Customer satisfaction in European food retailing

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Abstract

Customer satisfaction and customer loyalty is becoming an increasingly important factor in modern retailing—a market characterized by slow growth and intense competition. Big non-European chains such as Walmart are already present in some countries and consider buying some of the retail chains in other countries, e.g. in the Scandinavian countries. This development will demand even more focus on customer satisfaction and customer loyalty in order to stay in business and may also demand that existing actors on the market place form new coalitions. Promising new partners may be identified, partly based upon measures identifying how potential partners are perceived by the customers. Based on results from the European Customer Satisfaction study, a comparative analysis of customer satisfaction in Europe is conducted. Some specific Danish results are shown and the relationship between customer loyalty, supermarket type and ownership structure is studied. The relationship between results after taxes and customer loyalty is documented.

Introduction

European food retailing structure is rapidly changing. Concentration is increasing both through ownership and store size, and companies are responding to slow growth in home markets by expanding into other markets. Store chains are increasingly being branded in order to increase differentiation between chains, subsequently increasing store loyalty. Private labels have obtained a more dominant role within the last few years. They may be seen as a way to increase differentiation, but of course they are also the retailers’ opportunity to avoid the costs of marketing, incurred by the producers’ brand, yielding higher gross margins.

Operating in such a market with slow growth and intense competition demands focus on customer satisfaction and customer loyalty to obtain positive net operating profits. The purpose of this article is to empirically analyse the question of customer satisfaction and loyalty in retailing, to investigate possible effects of ownership and type in Danish retailing, and to study the relationship between customer loyalty and profit in Danish retailing. The empirical analysis is based on data obtained from the recently introduced European Customer Satisfaction Index (ECSI), a Pan-European customer satisfaction measurement instrument.

Sirohi et al. (1998) represents one of the latest attempts to model the relationship between antecedents and effects of customer satisfaction with a focus on retailing. In many respects the ECSI model and the analysis presented in this paper is in accordance with the recommendations for future research mentioned in that article. Firstly, we have all the big store chains included in our study, contrary to Sirohi et al. (1998) who studied many stores within a specific chain only. It gives us the opportunity to test the effect of store characteristics such as type and ownership. Secondly, we have comparable data from several countries, and for Denmark we have made measurements for two consecutive years (1999 and 2000) making it possible to look for differences due to differences in retail structure across countries and for effects of managerial actions in 1999 with a potential influence in year 2000.

The paper is organized as follows. Firstly, the paper presents the methodology behind the ECSI. Secondly, the ECSI pilot phase is described. Thirdly, the empirical study and results are presented.

Section snippets

The ECSI model and methodology

In 1989, Sweden became the first country to have a harmonized cross-company, cross-industry national measurement instrument for customer satisfaction and evaluations of quality of products and services, the Swedish Customer Satisfaction Barometer (SCSB) (Fornell, 1992). SCSB has been adopted and adapted for use in the American Customer Satisfaction Index (ACSI) (Fornell et al., 1996; Anderson and Fornell, 2000).

The successful experiences of the Swedish and American customer satisfaction indices

The ECSI study

Twelve European countries participated in the ECSI study, and across Europe nearly 55,000 interviews have been carried out during the spring of 1999. All participating countries cover telecommunication, nearly all the countries cover retail banks and five countries cover supermarkets. Further information can be found at the IFCF website (www.ifcf.org).

In addition, some participating countries included areas of particular interest to that country. In Denmark e.g., 30 companies within eight

The European results

In the following section some of the results for satisfaction and loyalty in European retailing will be studied in more detail. We will analyse the drivers of customer loyalty on the macro level, and we will try to identify some indicators that may explain some of the differences we see between the individual European countries.

Customer satisfaction and customer loyalty for European retailing 1999 are shown in Fig. 2. In total, results for five countries are shown.

It appears that customer

Danish results

In the following sections, the Danish results will be studied in more detail. Firstly, we want to examine the consequences of store ownership and store type on customer satisfaction and customer loyalty. Secondly, we will try to explain differences in return on assets as a function of differences in store loyalty.

Conclusion

The newly developed methodology behind the Pan-European customer satisfaction measurement instrument ECSI has been applied to the food retailing sector in selected European countries, and there are interesting results providing insight into the creation of customer satisfaction and customer loyalty.

We have seen quite large differences in customer satisfaction and loyalty between companies owned by cooperatives and companies owned by private companies in Denmark. It seems as if the cooperative

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