Effects of Service and Communication Initiatives on Retail Grocery Consumers' Loyalty.

Abstract

As retail chains expand, the outlets' physical attributes (for example, convenient locations) and general retail offerings (for example, merchandise price and quality) lose their discriminating power. Could consumers, then, use services to differentiate between retailers? A survey of consumers identifies service activities and communication initiatives as prime determinants of retail loyalty. The implications for retailers facing similar environmental and competitive circumstances are discussed. Suggestions for further research are advanced and an invitation for cooperative investigation is extended.

For many years, Singapore has been promoted and has come to be perceived as a shopper's paradise for both residents and visitors. Its wide range of local and imported products has turned the island nation into a "retail destination" for travelers and a competitive shopping market for local residents turning the city-state into a "blending pot" for goods- and service- based products. Singapore also offers a unique blend of eastern and western values, creating an ideal site to research issues of interest to international marketers and retailers. For instance, in Singapore, consumers may shop at traditional (neighborhood wet markets), non-traditional (national and international supermarkets), online, and at foreign-located (Malaysia is two kilometres away [Piron, 2000(a)]) outlets to purchase groceries.

With respect to non-traditional grocery outlets, local shoppers benefit from an increasingly competitive retail environment. Two local chains, NTUC FairPrice (63 outlets) and Cold Storage Supermarket (20 outlets), compete with foreign-controlled retailers: Hong Kong-based Park-n-Shop (22 outlets) and French hypermarket Carrefour (one megastore). In 1998, Tops initiated on-line grocery shopping with the world's first nationwide broadband network.

While small in size, the city-state stands tall as far as service and service quality are concerned. Also, and maybe because overall activities may seem somewhat less plentiful than elsewhere, most citizens and residents alike have made shopping a primary activity, a focus of many conversations. The local culture also supports contests of all sorts. Recently (Straits Times, January 20, 2001), an announcement was made that "[S]hoppers [were] to vote for [the] best supermarket chains." Chains would be evaluated on dimensions such as "widest range of food products, widest range of nonfood products, most courteous and helpful service, and most enjoyable shopping experience." This study is timely.

In the local context, grocery shopping in Singapore is equivalent to an immersion within a multicultural environment. Retailers offer products from Asia and the world. Grocers sell fresh and dry products, along with canned goods, and supermarkets also offer live seafood products. Shoppers of diverse races rub elbows, push and shove, standing eventually nicely in line at the register. Grocery shopping is often done as a family but, often, foreign maids do the shopping alone or with some of the employing family's children. While price haggling is common at wet markets, prices are fixed at supermarkets, as in other countries.

With three major races (Chinese, Malays and Indians) along with a sizable crowd of expatriates, and many religions, Singaporean shoppers have plenty of opportunities to buy special or "seasonal" items. Grocery stores and supermarkets follow the many holidays with appropriate displays and banners, followed by after-holiday sales.

Because of Singapore's geographical constraints, grocery stores and supermarkets are plentiful and highly visible. Combining the many holidays referred above with the multiplicity, and thus highly competitive environment, of retail outlets and supermarkets make Singapore a market that always seems to have sales, as discussed in other research (Marshal 2000; Piron 2000).

Such a highly competitive environment calls for intimate understanding of the retail situation, and what stimulates consumer loyalty and leads to a number of questions. First, which attributes do shoppers use to discern grocery outlets? Do shoppers' store perceptions correlate with actual buying behaviour? How is service-based differentiation used and should it even be considered (that is, most grocery shopping has come to be expected as self-serve: would offering dietary advices, clear price and quality comparisons, or other personal services be a source of competitive advantage in this highly competitive industry)? Can this research benefit retailers elsewhere? To improve readers' appreciation of such questions, we first discuss customer loyalty.

Literature Review

Lewison (1997) sees customer loyalty as inducing success; delighted customers communicate enthusiastic word-of-mouth. Later, Kotler and Armstrong (1996) suggests that strategic plans translate into development, maintenance, or enhancement of customers' loyalty.

