International Journal of Academic Research in Business and Social Sciences

July 2013, Vol. 3, No. 7

ISSN: 2222-6990

Impact of Customer Retention Practices on Firm

Performance
Gengeswari, K.
University Tunku Abdul Rahman, Faculty of Business and Finance, Department of Marketing,
Perak Campus, Jalan Universiti, Bandar Barat, 31900 Kampar, Perak, Malaysia
E-mail: [email protected]

Padmashantini, P.
University Tunku Abdul Rahman, Faculty of Business and Finance, Department of Marketing,
Perak Campus, Jalan Universiti, Bandar Barat, 31900 Kampar, Perak, Malaysia
E-mail: [email protected]

Sharmeela-Banu, S.A.
University Tunku Abdul Rahman, Faculty of Business and Finance, Department of Marketing,
Perak Campus, Jalan Universiti, Bandar Barat, 31900 Kampar, Perak, Malaysia
E- mail: [email protected]

DOI: 10.6007/IJARBSS/v3-i7/10 URL: http://dx.doi.org/10.6007/IJARBSS/v3-i7/10

Abstract

Customer retention has become the buzzword among both practitioners and academics due to
its significant impact towards the improvement in firm performance. Though firm performance
is normally evaluated using financial measures, this paper has utilized non-financial measure i.e.
customer satisfaction. This is due to the appropriateness of its application to measure
performance of service-oriented (retail) firms. This study was conducted using mall-intercept
surveys at AEON Perak, Malaysia whereby, it collected 200 completed questionnaires.
Hierarchical regression analysis was employed to examine the impact of customer retention
towards firm performance alongside with the demographic profiles as the moderator. Four
dimensions of customer retention namely word-of-mouth, price insensitivity, repeat purchase
and non-complaining behavior as well as demographic profiles are found to significantly
influence firm performance (customer satisfaction). Hence, it is recommended that
practitioners should be more considerate towards enriching the said dimensions of customer
retention in order to leverage its promising potential.

Keywords: Customer retention, firm performance, customer satisfaction, and measures of firm
performance

68 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

Customer Retention and Firm Performance

Customers are the fortitude of firms (Gupta and Zeithaml, 2006) hence their main
agenda is to produce a customer (Ang and Buttle, 2006). Firms would not be able to uphold and
increase their performance without customers (Gupta and Zeithaml, 2006; Buttle, 2004) as
firms are believed to have no revenues, no profits and therefore no market value (Ang and
Buttle, 2006). Furthermore, a worldwide survey conducted by The Economist revealed that
about 65% of respondents (senior executives of multinational companies) had admitted that
customers are their topmost priority to achieve their targeted firm performance in the next
three years (Gupta and Zeithaml, 2006). Similarly, several past studies claimed that the
existence of a firm is mainly to create and sustain an advantageous relationship with its
preferred customers (Ang and Buttle, 2006; Ryals and Knox, 2005)
As such, customer retention has been the center of discussion (Larivie’re and Poel,
2005; Terblanche and Hofmeyr, 2005) and the key agenda of firms since the last decade (Gupta
and Zeithaml, 2006; Buttle, 2004; Larivie’re and Poel, 2005). Saturated markets and high levels
of competition within industries have necessitated the practice of customer retention
strategies among firms (Singh, 2006; Honts and Hanson, 2011). In addition, it has been
discovered that recruiting new customers is essentially a costly affair as compared to retaining
the existing customers (Woo and Fock, 2004; Trasorras et al., 2009; Ghavami and Olyaei, 2006).
Accordingly, the practice is believed to enable the firms to sustain in the said intense
competition besides enjoying significant savings from retaining existing customers. This is
supported with past studies, which ascertained a significant relationship between improvement
in firm performance and customer retention practice (Ryals and Knox, 2005; Singh, 2006;
Trasorras et al., 2009; Stengel, 2003). For instance, firms can increase profits by 25 to 95
percent with a mere increase of 5 percent in customer retention rates. Thus, it is wise to
conclude that a small increase in customer retention rate will further accelerate firm’s profits
(Ryals and Knox, 2005; Reichheld and Schefter, 2000).
Review on past literatures indicates that firm performance is normally associated and
computed using either accounting or financial expressions (Gupta and Zeithaml, 2006; Ryals
and Knox, 2005; Avci et al., 2010) where profit, operational costs and market share are amongst
the most common measures used to assess a firm’s financial performance (FP) (Larivie’re and
Poel, 2005; Kaplan and Norton, 2001). Nevertheless, both practitioners and academicians claim
that firm performance should not be assessed solely based on the financial dimensions (Kaplan
and Norton, 2001; Reichel and Haber, 2005). Hence, consideration on the non-financial
performance (NFP) metrics is also equally important in measuring the performance of firms
particularly within the service sector (Ryals and Knox, 2005; Avci et al., 2010; Kaplan and
Norton, 2001). As such, this study intends to empirically examine the impact of customer
retention practice towards firm performance by focusing on the firm’s non-financial dimensions
within the Malaysian retailing sector in general, and AEON (key retailer), in specific.
Accordingly, implications were furnished in order to benefit both academic and practitioners
concerned.

