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A Study of the Factors Affecting Customer Loyalty in Fast Food Industry (Case Study: Customers of Fast Food Restaurants in City of Tehran)

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A Study of the Factors Affecting Customer

Loyalty in Fast Food Industry

(Case Study: Customers of Fast Food

Restaurants in City of Tehran)

Hediyeh Amanolah Baharvand, Shahrzad RezaeiDarjazini, Ali Feyzi

Abstract— The aim of the present study has been to study the factors affecting customer loyalty in fast food industry in city of Tehran in educational year 2013-14. This study is descriptive- survey and applied in terms of methodology and purpose respectively. Statistical population included all the fast food customers in Tehran and study sample consisted of 252 people including the customers of fast food restaurants in districts 4 and 5. The sample size of the study was selected through simple random sampling method using Cochran's formula. The intended data was collected by a questionnaire, the validity and reliability of which was approved of, and it was completed by the respondents. The Cronbach's alpha has been 0.94 for this questionnaire. In order to descriptively and inferentially analyze the data, the SPSS software was used. Spearman's rank correlation coefficient was used to inferentially analyze the variables. The results of the study indicate that there is a high correlation between trust and customer loyalty. Besides, there is a high correlation and relationship between corporate image and customer loyalty. Switching costs have a weak relationship with customer loyalty; and there is also a weak relationship between customer trust and switching costs.

Index Terms— Customer Loyalty, Fast Food Industry, Customer Trust.

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1 I

NTRODUCTION

ODAY, the competition has intensified in production and service sectors around the world. Increased competition is obvious in service sector, in industries such as hospitality, banking, insurance, etc. and this makes it increasingly harder to retain customers and increase their loyalty in this environ-ment (Alameh&Noktehdan, 2010, p. 2). Recognizing and antic-ipating customers’ needs is essential for the business to gain a competitive advantage. The customer is considered to be the key and central factor in agility of the organization and all the goals, strategies and resources are all oriented to attract and retain customers (Hamidizadeh&Ghamkhari, 2009, p. 3). Ex-pansion of fast food and people’s desire to consume fast food, especially in big cities, has now become a major challenge for fast food owners and providers as well as for nutrition and health specialists, and a major issue in today industrial society. On one hand, expansion of industry in its various dimensions including food industry paves the way for country’s devel-opment, and on the other hand, today mechanized life has caused people to turn to fast food because of lack of time and rush to do thing, etc. (Mirshahi, 2008). According to the stud-ies conducted by A. C. Nilsen in 28 Asian, European and American countries, the Asians are the biggest fan of fast food within this huge market. Only the university students spent $7 billion on less essential purchases which include fast food

(Farahian&Malkami, 2007, p. 2).

By the turn of the third millennium, many concepts including loyal customers have increased in importance in leading or-ganizations and individuals like Day (1969), Jacoby & Chest-nut (1897) conducted more extensive researches on this sub-ject-matter. Of course, the customer loyalty programs began first in USA airline industry by issuing the license for aviation organization in 1978 (Hamidizadeh&Ghamkharizadeh, 2009). Many organizations have expanded customer loyalty pro-grams as one part of relationship development activities. Cus-tomer loyalty is a complicated concept. The Oxford dictionary defined loyalty as the quality of being faithful. Larson & Su-sanna (2004) believed that loyalty is to gain the commitment of customer to make a transaction with a respective enterprise

and to repeatedly buy goods and services

(Taleghani&Sadraee, 2008, p. 3).

During 1990s, many companies offered company introduction programs as a way to strengthen and even change their com-pany’s image in an attempt to improve their competitive ad-vantage. Broadly introducing new logos, the number of com-pany who changed their name and flourishing of design in-dustry in that decade provide evidence for this. Corporate image is defined in Oxford dictionary as the overall picture which an individual, an organization, a product, etc. gives to the enterprise. Martinea(1960) believedthat corporate image is a result of peoples’ recognition, feelings and impression about the company. The corporate image is a conglomerate of cus-tomers’ feeling and behaviour. Mental picture or corporate image is a set of impressions about the company, and these impressions through feelings, perceptions and views of the observers are used for describing, remembering and

com-T

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Department of Management, Boroujerd Branch Islamic Azad University, Boroujerd, Iran. Corresponding Author, E-mail: baharvandhsd@yahoo.com

Ma In Business Management-International Persian Gulf University, E-mail: Sh_rezaei1@yahoo.com

Department of Management, Boroujerd Branch Islamic Azad University, Boroujerd, Iran

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254 municating with the company (Akin &Demirel, 2011, p. 132). These images can be imprinted on the minds through adver-tisements, trying the product, peoples’ reaction after using those products, reading and hearing about those companies and their rivals (Anvari et al. 2007).

