1. technology and computing
2. enterprise technology
3. customer relationship management

International Journal of Management and Humanity Sciences. Vol., S (4), 4071-4077, 2014
Available online at http://www.ijmhsjournal.com
ISSN 2322-424X©2014
The Study of Effective Factors on Customer Relationship Management
in Perfume and Cosmetic Industries in Boushehr Province
1
2
Ahmad Qaderian, and Gholamreza Jamali
1- Science and Research Branch, Islamic Azad University, Boushehr, Iran
2-Persian Gulf University, Boushehr, Iran
*Corresponding author E-mail: [email protected]
Abstract
Customer attraction and retention has been a crucial concept in perfume and
cosmetic industries. This study investigates the influence of relationship quality on
customer attraction and retention in perfume and cosmetic industries. Empirical
testing using a survey of 410 perfume and cosmetic customers in Boushehr province
confirms all of our hypothesized effects. The findings of the research indicate that
relationship quality has a direct and positive impact on customer attraction and
retention. Finally, findings and managerialimplications are discussed.
Keywords:relationship quality, customer attraction and retention
Introduction
Globalization, intense competition and advances in information and communication technology have
dramatically changed the contemporary business marketplace. These changes have forced firms to seek
solutions to stay competitive and survive in the marketplace. In such a condition, firms need to focus on the
management of the relationships with customers. Successful relationships with selected customers bring into
the firm the benefits of higher profitability through reduced marketing and administrative costs and better
sales growth (Low and Johnston, 2006).According to Colgate and Danaher (2000) and Karakostas et al.
(2005) acquisition of a new customer is five times more expensive than to get an existing customer to make
a new purchase. Reichheld and Sasser (1990) estimate that the retention of an additional 5% of customers
can increase profit by nearly 100%. Moreover, a dissatisfied customer causes market damage because they
are more likely to defect to competition and more likely to persuade others to defect (Feinberg et al.,
2002;zgener and İraz, 2006). Thus, Development of close and long-term relationship with customers and
turning them into loyal customers are of critical importance.
Currently, firms implement Customer Relationship Management (CRM) systems to facilitate the maintenance
of this relationship. CRM is the key competitive strategy (zgener and İraz, 2006) which is underpinned by
information and communication technologies (Ryals and Knox, 2001). CRM has been widely recognized as
an important business approach to build long-term, profitable relationships with specific customers (Coltman
et al., 2011; Nagi et al., 2009).
CRM is a set of processes enabling systems to support a business strategy (Ӧzgener and İraz, 2006). It
encompasses the management of all possible ways that an organization interacts with its customers
(Karakostas et al., 2005). CRM is a cross-functional organizational process that concentrates on
establishing, maintaining, and enhancing long-term relationships with attractive customers (Parvatiyar
andSheth, 2001; Verhoef, 2003; Jayachandran et al., 2005; Payne andFrow, 2005; Roos et al., 2009). It
covers all the processes related to customer acquisition, customer cultivation, customer retention and the
reactivation of defected customers (Benoit andVan den Poel, 2012).According to Chang (2007), the nature of
a CRM system aims to maximize customer value in the long-term, by focusing business processes,
marketing and customer service.
Past researches indicate that CRM leads to greater customer loyalty (Izquierdo et al., 2005). The benefits of
CRM have been well documented in the litreature (e.g.,Sheth and Parvatiyar, 2000; Reichheld, 2001; Bolton
et al., 2004; zgener and İraz, 2006; Meyer- Waarden, 2007). Some of these benefitsinclude Gathering and
integrating information on customers, Developing a closer relationship with customers, Increasing customer
satisfaction, Declining customer acquisition costs, Ensuring sustainable competitive advantage, Maximizing
Intl. J. Manag. Human. Sci. Vol., S (4), 4071-4077, 2014
profitability due to increased sales, Increasing customer loyalty as a result of more personal and efficient
service (zgener and İraz, 2006).
This paper intends to empirically examinethe relationship between relationship quality and customer
attraction and retention in perfume and cosmetic industries in Boushehr province in order to provide insights
for managers who are involved in relationship quality initiatives.A close relationship between the customers
and perfume and cosmetic companies is a key factor towards the profitable relationship between them.
