AN EMPIRICAL STUDY ON FACTORS AFFECTING CUSTOMER RETENTION IN LOGISTICS

SERVICE PROVIDERS – A CASE STUDY ON ABC LOGISTICS (PVT) LIMITED

 Presentation Outline
Background, Symptoms, Justification &
Introduction Problem Statement, Research Questions
& Research Objectives

Related Literature Related Literature Summary

Research Conceptualization, Operationalization

Methodology table, Research design: Population &
sample & sample design: Data Collection
methods

Analysis Data Analysis of the findings

Research Findings & Conclusion and Recommendations

Discussion
 Background of the study

 Logistics is a critical part of a healthy economy in today’s globalization. The transportation, manufacturing and
distribution of goods to local and international markets plays an immense role in business (Vootman, 2004).

 In the current challenging regional context, Sri Lanka has aspirations to become South Asia’s leading maritime,
logistics and distribution hub as geographically it’s well situated in South Asia region.

 This study is based on a well reputed logistics service provider in Sri Lanka namely, ABC Logistics (Pvt) Limited,
which has been an industry giant with over 25 years in the logistics business in Sri Lanka.

 During the past five years the company has experienced a gradual increase in the attrition of existing customers
which has effected the organizational performance.

 Customer retention is contemplated a significant feature in influencing the execution of the business (Dawes,
2009).
 Justification of the problem
Turnover against GP margins (LKR)
Customer Attritions
Financial Turnover  Percentage
Customer Total Customer Year (Millions) GP (Millions) %
Financial Year
Attritions Base
2013-2014 48 1320 2013/2014 3,675.50 445.00 12%
2014-2015 58 1262
2015-2016 72 1190 2014/2015 3,524.25 334.80 10%
2016-2017 82 1108
2017-2018 93 1015 2015/2016 3,465.45 291.10 8%

2016/2017 3,216.87 257.35 8%

Chart Title 2017/2018 2,987.61 209.13 7%

1400

1200 1320
1262
1190
1000 1108
1015
800 GP Margin
600 4,000.00
3,500.00
400
3,000.00
200
2,500.00
0 48 58 72 82 93
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2,000.00

Customer Attritions Total Customer Base 1,500.00

1,000.00
500.00
-
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

Turnover (Millions) GP (Millions)

 Significance of the research
• Senior managers in ABC Logistics to gain extra awareness on which retention strategy is well exploit and less
exploit.

• A guidance on how well the organization is utilizing the retention strategies, identify any gaps that may avoid
retention and work towards enlightening customer retention.

• To evidence on what strategies related establishments can embrace to accomplish customer retention.

• The researcher has found that there are number of studies which have been done in order to recognize the
connection among customer satisfaction and business achievement in other industries. Thus, very few studies
have been done specially on the logistics industry from the perspective of customer retention.
 Problem Statement

This has ABC Logistics Therefore, a

Logistics
industry is hampered the have study needs to
mainly dominate current Logistics experienced a be conducted
by the Shipping service providers considerable to find out
and Air lines. (LSP’s) in terms attrition of its Factors
Also with many of market share, customer base affecting
new logistics revenue growth, over a period of customer
service providers margins and five years which retention in
(LSP’s) who has customer base
is to be studied ABC Logistics
entered to the
(Pvt) Limited
industry
for the
retention of
existing
customers
 Research Questions & Research Objectives
Research Questions Research Objectives

What are the factors affecting the retention of To identify factors affecting the retention of customers
customers at ABC Logistics (Pvt) Limited? at ABC Logistics (Pvt) Limited

What is the relationship between independent variables To identify the relationship between independent
and dependent variable? variables of the study and the dependent variable

Which is the most significant independent variable To identify the most significant independent variable
which influence the dependent variable? to influence the dependent variable

What is the combined impact of identified independent To identify the impact made by identified independent
variables to dependent variable? variables to dependent variable
 Literature Review
Literature Review
Summary
Type of Variable Article Name Author Year

Customer Satisfaction Understanding the Effect of Verhoef, Peter 2003

Customer Relationship
Management Efforts on
Customer Retention and
Customer Share Development.
 
Advancing Nonprofit Hewett, K. M. R. 2008
Organizational Effectiveness
Research and Theory
       
Relationship Quality Linkages between customer Steven & Dresner 2012
service, customer satisfaction
and performance in the airline
industry
 
The relationship between Al-Hawari and Newby 2009
relationship quality and retention
within the automated and
traditional contexts of retail
banking
       
Switching Costs The positive and negative Jones 2007
effects of switching costs on
relational outcomes
 Literature Review Summary
Consumer switching costs: a Burnham 2003
 
Cont……
typology, antecedents, and
consequences

       
Price Competitiveness Satisfaction and Repurchase Kellar & Preis 2011
Intention: B2B Buyer-Seller
Relationships in Medium-
Technology Industries
       
Reducing construction costs:    
European best practice supply Proverbs and Holt 2000
chain implications.
       
