INFLUENCES OF CUSTOMER ORIENTATION ON BRAND EQUITY OF BORN ONLINE BUSINESS
By
Mariëlle Meedendorp
Newcastle University Business School
University of Groningen, Faculty of Economics and Business Dissertation for MSc IB&M and IM (NBS8199)
Nima Heirati & Ad Visscher
January 30
th2015
m.c.meedendorp@newcastle.ac.uk
Student number: B4017392 / S2414724
ACKNOWLEDGEMENTS
This dissertation could not have been possible without the support of several people. Firstly, I would like to thank those who supported me with the research execution namely, Mister Jansen from Catawiki.com, Mrs. Gerdes from Collectioneur.nl, and Mister de Vries from Captusion.com as well as Mister Schuil from Marktplaats.nl. Furthermore, I wish to thank all the survey responded who took the time and effort to help me with my research. Moreover, I would like to thank my supervisors, Dr. Heirati and Dr. Visscher for providing feedback and support regarding this dissertation. Finally, I wish to thank my family for their continuous support and confidence throughout this research.
TABLE OF CONTENTS
ACKNOWLEDGEMENTS ... 2
TABLE OF CONTENTS ... 3
TABLE OF FIGURES ... 5
TABLE OF TABLES ... 5
ABSTRACT ... 6
1. INTRODUCTION ... 7
1.1 Introduction ... 7
1.2 Background ... 7
1.3 Research Gap ... 8
1.4 Research Objectives ... 9
1.5 Research Questions ... 9
1.6 Summary ... 10
2. LITERATURE REVIEW ... 11
2.1 Introduction ... 11
2.2 Empirical Setting ... 11
2.3 Market Orientation ... 12
2.4 Customer Orientation ... 13
2.5 Brand Equity ... 13
2.6 Customer Satisfaction ... 14
2.7 Customer E-Loyalty ... 15
2.8 Online Business ... 15
2.9 Costs ... 16
2.10 Grievance ... 17
2.11 Quality ... 18
2.12 Convenience ... 18
2.13 Conceptual model ... 19
2.14 Hypotheses ... 20
2.15 Summary ... 23
3. METHODOLOGY ... 25
3.1 Introduction ... 25
3.2 Research Approach ... 25
3.3 Data Collection Methods ... 26
3.4 Measures of Constructs ... 27
3.5 Data Collection Procedure ... 28
3.6 Ethical Considerations ... 29
3.7 Summary ... 30
4. FINDINGS & DISCUSSION ... 31
4.1 Introduction ... 31
4.2 Sample Profile ... 31
4.3 Descriptive Statistics ... 32
4.4 Regression Analysis ... 36
4.5 Additional Testing ... 44
4.6 Summary ... 45
5. CONCLUSION ... 47
5.1 Introduction ... 47
5.2 Conclusion ... 47
5.3 Managerial Implications ... 48
5.4 Challenges and Limitations ... 49
5.5 Future Research ... 50
5.6 Summary ... 51
REFERENCES ... 52
APPENDIX A ... 56
Survey ... 56
TABLE OF FIGURES
Figure 2.1 Conceptual Model ... 20
Figure 4.2.1 Gender ... 31
Figure 4.2.2 Online Purchase Frequency ... 31
Figure 4.2.3 Age ... 31
TABLE OF TABLES Table 2.1 Hypotheses ... 24
Table 3.3 Data Collection Methods ... 26
Table 4.2 Statistics Gender, Age and Online Purchase Frequency…... 31
Table 4.3.1 Descriptive Statistics... 32
Table 4.3.2 Cronbach’s Alpha ... 34
Table 4.3.3 Correlation Matrix between Constructs ... 36
Table 4.4 Regression Analysis Results ... 38
Table 4.5.1 Independent T-Test Samples Gender versus Online Purchase Frequency …... 44
Table 4.5.2 Regression Analysis Age regressed on Online Purchase Frequency ... 45
Table 4.6 Hypotheses ... 47
ABSTRACT
Born online businesses do not offer a physical store where consumers can visit and try out products. Therefore, the customer orientation of born online business is suggested to be influenced different than from those with offline business which consumers can visit. This study is aimed at defining the influence of customer orientation on brand equity in born online business. Additionally, establishing the moderating role of costs, grievance, quality and convenience between customer orientation and customer satisfaction, as well as between customer orientation and customer e-loyalty. These moderators have been established by Pareek (2014) and Homburg et al. (2014), but only in offline market settings and not in the online market. Therefore this study focuses on the extent of these moderators effects in born online business. The research is based on a quantified field study using online surveys. The survey response was comprised of 150 respondents from 1250 surveys. These respondents were reached through means of born online businesses. The results showed that both costs and grievance have a negative moderating effect on the influence of customer orientation on customer satisfaction as well as customer satisfaction. Though, grievance is found to be a strong negative moderator, whereas costs is an intermediate moderator. On the other hand the moderators, quality and convenience have a strong positive effect on the influence between customer orientation and customer satisfaction and customer e-loyalty in born online business.
Overall, there is support for the hypothesis that customer satisfaction has a positive influence on customer e-loyalty, though not a strong influence and together customer satisfaction and customer e-loyalty have a positive influence on brand equity. This means that consumers prefer the convenience and low costs, as well as trust the quality provided by born online business. In turn, this will make consumers more willing to purchase products and services online. The findings contribute to expand the understanding of the influence moderators have when it comes to born online business.
