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Impact Of Customer Satisfaction And Loyalty

1) Introduction

1.1 Context Of The Research

The business in the present world is getting competitive day by day and to become successful in the business world, it is vital for the business entities to emphasize on customer satisfaction and customer loyalty aspects. Both the terms are related to services of the company and both have inverse relationship with repeat purchase (Alexander and Sinnett, 2005). Customer satisfaction is a marketing tool that drives the business to enhance the level of service efficacy and this also creates positive impression among the customers after they purchase and consume

Customer loyalty shows that customers are highly satisfied with the consumption of products and services and they show loyalty through purchasing the products on repeat basis. Both customer satisfaction and customer loyalty plays important role in enhancing company's performance (Fraering and Minor, 2013). Customer satisfaction as well as customer loyalty both the aspects are affected by various factors like products quality, service quality, product price and other business environment. Hence, in such context, the research work will analyze how the customer satisfaction and customer loyalty affects the overall company performance of the Tesco PLC in UK. Tesco PLC has been selected since it is a large retailer in UK and it has thousands of retail stores, supermarkets and hyper markets in 12 different countries.

1.2 Rational And Issues Of The Research

According to Duffy (2003), customers are considered as the essential elements for business success because they have direct relationship with company's products and services. Consumers purchase products from company in exchange of money which needs to be a valuable transaction for facilitating customer loyalty. However, on the other hand, Gerson (2010) argued that customers are those requisites for a business organization which aids the entity to acquire greater success and profitability (Cheung and Prendergast, 2006). In order to accelerate company's profitability aspects, it is vital to bring quality products at the market place as that will also encourage the clients to facilitate repeat purchase. It is imperative for the business organization to satisfy the customers so that better outputs can be derived (Ennew, Binks and Chiplin, 2015).

Tesco PLC is considered the third largest retailer on the basis of profits and revenue in the entire retail industry of UK (Evanschitzky and Prykop, 2015). According to many surveys and research work, it has been identified that Tesco has 500,000 employees which helps in operating all the business activities. As Tesco is among the largest retailer; thus the customers are considered as more critical for the company. This company is highly affected by the competitor's policies and strategies (Chen and Huddleston, 2000). Hence, to sustain in the competitive environment, the company should be more careful about the customer retention and satisfaction aspects. Further, the research topic has been selected so as to highlight all the factors which impacts customer satisfaction and loyalty aspects.

Sales volume is an important indicator of any retail company and for Tesco too; thus sales volume determines performance of the company. Customer satisfaction and customer loyalty both are vital for the purpose of increasing sales volume. It also assists in retaining the customers for longer time span (Cheung and Prendergast, 2006). Therefore, in such respect, Tesco should maintain customer satisfaction and loyalty aspects in the company so as to improve its performance.

The reason for which the present topic has been selected is to highlight the factors through customer satisfaction and loyalty can be increased. The study is also presenting effectiveness of customer satisfaction and its role in success aspects for Tesco PLC (Chiarini and Douglas, 2015). It is imperative for Tesco to retain the customer so as to sustain in the competitive market of UK and all across the world. The research will critically analyze how Tesco PLC can maintain satisfaction through delivering various products and services.

1.3 Aim Of The Research

The main aim of the research study is to comprehend the impact of customer satisfaction on company's performance. Thus, in such context the study has been describing the impact of customer loyalty on company's growth and success aspects.

1.4 Objectives Of The Research

  • To ascertain the impact of customer satisfaction on company's performance
  • To identify the factors that affect customer loyalty
  • To explore the relationship between customer satisfaction and customer loyalty
  • To recommend several strategies for enhancing customer satisfaction aspects

2) Literature Review

2.1 Customer Satisfaction

Customer satisfaction plays very important role in the achievement of goals and objectives of any company. As, Tesco PLC is a grocery and general retail company; thus the business has to interact more with the customers for larger selling (Blut and, 2015). To retain the customers it is necessary to provide services in such way that helps in creating differentiation at the market place.

According to Hill (2002), customer satisfaction is the level that describes how customer feels after purchasing any product and service (Vanitha, 2012). The after-purchase evaluation of products or services’ performance by the customers or users is generally known as the customer satisfaction. Thomas (2013), defined that the customer service needs to be efficient so that it can meet all the requirements of end users.

According to Djordjevic (2012), customer service is termed as a marketing tool that is used to assess the customer’s post-purchase perception based on the various variables such as product quality, price, delivery, design, and location etc. These factors also leads to customer retention and as a result helps in overall growth and success (Bienstock, Mentzer and Kahn, 2015).

