MARKETING FACTORS AFFECTING CUSTOMER SATISFACTION AND LOYALTY: A CASE STUDY OF THAI FOOD SUPPLIER IN BANGKOK

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1 39 MARKETING FACTORS AFFECTING CUSTOMER SATISFACTION AND LOYALTY: A CASE STUDY OF THAI FOOD SUPPLIER IN BANGKOK Sumit Kumar Bhalla* Tin Zar Lwin* ABSTRACT Food sector in Thailand is growing and reaching the success level among dynamic and diverse market. In spite of increasing food consumptions in consumer market, the business market which transaction between suppliers and buyers arises should not be overlooked. The key constructs of maintaining good relationship in business market are customer satisfaction and customer loyalty. The marketing factors which affect the increase of satisfaction level need to be specified. Even though a number of studies have been done related to the factors on customer satisfaction and loyalty, they were mostly focused on service industry and consumer market. This research specifically examines the relationship of marketing factors affecting customer satisfaction and loyalty. A case of Thai food supplier was selected to test the effect of marketing variables. The total 154 business customers were picked to complete questionnaires through telephone survey. The results confirm that customer satisfaction is positively associated with customer loyalty. Similarly, the four factors (product quality, distribution, price, and service quality) also have a significant positive relationship with business customer satisfaction in business market. The results from the multiple regression analysis indicate that service quality is the best predictor of business customer satisfaction while product quality plays an important role in the loyalty of business customers. It can be concluded that, in business market, different types of customers require different marketing strategies. In order to satisfy business customers, supplier should recognize this fact by classifying them into groups and understanding their critical criteria and requirements. After that, supplier should offer products and services according to their specific requirements. Keywords: customer satisfaction, Thai food industry, product quality, distribution, service quality. * Lecturer, International Business Management (International Program), International College, Siam Technology College, Thailand

2 40 INTRODUCTION The increase of customer satisfaction has become a principle approach which most marketing-oriented organizations implement on a routine basis to increase profitability. There are many interesting factors which have potential to achieve the increase of customer satisfaction. A number of researchers have studied several factors. Therefore, it is essential for the company to know and understand the factors that influence the level of customer satisfaction in order to design and distribute the best offerings. The case of food supplier: Tong Garden Co., Ltd. Part. (Thailand) Tong Garden, Thailand is a manufacturer and supplier of healthy food snacks which was established in The products of this company are mainly from sunflower seeds, pumpkin seeds and nuts which produced from high quality materials with no preservatives in order to provide natural nutritious value to the consumers. The products of this company are available for customers throughout Thailand and also export to foreign market in several countries. The key account customers include retailers, wholesalers, distributors and export customers (traders). These customers buy products to resell in consumer market. Moreover, the other business customers who buy products to use for their organizations purposes, for example; Thai Airways (buy product for giving to passengers as a snack before meal), Dutch Mill s yogurt manufacturer (use sunflower seeds to mix with yogurt 2 in 1 pot) also considered as the business customers of the supplier s company (Tong Garden, Online, n.d.) RESEARCH AIMS This research aims to examine the factors which have positive effect to the business customer satisfaction and verify the most important factor that could lead to customer loyalty. - To find out any positive relationship between customer satisfaction and customer loyalty in business market. - To find out any positive relationship between four marketing variables (product quality, distribution, price, and service quality) towards customer satisfaction in business market. - To find out strongest influencer of customer satisfaction and customer loyalty.

3 41 Hypotheses H1: Customer satisfaction is positively associated with customer loyalty. H2: Product quality is positively associated with customer satisfaction. H3: Distribution is positively associated with customer satisfaction. H4: Price is positively associated with customer satisfaction. H5: Service quality is positively associated with customer satisfaction. H6: Product quality, Distribution, Price and Customer Service are the important factors towards customer satisfaction. H7: Product quality, Distribution, Price and Customer Service are the important factors towards Customer Retention. THE CONCEPTUAL MODEL Figure 1. The Conceptual Model METHODOLOGY It includes research approach, research strategy, data collection, and sampling design. Primary data were gathered via quantitative methods within a structured questionnaire which was used as the research instrument. The questionnaire was designed to measure the relationship of related items containing the factors that were expected to explain business customer satisfaction in the business market. Before the telephone survey, a pilot study was carried out to measure the strength and weakness of the questionnaire and to ensure reliability and validity as

4 42 well as ascertain the required sample size. Thereafter, a telephone survey gathered information from 154 business customers who were randomly selected as participants of this research. Analysis of findings Table 1. H1: Customer satisfaction is positively associated with customer loyalty The results confirm that customer satisfaction is positively associated with customer loyalty. Table 2. H2: Product quality is positively associated with customer satisfaction The null hypothesis was accepted, the higher product quality leads to the increase of customer satisfaction.

