April 2012

163801

Antecedents of customer loyalty in UK retail gambling

Vanden Bowen Abstract
The study aimed to identify the possible antecedents of customer loyalty in the retail gambling industry of the UK. A review of the extant literature was first undertaken to construct a hypothetical conceptual model, which was then used to guide the collection and analysis of customer perspectives through the use of questionnaires. Preliminary results of the questionnaires were then used to inform in-depth interviews with practitioners for purposes of confirmation, triangulation and meaning. Following the synthesis of existing theories and primary research, the hypothetical conceptual model was revised to find that a number of antecedents were interrelated; satisfaction, relationships with employees and service quality were found to be directly linked to loyalty, whilst other constructs were considered indirectly associated to loyalty through a mediatory role. Although the exploratory nature of the study limited the degree to which generalisations could be made, the provision of competitive offerings and exceptional levels of service were considered crucial aspects of developing effective loyalty strategies. 1

Christine Willcox, Emma Dixon and Stephen Lee have been instrumental in the completion of this study. Thank you.

Contents
Chapter 1
1.1 1.2 1.3

Title Introduction
Retail gambling in the UK Research Question Research Objectives

Page 5
5 6 6

2
2.1 2.2 2.3

Literature Review
Customer Loyalty Loyalty in UK retail gambling Antecedents of Loyalty 7 8 8

3
3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8

Research Method
Research Philosophy Research Method Research Instruments Pilot Sampling Primary research process Results evaluation Ethics 15 16 17 18 19 19 20 20

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Chapter 4
4.1 4.2

Title Results
General prescription regarding loyalty Results pertinent to each hypothesis

Page 21
21 22

5
5.1 5.2

Discussion
General discussion regarding loyalty Discussion pertinent to each hypothesis 34 34

34

6
6.1 6.2 6.3 6.4

Conclusions
Summary Managerial Implications Limitations Future Research 40 40 41 41

40

References Appendices

42 46

Chapter 1 Introduction
This chapter provides a brief introduction to the UK retail gambling industry and highlights the rationality and purpose of the research project.

1.1 Retail gambling in the UK

Within six months of its legalisation in 1961, the retail gambling industry of the UK saw significant growth as over 10,000 betting shops opened (Munting, 1996). Although the industry continues to prosper to this day, with revenues exceeding 10bn generated in 2010 (Gambling Commission, 2010), the number of betting shops in the industry has fallen from its peak of around 15,000 to around 8,000 (Walmsley, 2012). A report by Mintel (King, 2011) attributed the consolidation to a number of factors, including a decline in horse racing interest, the introduction of new regulations and taxes and the introduction of new technologies. Despite these challenges, many bookmakers have prospered, with new technologies bringing both advantages and disadvantages to operators of licensed betting offices in the UK. The introduction of new gaming machines helped to compensate for a decline in horse racing revenues and new channels of delivery have allowed bookmakers to increase the variety of betting opportunities available to their customers (Walmsley, 2012); but these advantages have not been without their drawbacks; the introduction and rapid growth of the World Wide Web has presented retail bookmakers with new issues to contend with. The internet has allowed many traditional bookmakers the opportunity to give customers easy access to a wider range of services, but it has also intensified competition from purely online bookmakers and betting exchanges. Intensified competition, coupled with the expansion of consideration sets for customers, has put retail bookmakers under increasing pressure; irrespective of their online presence, maintaining a profitable retail estate has become a central issue of concern for bookmakers large and small. It is now widely accepted that a loyal customer base has the potential to both increase revenues and reduce costs (Gremler and Brown, 1998), resulting in greater profitability. Preliminary reviews of the literature identified gaps in customer loyalty discourse surrounding the context of the UK retail gambling industry. Loyal customer bases yield significant strategic potential (Gremler and Brown, 1998); consequently, the findings of firms are likely to remain confidential. The antecedents of customer loyalty are of critical importance as customer loyalty programmes can be expensive (Rust et al, 1995); for this reason there is a real need to understand where value is delivered in order to construct a successful loyalty campaign (Roig et al, 2009).

1.2 Research question

This study aimed to provide operators without the resources to conduct their own research a starting point for customer loyalty strategies; in order to do this the following research question was to be answered: What are the possible antecedents of customer loyalty in the UK retail gambling industry?

1.3 Research objectives

In order to answer the question, the following objectives were completed: 1. Creation of a hypothetical conceptual model for the antecedents of UK retail gambling. 2. Subsequent testing of the hypothetical conceptual model through primary research. 3. Creation of a revised conceptual model for the antecedents of retail gambling in the UK. In an effort to answer the research question in greater depth, a subordinate objective was proposed: 4. Where applicable, highlight the managerial implications of any findings.

This chapter has provided both the rationality behind and purpose of the research project, chapter 2 critically evaluates the extant discourse surrounding loyalty and its antecedents, to support the production of tentative hypotheses to be used in the creation of a hypothetical conceptual model. In order to satisfy objective 2 the model is to be tested; chapter 3 explains how the model was to be tested, and chapter 4 provides the results. Chapter 5 synthesises previous chapters to produce a revised conceptual model for the antecedents of retail gambling in the UK. The study concludes with a summary of the main findings and their respective managerial implications, limitations of the study and potential avenues for future research in chapter 6.

Chapter 2 Literature Review

This chapter summarises the current thinking surrounding the concept of loyalty, and develops tentative hypotheses to be used in guiding the exploration of the possible antecedents of customer loyalty in the retail gambling industry.

2.1 Customer loyalty

It is now generally accepted that effective loyalty programs add to the value proposition of an organisation, providing them with a competitive advantage (Dowling and Uncles, 1997); the benefits for an organisation are said to include increased revenues and cost savings (Ruyter et al, 1998) which improve the longevity of a company. In order to obtain these benefits, an organisation must have a thorough understanding of what drives customer loyalty in their industry (Lewis and Soureli, 2006); for this purpose, academic discourse has attempted to demystify the complex construct of customer loyalty, and this has resulted in theories aimed at an improved understanding of both loyalty and its antecedents.

Defining loyalty
Whilst Oliver (1999: 35) defines ultimately loyal customers as those which fervently desire to re-buy a product or service and will have no other, Kotler (1972) considers the possibility of customers who may be loyal to more than one brand, service or firm.

Measuring loyalty
Although the measurement of the construct of loyalty has predominantly been approached from two perspectives, it is now generally accepted that there are three ways to measure loyalty (McCain, 2003): these are behavioural, attitudinal and composite methods. Whilst behavioural measurement methods attempt to identify loyal customers by investigating the actions of a customer, such as the proportional expenditure a firm receives, willingness to recommend and willingness to co-operate with a firm (Phillips et al, 2010; Baloglu, 2002), this approach has been criticised as myopic, as it makes no attempt to understand the underlying factors driving repeat purchase behaviours (Jacoby and Chestnut, 1978). Attitudinal perspectives look to compensate for the principal drawback of behavioural measurements by investigating the feelings a customer has for a product, service or brand (Hallowell, 1996); Baloglu (2002) posits that levels of trust, commitment and the perceived switching costs are key indicators of attitudinal loyalty. Work by Phillips et al (2010) highlight a fundamental flaw of a purely attitudinal approach to the measurement of loyalty, asserting that irrespective of a persons attitude to loyalty, there will be no bearing on profitability unless the attitudes are reflected in behaviour.

In relation to the aforementioned advantages and limitations, Dick and Basu (1994) and McCain (2003) advocate the use of composite methods of loyalty measurement, in the belief that both a favourable attitude and repeat patronage are required for loyalty: as the name suggests, composite measures look to assess both attitudinal and behavioural dimensions of loyalty.

Service loyalty
The concept of loyalty is often referred to as service loyalty in the context of services (RundleThiele and Bennett, 2001); Phillips et al (2010) argue that service loyalty requires a separate silo of study as the unique characteristics of services require a different approach to traditional research studies, which tend to focus on brand loyalty. Service loyalty variables, such as levels of intangibility and function and industry specific characteristics have been found to differ from service to service (Harrison, 2000), consequently, a firm looking to create an effective customer loyalty strategy would need to consult the relevant academic discourse surrounding the service industry in which they are competing in.

