The importance of relationship in customer loyalty strategies: An exploratory study of Moroccan industries.

Transcription

1 The importance of relationship in customer loyalty strategies: An exploratory study of Moroccan industries. Laila OUHNA* * Corresponding author: author: Laila OUHNA, Dr., National School of Trade and Management/ Ibnouzohr University, Agadir, Morocco, ouhnalaila@yahoo.fr Soumiya MEKKAOUI** **Soumiya MEKKAOUI, Ph.D, National School of Trade and Management / Ibnouzohr University, Agadir, Morocco, soumiyamekkaoui@hotmail.com

2 Abstract Customer loyalty is crucial for companies because of the huge competition in their environment. In Moroccan economy, the agri-food industries represent a vital sector. It contributes with 30% of total industrial production in the country. The objective of this paper is to investigate the relationship between agri-food industries and their customers. It aims to study how agri-food companies retain their customers. Data of our empirical research were collected from ten Moroccan agri-food firms. The results of this study highlight the importance of relationship in loyalty strategies. Therefore, to maintain distributor s loyalty, a producer may enhance relational determinant as relationship satisfaction, commitment, and trust. Keywords Agri-food businesses, Loyalty strategy, Relationship marketing, Relationship satisfaction, Trust, commitment.

3 1. INTRODUCTION The agri-food industries represent a vital sector in Moroccan economy. It contributes with 30% of total industrial production in the country. Nowadays, the competitive environment of industrial markets encourages companies to focus their marketing efforts to maintain and expand their market share. Therefore, customer loyalty represents a main factor for the companies competitiveness. Indeed, it has been shown that retaining a customer is five times less costly than conquering new one (Jones & Sasser, 1995). The prospect acquisition costs are increasingly high, which favors keeping a good personal relationship with customers and retain them. Loyalty strategy constitutes a good solution for developing business activity and defending their market shares (Benavent & Meyer-Waarden, 2004). They are considered as defensive strategy to reduce customer defection (Crié, 2002). The existing literature on loyalty focus on the issue of loyalty programs, their efficiency and profitability (Daams & al., 2008; Meyer-Waarden & Benavent, 2009 ; Liu & al., 2011 ; Dorotic & al., 2011 ; Gómez & al., 2012 ; Evanschitzky & al., 2012). However, loyalty strategies remain a subject rarely explored by researchers (Benavent & al., 1999/2000). This research aims to investigate loyalty strategies adopted by Moroccan agri-food companies. The objective is also to find out the relationship between Moroccan producers and their distributors. Therefore, this paper is divided into five sections. The first section focused on research objectives. In the second section we review the current literature on loyalty strategies and customer relationship in B to B context. Then, we present the research methods. In the fourth section we present and analyze the results. Finally, we discuss the results, we present their implications, their limits and further research. 3

4 2. CONCEPTUAL BACKGROUND 2.1. B to B Customer loyalty Literature on customer loyalty has been developed since the 70s. The concept has been defined as a behavioral measure (Massey, Montgomery & Morrison, 1970, Copeland & Cunningham, 1986). These measures include proportion of purchase, probability of purchase, probability of product repurchase, purchase frequency, repeat purchase behavior, purchase sequence, and multiple aspects of purchase behavior. Other authors defined loyalty from the consumer attitudes toward the brand (Bass & al, 1972), preferences (Guest, 1944), or the intention of repurchasing (Labarbera & Marzusky, 1983 ). Although, the one-dimensional view of loyalty is criticized by authors. They suggest defining loyalty by combining the attitudinal and behavioral dimension (Jacoby & Kyner, 1973). According to Day (1969) observing a systematic repurchase behavior without incorporating a positive attitude of the customer is a false loyalty. The author considers that the true loyalty must necessarily derive from intent. Indeed, the attitudinal approach considers that customer loyalty stems from his rational decision to make the purchase. So, loyalty has both an attitudinal and behavioral dimension (Dick & Basu, 1994). It is supposed that customers who are behaviorally loyal to a firm display more favorable attitudes towards the firm, in comparison to competitors. However, in some cases behavioral loyalty does not necessarily reflect attitudinal loyalty, since there might exist other factors that prevent customers from defecting (Liljander & Roos, 2002; Reinartz & Kumar, 2002; Aldlaigan & Buttle, 2005). The concept of customer loyalty is defined as a commitment to re-buy or re-patronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior (Oliver, 1999). In B to B context, customer loyalty is related to actions for enhancing present and future buying behavior and other reasons for the relationship (Meyer & Oevermann, 1995). Companies can develop customer loyalty by influencing current and future customer buying behavior in a positive way. Accordingly, these actions have the objective to stabilize and expand the customer relationship (Homburg & Bruhn, 1998). 4

