Effect of Public Relation on Customer Loyalty with Special Reference to E-Commerce Portals

Abstract

The business world is changing rapidly, seeing new trends of strategy implementation. Moreover, the Internet provides customers with ample information for whatever they require. This calls for more credibility and transparency from the organizations to attract new customers and maintain existing customer base. With customer acquisition being a costly affair, organizations look at leveraging customer loyalty. This study aims to examine the effect of public relation (PR) on customer loyalty for e-commerce portals. The researchers used questionnaires for data collection, which they distributed to 188 samples comprising of Flipkart, Jabong, and Ebay users - the top thee ecommerce portals in India based on Alexa rankings. Bi-variate correlations identify the relationship between public relation and customer loyalty. The findings indicate public relation has a positive influence on customer loyalty, provided the awareness, reach, and efficiency of the PR activities are high. Low awareness and low efficiency of the PR message do not foster loyalty of any kind. Public relation also has a higher significant relationship with customer loyalty when past good experience with the e-commerce portal acts as a moderating factor. [PUBLICATION ABSTRACT]

Headnote

Abstract

The business world is changing rapidly, seeing new trends of strategy implementation. Moreover, the Internet provides customers with ample information for whatever they require. This calls for more credibility and transparency from the organizations to attract new customers and maintain existing customer base. With customer acquisition being a costly affair, organizations look at leveraging customer loyalty. This study aims to examine the effect of public relation (PR) on customer loyalty for e-commerce portals. The researchers used questionnaires for data collection, which they distributed to 188 samples comprising of Flipkart, Jabong, and Ebay users - the top thee ecommerce portals in India based on Alexa rankings. Bi-variate correlations identify the relationship between public relation and customer loyalty. The findings indicate public relation has a positive influence on customer loyalty, provided the awareness, reach, and efficiency of the PR activities are high. Low awareness and low efficiency of the PR message do not foster loyalty of any kind. Public relation also has a higher significant relationship with customer loyalty when past good experience with the e-commerce portal acts as a moderating factor.

Keywords: public relation, customer loyalty, e-commerce, flipkart, jabong, ebay

Introduction

Customer purchases of various products are on the rise. Alongside, newer products also are entering the market, hoping to gain a good market share. Today, there is cutthroat competition in all markets, and the challenge lies heavily with businesses to create and maintain a cordial relationship with the customers in order to maintain and increase their market share. Public relations (PR) is one such tool to achieve this. The concept of public relations has been evolving over time. In 2011 and 2012, the Public Relations Society of America (PRSA) defined PR as "a strategic communication process that builds mutually beneficial relationships between organizations and their publics" (PRSA, 2012). It is essential for businesses to manage the communication flow effectively with the public to avoid perception gap between the organization and the public.

Customer acquisition is a costly affair. Firms spend more than five times as much to obtain a new customer than to retaining an existing one (Kotier & Keller, 2006). According to a study by the global business consulting firm Baines and Company, a 5% increase in customer retention can increase a company's profitability by 75% (1999). Customer loyalty enhances customer retention that results from effective PR services. Loyalty factors are an organization's most reliable success indicators (Zeithaml et al., 1996). Higher customer loyalty implies a higher market share and an ability to demand relatively higher prices, compared to those of competitors (Chaudhuri & Holbrook, 2001). Moreover, loyal customers foster positive word-of-mouth promotion and defy competitors' strategies (Dick & Basu, 1994).

Also important is assessing the effectiveness of communication, failing which the effort of the business in executing a PR strategy will not see effective results. This, in turn, would affect the loyalty of the customer toward a product. Equivalent of advertising value has become obsolete in the West and soon will do so in other parts of the world. Reach is the key now. Without standardization, results remain fragmented, and organizations are unable to define return-on-investment. A recent report by the MSL group (MSL Group, 2013) on public relation in India and on 2013 outlook states that measuring the number of media mentions is meaningless. Media measurement should include quality of media coverage (tone, relevance, credibility). Buying behavior is changing rapidly as consumer perceives brands. Therefore, public relations has the ability to measure outcomes by gauging purchase behaviors and decisions, rather than measure outputs. Therefore, this study aims to investigate the effect of public relation on customer loyalty with special reference to e-commerce portals. Since online shopping is creating a wave in the industry, this study uses e-commerce portals to study the effect of PR on customer loyalty.

