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Impact of Customer Service on Consumer Buying Behaviour

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Chapter 2 – Literature Review

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.

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 (Kursunoglu, 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).

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.

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 (Herrhausen 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 firm’s’ 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).

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 firm’s’ 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 individual’s 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.

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.

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 (Kursunoglu, 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 Kalinic, 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 firm’s perceived performance exceeds customer’s expectations, a positive disconfirmation is created, hence leading to customer satisfaction. Moreover, if a firm’s perceived performance does not 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 theorized 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).

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 (Išoraitė , 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 individual’s’ 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).

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 individual’s’ 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. Kursunoglu (2014) found that the level of customer service provided has an impact on customer satisfaction and customer loyalty. (FINISH THIS)

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 effects 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.

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