You are on page 1of 18

Table of Contents

Title
Abstract ....................................................................................................................................................... 3 Introduction .................................................................................................................................................. 3

Research Question Research objective Significance of study Problem statement Theories supporting

Literature Review: ........................................................................................................................5 Customer satisfaction Customer loyalty Customer retention Theatrical frame work: ................................................................................................................8 Hypotheses Statistical Analysis: .......................................................................................................................8 Research Methodology Tables Descriptive Statistics Correlations Regression

Discussion: ....................................................................................................................................11 Suggestions and limitation: ........................................................................................................12 Questionnaire: .............................................................................................................................13 References: ...................................................................................................................................15

Title Factors affecting the customer loyalty in textile industry of Pakistan


Abstract
Top companies always look into the needs and demands of their customers in order to survive and compete successfully in todays environment. That is the reason why researches are conducted from all around the world have continuously emphasized on the importance of customer satisfaction, loyalty and retention. The current research study is conducted in Pakistan to find the impact of customer satisfaction and customer retention on customer loyalty. The data were collected from 50 customers of textile industry. The collected data is analyzed by using Microsoft Excel and SPSS 17. The results of the study show that customer satisfaction and customer retention is positively correlated with customer loyalty whereas customer satisfaction have significant impact on customer loyalty and customer retention have insignificant impact on customer loyalty. The weak side of this research study is that it is limited to only textile industry.

Introduction
There is very stiff competition among companies in the dynamic market and it is threat for the companies that their customers rapidly switching between products and the customers are not showing loyalty towards the product. Textile industry has grown rapidly in Pakistan over last decade and there is a great competition among existing Textile Companies with respect to loyal customers. Due to different customer choices there are many new textile brands have been introduced in the Pakistani market. We select AL-KARAM brand and collect data from its customers but our research is applicable for the whole textile industry.

Problem statement:
Problem is the switching attitude of the customers and not being loyal towards the product. Research Questions: Question 1: What is the relationship between customer loyalty and customer satisfaction? Question 2: What is the relationship between customer loyalty and customer retention?

Research Objectives:
The objective is to: To find the impact of customer`s satisfaction and customer`s retention on the customer loyalty.

Significance:
In todays world it is important to determine the capabilities of the textile sector of Pakistan in retaining their customers. It can be determined by conducting research about factors which influences customer loyalty, because no industry can go far without sustaining their customers. Loyalty generates revenue and reduces costs to acquire customers. Without loyal customers no company can earn profit in long run. Purpose of this research is to find how to make the customer loyal because it takes high cost to make new customers rather than to keep existing customers.

Theory Supporting the Research


Social Exchange Theory Social Exchange Theory was proposed by George Casper Humans (1958). According to Social Exchange Theory give and take forms the basis of almost all relationships though their proportions might vary as per the intensity of the relationship. In a relationship, every individual has expectations from other one. A relationship without expectations is meaningless. According to Social Exchange theory feelings and emotions ought to be reciprocated for a successful and long lasting relationship.

Literature Review

Customer satisfaction has been gaining increasing attention from the researchers and practitioners as the importance of customer satisfaction cannot be avoided because happy customers are like free advertising. Now a days trend for businesses to become highly customercentric is to put the customer at the centre of business in terms of strategies, actions and processes. Customer satisfaction has importance in business sector because without satisfied and loyal customers, you don't have a profitable business. A single unsatisfied customer can send away more business from your organization than 10 highly satisfied customers. The more you focus on customer satisfaction and retention, the more long-term business you will get (loyalty). In practice, organizations are increasingly setting strategies to ensure customer retention, and direct their staff to be more customer-focused and service-oriented Variables in this article are: Customer satisfaction, Customer loyalty and Customer retention. Customer satisfaction and Customer retention are considered as an independent variable, whereas Customer loyalty is considered as dependent variable. Aggregately, three variables are considered for analysis, out of which two are independent and one is dependent.

