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J. Global Business Advancement, Vol. 5, No. 3, 2012

Drivers of customer satisfaction: perspectives from the food retail sector of an Arab nation M. Sadiq Sohail Department of Management and Marketing, College of Industrial Management, King Fahd University of Petroleum and Minerals, P.O. Box 210, Dhahran 31261, Saudi Arabia E-mail: [email protected]

Syed Aziz Anwar* Scientific Research and Doctoral Studies, Hamdan Bin Mohammed E-University, P.O. Box 71400, Dubai, UAE E-mail: [email protected] *Corresponding author

Fuad Hossain Rabbie SQL Power, 4950 Yonge Street, Suite 1900, Toronto, Ontario, Canada M2N 6K1 E-mail: [email protected] Abstract: Customer satisfaction has come to occupy strategic heights given the growing competitiveness of the food retail market in Saudi Arabia. The purpose of this paper is to examine the key drivers of customer satisfaction. The paper examines the relationship among the extent of store familiarity, store atmosphere, price perception of products and availability of items based on cultural needs, and customer satisfaction. This study is based on a questionnaire survey. Based on a model developed for this study, the paper uses empirical research to determine these relationships. Findings of this study reveal that three of the four factors have influence on the satisfaction of customers in Saudi Arabia. Owing to limited sample size, however, the results of this study cannot be generalised for the entire Kingdom of Saudi Arabia. Nevertheless, this study makes a valuable contribution, given the fact that there is a dearth of empirical studies of this nature undertaken in the Middle East region. Keywords: customer satisfaction; food retailing; store familiarity; store atmosphere; Saudi Arabia. Reference to this paper should be made as follows: Sohail, M.S., Anwar, S.A. and Rabbie, F.H. (2012) ‘Drivers of customer satisfaction: perspectives from the food retail sector of an Arab nation’, J. Global Business Advancement, Vol. 5, No. 3, pp.181–192.

Copyright © 2012 Inderscience Enterprises Ltd.

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M.S. Sohail et al. Biographical notes: M. Sadiq Sohail is a Professor at the Department of Management and Marketing, King Fahd University of Petroleum and Minerals, Saudi Arabia. He holds a PhD from St. John’s College. His research papers have been published in scholarly journals all over the world. He has also written case studies, books and book chapters in the areas of marketing and management. Syed Aziz Anwar is a Professor of International Business and Marketing and Dean of Scientific Research and Doctoral Studies at Hamdan Bin Mohammed E-University, Dubai. He holds a PhD from University of Delhi. His PhD dissertation was published in 1983 following sponsorship from the Commission of European Union, Brussels. His research papers have been published in scholarly journals in the USA, UK, Asia and the Middle East region. Fuad Hossain Rabbie obtained his MBA from King Fahd University of Petroleum and Minerals, Saudi Arabia. He is presently a Business Analyst at the management consulting firm, SQL Power, Canada. His research interests include retailing, consumer behaviour and strategic marketing.

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Introduction

A formidable body of research has been built up in recent decades suggesting that customer satisfaction and retention are the keys to success of a firm (Gronroos, 1990; Eriksson and Vaghult, 2000). Surely, satisfaction is invaluable for customer retention. A satisfied customer is likely to stay with the seller. The outcomes of customer retention include increasing sales, revenues and reduction in marketing costs (Gronroos, 1990). To provide customer satisfaction in a competitive industry, it is important to examine the drivers of customer satisfaction in consumer markets, which are being increasingly characterised by growing influence of culture. Such an understanding would help provide customer satisfaction, thereby benefiting from the positive outcomes such as customer retention, positive word-of-mouth communication and increased profitability. This study reports the impact of four underpinnings of customer satisfaction in Saudi Arabia: store familiarity, store atmosphere, price and availability of items based on cultural influences. The research setting is the Saudi Arabian market. The Kingdom is the largest retail market in the Arabian Peninsula. The relatively large population base, high percentage of youth population and high levels of disposable income have made the Kingdom one of the most attractive destinations for Fast Moving Consumer Goods (FMCG) in the region. Recent trend in the Kingdom is characterised by an upsurge in large retail stores. A number of mega hypermarkets have appeared mainly in the cities. In fact, Saudi Arabia is one of the most promising emerging markets in the world. Therefore, well-known global retailers are planning to enter this market. The paper is organised as follows. The paper first provides an overview of the retailing scene in Saudi Arabia. The subsequent section reviews the literature and a research model is outlined. The research methodology is then described. Thereafter, the results of the present study are analysed and discussed. In the penultimate section, the directions for future research are highlighted. The final section explores the implications of this study for practitioners.

