Evaluating the effectiveness of relationship marketing on customer`s

ISSN: 2408-5480 Vol. 3 (3), pp. 201-205, March,
2015. © Global Science Research Journals
http://www.globalscienceresearchjournals.org/
Global Journal of Agricultural Economics, Extension and
Rural Development
Full Length Research Paper
Evaluating the effectiveness of relationship marketing
on customer’s attitude and customer lifetime value
Azade Ebrahimi Bahreini1*, Ali Mollahosseini2, Parviz Ahmadi3
*1
Department of Management, ShahidBahonar University, Kerman, Iran.
2
Department, ShahidBahonar University, Kerman, Iran
3
Department, Tarbiat Modarres University, Tehran, Iran
Accepted 24 March, 2015
Abstract
In recent years, Attitude is the important factor that affecting the buying behavior of consumers. These
days, the survival of organizations depends on customer’s repeated purchase, so organizations must
lead repeat customer’s purchase by changing the mentality and attitude of consumers. Thus,
organizations need to focus their attention on the relationships with customers, theorists have
suggested relationship marketing (RM).At the core of RM is the development and maintenance of longterm relationships with valuable customers. In RM, the customer lifetime value (CLV) is the discounted
profit streams of a customer across the entire customer life cycle. The CLV plays a key role in customer
acquisition and retention decisions. The purpose of this descriptive correlational study was to examine
the effect of relationship marketing on customer lifetime value of Hacoupian brands with consideration
of attitude as a mediator. The purpose of this descriptive correlational study is to examine the effect of
the consumer’s attitude of the Hacoupian brands on the customer’s lifetime value by considering
consumer particular value as a mediator variable. Population of survey in this research was customers
of Hacoupian brand in Kerman and a sample of 384 randomly selected for this study. Datas are
collected through questionnaires and Analysis by SPSS and AMOS. This research finds that there is a
significant relationship between relationship-marketing and attitude toward luxury brand and also there
is a significant relationship between attitude toward luxury brand and customer’s lifetime value.
Keywords: Attitude, brand, customer lifetime value, relationship marketing
INTRODUCTION
World-wide sales volume of luxury goods increased
significantly up to US$ 130 billion in 2007 (Okonkwo,
2007). In particular, the demand for luxury brands has
grown rapidly in Asia. Ownership of luxury brands can
reflect the owner's social status as luxury brands are
universally recognized as a statement of good taste in a
global economy (Nueno & Quelch, 1998). To achieve
*Corresponding Author’s Email: aebrahimi88@yahoo.com
success in the complex and competitive market of today,
researchers have maintained and practitioners agree that
customer satisfaction is the key (Ndubisi and Chan,
2004). Thus, a number of key areas that needs to be
considered if the customer is to be served satisfactorily
have been prescribed. One of these key areas is to
leverage firm-customer relationship to gain privileged
information about customers’ needs and thereby serve
them satisfactorily. Relationship marketing therefore,
strives to get the firm close to the customers in order to
enable it to accurately and adequately discern and satisfy
Glob. J. Agric. Econ. Ext. Rural Deve.
202
Figure 1: Research model.
ATLB: Attitude toward luxury brands
their needs. Besides its ability to help understand
customers, relationship marketing also helps to increase
market share, profitability, and reduce cost. Research
has shown that the cost of serving one loyal customer is
five to six times less than the cost of attracting and
serving one new customer. Although there is a long list of
benefits associated with relationship marketing, little is
understood about the actual influences of the
underpinnings of relationship marketing on relationship
quality and customer satisfaction, as vast scholarship in
this area remains conceptual (Ndubisi, 2003).
The present study aims at: (1) examining the effect of
relationship marketing on consumer’s attitude towards
luxary brands and (2) examining the effect of consumer’s
attitude towards luxary brands onCustomer Lifetime
Value (CLV).
LITERATURE REVIEW
Attitudes
Attitudes are a set of inclinations, which form the
individual’s thoughts, emotions and behaviors for a
psychological object in an organized way. Attitudes are
one of the most important determinants of human
behaviors. Researches show a general consistency
between behaviors and attitudes, which indicates that it is
possible to make realistic predictions about the
individual's behaviors based on their attitudes (bal&
kutlu,2012). Jabari discusses that attitude is one of the
factors that influence consumer behavior and also based
features. Changes in people’s Attitude is possible through
things like advertising and sales promotion, etc(Jabari,
2010).
Relationship Marketing
The concept of relationship marketing has emerged
within the field of services marketing and industrial
marketing (Berry, 1983; Gummesson, 1987; Christopher
et al.,1991; Gummesson, 1991). Berry (1983) viewed
relationship marketing as a strategy to attract, maintain
and enhance customer relationships. Rapp and Collins
(1990) argued that the goals of relationship marketing are
to create and maintain lasting relationships between the
firm and its customers that are rewarding for both sides.
Blomqvist et al. (1993) offered the following key
characteristics of relationship marketing: every customer
is considered an individual person or unit, activities of the
firm are predominantly directed towards existing
customers, it is based on interactions and dialogues, and
the firm is trying to achieve profitability through the
decrease of customer turnover and the strengthening of
customer relationships. Gummesson (1993) concluded
that relationship marketing is a strategy where the
management of interactions, relationships and networks
are fundamental issues (OlyNdubisi & Kok Wah, 2005).
