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In this chapter, we connect the past and recent studies by revised the past findings. The topics included in this chapter are review of literature, review of relevant theoretical model, proposed conceptual framework, hypothesis development and conclusion.
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Perception means that the act of discerning, realizing and becoming aware of through the senses. Customer perception varies from a person to the other person, which means different people perceive different things at the same situation.
Nowadays, retailers are conscious of the customer satisfaction which is important for the success of their marketing strategies (Go´mez et al., 2004; Betancourt et al., 2007). Customer satisfaction is considered as one of the key success factor in today’s intensively competitive business world (Jamal & Naser, 2002). According to Jaarsveld and Heerden (2007), brand image will be based on the customers’ actual experience in a company instead of the advertising provided by company.
In fact, the existence of a positive correlation between store attribute perceptions and customer satisfaction was found in several studies (Bernhardt et al., 2000; Szymanski and Henard, 2001). Companies must investigate truly the whole process of interaction through the customer perception. It is because customers will change their perceptions from rational judgement to an emotive judgement when the customers accumulated more familiar experiences towards the company and eventually customers are more likely to concentrate on the result of the product or service consumption.
Knox and Denison (2000) highlight the importance to create retail strategies which focus on customer loyalty, consumer patronage and customers’ switching behaviour. Therefore, hypermarkets need to find out what is the customer perception on itself and its offerings. It is because identification on which elements of marketing mix are influencing variables in customer perception can help to align hypermarkets’ focuses and resources with customer expectation and compete effectively in the market. Besides, it can be valid in setting priorities for projects and developing appropriate marketing strategy to gain distinctive competitive advantage.
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As such, signals on whether the marketing mix is potentially favourable or unfavourable for the company can be indentified from understanding on customer perception. Hypermarkets can thus take timely corrective action from early warning signs. The targeted improvements and activities can strengthen the relationship with the customer and bring positive effect towards customers’ whole experience and brand loyalty. Customers perceive that the company treats them and understands their needs seriously and cautiously.
The absolutely perfect customer experience should be focused as it can increase customers’ brand loyalty and expand market share through positive public opinions. It becomes essential for hypermarkets to ascertain customers’ satisfaction which will lead to loyalty, sustained patronage, positive words of mouth, disregard advertisements of competitors, deliver more ideas and suggestions (Hesselink and Wiele, 2003), and finally enhance market share, profitability and customer retention.
According to Basu and Sengupta (2011), pricing, promotion and product assortment which are important elements for retailer’s marketing policies are predictors of shopping behaviour where the first two elements are under definitely under retailer’s control. As a result, we discuss the customer perception which is an important area for hypermarkets to investigate their brand loyalty.
In these times, companies’ most meritorious assets are their brands which adding both economic and strategic value to its proprietors. With respect of this, in order to increase the brands of companies, building and persisting brand loyalty has become a core of marketing theory and eventually establishing sustainable competitive advantage. Therefore, brand loyalty has been intensively analyzed during the past decades among marketing specialists. In the research of Dipl.-Kffr. Nadjia Silberhorn, this study cited plenty studies and publications in marketing research which are dedicated to the brand loyalty concept such as past studies of Colombo and Morrison, 1989, Bhattacharya, 1997, Dekimpe et al., 1997, Chaudhuri and Holbrook, 2001. Besides, with the multinomial logit formulation, Grover and Srinivasan (as cited in Dipl.-Kffr. Nadjia Silberhorn, 2010) have estimated the impact of marketing mix on segment customers base on the observed brand shares and also the Dillon and Gupta (as cited in Dipl.-Kffr. Nadjia Silberhorn, 2010) have assessed intrinsic preference and response to the marketing mix.
