Do Quality, Value, Satisfaction and Loyalty Differ Amongst Different Cultural Groups of KFC Customers?

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1 Page 1 of 8 ANZMAC 2009 Do Quality, Value, Satisfaction and Loyalty Differ Amongst Different Cultural Groups of KFC Customers? Nic S Terblanche, University of Stellenbosch, nst@sun.ac.za Abstract This study reports on the empirical findings in respect of the relationships between various dimensions of a loyalty model for KFC and considers differences amongst different culture groups in respect of perceived quality, value, satisfaction and loyalty. The respondents are all customers of KFC and they were required to respond to items from (mostly) the American Customer Satisfaction Index (ACSI) scales. The empirical findings provide support for the theoretical model proposed but there are little differences in how the various culture groups loyalty intentions are shaped. Keywords: Customer loyalty, products, choice, intention

2 ANZMAC 2009 Page 2 of 8 Do Quality, Value, Satisfaction and Loyalty Differ Amongst Different Cultural Groups of KFC Customers? Introduction Customer retention has been acknowledged as an essential contributor to profitability over the long term (Iniesta and Sánchez, 2002; Heskett, Sasser and Schlesinger, 1997; Heskett, 2002; Dick and Basu, 1994). Satisfaction, loyalty and commitment of customers are probably the three constructs that have been studied the most in an effort to try and understand the drivers of customer retention. Research suggests that customer retention leads to increased long-term profitability, lower sales/marketing costs, and more opportunities for cross-selling of products and services and positive word-of-mouth by customers (Kent and Löfmarck Vaghult, 2000; Wirtz and Lihotzky, 2003). In this study customer loyalty is a proxy for customer retention. Purpose of the Study The primary objectives of this study are twofold. The first objective was to ascertain whether selected constructs impact on customer loyalty to KFC. The second objective of the study was to determine whether clients from different cultural groups differ in their perceptions of the quality, value, satisfaction and loyalty to the firm. The Theoretical Framework of the Study Four constructs were investigated in the study. The primary focus was on the relationships between perceived quality, perceived value, satisfaction and the loyalty of customers. Customer loyalty Customer loyalty can be defined as a deeply-held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby, causing repetitive same brand set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior (Oliver, 1999). Customer loyalty can be defined from a behavioral, attitudinal or situational perspective (Chaudhuri and Holbrook, 2001; Uncles et al., 2003). Behavioral, attitudinal and situational loyalties all play a role in marketing. Firms would prefer that their customers loyalty is attitudinal because of the emotional element. Customer satisfaction Customer satisfaction, according to Fornell et al (1996), lies at the core of a sequence of relationships, including antecedents such as perceived quality and perceived value as well as the consequence of customer satisfaction (loyalty). Satisfaction in this study refers to cumulative satisfaction. Customer satisfaction has been credited with numerous beneficial outcomes. In this study, the primary focus is on customer satisfaction and its relationship with customer loyalty. Based on the preceding discussion, the following hypothesis is formulated: H 1 : There is a positive relationship between customer satisfaction and customer loyalty of KFC customers