Definition and Conceptual Framework of Customer Loyalty

Many definitions of the phenomenon have been advanced. We retain Dick and Basu's (1994) conceptualisation of customer loyalty since it focuses on developing a sustainable, marketing-based competitive advantage. Such a focus is characteristic of the Singapore retail environment and primordial in today's customer-centered industries.

Dick and Basu's (1994) framework of customer loyalty is presented in Figure 1: it conceptualises loyalty as the relationship between relative attitude toward an entity (product/service/brand/store) and patronage behaviour. Cognitive, affective, and behavioural components of attitude contribute to loyalty.

Relative Attitude-Behaviour Relationship

As generally agreed, attitude is viewed as an appraisal function. Relative attitudes likely translate into strong indications of repeat patronage. Crossclassifying relative attitudes and patronage (high and low levels for each) leads to the four specific loyalty conditions (Figure 2) discussed below.

Figure 2: Four Specific Conditions
Related to Loyalty
                         Repeat Patronage
                         High              Low
                   High  Loyalty           Latent
                                           Loyalty
Relative Attitude
                   Low   Spurious          No
                         Loyalty           Loyalty
Source: Dick and Basu, 1994

No Loyalty: Low relative attitude and low repeat patronage signal an absence of loyalty (Dick and Basu, 1994). This occurs with recent introduction and/or inability to communicate distinct advantages, as well as when competing brands are indistinct.

Spurious Loyalty: Describes a low relative attitude and high repeat patronage and is characterised by non-attitudinal influences on behaviour. It is similar to inertia (Robertson, 1976) when consumers perceive little brand differentiation in a low involvement categories and repeat purchases on situational cues, such as familiarity.

Latent Loyally: High relative attitude and low repeat patronage reflect latent loyalty. Consumers may display high relative attitudes toward a particular outlet, but patronise other stores that offer promotions.

Loyalty: Clearly the favoured situation. Loyalty signifies a favourable correspondence between relative attitude and relative patronage.

Store Loyalty

A store loyal customer prefers and visits the same store to purchase certain merchandise. Thus, the retailers' objective is to increase customers' store loyalty. However, as most consumers shop at a few stores for similar merchandise, sustaining inclusion in customer's consideration sets might prove more reasonable than developing absolute loyalty. Convenient location, complete assortments, low stockouts, fidelity rewards and superior service enhance inclusion in consumers' consideration sets (Lynch, 1995).

Customers benefit from loyalty too, favoring heuristics, such as readymade shopping decisions, to simplify low involvement decision-making. So, as needs arise, consumers may activate the simpler decision node: "I will return to the same store." Such a heuristic further reinforces the consequence of consideration set inclusion.

Consumer Decision Process: Store Choice

Understanding why consumers patronise one store over another is important. Monroe and Guiltinan (1975) proposed a sequence of effects leading to store choice, and household and buyer characteristics that influence perceptions and importance of store attributes. Efforts to influence store choice and maximise in-store sales are correlates within a retail marketing strategy, a distinction that many models fall to convey. Later, Hansen and Deutscher (1978) designed a thorough, but bulky (41 attributes), store selection tool.

We used focus group interviews to try to simplify and update the consumers' store selection process. Our panel of 20 consumers identified nine attributes that are discussed below, along with their influence on store loyalty.

Convenience

Convenience may affect customer loyalty: 20 per cent of Keaveney's (1995) respondents identified store location (accessibility), operating hours, and time waiting to be served as inconveniences. Earlier, Huff (1964) identified location accessibility as one of the most common variables affecting store choice decisions. Later, Lindquist (1974) offered three types of convenience: convenience-general, location convenience and parking. In this research, we evaluate the significance of convenience factors on store patronage decisions.

Store Image

As retailers find it harder to differentiate their business solely on the basis of merchandise, price, promotion and location, the image a store creates can offer a unique position. A store image is the store's personality -- how the consumer sees and feels about the store, his/her overall attitude toward the store -- thus a competing tool. Darden (1983) and Barker, Grewal and Parasuraman (1994) found a high correlation between perceived store image and patronage intentions. Thus, as consumers tend to match pictures of themselves with the stores they patronise, a unique image is important.