69 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

Measures of Customer Retention

Customer retention has become the main agenda for the firms who emphasize on
maintaining a productive relationship with customers, besides functioning as a key instrument
to generate financial gains (Zeithaml et al., 1996; Kumar et al., 2007; Coviello et al., 2002). Past
literatures indicate that customer’s price insensitivity is the key stimulus for satisfying firm’s
customers (Ang and Buttle, 2006; Ryals and Knox, 2005; Trasorras et al., 2009; Eggert and
Ulaga, 2002). The retained customer would not mind paying slightly higher prices and look
forward for discounts as compared to the new customers (Ang and Buttle, 2006; Coviello et al.,
2002; Ahmad and Buttle, 2002). This is because retained customers believe that slightly higher
prices indicate higher quality besides indicating firm’s above average customer service (Ang and
Buttle, 2006; Honts and Hanson, 2011; Zeithaml et al., 1996). These customers normally shop
all year round even after discount periods at their preferred shops and find it worthwhile to do
so due to the value for money component (Ang and Buttle, 2006; Woo and Fock, 2004;
Zeithaml et al., 1996; Eggert and Ulaga, 2002).
Subsequently, customers who stay with a firm for a longer tenure are considered as
retained customers (Ang and Buttle, 2006; Larivie’re and Poel, 2005; Terblanche and Hofmeyr,
2005; Bowen and Chen, 2001). Thus, they discovered three distinctive methods i.e. behavioral,
attitudinal and composite which was used to measure their customer retention rate. Behavior
measurement is described as purchasing activities which are repetitious and consistent in
nature (Ang and Buttle, 2006; Zeithaml et al., 1996; Bowen and Chen, 2001). Furthermore, past
researchers have uncovered the existence of a linear relationship between repeat purchases
and customer satisfaction (Gupta and Zeithaml, 2006; Ang and Buttle, 2006; Gomez et al., 2004)
and when services rendered are above the expectation and perception, repeat purchases and
positive intentions regarding firms are generated (Chen and Hitt, 2002; Lopez et al., 2007).
Repeat purchasers frequently shop at firms, tend not to shop at other firms and are delighted
to shop at a particular firm. Furthermore, these customers are comfortable shopping at a
particular firm for some time and more and more purchases are done over time (Trasorras et
al., 2009; Zeithaml et al., 1996; Eggert and Ulaga, 2002; Bowen and Chen, 2001).
According to (Trasorras et al., 2009; Kaplan and Norton, 2001; Bowen and Chen, 2001)
customer retention rates can be measured using attitudinal data which mirrors the customers
emotional and psychological attachment i.e. loyalty, engagement and adherence. The next
approach of measuring customer retention combines both behavioral and attitudinal
measurements where it is known as composite measurement (Larivie’re and Poel, 2005; Bowen
and Chen, 2001). This measurement induces customers to spread positive word-of-mouth to
their social circle regarding firms and their offerings. Suggesting a particular firm when
suggestions are needed, volunteering to be a spokesperson or street ambassador for the firm,
sharing information about the firm are the common practice of customers who spread positive
word-of-mouth about the firm (Ang and Buttle, 2006; Woo and Fock, 2004; Trasorras et al.,
2009; Reichel and Haber, 2005; Fecikova, 2004; Fornell and Wernerfelt, 1987).
Besides, customer retention greatly depends on the non-complaining-behavior of
customers (Ang and Buttle, 2006; Zeithaml et al., 1996; Kumar et al., 2007). It is discovered that
satisfied customers are less likely to complain regarding firms (Ang and Buttle, 2006; Trasorras
et al., 2009) and their offerings (Avci et al., 2010; Fecikova, 2004). Retained customers would

