Effects of Customer Loyalty on Customer Retention: A Case of Jade Collection Clothing Retail Store in Nairobi

Abstract

In the wake of several international clothing stores closing down in Kenya between 2016 and 2018, Jade Collection clothing store has sustained its presence in Kenya. The purpose of this study was to examine the effects of customer loyalty on customer retention in the fashion apparel retail sector in Nairobi, using Jade Collection as the case. Specifically, the study sought to analyse the effect of the company’s commitment to its customers, customer satisfaction and customer loyalty in retaining their customers. The research questions that guided the study were: What effect does customer commitment have on customer retention? What effect does customer satisfaction have on customer retention? What effect do customer reward programs have on customer retention? This study adopted the descriptive research design. The target population included customers of Jade Collection. The store had a customer loyalty registered population of 239 in two of its stores in Nairobi. It is of note that the customer base of the shops is much higher, however the study was contained to the customers who had willingly enrolled in the reward program. The sample frame used to generate the sample size was Jade Collections database of customers registered onto the reward program. The study used simple random sampling to select 150 respondents. Questionnaires using Likert scale and closed ended questions were used to collect data from the respondents. A pilot study was carried out to test the consistency and reliability of the questionnaire. The questionnaires were distributed through an online survey platform. Data analysis was done using descriptive and inferential analysis generated by IBM SPSS Statistics 25, and presented using figures and tables. Descriptive statistics of frequencies, means and standard deviation were used to analyze the data. Additionally, an in-depth analysis was done using inferential analysis of correlations and regression to establish the relationships between the variables. The study showed that the majority of the respondents (40.1%) were in the 30 to 39 age bracket. Sixty eight point one percent of the customers felt there were adequate staff at the store to help the customers, and 92.2% agreed it was easy to complete payment transactions. Respondents, 69%, agreed that they periodically received communication on new stock arrivals or upcoming sales that they can benefit from. The study further showed through 32.7% variation, that there was a positive significant association between customer commitment and their retention in the clothing retail store. And that a single unit increase in customer commitment increases customer retention by 19.4%. The study showed that 78% of the respondents agreed that they are warmly welcomed when they visit the shop, and 65.2% agreed that shop attendants are knowledgeable and make useful suggestions on clothing selections for the customers. Further, the study showed that 84.8% of the respondents expressed their satisfaction with the quality of clothes sold, and 70.4% were satisfied with the price. Overall, 79.5% of the customers are happy with the quality of services and products and will continue shopping with the clothing shop. Moreover, the study showed that there was a significant and positive association between customer satisfaction and customer retention, and that a single unit increase in customer satisfaction increases their retention in the clothing retail store by 22.1%. The majority of respondents (78.8%) agreed that the clothing retail store was the first shop they will visit when looking for a specific item of clothing. Eighty four point eight percent are very comfortable with the shop’s brand and are willing to recommend them to their family and friends. The attendants of Jade Collections explained the reward program and invite the customers to join, 54.5% agreed with this. Finally, 69.7% believe that reward programs play a role in customer retention. The study further showed that there was a positive and significant association between customer reward programs and customer retention, and that a single unit increase in customer reward programs increases retention of customers in the clothing retail stores by 21.6%. To enhance the commitment of customers to the store, the study recommends that management creates opportunities where the customers are able to learn more about the internal policies of the store that govern their activities such as return of goods policies, refund policies as well as complaint policies and making orders. It also recommends management to enhance the quality of services provided as well as the clothes that are being sold at the store. Service quality may be improved through empowering the staff members with skills and techniques relevant to customer handling. The study recommends that the management should create more awareness on and activate the available reward program at the store so as to increase enrollment to the programs among customers thus improving customer retention. It also recommends that management engage in further training of customer-facing employees to sensitize them on the benefits of enrolling customers onto the reward program so as to facilitate increased awareness and enrollment of customers. The study further recommends customer-facing employees to be trained on customer care skills so as to encourage them to communicate better with customers. The study recognizes that not all loyal customers enroll onto customer reward programs, and there is need to widen the scope of further research to include these customers to understand and compare loyalty preferences. There is need for a similar study to be carried out to establish the effects of customer loyalty on customer retention in various other clothing stores within Nairobi County for a wider understanding of the customer’s preferences, and to further inform on competitor analysis and subsequent relevant strategy. Another study may also be carried out to examine the relationship between demographic characteristics and customer retention in clothing retail stores in other key towns in Kenya, for example Mombasa and Eldoret, for similar intentions.