2.2 Loyalty in UK retail gambling

A review of the extant literature concerning customer loyalty found no readily available studies attempting to identify the antecedents of customer loyalty within the context of the UK retail gambling industry. As previously mentioned, customer loyalty and the subsequent benefits it provides a firm result in competitive advantage; firms which have conducted their own studies are unlikely to make this information publicly available, as it would diminish the strategic potential. Despite this, a wealth of literature concerning the antecedents of customer loyalty in a variety of other service environments is readily available; as a service providing gambling opportunities and an area of discretionary spend casino loyalty studies have been of significant value. The similarities in terms of retail presence and intangibility have meant that discourse surrounding financial service loyalty is also of high relevance to a study aimed at identifying the possible antecedents of consumer loyalty in the UK retail gambling industry.

3.3 Antecedents of loyalty

As previously highlighted, the unique characteristics of different industries results in different sets of variables responsible for influencing customer loyalty (Harrison, 2000); these variables are said to require different methods of measuring and encouraging loyalty (Rundle-Thiele and Bennett, 2001). As no literature concerning the antecedents of customer loyalty in the UK retail gambling industry is readily available, efforts to identify these are justified. Consultation with practitioners and exploration of the customer loyalty literature have identified the antecedents most relevant to the study as: satisfaction, service quality, perceived superiority of offerings, perceived value, brand image, switching costs, relationships with employees, social bonding, commitment and trust. The remainder of the literature review is geared toward a discussion of the literature concerning these antecedents, with each section proposing tentative hypotheses, used in the creation of a new conceptual model of the antecedents in the UK retail gambling industry. 8

Satisfaction The degree to which a customer is satisfied is dependent on how well their expectations are met (Oliver, 1999: 38); general consensus among scholars suggests that satisfaction plays a key role in customer loyalty, as it is improbable that dissatisfied customers will continue to frequent a service with which they are unhappy. The exact role is still contested. Kuusik (2007) has highlighted several studies in a multitude of service environments revealing direct correlation between satisfaction and loyalty, meaning that improvements in satisfaction increase loyalty. Seminal work by Reichheld and Sasser (1990) suggests otherwise, finding that sixty to eighty percent of customers were satisfied before defecting; Oliver (1999) expands on these studies, by positing the notion that satisfaction is a prerequisite to loyalty, and that providing satisfaction is present, other variables are able to drive loyalty. Although debate still surrounds the construct of satisfaction, it is said to play a key role in determining future patronage of a service provider (Rundle-Thiele and Bennett, 2001): the contested and contextual nature of satisfaction requires further investigation regarding the relationship in the context of the UK retail gambling industry, but the general agreement surrounding satisfaction in service loyalty environments would suggest that: H1: Satisfaction is positively related to loyalty. Service quality Quality service emerges through consistent conformance to customer expectations (Lewis and Booms, 1983: 100), but the lack of tangible cues available in most services is problematic for both firms and consumers in delivering and evaluating service quality (Zeithaml, 1981). In an effort to counteract this impediment, service quality frameworks were created; Parasuraman et al (1988) introduced the SERVQUAL model in an attempt to standardise the measurement of service quality, which has since been refined to five dimensions. In terms of both delivery and evaluation, reliability, assurance, tangibility, empathy and responsiveness have been posited as the most important dimensions of both the core and augmented aspects of a service (Parasuraman et al, 1991). Service quality frameworks such as the aforementioned have been used to assess the impact that service quality has on loyalty; the results of these studies has been contradictory. Bei and Chiao (2001) found that service quality in the automobile industry indirectly impacted loyalty through satisfaction. A more comprehensive investigation in the context of myriad service environments also found that service quality mediated satisfaction (Cronin et al, 2000). The findings of Bei and Chiao (2001) and Cronin et al (2000) have been paralleled in the financial services industry (Lewis and Soureli, 2006), but some casino studies (Low, 2009; Phillips et al, 2010) are considered to have more direct links. The majority of studies suggest that service quality plays a mediating role in service loyalty, therefore: H2: Service quality is positively related to satisfaction.

Perceived superiority of offerings Widely accepted economic theory dictates that individuals engaging in economic activity look to derive the greatest gains through utilisation of their limited resources (Smith, 1776); following this rationality, the work of Meyers-levy and Malaviya (1999) posit that offerings which a customer deems to be superior in relation to that of competitors will encourage a customer to purchase from the provider again, which has previously been identified as an indicator of behavioural loyalty (Baloglu, 2002). Oliver (1999) opposes these sentiments, and argues that loyalty directed towards costs and benefits (as opposed to brand) is not ultimate loyalty, and that these customers are unlikely to hesitate when defecting to a competitor should their offerings be deemed superior; Dick and Basu (1994) disagree, arguing that a customer who perceives the offerings of a firm to be superior has a lower propensity to switch and is more willing to recommend displaying both attitudinal and behavioural dimensions of loyalty. McCain (2003) identified three key dimensions which were evaluated by a customer in the casino industry, these were the facilities, service and products provided; as Dick and Basu (1994) had suggested, the study found that these dimensions were positively related to customer loyalty the hedonic nature and similarity of offerings of the casino and retail gambling industries suggest that these findings should be paralleled: H3: Perceived superiority of offerings is positively related to loyalty. Perceived value The perceived value of a service is subject to a judgement by a customer concerning what was gained in relation to what was given up (Zeithaml, 1988:3); the sacrifices made can have both monetary and non-monetary dimensions (Anderson et al, 1994) making them highly subjective. The subjective nature of the construct has produced controversial findings in different service industries; Bei and Chiaos (2001) study of the automobile industry found that customers who perceived a price to be fair were more inclined to display repeat purchase behaviours. Whilst the results may suggest that successful attempts to improve the perceived value of a service directly increase loyalty to a firm, Voss et als hotel study (1998) found that higher levels of perceived value increased satisfaction, which in turn impacted loyalty. These findings are similar to the ideas of Zeithaml (1988), who stated that perceived value mediated satisfaction because the monetary construct of price played a crucial role in setting expectations. As an almost purely monetary product, one might expect these views to be reflected in the results of a study in the financial services industry but Lewis and Soureli (2006) found a direct link between perceived value and customer loyalty. The contested nature of such a construct requires further investigation specific to the retail gambling industry, as seminal work suggests that perceived value is a mediator of loyalty through satisfaction, the following hypothesis is proposed: H4: Perceived value is positively related to satisfaction, which impacts loyalty.

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Brand image Although there is no widely accepted theory of brand (Chernatony and Riley, 1998), brand image is said to be the way in which consumers perceive a brand, and these perceptions can be manifested through the functional and non-functional benefits a customer expects (Pitcher, 1985). Academia concerning brand image and customer loyalty tends to focus on the non-functional benefits of a brand, as these are said to have greater scope for providing a business with sustained competitive advantage (Aaker et al, 2004). The non-functional aspects of brand image include the usage of brands to express oneself (Low, 2009), or to make statements about identity or status (Ambler, 1997). Favourable brand images have been shown to encourage repeat purchase behaviour in casino studies: an examination of customer retention in Las Vegas casinos found that 68% of the survey population stuck with a brand that they liked (Low, 2009); these findings supported an earlier study by Lewis and Soureli (2006) in the retail banking industry. After consideration of previous service loyalty studies, the following hypothesis is formed: H5: Brand image is positively related to loyalty. Switching costs Switching costs are the costs involved in changing from one service provider to another (Porter, 1980), these can be both physical and emotional, and involve an assessment by the customer concerning the costs of abandoning an existing service for a new one; such costs include the loss of a loyalty bonus, sacrificing existing relationships with employees and costs involved in procuring a new service supplier (Ruyter et al (1998). Gremler and Brown (1998) argue that switching costs for services are higher than goods, whereas Ruyter et al (1998) consider the concept to be contextual, and dependent on the type of service, intensity of competition and the acquisition and retention efforts of firms. The notions of Ruyter et al (1998) were of greater applicability in Baloglus (2002) casino study, the costs of switching were found to be positively related to loyalty, but the participants perceived switching costs to be low. Low switching costs are said to be problematic for those looking to create a loyal customer base, as it increases a persons propensity to look for alternatives (Ruyter et al, 1998). Although the results of previous casino studies may suggest the perceived costs of switching will be low, a relationship between switching costs and loyalty is expected: H6: Switching costs are positively related to loyalty

