Consumer Loyalty and Satisfaction

 

Coca-Cola Company

According to Coca-Cola’s Annual Report (2002), the Coca-Cola Company in 2002 achieved worldwide unit case volume growth of five percent; the growth rate was 4.5 percent. Cash from operations was a record $4.7 billion, a 15 percent increase over 2001. Reported earnings per share were $1.23 after a reduction of $0.54 resulting from accounting changes and several other items, including $0.11 per share impact from stock option expense.

 

Supported by strategic investment and innovation, brand Coca-Cola products achieved 3 percent volume growth in North America, led by the introduction of Vanilla Coke and the continued rollout of diet Coke with lemon. Vanilla Coke brought in eight million new consumers who were not drinking Coca-Cola; in addition, diet Coke with lemon attracted over three million consumers to diet Coke.

 
Such a pace of innovation around the Coca-Cola  brand is unprecedented. It was nearly 100 years before the company launched the first extension of Coca-Cola—diet Coke, in 1982. It took another ten years to build diet Coke into a worldwide brand. It’s now the number-three soft drink in the world, and number-two in some markets.

Responsibility for the world’s most beloved and valuable brand requires extreme care in how, when, and why we extend it. The company does not risk consumer loyalty to the brand or seek an artificial bump in volume by spinning out product after product to chase the latest fad. By staying close to the brand’s identity, Coca-Cola has created new products such as Vanilla Coke, diet Vanilla Coke, and diet Coke with lemon. These products have lasting appeal that are expected to generate equally lasting value for share owners. Further, the quality and reliability of Coca-Cola products, the unparalleled brand appeal and distribution, combined with valuable consumer insights and strong customer relationships have generated sustained profitability for Coca-Cola, Fanta, Sprite and our other carbonated soft drinks for many years.

 
Over the past three years, Coca-Cola has grown internally and through strategic acquisitions to become the world’s largest producer of ready-to-drink juices and juice drinks. Outside the United States, its share of sales for the sports-drink category is one of the largest in the world. Across 70 countries, POWERADE grew 25 percent and increased its share of the category. Moreover, the company has been successful in strategically building a water business that enhances our offerings to our customers. Together with Dasani, which grew volume 40 percent last year as the number-two bottled water brand, we have become one of the leading players in the water category in North America, both in terms of share of sales and dollar value.

Coca-Cola is a classic example of a brand with long-term consumer loyalty. Coca-Cola has revolutionized the way people think about soda. Through proper brand building and the introduction of related offerings such as Diet Coke, Fanta, and Sprite, the Coca-Cola Company made worldwide impact. It catapulted beverage sales to more than one billion servings per day. What separate Coke from other brands are its name, identity, and loyal following--all of which are marketing creations. The company's comprehensive business strategy revolves around the fact that the Coca-Cola brand is the core, and that consumer demand drives all.

 

Consumer Loyalty

A better appreciation of the underlying forces that influence the loyalty of customers--particularly their attitudes and changing needs—helps the Coca-Cola Company develop targeted efforts to correct any downward migration in their spending habits long before it leads them to defect. Such an appreciation also helps the company improve its current efforts to encourage other customers to spend more.

Differentiating and measuring degrees of loyalty is an evolving craft. Companies first tried to measure and manage their customers' satisfaction in the early 1970s, on the theory that increasing it would help them prosper. In the 1980s, they began to measure their customers' rates of defection and to investigate its root causes. By measuring the value of the customers themselves, some companies also identified high-value ones and became better at preventing them from defecting. These ideas are still important, but they are not enough. Managing migration--from the satisfied customers who spend more to the downward migrators who spend less--is a crucial next step.

Service delivery is an interactive and dynamic process, that from the consumer's point of view is much more than a passive exchange of money for a particular service. Characteristics of services often require customers to be actively involved in helping to create the service value -- either by serving themselves or by cooperating and often working collaboratively with service personnel (Claycomb, Inks & Lengnick-Hall 2001). In high-contact systems customers can influence the time of demand, the exact nature of the service, and the quality of service (Lovelock & Young 1979). If consumers somehow become better customers -- that is, more knowledgeable, participative, or productive -- the quality of the service experience will likely be enhanced for the customer and the organization (Bowers, Martin & Luker 1990).

Organizations that capitalize on customers' active participation in organizational activities can gain competitive advantage through greater sales volume, enhanced operating efficiencies, positive word-of-mouth publicity, reduced marketing expenses, and enhanced customer loyalty (Reichheld & Sasser, 1990). Customers who actively participate in organizational activities can directly increase their personal satisfaction and perceptions of service quality (Bowers, Martin & Luker 1990).