From the above discussion it can be said that customer satisfaction is very much vital aspect for Tesco because that can only assist the business entity to derive long term sustainability at the competitive market place (Bansal and Taylor, 2015). Tesco is a retail company and it has many competitors like Sainsbury, Marks & Spencer EBay and so on in UK; hence it is essential for the business entity to emphasize more on customer satisfaction and loyalty dimensions (Duffy, 2003). Tesco seems to be a customer oriented company; therefore it is vital for the entity to offer only suitable and requisite products to the clients. Tesco is unable to achieve the goals and objectives without focusing on customer satisfaction dimensions.

2.2 Factors That Affect Customer Satisfaction

There are several factors that affect customer satisfaction such as quality aspects, employee’s response towards purchasing the products and after sales services (Lun and, 2016). Since, Tesco has wide range of products and services; therefore it is essential for the business entity to emphasize on those aspects that develops customer satisfaction level (Fraering and Minor, 2013). There are several players in the retail industry that are delivering same sorts of products to the customers; hence it is essential for Tesco plc to consider competition from the level of substitutes (Agnihotri and, 2015). Customer satisfaction is associated with many dimensions; therefore Tesco must make sure that they are delivering quality services because that can also assist in retaining clients for longer time period (Alexander and Sinnett, 2005).

When customers repeatedly purchase products from customers; this demonstrates that they are satisfied with Tesco's services. Hence, attention should be given towards quality aspects so that clients can also promote the services to other segments (Gerson, 2010). Customers get satisfied when Tesco meets their demands on time. In order to acquire customer satisfaction, retail industry typically focuses on delivering appropriate and competitive services with reasonable prices (Mithas and, 2016). Tesco must not compromise with quality because that may lead the customers to switch to another brand. The term customer satisfaction is related to brand aspects as well where in customers who are more brand conscious purchases services from Tesco always (Piercy and Morgan, 2015).

2.3 Measurement of Customer Satisfaction

In order to measure customer satisfaction, Tesco can check the frequency of customers who have purchased the products in a specific time limit and who are retained as well. Furthermore, customer satisfaction can also be identified by collecting feedback from the customers regarding the capability of services (Hill, Self and Roche, 2002). This is also effectual in terms of making certain changes in the service provision. The level of customer satisfaction can be measured with the help of ascertaining the degree on to which customers are promoting the services of Tesco on regular basis (Hao, Yu and Fong, 2015). A customer survey can also be conducted so as to collect the experience of customers about the services. However, this needs to be conducted after finishing the purchase decision (Sleep, Bharadwaj and Lam, 2015). Moreover, survey monkey is another technique through which customer satisfaction aspects can be measured.

Another technique of measuring customer satisfaction is to ascertain number of loyal customers who always purchase products from Tesco instead of having several competitors and substitute products (Hoerl and Snee, 2012). Tesco can acquire opinion from the sales agent as well who directly communicates with the clients and who have the idea regarding company's services and performance as well. When customers are satisfied, they purchase more products and services which enhances revenue and profitability aspects; thus from this aspect the overall value of customer satisfaction can be found out (Lee, 2016).

2.4 Customer Loyalty

According to views of Alexander (2005), it is contended that customer loyalty is both an attitudinal and behavioral tendency where in customer gives importance to a brand over all the other products (Bolfing and Cadotte, 2015). Customer loyalty encourages consumers to shop more consistently and there in customers also feel positive about the shopping experience (Caruana and, 2015). This also aids to attract consumers to purchase familiar brands so as to remain in competitive market place. In order to enhance customer loyalty aspects, Tesco focuses on developing long term and better relationships with the clients so that they may not switch to other brands (Johnson and Gustafsson, 2011). Customer loyalty is all about remaining with a single entity whose products are preferable to consume by customers most often. In the concept of customer loyalty, Tesco has developed several loyalty programs and schemes where in customers are rewarded on specific purchase limit; therefore this encourages the customers for repeat purchase (Karjaluoto and, 2015). Tesco has been trying to develop customer retention level through accentuating on after sales services in which the business entity resolves all the queries and problems of clients with maximum potential. Thus, from the above discussion, it is clear that customer loyalty is all about number of retained end users (Vanitha, 2012).

2.5 Factors That Affect Customer Loyalty


Consumers always prefer to purchase those products that are convenient to buy and for such aspect, Tesco has made several changes in service provision. Online delivery of products and services aids the consumers to derive convenient products which also helps them to fulfill their demands on time (Kaufman, Bethrower and Gerson, 2007).

