Assessing the Outcomes of Generation Y Customers Loyalty - Literature review Example

ASSESSING THE OUTCOMES OF GENERATION Y S LOYALTY By Location Introduction The business environment isalways prone to changes, and the banking sector has not been an exemption because the industry has undergone tremendous changes coming from structural, regulatory and technological factors (Eichengreen & Gupta, 2013). Therefore, these financial institutions have been under pressure because of the intense competition and slow growth rates. In this regard, the players in the banking sector have been struggling to come up with the strategies that can help them maintain and sustain their competitiveness. It is always important to note that the unhealthy competition is the reason behind the fall in customer relationships (Delis, 2012). In response, banks have developed both offensive and defensive strategies in a bid to strengthen customer loyalty to their brands. Nonetheless, it is imperative to the players in the banking sector to note that development and maintenance of customer loyalty is the basis for increased profits because it leads to repeat patronage, positive word of mouth and less sensitivity to prices. The implication is that customer loyalty is a major determinant of profitability and the market share (Jumaev, Kumar & Hanaysha, 2012). Banks can only achieve customer loyalty if they are aware of some of the factors that are crucial for customer satisfaction and customer loyalty (Jumaev, Kumar & Hanaysha, 2012). Moreover, studies also show that customer loyalty is a subject of the particular type of the market segments. The youth generation is an important segment that has been much attention from the banking sector and they are fondly known as Generation Y because the young people exhibit unique buying powers based on their incomes (Castells, 2013). Since there is always a major competition for the older customers, banks are now shifting their focus to the younger people with appropriate strategies to retain them and also develop a strong loyalty to their brands. The particular focus on Generation Y is also triggered by the fact that they constitute a bigger percentage of the population of the developed countries. On the other hand, reaching customers at younger ages leads to strong relationships with the organization. Therefore, it is imperative to study the dynamics and elements that influence loyalty and satisfaction of the Generation Y through a search of the existing literature. Theoretical Background The banking sector having been faced with fierce competition has witnessed numerous efforts for gaining competitive advantage (Delis, 2012). One of the common strategies with the most banks today is the product differentiation though it has always proved difficult to implement such competitive approaches to retail banking. The difficult in achieving competitive advantage among banks is because banking products and services face the challenge of imitation from the rival banks. In response, banks have been fast to come up with new opportunities and strategies for identifying as well as developing strong customer relationships. On the other hand, the new strategies are meant to enhance customer loyalty (Jumaev, Kumar & Hanaysha, 2012). Therefore, there has been an increase in the interests of the factors that determine customer loyalty especially elements of service quality and customer satisfaction. In this regard, the underpinning theory behind customer loyalty is because banks have refocused their attention to managing relationships with their customers since it helps in identifying their level of satisfaction with the service quality (Delis, 2012). Customer satisfaction There have been various studies directed to customer satisfaction with much emphasis on the service quality (Bahri, Sabahi, Taheri & Hatami, 2013). The banking sector is thus full of such studies where the focus is on measuring service quality since it is an important determinant of levels of customer satisfaction. However, Delis, (2012) is of the opinion that service quality is just part of customer satisfaction. The implication researchers treat service quality as a component of customer satisfaction. Conversely, Bahri, Sabahi, Taheri and Hatami (2013) while investigating the imminent relationship between service quality and customer satisfaction revealed that the latter is a higher construct of the former since has a role in the behavioral intentions of the customers. According to Rego, Morgan and Fornell (2013), customer satisfaction is undoubtedly very important, and the construct can be viewed in both affective and cognitive dimensions. Also, a study on this construct can investigate the cognitive dimensions using the confirmation and the disconfirmation paradigm. In this case, the investigation starts by comparing the actual experience of the customers by using a product with the customer’s expectations considered before the purchase. On the other hand, Iglesias, Singh and Batista-Foguet (2011) are of the opinion that it is utterly impossible to understand without the affective dimension being put into consideration. Wieseke, Geigenmüller and Kraus (2012) also support that assumption by presuming that the effect experience that customers have with purchase, as well as consumption of the particular product, has direct influence on the assessment of customer satisfaction. Moreover, studies confirm that each of the service encounters triggers assessment from the customer thus generating an emotion reaction to accompany the decision. Therefore, with time, the customer creates or develops an overall assessment of the services based on the value accrued or enjoyed from the service encounters as put across by Morgan and Fornell (2013). Singh and Batista-Foguet (2011) are of the opinion that service quality, as well as affective and cognitive dimensions, are not the only determinants of customer satisfaction. In this case, other elements like performance, disconfirmation, desires, equity, and expectations are also some of the determinants of customer satisfaction. Moreover, Morgan and Fornell (2013) claims that customer satisfaction is attributed to other extrinsic factors especially the levels of satisfaction with the frontline employees, the primary or core service and, generally, the organization. Therefore, it is imperative to identify the gap in the existing