Building Customer Loyalty in online Retailers

Building Customer Loyalty in Online Retailers

Since 2000 e-commerce as a percent of total retail sales has increased from 0.8% to 5.5% (U.S. Department of Commerce Economic and Statistics Administration, 2013). As e-commerce continues to grow, so does the competition for companies that have an online-only presence. GetItNow.com is a developing online retailer that started doing business in 2010. Currently, GetItNow.com sells a wide array of general merchandise items including housewares, clothing, jewelry, and shoes. Despite Huang's (2011) findings that customers have high behavioral loyalty to online retailers, the competition amongst online retailers causes companies still need to actively monitor customer satisfaction, quality perceptions, and switching barriers. Get It Now has struggled to create a customer loyalty plan that will encourage repeat business and the management team would like to research available strategy plans that would increase the likelihood of customers returning. In Ahmad's (2002) research, it was determined that convenience and competitive pricing are two key reasons why people are shopping online. Ideally, if an online retailer (now referred to as, e retailer) offers a satisfactory experience for customers they will return to the e retailer for future purchases. However, one study found that despite having a satisfying shopping experience, online shoppers would only recommend the website to others 84% of the time (Ahmad, 2002). The barriers involved with switching to a different e retailer offering the same or similar product are minimal and earning repeat business from customers can prove to be difficult. If an e-retailer cannot attract new customers the e-retailer will not be able to continue its operations. Despite the online only presence, many e-retailers still rely on word of mouth in order to earn new customers (Norizan & Ismail, 2009). Positive word of mouth can decrease the need for excessive spending on marketing expenses (Norizan & Ismail, 2009). Building an online presence that will encourage customer satisfaction will create a loyalty amongst customers that will encourage their repeat business despite lower competitor prices. In a perfect world e-retailers would be able to offer their customers the ideal purchasing environment. However there are significant costs associated with this ideal image. As Choi, Kim, Kim, and Kim (2006) pointed out, "store loyalty is one of the central concepts for business success, more specifically, profitability" (p. 938.) GetItNow.com's management team has requested information on customer retention programs, specifically what attributes should be incorporated into marketing and operation strategies to create customer loyalty for e retailers?

Methodology

To address the research question searches were completed utilizing the Metropolitan State University's Library database. The primary database searches included Business Source Premier, ABI/Inform, and the One Search feature was also used. Key words searched included customer relationship management, customer loyalty, online, retail, e-commerce, customer satisfaction, trust, and customer service guarantee. The search was further narrowed to include full text and scholarly journal articles only. The noted search parameters led to relevant and informative sources of information; typically between 30 and 100 articles were generated with each search variation. The search terms were changed and adapted as needed and many times different terms were discovered through reading useful articles. Abstracts were scanned for relevance to the research topic. Most of the research articles used to develop this literature review consisted of online surveys with samples consisting of university students. Huang's (2011) research was built from a data set derived from the 2007 comScore database, which provided information regarding dollars spent in various industries and types of retailers. Souitaris and Balabanis completed their research in person outside of grocery stores in the UK by asking 1 in 5 passersby to participate in a research questionnaire. The articles provided a good mix of qualitative and quantitative research. One challenge that was identified was the difficulty in finding relevant recent research data. In the early 2000s there was a lot of research done as the internet boom was building, however since the capabilities of internet retailing have changed so rapidly and drastically recent research would be beneficial to GetItNow.com in evaluating this research question.

Literature Review

What attributes should be incorporated in marketing and operation strategies to increase customer loyalty for e retailers? This literature review identifies the critical factors in creating customer loyalty for e retailers. These critical factors include customer satisfaction and switching barriers. Investing resources into either or both of these will help to create customer loyalty. According to Yoon (2008), there are marketing tactics and interactivity factors that will trigger relationship building efforts. As Choi et al. (2006) pointed out in their research the same quality factors that generate loyal behavior do not necessarily create disloyal behavior. This section is broken out into subheadings that categorize and explain their impact on customer loyalty.

Customer Satisfaction

Customer Satisfaction has been proven to contribute considerably to loyalty (Norizan & Ismail, 2009.) There are multiple factors that influence customer satisfaction, such as service quality, trustworthiness, and the marketing and operational strategy employed by the e retailer. According Tsai, Huang, Jaw and Chen (2006), enhancing customer satisfaction can be accomplished through implementing marketing resources that improve service quality and increase trust. For some e retailer consumers a user friendly website will cause satisfaction level to rise. Creating a complaint management system will allow customers to easily communicate problems and give the e retailer a chance to save the sale (Ahmad, 2002). Also noted in Souitaris and Balabanis (2007) research findings was that a customer's perceived value for money and product quality have a direct effect on a customer's loyalty. Additionally, a customer's sense of elevated service quality and trust will have the greatest impact on overall satisfaction (Tsai et al., 2006).

Service Quality

Service quality can be addressed through many different avenues. Norizan & Ismail (2009) pointed out that service quality provided by the e retailer is the main contributor to customer satisfaction. Providing an easy to navigate online store and