Explore the Relationship Between Consumer Satisfaction and Consumer Loyalty Based on Four Industries

Boxiang Xiao^1,a,*,†, Dezhi Kong^1,†, Xinyue Huang^1,†, Yanlu Cao^1,† and Yunting Wang^1,†

¹Department of Business, Macau University of Science and Technology, Macau, China

a. 2009853tb011002@student.must.edu.mo

*corresponding author

^†These authors contributed equally.

Abstract: In recent years, with the continuous development of customer relationship management, the two indicators of consumer satisfaction and consumer loyalty are often regarded as the criteria for measuring the success of customer relationship management, but at the same time whether these two indicators are applicable to the market competition environment is often controversial, this article will use the questionnaire survey method to explore the relationship between consumer satisfaction and consumer loyalty in the catering industry in the Macao Special Administrative Region, and use the case summary method to explore the other three industries in different market environments. It also summarizes the factors that contribute to this situation and also tries to provide more suggestions for improvement for practitioners.

Keywords: customer satisfaction, customer loyalty, customer relationship management, positive correlation

1. Introduction

With the development of business, customer satisfaction and customer loyalty have gradually become essential factors for manufacturers to improve service levels and maintain customers, which is of great significance for implementing enterprise customer relationship management. Studies have shown that the transaction cost of the company with new customers is more than six times the transaction cost with old customers, so customer loyalty and satisfaction can not only fully develop and use the existing customer resources of the enterprise, but also rely on the word-of-mouth transmission of the existing customers of the enterprise, so that the original customers of the enterprise introduce new customers to the enterprise, attract potential customers, and achieve the effect of continuously expanding the customer team, to effectively achieve the purpose of improving profits for the enterprise.

Therefore, to better obtain competitive advantages, whether enterprises actively explore innovation paths, upgrade service business, or use social media and other tools to carry out marketing promotion, the ultimate purpose is to enhance "customer loyalty and satisfaction" and explore the relationship between the two and their influencing factors is of more practical significance for many Chinese enterprises to improve their services and enhance brand competitiveness.

2. Literature Review

2.1. Current Status of Customer Satisfaction Research

The study of customer satisfaction originated in the sixties of the twentieth century. Cardozo first believed that improving customer satisfaction would cause customers to purchase again without switching to other products [1].

Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein states that customer satisfaction is defined as "the number or percentage of customers who play an important role in keeping a product or service relevant and are essential; Therefore, it is in the best interest of a business to ensure customer satisfaction and build customer loyalty [2].

Johnson, Michael D., Andreas Herrmann, and Frank Huber point out the value of looking at customer satisfaction through a dynamic lens. Because as customers reuse products or interact with services, customer satisfaction evolves. And the satisfaction experienced with each interaction affects the overall cumulative satisfaction. Over time, it will lead not only to overall customer satisfaction but also to customer loyalty [3].

Parker, Christopher J.; Wang, Huchen argue that customer satisfaction is measured on an individual level but is almost always reported on an aggregate level. It can and often is measured from different dimensions [4].

Customer satisfaction is a vague and abstract concept that refers to a customer's commitment or attachment to a brand, store, manufacturer, service provider, or other entity based on a good attitude and behavioral responses.

2.2. Current Status of Customer Loyalty Research

Buchanan and Gilles claim that long-term customers are less changeable, less price-sensitive, and loyal customers are less expensive to serve, because they are familiar with the process, require less "education," and have fixed order addresses [5].

Schlesinger and Heskett pioneered the link between employee satisfaction and customer satisfaction, arguing that selecting, developing, and creating a culture of excellence can increase employee satisfaction, improve employee competitiveness, and thus improve better service, thereby increasing customer satisfaction and loyalty [6].

Fredrick Reichheld again complements Schlesinger and Heskett's theory and further subdivide and expands employee satisfaction to include the loyalty of suppliers, distributors, shareholders, and executive boards. He also pointed out that cooperation between various departments is the ideal state of customer loyalty [7].

Dick, Alan S., and Kunal Basu point out that customer loyalty is when consumers continue to use or support a brand through buybacks or other means, repeatedly demonstrate positive behavior in purchasing products or services that support a brand, and even promote the brand to others by word of mouth [8].

Jones, Michael A., David L. Mothersbaugh, and Sharon E. Beatty argue that consumers may buy back brands due to factors (such as the existence of monopolies), or they may be due to a lack of local alternatives or high switching costs. This loyalty is called "false loyalty" [9].

