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CUSTOMER SATISFACTION AND LOYALTY IN LOGISTICS SERVICES

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND TO THE STUDY

A multitude of companies today has already identified the need to create a loyal customer base and acknowledges that maintaining existing customers and extending business with them is significantly less expensive than acquiring new customers. Customer loyalty gained importance when the classic marketing paradigm with its instrumental and transactional orientation proved unsuitable in the context of longer-term business relationships. Instead, the relationship marketing approach, which is specifically concerned with the study of relational ex-changes, gained importance within research, serving as a conceptual foundation for the majority of customer loyalty researchers.

The question of how loyalty develops has been subject to an abundance of research, leading to an expansive body of literature on loyalty determinants. The extant literature exploring different factors and their constituent effects on loyalty, however, reveals a strong focus on consumer goods and industrial equipment settings, while industrial services have received relatively little attention so far. In addition, the majority of articles incorporates merely a few potential determinants and thus fails to draw a comprehensive picture of the mechanisms of customer loyalty formation.

Just like other businesses, logistics service providers (LSPs) are faced with increasing competitive pressure that urges them to concentrate not only on operational business processes, but also on an efficient and effective customer management. One way to meet this challenge of rapid growth and expansion, according to Langley et al. (2005) is to focus on establishing, maintaining, and developing relationships with customers. An often proposed driver of logistics outsourcing is the need to develop and maintain competitive advantage, which customers of LSPs intend to achieve through concentrating on core competencies and re-engineering.  

I also discover another important driver is the ongoing globalization, which several authors regard as the most important challenge that companies are facing. Companies that outsource logistics activities increasingly try to consolidate the number of LSPs they use globally. Therefore, LSPs do not only have to devise sustainable growth strategies, but also have to develop intercultural management competencies, a challenge hardly addressed in LSP management literature. While intercultural management deals with the influence of culture on management styles in different countries, it is also arguable whether a one best way management paradigm is applicable even within national confines. LSPs’ customers are extremely diverse and similarly, relationships between LSPs and their customers can be expected to exhibit momentous differences. As such, it is a crucial management issue for LSPs to design their customer loyalty efforts in a manner that accounts for both cultural context and different relationship characteristics.

1.2   STATEMENT OF THE PROBLEMS

The high cost of service and customers’ dissatisfaction over product services have becomefactors affecting most Logistic Service Providers [LSP] in Nigeria. This study identifies how LSPs can improve their conventional approaches to quality service through customer satisfaction and customer loyalty. Most LSPs in Nigeria are lagging behind in respect of performance indicator. Inspite of the high cost of delivery, LSPs still delay deliveries due to poor logistics. This dissatisfy customers and inturn makes it difficult for them to be loyal to the company.. Hence this research work tends to examine the problems associated with DHL Nigeria and proffer suggestive solutions to these problems.

1.3   AIM AND OBJECTIVES OF THE STUDY

As outlined in the preceding section, LSPs are confronted with diverse management challenges that result from continuous growth, globalization, and customer diversity. The aim of this study therefore is to identify determinants of customer loyalty in relationship to service rendered by LSPs with special reference to DHL Nigeria.

The objectives of this research work includes:

· Investigate study on customer level of satisfaction in towards DHL Express.

· To identify the loyalty of customer towards DHL Express.

· To measure the specific reasons for satisfaction and dissatisfaction in with DHL Express.

· Examine the interface of marketing and logistics at DHL Nigeria

· Examine the mechanisms underlying loyalty in the logistics outsourcing context at DHL.

·  To identify the recommendations of DHL Express to others by existing loyal customers.

1.4  RESEARCH QUESTIONS

Research questions are meant to generate possible answers to different aspects of the research problem and they should be clearly stated such that they act as guides in identification, collection and analysis of relevant data. In order to achieve the purpose of this research study, the study will attempt to provide answers to the following research questions.

· Is there any relationship between customer satisfaction and customer loyalty in Logistic Service Providers?

· Is there significant relationship between quality service delivery and customer loyalty?

· What is the effectiveness of quality service on customer satisfaction?

· Does efficient and effective competitive advantage affect customer interest?

· Does new service control development programmes have impact on customer satisfaction?

