The effects of customer equity on customer loyalty for chain restaurants: Case study of kfc vietnam

Nội dung text: The effects of customer equity on customer loyalty for chain restaurants: Case study of kfc vietnam

1. THE EFFECTS OF CUSTOMER EQUITY ON CUSTOMER LOYALTY FOR CHAIN RESTAURANTS: CASE STUDY OF KFC VIETNAM Nguyen Hoai Long E-mail: longnguyenhoai@neu.edu.vn Dinh Van Oanh E-mail: oanhdv@neu.edu.vn Pham Hong Hoa E-mail: hoaph@neu.edu.vn Vu Tri Dung E-mail: dungvt@neu.edu.vn Pham Thi Kim Thanh E-mail: thanhpham.neu@neu.edu.vn Nguyen Ngoc Quang E-mail: quangnmkt@neu.edu.vn Marketing Faculty, National Economics University, Vietnam Abstract This study aims to examine the relationship between customer equity and customer loyalty in fast-food chain restaurant in Vietnam. A survey of 352 customers of KFC restaurant was conducted in March 2019 to collect data. Structural Equation Model (SEM) is used to test the hypothesis on the relationship between three key determinants of customer equity - brand equity, value equity, relationship equity and customer loyalty. Research results confirm that brand equity, value equity, relationship equity have a positive impact on customer loyalty. The managerial implications are also discussed in the paper. Keywords: Customer equity, Brand equity, value equity, relationship equity, customer loyaty 1. Introduction Marketing is applied not only to generate sales and profits in the short term but also to create customer loyalty in the long term. The problem for researchers as well as businesses is how to measure marketing performance, how to quantify and measure the long-term impact of marketing. One of the ways that researchers use to measure the impact of marketing is to measure customer equity. 229
2. Customer equity is defined as the total long-term value that customers can bring to businesses. From the financial approach, customer equity is synonymous with the lifetime value of customers and are determined by the value that customers bring to the enterprise during the time of being a customer of that enterprise. From the marketing approach, customer equity is understood as attitudes and perceptions of customers to businesses. Accordingly, customer equity is determined based on the customers' assessment of the components that constitute the customer equity: value equity, brand equity and relationship equity. Through customer surveys, we can possibly measure customer evaluations of these three elements. In the chain restaurant industry, it is not too difficult for marketing efforts to attract new customers but the life or death problem lines in the ability of the business to maintain customer loyalty, then it is neccessary to understand the effects of current marketing efforts in generating customer equity on the customer loyalty of the chain restaurant. This study was conducted to explore the impact of customer equity components (value equity, brand equity and relationship equity) on customer loyalty of chain fast-food restaurants. KFC - one of the most famous fast-food restaurant chain in Vietnam, is chosen as the case study in this research. Value Equity Value equity is defined as the customer’s objective assessment of the utility of a brand based on perceptions of what is given up by the customer for what is received (Rust et al, 2000). Customers’ evaluations of a product/service are highly influenced by perceptions of value. Value equity is the keystone of customer equity, since if a company’s product value does not meet the customers’ assessment, the firm’s brand strategy and relationship marketing strategy will be insufficient to enhance customer equity. In the restaurant industry, value equity is defined as the customer’s objective assesment of the utility of a brand based on perceptions of what is given up for location when they select restaurants. Location has been used to measure a restaurant’s value in the sense that a convenient location can help to save time for patrons (Auty, 1992; Heung, 2002; Law et al., 2008). Lastly, the aesthetic factor is important in value equity (Holbrook, 1999). In the restaurant industry, environment is an important attribute that influences customers’ aesthetic evaluation of the restaurant (Bitner, 1992; Foster, 1997; Kivela, 1997; Soriano, 2002). Bitner (1992) mentioned that because a service provider communicates with customers in the restaurant environment, that environment greatly influences the perceived value in a restaurant. In this sense, a nice environment can enhance perceived value of 230
