Australian Journal of Commerce Study SCIE Journals Australian Society for Commerce Industry & Engineering www.scie.org.au 12 Driving Forces of Supermarket’s Consumer Trust and Loyalty: An Empirical Study in Malaysia Muhammad Khalilur Rahman (Corresponding author) Graduate School of Business, Faculty of Business and Accountancy, University of Malaya 50603 Kuala Lumpur, Malaysia Tel: +60103626718, E-mail: [email protected]Abdullah-Al-Mamun Faculty of Economics and Management Sciences, International Islamic University Malaysia 53100 Gombak, Kuala Lumpur, Malaysia Abstract This paper is assessing and developing the customer‘s trust and loyalty of retailing Giant supermarket in Malaysia. The study tries to elaborate an instrument to measure the customer‘s trust and loyalty in this context. A total of 137 participants are conducted using structural equation modeling (SEM) technique with Partial Least Square (PLS). The findings revealed that service quality and brand image have significant relationship with customer trust and loyalty, and overall customer trust has positive impact on loyalty in supermarket. In addition, a customer benefit has the interaction effect on relationship between service quality and trust, and brand image and trust. The paper is concluded with an importance performance analysis and a summary of the main results of the study. Keywords: Service quality, Brand Image, customer trust and loyalty, Customer benefits, Supermarket, Malaysia 1. Introduction Giant hypermarket is a major supermarket and retailer chain in Malaysia (Rahman, Jalil, Robel, & Abdullah-Al-Mamun, 2014a). It is a subsidiary of Dairy Farm International Holdings (DFI). Its headquartered is in Shah Alam, Selangor. The study of consumer‘s trust and loyalty is an important issue for Giant retailing supermarket. In the modern marketing strategy, customer loyalty is considered as a strategic tool in assessing and developing customer satisfaction and promoting customer loyalty (Saili, 2012; Rahman & Jalil, 2014b). Customer loyalty program has been increasingly concerned interests in both marketing academics and practitioners (Leemheer, Heerde, Bijmolt, & Smidts, 2007; Rahman, Jalil, Robel, & Abdullah-Al-Mamun, 2014b). In 2006, the total customer loyalty programs enrollments were increased 1.5 billion in the United States. Similarly, today customer loyalty is increasing exponentially among Malaysian consumers in retail business. The development speed of customer loyalty in retail business in developing countries is faster than that in developed countries due to the rapid growing of the economy. Although, loyalty programs are widely used in retail all over the world, and retailers have indeed invested a lot of money into loyalty programs, many loyalty programs do not bring corporate managers their expected customer loyalty. Retailers in United Kingdom such as Safeway gave up loyalty programs and save company $75 million per annum. At the same time, other retailers such as E. Leclerc in France still invest millions of dollars per year to implement and promote customer loyalty programs. Furthermore, there is still an academic debate about the effect of retail loyalty programs on customer loyalty. Some of extant empirical study have proposed loyalty programs in retailing had positive impact on customer purchasing behavior (Magi, 2003; Lewis, 2004; Taylor and Neslin, 2005; Meyer-Waarden, 2007; Ho et al., 2009; Omar et al., 2011). Several investigators found that loyalty programs in retailing did not generate any impact (Meyer -Waarden, 2006; Leenheer & Bijmolt, 2008). These two opposite conclusions hinder the proper evaluation of loyalty programs; need to understand these programs.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Australian Journal of Commerce Study
SCIE Journals
Australian Society for Commerce Industry & Engineering
www.scie.org.au
12
Driving Forces of Supermarket’s Consumer Trust and Loyalty: An Empirical Study in Malaysia
Muhammad Khalilur Rahman (Corresponding author)
Graduate School of Business, Faculty of Business and Accountancy, University of Malaya
Faculty of Economics and Management Sciences, International Islamic University Malaysia
53100 Gombak, Kuala Lumpur, Malaysia
Abstract This paper is assessing and developing the customer‘s trust and loyalty of retailing Giant supermarket
in Malaysia. The study tries to elaborate an instrument to measure the customer‘s trust and loyalty in
this context. A total of 137 participants are conducted using structural equation modeling (SEM)
technique with Partial Least Square (PLS). The findings revealed that service quality and brand image
have significant relationship with customer trust and loyalty, and overall customer trust has positive
impact on loyalty in supermarket. In addition, a customer benefit has the interaction effect on
relationship between service quality and trust, and brand image and trust. The paper is concluded with
an importance performance analysis and a summary of the main results of the study.