Customer satisfaction:
Customer satisfaction creates value for customers, in short managing their expectations and to fulfill their needs (Guzzo, 2010). Customer satisfaction is defined as meeting one`s criteria or satisfying one`s expectations or a satisfied customer has a particular feeling or attitude towards a service or product it has used Maiyaki et al. (2011). When the product provided by Textile Company satisfies the customer they tend to increase their usage and level of purchase. In this aspect, customer satisfaction has been regarded as a fundamental determinant in maintaining long-term customer relationship behaviors including loyalty (Oliver, 1980; Zeithaml et al, 1996; Anthanassopouloset et al, 2001; Fornel, 1992; Levesque, & McDougall, 1996) If customer is satisfied he/she buys the product again and again. It is one of the very important factors that affect the customers. The more organization focus on customer satisfaction and retention, the more long-term business they will get. This implies that customer satisfaction and customer loyalty are highly related, and dissatisfaction lead to customer's intention to switch Customer satisfaction is positively related with customer loyalty and negatively related with customer intentions to switch. Mohsan et al, (2011).Positive association of customer satisfaction on repurchase, market share and world of mouth. Timothy L. Keiningham (2003).
5

In other words satisfaction is a necessary prerequisite for building long term customer relationships and likely to increase loyalty and Fornell (1992) found that high customer satisfaction will result in increased loyalty for the firm and that customers will be less switched to other competitors. . It is also examined that satisfied customers are more likely to be repeat (and even become loyal) customers and dont think to switch to other service providers. Guiltinan, Paul and Madden (1997)

Customer loyalty:
Customer loyalty is the feelings that compel the customer to repurchase a product, service or brand (John, 2011). Consumer satisfaction and consumer loyalty both are considered as a tool to develop and attain sustainable competitive advantage (Ali et al., 2010). Companies can develop a loyal customer by offering superior value, excellent services and quality products. Customer loyalty is actually considered as a combination of customers favorable attitudes and their purchase behaviors. The researcher states that customer loyalty is positively related to profitability of the firms. Roger Hallowell (1996). Findings demonstrate that customers loyalty-based behaviors are multidimensional. In particular, no one metric best predicts all behaviors associated with customer loyalty. This implies that firms must balance and manage different aspects of the customer experience simultaneously if they are to optimize the loyalty behaviors they desire from their customers. (L. Keiningham et al,(2007).

This view was also shared by Anton (1996) who stated that satisfaction is positively associated with repurchase intentions, recommending a product or service, loyalty and profitability. Similarly, Rust and Zahorik (1993) stated that greater customer satisfaction leads to greater intent to repurchase. Fornell (1992) found that high customer satisfaction will result in increased loyalty for the firm and that customers will be less switched to other competitors. A strong relationship exists between loyal and satisfied customer.

Customer Retention:
Customer retention refers to customers stated continuation of a business relationship with the firm (Timothy et al., 2007). Similarly Gerpott, Rams and Schindler (2001) defined customer retention as It is the continuity of the business relations between the customer and company. Customer retention is more than giving the customer what they expect; its about exceeding their expectations so that they become loyal advocates for our brand. Retaining customers is about
6

building relationships, and relationships are about customer. Treat your customer as a person, and not a customer; start by hiring people who show they care about others. Different studies have examine the relationship of customer retention and customer loyalty in different context some have studied it as there is positive relation, other have studied that they have no strong relation exist between them. Wong, Chan and Ngai (2009) Proved that good relation with customer have significant impact on customer loyalty. The article concludes that customer satisfaction has considerable/ important while customer retention has non considerable impact on Customer loyalty. Inamullah khan(2012). Much of the research regarding customer satisfaction and customers behavior has focused on the relationship between satisfaction and retention. This emphasis is the result of previous research, which states that customer retention I s a key driver of firm profitability (Reichheld, 1996; Reichheld and Kenny, 1990; Reichheld et al., 2000) W.Andreassen. (2007), he analyzed values of different customer satisfaction and loyalty metrics in predicting customer retention and recommendation and conclude the positive relationship between customer loyalty and customer retention. Blattberg et al. (2001) state that customer retention is taking place when a customer keeps on buying the same market offering over a long period of time. Post sales services are the important factor for customer retention as it keeps the customer bound to the product up to some extent. (Saeed, Grover & Hwang, 2005) With regard to satisfactions relationship to customer behavior, research has shown a link been satisfaction and customer retention (Bolton, 1998)

Theoretical Framework
Customer satisfaction Customer loyalty

Customer retention

Hypotheses
H1: customer satisfaction has significant impact on customer loyalty Ho: customer satisfaction has not significant impact on customer loyalty

H2: customer retention has significant impact on customer loyalty Ho: customer retention has not significant impact on customer loyalty

Statistical Analysis
Methodology
A demographics section was also included in the start of the questionnaire containing questions regarding gender, age, qualification and occupation of the respondents as well as the number of years customer is using the a particular brand and the questionnaire contains 16 questions i.e. there is 3 questions for measuring customer satisfaction and customer loyalty each and customer retention have 10 questions to measure. Our population includes all customers of textile companies. Data were collected from 50 customers in twin cities of Pakistan i.e. Islamabad and Rawalpindi.

