Understanding consumer behaviour has taken the attention of researchers and companies due to their relevance for business success (Jones et al 2000). How is consumer satisfaction related with their loyalty has been likely the most important issue in consumer behaviour for ensure a long-term success in a marketing strategy (Pappu et al 2006). The literature and researchers suggest that there is a strong relation between product satisfaction and brand loyalty, but always highlighting their relation as a unidirectional relationship.
In other words, product or service satisfaction has a direct relationship with loyalty, but loyalty has not a significant dependency with satisfaction (Oslen 2005). In other words, brands can have satisfied customers; nevertheless, that does not mean loyal customers in the future (Oslen 2005). In addition, the literatures also suggest that there is a link between loyalty and profitability thanks to repurchase behaviour (Dick & Basu 1994; Anderson et al 1994; Rust et al 1995).
All these positive consequences are possible if managers consider in their strategies concepts such as consumer satisfaction and customer loyalty to build strong relationships based on trust and commitment (Dick & Basu 1994). All these concepts are totally useful to take a lot of opportunities in the wine business. Its features as a business mix between products and services, its challenging competitive environment and its complexity for products evaluation, make the wine business completely dependent of these concepts.
Hence, this essay will discuss what is customer satisfaction and why is relevant for a business success in a long-term. Then, it will do the same with customer loyalty concept making a special attention in the differences between customer satisfaction and customer loyalty concepts. Furthermore, to have different viewpoints about loyalty, also it will be discussed an important argument against loyalty known as “double jeopardy effect”. After that, this essay will offer two approaches of how is calculated customer profitability due to their significance in managerial marketing decisions.
Finally, it will be explained how are linked satisfaction- loyalty-profitability and its consequences to the wine business. Customer satisfaction is very important to a business success in a long-term (Jones et al 2000; Pappu et al 2006). There is a wide range of arguments to support why customer satisfaction is so relevant for future performance of many companies. For example, satisfied customers are stronger against competition marketing campaigns, also they are less sensitive to the price and might be more loyal to the brand than unsatisfied customers (Dimitriades 2010).
However, satisfaction is not the only step that wineries have to give to archive their goals with their clients. There is a big differentiation between satisfaction and loyalty, and a deep understanding of each concept might be essential for businesses with a strong association between products and services like the wine business. Nowadays, the wine business has been recognized as one of the most competitive business due to its small margins and large supply. In addition, the changing wine business environment has forced wine producer to use strategies focused on consumer preferences (Kimpakorn & Tocquer 2011).
All these factors have become critical for wineries that want to have a differentiation against their competitors and satisfy their customers. According to aforementioned, several authors are defined and studied customer satisfaction and their loyalty due to their relevance in a long-term, but their definitions vary according to the purpose of the study (Oslen 2005). Nevertheless, The American Marketing Association (AMA), is the most respectful professional association for individuals and organizations who are leading the practice, teaching, and development of marketing worldwide, and they defined customer satisfaction as follow: 1.
The degree to which a consumer’s expectations are fulfilled or surpassed by a product. 2. The post-purchase evaluation of a consumer action by the ultimate consumer or the decision maker. The beliefs, attitudes, and future purchase patterns; word-of-mouth communication; and legal and informal complaints have been related to the post-purchase satisfaction/dissatisfaction process. (American Marketing Association 2012) Therefore, for those wineries that are looking for a differentiation, satisfied customers might be a good alternative.
As it is possible to see, according to the definition of AMA, everything is related with consumer’s expectations and how companies exceed it or not. In addition, the post-purchase process will determinate their attitudes and beliefs to the brand. In this line, a satisfied customer is a potential ‘promoter’ of the brand through word-of-mouth and could be a very profitable if companies understand their needs and wants. Moreover, Anderson and Sullivan (1993) explain that are two factors as antecedents of satisfaction, expectations and perceived quality (Anderson et al 1993).
This means, the evaluating process will depend on how were built these expectations and the quality perceived. Furthermore, the authors sustain that these antecedents will have a different weight in the process depending on how complex is evaluate the product. Consequently, it might be more relevant manage customer satisfaction when clients are familiarized with the product. On the contrary, when the product is complex or difficult for evaluating, expectations are more relevant (Anderson et al 1993). So, these findings challenge the wine industry due to wine is not an easy product to evaluate.
In other words, it is not enough produce just a good quality wine, but also it is manage customer’s expectation as a part of their job to obtain their satisfaction. Wineries that already exceed customer’ expectations, now are looking for keeping their attention and future preferences. Is here when loyalty becomes an important and relevant goal for those wineries that passed the first step, create a long-term relationship with their customers. Many conceptualizations of customer loyalty can be found in the literature (Donio et al 2006).