Keywords: Service quality, Brand Image, customer trust and loyalty, Customer benefits, Supermarket,
Malaysia
1. Introduction Giant hypermarket is a major supermarket and retailer chain in Malaysia (Rahman, Jalil, Robel, &
Abdullah-Al-Mamun, 2014a). It is a subsidiary of Dairy Farm International Holdings (DFI). Its
headquartered is in Shah Alam, Selangor. The study of consumer‘s trust and loyalty is an important
issue for Giant retailing supermarket. In the modern marketing strategy, customer loyalty is considered
as a strategic tool in assessing and developing customer satisfaction and promoting customer loyalty
(Saili, 2012; Rahman & Jalil, 2014b). Customer loyalty program has been increasingly concerned
interests in both marketing academics and practitioners (Leemheer, Heerde, Bijmolt, & Smidts, 2007;
Rahman, Jalil, Robel, & Abdullah-Al-Mamun, 2014b). In 2006, the total customer loyalty programs
enrollments were increased 1.5 billion in the United States. Similarly, today customer loyalty is
increasing exponentially among Malaysian consumers in retail business. The development speed of
customer loyalty in retail business in developing countries is faster than that in developed countries due
to the rapid growing of the economy. Although, loyalty programs are widely used in retail all over the
world, and retailers have indeed invested a lot of money into loyalty programs, many loyalty programs
do not bring corporate managers their expected customer loyalty. Retailers in United Kingdom such as
Safeway gave up loyalty programs and save company $75 million per annum. At the same time, other
retailers such as E. Leclerc in France still invest millions of dollars per year to implement and promote
customer loyalty programs. Furthermore, there is still an academic debate about the effect of retail
loyalty programs on customer loyalty. Some of extant empirical study have proposed loyalty programs
in retailing had positive impact on customer purchasing behavior (Magi, 2003; Lewis, 2004; Taylor and
Neslin, 2005; Meyer-Waarden, 2007; Ho et al., 2009; Omar et al., 2011). Several investigators found
that loyalty programs in retailing did not generate any impact (Meyer-Waarden, 2006; Leenheer &
Bijmolt, 2008). These two opposite conclusions hinder the proper evaluation of loyalty programs; need
to understand these programs.
Australian Journal of Commerce Study
SCIE Journals
Australian Society for Commerce Industry & Engineering
www.scie.org.au
13
Customer loyalty is a key factor for retailers to achieve long-lasting success and sustainable operation
(Rahman & Jalil, 2014b; Rahman et al., 2014a). Currently, researchers have generally recognized
customer loyalty including behavioral dimension and affective dimension. However, most studies in
retailing have analyzed the effects of loyalty programs on customer loyalty only from behavioral
dimension (Berger et al., 2002; Magi, 2003; Leenheer et al., 2007; Rahman, 2014), and thus ignored
the emotional dimension of loyalty. Due to lack of this study, the paper is to explore the effect of
loyalty programs both on behavioral loyalty and affective loyalty. Previous studies on customer loyalty
have empirically confirmed that customer value was a precursor to loyalty in service sector (Woodall,
2003). From a customer point of view, the prerequisite for them to participate in loyalty programs is
that their expected benefits are superior to their expected costs (Mauri, 2003). Hence, retailers aiming
at improving customer loyalty through loyalty programs should ensure that these programs could create
and deliver superior customer value to their customers. Due to the limited resource of firm and the high
costs of creating customer value, it is crucial for firms to investigate the effects of each dimension of
customer value on loyalty and allocate resource accordingly.
