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Strategy is a term that originates from the Greek word “stratigiki”. It concerns the deployment of an army’s resources in a unique manner in order to avoid the combination of threats and weaknesses and try to match opportunities with strengths (Thompson & Gamble J., 2007). There is a history of battles where stronger armies (in terms of resources) lost in the battlefield when confronted a weaker army with charismatic leadership and strategy (Sanders & Carpenter, 2007). Similarly, in the business world strategy aims to achieve better effectiveness and performance of resources by examining ways of matching strengths with opportunities and simultaneously avoiding the combination of weaknesses and threats (Hitt et al., 2008). As a result in the business there is a need both to know the firm and the business environment better. In this dissertation, the generic strategy of cost leadership will be analysed the Retail Supermarket business in regard to customer service quality, a second objective will be to compare the perceptions of quality across customers in different cultures.

2.1 Cost leadership strategy and customer service in Retail Industry

There are three levels of strategy; Corporate, Business (or generic) and Functional level strategy (Lumpkin et al., 2009). Corporate strategy refers to the arenas and the staging in which companies compete with certain products / services (SBU’s) on specific markets (Hitt et al., 2008). For example, SW (Southwest) Airlines begun to compete at the late seventies as both a parcel and passenger carrier (selection of certain SBU’s) in small trips between the southwestern states of America (Arenas or markets). Business strategy refers to the achievement of sustainable competitive advantage for a certain Strategic Business Unit (Sanders & Carpenter, 2007). Walmart for instance was the first international retailer to provide the best prices of its product categories by cutting off every unnecessary frill with slogan: “Save money. Live better.”. In contrast, Mercedes Benz  manufactures luxury cars of high quality at the highest standards and status at premium prices. As for functional strategy, it deals with the alignment of a certain business function (HR, Finance, Operations, and Marketing) with the business strategy strengths (Thompson & Gamble J., 2007). In this dissertation the focus will be on the alignment of aspects of marketing strategy with a generic business strategy.   

If the key factor of a company's productivity is the magnetism of the business in which it functions, an essential minor factor, is its status within that business. Although a business might have low rate prosperity, a company that is perfectly situated can produce bigger returns.

A company situates itself by controlling its strong points. Michael Porter has coversed that a company’s strong points eventually drop into one of two captions: cost advantage and differentiation. By implementing these strong points in either a wide or narrow range, three generic strategies are shaped: cost leadership, differentiation, and focus. These strategies are implemented at the business entity level (Gonzalez & Suarez). They are termed generic strategies since they are not company or business reliant. The next table exemplifies Porter's generic stratagems:

These three models are instances of "generic strategies", as they can be implemented to goods or services within all businesses, and to companies of all dimensions. They were initially established by Michael Porter in 1985 in his book Competitive Advantage: Creating and Sustaining Superior Performance. Porter termed the generic strategies, "Cost Leadership", "Differentiation" (creating exclusively attractive goods and services) and "Focus" (supplying a particular service in a niche marketplace). He later sub-segregated the Focus plan into two fractions: "Cost Focus" and "Differentiation Focus" (Porter, 1980).

In general, cost leadership is on the subject of being the lowly cost creator in the business. For an association to achieve competitive lead, it should attain general cost leadership in a business it is contending in. For firms contending in a “price-responsive” market, cost leadership is the strategic significance of the whole group. It is crucially vital for these firms to have a careful understanding of their costs and cost factors to chase a cost leadership strategy. They as well are required to completely recognize their aimed client group’s meaning of quality, generally indicated in terms of design requirements, contractual specifications, delivery and services at the acceptable likely cost.  Achieving a cost level that is low in relation to its rivals, is deemed as a specific significance for the firm.

For firms not contending on price, a cost leadership strategy is yet critically central. Companies competing in the business via good and service differentiation, will be necessitated to concentrate on cost efficiency and quality, to uphold or improve the worth viewed by their goal customers. Customers will choose products and providers that offer value which compares or surpasses the real and perceived price, both at the time of acquisition and over the product’s span. Price stays a variable of value, though not  to the same level as for an undistinguished market.

Consequently, cost control have to be a purpose of each firm, apart from their detailed market point of reference. Companies that acquire a  cost leadership strategy, allow them to support market share, protect supply, build  access walls, deteriorate threat of surrogates, defend market share against competitors, add to market share, venture new markets, and cut the cost of principal.

As the industry setting become yet more vibrant, a strong cost leadership strategy inside the structure of corporate strategy, is fundamental to guarantee the accomplishment of the business. It must offer the course that the entire organization is able to chase in order to protect the firm’s future endurance and achievement (Porter, 1980).                                                

Differentiation strategy consists of a firm’s intention to achieve profitably by providing superior value to its customers. Thus, the basic implication is that the perceived value should by far exceed the cost (Hitt et al., 2008). Added value chain aims at providing the highest value and customer service without neglecting any cost control. Focus strategy deals with the adoption of either a cost leadership or a differentiation strategy for a specific target group. Porter (1985) was the first to suggest the need of firms to follow a single generic strategy and avoid any combination. Companies are capable of providing extended value to their customers either through differentiation or through low price comparing to the competitors.