3 Page 3 of 8 ANZMAC Perceived quality In the present study it is hypothesised that the greater the perceived quality, the greater the level of customer satisfaction. This view is supported by the theoretical perspective which claims that customer satisfaction is an outcome of consumers positive evaluations of the quality of products and services (Babakus, Bienstock and Van Scotter, 2004; Liu, 2005). Perceived quality has also been found to have a significant effect on perceived value (Dodds, Monroe and Grewal, 1991). In a similar vein, it has also been established that product value was enhanced by marketing communications that emphasise the relative higher quality of a product (Rangaswamy, Burke, and Oliva, 1993). We expected the product and service quality dimensions of ACSI to be highly correlated. An exploratory factor analysis confirmed that the two dimensions are indeed one. The combined dimensions are labelled as perceived quality. Based on the research findings that satisfaction is the behavioural outcome of quality, the following hypothesis is suggested: H 2 : There is a positive relationship between perceived quality and customer satisfaction of KFC customers Perceived value The nineties witnessed that the interpretation of consumer behaviour is enhanced when it is analysed from a perceived value perspective (Ostrom and Iacobucci, 1995; Jensen, 1996; Woodruff and Gardial, 1996; Heskett, Sasser and Schlesinger, 1997). Gallarza and Saura (2006) believe that the value concept is multi-faceted and complex because the term value is extremely abstract and polysemous. Zeithaml s (1988) conceptualised value as having both a get and give element. Despite conceptualisation differences of perceived value, the importance of perceived value in marketing is shared by several authors who anticipate that perceived value will increase in importance in this century (Woodruff, 1997; Forester, 1999; Treadgold, 1999). The preceding discussion leads to the following two hypotheses: H 3 H 4 There is a positive relationship between perceived quality and perceived value of KFC customers There is a positive relationship between perceived value and customer satisfaction of KFC customers Perception Differences amongst Cultural Groups Studies in the USA found that race and ethnicity play an important role in consumer decisionmaking (Podoshen, 2008: 211). Several studies also found that Black Americans patronise fast food outlets more than any of the other race groups (Cavallaro, 2008: 8). A study undertaken in 2004 found that Black neighbourhoods had 40% more fast food outlets per square mile compared with the White neighbourhoods (Block, Scribner and DeSalvo). Black townships in South Africa were traditionally developed as dormitory towns with the minimum of shopping and other amenities, it is highly unlikely that the prevalence of fast food outlets in the Black townships would be nearly as dense as those in the White towns and cities because of location restrictions imposed by the repealed Group Areas Act. Although the Group Areas Act has been repealed some time ago, the geographical location of the different race groups have not changed substantially since the repeal of the Group Areas Act.

4 ANZMAC Page 4 of 8 The second objective s findings could be of use for the design of outdoor promotion and advertising strategies aimed at the particular culture groups. The racial classification used by the South African government was used for cultural identification purposes in this study. The groups are Blacks, Coloureds, Indians and Whites. The followings hypothesis is investigated: H 0 : The mean scores of the perceptions of quality, value, satisfaction and loyalty of the four different cultural groups are equal. Research Design The dimensions measured empirically were perceived product quality, perceived service quality, perceived value, customer satisfaction and customer loyalty. The items measuring each of these variables were all linked to 10 point semantic differential scales. A structured questionnaire was used to collect data during interviews with respondents. All interviews were conducted using random suburb sampling to obtain a representative national sample. The total sample for this study was 533 interviews. Respondents were interviewed in-home and had to be 18 years or older to qualify for the interview and they also had to have bought a meal from KFC in the month preceding the interview. Empirical Results The instrument used in the study was mainly based on items of the ACSI scale. The dimensions of Customer Expectations and Customer Complaints of the ACSI scale were not studied. We felt that if a respondent is asked her/his expectations and experiences in the same interview, the response in respect of expectations is influenced by what was experienced. Less than one percent of the respondents reported that they complained to store staff or managers and this low prevalence of complaining made it impossible to find any relationship between complaints and Customer Satisfaction/Customer Loyalty. A variety of statistical tests were used to analyse the data. The statistical tests included a CFA, a SEM and ANOVAS. Except for the analysis of variance, the data in respect of all the culture groups were lumped together and analysed at the aggregate level. The Cronbach alpha co-efficients of the dimensions and the scale used to measure customer loyalty exceeded the generally accepted cut-off value of 0.7 (Nunnally and Bernstein, 1994). The objectives of this study were twofold. The first objective was to ascertain whether the selected factors impact on customers loyalty to KFC. Structural equation modeling (SEM) was used to estimate the relationships in the model. The second objective of the study was to assess whether clients from different cultural groups differ in their perceptions of the quality, value, satisfaction and loyalty to KFC. To test the hypothesis that the mean scores of the perceptions of quality, value, satisfaction and loyalty of the four different cultural groups are equal, an analysis of variance (ANOVA) to test for differences between cultural groups and Scheffe post hoc tests for multiple comparisons were conducted. A CFA was conducted using LISREL 8,80 (Joreskog & Sörbom, 2000) to assess the measurement properties of the items used in the model. Because the data were not normally distributed, the Robust Maximum- Likelihood (RML) estimation method was used to test the theoretical model. Figure 1 illustrates the empirical relationships between the dimensions studied. The model fit indices suggest a moderate fit of the model to the data (χ2 = ; df = 61; Satorra-Bentler Scaled Chi-square = ; RMSEA = ; and ECVI = 0, 569. The relationships between customer satisfaction and customer loyalty, perceived value and customer satisfaction,

