Building Customer Loyalty: A Customer Experience Based Approach in

303 Pages·2009·2.17 MB·English

by  Martina Donnelly

Building Customer Loyalty: A Customer
Experience Based Approach in a Tourism
Context

Martina Donnelly
Bachelor of Business Studies in Marketing (Honours)

A thesis submitted in fulfilment of the requirement for a Masters
degree in Business Studies by Research

Research Supervisors:
Dr Mary T. Holden & Dr. Patrick Lynch

Submitted to Waterford Institute of Technology, June 2009
DECLARATION 
The author hereby declares that, except where duly acknowledged and referenced, this
research study is entirely her own work and has not been submitted for any degree or
other qualification in Waterford Institute of Technology or any other third level
institution in Ireland or abroad.

_________________
Martina Donnelly,
June 2009

I
ABSTRACT 

Building Customer Loyalty: A Customer Experience Based Approach in a
Tourism Context

In light of the challenges facing the Irish tourism industry, Fáilte Ireland (TPDS report)
emphasises that the future success of tourism enterprises relies upon delivering a
‘unique and complete holiday experience’. In addition, it has recognised that the
underpinning critical success for the tourism industry is building customer loyalty
through the creation of the total customer experience. A review of the literature
indicates a general consensus that quality, value and satisfaction are major determinants
of customer loyalty. However, while much is known about the relationship between the
aforementioned variables and customer loyalty, these variables do not fully explain how
customer loyalty is built. Therefore, this research study seeks to reduce the existing gap
in extant knowledge by identifying and examining a new determinant of customer
loyalty – the customer experience. The overarching objective of this thesis was to
examine the relationship between customer experience and customer loyalty. Indeed,
both customer relationship management (CRM) and brand literature indicate that
loyalty-building is found in the customer’s experience with the product/service, hence it
is perceived that a fundamental key to building customer loyalty is the successful
management of each individual customer’s experience. The customer experience has
been defined as involving three components: functional clues, humanic clues, and
mechanic clues. Each one of these clue sets have been investigated individually in
relation to their impact on loyalty. Based on the literature, the relationship between
customer experience and loyalty in this study has been hypothesised to

H There is a direct relationship between functional clues and loyalty.
1.
H The relationship between functional clues and loyalty is mediated by the
2.
variables - value and quality.
H There is a direct relationship between mechanic clues and loyalty.
3.
H The relationship between mechanic clues and loyalty is mediated by value
4.
and quality.
H There is a direct relationship between humanic clues and loyalty.
5.
H The relationship between humanic clues and loyalty is mediated by value and
6.
quality.
The study utilised two phases of data collection – an initial qualitative phase followed
by a second phase involving a quantitative methodology. The study collected data from
both sides of a dyad: key informants from the hotel industry and the hotels’ customers.
The study involved assessing three and four star hotels in the cities of Waterford,
Wexford and Kilkenny in the South East region of Ireland. The data was analysed using
Nvivo (N7) and the Statistical Package for Social Science (SPSS V.15).
The qualitative phase of the study involved in depth interviews with hotel key
respondents. This provided the necessary information to create a detailed blueprint of
the customer hotel experience based on four critical stages and on each of the
experience clues – functional, mechanic and humanic. Indeed, this was a major outcome
II
of the qualitative phase and informed the development of the customer survey in the
second quantitative phase. The quantitative phase revealed that the relationship between
the functional and mechanic clue sets and loyalty is totally mediated by the value and
quality variables. The relationship between the humanic clue set and loyalty was both
direct and indirect; the indirect relationship was mediated through value and quality.
Due to the lack of research and interest in this area, this study not only contributes
substantially to extant academic knowledge, but also makes a significant contribution to
tourism practice. Ultimately it bridges the knowledge gap by conceptualising customer
loyalty through identifying a number of key determinants. Hence, a major theoretical
contribution of this thesis is the fact that it both synthesises and builds on extant efforts
to conceptualise and build loyalty. The main practical implication is that it provides best
practice guidelines for building customer loyalty through the customer experience.
Indeed, for destination managers it highlights the importance of focusing on each of the
experience clues - functional, mechanic and humanic - in order to create the total
customer experience, a key determinant in building customer loyalty. Furthermore, this
study also offers a methodological contribution of data collection in the form of
blueprinting – a critical technique in illustrating the customer experience process. While
this technique has been in existence for the last twenty years, it has not commonly
utilised. Therefore, this study offers a guideline for future researchers in terms of this
data collection technique.

