Customer Loyalty and Organizational Performance in Cameroon: The Case Study of Kosan Crisplant Company
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The main goal of this research is to carry out an analysis of the impact of customer loyalty on the performance of KOSAN CRISPLANT Cameroon SA. This research makes use of primary data on customer loyalty, customer relationship management, customer satisfaction, motivation as well as the profitability of the company. Correlation analysis was done and in addition, the multiple linear regression model was specified for the above variables and analyzed using SPSS version 24. The correlation analysis shows are very strong relationship with the company’s performance while the regression reveals that, customer loyalty, customer relationship management, customer satisfaction are significant determinants of company performance. Furthermore, the results show that 61.7% of the changes in company performance is determined by the explanatory variables analyzed (customer loyalty, customer relationship management, customer satisfaction, motivation). This study, therefore, recommends staff training on customer relationship courses such as; customer service, customer follows up as well as motivation. Conclusively, customer loyalty is a strong determinant of the performance of KOSAN CRISPLANT Cameroon SA.
1.1 Background of the Study
Consumers are the fortitude of firms (Gupta and Zeithaml, 2006) hence their main agenda is to produce a customer (Ang and Buttle, 2006). Companies would not be able to succeed and increase their performance without consumers of their products (Gupta and Zeithaml, 2006; Buttle, 2004) as they are believed to have no revenues, no profits and therefore no market value (Ang and Buttle, 2006). Similarly, several past studies claimed that the existence of a firm is mainly to create and sustain an advantageous relationship with its preferred customers (Ang and Buttle, 2006; Ryals and Knox, 2005) As such, customer retention has been the center of discussion (Larivie’re and Poel, 2005; Terblanche and Hofmeyr, 2005) and the key agenda of firms since the last decade (Gupta and Zeithaml, 2006; Buttle, 2004; Larivie’re and Poel, 2005). Saturated markets and high levels of competition within industries have necessitated the practice of customer retention strategies among firms (Singh, 2006; Honts and Hanson, 2011).
In addition, it has been discovered that recruiting new customers is essentially a costly affair as compared to retaining the existing customers (Woo and Fock, 2004; Trasorras et al., 2009; Ghavami and Olyaei, 2006). Accordingly, the practice is believed to enable the firms to sustain in the said intense competition besides enjoying significant savings from retaining existing customers. This is supported with past studies, which ascertained a significant relationship between improvement in firm performance and customer retention practice (Ryals and Knox, 2005; Singh, 2006; Trasorras et al., 2009; Stengel, 2003).
For instance, firms can increase profits by 25 to 95 per cent with a mere increase of 5 per cent in customer retention rates. Thus, it is wise to conclude that a small increase in customer retention rate will further accelerate firm’s profits (Ryals and Knox, 2005; Reichheld and Schefter, 2000). Review on past literatures indicates that firm performance is normally associated and computed using either accounting or financial expressions (Gupta and Zeithaml, 2006; Ryals and Knox, 2005; Avci et al., 2010) where profit, operational costs and market share are amongst the most common measures used to assess a firm’s financial performance (FP) (Larivie’s and Poel, 2005; Kaplan and Norton, 2001). Nevertheless, both practitioners and academicians claim that firm performance should not be assessed solely based on the financial dimensions (Kaplan and Norton, 2001; Reichel and Haber, 2005). Hence, consideration on the non-financial performance (NFP) metrics is also equally important in measuring the performance of firms particularly within the service sector (Ryals and Knox, 2005; Avci et al., 2010; Kaplan and Norton, 2001). As such, this study intends to empirically examine the impact of consumer behaviour towards firm performance, in specific.
The retained consumer would not mind paying slightly higher prices and look forward to discounts as compared to the new consumers (Ang and Buttle, 2006; Coviello et al., 2002; Ahmad and Buttle, 2002). This is because retained customers believe that slightly higher prices indicate higher quality besides indicating firms above-average customer service (Ang and Buttle, 2006). These customers normally shop all year round even after discount periods at their preferred shops and find it worthwhile to do so due to the value for money component (Ang and Buttle, 2006; Woo and Fock, 2004). Subsequently, customers who stay with a firm for a longer tenure are considered as retained customers (Ang and Buttle, 2006; Larivie’re and Poel, 2005; Terblanche and Hofmeyr, 2005; Bowen and Chen, 2001).
Thus, they discovered three distinctive methods i.e. behavioural, attitudinal and composite which was used to measure their customer retention rate. Behaviour measurement is described as purchasing activities which are repetitious and consistent in nature (Ang and Buttle, 2006; Zeithaml et al., 1996; Bowen and Chen, 2001). Furthermore, past researchers have uncovered the existence of a linear relationship between repeat purchases and customer satisfaction (Gupta and Zeithaml, 2006; Ang and Buttle, 2006; Gomez et al., 2004) and when services rendered are above the expectation and perception, repeat purchases and positive intentions regarding firms are generated (Chen and Hitt, 2002; Lopez et al., 2007).
Repeat purchasers frequently shop at firms, tend not to shop at other firms and are delighted to shop at a particular firm. Furthermore, these customers are comfortable shopping at a particular firm for some time and more and more purchases are done over time (Trasorras et al., 2009; Zeithaml et al., 1996; Eggert and Ulaga, 2002; Bowen and Chen, 2001). According to (Trasorras et al., 2009; Kaplan and Norton, 2001; Bowen and Chen, 2001) customer retention rates can be measured using attitudinal data which mirrors the customers emotional and psychological attachment i.e. loyalty, engagement and adherence.