70 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

possibly never complain even if they have to queue up and would never spread negative
comments or rumors about firms (Gupta and Zeithaml, 2006; Reichheld and Schefter, 2000;
Eggert and Ulaga, 2002; Laitini, 2002). These customers normally acknowledge good services
and assistance received from firms (Ang and Buttle, 2006; Stengel, 2003; Coviello et al., 2002;
Eggert and Ulaga, 2002). Furthermore, firms need to manage complaints well as it has a positive
effect on customer retention which in turn influences customer satisfaction (Ang and Buttle,
2006; Trasorras et al., 2009; Zeithmal et al., 1996; Kumar et al., 2007).

Measures of Firm Performance

Though financial performance (FP) metrics are the generic tool to assess firm’s
performance, recent studies claim that non-financial performance (NFP) metrics are of equal
importance in measuring performance of firms particularly within the service sector (Gupta and
Zeithaml, 2006; Ryals and Knox, 2005; Larivie’re and Poel, 2005; Avci et al., 2010; Kaplan and
Norton, 2001; Reichel and Haber, 2005). Accordingly, firms operating within the retailing sector,
a key component of the service sector, are also increasingly utilizing NFP metrics to evaluate
their performance (Ryals and Knox, 2005; Avci et al., 2010; Reichel and Haber, 2005). This is
because NFP metrics center on the long-term success of firms by concentrating on customer
satisfaction, internal business process efficiency, innovation and employee satisfaction
(Reichheld and Schefter, 2000; Avci et al., 2010; Laitini, 2002). Furthermore, NFP plays a major
role in assessing the performance of service firms and due to the nature of the service firms
which provide mostly intangible services, depending on manpower and customer centric
(Stengel, 2003; Avci et al., 2010). Besides that, it is also very challenging to collect financial
information from companies due to confidentiality concern unless they are public listed
companies.
Customer satisfaction is believed to be a vital element in evaluating the non-financial
performance of firms particularly service oriented firms (Trasorras et al., 2009; Avci et al., 2010;
Zeithaml et al., 1996; Eggert and Ulaga, 2002). This is in line with the past researches which
discovered a linear relationship between customer retention and customer satisfaction (Kumar
et al., 2007; Gomez et al., 2004; Lopez et al., 2007). It is learnt that firm performance can be
enhanced with the customers who are delighted when the service provided is above their
expectations (Trasorras et al., 2009; Zeithaml et al., 1996; Eggert and Ulaga, 2002; Bowen and
Chen, 2001). As such, it is vital for both academics and practitioners alike to comprehend the
forerunners and effects of customer satisfaction.
Since the last decade, numerous researchers have identified service quality, customer
expectations, disconfirmation, performance, desires, affect and equity as attributes of
customer satisfaction (Gupta and Zeithaml, 2006; Trasorras et al., 2009; Stengel, 2003; Kumar
et al., 2007; Ahmad Jamal and Kamal Naser, 2002). Satisfied customers always make repeat
purchases by buying again and again from the current firm or service provider because
customers feel that their needs are fulfilled by shopping at these firms and they tend to stay
loyal with the firms (Buttle, 2004; Honts and Hanson, 2011; Ahmad Jamal and Kamal Naser,
2002). These customers will also prefer to shop at the current firm and consider them as part of
their consideration set when they intend to purchase in the future probably because there is no
contractual obligation between them (Honts and Hanson, 2011; Cho et al., 2006). As a

71 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

consequence, customers feel comfortable to shop with the firm and this in turn improves firm
performance (Avci et al., 2010; Zeithaml et al., 1996). Besides, they would be delighted to
continue the purchasing relationship with the current firm and regard it as a pleasure to
maintain the said relationship (Bowen and Chen, 2001; Fornell and Wernerfelt, 1987).
According to (Lopez et al., 2007), perception of great service quality by customers, results in
extraordinary customer satisfaction. When services provided by service organizations exceed
the anticipation of customers, it satisfies the customers tremendously (Singh, 2006; Trasorras et
al., 2009; Ghavami and Olyaei, 2006; Lopez et al., 2007). Accordingly, it contributes towards
acceleration in the customer lifetime value which will in turn improve the performance of firms
(Ang and Buttle, 2006; Stengel, 2003; San Marti’n et al., 2003).
To conclude, this study utilizes customer retention practices as a tool to evaluate
customer satisfaction which is regarded as a key component of the firm’s non-financial
performance. This study considers repeat purchases, price insensitivity, word-of-mouth
communications and non-complaining-behavior are the key measures of customer retention
practice. In addition, the impact of the customer’s demographic profiles towards firm’s
retention practice and subsequently on the resultant firm performance is also measured. Figure
1 exhibits the association among the discussed research variables.