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Relationships with employees Firms endeavouring to create strong relationships with customers are said to engage in relationship marketing strategies (Berry, 1995); these strategies are proposed as cost-effective ways to retain customers and increase revenues (Reichheld and Sasser, 1990) by reducing a customers propensity to look for alternatives (Bowen and Shoemaker, 2003), increase positive word of mouth (Phillips et al, 2010) and make customers more forgiving of mistakes made by the firm (Ruyter et al, 1998). The apparent benefits have caused academics to investigate the topic further, Phillips et al (2010) investigated the correlation between relationship strength and loyalty in the casino industry, many customers considered their feelings of friendship and affiliation with staff as the primary driver for their continued patronage. The importance of relationships appears to be contextual, as a similar study by Lewis and Soureli (2006) in retail banking found no such associations. As Harrison (2000) predicted, the construct appears to depend on industry specific variables, and requires further investigation in the retail gambling context. As both the casino and retail gambling industries are of a hedonic nature, relationships with employees may be of similar importance: H7: Relationships with employees is positively related to loyalty Social bonding Schouten and McAlexander (1995) conducted an ethnographic study into the subcultures of consumption, although the study was based on a product (Harley Davidson motorcycles) as opposed to a service, the conclusions were of wider relevance; they found that consumption activities served as the basis for interaction and social cohesion between individuals with similar sets of values. The findings of Schouten and McAlexander (1995) have been paralleled amongst gamblers, with Phillips et al (2010) and McCain (2003) promoting the idea that social bonding and community play integral roles in encouraging customer loyalty. After consideration of the literature, the following hypothesis has been formed: H8: Social bonding is positively related to loyalty

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Commitment Committed customers are characterised by the expression of a stable preference and a resistance to change (Kiesler and Sakumura, 1966), which results in a display of both attitudinal and behavioural loyalty responses to a firm. Numerous studies have investigated the relationships between commitment and other loyalty constructs, Morgan and Hunt (1994) found a relationship between commitment and brand image, which was posited to have emerged as a result of a persons desire to appear consistent in their behaviour, which extended to their consumption habits. Morgan and Hunt (1994) also elaborate, by providing managerial suggestions concerning commitment; recommending that a party looking to encourage commitment in another party should display it first. This rationality would suggest that a firm looking to encourage commitment would have to do so first, which could entail vulnerability (Morgan and Hunt, 1994). The casino study of Baloglu (2002) used commitment and trust as indicators of attitudinal loyalty, the results of the study provided evidence to suggest that high levels of trust and commitment positively related to higher costs of switching, which has been theorised as both an indicator and an antecedent of loyalty. Available discourse suggests that: H9: Commitment is positively related to loyalty Trust Rotter (1980: 2) defines trust as a generalised expectancy held by an individual that the word, promise, or statement of another individual can be relied upon. Trust is closely associated with loyalty as it is an integral part of relationship formation (Bowen and Shoemaker, 2003), an antecedent of commitment (Morgan and Hunt, 1994) and an aid in resolving difficulties (Rotter, 1980). In a study within the context of luxury hotels, Bowen and Shoemaker (2003) concluded that trust was an aid in forming stronger relationships as trust suppressed natural opportunistic behaviour, reducing the likelihood of one party taking advantage of the other party; this helps to strengthen a relationship as it reduces levels of uncertainty for both parties. The intimate relationship between trust and commitment which Morgan and Hunt (1994) emphasised is a result of a virtuous circle; as levels of trust increase, the incentives for doing business again increase, this encourages commitment, which has previously been defined as a stable preference and a resistance to change (Kiesler and Sakumura, 1966). As committed customers are more likely to increase revenues for a firm, effort has been devoted to understanding the construct in greater detail. The contexts of greatest relevance to the study, casinos (Baloglu, 2002) and financial services (Lewis and Soureli, 2006), have found that trust plays a crucial role within the context of loyalty. Academic consensus surrounding the construct of trust suggests that: H10: Trust is positively related to loyalty

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Model 1

Tentative Conceptual Model

A Lack of existing conceptual frameworks concerning the antecedents of customer loyalty in the UK retail gambling industry has led to the production of a new model. The possible antecedents and their respective hypotheses have been combined to form a conceptual framework which is useful in assisting in the development, refinement and discussion of ideas surrounding exploratory concepts (Robson, 2002).

Perceived Value

H4 Satisfaction

H2

Service Quality

Relationship with Employees H1 Social Bonding

Brand Image

H7

H5

Perceived Superiority of Offerings

H8

H3

Loyalty
H6 Switching Costs

Commitment

H9 Attitudinal Loyalty Behavioural Loyalty

Proportionate spend

Trust

H10

Willingness to co-operate Willingness to recommend 14

Chapter 3 Research Method

The previous chapter reviewed the available academic discourse and produced tentative hypotheses which were used to create a hypothetical conceptual model. This chapter aims to outline the way in which primary research was undertaken in an effort to test the conceptual model.

3.1 Research philosophy

The creation and subsequent testing of a hypothetical conceptual framework is typical of a deductive research methodology (Saunders et al, 2007), but the exploratory nature of the study required an openness to emergent ideas when evaluating the results a key characteristic of an inductive approach (Saunders et al, 2007). Multiple methodological approaches were utilised in the study, identified by Saunders et al (2007) as a feature of a pragmatic research philosophy; the principal argument of which is that the most important determinant of the research philosophy is not the way in which it is approached, but the use of appropriate mechanisms in relation to the research question (Robson, 2002). Types of data Adoption of a pragmatic research philosophy extended to data collection: deductive approaches tend to rely on the collection and analysis of quantitative data (Robson, 2002), which was crucial for the clarification of the research question as it enables the testing of hypotheses, exploration of relationships and identification of trends (Saunders et al, 2007). The purely numerical nature of quantitative data (Saunders et al, 2007) can sometimes overlook certain parts of human behaviour (Robson, 2002) because these can be difficult to quantify (Dey, 2003). As the study investigated consumer buying behaviour, qualitative data was also collected; non-numerical data is useful for gaining rich information (Saunders et al, 2007), but the complex nature of such an endeavour can be time consuming (Saunders et al, 2007). Subject to these considerations, mixed methods research was adopted so that both methods of data collection could be used complimentarily.

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3.2 Research method

Mixed methods research The use of mixed methods research is becoming increasingly advocated in business and management research (Curran and Blackburn, 2001) as it provides the researcher with better opportunities to answer and evaluate the research question (Tashakkori and Teddlie, 2003) whilst increasing the reliability of the findings through triangulation (Saunders et al, 2007). One major disadvantage of using multiple methods is that it requires more resources, for this reason Robson (2002) argues that it is most effective in small-scale projects when one method is central and the other supplementary. Following Robsons (2002) advice, quantitative research was made the central method, whilst qualitative supplementary; the decision was rationalised after consideration of the critical importance of quantitative data in testing hypotheses which was contributory to answering the research question. The fact that qualitative data collection can be time consuming reduced the methods feasibility on a larger scale, as completion of the study was subject to time constraints. Quantitative data collection was carried out through the use of questionnaires, and qualitative the use of interviews. Questionnaire The method chosen as central to primary research was the use of questionnaires to obtain quantitative data; they were deemed most appropriate as they make it possible to deal with a large sample with relatively few resources (Robson, 2002). Questionnaires are a valuable tool for investigating the expectations, perspectives and preferences of a population (Robson, 2002); however, it can be difficult to assess the truthfulness or seriousness of participants when completing the questionnaire (Saunders et al, 2007). Researcher-administered questionnaires were chosen in an effort to counteract the aforementioned limitation, but participants were encouraged to complete and submit questionnaires anonymously in an effort to reduce the impact of the researcher on responses (Robson, 2002). Robson (2007) posits that questionnaires can be time consuming and require significant skill in order to obtain effective results; the specificity required for a successful questionnaire meant that, where possible, questionnaires made use of instruments that had been used successfully in previous studies which assessed loyalty in service environments. Interviews Semi-structured interviews produced qualitative data and were used to supplement questionnaires, providing richer information of greater depth (Saunders et al, 2007) in an effort to add meaning to the results of the quantitative data (Robson, 2002). More specifically, many scholars in marketing theory development had suggested the use of interviews in service loyalty assessment (Parasuraman et al, 1985; Peter and Olson, 1983; Zaltman et al, 1982). Robson (2007) advises that researchers of limited experience should use semi-structured interviews over alternatives as they allow the overall focus of the interview to be determined before hand, whilst providing enough flexibility for interviewer discretion when guiding the conversation. 16