3. customers. Moreover, the price, food and service quality are very important factors infuencing to customer repurchase intention. Brand Equity Brand equity is defined as the customer’s subjective and intangible assessment of the brand above and beyond its objectively perceived value (Rust, Zeithaml, & Lemon, 2000). Brand equity influences customer equity formation in three ways: it provides a stimulus to consumers and helps to attract new consumers to the company, it provides a reminder to customers concerning the company’s products/services in order to encourage repurchases/revisits, and it provides an emotional bridge between the customer and the brand (Rust et al., 2000). Brand equity creates specific brand associations in consumers’ minds and indicates a general market signal about the credibility of a particular brand (Erdem & Swait, 1998). Consequently, it helps to create a customer’s desire to continue a relationship with a seller (Moorman et al., 1992; Bolton et al., 2002; Martenson, 2007; Tepeci, 1999). Martenson (2007) has stated that a brand consists of perceptions about a specific company, and influences consumer behavior regarding the maintenance of a relationship with that company. Tepeci (1999) has stated that branding is a prerequisite of relationship building. Aaker (1991, 1996) proposed four dimensions of brand equity: (1) brand loyalty, (2) brand awareness, (3) perceived quality, and (4) brand image. These four dimensions are widely accepted and empirically tested in later studies (e.g. Keller, 1993; Yoo and Donthu, 2001). Brand equity motivates patrons in their restaurant selection and decision- making, consequently it has been considered as an important capital in the restaurant industry (Kim and Kim, 2004). In spite of the importance of branding, the restaurant industry is far behind other industries in terms of brand research. Therefore, attention should be paid to adapting existing dimensions of measuring brand equity in restaurant marketing research. Based on the definition of brand equity, dimensions should be adapted to enable customers’ effective assessment of a restaurant. Among Aaker (1991, 1996)’s four dimensions, perceived quality of restaurant should be grouped with value equity rather than brand equity because perceived quality of restaurant is an objective assessment (Lemon et al., 2001; Rust et al., 2004). Another dimension – brand loyalty – should be grouped with relationship equity rather than brand equity because loyalty is defined as ‘‘a deeply held commitment to buy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior’’ (Oliver, 1999, p. 34). This is relevant to the concept of relationship equity (Lemon et al., 2001). 231
4. Two dimensions remain and are the ones used in this study: brand awareness and brand image. Items to use in measuring two subconstructs are derived from the food-service literature Relationship Equity Relationship equity is defined as a customer’s tendency to continue purchasing a particular brand above and beyond the objective and subjective assessment of the brand (Lemon et al., 2001). The concept of relationship equity includes the belief that significant brand and value equity may not be sufficient to maintain a customer. In other words, even though customers evaluated a product objectively and subjectively, they might not rebuy it in the future for several reasons, including changes in individual situations and the effects of marketing efforts from other companies (Oliver, 1999). With the evolution of customer-oriented marketing, relation- ship equity has been in the spotlight by many researchers (Berry, 1995; Liljander and Strandvik, 1995; Storbacka et al., 1994), and relationship equity’s interactions with other constructs have been examined. According to Rust et all (2001), there are four key measures of relationship equity are loyalty programs, special recognition and treatment programs, community- building programs, and knowledge-building programs (Lemon, Rust, and Zeithaml 2001, Rust, Zeithaml, and Lemon 2000, 2004, Leone, Rao, Keller, Luo, McAlister, Srivatstava 2006). Moreover, Crosby et al, in their research, they proposed other four drivers: (1) trust, (2) commitment, (3) Affective conflict; (4) satisfaction ((Crosby, Evans, & Cowles, 1990; Dorsche, Swanson, & Kelley, 1998; Dwyer, Schurr, & Oh, 1987; Hennig-Thurau & Klee, 1997; Roberts, Varki, & Brodie, 2003). In this paper, we’ve used combined these approaches. In summary, there are three key drivers of customer equity that operate both independently and all together. By improving these three elements, businesses can enhance the overall customer equity. Customer loyalty Loyalty can be defined as a deep commitment to repurchase or repeat purchase behavior for a consistently preferred product/service in the fu- ture, which causes repeat purchase of the same brand or set of brands de- spite situational influences and marketing efforts which have the potential to bring about changes in behavior (Oliver, 1999). The defini- tion in Oliver (1999) is based on attitude-behavior consistency and rela- tive attitude toward an organization (Dick & Basu, 1994). Oliver (1999) identifies four phases in the construction of loyalty: cognitive loyalty, af- fective 232
