An examination of factors leading to abating customer loyalty towards magazine subscriptions

Abstract

Customer loyalty in the means of continued subscriptions is key to sustain within a limited market. Where an organisation cannot attract new customers, it must focus on it’s competitors and entice customers away. Getting this right depends among others on the retention of customers and therefore, understanding the reasons that make magazine readers cancel their subscriptions.

Based upon a review of related theories on customer loyalty and customer retention, and experience from practitioners, a contextual model for the German magazine publishing industry could be created. The magazine reader loyalty model incorporates the generic customer loyalty model (Dick and Basu, 1994) and reflects the typical customer life cycle of magazine subscribers.

Focusing on the effect of attitudinal changes, this study utilises related studies, real world databases and brainstorming sessions to create a list of presumed factors that lead to abating customer loyalty towards magazine subscriptions. Within a qualitative- quantitative survey, data on the importance of these factors was collected.

From a comparison of former and actual subscribers, the effectiveness of these attributes is investigated. An analysis method based upon probabilities is utilised to overcome the limitations that affected related studies. This novel analysis method enables substantiated statements on the commonness and effectiveness of attitudinal factors and thus, their relevance towards customer loyalty.

From this, the most significant factors that lead to a drop out of magazine subscribers could be identified to be i) the time that is available to a reader, ii) the actual reading behaviour, iii) the entertainment value of a magazine, iv) the perceived time savings and

v) the availability of alternative magazines and other media.

Further, evidence was found that i) the compilation of a magazine, ii) overall satisfaction, iii) fast access to information, iv) delivery satisfaction and v) the discussion of articles with friends and colleagues are of limited use as measurements. Those factors are unlikely and when present, found among former subscribers as well as actual subscribers.

This study concludes that some factors are more important than others, especially those that deal with available time and perceived time savings. Decision-makers and marketers should focus on these factors in the first place. Additional, suggestions for further research are given, emphasising the differences of abating customer loyalty and sustain customer loyalty.

Table of Contents

  Abstract NA  

1  Introduction  1

2  Aims and Objectives  4

3  Literature Review  5

3.1  Customer Loyalty  6

3.2  Customer Retention  16

3.3  Consolidation of Theories  24

3.4  Previous Related Studies  27

4  Research Methodology  34

4.1  Research Philosophy  34

4.2  Research Strategy  35

4.3  Theoretical Framework  37

4.4  Operationalisation of Major Variables  40

4.5  Data Collection Techniques  42

4.6  Data Analysis  44

4.7  Research Implementation  47

5  Findings  50

5.1  Demographic Data and Buying Behaviour  50

5.2  Attitudinal Changes  54

5.3  The Factors that Affect Attitude  55

5.3.1  Time  57

5.3.2  Compilation  57

5.3.3  Interests  58

5.3.4  Substitute Goods  59

5.3.5  Pricing  60

5.3.6  Advantage  61

5.3.7  Convenience  62

5.3.8  Sharing  63

5.3.9  Other Findings  63

6  Discussion  65

7  Conclusion  73

  References NA  

Appendix  NA  

List of Figures

  Figure 1: Customer Loyalty Model by Dick and Basu (1994)  7

  Figure 2: The Four Cs of Customer Loyalty (Rowley 2005)  8

  Figure 3: The effect of perceived approachability and responsiveness upon loyalty and  

  behaviour (Divett et al 2003)  13

  Figure 4: Impact of Corporate Image on Quality Customer Satisfaction and Customer  

  Loyalty (Andreassen and Lindestad 1998)  15

  Figure 5: Five-level Hierarchy of Customer Behaviours (Heskett 2002)  19

  Figure 6: Customer Satisfaction Configurations and Related Service Strategies (Woo  

  and Fock 2004)  22

  Figure 7: Magazine Reader Loyalty Model  37

  Figure 8: Research Framework  39

  Figure 9: Conflicting Motives and Attitudinal Changes  66

  Figure 10: Importance of a Negative Attitudinal Changes towards Terminations  70

List of Tables

Table 1:  Theories on Customer Loyalty and Customer Retention  26

Table 2:  Summary of Previous Related Studies  33

Table 3:  Deductive and Inductive Approaches in Contrast (Saunders et al 2003)  35

