CHAPTER 2

1 LITERATURE REVIEW

1.1 INTRODUCTION

Business world has shift and grow rapidly. From small convenient shop to shopless,
business has undergo rapid transformation via the merge of Internet. The usage of E-
Commerce has widely be use and accepted worldwide. Consumer loyalty is vital as a
part of study for customer satisfaction. (Oliver, 1999). To understand customer loyalty, it
is important to explore satisfaction. In this literature review we will turn our attention to the
satisfaction-loyalty relationship and to extent the discussion of factors that may influence
the customer loyalty on e-commerce. E-commerce revolve not only about businesses
with financial transaction but also Non-financial transactions such as pre sale dan after
sale activities. (Chaffey,2009). Due to benefits of Internet use, quality is the main
determinant of customer loyalty, especially in online context. Nowadays, customers are
more demanding and smarter. The fact that they started to evaluate the quality of Internet
technology based on how they perceive the quality criteria of particular website
1.2 DEPENDENT VARIABLE

1.2.1 Customer Loyalty

According to J. Flint, C. Blocker and P. Boutin (1999), customer loyalty lead a critical role in
business success and customer loyalty has become more significant especially when
customer acquisition alone does not equate to long term success. P. Kotler (2010) agreed
that the main objective of strategic marketing planning is customer loyalty because it brings
many favourable outcomes to companies. Firstly, loyal customers are likely to spread and
discuss the past service experiences positively than non-loyal customers, creating a free
advertising via mouth with no extra cost. (Shoemaker and Lewis. 1999). If customer has
the loyalty, it is less expensive to retain current customer than it is to seek the new ones.
Next, it will secures good relationship between customer and business. Lastly, loyal
customers are easily accessible than first-timers since organisation usually contain the
records, and can be used to target indirect marketing easier. The knowledge give chances
for supplier to accurately target the segment and solicit direct responses for promotion
purposes. In online shopping and E-commerce, e-loyalty is the suitable word to be used to
express customer loyalty. Anderson and Srinivasan (2003) defined e-loyalty as customer’s
favourable attitude and commitment towars online retailer that result in repeat purchase
behaviour. Liu (2007) expresses e-loyalty as favourable attitude toward e-commerce
website that predisposes and attract the customer to repeat their buying behaviour. Loyal
customer will have more intention to buy from their regular website rather than switching to
another website.

Wilkins et al. (2010) defined customer loyalty from behavioural persepective as intention to
repeat purchasing the same products in the next purchasing occasion without starting any
further searching activities. While Oliver (1997) defined customer loyalty as the firm’s deeply
held commitment to resupport or rebuy a preferred goods consistently in the future, that will
cause the repetitive same-brand or same brand-set purchasing, even with the present of
situational effects and marketing efforts.

Chaudhuri and Holdbrook (2001) study proved customer loyalty can be observed in two
dimension, which are behavioural loyalty and attitudinal loyalty. Behavioural loyalty is the
willingness to continure a relation a make a repurchase on the same product, while
attitudinal loyalty expressed by the level of customer’s advocacy and psychological
attachments to businesses or service provider. Uncles, Dowling and Hammond (2003) found
another way to measure loyalty using composite approach that argued loyalty is regarded
as integration of behavioural measures ( in the sense of hardcore loyalty, exclusive
purchase, repeat purchase probability, share of category requirement and etc) and attitude
(reference to brand preference, intention to buy, liking and commitment).
1.3 INDEPENDENT VARIABLE

1.3.1 Website Design

Character of E-commerce extremely important to the business because it can appear very
boring and unattractive it the website is just a plain website. A creative website can boost
customer impression and build a positive reputation and characterization for itself.
Characterized website can enhance the cite recognition and recall. (Srini, Rolph and
Kishore, 2002). Shanna Mallon in her blog explained how to measure the effectiveness of
website design. There are five keys aspects in measuring website design which are strategy,
usability, style, content and search optimization. Jen Allchin, Search Marketing Strategist
has listed 7 statistics that can be used to measure success of ecommerce website. There
are bottom line net profit, conversation rate to visitors, engagement of email subscribers,
cart abandonment rate, visitor traffic, average value per transaction and mobile users.

According to Chen, Zhang and Huang (2010) a well-establish website is able to attract,
ease-to-use will enhance the users’ skills and build a long term relationship between buyer
and seller. Roberts, Ranki, Silver, Moore, Plunkett, Washburn and Wilch-Rigen (2003) in
their study showed that attractive website will encourage more online consumers to search
for it. They also listed down the characteristic of great website design which have good
accessibility which includes loading speed, timing, and quality of internet line as well good
quality of website support system. According to Constantinides (2004), quality of online
presentation will affect total impression that customers face from the site. The same study
also revealed that website design as an important element to be considered for the total
service quality.
Lee and Lin (2005) discussed on how essential website design for online retailers. It
connected to the interface, which the customer meets when visit a site, therefore website
design is vital to attract customers and make them stay and enjoy interact with the website.
The study also reported that website design is necessary and included in the measurement
of e-satisfaction. The same study also listed some aesthetic element of multimedia, domain
name, layout and color graphic to be included in creativitiy of the site. Both Lee and Lin
(2005) and Wolfinbarger and Gilly (2003) studies revealed that website design factors are
important for customer, it can be use to evaluate an online site quality for e-satisfaction but
also these are predictors for online retailers to eventually create e-loyalty. Poh-Ming (2014)
has run SmartPLS (M3) as the main analytical tool to test the effect of website quality on
customer e-loyalty through trustworthiness in Malaysia. The result revealed that website
content and trustworthiness are positively related to customer e-loyalty.
1.3.2 Responsiveness

According to Zeithaml, Parasuraman and Malhotra (2002) responsiveness is an element

influencing service quality. It is related to how well a company can respond to questions and
problems encounter by the customers. Responsiveness measures the ability of retailer (in
this context e-retailer) to provide information to customers when problem occurs, practicality
of mechanisms for handling returns and providing online guarantees. (Chang, Wang and
Yang, 2009) Lee and Lin (2005) revealed that customers that go for online shopping
expecting the retailers to respond to the question immediately and supported by Kassim and
Abdullah (2010) that agree responsiveness is improving the satisfaction and enchance the
trust by customers.

