Value, satisfaction and loyalty in the retail industry: A theoretical approach to loyalty

STRATEGY & INNOVATION Value, satisfaction and loyalty in the retail industry: A theoretical approach to loyalty Valor, satisfacción y fidelidad en el sector minorista: Un enfoque teórico de la fidelización 3 Enrique Carvajal Zaera et al. RESEARCH ARTICLE - Value, satisfaction and loyalty in the retail industry: A theoretical approach to loyalty Enrique Carvajal Zaera (Independent Researcher) Marketing Manager at Sizet Experience. Seville, Spain [email protected] Jazmin R. Paredes-Paredes Department of Basic Sciences, Faculty of Medicine and Health Sciences, Universitat Internacional de Catalunya, Spain [email protected] Marta Dominguez de la Concha-Castañeda (Department of Business and Management) University of Seville, Spain mar[email protected] José L. Galán González (Department of Business and Management) University of Seville, Spain [email protected] Received: 29/07/2022 Accepted: 15/03/2023 DOI: 10.55234/edeij-2-056 Article citation: Carvajal Zaera, E., Paredes-Paredes, J.R., Domínguez CC, M., Galán González, J.L. (2023). Value, satisfaction and loyalty in the retail industry: A theoretical approach to loyalty. ESIC Digital Economy and Innovation Journal, 2, e056. https://doi.org/10.55234/edeij-2-056 ABSTRACT Although customer loyalty has been widely investigated, few studies address the role of customer value and customer satisfaction. Besides, there is still a need for a sound theoretical framework to explain and promote businesscustomer relationships. This paper aims to contribute to understanding the origin and effect of the concept of loyalty in commercial relationships in the retail industry. To do so, we review and discuss the triggers of loyalty behavior in society. There is a section to explain the elements that produce loyalty behavior in the buyer and its logical sequence. Besides, we address the concepts of value and consumer satisfaction and their association with the customer's post-purchase behavior. This analysis enables a more complete overview of the customer’s behavior and allows to take well-informed actions within the retail market. Besides, it opens the door to future research related to buyer behavior in different environments, such as the digital environment. KEYWORDS Loyalty; value; satisfaction; consumer; customer; relational marketing; retail JEL CLASSIFICATION M10; M31; L81 4 DIGITAL ECONOMY & INNOVATION JOURNAL DIGITAL ECONOMY & INNOVATION JOURNAL / STRATEGY & INNOVATION Vol. 2 - 2023 - ISSNe 2792-8721 RESUMEN Aunque la lealtad del consumidor ha sido ampliamente investigada, pocos estudios abordan los roles del valor y la satisfacción del cliente. Siendo necesario un marco teórico sólido para explicar y promover las relaciones entre empresas y clientes. Este estudio pretende contribuir a comprender el origen y el efecto del concepto de lealtad en las relaciones comerciales del sector minorista o retail. Para ello, se revisan y discuten los factores desencadenantes del comportamiento de fidelización en la sociedad. Se dedica un apartado a explicar los elementos que producen el comportamiento de fidelización en el comprador y su secuencia lógica. Además, abordamos los conceptos de valor y satisfacción del consumidor y su asociación con el comportamiento postcompra del cliente. Este análisis permite tener una visión más completa del comportamiento del cliente y ejecutar acciones informadas dentro del mercado minorista. Además, abre la puerta a futuras investigaciones relacionadas con el comportamiento del comprador en diferentes entornos, como el digital. PALABRAS CLAVE Fidelización; valor; satisfacción; consumidor; cliente; marketing relacional; comercio minorista CÓDIGOS JEL M10; M31; L81 CONTEXT Although customer loyalty has been widely investigated, few studies address the role of customer value and customer satisfaction. Besides, there is still a need for a sound theoretical framework to explain and promote businesscustomer relationships. OBJECTIVE This paper aims to contribute to understanding the origin and effect of the concept of loyalty in commercial relationships in the retail industry. METHODOLOGY To do so, we review and discuss the triggers of loyalty behavior in society. There is a section to explain the elements that produce loyalty behavior in the buyer and its logical sequence. Besides, we address the concepts of value and consumer satisfaction and their association with the customer's postpurchase behavior. RESULTS We found a remarkable difference amongst the concepts of value and consumer satisfaction and how they associate with the customer's post-purchase behavior. Customer loyalty was identified as a cohesive factor in this dynamic. Implications: This analysis enables a more complete overview of the customer’s behavior and allows to take well-informed actions within the retail market. Besides, it opens the door to future research related to buyer behavior in different environments, such as the digital environment. 