Table 4:  Operationalisation of Major Variables  40

Table 5:  Presumed Factors that Affect the Attitude of Magazine Subscribers  41

Table 6:  Taxonomy of Attitudinal Changes  45

Table 7:  Summary of Demographic Data and Buying Behaviour  50

Table 8:  Commonness of Attitudinal Changes for Former and Continual Subscribers  53

Table 9:  Effectiveness of Attitudinal Changes Towards a Termination  56

List of Abbreviations

ASP Application Service Provider

B2B Business to Business

B2C Business to Consumer

1 Introduction

What makes magazine readers cancel their subscriptions? This is an interesting question that gains in importance for magazine publishers and their service providers. Within a fully developed market, retaining customers is seen as a key to market dominance and long-lasting profits (Rowley and Dawes, 1999). To achieve this, it is important to understand the factors that lead to abating customer loyalty counter these factors. From the figures of the advertising market, one finds that the German market spans a volume of 12 billion Euros per year (Rüdell, 2007). It is dominated by traditional media, whereof television, newspapers, magazines and journals are the most important players. About 25 percent of this market is assigned to popular magazines and professional journals. Nearly 6000 different titles have been published in 2004 with a steady upward tendency during the preceding decade (ibid).

However, this trend might be finished soon. As the magazine market is believed to be fully developed, rivalry among competitors emerges (Gassmann, 2006). This proposition is confirmed by the figures for the German advertising market. Where the number of published magazines increased by 20 percent within the last decade, the net advertising income had a peak in 2000 and then, fell down by 25 percent (Rüdell, 2007).

Besides this emerging rivalry, changes in European legislation additionally increase the pressure towards the industry. Whereas the national markets were protected by strong market entrance barriers in the past, the ongoing unification of European law might erode these barriers soon.

For instance, whereas subscriptions in France have to be actively renewed, subscriptions in Germany continue unless a subscriber gives notice. Regulations like this supported

separate distribution channels and fragmented the European market into smaller national markets. This leads to a specialisation of many companies within the industry. In Germany, a diverse supply chain emerged with many small companies with a dedicated focus. Today, this supply chain consists of publishers, content holders, news agencies, print offices, distributors, call centres, data processing companies, retailers and others.

However, with the ongoing unification of European law, these barriers are likely to fade and competitors from other national markets might enter the market. Though, many of the smaller companies are highly specialised and thus, very sensible to changes in this isolated market.

So, the companies within this market face new challenges and are forced to take action. Due to the unifications in European law and the increasing rivalry with foreign competitors, they have to adopt their current strategies and prepare for stronger competition. From the Boston Matrix (Henderson, 1970), one can find two generic strategies to counter this. First, companies can enter new markets and grow therein. Second, they can focus on their competitors and try to increase their market share within an existing market.

According to Blank (2006), some US companies decided for the first option: they have placed large investments in online communities and portal sites. This enables them to diverse their investments and allow further growth. However, a similar trend cannot be identified for European companies. Gassmann (2006) states that German publishers are doubtful as most of them have no web strategy at all.

From there, it is consequential to investigate the second option from the decision matrix: increasing the current market share. To do so, it is important to understand the rules of the market and to perform better than competitors. One important component to

achieve this superior performance is seen in customer retention. Therefore, it is essential

to understand the motivation that makes customers cancel their subscriptions and to

create an authoritative strategy to counter this. It is the aim of this thesis to examine the

factors that lead to abating customer loyalty to magazine subscriptions and thus, enable

companies within the market to adopt their strategies and increase their customer base.

2 Aims and Objectives

Within a hard-fought market, it is essential to have an in-depth understanding of the business. For service providers in the magazine publishing industry, this means understanding their customers and suppliers, competitors and substitutes. At the end of the supply chain, the consumer ultimately decides if he is satisfied with the product and service and if he is willing to spend money.

Thus, the aim of this research is to improve the understanding of the motivation that affects magazine readers within their decision making process. An exhaustive literature review on customer loyalty and customer retention will examine the theories that form the basis of this domain. The status quo of academic research will be asserted and from there, an adequate field of research is chosen.

As most magazines are sold on a subscription basis (Rüdell, 2007) and subscribers are believed to be most lucrative, this group of magazine readers is auspicious. Previous research within this domain investigated the reasons that make magazine readers to become subscribers (see Knoblauch, 2005). From there, it is consequent to investigate the motives that affect magazine readers after becoming subscribers.