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Furthermore, the study of Nadjia Silberhorn indicates that the majority studies on brand loyalty are limited to single-category perspective. Nevertheless, it still have an enormous amount of literatures are on the cross-category relationships in consumers’ decision-making by using multi-category market basket models such as past studies of Dichtl, 1974, Bocker, 1975, Bocker and Merkle, 1975, Schnedlitz and Kleinberg, 1994, Russell and Kamakura, 1997, Ainslie and Rossi, 1998, Hruschka et al., 1999, Manchanda et al., 1999, Seetharaman et al., 1999, Russell and Petersen, 2000, Chib et al., 2002, Singh et al., 2005, Hansen et al., 2006, Song and Chintagunta, 2006, 2007, Niraj et at., 2008.
In essence, they will be having relationship between loyalty and satisfaction due to loyalty implies satisfaction, but satisfaction does not necessarily lead to loyalty. Consequently, there is an unsymmetrical relationship between loyalty and satisfaction (Waddell, 1995; Oliver, 1999).
Theoretically, a conceptual framework of brand loyalty has been developed by Oliver (1997). The framework reveals the overall range of brand loyalty is based on a hierarchal effect model with respect to affective, behavioral intent, cognitive and action dimensions. Furthermore, in year 1999, Oliver gave a definition of brand loyalty as “a deeply held commitment to rebuy or repatronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts are having the potential to cause switching behavior”. As such, it reveals that the changes in marketing environments or strategies will influence the purchasing behavior of a customer, but consumer’s loyalty will still remain constantly and they will still repeatedly purchase their favorite brands in the future.
Additionally, the study of Nadjia Silberhorn also cited that brand loyalty concept has been abiding concern to both marketing practitioners and academics such as past studies of Day, 1969, Wind and Frank, 1969, Jacoby and Chestnut, 1978, Aaker, 1991, Oliver, 1999, Chaudhuri and Holbrook, 2001. As a result, loyalty can be classified into contractual loyalty, functional loyalty, emotional loyalty and transactional loyalty.
On the other hand, Jacoby and Chestnut (1978) reflects that the construction of brand loyalty can be divided into attitudinal and behavioral dimensions when defined as “the biased behavioral response expressed over time by some decision-making unit with respect to one or more alternative brands out of a set of such brands and which is a function of psychological (decision-making, evaluative) processes”. For further explanation, attitudinal loyalty is considered as a predisposition that consists of commitment to a brand and intention to repurchase the brand (Mellens et al., 1996). In contrast, behavioral loyalty is defined as the brands that have been repeatedly purchased by customers which are reflecting the patterns of continued patronage and actual spending behaviors. Thus, it reveals that behavioral loyalty is only concerning with observable action (East Robert, Hammond et al., 1996). In year 2004, Gounaris and Stathakopoulos argued that an increase in behavioral loyalty is caused by attitudinal loyalty. Hence, both loyalty are interdependence and have significant influence among each other.
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However, brand loyalty also can be defined as the final destination of brand management in a company with respect to test the weakness or strength of its customers’ loyalty and it can check whether consumers still favor its product which compare to competitors (Aaker, 1996).
Lastly, Tseng et al. (2004) had highlighted the convenient factor or a variety behavior to purchase a certain specific product occasionally does not make sense with brand loyalty. It is because those consumers do not like the product even they repurchase it. Since brand loyalty cannot be simply determined by consumers’ repurchasing frequency, it is not sufficient enough or reasonable to evaluate brand loyalty solely depending on customer purchase behavior.
2.1.3 Marketing Mix
The model of marketing mix was initially developed by McCarthy in 1960 and he defined the traditional marketing mix by the “four Ps” which are product, price, place and promotion.
“The developing of a marketing mix must be an integral part of selecting a target market” has been stated by McCarthy (1971). Thus, all ingredients of variables must be set timely in accordance to coordinate with marketing strategy for making the strategy successful. There are involved numerous of variables such as brand, service, advertising, product, prices, package, media, salesman and intensity of sales that can be varied or altered. Moreover, McCarthy (1971) had mentioned that the four major elements of marketing mix are the “four Ps” and all of the four Ps are equally important to the marketing mix.