1. INTRODUCTION 1.1 Introduction
This research will begin by providing some background information and establishing research objectives. Then a literature review is provided and hypotheses created. Next the methodology will be explained followed by the findings. Lastly the findings will be discussed and answers to research questions concluded as well as any managerial implications this might have. Finally, challenges and limitations are defined and future research discussed.
1.2 Background
Since recent years more businesses focus on what customer need and want, rather than offering a set product with a bunch of different services and insisting the consumers buy it (Ho-Dac, et al., 2013; Canevello, et al., 2010). In this manner, consumers become more satisfied with the goods and services it obtains and the company they buy it from, increasing sales (Ho-Dac, et al., 2013; Berger & Janoff Bulman, 2006; Canevello, et al., 2010). The pull strategy seems to gain more popularity, as businesses can identify which products and services sell best, which to abandon as well as which areas it could improve (Jaworski, et al., 2000). This responsiveness to the market is a key focus of market orientation. The concept of market orientation can be divided into five perspectives, for this research the customer orientation perspective is selected (Lafferty & Hult, 2001). The customer orientation perspective is concerned with creating and enhancing customer satisfaction (Steinman & Deshpandé, 2000). Past research has linked customer orientation and its increasing customer satisfaction to stronger brand equity.
Moreover, stronger brand equity should lead to increasing sales and business opportunities as companies find those having strong brand equity a reduced risk to form alliances with (Keller, 2013). However, most past studies mainly focused on offline brands with an online platform (Pareek, 2014; Homburg, et al., 2011; Steinman & Deshpandé, 2000). In this day and age
companies born online is booming and thus do not have offline stores for consumers to visit and have a face to face conversation with staff. Therefore, this research will focus on applying existing theories concerning customer orientation and brand equity to these born online businesses. It is assumed that overall the same principle applies, that customer orientation will increase brand equity (Homburg, et al., 2011). However the research will try to identify if there are any matters that may be different for born online businesses. Specifically, in how customer orientation influences customer satisfaction and customer e-loyalty, which in turn influence brand equity (DuBois Gelb & Rangarajan, 2014). The study will be executed by means of surveying consumers from born online businesses. A more in-depth description of this study is provided on the following pages.
1.3 Research Gap
Over the past decades, increasing research has focused on cultural market orientation and specifically the customer orientation aspect of businesses, mainly retailers as well as the salespersons (Hwang & Norton, 2014; Brik, et al., 2011). However, it can be stated that born online businesses are relatively new and little research has been done on the customer orientation of these online businesses. Moreover, previous research (Hwang & Norton, 2014;
Chaston, 2003; Franke & Park, 2006; Homburg, et al., 2011; Steinman & Deshpandé, 2000) has mainly focused on offline business that consumers can visit and examine products before purchase. Therefore, there is a research gap of how precisely brand equity is established and defined for born online businesses. Another research gap resulting from this is the influences customer orientation has on the brand equity of born online businesses. Additionally, there are moderating factors such as, cost, grievance, quality and convenience, which could influence the effect of customer orientation on customer satisfaction and customer e-loyalty (Pareek,
2014; Homburg, et al., 2011). These factors are mainly examined in an offline market, little has been done in an online market setting.
1.4 Research Objectives
The purpose of this study is aimed to discover to what extent quality, convenience, cost and grievance have a moderating role on the effect of customer orientation to customer satisfaction.
This, in order to see the extent customer satisfaction and customer e-loyalty have on brand equity. Overall, this is in the context of born online businesses. Based on the research gap the following research objectives have been established:
To investigate the Moderating Roles of Costs, Grievance, Quality and Convenience, between Customer Orientation and Customer Satisfaction as well as E-Loyalty in Born Online Business.
To determine the extent of Influence Customer Satisfaction and Customer E-Loyalty have on the Brand Equity of Born Online Business.
1.5 Research Questions
In order to answer the research objectives, several research questions have been created. The answers to these questions will be provided in chapter 5 namely, Discussion and Conclusion.
For starters, it should be helpful to understand the effect of customer orientation on customer satisfaction as well as customer e-loyalty in born online businesses. More importantly the moderating role of costs and grievance, thus the next research questions are specified:
1. To what extent does Costs influence the effect of Customer Orientation on Customer Satisfaction as well as Customer E-loyalty in Born Online Business?
2. To what extent does Grievance influence the effect of Customer Orientation on Customer Satisfaction as well as Customer E-loyalty in Born Online Business?
Equally significant are the effects of the moderators, quality and convenience are expected to have an influence on this relationship, therefore the following research question is raised:
3. To what extent does Quality influence the effect of Customer Orientation on Customer Satisfaction as well as Customer E-Loyalty in Born Online Business?
4. To what extent does Convenience influence the effect of Customer Orientation on Customer Satisfaction as well as Customer E-loyalty in Born Online Business?
Lastly the third objective is to define the extent of influence customer satisfaction and customer e-loyalty have on brand equity, leading to the following research questions:
5. To what extent does Customer Satisfaction influence Brand Equity?
6. To what extent does Customer E-Loyalty influence Brand Equity?
1.6 Summary
It has been established that there is a research gap between born online business and offline business with online platforms. Specifically, how brand equity is established for born online businesses and how customer orientation can influence brand equity in born online businesses.
Moreover moderating factors could influence the effect between customer orientation and customer satisfaction as well as between customer orientation and customer e-loyalty. The moderating factors used in these research are costs, grievance, quality and convenience.
Research objectives have been established to investigate the extent of the influence of these moderators. Finally, based on the research objective, research questions have been created.
