Munir Hussain 31 Senior Lecturer Khadim Ali Shah Bukhari Institute of Technology, Karachi, Pakistan

Transcription

1 Impact of innovation in FMCG products on customer loyalty and satisfaction: A case study of Confectionary Producer English Biscuit Manufacturers in Pakistan Munir Hussain 31 Senior Lecturer Khadim Ali Shah Bukhari Institute of Technology, Karachi, Pakistan Amna Munir 32 Lecturer Jinnah University for Women, Karachi Pakistan Mughees Siddiqui 33 Abstract The purpose of this quantitative study is to discover the impact of innovation on customer s loyalty and satisfaction. Furthermore it is a brief review of some relevant approaches which have been used for the measurement of customer satisfaction. It also describes the number of factors which may consider facilitating customers in Pakistan. The aims and objectives of this research are to determine the impact of innovation on customer satisfaction, customer loyalty, new features of product, customer retention, the factors affecting the innovation, and comparison of existing old and new product in terms of innovation. This quantitative research was conducted through the responses collected by Pakistani buyers with the help of close ended questionnaire developed on Likert and dichotomous scale. Keywords: Fast-moving Customer Goods, FMCG, Customer Loyalty, Pakistani Customers, Product, Brand, Retention Introduction This research is an attempt to look forward the relationship between customer satisfaction, brand loyalty and product innovation focusing on Fast-Moving Customer Goods (FMCG). This research helps in finding out how process of innovation will be done and how the innovative product would satisfy the customer demand, needs and requirement; and why a customer always demands a specific brand, e.g. A person using a brand from which he is being satisfied, won t be bothering about any other brand, every person wants value maximization so innovation would increase brand loyalty, and would help in increasing customer satisfaction. In Pakistan this kind of research with having this match of variables are very few. First of all, our analysis showed that product quality and time-to market are significantly positively associated with customer satisfaction, while unit cost has no significant effect, when managers introduce new products they should consider the firm's capabilities and the position of their own and rival existing products. The tactical use of resources is every important when the innovation is brought in a product. 31 Author is senior lecturer in KASBIT Karachi. He has been associated with Charles Edward College London before joining KASBIT. He has written many research papers published in international research journals of world repute. He has also attended several international workshop and seminar. His areas of research are Business Research Methodology, Organizational Behavior, and Marketing Management & Research etc. 32 Author is Lecturer in Jinnah University of Women Karachi. She has been working in Khadim Ali Shah Bukhari Institute of Technology for three years. She has attended several conferences and research sessions during career. Her areas of research are Principles of Marketing, Marketing Management & Research, and Introduction to Business 33 Author has MBA degree in Integrated Marketing communication from KASBIT and running his own business. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 423

2 Managers should examine which resources are already in place, and which need to be built. This exercise will help us towards customer or technological examination. There should be a clear differentiation in new product s features. This is a way in which a marketer can make customer happy and satisfied that consequences in more selling of such product. Development in terms of innovation can lead businesses towards the creation of new business enterprise that that can be more widespread. Some researchers claim that the innovation is a domain of management rather than marketing. This argument shows that satisfaction and brand loyalty are affected by commitment and trust of a customer that is a direct result of service quality and features. This research implies that the consumer s brand loyalty, satisfaction and/or dissatisfaction are conclusion with the experience of product. The Organization English Biscuits Manufacturers (E.B.M) has been in the business of manufacturing and marketing branded biscuits in Pakistan for over 40 years. EBM is a leading biscuit company in Pakistani firm that has achieved ISO Certification entitled with an institutional slogan 'The Legend Leads'. Under the brand range, Peek Freans, the company today carries the largest variety of biscuit products including Marie, Sooper, Gluco, Click, Rio Choco Vanila, Rio Strawberry Vanila, Party, Rio Choclate, Peanut Pik, Peanut Pista, Rio Vanila, and farm house. Aims & Objectives 1. To determine the impact of innovation on customer satisfaction 2. To find the impact of innovation on customer loyalty 3. To identify the factors affecting the innovation in the existing FMCG products 4. To study the impact of pricing on the innovation 5. To compare the impact of innovation on existing, old and new product perception. 6. To determine the impact of new features of a product on customer s re-purchase 7. To study the impact of innovation on customer retention for the same product. Hypotheses 1. There is a relationship between the impact of innovation and customer satisfaction. 2. There is a relationship between the impact of innovation and customer loyalty. 3. There is a positive relationship between quality enhancement and innovation 4. There is a relationship between pricing and the innovation. 5. There is a relationship between innovation and existing old and new product perception. 6. Increase in the new features of a product does increase the customer s repurchase. 7. There is a relationship between innovation and customer retention for the same product. Methodology Purpose of Study: Descriptive study best describes the characteristics and data relation between the cause and effect. Data Collection method: The research framework utilized for this study was quantitative that best suits with this type of research because we had to conduct research through surveys by sample elements (working employees) from diverse population (business industry). Type of Investigation: suitable for this research was correlational that provides best answer measuring variables and their relationship. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 424