5. loyalty, intentional loyalty and behavioral loyalty. The first occurs when the ties between the brand and the consumer are based on rational criteria such as price or quality. Affective loyalty is based on cognitive loy- alty, satisfaction and the establishment of affective links between the two parties. Intentional loyalty is a relative evaluation based on affective loy - alty and a predisposition to purchase the brand. Behavioral loyalty is real behavior and is observed in repeated purchases over time and word-of- mouth recommendations (components of CLV). Loyalty has been widely regarded as being of utmost importance in marketing literature (e.g. Oliver, 1999). Loyal customers tend to pay less attention to competing brands and advertising, are less price sensitive and create positive work- of-mouth (WOM) (Desai and Mahajan, 1998). Oliver (1999) defined loyalty as a deeply held commitment to re-patronize a preferred product/service consistently in the future, thereby causing repeat purchase despite situational influences and marketing efforts having potentials to induce switching. Loyalty in a business context is less likely to be derived from routine or habit, as in some low involvement products/ services. Rather references arisen out of positive word-of-mouth play a very important role for the firm (Kumar et.al.,2003). Thus, we consider behavioral facets such as actual word-of-mouth and purchase behavioral intention as items of our loyalty construct. To study the impact of brand equity, value equity, relationship equity on customer loyalty, the following research model is proposed to conduct the survey. VE H1 H4 H6 H3 Loyalty BE H7 H2 H5 RE Figure 1: Proposed Research Model 233
6. Research Hypothesis H1: Brand equity positively influences Value equity for a chain fastfood restaurant brand H2: Brand equity positively influences relationship equity for a chain fastfood restaurant brand H3: Brand equity positively influences customer loyalty for a chain fastfood restaurant brand H4: Value equity positively influences customer loyalty for a chain fastfood restaurant brand H5: Relationship equity positively influences customer loyalty for a chain fastfood restaurant brand H6: Value equity positively mediate the relationship between brand equity and customer loyalty H7: Value equity positively mediate the relationship between brand equity and customer loyalty 2. Research Method We use both qualitative and quantitative research method in this study. Qualitative research was conducted with the aim of testing and indentifying items of model factors of brand equity, value equity, relationship equity and customer loyalty. The data collection method used is in-depth interviews with 5 groups (from 3-5 customers of KFC). On the basis of the sub factors indicated from the theoretical review results, the qualitative research process aimed to identify items from which to design quantitative surveys. There is one sub-factor of "Affective conflict" within the Relationship equity element that is totally not mentioned by the interviewee, hence no item in sub-factor Affective conflict has been developed and included in the quantitative survey. Preliminary quantitative research was carried out through survey with self- report questionnaire in the sample of 50 KFC customers. Collected data were processed by SPSS software 22, exploratory factor analysis (EFA) and Cronbach’s Alpha reliability coefficients used in data analysis. The data processing results have eliminated inappropriate variables and help us complete the questionnaire for official research. Official quantitative research was conducted in March 2019 with a sample size of 400 KFC restaurant survey customers. After removing invalid responses, the remaining valid responses are 352. Collected data were processed by SPSS software version 22 and AMOS software. 234
7. 3. Results EFA results The results of EFA and Cronbach’s Alpha analysis show that the aggregate coefficient of all scales is greater than 0.6 and the the total covariance deviation is greater than 50%. and qualified. Accordingly, the brand equity variable (BREQ) are extracted into the following sub-factors: Table 1: EFA results for factor “Brand equity” Factor No Sub factor Items loading 1 Top of I think of KFC first when mentioning fast food restaurant 0.757 mind When choosing fast food restaurant, KFC is one of the 0.815 (TOM) restaurants I think of I often support my friend when they suggest KFC restaurants 0.753 2 Perceived When I think about the brand, some of the features of the 0.765 Differences restaurant quickly appeared in my mind (DEFE) I can recognize this brand among other fast food chains 0.814 Restaurants in KFC chain have distinguished style 0.659 3 Associated Restaurants in KFC chain always have stable quality 0.604 image When think of FKC, I think of a crowded and fun place 0.794 (IML) When mentioning KFC, I envisioned a modern, youthful, 0.712 foreign-style place KFC restaurant chain has a very specific taste of fried 0.721 chicken that other restaurants do not have 4 Image of When I want to find a clean place, I often think of 0.649 benefit restaurants like KFC (IMI) When I want to have a good time with friends and relatives, 0.763 KFC is one of the first choices I think of. When I want to find a fancy space to relax with friends, 0.897 I often think of KFC Factor “Value equity” (VEEQ) composed of 4 sub factors as follows: 235