This study investigates the factors that lead to abating customer loyalty towards magazine subscriptions. An in-depth understanding of the motives therefore enables companies within this business to found their decisions on substantiated data. This enables qualified statements on the termination reasons of subscribers and might endorse current business practices. Further, it enables companies to improve their services and eventually, to adopt their strategies.

3 Literature Review

To understand the reasons that affect magazine readers when they cancel their subscriptions, one has to understand the contextual meanings of customer loyalty and customer retention. Both concepts are coherent and a lot of academic literature is dedicated to these fields of research.

The first part of this literature review will outline the major theories on customer loyalty. It will present the relevant models on customer loyalty and show how loyalty is affected by attitude and behaviour. These theories are set in contrast and similarities as well as discrepancies are highlighted.

Subsequently, the theories on customer retention are incorporated. It is shown where they are based on the models on customer loyalty and where they lead to conflicting interpretations. Conflicts as well as dependencies in between of these theories are emphasised, so that the reader gains a reasonable understanding of these topics and the status quo of academic research.

Afterwards, the focus is lead to the media industry. Previous related studies on customer loyalty and customer retention in the context of subscriptions and magazine readership are examined. This forms the basis for an appropriate research and from there, an adequate field of research is chosen.

3.1 Customer Loyalty

The concept of customer loyalty has been around for many years. It gained in importance in the mid 1990ies when Dick and Basu (1994) published their constitutional paper “Customer Loyalty: Towards an Integrated Conceptual Framework”. In this paper, Dick and Basu show that loyalty consists of two determinants: attitude and behaviour.

The importance of customer loyalty is emphasised by Rowley and Dawes (1999) when they state that “loyalty is likely to lead to [...] repeat patronage, and positive recommendations which may influence other actual or potential customers.” They amplify that “a loyal customer base can be a valuable asset for any organisation. It reduces the need to seek new customers, and is positive feedback that the organisation’s products and services are meeting the needs of a particular group of people”. This is reflected by the Customer Loyalty Model as proposed by Dick and Basu (Figure 1). The model combines the two determinants’ relative attitude and repeat patronage into one portfolio. The four sectors that emerge thereof describe four separate conditions of loyalty. These conditions are summarised by Rowley and Dawes (1999) as:

• “Loyalty signifies a favourable correspondence between relative attitude and repeat patronage.

• Latent loyalty is associated with high relative attitude, but low repeat patronage.

• Spurious loyalty represents a low relative attitude, with high repeat patronage.

• No loyalty is associated with a low relative attitude, combined with low repeat patronage.”

The Customer Loyalty Model gives insight into customer behaviour and allows to understand the various conditions of loyalty. However, the model is also criticised as being too general. Rowley (2005) states that the focus of businesses is mostly on only one of the four described groups: the group of loyal customers. Thus, the Customer Loyalty Model might be too general and only of limited use for real-world scenarios. This is also emphasised by Rundle-Thiele (2005) when the author states that “loyalty may be one or a combination of attitudinal or behavioural loyalty. Yet this may still provide a limited view of loyalty”.

Figure 1: Customer Loyalty Model by Dick and Basu (1994)

The limitations that arise from Dick and Basu’s model are addressed by Rowley (2005). The author states that the focus of businesses is mostly on the group of loyal customers and from there, the need to refine this particular group arises. The Four Cs of Customer Loyalty (Figure 2) utilises inertial and positive behaviour and inertial and positive attitude to divide the group of loyalists. From this more detailed classification, one finds

captives, convenience-seekers, contended customers and committed customers as subset of the group of loyalists.

Figure 2: The Four Cs of Customer Loyalty (Rowley, 2005)

Rowley (2005) describes these groups as:

• Captives, which “continue to patronise a brand, service, or service outlet because they have no real choice. These customers have few opportunities for switching, or alternatively they experience what they perceive as a high switching cost. [...] Customers may also be tied to a brand that is associated with products or services where buying decisions are infrequent.” (ibid),

• Convenience-seekers, that “exhibit a behaviour that includes possibly frequent re-purchases or visits to a store location, but are inert in attitude. [...] Convenience is likely to be particularly important in the context of low involvement, routine purchases.” (ibid)

• Contended customers, that “have a positive attitude to the brand, but are inertial in their behaviour. [...]Contented customers are likely to stay with the brand, and to support the brand through positive word-of-mouth exchanges.” (ibid)

• Committed customers, “that are positive in both attitude and behaviour. [...] They can be dependent on making continuing purchases and to engage in positive and delighted word-of-mouth exchanges with other potential customers” (ibid) From both portfolios, one finds that attitude and behaviour are significant determinants of customer loyalty and that the group of loyals is most important to business organisations, as loyalty leads to repeat patronage and positive recommendations (Rowley and Dawes, 1999). The question arises how one develops and maintains these factors to improve customer loyalty?