Figure 1: Research Framework

Customer Retention

 Word of Mouth Firm Performance

 Price Insensitivity  Non-Financial
 Repeat Purchase Performance
 Non-Complaining o Customer
Behaviour Demographic
Satisfaction
 Gender
 Age
 Marital Status
 Academic
Qualification
 Household
Income

Methodology

This study is descriptive in nature where it collects data only once from respondents via
cross-section approach. Target population of this study consists of shoppers at two AEON
shopping centers in Perak, Malaysia. AEON is a key retailer in Malaysia whereby currently it
leads the Malaysian retailing sector with its total revenue reaching RM3 billion in 2011 (Star
Online, 2013).
A research instrument was developed based on the review of past studies and further
refined based on the feedbacks from preliminary works i.e. pre-tests and pilot study. The
questionnaire was pre-tested by a group of academics from Faculty of Business and Finance,

72 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

University Tunku Abdul Rahman, Perak in order to ensure it has appropriate content, language,
instructions, layout and sequence. The pre-tested questionnaire was then used to conduct pilot
study among 20 shoppers at AEON Ipoh Garden, Perak.
The finalized questionnaire has two major components namely Section A and Section B.
Questions in Section A centers about respondents’ demographic aspects i.e. age, gender,
income, education level and marital status as well as their frequency of visiting AEON in a
month. Meanwhile, questions in Section B centers about research variables of this study
namely customer retention practices and resultant firm performance. Five-point likert scaling
technique (1= Strongly disagree and 5= Strongly agree) was employed in this section in order to
measure the variances in respondent’s responses.
Subsequently, mall-intercept survey was carried out in gathering data from potential
respondents. The respondents were selected based on the judgmental sampling technique.
Accordingly, only the first 100 shoppers (from each of the two AEON centers in Perak) with
AEON loyalty card who had willingly agreed to participate were considered in this survey. As
such, there were 200 respondents who had completed the questionnaires. Besides, the
respondents were approached as they were leaving the checkout counter either at the
department store or supermarket of AEON. This was to ensure that their shopping activity was
not interrupted. Such move was indeed a good technique in augmenting their inclination to
participate in the survey.
The 200 completed questionnaires were tested for the accuracy of their measurement.
Reliability of the measures was tested by computing Cronbach’s alpha. All the measures are
deemed to be highly reliable as their alphas amounting more than 0.8 with an overall alpha of
0.9496. Meanwhile, the validity of measures was tested using facial and (factorial) construct
validity. Facial validity was assessed via the execution of preliminary works where the resultant
feedbacks were used to further improve the questionnaire besides ensuring its content was
adequate to cover the research issues concerned.
On the other hand, construct validity was tested via the factor analysis. Attributes with
lower than 0.5 factor loading values were withdrawn as well as components with more than 1.0
Eigen value only were taken into consideration. As summarized in Table 1, the results of factor
analysis indicated that all the attributes had been grouped onto components that yield into a
rational reflection of the research framework of this study (Stapleton, 1998). As such, it had
justified the construct validity of the measurement used in this study. On the other hand,
cross-tabulation analysis was used to assess the association between demographic aspects and
frequency of visiting AEON. In addition, a hierarchical regression analysis was employed to
examine the impact of customer retention practice on the firm’s performance with the
moderation effect from the respondent’s demographic aspects.