5 Page 5 of 8 ANZMAC perceived quality and perceived value, perceived quality and customer satisfaction are strong and highly significant (Table 1). Hypotheses 1, 2, 3 and 4 are thus supported. Table 1 Path co-efficients for the model in Figure 1 PATH Path co-efficients / (t-value) Customer Satisfaction Loyalty 0.98 / (19.52)*** Perceived value Customer satisfaction 0.57 / (8.68)*** Perceived quality Perceived value 0.79 / (16.84)*** Perceived quality Customer satisfaction 0.45 / (6.72)*** *** = p < To address the second objective a series of four ANOVA tests were conducted. Cultural classification was the independent variable. The four dependent variables were loyalty, perceived quality, customer satisfaction and value respectively. The objective of the first analysis of variance was to assess the differences amongst the different culture groups in terms of loyalty. The resultant F-value of suggested that the null hypothesis that the mean scores amongst culture groups are equal, had to be rejected. The post hoc test (Scheffe) revealed that the mean loyalty score of White customers (8.4706) differed significantly (p< 0.01) from the mean score of Black customers. The Scheffe test also revealed that the mean loyalty score of White customers (8.4706) differ significantly from that of Coloured customers (9.1382) of KFC. The analysis of variance undertaken to assess the differences amongst the different culture groups in terms of perceived quality (dependent variable) produced a F-value of which suggested that the null hypothesis that the mean scores amongst the culture groups are equal, had to be rejected. The post hoc test (Scheffe) revealed that the mean perceived quality score of Coloured customers (8.6565) differed

6 ANZMAC Page 6 of 8 significantly (p< 0.01) from the mean score of Black customers. Coloured customers thus rate the quality of the fast food provider products and services significantly higher than Blacks. The analysis of variance test to assess the differences amongst the different culture groups in terms of customer satisfaction (dependent variable) did not provide any significant differences between the four culture groups as the F-value was (p> 0.05). The null hypothesis that the mean scores of customer satisfaction of the four different cultural groups are equal thus could not be rejected. The analysis of variance undertaken to assess the differences amongst culture groups in terms of perceived value (dependent variable) produced an F-value of which suggests that the null hypothesis of the mean scores amongst the culture groups are equal, had to be rejected. The post hoc test (Scheffe) revealed that the mean perceived value score of Coloured customers (8.9996) were significantly higher than the mean scores of White customers (p< 0.001; ), Black customers (p< 0.01; ) and Indian customers (p< 0.05; ). Discussion and Conclusion Both perceived quality and perceived value are important for customer satisfaction in the fast food industry. Customer satisfaction appears to be a good predictor of customer loyalty. These findings support and contradict previous research findings on the relationship between customer satisfaction and customer loyalty. Some authors have found that not all satisfaction convert to customer loyalty (Mittal and Lassar, 1998). Other studies found that customer satisfaction does not impact on customer loyalty or that the characteristics of customers have different thresholds that, at similar levels of satisfaction ratings, result in different repurchase rates (Miranda, Kónya and Havrila, 2005; Mittal and Kamakura, 2001). The results related to the second objective of the study, namely how clients from different cultural groups differ in their perceptions of the quality, value, satisfaction and loyalty to KFC, produced some interesting findings that could be of value to managerial practice. Significant differences exist amongst the loyalty scores of Black, Coloured and Indian customers of KFC. Managerial Implications The differences in the mean loyalty scores, although statistically significant, do not warrant a different marketing strategy for each of the four cultural groups as the raw mean values are all relatively high and range from 8,47 to 9,1 out of 10 for the cultural groups. The cultural groups also differed significantly in respect of how they perceived the quality and value offered by KFC. No meaningful differences in respect of all the respondents satisfaction with KFC could be found. What is important from a managerial viewpoint is that KFC should determine in more precise and detailed terms, what makes their customers satisfied and loyal. Loyalty demands an attitudinal predisposition from the customer that sheer satisfaction cannot persistently bring into being. The bottom line is that customer satisfaction measures are insufficient per se and need to be augmented by a degree of loyalty. In the final analysis it seems appropriate to at least focus on those elements that create satisfaction as such elements do impact positively on loyalty. References American Customer Satisfaction Index, Methodology Report. The Regents of the University of Michigan: Ann Arbor, MI.

