Getting into the minds of the customer: Understanding the underlying constructs of customer loyalty

Authors: 1. Prof. Rupesh Kumar Tiwari Designation: Sr. Lecturer, Faculty of Management Organization: Disha School of Management Education, Raipur Email: rupeshtiwari9999@yahoo.co.in Ph.No: 09770413336 Address: HIG2/26, Vivek-Vihar Old Borsi Colony, Durg (Chhattisgarh)- 491001 2. Prof. Anish Abraham Designation: Lecturer, Faculty of Management Organization: Disha School of Management and Technology, Raipur Email: anish.abraham@dishamail.com, anishabraham10@gmail.com Ph. No: 09713200540 Address: E.W.S 540, Vaishali Nagar, Supela, Bhilai, Durg Chhattisgarh- 490023

Getting into the minds of the customer: Understanding the underlying constructs of customer loyalty
Abstract The current study aims to investigate the influence of sports celebrities, brand reputation and word-of-mouth (WOM) behavior on customer loyalty in the lucrative Indian sports shoe market. A sample of 123 respondents of the city of Chennai, participated in the study. The current study tries to generate a regression model explaining the customer loyalty and also highlights on the most influencing factor towards building a confident loyal customer base. The research is based on a small sample but very diverse demographic group of respondents. The study tries to assist marketers who wanted insights on consumer behavior of exhibiting strong loyalty towards the brand by setting appropriate marketing strategies. This paper tries to fill a void between the available literatures, by indicating the relationship of the three factors under study i.e. influence of sports celebrities, brand reputation and word-of-mouth on the customer loyalty. Introduction In this era of fierce competitive market, most of the companies have now set various strategies for retaining their customers through various means like superior product quality, providing better service, by using celebrities to endorse their brands; strategizing to elevate the reputation of their brands and thus creating a high loyalty level among their customers. McCracken (1989) defines celebrity endorsement as: Any individual who enjoys public recognition and who uses this recognition on behalf of a consumer good by appearing with it in an advertisement. The use of celebrity endorsers by marketers for marketing their products has been in use since a long time. Marketers by using celebrity endorsers not only aim at increasing the revenues for their company but also, use celebrity endorsements as a means of adding value to the product/brand or the company (McCracken 1986, 1989). For ages, sports celebrities have been idolized by generally everyone, from a 5 to a 50 year old person. Over the years, Marketers have been paying huge lump sum of money to various Sports Icons for endorsing their offerings. Sports celebrities can endorse a brand by using or carrying a brand (e.g. Yuvraj Singh and Reebok) or they can deliver testimonials about the brand (or any social campaign by that brand) being endorsed (e.g. the Indian footballer Baichung Bhutia and Aircels Save Our Tiger Initiation). Sports celebrities such as Sachin Tendulkar with no less than a dozen brands under his belt (e.g. Adidas, Jaypee Group, Boost), Indian Cricket Captain M S Dhoni (Reebok, Titan Sonata, Aircel), ace shooter and Indias only Olympic gold medalist Abhinav Bindra (Samsung electronics, BSNL); have arguably become some of the most sought after icons of Indian sports domain, by the marketers for the purpose of leveraging their brands. Its a highly debatable that whether celebrity endorsements are that effective or not, do they give the marketers necessary return on investment. However in their study of five advertisements that used celebrity endorsers, Miciak and Shanklin (1994) found that intended expectations of the marketers were achieved, as customers often show a great sense of loyalty towards a brand which is endorsed by their role models.

All the marketing initiatives are more or less aimed at building the brand for a favorable loyalty of the customer. Aaker (1991) defines brand as distinguishing name or symbol intended to identify both product and services. In the current study, the researchers argue that brand reputation (BR) does influence customer loyalty (CL) and investigates whether brand reputation is a construct towards customer loyalty. Word of Mouth communication (WOM) on the other hand has captured the attention of the marketers lately and its popularity is growing multifold day by day. In previous researches by Richins (1983); Murray (1991); Mangold et al. (1999); the significance of WOM communication emerged, which was found to be of high impact on the customers purchase decision and the satisfaction towards the brand. Recent researches have identified WOM communication as the most important as reliable source of information to the customers while making any purchase decision. This could be the reason for the use of celebrity endorsers by many companies to create a buzz among the customers for a better brand reputation ultimately developing the loyalty among the customers. This paper aims to understand the influence of three constructs namely role model (sports celebrity), brand reputation and word of mouth, on the loyalty of the customer towards a brand.

