Chapter essential background themes and topics for

Chapter
2 – Literature Review

 

 

2.1 Introduction

This chapter
attempts to review the essential background themes and topics for this study.
It will critically review existing literature surrounding this topic, providing
an in depth analysis in relation to project aims and objectives. The section
will explore elements of customer service – service improvement practices,
customer relationship management and training of staff – followed by an
evaluation of consumer buying behaviour which includes components of customer
satisfaction and customer loyalty. Finally, a summary of the chapter will be
given, hereafter presenting the hypothesise and a theoretical framework for
this study.

 

2.2 Customer Service

Customer service
can simply be defined as the relations that an organisations employees hold and
maintain with its consumers. It covers a wide range of areas that include
before, during and after sales service (Kursunluoglu, 2014). Different firms
adopt differing levels of customer service. Whilst some firms place great emphasis
on their customers to put their wants and needs before anything else, other
organisations simply look to derive profits by all means. The types and amounts
of customer service provided depends on the individual organisation, as well as
the market that they are present in (Batra, 2017). The attaining of competitive
capabilities is essential in order for firms to contest in any competitive
market place. Competitive capabilities can be seen as a manufacturer’s actual
or realised strength in comparison to its competitors. Firms must deliver
specific requirements needed by customers in an attempt to drive them away from
competition. With increasing competition and rise in technology, customer
requirements have evolved to include not only high quality products, but also
exceptional customer service (Hong et al. 2014).

 

 

2.2.1 Customer Service Improvement Practices

There are number
of factors that contribute towards efficient customer service. A service
improvement practice (SIP) is a method, process or way of doing things to
improve customer service processes through increasing service delivery
performances. Firms that adopt the greatest number of customer service
improvement practices are more likely to persistently raise the quality of
their customer service (Dickson, 2015). As an illustration, some organisations offer
repair and replacement services, provide various goodwill gestures to customers
on a day to day basis (Law, 2016), as well as constantly assembling and analysing
customer complaints, something which is vital as it directly focuses on
customer needs and wants (Dickson, 2015). Jebarajakirthy and
Sivapalan (2017) believe that high service quality provides a source of
competitive advantage for organisations. They established that by maintaining
high service quality, customer intention to repurchase will be enhanced,
enabling firms to maintain a long term relationship with their customers. This
is further reinforced by Prakash and Mohanty (2013) who state that higher
levels of service quality produce increased customer satisfaction and a growth
in sales. Although numerous strategies can generate such outcomes, if service
quality is distinctively created, it is difficult to imitate. This can offer a
unique selling point to organisations in comparison to its competitors. By
adopting greater customer SIP’s, firms will enhance their level of quality,
hence enabling them to create improved customer value and inevitably increase
loyalty to their organisation.

 

Whilst efficient
customer service can be achieved in countless number of ways, service failures
can have detrimental effects on successful and profitable customer
relationships (Cambra-Fierro et al. 2015). When services are unsuccessful in
meeting customer expectations, they are regarded as service failures. This can
instigate customer dissatisfaction, negative word of mouth or customer
defection which can consequently lead to a loss of customers to competitors
(Koc et al. 2017). According to Cheung and To (2017), the response of an
organisation to service failures determines whether a strong brand image is
built or whether their previous efforts are threatened, hence damaging the
reputation of the organisation. This is supported by Andreea (2015), who claims
that organisations who establish particular recovery strategies after service
failures can create an extensive advantage. Whilst service failures are
considered to be unavoidable, the most important factor for organisations is
their customers’ confidence in the firm to put things right, and inevitably
produce a satisfactory solution. By correctively responding to service
failures, organisations successfully maintain trust of their customers, hence
encouraging customer retention.

 

2.2.2 Customer Relationship Management

Customer
relationship management (CRM) can be defined as the core organisational
processes that focus on establishing, maintaining and enhancing long-term
associations with customers in an attempt to increase customer satisfaction,
loyalty and retention (Herhausen and Schögel, 2013). The purpose of
CRM is to build connections with customers in order to understand their wants
and needs. It is increasingly being recognised as a means of developing
innovative abilities and constructing a long-standing competitive advantage
(Bhat and Darzi, 2016).