8. Table 2: EFA results of factor “Value equity” Factor No Sub factor Items loading 1 Food quality (FOQ) KFC food presentation is attractive 0.646 Raw materials for making dishes of KFC are fresh 0.792 KFC's food ensures nutrition 0.585 The temperature of the dish is appropriate 0.635 2 Drink quality (DRQ) Drinks look attractive 0.521 Beverages origin is guaranteed 0.799 Drinks are fit my taste (delicious) 0.735 3 Service staff quality Staff is friendly, well behave 0.797 (SSQ) Staff are always ready to help 0.866 Staffs always serve customers' requests promptly and 0.834 thoughtfully Knowledgeable and enthusiastic staffs advise 0.731 customers in ordering KFC staffs brings a sense of peace of mind and trust 0.560 4 Service process Waiting time to be served short 0.713 quality (SPR) Reasonable service process 0.669 5 Convenience KFC stores are conveniently located in terms of traffic 0.634 (CONVI) KFC stores have enough parking space 0.736 I can contact to book a table easily 0.801 KFC delivery service is good 0.737 KFC stores have a variety of payment methods 0.577 6 Price The quantity of foods match the price 0.772 (PRICE) The quantity of drinks match the price 0.761 KFC's price is reasonable compared to restaurant quality 0.825 236
9. Factor No Sub factor Items loading The average spending for a meal at KFC is reasonable 0.873 KFC's price is reasonable compared to other fast food chains 0.728 7 Service environment Food containers (bowls, chopsticks, cups ) of KFC are 0.828 cleanness always clean (CLEAN) KFC tables and chairs are always clean 0.699 The restaurant floor is always clean 0.601 8 Service environment The atmosphere of KFC comforts me 0.580 comfortability The design of KFC tables and chairs are comfortable 0.823 (COMFO) KFC's premises are designed to create comfort for the customers 0.644 Interior decoration brings comfort 0.751 Factor “Relationship equity” (REEQ) composed of 3 sub factors as follows: Table 3: Table 2: EFA results of factor “Relationship equity” Factor No Sub factor Items loading 1 Trustworthy I believe that KFC always considers and solves 0.649 (TRUST) arising problems honestly I believe that KFC always shows their understanding of 0.789 customers and offers appropriate programs to customers I believe that KFC will treat customers fairly 0.865 2 Satisfaction I'm happy with KFC performance 0.688 (SATIS) I'm delighted with KFC performance 0.829 I'm content with KFC performance 0.745 3 Affective I feel emotionally attached to KFC 0.620 commitment I like being associated with KFC 0.862 (AFFEC) I genuinely enjoy my relationship with KFC 0.829 Items describing factor “customer loyalty” are indentified as: 237
10. Table 4: Table 2: EFA results of factor “Customer loyalty” Factor No Sub factor Items loading 1 Customer When I intend to go to a restaurant, KFC is the first 0.655 loyalty brand I think of (Q4.11) (LOYA) I will definitely continue to go to KFC restaurant chain 0.69 (Q4.12) I will suggest my friend to choose KFC restaurant 0.832 chain when eating out (Q4.13) I will say good things about KFC restaurant chains 0.821 with others (Q4.21) I will give positive information about KFC restaurant 0.765 chain on social networks I will leave good comments on the KFC restaurant chain 0.672 online (websites, online applications ) (Q4.24) Structural model The result of data process by AMOS showed the estimated structural model as bellow: Figure 2: Structural model 238
11. Note: BREQ – Brand equity, VAEQ – Value equity, REEQ – Relationship equity, LOYA – Customer loyalty Fit indices provided by AMOS indicated that the model had an acceptable fit. Chi-Square was 653.942 and Chi-Square/DF = 1.353 and CFI = .922, IFI = 827., TLI = .883 and a root mean square error of approximation (RMSEA) = .085 Values of CFI, IFI, and TLI ranged from 0 to 1 with a value close to 1.00 indicating good fit (Byrne, 1998). RMSEA should be less than .10; however, ideally, it should be between .04 and .08 (Turner and Reisinger, 2001). In this structural model, almost of fit indices are approached with good value and all the hypotheses are supported. The results show in the table 5 as bellow: Table 5: Hypotheses testifying results Hypotheses Linkage Estimate P value Result H1 BEEQ VAEQ 1.683 Supported H2 BEEQ REEQ 3.716 Supported H3 BEEQ LOYA 1.608 0.006 Supported H4 VAEQ LOYA 0.526 0.026 Supported H5 REEQ LOYA 0.632 Supported H6 BEEQ VAEQ LOYA 0.885 Supported H7 BEEQ REEQ LOYA 2.348 Supported 4. Discussion and Conclusion The purpose of this study is to explore the impact of brand equity, value equity and relationship equity on customer loyalty in chain restaurant industry. The results of research on fast-food restaurant chains support the hypothesis that brand equity, value equity and relationship equity have a positive impact on customer loyalty. Brand equity positively affect value equity and relationship equity. This result indicates that customers' evaluation on restaurant brands positively affects customer perception of the value they receive from restaurant chains (value equity), customer commitment with the restaurant chain (relationship equity) and these factors all positively affect customer loyalty. This suggests that the marketing activities of the chain restaurants should pay special attention to branding along with creating a good perception of customers on what customers receive (customer experience) and build relationships with customers. Marketing efforts for these activities will contribute positively to maintain customer loyalty - the core factor that dominates the success of the chain restaurants. 239
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