RESEARCH ARTICLE

Measuring Service Quality in Retail Loyalty Programmes (LPSQual)IMPLICATIONS FOR RETAILERS’ RETENTION STRATEGIES

Nor Asiah OmarSchool of Management, Universiti

Kebangsaan Malaysia Bangi, Malaysia.

Rosidah MusaFaculty of Business Management,

Universiti Teknologi Mara, Shah Alam, Malaysia&

International Journal of Retail & Distribution Management, Vol. 39 No. 10, 2011, pp. 759-784

ABDUL FAREAS BIN NOEW HANZAH (ZP O1364)

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ABSTRACT

Purpose – This research aims to empirically develop a reliable and valid scale for measuring the service quality of retail loyalty programmes (loyalty programme service quality (LPSQual)) in the context of department stores and superstores in Malaysia.

Design/methodology/approach – By adapting the process proposed by Churchill for developing measures of marketing constructs, an instrument to assess LPSQual in Malaysia is formulated. The methodology consists of developing the scale based on a literature review and qualitative method. The proposed scale is then purified and validated through exploratory factor analysis and confirmatory factor analysis.

Findings – The proposed instrument (LPSQual) contains 26 attributes in seven dimensions: reward, tangibility, policy, information usefulness, courteousness/helpfulness, personalization and communication.

Research limitations/implications – Further testing of the scales across multiple contexts is necessary for validity enhancement.

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ABSTRACT C o n t …

Practical implications – Retail managers must give serious thought to the non-material or “soft-benefits” component in a loyalty programme which emphasizes courteous/helpful and personalized services. Thus, managers need to focus on service personnel by providing training to upgrade employees’ skills in creating and delivering pleasant experience/service encounters to cardholders.

Originality/value – The main contribution of this paper is the development and validation of a new scale called LPSQual, which focuses on service quality in a loyalty programme. On the one hand, it is a pioneer in the study of service quality in loyalty programmes and, on the other hand, it confirms results from other researches on non-material strategies that can be used in loyalty programmes.

Keywords Loyalty programmes, Service quality, Scale development, Superstore, Department stores, Malaysia. Paper type Research paper

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INTRODUCTION• Loyalty programmes have rapidly grown across the globe, especially in the USA and the

UK (Bellizi and Bristol, 2004). Favourable responses from consumers have encouraged many firms to install loyalty programmes as a core component of their marketing strategy.

• Frost and Sullivan, an independent market research organization, reported that loyalty programmes are a growing business in Malaysia, with money spent on loyalty programmes accounting for 19.8 per cent of the total Advertising & Promotion (A&P) expenditure in 2005 (Ganesan, 2006). The A&P expenditure is expected to grow further from around USD646 million in 2005 to around USD1 billion in 2010 (Ganesan, 2006).

• Many researchers question whether loyalty programmes actually create customer loyalty or whether loyalty arises from some other factor (Capizzi and Ferguson, 2005; Hoffman and Lowitt, 2008). However, the most important parts of a loyalty programme are programme design (Demoulin and Zidda, 2009; Lacey and Sneath, 2006) and customer service (Lockyer, 2004).

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• Loyalty programmes have rapidly grown across the globe, especially in the USA and the UK (Bellizi and Bristol, 2004). Favourable responses from consumers have encouraged many firms to install loyalty programmes as a core component of their marketing strategy.