In summary, customer loyalty is the trust and emotional dependence formed by customers on the enterprise or brand, which is specifically manifested in the long-term and repeated purchase and use of the company's products and services. Among them, loyal customers will buy the company's products more and more often and will be more willing to try the company's new products because they are less price sensitive, and loyal customers will be more inclined to recommend the brand to potential customers around them and spread its brand culture. However, this situation will be called "false loyalty" if it occurs in some monopolies.

2.3. The Relationship Between Customer Satisfaction and Loyalty

Sharma, A., Gupta, J., Gera, L., Sati, M., & Sharma, S. show that customer satisfaction will affect trust because customer trust is a prerequisite for customer loyalty. When a customer connects with emotions through a brand's products or services, it creates a connection between the customer and the brand. The relationship between satisfaction and loyalty will affect profits. The happier the customer, the more loyal they are to the brand. This can increase sales and profitability. Customer satisfaction, therefore, plays an intermediary role between customer loyalty and service quality [10].

Valerie Goldberg reasoned that customer satisfaction comes into play when customers purchase goods or services from a business and have a positive experience. Moreover, when consumers return to the business because of a relationship with the company or employees, customer loyalty quietly comes into play because loyal customers return because they feel they will get a great product and be treated with a certain respect. Therefore, he believes that satisfaction and loyalty are independent indicators of each other but affects each other [11].

Based on this, this paper will use a questionnaire survey and case analysis method to conduct questionnaire analysis in the context of Macao's catering industry market and take the research of other service industries as the research blueprint, which means supplementing further based on the previous conclusions, to prove the views of this paper effectively:

H1: Customer satisfaction is positively correlated with loyalty.

3. Research and Suggestion

3.1. The Research of This Group

3.1.1. Materials and Methods

Our group’s research area is Macao, and the research enterprise are McDonald’s (It belongs to the imperfectly competitive market in Macao fast food industry) and Tiger Sugar (In the Macao milk tea industry belongs to the perfect competition market); the research object is the student of Macau university of science and technology (primary), other university students and the surrounding residents of Macau (secondary), concrete meet the following conditions: (1) Within two weeks of the questionnaire interview, the respondents had lived in Macao for more than one year; (2) The respondents have clear thinking and can well understand and answer the questionnaire; (3) Aged 18-60 years.

Survey method. The survey was conducted by electronic questionnaire from Thursday, September 29, 2022, to Friday, October 14, 2022. A total of 49 valid samples were completed by McDonald's, and 62 valid samples were conducted by Tiger Sugar.

Questionnaire Contents. The customer experience index system constructed in this study refers to the research methods of customer relationship management, including the "RFM Analysis Method", "Customer experience Questionnaire", "satisfaction questionnaire", "Loyalty questionnaire", etc. At the same time, combined the critical points of the catering industry investigated, such as McDonald's and Tiger Sugar, and considered their general problems. And using the RFM in Customer Relationship Management analysis of R data and F data fundamental indicators. The customer experience score is 1 to 4, and five second-level indicators are obtained by assigning weights to each second-level indicator. According to the previous research experience of several catering shops, the same weight is applied to each indicator, and a total of five second-level indicators are set.

Scoring method. Customer experience index and satisfaction index corresponding to the interview questions are closed, five-level attitude measurement scale, single choice questions. The original scoring principle was 5 points for "very satisfied", 4 points for "relatively satisfied", 3 points for "generally satisfied", 2 points for "not very satisfied", and 1 point for "very dissatisfied". The formula adopted is: S = ∑ (i1, i2, i3...... In)/n. This is the ratio of the total score of all respondents to the total number of respondents.

3.1.2. Statistical Treatment

After collecting relevant data needed in this research, the questionnaire star statistical software was used to analyze the data obtained from the survey, and the score of each part between 1 and 5 was considered statistically significant. Then the linear relationship between variables was tested by path analysis of the scatter plot model.

3.1.3. Results

The percentages of males and females in the McDonald’s sample are shown in Table 1.

Table 1: Gender of McDonald's Respondents.

The percentage of each age group is shown in Table 2.

Table 2: Age of McDonald's Respondents.

The percentages of males and females in Tiger Sugar's sample are shown in Table 3.

Table 3: Tiger Sugar Respondent Gender.

The percentage of each age group is shown in Table 4.

Table 4: Tiger Sugar Respondent Age.

