The impact of national culture and industry structure on grocery retail customer loyalty: a comparative study of the United Kingdom and Sri Lanka.

Abstract

Despite the pivotal influence of customer loyalty on retailer performance and profitability, the effect of national culture and industry structure on customer loyalty in grocery retailing has been thinly researched. This PhD is the first to investigate the influence of these factors by examining two culturally and structurally disparate markets; the UK and Sri Lanka. A sequential mixed methods research design was used where a qualitative phase (three focus groups in each country) preceded a large scale survey (n= 550). The preliminary inductive phase generated new knowledge in the absence of adequate existing theory and guided the development of the survey instrument which was used to further investigate the preliminary findings. This study finds that national culture has an indirect influence on customer loyalty via customer service and loyalty programmes. These findings make a significant contribution to theory by challenging the limited existing literature that suggests a direct influence. A direct influence of industry structure is identified in both countries; UK customers are more ‘truly’ loyal to their main retailer and this is influenced by a common focus on quality by retailers. Similarly, greater spurious and latent loyalty is evident in Sri Lanka where customers prefer retailers offering higher standards of customer service and product quality. An indirect influence is also highlighted by the aversion to tracking in the UK and openness in Sri Lanka which reflects the level of loyalty programme maturity and customer familiarity in the two countries. These findings provide the first focused insight of the influence of industry structure on customer loyalty. Findings further highlight that national culture influences customer perceptions of loyalty programme attributes where Sri Lankan customers are more open to tracking and tiered schemes whilst expecting preferential treatment and soft benefits. Whilst supporting the limited existing literature, these findings provide novel insights that will guide future research on the influence of national culture on loyalty programmes. The theoretical framework provided in this study is the first detailed depiction of customer loyalty in relation to national culture and industry structure. This framework will act as a valuable theoretical base when future research is undertaken in this area. From a practical perspective, this research will enable domestic grocery retailers in Western markets to understand how national culture influences customer loyalty, thereby, allowing them to cater to culturally disparate customer segments more efficiently. Similarly, international retailers can obtain a greater understanding of cultural and structural influences when developing their strategies by focusing on key elements such as customer service, product quality and loyalty programmes.