III
ACKNOWLEDGEMENTS 

I would first and foremost like to sincerely thank my supervisors Dr. Mary T. Holden
and Dr. Patrick Lynch for their guidance, assistance and encouragement during the
course of this research. Their support has been invaluable and much appreciated.

Furthermore, I would like to thank WIT for supporting me throughout my studies. I am
especially grateful for the financial support provided by Fáilte Ireland. I also wish to
acknowledge each of the hotels involved in the study, which provided considerable
access to their hotels. The project could not have been accomplished without their
support. An individual and very special thank you has to go to Mr. Paul McDaid and
Colin Aherne for providing me with the initial contact for each hotel. Also, I am
indebted to all the hotel staff/management who took the time out from their busy
schedules to talk to me during the first phase of the research.

I would like to thank Mr. Sean Byrne and Ms. Fiona Murphy for their assistance and
contribution towards my methodology.

For their support, both academic and social, I want to thankfully acknowledge Mr.
David Power, Ms. Josephine Matthews, Ms. Jennifer Hussey, Ms. Rita Bourke, Ms.
Alice Denwood, Mr. Darren O’Brien and Mr. Anthony Quinlan.

To my best friend throughout all my college years, Dave, thanks for being there, this
would have been a different experience without you and I’m glad it wasn’t.

On a personal note, I also wish to lovingly acknowledge my family without whom this
postgraduate work would not have been accomplished. Thank you to my parents who
have supported and encouraged me, not only throughout this research study but my
entire academic life. Thank you both for putting up with me for all these years.

Thanks to my sisters, Caroline, Josepha, Phil and Ollie (the four dolls) – who each
encouraged and supported me in so many ways, from listener, to chauffeur, to advisor,
to administrative assistant. Thank you to my brothers, Francis, Pat and Sean for your
support, encouragement and for always asking questions even when you had no idea of
what I was actually doing.

To Paul, thanks for your constant support, understanding and always believing in me.

Finally, I thank God for all His blessings.

IV
Dedication
This thesis is dedicated to my sister and best friend Phil, for her unending support
throughout my life and for never failing to inspire me.

To succeed... you need to find something to hold on to,
something to motivate you, something to inspire you.