· Does service quality and customer satisfaction affect the growth and profitability which the organization achieves?

1.5   STATEMENT OF HYPOTHESES

Hypothesis is a tentative answer to a research question. It is a conjectural statement about the relationships that exist between two or more variables which needs to be tested empirically before they can be accepted or rejected. In a research work, hypotheses are never proved or disproved, they are either supported (i.e. accepted) or rejected. To provide answer to the research questions arising from this study, the following hypotheses are postulated.

HYPOTHESIS ONE

HO: There is no significant relationship between quality service delivery and customer loyalty in Logistic Service Providers

H1: There is significant relationship between quality service delivery and customer loyalty in Logistic Service Providers

HYPOTHESIS TWO

HO: There is no relationship between customer satisfaction and customer loyalty in Logistic Service Providers

H1: There is relationship between customer satisfaction and customer loyalty in Logistic Service Providers

1.6 SIGNIFICANCE OF THE STUDY

The significance of the study is to ensure that Logistic Service Providers create better image for the customer. The study will help the Logistic of controlling their activities in respect to high quality service standard. Hence, the service quality and customer satisfaction survey would give a comparison test to validate service performance measures with DHL Nigeria. This study will also be useful to students for further research, and other Logistic Service Providers as inducing factors to customer patronage and the importance of quality control in everyday activities.

1.7 SCOPE OF THE STUDY

Scope of the study is mainly to examine the current level of customer satisfaction and the loyalty of the customer towards the company.  Also to investigate if the quality of service delivery is satisfactory to customers of DHL Nigeria.

1.8      LIMITATIONS OF THE STUDY

In the course of conducting this research work, it is expected that the following will constitute impediment to the effective conduct of this study.

·  Availability of relevant literatures and textbooks

·  Time constrains

·  Financial constraints

·  Inaccessible and inadequate data

·  Inadequate information given by the case study firm.

· Some customers have lack of time, so they may not communicate properly.

1.9      HISTOROCAL BACKGROUND OF CASE STUDY

DHL is a Deutsche Post World Net company of Germany that provides international Mail, Express, Logistics and Finance. The company was founded in 1969 by Adrian Dalsey, Larry Hillblom, and Robert Lynn. The trio initially provided a courier service between the Continental United States and Hawaii then expanded the business from there. In 1998, Deutsche Post World Net began to acquire shares in DHL, finally reached majority ownership in 2001, and completed the purchase in 2002. DHL's global headquarters are located in Bonn and London (its Excel  subsidiary). Headquarters for the Americas are located in Plantation, Florida, while its Asia Pacific & EEMEA headquarters are located respectively in Singapore & Bahrain/Brussels. DHL owns its own cargo airlines, European Air Transport, originally based in Brussels, and DHL Air, based at the East Midlands Airport in the United Kingdom.

1.10   DEFINITION OF TERMS

PRODUCT QUALITY: Product quality can be analyzed under the concept of two different perspectives, objectives quality and perceived quality (Brunso et al., 2005). The objective to measure the quality is determined by intrinsic and extrinsic attributes. The intrinsic or the inner attributes refers to something that are related to the physical of the product (color, appearance and etc) whereas perceived quality or extrinsic attributes exist in the form of non-physical but related to the product (brand name, stamp of quality, product information and etc).

CUSTOMER SATISFACTION: Customer satisfaction has been defined in various ways, but the conceptualization, which appears to have achieved the widest acceptance, is that satisfaction is a post-choice evaluative judgment of a specific transaction (Bastos and Gallego, 2008). Customer satisfaction is the result of a customer’s perception of the value received in a transaction or relationship – where value equals perceived service quality relative to price and customer acquisition costs (Hallowell, 1996; Heskett et al., 1990; Blanchard and Galloway, 1994). 

LOYALTY: Aaker and Keller, 1990 believe that loyalty is closely associated with various factors, one of the main ones being the experience of use. Customers may be loyal owing to high switching barriers related to technical, economical or psychological factors which make it costly or difficult for the customer to change

CUSTOMER LOYALTY : This can be defined as the faithful behaviour of clients to a company or organisation. Customer loyalty implies that even if companies make minor errors or mistakes, customers are still willing to do business with them or maintain relations.

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