Literature Review
This review focuses on the theoretical information regarding the consumer loyalty. This review will be carried out will be over the identification of parameters that affect the customer loyalty in Fast Moving Consumer Goods (FMCG) sectors. Freedom Foods Group Limited has been selected in this study, which is a well-known food industry of Australia. Different theories are taken in order to identify the basic principles of the organization. This study will reveal the major components of customer loyalty and the factors that affect the customer loyalty in a business.
Figure 1: Conceptual Framework
(Source: Rai and Srivastava 2012)
Customer loyalty is based on the long term relationship between the organization and the consumers. Customer loyalty is significant for any business to achieve the success, and thecost of attracting a new customer is much more than the cost of retaining an old customer (Rai and Srivastava 2012). Customer loyalty is involved in bringing huge profit to a business and investment. According to Blut et al. (2014), the precursor of the customer loyalty is a changeable parameter as it is dynamic and evolving in nature over the period of time (Toufaily, Ricard and Perrien 2013). In order to retain the customers for a long time, the food industries and other business sectors are trying to develop new strategies as it will help them to minimize the pressure of increased expectation of customers.
The dynamic model of customer loyalty focuses on the development of the customer loyalty. The five components of this model interpret the customer relationship cycle. Expected value, perceived value, perceived value after buying and using the product, perceived value in relative terminology and perceived equity value (Toufaily, Ricard and Perrien 2013). Expected value defines the relationship between the cost and the profit while perceived value is related to the satisfaction and dissatisfaction of the consumers after using the products. Therefore, perceived value in relative term highlights on the first experience of the customers after using new products.
Finally, the value in equity term focuses the relationship between the value that the customer has acquired and the value that the business has obtained. For the food industries and other business sectors application of such model is beneficial to retain their customers by enhancing the customer loyalty (Haghighi et al. 2012).
Figure 2: Dynamic model of Customer loyalty
(Source: Toufaily, Ricard and Perrien 2013)
Customer loyalty is influenced by various factors including customer satisfaction, trust, service quality, price, perceived value, corporate image and so on that affect the business of an organization.
Consumer satisfaction refers to the post consumption behavior of the consumers. As highlighted by Haghighi et al. (2012), cognitive and affective satisfactions are the basic two types. Customer satisfaction is associated with the customer loyalty and leads consumers to show positive purchasing behavior of any consumers towards a specific organization or brand. If the consumers are not satisfied with the quality of products then it is difficult for the organization to retain their customers (Rai and Srivastava 2012). In the context of the food industry and other FMCG sectors quality is a crucial aspect and involves in enhancing customer loyalty by maximizing their satisfaction level (Shahin et al. 2017).
Conceptual Framework
Product attributes are the main focus of Kano model based on the process by which the service or products are perceived by the consumers. According to Shahin et al. (2017), Kano model assesses the nonlinear relationship between the satisfaction of consumers and the performance of the product. Threshold attributes, excitement attributes, performance attributes and indifferent attributes are major four elements of Kano model. Threshold attributes focus on the customer satisfaction while performance attributes are related to the increment in the consumer satisfaction in spite of poor product performance (Shahin et al. 2017).
Excitement attributes highlights on the high level of satisfaction and indifferent attributes are less important for customers. Application of such model in the FMCG sectors is used to critically evaluate the customer satisfaction level and their different dimensions regarding the product (Rahman and Jalil 2014). This model is effective to enhance the customer loyalty by enhancing the customer satisfaction (Su, Hsu and Swanson 2017).
Figure 3: Kano Model of customer satisfaction
(Source: Shahin et al. 2017)
Service quality is a relationship between the expected service and the received service. According to Rahman and Jalil (2014), the overall impression of a consumer depends on the service quality of an organization. Service quality is one of the main precursors of the consumer satisfaction and it is the primary source of the customer loyalty. As criticized by NAPITUPULU and ADITOMO (2015), if any organization fails to provide quality service than the repeat purchasing behavior of a consumer is affected. In the context of the FMCG, sectors quality should be the prior element of their business. Therefore, consumers try to pay more if they satisfied after consuming the product that is the big opportunity for the organization to maximize their profitability and customer retention (Shahin et al. 2017).
Trust is a key variable of the customer loyalty and influences both positively and negatively the purchasing behavior of the consumers. According to Rubio, Villaseñor and Yagüe (2017), trust is a multidimensional construct, which refers to the honesty of a person or transparency in a business. Keeping the consumer trust in the mind suppliers of a business requires to be competent and to deliver the product or service according to the expected quality of the customers (Haghighi et al. 2012). Hence, in the FMCG sectors trust refers to the expectation of the customers that is promised by the service providers. However, if the breach of trust occurs while purchasing products principle of customer loyalty is affected (Javed and Cheema. 2017).
Customer Loyalty
As described by Su, Hsu and Swanson (2017), the trust of a consumer is built according to the competent action of an organization. In order to deliver a good quality product or service, the distributor must be competent. Trust acts as the key element of customer relationships and long term relationship between the organization and the consumer (Leppäniemi, Karjaluoto and Saarijärvi 2017).
Perceived value of the customer is supposed as the tradeoff between the consumer and the service provider through which one party is benefited by the consumption of the product and other get financial profit. According to Javed and Cheema (2017), the perceived value is evaluated by the consumers properly and depends on different components including financial resources, quality of the product and the knowledge about the product. FMCG sectors develop various strategies to attract their consumers by giving them value. This is a useful approach to sustain the customer loyalty in the business (Haghighi et al. (2012). However, it is very natural that creating high consumer value in target audience brings high chances to achieve the trust of the consumers for any organization, which is directly associated with maximizing customer loyalty (Leppäniemi, Karjaluoto and Saarijärvi 2017).