2. LITERATURE REVIEW 2.1 Introduction
In chapter 1 an introduction was provided and research objectives and research questions established. In this chapter an empirical setting is provided and literature reviewed to explain the constructs used. The constructs explained are Market Orientation, Customer Orientation, Brand Equity, Customer Satisfaction, Customer E-Loyalty and Online Business. Moreover the moderators, Costs, Grievance, Quality and Convenience are explained as well. Based on this a conceptual model is formed and hypotheses developed. At the end of this chapter a summary is provided.
2.2 Empirical Setting
Since 2004 when only 15% of individuals in the European Union bought online products or services, online purchases have risen to 38% in 2013 amongst individuals in the age 16 to 74 (European Commission, 2014). This is probably due to the rise of individuals using the internet regularly from 36% in 2004 to 72% in 2013 (European Commission, 2014). The business to consumer e-commerce in the United States has more than doubled its volume from $211 billion in 2006 to $593.16 billion in 2012 (Statista Inc., 2014). Worldwide the business to consumer ecommerce is expected rise from $1058 billion in 2012 to $2356 billion in 2018 (Statista Inc., 2014). These figures show significant increases in the e-commerce market. Though it does not distinguish between born online businesses and those with offline experience, it strongly shows the up rise of consumers making use of e-commerce. Over the past decade the number of people purchasing online and the volume of e-commerce has more than doubled and is expected to double again over the next decade. Therefore, it is important to understand how the online business can be influenced by moderators and to what extent.
2.3 Market Orientation
According to various authors market orientation is about business emphasis on customers, the importance of sharing information and inter-functional coordination of marketing activities and relationships as well as the responsiveness to market activities (Lafferty & Hult, 2001; Ben Brik, et al., 2011). Moreover, market orientation can be subdivided into five different perspectives (Lafferty & Hult, 2001; Hwang & Norton, 2014). Firstly, there is decision-making perspective (Shapiro, 1988; Ben Brik, et al., 2011), which is defined by “a strong commitment by management to share information interdepartmentally and practice open decision making between functional and divisional personnel” (Lafferty & Hult, 2001, p. 96). Secondly, there is the perspective of market intelligence, which “refers to learning, understanding and responding to stakeholder perceptions and behaviours within a given market” (Jaworski, et al., 2000;
Hwang & Norton, 2014). Thirdly is the culturally based behavioural perspective (Slater &
Narver, 1998; Ben Brik, et al., 2011), which believes “businesses are committed to understanding both the expressed and latent needs of their customers, and the capabilities and plans of their competitors through the processes of acquiring and evaluating market information in a systematic and anticipatory manner” (Slater & Narver, 1998, p. 1003). Next perspective is regarding strategic focus (Ruekert, 1992; Hwang & Norton, 2014). This perspective sees market orientation as “the degree to which the business unit will obtain and use information from customers, can develop a strategy which will meet customer needs as well as implements that strategy by being responsive to customers’ needs and wants” (Ruekert, 1992, p. 228).
Lastly is the customer orientation perspective (Steinman & Deshpandé, 2000; Hwang &
Norton, 2014), which they define as “the set of cross-functional processes and activities directed at creating and satisfying customer through continuous needs-assessment” (Steinman
& Deshpandé, 2000, p. 110). As this study is not aimed to understand interdepartmental and
competitive processes, but rather aspects directed at consumers in order to make them satisfied, customer orientation will be the perspective this study focusses on.
2.4 Customer Orientation
According to Jaramillo and Grisaffe (2009, p. 169) customer oriented businesses “are solution providers who deliver value by assessing customers’ needs, then responsively helping customers identify alternatives, evaluate them, and select the best solution”. Furthermore, customer orientation “reflects a high concern for others, low-pressure selling, and problem–
solution selling approaches” (Franke & Park, 2006, p. 694). Overall, empirical findings suggest a significant relation between customer perception of the customer orientation of a salesperson and customer satisfaction, trust as well as establishing and development of a relationship with the salesperson (Franke & Park, 2006). This perspective of market orientation can according to Homburg et al. (2011) be subdivided into two different concepts. First of all there is functional customer orientation, which is viewed as “a set of task-oriented behaviours aimed at helping customers make satisfactory purchase decisions” (Homburg, et al., 2011, p. 798). Second is the relational customer orientation, which also “includes behaviours aiming at establishing a personal relationship with the customer, such as getting to know a customer personally”
(Homburg, et al., 2011, p. 796). According to Homburg et al. (2011, p. 799) the main aim of customer orientation is to obtain customer loyalty which is defined as “a customer’s expressed preference for a company and intention to continue to purchase from it and to increase business with it in the future”.
2.5 Brand Equity
Research regarding brand equity can be divided into two main approaches, namely, finance based and consumer based (He & Li, 2011). As this research is based on customer orientation,
it will focus on consumer based brand equity. A significant part of business is its brand equity, as strong positive brand equity stimulates positive reviews and customer loyalty, which in turn increases sales (Ho-Dac, et al., 2013). Brand equity can be defined as “What distinguishes a brand from its commodity counterpart in the favourable perceptions and feelings of customers and potential customers, thus reducing the price elasticity of goods or services that carry its name” (DuBois Gelb & Rangarajan, 2014, p. 95). Keller (2013, p. 57) finds that brand equity
“explains why different outcomes result from the marketing of a branded product or service than if it were not of a branded product”. Moreover, he states that brand equity consists of brand awareness and brand image. Whereby brand awareness is dependent of brand recognition and brand recall by consumers and brand image is consistent of brand attributes and brand benefits (Keller, 2013). Whereas Hollensen (2014, p. 503) divides brand equity into five categories, namely, brand loyalty, brand awareness, perceived quality, brand associations and other proprietary brand assets.