Customer Lifetime Value (CLV)
Dwyer (1989) proposed that CLV is the net value of the
expected profit of the enterprise minus the related cost.
Kotler (1997) pointed out that CLV is the net profit
obtained from a certain customer over the lifetime of that
customer, as s/he continues to purchase products from
the company. Thus, CLV is the profit produced by all of
the steps that an enterprise takes to maintain a
relationship with the same customer(Ing Wu & Chi Li,
2011). The notion of lifetime value of a customer has
been well accepted by both researchers and business
practitioners. It is generally believed that lifetime
customers are the most profitable to a firm. Reichheld
and Teal (1996) attributed the increase in profits from
loyal customers to their willingness to pay price
premiums, the added profits from sales through referrals,
profit from cost savings obtained by serving a long time
customer, and revenue growth from a loyal customer
dueto increased sales to that customer. These are the
most commonly held reasons for increase in profitability
from lifetime customers. Customer lifetime value (CLV) is
gaining importance as a marketing metric in both
academia and practice. Many big companies are
routinely using CLV as a tool to manage and measure the
success of their businesses (Gupta et al., 2006).
Research Model and Hypotheses
Research model
Figure 1 shows a broad overview of the conceptual
model used to discuss the relationships among
Relationship marketing, attitude toward luxury brands and
customer lifetime value.
Bahreini et al.
Research Hypotheses
According to Rakstis (1996), the National Retail
Merchants Association, USA, reported that businesses
lose approximately 20 percent of their customers each
year, most of which arise from issues relating to
incompetent service delivery. Of customers who switch
financial institutions in the USA, 40 percent do so
because of service quality problems. Calonius (1988)
emphasized that an integral element of the relationship
marketing approach is the promise concept. According to
Calonius the responsibilities of marketing do not only, or
predominantly, include giving promises and thus
persuading customers as passive counterparts in the
marketplace to act in a given way, but in keeping
promises, which maintains and enhances an evolving
relationship. Fulfilling promises that have been given is
equally important as a means of achieving customer
satisfaction, retention of the customer base, and longterm profitability (Reichheld and Sasser, 1990). Blattberg
and Deighton (1996) pointed out that not all customers
are the same; as the competition in the market becomes
more severe, keeping valuable customers becomes more
important to enterprises. According to the 80/20 principle
(Pareto Principle), 20% of the customers bring the
enterprise 80% of the profit. Therefore, determining how
to hold onto that 20% of the customers and to how to
measure their CLV are very important topics(Ing Wu &
Chi Li, 2011). Communication is the ability to provide
timely and trustworthy information. Today there is a new
view of communication as an interactive dialogue
between the company and its customers that take place
during the pre-selling; selling, consuming and postconsuming stages (Anderson and Narus, 1990).Wilson
(1995) argued that commitment is the most common
dependent variable used in buyer-seller relationship
studies. In sociology, the concept of commitment is used
to analyse both individual and organizational behavior. In
marketing, Moorman et al (1992) defined commitment as an
enduring desire to maintain a valued relationship. This implies a
higher level of obligation to make a relationship succeed and to
make it mutually satisfying and beneficial.
Based on a review of the relevant literature, the following
hypotheses are proposed:

Relationship marketing will positively influence Attitude
toward luxury brand.

Attitude toward luxury brand will positively influence
customer lifetime value.
METHOD
203
―I react favorably to luxury brands‖, ―Luxury brands are
good brands‖) measure Attitude toward luxury brands
(Hoonkim et al.2012); and six items (e.g., ―This Brand’s
words and promises are reliable‖, ―This store's brand is
consistent in providing quality services‖) measure
relationship marketing (OlyNdubisi & Kok Wah,2005).
And eight items (e.g. ―I am willing to purchase from this
company again‖, ―The money I spend here is well-spent‖)
measure Customer Lifetime Value(Ing Wu & Chi Li,
2011). For purposes of this study, Hacoupian was the
brand used to calculate customer lifetime value.
4.2. Sample and data collection
The sample size is very important to generalize the
results to the community. There are several methods for
determining sample size which among them
mathematical methods are the most accurate ones for
calculating the sample size. Given the focus on luxury
brands, the sample (n=384) consists of People who have
purchased Hacoupian brand more than twice in Kerman.
In the present study, in order to more assurance a total
number of 400 questionnaires were distributed among
consumers in stores. Some of questionnaires were
excluded due to wrong and incomplete responses and
finally 384 questionnaires were analyzed for data
analysis. the demographic characteristics of respondents
shows that Among the respondents, 73.4% are males
and 26.6% are females. Among respondents surveyed,
26.6 percent less than 30 years, 46.4% between 30 and
39 years, 17.4% between 40 to 49 years and 9.6percent
were aged 50 years or older.30.7 percent of the
respondents have associate degree or less, 46.1 percent
have undergraduate education, 15.4 percent have
graduate education and 7.8 percent have Ph.D. The
income level of the respondents participating in this
study, it was found that 33.9percent of respondents
earning less than 3million tomans (RS), 39.3percent
haveincomesbetween3 to5million RS and103 of them
had an income of more than 5million RS.