This study focuses on culture-related perceptions of customers about Retail Service Quality and the implications for applying the generic strategy of cost leadership. As a result the basic generic strategies will be analysed in view of Retailers. Differentiated retailers in specific, try to succeed higher profit margins at higher price by offering a product / service of the highest value (Sanders & Carpenter, 2007). This also means that customers can offset superior value for premium prices. On the other flip of the coin, low cost retailers sell their products at the lowest possible prices and customer access costs, on a satisfactory product and service quality (Hitt et al., 2008). This is also reflected on the Customer Value Equation (see figure 2.1 below), developed by Walker et al. (2006).  

A higher value for money ratio may occur in both strategies; low cost leadership and differentiation as it was presented by Walker et al. (2006). Retailers that minimise customer access costs and provide the best results at the best customer service are able to develop their competitiveness. Alternatively, retailers should provide the best outcome (Results plus Process Quality) comparing to customer costs (Price plus Customer Access Costs) and proceed on benchmarking their ratio with their rivals (Sanders & Carpenter, 2007).

Porter (1985) revealed that firms cannot combine low cost and differentiation strategy and be competitive at the same time. He also named these firms as “Stuck-In-The-Middle”, because they were vulnerable to competitors that adopted either a Low cost or a differentiated strategy. IKEA and ALDI for instance have followed this advice, by selling at the lowest prices and minimising their customer services in order to be able to squeeze their prices (Uusitalo & Rökman, 2007) (Johansson & Thelander A, 2009). However, a research indicated that forty-five percent of customers stated they were completely dissatisfied to neutral and they wouldn’t suggest these retailers because they don’t offer basic services needed for a satisfactory product (Arnold, 2002). IKEA until 2009 didn’t offer assembling of their furniture that was highly valued by a lot of customers (Johansson & Thelander A, 2009). ALDI on the other hand has a very dissatisfactory complaints handling policy (mean average of 3.5 on a seven-point Likert scale) that makes customers dissatisfied and to develop brand switching behaviours (Uusitalo & Rökman, 2007). As a result, the impact of customer service is very important even when retailers adopting the cost leadership strategy.

Retailers consider that the best way to reduce costs is to avoid processes that entail customer service. The basic retailing services concern information, advice, order taking, hospitality, security, exceptions (customer care, complaints handling etc), billing and the provision of various means of payments (Yeap and Ramayah, 2011). The most frequent Retail Service complaints concern ineffective complaints handling, lack of information, poor customer care and billing services (long queues etc). The customers that complained declared that their experience was so poor that they wouldn’t prefer the store in the future, despite the very competitive prices (Uusitalo & Rökman, 2007). On the other hand, Hitt et al. (2008) considered price as a customer satisfaction indicator. Thus, despite the fact that customer satisfaction is impacted by price, retailers need to meet some minimum standards of quality to bolster customer satisfaction.

Indeed, today’s environment and technology has made customers even more demanding and they require augmented products at a very low cost (Lumpkin et al., 2009). When Porter developed generic strategy theory, the technology didn’t offer the opportunity to firms to develop EPR and Flexible Manufacturing Systems (FMS). In addition, no internet and New Information and Communication Technologies were available (Sanders & Carpenter, 2007). Firms today have the opportunity to squeeze their costs, for instance Amazon.com offers the best retailing services at a very low cost (Lumpkin et al., 2009). The notion of service quality is further analysed at the next section.  

Retail involves all activities that openly refer to the sale of products and services to the customer for individual, non-industry exploitation (Retail Glossary, 2005). The retail sector deeply and remarkably accentuates profit margin, and as the global rivalry is rising, prices are being reduced, economies of scale provide a hopeful competitive lead. This might be one of the essential factors for trends toward lesser and wider scope retailers. “Three factors that contribute toward such trend, are augmented car possession, augmented rate of households with freezers and refrigerators, and the expansion in the number of working wives.” (Jeannet and Hennessey, 1988). Meaning that the augmented vehicle ownership, rising buying power, and time limitations, guides customer from area and small stores, straight into the model of once-per-week shopping at big merchants.

The chief strategic marketing judgment residing before a world retails competitor, is whether to implement normalized marketing campaigns throughout the intended countries, or whether it must be tailored to a specific market. This choice has to be supported by considerable comprehension in both the market’s fiscal and cultural features. This noticeably holds true for Tesco in our present times. Tesco has attained 25% market share, nearly market diffusion in U.K. Food retailing. Tesco ventured abroad, since it was obliged to. The firm transferred into further regions, such as clothing business and online-shopping. However, that is improbable to provide it the type of development investors aspired for (Griffith, 2002).