Customer Service

Tesco's customer services needs to be effective because customer loyalty is a dependent factor on this aspect (Do, Gursoy, Yolal and Lee, 2015). Sales agents of Tesco have been treating all the clients in adequate manner so that their service experience can be enriched.

Personal Relationships

Relationships with the sales agent matters a lot; therefore Tesco's employees make sure that they are communicating with the clients frequently (Ray and Holbrook, 2015). This shows how much the customers prefer to shop with Tesco.

Consumer Outreach

The way company reaches the clients determines loyalty aspects; however that should be convenient (Makasi, 2014). Tesco has adopted varied modes for reaching the customers; hence this assists the business entity to balance demand and supply.

Reputation of the Business

Reputation of Tesco is an important factor which changes purchase decision of clients. Since, Tesco is a largest retailer; thus the company is able to retain more clients (Bowden, Dagger and Elliott, 2015).

2.6 Measurement Of Customer Loyalty

In order to measure consumer loyalty, Tesco needs to ascertain the level of potential customers who have been retained from longer time period (Babin, Boles and Griffin, 2015). Customer loyalty can be measured through analyzing Tesco's position in competitive market place and also among customer's mindset. Customer loyalty can be measured through analyzing market share of the company and also through observing interest of clients in Tesco's products and services (Maricic, Veljkovic and Djordjevic, 2012). Market share of the company has been increasing continuously which shows that Tesco has more loyal customers. Further, Tesco can also observe current customer base so as to get information about customer loyalty (Kandampully, Zhang and Bilgihan, 2015). When the level of competition decreases, that means that the subsequent business is able to create competitive edge over the rivalries. This is highly beneficial in accomplishing long term sustainability in retail industry of UK (Makasi, 2014).

2.7 Relationship Between Customer Satisfaction And Customer Loyalty

There is a direct relationship between customer satisfaction and customer loyalty as customers only become loyal when they are satisfied with the products and services. In customer satisfaction, Tesco chiefly emphasizes on delivering better services to the clients which in turn assists the end users to get valuable services from the company (Ferreira and, 2015). This prominently works in retaining the clients and helping them to promote it to other customers as well (Saeidi, and, 2015). Thus, in simple terms it can be said that when customers are retained; they shows more loyalty to the company's products and services (Sherman and Sherman, 1999). To augment customer satisfaction level, Tesco has been focusing on affordable products and services which leads the customers to buy the products in bulk. Customer loyalty can be acquired through offering additional benefits to the clients such as rewards, schemes and discounts (Terho, Eggert, Haas and Ulaga, 2015). When customers get these benefits, they become satisfied users of the company which is a beneficial state for Tesco. Further, in order to comprehend the relationship between customer satisfaction and loyalty, it can be said that both have direct impact on the performance of growth and success aspects (Vomberg, Homburg and Bornemann, 2015). Satisfied customers are more loyal to the business; therefore it reduces Tesco's efforts on additional services (Yang, Sonmez and Duan, 2015).

2.8 Impact Of Customer Satisfaction And Customer Loyalty On Company Performance

Customer satisfaction as well as customer loyalty both the terms directly impacts Tesco's performance and productivity (Szwarc, 2005). For instance- high customer satisfaction level helps Tesco to grow more and vice-versa (Soh, Chin and Wong, 2015). Customer satisfaction drives the customers to purchase more products and services and this also aids the business entity to enhance the level of profitability (Cui and Wu, 2015). This is termed as a profitable state for the business entity (Rambocas and, 2015). Tesco pays more attention towards quality aspects which encourages the clients to promote the services to other market segments and this retains position of the business in external market place (Rodriguez, Peterson and Ajjan, 2015). Moreover, it is also useful in terms of enhancing market share. Customer loyalty encourages end users to facilitate repeat purchase which helps Tesco to prosper more in retail industry (Thomas, 2013).

Customer satisfaction is one such aspect that helps Tesco to strengthen all the activities and operations and its also assist in reducing operational cost (Kang, Alejandro and Groza, 2015). When profitability of the company increases, employees get more opportunities and benefits which further motivates them to deliver adequate services to the clients (Thornton, 2005). On the other hand, to underpin the services, Tesco motivates the employees to attend more training sessions so that better services can be delivered (Felício and Rodrigues, 2015). Similarly, such sales agent convinces clients and as a result it changes the purchase decision of customers (Zhang, Jiang, Shabbir and Zhu, 2016). Thus, from the discussion it is clear that customer satisfaction as well as loyalty brings more benefits and advantages to Tesco (Makasi, 2014).


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