5 43 Table 3. H3: Distribution is positively associated with customer satisfaction The null hypothesis was accepted. Better distribution increases customer satisfaction. Table 4. H4: Price is positively associated with customer satisfaction As a result, the null hypothesis was accepted. Price is positively associated with customer satisfaction.

6 44 Table 5. H5: Service quality is positively associated with customer satisfaction The null hypothesis was accepted, service quality has positive effect to customer satisfaction in which higher service quality is related to the increase of customer satisfaction. Table 6. H6: Product quality, distribution, price and customer service are the important factors towards customer satisfaction The standardize beta value from the coefficient table confirms that "Service Quality" is the best predictor which has the greatest influence on business customer satisfaction.

7 45 Table 7. H7: Product quality, distribution, price and customer service are the important factors towards customer retention The standardize beta value confirms that "Product quality" (b = 0.396) is the best predictor which has the greatest influence on business customer loyalty. CONCLUSION This study founds the positive relationship between customer satisfaction and customer loyalty. The increase in satisfaction level initiates the increase of customer loyalty. Satisfying customers needs appear to be practical marketing tactic in order to create company profitability. This study also identifies the effect of four marketing variables (product quality, distribution, price, and service quality) on Thai customer satisfaction and degree of loyalty with their products. Moreover, multiple regression analysis was used to find out the best predictor or influencing factor of customer satisfaction and loyalty in the market. The results are able to answer the research questions in which each four factors have positive effect towards customer satisfaction. Service quality is the best predictor of customer satisfaction while product quality is the most influencing factor to the customer loyalty. In addition to this, the findings of the study suggest the differences among the various groups of customers. The different types of customers have different criteria to consider when they would like to purchase any product. Therefore, the different groups of respondents were discovered by the feedback of the research questions.

8 46 The findings from this study provide broad views and specific managerial implications for the supplier of Food Industry in Thailand. These research findings identify the degree of correlation between customer satisfaction and customer loyalty. Moreover, the results also brought out the fact that marketing variables including product quality, distribution, price, and service quality are important determinants of customer satisfaction and loyalty in business-to-business relationship. Taken together, the significant positive association between four variables and customer satisfaction indicates that customers are seeking for high product quality, efficiency distribution system, appropriated price, and excellent service quality. The supplier who is able to offer such values to meet the requirements would be successful in the business. This implies that sellers can develop appropriate marketing programmers by focusing on specific variable to match with specific types of customer s satisfactions and keep them as loyal customers by repeated purchase from the same supplier to generate profitability to the organization. REFERENCES Aaker, D. A., Kumar, V., & George, D. (1999). Essential of marketing research. Hoboken, NJ: John Wiley & Sons. Bitner, M. J., & Hubbert, A. R. (1994). Encounter satisfaction versus overall satisfaction versus quality. In Rust, R. T., & Oliver, R. L. (Eds), Service quality: New directions in theory and practice. London, UK: Sage. Blumenfeld, D. E., Daganzo, C. F., Frick, M. C., & Gonsalvez, D. J. A. (1999). Impact of manufacturing response time on retailer inventory. International Journal of Operations & Operation Management, 19(8), pp Dawes, J., & Swailes, S. (1999). Retention sans frontiers: Issues for financial service retailers. International Journal of Bank Marketing, 17(1), pp Doyle, C. (2003). Dictionary marketing. Glasgow, UK: Harper Collins. East, R. (1997). Consumer behavior: Advances and applications in marketing. London, UK: Prentice Hall. Egan, J. (2001). Relationship marketing: Exploring relational strategies in marketing. London, UK: Prentice Hall. Heskett, J. L. (2002). Beyond customer loyalty. Journal of Managing Service Quality, 12(6), pp

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