Tony Dorsett

V
TABLE OF CONTENTS 
DECLARATION...................................................................................................................................... I 
ABSTRACT .......................................................................................................................................... II 
ACKNOWLEDGEMENTS ...................................................................................................................... IV 
DEDICATION ....................................................................................................................................... V 
TABLE OF CONTENTS .......................................................................................................................... VI 
APPENDICES ...................................................................................................................................... XI 
LIST OF FIGURES ............................................................................................................................... XII 
LIST OF TABLES ................................................................................................................................ XIII 
CHAPTER ONE ..................................................................................................................................... 1 
INTRODUCTION .................................................................................................................................. 1 
1.1 BACKGROUND TO THE STUDY ....................................................................................................... 1 
1.2 RESEARCH AIMS AND OBJECTIVES ................................................................................................. 4 
1.3 RESEARCH OUTLINE ...................................................................................................................... 4 
1.3.1 QUALITATIVE RESEARCH, PHASE ONE: IN‐DEPTH INTERVIEWS WITH MANAGERS AND BLUEPRINT ........................ 5 
1.3.2 QUANTITATIVE RESEARCH, PHASE TWO: CUSTOMER SURVEYS ..................................................................... 5 
1.4 STRUCTURE OF THESIS .................................................................................................................. 6 
1.5 CONCLUSION ................................................................................................................................ 8 
CHAPTER TWO .................................................................................................................................. 11 
THE TOTAL CUSTOMER EXPERIENCE .................................................................................................. 11 
2.1 INTRODUCTION ........................................................................................................................... 11 
2.2 TOURISM SECTOR REVIEW ‐ DESTINATION EXPERIENCE ............................................................... 13 
2.3 DESTINATION MANAGEMENT ..................................................................................................... 15 
2.4 AN INTRODUCTION TO THE CUSTOMER EXPERIENCE CONCEPT .................................................... 22 
2.4.1 THE CUSTOMER EXPERIENCE DEFINED ................................................................................................... 22 
2.4.2 EXPERIENCES VERSUS SERVICES ............................................................................................................ 23 
2.5 THE NATURE OF CUSTOMER EXPERIENCE .................................................................................... 24 
2.5.1 EXPERIENCE LEVELS ............................................................................................................................ 25 
2.5.2 EXPERIENCE DIMENSIONS .................................................................................................................... 26 
2.5.3 EXPERIENCES: SERVICE LOGIC MODEL .................................................................................................... 30 
2.6 CUSTOMER EXPERIENCE MANAGEMENT ..................................................................................... 33 
2.6.1 MANAGING CUSTOMER EXPERIENCE CLUES ............................................................................................ 33 
2.6.1.1 Functional Clues .................................................................................................................... 35 
2.6.1.2 Mechanic Clues ..................................................................................................................... 36 
2.6.1.3 Humanic Clues ...................................................................................................................... 40 
VI
2.7 EXPERIENCE VALUE MANAGEMENT ............................................................................................. 44 
2.8 EXPERIENTIAL MARKETING.......................................................................................................... 46 
2.9 CONCLUSION .............................................................................................................................. 48 
CHAPTER 3 ........................................................................................................................................ 49 
BUILDING CUSTOMER LOYALTY......................................................................................................... 49 
3.1 INTRODUCTION ........................................................................................................................... 49 
3.2 THE CUSTOMER LOYALTY CONCEPT ............................................................................................. 50 
3.2.1 THE CONCEPTUALISATION OF CUSTOMER LOYALTY ................................................................................... 52 
3.2.2 MAJOR DETERMINANTS OF LOYALTY ..................................................................................................... 55 
3.3 PERCEIVED CUSTOMER QUALITY ................................................................................................. 57 
3.3.1 PERCEIVED CUSTOMER QUALITY MEASURES ........................................................................................... 58 
3.3.2 SERVICE QUALITY IN RELATION TO CUSTOMER EXPERIENCES AND LOYALTY ................................................... 60 
3.4 CUSTOMER VALUE CONCEPT ....................................................................................................... 62 
3.4.1 CUSTOMER VALUE MEASURES ............................................................................................................. 63 
3.4.2 CUSTOMER VALUE IN RELATION TO CUSTOMER EXPERIENCES AND LOYALTY .................................................. 66 
3.4.3 THE ROLE OF CUSTOMER VALUE IN BUILDING LOYALTY ............................................................................. 67 