literature to identify if the same factors influence the satisfactory rates among the young customers or the generation Y. Customer Loyalty Jumaev, Kumar and Hanaysha (2012) posit that customer loyalty translates to purchasing behavior and many studies have been linking it to customer satisfaction. In this case, customer satisfaction is an accurate reflection of their purchase behavior since even previous studies have been linking the former to behavioral intentions. Nonetheless, many academicians support that positive customer satisfaction has a good implication on their cross-buying behaviors. Moreover, Morgan and Fornell (2013) confirm that customers are high likely to consider repeat purchase behaviors if they gain a certain amount of satisfaction by using a particular product or service. However, owing to the complexity of the issue of customer loyalty, existing studies recommend various approaches to investigating this aspect element. Therefore, the academicians have not been able to come up with a uniform definition of the term customer loyalty. In most of the previous studies, the common assumption is that customer loyalty can be investigated using both attitudinal and behavioral dimensions that should not be the case (Caruana, Ramasashan & Krentler, 2015; Delcourt, Gremler, van Riel & van Birgelen, 2013). In this regard, behavioral dimension encompasses aspects like switching habits, repurchase behavior, frequency of purchases. On the contrary, longitudinal dimensions include such aspects of commitment, customer attitude, and the intent to recommend a product or a service to peers. Delcourt, Gremler, van Rie and van Birgelen (2013) assert that apart from the attitudinal and behavioral dimensions, customer loyalty also contain some cognitive elements or components. Nonetheless, Caruana, Ramasashan and Krentler, (2015) argue that customer loyalty for the product sectors is easy to analyze and conceptualize as compared to the service sectors because services are of unique characteristics compared to the products. The implication is that in the service sector, customer loyalty is rather based on the interpersonal relationships that are also easy to develop. According to Caruana, Ramasashan and Krentler (2015), a very important issue to consider with customer loyalty is the difficulty in developing good customer bonding especially for the banking sector. The implication is that the advent of technology has reduced the levels of contacts between the banks and their esteemed customers. In this regard, technology has brought new ways through which individuals receive services where developments like Internet banking and self-service zones are denying the banks the chance to interact with their customers (Delis, 2012). Moreover, Jumaev, Kumar and Hanaysha, (2012) assert that the modern consumer is also influenced some phenomena that encourage them to seek for varieties and switch their spending habits. There is also substantive evidence that customers are always interested in the offers provided by the banks and this explains why they jump to products that competitors offer especially the promotional campaigns and other banking incentives (Delis, 2012). Nonetheless, the issue of customer loyalty in the banking sector is not an easy one given that the bank customers always put higher expectations thus their needs are more sophisticated. Therefore, existing literature also present the gap as to how the customer loyalty of the younger generation is any different from the ordinary banking customers, Castells (2013). Studies on customer satisfaction and customer loyalty in retail banking Several emperical studies have been undertaken and explain the relationships between customer loyalty and customer satisfaction. For instance, Ennew, Binks and Chiplin (2015) tried to analyze the existing relationships between customer loyalty, satisfaction and profitability of an organization. The research findings indicated that customer satisfaction could actually be used to explain a good percentage of the imminent differences in the levels of customer satisfaction. Nonetheless, there are also numerous studies that investigate how service quality affects customer satisfaction. In this regard, Ganguli, and Roy (2011) confirm that service quality is an important dimension since it drives the levels of customer satisfaction. On the other hand, Ganguli, and Roy (2011) investigated how and defined the existing relationships between relational benefits gotten from the use of a product or service and satisfaction. In this sense, the research inferred that customer satisfaction was highly dependent on the levels of service satisfaction and also had a direct impact on accessibility as well as satisfaction with the frontline employees. Nonetheless, Mohsan, Nawaz, Khan, Shaukat and Aslam (2011) investigate how elements like image, perceived service quality and levels of satisfaction determines the loyalty of the customers. In this case, the research also found out that service quality is directly related to customer loyalty since it affects the levels of customer satisfaction. Other studies like Ennew, Binks and Chiplin (2015) also examines the element of customer loyalty and confirmed that perceived switching and satisfaction are some of the determinants of customer loyalty. Besides, Siddiqi (2011) examined how satisfaction, image, and perceived quality have an effect on the satisfaction levels of the banking customers. The study, therefore, confirmed that satisfaction levels or drivers of loyalty on banks as brands did vary among the financial institutions. On the other hand, Nawaz, Khan, Shaukat and Aslam (2011) tried to investigate how satisfaction rates differ between the old bank customers and the university students and concluded that the levels of satisfaction does not vary between the groups. However, the study noted differences in switching behaviors and loyalty (Nawaz, Khan, Shaukat & Aslam, 2011). In this case, the study confirmed that the retired customers are more loyal, ready to recommend the service provider and are high likely to remain customers of the firm on a long time basis. Besides, Siddiqi (2011) argues that some of the additional factors or drivers to customer loyalty include corporate image and customer loyalty. Also, Ganguli, and Roy (2011) sought to examine how elements like location convenient, reputation of the firm, shopping