Trust, as the most important relationship-based marketing variable determines the extent to which each side can count on other side’s promises and is defined as the desire to have faith in or rely on the other one.

Trust is a multidimensional concept and has different dimen-sions. The concept of trust is a kind of belief, feeling or expec-tation of the buyer (seller) which is a result of expertise, relia-bility or intentions of the seller (buyer) (Habibi&Pirkouhi, 2006). Trust is based on the evaluation of three complementing dimensions. Trust can be seen based on three dimensions: 1) efficiency, financial power or reliability, 2) honesty or integrity and 3) empathy, unity and charity.

The first element can be interpreted as rational trust, and sec-ond and third elements as emotional trust (Halliburton &Poenaru, 2010, p. 7). When good products and services are offered to the customer at the time of first purchase, motiva-tion for repurchase is generated in the customer. The buyer who trusts the seller will most likely want to continue his/her interaction. The consumer accepts the product of trust accord-ing to the awareness of the past and present, and repeated good quality of the product will raise the level of trust. The problems of buyer and seller should be addressed simultane-ously and they cannot be approached separately. Developing trust among consumers is important, but maintaining and continuing it is far more important given the growth of tech-nology (Habibi, 2011, p. 2).

Switching costs arise when the customers change their provid-er. They are dependent on the satisfaction and loyalty of the customers. When customers think switching to another store is costly, they are more eager to keep their relationship with the current store (Kheiri, Rezaee&Mirabi, 2010). Jackson stated that switching costs are sum of all the costs the consumers incur during the process of change. In addition to the mone-tary costs which the consumers have to bear, there are other hidden costs including psychological and physical costswhich are also involved whendealing with a new provider. Shy be-lieved that switching costs are partly specific to the customer and it is the reason why some customers are unwilling to change the suppliers. Fornell& Klemperer suggested thatswitching cost will directly impact on the loyalty of thecustomer whereby it reduces the price sensitivity ofcus-tomers and their satisfaction level (Ling et al. 2012).

Whereas some types of switching costs exist even if all prod-ucts and suppliers are identical and known to the buyer, search costs can exist even when products and/or suppliers are differentiated and the buyer has incomplete information about which one is a better or worse substitute.Besides, search costs can arise with homogenous products where effort has to be invested in finding the best price. (Fernandez, McSorly, Padilla, Reyes & Williams).

Given the significance of the subject, this study aims at study-ing the factors affectstudy-ing customer loyalty in fast food industry

in restaurants in city of Tehran. There have been studies con-ducted related to the subject matter of the present research inside and outside Iran which some of them include:

Hamidizadeh&Ghamkhari (2008) in a study titled “Determin-ing the Level of Loyalty of ShahrvandChain Stores’ Custom-ers” concluded that reliability, the impact of services and the impact of quality have a positive and significant effect on cus-tomer loyalty.

Hoseini&Heirati (2007) conducted a study titled “Increasing Profitability through Measuring the Degree of Customer Loy-alty” in which their case study was measuring the degree of customer satisfaction and loyalty in Super Star restaurants in Iran. The research results indicated a relationship between loyalty of external customers (consumers) and loyalty of inter-nal costumers (staff). This study also shows that Super Star restaurants should pay more attention to recognized highly important factors including restaurant staff behavior, basic parameters (taste and flavor of the food, food safety, packag-ing and food trays), price and primary services (a clean envi-ronment, waiting time for food delivery and how the food is served) and of course comparing these factors to rivals ser-vices in order to raise customers satisfaction.

Another study was conducted by Ling et al. (2012) in Malaysia titled “Exploring Factors that Influence Customer Loyaltya-mong Generation Y for the Fast Food Industry inMalaysia”. The findings revealed that corporate image, trust and per-ceived switching cost werepositively related to the customer loyalty. In addition, the finding also concludes that trust is positivelyrelated to customer loyalty, mediated by perceived switching cost.

The main question which we are trying to answer in this study is what factors affect customer loyalty in fast food industry?

2

R

ESEARCH

H

YPOTHESES

There is a relationship between corporate image and customer loyalty.

There is a relationship between trust and customer loyalty. There is a relationship between perceived switching costs and customer loyalty.

There is a relationship between trust and switching costs.