2.6 Customer Satisfaction
Measuring customer satisfaction is important for businesses as product or service satisfaction will influence a consumer’s decision whether or not to keep using a business (Chiua, et al., 2013). Farris, et al. (2010) view customer satisfaction as whether or not customer expectations are met or exceeded. This seems to be in line with Chiua, et al. (2013) who believe that when the performance of a product or service is met satisfaction occurs. According to them
“satisfaction is a post-activity measuring index”, which after consumption measures consumer’s response to the perceived discrepancy between the actual performance of a product and prior expectations (Chiua, et al., 2013, p. 285). Moreover O’Sullivan & McCallig (2012) find that customer satisfaction can lead to increased transactions, willingness to buy additional services and reduced transaction costs as well as reduced price elasticity.
2.7 Customer E-Loyalty
First of all e-loyalty has been defined as “The consumer’s favourable attitude toward an electronic business, resulting in repeat purchasing behaviour’’ (Rafiq, et al., 2013, p. 494).
Several studies have already established that customer satisfaction influences customer loyalty (Farris, et al., 2010) (Buttle, 2009). According to Rafiq, Fulford and Lu (2013), due to the competitive nature as well as the ever-increasing quantity of online retailers in the online market, loyalty development is both more significant as more challenging than in offline retailing. Additionally McMullen and Gilmore (2008) state that customer loyalty is not specific to the frequency and depth of buying from one online business brand over another, but rather depends on the opportunity or when a situation occurs. Moreover, McMullen and Gilmore (2008) distinguish between on one hand ‘proactive loyalty’, whereby a consumer frequently purchases this specific brand and settling for no other. On the other hand, there is ‘situational loyalty’, which “is exhibited when the consumer purchases a product or service for a special occasion, this is particularly important within services, which are purchased annually”
(McMullan & Gilmore, 2008, p. 1085).
2.8 Online Business
Over the past decade, several research studies have been done in the expansion of customer orientation of offline business moving forward to providing online products and services. For instance Srinivasan and Moorman (2005) researched, firm commitments and rewards for customer relationship management in online retailing, but they focused on those who already had previous offline experience. While Chaston (2003) did his research in the online business to business segment, it only focused on relationship marketing and not on customers. Others considered the basic information data needed to implement in a CRM system as a whole within online businesses (Gurău & Ranchhod, 2003). In recent years, several rapidly growing ‘born
online’ companies have been established, such as Twitter, Wikipedia and Facebook. Originally born online businesses made significant mistakes like oversimplifying the branding process, where flashing advertisement caught consumer attention, but failed to explain the product or service attributes as well as failed to persuade consumers to visit the company’s website (Keller, 2013). According to Hollensen (2014, p. 519) “The internet is an open, cost-effective and ubiquitous network. These attributes make it a global medium with unprecedented reach, contributing to reduced constraints of geography and distance. The internet has enhanced the ability of firms to engage customers in collaborative innovation”. Whereas offline companies need to be close to their customers, Hollensen (2014) finds that this barrier is unnecessary for online businesses and therefore have less costs to communicate with consumers. The virtual environment of online business enables them to interact with a greater number of consumers without having to comprise on the richness of the conversations (Evans & Wuster, 2000).
2.9 Costs
According Berger & Janoff Bulman (2006, p. 53) state that “people may assume that the more rewards received and the fewer costs incurred, the more satisfied they will be”. Berger &
JanoffBulman (2006) find that costs can be time, effort and/or resources required to fulfil the needs. Furthermore Pareek (2014) states that cost is a significant factor for customer satisfaction, which can be defined by price fairness and service charges. Specifically hidden or extra service charges added to the product or service price can negatively influence customer satisfaction (Pareek, 2014). Moreover Chebat, et al. (2011, p. 823) find switching cost an important factor for customer satisfaction and state, “switching costs function as a powerful defensive marketing tool constraining consumers' behaviour by deterring customers from changing to another supplier”. Chebat, et al. (2011) believe this is to obtain repeat purchase and define several aspects to switching costs. Firstly penalty costs for switching providers during a
contract period (Chebat, et al., 2011). Secondly are perceived risks and opportunity costs for switching to an unknown provider (Chebat, et al., 2011). Thirdly are the costs of learning a new service and difference in employee knowledge from one provider to another (Chebat, et al., 2011). A fourth aspect are time and effort costs to find a new provider (Chebat, et al., 2011).
Next is the cost aspect of having to fill out all administrative issues when switching to a new provider (Chebat, et al., 2011). Lastly is the costs concerning relationships which have to be rebuilt between the new provider and customer (Chebat, et al., 2011).
2.10 Grievance
According to Chang (2008, p. 321) critical determinants of customer satisfaction are “service failures and consequent recoveries”. This seems to coincide with Pareek (2014), who describes grievance as a customer satisfaction factor. Grievance is the way issues are handled and recovered (Pareek, 2014, p. 57). Furthermore Brewer and Lam (2009) define five different approaches for grievance handling. Firstly, is the integrating approach when someone prefers collaboration with others and occurs when someone has a high concern for self and others (Brewer & Lam, 2009). Secondly, is the obliging approach when someone prefers accommodation to others’ needs and occurs when someone has a low self-concern, but for others a high concern (Brewer & Lam, 2009). Thirdly is the dominating approach when someone prefers to compete with others and occurs when someone has a high self-concern, but concern for others is low (Brewer & Lam, 2009). Next is the avoiding approach when someone prefers withdrawal and occurs when someone has a low concern for self and others (Brewer &
Lam, 2009). Lastly is the compromising approach when someone prefers to share with others and occurs when someone has an intermediate self-concern as well as intermediate concern for others (Brewer & Lam, 2009).
