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Journal of Marketing and Management, 6 (1), 16 -27, May 2015 16
The Impacts of Customer Loyalty on Negative Word-of-Mouth Communication and
Repurchase Intention
Bunyamin Topcu, PhD
Marmara University, Istanbul/Turkey
[email protected]
Adnan Duygun
Akademik Platform, Kadiköy – Istanbul/Turkey
[email protected]
Abstract
This research aims to develop and test a model to reveal the influence of customer loyalty on
negative word-of-mouth communication and repurchase intentions. Data were gathered
through survey from bank customers who have co-branded credit cards and use it at least one
year. The results show that the customer loyalty decreases the bad impact of the negative wordof-mouth intention and has positive effects on repurchase intention.
Key Words: Customer Loyalty, Negative Word-of-Mouth Communication Intention,
Repurchase Intention, Co-branded Credit Cards
Introduction
Companies try hard to survive in the cost-cutting and intensive competitive pressure. Thus, in
today’s ever-changing business world, the race for a higher market share has become linked to
the concept of customer loyalty. As customers become harder to reach and engage in a
technologically advanced and information rich world, the need for businesses to create loyal
Journal of Marketing and Management, 6 (1), 16 -27, May 2015 17
customers and sustainable business and plan strategies aimed at retention, has never been more
important. In this regard, loyalty marketing is one of the most important vehicle not only to
increase customer centric initiatives but also for increasing direct and indirect revenues and
business continuity especially for many retail companies including banks, airlines, hotels etc.
(Donavan & Samler, 1994). Hence, it is very important to estimate the customers’ future
decision since the company can take corresponding actions proactively.
Creating a good customer loyalty helps companies to be different from their competitors and
be one step in front of them. Therefore, the customer loyalty is important matter of concern of
the companies. So, establishing a loyalty program strategy should be a company’s highest
priority. Because, loyalty marketing is a system that was designed to create stronger bonds
between customers and businesses has turned into a massive revenue stream. The program
revenue generated via alliances with credit card issuers and consumer businesses that profit off
loyalty programs are making businesses rich (De Boer & Gudmundsson, 2012).
Especially, in recent years, almost all banks have significantly increased their variety of
services in individual banking and focused on the customer loyalty. Co-branded credit cards
are examples of this case. In addition, co-branded credit card is an outcome of bank’s and
airlines/hotels’ collaborative loyalty initiatives and today there are many examples of this case.
Through these credit cards banks aim to keep their number of customers, assure customer
satisfaction and even turn satisfaction to customer loyalty (Savaşçı & Tatlıdil, 2006).
From this point on, it is useful to examine the customer loyalty and so, it is noteworthy to keep
in mind that customer loyalty may also affect negative word-of-mouth communication
intention and repurchase intention of customers. This situation is much more important in
service industry and, consequently, this research has been conducted on banking services. The
extreme competition and saturation in the financial markets and the growing demand of
products and services have forced banks to create robust Customer Relation Management
Journal of Marketing and Management, 6 (1), 16 -27, May 2015 18
(CRM) strategies and increased the need for creating loyal customers. To point out the findings
in marketing and finance literature with displaying the interaction between customer loyalty,
word-of-mouth communication and repurchase intention is the main purpose of this study.
Literature Review
Brand or company loyalty is a key marketing asset for companies. Marketers evaluate aspects
of it through a number of metrics, including repurchase rate, share of requirements, willingness
to pay a price premium, and other measures. In increasingly competitive markets, being able
to build loyalty in customers is seen as the key factor in winning market share (Jarvis & Mayo,
1986). A robust loyalty strategy must be executed through a comprehensive customer loyalty
programmes that have currently been adopted by firms seem to be aimed at motivating repeat
purchases. (Hart et al., 1999). Loyalty depends on in a number of factors, including satisfied
and influential customers who are willing to recommend the brand, hidden values or emotional
benefits, which are effectively communicated and a strong image for the product, the user, or
the usage experience (Farris et al., 2010).