3 R

ESEARCH

M

ETHODOLOGY

The present research is descriptive-survey and applied in terms of methodology and purpose. Because the customers and consumers of fast foods are widespread and given the limitations related to fast food restaurants in towns, in such a way that there are no chain restaurants with known commer-cial names available to people, the statistical population of this study includes fast food customers in city of Tehran. The study sample was also selected from among the customers of fast food restaurants in districts 4 and 5. Cochran's formula was used in order to determine the sample size of the study. In this study, simple random sampling method was used. Data collection method is divided into library and field methods. Besides, a questionnaire was used to collect data. This ques-tionnaire was extracted from Ling et al. (2012)and is in 5-point

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255 Likert scale and has 5 items from totally agree to totally disa-gree. The validity of the questionnaire was approved by the experts. In order to measure reliability, first 30 questionnaires were distributed as samples; then theCronbach's alpha was calculated as 0.94,and its variables are presented in table 1.

The data obtained from the questionnaire was analyzed through descriptive statistics and inferential statistics includ-ing Spearman's rank correlation coefficient usinclud-ing SPSS soft-ware, version 18.

TABLE1

CRONBACH'S ALPHA FOR RESEARCH VARIABLES

4 R

ESEARCH

F

INDINGS

Testing hypothesis 1) there is a relationship between corporate customer loyalty.

TABLE2

CORRELATION TEST BETWEEN CORPORATE IMAGE AND LOYALTY

Since the level of significance is below the level of error, the H1 hypothesis is accepted, i.e. there is a relationship between corporate image and customer loyalty. The correlation

coeffi-cient shows that the relationship between two variables is di-rect, and there is a high correlation between them.

Testing hypothesis 2) there is a relationship between trust and customer loyalty.

TABLE3

CORRELATION TEST BETWEEN TRUST AND LOYALTY

Since the level of significance is below the level of error, the H2 hypothesis is accepted, i.e. there is a relationship between trust and customer loyalty. The correlation coefficient shows that the relationship between two variables is direct, and there

is a high correlation between them.

Testing hypothesis 3) there is a relationship between corpo-rate image and customer loyalty.

TABLE4

CORRELATION TEST BETWEEN PERCEIVED SWITCHING COSTS AND LOYALTY

Since the level of significance is below the level of error, the H3 hypothesis is accepted, i.e. there is a relationship between perceived switching costs and customer loyalty. The correla-tion coefficient shows that the relacorrela-tionship between two

varia-Alpha coefficient Number of ques-tions value All questions 17 0.907 Customer loyalty 4 0.831 Corporate image 5 0.793 trust 5 0.844 Switching costs 3 0.759 Correlation coeffi-cient Significance level Level of error Independent variable Dependent variable Test result 0.675 0.000 0.05 Corporate image Customer loyalty Acceptance of H1 Correlation coeffi-cient Significance level Level of error Independent variable Dependent variable Test result 0.703 0.000 0.05 trust Customer loyalty Acceptance of H2 Correlation coeffi-cient Significance level Level of error Independent variable Dependent variable Test result 0.246 0.000 0.05 Switching costs Customer loyalty Acceptance of H3

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256 bles is direct, and there is a low correlation between them.

Testing hypothesis 4) there is a relationship between corporate image and customer loyalty. TABLE5

CORRELATION TEST BETWEEN TRUST AND SWITCHING COST

Since the level of significance is below the level of error, the H4 hypothesis is accepted, i.e. there is a relationship between trust and switching costs. The correlation coefficient shows that the relationship between two variables is direct, and there is a low correlation between them.

5 D

ISCUSSION AND

C

ONCLUSION

Given the results obtained from the first hypothesis, it was re-vealed that the value of Spearman's correlation coefficient be-tween corporate image and customer loyalty is 0.675; this shows that there is a relationship between corporate image and custom-er loyalty, and these two have a high correlation. Thus, thcustom-ere have been no evidence for rejection of this hypothesis. The research results are consistent with findings of Ling et al. (2011), but are not consistent with findings of Hoseini et al. (2010).

Given the results obtained from the second hypothesis, it was revealed that the value of Spearman's correlation coefficient be-tween trust and customer loyalty is 0.703; this shows that there is a relationship between trust and customer loyalty, and these two have a high correlation. Thus, there have been no evidence for rejection of this hypothesis. The research results are consistent with findings of Ling et al. (2011), and findings of Bell & Marshall (2002).

Given the results obtained from the third hypothesis, it was re-vealed that the value of Spearman's correlation coefficient be-tween switching costs and customer loyalty is 0.242; this shows that there is a relationship between perceived switching costs and customer loyalty, and these two have a low correlation. Thus, there have been no evidence for rejection of this hypothesis. The research results are consistent with findings of Ling et al. (2011), and Tung et al. (2011).