Theory and Hypotheses

Celebrity Endorsements: Role Model (RM) Huge amount of literature is available on celebrity endorsements investigating its influence on consumer behavior. Kahle and Homer (1985), in their studies have examined the celebrities attractiveness. Some researches also found that use of celebrities for endorsing any product is likely to create more positive response from the consumer in terms of advertisement acceptance and purchase intentions. Many researches are also available, which have examined the impact of usage of celebrity for product endorsements on the profitability of the firm (Bobinski and Ramirez, 1994; Agrawal and Kamakura, 1995). Till and Shimp (1998), documented the possible penalty of any kind of negative news or information about the celebrity endorser on the consumer behavior and concluded that any negative information about the celebrity results in a negatively high impact on purchase intention and brand image. Kaikati (1987) examined the various types of celebrity endorsements prevalent in the market, whereas Erdogan (1999) figured out the various advantages, disadvantages of using celebrities for endorsements and their relative effectiveness. Ward (1974) and Bush et al. (2004) have found that people in the society, learn to become a customer through the process of information transfer as a result of socialization. Sports celebrities when endorse through mass communications, serves as vicarious role models for the customers influencing their purchase behavior (Martin and Bush, 2000; Clark et al., 2001). Word of Mouth (WOM) Word of Mouth is defined as the degree to which an individual tells about an event of experience (both positive and negative) to his peers and relatives. Previous studies by Richins (1983);

Murray (1991); Mangold et al. (1999), elicited a higher degree of significance between WOM and customers purchase decision. Bush et al. (2004) studied in a microscopic level on, the influence of celebrity endorsement on the genders word of mouth communication and noticed that females were more prone to spreading out the positive word of mouth about a product or brand which was endorsed by their favorite celebrities than their male counterparts. Brand Reputation (BR) In his study Yi (1990), argued over the similarity of the two constructs namely brand reputation and customer satisfaction. However, studies done by, Cronin and Taylor (1992); Bolton and Drew (1991); revealed that brand reputation is more important criteria than the satisfaction construct, which the customer takes into account for the overall evaluation of the brand. According to Aaker and Keller (1990); brand reputation is the customers perception of quality about the brand. Hoch and Ya (1986), found that one of the key purpose of a brand is that it assist in decision making when physical or technical attributes of a brand are difficult to make use of. Brand name is defined as an extrinsic indication or cue which is associated with the product but not part of its physicality. Therefore, a brand name carries an overall quality perception which is not necessarily governed by the physical or technical (intrinsic) attributes of the product (Aaker, 1991, p.19) Shapiro (1983) and Zeithaml (1988), propose that the brand reputation is directly associated with the products perceived quality and at times the loyalty are found to be more connected to the reputation of the brand rather than the products offered. A previous work by Doyle and Fenwick (1974), suggests that the customers prefer to shop in stores whose brand images are parallel to their self image. Loyalty The fourth variable under study to understand customer behavior is loyalty; which according to Jacoby and Kyner (1973) is behavioral response originated as a result of certain psychological responses. This makes Loyalty a consequence of behavior and attitude as well. Brand loyalty is composed of two elements namely, positive attitudes and re-purchase. The importance of loyalty was first documented by Reichheld (1996), in his work, The Loyalty Effect, where in he claims that attracting a new customer is at times five times more costly than retaining an existing customer. Aaker (1991) explains customer loyalty, as the intended behavior of repurchase intention or low likelihood of a customer, switching the brand. This loyalty shown by the customer could be because of high barrier to switching cost or technological/ psychological adaptability. The researchers are proposing the following hypothesis: H1: Customer Loyalty depends upon the three constructs under study i.e. WOM, brand reputation and celebrity endorsement.

The researchers also propose the following regression model for the hypothesis under investigation Customer Loyalty (CL) = + 1 Role Model (RM) + 2 Word of Mouth (WOM) + 3 Brand Reputation (BR) The researchers also put forward a general graphical model (Figure 1) on the basis of the above hypothesis to be tested:

Word of Role Model (Sports Celebrity)

Custom er

Brand Reputati on
Fig .1 A graphical model depicting the influence of celebrity endorser, word of mouth, brand reputation on customer loyalty Methodology From the above discussed literatures, researchers are trying to investigate the relationship of various constructs using the multivariate analysis i.e. multiple regression on the analytical tool SPSS 13.0; as the researchers believe that there is no significant correlation between the independent variable under study WOM, Brand Reputation and Celebrity Endorsement for the purpose of the study. Also, the researches believe that customer loyalty depends upon the above mentioned three constructs; therefore, customer loyalty can be treated as the dependant variable for the regression analysis. The researches have also used ANOVA, to test the hypothesis and to find out the significance of the regression model.