In addition, some related investigations have examined the positive relationship between perceived
value of loyalty programs and customer loyalty (Yi and Jeon, 2003; Li et al., 2003; Rahman, Haque &
Jalil, 2014). Customer benefits, service quality and brand image as relationship marketing approaches
to customer loyalty that could improve customer trust and succeed customer loyalty program (Chen,
2010). According to past study it found that service quality, brand image (Jalil & Rahman, 2014) and
customer benefits affect the mediating role of customer trust in loyalty programs. Based on the
conceptual research model and previous study of Malaysian retail supermarket, this paper will examine
the mediating role of customer trust or customer commitment for loyalty programs and analyze the
importance degree of each dimension of customer trust in loyalty programs. This paper develops a
conceptual research model on the assessing and developing customer loyalty programs. Furthermore, it
proposes the hypotheses regarding the mediating variable of customer trust relationship with customer
loyalty (Fig. 1).
Figure 1. Conceptual Model
Giant is operating under the retail industry. Giant‘s mission was always been to offer a wide variety of
products at the lowest possible price. There is a slogan ―everyday low prices, big variety and great
value‖. Although they have low price product but customers are not fully satisfied. They have so many
management problems which are unable to satisfy customers‘ wants and needs. Cleanness and
freshness of products and service quality are very important but their products and services are not
cleanness and freshness. Customers are usually feeling comfort in their shopping. If customers are not
feeling comfort they will not buy regularly but if they feel comfort they will continue to shop in
supermarkets. They do not have well organized pricing system to enable their customers to easily
locate product price. Therefore, service quality is essential for the customer loyalty, if customers are
found any difficulties they can move and shift to other shop. Customers usually come and go out by the
some moment to purchase something from the retail supermarkets. The pricing tag of product is very
important for customers; it is very confusing and problem to customer that there are some of the pricing
tags at the supermarket are not properly pasted on the storage rack and products. Some of the Giant
Supermarket outlets are not properly maintained. These outlets are quite dirty and disorganized. They
Service
Quality
Brand
Image
Consumer‘s
Benefits
Consumer‘s
Trust
Consumer‘s
Loyalty H1a
H2a
H3
H1b
H2b
Australian Journal of Commerce Study
SCIE Journals
Australian Society for Commerce Industry & Engineering
www.scie.org.au
14
have lack of employees‘ benefit, customers‘ benefit and insufficient of customer service counter.
2. Objective of Study Millions of people are interested to shop in supermarket. In Malaysia, many people have middle level
and lower income. They want to buy low cost price products and services. With their low income, they
do not afford to buy expensive products and services. The objective of this paper is: (i) to examine how service quality and brand image may achieve consumer‘s trust and loyalty.
(ii) to determine the moderating effect of consumer‘s benefit between consumers‘ service quality
and trust, as well as consumer‘ brand image and trust.
(iii) to recommend how service quality, brand image, customer benefit and trust may adopt
pragmatic strategy to ensure higher customer loyalty.
People of Malaysia are multicultural, most of the people are not wealthy, many people are poor, but
they are interested to shop in supermarket with lower price and good quality product and services.
Today in Malaysia has many hypermarket and supermarket. They offer lower price product and service
but they are unable to customer trust and loyalty due to inefficiency service quality. Recently
Malaysian retail supermarket is developing their service quality but still now they are not able to
customer loyalty. Specially, Giant retail supermarket should developing good service and lower pricing
strategy in their business strategy. They also should provide high efficiency and good quality service to
poor customers for the customer trust and customer loyalty. This research is very significant since a
few people have done research on this topic to assessing and developing customer loyalty program in
retail supermarket business. This research will help us to test the hypothesis that Giant retail
supermarket provide maximum trust and loyalty to more customers. Finally, this research will help us
to determine whether actually service quality, brand image, customer benefit and customer trust make
more customers satisfied or not. This will be done by collecting primary data through questionnaires as
stated in the methodology of this research and the data will be collected only from the Malaysian
customers. Any strategy is adopted to improve the quality of service, it remains to be examined
whether consumers are satisfied or not. The areas and the factors that are contributing to the
satisfaction or dissatisfaction in services are also unclear, thus making it difficult to identify effective
marketing strategies to maximize customer trust and loyalty in all aspects.