Rowley and Dawes have investigated this and found that there are three premises that must be met to achieve loyal customers: cognitive antecedents, affective antecedents and conative antecedents. According to Rowley and Dawes, these premises can be manipulated and getting this right, results in improved loyalty. They authors explain the antecedents as follows:

• “cognitive antecedents, which are associated with a “rational” decision making based in informational determinants;

• affective antecedents, associated with the feelings about the product or service;

• conative antecedents, or those associated with a behavioural disposition.” (ibid) Further, they explain that loyal behaviour can be measured easily but the linkage between behaviour and attitude could still be hidden to the observer. They state that “attempts to establish causal primacy may be unrealistic” (ibid) but there is also evidence that “when a customer is completely satisfied [...] they are significantly less

likely to defect or switch, leading to the proposition that the intensity of satisfaction is an element in customer loyalty” (ibid).

To overcome these limitations, Rowley and Dawes (1999) suggest that besides the measurement of behaviour, also attitudinal elements should be measured. From their research, Rowley and Dawes found that three types of measurements are applicable and suggest the use thereof to determine customers’ attitude:

• “Search motivation – a number of studies suggest that, as experience learning satisfaction and repeat purchase increase, the search for information about alternative brands decreases.

• Word-of-mouth – post-purchase communication is supposed to be particularly likely if consumers experience notable emotional experiences, often arising from satisfaction or dissatisfaction.

• Resistance to counter persuasion – individuals holding strong commitments, demonstrating enhanced resistance to counter persuasion.” (ibid)

Rundle-Thiele (2005) has focused on loyalty and loyalty measurement in the context of marketing. The author clarifies that loyalty, commitment and retention can be used interchangeable in this context. Within the paper, Rundle-Thiele consolidates survey based loyalty measures with the aim of generalisation. To do so, services and retailing markets are instantiated as they represent the largest sectors of Western economies (ibid).

In contrast to the traditional perspective of loyalty, Rundle-Thiele “suggests that loyalty is not necessarily a series of hierarchical stages, and should not be considered to always comprise favourable attitudes, intentions and repeat-purchase” (ibid).

In contrast to the two-dimensional attitude-behaviour model as introduced by Dick and Basu and refined by Rowley (2005), Rundle-Thiele describes attitude loyalty and behaviour loyalty as completely uncoupled within a commercial context. The author states that “customers can persevere in a commercial relationship without a feeling or an attitude of devoted attachment” (ibid).

To overcome the limitations of Dick and Basu’s two dimensional model, Rundle-Thiele redefines loyalty as: “The state or quality of being loyal, where loyal is defined as a customer’s allegiance or adherence towards an object” (ibid).

As Rowley (2005) does, Rundle-Thiele (2005) also argues that the traditional loyalty categories are too narrow, which would limit marketers in their actions. The author suggests that these categories should be “expanded to encompass a far broader range of loyal states and qualities to benefit both customers and marketing managers” (ibid). From an analysis of measurement methods, Rundle-Thiele found that the word of mouth is a popular and efficient measurement. The author adds that usually “word of mouth measures correlate to company profits and growth” (ibid), which recommends its use in loyalty measurements, in general.

This is quite similar to the recommendations of Rowley and Dawes (1999), when they suggest the use of search-motivation, word of mouth and resistance to counter persuasion as attitudinal measurements. However, Rundle-Thiele (2005) explicitly states that there is no correlation of attitude and behaviour. So, they reject the generalisation that both Dick and Basu (1994) and Rowley (2005) suggested.

Another model that refines Dick and Basu’s customer loyalty model is presented by Uncles, Dowling and Hammond (2003). They have examined customer loyalty programmes and checked their actual effect on customers within different markets. They found this to be a paradoxical, where “loyalty in repeat-purchase markets is