Corporate Image The collective impact of service Nguyen 2006
workers and services cape on the
corporate image formation

       
  Relationship between corporate Kim and Lee 2010
image and customer loyalty in
mobile communications service
markets.

       
Customer Retention A model of customer satisfaction Sim, Mak & Jones 2006
and retention for hotels
       
  Customer retention management– Ahmad 2002
a reflection of theory and practice
 Conceptual Framework

Independent Variables Dependent Variable

 Research Design
Quantitative
Methodology

Data Analysis
IBM SPSS V.20
Population
1015 existing customers
of ABC Logistics (Pvt)
Limited

Measurement Scale METHODOLOGY

1-5 Likert scale Sample Size
G* Power statistical power
analysis method & 138
existing customers were
selected as the sample size
Instrument Sampling Design
Questionnaire Marketing Managers
“A” and “B” Sections Shipping Managers
Procurement Managers
General Managers
 Operationalization Table
Heading
Variable Indicators Citation Questions Scale
Number

Reliability
Agility 5 Point
1.0 Customer Satisfaction (Meng et al. 2010) 1.1 – 1.5 Likert
Customization Scale
Flexibility
Tangibles
Reliability 5 Point
2.0 Relationship Quality Responsiveness (Cronin, J. and Taylor, S. 1992) 2.1 – 2.5 Likert
Assurance Scale
Empathy

Monetary costs (Heide and Weiss, 1995) 5 Point

3.0 Switching Costs 3.1 – 3.5 Likert
Intangible costs (Chen, Chao-Hua;Lee 2008) Scale

5 Point
4.0 Customer Retention loyalty (Edward and Sahadev 2011) 4.1 – 4.4 Likert
Scale
5 Point
5.0 Corporate Image Image (Newell and Goldsmith 2001) 5.1 – 5.3 Likert
Scale
5 Point
Price stability/
6.0 Price competitiveness (Hsu and Wann 2004) 6.1 – 6.3 Likert
reasonableness
Scale
 Hypotheses of the study
Variable Hypotheses
There is a relationship between customer satisfaction and customer
H1
Customer retention
H1
Satisfaction There is no relationship between customer satisfaction and customer
H1o
retention

H2 There is a relationship between relationship quality and customer retention

Relationship H2
Quality There is no relationship between relationship quality and customer
H2o
retention

H3 There is a relationship between switching costs and customer retention.

Switching Costs H3
H3o There is no relationship between switching costs and customer retention

There is a relationship between price competitiveness and customer

H4
Price H4
retention.
Competitiveness H4o
There is no relationship, between price competitiveness and customer
retention
H5 There is a relationship between corporate image and customer retention.
Corporate Image H5
H5o There is no relationship between corporate image and customer retention
 Data Analysis
Demographics Analysis
Gender Analysis Age Analysis Highest Educational Qualification
Analysis

16% 6%
21% 26% 22%
25%

84%
48% 52%

Male Female > 28 - 38 > 38 - 48

> 48 - 55 > 55 Advanced Level Graduate Post Graduate

Title of the Job Category Analysis Experience in the industry Analysis

11%
24%

15% 38% 48%

28%
36%

Shipping Manager General Manager Above 7 and below 11 Above 11 and Below 15
Procurement Manager Marketing Manager Over 15
 Descriptive Statistics
Variable Mean Value Standard
Deviation

Customer Satisfaction 3.86 1.740

Relationship quality 3.73 1.132

Switching costs 3.73 1.132

Corporate Image 3.79 1.123

Price Competitiveness 2.75 1.308

Customer Retention 3.68 1.152

 Reliability Analysis
Variable/Items Cronbach Alpha Reliability Statistics
Cronbach's Cronbach's N of Items
Customer Satisfaction 0.816 Alpha Alpha Based
on
Standardized
Items
Relationship Quality 0.752
.936 .954 25