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Furthermore, Armstrong and Kotler (2005) recently stated that marketing mix is the set of controllable and tactical marketing approach that firm tends to produce the demanded response in the target market, which consists of “four Ps” into four groups of variables; there are product, price, place and promotion.
Product
Varity
Design
Features
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Brand name
Quality
Promotion
Advertising
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Personal selling
Sales promotion
Public relation
Place
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Channels
Coverage
Assortments
Locations
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Inventory
Price
List price
Discount
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Customers
Source: Armstrong and Kotler (2005), Marketing: An introduction (7th ed). New Jersey: Pearson Prentice Hall. (p.57)
However, based on the adapted study that we have used for our study, it had adopted the selected variables like price, store image, distribution intensity, advertising expenditures and price promotions from the traditional “four Ps as a representatives set of marketing programs (Yoo et al., 2000). Therefore, our study would like to further adapt the same variables of marketing programs which are price, store image, distribution intensity, advertising expenditure and price promotions as our independent variables for investing the Malaysian hypermarket’ brand loyalty.
The definition of price is “an important extrinsic cue and indicator of product quality or benefits” (Yoo et al., 2000). Moreover, price also can be classified as “the only element in the marketing mix that produces revenue; the other elements produce costs” (Kotler, 2003). In the marketing mix model, companies adjust price and reduce the expenses in order to gain expected profits. In addition, the equilibrium point between supply and demand in retail market is the determinant of price (Hakansson & Waluszewski, 2005).
Generally, different retailers are using different price strategies for achieving their respective goals. According to the study of Peter, Leszczyc, Sinha and Sahgal (2004), Every Day Low Pricing (EDLP) and promotional pricing (Hi-Lo pricing) are the two price strategies that usually be distinguished in the literature. EDLP strategy tends to offer lower average prices whereas Hi-Lo strategy is offering special price frequently on individual goods. The EDLP strategy is more likely to be applied by general store which is located in unpopular area. In contrast, Hi-Lo Pricing is more likely to be applied in a small grocery store where the store is placed in or near residential areas and liveliness areas. (Rhee & Bell, 2002).
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In addition, price is also implied the cost of product or service usually express in the money term. Nevertheless, regarding what type of product or service sell, suddenly changes of the price will have a direct effect to the customers or clients then influence the profitability of the business. Therefore, price will have an indirect impact to the business earning.
In practice, the high price brand indicates higher quality which compare with lower price brand. Thus, prices and perceive quality have a positive relationship and eventually will influence the brand loyalty.
Martineau (1958), the first researcher offers that the store image is “the way in which the store is defined in the shopper’s mind, partly by its functional qualities and partly by an aura of psychological attributes”. Different authors advance many concepts of store image in the past three decades (Doyle and Fenwick, 1974; James, 1976; Kunkel and Berry, 1968; Marks, 1976). Store image is a combination of a customer’s perceptions towards a store on different attributes (Bloemer and de Ruyter, 1997). The overall store image can be formed by different attributes such as the nine elements: merchandise, service, clientele, physical facilities, comfort, promotion, store atmosphere, institutional and post transaction satisfaction which have been combined and identified by Lindquist (1974).
For McGoldrick (1990), accumulated image acts as a valuable asset of the “retail brand” which corresponded to the long-term consequences of the marketing activities. The acknowledged store image for customers is the competitive advantage for hypermarkets in marketplace as well. Moreover, Pan and Zinkhan (2006) defined that store image is the method in which store is perceived in customer’s mind. It will influence the decision of customers as where to shop. Companies’ images formed by stakeholders are based on products, brands organizations and chains of organizations (Fombrun and van Riel, 1997; Lemmink, Schuijf and Streukens, 2003). As a result, we defined the store image for this study as the way of thinking in customers’ mind towards different attributes of primarily marketing mix implemented by hypermarkets.
Generally, when products are available numerous stores to cover the market can be defined as distribution intensity. However, it has been argued that certain variety of distribution fit certain category of products and firms tend to distribute exclusively or selectively rather than intensively to its products in order to enhance the products’ images and gain substantial retailer support.