Results of McDonald's customers' sense of experience, satisfaction, and loyalty in terms of products and services. First of all, the product price score and service attitude score are good and still need to be strengthened in promoting customer purchase frequency. In terms of respondents' experience, the average score of customers' perception of service quality experience is 4.27, which gets the highest recognition from respondents among the six indicators; the average score of perception of product price/performance experience is 3.78, which is at a good stage. In terms of products, the respondents' evaluation of product price and product quality is relatively high, with an average score of 4.16 and 4.12 respectively, ranking the top three; while the frequency of purchase and last purchase scores are relatively backward, with the lowest customer purchase frequency score, with an average score of 2.59. Repurchase frequency has become the lowest scoring dimension in this survey, and it has become an important element to pay attention to in the current McDonald's service management.

Table 5: McDonald’s Specification of Variables.

Second, large number of important development customer groups with the potential to develop into loyal customers. According to the R and F data in this RFM survey analysis (Table 6), it can be seen that the highest number of customers who have spent recently but not very frequently are 26 and 27 respectively. This group is an important development customer for McDonald's and needs to invest efforts to focus on it and enhance its brand loyalty.

Table 6: McDonald’s RFM Model Analysis-R and F data.

Tiger Sugar customer experience, satisfaction, and loyalty results in terms of products and services. Firstly, the product quality and service quality scores are high, and the cost performance needs to be improved. In terms of respondent experience, the average score of customers' perception of service quality experience is 4.35, with the highest consumer recognition. In terms of products, respondents rated product quality highest with an average score of 4.18, ranking second; purchase frequency and last purchase scored lower, with average scores of 1.47 and 2.18 respectively. The frequency of purchase is the lowest scoring dimension in this survey, indicating that the number of Tiger Sugar's long-term loyal customers is low and needs to be cultivated and developed.

Table 7: Tiger Sugar Specification of Variables.

Second, few returning customers, but most are important to retain customers. Analysis of the R and F values from Tiger Sugar's RFM survey analysis (Table 8) shows that the highest number of customers who have spent more recently but less frequently are 42 and 52, respectively. This group is an important retention group for Tiger Sugar and may be customers who are going to lose or already going to lose, and need to carry out retention measures.

Table 8: Tiger Sugar RFM Model Analysis-R and F Data.

3.1.4. The Relationship Between Customer Satisfaction and Loyalty

According to the linear regression results, the customer satisfaction of the youth group for McDonald's and Tiger Sugar is influenced by food quality, price, and service quality, with satisfaction scores of 274 and 307, respectively; and loyalty scores of 151 and 157, respectively.

The customer loyalty of the youth group is influenced by customer satisfaction and is positively and significantly influenced, the higher the trust of the youth group in the merchant, the greater the moderating effect on customer satisfaction, and the higher the customer loyalty.

Figure 1: McDonald’s Relationship between Customer Satisfaction and Loyalty Relationship.

Figure 2: Tiger Sugar's Relationship between Customer Satisfaction and Loyalty Relationship.

3.1.5. Discussion and Suggestion

Improving customer satisfaction plays an important role in improving loyalty. After collecting and researching the questionnaires sent out, it was found that customers’ loyalty to products is closely related to their satisfaction. Therefore, only by improving customers' experience and satisfaction can loyalty be improved most effectively.

To improve customer experience, it is especially important to enhance the experience of service process and product quality. Service process and product quality are the two most important factors affecting consumers' experience. Consumers will have a lower tolerance and higher sensitivity to them. As an enterprise with the nature of service, while improving the quality of the core products, the catering industry should also improve the relevant support services such as quality of service staff, in-store environment, waiting time, etc.

This method can also be applied to other types of business activities. In order to improve corporate reputation, attract and retain more new and old customers, and gain more benefits, it is necessary to ensure customer loyalty. Satisfaction is the most important factor affecting loyalty. Therefore, improving customer satisfaction is of great significance for enhancing recommendation degrees.

More focus should be on matching price with quality in order to improve customer satisfaction. The survey finds that a considerable number of respondents believe that the quality of the brand products does not match the price (McDonald's 8.16%, Tiger Sugar 5.88%), and this low score accounts for a large percentage in the satisfaction evaluation criteria designed by the questionnaire. Perhaps, in the operation of the enterprise, a better way can be found to reduce the cost while improving the product quality. Through a better and more accurate pricing strategy, customers can feel the match between product price and product quality, which will help the enterprise to obtain higher customer satisfaction.

