Retailer loyalty: more than just service

More sophisticated and demanding customers, competition from both domestic and foreign sources, new retailing formats and breathtaking new technological developments, are just a few of the variables pressurising retailers to find new ways to differentiate themselves from others. These attempts have ranged from a focus on service delivery to loyalty schemes - all with limited success.

Two professors, Nic Terblanche from Stellenbosch and Christo Boshoff from the University of Port Elizabeth, started studying ways in which retailers can keep their customers loyal. After surveying over 11 000 retail customers in sectors as diverse as fast food, clothing, grocery, hardware, cosmetics, gifts and houseware, they concluded that the answer is a satisfactory in-store experience. The components of the in-store shopping experience (ISE) may be grouped under five underlying dimensions, namely:

1. Personal interaction (service quality).
2. Merchandise value.
3. Merchandise variety and assortment.
4. Internal store environment.
5. Complaint handling.

Measurement

They then proceeded to develop a valid and reliable instrument that can measure and assess these dimensions from a customer perspective.

The next step was to determine which of these dimensions predict loyalty towards a retailer. In their study, customer satisfaction with the elements of the in-store shopping experience was used to predict two measures of loyalty. The first measure was an attitudinal measure of loyalty. The second measure was actual buying behaviour - actual sales recorded in monetary terms and in terms of units bought. The empirical results suggest that a satisfactory in-store shopping experience enhances both attitudinal loyalty and actual sales.

In a study involving a major South African retailer, the two researchers found that Merchandise Value was the strongest predictor of attitudinal loyalty followed by Store Environment, Personal Interaction (service), Merchandise Variety and Assortment and Customer Complaint handling.

The strongest predictor of behaviour loyalty (actual buying behaviour) is also Merchandise Value, followed by Personal Interaction, Customer complaint handling, Merchandise Variety and Assortment and Store Environment.

"It is clear from our research," says Prof Boshoff, "that different types of retailers will have to concentrate on different dimensions of the in-store shopping experience to drive loyalty.
Customer complaint handling (which includes returns) may be more important for an Internet retailer or direct marketing company's customers than for a grocery retailer.

Service

"Service is important but we want to caution against too narrow a perspective. It is significant that what we define as Merchandise Value drives both attitudinal loyalty and behavioural loyalty", says Boshoff.

"The empirical results seem to suggest that, if retailers want to realise the elusive goal of store loyalty, they may have to return to the basics of retailing rather that the add-ons and gimmicks so prominent in modern-day retailing" says Prof Terblanche.

For more information contact Christo Boshoff at the Department of Business Management, University of Port Elizabeth, Tel: +27 +41 5042577.