Literature Review

General

There has been a paradigm shift in the understanding of public relations. The discipline has shifted from a communication-centered approach to an organization-centered approach in explaining the model of public relations. Due to the dominance of the organization-centered perspective in public relations, strategic communication and its effect on public has very little emphasis on public (Botan &Soto, 1998). According to Karlberg (1996), research conducted on this principle had conceptualized public relations as a commercial management function-a means of influencing consumer value and behavior, of cultivating markets, of corporate image control, and of issues management. The process of public relations is a dynamic process with interactions between three variables - source, message, and receiver. However, scholars had neglected the message variable in the public relations process. Hallahan (2000) stated the primary function of public relations should be to create effective messages to reach strategically important public. Later, Kelly (2005) constructed an understanding of the message and receiver variables, and to explore the relationship between the two. This study examines four PR strategies such as informative, persuasive, facilitative, and cooperative. The findings of the study suggested the attributes of publics such as involvement, goal compatibility, problem - recognition, information - seeking, and information processing behavior influence the use and effectiveness of public relations strategy in organizations. The public relations process had seen a shift from source-oriented perspective of measuring the number of messages placed in media to a consumer-oriented approach of measuring the impact of messages that are targeted to the public (Watson et ah, 2005). This is a remarkable shift in the public relations industry.

The introduction of Web 2.0 has revolutionized the communication process. It provides great scope for efficient and fair communication with various people; especially for the public relations industry (Yang & Lim, 2009). Today, PR is less about channeling your message through the right media and more about making connections directly with your audience (Davis, 2012). Investigations had also revealed that the public trust consumer opinions on the internet rather than official communication from an organization about a product (Kucuk, 2008). Brian G. Smith (2010) conducted a study that explored social public relations through a qualitative analysis of user involvement on Twitter. Analysis of Twitter posts expanded understanding of interactivity online and demonstrates social media user fulfillment of public relations objectives. Social media renders huge success in the public relations practice, and capitalizing on this success, many companies followed the trend of creating visibility in the online space. For example, Facebook has more than 68 million active users, with an average of 250,000 everyday registrations by people. Particularly, when Facebook permitted companies to register, more than 4,000 companies joined within the first 10 days (Waters et al., 2009). This is a good relationshipbuilding tool. However, the online transformation in the public relations arena has taken a new high in 2011. Associated with this digital transformation in the communication space, a key concern is customer relationship management in the public relations process (Starkey, 2010). Therefore, Web 2.0 is a natural environment for public relations, where new figures such as the community manager simply transfer the management of brand and company reputations to this new digital medium (Estanyol, 2012).

Relationship Management in Public Relations

One-way and two-way communication in the public relations process and the building of mutually beneficial relationships are two principal objectives of public relations (Cutlip et al., 2000). Similarly, Ledingham and Bruning (2000) stated the following: "To be effective and sustaining, relationships need to be seen as mutually beneficial, based on mutual interest between an organization and its significant publics," and that "the key to managing successful relationships is to understand what must be done in order to initiate, develop and maintain that relationship." As the focus shifted to relationship management in the public relations process, Grunig (1993) stated the need for organizations to build substantive behavioral relationships with the publics. Bruning and Galloway (2003) conducted a study that suggested organizations build anthropomorphic relationships by engaging in behaviors that build trust, demonstrate openness about the organization and all the issues concerned, and be willing to invest time and effort into relationships with key public members. Exchange and reciprocity alone does not define organization-public relationships. It also depends on interdependence (Broom, Casey, et al., 2000). Interdependence is the success of an organization to sell its products to the public and simultaneously gain approval and support by the public for the organization's practices. The most common way public relations scholars analyze relationships is via perception between relational parties (Ledingham & Bruning, 2000; Ledingham, Bruning et al., 1999; Waters, 2009). Grunig and Huang (2000) proposed a scholarship enumerate perceptions of trust, commitment, influence, and satisfaction in a relationship. Meng (2007) reviewed the literature on relationships and found definitions followed the cue from Grunig and Huang (2000).