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Consumer retailing in Saudi Arabia

Retailing, specifically food and consumer goods retailing, has been one of the most dynamic and rapidly changing sectors of most developing economies, including Saudi Arabia. The grocery and food retail market is estimated to be about US$ 70 billion for the year 2011. The retailing industry in Saudi Arabia bears little resemblance to what it was even a decade earlier. Large retail outlets in multiple formats have now been dominating the sector, and competition in the retail marketplace has been steadily increasing. This had led to growing emphasis on providing better services and satisfaction to customers. Since the opening of the first hypermarket in 2005 by a French multinational, a large number of multinational chains have established their presence. The major trend underway is the ongoing development of supermarkets and hypermarkets, especially the latter, which are gaining great popularity among the Saudi and expatriate population segments. Hypermarkets and supermarkets have been gaining market share, while independent groceries and food specialists have been losing. This has led to a rapid expansion in numbers of large retail outlets and a consequent increase in their sales volume. The number of smaller stores has been declining consistently. A combination of strong consumer spending, strong business investment and sustained high oil prices has provided great opportunities for the growth of this industry (Sohail, 2008). However, in the wake of growing competition, larger stores face a major challenge with a continued emergence of new competitors. The major challenge, however, lies in achieving customer retention and loyalty by providing satisfaction.

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Literature review

A review of literature explicitly suggests that customer satisfaction and retention are the keys to success of firms (Gronroos, 1990). Customer satisfaction has significant implications for the financial performance of firms (Bolton et al., 2004). Interestingly, customer satisfaction has been found to have a negative impact on customer complaints (Fornell, 1992). Increased customer satisfaction minimises the likelihood of customer defection (Anderson and Sullivan, 1993). Further, customer satisfaction may also reduce costs related to warranties and field service costs (Fornell, 1992). As satisfied customer stays with sellers (Eriksson and Vaghult, 2000), providing satisfaction to customers has been given a priority by retailers. This section examines key motives that are behind customer satisfaction. We review literature and identify those motives. The extent of familiarity with the store, the atmosphere of the store, price perception of products and availability of items based on cultural needs increase customer satisfaction and ultimately lead to customer satisfaction and retention.

3.1 Familiarity with store Familiarity is the knowledge which people have based on their experience and previous contracts (Luhmann, 1988). Familiarity has been associated with information retention and cognitive structuring (Soderlund, 2002). Previous research on familiarity has been

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undertaken from different perspectives. Familiarity with the store saves time when shopping, and at the same time, helps in processing new information (Johnson and Russo, 1984). Familiarity helps in reducing purchase anxiety for store loyalists (Grewal et al., 1998). Another study pointed out that “research on the issue of reference prices must consider the extent that individuals have different degrees of familiarity with the product category and with the different prices charged for various product alternatives” (Monroe et al., 1991). Having product familiarity also decreases the need for sales personal (Kennedy et al., 2001). It would be reasonable to assume that a familiar person would keep on coming back to the same store for the same products repeatedly. This creates a more loyal customer. It can be said that a highly familiar customer will not react to marketing advertisements in the same way a less-familiar customer does (Soderlund, 2002). Consumers with low levels of familiarity depend on extrinsic cues for purchasing decision, whereas consumers with high levels of familiarity deal with their own personal experience or intrinsic cues to help with their purchasing decisions (Rao and Monroe, 1988). This is important since a new customer will have few core cues to evaluate a given product and will use whatever information is presented to him or her to judge the product. After the customer has become more familiar with the product or store, more core cues may be used in assessment of the product and store. This kind of situation has implications for the advertising strategy and it also brings up the question of involvement segmentation. In other words, customers with lower levels of involvement do repeat purchasing behaviour on the basis of situational cues such as familiarity of the store or product (Framework et al., 1994). Familiarity is also a stepping stone for trust in consumers (Luhmann, 1979; Gefen, 2000). It has been noted that the more familiar the consumers are with a situation, the more they trust in that particular situation. It is reasonable to assume that this can be applied to a store as well. One of the major benefits of familiarity is to do away with risk. Familiarity is increased by the number of experiences the customer has with the product (Alba and Hutchinson, 1987) and this, in turn, reduces the uncertainty in future purchase situations (Flavian and Gurrea, 2005). Risk usually has to do with uncertainty or lack of information about a product or store. Facilitating familiarity with a store will help increase information knowledge to the consumer and in turn increase repeat purchases. Finally, familiarity can lead to a more aggressive or heightened interest for a product (Baker, 1999). Overall, we can see that there is a positive relationship between store familiarity and customer satisfaction.

