“Factors that affect customer loyalty in small enterprises”

The study was conducted by collecting the data from 608 customers of migrant retailers working in the retail industry of Pretoria West in South Africa in order to identify socioeconomic factors that affect customer loyalty. Data was collected from eligible respon- dents by using a pre-tested, validated and standardised questionnaire of study that was self-administered by respondents. The study found that about 69% of customers were loyal to their retailers. About 68% of customers had a favorable attitude towards their retailers. About 68% of retailers used appropriate promotional measures for marketing their goods to potential customers. About 69% of retailers provided their customers with satisfactory quality of services. About 67% of customers were loyal to their retail- ers’ brands. Factor analysis was used for extracting 3 influential predictors of customer loyalty. These factors were entrepreneurial skills, marketing skills, and selling price. The percentage of variance explained by the 3 extracted factors was equal to 92.58%.


INTRODUCTION AND BACKGROUND TO STUDY
This study is conducted by collecting the data from 608 migrant retailers of textile and footwear merchandise operating in Pretoria West in order to identify and quantify predictors of customer loyalty. The retail industry of Pretoria West is highly competitive, as it is home to a wide variety of local and imported clothing, textile and footwear products from countries such as China, Bangladesh, India, Pakistan, Vietnam, Malaysia and South Korea. Customers switch retailers constantly in search of better value for money and quality customer services (Grewal, Roggeveen, Sisodia, & Nordfalt, 2017).
The South African retail sector is currently more competitive than ever before with changing patterns in customer loyalty and increasing customer options on the market. Local clothing, textile, and footwear producers are under immense pressure from foreign-based competitors (Worku, 2018). Customers demand value for money and quality customer services continually from their retailers, marketers, distributors, wholesale suppliers and producers. Customers need to ensure value for money in all transactions. They also demand total commitment and devotion from retailers. As such, retailers need to ensure their relevance to the market by conducting market research on innovations continually. Doing so entails the ability to use appropriate promotional measures, the ability to market goods and services optimally, and the ability to network with potential customers in the market effectively (Baloch & Jamshed, 2017).
Companies ought to understand consumer behavior so that they can predict market demand (Ghochani & Zadeh, 2015) accurately enough, because consumer behavior is a shopper's ultimate decision made by buying, utilizing and discarding of products and services in a definite length of time. Ghochani and Zadeh (2015, p. 308) add that knowledge of consumer behavior could be extremely valuable during strategic planning. Consequently, the relationship between consumer behavior and an evolving marketing plan becomes a key factor in decision making. The needs of consumers evolve as a function of time and circumstances. As a result, retailers must conduct empirical research into service quality, marketing strategies and tactics, the cost of production and distribution, and consumer behavior (Furaiji, Latuszynska, & Wawrzyniak, 2012). The study conducted by Garcia-Fernandez, Galvez-Ruiz, Fernandez-Gavira, and Velezcolon (2016) has shown that both product quality and service quality are key requirements for retaining existing customers in the global retail industry. The study conducted by Worku (2018) has identified socioeconomic factors that affect sustainable profitability in small, micro and medium-sized enterprises (SMMEs) operating in Gauteng Province, South Africa. The authors have found that the profitability of SMMEs is significantly influenced by the level of entrepreneurial skills, access to finance needed for business operation, level of education, and the ability to order large volumes of merchandise from wholesale distributors on credit.

Objective of the study
The aim of the study is to identify socioeconomic factors that affect customer loyalty in small, micro and medium-sized enterprises operated by migrant retailers working in the retail industry of Pretoria West.