Long-term relationship between perfume and cosmetic companies and customers will offer many benefits as
customers are the main source of profits for the companies.
The remainder of this paper is organized as follows. The next section provides the theoretical framework of
the study. The concept of relationship quality and its key components are explained based on extensive
literature review. Furthermore,hypotheses pertaining to the relationship quality and customer retention is
discussed in this section. In section 3, the research methodology is described. The results of the hypotheses
testing is presented in section 4. Finally, we draw some conclusions and implications.
Literature Review and Hypotheses Development
Relationship quality
Relationship quality is defined asthe overall assessment of the strength of a relationship and the extent to
which it meets the needs and expectations of the parties based on the past history of successful or
unsuccessful events (Smith, 1998). Relationship quality is emerging as a key business strategy for retaining
customers in a highly competitive marketplace (Meng andElliot, 2008). The relationship marketing literature
recognizes the relationship quality construct as an important determinant of the longevity and intensity of
relationships (Hennig-Thurau, 2000).
Relationship quality is typically conceptualizedas a higher order construct consisting several distinct but
related dimensions (Roberts et al., 2003). Crosby et al. (1990), Kim and Cha (2002), Hsieh and Hiang(2004),
Lin and Ding (2005), Wong et al. (2007), Moliner et al. (2007b), Macintosh (2007) and Meng and Elliot (2008)
consider it a construct composed of two dimensions: trust and satisfaction. Ulaga andEggert(2006), Moliner
et al. (2007a), Beatson et al. (2008), Qin et al. (2009) conceptualize relationship quality composed of three
dimensions: trust, satisfaction and commitment. Roberts et al. (2003) used four variables to measure
relationship quality (trust, commitment, satisfaction and affective conflict).Consistent with
previousresearches,we adopt trust and satisfaction as the core components ofrelationship quality and
evaluate their impact on customer attraction and retention.
Trust
Trust is “the willingness to rely on an exchange partner in whom one has confidence” (Moorman et al.,
1993). It is also defined as “the expectations held by the consumer that the firm is dependable and can be
relied on to deliver on its promises” (Sirdeshmukh et al., 2002). Trust is commonly considered the primary
and fundamental requirement for successful relationship development and enhancement (Medlin et al.,
2005). Nowadays, business relationships are based on trust.
Past researches have investigated the conceptof trust with respect to business relationships (Narayandas
and Rangan, 2004).Literatureindicates that trust plays a significant role in the creationand preservation
oflong-term relationships. Reichheld and Schefter (2000) state that “to gain the loyalty of customers, you
must firstgain their trust”. The importance of trust in explaining customerloyalty is well supported and
discussed in literature(Chaudhuri and Holbrook,2001; Sirdeshmukh et al.,2002; Ball et al., 2004; Hikkerova,
2011). Trust has been shown to be a strong determinantof loyalty.
Satisfaction
Satisfaction is the degree to which performance meets customer’s expectations (Negi and Ketema, 2013). It
is an emotional state that occurs in response to a positive evaluation of the interaction experiences (Chang
and Ku, 2009). Satisfaction of customer’s needs is posited at the center of the exchange relationship
(Roberts et al., 2003).
Literature suggests that if customers are satisfied with a brand, they increasingly tend to repurchase its
products or services and become loyal customers. Satisfaction has a significant role to the strength of a
relationship. A customer who is not satisfied with a product or service is not expected to have a good
relationship with the firm (Roberts et al., 2003). Researches indicate that customer satisfaction has a
significant positive impact on customer retention. Customer satisfaction is considered as one of the main
antecedents of customer loyalty (Reynolds and Beatty, 1999; Verhoef, 2003; Evanschitzky and Wunderlich,
2006). It has been hypothesized to be a direct and positive driver of loyalty.
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Brand
There are divergent streams of research on the concept ofbrand image.Brand image has been defined as
the consumer’s mental picture of the offering (Dobni and Zinkhan, 1990). Itincludes symbolic meanings that
customers associate with the specific attributes of the product or service. In business markets, brand image
can also be expected to play an important role, especially where it is difficult to differentiate products or
services based on tangible quality features (Cretu and Brodie, 2007).