The importance of create profitable relationship with customers is so relevant that many authors have dedicated their studies to understand it. What is customer loyalty and why it is so significant to the future success of a business are the key questions. The main recurrent argument in the literature is capturing a new customer is much more expensive than delighting existing one (Dick & Basu 1994). As we discuss before, satisfaction in the wine business is more related with customer expectation, but once exceeded these expectations, is essential start to thinking in how to build a sustainable relationship with customers in the long-term.
Dick and Basu (1994) defined loyalty as follow: “The strength of the relationship between an individual’s relative attitude towards an entity (brand, service, store, or vendor) and repeat patronage” (Dick & Basu 1994) So, Dick and Basu (1994) suggest that there is a link between the strength of the relationship and the individual’s relative attitudes toward a brand, which it determinate a possible future purchase. Now, it is not clear yet how these attitudes work and are built. To explain this, Dick and Basu (1994) explain three different approaches of customer loyalty.
First, loyalty as an attitude toward a brand, second, loyalty expressed as a pattern behaviours, and third, buying moderated by individual attitudes (Dick & Basu 1994). Understanding these three views are very useful for appreciate deeply what is customer loyalty. The first approach is viewed as positive attitudes toward a brand. This means, a good past experiences generated a commitment with the brand. This is measured asking people how much they like the brand or if they will give any recommendations.
The level of these feelings and recommendations will measure the level of commitment with the brand and future purchases (Dick & Basu 1994). In other words, any marketing campaign that reinforces positive attributes toward the brand is working on enhancing these positive attitudes. For instance, Coca-cola and its marketing campaign of happiness or Harley-Davidson and their ‘unique sound’ and ‘style’ of motorcycles, both are campaigns that enhance positive attributes toward the brand.
However, this definition is not quite verifiable for buying of ‘low-risk’ (Dick & Basu 1994). The second definition, loyalty expressed as pattern behaviour, defines different kind of customers. Those called ‘monogamous’ that means one hundred per cent loyal to a brand and the others as ‘promiscuous’ that means loyal to a category of products more than a specific brand (Dick & Basu 1994). So, under this definition loyalty is more like a propensity to buy a brand into a category of products than feelings of commitment with a particular one.
In deed, there are evidences that show people who declared them self as satisfied or very satisfied and in the next purchase they buy another brand. For example, In the UK, Oglivy Loyalty Centre found that, although 85% of automotive customers declared them self as satisfied, only 40% bought the same brand, and of packaged goods customers who identified a favourite brand, the 66% had bought another brand recently (O’Malley 1998). Finally, the third approach, buying moderate by individual attitudes, links the behaviour with customer’ attitudes.
Dick & Basu (1994) interpret behaviour as the act of buying plus the attitudes created for that act. As attitudinal dimensions Dick and Basu (1994) give three steps, ‘customer satisfaction’, ‘customer trust’ and ‘customer commitment’. These three steps would be the antecedents of customer loyalty. In simple words, people will buy something with expectations created by advertising, background, social environment, etc. Then, post-purchase, they will create several attitudes according to the process of product evaluation.
Consequently, these attitudes will generate satisfaction if these expectations were exceed it. Once satisfaction is obtained, people might develop trust in that brand and a possible desire of commitment. Hence, according to this third definition, we can see a deeper process behind customer loyalty and a better explanation of how to manage it. It may say, to build customer loyalty is not enough create a relationship through a loyalty scheme, gifts or create email lists and send emails for communicating promotions and activities.
Loyalty is much more complex than that, first, it is necessary obtain customers’ trust for building a compromise with them (Dick & Basu 1994). Then, once customers take commitment, it is possible to speak about loyalty. As an example, this is similar to marriage. First, there is a period where people know each other (trust), then, people who really want to make a compromise for building something in the future get engaged, and finally, during the marriage, the couple works everyday to remember their votes and keep their loyalty through time.
In marketing, seems to be the same pattern, companies that want to create strong relationships based on trust, first, they must gain it. Then, companies have to build a commitment with those customers that are profitable for them and, finally, find the way to develop their loyalty, remembering why they took this preference in the past. Small brands have a double goal, increase their market share and their popularity to defeat the double jeopardy effect. In the literature it is possible to find a very common, but unknowing phenomenon called, Double Jeopardy (Ehrenberng et al 1990).
This phenomenon, presented in business is cited as one of the most common arguments against loyalty explaining the repurchase behaviour as a consequence of the brand size in the market. Ehrenberg (1999) explains this phenomenon as follow: In any given time period, a small brand typically has far fewer buyers than a larger brand. In addition, its buyers tend to buy it less often. This pattern is an instance of a widespread phenomenon called “double jeopardy”