2.11 Quality
Concerning E-Loyalty, Rafiq, et al (2013) find that quality of the online process of buying products or services makes consumers more loyal to the online market than offline market.
Pareek (2014) defines quality as speed, accuracy, reliability, security, responsiveness, assurance, communication, courtesy and commitment. Whereby speed comprises of time to order and time to deliver (Pareek, 2014). Furthermore, accuracy is having the correct information provided and having the correct product or service delivered (Pareek, 2014).
Moreover, reliability is the probability that a product or service will fulfil its duties according to given standards (Ranous, 1964). Additionally, security is having private information protected from fraudsters and misconduct (Eisen, 2010). In addition assurance is having some form of guarantee that if a product or service does not work properly, it is insured and may be replaced by another or returned to the provider (Eisen, 2010). Next responsiveness is “the perception that a partner understands, values, and supports important aspects of the self”
(Canevello, et al., 2010, p. 78). Additionally, consumers should be able to communicate with the company regarding products or services, so contact information or web portals should be available (Canevello, et al., 2010). Furthermore discount options are a form of courtesy (Pareek, 2014). Lastly loyalty schemes, offer a form of commitment to consumers (Rafiq, et al., 2013).
2.12 Convenience
Besides quality Rafiq, et al. (2013) also found the convenience of the online buying process makes consumers more loyal to the online market. Moreover Okazaki & Mendez (2013) find that convenience in mobile commerce depends on two main issues, namely, the perceived ease of use as well as the perceived usefulness. Additionally intrinsic attributes of mobile convenience are defined as portability and interface design, which together determine ease of use (Okazaki & Mendez, 2013). In addition extrinsic attributes of convenience in mobile
commerce are simultaneity, speed as well as search ability (Okazaki & Mendez, 2013). These extrinsic attributes determine the usefulness of a product or service (Okazaki & Mendez, 2013).
Whereas Pareek (2014) states that convenience consists of several variables, namely; opening hours, parking space, queuing time, traveling distance and ATM availability. As these do not all apply for online business this research will adapt opening hours to website availability, as when an error occurs and the website goes offline, it is not accessible as a closed store.
Furthermore queuing time is considering website ease and speed of selecting a product or service a consumer wants and making the purchase. Traveling distance is the ease and the amount of clicks it takes to select what a consumer want to purchase. Lastly ATM availability has considered the payment options for an online purchase.
2.13 Conceptual model
The conceptual model brings about the theories mentioned before and expected outcome. That is an increased brand equity by applying customer orientation in born online businesses, without offline experience (He & Li, 2011). It is suggested that customer orientation will lead to increased customer satisfaction as well as increasing customer e-loyalty by consumers (HoDac, et al., 2013). This in turn is assumed to lead to increased brand equity of the born online business (He & Li, 2011). These aspects are what a company aims for to gain increase in positive reviews and customer e-loyalty (Homburg, et al., 2011). Consequently, this will increase the company’s sales (Ho-Dac, et al., 2013). Additionally, it will make trade with other companies or suppliers easier as a strong brand is considered less of a risk to make alliances with or will give their own products added value in consumer eyes (Srinivasan & Moorman, 2005; Gurău & Ranchhod, 2003)). However, some factors are assumed to influence the effect of customer orientation on customer satisfaction and customer e-loyalty. These factors are mainly taken from Pareek (2014), but slightly adjusted as his research was focused on mainly
offline retailers. Therefore the variables of convenience are adjusted to usability of website, delivery time and payment options. The conceptual model is displayed below in Figure 2.1.
Figure 2.1 Conceptual Model
2.14 Hypotheses
In this section hypotheses are formed which will state the expected influence different variables have on a construct. Furthermore the expected moderating effect of quality, convenience, cost and grievance on customer satisfaction as well as on customer e-loyalty. Overall, what the expected effect of customer orientation on brand equity is.
2.14.1 Customer Satisfaction and Brand Equity
First of all brand equity is defined as “What distinguishes a brand from its commodity counterpart in the favourable perceptions and feelings of customers and potential customers,
Brand Equity
Customer Satisfaction
Customer E-Loyalty
Costs
Customer Orientation
Quality
Direct effects Moderating factors
Grievance Convenience
thus reducing the price elasticity of goods or services that carry its name” (DuBois Gelb &
Rangarajan, 2014, p. 95). Whereas customer satisfaction has been defined as whether or not customer expectation is met or exceeded (Farris, et al., 2010). These seem to overlap as to when customers perceive something is good about either a brand, a product or service. So when a customer is satisfied about a product or service he or she in turn will be satisfied with the brand who provided the product or service. Therefore the following hypothesis has been established:
H1: Customer satisfaction is positively related to brand equity of born online business.