LITERATURE REVIEW
Te-Shyang, Tung-Liang, and Pao Hui (2017, p. 741) describe customer loyalty as a measure of repeated consumption or utilization of services in the marketplace. Ghochani and Zadeh (2015, p. 308) define consumer behavior as a consumer's ultimate decision made by buying, using and discarding of goods and services in a definite length of time. The psychological factors influencing consumer behavior include attitude, learning, and perception. Ye, Siong Choy, and Wendy-Ming-Yen (2015) define customer satisfaction as the process whereby a product satisfies customers or how the product fulfils customers' needs and expectations. Rani (2014, p. 52) explains that a company can formulate a strategy and avail itself of a unique value proposition by identifying and understanding the psychological factors that influence consumer behavior. Shahsavar and Sudzina (2017, p. 2) state that consumer loyalty is a heartfelt dedication to buy a product or service of interest repeatedly. Furthermore, Lemon and Verhoef (2016, p. 71) define customer retail experience as a multidimensional construct focusing on a customer's cognitive, emotional, behavioral, sensorial, and social responses to a firm's offerings during the customer's entire purchase journey.
Customer engagement is a key aspect of relationship marketing that is defined as the intensity of an individual's participation in organizational activities (Ye, Siong Choy, & Wendy-Ming-Yen, 2015). Customer brand engagement is the level of individual, brand-related and context-dependent state of mind characterized by specific levels of cognitive, emotional and behavioral activities in direct brand interactions (Ashley & Tuten, 2015). Kumar, John, and Senith (2014) have shown that customer loyalty to brands depends upon the ability of retailers to provide cost-effective, quality and reliable goods and services to customers at all times efficiently. Watson, Beck, Henderson, and Palmatier (2015) explain that consumer behavior is difficult to monitor and involves the psychological processes that consumers experience during the recognition of need, problem solving, purchasing, information analysis and interpretation, planning and implementation of market-related plans of action. Kim (2011) has pointed out that marketing strategy mirrors market demand in cases where valuable information is integrated into marketing strategy on factors that are known to influence the buying decisions of consumers. Rani (2014) states that a company can formulate a strategy and avail itself of a unique value prop-osition by identifying and understanding the psychological factors that influence consumer behavior. The author adds that consumer-buying habits are influenced by a combination of cultural, social, personal, and psychological factors that are associated with the basic needs and preferences of consumers. Ghochani and Zadeh (2015) have shown that marketers cannot control all factors that affect consumer behavior, and that an in-depth knowledge of such factors can enable them to align their business strategy with market demand. This shows that perfectionism, price consciousness, brand consciousness, novelty and fashion, habitual brand loyalty, awareness of benefits, taste and accessibility match all affect consumer preference. The authors point out that there are three fundamental categories of decision-making styles. These are consumer typology, psychographic and lifestyle approach, and the consumer characteristic approach.
According to Uta and Popescu (2013), attitude is a psychological process with the greatest stability over time and is a process that directly affects the actual behavior of the consumer. Attitude is a mental process by which an individual orients future behavior based on past experience, past information, perception held by consumers, and assumptions, beliefs and feelings about a particular object. Attitude has cognitive, affective and conative components. The cognitive aspect of attitude results from accumulated information on a particular object under review by an individual, whereas the affective aspect of attitude results from the feelings about the object under evaluation. The conative aspect of attitude results from an individual's predisposition to behave in a certain manner following evaluation of an object (Uta & Popescu, 2013). Attitude can be learned and be influenced by external factors such as mates and colleagues and is very hard to change attitude (Uta & Popescu, 2013, p. 62). Understanding the attitudes of potential customers is a key asset for marketers. It enables them to market and promote their goods and services optimally.
Lin, Zhou, and Chen (2014) have shown that entertainment and positive credibility significantly influence the attitude of consumers, whereas irritation and poor track-record influence the attitude negatively. Jasarspahic and Duman (2014) have pointed out that the use of incentives is the most useful method of competing with business rivals. Di Franco (2014) has illustrated that the "pull" strategy works better than the "push" strategy, because the "pull" strategy is based on highly innovative methods of promotion and marketing. Sohail and Al-Gwaiz (2013) have shown that the behavior of consumers towards promotion is dependent upon the techniques used for promotion and the credibility of the agency that conducts promotion.
Furaji, Latuszynska, and Wawrzyniak (2012) define learning as changes in an individual's behavior arising from experience. Learning affects the behaviour of the customer positively in cases where the customer experiences a desirable new product or improved service delivery. This phenomenon is psychological in nature and affects consumer behaviour. Poynor and Wood (2010) state that presentations used by shops to display varieties into subcategories can encourage or discourage shoppers depending on how genuine the adverts are. Untruthful or distorted subcategories or adverts often mislead customers.
Shahsavar and Sudzina (2017) explain that the most important factors in building and directing consumer relationships are consumer value and consumer satisfaction. The ability of service providers and retailers to utilize appropriate customer relationship management strategies is a key requirement for ensuring customer satisfaction and loyalty at the marketplace. In this regard, the key indicator is the ability of service providers and retailers to identify quality and cost-related factors that are of a particular interest to their customers. This task requires the ability to conduct market research based on data collected from business rivals and competitors. Customer loyalty is a deeply-held commitment to repurchase a preferred product or service from a worthy retailer or service provider. The degree of loyalty depends upon the degree to which the service provider adheres to quality standards. Failure to adhere to quality standards has the potential for terminating the relationship between the service provider and customer (Baloch & Jamshed, 2017).
Te-Shyang, Tung-Liang, and Pao Hui (2017, p. 741), Toklu (2017, p. 650) refer to shopper loyalty as a measure of the likelihood of customers coming back seeking the same product, goods or services from the same service provider or retailer. The customer comes back seeking the same service if the quality of service provided to the customer was worthy of the amount of money and time that was spent on the service provided. This shows that loyal customers are a long-term primary profit source of businesses. Cidro, Matiasek, Craig, Dhillon, and Zahayko (2014) have quantified customer loyalty as a function of repeat purchases and willingness to promote the reputation of a given company or service provider to their friends, colleagues and family.