5 Enrique Carvajal Zaera et al. RESEARCH ARTICLE - Value, satisfaction and loyalty in the retail industry: A theoretical approach to loyalty INTRODUCTION The changes that have occurred in the environment in recent decades have questioned the traditional concept of Marketing and emphasized the need for an approach focused on the relationship with the customer rather than on the generic market or product transaction (Barroso Castro and Martin Armario, 1999; Chiesa, 2005; Barroso Castro, Martín Armario and Martín Ruiz, 2007; Velázquez, Saura and Molina, 2011; Assaker and Hallak, 2013; Ramseook-Munhurrun, Seebaluck and Naidoo, 2015). Thus arises Relationship Marketing, which aims to maintain ongoing relationships between the company and its customers, in such a way that the parties involved in the relationship obtain benefits derived from it (Bolton, Lemon and Verhoef, 2002; Gupta, Lehmann and AmesStuart, 2004; Marzo, Pedraja and Rivera, 2004; Meyer- Waarden, 2007; Puccinelli et al., 2009; Ashley et al., 2011; McKercher, Denizci-Guillet and Ng, 2012; East, Wright and Vanhuele, 2013; Steinhoff and Palmatier, 2014; Meyer-Waarden, 2015). Its rationale is to invest resources, not only in attracting customers, but primarily in maintaining customer relationships over time (Bolton, Lemon and Verhoef, 2002; Gupta, Lehmann and AmesStuart, 2004; Meyer-Waarden, 2007; Puccinelli et al., 2009; Ashley et al., 2011; Frisou and Yildiz, 2011; McKercher, Denizci-Guillet and Ng, 2012; East, Wright and Vanhuele, 2013; Steinhoff and Palmatier, 2014; Meyer-Waarden, 2015), and that these customers are the origin of the emergence of new customers (Figure 1). In the retail market, some authors (Zhang et al., 2010; Cambra-Fierro, Melero-Polo and Sese, 2015) suggest that building a relationship with the customers may improve the perceived benefits and values. Besides, it could be the basis to establish a multichannel strategy which would lead to a whole different variety of improved commercial results (Gómez et al., 2017). However, there is no theoretical framework for developing the fundamentals of this business-costumer relationship in the retail industry. Figure 1. Basis of Relationship Marketing Source: Barroso Castro and Martín Armario, 1999 6 DIGITAL ECONOMY & INNOVATION JOURNAL DIGITAL ECONOMY & INNOVATION JOURNAL / STRATEGY & INNOVATION Vol. 2 - 2023 - ISSNe 2792-8721 Rahman, 2015), thus, according to Grewal, Levy and Lehmann (2004), if we unpack the definition of value, we will find on the benefit side product selection and quality in service, and on the cost side, the time and effort involved in making the purchase and, of course, the price. Therefore, managers would need to find out what is perceived as valuable by their customers, to be able to do better what matters most to them: communicate the value of the service or product afterward and thus satisfy them extensively (Abad, 2004). According to Sánchez and Moreno (2003), customer value depends on the following equation: Value = Customer results + Process quality Customer price + Access cost In other words, the users’ assessment of their relationship with the store is based on: "What he perceives he receives": the product, the service, the attention, etc. "What he perceives he sacrifices": the price, the time, the inconvenience, etc. Then we can confirm that value arises from the customer's comparison of what he perceives he gains and loses by going to that store (Dodds, Monroe and Grewal, 1991; Grewal, Monroe and Krishnan, 1998; Grewal, Levy and Lehmann, 2004; Chiesa, 2005; Barone, Norman and Miyazaki, 2007; Grewal, Levy and Kumar, 2009; Allaway et al., 2011; Swoboda, et al., 2013; Mira et al., 2013; Choi and Huddleston, 2014; Khan and Rahman, 2015). To create value for the consumer, we must keep in mind that value is somewhat subjective (Grewal, Levy and Lehmann, 2004; Barone, Norman and Miyazaki, 2007; Grewal, Levy and Kumar, 2009; Allaway et al., 2011; Swoboda, et al., 2013; Mira et al., 2013; Choi and Huddleston, 2014; Khan and Rahman, 2015), as it de- This study answers the following research questions: What are the mechanisms underlying the relational marketing strategy? What are the roles played by the perceived value, customer satisfaction and loyalty within a business-costumer relationship model? How does the retail market adapt to this relationship? We hypothesize that value, satisfaction, and loyalty are keys to the dynamic business-costumer relationship. Our second hypothesis states that the complexity of each of these key factors contributes to the