In todays’ globalised competition the strategic importance of satisfaction, quality and
consequently loyalty has increased through winning consumer preferences and maintaining
sustainable competitive advantages (Petruzzellis et al., 2008). Moreover, the bank attributes
such as perceived convenience, service quality and price (Bhatnagar & Ratchford, 2004) which
also shapes customers’s attraction. As a result choice or purchase decision starts and it includes
satisfaction and met expectations. Hence, the importance of a bank attribute for the choice or
repurchase decision might vary for different situations and customers.
We can say that the most fundamental test of loyalty, however, can be captured in a simple
question: When faced with a situation in which a brand is not available, will its customers
search further or substitute the best available option? When a brand enjoys loyalty at this level,
Journal of Marketing and Management, 6 (1), 16 -27, May 2015 19
its provider can generate powerful leverage in trade negotiations. Often, such loyalty will also
give providers time to respond to a competitive threat. Customers will stay with them while
they address the threat (Farris et al., 2010).
Thus; high switching barriers may mean that customers have to stay with suppliers who do not
care for the satisfaction created in the relationship. On the other hand, customer satisfaction is
usually the key element in securing repeat patronage, this outcome may be dependent on
switching barriers in the context of service provision (Jones et al., 2000). One of the remarkable
research which was done by Forrester Research indicates that %71 of banks’ customers are
reluctant to switch (Little & King Integrated Marketing Group Inc., 2011). Moreover, the
financial impact of a one percent increase in customer retention rate has been calculated (Van
den Poel & Larivière, 2004).
Besides, there are some researches proving the impact of customer loyalty such as; in his book
Ferederick F. Reichheld (Reichheld, 1996) finds that 5% increase in customer retention yields
a 25 percent to 100 percent increase in profits, on the orther hand, McCaughey and Behrens’
findings presented indicate that airlines’ loyal customers positively impacts the probability that
a customer chooses a more expensive fare (McCaughey & Behrens, 2011). Generally; there is
a strong connection between customer loyalty and repurchase decision (of same product and
from the same company) (Walters & Bergiel, 1989) and in order to generate customer loyalty,
service recovery is important. A successful service recovery increases the customer
satisfaction, repurchase or revisit intention and positive or negative word-of-mouth, whereas
an unsuccessful trial of service recovery creates a second negative effect, multiplying the
effects of the first failure on the customer (Ekiz et al., 2008).
Journal of Marketing and Management, 6 (1), 16 -27, May 2015 20
Methodology and Findings
This section contains; research purpose, scope and limitations, research model, variables and
hypotheses, sampling plan and finally results and suggestions.
The Purpose, Scope and Limitations of the Research
The purpose of our research is to develop and test a model to reveal the influence of customer
loyalty on negative word-of-mouth communication intention and repurchase intentions, and to
examine the relationships between them. Anyone having a co-branded credit card and use it at
least one year is in the scope of this research. Taking into consideration the high number of
customers and the difficulty in finding all of them as well as the limitations of time and cost, it
has been decided to conduct a pilot study on bank customers who meet the above mentioned
criteria. The research has been carried out involving customers residing in Istanbul.
The Model, Variables and Hypotheses of the Research
As seen in Figure 1, customer loyalty affects the customers’ negative speeches or negative
word-of-mouth communication intention and repurchase intention.
Journal of Marketing and Management, 6 (1), 16 -27, May 2015 21
Figure 1: Model of Research
Variables of the research are shown in Table 1. Additionally, the resources that were used while
defining and adapting the variables are shown in Table 1. The variables were asked in
questionnaire format by using a five-point Likert scale.
Table 1: Variables of the Research
Variables
Number of Variables Resource
Customer Loyalty
4
Chitty et al. (2007), Luarn and Lin
(2003)
Negative Word-of-Mouth
3
Communication Intention
Blodget et al.(1997), Davidow
(2003), Wirtz and Mattila (2004)
Variables
Repurchase Intention
Variables
3
Blodget et al.(1997), Davidow
(2003), Wirtz and Mattila (2004)
These variables were that are shown in Table 1, readjusted to the banking services on which
the study was to be conducted. Additionally, variables on negative word-of-mouth
communication intention were asked as negative sentences in the questionnaire. Then,
necessary changes were done and the obtained data were included in the research.