In order to measure the organization-public relationship, Grunig and Linda (1999) developed a reliable PR Relationship Measurement Scale that used six components for measuring existent relationships - Control Mutuality, Trust, Satisfaction, Exchange Relationship and Communal Relationship.

Public Relations and Customer Loyalty

Most problems arise from the complex nature of consumer behavior as the needs of consumers keep changing with time. This is because of the exposure to various products, the demand created in the market and the increasing knowledge consumers gain in the purchase process. Organizations cannot control or determine the information sources that consumers have access to, which play a key role in determining consumer behavior towards products. There has been a long debate by many scholars on the influence of public relation activities on consumers. Ledingham and Bruning (1998) reported that the organization - public relationship variables of trust, openness, involvement, investment, and commitment influences consumer behavior. Further research conducted by Bruning (2000) revealed specifically that key publics who share a strong relationship and an identity with the organization are likely to be inclined to that organization even in the face of competition. This is because of the identity they share with the organization that influences their behavior intent. Therefore, organization-public relationships, when managed effectively, positively affect the attitudes, evaluations, and behaviors of key public members (Bruning et al., 2004). Building on this, research scholars Papassapa Rauyruen and Kenneth E. Miller (2007) also reported the importance of relationship quality. Additionally, they also believed the relationship quality has a direct influence on customer loyalty itself. Zeithaml, Berry et al. (1996) proposed a comprehensive multi-dimensional framework to measure customer loyalty. They stated that loyal consumers have (1) high purchase intention (repurchase intention), (2) less price sensitivity (price insensitivity), (3) feedback to the firm (word-of-mouth, complaint behavior), and (4) do more business (frequent purchase and no switching behavior).

Ahluwalia et al. (2000) conducted a study in which results suggested a committed consumer will refuse to give in to information that provokes them to switch behavior, be it negative information about the organization they are committed to or positive information about competitors. Such an information processing predisposition may see re-purchase intentions from committed consumers. The ratings the public provide, of the relationship organizations share with them, predict the level of loyalty towards an organization (Ledingham, Bruning, et ah, 1997). For a better understanding of the relationship quality between organizations and publics, Eyun-Jung Ki and Linda Childers Hon (2007) developed a research model that postulates the linkages among perceptions of the organization-public relationships, attitudes, and behavioral intentions toward an organization by the public. Hon and J. E. Grunig (1999) proposed six relationship indicators, among which perceptions of satisfaction and control mutuality best predict a positive attitude toward the organization. The study revealed that the positive attitude is a forerunner to loyal behavioral predispositions towards the organization. Interestingly, JeffriesFox and Weiner (1999) reported positive and proactive public relations campaigns can increase customer loyalty even when organizations reduce advertising spending. Public relation is more about building a good relationship with the publics on a long-term basis. Likewise, a key factor that influences the perceptions of organization-public relationship and the behavioral intentions towards the organization is time. Ledingham, Bruning, et al. (1999) in their study suggested that public relations practitioners at the earliest possible time should develop mutually beneficial relationships with publics, and maintain and enhance the quality of the relationships by continuing public relation activities. It further proposes that established relationships also should foster loyalty toward the organization. Bruning, Melissa, et al. (2008) explored the concept of dialogue and observed how it positively affected the public and their behavioral predispositions. The results proposed that the attitude of the relationship and dialog had a positive effect on public evaluations of an organization and their intended behavior. Further, Hsieh and Kai Li (2008) found consumer reaction to PR depends on levels of self-congruence and how consumer expectations match the company's properties presented through PR efforts. Further narrowing down to customer loyalty for online portals, Albert Caruana and Michael T. Ewing (2010) conducted a study on the influence of corporate reputation on loyalty in an online context. The study uses two groups of online vendors, one dealing in books and the other in shares. Findings from the two samples suggest that corporate reputation has a direct effect on online loyalty and provides an important mediating effect for perceived value in terms of their impact on online loyalty. Organizations are accountable to the public. All organizations operate in a competitive environment. Public besought by rivals will remain loyal to those organization that earn loyalty consistently and continuously. Therefore, organizations should communicate with a customer driven focus as people support organizations that serve their interests and needs (Ronald Smith, 2013).

