Assessing customer satisfaction and loyalty in the retail sector

Abstract

Purpose The effects of customer satisfaction on loyalty have been widely discussed by the academic community. Although the results of the studies reported in the literature are often contradictory, the existence of a relationship between satisfaction and loyalty is acknowledged, despite the influence of moderators and constraints of various kinds. The purpose of this paper is to discuss this relationship in the specific context of the retail sector, since this sector presents major challenges in terms of competition, and efforts placed on customer satisfaction and loyalty are more evident. Design/methodology/approach A survey based on the European Customer Satisfaction Index (ECSI) model was applied to a retail store in Portugal. This model has its roots in Switzerland, where in 1989, Claes Fornell developed a new complementary method for measuring the overall quality of companies’ output, through the calculation of an aggregated customer satisfaction index. The proposed model is based on a set of causal relationships established between a set of constructs. The ultimate goal is to calculate both satisfaction and loyalty indexes as well as to estimate the relationship between both constructs. Structural equation modelling, based on a partial least squares (PLS) estimation methodology, is the statistical technique used to estimate the model parameters, as well as to compare the aggregated indexes. PLS is based on the principles of linear regression and combines multiple regression aspects with factor analysis, in order to estimate a series of interrelated relationships. Findings The results confirm a positive influence of satisfaction on customers’ loyalty to the retail store. The study also shows the importance of the image construct, due to its strong direct effects on satisfaction, which makes it essential for influencing the loyalty index, both directly and indirectly. The impact of the image construct is also evident on the expectations, as the latter has shown a considerable direct effect on perceived quality. Research limitations/implications The study is based on a single case study of a Portuguese sports retail store. In future it would be interesting to study a representative sample of the whole retail sector. Practical implications The study is useful for the specific retail store where it was undertaken to help it devise better customer service, in order to increase satisfaction and loyalty. It is also useful for the entire network of stores for that retailer and other retail chains. Social implications The systematic application of customer surveys to whole sectors of the economy would improve competition, customer service and, ultimately, contribute to development and economic growth. Originality/value The ECSI has been applied to various industry sectors in different countries, including Portugal. It has never been used in the context of the Portuguese retail sector and it adds to the discussion on the relationship between satisfaction and loyalty, which is a pertinent topic of interest for researchers in quality management.