2.14.2 Customer E-Loyalty and Brand Equity
Secondly, brand awareness is considered a significant attribute of brand equity. Whereby brand awareness depends on brand recall and brand recognition (Hollensen, 2014). The more aware a customer is of a specific brand the more likely the customer will make his or her purchase at that brand (Cao, et al., 2011). According to Cao, et al. (2011) this is because people prefer to avoid the unfamiliar when there is a known alternative feature is present. Moreover, when a customer is loyal to a brand the customer will recognize the brand logo for sponsored events, making the event more attractive to go to (Hollensen, 2014). Furthermore, when one is loyal to a brand the consumer feel positive when recognizing the brand logo in advertisements or on products (Buttle, 2009). Therefore, customer e-loyalty should have a positive relation to brand equity. As such the following hypothesis is defined:
H2: Customer e-loyalty is positively related to brand equity of born online business.
2.14.3 Costs and Grievance
Thirdly, according to Keller (2013) an important factor of brand equity is brand image.
Moreover, Keller (2013) states brand image is linked to brand benefits and brand attributes.
Brand attributes can consist of the speed and effectiveness of handling complaints or answering
questions. Additionally, it consist of, how easy one can navigate through a company’s website (Buttle, 2009). On the other hand brand benefits consist of discounts it offers, either static discount as 15% off, or system based. These can be based on a previous purchase system, the more you purchase the higher the discount, or on a recommend a friend system, where you get discount for each customer you advised to buy at that company (Hollensen, 2014). As customer satisfaction influences brand equity it should be negatively influenced when costs of products and services are high. Moreover, when customers struggle to navigate on the company’s website or proper complaint assistance it is negatively moderating the relation between customer orientation and customer satisfaction as well as customer e-loyalty. Regarding this the subsequent hypotheses have been specified:
H3: The relation between customer orientation and customer satisfaction as well as customer e-loyalty in born online business is negatively moderated by Costs.
H4: The relation between customer orientation and customer satisfaction as well as customer e-loyalty in born online business is negatively moderated by Grievance.
2.14.4 Quality and Convenience
Next Rafiq, et al. (2013, p. 494) defined customer e-loyalty as “The consumer’s favourable attitude toward an electronic business, resulting in repeat purchasing behaviour’’. Whereas Homburg et al. (2011, p. 796) state that customer orientation “includes behaviours aiming at establishing a personal relationship with the customer, such as getting to know a customer personally”. Meaning that costumer orientation is aimed at increasing a consumer’s favourability towards a brand. However, if the quality of the product or service is not satisfactory to customer expectations this will moderate negatively the relation between customer orientation and customer satisfaction as well as customer e-loyalty. Quality is defined as assurance, communication, courtesy, speed, accuracy, reliability, security, responsiveness
and commitment (Pareek, 2014). Moreover Pareek (2014) states that convenience consists of several variables, namely; traveling distance, opening hours, parking space, queuing time and ATM availability. Therefore, if the website cannot be opened, is working slow, has limited payment options or it is complicated to reach a certain item on the website, this will cause a negative moderating effect as well. Hence the subsequent hypothesis are stated:
H5: The relation between customer orientation and customer satisfaction as well as customer e-loyalty in born online business is negatively moderated by low Quality.
H6: The relation between customer orientation and customer satisfaction as well as customer e-loyalty in born online business is negatively moderated by low Convenience.
2.14.5 Customer Satisfaction and Customer E-Loyalty
Lastly Rafiq, et al. (2013, p. 494) stated that e-loyalty is “The consumer’s favourable attitude toward an electronic business, resulting in repeat purchasing behaviour’’. This is in line with Chiua, et al. (2013) who state that a consumer decides to keep using a particular business or not is influenced by product or service satisfaction the consumer has when making a purchase at that business. This suggests there is a significant influence of customer satisfaction towards customer e-loyalty. Hence the following hypothesis is defined:
H7: Customer satisfaction will have a positive influence on customer e-loyalty of born online business.
2.15 Summary
The empirical setting showed a significant increase in individuals making purchases online as well as using the internet more frequently (European Commission, 2014). Furthermore, it showed a strong increase in volume of the e-commerce in the U.S (Statista Inc., 2014). Over the past decade as well as the worldwide e-commerce is expected to double in volume from
2012 to 2018 (Statista Inc., 2014). Then the concepts used for research objectives and research questions mentioned in chapter 1 were explained, which led to the conceptual model. Lastly hypotheses were developed, which suggest different relationships between the concepts and the expected influence one variable will have on another. An overview of the hypotheses can be seen below in Table 2.1.
Table 2.1 Hypotheses
H1 Customer satisfaction is positively related to brand equity of born online business.
H2 Customer e-loyalty is positively related to brand equity of born online business.
H3 The relation between customer orientation and customer satisfaction as well as customer e-loyalty in born online business is negatively moderated by Costs.
H4 The relation between customer orientation and customer satisfaction as well as customer e-loyalty in born online business is negatively moderated by Grievance.
H5 The relation between customer orientation and customer satisfaction as well as customer e-loyalty in born online business is negatively moderated by low Quality.
H6 The relation between customer orientation and customer satisfaction as well as customer e-loyalty in born online business is negatively moderated by low Convenience.
H7 Customer satisfaction will have a positive influence on customer e-loyalty of born online business.
3. METHODOLOGY 3.1 Introduction
In chapter 1 research objective have been developed as well as research questions. In chapter 2 the literature was reviewed and hypotheses developed. In this chapter the research approach, data collection methods and measures of constructs are developed. Furthermore, this chapter will explain the data collection procedure and ethical considerations. At the end a summary is provided after which the chapter 4 providing the findings will begin.
3.2 Research Approach
3.2.1 Quantitative
The research paradigm is considered positivism, as this research is based on research objectives and uses a hypothetical approach. Therefore, quantitative research methods are considered best.