A retailer fabricates customer constancy through expanding a plain and characteristic representation of its retail offering and constantly strengthening that picture through its products and service. Positioning is the creation and execution of a retail blend to produce an image of the merchant in the consumer's intellect, proportionate to its rivals.

A perceptual map is commonly employed to reveal the customer's reflection and fondness for retailers.

Tesco and Asda have found their market share drop as the downturn has provoked an alteration in consumer performance, in accordance with numbers from research firm Kantar Worldpanel. When certified statistics revealed RPI price increases at 5pc, Kantar's figures set yearly sales growth amongst British grocers at merely 3.8pc during the 12 weeks into the 7th of August. According to the research group, grocery price increases were in succession at 5.2pc above the period.

"It is obvious that consumers are attempting to direct their private inflation, by trading down. This can be executed via looking for cost-effective channels and less costly substitute goods," Kantar said.

Sales enlargement of 24.4pc at Aldi provided the trader a 3.6pc market share, up 0.6% and a new high for the firm. In the interim, Lidl witnessed sales surge 13.8pc, as its market share soared 0.2 of a point to 2.6pc. "It's predictable that the markdowns have been remarkably driven forward this month," Kantar said.

Therefore, The economic recession and British customer’s concern for a good buy, has urged record figures of consumers to price cut grocers Aldi and Lidl, to the detriment of the UK's prime superstores. The grocery market persists on generating firm expansion aided by prices increase. These transformations are at the edge, however demonstrate how consumers are rushing to deal with the augmenting pressures on their domestic funds. Shoppers are coping with their budget, by producing more shopping outings, yet purchasing smaller quantities of  items.

The Customer Satisfaction Model is a universal stage structure the associates the 2 comprehensive Ps (people and performance), and represents the influence of the traditional Ps (product, price, place, promotion).  

 (a) Create customer contentment by meeting, or moreover, surpassing, customers' requirements and prospects, i.e. providing better-quality comparative perceived worth. 

(b) Accumulate contended (and profitable) consumers into a considerable share of the pertinent supplied market.

(c) Influence the market allocations into superior productivity through scale economies (i.e. dispersion of fixed costs over a wide capacity foundation), experience outcomes (i.e. learning curve efficiencies), and market power (e.g. attaining higher contracts from dealers).

Firms are encountering more concentrated customer service tensions than ever before. Whenever a service breakdown comes into light, the company’s reaction has the prospective either to reinstate customer contentment and strengthen allegiance, or to worsen the situation and force the customer to a contending company. Service recuperation relates to the deeds an organization exert in return to a service breakdown (Gronroos 1988). Recovery organization is believed to have a major significance on customer assessments, because clients are habitually more expressively occupied in and perceptive of recovery service, than in custom or unparalleled service, and are frequently more displeased by an organization’s unsuccessful recovery, than by the service breakdown itself (Berry and Parasuraman 1991; Bitner, Booms, and Tetreault 1990).   

2.2 Service Quality – Determinants and Implications for Managers

Service comprises of a provider’s promise about an experience offering that is guided through interaction between customers and the firm. As a matter of fact, experience is provided to customers through facilities (buildings, vehicles, machinery etc), employees (front-stage and back-office personnel) and processes (Zeithaml, et al., 2008). Since facilities could be easily copied, sustainable competitive advantage in services is relied on HR practices (recruitment, reward schemes, development, job-appraisal, and training) organizational culture, and processes adopted to meet customers’ needs (Armistead & Kiely, 2003). Besides, service providers should adopt practices and strategies that are connected with the unique features of services. The most important special service properties concern intangibility, inseparability and heterogeneity (Svensson, 2006).

In modern economy, rarely one finds a service offering of only goods or only services. Instead, most of the offerings concern a mix of goods and services referred in bibliography as “products” (Wong & Sohal, 2003). However, in terms of intangibility there are offerings incorporating more goods and some others are based on services. As a result, there are products characterised by 1) strong search quality, 2) strong experience quality and 3) strong credence quality (Rushton & Carson, 1989). Strong search quality is the ability of customers to assess product quality prior to consumption based on obvious attributes (Walker et al., 2006). Clothing, furniture, houses and cars belong to this category, since customers find it easier to assess quality prior to consumption based on such features. On the other hand, products with a great deal of experience quality are the ones that customers are capable of assessing quality only after consumption occurs (Restaurant meals, vacations, haircuts, babysitting services and telecommunications) (Douglas & Connor, 2003). Last but not least, there are products based mostly on services rather than on goods (TV repairs, Legal services, car repair, medical services). These services are strong in credence quality, since customers are based on the provider‘s credibility as well as on the quality of interaction (Gabbie & O’Neill, 1996). The basic strategy of retailers is to augment their offering using services and for service providers to increase their physical evidences (Armistead & Kiely, 2003).        