Good management of customer expectations plays an important role in improving customer satisfaction. No matter in what industry, complaints after consumption happen from time to time. When customers' expected benefits deviate from their perceived benefits, their dissatisfaction may occur, and then complaints and other after-sale behavior may also occur. In order to minimize the negative impact of such incidents, enterprises should manage customer expectations well while ensuring the quality of products and services. For example, avoid exaggerated false propaganda in public places such as social media and official corporate websites, or communicate effectively with customers before products are sold. The study found that the difference between expected and perceived benefits significantly affects customers' satisfaction, loyalty, and recommendation degree. Therefore, managing customer expectations well, grasping the content and intensity of customer publicity, guiding customer expectations, helping customers develop more rational and realistic expectations, enhancing mutual understanding and trust between the supply and demand sides, and reaching a consensus, can all improve customer satisfaction more effectively, and then enhance their loyalty.

Deficiencies and prospects of the research. First of all, this survey mainly focuses on the Macao market, and the respondents are primarily university students. The scope of the survey is limited, and the number of samples is small, so it is challenging to represent the overall situation of the research objects. Second, the survey and research methods mainly focus on the collection and research of questionnaires, and the questions designed are just some relatively simple scoring and selection, and the number of questions is small, so it isn't easy to accurately calculate the value of satisfaction and loyalty. Third, this survey is mainly based on the catering industry, and the two companies are relatively affordable and well-known. At the same time, although the survey obtains a positive correlation between satisfaction and loyalty, it is still difficult to find the abnormal factors leading to the deviation of the correlation. Customer loyalty in the study is mainly manifested as behavioral loyalty, and it is difficult to judge whether customers’ attitudes are loyal too. Overall, the conclusions obtained from this survey may have some limitations. Therefore, what follows will be a study of a larger market and more industries in order to confirm the hypothesis put forward previously.

3.2. About Other Researchers' Research on Three Different Markets

The positive relationship between customer loyalty and satisfaction varies in different markets. In the following, we will describe the research of other research methods in three different markets and thus discuss the relationship between customer loyalty and satisfaction.

3.2.1. E-book Industry

The youth project of Shanghai Jiao Tong University and the National Social Science Foundation of China "Research on the Social Reading and Guiding Mechanism of Adolescents in the context of New Media" takes adult users who are using e-book reading clients as the research object. A mixed method of questionnaire survey and focus group interview was used to conduct the research. Through a 90-minute one-to-one interview with users who have more than one year of e-book reading experience, the user's usage of e-book reading client, satisfaction, future use intention, and specific views on perceived value is understood. The results were analyzed by questionnaire pre-test and determination model. The test was conducted by inviting 100 adult users of the e-book reading client to participate in the pre-test of the questionnaire. Exploratory Factor Analysis (EFA) is carried out on these 100 questionnaires. After eliminating the outliers and retaining the valid questionnaire, the structural model analysis method is used to analyze the exploratory factor analysis and draw the conclusion that the user's satisfaction with the e-book reading client has a positive and significant impact on their loyalty. And perceived value can cause the relationship between them to fluctuate.

3.2.2. B&B Tourism

This study discusses the relationship between perceived value, satisfaction, and loyalty of B&B tourists in the tourism market. The study constructs a theoretical model of "perceived value-satisfaction-loyalty" based on the theory of planned behavior and uses structural equation modeling and mediating effect tests to verify the mechanisms of perceived value, satisfaction, and personal factors of B&B tourists on loyalty. The results show that the perceived value of B&B tourists can directly increase loyalty and indirectly weaken it through low satisfaction. Overall, the perceived value of B&B travelers enhances loyalty. This study supports the conclusion that customer loyalty is influenced by customer satisfaction and is positively and significantly affected.

3.2.3. Hotel Industry

According to Jones and Sasser, the positive relationship between customer satisfaction and loyalty is also applicable in the hotel industry. As for the relationship between customer satisfaction and loyalty, Jones and Sasser provide a clear relationship diagram. According to their theory, the proportional relationship between satisfaction and loyalty is not a straight line, but a parabolic upward trend. According to the data, when the customer satisfaction evaluation is given as poor or general, the loyalty degree is usually under 20%. Even when the satisfaction evaluation is given as good, the loyalty degree is just 40%. Only when the evaluation is given as very good or extremely good will, the satisfaction degree will reach more than 90%, and only at this time, the customers will truly become loyal customers. For example, if in the customer feedback received by the hotel, 50% of customers think the hotel service is excellent, 45% think good, 3% think average, and the remaining 1% think poor and very poor, analysts will believe that there is a big problem for the hotel because it has lost the loyalty of half of its customers. The hotel industry is so competitive that if a customer is not completely satisfied with one experience, the customer will be lost forever. Therefore, the overall relationship between customer satisfaction and loyalty changes in a positive proportion.