3. Literature Review 3.1 Consumer Loyalty Program
Customer loyalty programs play an important role as a marketing strategy. It is conducted to the
customer satisfaction through repurchase buying behavior. In the retail marketing strategy, a loyalty
program offers the positive motivational influence and reward to its customers with the objective of
assuring more loyal customers to company (Lacey, 2003; Yi & Jeon, 2003; Leenheer et. al., 2007;
Omar, Aziz, & Nazri, 2011; Saili, Mingli, & Zhichao, 2012; Rahman, Haque & Jalil, 2014). It could
association customers with a company and maintains a positive impact in the relationships between
customers and company by various incentives. In the past decade, loyalty programs have been
implemented almost beyond national boundaries. Retailing loyalty program have focused on analyzing
the impact of loyalty programs on the behavior of local customers from a company point of view. For
example, through an investigation of the Swedish customers in department industry, the study by Magi,
(2003) found loyalty programs only had partial impact on customer expenditure. In American retailing,
some researchers have found loyalty programs had positive impact on share of purchase, purchase
amount, revenue and orders of customers (Lewis, 2004; Taylor & Neslin, 2005). However, other
scholars argued loyalty programs did not have any impact on market share, repeat purchase rate,
purchase volume, total purchase expenditure and purchase timing (Meyer, 2007). This debate of
empirical studies demands a thorough solution for the validity of loyalty programs, that is, conforming
whether loyalty programs could really engender and maintain customer loyalty. Superior perceived
effectiveness of loyalty programs is necessary for firms to develop customer loyalty. An effective
loyalty program should be viewed valuable by customers. Service quality and brand equity of customer
loyalty programs depended on forms of rewards, and the relativity between rewards and products or
services. According to study Saili et al., (2012) enriched their study by measuring perceived
effectiveness of loyalty programs through three dimensions: cash value of rewards, probability of
getting rewards and desire for rewards. The study Yi and Jeon (2003) stated that customers perceived
effectiveness of loyalty programs to assess and develop the effectiveness of loyalty programs
Australian Journal of Commerce Study
SCIE Journals
Australian Society for Commerce Industry & Engineering
www.scie.org.au
15
comprehensively. Perceived effectiveness of loyalty programs refers to tradeoff between interests that
customers obtain from loyalty programs and costs that customers pay for participating loyalty
programs.
Many scholars have defined customer loyalty with different concept; most of them explored and
measured customer loyalty from two aspects: loyal behavior and loyal attitude (Saili, 2012, Abdullah et
al., 2012). Customer loyalty may measure from the actual purchasing behavior of customers (Rahman,
Haque & Jalil, 2014). Attitude mainly measures loyalty on the basis of customer preference to specific
product. Purchase behavior is the main component of loyalty which reflects the possibility of
transacting with the same provider again (Jones et al., 2003). Previous studies about customer loyalty
have measured from proportion of purchase (Baloglu, 2002), frequency of purchase and past activities
of consumer (Ho et al., 2009). Actual loyalty between company and its customers is built on the basis
of long-term relationship and emotional connection between them. Customer will pay a strong
attention on retailers if their shopping experience meet their expectation and satisfy their fundamental
needs. Customer loyalty plays an important role in an organization‘s success. Customer loyalty is
defined as a deeply commitment to repurchase the preferred products and services consistently in the
future (Bloemer & Odekerken, 2002). Li & Green (2011) stated that customer loyalty is challenging to
achieve for marketers and to explain by researchers. Customer loyalty is the result of successful
marketing strategy that creates competitive value for consumers (Oliver, 1995; Bloemer & Odekerken,
2002).