Brand and Consumer Loyalty

More businesses are considering the importance of building and managing brand names because of the intense competition within the globalized economy, emerging trends in marketing, brand extension, acquisitions, and many other activities that cause confusions in the business (Laforet & Saunders, 1999). Consequently according to Balmer and Wilson (1998), researchers in marketing, public relations, and corporate communications are concerned with corporate identity management and the benefits branding bring to the business. Moreover, building brand names means announcing the identity of a company (Asher, 1997). The focus in building brand names therefore is to develop an intuitive and memorable image of the firm, services or products by presenting what is unique and special about the company.

When it comes to the buying preferences of today's consumers, a major new business study reveals that what keeps Americans buying a particular brand has less to do with pricing and merchandising than with how well the company treats its customers (Kara, 1998). Conducted for SOCAP by The Center for Client Retention, the study finds a direct correlation between buying intent and a customer's experience with a company's consumer affairs department. Specifically, 90 percent of those consumers who were delighted with their experience say they will continue to buy the product/service while only 37 percent of the customers who were dissatisfied with their experience say they will remain brand loyal.

            Underscoring the importance of these "relationship" factors, the study charts the influence of these attributes on brand loyalty and finds a direct association. Specifically, 88 Percent of respondents who gave "ability to demonstrate concern and interest" the highest ranking said they would be very likely to repurchase a company's products, while only 3 percent would be very unlikely to repurchase. The reaction to representatives who "show enthusiasm" was the same: 88 percent would be very likely and only 3 percent very unlikely to repurchase a company's products.

       In fact, the SOCAP study finds that when customers are satisfied with the way a company handles their questions or complaints, they sometimes become more loyal than customers who never experience a problem. Another way that customer service impacts sales is through the "word of mouth" factor, whereby consumers tell their family and friends about their positive and negative experiences with a company. In this study, 58 percent of all respondents told others about their experience with a consumer affairs department, with most telling three or more people.

Consumer Satisfaction

       In today’s business world, the value and importance of customers is not something that should be set aside by companies. Marketing plans and strategies would be incomplete without paying much consideration to the customers. Customers will and should always be a part of the agenda in any marketing plan of any company. Because of the implications for profitability and growth, customer retention is potentially one of the most powerful weapons that companies can employ in their fight to gain a strategic advantage and survive in today's ever increasing competitive environment (Lindenmann, 1999).

     Nowadays, companies’ concern does not only evolve around managing finances and operations. Companies have realized the importance of managing reputational risk. Business image and reputation are considered as intangible assets which are as equally important as tangible assets. These assets are founded on the companies’ relations with their customers. Integrity, transparency, and accountability are important elements in this foundation. Hence, it is important for companies to be able to secure this relationship by being able to keep the degree of these three elements high (Sercovich, 2003).

            The companies’ commitment to further improve on their accountability, transparency, and integrity should not be considered merely as an effort to serve Public Relations purposes. Instead, this commitment should be regarded as an effort to maintain the long-term sustainability of these companies. As the customers demand for higher standards, any shortcomings on the part of the companies to deliver would jeopardize the life of their respective company. Hence, it is really important for companies to not only maintain and protect these intangible assets. It is also a must that they increase these assets for future benefits (Sercovich, 2003).

       The customer-company relationship is based on a continuum wherein both “always-a-share” and “lost-for-good” relationships occupy the two extremes of the continuum. In an “always-a-share” relationship, transactions are arms-length and discreet. Customers are valuable and at the same time, replaceable. On the other hand, in a “lost-for-good” relationship, the probability that the customer will purchase again from the same company is extremely low when the customer decides to terminate the use of a product due to product defects or problems (Jacobs, Latham, & Lee, 1998).

        The disconfirmation paradigm has been the dominant model used in explaining the customer’s satisfaction or dissatisfaction. There are actually 3 possible reactions that may come from the customer. Two of them are positive reactions while the other one is a negative one. A customer shows a positive reaction either when the product is able to perform as what he/she has expected (zero positive index) or the product is able to exceed its expected performance (positive disconfirmation index). On the other hand, a negative reaction (negative disconfirmation index) is expected when the product performs below the expectation of the customer (Jacobs et al., 1998).

Customer satisfaction refers to the consumer’s positive subjective evaluation of the outcomes and experiences associated with using or consuming the product or service. Satisfaction occurs when the product has been able to meet or exceed the conceived expectations that the customer has (Padilla, 1996). Furthermore, customer satisfaction may also be considered as the measure of the high degree of quality of the product (Jacobs et al., 1998).     

Consumer satisfaction may be considered as the measure of quality of a particular product (Jacobs et al., 1998). However, it should not be limited to the traditional concept of quality. In its traditional concept, manufacturers view quality as inherent in the product or service. Once a product or service has been delivered or sold, its quality is believed to have been established (Leon & Crosby, 2003). However, Leon and Crosby (2003) argued that a product’s quality still has some other dimensions that are under the manufacturer’s control. These dimensions may still be modified and enhanced even after delivery.