As for inseparability, service delivery neither can be separated from the provider nor can be stored in a warehouse (Zeithaml et al., 2008). As a result, quality control cannot easily applied prior to service delivery and as a result, complaints are more easily occur in service-based offerings than in tangible offerings (Armistead & Kiely, 2003). This implication suggests that managers should adopt flexible service failure procedures (McCollough et al., 2000). With regards to service heterogeneity, every actual service delivery performance may significantly differ to the standard one. This is attributed to the fact that either customers perceive performance differently or because contact personnel interacts differently with customers during the day (Zeithaml et al., 2008). As a result, employees should know how to react to customers’ response and requests during the “moments of truth” (Svensson, 2006). As already mentioned, HR practices are very important to minimise service heterogeneity (recruitment, customer-centric training, development and effective job appraisal) (Walker et al., 2006).  

In order to measure service quality as it is perceived by customers, Parasuraman et al. (1988) revealed five dimensions of Service Quality (SERVQUAL MODEL), 1) Reliability, 2) Responsiveness, 3) Assurance, 4) Empathy and 5) Tangible aspects. Reliability is related to the aforementioned heterogeneity that providers should eliminate as possible as they can. Customers need a reliable and consistent service delivery comparing to their expectations, which are formulated by marketing communications (Kotler & Keller, 2007). In case service delivery performance fails to meet customer expectations, customer satisfaction and experience become very poor and vise versa (Douglas & Connor, 2003). Responsiveness is referred to the speed of problem solving processes as soon as customers make obvious requests (Zeithaml et al., 2008). As far as assurance is concerned, this dimension deals with the customer’s confidence that the provider’s service delivery system is capable of safely fulfilling company’s promises (Benkenstein et al., 2004). Empathy is the emotional alignment of contact personnel to customer’s problems or requests (Holtz et al, 2008). Finally, the dimension of tangible aspects involves facilities, employees appearance etc. The SERVQUAL model is widely used in banking sector, hospitality and tourism sector as well as in telecommunications (Zeithaml et al., 2008). However, in retail settings this model does not fit properly. Services are also provided to customers in retailing business. The basic retailing services concern information, advice, order taking, hospitality, security, exceptions (customer care, complaints handling etc), billing and the provision of various means of payments (Yeap and Ramayah, 2011). At the next section an adjusted model for Retail Service Quality is developed.

LIDL – Cost & Quality

Lidl was established in Germany in the 1930s, but attained its current business as a discounter in the 1970s. Lidle is one of the biggest and well-know low-cost retail store in Germany and in the world. Lidl ventured the UK market in 1994, and now has about 450 UK stores. Nevertheless, the nation is not as absorbed in discounters as Germany, fairly as a result of the effective and efficient marketing of the big four retailers (Tesco, Asda, Sainsbury's and Morrisons) in persuading customers they supply rewarding retail experiences. Thus the control of large supermarket, chains in the UK, and Lidl's market share of just about 1.5% in 2007 (weighed against the market leader Tesco's 27.6% market share).

Due to its diminished advertising expenditures, a central store presentation, and a narrow product selection involving namely private label goods, supported by operational effectiveness, Lidl has altered grocery retailing in Germany, where roughly 90% of the German consumers habitually shop at this low-cost retail outlet. Its achievement was an immense factor in Germany, reflecting amongst the lowest grocery prices in entire Europe.

The headline retailers encounter in attaining low prices whilst preserving margins,  is specifically applicable for Lidl, as it operates under a low-scope culture. Nonetheless, as Lidl is not a publicly-scheduled firm, and reveals trivial financial information, it is not exposed to the probably disturbing shareholder criticism at each and every quarter of the fiscal year results, and is not required to share dividends; therefore attaining a wider range to venture in development to ensure a long-term expansion.

“Quality is big and prices are small at Lidl”, says Karl-Heinz Holland, CEO of Lidl.

The keystone of Lidl’s values is simplicity:

• pure retail → the firm just procures and vends
• entirely focused on one target → to provide the customers, a daily superior quality goods at the greatest feasible prices.

Within the supermarket stores, there is a fee for delivery service bags - at Lidl, the shoppers just pay for what they acquire. There are no unknown fees at Lidl, and all the prices are mainly competitive, day after day. They don′t tender shopping baskets - at Lidl, they merely give trolleys. The shoppers are required to insert a pound coin as a deposit - that sets aside costs for the firm, where these reductions are allocated to the shoppers. Inside the stores, a number of goods are sold openly from containers or from pallets - at Lidl, they maintain the whole thing as simply as possible, and that is why customers save more money.

Lidl has as well been able to set up strong UK development by repositioning the business to emphasize more on prime consumer trends of health and quality. These are significant traits for UK grocery retailers, not simply because they are rising consumer trends, however also as the primary four retailers have launched a model over what is anticipated of grocery stores in the nation.