Given the results obtained from the fourth hypothesis, it was re-vealed that the value of Spearman's correlation coefficient be-tween trust and perceived switching costs is 0.30; this shows that there is a relationship between trust and perceived switching costs, and these two have a low correlation. Thus, there have been no evidence for rejection of this hypothesis. The research results are consistent with findings of Ling et al. (2011).

Given the research results it was revealed that there is a relation-ship between corporate image and customer loyalty, and these two have a high correlation. Besides, there is a relationship be-tween trust and customer loyalty and theses two have a high cor-relation. There is also a relationship between perceived switching costs and customer loyalty but these two have a low correlation.

Be-side s, there is a relationship between trust and perceived switching costs and these two have a low correlation. Since corporate im-age, trust and switching costs have a major role in winning and increasing loyalty of customers of fast food restaurants, have a direct relationship and correlation with customer loyalty in this industry, and trust has a relationship and correlation with cus-tomer’s switching costs, owners of restaurants and fast food pro-viders should give priority to programs related to building trust, creating a proper image of the company in the customers’ minds and further improvement of it, and increasing the switching and moving costsof the seller.

R

EFERENCES

[1] Akin,E.,&Demirel, Y.(2011). Are corporate image relation satisfaction and identification with corporate influential factor on effectiveness of corporate communication and consumer retention? European Journal of Social Science, 23(1), 131-156.

[2] Alameh, M., &Noktehdan, I. (2010). A study of the impact of the quality of services on customer loyalty. Journal of Business Management, 5, 109-124. [3] Anvari, A., Ghaedi, M., &Mousavi, A. (2007). Customer relationship

man-agement and marketing. Tadbir Journal, 180, 75-80.

[4] Farahian, L., &Malkami, A. (2007). A study of the structure of fast food indus-try in Iran and factors consumer behavior. Journal of Business Surveys, 27, 71-88.

[5] Fernandez, D., Mcsorley, C., Padilla, A., Reyes, T.,& Williams, M. (2003).Switching Costs. Office of Fair Trading Economic Research and Discus-sion Paper Resources. Retrieved from www.oft,gov.uk/sharved-oft/reports/comp-policy/oft655.pdf

[6] Garcia de los salmons, M.,& Rodriguez de Bosque, I.(2011). Corporate social responsibility and loyalty in services sector. Esic Market, 138, 199-221. [7] HabibiPirkouhi, A. (2006). The importance of trust in relationship-based

mar-keting and a scale for measuring it. Journal of Administrative and Economic Sciences of Isfahan University, 3, 81-103.

[8] Hamidizadeh, M., &Ghamkhari, M. (2008). “Identifying the factors affecting customer loyalty based on fast response organization. Journal of Commerce, 52, 187-210.

[9] Halliburton,Ch.,&Poenaru,A.(2010). The role of trust in consumer relation-ships. ESCP Europe Business School.

[10] Han, H. (2007). Restaurant customer emotional experience and perceived switching barriers: A full service restaurant setting(unpublished Doctoral dis-sertation). Kansas state university. Retrieved from proQuest Dissertations and These database.(DAT-A68/12. AAT 3291377).

[11] Hoseini, H., &Heirati, N. (2007). Increasing profitability through measuring the degree of customer loyalty by case studying the Super Star restaurants in Iran. National Conference of Customer/Citizen Relationship Management. Teacher Training University.

[12] Kheiri, B., Rezaee, S., &Mirabi, V. (2010). A study of the effect of customer Correlation coeffi-cient Significance level Level of error Independent variable Dependent variable Test result 0.30 0.000 0.05 trust Switching costs Acceptance of H4

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257 relationship management systems for retailers. First Conference on Organiza-tional Intelligence and Business Intelligence.

[13] Larson S., & Susanna H., (2004). Managing customer loyalty in the automobile industry. Department of Business Administration and Social Sciences. [14] Ling, K.,Mun, Y.,& Ling,H. (2012). Exploring factor that influence customer

loyalty among Generation Y for the fast food industry in Malaysia. African Journal of Business Management, 5(12), 4813-4822.

[15] Mirshahi, S. (2008). How to use marketing research process in fast food.Journal of Development of Market Engineering, 6, 18-22.

[16] Taleghani, M., &Sadraee, S. A. (2010). Proposing a conceptual model for ex-plaining the process of ‘quality-satisfaction-loyalty’ in banking industry (case study: Mellat bank of Gilan Province). Iran Marketing Journal, 1, 1-16. [17] Tung, G.,Kuo,Ch.,&Kuo, Y. (2011). Promotion, switching barriers, and loyalty.

References

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