Store Atmospherics 

Store atmosphere is the total sensory experience created and manipulated by the store. Such ambiance may influence consumers' patronage decision (Kotler, 1973), providing informational cues about merchandise and service quality, and stimulating consumption. Appealing atmospheres use cues that cater to the consumer's senses (Lewison, 1997).

Store Design

A retail store is an exhibit, hinting the shopper at available products and services (Pegler, 1997). Design elements are functional and/or aesthetic in nature. Functional store elements include layout of store sections and traffic aisles, in-store visual presentation of merchandise, retail displays, graphics and signs, store fixtures and equipment. Aesthetic elements refer to architecture, colour, materials, and style.

Price of Merchandise

Keaveney (1995) identified price as affecting customer-switching behaviour. Pricing issues related to customers' loyalty include prices exceeding internal references, and price increases. Unfair (for example, customer feels cheated or believes that the price is inequitable) and deceptive (for example, final price exceeds a quoted price) pricing practices may stir customers to switch loyalty.

Variety and Assortment of Merchandise

Variety refers to the number of product categories offered, and outlets with a large variety are said to have breadth. Stores carry wide varieties to meet the broad needs of targeted customers.

Assortment is the number of different items, Stock Keeping Units (SKUs), within a merchandise category. Sizes, brands and variants usually define each SKU in a supermarket. Stores with large assortments are said to have depth. For example, category killers offer large assortments in limited variety. Wide or narrow, deep merchandise strategies encourage customer loyalty (McGoldrick, 1990).

Quality of Merchandise

Quality influences value determination and refers to a product's performance relative to its requirements. Perceptions of quality follow changing customer requirements. Therefore, improving consumer-perceived product quality may effectively increase customer satisfaction and product sales (Lynch, 1995).

Relationships

With increasing competition and the rising costs of attracting new customers, retailers creatively stimulate relationship-building through reward programmes, using financial, social, or structural customer value-building approaches. Financial benefits offer added incentives through sales promotions, discounts. When stores foster stronger links with customers, understand their needs and wants, and personalise their offerings, they expand social benefits. In turn, social benefits bear structural ties, developing long-term bonds that are mutually beneficial to retailers and customers.

Customer Service

Customer service is also linked to customer satisfaction loyalty. Lewison (1997) defines customer service as "all the features, acts and information that augment the customer's ability to realize the potential value of a core product or service. It involves what extras the retailer should provide in support of the firm's primary offering of goods and/or services."

Customer service is equally concerned with how extra, and sometimes complementary, services (for example, delivery and installations, wrapping and packaging, alteration and repairs) are performed. For instance, Keaveney (1995) defines service encounters as the personal (that is, friendly, trustworthy, dependable, etc) interactions between customers and store employees. Further, Fisk (1981) divides service evaluation into pre-consumption, consumption and post-consumption stages. Initially, peripheral performance, such as pleasantness and cleanliness, is paramount (Bitner, 1992). At the second stage, customers gauge perceived expected performance. Lastly, the core service (for example, payment procedures, promptness of required checkout procedures and after-sales service) having been delivered, customers assess the overall service. Service encounters have the potential to significantly influence customer loyalty.

Theoretical Framework and Hypotheses

From our discussion of the literature on store patronage and loyalty, and on service encounters, several observations seem warranted. First, the bulk of the literature focuses on North American, and occasionally European, situations. Second, altogether, service research has ignored the grocery retail context, even though grocery shopping may be the most frequent service encounter for consumers. Finally, the usefulness of retail patronage and loyalty attributes lists appears suspect, varying from less than 10 (Keaveney, 1995) to more than 40 (Hansen and Deutscher, 1978).

Such observations have important implications to the present study. First, some conversion from the American and occasional European experiences is required. Second, in the absence of an established retail service model, our investigation remains exploratory. These implications underscore the advantage of using Singapore as a research ground. The city-state is a multicultural society that has successfully incorporated European and American values, especially in the retail environment. For example, local shoppers have access to American franchise outlets such as McDonald's, Burger King, Kentucky Fried Chicken, and European chain stores such as Carrefour, IKEA, Marks & Spencer. This, along with regionally- and locally-owned retail outlets like Takashimaya from Japan, or CK Tang, NTUC FairPrice and Cold Storage from Singapore. In other words, retail research conducted in Singapore could very well benefit retail executives from other parts of the world.