3.2 Store atmosphere Creating a positive store atmosphere would improve the perceptions of all store merchandise and features. The halo effect might lead to the perceived positive features of a particular item extending to a broader brand (Cooper, 1981). Another study has also suggested that store atmosphere will positively affect perception of the store’s product and the social image purpose (Schlosser, 1998). However, it is not correct to say that all products have equal social image effect. Store image is defined as consumers’ impression of a store that is based on responses to the store’s features. These responses could be cognitive and/or emotional (Martineau, 1958). Accordingly, a store’s social image is defined as its style or appearance rather than its practicality. It represents how customers

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value the store’s name with regard to purchasing goods and services from that store (Greenberg et al., 1983). Some other variables in store atmosphere include qualities such as proper waiting lines, temperature, music and cleanliness. All these are seen to have an effect on the satisfaction of consumers. Pleasant stores have a greater degree of satisfaction than unpleasant stores (Spies et al., 1997). Past research indicates that music had a favourable influence on the customers (Baker et al., 1992). The environmental psychologists have argued with emphasis that a critical role of the physical environment is its ability to facilitate or hinder the goals of a person within that environment (Cander, 1983; Darley and Gilbert, 1985). Negative consequences can come from crowding (Machleit et al., 1994) leading to diminished satisfaction of the consumer. They can also come from delayed customers (Taylor, 1998). Therefore, store atmosphere can be a major factor in deciding whether a customer comes back to the store or not. Literature indicates that a pleasant store generally induces consumers to spend more time and money on that store (Donovan et al., 1994).

3.3 Price The price a person pays for a product has been found to be a contributor to its perceived value (Baker et al., 2002) and hence retailers are interested in knowing how sensitive consumers are to price (Mulhern et al., 1998). Price sensitivity is the awareness of the consumer about what they perceive to be a fair price for a product. Price sensitivity varies across products of various characteristics (Blattberg and Neslin, 1989). The relationship between price sensitivity and promotional offers is especially important to retailers (Shankar and Krishnamurthi, 1996), since there is a significant relationship between price perception, brand preference and purchase intention (O’Cass and Lim, 2001). There are non-price promotions that also influence price sensitivity (Neslin, 2002). There is also a vast body of literature focusing on positive impact of perceived fair pricing on customer satisfaction (Brown, 1974; Krishnamurthi and Raj, 1991).

3.4 Availability of products based on cultural needs The language of clothes (Lurie, 1981) and the language of automobiles (Aronoff, 1985) are all semiotic systems that consumers perceive or get from the products they buy. Consumers give meaning to products by a number of factors. Semantic components of a brand image contain ‘technical matters’, ‘product characteristics’, ‘financial value’ or ‘social suitability’ (Levy, 1978). These factors are particularly relevant in the cultural context of Saudi Arabia. The theory of symbolic consumption assumes that no matter what consumption communicates, there are still a number of inferences about people who are affected by the goods and services that they presumably have selected (Belk et al., 1982). This implies that people give meaning to the products they buy in a country like Saudi Arabia, where culture has a strong influence on purchase of consumer items including clothing, food, religious products or even music. It is, therefore, important to explore the influence of culture on customer satisfaction (Barthes, 1967).