complexity of a relational model. We analyzed the perceived value and how it related to customer satisfaction. Then we reviewed the interaction of satisfaction with loyalty. Here we tap into the complexity of both constructs that contribute to an asymmetrical association between them. Overall, with a theoretical descriptive methodology, we analyze and discuss customer loyalty as a product of value and satisfaction, taking into account their beneficial and relational impact on retail marketing. RELATIONSHIP BETWEEN VALUE AND SATISFACTION When applying the new relationship marketing approach, it is essential to know what the customer values (Barroso Castro and Martin Armario, 1999; Chiesa, 2005; Barroso Castro, Martín Armario and Martín Ruiz, 2007; Velázquez, Saura and Molina, 2011; Assaker and Hallak, 2013; Ramseook-Munhurrun, Seebaluck and Naidoo, 2015), because, deliberately or not, all purchase decisions are based on the value obtained by the customer explaining his preferences for certain products and/or services. Consumer perceived value is the comparison between costs and benefits (Dodds, Monroe and Grewal, 1991; Grewal, Monroe and Krishnan, 1998; Grewal, Levy and Lehmann, 2004; Barone, Norman and Miyazaki, 2007; Grewal, Levy and Kumar, 2009; Allaway et al., 2011; Swoboda, et al., 2013; Mira et al., 2013; Choi and Huddleston, 2014; Khan and 7 Enrique Carvajal Zaera et al. RESEARCH ARTICLE - Value, satisfaction and loyalty in the retail industry: A theoretical approach to loyalty pends on the perceptions of each customer. Thus, there may be a user who values the delivery of an explanatory booklet with instructions on how to use a particular cell phone and another who is uncomfortable that reference is made to his unfamiliarity with the product by giving him the booklet in public. But in addition, value is dynamic and changes over time (Grewal, Levy and Lehmann, 2004; Noble and Phillips, 2004; Barone, Norman and Miyazaki, 2007; Grewal, Levy and Kumar, 2009; Allaway et al., 2011; Swoboda et al., 2013; Mira et al., 2013; Choi and Huddleston, 2014; Khan and Rahman, 2015). The customer who bought that product for the first time can be irritated, but if, after two months of trying to use the mobile device without obtaining positive results, returns to the store looking for a solution to his problem, he will probably highly value all the indications given to him, and even more if it is in writing. The in-store customer receives a product in a particular way and unconsciously compares that experience to what he expected to receive (Parasuraman, Zeithaml and Berry, 1985; Parasuraman, Zeithaml and Berry, 1988). He then has perceptions of the service he has received. In addition, the customer has paid a price for the product both in money and in time, travel, etc., which he perceives as a sacrifice (Grewal, Levy and Lehmann, 2004; Barone, Norman and Miyazaki, 2007; Grewal, Levy and Kumar, 2009; Allaway et al., 2011; Swoboda et al., 2013; Mira et al., 2013; Choi and Huddleston, 2014; Khan and Rahman, 2015). If, when comparing what he perceives he has received with what he perceives he has paid for, the outcome is favorable, he will have perceived value and will leave satisfied. If, on the other hand, the customer perceives that the effort he has made is greater than what he receives, he will not have received value, and will therefore leave dissatisfied (Jones and Sasser, 1995). And these perceptions will have an impact on their subsequent actions, i.e., on whether the customer is loyal or not (Woodside, Frey and Daly, 1989; Bitner, 1990; Halstead and Page, 1992; Rust and Zahorik, 1993; Biong, 1993; Taylor and Baker, 1994; Anderson, Fornell and Lehmann, 1994; Rust, Zahorik and Keiningham, 1995; Hallowell, 1996; Homburg and Giering, 2001; Evanschitzky and Wunderlich, 2006; Ho, 2009; Yee, Yeung and Cheng, 2010; De Cannière, De Pelsmacker and Geuens, 2010; Dagger and David, 2012; Ou et al., 2014; Hunneman, Verhoef and Sloot, 2015). This whole process is reflected in Figure 2. As can be seen in Figure 2, there are many elements at play and some often go unnoticed. Thus, Yi (1990) indicates that the concept of satisfaction should be conceptualized as a multidimensional construct. The first dimension is the satisfaction obtained with a product (LaBarbera and Mazursky, 1983; Marr and Crosby, 1992; Homburg and Giering, 2001; Evanschitzky and Wunderlich, 2006; Ho, 2009; Yee, Yeung and Cheng, 2010; De Cannière, De Pelsmacker and Geuens, 2010; Dagger and David, 2012; Han Bae, 2012; Ou et al., 2014; Hunneman, Verhoef and Sloot, 2015) where we take into account variables such as durability, technical sophistication, ease of use, and monetary value. The second dimension is satisfaction regarding the purchase process (Marr and Crosby, 1992; Ramsey