Initial Approach

To refine the constructs to be examined, and to reduce potential threats to face validity, several steps were taken. First, a focus group of 15 shoppers was asked to consider the following question: "With respect to your supermarket shopping experience, which attributes/characteristics do you consider when selecting a supermarket?" The responses were compared to two lists identified in the literature review.

Consumers from our focus group identified attributes strikingly similar to those recorded in a survey of 3,000 European shoppers (The Euromonitor, 1986) and by Lindquist's (1974) American consumers (see Appendix A). The seven attributes identified by the local panel encompass previously identified dimensions and, as a more compact set, offer an attractive trade over builder lists without compromising the scope of the study. The attributes are location convenience, store image, price of merchandise, variety and assortment of merchandise, quality of merchandise, advertising and promotion and service. Again, the seven attributes above were identified as the most important factors by a focus group of Singaporean shoppers when looking for a supermarket.

Questionnaire Design

We used a structured-undisguised questionnaire where questions are presented with exactly the same wording and in exactly the same order to all respondents when collecting data. Structure refers to the degree of standardisation imposed on the questionnaire, while disguise refers to the amount of knowledge communicated to the respondents about the purpose of the study (McDaniel and Gates, 1998).

There are four sections in the questionnaire. The first section covered the general attributes of supermarkets where, with a five-point itemisedratings scale, consumers indicate the importance they attach to each of the seven attributes. The second section aimed to determine consumers' shopping behaviour at supermarkets; respondents indicated their degree of agreement or disagreement with scenario statements about the store attributes. The next section aimed to identify respondents' grocery shopping habits. Finally, the last section tapped respondents' demographic profile.

A pretest was conducted on 20 consumers before the administration of the actual questionnaire. Necessary adjustments and improvements were then made.

Research Sample and Data Collection Method

The survey was conducted outside three high-traffic locations chosen for their vicinity to supermarkets, and where one out of every 10 passers-by was systematically invited to participate in the survey. Over two weekdays and two weekend days, 200 consumers were surveyed [1], resulting in 180 usable questionnaires. In spite of the often-mentioned shortcomings of such a convenience sample, we are confident that the technique allowed us to tap opinions of retail outlets' true audiences, that is, the population at large.

Hypotheses

The following eight hypotheses were framed from the reviewed literature on consumers' store loyalty and a pre-test. Since the relevant issues were identified in the previous discussion, in this section, we merely state the hypotheses with a brief reference to the previous research from which they stem.

Based on Keaveney's (1995) finding that convenience is one factor that affects customer-switching behaviour,

H1: Convenient store location is a significant determinant of store patronage loyalty.

Building on Darden's (1983) finding that store image and patronage intentions are correlated,

H2: Favourable store image is a significant determinant of store patronage loyalty.

Since price is a factor that affects customer-switching behaviour (Keaveney, 1995),

H3: Lower merchandise prices is a significant determinant of store patronage loyalty.

According to McGoldrick (1990), deep product assortments build customer loyalty. Therefore,

H4: Deep product assortments are a significant determinant of store loyalty.

Lynch (1995) identified quality as supporting customer retention. Thus,

H5: Higher quality of merchandise is a significant determinant of store loyalty.

In keeping with Kotler and Armstrong (1996), reward relationships help to create long-term bonds with customers, and so

H6: Advertising and promotions are a significant determinant of store loyalty.

Since customer service is used to achieve customer satisfaction and to maintain customer loyalty (Lewison, 1997),

H7: Consumers' perceived quality of provided services is a significant determinant of store loyalty.

A summary hypothesis to test the significance of the regression model:

H8: The seven independent variables significantly explain the variance in store loyalty.