5 B to B customer loyalty is analyzed in different dimensions. Rundle-Thiele (2005) studied customer loyalty in five dimensions. The situational loyalty (Oliver, 1999; Dubois & Laurent, 1999), resistance to competing offers, which has also been referred to in the literature as price sensitivity (Hozier & al., 1985; Zeithaml & al., 1996; de Ruyter & al., 1998; Narayandas, 1999; Ganesh & al., 2000), propensity to be loyal (Mellens & al., 1996), attitudinal loyalty (Bowen & Chen, 2001; Butcher & al., 2001; Guest, 1944; Pritchard & al., 1999) and finally complaining behavior (Bloemer & al., 1999; de Ruyter & al., 1998). The author considered the specifics of inter-organizational exchange and the competition to define the true B to B customer loyalty Customer loyalty strategies Customer loyalty is considered as a main factor of firm competitiveness (Anderson & al., 1994; Hallowell, 1996; Reichheld, 1996; Silvestro & Cross, 2000; Leverin & Liljander, 2006). Companies are seeking to adapt efficient strategy to retain their customers. Customer loyalty strategy is defined as a strategy which identifies, maintains and increases the yield of the best customers, through a value-added relationship, interactive and focused on the long term (Barlow, 1992 ; cited by Benavent & Meyer-Waarden, 2004, p. 97). Therefore, the customer loyalty strategy is designed as a marketing process. This process begins by selecting best customers to retain. Then, company seeks to maintain them and to develop their value. The relationship has an important place in loyalty strategy. It contributes to maintain and increases the yield of the best customers selected. Benavent & Meyer-Waarden (2004) classified loyalty strategies into two types, which differ according to their specific objective. The first strategy is the customer heterogeneity management based on the establishment of discrimination between customers to manage their diversity and needs. This strategy is required when the company has very heterogeneous clients and the discrimination between them is achieved by applying marketing mix. The second loyalty strategy is the customer relationship management. This type of loyalty strategy is established to increase or maintain the level of customer business with the company. It applies to changing customer behavior in order to increase their value (Benavent & Meyer-Waarden, 2004). Indeed, the customer lifetime value means profitability of each customer category. So, their profit increases across the entire customer life cycle by implementing the exit barriers on the relationship for each customer category. 5

6 2.3. Relational loyalty strategy Loyalty strategy by customer relationship management gives great importance to relationship elements. Companies adopt this type of loyalty strategy act based on three aspects: - Relational aspect, by developing a learning relationship with their customers in order to develop a long-term relationship based on trust and commitment; - Transactional aspect, either by creating for each experience a satisfaction that will create a positive attitude, or by offering complementary product and increase customer value through promotions products; - Customers locking aspect: This is to create a customer supply dependence on the company by imposing exit barriers. Indeed, this aspect has been strongly linked in the literature in the inter-organizational context. This is due to rational character of this type of exchange relations. Conceptually, loyalty strategies seek to build stronger and more durable relationships with customers. Durable relationships encourage customers to do something about a problem they have had with a product or service rather than quietly defecting from the brand (Duffy, 1998). The relational aspect, based on relational elements as trust and commitment, develop durable relationships. So, building relational customer loyalty is considered as a business strategy that helps businesses to boost loyalty and maximize share of their customers. They use to develop relational elements. 3. METHODOLOGY 3.1. Data collection The data were collected using a qualitative exploratory study of agri-food industries in Souss Massa Drâa region in Morocco. Interviews were conducted with the responsible of ten agrifood companies in several industries (fruit and vegetable packaging house, dairy industry, fish industry). The collection of data was done via individual semi-directive interviews in order to touch directly the individual and to make sure that the questions are completely understood. The selection of respondent firms was not random. In fact, in qualitative research, the goal is 6