Findings and Discussions

Table 2 summarizes the frequency counts for the demographic aspects of study’s
respondents. The majority of the study’s respondents consist of females (78.5%), young adults
(54%) and un-married (single-status) (63%) respondents. Besides, about 61% of the surveyed
respondents were found to have monthly household income below RM3000. Meanwhile,

73 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

slightly more than a quarter of study’s respondents were found to have Bachelor’s degree as
their highest education qualification.
Furthering the analysis, excerpt of cross-tabulation analysis (refer to Table 3) indicated
that demographic aspects of gender, age, income and marital status significantly influence
respondents’ frequency of visiting AEON. Indirectly, it implies that the demographic aspect of
education level was found to possess insignificant association with the respondent’s visit to
AEON. As shown in Table 3, male and married respondents were found to visit AEON more
frequently compared to other groups where the strength (Phi-value) of the said associations are
33.2% and 28.4%, respectively. Further, young adults were found to visit AEON more frequently
compared to their senior counterparts with the Phi-value of 0.344. Besides, respondents with
low household income were discovered as the frequent visitors of AEON compared to
respondents with above average household income. Strength of the said association is 39.4%.
Table 4 illustrates the output of factor analysis conducted on the measures of customer
retention practice. All 20 attributes were retained due to their loading value of 0.5 and above.
These attributes were then grouped into 3 factors and renamed as (i) non-complaining
returners (NCR), (ii) word-of-mouth (WOM) and (iii) price insensitivity. Factor of non-
complaining returners is considered as the most critical component of customer retention
practice due to its highest percentage of variance compared to the other two factors.
Nevertheless, it is believed that all these three factors are equally important dimensions of
customer retention practice due to the ignorable difference in their percentage of variance.
The retained attributes were then used for further analysis in order to preserve the consistency
of the findings.
Table 5 and 6 depict the output of hierarchical regression analysis conducted to
examine the impact of customer retention practice towards the firm’s (non-financial)
performance i.e. customer satisfaction. The said analysis was also employed to examine the
impact of demographic profiles towards the association between customer retention practice
and customer satisfaction. As shown in Table 5, both models (with and without the additional
variables) were found to have a significant value of 0.000 which implies that all the variables
(Model 1-customer retention practice; Model 2- customer retention practices and demographic
aspects) significantly influence customer satisfaction at AEON with an adjusted R-square value
of 60% and 62%, respectively. It shows that the strength of the said associations is above the
average indicators. Significant F change enhances that the entry of demographic profiles had
further improved the relationship between customer satisfaction and customer retention
practice despite the change is negligible (0.0285/ 2.85%).
In order to further assess the contribution of individual predictors towards customer
satisfaction, Beta value was referred. As indicated in Table 6, customer retention practice is the
sole contributor for customer satisfaction under Model 1 and hence, a detailed description is
deemed unnecessary. However, customer retention practice was still found to be a top
contributor (Model 2) despite the presence of demographic profiles. The contribution of
customer retention practice is subsequently followed by the demographic aspects of income,
age, marital status, education and gender with the beta value of -0.1281, 0.1243, 0.0925,
0.0652 and 0.0277, respectively. It is also worthwhile to note that only income and age of
demographic aspects, besides customer retention practices, have significant influences towards
customer satisfaction at AEON. Such results are similar to the findings obtained from cross-

74 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

tabulation analysis (Table 3) which discovered that income and age are significant key
contributors towards the respondent’s frequency in visiting AEON. It should be noted that
frequency of visiting is one of the key measures for customer retention practice and hence, the
vital role of income and age have been justified.

Theoretical and Managerial Implications

This study explores the impact of customer retention towards customer satisfaction
which is treated as a key measurement of the firm’s non-financial performance. The findings of
this study are expected to provide several useful and meaningful implications for both
academics and practitioners alike.
This study is believed to boost the database of existing literatures pertaining to
customer satisfaction and retention within the retailing sector. Further, this study has also
demonstrated that customer satisfaction is indeed a highly reliable measurement of non-
financial performance for service-oriented firms, in general and retailers, in particular. In
addition, the research model of this study could serve as a reference point for academics in
order to further enhance their students’ understanding on the key variables i.e. satisfaction,
retention and non-financial performance measures of this study. The findings of this study have
also highlighted that customer satisfaction could be the effect of customer retention practice
instead of coinciding; hence it has made clear the common misconception about similarity
between customer retention and satisfaction measures.
On the other hand, the practitioners i.e. retailers would be made aware of the
importance of factors generated from factors analysis i.e. non-complaining returners, word-of-
mouth and insensitivity in enhancing the customer satisfaction, in particular and non-financial
performance, in general. Accordingly, practitioners could improve these factors and their
respective attributes by devising appropriate strategies to retain more existing customers. For
instant, Table 4 indicates that repeat buyers and their non-complaining attitudes are key
components of customer retention practice. In line with this, firms need to preserve their
existing customers from switching to competitors by improving their existing price-based and
non-price based offerings. This would tie-up customers with the firm’s offerings and hence, the
firm itself.
Besides, Table 5 and 6 indicate that demographic aspects of respondents predominately
income and age were found to significantly influence the impact of customer retention on the
customer satisfaction. This has emphasized the importance of demographic variables for firm’s
customer retention strategies. Accordingly, firms should customize their business strategies
according to the demographic aspects of customers that they deal with. Such move would
permit the firms to easily reach new customers besides staying closer to the existing customers.