Therefore, based on the above literature review, the following are the research hypotheses:

HO: Public relation does not relate positively to customer loyalty.

HI: The awareness and reach of PR activities influence customer loyalty.

H2: The efficiency of PR activities determine its effect on customer loyalty.

H3: The relationship between public relation and customer loyalty has more significance with a moderating factor.

Method

Samples for this study comprised of Flipkart, Ebay, and Jabong users in Chennai. Based on the Alexa rankings, this study uses these top three e-commerce portal users. The study also considers the print media and online media activities of Flipkart, Ebay, and Jabong. A total sample of 188 represented the population. The sample size formula derived the sample size of 188, taking into account the following parameters: 6% as margin of error, 90% as confidence level, 50% as response distribution and 16.16 million as the population size. Stratified random sampling was adopted and 188 samples were classified into three groups; Flipkart (83), Ebay (45), and Jabong (60) users. The authors analyzed the data using SPSS 19.

The total sample of 188 represented an effective response ratio of females (n = 98) accounting 52.1% of the total sample and males (n = 90) accounting for 47.9%. The majority of respondents were in the age group of 20-24 accounting for 71.9% of the total samples, while those over 24 years of age accounted for 19.7%. Of the total samples, 57.4% were working professionals (n = 108) while 41.5% accounted for students (n = 78) and 1.1% accounted for others (n = 2). The study used a survey questionnaire to gauge the relationship between public relation and customer loyalty among the samples.

Analysis

Frequency, percentage analysis and cross tabulation determines the awareness, reach, and efficiency of PR activities of the e-commerce portals. It also determines a moderating factor for the effect of public relation on customer loyalty.

The authors used Likert type data to gauge the awareness and reach of PR activities. Among the total samples, 20.2% read newspapers very frequently, 46.8% read frequently, and 28.2% read occasionally. The findings indicate that around 95% of the samples receive exposure to the print media on a regular basis. Therefore, this gauges the awareness of PR activities. The cross tabulation results of samples who read the news articles they come across in newspapers about these e-commerce portals reveal that of the 22.9% who have come across positive news articles frequently, 9.3% read those news articles very frequently, 46.5% read them frequently and 34.9% read them occasionally. Of the 51.1% who have come across news articles on an occasional basis, 10.4% read them very frequently while 17.7% read them frequently and 40.6% read them occasionally. Only 2.1% have come across news articles very frequently while 16% have come across news articles rarely, 3.2% have come across them very rarely and 4.8% have never come across news articles on these e-commerce portals. These determined the awareness and reach in terms of print media, and the following will determine the same in terms of online media.

The cross tabulation results of the frequency of online medium usage and if articles in the online medium are read reveal that of the 54-8% who use the online media very frequently only 30.1% read articles about these e-commerce portals in the online media while 50.5% read them sometimes. Of the 34% who use the online media frequently, 26.6% read articles online while 48.4% read them sometimes and of the 10.1% who use the online media occasionally, 41.1% read articles online while 26.3% read them sometimes.

In terms of awareness of e-commerce portals having a social media presence, 63.8% accounted for yes while 36.2% accounted for not being aware of the social media presence of ecommerce portals.

Cross tabulation results for checking social media pages of these e-commerce portals for updates and for engaging in their conversations reveal that of the 16.5% who check the social media pages frequently, 32.3% engage in conversation on these pages frequently while 6.5% engage in conversations occasionally while 19.4% engage in them rarely while 29% never do so. Of the 27.1% who check the social media page occasionally, 5.9% engage in social media conversation frequently while 31.4% engage in them occasionally, 33.3% engage rarely and 29.4% never do so. While 9% check these pages for updates rarely, 3.2% checks them very rarely while 42% never checks them.

Comparing print media and online media awareness of PR activities of these e-commerce portals, both the media did not have much of difference in terms of the levels of awareness and reach. When the samples are divided into two groups along the median, 56% accounted for high awareness & reach (n = 105) while 44% accounted for low awareness & reach (n = 83). Of those who accounted for low awareness, 67% are working professionals (n = 56) and only the remaining 33% are students (n = 27).