7 to have access in a small sample the diversity of views (Giordano, 2003). We seek the rich content, diversity and quality (Evrard & al., 2003). For this reason, access to respondents was a difficult step for us. The interview guide used in the study explores the relationship between producer and distributor and includes a set of themes regarding the loyalty strategy applied by agri-food companies. The first theme tackles general information relative to the activity of a company and its distribution policy. The second theme seeks to evaluate the formalization of loyalty strategy. The third theme concern axes of loyalty strategy applied by the company Data Analysis We collected our data by using audio recording and the taking notes during the interviews. The use of audio recorder permits us to preserve the integrality of the expressed opinions, making data exhaustive and discursive, without worrying about the risk to miss information (Thietart, 1999). Only one interviewee didn t accept to be recorded, but he was very cooperative and helps us take notes. After collecting data, we totally transcribed the interviews in order to analyze them correctly. This technique allowed us to make the content analysis. Then the text of transcribed interviews has been devised, and then we combined these units as defined themes into categories. According to Bardin (1993) cited in (Quivy & Campenhoudt, 2011), three methods of content analysis exist, thematic analysis, formal analysis and structural analysis. In our qualitative study, we used thematic analysis method, and principally, a categorical thematic analysis. It consists in calculating and comparing the frequencies of certain characteristics previously grouped into categories (Quivy & Campenhoudt, 2011). In addition, an analysis of the evaluation enabled us to interpret the results in a much easier way. 7

8 4. RESULTS The literature review helps us to interpret the results of the qualitative study. A first theme was to introduce the discussion and measure the degree of formalization of the loyalty strategy in Moroccan firms. Theme 1: Agri-food Company and their distributors - Distribution Strategy: In the agri-food industry, companies often adopt an intensive distribution through the use of retailers, and for some companies, wholesalers. In addition, they distribute their products in all super markets available in Morocco as Marjane, ATACADAO, Carrefour Market, Acima and Aswak Assalam. -Distributors loyalty: The interviewed companies measure their customer distributors loyalty by return, repurchasing, re-cooperation, and renewing a contract. Theme 2: Loyalty strategy formalization All companies interviewed confirmed that they didn t adopt any loyalty programs. They adopted loyalty strategy that is not formalized. This is explained by the specificity of the food industry. However, one company has already had experience in the implementation of a customer loyalty program. This program was considered ineffective and was stopped. The company explained its ineffectiveness by the fact that distributors did not accept to be dependent on a given program. "Adopting a loyalty program is not beneficial for us, the specificity of our activity does not allow, and even our customers will not appreciate it " Drinks industry. Regarding the selection of customers to retain be made loyal, all companies segment their customers into categories, and then they determine customer to retain. These customers are determined according to different criteria: Purchase volume, customer solvency, their seriousness, commitment and responsiveness. Eight to ten of our customers are entitled to unlimited products with exceptional conditions. These eight customers are classified according to: the tonnage purchased, their attendance, their solvency and compliance with their commitments Fruit and vegetable packaging house company. 8

9 Theme 3: loyalty strategy axes - Relationship between producer and distributors All companies interviewed confirmed the predominance of relational bonds in their loyalty actions with distributors. They ensure maintaining good relationship with persons in contact as well as with institutions. They ensure to make a good relationship quality with their distributors. - Trust Trust was explained by the importance of the presence of the reception, service quality, good conditions, freedom, kindness, reliability and a friendly relationship between the industrial and its distributor customer. These elements can be grouped into two dimensions of trust: credibility and benevolence. Institutional Trust is the most vital in B to B exchange, then interpersonal trust. The producer must be honest, loyal, helpful and friendly Drinks company. - Commitment: Accordingly to our interviewees, commitment is an important element in maintaining a relationship. Companies give importance to mutual commitment. "Mutual commitment increases loyalty and relationships quality" Cheese Company. In addition, interviewees indicate that the determinants of commitment are: trust, reliability, reputation and positive word of mouth, and also satisfaction is a strong determinant. - Dependence: Dependence was negatively perceived by our interviewees. They completely refuse to accept dependence as loyalty determinant. They would rather talk about cooperation. "For us, high dependency is not beneficial." Vegetable packing house company. Dependency is not beneficial, it is dangerous. It has a risk of hostile customers, because according to the culture of our customers, dependency disturbs them and the company will not be motivated to develop good relationships to success." Company drinks. -Satisfaction: Satisfaction represent a key factor in loyalty strategies in Moroccan agri-food industries. They also speak of the relationship satisfaction. Thus, Moroccan companies ensure the 9

