by André de Waal and Béatrice van der Heijden
- Purpose – One of the most important characteristics of high-performance organizations is that these organizations always aim at servicing their customers as best as possible. In practice, this means that the employees of these organizations have to behave toward customers in such a way that these customers are not only fully satisfied but also become loyal to the organization. The purpose of this paper is to look at the concrete behaviors that are needed to create this customer loyalty.
- Design/methodology/approach – From a literature review the items that potentially are of influence on creating customer loyalty and customer intimacy were identified, based on a previous
validated questionnaire while adding additional items. These items were subsequently validated in practice with a questionnaire distributed among people who are in daily life regular customers of organizations.
- Findings – The research results show that there are eight behavioral factors of importance to create customer loyalty and customer intimacy: first, service quality delivered by employees; second, capability of employees to deliver high quality; third, empathy of employees toward customers’ wishes and needs; fourth, understanding of employees of customers’ needs; fifth, responsiveness of employees toward the needs of customers; sixth, courtesy of employees toward customers; seventh, service manner of employees; and finally, trust customers place in employees.
- Research limitations/implications – The implication of this research is that, now that the behavioral factors are known, an organization can make sure its employees focus on displaying these behaviors toward customers consistently over time, in order to make sure customers will experience the organization as a high-performance organization and will feel loyalty toward the organization.
- Originality/value – The research described in this paper adds to the literature in the sense that it encompasses previous research into once item list and specifically looks at behaviors that create excellent service and thereby customer loyalty and customer intimacy, both concepts that go beyond the much researched topic of customer satisfaction.
- Keywords – Customer loyalty, Service quality, High-performance organizations, Excellence, Customer intimacy
One of the most important goals of every organization is to serve customers as best as possible (deWaal, 2012). In order to fulfill this goal, employees of the organization need to realize that customers are the most important thing in the world to them, and that without satisfied customers the organization does not have a reason to exist. In practice, this means that employees have to behave in such a way toward customers that these customers are not only fully satisfied with the service provided at a particular moment, but, in a longer-term perspective, become loyal to the organization.
In the past decade, researchers have reported that customer loyalty goes beyond customer satisfaction as the latter points at the result of one or a limited number of encounters between customers and organizations, while the former refers to an ongoing relation between these customers and organizations (Bügel, 2010). Customer loyalty has many advantages for an organization: favorable word-of-mouth marketing, justified price premiums, reduced employee training costs, and lower employee turnover, all resulting in higher firm profits (Yim et al., 2008; Bügel, 2010). A study among 12 USA industries found that organizations that focused on increasing customer loyalty experienced double-digit profits from customers willing to buy more from them, customers being reluctant to switch business away from them, and customers likely to recommend them more often. Concretely, it was found that a modest improvement in customer loyalty could result in between $179 million (for health insurance companies) and $308 million (for hotel chains) of incremental revenue over three years, for every $1 billion in annual sales (Temkin, 2011). As Setó-Pamies (2012, p. 1257) concludes: “Customer loyalty gives companies a competitive advantage that is sustainable over time and is therefore the key to success. Few businesses can survive without establishing a loyal customer base.” Despite numerous studies into the nature of customer loyalty (Al-Awadi, 2002; Chang et al., 2009; Kuo and Ye, 2009; Yieh et al., 2007; Yu et al., 2005), there appears to be no general accepted definition in the literature of the construct of customer loyalty (Setó-Pamies, 2012). Its conceptualization seems to be based on a collection of factors, such as, among others, trust, where the customer trusts the vendor or product; perceived value of the product or service provided, which has to be greater than that supplied by competitors; and emotional attachment, where the customer develops a commitment to the vendor which is resistant to change (Pitta et al., 2006; Reichheld, 1996). Another factor which in recent years is increasingly seen to be of importance in the customer-organization relationship is customer intimacy (Treacy and Wiersma, 1993). Customer intimacy is defined as “making customers feel good whenever they make contact with your company” (Ballou, 2006, p. 5, cited in IBM Global Services, 2006) or, alternatively, “tailoring and shaping products and services to fit the increasingly specific definition of the customer” (Bügel, 2010, p. 65). Previous empirical work has shown that the interaction between the service employee and the customer is the most important determinant of customer intimacy (Fleming et al., 2005; Lloyd and Luk, 2011; Pitta et al., 2006). For instance, Yim et al. (2008) found that exceptional service during the customer-employee interaction drives customer-firm intimacy and customer loyalty, and thus profitability (Lau, 2000; Xu and Van der Heijden, 2005).