3.3 Research instruments

Efforts to maximise the usefulness of the study involved deliberation concerning the instruments used in conducting primary research; the next paragraphs discuss the main considerations made. Sources of questionnaire instruments As previously mentioned, questionnaire instruments were adapted from previous successful studies concerning service loyalty assessment in an effort to obtain effective results. The four key themes highlighted in the literature were attitudinal and behavioural loyalty, composite loyalty and their possible antecedents. Attitudinal loyalty The literature review highlighted the work of Morgan and Hunt (1994) and Oliver (1999) who considered trust, commitment and the costs of switching to be key indicators of attitudinal loyalty. Lewis and Soureli (2006) measured these constructs within the context of retail banking, and these questions were then reconceptualised to fit the retail gambling context. Behavioural loyalty Baloglu (2002) used proportionate expenditure, willingness to recommend and willingness to co-operate as behavioural loyalty assessment instruments in casinos; these questions were then adapted for retail gambling. Composite loyalty The study used the responses from attitudinal and behavioural loyalty questions to create a composite loyalty score. Possible antecedents Questions that assessed the core and augmented dimensions of service quality were adapted from the RATER framework of Parasuraman et al (1991), perceived superiority of offerings and perceived value constructs were adapted from Lewis and Soureli (2006), whilst questions regarding relationships with employees were adapted from the work of Phillips et al (2010). Other instruments were created independently. Appendix 1 shows the resultant questionnaire, items were measured using a 5-point likert scale ranging from strongly agree (5) to strongly disagree (1) these measures paralleled those of Lewis and Soureli (2006), for purposes of comparison and reliability. Sources of interview instruments Interviewees were provided with the preliminary results of the questionnaire and were asked to discuss them; this resulted in the synthesis of key themes identified in the literature review with quantitative data, producing a practitioner perspective of the possible antecedents of customer loyalty in the UK retail gambling industry.

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3.4 Pilot
Two pilots each involving the distribution and completion of 5 test questionnaires were undertaken in an effort to reduce the likelihood of complications when conducting the main data collection exercise (Robson, 2002); these were conducted in a separate betting shop to avoid the possibility of contaminating the main study (Robson, 2007). Respondents to the first pilot expressed concerns surrounding the completion time and similarity of some instruments. Although participants were unaware that some questions were purposefully similar (constructs were measured using multiple items so that their internal consistency could be measured); their concerns resulted in the removal of 18 items, all of which were multiple items. Completion times of the second pilot were noticeably shorter, with feedback resulting in minor cosmetic changes before the questionnaire design was finalised.

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3.5 Sampling
Questionnaire sampling technique Time and resource constraints makes sampling a necessity (Saunders et al, 2007), and such constraints meant that convenience sampling was adopted over alternatives. As convenience sampling has a low likelihood of being a representative sample (Henry, 1990), alternatives such as stratified random sampling may have been more useful in terms of generalisability of the results (Saunders et al, 2007); the exploratory nature of the study meant that the greater resource consumption involved in undertaking stratified random sampling may have been wasteful should no results be found. Henry (1990) asserts that convenience sampling is beneficial in conducting exploratory research, but the use of a convenience sample coupled with the small scale of the sample made it difficult to make any statements that can be generalised for the whole UK retail gambling population (Malhotra, 1999). Considering the aforementioned limitations, any comments which appear to be generalisations should be deemed tentative hypotheses, should a similar study be carried out using a generalisable sample. Questionnaire sample frame The use of convenience sampling meant that only one qualifier was used to screen participants; they had to be patrons of at least one betting shop. Patrons of the chosen betting shop in Bath were able to participate in the study, everyone was indiscriminately asked to participate. Interview sampling technique Two betting shop managers in Bath were chosen to provide a practitioner perspective, and once again convenience sampling was adopted by using known associates (Robson, 2007). Interview sample frame Christine had managed a bookmaker in Bath for almost four years; the betting shop she managed was owned by one of the largest bookmaking companies in the UK. Emma had been working in the retail gambling industry for over a decade, and had been employed as a manager of an independent bookmaker in Bath for almost six years. She was winner of 2011 Racing Post regional betting shop manager of the year for the south west region.

3.6 Primary research process

For the duration of one week, commencing 2nd April 2012, 70 questionnaires were researcheradministered in Christines betting shop in Bath. Interviews took place in the respective staff rooms of each of the managers to be interviewed. These took place week commencing 16th April 2012, and followed the distribution of preliminary questionnaire results.

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3.7 Results evaluation

Quantitative Data Evaluation Following the distribution and return of questionnaires, the following process was used to evaluate results: 1. Initial confirmatory analysis was used to check questionnaires for missing data. Incomplete questionnaires were to be discarded. 2. Responses were coded: a. Strongly Agree = 5 b. Agree = 4 c. Neither agree nor disagree = 3 d. Disagree = 2 e. Strongly Disagree = 1 3. Microsoft Excel was used to create a data matrix and for basic descriptive analysis. 4. The data matrix was loaded in SPSS. 5. The internal consistency of multiple items was subject to Cronbachs Alpha tests, which was used to assess the reliability of research instruments (Kirkpatrick and Feeney, 2009). 6. Various relationships were then measured using correlation coefficient analysis, which enabled the quantification of a relationship between variables (Saunders et al, 2007). Following the advice of Saunders et al (2007), Kendall Tau-B was used as the data to be analysed was not normally distributed. Unless specified, relationships were significant at the 0.05 level a level which implies that the results were unlikely to happen by chance (Saunders et al, 2007). Interview Data Evaluation The supplementary nature of the interviews resulted in less sophisticated evaluation methods, the data was reduced and key themes and verbatim quotes were extracted for purposes of confirmation, triangulation and meaning (Robson, 2007).

3.8 Ethics
Although for most people gambling is an enjoyable experience, it is an industry which must contend with addiction. The sensitivity surrounding behavioural loyalty in the context of gambling meant that only very limited information was asked for in terms of betting expenditure, and participants were made aware their partaking was discretionary. Primary research was only conducted after clearance, after which point ethical codes of conduct were considered at all times.

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Chapter 4

Results

In order to address the issue of loyalty in the UK retail gambling industry, a structured questionnaire was developed and introduced over a period of one week in a betting shop in Bath; the items aimed to measure key antecedents identified in the literature review. Distribution of 70 questionnaires resulted in 62 being returned, after initial confirmatory analysis 6 were discarded as unusable, leaving 54 usable responses; this equated to a usable response ratio of 77%. Initial descriptive analysis of the data indicated that the respondents were predominantly male (94%). Respondents were most likely to be over 50 (50%), whilst 35% were aged 30 49, and 15% were aged 18 29. 92% of respondents bet at least once a week. This is broadly indicative of what one might expect from the betting shop population (King, 2011).

4.1 General prescription from the data regarding loyalty

Item 1 of the questionnaire asked respondents to state the betting shops that they felt they were a loyal patron of, the majority (51%) of respondents considered themselves a loyal patron of more than one bookmaker, whilst 48% claimed they were loyal to a single bookmaker. Only one respondent (1%) declared that they were loyal to no bookmakers. Respondents were then asked to choose the bookmaker they considered themselves to be most loyal to, this became their main bookmaker. As discussed in the methodology section of the report, a composite measure of loyalty was used in an effort to gauge the levels of loyalty displayed by a respondent; this involved the measurement of both attitudinal and behavioural dimensions that had previously been highlighted as associated with loyalty in the academic discourse. As per the coding schedule identified in the methodology section, scores of 5 would indicate strong agreement, 3 neither agreement nor disagreement and 1 strong disagreement. This scale applies to all scores except the composite score; as it is composed of two items 10 would indicate strong loyalty, 5 no loyalty and 1 strong disloyalty. Attitudinal loyalty In an effort to avoid repetition, the dimensions of switching costs (H6), commitment (H9) and trust (H10), which formed the attitudinal loyalty score, are addressed in their corresponding sections. Following the collection and analysis of this data, the survey sample as a whole had a mean score of 3.3 in regards to their attitudinal loyalty.

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Behavioural loyalty The behavioural dimensions associated with loyalty were measured, participants were asked to estimate the proportion of betting expenditure that their main bookmaker received, and to answer questions aimed at measuring their willingness to both recommend and co-operate with their main bookmaker. As a whole, respondents had a behavioural loyalty mean score of 3.4, denoting a presence of behavioural loyalty in the survey population. Composite loyalty The aforementioned scores imply a positive but weak level of loyalty, both in attitudinal and behavioural terms; each respondents attitudinal and behavioural loyalty scores were added together to create a personal composite loyalty score. Respondents were then ranked by loyalty score, with the lowest quintile (disloyal) and the highest quintile (loyal) subject to their own analysis. This rank and analysis allowed for a comparison of extreme cases for analytical purposes.