Journal of Marketing and Management, 6 (1), 16 -27, May 2015 22
Hypotheses of the research can be listed as it follows:

H1: Customer loyalty has a statistically negative impact on negative word-of-mouth
communication intention at a significance level of α = 0,05.

H2: Customer loyalty has a statistically positive impact on repurchase intention at a
significance level of α = 0,05.
Sampling Plan
The number of persons as bank customers involved in the present study is to many. Because of
the above mentioned reasons, it has not been possible to perform the questionnaire on all of
them. For this reason, a sampling plan has been conceived. As it is not possible for most of the
times to know the standard deviation and variance in the population, it has to be estimated.
Such estimation is easier achieved via rates. Even in cases in which there is no information
about these rates, the value (0,5 X 0,5 = 0,25), where P (1-P) is the highest, can be accepted.
Because of all these reasons, the most common sampling formula in practice is the following:
n= P (1- P)/(e / z)2 (Kurtuluş, 1989). According to this formula, the sample size should be 384
persons of 75.846 persons as the value of z is 1,96 for the maximum variance (0,5 X 0,5 = 0,25)
and 95 % of confidence interval.
Concerning the sampling method, the simple random sampling was used. Some 1000 persons
were included in the research in case there may be questionnaires which are not correctly filled
in or not all the people are accessible. Of all the questionnaires, some 935 were observed to be
useful.
Journal of Marketing and Management, 6 (1), 16 -27, May 2015 23
Results and Suggestions
Measuring variables of customer loyalty, negative word-of-mouth communication intention
and repurchase intention, as mentioned earlier in Table 1, have been defined with the help of
important studies in literature. The research has been conducted on customers possessing cobranded credit cards at least one year. By focusing on the model in Figure 1, two hypotheses
have been put forward and tested. As seen in Table 2, the results of these hypotheses can be
summarized as the following:
Table 2: Hypotheses Test Results
H1: Customer loyalty has a statistically negative impact on negative wordACCEPTED
of-mouth communication intention at a significance level of α = 0,05.
H2: Customer loyalty has a statistically positive impact on repurchase
ACCEPTED
intention at a significance level of α = 0,05.
Implications
The present research offers important results to managers. Firstly, customer loyalty has a
negative effect on negative word-of-mouth communication intention, we can say that the good
customer loyalty would reduce the negative word-of-mouth communication intentions of the
customers. This should increase the possibility for the bank to be chosen by its customers and
potential customers.
Secondly, it is clear that the customer loyalty have a positive effect on repurchase intention;
therefore, the studies conducted on customer loyalty will increase the possibilities of
repurchase intention in the future.
Journal of Marketing and Management, 6 (1), 16 -27, May 2015 24
Limitations and Future Research
There are some limitations of this research. For instance, the study has been conducted only in
relation to the banking services (co-branded credit cards) and in a specific area which is that of
Istanbul, Turkey. Therefore, the results of the research cannot be generalized to other service
areas and other geographical regions. For this reason, the research should be performed
separately for other services and other geographical regions.
Conclusion
Customer loyalty can occur directly through a compnay’s products and services and recently
has received attention from marketing researchers. This research has proven that customer
loyalty affects negative word-of-mouth communication and repurchase intention; namely
product choice, overall attitudes about products and services, trust, and purchase intentions.
Finally, repurchase intention and willingness to recommend which includes financial outcomes
like market share, reduced communication costs and shareholder value etc. The increased profit
from satisfaction and loyalty comes from several factors, i.e. reduced marketing and
operational costs, and increased sales. Loyal customers are less likely to switch because of
price and they make more purchases than similar non-loyal customers (Reichheld and Sasser,
1990). Also, this research shows that the customer loyalty have a negative impact on negative
word-of-mouth communication intention and positive impact on repurchase intention.
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Bünyamin Topçu works as a visiting lecturer in Marmara University and Istanbul University
and works as an independent consultant for loyalty marketing initiatives due to his professional
experience. He has published academic books and papers in finance and loyalty marketing. He
holds a PhD degree in Finance and Banking as well.
Adnan Duygun works as a freelance management consultant and lectures at various
universities. Mr. Duygun holds master degrees in marketing, management and international
trade. Mr. Duygun is also in process of completing his Ph.D. thesis at Istanbul University.