The shopping practice at Lidl is founded on straightforwardness for the consumer. They preserve company costs along, so that the reductions that Lidl apply on operational costs, can be passed on back to the shopper in cut-rate prices. A single factor for Lidl's lesser operational costs, is their narrow assortment of products. Lidl amasses stock around 1,800 lines, judged against roughly 30,000 amassed by the other huge stores. By maintaining their selection small, they have the opportunity to gain smaller-sized stores. Thus sparing on illumination, heating and repairs invoices. Some perceive this philosophy as a bright notion, regarding that study reveals that the majority of customers are likely to purchase only 400 or 500 distinct foodstuffs. Lidl maintains reduced fixed cost via using nominal numbers of store personnel and guiding them on all facets of the store level. Therefore, you will probably view only one affiliate on the till, and another piling the fruit and vegetables. Like numerous superstore, headquartered in Germany, Lidl charges shoppers for plastic bags, the rationale behind this is dual: to maintain operating costs to a bare minimum, and to be environment-friendly by urging shoppers to exploit their plastic bags multiple times.

With LIDL, goods are chiefly sold from pallets and normalized shelves, resulting in cost savings and logistical benefits, while other huge retail store, such as Tesco, offer their markets an assortment of various shelves and arrangements of products. In brief, LIDL offers a limited selection, in addition to the basic advantage for their consumers – the product. However, although LIDL comprises only profits vended per sold item, the firm is able to bring about high number of sales, and high returns, because of its high fixed proceeds of products for each day, calculated against their small variety of goods (Lidl, 2008).

Low-cost retailers are discounter shops that are influenced by the discount-strategy, hence offering lower prices, however having a narrow product selection. The size of the shop does not control the approach and strategy of the retailer. Furthermore, a low-cost retailer is a discounter that provides a wide variety of products, limited service, and cut-rate prices. Discount stores offer both private labels, and state brands; however, these trade names are commonly less fashion-focused than brands in department stores.

Although Lidl has been known for its low-cost merchandise, the company offers good quality too. Lidl is not overlooking quality, as it is sort of creating a balance between cost and quality, hence following an efficient and effective approach within its course of production. Lidl has been recently focused on generating higher quality that accompanies its low-priced goods. The entire group operates more than 80,000 workers. LIDL is tremendously hierarchically structured, and functions without much communication and publicity about their industry, thus concentrating on the common market strategy of all price-cut retailers. As illustrated above, with their product scope of more than 2000 products, they are supplying everyday goods and further exceptional goods every week on unique offers.

Question:

How do perceived quality/cost aspects, integrated into a nation’s distinct dimensions, whether demographic or financial, bring about the desired outcomes and possibilities?

2.3 Retail Service Quality Model 

Dabholkar et al. (1996) developed proposed a new adjusted model, known as Retail Service Quality Model, to suit to the retailing environments. They also validate it using Confirmatory Factor Analysis to reveal five possible determinants; Store’s Physical Aspects, Store’s Reliability, Personal Interaction with Store’s Personnel, Store’s Problem Solving and Store’s Policy (for more information please refer to the methodological framework’s chapter). This model is very important for this project, since service is a promise of experience (Zeithaml et al., 2008). Retailers manage customer experience by augmenting their product assortment with retail services, policies and physical evidence (Kim and Jin, 2002). As a result, by measuring Retail Quality, author is able to measure customer experience for LIDL in three different cultures; Irish, German and Greek. The final objective is to make associations with cultural dimensions in order to propose cultural related experience management tactics. Besides, as Yeap and Ramayah (2011) indicated the significance of each retail experience indicator is country and market driven. The aforementioned authors developed different multiple regression models to prove that the importance of each experience dimension varies according to the expectations and preferences persist in each country. As Hair et al. (2006) reinforced, the importance of each independent variable could be examined by assessing both their significance and beta coefficient in a multiple regression model.

2.3.1 Physical Aspects

Physical aspects are expected to be very important in retail sector, since they contribute over the decrease of customer risks (Bitner, 1992). A physically nice looking retail environment makes customers to feel safer and entices customers to stay for longer and positively influence their mood, which in turn moderates buying behaviour (frequency of visit, quantities, amount to be spent etc) (Zeithaml et al., 2008). Physical aspects incorporate a series of tangible enhancements like modern-looking equipment and features, physical facilities and shopping materials (handbags, catalogs etc) of high aesthetical value (Yeap & Ramayah, 2011). In addition, convenient and clean areas influence both mood and customer satisfaction (Bitner, 1992). Physical aspects are also considered as a hygiene factor as Herzberg originally mentioned (Thompson & Gamble, 2007). Convenient and clean facilities contribute to an environment that does not harm overall customer experience. However, dirty and messed areas dissatisfy customers, negatively affecting their behaviour and motivation both to buy in the future as well as to recommend the store to friends and colleagues (Theodoridis et al., 2009). The layout of the supermarket is also imperative to enhance customer’s experience, since it deals with the search effort and costs of customers. A layout that facilitates customer’s buying decisions significantly reduces physical and psychological risks associated to the time needed to find products (Zotos et al., 2010). It also makes it easier for consumers to move around in the store.      