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In contrast, they are some different definition on the distribution intensity. Distribution intensity also can be defined as the number of intermediaries a manufacturer plans to have in a trading area (Coughlan et al., 2001; Rosenbloom, 2004). Nevertheless, the general definition of distribution intensity is more suitable for our study because it determines the availability of brands at a purchase occasion which is our Malaysian hypermarket.
Furthermore, the concept of distribution intensity has been primarily invoked by Copeland (1923). He linked the product class (convenience goods, shopping goods and specialty goods) to required density of distribution. Accordingly, analysts tend to assume that convenience goods like grocery goods are likely to be distributed intensively which are on the basis of the underlying features of the product. If the distribution intensity can be successfully implemented, then the customers can buy a brand through many of the possible outlets in a trading area (Coughlan et al., 2001).
Advertising is a main marketing communication tool used by the company to provide information about the product or service to their customers. Additionally, Moorthy and Zhao (2000) had highlighted the characteristics of advertising spending are signaling and informational devices to the customers. As such, advertising lets the customers aware of new products or services are launched while providing information related to the new products or services. This is one of the marketing strategies that help the company for promoting their products or services.
Based on the study conducted by Barone, Taylor, and Urbany (2005), most of the advertising spending is to introduce new products or services. Company tends to inform their customers when they launch a new product or service and attract them to purchase it by using advertising. Thus, advertising is a media that delivering information to the customers. With respect of that, customers will judge whether the products or services are suitable for them before they decided to purchase it. However, the effect of advertising toward customers should be concerned seriously. So that, company must design carefully on their advertising as the messages delivered may provoke different target customers (Angel and Manuel, 2005).
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Besides, advertising spending and the perceive quality are positively related (Moorthy and Zhao, 2000; Aaker and Jacobson, 1994). Therefore, it implies that the quality of the products or services is high if a company allocated large amount of advertising spending. Additionally, the products quality is superior if the company’s advertising spending is extremely high by reason of the company had invested in the brand (Kirmani and Wright 1989). The intention of company invested in the brand is to make the products or services success and become familiar to their customers.
Firstly, promotion is a tool that can help an organization to achieve its objectives (Alvarez &Caselles, 2005). Promotion is when companies inform, persuade, or remind customers and the general public of its products or services (Kotler, 2003). Furthermore, as usual, retail promotion is a method that influence and attract customers to purchase products or services to attain specific sales objectives. Therefore promotion is able to influence customers purchasing behavior and decisions towards the particular brand or store, especially during the sales promotion period (Freo, 2005). In retail stores, promotions significantly impact sales volume when compared to non-promoted ones (Freo, 2005).
On the other hand, promotions both stimulate customers to buy more quantities of promoted products or services and induce customers to increase use of the product. Moreover, sales promotions contain a multiform of marketing tools designed to stimulate the purchase of products or services by offering an inducement (d’Astous&Landreville, 2003). Hence, promotion and communication are vital features to be considered as marketing tools.
Meanwhile, we would like to focus on the price promotion which will be further discussed as following. In accordance with Yoo et al (2000), price promotion was defined as the “short-term price reductions” and was believed to harm brand equity when offered over in long-term time. Hence, the price promotion period is normally short-term compared to other marketing mix elements such as product, price, and place.
Basically, price promotions have become more famous as the main content of marketing budget, and its proportion was raising year by year (Sangman et al., 2001). Whereby, the effects from price promotion mainly hail from brand switching, incidental purchase and storage (Van Heerde et al., 2003).
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Withal, most of the effect of a price promotion is seen in customers’ short-term brand choices and it increases the price sensitivity of non-loyal customers (Mela, Gupta and Lehman, 1997). In conclusion, price promotion in retail industry must be considered with time period in order to operating effectively and efficiency.