In this cross sectional study questionnaires have been used. The liker scale ranging from 1 to 5, where 1 = Strongly Disagree, 2 = Disagree, 3 = neutral, 4 = agree and 5 = strongly agree was developed to measure the impact of customer satisfaction and customer retention on customer loyalty The collected data then analyzed using the Microsoft Excel and SPSS 17. We adopted customer retention questionnaire by REICHHELD (2003) and the questionnaire on customer satisfaction and loyalty were adopted by POLARIS marketing Research Company which is founded in Atlanta by Jan Carlson in 1989.

Tables

Table 1 :DESCRIPTIVE STATISTICS


N C.L C.S C.R Valid N (listwise) 50 50 50 50 Minimum 1.33 2.00 2.20 Maximum 4.67 4.67 5.00 Mean 3.2667 3.3933 3.6740 Std. Deviation .75593 .69233 .65335

Table 2 : CORRELATIONS
C.L C.L Pearson Correlation Sig. (2-tailed) N C.S Pearson Correlation Sig. (2-tailed) N C.R Pearson Correlation Sig. (2-tailed) N 50 .675
**

C.S 1 .675
**

C.R .466** .001 50 .611** .000 50 50 1

.000 50 1

.000 50 .466
**

.611

**

.001 50

.000 50 50

**. Correlation is significant at the 0.01 level (2-tailed).

REGRESSION Table 3 Model Summary

Change Statistics Sig. F Cha nge 47 .000

Model 1 a.

R .678
a

R Square .460

Adjusted R Square .437

Std. Error of the Estimate .56704

R Square Change .460

F Change 20.041

df1 2

df2

Predictors: (Constant), C.R, C.S

Table 4 Coefficientsa
Unstandardized Coefficients Model 1 (Constant) C.S C.R a. Dependent Variable: C.L B .596 .680 .099 Std. Error .486 .148 .157 .623 .086 Standardized Coefficients Beta t 1.225 4.600 .632 Sig. .227 .000 .531

10

Discussion
Descriptive Statistics:
Table 1 provides the descriptive statistics of the dependent variables i.e. customer loyalty and independent variable i.e. Customer satisfaction and customer retention. The mean value of customer satisfaction and customer retention is 3.3933 and 3.6740 respectively with standard deviation of .69233 and .65335 indicating that customers are moderately satisfied and have more retained with their brand. The mean value of dependent variables i.e. customer loyalty is 3.2667 which is above average of 3 indicating that overall customer are slightly loyal to their brand. Moreover, standard deviation for dependent variables is.75593 indicating that respondents are slightly loyal customers and any slight change in textile brand would never cause them to switch to another brand which offers better product. The standard deviation lies within 1 which is normal distribution about 68% responses given by customers are around the mean of the variables i.e. 3.

Correlation:
Table 2 provides the correlations for the variables i.e. customer loyalty being dependent variable whereas, customer satisfaction and customer retention being independent variable. Reichheld (2003) and Satmetrix (2004) used Pearson correlations to test the strength of the relationship between various satisfaction/loyalty survey questions and subsequent customer behaviors (repurchase and recommendations).

All variable is significant at 1% level of significant. The correlation coefficient of customer loyalty for customer loyalty is 1 and for customer satisfaction is .675 this means that Customer loyalty and customer satisfaction are strongly correlated and have positive relation means higher will the customer satisfied more the customer will show loyalty towards the product and repurchase the product again and again in textile sector. It is accept that H1 which states that customer satisfaction has significant impact on customer loyalty and Ho is rejected. For independent variables i.e. customer satisfaction is .611 correlated with customer retention that shows there is strong positive correlation between the two independent variables as customer is more satisfied with the product more the customer will retained with the product and customer satisfaction is perfectly correlated with itself. The correlation coefficient of loyalty for customer retention is .466 and thats why retention is moderately or reasonably correlated with customer loyalty so H2 which states that customer retention has significant impact on customer loyalty is not accepted as the Pearson coefficient of correlation of customer loyalty for customer loyalty is .446 that indicates the positive and

11

moderate relationship exist between the variables i.e. customer loyalty and retention as the customer sustain its buying attitude toward the product the more the customer become loyal.