Further, the PR Relationship Measurement Scale Grunig and Linda developed in 1999, comprising of six parameters namely Control Mutuality, Trust, Satisfaction, Commitment, Exchange relationship, and Communal relationship, measures the efficiency of PR activities of these e-commerce portals. Satisfaction, Commitment, and Trust are the highest efficient factors with 77.8% accounting for satisfaction, 75.7% accounting for commitment, and 67% accounting for trust. Control mutuality accounted for 52.4% while exchange relationship and communal relationship accounted for the lowest efficient factors with 30.3% and 18.4% respectively. The authors divided the samples into two groups - high efficiency & low efficiency of PR activities along the median: 73% of the total samples accounted for high efficiency (n=138) while 27% accounted for low efficiency (n =50).

The effect of public relation on customer loyalty also determines a moderating factor. This study identifies past good experience with the e-commerce portal as a moderating factor for public relation's influence on customer loyalty with 75% of the total samples accounting for it.

Further, Pearson's correlation coefficient and independent samples t-test, tests the hypotheses. In this study, the alpha value is 0.05. The null hypothesis is as follows:

HO: Public relation does not relate positively to customer loyalty.

As per Pearson's correlation coefficient, Table 1 shows r = .311 and p<0.05. Since the p value is less than the alpha value, this rejects the null hypothesis, and the value of r indicates there is a positive correlation between public relation and customer loyalty. This defies the null hypothesis HO that there is no relationship between public relation and customer loyalty. Therefore, public relation relates positively to customer loyalty.

The first hypothesis is as follows:

HI: The awareness and reach of PR activities influence customer loyalty.

This hypothesis states that level of awareness and reach of public relation activities, impacts the significance of the relationship between public relation and customer loyalty. Results of HO show that there is a positive correlation between public relation and customer loyalty. To test this hypothesis, the authors divided two groups along the median (m=4) - one group having high awareness of public relation activities of the e-commerce portals (n= 105) and another group having low awareness of the same (n= 83). Table 2 shows the correlation between public relation and customer loyalty of samples having high awareness of public relation activities while Table 3 shows the correlation between public relation and customer loyalty of samples having low awareness of public relation activities.

Comparing Table 2 (r = .421 and p <0.05) and Table 3 (r = .129 and p>0.05), it is evident there is a positive correlation between public relation and customer loyalty only with high awareness of PR activities of the e-commerce portals. However, comparing the r value of HO (r = .311) from Table 1 and that of HI (r = .421) from Table 2, the significance of the correlation is better with increased awareness of PR activities.

To confirm this, the researchers used independent samples t-test and compared the means of two groups: one with increased awareness of PR activities and another with low awareness. Table 4 and Table 5 shows the results of the t-test. With the Sig (2-tailed) value <0.05, it is evident that there is a statistically significant difference between the group with high awareness (M=9.43, SD = 2.464) and the group with low awareness (M= 10.87, SD = 2.339); t(186) = 4.07 and p= .000.

The second hypothesis is as follows:

H2: The efficiency of PR activities determine its effect on customer loyalty.

This hypothesis states that the efficiency of PR activities determine the relationship between public relation and customer loyalty. To test this hypothesis, samples were divided into two groups; one group rating the efficiency of public relation activities of the e-commerce portals high (n=138) and another group rating it lower (n= 50). Table 6 shows the correlation between public relation and customer loyalty of samples rating the efficiency of public relation activities high while Table 7 shows the correlation of those rating it lower.

Comparing Table 6 (r = .367 and p<0.05) and Table 7 (r = .127 and p>0.05), it is evident there is a positive correlation between public relation and customer loyalty only with high efficiency of PR activities, while there is no correlation when the efficiency of PR activities is low. However, comparing the r value of HO (r = .311) from Table 1 and that of H2 (r = .367) from Table 6, the significance of correlation is better with increased efficiency of PR activities.