and Sohl, 1997; Homburg and Giering, 2001; Evanschitzky and Wunderlich, 2006; Ho, 2009; Yee, Yeung and Cheng, 2010; De Cannière, De Pelsmacker and Geuens, 2010; Dagger and David, 2012; Han Bae, 2012; Ou et al., 2014; Hunneman, Verhoef and Sloot, 2015), related on the one hand to the personal interrelationship between the salesperson and the consumer, and on the other hand to the search for the satisfaction of the consumer's needs. Finally, the third dimension refers to the satisfaction related to the postpurchase service, being this dimension related to two properties: the consumer's judgment of the quality of the service and the consumer's evaluation of the interaction experience concerning the service received (Crosby, Evans and Crowles, 1990; Homburg and Giering, 2001; Evanschitzky and Wunderlich, 2006; Ho, 2009; 8 DIGITAL ECONOMY & INNOVATION JOURNAL DIGITAL ECONOMY & INNOVATION JOURNAL / STRATEGY & INNOVATION Vol. 2 - 2023 - ISSNe 2792-8721 Yee, Yeung and Cheng, 2010; De Cannière, De Pelsmacker and Geuens, 2010; Dagger and David, 2012; Han Bae, 2012; Ou et al., 2014; Hunneman, Verhoef and Sloot, 2015). According to Homburg and Giering (2001), all three dimensions have a positive influence on the consumer. By way of summary, we will define satisfaction as a postchoice valuation judgment concerning a specific purchase decision. From this perspective, satisfaction is the consequence of a cognitive and affective process and a value judgment based on an accumulated experience with products or services, and is related to the product, the purchase process, and the after-sales service (Homburg and Giering, 2001). Thus, a customer may leave a store dissatisfied because he does not have the product he needs at that precise moment, if he has to wait a long time to be served, if he is not given enough time and does not receive the explanations he would like, if the product is too expensive, or if he is offered a white or unknown brand product instead of the brand he is used to. Figure 2. Value-Satisfaction-Loyalty Scheme Source: own elaboration 9 Enrique Carvajal Zaera et al. RESEARCH ARTICLE - Value, satisfaction and loyalty in the retail industry: A theoretical approach to loyalty SATISFACTION AND LOYALTY: THEIR COMPLEXITY AND ASSOCIATION Having pointed out the relationship between value and satisfaction, we will now analyze the relationship between satisfaction and loyalty. There is a large body of literature on the relationship between satisfaction and loyalty, which can be divided into three groups. The first of these refers to studies that have been based on the assumption of a linear relationship between satisfaction and loyalty (Woodside, Frey and Daly, 1989; Bitner, 1990; Halstead and Page, 1992; Rust and Zahorik, 1993; Biong, 1993; Taylor and Baker, 1994; Anderson, Fornell and Lehmann, 1994; Rust, Zahorik and Keiningham, 1995; Hallowell, 1996; Homburg and Giering, 2001; Evanschitzky and Wunderlich, 2006; Ho, 2009; Yee, Yeung and Cheng, 2010; De Cannière, De Pelsmacker and Geuens, 2010; Dagger and David, 2012; Han Bae, 2012; Ou et al., 2014; Hunneman, Verhoef and Sloot, 2015). The second group brings together several authors who have generated theoretical and empirical evidence for the existence of a more complex structure in the relationship between satisfaction and loyalty. The authors in this group conclude that there are high and low levels of satisfaction and that these levels would have to increase the probability that the consumer reacts in some direction, towards satisfaction or dissatisfaction. Thus, at medium satisfaction levels, consumers may enter the indifference zone, where satisfaction level has little impact on consumer loyalty (Finkelman and Goland, 1990; Finkelman, Cetlin and Wernner, 1992; Homburg and Giering, 2001; Yee, Yeung and Cheng, 2010; De Cannière, De Pelsmacker and Geuens, 2010; Dagger and David, 2012; Han Bae, 2012; Ou et al., 2014; Hunneman, Verhoef and Sloot, 2015). Finally, the third group of authors examines the existence of factors that moderate the relationship between satisfaction and loyalty, such as age, income level, shopping environment, and variety sought by the consumer (Bloemer and Kasper, 1995; Homburg and Giering, 2001; Noble, Griffith and Adjei, 2006; Yee, Yeung and Cheng, 2010; De Cannière, De Pelsmacker and Geuens, 2010; Dagger and David, 2012; Han Bae, 2012; Ou et al., 2014; Hunneman, Verhoef and Sloot, 2015). All this leads us to think that, once customer satisfaction has been achieved, there is a direct relationship between satisfaction and loyalty, but the satisfied consumer will not always be loyal; it will depend on the level of satisfaction and moderating factors. For example, in the Australian market, around 65% of customers left brands they were loyal to since other