Limitation

This study was carried out among shoppers at a specific retailer and hence, the
generalization of this study’s findings could be an issue. Participation of 200 respondents had
further raised concerns on the generalization of findings. Accordingly, it is suggested to

75 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

investigate shoppers from different retailers in order to obtain varied responses. Besides,
higher participation from larger sample is needed to improve the generalization of findings.
Besides, the utilization of judgmental sampling technique due to the absence of
appropriate sampling frame has raised the concern towards the sampling elements i.e.
respondents of this study. Hence, it is recommended to refer to an appropriate sampling frame
to identify suitable respondents via probability sampling technique. Such technique would
allow every element in the population to be probabilistically chosen which in turn would reduce
the apprehension towards suitability of study’s respondents.
As survey method might confine the respondents’ insights based on the predetermined
responses given in the questionnaire, it is recommended to include unstructured questions in
order to obtain comprehensive and in-depth insights from respondents. In addition, it is also
highly recommended to employ a mixed mode research in order to enrich the findings
particularly if the data collection involves more than one group of respondents. Future
researches should also explore other aspects of customer retention practice and different
measures of non-financial performance to further expand the said areas of investigation.

Conclusion

Customer retention practice is very vital for firms to move beyond satisfying both
existing and new customers where the practice is proved to be an important tool to improve
firm’s performance particularly from their non-financial aspects. Hence, the practice should
become a compulsory management tool for retailers to sustain in the competitive retailing
sector. The findings of this study alongside the implications given are expected to enlighten the
practices of customer retention within the Malaysian retailing sector.

References

1. Ahmad Jamal and Kamal Naser (2002). Customer satisfaction and retail banking: an
assessment of some of the key antecedents of customer satisfaction in retail banking.
International Journal of Bank Marketing. 20(4): 146-160.
2. Ahmad, R. and Buttle, F. (2002). Customer retention management – a reflection of theory
and practice: A case study. Marketing Intelligence and Planning. 20(3): 149-161.
3. Ang, L. and Buttle, F. (2006). Customer retention management processes - a quantitative
study. European Journal of Marketing. 40(½): 83-99.
4. Avci, U., Madanoglu, M. and Okumus, F. (2010). Strategic orientation and performance of
tourism firms: evidence from a developing country. Tourism Management. 1–11.
5. Bowen, J. and Chen, S. (2001). The relationship between customer loyalty and customer
satisfaction. International Journal of Contemporary Hospitality Management, 13(5): 213-
217.
6. Buttle, F. (2004). Customer Relationship Management: Concepts and Tools. Elsevier: Oxford.
7. Chen, P.Y. and Hitt, L.M. (2002). Measuring switching costs and the determinants of
customer retention in internet-enabled businesses: a study of the online brokerage
industry. Information Systems Research, 13 (3): 255–274.