The researchers have chosen the three prominent Shoe Brands such as Adidas, Reebok and Nike which exist in India and are particularly endorsed by Various Sports Celebrities. The Sample consists of respondents from the city of Chennai, who were willing to respond to the study hence constituting convenience sample. The initial size of the sample was 123 however only 90 respondents responses were found suitable and relevant to the current study. Measurement To understand the influence of sports celebrities, the role model scale consisting of five items developed by Rich (1997) was used after slight modification and adjustment to suit the requirement of the current study. A similar kind of measures developed by Aaker and Keller (1990); Smith and Park (1992) to measure brand reputation were used, which consisted of three items. Three items were identified and were adapted from the purchase intentions scale developed by Zeithaml, Berry and Parasuraman (1996), to investigate the influence of word of mouth. The following instruction initiated the questionnaire intended to record the responses from the respondents please, share your level of extent to which you are agreeing to the following statements and was followed by a similar set of multi-item scales developed to record the responses towards the main variables: role model, brand reputation, word of mouth and loyalty. Five point Likert scale was employed to measure the score of the respondents for each item. Variables pertaining to the current study were selected on the basis of an extensive literature survey. The questionnaire carried twenty four items in order to be administered and to capture the responses from the respondents. To measure the impact of a sports celebrities, an adapted version of role model scale by Rich (1997) consisting of five items, was used. Three items illustrating word of mouth phenomenon were selected from purchase intention scale by Zeithaml, Berry and Parasuraman (1996), and were adapted accordingly to serve the purpose of the study. Three items were designed to measure brand reputation, which were similar to ones given by Aaker and Keller (1990); Smith and Park (1992); Loken and John (1993). And finally loyalty scale developed by Ehigie (2006) was selected, developed and used to measure the loyalty factor; this employed scale had thirteen items.

Analysis and Discussion

Model Summary Adjusted R Square .823 Std. Error of the Estimate .115

Model 1

R .917(a)

R Square .840

a Predictors: (Constant), MBR, MWOM, MRM Table I. ANOVA (b)

Model 1

Sum of Squares Regression Residual 26.868 14.866

df 3 56

Mean Square 8.956 .265

F 33.73 7

Sig. .000(a)

Total 41.733 59 a. Predictors: (Constant), MBR, MWOM, MRM b. Dependent Variable: ML Table II. Coefficients (a) Model Unstandardized Coefficients (Constant) MRM MWOM MBR B .174 .688 .875 Std. Error .244 .177 .120 .124 Standardized Coefficients Beta .064 .434 .417 t .712 .499 3.793 3.819 Sig. .479 .619 .000 .000

.472 a. Dependent Variable: ML Table III.

(Note ML= mean of loyalty items; MRM= mean of role model items; MWOM= mean of word of mouth items; MBR= mean of brand reputation)

From the SPSS output i.e. Table III, the following regression equation can be deciphered: ML= 0.174 + (0.688) MRM + (0.875) MWOM + (0.472) MBR The researchers have tested the significance of the regression model at 5%. From the ANOVA Table i.e. Table II, significance value was found to be below 5%, hence the regression model is highly significant and can be applied to understand the customer loyalty. The value of Adjusted R was found to be 82.3% which indicates that the unexplained portion is only 17.7% which is good enough to develop the regression model to meet the objective of the current research. From the regression model i.e. Table III, it can be noticed that the variable word of mouth has the most prominent effect ( value = 0.875) on customer Loyalty followed by the celebrity role model ( value= 0.688) and brand reputation ( value= 0.472) respectively. From the regression model it can be deduced that the three independent variables have three distinct relationships towards customer loyalty and each one influences the ultimate customer loyalty in different tones. With regard to role model, it was found that role model had a moderate influence in determining customer loyalty which is evident from Table III or the generated regression equation; whereas, brand reputation was found to be of comparably low ability to create loyalty among the customers. This could be explained because of the fact that the three shoe brands selected for the current study are more or less positioned to the upward class customers and hold the same sense of reputation of being trendy, contemporary yet classy. However, regression model also reveals that word of mouth has the maximum impact on customer loyalty.

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