 

According to Tseng (2016), CRM can be
classified into analytical and behavioural CRM. Analytical CRM signifies how a
firm collects and examines valuable information through communication with
their customers. The information is developed into modified strategies which
attempt to fulfil and exceed customer wants and needs. Behavioural CRM refers
to the integration of a firms’ connection channels with its customers. The
various networks such as the stores, customer service and the website for which
customer purchase and service records are documented help companies understand their
customers’ purchase behaviour (Tseng, 2016). CRM is therefore used to recognise
and prioritise the most suitable customers in accordance to numerous scoring
procedures, illustrating clear goals and objectives for the firm.

 

However, Bhat and Darzi (2016) believe that CRM
is a concept made up of four differing components; complaint resolution,
customer knowledge, customer empowerment and customer orientation. Complaint
resolution is how a firm addresses customer complications, whereas customer
knowledge considers how an organisation gathers, manages and shares information
to, from and about customers (Ashnai et al. 2010). Customer empowerment looks
at how a firm gives its customers power/authority to make decisions, with customer
orientation referring to a set of beliefs that place the interests of customers
first. By adopting these four concepts, firms can instil CRM to the highest
level, inevitably leading to customer loyalty and competitive advantage (Bhat
and Darzi, 2016).

 

 

2.2.3 Training of staff

The importance of
training has increasingly been recognised as a means of intensifying the
organisations level of customer service. Training can be expressed as a
continuous process of direction, correction and improvement at every level of
performance. It is a fundamental part of every organisation as it helps to accumulate
human resources which are crucial assets to a firms’ success (Sharma, 2014). Lee
(2012) believes that training improves knowledge, skills and abilities of
employees, enabling individuals to not only perform better, but also permit them
to implement organisational practices to required standards. Moreover, Currie
(2010) states that coordinated communication and training of employees are
vital to internal organisational success, as well as the quality of service
offered to customers. This is supported by Zumrah (2015), whose study
demonstrated a positive relationship between training and customer service
offerings.

 

Nevertheless,
there are other factors which are overlooked by these studies that need to be
considered. For example, an individuals level of competence and interpersonal
skills can have a vast influence on quality of service offered. Ro and Mattila
(2015) found that discontent customers can be identified by organisations
through recruiting individuals with worthy interpersonal skills and authentic friendliness
traits. Compassionate employees are able to identify customers’ personal
characteristics and communication styles, hence being able to correctly
evaluate a particular situation and ultimately decide on the appropriate action
needed to fulfil customer wants and needs. Furthermore, Punia and Kant (2013) acknowledged
elements that influenced the effectiveness of training, hence shaping the level
of service offered. They stated that lack of support from top management and
colleagues, employees’ individual attitudes, job related factors as well as
deficiencies in training programmes all have an immeasurable affect on training
effectiveness. Through regulating these factors, firms can offer successful
training, hence providing optimal customer service.

 

 

2.3 Consumer Buying Behaviour

Consumer buying
behaviour refers to the purchasing behaviours of customers before, during and
after a sale. Consumers are influenced by organisations on distinctive levels
including administrative communication, atmosphere within the stores as well as
the qualities of each individual brand (Elg and Hultman, 2016). As we know,
every individual holds their own preferences of items they purchase, as well as
the location they purchase it from. Organisations therefore adopt distinct
marketing strategies in an attempt to influence individual buying behaviours of
consumers, hence attracting them towards their firm. It is important for firms
to create value to customers to drive their satisfaction, loyalty and
profitability (Kumar and Reinartz, 2016). In doing so, firms can find ways to
influence buying behaviours of their customers, creating customer loyalty and
retention, and ultimately increase the long term success of the business.