Datta (2003) conducted a qualitative research study to find out that the price has a major influence on customers’ brand loyalty. According to the report, it indicated the price has directly correlated to loyalty (Sirohi, McLaughlin, Wittink, 1998). Brand loyalty represents purchase behavior, is different with customer satisfaction (Griffin, 1996). Whereby, British retail store’s study revealed high income shoppers will have significant difference in the levels of loyalty. The highest percentage of loyalty is 38% and the lowest is 25% which depicts the price will influence the loyalty (East, Harris, Willson, & Hammond, 1995). Furthermore, Mulherm, Williams and Leone (1998) said that the price elasticity in brand loyalty is high whereas for the high frequency of promotion brand and high income level of certain geographic market areas are lower.
(Neither loyal nor disloyal customers are using the price as an evaluative criterion of the product, actually they will not influenced by the price consideration. (Helsen and Schmittlein 1994; Meer 1995). Generally, brand loyal customers are more willing to pay the full price or premium price for their favorite brand cause brand loyal consumers are less influenced by price sensitive compare with brand disloyal consumers. Thus, if the price level changing also is does not affect the brand loyalty. Moreover, the low and high prices can equally link to the brand that can bring the level of benefit to consumers. So that, this show that there is not direct relationship between price and brand loyalty. As conclusion, the brand loyal consumers are more willing to pay the full price for their favourite brand compare with disloyal consumers because they more perceive their favourite brand to have a superior quality.)
In addition, based on the adapted study that we are using for our study, one of its findings showed that the price is an equivalent and negative effect on brand loyalty. It had given the relationship between price and brand loyalty was significant (t = – .649, p < .517). Moreover, price was negative predictors of brand loyalty (β = - .027).
Researchers believe that store image will influence brand loyalty. Store image is found to be positively correlated to brand loyalty had indicated with the evidences collected from both theorizing and empirical studies (Lessig, 1973; Mazursky and Jacoby, 1986; Osman, 1993; Bloemer and de Ruyter, 1998). The favourableness of store image will result in higher valence of store to the customers. A certain degree of loyalty will be developed to commensurate with the customers’ favorableness of the store image (Sirgy and Samli, 1985; Schiffman and Kanuk, 2007).
In other words, Kunkel and Berry (1968) also proposed that favourable store image will induce brand loyalty. Store image such as perceived price, service, convenience, product quality and atmosphere directly affect brand loyalty (Sirohi, McLaughlin and Wittink, 1998). Nevertheless, Gupta and Pirsch (2008) supposed that store image affects store loyalty indirectly via store satisfaction. Customers will more likely to shop and purchase from the store when there is a favourable image in their minds. Therefore, hypermarkets should focus on enhancing store image which will eventually bring positive customer perception, higher brand loyalty and competitive advantages for them. As a result, we select store image which is critical and directly related to brand loyalty as one of the elements of marketing mix for our research.
Additionally, based on the adapted study that we are using for our study, one of its findings showed that the store image is an equivalent and positive effect on brand loyalty. It had given the relationship between store image and brand loyalty was significant (t = 7.934, p < .001). Moreover, store image was positive predictors of brand loyalty (β = .362).
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In the customers’ perceptions, customers will be more satisfied by reason of the product is available in a greater number of stores and they will be offered the product where and when they want it (Ferris, Oliver, and Kluyer, 1989, Smith, 1992). Thus, intensive distribution can reduce the time of customers like inherent spend on searching the stores and travelling to and from the stores. Besides, intensive distribution also provides a convenience in purchasing products and makes it easier to get services which are related to the products.
As a result of increment on distribution intensity, customers will have more time and place utility and perceive more value for the product. With respect of it, such increased value will lead to greater customers’ satisfaction and perceived quality. Consequently, greater brand loyalty will be developed along with customers’ satisfactions with the product (Yoo et al., 2000).
Additionally, based on the adapted study that we are using for our study, one of its findings showed that the distribution intensity is an equivalent and positive effect on brand loyalty. It had given the relationship between distribution intensity and brand loyalty was significant (t = 5.159, p < .001). Moreover, distribution intensity were positive predictors of brand loyalty (β = .235).