2.3.2 Reliability

Reliability is the ability of a retailer to provide homogenous, consistent and error-free services and transactions comparing to the promises that are communicated by the Integrated Marketing Communications (Kotler & Keller, 2007). Marketing communications deal with the delivery of messages and expectations from the retailer to customers connected to the positioning strategy and Unique Experience Proposition of a certain retailer (Theodoridis et al., 2009). For instance a message “You find everything you want at the best price” transfers a message that merchandise is available at the best price. As soon as retailers fail to meet the communicated experience, they simply dissatisfy customers due to their unreliability (Mehta et al., 2000). 

2.3.3 Personal Interaction with Personnel

Services are provided when customers and front-stage personnel interact (Zeithaml et al., 2008). This is also mentioned as “service encounter” and the time of interaction as “the moment of truth” (Walker et al., 2006). First line employees in super markets provide services, since they interact with customers. The basic services in retail concern information, advice, order taking, hospitality, security, exceptions (customer care, complaints handling etc), billing and the provision of various means of payments (Yeap and Ramayah, 2011). Mayer et al. (2003) proved that the interaction itself explains a great deal of performance variability in services. The most crucial constituents of personal interaction in retail involve employees’ ambience, effort, empathy and courtesy (Mayer et al., 2003). The ideal personal interaction of customers with employees include personnel’s knowledge and behaviour for responding accordingly to customers’ requests, honesty and safety in transactions, punctuality of services and individual attention (Walker et al., 2006).    

2.3.4 Problem Solving

Problem solving in Retail settings entails every process for responding to customers’ problems in order for the retailer to recover errors occurring in the service or product delivery (McCollough et al., 2000). Three are the most vital issues in supermarkets’ problem solving; 1) The successful handling of returns and exchanges, 2) The emphatic interest of the contact person to solve the problem and 3) The ability of the employee to handle customer complaints directly and immediately (Dabholkar et al., 1996). These strategies show a sincere interest to customer’s needs that consumers highly appreciate. A problem or a service error usually hampers customer satisfaction. However, a successful handling of customer’s complaint is a critical success factor of experience management, since customer experience and satisfaction gets better comparing to the prior-complaint time (service recovery paradox) (McCollough et al., 2000). This does not mean that retailers should repeat such errors. In case customers experience more than once there is no any effect of the service recovery paradox (Zeithaml et al., 2008).      

2.3.5 Policy

Companies’ policies influence customer experience (Yeap and Ramayah, 2011). The ideal store for the customer is the one that adopts flexible and customer oriented policies (Zeithaml et al., 2008). Product assortment and quality is the first policy that retailers should make their decisions upon (Theodoridis et al., 2009). Business strategy is a key question. Low cost retailers often adopt a merchandise of high value for money, which usually reflects an assortment of private labels (PLs) (Kim & Jin, 2002). On the other hand Differentiated retail-chains usually follow a product assortment policy of less Private Labels and more SKUs (Stock Keeping Units) that actually increases stock keeping costs and other overhead costs (Dabholkar et al., 1996). The second policy deals with the store’s ease of access that seriously affects physical and psychological effort (Mehta et al., 2000). Both the parking and the operating hours influence ease of access that retailers should influence (Mehta et al., 2000). Last but not least, experience is also affected by the company’s flexibility in terms of payment methods (Dabholkar et al., 1996). As a result, it is vital for retailers to accept most major cards.  

3. METHODOLOGICAL FRAMEWORK

3.1 Introduction

Methodological framework concerns the structure as well as the planning of a research project (Saunders & Thornhill, 2003; pp 56). Methodological framework ensures the use of the best case to case data collection method (see section 3.2), providing researchers with the most reliable and proper data for both an efficient and an effective research (Parasuraman et al., 2007; pp 63). Furthermore, the methodological framework puts the research on the rail to collect a representative sample with regards to the total population (see paragraph 3.3) in order to minimise the sampling error (Malhotra, 2008; pp 85). Last but not least, the research framework represents every possible interaction between two or more variables by simultaneously helping readers to understand the hypotheses’ building.

3.2 Data Collection Method 

In general, there are two basic methods to collect primary data; Qualitative and Quantitative method (Parasuraman et al., 2007; pp 76). The former concerns the data collection through evoking emotions from persons of a certain population through questions / discussion axis in focus groups or in-depth interviews. In addition, the Delphi method is useful to collect data from experts about new product development (Malhotra, 2008; pp 91). Qualitative method requires a great deal of interpersonal skills and knowledge about psychology as well as various facilities to isolate participants from various types of noise (Saunders & Thornhill, 2003; pp 79). One further barrier of using a qualitative method is that the researcher should carefully pick a small number of participants out of the population to represent the research. As a result, there is a peril to collect unreliable data (Parasuraman et al., 2007; pp 78). In addition, because of the interaction between researchers and participants, researchers should reassure objectivity and not to influence participants’ answers (Saunders & Thornhill, 2003; pp 84).  