Ribbink (2004) has adopted assurance and responsiveness from SERVQUAL model in the
research while Chiu et al. (2009) has chosen responsiveness and security as two out of
seven determinants in repurchase intention. Anderson and Swaminathan (2011) revealed
that interaction, commitment (responsiveness) and usefulness are three out of eight
determinant that have effect on e-loyalty. Mohd Shoki, Ooi, Norhayati and Khalid has
examined the relationship and impacts of e-SQ and e-Satisfaction on e-Loyalty in internet
banking. The regression indicated website aesthetics and guide, efficiency-system
availability and responsiveness were found to have positive and significant impact on e-
satisfaction. The result is also supported by Parasuraman et.al, (2008) and Wu, et.al, (2008).
The findings also has prove that e-satisfaction and e-loyalty positive links existed.
1.3.3 Trust

Ostrom and Lacobucci (1999) defined trust as the will or intention in relying on a partner
who has the courage to exchange. Bendapudi and Berry (1997) on the hand, believe that
trust leads to devotion and dedication since it will lessen the cost of negotiation and ease
the fear of customers towards opportunistic behaviour of some supplier and service
providers. It was pointed by Rexha, John and Shang (2003) that lack of online consumer
trust was the main barrier of consumer participation in e-commerce and has been found as
one of major obstacles to the popularity of internet transaction. When it comes to E-
commerce, e-trust is more practical. E-trust is the degree of confidence that customers
have in online exchange or in online exchange channel. (Bart, Shankar, Sultan and Urban,
2005). E-trust includes consumer perception on how the website can deliver on
expectation, reability on website information, and level of confidence in site channel.
(Krauter and Kaluschab, 2003). Lee, Huang and Hsu (2007), identify ability, benevolence
and integrity as three principles of trust. The study suggested that trust will lead to
commitment and loyalty.

The study by Sardinha (2015) also proved that e-trust has positive effect on e-loyalty, which
means loyal customer are more attracted to more credible online fashion companies. In
addition, price and web design also have positive and direct impact on e-loyalty. The past
research agree that trust is the key element in creating affective loyalty. It appears that
when one part has reliability and integrity of the other part interchange. (Morgan and
Hunt,1994). Parasuraman et al, (1985) suggest that it is important for the customer to trust
the service suppliers, to assure the behaviour maintained with them and to have certainty
of data transmitted to them. These are essential to obtain customers’ loyalty. Lockshin
(1997) and Sirdeshmukh et al, (2002) also recognize the role of trust in creating loyalty.
Blanca García Gómez, Ana Gutiérrez Arranz, Jesús Gutiérrez Cillán, (2006) has ran a
research on loyalty dimension among customer using ANOVA analysis. The finding that
focused on grocery companies revealed that loyalty programs will enhance and strengthen
the customers’ loyalty.
2.3.4 Reliability

Unwavering quality speaks to the capacity of the site to satisfy arranges accurately,
convey quickly, and keep individual data secure (Parasuraman et al., 1988; Janda et al.,
2002; Kim and Lee, 2002). It is figured as a main component of e-benefit quality; and
alludes to consistency of conveyance and steadfastness in connection to web
architecture (Cox and Dale, 2001, Madu and Madu, 2002; Tih and Ennis, 2004). An online
supplier is viewed as dependable in the event that it plays out the administration as
guaranteed (Tan et al., 2003), the site is accessible every minute of every day and is in
working condition (Zeithaml et al., 2000; Santos, 2003; Yang, 2003). Be that as it may, in
the Web condition, since clients assume a more straightforward job in administration
arrangement, new parts of this measurement may emerge –, for example, blunder
avoidance and mistake dealing with (Shneiderman, 1998; Norman, 1998).
2.3.5 Satisfaction

Customer satisfaction is the key for customer retention. Kotler (2010) defined customer
satisfaction as consumer’s feeling of pleasure or disappointment that result from comparing
a product’s perceived performance (or outcome) in relation to his/her expectation. Anderson
and Srinivasan (2003) on the other hand defined satisfaction as contentment of customer
with respect of their (customer) prior purchasing experience with given service firm. As
customer satisfaction reflects the degree of a customer’s positive feeling about service
provider, it is important of service providers to understand’s perception of their services.
Satisfaction in online marketing are widely being used by customer as a judgement on their
internet experience compare to their experience with traditional offline service provider or
retail stores. (Tan, Tung and Xu, 2009). Study by Sardinha (2015) reported that e-
satisfaction was found to be one factor that impact e-loyalty. Since 1990’s, customers’
satisfaction and customers’ loyalty are two important constructs that give effect to
administrative. According to Vilares and Coelho (2003) loyal customers are willing to provide
services which could contribute in the growth of companies, that is why companies should
concentrate on customer’s loyalty and utilizing this loyalty as main strategy for the future.
1.4 CONCEPTUAL FRAMEWORK

The conceptual framework is a conceptual model based on the review of literature. The
model can graphically depict relationship between independent, moderator and dependent
variables. Although the student researcher is not expected to prove the relationship, the
model forms the basis of the research.

Independent Variable
Dependent Variable
Customer Loyalty In E-Commerce

Website Design

Responsiveness
Customer Loyalty
Trust

Realibility

Satisfaction