Factors Affecting Customer Loyalty in NCR: An Analysis

Factors Affecting Customer Loyalty in NCR: An Analysis

Arpit Kumar Parhi (Birla Institute of Management Technology, India) and Pooja Misra (Birla Institute of Management Technology, India)
DOI: 10.4018/978-1-5225-4831-7.ch020
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Abstract

In India, the retail industry is rapidly growing and the US$ 600 Billion industry is all set to touch the US$ 1 Trillion mark by 2020. With rising disposable income levels, Indian consumers are getting sophisticated day by day and gone are the days when customers are dependent on a handful of brands. All the retailers are trying to woo customers by making their products available according to the convenience of customers and gain a share of the customer's wallet. The availability of many brands is making the customers try different brand which is decreasing customer loyalty. Loyal customers are always helpful for a retailer as the life time value of loyal customers is much higher than that of disloyal customers. The research study aims to understand and analyse the factors affecting customer loyalty in NCR. The research studies four major factors which impact customer loyalty, i.e., customer service of the retailer, brand image of the retailer, trustworthiness of the retailer and special benefits provided by the retailer to the loyal customers.
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Introduction

Customer Loyalty is an attitudinal and behavioural tendency of customer to favour one brand over the other. The Indian retail market is growing at an impressive speed. The country is witnessing a transformation from age-old organised form of retailing to organised retailing practices. The attractiveness of Indian retail market, which is largely unorganised underserved, has attracted many global players like Walmart, Zara, H&M, and Armani etc. to open shops in India. With the evolution of faster connectivity and internet services like 4G and LTE and the largest young population who are tech savvy, e-commerce is growing at a rapid speed in this developing economy. With the markets in developed countries like the U.S being saturated and the current economic slowdown in China, it has forced many retailers who have ignored the Indian market so far to invest heavily in this growing economy. As now large number of option are available for the customer the growth and size of the Indian retail market has intensified the level of competition amongst retailers. During pre-liberalisation, era customers had very few options to choose from but now in this age the power balance has changed, the power has shifted gradually to the hands of the customer. The customer can choose any brand and any channel as per his convenience since there is no shortage of options available in the market so if one retailer misses the opportunity to serve the customer the other one will do it.

As the retailers in India have understood the importance of customers in the business process, no one is willing to lose a customer. Retailers know that acquiring new customers is costlier than that of retaining existing customers since they do not have to spend much in terms of advertisements and promotions. The existing customers have already tried out the product/service offering of the retailer and thus it is relatively easier for the retailers to woo these customers to stay loyal to the retailer. Loyal customers are always helpful for a retailer since the lifetime value of loyal customers is much better than that of disloyal customers. Loyal customers are also easy to serve for a retailer. The retailer knows the customer’s shopping preferences and can make customized offer to the customer. Loyal customers can also increase the awareness about the retailer via word of mouth. This kind of unpaid and personal promotion can be very beneficial for any retailer. Loyal customers are beneficial for the retailer but due to high brand proliferations, there is huge option range available for the customers that has lowered the tolerance level of the customer. So if the customer does not like any aspect of product/service offering of the retailer then he/she can switch to a different retailer. Internet has made a vast amount of information available to the customers, which in turn have increased the market knowledge of the customers. Large number of available options and market knowledge has also lowered the switching cost. Nowadays it is not very difficult to find a substitute of any product or service. Therefore, it has become a major challenge for the retailers to retain the customers with them and make them loyal customers.

The research study aims to understand and analyse the factors affecting customer loyalty and the strategy that retailers should adopt in order to increase customer loyalty level. The research studies four major factors which affect customer loyalty ie. Customer service of the retailer, brand image of the retailer, trustworthiness of the retailer and special benefits provided by the retailer to the loyal customers. All these four factors are very crucial for customer loyalty since these factors can form either a positive customer experience or a negative one. A positive customer experience can lead to customer satisfaction and a satisfied customer is more likely to repurchase from the same retailer which can in turn increase customer loyalty for the retailer.

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