76 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

8. Cho, S., Woods, R., Jang, S. and Erdem, M. (2006). Measuring the impact of human resource
management practices on hospitality firms’ performances. International Journal of
Hospitality Management, 25 (2): 262-77.
9. Coviello, N.E., Brodie, R.J., Danaher, P.J. and Johnston, W.J. (2002). How firms relate to
their markets: An empirical examination of contemporary marketing practices. Journal of
Marketing. 66(3): 33-46.
10. Eggert, A. and Ulaga, W. (2002). Customer perceived value: a substitute for satisfaction in
business markets. Journal of Business and Industrial Marketing. 17(2/3): 107-18.
11. Fecikova, I. (2004). An index method of customer satisfaction. TQM Magazine. 16 (1): 57-66.
12. Fornell, C. and Wernerfelt, B. (1987). Defensive marketing strategy by customer complaint
management: a theoretical analysis. Journal of Marketing Research. 24: 337-46.
13. Ghavami, A. and Olyaei, A. (2006). The impact of CRM on customer retention. Master’s
Thesis. Lulea University of Technology.
14. Gomez, M.I., McLaughlin, E.W., and Wittink, W.R. (2004). Customer satisfaction and retail
sales performance: An empirical investigation. Journal of Retailing. 80(4): 265-278.
15. Gupta, S. and Zeithaml, V. (2006). Customer metrics and their impact on financial
performance. Marketing Science, 25(6): 718–739.
16. Honts, R. and Hanson, J. (2011). Maximizing customer retention a strategic approach to
effective churn management. Accenture White Paper. PUBLISHER.
17. Kaplan, R. S. and Norton, D. P. (2001). Transforming the balanced scorecard from
performance measurement to strategic management. Part-1. Accounting Horizon. 15(1):
87–104.
18. Kumar, V., Andrew, J.P. and Robert, P.L. (2007). How valuable is word of mouth? Harvard
Business Review, 85(10): 139–146.
19. Laitinen, E. (2002). A dynamic performance measurement system: evidence from small
Finnish technology companies. Scandinavian Journal of Management. 18(1): 65–99.
20. Larivie`re, B. and Poel, D. V. D (2005). Predicting customer retention and profitability by
using random forests and regression forests techniques. Expert Systems with Applications.
29 (2): 472–484.
21. Lopez, J., Hart, L.K. and Rampersad, A. (2007). Ethnicity and customer satisfaction in the
financial services sector. Managing Service Quality. 17(3): 259-274.
22. Reichel, A. and Haber, S. (2005). A three-sector comparison of the business performance of
small tourism enterprises: An exploratory study. Tourism Management. 26: 681–690.
23. Reichheld, F.F. and Schefter, P. (2000). E-Loyalty: Your secret weapon on the web. Harvard
Business Review, 78(4): 105-113.
24. Ryals, L.J. and Knox, S. (2005). Measuring risk-adjusted customer lifetime value and its
impact on relationship marketing strategies and shareholder value. European Journal of
Marketing. 39 (5/6): 456-472.
25. San Martı´n, S., Gutie´rrez, J. and Camarero, C. (2003). Firms’ signals as factors that
engender consumers’ trust. 32nd EMAC Conference, University of Strathclyde, Glasgow. 20-
23 May.
26. Singh, H. (2006). The importance of customer satisfaction in relation to customer loyalty
and retention. UCTI Working Paper. Asia Pacific University College of Technology and
Innovation, Malaysia.

77 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

27. Stapleton, C.D. (1997). Basic concepts in exploratory factor analysis (efa) as a tool to
evaluate score validity: A right-brained approach. Annual meeting of the Southwest
Educational Research Association. 21-23 January. Austin: 1-11.
28. Star Online (2013, February 12). AEON Gears for Growth. Assessed on 18 March ,
http://thestar.com.my/news/story.asp?file=/2013/2/12/metrobiz/12692478&sec=metrobiz
29. Stengel, G. (2003). Ten tips for measuring and improving performance. Stengel Solutions.
http://www.stengelsolutions.com/tips14.htm. Accessed on 28th February 2012.
30. Terblanche, N.S. and Hofmeyr, J. (2005). A study of two customer retention measures: the
American customer satisfaction index and the conversion model. ANZMAC Conference:
Relationship Marketing (Consumer).Cape Town. 5-7 December.
31. Trasorras, R., Weinstein, A. and Abratt, R. (2009). Value, satisfaction, loyalty and retention
in professional services. Marketing Intelligence & Planning. 27 (5): 615-632.
32. Woo, K. and Fock, H.K.Y. (2004). Retaining and divesting customers: an exploratory study of
right customers, at-risk right customers, and wrong customers. Journal of Services
Marketing. 18 (3): 187-197.
33. Zeithaml, V.A., Berry, L.L., and Parasuraman, A. (1996). The behavioral consequences of
service quality. Journal of Marketing, 60(2): 31-46.