3 Study Setting, Type of Experiment and Time horizon: This research was conducted in non-contrive setting whereas field experiment was used because natural environment was utilized. The consequences of the research are followed by longitudinal time horizon. Sample: According to the need of our research we used stratified random sampling (probability model) for acquiring desired feedback from elements of different cities of Pakistan. Questionnaire: Questionnaire was prepared for acquiring reply directly (by one-o-one meeting), but due to problems in approaching some responding 9 questionnaires were filled on phone but all the data of respondents was taken with their consent. Some of our respondents were not proficient in English so we used Urdu translation of questionnaires. Equation: The formula for calculating Z value is as under: Where represents the sample mean; µ represents the population mean; and is standard error At the Level of Significance α = 0.05, the critical values will be ± The value of µ is taken as 3. Conceptual Frame Literature review There is a great deal of research work conducted for evaluation of customer s satisfaction. And there are many researchers relate it to actual performance of a service or product in terms of customer satisfaction, loyalty and retention. (Tse and Wilton, 1988; Oliver, 1999; Hanif,Hafeez and Riaz, 2010). Henning-Thrau & Klee (1997) claim that product manufacturers should work on customer satisfaction measures in products offerings to attain competitive advantage on ever exploring marketing competition in the globalized world. It can be achieved through an appropriate fit between customer s expectation and performance levels of products or services offered. Gustafsson, Johnson and Roos (2005) explain that customer satisfaction is all about the customer s determination of a particular product or service. On the other hand Kim, Park and Jeong (2004) define when a customer is satisfied with a product or service he/she may react. Eshghi, Haughton and Topi (2007) believe that the marketers or manufacturers should propose a clear differentiation in the product as well as build a close relationship with the customers for getting a maximum altitude of customer satisfaction because it customer s satisfaction plays an important role in contemporary business world. Furthermore, this strong relationship with the customers and their satisfaction can enlarge the number of loyal customers. They also worked on relation between customer s satisfaction and brand development and argue that customer satisfactions can a cause for customer retention that can be very profitable for the organization. Same argument is given COPY RIGHT 2012 Institute of Interdisciplinary Business Research 425

4 by Anderson, Fornell and Mzvancheryl (2004). Gustafsson, Johnson and Roos (2005) emphasizes organizations to pay additional concentration to improve the quality and match it with an appropriate price so that satisfied customers can be made that will be directly concerned to the organizational betterment and customer retention. On the other hand Turel et al. (2006) believe that there is positive relationship between price and customers satisfaction. Anderson et al. (2004) also mention that customer s eagerness to pay more and positive word of mouth for a particular brand establishes levels of satisfaction. They also argue that if a business cannot satisfy customers efficiently and proficiently against its competitor(s), it can lose its market share. The term of customer satisfaction is used for evaluation either a good or service provided by any business may make customer happy/pleased or not (Nemati, Khan & Iftikhar, 2010). Contrary, the markets are very competitive and businesses are enthusiastic to take advantage in this competitive environment in terms of differentiation and quality advancement but these consequences may not properly achieve without customer satisfaction because it accumulates a great deal of essential fragment of a business. Anderson & Sullivan (1993) recognize that customer satisfaction has positive impact on repurchase intentions. This is evident that businesses those who give precedence, priority and main concern to the satisfaction of customer, it can positively affect on customer s brand loyalty and retention. This is a reason why businesses build up and retain their customer base for achieving irreversible loyalty. Bolton (1988) argues that the customers having longer relationship with a brand have higher cumulative satisfaction levels/rating as compare to new customers. Homburg, Hoyer & Koschate (2005) also mention that customer satisfaction plays an important role in price increase and repurchase intentions. Hausman (1995) works on the relation between customer satisfaction and innovation. He argues that innovation plays an important role in making customers happy and satisfied because mostly the customers are eager to behavior in the light of company feedback or behavior in the terms of complaints that have been made or customer service and research that has been conducted for innovation in customers favor. Anderson and Sullivan (1993) also give important stress on provision of quick complaint handling and making an effective infrastructure for customer service help. This is the way according to which customer s impression can be positively changed for the favor of brand or product. According to Fornell et al. (1996) and Terblanche (2009), the customer satisfaction can be achieved through strong customers relationships, in terms of perceived quality and perceived value of customers as well as the outcomes of customer loyalty and satisfaction. This study is about cumulative satisfaction. Moreover, it has been attributed with various beneficial results. This research primarily focuses on showing relationship between customer satisfaction and customer loyalty. Innovation is defined as a new perception, idea, development, research or scientific investigate. (Nemati,Khan,and Iftikhar,2010). Furthermore, according to Nemati, Khan and Iftikhar (2010) innovation is a process according to which a new idea, perception, or invention is transformed or changed into a product and customers do pay in exchange of that advancement or invention. In modern era companies and businesses are turning over accommodating with innovation, research and development toward attaining customers attention and making them satisfied innovation has direct relation to the product quality advancement and customer satisfaction accordingly. Innovation is a process to introduce new products, techniques, strategies, market plans, operational enhancement, packaging, and procedures etc. (Hausman, 1995) Schikler (1994) describes that due to globalized world, the demand of customers is growing and due to competition democratization of adopting or choosing new product is increasing. This is a reason why new technologies are structuring the ways to cater customer s satisfaction, attention or loyalty. Advancement of new technology is a way according to which customer s needs and wants can be evaluated and be better treated. Evans and COPY RIGHT 2012 Institute of Interdisciplinary Business Research 426