On the other hand, Quantitative method in social sciences is conducted through a SURVEY. The latter is based on a strict data collection tool that regards a QUESTIONNAIRE. The quantitative method is characterised by strong discipline and reliability using various statistical methods of inference (and significance) as long as the sample of the survey ensures normal distribution (Malhotra, 2008; pp 127). One further advantage of this method is that researchers can explore relationships between two or more variables or scales, without directly asking for obvious or sensitive answers (Parasuraman et al., 2007; pp 102). Besides, the research tool or construct is based on research of other authors that further ensures the validity and reliability of the research. In addition, attitudes, perceptions and behavioural aspects, could be further collected using quantitative scales (e.g. Likert) (Malhotra, 2008; pp 165). Since the purpose of this research entails the measurement of attitudes like customer satisfaction, perceptions (perceived quality) and behavioural aspects such as customer loyalty, the use of a SURVEY matched the needs of this research.       

3.3 Data Collection Scale

Goods incorporate services to enhance customer’s experience. Especially in retailing, where goods are sold, services are mandatory for the customer experience management. Besides, service augmentation is a basic tool of differentiation along with product assortment in the super market retailing business. A service consists of an experience promise about service quality. Parasuraman Zeithaml and Berry (1988) first referred to perceived quality and developed a respective construct named SERVQUAL model for collecting service quality data. Dabholkar et al. (1996) further developed a construct to measure the post-purchase perceived quality with regards to the service encounter. Parasuraman et al (1998) proposed four basic precursors of service quality that are Reliability, Responsiveness, Assurance and Empathy to be measured on a Likert scale.   

Dabholkar et al. (1996) first developed an instrument, known as Retail Service Quality Scale (RSQS), to suit to the retailing setting making adjustments to the SERVQUAL measure. They also validate it using Confirmatory Factor Analysis to reveal five precursors; Store’s Physical Aspects, Store’s Reliability, Personal Interaction with Store’s Personnel, Store’s Problem Solving and Store’s Policy. The aforementioned construct incorporated twenty items on a five points Likert scale (1= I Strongly Disagree, 5= I Strongly Agree) that is presented in Questionnaire’s parts one to five (see appendix). Mehta et al.  (2000) further proposed a construct validated using Reliability and factor analysis adjusted for Supermarkets and electronic goods retailers focusing on customer satisfaction, overall quality and customer Loyalty using a seven-point Likert scale (see Questionnaire’s part six in appendix).

3.4 Sampling Procedure and Sampling Plan

The sampling procedures as well as the plan further ensure the reliability of the research in terms of sampling error and structure. Third parties also develop relationship of trust as long as they know the exact reasons of the project’s decision making. In general there are five major decisions that have been made (Parasuraman et al., 2007; pp 111-132); 1) the definition of the population, 2) the definition of the sampling frame, 3) the definition of the sampling method, 4) the definition of the sample’s size and 5) the implementation of the sampling plan. The last process refers to 6) data coding and entry.

As for the first decision it concerns adult customers of the retailing chain of Lidl in the capitals of 3 different countries; In Dublin (Ireland), Berlin (Germany) and Athens (Greece). Adult persons were selected, because of the fact they are the main decision makers. The countries were selected to represent different cultures and the capitals were decided, since they represent a high percentage of their total population. As far as the definition of the sampling frame is concerned, it deals with the access of data in various sampling units where sampling elements are reached. In this research, the sampling frame was the internet itself, in which two central stores of Lidl (sampling units) were chosen to receive fifty valid questionnaires from its customers (sampling elements). The third decision deals the way a sample is acquired that impacts the sampling error. The latter is minimised by using a Simple Random Sampling method. This method is both time and cost efficient per unit of sampling error and it also guaranties the existence of normal distribution necessary for statistical inference (Malhotra, 2008; pp 183).

With regards to the sample’s size, as Parasuraman et al. stated (2007; pp 151) one rule of thumb to decrease the sampling error is to receive data out from three-hundred and twenty sampling elements in Business to Consumer research. As for the implementation of the sampling plan, it took place outside the LIDL stores from 18.00 to 21.00, local time, to ensure employees’ presence. In order to ensure simple random sampling there was a simple process designed. A number was chosen from one to five, in this case number three and as a result the third, the eighth, the thirteenth etc customers were requested to participate. As far as the last stage is concerned, answers were coded in SPSS application to execute descriptive and inferential analysis.    

3.5 Research Framework

This research was based on the following research questions:

1) What impacts customer experience in Ireland, Germany and Greece?

The first research question entailed the exploration of the most influential factors of customer experience in Ireland, Germany and Greece. Using multiple regression analysis, the researcher revealed significant factors possibly connected to cultural differences.  

2) Do different precursors related to cultural differences?

