Customer Loyalty and Customer Satisfaction Essay

Custom Student Mr. Teacher ENG 1001-04 12 June 2016

Customer Loyalty and Customer Satisfaction

Customer Loyalty can be difficult to define given the different views that are presented within the literature. Zithaml, Berry and Parasuraman (1996) determine that loyalty includes a customer’s intention to stay with an organisation and that loyalty includes four elements: repurchase intentions, recommending the service provider to other customers, less complaints and tolerance of price increases. Oliver, (1999) provides a different definition and describes loyalty as a customer’s overall attachment to a product, service, brand or organisation.

A better appreciation of the factors that influence the loyalty of customers, particularly their attitudes and changing needs can help companies to develop strategies to prevent customer defection (Coyles & Gokey, 2002). Customer loyalty is important as it can have a powerful impact on a firm’s performance and it is considered to be a source of competitive advantage (Lam, et al., 2004). There is a strong level of agreement that customer loyalty and satisfaction are linked; however, there is an absence of consensus as to what constitutes customer satisfaction (Caruana, 2002); in addition, despite the fact that many loyal customers are satisfied, this does not always translate into customer loyalty (Kuo & Ye, 1999, Jones & Sasser, 1995) and studies have shown that satisfied customers may express a desire to switch to a competitor but it may prove to be difficult due to a lack of suitable alternatives (Pantouvalkis & Lymperopoulos, 2008, citing Mittal & Lassar, 1998).

In contrast however, Reicheld & Sasser, (1990), indicate that high customer satisfaction should provide increased loyalty, which makes it less likely that a customer will decide to switch to a competitor. In addition to customer satisfaction, it has been suggested by numerous Researchers that there are other key antecedents to customer loyalty including perceived value, service quality, corporate image, reputation, trust and switching costs (Ishaqa, 2012, Lam et al, 2004, Bitner, 1995); however, although Researchers have posited that there is a connection, it can be argued that the connections is not fully understood, due to the number of potential antecedents (Wang & Wu, 2012); hence the relevance of this research.

Perceived value- Perceived value can be defined in simple terms as the benefits received and the sacrifices made by the customer, although some studies have also proposed that perceived value is multi dimensional (McDougall & Levesque, 2000). It is also important to consider how perceived value can be increased and this may be achieved by delivering a better service, providing customisation of services (Coelho & Henseler, 2012) or reducing the customer’s cost perceptions (Ravald & Gronroos 1996).

A customer’s perception of value could motivate them to continue to utilise the services of a service provider (Wang, 2010) and customers may also stay loyal to a company if they feel they are receiving greater value than they would from a competitor (Lam, et al, 2004, citing Bitner & Hubbert, 1994, Bolton & Drew, 1991; Sirdeshmukh et al, 2002). Another consideration of why a customer may stay loyal, rather than move to a competitor is the anticipated switching costs, including the cost involved in changing to an alternative, loss of loyalty benefits and developed routines and procedures (Lam, et al., 2004). In situations where switching costs are high, customers may stay with a service provider regardless of the perceived value (Wang, 2010)

Service quality- Some studies have examined service quality as an antecedent of customer satisfaction (Rust & Oliver 1994; Spreng & MacKoy 1996), which as indicated earlier, is posited by some studies to link to perceived value.

Parasuraman et al, 1988, developed the SERVQUAL model which can be adapted to suit the needs of an organisation and defines service quality as comprising of five dimensions including reliability, responsiveness, assurance, empathy and tangibles. As part of the model the customer will compare their expectations with the perceived performance of services, or according to Santos, (2003), where the customer will make an overall judgement of the service offered. Whilst the SERVQUAL model is said to provide a good indicator of overall service quality (Buttle, 1996), it has been questioned whether or not the model can be applied to a range of industries and if the five dimensions are sufficient (Hu, et al, 2009, citing Buttle, 1996, Carman, 1990, Cronin & Taylor, 1990).

Some Researchers have also argued that the SERVQUAL model has shortcomings, as the model only measures the quality of interaction and tangibles such as décor, etc., but not the actual quality of the service outcome (Sureschander, et, al, 2001). Brady & Cronin, (2001) proposed a model which includes the quality of interaction, physical environment and the outcome. Given the fact that for this study the outcome relates to the quality of homes, or the end product, it will be important to determine how this influences service quality perceptions, in addition to considering the SERVQUAL model.

Also, according to Barber & Goodman, (2011), since the SERVQUAL model was developed, the debate on how to define and measure customer expectations, perceptions and performance and to understand how to address the gap has not been addressed. It is important to understand where gaps exist with the services provided and customer expectations, as meeting customer expectations is a significant driver of customer satisfaction, which can increase loyalty intentions (McDougall & Levesque, 2000). The reality is that different customers have different service needs and expectations (McKnight, 2009) and it is important that this research also provides an insight into how customer expectations can be met.

Corporate image- Several authors propose that service quality is determined by an evaluation of the corporate image of the organisation (Martínez García & Martínez Caro, 2008) and the relationship between satisfaction and corporate image have been reported in a number of studies (Razavi et al, 2012, citing Lai et al, 2009, Leblanc, 2001; Kandamplully and Hu,2007) Gronroos, (1984), indicated that image, including corporate image is built mainly via the customer’s experience and the manner in which the service is delivered. Bitner, (1992), proposed that the physical environment is instrumental, yet in later years these views have been extended to include a wider definition, including the business name, architecture, products and services and general impression of quality (Nguyen & Leblanc, 2001).

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