In the scholarly literature, many models and accompanying scales for measuring the quality of service can be found; for instance the synthesized model of service quality from Brogowicz et al. (1990), the information technology (IT) alignment model from Berkley and Gupta (1994), the service quality and satisfaction model developed by Spreng and Mackoy (1996), the PCP (Pivotal, Core, Peripheral) attribute model from Philip and Hazlett (1997), the retail service quality and perceived value model of Sweeney et al. (1997), the customer value and customer satisfaction model developed by Oh (1999), the antecedents and mediator model of Dabholkar et al. (2000), the internal service quality model by Frost and Kumar (2000), the internal service quality data envelope analysis model from Soteriou and Stavrinides (2000), the service quality model for internet banking proposed by Broderick and Vachirapornpuk (2002), the service quality model for IT-related business developed by Zhu et al. (2002), and the model of e-service quality from Santos (2003). Three of the most widely used models are SERVQUAL (Parasuraman et al., 1988; Vijayvargy, 2014), SERVPERF (Cronin and Taylor, 1994), and the Grönroos model (Grönroos, 1984, 2000). The SERVQUAL (which stands for service quality) scale measures service quality as the difference between expectations and perceptions of customers while the SERVPERF (which stands for service performance) scale measures the result of the service. In contrast, the scale of Grönroos’ Augmented Services Offering model takes into account technical quality, functional quality, and company image, as these are seen as justifications for the service quality a firm provides. In the literature there is a debate about which is the better scale, with the controversies centering around the alleged one-sided focus on the service delivery process while service quality is a more encompassing construct, or whether a certain scale is too American based without taking the European context into account, or whether a scale is too complicated ( Jeffrey James, 2004; Vijayvargy, 2014). There is however another contention point which might have been missed thus far in this debate. Many researchers regard service quality levels, which is measured by the above-mentioned scales, as antecedents for customer satisfaction, which, in turn, should correlate with overall attitudinal loyalty of customers (Kumar et al., 2010; Rahman et al., 2012). However, these scales do not measure the actual behaviors which employees need to display in order to create and strengthen customer intimacy and customer loyalty, they provide information about the outcome of these behaviors (Dabholkar et al., 2000). In this respect, there seems to be a gap in the literature as there is – to the best of our knowledge – no validated listing of the behaviors which need to be shown by employees to achieve high service quality, and herewith increased customer intimacy and customer loyalty. To address this gap in the literature, the research question that is central in our study is formulated as follows:
RQ1. What kind of behaviors does an employee need to display during the customer-employee interaction, in order for the customer to experience customer intimacy which in turn creates customer loyalty?
The main objective of this study was to develop a psychometrically sound instrument for the measurement of employee behavior. Thus, in this study we aim to generate validated measures for the behaviors that employees need to display in order to provide excellent service. More specifically, these behaviors should have predictive value in the light of customer loyalty. In order to do so, first, we will go into a thorough search of the scholarly literature to find out which ingredients are important to take into account in our conceptualization of the behavioral factors needed to create customer loyalty. Next, we will deal with the operationalization of the concept into a set of questionnaire items that are thought to be representative for the construct of customer loyalty and its comprising factors. Finally, the psychometric validation of the instrument will be discussed. This paper is structured as follows. First the theory of customer loyalty and behaviors leading to customer loyalty is discussed. Then, the research methodology is described and the research results are given. The paper ends with a conclusion, the limitations of the study, and opportunities for future research. The research described in this paper will add to the literature in the sense that it goes beyond the much researched topic of customer satisfaction, by incorporating the concepts of customer loyalty and customer intimacy which are important in terms of positive outcomes for organizations in the longer run.
Behaviors leading to customer loyalty
Aksoy (2013) succinctly describes the mechanism that leads from employee behaviors to customer loyalty. First, the organization has to understand what constitutes customer loyalty, that is the organization should clearly define what a loyal customer means so that it can be measured and managed in line with the organization’s strategic goals. Then, the organization should actually put practices in place to track customers’ loyalty with various performance indicators, such as customer satisfaction and customer complaints and engage customers with the organization in an effort to increase the results on these performance indicators. Lastly, the organization has to act on the outcomes of the performance indicators in order to influence the attitude of customers positively.
The literature provides a plethora of performance indicators with which to measure and track customer intimacy and customer loyalty. Yim et al. (2008) looked at the ways a fast food restaurant and a hair salon created customer loyalty and customer intimacy through fostering customer-firm affection, which is defined as the affectionate bond that develops over time between a customer and an organization. The authors found that customer-firm affection complements satisfaction and trust in developing customer loyalty. More specifically, their research showed that customer-firm affection can be greatly enhanced by adding excitement to the service delivered, as this excitement entices customer passion. From their validated measurement scale, the items that deal with the behavior of employees – and the effect of this behavior on customers – during the customer-firm interaction were selected for our study.