3.2.4. Summary and Suggestion

Overall, customer satisfaction is positively correlated with customer loyalty. However, the strength of competitive pressure in different markets (that is, external and internal factors are different) will lead to different levels of positive correlation between customer satisfaction and customer loyalty.

Therefore, the conclusions drawn in this paper are also drawn through two different competitive market models: the perfectly competitive and the imperfectly competitive.

The relationship between consumer satisfaction and consumer loyalty in a perfectly competitive market. The model of a perfectly competitive market means that consumers and merchants can enter and exit the market freely, neither the buyer nor the seller has the right to price the goods, and the market is completely controlled by an invisible hand. This is an idealized model and market. Therefore, in the analysis of the samples and the cited examples in this article, we mainly analyze some samples similar to the perfect market to analogize the possible situations in a perfectly competitive market.

The sample model selected in this paper is a commodity that is highly homogeneous in product type and uses and is easy to buy, such as beverages, the hotel industry, banks, etc. Brands in these industries tend to be highly fungible. Customers can freely switch between different brands.

For this type of market, this paper argues that customer satisfaction is an important component of customers' perception of the value of products purchased. Therefore, according to the curve after the linear regression of the survey sample data, it can be judged that when the customer's satisfaction level decreases, the customer's value perception of the product will also decrease. Therefore, customers will move to the same type of products under the relatively cheaper brands.

At the same time, we can learn from the concepts we have learned that customer satisfaction and customer expectations are related. In the catering industry, hotel and homestay models, customers' expectations for different stores are basically similar, so customer satisfaction is high under this premise [12].

Under the market model selected in this paper, the price level of the product itself is similar among different brands. That is to say: improving the customer satisfaction of the brand itself, that is, under the premise of the same price, lets customers feel a higher value experience. So, customers will instinctively be more loyal to this brand because it makes them think that it is worth the money. Similarly, when customer satisfaction drops, customer loyalty also decreases, and they start to consider other more cost-effective brands [13].

Therefore, the conclusion of this paper on the relationship between customer loyalty and satisfaction in a perfectly competitive market is that customer satisfaction, and customer loyalty is positively correlated, and the correlation and sensitivity between the two are strong.

The relationship between consumer satisfaction and loyalty in oligopolistic and monopolistic markets. In real life, most of the time customers face oligopoly and monopoly markets, and there are often only one or a few products to choose from within reach.

For the model, in this case, this paper considers that many service-oriented enterprises can be classified into the oligopoly and monopoly market model for analysis due to the limitation of development conditions in some regions. Under these models, customers have limited choices, and there is no way to freely switch between different products.

But for this market model, this paper still believes that customer satisfaction is related to customers' expectations for the product itself, and the relationship curve between customer satisfaction and loyalty is still positively correlated.

However, compared with the model of the perfectly competitive market mentioned earlier, the sensitivity of the interaction between customer satisfaction and customer loyalty will decrease under the model of the imperfectly competitive market. This sensitivity has a positive correlation with the customer's own degree of freedom in market choice.

The samples and investigations conducted in this paper can also corroborate the previous assumptions, so the final conclusion of this paper is that the relationship between consumer satisfaction and loyalty in monopoly and oligopoly markets is: There is a positive correlation between the two, but the sensitivity of the relative changes between the two is low.

4. Conclusion

In general, as the two most important indicators to measure the success of enterprises, customer loyalty and satisfaction are closely related, through the demonstration of this article, it is found that only continuous improvement of customer satisfaction can help to enhance loyalty, and enterprises can also improve product quality, avoid exaggerated publicity and other measures to meet the reasonable expectations of consumers, in order to enhance the trust of both supply and demand, and then improve satisfaction and even enhance loyalty. With the continuous development of the market economy, this article also has to be divided into different market situations, such as in the homogeneous market based on beverages and daily necessities, that is, the perfectly competitive market, due to the convenience brought by lower switching costs, resulting in this market, although customer loyalty and satisfaction are positively correlated, but the correlation and sensitivity of the two are strong, and for the monopoly market, due to the limited choice of customers, the conversion cost is higher, resulting in low sensitivity between customer loyalty and satisfaction. Therefore, the above market can also be argued that in different market environments, although customer loyalty and satisfaction are positively correlated, the sensitivity of the two is closely related to the degree of freedom of customers to choose alternatives in the market.

Therefore, making the right trade-offs and decisions between required customer loyalty and satisfaction can not only improve efficiency between input and output. It can also enable enterprises to have a standard for measuring customer feedback according to different markets and positioning in the follow-up monitoring process, thereby helping enterprises improve loyalty and satisfaction, so as to overcome challenges and opportunities.