3.2 Service quality
Customers‘ satisfaction and dissatisfaction, royalty and retention are conducted with the service quality
of the goods and services of the company (Li & Green, 2011). The customers‘ purchase behavior is
related to the product service that is offered by the company to satisfy their valued customers. Price is
not the primary differentiating factor for consumers, rather they trust on quality services. Consumers
are focused on quality service and findings specialized items. Therefore, company should provide
everyday discounts to the customers for their purchase frequently. Customers‘ evaluations of the
service quality are quite difficult to be developed in the retail marketing strategy. Service quality has a
tangible link to customer‘s trust, as in fact, the consumer‘s trust is represented by the service quality in
one way or another. Service quality has a significant impact to the customer‘s trust which directly
affects the customer‘s loyalty in supermarket.
3.3 Brand Image
Brand image offers a significant perspective on the understanding of consumer decision making (Jalil
& Rahman, 2014). The study by Azevedo & Farhangmehr (2005) found that consumers can decide not
to buy a product or not to shop at a particular store if they feel that the actions are not consistent with
their own perceptions of themselves. They will always need symbols to help them sort out the
complexities of daily life as they use products to express their social identities. Consumers search for
products which have images that are compatible with their perceptions of self-brand image (Jamal &
Goode, 2001). In the retail context, actual self-image congruity as the degree of match between a
shopper‘s actual self-image and a store image, and the ideal self-image congruity is the degree of match
between a shopper‘s ideal image and a store image. Self-image congruity affects the consumer‘s
purchase motivation because people have a motive to behave consistently with their self-perceptions.
They also prefer products with images that match their own self-image. The study by Azevedo &
Farhangmehr (2005) and Yang and Peterson (2004) argue that brand attitudes are the most abstract and
highest level of brand associations.
3.4 Customer’s Trust
Trust is the willingness to rely on an exchange partner (Prasarnphanich, 2007). Trust consists of two
distinct dimensions such as credibility and benevolence. Credibility refers to the extent to which the
buyer or supplier believes that the other party has the required expertise to perform the job effectively
and reliably. Benevolence refers to the extent to which the buyer is genuinely interested in the other
partner‘s welfare and motives to seek joint gain. This benevolence dimension is consistent with the
issue of privacy and security concerns that vendors do their best efforts to protect customers‘ personal
information and prevent any personal losses due to their interaction with the vendors. Trust can be
defined as a willingness to depend on an exchange party when someone has confident to that party. The
study by Abdu et al. (2012) pointed out that trust refers to an advantage received by consumers in long-
term relational exchange with the organization. Many researchers have suggested that trust acts as a
Australian Journal of Commerce Study
SCIE Journals
Australian Society for Commerce Industry & Engineering
www.scie.org.au
16
mediating variables in the satisfaction-loyalty relationship. However, Taylor et al. (2004) stated that
trust acts as a basis of loyalty creation. Trust is a precursor to commitment which eventually will lead
to customer loyalty. Trust plays an important role in creating loyal customer. Customer loyalty plays a
significant role in many businesses. Therefore, if the company can sustain their customer well, the
customers will have less attention to switch to its competitors and keep being loyal to the company and
eventually lead to high profitability. Commitment is defined as an enduring desire to maintain a valued
relationship. It consists of three components such as instrumental component where one party takes
some actions to demonstrate commitment. Attitudinal component signifies an enduring intention by the
parties to develop and maintain the relationship. Finally, the temporal component suggests commitment
in something only over the long term and in a consistent manner.
3.5 Customer benefit
There are plenty of studies on the relationship between firms and customers. However, most of these
studies are investigated from the enterprises perspective. The marketing literature over the past decade
has begun to focus on the motivation and desire of establishing and maintaining long-lasting
relationship between customers and service providers. Customers should perceive the relationship
valuable to stay in a long-term relationship. Besides core benefits, such as product and service quality,
firms should offer additional benefits to their customers, including social, psychological, economic and
other benefits. Many scholars have called these benefits ―relationship benefits‖ and defined this
concept as interests‘ customer perceived from long-term relationship with service provider (Marzo-
Navarro et al., 2004; Vazquez-Carrasco & Foxall, 2006). In this way, benefits customer gaining from
relationship with company has been separated from core service of firms. It stresses the differentiation
between interests provided by company and effectiveness perceived by customers.
