CHAPTER 1 INTRODUCTION

Transcription

1 CHAPTER 1 INTRODUCTION The Indian food and grocery sector is mostly (95 percent) lies in the unorganized sector of neighborhood Kirana stores (mom and pop). They are very close to the heart of retail customers due to various functional, psychological and sociological benefits [1,2]. Consequently, relationships and loyalties are strong between Kirana stores and customers as they are formed on closeness, trust, commitment and satisfaction [3]. This poses a big challenge to the modern retail formats for acquiring and retaining loyal customers [4]. Furthermore, given the wide diversity of choice in retail formats, wide-ranging products and different brands offered to today s consumers, consumers rarely shop exclusively at a single retail format or a single retail store within a format, preferring to extend their store visits and purchases across multiple store formats that, in combination, can satisfy their shopping needs [5,6,7&8]. This milieu makes customer loyalty as a critical issue for endurance of retailers in dynamic retail market characterized by a growing heterogeneity of demand and emergence of new retail format [9,10&11]. While the struggle for store patronage and loyalty continue to strengthen [6, 13], creating a genuine structure of customer loyalty has become strategic challenge for retailers in protecting themselves from customers visiting another outlet at the next available opportunity [14]. Therefore, only customer with an emotional bond to their retailer are resistant to other infiltrating influences [15]. Recent past research findings had also shown that developing affective bonds and connections between consumers and firms establishes committed relationships [16], which create customer s emotional loyalty towards a firm [17]. Moreover, today s retailers identify that satisfying and retaining customers by using relationship-building strategies is one of the persuaded forms of protractible competitive advantage [18&19]. As marketing theory and practice has become more and more customer centered [20], grocery retail managers have augmented their prominence on developing long-term client relationship through customers loyalty programs [21&22] that offer economic, psychological, and sociological rewards to customers [23]. Previous research also reports that customer loyalty programs not only build a closer bond between the store and current customers [24] but also

2 develop customers commitment and trust in the organization [25] by providing immediate incentives that are useful in getting customers to switch away from contending stores [26]. In this scenario, loyalty programs are considered as explicit efforts by retailers to encourage the continued patronage of customers. However, some researchers [27] reports that customer loyalty is simply not for sale or cannot be bought for ever by companies or deals [28] unless loyalty becomes an emotional choice factor that could lead to high and irreversible switching costs [29]. Furthermore, most customers hold several loyalty cards of competing retailers [30]. The multiple card members are less probable to stay loyal, because they attain a superior level of effectiveness from different loyalty programs. Growing incidence of multiple loyalty card usage has resulted in small customer lifecycles, because life duration with the retail firms is not unending [31]. Therefore, retail managers are increasingly looking at the psychological meaning, mostly attitudinal and emotional [32], of loyalty program so as to differentiate it from behavioral definitions, and tend to define loyalty as commitment to the relationship and obvious loyalty behaviors [33]. 1.1 Statement of the problem Despite the pervasiveness of loyalty programs, research on the influence of loyalty programs on customers emotional loyalty towards the retailer is scant and shows ambiguous results [18]. Some practioners have posited that grocery loyalty program, specifically, are ineffective [35] are not well understood [36] in enhancing the emotional loyalty from customers [37, 38&39]. Dowling [39] suggested that loyalty programs do not essentially promote loyalty and are not cost effective and that the explosion of loyalty programs is hype or a me-too scheme. Still there is much argument over whether the loyalty program is an interesting marketing tool [40&41). Furthermore, the empirical result on the vigor and trend of possessions on customer behavior is inadequate and incongruous [42]. Conversely, a few studies show that loyalty programs have a positive impact on consumers repatronage decisions and their share of wallet [37&44]. The different observations suggest a need to understand these programs better. There are still no clear indicators as to whether these initiatives are successful with some research supporting the value of loyalty programs to retailers [45, 37 & 31] while others are not as supportive of its value [48 & 49]. There is also the possibility that what loyalty schemes in one country may not work in another, and that there may be variation across countries and across different cultures [50]. In

3 this connection, little research has investigated about the knowledge, perceptions, feelings, emotions and gratifications, and loyalty (both behavioral and attitudinal) associated with loyalty programs in emerging Indian food and grocery retail market. Therefore, this study aimed to provide empirical evidence that how consumers attitudes namely cognitive and affective responses are associated with loyalty programs. The study further investigates the impact of consumer responses (associated with loyalty programs) on their emotional loyalty. 1.2 Need for the Study In the Indian food and grocery retailing sector, consumers patronage a variety of shopping avenues such as traditional kirana stores, pushcart stores, online stores, convenience stores and modern retails stores for purchasing their grocery needs as they have been highly involved in cross shopping, to accommodate their changing lifestyles as well as satisfying their ever increasing shopping needs. This posed a challenge to retailers to retain existing customers, and gain a superior share of consumer expenditures. However a few studies [22] highlighted the need of the loyalty programs/schemes to develop affective (emotional) loyalty and repeat purchases from specific retails stores. Though a few studies repeatedly emphasize increasing incidence of loyalty programs used by retailers to expedite their affective customer relationship activities to develop emotional bonds with customers, little empirical evidences are available about the determinant attributes of loyalty programs that influence customer s emotional loyalty towards a retailer(s). Hence there is need to fill this research gap in academic literature on customer loyalty programs in a competitive dynamic Indian food and grocery retailing. Despite this rigorous use, some practitioners hypothesize that loyalty programs may be unproductive [44]. Moreover a few studies repeatedly highlighted the effectiveness of loyalty programs in terms of creating emotional attachment between customer and retailer in different context. Therefore in terms of practical application of loyalty programs in Indian context, there is a need for the study to understand the factors affecting the customer loyalty programs which in terms of customer satisfaction, store choice behavior and emotional attachment which leads to emotional loyalty. Consequently the study is assumed significance in understanding and increasing the body of knowledge through exploration and examination of customer loyalty programs among Indian food and grocery customers.