 

 

2.3.1 Customer Satisfaction

Customer
satisfaction can be seen an individual’s perception of the performance of a
product or service in relation to his or her expectations (Torres and Kline,
2013). It involves meeting the needs at the end of the service. Whilst each
customer will have a distinct level of contentment from differing services,
satisfaction can simply be seen as an evaluation of how much a firm could meet
or exceed customer expectations (Kursunluoglu, 2014). Customer satisfaction is
essential for every competing firm as it primary determinant of the level of
success in today’s competitive business world (Marinkovic and Ka1linic, 2017).
A satisfied customer is highly likely to share their experiences with family
and friends, encouraging them to buy into a product/service. Likewise, a
dissatisfied customer could potentially switch brands and possibly disperse
information about their negative experiences, consequently damaging an
organisations reputation and therefore sales (Evans et al. 2009). Furthermore,
a customers repurchase intention is strongly linked with customer satisfaction
(Marinkovic and Kalinic, 2017), demonstrating the vast importance of the topic
to organisations and marketers.

 

There is much
research surrounding customer satisfaction. According to Isac and Rusu, 2014, customer
satisfaction or dissatisfaction is based upon an individual’s ability to learn
from past experiences. The theory of expectation disconfirmation explains that
an individual compares their post purchase perceptions to their prior pre
purchase expectancies. The resulting gap between expectations and performance results
in disconfirmation (Van-Ryzin, 2013). For example, when a firms perceived
performance exceeds customer’s expectations, a positive disconfirmation is
created, hence leading to customer satisfaction. Moreover, if a firms perceived
performance doesn’t fulfil customer expectations, a negative disconfirmation can
occur, therefore leading to customer dissatisfaction (Petrovsky et al. 2017). Further
to this, the theory of assimilation states that consumers attempt to avoid
dissonance by adjusting perceptions to a certain product/service in an attempt
to bring it closer to their expectations. Customers can reduce uncertainty
caused by the difference in anticipation and performance, by either altering
their expectations to match the product’s perceived performance, or by
increasing level of satisfaction through minimising importance of
disconfirmation (Isac and
Rusu, 2014).

 

However, it is
argued these theories may have many potential downfalls. Firstly, both
approaches make an assumption of a connection between expectation and
satisfaction, but do not specify how expectation disconfirmation can lead to
satisfaction or dissatisfaction. 
Secondly, the assimilation theory theorises that individuals are
motivated enough to regulate either their expectations or perceptions of
product performance. Adjusting for actual product performance can lead to
positive relationship between customer expectation and satisfaction, hence
predicting that couldn’t occur unless expectations were negative at the start
(Isac and Rusu, 2014).

 

 

2.3.2 Customer Loyalty

Customer loyalty can
be described as an intentional user solution to build a relationship with a
company over a long period of time (Išorait? , 2016). Firms
increasingly acknowledge the importance of greater loyalty, as it can lead to a
number of benefits such as a reduction in marketing costs, enlarged prospects
for brand extension, as well as an enhanced market share (Evans et al., 2009). Popular
organisations can build customer loyalty to such an extent that their customers
engage to a point of sharing the company’s purpose and values, delivering a
unique and powerful customer experience (Grewal et al., 2017). It is one of the
greatest intangible assets a firm can have, offering not only vast potential for
differentiation, but also delivering a source of competitive advantage (Cossío-Silva et al. 2016). According to Evans et al.
(2009), loyal customers are a good source for spreading positive word of mouth,
as well as illustrating great resistance to competitive offerings. Customer loyalty is vitally important to organisations. The costs of
dealing with loyal customers are significantly inferior to the costs of
attracting new customers, as loyal customers are more likely to pay for
products or services to other potential customers (Cossio-Silva et al. 2016). Furthermore,
individuals who are loyal to a firm are less sensitive to price changes and
also buy more often and in large quantities from firms, demonstrating the crucial
nature of customer loyalty to firms (Alves et al. 2016).