In 1995, Berry and Bitner have first explored the dimensions of relationship benefits through
theoretical analysis in consumer service context. Berry suggested that relationship benefits should be
composed of customized service benefits, risk reduction benefits and social benefits; whereas, Bitner
recognized that besides social benefits, relationship benefits should include the benefits which could
simplify personal life and save switching cost for customers. The relationship between customers and
individual sales could bring convenience and better purchase decisions to customers. However, these
studies analyzed only from the level of theory that put forward the three dimensions of relationship
benefits by empirical studies: confidence benefits, social benefits and special treatment benefits.
Confidence benefits refer to a series of psychological factors, which are related to reduction of
customer perceived anxiety and risk after transaction. This type of benefits could not only make
customers trust the service provider but also make providers maintain their commitment to customers
(Gronroos, 2007). Therefore, it has been viewed as a key factor of successful relationship. Social
benefits including sense of belonging, empathy, understanding, familiar, personal knowledge, social
support and even friendship are derived from long-term relationship between employees and
customers, and associated with interpersonal links between them. Special treatment benefits consist of
economic interest customers obtaining from the relationships with firms and the benefits of customized
service, because saving money is the main motive of customer to make relationship transaction.
4. Methodology 4.1 Data Collection
Data was collected of this study through self-administered questionnaires from Malaysian Giant
supermarket consumers in the Kuala Lumpur area of Malaysia. Kuala Lumpur area is the economic
hub and a large portion of population buys their preferred commodities from supermarkets. The study
is concerned with the customer trust enhances the development of customer loyalty in the Malaysian
Giant supermarket context. In this study, male and female customers were selected in both gender since
the perception, customers‘ belief, customers‘ attitudes and level of experience may differ in terms of
customer trust and loyalty. Non-probability sampling mechanism is used in this study since participant
can be selected based on personal judgment (Zikmund, Carr & Griffin, 2012).
4.2 Instrument
Partial Least Squares (PLS) based structural equation modeling technique is used to estimate the
structural model. PLS is well suited in this paper since the constructs are measured by a single item,
and PLS provides accurate estimates of interaction effects (Booker & Serenko, 2007). Data was
collected between November 2013 and February 2014. In this study, 5-point likert scale is used to
understand the level of satisfaction and dissatisfaction of Malaysian supermarkets‘ consumers.
Australian Journal of Commerce Study
SCIE Journals
Australian Society for Commerce Industry & Engineering
www.scie.org.au
17
4.3 Sampling and Response Rate
The original sample size of the study is 190 participants are considered to data analysis representing
response rate 52. 86%. The response rate was also considered acceptable compared to other similar
studies. The study Ho (2008) received 153 completed questionnaires out of 500 questionnaires which
lead to response rate of 30.6%. Therefore, the response rate of 56.57% obtained from this study is still
considered acceptable.
5. Analysis and Discussion 5.1 Demographic Information
The sample included 52% female and 48% male with 33% participants aged below 24 years, 57% of
the participants aged between 25 and 40 years, and 10% of participants aged above 40 years. The
participants of the current study were well educated, in that 46% completed secondary/Diploma degree
while 34% attained undergraduate degree and 20% university degree. In terms of respondents‘ income
level, 57% and 43% of the respondents spend less than RM200 and RM201–RM400 respectively.
5.2 Measurement Model
The measurement model (Fig. 2) shows the first and second order constructs. The results R-square
value of customer trust is 0.287 proposing that 28.7% of the variance in customer‘s trust can be
explained by service quality and brand image. Furthermore, the R-square value of customer loyalty is
0.471 proposing that 47.1% of the variance in customer loyalty can be explained by the service quality,