Regression:
In table 3 R2 value of this analysis is 0.460 at the significance level of p<0.000.This shows that customer loyalty which is dependent variable is 46% depends/based on the customer satisfaction and customer loyalty(independent variable) and remaining 54% on other variables. It can be said that 46% of the variation of customer loyalty is explained by the variables i.e. customer satisfaction and customer retention. In table 4 Beta value of customer satisfaction is .623 (standardized coefficient). This is proving correct first hypothesis H1 i.e. customer satisfaction has significant impact on customer loyalty because it shows the association and strength of relation between the variables. The unstandardized Beta value of customer satisfaction is .680 which shows that one percent change in customer satisfaction will change customer loyalty with .680 or 68%.so both values of beta proving the H1 correct. The beta value of customer retention is .086 (standardized) so H2 (customer retention have significant impact on customer loyalty) is not acceptable because it shows very low association between the variables and the unstanderized Beta value of customer retention is .099 which is less than acceptance level and is insignificant. This beta value shows that one percent change in customer retention will only cause 0.099 or 9.9% change in customer loyalty.

Limitation and conclusions


The drawback of this research is that it is only limited to a single industry of textile and it is conducted in limited area of Rawalpindi and Islamabad which lower its generalizability. Other variables which are not included like service quality and switching cost can be explored to study other factors affecting customer loyalty. This study is conducted in Pakistan only so it can be conducted in other cultures/countries as well. By all researches it is concluded that customer satisfaction plays an important role to ensure customer loyalty. Because first of all companies should do efforts to retain customers, if they succeed in retaining the customer it means that customer become satisfied with those companies products/services which would lead them to customer loyalty. In simple word more the customer satisfaction and customer retention for long time period more will be the customer loyalty towards the organization. After conducting this study we conclude that customer satisfaction has significant impact on customer loyalty and customer retention have insignificant impact on customer loyalty.
12

(Questionnaire) Factors affecting the customer loyalty in textile industry of Pakistan


Please respond to the following questions by circling the best fitting number. All the information collected through the questionnaire will be used only for contribution to knowledge and kept secret / confidential. Please ensure that you mark all the given statements as incomplete responses will not fulfill researchers requirements. Thanks DEMOGRAPHICS The following data is required for statistical purposes only please do not give your name or identification. Occupation__________________________ Salaried Businessman Student Qualification_________________________ Graduation Masters Others Age (in Years) _______________________ Gender _____________________________ Male O Female Others

In total, how long have you been a customer of Al-karam Brand? Less than one year One to under three years Three to under five years Five to under ten years Ten years or more

How likely are you to recommend Al-karam Brand to a friend or relative? Would you say the chances are ? Poor Fair Good Very Good Excellent

13

How likely are you to repurchase products and services from Al-karam Brand? Would you say the chances are ? Poor Fair Good Very Good Excellent

Please rate your level of agreement with the following statements (5-1 scale with 5 being completely agree, 3 being neutral, and 1 being completely disagree):

I believe Al-karam deserves my loyalty Over the past year, my loyalty to Al-karam has grown stronger Al-karam brand values people and relationships I am satisfied with Al-karam Brand? ahead of short-term goals

1 1 1 1

2 2 2 2

3 3 3 3

4 4 4 4

5 5 5 5

To what extent from 1 to 5 (5 means the most important) does the following attributes influence your decision to continue to go to Al-karam stores: Up-to-date designs Additional services (Fashion Magazine) Location of the stores / studios Price Colors Friendly and Co-operative sales representative Quality of fabric Easy and fast Buying process at Al-karam studios Available in all other famous clothing stores Special offers and seasonal sales etc. 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5

Customer retention Survey (REICHHELD) Customer satisfaction and loyalty survey (POLARIS) Thank you for your feedback
14