3.5 CUSTOMER SATISFACTION CONCEPT ........................................................................................... 69 
3.5.1 CUSTOMER SATISFACTION AND CUSTOMER LOYALTY ................................................................................ 70 
3.5.2 CUSTOMER SATISFACTION MEASURES ................................................................................................... 71 
3.3.5 CUSTOMER SATISFACTION IN RELATION TO CUSTOMER EXPERIENCES ........................................................... 72 
3.6 INTERRELATIONSHIPS BETWEEN QUALITY, VALUE AND SATISFACTION ........................................ 73 
3.7 CUSTOMER EXPERIENCE MODEL OF CUSTOMER LOYALTY ............................................................ 74 
3.7.1 QUALITY, VALUE AND SATISFACTION ..................................................................................................... 75 
3.7.2 QUALITY, VALUE, SATISFACTION AND LOYALTY ........................................................................................ 76 
3.7.3 CUSTOMER EXPERIENCE, QUALITY, VALUE, SATISFACTION AND LOYALTY ...................................................... 77 
3.8 CONCLUSION .............................................................................................................................. 80 
CHAPTER FOUR ................................................................................................................................. 82 
PHILOSOPHICAL UNDERPINNING AND METHODOLOGY ..................................................................... 82 
4.1 INTRODUCTION ........................................................................................................................... 82 
4.2 PHILOSOPHICAL PERSPECTIVES ................................................................................................... 82 
4.2.1 THE SUBJECTIVIST‐OBJECTIVIST DEBATE ................................................................................................. 87 
4.3 QUALITATIVE VERSUS QUANTITATIVE RESEARCH METHODOLOGIES ............................................ 92 
4.3.1 TRIANGULATION AND A MIXED‐METHOD APPROACH JUSTIFICATION ........................................................... 94 
4.4 SECONDARY RESEARCH VERSUS PRIMARY RESEARCH .................................................................. 96 
4.5 RESEARCH DESIGN ...................................................................................................................... 97 
4.5.1 RESEARCH DESIGN TYPES .................................................................................................................... 98 
4.6 DATA COLLECTION METHODS .................................................................................................... 101 
VII
4.6.1 FOCUS GROUPS ............................................................................................................................... 101 
4.6.2 PARTICIPANT OBSERVATION............................................................................................................... 102 
4.6.3 INTERVIEWS .................................................................................................................................... 103 
4.6.4 SURVEY RESEARCH ........................................................................................................................... 104 
4.6.5 CUSTOMER EXPERIENCE “BLUEPRINT” ................................................................................................. 105 
4.7 SAMPLE DESIGN ................................................................................................................................. 106 
4.8 PHASE ONE – INTERVIEWS AND BLUEPRINT DESIGN .................................................................. 113 
4.8.1 INTERVIEW SAMPLE .......................................................................................................................... 113 
4.8.2 INTERVIEW ACCESS, PROTOCOL AND INTERVIEW GUIDE .......................................................................... 114 
4.8.3 CUSTOMER EXPERIENCE BLUEPRINT .................................................................................................... 116 
4.9 PHASE TWO – CUSTOMER SURVEY ............................................................................................ 117 
4.9.1 SURVEY SAMPLE AND IMPLEMENTATION .............................................................................................. 117 
4.9.2 QUESTIONNAIRE DESIGN ................................................................................................................... 118 
4.9.2.1 Questionnaire Format ......................................................................................................... 118 
4.9.2.2 Wording .............................................................................................................................. 119 
4.9.2.3 Question Sequence ............................................................................................................. 119 
4.9.2.4 Instructions ......................................................................................................................... 119 
4.9.2.5 Aesthetics ............................................................................................................................ 120 
4.9.2.6 The Cover Letter .................................................................................................................. 121 
4.9.2.7 Measurement Scales ........................................................................................................... 121 
4.9.3 VALIDITY AND RELIABILITY OF SURVEYS ................................................................................................ 126 
4.10 DATA ANALYSIS ....................................................................................................................... 128 
4.11 DATA PREPARATION AND ANALYSIS FOR QUANTITATIVE RESEARCH ........................................ 129 
4.12 RESEARCH LIMITATIONS .......................................................................................................... 133 
4.13 CONCLUSION........................................................................................................................... 133 
CHAPTER FIVE ................................................................................................................................. 135 
RESEARCH FINDINGS ....................................................................................................................... 135 
5.1 INTRODUCTION ......................................................................................................................... 135 
5.2 PHASE ONE: QUALITATIVE FINDINGS ......................................................................................... 136 
5.2.1 HOTEL CUSTOMER PROFILE ............................................................................................................... 136 