Findings and Limitations

Using an analysis of variance procedure (Table 1), three of the seven variables hypothesised were found to be statistically significant ([alpha][less than].05). In keeping with both retail industry axiom and prior academic research, proximity of store location is a significant determinant of store loyalty and patronage. Thus, Singaporeans "fit" the behavioural model developed in other countries and cultures. The service [2] level offered by the stores also significantly correlates with store loyalty. This finding, coupled with the lack of statistical significance achieved by all three merchandise-related variables, evidences the fundamental importance of customer-support activities. In a highly competitive retail environment, Singaporean shoppers have a wide range of quality merchandise available. Thus, retail service(s) may be a prime determinant of story loyalty.

The data identified advertising and promotion activities as significantly related to store loyalty, highlighting the importance of consistent communication in developing and maintaining a relationship with customers. In other words, while location and service may be the foundations of patronage, ongoing communication stimulates top-of-mind positioning and fosters loyalty.

The pattern of non-statistically significant variables is also noteworthy. Contrary to expectations developed from the literature, introspection and intuition, each of the three merchandise-related hypotheses failed to achieve statistical support. The "store image" hypothesis was not supported, either. Such findings are somewhat puzzling and may lead us to ponder whether consumers might be reluctant to admit being swayed by emotional rather than rational factors. It could also be that dimensions of store image are confounded in other variables in the study.

The whole of the independent variables was hypothesised to be predictive of the dependent variable, store loyalty. Regression analysis supports the hypothesis: Approximately 50 per cent of the variance in the store patronage behavior was accounted for by location, service and promotion. (Interestingly, when all of the variables were included, the portion of variance explained only rose to 60 per cent.)

While the pattern of results seems both statistically interpretable and operationally relevant to retailers, several limitations merit discussion. First, while the Singapore retail environment shares similarities with others, generalisations should be extended with prudence: Retailers should initiate appropriate, context-specific research. Second, as initiated in the discussion section that follows, factors that underlie the observed pattern of results should be investigated. Finally, time, location, and socio-economic parameters of any shopping behaviour investigation may produce study-specific results. Reliability should be assessed through longitudinal analyses.

Discussion and Critique

For retail management and decision-makers, it is often helpful to know whether subsets of respondents differ in their perceptions of the phenomenon under investigation. Such knowledge can shape the pace and form for which seemingly recommended changes are made. Table 2 identifies the four demographic and loyalty relationships.

The patterns revealed in the data suggest a number of implications. Using the demographic information provided by the respondents to better understand their loyalty, we observe the following. Store loyalty appears "robust" as differences in income and education do not generate different levels of loyalty. Second, retailers need to consider the higher loyalty displayed by single male consumers, compared to females and married shoppers. Traditionally, female consumers, married or not, have taken the responsibility for grocery shopping where they may display expertise over male consumers (Hwang, 1994; Piron, 2000b; Hansen and Deutscher, 1978; Polegato and Zaichkowsky, 1994). Female consumers may feel justified to sometimes trade-off habitual retail patronage for temporary price savings, convenience, and other factors. Thus, they appear to be less store loyal than male shoppers. This finding confirms the importance to retailers of well-publicised "ELP," everyday low price policies.

Importance rankings provided by the respondents also exhibited non-uniformity when analyzed using ANOVA, followed by Bonferroni multiple comparison of means tests. Specifically, rankings for the importance of merchandise dimensions (price, quality, assortment) were the highest with means upwards of 4.0 on a five-point scale. Location convenience, store image and service formed a lower importance rank group (means between 3.5 and 4.0). Advertising and promotion formed their own, third, importance rank.

However, when behaviour rather than importance rank was assessed with store patronage loyalty, we observed that none of the merchandise variables were statistically significant. An explanation for this may be that respondents have an a priori assumption that merchandise assortment, quality, and price are at an acceptable level, due to competitive pressure(s). This expectation for grocery stores may be based on experience, retailers' and word-of-mouth communications. Alternatively, when asked directly about what is important is selecting a grocery retailer, respondents would seek to appear rational, stating that (of course) product quality, prices, and mix are more important than other factors. However, when behaviour is assessed, location, service, and advertising/promotion are actually strong determinants of retail patronage.