4.2 Results pertinent to each hypothesis

The remainder of the results section addresses the results relevant to each of the hypotheses which contribute to answering the research question what are the possible antecedents of customer loyalty in the UK retail gambling industry? Descriptive data most relevant to the aforementioned research question is presented in this section, and correlation coefficient analysis is available in their respective tables the full data matrix is available in appendix 2. H1: Satisfaction is positively related to loyalty Item 14 asked participants whether they were satisfied with their main bookmaker; this was the case, with 96% of respondents in agreement, producing a mean score of 4.2.A comparison of the disloyal and loyal quintiles found high levels of satisfaction, but they were subject to some deviation from the norm: 70% of the disloyal quintile agreed that they were satisfied, whilst the loyal quintile was in unanimous agreement, and 80% in strong agreement. The previous comments are also demonstrated in the mean scores, with the disloyal lower than the sample (3.7) and the loyal higher (4.8). To test the hypothesis and confirm the above, statistical analysis was used. The results of Kendall Tau-B tests confirmed a relationship, with weak levels of positive correlation (.387) being identified between satisfaction and loyalty. The exploratory nature of the study meant that the satisfaction construct was subject to further analysis with other constructs which were measured; relationships with employees (.402) was another relationship identified as significant.

22

Table 1

Composite Loyalty Correlation Coefficients

Key: Dark Blue: Light Blue: Grey:

Hypothesis Test (Deductive Results) Significant finding produced through exploration (Inductive Results) No significant relationship/Duplicate

23

Table 2

Antecedent Correlation Coefficients

Key: Dark Blue: Light Blue: Grey:

Hypothesis Test (Deductive Results) Significant finding produced through exploration (Inductive Results) No significant relationship/Duplicate

24

H2: Service quality is positively related to loyalty The multi-dimensional nature of service quality was highlighted in previous chapters of this report; this resulted in the construction of five questions that were required to measure both the core and augmented aspects of service quality. As multiple items were used to measure a single construct, the items were subject to Cronbachs Alpha tests; the score (.936) indicated that the service quality questions were of excellent internal consistency. Figure 1 shows that, in a fashion not dissimilar from the satisfaction construct, the quality of service that respondents felt they received was an area of general agreement, with both the mean (4.2) and the mode (5) of the sample indicative of this.

Fig. 1: 5 4 Mean Score 3 2 1 0

Items 15 19: Service Quality Dimensions

4.9 3.9 4.2 3.3 4.3 4.2 4.9 4.85

3.5

Disloyal Overall

Sample Core Augmented

Loyal

The construct of service quality was then deconstructed, and subject to further descriptive analysis. Research instruments specifically aimed at assessing the core benefits of the service provided by the respondents main bookmaker received a similar response from the disloyal segment when compared to the survey sample, with the mean (3.9) displaying this. The loyal quintile was found to be more agreeable, with the core attributes provided by their main bookmaker receiving a mean score of 4.9. There was, however, greater disparity between the augmented aspects of service delivery; whilst 87% of the survey population agreed that employees were kind, only 50% of those segmented as disloyal agreed. The provision of individual attention, (the second of the two items measuring the augmented aspects of service quality) found similar results; just 40% of disloyal customers were in agreement, which is less than half compared to the survey population (83%). The loyal 25

quintile was found to be the most agreeable in relation to augmented service elements, with a mean score of 4.85. Statistical analysis which employed Kendall Tau-B tests confirmed a relationship of medium strength (.411) between service quality and satisfaction, but a stronger link between service quality and loyalty (.499) was discovered through exploratory analysis. When scrutinising the results in greater depth, service quality was also found to have links with brand image (.344) and social bonding (.404), and a particularly strong link with relationships with employees (.658). H3: Perceived superiority of offerings is positively related to loyalty Those participating in the survey were asked multiple questions in an effort to determine whether they perceived their main bookmakers offerings to be superior in relation to their competitors, once again the internal consistency of the questions were tested using Cronbachs Alpha; the resultant rating of .750 denoted good reliability. The relevant data was then aggregated, resulting in a mean score of 3.1 for the survey sample. Figure 2 disassembles the construct, whilst comparing the results to the extreme quintiles:

Fig. 2:

Items 20 22: Perceived superiority of offerings

5 4.3 4 Mean Score 3 2 1 0 Disloyal Facilities Sample Products Services Loyal 2.9 2.5 2.9 2.7 2.9 3.6 3.2 3.5

The means denote high degrees of impartiality in many cases: with the loyal quintile more likely to agree with statements surrounding perceived superiority, except for facilities, as characterised by a mean score of 3.2. In order to test the hypothesis, Kendall Tau-B tests were used: the resultant score (.218) denoted a relationship of little significance. Further exploration found stronger links between perceived superiority and perceived value (.634) and brand image (.525).

26

H4: Perceived value is positively related to satisfaction, which impacts loyalty. Two questions were asked in order to determine whether perceived value mediated satisfaction within the context of the UK retail gambling industry; the internal consistency of these questions were subject to Cronbachs Alpha tests, to which they were given a good (.808) rating of internal consistency. Perceived value was responded to in a similar way to the construct of perceived superiority, with both the whole survey sample (mean: 3.2) and disloyal segment (mean: 3.0) expressing no real opinion as to whether they received greater value from their main bookmaker. On the other hand, loyal respondents were more inclined to agree, demonstrated by a mean score of 3.7. The findings of descriptive analysis were reaffirmed when subject to statistical analysis, with a weak positive (.362) relationship found between the constructs of perceived value and satisfaction. Further exploration exposed a relationship of similar strength (.358) with brand image. H5: Brand image is positively related to loyalty Cronbachs Alpha reliability tests returned a score (.715) that validated the reliability of the multiple items used to assess brand image, after which the results were subject to further analysis. Mean scores derived from descriptive analysis suggested that high levels of impartiality were evident amongst weaker levels of loyalty, with the mean score for the survey sample (3.3) and disloyal (3.1) demonstrating this. Loyal respondents were in greater agreement, with a mean score of 3.8. Item 26 asked respondents whether their main bookmaker had a good reputation, 81% indicated agreement. When asked to compare this to competitors (Item 25) the results were of lesser clarity, with only 40% in agreement and 50% expressing impartiality. Kendall Tau-B was used to test the hypothesis; it showed a relationship (.217) of little significance. Brand image and other constructs appeared to have stronger relationships: with both relationships with employees (.363) and social bonding (.402) indicative of a significant relationship.

27

H6: Switching costs are positively related to loyalty. Multiple items attempted to measure both the physical and emotional costs of switching; before beginning the analysis of the results, Cronbachs Alpha tests were employed. The result of the test (.530) indicated poor internal consistency; an important consideration when assessing the reliability of any of the findings associated with switching costs. A high standard deviation (0.9) exposed disparity which the mean score for the survey sample (2.9) hides; the disloyal and loyal differed on the perceived costs of switching, with mean scores of 1.6 and 3.8 respectively. Figure 3 shows this:

Fig. 3: Items 10 & 11: Switching Costs

5 4 Mean Score 3 2 1 0 Disloyal Overall Sample Physical Emotional Loyal 1.6 1.6 1.6 2.9 2.7 3 3.8 3.7 3.8

As switching costs were a component of the attitudinal loyalty construct, the relationship with behavioural loyalty was assessed (using Kendall Tau-B), to which a score of .410 was derived, indicating a positive relationship of medium strength.

28

H7: Relationships with employees is positively related to loyalty The survey employed multiple items in an effort to better understand the role of relationships with employees within the context of retail gambling, and was therefore subject to internal consistency tests. Having derived an acceptable (.575) score from Cronbachs Alpha tests, the results were subject to analysis. Descriptive analysis of the results pertinent to relationships with employees found that the survey sample were in general agreement (mean: 3.9), with the disloyal quintile more likely to respond with impartiality or disagreement, and the loyal the opposite. The results from Item 30 (Fig. 4) demonstrate this:

Fig. 4

Item 30: The staff at my main bookmaker are more like friends to me

Disloyal
10% 10% 30% 50%

Sample
11% 21% 22% 46%

Loyal
40% 60%

Statistical analysis confirmed hypothesis 7, with a relationship of medium strength (.575) being identified through Kendall Tau-B tests. To re-iterate the results of exploratory investigation, relationships with employees was found to be related to other constructs, including satisfaction (.402), service quality (.658), brand image (.363) and social bonding (.370). H8: Social bonding is positively related to loyalty A review of the extant literature concerning loyalty found that consumption habits may be driven by social factors, and primary research had been conducted accordingly. Participants were asked if they frequented their main bookmaker because their friends also frequented it although the mean score (3.3) suggests that the question was answered with high degrees of impartiality this was not the case. Only 30% of respondents answered with impartiality, with similar percentages agreeing or disagreeing with the statement. As the dynamic of the previous results would suggest, disloyal respondents were more likely to respond with disagreement, whereas loyal the opposite. Kendall Tau-B tests found a relationship between social bonding and loyalty, insignificant levels of correlation (.240) were found; whilst stronger links with social bonding (.404), brand image (.402) and relationships with employees (.370) emerged.