5.2.2 MAIN REASONS CUSTOMERS STAY ...................................................................................................... 137 
5.2.3 MARKETING AND ADVERTISING ACTIVITIES ........................................................................................... 138 
5.2.4 VALUE MOST ABOUT THE CUSTOMER EXPERIENCE ................................................................................. 138 
5.3 THE HOTEL CUSTOMER EXPERIENCE BLUEPRINT ........................................................................ 141 
5.3.1 PART ONE: THE HOTEL EXPERIENCE STAGES ......................................................................................... 141 
5.3.1.1 Stage 1: Reservation ........................................................................................................... 142 
5.3.1.2 Stage 2: Arrival/ Check‐in ................................................................................................... 143 
5.3.1.3 Stage 3: In‐house ................................................................................................................ 145 
5.3.1.4 Stage 4: Check‐out/Departure ............................................................................................ 146 
5.3.2 PART TWO: THE EXPERIENCE CLUES .................................................................................................... 147 
5.3.2.1 Functional Clues .................................................................................................................. 147 
5.3.2.2 Mechanic Clues ................................................................................................................... 151 
5.3.2.3 Humanic Clues .................................................................................................................... 154 
VIII
5.3.3 BLUEPRINT DESIGN OF THE HOTEL CUSTOMER EXPERIENCE...................................................................... 155 
5.7 PHASE TWO: QUANTITATIVE FINDINGS ..................................................................................... 160 
5.7.1 RESPONSE RATE .............................................................................................................................. 160 
5.7.2  PROFILE OF QUESTIONNAIRE RESPONDENTS ......................................................................................... 161 
5.8 VALIDITY, RELIABILITY AND FACTOR ANALYSIS OF VARIABLES ................................................... 163 
5.8.1 FUNCTIONAL CLUES.......................................................................................................................... 166 
5.8.2 MECHANIC CLUES ............................................................................................................................ 167 
5.8.3 HUMANIC CLUES ............................................................................................................................. 168 
5.8.4 VALUE AND MONETARY VALUE .......................................................................................................... 169 
5.8.5 QUALITY, SATISFACTION AND LOYALTY ................................................................................................. 169 
5.9 ANALYSIS OF HYPOTHESISED CONCEPTUAL LOYALTY MODEL ..................................................... 170 
5.10 TESTING UNDERLYING DATA ASSUMPTIONS:  MODEL ONE AND MODEL TWO ......................... 172 
5.11 STUDY’S OBJECTIVES AND HYPOTHESES .................................................................................. 178 
5.11.1 TESTING FOR MEDIATING EFFECTS – FUNCTIONAL CLUES:  MODEL THREE ................................................ 180 
5.11.2 TESTING FOR MEDIATING EFFECTS – MECHANIC CLUES:  MODEL FOUR ................................................... 184 
5.11.3 TESTING FOR MEDIATING EFFECTS – HUMANIC CLUES:  MODEL FIVE ...................................................... 187 
5.12 ANALYSIS OF VARIABLE MEANS ............................................................................................... 190 
5.13   SUMMARY ............................................................................................................................ 191 
CHAPTER SIX ................................................................................................................................... 193 
DISCUSSION .................................................................................................................................... 193 
6.1 INTRODUCTION ......................................................................................................................... 193 
6.3 THE REVISED CEL MODEL ........................................................................................................... 194 
6.3.1 FUNCTIONAL CLUES ‐ QUALITY, VALUE AND LOYALTY.............................................................................. 195 
6.3.2 MECHANIC CLUES ‐ QUALITY, VALUE AND LOYALTY ................................................................................ 199 
6.3.3 HUMANIC CLUES ‐ VALUE, QUALITY AND LOYALTY VARIABLE ................................................................... 203 
6.4 CONCLUSION ............................................................................................................................ 207 
CHAPTER SEVEN ............................................................................................................................. 209 
CONCLUSION .................................................................................................................................. 209 
7.1 INTRODUCTION ......................................................................................................................... 209 
7.2 THE OUTCOME OF THE PROJECT AS RELATED TO THE RESEARCH OBJECTIVES ............................. 209 
7.2.1 RESEARCH OBJECTIVE ONE: TO EXAMINE THE RELATIONSHIP BETWEEN CUSTOMER EXPERIENCES AND CUSTOMER 
LOYALTY. ................................................................................................................................................ 210 
7.2.2 RESEARCH OBJECTIVE TWO: IDENTIFY AND EXAMINE CURRENT CUSTOMER EXPERIENCES WITH REGARD TO 
FUNCTIONAL, MECHANIC AND HUMANIC CLUES WITHIN THE HOTEL SECTOR IN THE SOUTH EAST OF IRELAND. .............. 211 
7.2.3 RESEARCH OBJECTIVE THREE: TO DEVELOP A DETAILED BLUEPRINT OF THE CUSTOMER EXPERIENCE IN RELATION TO 
THE HOTEL STAY ....................................................................................................................................... 212 
7.2.4 RESEARCH OBJECTIVE FOUR: TO IDENTIFY AND EXPLORE THE RELATIONSHIPS THAT EXIST BETWEEN THE 
INDEPENDENT VARIABLES: THE CUSTOMER EXPERIENCE, SERVICE QUALITY, CUSTOMER VALUE, CUSTOMER SATISFACTION 
AND THE DEPENDENT VARIABLE ‐ CUSTOMER LOYALTY. ..................................................................................... 212 
7.2.5 RESEARCH OBJECTIVE FIVE: TO DEVELOP A NEW AND MORE DYNAMIC LOYALTY‐BUILDING MODEL. .................. 214 
IX