Switching Costs 0.825

Customer Retention 0.930

Corporate Image 0.876

Price Competitiveness 0.727

 Correlation Analysis
   
CORPORATE RELATIONSHIP CUSTOMER PRICE SWITCHING
IMAGE QUALITY SATISFACTION COMPETITIVNESS COST

CUSTOMER Pearson .750** .975** .914** .885** .975**

RETENTION Correlation

  Sig.(2-tailed)   .000 .000 .000 .000 .000

  N 110 110 110 110 110 110

CORPORATE IMAGE Pearson Correlation .750** 1 .859** .918** .566** .859**
 
  Sig.(2-tailed) .000   .000 .000 .000 .000

  N 110 110 110 110 110 110

RELATIONSHIP QUALITY Pearson Correlation .975** .859** 1 .967** .808** 1.000**

  Sig.(2-tailed) .000 .000   .000 .000 .000

  N 110 110 110 110 110 110

CUSTOMER SATISFACTION Pearson Correlation .914** .918** .967** 1 .742** .967**

  Sig.(2-tailed) .000 .000 .000   .000 .000

  N 110 110 110 110 110 110

PRICE COMPETITIVENESS Pearson Correlation .885** .566** .808** .742** 1 .808**

  Sig.(2-tailed) .000 .000 .000 .000   .000

  N 110 110 110 110 110 110

SWITCHING COSTS Pearson Correlation .975** .859** 1.000** 0.967** .808** 1

  Sig.(2-tailed) .000 .000 .000 .000 .000  

  N 110 110 110 110 110 110

 Multiple Linear Regression Analysis

Model Summary
Model R R Square Adjusted R Std.Error of the
Square Estimate
1 .892a .852 .890 .49121

a. Predictors: (Constant): PRICE COMPETITIVENESS, CORPORTE IMAGE,

SWITCHING COSTS, RELATIONSHIP QUALITY, CUSTOMER
SATISFACTION
 Hypothesis Testing
Hypothesis 1: Customer Satisfaction Hypothesis 2: Relationship Quality Hypothesis 3: Switching
R= 0.914 R= 0.975 Costs
R2= 0.836 R2= 0.952 R= 0.975
Significance: 0.000 Significance: 0.000 R2= 0.952
Significance: 0.000
 Hypothesis Testing Cont…..
Hypothesis 4: Price Competitiveness Hypothesis 5: Corporate Image
R= 0.885 R= 0.750
R2= 0.783 R2= 0.563
Significance: 0.000 Significance: 0.000
 Hypothesis Summary
Independent Statistical Outcomes Result
Variables

R R squared Significance

Customer 0.914 0.836 0.000 H1 Accepted

Satisfaction H1o Rejected

Relationship 0.975 0.952 0.000 H2 Accepted

Quality H2o Rejected

Switching Costs 0.975 0.952 0.000 H3 Accepted

H3o Rejected

Price 0.885 0.783 0.000 H4 Accepted

Competitiveness H4o Rejected

Corporate Image 0.750 0.563 0.000 H5 Accepted

H5o Rejected
 Conclusion and Recommendations

Conclusion Recommendations

 Customer Satisfaction as its absence will  To develop a customer focus panel to

lead to the failure of the organization identify customer needs and discuss views

 Relationship Quality & Switching Costs

 To have efficient communication
has found to be the most important
independent variables
 The sales team to have frequent sales visits to understand customer
requirements and attend to their rate quotations within the given
 Price Competitiveness
period.
one of the elements of customer retention
 To pay more attention on investing on service quality and
 Corporate Image
create more appropriate barriers to prevent customers
organization has a respectable corporate
from switching to competitors.
image in the marketplace , consumers many
have a preference for that company even if  To develop a procurement team to negotiate rates
there are similar business offering the same
products or services for different price with Shipping lines and Air lines
 Reference List
 Al-Hawari, M., Ward, T. & and Newby, L., 2009. The relationship between service quality and retention within the automated and traditional
contexts of retail banking.. Journal of Service Management , 20(4), pp. 455-472.

 Cronin, J., J., and A. Taylor, S. 1992. “Measuring Service Quality: A Re-Examination and Extension.” Journal of Marketing 56 (3): 55–68

 Edward, Manoj, and Sunil Sahadev. 2011. “Role of Switching Costs in the Service Quality, Perceived Value, Customer Satisfaction and
Customer Retention Linkage.” Asia Pacific Journal of Marketing and Logistics 23 (3): 327–45. https://doi.org/10.1108/13555851111143240.

 Hewett, K. M. R. a. S. S., 2002. “An exploration of the moderating role of buyer corporate culture in industrial buyer-seller relationships”.
Journal of the Academy of Marketing Science, 3.pp. 229-39.

 Kim, Y. and Lee, J. W, 2010. Relationship between corporate image and customer loyalty in mobile communications service markets. Africa
Journal of Business Management, 18(4), pp. 4035-4041.

 Meng, Shiang Min, Gin Shuh Liang, Kuang Lin, and Shiou Yu Chen. 2010. “Criteria for Services of Air Cargo Logistics Providers: How Do
They Relate to Client Satisfaction?” Journal of Air Transport Management 16 (5): 284–86. https://doi.org/10.1016/j.jairtraman.2010.02.003.

 Newell, Stephen J., and Ronald E. Goldsmith. 2001. “The Development of a Scale to Measure Perceived Corporate Credibility.” Journal of
Business Research 52 (3): 235–47. https://doi.org/10.1016/S0148-2963(99)00104-6.

 Nguyen, N., 2006. The collective impact of service workers and services cape on the corporate image formation. International Journal of
Hospitality Management, 25(2), pp. 227-244.
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