Reputation
The concept of corporate reputation draws academic attention from the management, economics, sociology,
and marketing areas (Brown et al., 2006). Reputation is one of the primary contributors to customer
attraction and retention. Companies and brands with a good reputation are likely to attract more customersas
customers anticipate that a brand will meet expectations (Loureiro and Kastenholz, 2011).Thus, a reputation
for high quality means more customers, fewer dissatisfied customers, and increased profitability (Bennett
and Barkensjo, 2005).
Customer attraction and retention
Retention refers as a commitment to continue to do business or exchange with a particular company on an
ongoing basis (Syaqirah and Faizurrahman, 2014). Retention is also defined as the customers’ liking,
identification, commitment, trust, willingness to recommend, and repurchase intentions (Stauss et al. 2001;
Syaqirah andFaizurrahman, 2014).
Although the process of attracting new customers is important, most companies make customer retention a
top priority for several reasons. Long-term customers are less expensive, buy more, take less of a
company’s time, are less sensitive to price differences, and bring in new customers (Benoit andVan den
Poel, 2012). As it mentioned, the cost of winning a new customer is about five times more expensive than
the cost of keeping an existing one (Colgate and Danaher, 2000; Karakostas et al. 2005).
Based on the above considerations and literature review regarding relationship quality and customer
attraction and retention, the conceptual framework of the study (figure 1) and the following hypothesizes are
developed.
 H1: relationship quality has direct and positive impact on customer attraction and retention in perfume and
cosmetic industries.
 H2: customer trust has direct and positive impact on customer attraction and retention in perfume and
cosmetic industries.
 H3: customer satisfaction has direct and positive impact on customer attraction and retention in perfume
and cosmetic industries.
 H4: reputation has direct and positive impact on customer attraction and retention in perfume and cosmetic
industries.
 H5: brand has direct and positive impact on customer attraction and retention in perfume and cosmetic
industries.
Reputation
Customer Trust
Relationship Quality
Brand
Customer Satisfaction
Figure 1. Research framework
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Customer
Attraction and
Retention
Intl. J. Manag. Human. Sci. Vol., S (4), 4071-4077, 2014
Methodology
Data collection and sample
Figure 1 demonstrates the conceptual framework of the study. This framework is developed based on
previous academic literature and concepts. As mentioned earlier, the purpose of this research is to
understand the nature of the relationship between relationship quality and customer attraction and retention.
After an almost extensive literature review, research questionnaire is designed. In section A of the
questionnaire, the questions are about the respondents’ profile. In section B, the questions ask the
respondents about their perceptions and knowledge on research constructs. This section includes 30
questions in total and uses the five point Likert-scales with the values: 1 = Strongly Disagree, 2 = Disagree,
3= Neither Agree/Disagree, 4 = Agree and 5 = Strongly Agree. Then, a pilot test (of sample size 40) is
conducted which the result shows that the questionnaire is able to meet the research objectives and can be
preceded. As it shown in table 1, the Cronbach’s alphas of the all dimensions ranged from 0.73 to 0.92 which
indicates a good reliability.The test for validity is also conducted through discussion with faculty members.
The number of statistic samples is determined to have 384 samples according to the following relation with
the error level of 5%, confidence level of 95% and adaption ratio of 50 %.
NZ∝ p. q
n=
e
Finally, a large-scale survey ofcustomers in perfume and cosmetic industries in Boushehr province is
conducted to confirm the hypothesized relationships.In total, 450 questionnaires randomly distributed among
the population. After deleting questionnaires with incomplete information, we retained 410 valid responses,
resulting in a 0.91 response rate.
Table 1. Cronbach alpha
Dimension
Reputation
Customer trust
Relationship quality
Brand
Customer satisfaction
Relationship quality (total)
Customer attraction and retention
Total
α
0.73
0.81
0.89
0.90
0.89
0.92
No. of Questions
5
5
10
20
10
30
Results
Demographic Analysis
Demographic data gathered through the use of questions in the section A of the questionnaire to obtain
general information about the respondents such as gender, age, level of education and purchase experience
(table 2).