Using Bivariate analysis and Pearson’s significance tests, any such different experience precursors were examined in order to check the impact of cultural dimensions. Using the findings of GLOBE research project, the author crosschecked possible relationships between experience factors and cultural dimensions as mentioned in the Literature Review. The results indicate managers how marketing strategy should be adjusted according to cultural differences.

4. FINDINGS

4.1 Sample’s Statistics

As far as the sample’s demographics it concerned, 55.83 percent were men and 44.17 percent women (see Figure 4.1 and Table 4.1). This reflects the reality.  For instance in Greece, women are used to live with their parents until their marriage. As a result households with a single persons concern men mostly. One further reason for this in many western countries is because of the fact that women are more likely to be unemployed and thus they cannot afford to live alone. 

Table 4.1 Sample's Demographics - Gender

 

Frequency

Valid Percent

Male

201

55.83

Female

159

44.17

Total

360

100.00

As for the composition of the participants’ age, 15 percent of them were up to forty-five years old. 28.61 percent of them were between forty-one and fifty-two, whereas a 22.22 percent of the sample aged between fifty-three and sixty five. Approximately one fifth of the total sample was between sixty-six and seventy-five years old. Finally, a 13.89 percent of the participants aged more than seventy-five years old. This fact indicates the ageing of the Europe’s population, especially in these three countries. For more information, please refer to Figure 4.2 and Table 4.2.  

Table 4.2 Sample's Demographics - Age

 

Frequency

Valid Percent

18-25

14

3.89

26-33

22

6.11

34-40

18

5.00

41-46

30

8.33

47-52

73

20.28

53-65

80

22.22

66-75

73

20.28

75+

50

13.89

Total

360

100.00

With regards to the sample’s composition by its annual income, the majority (60.56%) of them earn up to twenty-two thousand Euros, indicating that Lidl targets on the poorest customers. However, a 14.72 percent earns between twenty-two and twenty-six thousand Euros, whereas 11.67 percent, between twenty-six and thirty thousand Euros. Lastly, only a 13.06 percent of the total sample earns more than thirty-thousand Euros (See Figure 4.3 and Table 4.3 below). 

Table 4.3 Sample's Demographics - Income

 

Frequency

Valid Percent

Between 6 and 12.000€

78

21.67

Between 12 and 18.000€

71

19.72

Between 18 and 22.000€

69

19.17

Between 22 and 26.000€

53

14.72

Between 26 and 30.000€

42

11.67

30.000€ >

47

13.06

Total

360

100.00

As far as the sample’s educational status is concerned, a 10.28 and a 10.56 percent graduated Primary and Secondary School respectively. The majority of the respondents declared they graduated High school (55.83%). A 13.06 percent graduated a Technical School and only a 6.94% was in possess of a university degree. Finally, a small part of the sample replied they had a Master’s Degree (2.22%) or a PhD/ Doctorate Degree. For more information please refer to the following Figure 4.4 and Table 4.4.

Table 4.4 Sample's Demographics - Education

 

Frequency

Valid Percent

Primary School

37

10.28

Secondary School

38

10.56

High School

201

55.83

Technical School graduate

47

13.06

University Graduate

25

6.94

Master’s Degree

8

2.22

PhD - Doctorate

4

1.11

Total

360

100.00

Last but not least, the sample was equally distributed to include three distinct Nationalities (see Figure 4.5 and Table 4.5); the Irish (33.33%), the German (33.33%) and the Greek one (33.33%). 

Table 4.5 Sample's Demographics – Country of Origin

 

Frequency

Valid Percent

IRELAND

120

33.33

GERMANY

120

33.33

GREECE

120

33.33

Total

360

100.00

4.2 Retail Service Quality Scale Statistics – Factor Analysis Approach

Using factor analysis, the Author confirmed the existence of five different Service Quality precursors (1) Store’s Physical Aspects, (2) Store’s Reliability, (3) Personal Interaction with Store’s Personnel, (4) Store’s Problem Solving and (5)Store’s Policy,  as mentioned in the chapter of the methodological framework. Tables 4.6 to 4.10 present the factor analysis result from SPSS application.

Table 4.6: The Physical Aspects' Scale(a)

ITEMS

 Component (Raw)

 Component  (Rescaled)

This store has modern-looking equipment and fixtures

        1.559

         0.976

The physical facilities at this store are visually appealing

        1.602

         0.960

Materials associated with this store's service (such as shopping

        1.577

         0.977

This store has clean, attractive and convenient public areas

        1.491

         0.950

The store layout at this store makes it easy for customers to find

        1.584

         0.979

The store layout at this store makes it easy for customers to move around in the store

        1.561

         0.983

Extraction Method: Principal Component Analysis.

(a) 1 component extracted.

Table 4.7: The Reliability Scale(a)

ITEMS

 Component (Raw)

 Component (Rescaled)

When this store promises to do something by a certain time, it will do so

        1.353

               &n

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