots on map in Figure 1). One respondent described loyalty associations as follows: “Faithfulness, keeping one's word, co-operation with a person we put our trust in who is important to us and for some reasons trustworthy”. The importance of loyalty to customers was clearly evident. Consider one respondent who stated: “Loyalty is an attitude of being obliged to a person or institution for the trust they put in us. It obligates two sides, people or institutions to fulfill an agreement, keep a promise or a word given”. The sub-theme of respect was present in both the trust and important concepts showcasing their interconnectivity. Respondents statements reflecting respect are: “Stay true to oneself and to other people. Have responsibility and respect for product/people”, and “Respect for shared values (…)”. Another trust concept sub-theme honesty was also identified in the person theme, showing the importance of honesty in the loyalty concept, with one respondent stating: “In my opinion loyalty is faithfulness, honesty towards something or somebody (…).

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The person theme emphasized friends, brands and company suggesting that loyalty can be directed towards these objects. Sub-themes incorporated in this theme were trust, important, use and (indicated by gray dots on map in Figure 1): “When I think of the word loyalty, I think of trust, family, friendship, genuinely caring for someone and their feelings”. One respondent highlights the importance of both environments commenting “Always trusting what you are loyal to no matter what it is e.g. friends, family, shops, etc. Even if something goes bad you should give them another chance (always staying by their side)”. Further loyalty objects were identified by Leximancer, namely: product, service, brand and person. Each of these themes had two or three sub-themes, and with the exception of person there was no overlap (see map on Figure 1). Respondents referred to loyal behaviors, such as: “loyal to the one brand/object; won't use another brand/shop somewhere else”. It is clear that respondents viewed loyalty as more than behaviour with references made to factors that promoted loyalty including: price promotions, convenience of location, monopoly, etc. One of the respondents commenting: “Loyalty in my opinion is more than the brand of clothes you buy or can of drink you purchase (as preferences can easily change depending on your mood). Loyalty is about staying true and sharing a bond with someone like a father to his son or a best friend to a best friend. Loyalty is more than materialistically [.It is something] deep.” Respondents emphasized the relational character of loyalty indicating that for every company action there is a subsequent customer reaction. This method highlighted factors that contribute towards loyalty, including “Customer service, return purchased/visits, attention given to customers, attentiveness, peace of mind, clear well-informed information given, honesty”. The last theme identified was positive, which was understood as a positive attitude based on respondent comments “Loyalty is a personal positive attitude towards a product or service”. The theme positive was not overlapping and it had a peripheral position on the map (see Figure 1). In relation to positive respondents noted the necessity of being stable, keeping a word, being patient and accepting mistakes. This is exemplified with the following respondent comments: “(…) Loyalty is when you accept the product in spite of all its defects”, and “(…) To stick with something in good times and bad”. The conclusion is that a broad positive attitude or satisfaction may not be sufficient for loyalty, rather loyalty is a bond between a customer and an object: “(…) A trustworthy customer does not stop buying a specific brand even if the product has been faulty on occasion, due to means of production. Being able to sacrifice in order to show devotion is loyal.” Being loyal from a respondent‟s perspective involved free choice. This suggests that marketing attempts to induce loyalty using incentives may be misguided if loyalty is the aim. One of the respondents highlighted this problem: “Being loyal is not blind obedience but conversation and making democratic decisions which are sometimes not quite in accordance with our own opinions but certainly in accordance with a certain followed policy.” Pathways were analysed in Leximancer to understand the interrelationships between themes. This analysis suggests that from a customer viewpoint loyalty represents long term faithfulness toward an object be it family, friends, product, service, brand, and/or company. One respondent described loyalty associations in following way: “It's being faithful. If something is good for us, performs well does not change dramatically, we remain loyal to a particular thing, person or service. The word loyalty is for me inseparably associated with faithfulness and constancy. To be with something, good or bad. To be with something in the long-run not the short-run. To never go behind someone’s back. To be honest, fair and true to something you consider special”.

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Discussion Brand relationship and brand community literatures recognize the importance of the consumer. However, commonly accepted definitions such as those put forward by Jacoby (1978) tend to overlook the relational concerns. Rather, the loyalty literature has suggested a series of conditions for loyalty, namely that loyalty involves purchasing over time that is a function of psychological processes. Consistent with prior research our research identified the objects that people can be loyal to including family, friends, employees, companies, brands and products. Whilst the factors identified here are largely consistent with prior research efforts a customer view of loyalty has assisted us to better understand that loyalty can have multiple foci; is relational, suggesting that for every company action there is a potential customer reaction. The principles that govern loyalty in a personal setting can provide insights to assist marketers to build loyalty. The most important factor noted in this research was trust suggesting that trust is a condition for loyalty formation. This is consistent with prior research (e.g. Chaudhuri & Holbrook 2001; Sirdeshmukh et al. 2002). This research suggests that the theoretical bases underpinning loyalty research require further consideration and development by academics. Whilst the factors identified here are largely consistent with prior research efforts, a focus on customers‟ perceptions of loyalty has extended our understanding of the concept of loyalty in terms of its multiple foci (i.e. it is relational, suggesting that for every company action there is a potential customer reaction). Limitations, future research directions and managerial implications This study employed Leximancer. We briefly consider the limitations associated with Leximancer that impact our research. Usually, Leximancer includes many unnecessary terms in the analytical rounds (Cummings & Daellenbach, 2009; Royer, et al., 2007). Unless these are eliminated by the researcher, the clarity of the concepts which emerge are diminished, while some crucial concepts may be ignored or overlooked (Cummings & Daellenbach, 2009; Royer, et al., 2007). Interpretation of the Leximancer maps may be biased by the researcher (Royer, et al., 2007). However, in considering these limitations, Leximancer has produced some useful insights into loyalty that can now be confirmed using other research methods in future research. Data extracted from the Leximancer analysis was particularly informative in respect of understanding customers‟ views of loyalty, which proved to be multifaceted and relational. The concept of trust appears to be a necessary and sufficient condition for loyalty formation and continuance: “Loyalty is a bond that has been built on the experience of mutual trust.” To maintain loyalty, products and services need to be reliable (delivering as promised) and of a sufficient quality. The companies‟ shouldn‟t ignore customers‟ perspective of what loyalty is, because their marketing actions directed into building customer loyalty will be irrelevant. Loyalty literature remains marketer focused. The brand relationship and brand community literatures offer considerable potential to extend our understanding of loyalty.

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