The next approach of measuring customer retention combines both behavioural and attitudinal measurements where it is known as composite measurement (Larivie’re and Poel, 2005; Bowen and Chen, 2001). This measurement induces customers to spread positive word-of-mouth to their social circle regarding firms and their offerings. Suggesting a particular firm when suggestions are needed, volunteering to be a spokesperson or street ambassador for the firm, sharing information about the firm is the common practice of customers who spread positive word-of-mouth about the firm (Ang and Buttle, 2006; Woo and Fock, 2004;).
Besides, customer retention greatly depends on the non-complaining-behaviour of customers (Ang and Buttle, 2006; Zeithaml et al., 1996; Kumar et al., 2007). It is discovered that satisfied customers are less likely to complain regarding firms (Trasorras et al., 2009) and their offerings (Avci et al., 2010; Fecikova, 2004). Retained customers would never complain even if they have to queue up and would never spread negative comments or rumours about firms (Gupta and Zeithaml, 2006;). These customers normally acknowledge good services and assistance received from firms (Ang and Buttle, 2006; Stengel, 2003; Coviello et al., 2002; Eggert and Ulaga, 2002).
Furthermore, firms need to manage complaints well as it has a positive effect on customer retention which in turn influences customer satisfaction (Ang and Buttle, 2006; Trasorras et al., 2009; Zeithmal et al., 1996; Kumar et al., 2007).Measures of Firm Performance Though financial performance (FP) metrics are the generic tool to assess firm’s performance, recent studies claim that non-financial performance (NFP) metrics are of equal importance in measuring performance of firms particularly within the service sector (Gupta and Zeithaml, 2006; Ryals and Knox, 2005; Larivie’re and Poel, 2005; Avci et al., 2010). Accordingly, firms operating within the retailing sector, a key component of the service sector, are also increasingly utilizing NFP metrics to evaluate their performance (Ryals and Knox, 2005; Avci et al., 2010; Reichel and Haber, 2005). This is because of NFP metrics centre on the long-term success of firms by concentrating on customer satisfaction, internal business process efficiency, innovation and employee satisfaction (Reichheld and Schefter, 2000; Avci et al., 2010; Laitini, 2002).
Furthermore, NFP plays a major role in assessing the performance of service firms and due to the nature of the service firms which provide mostly intangible services, depending on manpower and customer-centric (Stengel, 2003; Avci et al., 2010). Besides that, it is also very challenging to collect financial information from companies due to confidentiality concern unless they are publicly listed companies. Customer satisfaction is believed to be a vital element in evaluating the non-financial performance of firms particularly service-oriented firms (Trasorras et al., 2009; Avci et al., 2010; Zeithaml et al., 1996; Eggert and Ulaga, 2002). This is in line with the past researches which discovered a linear relationship between customer retention and customer satisfaction (Kumar et al., 2007; Gomez et al., 2004; Lopez et al., 2007).
It is learnt that firm performance can be enhanced with the customers who are delighted when the service provided is above their expectations (Trasorras et al., 2009; Zeithaml et al., 1996; Eggert and Ulaga, 2002; Bowen and Chen, 2001). As such, it is vital for both academics and practitioners alike to comprehend the forerunners and effects of customer satisfaction. Since the last decade, numerous researchers have identified service quality, customer expectations, disconfirmation, performance, desires, affect and equity as attributes of customer satisfaction (Gupta and Zeithaml, 2006; Trasorras et al., 2009; Stengel, 2003; Kumar et al., 2007; Ahmad Jamal and Kamal Naser, 2002).
Satisfied customers always make repeat purchases by buying again and again from the current firm or service provider because customers feel that their needs are fulfilled by shopping at these firms and they tend to stay loyal with the firms (Buttle, 2004; Honts and Hanson, 2011; Ahmad Jamal and Kamal Naser, 2002). These customers will also prefer to shop at the current firm and consider them as part of their consideration set when they intend to purchase in the future probably because there is no contractual obligation between them (Honts and Hanson, 2011; Cho et al., 2006). As customers feel comfortable to shop with the firm and this, in turn, improves firm performance (Avci et al., 2010; Zeithaml et al., 1996). Besides, they would be delighted to continue the purchasing relationship with the current firm and regard it as a pleasure to maintain the said relationship (Bowen and Chen, 2001; Fornell and Wernerfelt, 1987). According to (Lopez et al., 2007), perception of great service quality by customers, results in extraordinary customer satisfaction. When services provided by service organizations exceed the anticipation of customers, it satisfies the customers tremendously (Singh, 2006; Trasorras et al., 2009; Ghavami and Olyaei, 2006; Lopez et al., 2007). Accordingly, it contributes towards acceleration in the customer lifetime value which will, in turn, improve the performance of firms (Ang and Buttle, 2006; Stengel, 2003; San Martin et al., 2003)
1.2 Statement of the Problem
Like many other parts of the world, organizations in Cameroon, are facing looming challenges in attracting and retaining consumers to increase sales.
An organization which does not ensure customer satisfaction and consumer retention will suffer from a serious competitive disadvantage. They will lose the competitive edge that the knowledge of customers and a better understanding of customer needs can give them while anticipating and adapting to relationship marketing developments. A specific target is to find out about the relationship between customer’s loyalty and the performance of the organization in order to build a good relationship with customers.
1.3 Research Questions
This study permits us to formulate the following research questions:
What is the effect of customer loyalty on the performance of KOSAN CRISPLANT COMPANY?
What are the challenges faced by KOSAN CRISPLANT COMPANY in attracting and retaining customers?
1.4 Objective of The Study
The main objective of this study is to investigate the impact of customer loyalty on organizational performance. The following specific objectives are put forward:
To ascertain the effect of customer loyalty on the performance of KOSAN CRISPLANT COMPANY
To find out challenges faced by KOSAN CRISPLANT COMPANY in attracting and retaining consumers