Data Analysis
A series of confirmatory-factor analysis models were
estimated using the data from samples. The two-step
approach to structural equation modeling suggested by
Anderson and Gerbing (1988) was used in this study.
Before estimating the paths to test the relationship
among constructs, a confirmatory-factor analysis was
conducted to analyze validity through Amos 21. Table 1
indicates the results of the CFA for the measurement
model and shows factor loadings and t-values. The CFA
model is acceptable because CMIN/DF(2.78) GFI (.906)
and AGFI (.879) RMSEA(0.06) values are acceptable. All
Measures
of the values of Cronbach's Alpha are higher than 0.6,
therefore, reliability of the data was high enough for further
Scales developed in past researches were used to
measure the constructs on five-point rating scales
(1=strongly disagree, 5=strongly agree). four items (e.g.,
analysis. In summary, the measurements used in this
research have high enough validity and reliability for
further analysis.
Glob. J. Agric. Econ. Ext. Rural Deve.
204
Table 1: Confirmatory factor analysis and reliability analysis
Factors
Scales
RM
This Brand’s words and promises are reliable.
This store's brand is consistent in providing quality services.
Employees of this store shows respect to customer.
This company provides effective sales promotions.
This company offers personalized services to meet customer needs.
This company shows high professionalism in its services.
ATLB
I react favorably to luxury brands.
Luxury brands are good brands.
I enjoy buying luxury goods.
Considering the price of luxury brands, I'd prefer it.
I am willing to purchase from this company again.
The money I spend here is well-spent.
I am a loyal customer of this company.
I would still use the services of this company even if another company offers me a
promotional or favored price.
Even if the price increases, I still would like to go to this company for lodging.
If someone asks me for information on a related product, I provide them with information
about this company.
I would like to register as a member of the company and share my
opinions on its advantages.
I would like to, through my introduction, let my relatives and friends
become loyal customer of this company.
CLV
Table 2: Results of hypothesis test.
Hypothetical patch
relationship marketing
attitude toward luxury brands
attitude toward luxury brands
CLV
RESULTS AND DISCUSSION
As shown in Table 2, we find, among Relationship
marketing has a significant relationship with attitude
toward luxury brand, this means that RM can improve
customer's attitude toward luxury brand to the rate of
70%. Attitude toward luxury brand has a significant
relationship with customer lifetime value, This means that
Attitude toward luxury brand can increase customer
lifetime value(CLV) to the rate of 97%. Given that the
value of ATLB’s R2adj (adjusted R2) is equal to 0.49, it is
concluded that the variable of RM in this model,
determine 0.49 of the variance of consumer’s attitude
2
toward luxury brands and the value of CLV’s R adj
2
(adjusted R ) is equal to 0.97, it is concluded that the
variable of ATLB in this model, determine 0.97 of the
variance of customer lifetime value.
CONCLUSIONS AND IMPLICATIONS
First, the present study evaluates the effect of
relationship marketing on consumers‟ attitude toward
luxury brands. Using an experimental study on a total of
Path
estimates
0.70
0.97
Factor
loadings
0.71
0.69
0.63
0.50
0.78
0.69
C.R.
0.37
0.36
0.64
0.73
0.55
0.69
0.75
0.72
Fixed
3.597
4.874
4.968
Fixed
11.081
11.650
11.554
0.66
0.67
12.361
12.820
0.63
11.986
0.66
9.814
Fixed
12.339
11.182
8.971
13.735
12.331
C.R.
Result
4.622
4.751
supported
supported
384 respondents of consumers in Kerman who have
purchased Hacoupian brand more than twice, the current
study shows that relationship marketing has a significant
positive impact on consumers‟ attitude toward luxury
brands. In other words, the results show that ongoing and
awareness communication can improved consumer’s
attitude toward brand.
Second, the present study evaluates the effect of
consumers‟ attitude toward luxury brands on Customer
Lifetime Value. The results of this study shows that
consumers‟ attitude toward luxury brands has a
significant positive impact on Customer Lifetime Value. In
other words, rearing consumers‟ attitude by providing
information to customers is done, thus customers get
more knowledge and more accurate images of the
products that are going to buy it. This knowledge will lead
to lower customer’s dissatisfaction after the purchase of
goods and create sense of satisfaction, raise customer’s
commitment and loyalty and provides the customer’s
repeated purchase with more confidence.
Investment in advertising and improvement of service
in retailing may help to build relationship with consumers
in the long term. Investment in advertising and
improvement of service in retailing may help to build
relationships with consumers that engender long-term
loyalty (Ko et al., 2009). Loyalty program, updating
Bahreini et al.
customer's information in real time, acknowledging
customer birthdays with gifts, customized service, and
special treatments, to name few, can help to build and
maintain strong customer relationships. The findings of
this study can be used by managers in designing their
RM strategy in the future. Results of this study can be
directly or indirectly used as guidelines for manufacturing
companies or firms, service, advertising and commerce
firms.
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