10 management of customer complaints to keep this satisfaction. "We evaluate customer satisfaction 3 times a week and we manage claims continuously." Delicatessen Company. 5. CONCLUSION Based on the thematic analysis, Moroccan agri-food companies adopt loyalty strategies that are not formalized. They do not privilege the use of loyalty programs. A loyalty strategy begins by selection, maintain and development of profitable customers (Barlow, 1992). Food companies interviewed are selected according to various criteria. It is principally the respect of commitment. Then these companies operate mainly by relational elements to maintain and develop their customers. Moreover, agri-food companies retain their distributors primarily through relational strategies. They are primarily interested in maintaining a good relationship to ensure loyalty. Customer loyalty is perceived by our interviewees as a loyalty behavior. To increase the loyalty, the Moroccan agri-food industry practices relational loyalty strategy. The main factors of this loyalty strategy are trust, commitment and satisfaction. Regarding trust, this concept is expressed by two dimensions: credibility and benevolence. However, the credibility dimension is rarely cited by our interviewees. In this context, trust is especially linked to benevolence. Likewise, commitment is expressed through a mutual commitment. We noticed its importance in loyalty strategies practiced by agri-food businesses. In addition, our research finds out that it is the relationship satisfaction that contributes to customer loyalty. Our research highlighted that dependence is perceived inefficient in loyalty strategy. Moreover, it is badly perceived by the Moroccan agri-food businesses. Furthermore, our results reinforce previous studies of Abbad (2006, 2007) study. This author has addressed the relationship between suppliers and distributors in the Moroccan agri-food businesses. These results demonstrate that the dependence has a negative effect on maintaining lasting relationships with distributors (Abbad, 2007). We explain this phenomenon by the discrepancy of perception of loyalty between the supplier and the customer. Indeed, loyalty was previously defined as a set of actions aimed to increase 10

11 the dependence of the consumer to a product or a brand (Crié, 2002). However, loyalty is defined as "A set of elements to attract consumers freely to his perfect loyalty" (Lehu, 2003). Loyalty insists on the customer freedom in action. Customers require in their loyalty behavior a condition of total freedom Discussion and implications Customer loyalty is an important construct for marketers. It represents a tool to develop relationship with customers, to increase business and to attain customer retention (Kumar & Shah, 2004). The aim of this study was to investigate producer-distributor relationship in agrifood industries. Study results indicate that, relational determinant appears decisive in the supplier-distributors relationship. It has an important effect on loyalty strategy. This research find out that in the agri-food Moroccan context, companies concentrates on trust, commitment and satisfaction in their loyalty strategy. The main finding of this research may interests Moroccan managers regarding the development of their distributors loyalty strategies. They may reinforce their relationships with distributors and satisfy them Limitations and future work This research has several limitations. Different approaches for future research may be useful in exploring the issues investigated in this study. First, the study was conducted in specific branch of industry «agri-food firms» in SMD region which limits the external validity of the research. The results cannot be generalized to other industries and business-to-business settings. The culture of agri-food firms is comparatively specific so it might affect the nature of distributor s relationships producer. Hence, the relationships between firms and their distributors may be different in another industry and region. So, we suggest testing the research in other industries in different contexts. Second, our research is limited by using the «seller side» method. We have collected data only from the producers, and neglected the distributor s perception. We used the method of "Seller side" because it is the producers who develop loyalty strategies that are mostly affected by our questions. So, this method has affected the validity of our research. We suggest conducting «dyadic study» in future research to have a complete view. 11