References
Roger Hallowell (1996). The relationships of customer satisfaction, customer loyalty and profitability: an empirical study, Vol. 7 No. 4, pp. 27-42. Dennis Pitta, Frank Franzak and Danielle Fowle (2006). A strategic approach to building online Customer loyalty: integrating customer profitability tiers, 23/7 (2006) 421429, ISSN 0736-3761 Sepide Naghibi, Muhammad Musarrat Nawaz, M. Sarfraz Khan, Zeeshan Shauk and Numan Aslam (2011).Factors Of Customer Satisfaction and Loyalty in Industrial Marketing, 8(5), 902-907, ISSN 1990-9233 Faizan Mohsan, (2011).Impact of Customer Satisfaction on Customer Loyalty and Intentions to Switch: Evidence from Banking Sector of Pakistan Customer Satisfaction, Vol. 2 No. 16 Mian Usman Sattar (2012). Customer Satisfaction Affects the Customer Loyalty:Evidence from Telecommunication Sector in Pakistan, 4(3): 252-259 Ahasanul Haque1, Abdullah Al Mamun Sarwar, Farzana Yasmin, Aftab Anwar, Nuruzzaman (2012). The Impact of Customer Perceived Service Quality on Customer Satisfaction for Private Health Centre in MalaysiaVol. 4, No. 5, pp. 257267 (ISSN 2220-3796) Hazlina Abdul Kadir, Nasim Rahmani and Reza Masinaei (2011). Impacts of service quality on customer satisfaction:Study of Online banking and ATM services in Malaysia, Vol.2, No.1, 2010-023X Muzammil Hanif et al (2010). Factors Affecting Customer Satisfaction, ISSN 1450-2887 Issue 60 (2010) Timothy L. Keiningham (2003). The Impact of Customer Satisfaction on ShareOf-Wallet in a Business-to-Business Environment, 6(1), 37-50 Vijay M. KUMBHAR (2011). Factors Affecting the Customer Satisfaction in EBanking: Some Evidences Form Indian Banks, 3(4), 1-14
15

Motshedisi Elizabeth Molapo & Geoffrey Mukwada, (2011). The Impact of Customer Retention Strategies in the South African Cellular Industry: The Case of the Eastern Free State, Vol. 1 No. 2, Bassey, Nsikan Edet, Okon, Ubokudom Etim and Umorok, Umo Etesin(2011). Effective customer service: A tool for client retention among stock broking firms in Nigeria, Vol. 5(20), 7987-7991. Mornay Roberts-Lombard, (2011). Customer retention through customer relationship management: The exploration of two-way communication and conflict handling, Vol.5 (9), pp. 3487-3496. Reichheld, F.F. (1996), Learning from customer defections, Harvard Business Review, Vol. 74 No. 2, pp. 56-69. Reichheld, F.F. and Kenny, D.W. (1990), The hidden advantages of customer retention, Journal of Retail Banking, Vol. 12 No. 4, pp. 19-23 Reichheld, F.F., Markey, R.G. Jr. and Hopton, C. (2000), The loyalty effect the relationship between loyalty and profits, European Business Journal, Vol. 12 No. 3, pp. 134-9. Norizan Mohd Kassim, Salaheldin Ismail and Nor Asiah Abdullah (2010). Identifying the determinants of Customer retention in a developing Country Context, Volume 1, Issue 1 Chatura Ranaweera and Andy Neely, (2003). Some moderating effects on the service quality-customer retention link, Vol. 23 No. 2, pp. 230-248 Chantal Rootman Madle Tait and Gary Sharp (2010). Customer retention in British and Canadian retail banks: Lessons for South Africa, ISSN 1694-0938, 24-27

16

W.Andreassen.(2007), The value of different customer satisfaction and loyalty metrics in predicting customer retention,recommendation, and share-of-wallet, Emerald Group Publishing Limited, Vol. 17 No. 4, 2007,pp. 361-384. Bolton, R.N. (1998), A dynamic model of the duration of the customers relationship with a continuous service provider: the role of satisfaction, Marketing Science, Vol. 17 No. 1,pp. 45-65.

17

Business Research and Report Writing


Research topic: Impact of Customer satisfaction on customer loyalty

Girls group 1 Group Members: Fajar Farooq (Mb111004) Sobia Hanif (Mb111063) Sayra Fazal (Mb111056) Shazia Perveen (Mb111062)

Section: 3

Submitted to: Professor Mudasir Naseem


18