Table 2. Demographic analysis
Age
Education level
Female
Less than 20
20-30
30-40
More than 40
Under Diploma
Diploma
Associate
Bachelor
M.Sc. and PhD
Less than 5
50-10 years
More than 10
Frequency
Percent
Buy experience
Male
Gender
130
32
280
68
45
11
105
25.6
150
36.6
110
26.8
45
11
58
14.1
74
18
180
43.9
53
13
256
62.5
112
27.3
42
10.2
Test results
Hypothesis test results are presented in this section.Pearson correlation coefficient is used to test the
relationships hypothesized. The results of hypothesis testing is indicated in table 3.
Table 3.Results of hypothesis testing
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Hypothesis
H1
H2
H3
H4
H5
r
0.57
0.63
0.74
0.48
0.33
2
R
0.32
0.40
0.55
0.23
0.11
Sig
0.000
0.000
0.000
0.000
0.000
H1: relationship quality has direct and positive impact on customer attraction and retention in perfume and
cosmetic industries.
As shown in table 1, the significant level (0.000) is smaller than 0.05 and we could not reject the first
hypothesis. On the other hand, since the correlation coefficient between these two variables is 0.57, we
could say that relationship quality has a direct and positive impact on customer attraction and retention.
H2: customer trust has direct and positive impact on customer attraction and retention in perfume and
cosmetic industries.
As indicated in table 1, the significant level (0.000) is smaller than 0.05 and we could not reject the second
hypothesis. On the other hand, since the correlation coefficient between these two variables is 0.63, we
could say that customer trust has a direct and positive impact on customer attraction and retention.
H3: customer satisfaction has direct and positive impact on customer attraction and retention in perfume and
cosmetic industries.
As shown in table 1, the significant level (0.000) is smaller than 0.05 and we could not reject this hypothesis.
On the other hand, since the correlation coefficient between these two variables is 0.74, we could say that
customer satisfaction has a direct and positive impact on customer attraction and retention.
H4: reputation has direct and positive impact on customer attraction and retention in perfume and cosmetic
industries.
As shown in table 1, the significant level (0.000) is smaller than 0.05 and we could not reject the above
hypothesis. On the other hand, since the correlation coefficient between these two variables is 0.48, we
could say that reputation has a direct and positive impact on customer attraction and retention.
H5: brand has direct and positive impact on customer attraction and retention in perfume and cosmetic
industries.
As shown in table 1, the significant level (0.000) is smaller than 0.05 and we could not reject the above
hypothesis. On the other hand, since the correlation coefficient between these two variables is 0.33, we
could say that brand has a direct and positive impact on customer attraction and retention.
Discussions and Implications
This study investigated the relationship between relationship quality and customer attraction and retention in
perfume and cosmetic industries in Boushehr province. Therefore, based on an almost comprehensive
review of literature, a research model proposed to explore the impact of relationship quality on customer
attraction and retention.The relationship quality conceptualized with two dimensions: customer trust and
customer satisfaction. Furthermore, based on previous literature, customer trust also conceptualized with
two dimensions include reputation and brand image. Our findings are consistent with the proposed research
framework. The results indicated that relationship quality has a positive impact on customer attraction and
retention in perfume and cosmetic industries.
The findings of the study propose several suggestions to managers who are involved in relationship quality
initiatives. First, as relationship quality has a positive impact on customer attraction and retention and
accordingly increase sales revenue, managers should pay more attention to this construct. This paper
suggests the trust and satisfaction as vital factors in enhancing customer attraction and retention, raising the
question as to how a company might increase trust and satisfaction. Training the employees to offer higher
quality of service is an effective way to develop the belief in the customers’ minds that the firm is trustworthy.
Furthermore, making customers satisfied is the most effective way to increase customers’ intention to
repurchase. Second, managers must pay more attention to the concepts of reputation and brand image to
build a positive attitude among customers. Additionally, the study demonstrates that in order to establish and
maintain long-term customer relationships, firms need to focus on improving relationship quality construct as
a whole.
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