5 Schmalensee (2002) also include that innovation is not necessarily associated with launching new product in a market but innovation is a name of making a process of getting in touch and facilitating the market. They also relate innovation to the analysis of dynamic competition, pattern of investment, pricing and brand recognition strategies. Brand Loyalty refers to repeatedly buying of a particular brand manufactured by a particular manufacturer regardless of selection choice whether same item or brand is available in same market by different manufacturers (Carman, 1970). Carman (1970) also mentions that store loyalty is an important predictor of brand loyalty. He explains that store loyal customers may have higher score of brand loyalty and there is positive relationship between brand and store loyalty. There are some other factors involved with customer loyalty. McConnell (1968) estimates that there various number of factors involved so there is considerably more research required for evaluation of brand loyalty because without have understanding those factors this attitude is abstract. Nemati et al. (2010) show that in advertising point of view, the consumers are convinced to buy a brand if they feel that the offerings of a particular brand have an appropriate combination of quality and price. They also notice that brand loyalty can be achieved through the distinctiveness of brand offerings within the minds of customers. Bayus (1992) determines that manufacturers and retailers may utilize an analysis to measure up the loyalty of customers. This analysis can be conducted through questionnaires, interviews or feedback through retailers and wholesalers. Some people mix up the concept of brand loyalty to customer loyalty. Oliver (1999) describes that customer loyalty is a deep commitment of a customer that force to repurchase or re-patronize a chosen product constantly in the future. After that this attitude causes repetition for re-purchase same brand, regardless of contingency influences and marketing campaigns. Chaudhuri and Holbrook (2001) explain customer loyalty as an attitudinal, contingency or behavioral perspective. Uncles et al. (2003) and Terblanche (2009) declare that loyalty is attitudinal due to its emotional element, Behavioral due to customer s active participation and contingent due to satisfaction of a customer s situational requirements. There is much of literature available showing the advantages and benefits of customer satisfaction. Reichheld et al. (1990) and Reichheld (1996) mention that this is very expensive to acquire new customers in term of costs of acquiring than retaining current customers. Rust and Zahorik (1993) imply that spending money on customer relationships, customer facilitation, satisfaction, high quality service can lead a business to get more profits and market share. Same argument given by Buzzel & Gale (1997) and Brimpong (2008) includes that most of times high quality service leads to repurchase and enhancement of market share. Hallowell (1996) argues that customer satisfaction has relationship with customer loyalty and this leads to profitability. Data Analysis and Findings Reliability: The reliability test finding of the data through SPSS software s evaluation is as below: Reliability Statistics Cronbach's Alpha N of Items The Cronbach s Alpha is commonly used for measurement of internal consistency or reliability. This is very useful for likert-scale questionnaires for testing reliability. Cronbach s alpha on data available is that indicates a high level of internal consistency. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 427