12 REFERENCES Abbad, H., 2007, Stratégies de référencement des PME industrielles et critères logistiques: le cas de la grande distribution au Maroc, in: Working Paper De l Institut d Administration Des Entreprises (IAE) d Aix-en-Provence. Anderson, J.C., Narus, J.A., 1990, A model of distributor firm and manufacturer firm working partnerships, the Journal of Marketing, Barlow, R.G, Frequency Marketing: Keeping loyalty program costs in check, Target Marketing, Vol. 22, N 3, 1992, Baker, T.L., Simpson, P.M., Siguaw, J.A., 1999, The impact of suppliers perceptions of reseller market orientation on key relationship constructs, Journal of the Academy of Marketing Science, 27, Benavent, C., Meyer-Waarden, L., Programmes de fidélisation: Stratégies et pratiques, Revue française du marketing, 2/5, 95. Chen, S.-C., 2012, The customer satisfaction loyalty relation in an interactive e-service setting: The mediators, Journal of Retailing and Consumer Services, 19, Crié, D., 2002, Du paradigme transactionnel au paradigme relationnel : une approche par les produits fidélisants, in: 3rd International Congress Marketing Trends. Venise, p. 17. Crié, D., 2002, La relation client: Fidélité, fidélisation et produits fidélisants, Vuibert. ed, FNEGE. Paris. Daams, P., Gelderman, K., Schijns, J., The impact of loyalty programs in a B-to-B context: Results of an experimental design, Journal of targeting and measurement and analysis for marketing, 16, Dick, A.S., Basu, K., 1994, Customer loyalty: toward an integrated conceptual framework, Journal of the academy of marketing science, 22, Duffy, D.L., 1998, Customer loyalty strategies, The Journal of Consumer Marketing, 15,

13 Evanschitzky, H., Ramaseshan, B., Woisetschläger, D.M., Richelsen, V., Blut, M., Backhaus, C., 2012, Consequences of customer loyalty to the loyalty program and to the company. Academy of Marketing Science Journal, 40, Evrard, Y., Pras, B., Roux, E., 2003, Market - Études et recherches en marketing, 3 ème édition, Paris, Nathan, 699 p. Ganesan, S., 1994, Determinants of long-term orientation in buyer-seller relationships, the Journal of Marketing, García Gómez, B., Gutiérrez Arranz, A.M., Gutiérrez Cillán, J., Drivers of customer likelihood to join grocery retail loyalty programs. An analysis of reward programs and loyalty cards, Journal of Retailing and Consumer Services. Giordano, Y., 2003, Conduire un projet de recherche. Une perspective qualitative, Edition EMS, Paris. Howard, J.A., Sheth, J.N., 1969, The Theory of Buyer Behavior, New York, Wiley. Kumar, N., Stern, L.W., Achrol, R.S., Assessing reseller performance from the perspective of the supplier, Journal of Marketing Research, Lehu, J.-M., 2003, Stratégies de fidélisation, Editions d Organisation. ed. Paris. Liu, C.-T., Guo, Y.M., Lee, C.-H., 2011, The effects of relationship quality and switching barriers on customer loyalty, International Journal of Information Management, 31, Marchesnay, M., 1993, Pour de nouvelles formes de coopération entre PME/PMI: le cas de la chaine agro-alimentaire, Le cas des biotechnologies alimentaires, in: Groupe De Recherche En Economie Et Gestion Des PME, Quebec (Canada). Meyer-Waarden, L., 2004, La fidélisation client: Stratégies, pratiques et efficacité des outils du marketing traditionnel, Vuibert. ed, FNEGE. Paris. Meyer-Waarden, L., Benavent, C., 2009, Grocery retail loyalty program effects: self-selection or purchase behavior change?, Journal of the Academy of Marketing Science, 37,

14 Oliver, C., 1997, Sustainable competitive advantage: Combining institutional and resourcebased views, Strategic management journal, 18, Oliver, R.P., 1999, Whence consumer loyalty?, the Journal of Marketing, Quivy, R., Campenhoudt, L. van, 2011, Manuel de recherche en sciences sociales, Paris, Dunod, 262 p. Rundle-Thiele Sharyn, 2005, Elaborating customer loyalty: exploring loyalty to wine retailers, Journal of Retailing and Consumer Services, 12, Yi, Y., Jeon, H., «Effects of Loyalty Programs on Value Perception, Program Loyalty, and Brand Loyalty», Journal of the Academy of Marketing Science, Vol. 31, 2003,