29

H9: Commitment is positively related to loyalty Cronbachs Alpha tested the internal consistency of commitment items to find they were acceptable (.628). As with the results of the previous hypothesis, the construct of commitment provoked a strong response that the mean score (3.0) hides; this is evident when comparing the most extreme quartiles, with the disloyal displaying very low levels of commitment and the loyal the opposite, resulting in mean scores of 2.0 and 4.2 respectively. The above sentiments are demonstrated in figure 5, a question concerning emotional commitment:

Fig. 5 Item 7: I feel emotionally attached to my main bookmaker

Disloyal
10% 10% 30%

Sample
13% 11% 10%

Loyal
10% 20%

28% 50% 17%

31%

10% 50%

As commitment was a component of the attitudinal loyalty construct, the relationship with behavioural loyalty was assessed; the results of Kendall Tau-B tests (.484) confirmed a relationship between the two. Exploratory investigation also found a link of medium strength between the trust construct (.450) and a strong link between switching costs (.610).

30

H10: Trust is positively related to loyalty Two survey items were used to measure trust that respondents had for their main bookmaker, and for this reason they were subject to internal consistency tests; the Cronbachs Alpha score (.709) was deemed an acceptable result and confirmed the reliability of the questions asked. Even the disloyal quintile was in general agreement that their main bookmaker was trustworthy, with a resultant mean score of 3.5. The survey sample as a whole were in stronger agreement, with a mean score of 4.1, and the loyal quintile displaying even greater levels of trust, with a mean score of 4.8. Statistical analysis (Kendall Tau-B) confirmed a link between the construct of trust and behaviour: this was denoted by a weak positive score of .378.

Results of practitioner interviews

The preceding parts of chapter presented the results of the questionnaire; a draft version of the chapter was then sent to practitioners and interviews ensued. As explained in the methodology section (chapter 3), the supplementary nature of the interviews resulted in evaluation of lesser sophistication. Following a reduction of the qualitative data, the resultant key themes and verbatim quotes have been tabulated:

Table 3
Did Christine agree with the results? Christine

Practitioner Interview Results

Result / Hypothesis Emma Did Emma agree with the results?

N/A

All customers are different You have to work on more than one thing to keep people coming back Question 25 shows that customers showed loyalty to other competitors, too

General statements regarding customer loyalty in the UK retail gambling industry

It [loyalty] all boils down to customer service They [customers] have to feel comfortable in your shop... which is down to staff You can be loyal to more than one bookmaker

N/A

Yes

The core functions [of service] create satisfaction

Satisfaction

Satisfaction isnt enough, you need to provide an experience

Yes

31

Yes

I put it [service] at the top of the list Poor service detracts more than good service adds Consistent service is important as it links to our reputation [Service quality frameworks] are being put in our training... These are efforts to retain customers

Service Quality

Good customer service keeps customers [Augmented aspects of service quality] are most important, staff have to be attentive toward them [customers] as a person If staff feel driven, this will reflect in their behaviour toward customers If you have good customer service and good prices, it draws them back The core of it [service quality] is when someone walks up to the counter and puts a bet through. That makes no difference to anybody Too many big bookmakers employ people solely as a bum on a seat... it negatively impacts loyalty

Yes

Yes

We were doing a 25% bonus on our football coupons, then [a competing bookmaker] did 33%... It is a very competitive industry Even though some bookmakers have good facilities and we dont, people come here. It cant be that important... They dont care as long as the basics are there

Perceived Superiority of Offerings

What makes a shop [superior] is the staff People dont even notice [facilities]... my shop had a refit... two weeks later no one noticed anymore... you cant create loyalty through facilities

Yes

Yes

Some people are inclined to shop around for the best deal I wish I had more control [over pricing], but we work for a big company... The relationship with customers would be a lot better People ask [for competitor prices], but I cant do anything about it, if I could I would

Perceived Value

In my shop we can lay different prices and things, anyway. So that works to our advantage, and brings people back to us You have to entice through prices, and retain through service If one bookmaker offers treble the odds, then the others follow: it costs them all money Price only effects price sensitive people... theyre not the ones you want to be loyal It doesnt matter how many posters youve got up, or whatever you have on a screen, people dont read them Some people still see bookmakers are dark, dingy and smoky places Sometimes the owner works in the shop... that makes it [brand image] more personal

Yes

Yes

Sometimes the more infrequent gamblers bring in betting slips from other bookmakers... which suggests that they dont differentiate our brand from competitors

Brand Image

Yes

32

Yes

Those who visit multiple bookmakers are more aware of the low switching costs

Switching Costs

N/A

Yes

Yes

It cant be forced...relationships take time. The new hosting initiative is aimed at building relationships with customers: making them stay in the shop, and that is loyalty, isnt it? ... We havent entirely implemented it though, its too much... customers say what are you doing out here!? Get back behind the counter! [New initiatives] are all down to the manager of the shop and the staff [to make work]... they cant make us... there are too many [initiatives] and we are expected to bombard customers

Relationships go both ways, they like coming in because of the staff, and the staff like them You have to befriend them before they try and befriend you Relationships with employees

Yes

Yes

If their friends are there, they are going to go there I agree with the results, we are sociable beings... it can be a social thing, but some [customers] want to gamble on their own... other things [constructs] can affect that question

Social Bonding

Creating a good atmosphere and experience is critical [for social bonding]... it [loyalty] goes back to staff again You need to build a community in your shop where everybody knows each other Some people just go there because their friends go there They [some customers] dont see themselves as being like that [sociable] in the shop...

No

Yes

You can encourage commitment by providing them [customers] with things [incentives] they want to come back for Commitment is not to the bookmaker, but the staff they see as their friends

Commitment

The people that are loyal to a certain bookmaker is because they are emotionally attached to that bookmaker and the experience they have They think theyre not, personally I think they are a lot more emotionally attached than they like to think Emotional attachment is a driver of loyalty

No

Yes

Without trust you arent going to go there, so theres got to be trust there... if trust breaks down you can lose a customer

Trust

If you dont feel that you can trust the bookmaker, you wouldnt go to them, would you?

Yes

N/A

Needed more demographic data because customers are different, and customer characteristics could impact loyalty variables.

Limitations of the study

The way in which the questionnaire was distributed meant that customers staying were more likely to fill it out.

N/A

33

Chapter 5 Discussion
Chapter 4 provided the results of customer-questionnaires and practitioner-interviews, this chapter looks to synthesise these findings with existing theories so that the appropriate amendments can be made to the conceptual model.

5.1 General discussion regarding loyalty

Loyalty definitions The sample population only displayed slight indications of attitudinal and behavioural loyalty, and the majority also identified themselves as a loyal patron of more than a single bookmaker; these findings suggest Olivers (1999: 35) definition of a loyal customer as one which fervently desires to re-buy a product or service and will have no other is incompatible within the retail gambling context, promoting the ideas of both practitioners and Kotler (1972) who believe that customers could be loyal to more than one firm. Loyalty in UK Retail Gambling Rationality for the study came from a lack of readily available discourse concerning loyalty within the context of the UK retail gambling industry, making contextual comparisons impossible. For this reason, the remainder of the discussion section synthesises the available literature with the results of mixed methods research to discuss the hypotheses that contributed to the creation of a hypothetical conceptual model.

5.2 Discussion pertinent to each hypothesis

H1: Satisfaction is positively related to loyalty Quantitative data analysis confirmed a direct link between satisfaction and loyalty, but high levels of satisfaction were not exclusive to those with high loyalty scores. Practitioners also provided further evidence to support the thesis of Oliver (1999), who considered satisfaction to be a prerequisite of loyalty. Although it is evident that further investigation is required to fully understand the relationship between satisfaction and loyalty, the findings of the study concur with those of Rundle-Thiele and Bennett (2001), as satisfaction clearly played a key role in loyalty formation. Practitioners made similar suggestions to that of Reichheld and Sasser (1990); as high percentages of customers are satisfied irrespective of their loyalty, attempts to gain the loyalty of customers through improvements of satisfaction may be subject to diminishing returns, and resources may be better utilised elsewhere. Although this was not the case in the study, managers of betting shops (who are confident of the generalisability of the study) with high levels of dissatisfaction would be well advised to improve the situation if they wish to gain a loyal customer base.