The items that pertain to the product or to the organization (like organizational policies) were not selected as our study focuses on customer satisfaction, customer intimacy, and customer loyalty, created by the satisfaction of customers with the behaviors employees showed. Our study does not deal with satisfaction created by the features of the organization or its products.
Thus, the validated scale of Yim et al. (2008) was taken as the basis for the questionnaire in our research. However, other researchers have found additional factors and items which also seemed of importance to customer intimacy and customer loyalty. We have reviewed these factors and items and added those that were not present in the Yim et al. (2008) scale. For instance, Dixon et al. (2010) found – in contrast to Yim et al. (2008) – that it was not so much about providing a great service experience and delighting the customers, but rather about getting the basics right and reducing the effort for customers to solve their problem that builds customer loyalty. These authors therefore stated that the emphasis of customer service interactions had to be changed toward solving the problem of the customer quickly and easily. Unfortunately, the authors did not come up with possible measurement items but, based on their description of the five tactics high-performance organizations used, we derived items for the four tactics that deal with behavior. The tactics “Don’t just resolve the current issue, head off the next one” and “Focus on problem solving, not on speed” were translated into two items (“The employee solved my problem quickly” and “The employee solved my problem completely”), and the tactics “Arm sales representatives to address the emotional side of customer interactions” and “Listen to and learn from disgruntled customers” were operationalized into one item (“The employee was sympathetic to my situation”).
Bügel (2010) investigated the development of customer intimacy in five industries and found that it contributed significantly to creating customer commitment to the organization, and eventually to customer loyalty. Bügel’s research showed that investing in intimacy particularly paid off during the beginning and the ending of the relationship, and that customer intimacy could help with building customer relationships, and with preventing these relationships to end. Bügel measured the level of intimacy, passion, and commitment that a customer experiences in general with an organization, however he did not go into specific behaviors of the organizational employee. We therefore decided to build upon the validated general organizational items in regard to intimacy as developed by Bügel (2010) and translated these into general individual behavioral items.
Mechinda and Patterson (2011) examined the effects of the personality of the service provider as well as service climate and job satisfaction on customer-oriented behavior in a hospital setting. They found that various personality traits had differing effects on customer-oriented behaviors of front-line employees, that is nurses. We adjusted the items that the authors used to measure the behavior of the nurses and generalized these (i.e. from “patients” to “customers”).
Lloyd and Luk (2011, p. 178) investigated the service behaviors that were supposed to elicit a sense of comfort for the customer during the employee-customer interaction, in which comfort was defined as “an emotion characterized by feeling at ease due to lack of anxiety in a service interaction.” The authors found that overall comfort of customers of fashion apparel shops and casual dining restaurants positively impacted both overall quality and customer satisfaction, which ultimately led to positive word-of-mouth. The sense of customer comfort appeared to be created by two key groups of interaction behavior that contained specific behaviors: the effort employees made to understand customers, and their courteous behavior toward customers.
Creating an organizational climate that is aimed at providing excellent service was found to be important to guarantee that customers receive high-quality service (Bowen and Schneider, 1988). The satisfaction of employees with this organizational service climate was referred to as an employee perception of internal customer satisfaction (Xu and Van der Heijden, 2005). Jun and Cai (2010), while researching the dimensions of internal customer satisfaction, found that customer intimacy was the most influential dimension to achieve both high internal customer service quality, and subsequently, satisfaction. As internal customer satisfaction leads to external customer satisfaction, we made the assumption – just as Garvin (1988) did – that the behavior displayed by employees to achieve internal customer intimacy might be the same as the ones needed for achieving external customer intimacy. We therefore incorporated the items found by Jun and Cai (2010) for customer intimacy as well.
Winsted (2000) examined the behaviors of service providers that influenced the customer evaluation of the service encountered during restaurant and medical transactions and, subsequently, tied these behaviors to customer satisfaction. Although, as stated before, we were looking for behaviors that influence customer loyalty and customer intimacy, achieving customer satisfaction was one of the core components of achieving customer loyalty, and therefore we decided to include the behaviors as found by Winsted (2000) as well. Sirdeshmukh et al. (2002) looked into both the behaviors and practices of service providers that built or depleted consumer trust, and into the mechanisms that converted consumer trust into loyalty to the organization. Their framework used a multi-dimensional conceptualization for trustworthiness, and incorporated two distinct facets of consumer trust: front-line employees and management policies. The scholars tested their framework among respondents from retail clothing stores and non-business airline travel agencies. We selected the validated items that Sirdeshmukh et al. (2002) developed for the behaviors of front-line employees.