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Research model and hypotheses

Following a literature review, this study proposes a model that establishes the relationship between the four components and customer satisfaction. As a result, a conceptual model is developed as shown in Figure 1. Customer satisfaction is positively influenced by the interplay of these four dimensions. The hypotheses postulated for this study are as follows: H1: Store familiarity positively influences the customer satisfaction in the retail environment in Saudi Arabia. H2: Store atmosphere positively influences the customer satisfaction in the retail environment in Saudi Arabia. H3: Customers perception of fair pricing positively influences customer satisfaction in the retail environment in Saudi Arabia. H4: Availability of items based on cultural needs positively influences the customer satisfaction in the retail environment in Saudi Arabia. Figure 1

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Research model

Methodology

5.1 Questionnaire design and survey measures Based on the model developed, a survey instrument was developed specifically for this study. The first part of the instrument composed of questions to gather the demographic information. The second part of the instrument related to the framework of the research as depicted in Figure 1. All the constructs of the study were measured from items which are adapted from previous studies and discussed in the literature review. There were six items for each of the constructs of store familiarity and store atmosphere. Construct dimensions of price

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and cultural needs had five items each. Customer satisfaction was measured using four items. Responses of all the three dimensions were recorded along a seven-point Likert scale ranging from 1 (strongly agree) to 7 (strongly disagree). To improve the reliability and validity, multiple-item measures were used for all of the variables.

5.2 Sample selection and data collection The target population of this study included all adult individuals residing in the Eastern province of Saudi Arabia. Because of difficulties in obtaining probabilistic samples in Saudi Arabia, a convenience sampling technique was used. Although convenience sampling is not an ideal method, this is considered ‘a necessary evil’ for data collection in Saudi Arabia (Sohail and Sahin, 2010). We employed the procedures laid out by Salganik and Heckathorn (2004). In the first stage of data collection, initial recruits were randomly selected by the authors from university students in three major cities in Saudi Arabia. The chosen cities are spread across the tri-cities of Dhahran–Khobar–Dammam in the eastern province. After refinement, questionnaires were distributed to 1500 participants. All these efforts resulted in obtaining 515 usable responses. All collected questionnaires were checked for completeness. To increase accuracy and precision, an editing process was undertaken by reviewing the questionnaire and screening out illegible, inconsistent and ambiguous responses. After this process, data cleaning was undertaken for a more thorough and extensive treatment of responses. After this round of elimination due to incompleteness, we were finally left with 459 usable questionnaires. This gives a response rate of 31% which compares favourably with results of previous studies in Saudi Arabia.

5.3 Survey responses and profile of the respondents The demographic profile of employees indicates that an overwhelming 78.9% of the respondents were males and the remaining were females. This is not surprising, as socially and culturally, it is a challenge to approach females. With respect to age, it can be seen that majority of the respondents (51.2%) are in the age group of 25–30. There were 27.4% of middle age group of 26–35. In the age group of 31–40, there were 27.3% of respondents. The distribution of sample is fairly representative of the overall population distribution in the Kingdom. In terms of educational qualification, it can be seen that 68.8% of the respondents have undergraduate qualification. As for the nationality of respondents, 64.4% of the respondents were Saudis, while the remaining expatriates were drawn mainly from other nationalities from the Middle East region (21.5%) and the Indian subcontinent (9.5%). Table 1 provides an overview of these findings. We had more youth groups in our survey, in the age group of 18–24. Younger participants, especially from the university, were more eager to participate than other participants as seen from the age group numbers. Undergraduate students were more eager to help out with the survey, whereas graduate students were less eager to do so.

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Table 1

Profile of respondents No. of respondents (n = 455)

Percentage

Male

354

78.9

Female

105

21.1

18–25 years

60

13.2

25–30 years

233

51.2

30–40 years

126

27.3

36

3.8

Gender

Age

40 years or over Educational level High school Under graduate Graduate and higher

60

13.3

313

68.8

86

18.9

Nationality Saudi Middle Eastern

293

64.4

98

21.5

Indian sub-continent

43

9.5

Other

21

4.6

5.4 Reliability tests The internal consistency of the research instrument was tested by the reliability analysis. The descriptive statistics of the variables and reliability estimates are shown in Table 2. Table 2

Descriptive statistics and reliability estimates

Store familiarity

Mean

S.D.

Alpha

1.89

0.32

0.84

Store atmosphere

2.20

0.54

0.79

Price

2.05

0.45

0.81

Cultural products

2.91

0.76

0.85

Customer satisfaction

2.11

0.39

0.82

Means score showing 1 = strongly agree and 5 = strongly disagree.