34

H2: Service quality is positively related to satisfaction, which impacts loyalty Service quality appears to have a greater impact on customer loyalty in the context of retail gambling than expected; it was found to be a direct antecedent of loyalty and a mediator of satisfaction. Practitioners asserted that the core benefits of the retail gambling service were unlikely to create loyalty and therefore yield little strategic potential; they also felt that the augmented aspects were of paramount importance. Although exploratory in nature, these findings help to contextualise similar findings in casino industries (Low, 2009; Phillips et al, 2010), whilst contrasting those in financial services (Lewis and Soureli, 2006). As Harrison (2000) asserts, these discrepancies may be due to the unique characteristics of the services; different variables such as the frequency of use or functionality of services may play a role in determining the importance of service quality. To re-contextualise such findings, future studies might investigate the relationship between frequency of participation and loyalty in betting shops, or the perceived utility derived in relation to the importance of service quality. Such studies will further understandings of loyalty in the retail gambling context. Practitioners agreed that employees were responsible for delivering augmented aspects of service quality, and this delivery reflected on the firm. These statements provide an explanation of the results of statistical analysis, which found relationships with employees and brand image to be linked to service quality. H3: Perceived superiority of offerings is positively related to loyalty The results from the study simultaneously disconfirmed predictions surrounding the role of perceived superiority of offerings and contrasted the findings of McCain (2003) on which the prediction was based. Practitioners were in agreement with the results and felt that the ease with which products can be copied by competitors made it difficult to gain an advantage, the facilities were of low importance to customers and that services remained a key factor. Results from both methods of primary research have interesting implications concerning the legitimacy of seminal service loyalty work; Zeithamls (1981) work suggests that the intangibility of services makes it difficult for customers to evaluate them however this was a question which provoked the fewest impartial responses, which implied they had an opinion. Offerings were still found to be linked to perceived value and brand, which were identified as important factors in mediating loyalty; consequently, firms must ensure that they deliver competitive offerings for customers to not defect, which is an obvious requirement for encouraging loyalty.

35

H4: Perceived value is positively related to satisfaction, which impacts loyalty The results of both descriptive and statistical analysis confirmed the hypothesis, which correlated with much of the literature. Within the context of the study, the construct of perceived value was similar to that of Voss et al (1998), as higher levels of perceived value correlated with greater levels of satisfaction. Counter to this, Bei and Chiao (2001) found that perceived value was directly linked to purchase behaviours in the context of the automobile industry; the disparities might be explained by the type or size of purchase. By this rationality, those placing larger bets might have greater price sensitivity. These findings also concur with the views of Zeithaml (1988), who asserted that the construct of price plays a crucial role in perceived value; however, interviewees felt that perceived value yielded little strategic potential in encouraging loyalty, as the homogeneity of offerings limited the scope for price competition. Similarly to perceived superiority, bookmakers must meet minimum value perceptions of customers if they are to refrain from defecting. H5: Brand image is positively related to loyalty Results relevant to brand image contrasted a previous study by Low (2009) as the construct was not found to be directly linked to loyalty, but a mediator of others. In line with Pitcher (1985), the brand construct was found to be linked with both functional (perceived superiority of offerings) and non functional aspects (relationships with employees and social bonding) of retail gambling. Those with industry experience were interviewed, and their comments were similar to those of Aaker et al (2004). The results of the study suggest that the non functional aspects have greater scope for differentiation, which allows for competitive advantage; for instance, Emma highlighted that the owner would sometimes work at the betting shop, and this gave the brand a personal image which the bigger bookmakers could not replicate. Whilst the establishment of a relationship between brand image and loyalty might promote the use of campaigns aimed at promoting a brand image, both practitioners expressed concerns that customers had a blas attitude toward gambling brands. Should the statements of practitioners be confirmed, it could be deduced that the synergistic efforts of the mediating constructs were actually responsible for the higher brand scores which the loyal quintile displayed. In an effort to prove such statements, further investigation of the causal relationship of brand in relation to loyalty is required.

36

H6: Switching costs are positively related to loyalty Practitioners agreed with the results of descriptive and statistical analysis, which found that higher perceived costs of switching were reflected in the behaviour of respondents. The quantitative results were of similarity to those of Baloglus (2002) casino study, as the perceived costs of switching in the sample were low. Practitioners felt that this was a result of the intensity of competition in the area and the similarity of offerings, sentiments comparable to those of Ruyter et al (1998). High perceived costs of switching displayed by loyal customers appear to be a result of emotional attachment which has emerged through meaningful relationships with employees and social bonding; whilst operators have little power concerning the low physical costs of switching, these findings reiterate earlier thinking, with staff being of paramount importance in building relationships with customers and creating an atmosphere which facilitates social cohesion reducing a customers propensity to switch. The preceding paragraphs help to explain the low Cronbachs Alpha score: it appears that the items adapted from Lewis and Soureli (2006) which measured the physical and emotional costs of switching were completely different questions in the context of the retail gambling industry. It may be beneficial for future studies to measure the respective costs separately. H7: Relationships with employees is positively related to loyalty Results pertinent to relationships with employees concur with the work of Phillips et al (2010) who found that relationships with employees were a primary driver of continued patronage in the context of casinos; these findings contrast those of Lewis and Soureli (2006), who found no associations in retail banking. These results imply that the characteristics shared by casinos and betting shops which increase the importance of relationships with employees in encouraging loyalty are not found in retail banking; factors worth investigating might be contact time, stay duration or whether the service is discretionary. Following consultations, it was made evident that the importance of relationships had not gone unnoticed; one practitioner (Christine) highlighted attempts by their employer to improve relationships with customers, the introduction of new frameworks had been consciously noted by customers, and they had questioned their genuineness. Primary research suggested that relationships with employees should be considered a priority in driving loyalty, but had also emphasised the difficulty in artificial attempts to exploit the construct for purposes of loyalty. The previous sentiments highlight the importance in hiring employees both willing and capable of forming meaningful relationships with their customers. Bookmakers encouraging retail customers to use their online services should carefully consider such implications; the firm may lose their greatest form of differentiation by removing their staff from the bookmaking service. H8: Social bonding is positively related to loyalty The role of social bonding in the context of retail gambling loyalty appears to be a controversial one, whilst descriptive and statistical analysis found that social bonding had a weaker relationship than expected, there was disagreement between practitioners surrounding why, with both proposing explanations of equal plausibility. Emma felt that social bonding had subliminal elements which failed to be reflected in the responses of some participants, 37

whereas Christine felt that the results were an accurate reflection as some customers consider gambling an individual activity. Although there was disagreement surrounding the results, practitioners agreed that the social elements were an integral part of loyalty formation in at least some instances, and creation of a friendly and welcoming atmosphere would aid in social cohesion. The findings appeared to contrast the extant literature surrounding customer loyalty in other areas of discretionary spend (Phillips et al, 2010; McCain, 2003; Schouten and McAlexander, 1995), which furthers the notions of Harrison (2000) who insists that loyalty variables differ from service to service. H9: Commitment is positively related to loyalty Commitment was found to be positively related to behavioural loyalty and closely correlated with both trust and switching costs, contributing to the confirmation of the hypothesis and providing validation for Morgan and Hunts (1994) trust-commitment model within the context of the study. Practitioners asserted that commitment in retail gambling was driven by positive experiences and interactions with staff. Christine highlighted that the rigidity of company policy allowed for little discretion and hindered the degree to which she could provide such experiences. Emma emphasised the importance of the freedom that her employer gave her in catering to the individual needs of customers, and considered it an important factor in encouraging their return. Morgan and Hunt (1994) suggested that fostering commitment required vulnerability, operators of bookmakers must allow for such to reap the benefits of a committed customer base. H10: Trust is positively related to loyalty Respondents readily displayed feelings of trust toward their main bookmaker, and this was found to be reflected in terms of both attitude and behaviour providing confirmation of the hypothesis and concurring with the views of Bowen and Shoemaker (2003). The presence of high levels of trust were found irrespective of loyalty score, and a practitioner (Christine) picked up on such, and suggested that within the context of retail gambling, trust may be a prerequisite, as opposed to an antecedent in itself. A principal argument of Bowen and Shoemaker (2003) was that trust was required to suppress the opportunistic nature of a party involved in a transaction, making them more inclined to do business again; the retail gambling market is highly regulated, and numerous laws and regulations protect consumers. The aforementioned factors might instil trust in all patrons of the retail gambling industry of the UK, which would diminish both the importance and strategic potential of trust in the context of customer loyalty. Should further research confirm the statements of Christine, then the reduction of mistrust in customers would be more useful than heightening existing trust in others. Should it confirm otherwise, firms must decide whether the pursuit of higher levels of trust is a worthwhile endeavour, as it may entail vulnerability (Morgan and Hunt, 1994).

