Customer retention and the mediating role of perceived value in retail industry
| Pages | 2-24 |
| Published date | 12 February 2018 |
| DOI | https://doi.org/10.1108/WJEMSD-06-2017-0035 |
| Date | 12 February 2018 |
| Author | Jalal Rajeh Hanaysha |
| Subject Matter | Strategy,Business ethics,Sustainability |
Customer retention and the
mediating role of perceived value
in retail industry
Jalal Rajeh Hanaysha
Faculty of Business and Management,
DRB-HICOM University of Automotive Malaysia, Pekan, Malaysia
Abstract
Purpose –The purpose of this paper is twofold: to examine the effect of corporate social responsibility,
social media marketing, sales promotion, and store environment on the perceived value and customer
retention in the retail industry; and to provide a significant contribution to the existing literature by
examining the mediating effect of the perceived value between the stated factors and customer retention.
Design/methodology/approach –A quantitative research approach was utilized, collecting data from
customers of department stores in the east coast of Malaysia. In total, 278 valid questionnaires were used in
the analysis of data using the structural equation modeling.
Findings –The findings indicate that perceived value has a significant positive effect on customer retention.
The outcomes also showed that social media marketing has an insignificant effect on the perceived value, whereas
its effect on customer retention is positive and statistically significant. Additionally, the results confirmed that
corporate social responsibility and store environment have significant positive effects on the perceived value and
customer retention. Moreover, the findings showed that sales promotion has a significant positive effect on the
perceived value, but its effect on customer retention is insignificant. Finally, the results revealed that the perceived
value mediates the relationships between all of the independent variables and customer retention.
Originality/value –The results of this study improve our understanding of how these factors affect
customer retention in the retail industry.
Keywords Sales promotion, Customer retention, Perceived value, Corporate social responsibility,
Store environment, Social media marketing
Paper type Research paper
Introduction
The rapid growth in competition among all types of organizations has posed several
challengesfor them regarding maintainingtheir customers and achieving businessobjectives,
because of which organizations have shifted their focus from traditional marketing to
relational exchange practices with customers that could yield greater business profits in the
long term. For this reason, focusing on customer retention has become very important for
improving organizational performance and competitiveness. In order to achieve customer
retention, itis important to note that customerstend to evaluate their purchaseexperiences in
terms of the perceived value that results from the amount of money spent to get a productor
service and the ben efits received in retur n. Therefore, a posit ive customer experie nce has a
significant impact on customer retention and purchase behavior (Bapat and Thanigan, 2016).
To sustain customerrelationships and ensureorganizational effectiveness, it has becomevital
to understand what constitutes customer retention (Afzali and Ahmed, 2016).
In order to respond to the intense competition among businesses, it has become important to
search for the drivers of customer retention. Previous studies examined several factors and
predictors of customer retention in different industry contexts. However, the nature of these
factors tends to be different from industry to industry. This study focuses on the Malaysian
retail sector to explore customer retention and its antecedents as the majority of previous
studies on this topic were investigated in western cultures and only few were done in Asian
countries, particularly in retail sector. According to Tamuliene and Gabryte (2014), although a
significant amount of research has been conducted on examining the repurchase intentions of
World Journal of
Entrepreneurship, Management
and Sustainable Development
Vol. 14 No. 1, 2018
pp. 2-24
© Emerald PublishingLimited
2042-5961
DOI 10.1108/WJEMSD-06-2017-0035
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2042-5961.htm
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WJEMSD
14,1
consumers, there is no consensus agreement on what constitutes customer retention. Moreover,
Mandhachitara and Poolthong (2011) stated that corporate social responsibility is an important
factor that affects consumer behavior, but most of the previous studies on this concept were
investigated in Western countries, and only few were conducted in the Asian context.
Perceived value has been established as an important determinant of consumers’
perception and retention. In the current business environment, which is highly competitive
and frequently changing, retailers should clearly develop their understandings and
predictions toward the behavior of consumers in buying and selecting different goods and
services for satisfying their needs (Roy et al., 2017). Therefore, in order to obtain and secure
a competitive advantage in the targeted markets, several retailers have focused on
differentiating themselves by establishing a distinct brand image in the minds of their
consumers toward their department stores in an attempt to influence and motivate their
purchasing behavior. Perceived value was found in the literature as one of the key
predictors of consumer behavior. However, despite its importance as a key tool for
customers’evaluations of brand offerings, the marketing literatures showed that only few
empirical research works were undertaken to understand the perceived value and examine
its effect on customer behavior (Nguyen and LeBlanc, 1998).
By looking at the previous literature, it is also evident that some scholars considered
sales promotions and store environment as important factors that influence customer
retention in the retail context. Social media has also emerged as a new marketing
communication tool for establishing valuable relationships with customers and
sharing the latest organizational products/services with key stakeholders to achieve
marketing objectives. However, despite the importance of social media marketing as a
communication tool, there are limited research works which examined its effect on
customer retention. Duffett (2015) also reported that there is a limited research on social
media marketing in emerging countries. Therefore, based on the above facts, this study is
designed to examine the effects of social media marketing, corporate social responsibility,
sales promotion and store environment mediated by the perceived value on customer
retention. To the author’s knowledge, these variables have not been previously integrated
together into a sin gle framework to e xplain their direct and indirect effects on customer
retention through the perceived value. The next section presents the literature review for
this study followed by the methodology and results. Finally, this paper ends with the
conclusion and future research directions.
Literature review
Customer retention
Most of the previous studies on customer retention were guided by the commitment-trust
theory which was proposed by Morgan and Hunt (1994). The commitment-trust theory
posits that customer relationships can be established and maintained through gaining
consumers’trust and brand commitment which result from positive purchase experiences.
According to Van Vuuren et al. (2012), understanding the main constituents of trust and
commitment is vital in order to develop long-term relationships. Relationship marketing
consists in creating bonds with business customers by fulfilling their needs and honoring
the commitment made to them. Morgan and Hunt (1994) added that relationship
commitment and trust require firms to provide superior products and services to their
customers and communicate brand value. Instead of focusing on short-term benefits,
organizations adopting the relationship marketing strategy create long-term bonds with
their profitable customers. Consequently, customers tend to develop trust toward these
organizations, and the mutual commitment enables both parties to fulfill their needs.
Therefore, the higher degree of trust and commitment ultimately leads to greater customer
retention (Hilman and Hanaysha, 2015).
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Mediating role
of perceived
value in retail
industry
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