 

The concept of
customer loyalty has much been studied by several researchers. Beck et al.
(2015) stated that customer loyalty is made up from two theoretical elements of
attitudes and behaviours. Firstly, attitudinal loyalty is simply a perception
that desires a particular entity. Individuals are seen to be information
processors who collect information to form attitudes. The collection of robust
positive attitudes through systematic evaluation influence many
customer-related behaviours. Even without repeat purchase, the recommendation
of suppliers from one customer to the other demonstrates the presence of
attitudinal loyalty (Cossío-Silva et al. 2016). Secondly, behavioural
loyalty involves repeated purchase, which originates from an individuals’ habit
(Beck et al. 2015). Loyalty is perceived to be a way of behaving, with
‘repeated purchase’ being a loyalty indicator. Behavioural loyalty is
fundamental, whereas attitudinal loyalty is considered a cognitive perception.
Research indicates a positive relationship between behavioural and attitudinal
loyalty (Cossío-Silva et al. 2016).

 

However, Fraering and Minor (2013) indicated a
four stage process needed to form customer loyalty which were formed by
cognitive, affective, conative and action loyalty. The initial stage is
cognitive loyalty which is derived from an individual’s knowledge from previous
or recent experiences, followed by affective loyalty which refers to an
emotional connection being shaped between the customer and the product (Ordun,
2016). The third stage is conative loyalty, where repurchase becomes a
behavioural intention such as impulse buying, followed lastly by action loyalty
where customers not only have the intention to buy, but also the motivation to
repurchase. The commitment of action loyal customers is thought to be
unchangeable, regardless of any competitor movements (Fraering and Minor, 2013).
This four stage process is further supported by Han et al. 2011, who attempted
to test earlier work based on loyalty. Their results illustrated a strong
connection between the four stages, and discovered that the theoretical
framework had a convincing capacity for predicting the last stage of loyalty.

 

Whilst customer
loyalty brings about rewards to firms, it also provides benefits to customers. Switching
costs are seen as the one time costs that customers associate with the process
of switching from one provider to the other. When individuals switch away from an
entity, they are faced with several different switching costs (Chebat and
Haj-Salem, 2014). By sticking to one provider, individuals won’t have to
compensate for these costs. Furthermore, most organisations offer loyalty
reward programmes and loyalty cards. Not only does this derive profits for
organisations, but it also allows individuals to rack up loyalty points and
save money when purchasing items from the same firm (Meyer-Waarden, 2015). 

 

2.4 Purchase Intention

For this study,
customer service is considered to be effective if it has a positive influence
on consumer buying behaviour. Purchase intention refers to an individuals’
conscious plan to buy a product/service. It stimulates and drives consumer
buying behaviours (Haque et al. 2015). According to Hassan et al. 2015, the
AIDA (Attention, Interest, Desire, Action) model is a marketing model that
focuses on transactions and purchases performed by individuals. By offering
exceptional service, firms can encourage consumers to go through these stages,
hence creating a willingness to buy from that particular brand. The attention
stage involves gaining the awareness of customers, followed by the interest
stage where they become attracted to the product/service. FINISH Pornpitakpan et al. 2017, believe
that the extent of customer service offered can vastly influence consumers
buying behaviour. The level of interaction between customers and service
employees are seen to be essential, as that plays a large part in consumers’
assessment of the overall quality provided. Kursunluoglu (2014) found that the
level of customer service provided has an impact on customer satisfaction and
customer loyalty. (FINISH
THIS)

 

 

2.5 Chapter Summary

This chapter outlined
essential literature surrounding customer service and consumer buying behaviour
by identifying key elements of service improvement practices, customer
relationship management, training of staff, customer satisfaction and customer
loyalty. Hereafter, literature based upon purchase intention of customers was
discussed, determining how customer service can influence individual buying
behaviours. However, the body of literature provided above highlighted a few
key research gaps that need to be filled.

Firstly, although current
research states that high service quality influences customer satisfaction and
loyalty, there is no considerable empirical evidence to suggest a similar
pattern in UK supermarkets.

The second
research gap involves service failures. Whilst research declares that servicing
failures can have detrimental affects to organisations, and that the response
of firms to these failures are vital, there isn’t much indication of
individuals’ true perceptions to organisational responses, and what they truly
pursue in those particular situations.

Finally, despite
studies showing that relationships with employees are essential for
organisations, and that fully trained and competent staff can lead to better
customer service, there is no true evidence to suggest these matters, hence
remaining vastly controversial.