METHODS USED FOR CONDUCTING STUDY
This is a study based on a cross-sectional, descriptive and exploratory design. A self-administered questionnaire of study was used for collecting the data from a stratified random sample of 608 customers of migrant retailers working in the retail industry of Pretoria West in order to identify socioeconomic factors that affect customer loyalty.

Composite measure for promotional measures (PM)
A composite score was generated for promotional measures ( ) PM by assessing the responses obtained from 608 respondents of the study to 4 indicators of the optimal utilization of promotional measures (Christian, Zdenek, & Lucie, 2014).

Validity and reliability
Content validity (Silverman, 2016) was ensured by utilizing a variety of closed-ended questions on customer loyalty. External validity of the closed-ended questions was ensured by carrying out a pilot study before data collection started. Reliability and internal consistency were ensured by using the Cronbach Alpha test for reliability and internal consistency (Silverman, 2016). All estimated Cronbach Alpha coefficients were above 0.75. Table 1 assesses customer loyalty based on well-defined indicators of customer loyalty. About 56% of 608 customers in the survey were loyal enough to their retailers by the standards of Dehgan and Shahin (2011). About 54% of respondents had favorable attitude towards their retailers by the standards of Di Franco (2014). About 47% of respondents effectively utilized promotional measures by the standards of Christian, Zdenek, and Lucie (2014). About 57% of respondents were provided with quality services by the standards of Fetscherin and Heinrich (2015). About 80% of businesses employed at least one employee in their business operations. About 79% of businesses paid tax to SARS regularly. About 91% of businesses were profitable. Actual owners operated about 88% of businesses. About 23% of businesses were in operation for 6 years or longer.  Table 2 shows percentages for the level of education of respondents and marital status. It can be seen from the table that about 38% of respondents had ages of 31 to 50 years. About 38% of respondents had Diploma level education. About 84% of respondents were male. About 29% of respondents were married. About 40% of respondents were Asian. About 80% of respondents employed at least one employee in their business operations.  Table 3 shows frequency counts and percentages for past experience in loan applications. About 66% of respondents had applied for a loan at least once in the past from formal money lending institutions such as commercial banks or microfinance agencies.  Table 4 shows frequency counts and percentages for the assessment of managerial, entrepreneurial, marketing, and networking skills. About 69% of retailers had satisfactory managerial skills by the standards of Ward (2016). About 68% of retailers had satisfactory skills in entrepreneurial activities by the standards of Terjesen, Hessels, and Li (2016). About 69% of retailers had satisfactory marketing skills by the standards of Schlee and Karns (2017). About 60% of retailers had satisfactory networking skills by the standards of Livingstone, Mascheroni, and Staksrud (2018).   External validity (Silverman, 2016) was ensured by conducting a pilot study with a random sample of 10 eligible respondents at the site of study before starting the data collection. Doing so was helpful for refining the questionnaire of study. The Cronbach Alpha test was used for ensuring the reliability and internal consistency (Silverman, 2016) in the questions that were used for assess-ing customer loyalty, customer attitude, promotional measures, the quality of services offered to customers, and brand loyalty. Each of 5 indicators was measured by using a 5-point ordinal scale. All Cronbach Alpha estimates shown in Table 6 have magnitudes of 0.75 or above. As such, the scale used for measurement was reliable and internally consistent enough.

RESULTS OBTAINED FROM FACTOR ANALYSIS
Factor analysis (Box, Jenkins, Reinsel, & Ljung, 2015) is a technique that is used to reduce a large number of variables into fewer numbers of factors. Table 7 shows eigenvalues estimated from factor analysis based on principal axis factoring. It can be seen from the table that 3 of the 5 components have eigenvalues with magnitudes greater than 1. As such, 3 factors could be extracted by performing factor analysis based on principal axis factoring. The percentage of variance explained by 3 extracted factors is equal to 0.9995 = 99.95%. This figure is quite high and shows that 3 extracted factors are quite useful in accounting for variability in customer loyalty. 3 extracted components correspond to entrepreneurial skills, marketing skills, and networking skills. The percentage of variance explained by 3 extracted factors was equal to 99.95%.