4 1.3 Objectives of the Study The prime objective of this research is to provide the better understanding about the effective role of customer loyalty programs in determining the consumers emotional loyalty in food and grocery retailing. The general and specific objectives of this study are: 1. The general objective of this study is to trace the genesis, growth and development of customer loyalty programs in different context including western and Indian, Food & Grocery in particular. The specific objectives of this study are: 2. To explore the Determinant attributes (critical factors) of customers loyalty programs in Indian Food & Grocery retailing. 3. To examine the customer satisfaction s mediating effect over determinant attributes of loyalty programs on customer emotional loyalty. 4. To examine the emotional attachment s mediating effect over determinant attributes of loyalty programs on customer emotional loyalty. 5. To examine the customer store choice behaviour s mediating effect over determinant attributes of loyalty programs on customer emotional loyalty. 6. To examine the effect of determinant attributes of loyalty programs on emotional attachment. 7. To examine the effect of customer satisfaction on customer emotional loyalty. 8. To examine the effect of emotional attachment (between the customer and retailer) on customer emotional loyalty. 9. To examine the effect of customer store choice behavior on customer emotional loyalty. 1.4 Scope of the Study Primarily this study focused on exploring the determinant attributes of loyalty programs such as perceived value, trust, commitment, interpersonal communication, customer experience and switching cost in food and grocery retailing. Further the identified attributes has been tested, how the intermittent factors like, customer satisfaction, emotional attachment and store choice behavior are mediating their effect over determinant attributes of customer loyalty programmes over emotional loyalty. The scope of the study is confined to emotions, feelings that are evoked

5 by loyalty programs to develop emotional loyalty. The study was carried out in the thirteen districts of the state of Andhra Pradesh in India. 1.5 Overview of Data Collection and Analysis To meet the objectives of the study, both qualitative (exploratory) and quantitative (non experimental survey) research approaches have been adopted. In qualitative research approach formal interviews (semi structured) were conducted with different food and grocery retail format managers to explore the determinant attributes of customer loyalty programs and to crystallize the problem under investigation. The formal interviews have been conducted in all the thirteen districts of Andhra Pradesh in India. Besides the formal interviews, academicians and researchers were consulted and sought their suggestions to corroborate the statement of the problem and subsequently developed a conceptual model and survey instrument. During the second phase i.e. non experimental survey is conducted. Simple random method was adopted to choose the retail customers and mall intercept survey method was used to collect primary data by administering a structured questionnaire at food and grocery retail stores (Supermarkets and Hypermarkets). The survey was conducted during April 2015 to August The data analysis and results were based on 868 usable questionnaires duly filled up by the retail customers, who actively participated in marketing survey. Both descriptive statistical tools (Mean, Standard Deviations and Cross tabulations) and inferential statistical techniques such as Baron and Kenny mediation analysis [231], Sobel s test [232] and bootstrapping and simple linear regression (SLRA) was applied to test the formulated hypothesis from research frame work. 1.6 Underlying the Assumptions of the study A number of assumptions underlying the proposed research: 1. Basically it is implicit that, consistent with current research and re-conceptualizations, characteristics of customer loyalty programs are constructs that have applicability for determining Emotional loyalty in food and grocery retailing. 2. Research objectives of this study can be scrutinized in a cross-sectional analysis. Cross- Sectional analysis cannot prove the existence of effects that unfurl over time. However, it

6 can reveals whether constructs and variables are related as would be envisaged, thus flaking light on whether casual effects may exist without necessarily proving that they do. The question appears, then, whether cross-sectional research is useful. Like much of the work in this area and the marketing research in general, this study adopts the perspective that it is, provided that the limitations of cross-sectional research are considered when drawing conclusions. 3. The relationship is measurable which exist among the variables of this study. 4. It is assumed that, mall intercept technique is the best tool for congregate the variety of data needed to answer the mentioned hypothesis in this study. 5. The literature supports the reason for this study and specifically replicates the need for the research. 6. The terms in this study customer, shopper and respondent are assumed as the one and same. 7. Importance of Customer Loyalty programs attributes and Emotional loyalty is congruent with each other. 1.7 Organization of Dissertation This section gives an overview of the organization of the dissertation. 1. First chapter of this thesis includes introduction, statement of the problem, need for the study, research objectives, scope of the study, overview of data collection and analysis. 2. Second chapter provides an insight on the global and Indian scenario of retailing; growth and development of global retailing, special focus on Asia Pacific grocery retailing and extensive emphasis on food and grocery retailing. 3. Third chapter provides relevant literature to emotional loyalty in retailing, theoretical frame work concerning previous models of the present study, a review of general constructs in the proposed model from a marketing literature which enables to understand and examine the proposed conceptual model and end with identification of research gaps. 4. Chapter four describes the research methodology starts with research questions, hypotheses development, research design, sample design, survey instrument, measurement variables, diagnostic tests including reliability and validity, procedure of data collection and methods of data analysis.

7 5. Chapter five covers the descriptive statistical results and analysis relating to the characteristics of the sample, measurement of key constructs, cross tabulations and inferential statistical result and analysis relating to correlation, mediation analysis, simple linear regression and ANOVA. 6. Sixth chapter provides discussions of statistical results and deriving implications for academia as well as retail managers. 7. Seventh and the final chapter consist of, conclusion, suggestions, limitations and directions for future research.