convenience, and direct mailing has direct impacts on retention and cross-buying. In this case, the study concluded that customer satisfaction hugely affect customer retention than cross-buying behaviors of the customers. According to Delcourt, Gremler, van Rie and van Birgelen (2013), there is the need to analyze how affective attitudes, overall satisfaction, and future behavioral intentions can be predicted in the retail banking sector. However, better predictions of customer behavior in the retail banking best achieved by looking at both satisfied and dissatisfied customers as separate entities and also treating different components or elements of retail banking separately. Therefore, Siddiqi (2011) confirms that overall satisfaction, as well as affective attitudes, can accurately predict the future customer behavioral intentions. Youth market- generation y The focus has shifted to the youth market because this customer segment is full with sub-groups. According to Van den Bergh and Behrer (2013), youths are increasingly being considered as attractive customers by financial and banking services because of their potential to change the organizations. Therefore, the future of a financial institutions fair share of the market will depend on the ability to retain the younger generation of the customers. Young people have low financial value as compared to the older customers though the generation Y has been found to be high in their purchasing power and have unique incomes (Van den Bergh and Behrer, 2013). Therefore, targeting the young customers imply that banks can attract loyal customers whose loyalty can be turned into establishing strong relationships that the company can benefit from in the future. The Generation Y compromises of the individuals born between 1977 and 1995 while other academicians refer to Generation Y as the individuals who were born between 1982 and 2001 (Savage, Savage & Collins-Mayo, 2011). Van den Bergh and Behrer (2013) define generation Y as having civic purposes, possessing big ambitions and also optimistic about their future. Furthermore, Lazarevic (2012) defines Generation Y as being environmentally and globally conscious, disruptive in nature, and having mistrust for the media. Besides, the Generation Y attaches a lot of value to reality television and has a high affinity for privacy (Lazarevic, 2012). As part of the consumers, Generation Y is well informed, astute and always looking for bargains (Savage, Savage & Collins-Mayo, 2011). Besides, Lazarevic (2012) posits that people of the particular age are most likely to use computers in their early years. The generation also uses the internet for business transactions and making decisions on their purchase behaviors (Van den Bergh & Behrer, 2013). Furthermore, the generation Y appreciative of changes but still maintains fashion and brand consciousness (Lazarevic, 2012; Van den Bergh & Behrer, 2013). Interestingly, the generation has poor financial management skills thus lack realistic approaches to planning for their finances. Studies on youth market and retail banking Gao, Rohm, Sultan and Huang (2012) investigated how behaviors and attitudes of the youth as a potential market and also identified some of the determinants of their levels of satisfaction and loyalty. In this case, the study established that the youth market is heterogeneous because they have different needs influenced by their behaviors. However, Delis (2012) indicate that there is enough evidence that banks have been able to deliver services to meet such needs as the studies show that the younger generation has shown high levels of satisfaction for such initiatives. A study of decision-making on the use of credit cards reveals the criteria that youths use when choosing their retail banks and also identifies some of the factors that influence the students choices in chooses the brands (Rajaobelina, Brun & Toufaily, 2013). Gao, Rohm, Sultan and Huang (2012), therefore, confirmed that word of mouth, as well as recommendations, are some of the important aspects when marketing the products for the youths. Besides, the youths choose their brands based on reputation and image though the location of the financial institutions is of less importance. However, Gao, Rohm, Sultan and Huang (2012) argue that convenience is a factor that youths look at while parent’s influence is less decisive in choosing the retail banks. Cultural difference is also an important factor to consider with the generation Y because according to Rajaobelina, Brun and Toufaily (2013), the younger generation has a high preference for the internet. Therefore, there are several studies that confirm that most of the youths have engaged in internet banking. However, it also evident that strategies used to the adult markets can actually be used to drive the purchasing behaviors of the younger generation (Akturan & Tezcan, 2012). Besides, Bahri, Sabahi, Taheri and Hatami, B (2013) confirms that organizations can only achieve greater customer satisfaction if they have the knowledge of how it has an impact on behavioral intentions. In most of the studies on youth and the retail banking, many of the financial institutions consider youths to be homogenous markets but studies confirm that they are more of heterogeneous. Conclusion In summary, customer satisfaction has become the main focal point for the most organizations since it is the only basis for retaining customers and building strong relationships with the brand or satisfaction. In this regard, many organizations have now shifted their focus to managing their relationships with the customers so as to maintain strong loyalty to their brands. In effect, it has been imperative for the researchers to study some of the determinants of customer loyalty but most agree that service quality and satisfaction as the main drivers of satisfaction. Besides, the banking sector has been working on ways to gain the fair share of the youth market or the generation Y. The implication is that this particular customer segment is unique and also has different factors that affect their purchasing behaviors. Therefore, the existing studies recommend various determinants of satisfaction and loyalty among the youth market that the retail banking sector can utilize to ensure that these particular customers stay loyal to their brands. 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