In our research, we test that whether one of the marketing mix which is advertising spending will lead to brand loyalty. The study of Cobb-Walgren, Ruble and Donthu (1995), found that perceived advertising spending not only has positive effects on brand equity as a construct, yet also on each of its brand equity components which are brand loyalty, brand awareness, perceived quality and brand image.
Advertising acts as a pivotal role in raising the brand awareness and creating strong brand associations (Yoo et al., 2000). It is high probability that a brand will be included in the consideration set of customers if it has a repetitive advertising schedule. Then, the customer’s brand choices have been simplified and made it as a habit to select the brand. Great amount of advertising helps to build the brand awareness and relates to the positive association which will lead to greater brand equity. With the extended hierarchy of effects model, advertising had associated positively with brand loyalty due to it reinforced the brand associations and attitudes (Shimp, 1997).
Besides, Shimp (1997) also highlighted that advertising spending can construct a strong brand loyalty by enhancing their customer’s beliefs and attitudes toward the brand. When customers are frequently exposed to a brand’s advertising, they develop not only the customers’ high brand awareness and associations yet also a more positive perception of brand quality which leads to strong brand equity. In contrast, weak brand equity is because of customers seldom exposed to a brand’s advertising. Generally, when customers have greater brand equity towards a brand then it will assist in generating brand loyalty. Therefore, reduction on advertising spending has already become one of the major reasons that slacken brand loyalty.
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Furthermore, based on the adapted study that we are using for our study, one of its findings showed that the advertising spending is an equivalent and positive effect on brand loyalty. It had given the relationship between advertising spending and brand loyalty was significant (t = .397, p = .692). Moreover, advertising spending was positive predictors of brand loyalty (β = .016).
Generally, brand loyalty has been shown to be an important determinant in research study on consumer response to price promotions (Guadagni and Little, 1983). Raju et al. (1990) stated the degree of brand loyalty plays an important role in determining the optimal level for firms to use price promotions and it is also a major factor in influencing the frequency and size of price discounts offered by competing brands within the same product category. Withal, Raju et al (1990) also shows that it is non-usefulness to employ price promotion if all brands in a product market have a high loyalty.
Based on the self-perception theory and the price-quality theory, Shiv et al (2005) believed that high prices caused consumers’ high quality expectation, which means that products at high price were high quality value. Due to price promotions, customer would attribute their attitudes and behaviour to promotion incentives rather than their preference to brand. Thus price promotion only led to customers’ assessment of brand image and perceptible quality and reduced with brand loyalty.
Likewise, according to Gupta (1988), price promotions do not significantly affect to brand loyalty and it is only found to enhance temporary brand switching. This is because consumers are immediately attracted to promoted brand, and when deals end, they lose interest in the brand. So, changes in brand loyalty might not incur after price promotion unless the brand is perceived to be greater to and meet consumer needs that are better than its competing products.
On the other hand, Chun-Yi Shih (2007) mentioned that there is a positive effect on brand loyalty for search goods which the goods’ quality can be judged well before and after purchase or use it. In contrast, price promotions would decline the customers’ brand loyalty to non-price-sensitive brand companies (Wang Yongle& Li Meixiang& Zhao Jun, 2006). By understanding, non-price-sensitive brand companies are companies’ brand recognized by customers in respect of quality or service as the first core element rather than price in brand positioning.
Moreover, based on the adapted study that we are using for our study, one of its findings showed that the price promotion is an equivalent and positive effect on brand loyalty. It had given the relationship between price promotion and brand loyalty was significant (t = 4.110, p < .001). Moreover, price promotions were positive predictors of brand loyalty (β = .195).
By reviewing chapter two, it provides better understanding of the relationship between all the independent variables and brand loyalty. It can help marketers to develop better strategies and create brand loyalty among the customers by knowing of these.
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