78 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

List of Tables

Table 1: Comparison between Variables of Study’s Research Framework and Factors

Generated
Research Framework Factor analysis
Repeat purchase Non-complaining
Non-complaining behavior returners
Word of mouth Word of mouth
Price insensitivity Price insensitivity

79 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

Table 2: Demographic Analysis

Frequency %
Demographics (=200)
Gender
Female 157 78.5
Male 43 21.5
Age
Less than 20 yrs 31 15.5
20-30 yrs 108 54
31-40 yrs 35 17.5
41-50 yrs 20 10
51-60 yrs 6 3
Marital status
Single 126 63
Married 71 35.5
Others 3 1.5
Education level
School Leavers 34 17
Certificate 36 18
Diploma/Advanced Diploma 51 25.5
Undergraduate 54 27
Postgraduate 24 12
Professional Qualification 1 0.5
Monthly Household Income
Less than RM 3000 123 61.5
RM 3000 - RM 4000 25 12.5
RM 4001 - RM 5000 12 6
RM 5001 - RM 6000 10 5
More than RM 6001 30 15

80 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

Table 3: Summary of Cross-tabulation Analysis between Frequency of Visits and Demographic

Aspects
Demographics Frequency (%) Person Chi-square Phi
High Low Value Df Asym.Sign. Value Approx.Sign
Gender Male 51.7 19.2 22.03 6 0.01 0.332 0.001
Age 20-30 62.1 - 23.62 12 0.023 0.344 0.023
> 41 - 6
Income < 51.7 - 31.09 12 0.02 0.394 0.002
RM3000
> - 3.6
RM5000
Marital Married 51.7 26.5 12.68 6 0.048 0.282 0.048
Status

81 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

Table 4: Factor Analysis on Customer Retention Practice

Non- WOM Price
Measures of Customer Retention complaining
Returners Insensitivity
Frequent Shopper 0.8090
Shopping at AEON for Some Time 0.7565
Do not Prefer Other Retailers 0.7510
Delighted to Shop at AEON 0.6570
Prefer to Shop at AEON 0.5860
Never Complain 0.5160
Positive WOM 0.5349
Acknowledge Good Customer 0.6236
Service
Happy with Assistances Obtained 0.5834
Rarely Dissatisfied with Services 0.6602
Increased Spending 0.6948
Often Recommend AEON 0.5586
Share Information About AEON 0.5836
Prefer Suggesting AEON 0.6433
Volunteer as Spokesperson for 0.5560
AEON
Willingness to Spend 0.5834
Shop at Regular Price 0.8020
Shopping Influenced by Non-Price 0.6239
Continue Shopping after Sales 0.6633
Value for Money 0.6648
% Variance 4.3319 3.8954 3.6825
Eigen values 23.6594 21.4769 20.4127

82 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

Table 5: Hierarchical Regression Analysis

Model ANOVA R R Adj. R Std. Error
Square Square Estimate
F Sign.
1* 307.5286 0.000 0.7800 0.6083 0.6064 0.3794
2** 56.4019 0.000 0.7980 0.6368 0.6255 0.3700

Change Statistics
R
Square Sig. F
Change F Change df1 df2 Change
0.6083 307.5286 1 198 0.000
0.0285 3.0275 5 193 0.012

Predictor*: (Constant), Customer Retention

Predictor**: (Constant), Customer Retention, iGender, iAge, iMarital, iEducation, iIncome
Dependent variable: Customer Satisfaction

83 www.hrmars.com/journals
 International Journal of Academic Research in Business and Social Sciences
July 2013, Vol. 3, No. 7
ISSN: 2222-6990

Table 6: Hierarchical Regression Analysis (Cont’)

Unstandardized Standardized
Coefficients Coefficients
Model T Sig.
Std.
B Error Beta
1 (Constant) 0.9910 0.1361 - 7.2807 0.0000
Customer retention 0.7478 0.0426 0.7800 17.5365 0.0000
(CR)
2 (Constant) 1.0009 0.1362 - 7.3462 0.0000
Customer retention 0.6426 0.0557 0.6703 11.5357 0.0000
(CR)
Gender* CR 0.0112 0.0203 0.0277 0.5509 0.5823
Age*CR 0.0220 0.0124 0.1243 1.7774 0.0471
Marital Status*CR 0.0314 0.0240 0.0925 1.3095 0.1919
Education*CR 0.0082 0.0074 0.0652 1.1077 0.2694
Income*CR -0.0156 0.0069 -0.1281 -2.2729 0.0241

84 www.hrmars.com/journals