To confirm this, the authors used independent samples t-test to compare the means of the two groups: one that rated the efficiency of PR activities higher while the other rated it lower. Table 8 and Table 9 show the results of the t-test. With the Sig (2-tailed) value <0.05, it is evident there is a statistically significant difference between the group that rated high efficiency of PR activities (M=9.81, SD = 2.511) and the group that rated it lower (M= 10.78, SD = 2.384); t(186) = 2.34 and p = .020.

H3: The relationship between public relation and customer loyalty has more significance with a moderating factor.

Of the total samples, 74.6 % (n = 141) accounted for past good experience with the ecommerce portal as a moderating factor. This hypothesis tests the relationship between PR and customer loyalty with past good experience with the portal as a moderating factor. Table 1 shows the relationship between public relation and customer loyalty has more significance with the moderating factor than without the moderating factor. Comparing r value of HO from Table 1 (r = .311) and the r value from this H3 (r = .365) satisfies this hypothesis. The values r = .365 and p<0.05 support H3.

Findings

Public relation relates positively to customer loyalty. Though it is not a strong correlation, public relation influences customer loyalty to a considerable extent.

However, considering awareness, reach and efficiency factors in the relationship between public relation and customer loyalty as shown in Hl and H2, there is a relationship between public relation and customer loyalty only when there is high awareness & reach and when the efficiency of the PR activities are high. Low awareness, reach, and efficiency of PR activities of the ecommerce portals do not impact loyalty to even the smallest of extent. Therefore, awareness, reach, and efficiency are key factors to assess the effectiveness of public relation activities and its outcome. In other words, e-commerce portals building mutually beneficial relationships with key publics have an impact in the loyalty of customers towards their brand. When the PR activities are more effective, the significance of the relationship between PR and customer loyalty increases.

The awareness and reach of the PR activities carried out by these e-commerce portals in the print media and online media have created almost the same awareness levels in both media with not much of increase or decrease in the other. On the whole, the awareness and reach levels of the PR activities are considerably good, though not at its best. There is more awareness and reach among the student population compared to the working professional population, which is weak.

In terms of the efficiency of PR activities carried out by these e-commerce portals, it is considerably good with satisfaction, commitment, and trust leading the front followed by control mutuality. However, communal relationship and exchange relationship remain weak in terms of efficient levels.

The findings also illustrate that past good experience with the e-commerce portal acts as a moderating factor in the influence of public relation on customer loyalty. It is found that the relationship between public relation and customer loyalty is of higher significance with the moderating factor than without the moderating factor. Therefore, it is the past experience that the users have with the e-commerce portal that motivates them to trust that brand information they see in the print media and online media.

Conclusion

Public relation activities are vital for every organization in order to foster long-term beneficial relationships between the organization and key publics. This study implies that public relation activities of an organization have the ability to influence positively customer loyalty. However, the awareness and reach created by these PR activities is a key consideration factor in its influence on customer loyalty. The efficiency of the PR messages is a key consideration that creates a strong relationship with key publics through the media. Awareness, reach and efficiency of PR activities at its highest levels, creates a significant impact on customer's purchase decisions of products/brands. Though there may be PR activities carried out, but with their efficiency levels not up to the mark, it fails to create any impact on the purchase decisions which is a wasted effort by the organization. Therefore, every communication should be effective, rather than just increase the number of media mentions. Though public relation may not be the only factor affecting customer loyalty, there are moderating factors like along with PR that influences customer purchase decisions. Past good experience with the e-commerce portal is one such moderating factor. The previous experience, be it good or bad, acts as a catalyst in aiding consumers in their purchase decisions. Therefore, every service rendered by a product/brand should be of high quality, which motivates consumers to believe and trust what they read in the media about the brands, which, in turn, helps them retain customers. Especially in this competitive market place with everything going digital, PR activities in the print media and online medium play a significant role in drawing more customers and retaining existing customers.

Sidebar

Discussion Questions

1. What effect does PR create on customers besides influencing customer loyalty?

2. How can return-on-investment of PR activities be determined effectively?

3. What are the other significant factors that affect the relationship between PR and customer loyalty?

To Cite this Article

James, S., & Rajendran, L. (2013, Summer). Effect of public relation on customer loyalty with special reference to E-commerce portals. Journal of Multidisciplinary Research, 5(2), 87102.

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