more economical brands appeared. Besides, 92% of Australian customers feel more attracted to brands offering a loyalty program (B&T, 2022). The term loyalty is often misused. The fact that a customer buys again from the same store does not imply loyalty. It is, therefore, convenient to differentiate between mere retention and loyalty (Morgan and Hunt, 1994; Gundlach, Achrol and Men - tzer, 1995; Sanchez and Moreno, 2003; Molina et al., 2009; Lu, P. H. and Lukoma, 2011; Hino, 2014; Correia Loureiro, Miranda and Breazeale, 2014). Research on service marketing considers service quality as the main generator of consumer loyalty (Cronin and Taylor, 1992; Zeithaml, Berry and Parasuraman, 1996; Zeithaml, 2000; Molina et al., 2009; Lu, P. H. and Lukoma, 2011; Hino, 2014; Correia Loureiro, Miranda and Breazeale, 2014). According to Hill and Alexander (2000), in the manual on customer satisfaction and loyalty assessment, retention occurs when the customer, despite being dissatisfied with what they receive in their usual store, returns to buy because of: • Being a one-stop store and having no other option where to shop. Thus, in an isolated village or town where there is only one gas station, customers can continue to shop even though their degree of dissatisfaction is very high. These are hostage customers. 10 DIGITAL ECONOMY & INNOVATION JOURNAL DIGITAL ECONOMY & INNOVATION JOURNAL / STRATEGY & INNOVATION Vol. 2 - 2023 - ISSNe 2792-8721 •Out of habit, because it is the norm. • Because of the cost of switching, i.e., the inconvenience, insecurity, time, distrust, etc., that switching supplier entails for the customer. •Because of the price or some kind of discount or offer. In all these cases, the arrival of a competitor that offers the customer what he or she is looking for, or very high levels of dissatisfaction, can lead the customer to make the switch. A study conducted by the Chicago-based marketing agency Frankel in late 1998 (Brookman, 1998b) confirmed this point. The research was carried out on a sample of 3,228 families and analyzed the incidents that occurred during the act of purchase. For this purpose, three types of incidents were differentiated: (1) Critical: those negative experiences as a result of which the customer would think long and hard about returning to the establishment, probably leaving it; (2) Marginal: those experiences that, despite being unsatisfactory, would not affect whether the customer would return to the establishment or not; (3) Finally, satisfactory: positive and adequate experiences that would always make the customer return. These three types of incidents must be defined, specified and classified by each company that offers the service, so we take as an example the specification of Atlassian, an Australian software company that develops products for software developers, project managers, and other software development teams. They classified as (1) Critical incidents all those related to confidentiality, where privacy has been violated or customer data lost. (2) Marginal incidents are, for example when the public service is not available to a subset of customers, or it significantly affects essential functionality (e.g., git push, ticketing...). And finally, (3) Satisfactory incidents are those related to small annoyances for customers with alternative solutions or decreased performance of use. (https://www.atlassian.com/ es/incident-management/kpis/severity-levels). The results revealed that more than 35% of the participants had experienced a marginal or critical incident in their act of shopping. And 10% confirmed that they would change stores after a critical incident. Other findings from the study showed that the purchase ratio dropped by half after a critical incident versus a satisfactory one. Brookman (1998), with these data, demonstrates that: 1) negative experiences in the act of purchasing are more frequent than desirable; 2) when a customer is retained and not loyal, it is easy for him to decide to change supplier when faced with a high level of dissatisfaction (the so-called critical incidents); and 3) when the retained customer leaves the establishment, not only does the level of his purchases drop, but it also adversely affects the negative references he makes about the establishment in his circle of influence. Therefore, defining loyalty is not a simple task, since different approaches have emerged over the years. For example, Frank (1967) and Tucker (1974) based the concept strictly on repeat purchases. This concept was too simple and does not contemplate multidimensionality in the construct of loyalty (Kumar and Shah, 2004; Molina et al., 2009; Lu, P. H. and Lukoma, 2011; Hino, 2014; Correia Loureiro, Miranda and Breazeale, 2014). 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