For quantitative methods, databases as well as surveys can be used. Firstly a survey amongst born online businesses and its employees could provide insight of the pros and cons of customer orientation from the business perspective. However a survey amongst consumers possibly will deliver an insight of the pros and cons of customer orientation from the perspective of consumers. This side is necessary to determine the effects of customer orientation on customer satisfaction and e-loyalty. Analysing these aspects should provide an answer to how customer orientation can influence brand equity, more specifically how it can influence born online brand equity.
3.2.2 Qualitative
From this positivism paradigm research it is not expected that qualitative research methods need to be used. As time is limited to this research, arranging face to face meetings, such as for
interviews, was considered too time consuming. Moreover, as the research is based on online businesses, conducting observations of consumer and staff behaviour or videotaping subject’s actions is almost impossible (Blumberg, 2011).
3.2.3 Descriptive Research
For this research a descriptive research will be used as this research uses hypotheses which aim at describing underlying relationships between different constructs as in the section 2.13 Hypotheses. This research development will make use of cross-sectional surveys, whereby a one-time snapshot description of participants’ views will be offered. These views can alter over time and hence a repetition of the research could offer dissimilar results and conclusions.
Furthermore, culture may influence participants’ opinions and consequently a repetition with participants having different nationalities than in this research, can offer varying results and conclusions as well (Sayer, 1993).
3.3 Data Collection Methods
Table 3.3 Data Collection Methods Data Collection
Method
Advantages Disadvantages
Interviews Interviewer can use follow up questions
Special visual aid can be used
Illiterate respondents can be reached
High costs
It requires highly trained interviewers.
Time consuming
Respondents may be unwilling to talk to strangers at home.
Visits to respondents can be difficult.
Respondent may be influenced by interviewers’ presence to give social desired answers.
Observation Illiterate respondents can be reached
Shows habitual behaviour respondents are not aware of.
Behaviour will likely act different than without observer present.
High cost
Time consuming
Situations are more realistic, which is better to understand than
hypothetical ones for respondents
Limited geographic coverage
Self-administered survey
Expanded coverage geographically
Requires minimal staff
More anonymous
Respondents have time to think about their answer.
Printing and postage costs
Low response rates
Interviewer cannot probe or explain.
Processing data can be time consuming
Web-based survey Very low-cost option
Expanded coverage geographically
Requires minimal staff
More anonymous
Respondents have time to think about their answer.
Fast access to computer files
Rapid data collection
Visuals and movies may be used.
Respondents who cannot be reached by regular mail or phone, now can be reached.
Low response rate
Cannot be long or complex
Interviewer cannot probe or explain.
Converting surveys to the web can be costly
As can be seen in the table based on Blumberg (2011) the data collection method of interviews has the least advantages, while having the most disadvantages. Whereas Web-based surveys offer the most advantages. This supports the previous mentioned use of surveys over interviews.
3.4 Measures of Constructs
3.4.1 Coding and Data Analysis Techniques
Briefly explained next are the coding and data analysis techniques that will be implemented.
The survey questions will mostly be done by means of multiple choice questions. These will mainly be on a Likert scale. The survey will first explain the research and confidentiality precautions as well as requesting for consent to participate in this survey. Next will be some general questions regarding gender, age and nationality. Followed by asking how frequently the participants make an online purchase. Then by asking five questions using a five point Likert scale ranking varying from strongly disagree to strongly agree concerning the variables,
brand awareness, brand image, costs, complaint handling, quality and convenience (Rafiq, et al., 2013; Pareek, 2014). What is more a comment box will be provided for respondents to possibly clarify why they feel strongly or weak about something and provide any additional remarks. The results of the Likert scale will then be used to provide an overview per variable how significant that variable is to the consumer. In addition, any remarks could offer the foundation for future research.
3.4.2 Pre-Test
A pre-test was done before the distribution of the survey. This was done by means of having 10 students fill out the survey. Afterwards, these students were asked if any question could be interpreted in more than one manner. The students did not feel this was the case. Moreover the students stated that the questions were understandable.
3.5 Data Collection Procedure
3.5.1 Identifying and Access to Data Sources
Concerns involving identifying and gaining access to significant data sources are acknowledged. First of all surveys completed by born online business respondents possibly will establish the pros and cons of applying customer orientation. In addition, it should identify the influence of moderates, such as costs, grievance, quality and convenience, on the effect of customer orientation on customer satisfaction and customer e-loyalty. Overall by answering the sub research questions and analysing these would offer a conclusion for answering the central research question. While surveys could be posted on social sites, this is mostly considered as spam and ignored by many. Therefore the survey should be sent to customers of born online business, to obtain a higher response as well as it ensures the target group is reached. As the born online companies do not actually offer a physical place for its consumers to visit, it will
be necessary to make use of the company’s customer database to have them fill out why they prefer online use of services or to purchase products. As it is unlikely that companies will offer access to these databases to outsiders, due to privacy and security concerns, the surveys could be spread by the companies themselves. The companies then are aware of what is asked by their customers as well as make sure their privacy is not harmed and no spam mail is sent.
3.5.2 Data Collection
Firstly secondary data will be obtained through academic approved articles, by way of choosing peer reviewed sources, which are peer reviewed 3 times at least. Likewise articles from 2004 onwards are favoured above others from an older date. Secondly are the surveys, which must be handed out to potential participants. The surveys shall be conducted by viral means as to be able to analyse answers more rapidly. Besides the potential risk of losing data input is reduced as it is all stored in one place instead of collecting loose papers back. Nevertheless, if participants want to request a hard copy, then this can be delivered and such data will be processed manually in the electronic data by the researcher. Online businesses are chosen based on their past, specifically if there is confirmation of no offline experience beforehand.