6 3.1. One-Sample Statistics One sample statistics are used to compare whether a population mean is notably different from some hypothesized value. One sample statistics acquired through SPSS are as below: One-Sample Statistics (On Dichotomous Scale) N Mean Std. Deviation Std. Error Mean H H H One-Sample Test (on Dichotomous scale) Test Value = 0.5 t Df Sig. (2-tailed) Mean Difference One-Sample Statistics (On Likert scale) 95% Confidence Interval of the Difference Lower Upper H H H H1 H2 H3 N Mean Std. Deviation Std. Error Mean H One-Sample Test (On Likert Scale): Test Value = 3 t Df Sig. (2-tailed) Mean Difference 95% Confidence Interval of the Difference Lower Upper H H H H Conclusion Z-test shows that the test values of all hypotheses (H1, ; H2, ; H3, , H4, 6.747, H5, 7.708; H6, , H7, ) fall outside the non-critical area (±1.959), moreover that value of sigma is zero in all hypotheses tested that means all null hypotheses COPY RIGHT 2012 Institute of Interdisciplinary Business Research 428

7 have been rejected. This analysis demonstrates that Fast-Moving Consumer Good s (FMCG) innovation has direct relationship with customer satisfaction, customer loyalty, quality enhancement, pricing, and customer s perception about existing old and new product, new features introduced in a product and customer retention. FMCG products by English Biscuit Manufacturers are very satisfying in Pakistan consumer because this business has deep roots among her consumers in terms of positioning. Recommendations Good relationship with the customers is very important in marketing that s why businesses are recommended to improve their production positioning through appropriate customer s databank. Customer s value and expectations can be measured through questionnaire, interviews, pool survey and attitude survey. It is also recommended to sustain strong customer service or complaint department where customer s queries and complaint should be considered consciously. Price fairness is also recommended because Pakistani socio-economic environment organizations may use it as a competitive advantage. Strong research and development departments are also recommended which keep on working on manufacturing new products. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 429

8 References Bayus, B.L (1992).Brand Loyalty and Marketing Strategy: An Application to Home Appliances. Marketing Science 11(1):21-38 Bolton, R. N. and J. H. Drew (1991). A Multistage Model of Customers Assesment of Service Quality and Value. Journal of Consumer Research 54(April): Brimpong, M.A. (2008). The Effect of Customer Satisfaction on Loyalty. A case study of the First Allied Savings and Loans Ltd Buzzell, R.D., Gale, B.T. (1987), The PIMS Principles, Free Press, New York, NY. Carman, J (1970).Correlates of Brand Loyalty: Some Positive Results. Journal of Marketing Research7(1):67-76 Chaudhuri, A., Holbrook, M.B., (2001). The chain of effects from brand trust and brand affect to brand performance: The role of brand loyalty. Journal of Marketing 65 (2), Eshghi, A., Haughton, D., and Topi, H., (2007), Determinants of customer loyalty in the wireless Telecommunications industry, Telecommunications policy, Volume 31, Issue 2, Pages Evans, David. S & Schmalensee, Richard (2002). Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries. Innovation Policy and the Economy 2:1-49 Fornell, C., Johnson, M.D., Anderson, E.W., Cha, J., Bryant, B.E., (1996). The American customer satisfaction index: Nature, purpose, and findings. Journal of Marketing 60 (4), 7-18 Hallowell, R. (1996), "The relationships of customer satisfaction, customer loyalty, and profitability: an empirical study", International Journal of Service Industry Management, Vol. 7 No.4, pp Hanif, Muzammil; & Hafeez, Sehrish; & Riaz, Adnan; (2010) Factors Affecting Customer Satisfaction, International Research Journal of Finance and Economics, Issue 60, pp Hausman, J. (1995). Competition in Long-Distance and Telecommunications Equipment Markets: Effects of the MFJ. Managerial and Decision Economics 16(4): Homburg, C. and A. Giering, (2001) "Personal Characteristics as Moderators of the Relationship between Customer Satisfaction and Loyalty - an Empirical Analysis", Psychology and Marketing, Vol. 18, No. 1:43-66, Johnson MD, Gustafsson A, Andreassen TW, Lervik L, Cha J (2001). The evolution and future of national customer satisfaction index model. J. Econ. Psychol., 22(2): Kim, M.K., Park, M.C., and Jeong, D.H. (2004) The effects of customer satisfaction and switching barrier on customer loyalty in Korean mobile telecommunication services, Electronics and Telecommunications Research Institute, School of Business, Information and Communications University, Yusong-gu, Hwaam-dong, Taejon , South Korea. McConnell, J. Douglas (1968).The Development of Brand Loyalty: An Experimental Study. Journal of Marketing Research 5(1):13-19 Nemati, Ali Raza, & Khan, Khurram; and Iftikhar, Moazzam (2010) Impact of Innovation on Customer Satisfaction and Brand Loyalty, A Study of Mobile Phones COPY RIGHT 2012 Institute of Interdisciplinary Business Research 430

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