Switching cost is considered as the loss of the customers in terms of the money. According to Haghighi et al. (2012), the switching cost is associated with the enhancement of the brand loyalty. Hence, in the FMCG sectors as for example, Foods Groups Ltd. the switching cost is 290 US dollar. Switching cost should be the profitable as based on which the growth of business is dependent. Among the various factors switching cost is important in influencing the customer loyalty in the FMCG sectors. However, if the switching cost is high then it leads the customers towards dissatisfaction, on the other hand, if the switching cost is low then customers are found with highly satisfied. High barriers of switching cost make the consumers more loyal (Zadeh et al. 2014). However, if FMCG sectors provide good quality product with low price and discount, this is the easiest way of customer retention by achieving the customer loyalty (Mirza et al. 2015).
Corporate image affects a customer’s impression of an organization. As mentioned by Villaseñor and Yagüe (2017), physical and behavioral aspects of any organization are associated with the corporate image of the company. Businesses identity, service and quality of product all affect the image of an organization as perceived by the internal and external stakeholders (Mirza et al. 2015). Corporate image is considered as the extrinsic information and it is applicable for new and existing customers. The corporate image has no direct impact on the customer loyalty, however; expectation of the consumers and the corporate image about the quality of service affects the customer loyalty in FMCG sectors. On the other hand, the brand of an organization leaves the positive effect on customer loyalty. However, if the environment of an organization is well and there is good communication between the customers and the suppliers then it is easy to bring customer loyalty for the concerned organization (Zadeh et al. 2014).
Potential Factors Affecting Customer Loyalty in the Business
Conclusion
Customer loyalty focuses on the long term relationship of a customer with an organization and factors that influence customer satisfaction, trust and quality of the service, corporate image, perceived value, and price are vital factors of customer loyalty. Customer satisfaction is directly related to the customer loyalty as a fully satisfied customer can be retained. Moreover, the entire study focuses that customer loyalty has an immense connection with the customer satisfaction. However, if an organization is able to retain the trust and belief of the customers then they can retain the customers easily by satisfying them through their products or service.
References
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Haghighi, M., Dorosti, A., Rahnama, A. and Hoseinpour, A., 2012. Evaluation of factors affecting customer loyalty in the restaurant industry. African Journal of Business Management, 6(14), p.5039.
iosrjournals.org. 2017. Factors Affecting Customer Satisfaction and Customer Loyalty towards Belle Footwear Company in Lanzhou City, Gansu Province of the People’s Republic of China. [online] Available at: https://www.iosrjournals.org/iosr-jbm/papers/Vol14-issue2/F01424148.pdf?id=7919 [Accessed 19 Jul. 2017].
Javed, F. and Cheema, S., 2017. Customer Satisfaction and Customer Perceived Value and its Impact on Customer Loyalty: The Mediational Role of Customer Relationship Management. The Journal of Internet Banking and Commerce, 22(1), pp.1-14.
Leppäniemi, M., Karjaluoto, H. and Saarijärvi, H., 2017. Customer perceived value, satisfaction, and loyalty: the role of willingness to share information. The International Review of Retail, Distribution and Consumer Research, 27(2), pp.164-188.
NAPITUPULU, T.A. and ADITOMO, H.C., 2015. FACTORS AFFECTING CUSTOMER LOYALTY IN BUSINESS E-COMMERCE: A CASE OF INDONESIA. Journal of Theoretical & Applied Information Technology, 76(3), pp.45-100.
Rahman, M.K. and Jalil, M.A., 2014. Exploring factors influencing customer loyalty: an empirical study on malaysian hypermarkets perspective. British Journal of Applied Science & Technology, 4(12), p.1772.
Rai, A.K. and Srivastava, M., 2012. Customer loyalty attributes: A perspective. NMIMS management review, 22, pp.49-76.
Rubio, N., Villaseñor, N. and Yagüe, M.J., 2017. Creation of consumer loyalty and trust in the retailer through store brands: The moderating effect of choice of store brand name. Journal of Retailing and Consumer Services, 34, pp.358-368.
Shahin, A., Shahin, A., Mohammadi, S., Mohammadi, S., Harsij, H., Harsij, H., Rahbar Qazi, M.R. and Rahbar Qazi, M.R., 2017. Revising satisfaction and dissatisfaction indexes of the Kano model by reclassifying indifference requirements: A case study of the presidential elections. The TQM Journal, 29(1), pp.37-54.
Su, L., Hsu, M.K. and Swanson, S., 2017. The effect of tourist relationship perception on destination loyalty at a world heritage site in China: The mediating role of overall destination satisfaction and trust. Journal of Hospitality & Tourism Research, 41(2), pp.180-210.
Toufaily, E., Ricard, L. and Perrien, J., 2013. Customer loyalty to a commercial website: Descriptive meta-analysis of the empirical literature and proposal of an integrative model. Journal of Business Research, 66(9), pp.1436-1447.
Zadeh, S.R.M., Sharifi, M.R.P.K., Bigdeli, A. and Bigdeli, F., 2014. Identification and rank of the factors affecting on customer loyalty in companies distributing goods (FMCG). Academic Journal of Research in Economics and Management, 2(6), pp.1-10.
Mirza, H.H., Raja, Y.M., Ahmed, M. and Zaman, H.M.F., 2015. Are FMCG’s Consumers More Loyal Towards Brands? An Empirical Study in Pakistan. Stud, 4(1).
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