38

Model 2

Revised Conceptual Model

Perceived Value

The collection and analysis of quantitative data was used to inform practitioner interviews. The findings of the practitioner interviews were synthesised with the questionnaire results and existing academic discourse to revise the conceptual model of the possible antecedents of customer loyalty in the UK retail gambling industry. Satisfaction

Brand Image

Perceived Superiority of Offerings

Relationship with Employees

Social Bonding

Service Quality

Loyalty
Switching Costs

Commitment Attitudinal Loyalty Trust Behavioural Loyalty

Proportionate spend

Willingness to co-operate Willingness to recommend 39

Chapter 6 Conclusions
6.1 Summary
Whilst the hypothetical model expected loyalty to be a more linear concept, since the revision of the model it is evident that the antecedents of customer loyalty are interrelated and difficult to separate. Although the findings present issues for loyalty strategists, the evidence from the study identified three direct relationships that were of critical importance to effective customer loyalty strategies: 1. Satisfaction appears to be a prerequisite to loyalty; the presence of satisfaction is essential for loyalty formulation, but subsequent improvements may be subject to diminishing returns. 2. In line with similar casino studies (McCain 2003; Phillips et al, 2010), the relationships customers have with employees had been identified as the primary reason for their continued patronage. 3. Evidence suggests that the third direct relationship (service quality) shares intimate links with the preceding two; the core aspects of the service (efficient bet processing) contribute to satisfaction, whilst the augmented (individual attention and kindness of staff) elements appear to be both an antecedent of loyalty and mechanism for improved relationships between staff and customers. This study explored the possible antecedents of customer loyalty in retail gambling in the UK; although the results are subject to confirmation in a generalisable sample, the resultant conceptual model (model 2) provides a framework for practitioners to conduct their own small scale research and foundations for further contextual study.

6.2 Managerial implications

Although the managerial implications of the findings have been discussed throughout, the two most important considerations for loyalty strategists are considered to be: Satisfaction is a prerequisite to loyalty, and reductions in levels of dissatisfaction should be a priority. Providing adequate levels of satisfaction is the result of perceived competitiveness of offerings; although it may be tempting to manipulate the price element for satisfaction gains, competitors will have to retaliate through fear of their own customers defecting. As the price element appears to yield little strategic potential, attempts to provide unique consolations or incentives may be more effective in maintaining satisfied customers and differentiating the firm from others. Both customers and practitioners considered exceptional levels of customer service a key antecedent of loyalty, such service requires staff both willing and capable of providing outstanding levels of service, consequently, operators of betting shops need to ensure that their human resourcing policies, remuneration mechanisms and company procedures allow for such activity.

40

6.3 Limitations
The primary limitation has been emphasised throughout, but should nonetheless be reiterated: the exploratory nature of the study warranted small scale convenience sampling, and the results should not be generalised as indicative of the whole UK retail gambling population. Secondly, the use of previously used instruments was useful in creating a worthwhile questionnaire; but the low Cronbachs Alpha score of switching costs may provide evidence to suggest that such measurement instruments need to be adapted or refined for the retail gambling context.

6.4 Future research

Following a summary of the findings, their respective managerial implications and the limitations of the piece, the report ends by suggesting three alternatives for future research, any of which would be valuable additions to the extant academia: 1. The study could be replicated on a similar scale in an alternative location. Such a study would be useful in determining the replicability of this study; this report provides a framework for undertaking such an endeavour and may be most useful to independent operators of betting shops. 2. Conduct the study on a generalisable sample. Although this would be a study of considerable value it would be resource intensive and further small scale research should be conducted prior. 3. This study explored many variables in an attempt to define relationships, future studies may want to investigate fewer constructs in greater depth within the retail gambling context. The establishment of causal relationships would be research of significant value, and ideas for such studies have been made throughout the discussion section.

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References
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Appendices Appendix 1 2 3 Title Questionnaire Data Matrix Cronbachs Alpha Page 47 50 51

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A1

Questionnaire

This questionnaire will take NO LONGER THAN FIVE MINUTES and asks a few questions about you and your attitude towards bookmakers in an effort to determine what factors influence loyalty in retail gambling. You may leave any questions you feel uncomfortable with. All data collected will be anonymous and confidential; the findings from the questionnaire results may be given to your bookmaker so that they may IMPROVE YOUR BETTING EXPERIENCE.

(1) I consider myself a loyal patron of the following Bookmakers: Coral CreedBet Ladbrokes William Hill Other (Specify) None

(2) My main bookmaker (The ONE I feel most loyal to) is: Coral CreedBet Ladbrokes William Hill Other (Specify) None

(3) My main bookmaker is also my closest Yes

No

(4) I estimate that my main bookmaker receives the following proportion of my betting spend: Less than 25% 25% to 50% 51% to 75% 76% - 100%

The remainder of the questionnaire asks you to answer questions on your MAIN BOOKMAKER, the one you feel MOST loyal to. Please specify the extent to which you agree/disagree with each statement by ticking the relevant box for each.

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Question

Strongly Agree

Agree

Neither Agree / Disagree

Disagree

Strongly Disagree

(5) I can trust my bookmaker (6) I think that the staff at my main bookmaker have my best interests at heart (7) I feel emotionally attached to my bookmaker (8) I feel I have a commitment towards my main bookmaker (9) My relationship with my bookmaker has meaning to me (10) I feel it would take a lot of time and effort to change bookmaker (11) I have invested a lot in the relationship with my main bookmaker (12) If the topic of bookmaker came up, I would recommend my main bookmaker over others (13) If I saw an idea I liked at another bookmaker, I would share this idea with my main bookmaker (14) All in all, I am satisfied with my main bookmaker (15) Employees of my main bookmaker are knowledgeable (16) Employees of my main bookmaker are kind (17) My main bookmaker gives me individual attention (18) Employees of my main bookmaker provide a prompt and efficient service (19) Employees of my main bookmaker are keen to help (20) My bookmaker has better facilities than competing bookmakers (21) My bookmaker has better products than competing bookmakers (22) My bookmaker has better service than competing bookmakers (23) My main bookmaker offers the best prices (24) In comparison to competing bookmakers, I get the best value for money at my main bookmaker

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You are almost done... Thank you... Question Strongly Agree Agree Neither Agree / Disagree Disagree Strongly Disagree

(25) My bookmaker has a better image than other bookmakers (26) My bookmaker has a good reputation (27) My bookmaker makes a positive contribution to society (28) My choice to bet with my bookmaker says something about my personality (29) I have a better relationship with the employees of my main bookmaker than the employees of other bookmakers (30) The staff at my main bookmakers are more like friends to me (31) I visit my main bookmaker over others because my friends come here (32) I am used to doing business with my main bookmaker

About You Please provide a little information about yourself by ticking the relevant boxes. (33) Gender: (34) Age: Male 18-29 Female 30-49 50+

(35) I bet: month)

Frequently (Once a week or more) Occasionally (A few times a Rarely (A few times a year or less)

(36) Any other information on your loyalty to your main bookmaker, or feedback on the questionnaire is appreciated: ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

Thank you for filling out this questionnaire, if you are interested in the findings of this survey or would like to be involved further, you can contact vandenbowen@gmail.com.

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A2

Data Matrix

50

.XLSX and .SAV files are available on the memory stick or through contacting the author: vandenbowen@googlemail.com

A3

Cronbachs Alpha Results

Cronbachs Alpha was used to scrutinise the internal consistency of the results, Saunders (2007) suggests that scores of .600 are acceptable, with higher scores preferable.
Construct Cronbachs Alpha N of Items

Trust

.778 (Good)

Commitment

.628 (Acceptable)

Switching Costs

.530 (Poor)

Service Quality

.936 (Excellent)

Perceived Superiority of Offerings

.750 (Good)

Perceived Value

.808 (Excellent)

Brand Image

.715 (Good)

Relationship with Employees

.693 (Acceptable)

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