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Regression results and discussion

The results of the regression analysis summarised in Table 3 indicate that three of the four factors investigated (store familiarity, store atmosphere and price) contribute significantly to customer satisfaction. The F-statistic for the regression model was 12.312 (with a p-value less than 0.000) and predicts 4.33% of the variation found. It also shows a significant direct relationship between the three factors and customer satisfaction. One of

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the estimates, that is, products based on cultural needs however shows a negative sign. In general, we can conclude that Saudi customers tend to be satisfied with retail stores if the store creates store familiarity, provides a good store atmosphere and has reasonable prices. The positive sign of these estimates shows that the greater the extent of these factors, the higher the level of customer satisfaction. Three elements of the research proposition are thus firmly supported. The outcome of this research provides empirical evidence for the influence on customer satisfaction and their underpinnings. This study adds value to the literature by empirically linking a more comprehensive list of determinants to the dependent variable. It builds on past studies in this area, which had either investigated in different settings (Podoshen, 2008) or used incomplete set of variables. Table 3

Regression results Unstandardised coefficients

(Constant)

1.077

Product familiarity

0.295

Standardised coefficients Beta

t

Sig.

4.521

0.000

0.256

4.471

0.000

Store atmosphere

0.165

0.133

2.954

0.007

Pricing of products

0.104

0.121

2.343

0.006

–0.899

–0.109

–1.987

–0.764

Cultural products

Dependent variable: Customer satisfaction. R2 = 0.336; F = 12.312 (p < 0.001).

This study also has several managerial implications. A first conclusion is that retailers in Saudi Arabia wishing to develop customer satisfaction should emphasise store familiarity, atmosphere and fair pricing in their marketing strategies. A pleasant atmosphere does wonders for the store in terms of profit as it has been found to influence customer satisfaction. There is no conclusive evidence to state that stocking items based on cultural needs would have any impact on consumer satisfaction. Also, the relationship may be impacted by the nationalities of the respondents. It is possible that the results may be different for the Saudi nationals and non-Saudi expatriates.

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Conclusions and future research

This study has demonstrated that measurement of the ‘underpinnings’ of customer satisfaction in relationship marketing can predict customer loyalty in the retailing sector of Saudi Arabia. Researchers, strategists and retail operators in the Saudi market, aiming to provide customer satisfaction, should pay close attention to the findings of this study. Being the first of its kind, this study makes a valuable contribution to the existing knowledge related to the Saudi market. However, like any other empirical exercise, this study also suffers from some limitations. One of the limitations of this study is that it has not looked into the possible influences of socio-demographic factors on the relationship between the underpinnings and customer satisfaction. Second, the sample is drawn from the eastern province of Saudi Arabia. More empirical work with larger samples from

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across the Kingdom is needed to generalise these findings. Third, a limited number of women participated in this survey. As women tend to do more shopping, future studies of this nature must attempt to overcome the challenge in reaching women respondents.

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Implications for business marketing practice

The results we present in this paper have managerial implications. First, store management should be concerned about creating store familiarity by reminding customers of past relationships or emphasising unique selling techniques that cater to individual needs of the customers. Second, the store layout and design should be created in such a way as to connect culturally with the customers in Saudi Arabia. What works in the West may not necessarily work in Saudi Arabia. Against popular perception that price factors are inconsequential in oil-rich Saudi Arabia, it seems important to focus on the price factors in the context of customer satisfaction. Customer-oriented pricing strategies are likely to lead to customer satisfaction with retail stores in Saudi Arabia. Our study identifies store familiarity, store atmosphere and price factors as antecedents of customer satisfaction in Saudi Arabia. Management should take all possible steps on the ground to facilitate and enhance customer interactions with these antecedents of satisfaction. However, the management of these antecedents poses a distinctive managerial challenge, not present in relation to a single antecedent of satisfaction. It requires a kind of business marketing strategy which fosters interaction and synergy among various sub-systems of the retail organisation.

Acknowledgement M. Sadiq Sohail acknowledges King Fahd University of Petroleum and Minerals, Saudi Arabia for providing facilities and other support for undertaking this research.

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