Concluding Invitation

This study attempts to move beyond descriptive lists of store attributes when discussing retail patronage. In doing so, we have encountered a Singaporean mind- and behaviour-set that, we believe, blends Asian pragmatism, western predictability, and Chinese feelings of family and neighbourhood business loyalties. The resulting shopping decision phenomenon, while intellectually interesting with its complexities and subtleties, is difficult to unravel both statistically and operationally.

To generate more momentum, we invite other scholars and researchers to join in the task. Combined talents may well yield innovative and strategic insights into how best to increase store loyalty in the grocery and related industries. Other academics and practitioners may be able to contribute relevant theory, databases for historic assessments, algorithims, metrics, and subject pools for longitudinal studies. But whatever the resource strengths and limitations may be, we call for participation. Will you join us?

(1.) Surveys were conducted at Westmall (Bukit Batok Central), Bishan Junction 8 and Somerset MRT Station.

(2.) As noted in Appendix A, the attribute areas are service-general, salesclerk service, presence of self-service, ease of the merchandise return, delivery service, and credit policies of the store.

(3.) number in parenthesis indicates the number of categories from which respondents could choose.

References

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Table 1: Anova-Determinants of Store
Loyalty
Hypotheses and Variables      Significance
H1 Location                       .000
H2 Store Image                    .326
H3 Merchandise Price              .544
H4 Merchandise Assortment         .902
H5 Merchandise Quality            .266
H6 Service                        .000
H7 Advertisement & Promotion      .004
Table 2: Variance in Demographics and
Loyalty
Demographic         Observed          Interpretation
Characteristic      Condition
Gender (2) [3]      Unequal variance  Females less loyal than males
Marital Status (2)  Unequal variance  Singles more loyal than married
Education (3)       Equal variances   No difference in store loyalty
Income (5)          Equal variances   No difference in store loyalty

Appendix A: Patronage and Loyalty Attributes of European and American Shoppers

A. Things Liked About Main Grocery Store (Euromonitor, 1986)

1. Clean and Hygienic 

2. Good value

3. Cheap/low prices

4. Spacious

5. Good fresh meat

6. In-store bakery

7. Range of non-foods

8. Extensive range

9. Good parking

10. Opens late

11. Easy walking distance

12. Selection of frozen food

13. Own label products

14. Good fresh fish

15. Know the layout

16. Quality of foods

17. Good fresh fruit/vegetables

18. Convenient for transport

19. Efficient checkout service

20. Chilled/ready foods

21. Carry out service.

B. Component Attributes of Store Image
(Lindquist, 1974)
Merchandise       The five attributes considered here are
                  pricing, assortment, quality, styling or
                  fashion, and guarantee. Merchandise
                  itself is taken to mean the goods and
                  services offered by a retail outlet.
Service           The attribute areas are service-general,
                  salesclerk service, presence of
                  self-service, ease of merchandise
                  return, delivery service, and credit
                  policies the store.
Clientele         Social class appeal, self-image
                  congruency, and store personnel are
                  included as attributes of this factor.
Physical          This attribute category covers the
Facilities        facilities available in a store to
                  include such things as elevators,
                  lighting, air conditioning, and wash
                  rooms. It may also be used by a customer
                  to include store layout, aisle placement
                  and width, carpeting, and architecture.
Convenience       Three factors have been identified that
                  fit into this classification, namely,
                  convenience-general, location
                  convenience, and parking.
Promotion         With this summary grouping, one finds
                  sales promotion, advertising, displays,
                  trading stamps, and symbols and colours.
Store             This attribute category refers to a
atmosphere        customer's feeling of warmth, acceptance
                  or ease.
Institutional     Within this grouping is the
Factors           conservative-modern projection of the
                  store, and also the attributes of
                  reputation and reliability enter the
                  picture.
Post-Transaction  This classification of attributes would
Satisfaction      include such areas as merchandise in
                  use, returns and adjustments. In
                  essence, was the customer satisfied with
                  his purchase and with the store?