7 Page 7 of 8 ANZMAC Babakus, E., Bienstock, C.C., Van Scotter, J.R., Linking perceived quality and customer satisfaction to store traffic and revenue growth. Decision Sciences 35 (4), Block, J.P., Scribner, R.A., DeSalvo, K.B., Fast food, race/ethnicity, and income A geographic analysis. American Journal of Preventive Medicine 27(3), Cavallaro, M., The African-American food dollar Where it goes and how to get a piece of it. Restaurant Business 27 (8), 8-9. Chaudhuri, A., Holbrook, M.B., The chain of effects from brand trust and brand affect to brand performance: The role of brand loyalty. Journal of Marketing 65 (2), Dick, A. S., Basu, K., Customer loyalty: Towards an integrated framework. Journal of the Academy of Marketing Science, 22 (2), Dodds, W. B., Monroe K. B., Grewal, D., Effects of price, brand and store information on buyers product evaluations. Journal of Marketing Research 28 (3), Forester, M., Deja vu discussion delivers message emphasizing value. Chain Store Age 75 (4), 12. Fornell, C., Johnson, M.D., Anderson, E.W., Cha, J., Bryant, B.E., The American customer satisfaction index: Nature, purpose, and findings. Journal of Marketing 60 (4), Gallarza, M.G., Saura, I.G., Value dimensions, perceived value, satisfaction and loyalty: an investigation of university student s travel behaviour. Tourism Management 27 (3), Heskett, J.L., Beyond customer loyalty. Managing Service Quality 12 (6), Heskett, J.L., Sasser, W.E. (Jr), Schlesinger, L.A., The Service Profit Chain. How Leading Companies Link Profit and Growth to Loyalty, Satisfaction and Value. New York: The Free Press. Iniesta, M.A., Sánchez, M., Retail-consumer commitment and market segmentation. The International Review of Retail, Distribution and Consumer Research 12 (3), Jensen, H.R., The interrelationship between customer and consumer value. Asia Pacific Advances in Consumer Research 2, Jöreskog, K.G., Sörbom, D., LISREL 8.8. Lincolnwood, IL: Scientific Software International, Inc. Kent, E., Löfmarck Vaghult, A., Customer retention, purchasing behavior and relationship substance in professional services. Industrial Marketing Management 29 (4), Liu, C-M., The multidimensional and hierarchical structure of perceived quality and customer satisfaction. International Journal of Management 22 (3),

8 ANZMAC Page 8 of 8 Miranda, M.J., Kónya, L., Havrila, I., Shoppers satisfaction levels are not the only key to store loyalty. Marketing Intelligence and Planning 23 (2), Mittal, B., Lassar, W.M., Why do customers switch? The dynamics of satisfaction versus loyalty. The Journal of Services Marketing 12 (3), Mittal, V., Kamakura, W. A., Satisfaction, repurchase intent, and repurchase behavior: Investigating the moderating effect of customer characteristics. Journal of Marketing Research 38 (1), Nunnally, J.C., Bernstein, I.H., Psychometric theory. New York: McGraw-Hill. Oliver, R.L., Whence consumer loyalty? Journal of Marketing 63 (4), Ostrom, A., Iacobucci, D., Consumer trade-offs and the evaluation of services. Journal of Marketing 59 (1), Podoshen, J.S., The African-American consumer revisited: brand loyalty, word-ofmouth and the effects of the black experience. Journal of Consumer Marketing 25 (4), Rangaswamy, A., Burke R. R., Oliva, T. A., Brand equity and the extendibility of brand names. International Journal of Research in Marketing 10 (1), Treadgold, A., The outlook for Asian retailing. Discount Merchandiser 39 (5), Uncles, M.D., Dowling, G.R., Hammond, K., Customer loyalty and customer loyalty programs. Journal of Consumer Marketing 20 (4), Wirtz, B. W., Lihotzky, N., Customer retention management in the B2C electronic business. Long Range Planning 36 (6), Woodruff, B.R., Gardial, F.S., Know your customer: new approaches to understanding customer value and satisfaction. Malden: Blackwell Business. Woodruff, R.B., Customer value: The next source for competitive advantage. Journal of the Academy of Marketing Science 25 (2), Zeithaml, V.A., Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence. Journal of Marketing 52 (3), 2-22.

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