Moreover, businesses are selected on the grounds if they offer to an international customer base, as this is preferred for making a general conclusion. Having businesses from different size is not necessary, especially considering born online businesses only need headquarters from which it can control all processes.
3.6 Ethical Considerations
With regards to ethical issues the filled out questionnaires will be handled by the researcher alone. Furthermore, an online surveying tool will be used, this will store the results in an online cloud. Therefore, the change of data getting lost is limited as well as the access to the results
will only be available by password, which is in sole possession of the researcher. Additionally, the researchers own safety is hereby enhanced as both traveling to and meeting people face to face is unnecessary. Potential consumer participants are required to be older than 18, to make certain that the respondents are adults and old enough to make online purchases of various products. In addition, participants are informed that the survey is voluntary as well as they fill it out anonymously. The researcher will be the single one controlling the input from the surveys.
Also, the answers only shall be used for data analysis and any personal information will be left out of the final research report. Lastly, the data input from respondents will only be stored for a limited time, after which it shall be deleted, to reduce chances of misuse of personal data.
3.7 Summary
The research paradigm is positivism and will use descriptive research. As this research is aimed at expanding existing theories concerning brand equity and customer orientation, so that it will cover born online businesses as well, mainly quantitative methods can be used. This data will be gained by using secondary data sources as well as surveys amongst born online businesses and its consumers. The surveys will mainly be using Likert scale based questions. With regards to ethical considerations, the survey will be completely voluntary and using participants above the age of 18. The data collected will be only be accessible by the researcher and stored for a limited time period.
4. FINDINGS & DISCUSSION 4.1 Introduction
In the previous chapters research objectives, research questions and hypotheses and methodology were established. In this chapter the findings of the research are provided and explained. First the profile of the sample is explained. Followed by the statistics and correlations of the constructs. Next regression analysis was performed to form the basis for hypotheses testing and the results are discussed. Lastly a summary is provided.
4.2 Sample Profile
There were 1250 surveys distributed of which there were 150 responses to the survey. As can be seen in Figure 4.2.1 a larger proportion of respondents was female (66,6%) compared to male population of 33.3%. The majority of the sample is aged between 18-25 years (33%), with 27% in the 26-35 years age category, 13% between 46-55 years and the smallest group is in the 56-65 age category (7%). With respect to the online purchase frequency, only 8% makes a purchase very often, 54% quite often and 38% makes an online purchase sometimes.
Table 4.2 Statistics Gender, Age and Online Purchase Frequency
Gender Age Online Purchase
Frequency
N Valid 150 150 150
Missing 0 0 0
Mean 1,67 2,33 3,70
Median 2,00 2,00 4,00
Std. Deviation ,473 1,251 ,610
Minimum 1 1 3
Maximum 2 5 5
Figure 4.2.3 Age
Figure 4.2.1 Gender Figure 4.2.2 Online Purchase Frequency
4.3 Descriptive Statistics
4.3.1 Distribution
As shown in Table 4.3.1, the means range from 2,33 to 4,07 and standard deviations range from 0.401 to 1.208. Descriptive statistics provides information concerning the distribution of scores (Pallant, 2010). “The Skewness value provides an indication of the symmetry of the distribution. Kurtosis, on the other hand, provides information about the ‘peakedness’ of the distribution” (Pallant, 2010, p.57). All data is confirmed, by the Skewness and Kurtosis of all the scale items, to be within the normal distribution range of ±2 (DeVellis, 2012).
Table 4.3.1 Descriptive Statistics
Analysis Method Mean Std.
Deviation Variance Skewness Kurtosis Original
Loading Loading AVE Cronbach alpha Brand Equity. I mainly use search engines to find an
online provider of a product or service I need. 3,67 ,473 ,224 -,71 -1,51 ,787 ,787
,55 ,71 Brand Equity. Advertisement made me aware of
certain born online business. 3,47 ,620 ,385 -,73 -,44 ,818 ,818
Brand Equity. It is easy and quick to navigate and find
what I want on a company's website. 3,67 ,702 ,492 -,61 ,34 ,707 ,707 Brand Equity. News coverage made me aware of
certain born online business. 2,80 ,912 ,832 -,13 -,96 ,648 ,648
Customer Orientation. Online business provide less discount systems, (recommend a friend or earn points
for each purchase), than offline business
2,80 ,543 ,295 -,10 -,07 ,681 ,681
,52 ,69 Customer Orientation. Complaints are being handled
in a quick and good manner in born online business. 3,40 ,803 ,644 -1,44 1,88 ,779 ,779 Customer Orientation. Born online business provide
adequate return policies. 3,67 ,791 ,626 -,15 -,37 ,775 ,775
Customer Orientation. When making a purchase online
there are limited payments options. 2,80 ,543 ,295 -,10 -,07 ,641 ,641 Satisfaction. I find born online businesses to be
reliable in providing the correct information. 3,80 ,401 ,161 -1,52 ,30 ,814 ,814
,53 ,65 Satisfaction. Word of mouth is the main reason I am
aware of born online business. 3,83 ,689 ,475 -1,015 1,591 ,511 ,511 Satisfaction. I trust a born online business (Ebay) as
much as the online business of a physical store (Ikea). 2,80 ,835 ,698 ,39 -1,46 ,811 ,811
