CHAPTER 1

THE PROBLEM AND ITS SETTING

Introduction

The association between customer satisfaction and customer loyalty is one of

the most essential relationships for marketing theory and practice, because loyalty

impacts firms’ financial performance and value (Wong, Tong and Wong 2014). Every

business organization`s success depends on the satisfaction of the customers.

Whenever a business is about to start, customers always come “first” and then the

profit. Those companies that are succeeding to satisfy the customers fully will remain

in the top position in a market. Today’s business company has known that customer

satisfaction is the key component for the success of the business and at the same

time it plays a vital role to expand the market value. In general, customers are those

people who buy goods and services from the market or business that meet their

needs and wants. Customers purchase products to meet their expectations in terms

of money. Therefore, companies should determine their pricing with the quality of the

product that attracts the customer and maintains the long-term affiliation (Kabu

Khadka & Soniya Maharjan 2017).

Building and maintaining successful, long‐term relationships is crucial in many

of today’s competitive environments, in particular in the financial services sector. The

costs for acquir‐ ing new customers is five times higher than maintaining existing

customers. For credit cards, reducing customer defections by 5% doubles the

average customer life span, and increases profit by 75% (Athanasopoulou, 2014).

Losing customers is costly, as loyal customers purchase more, demonstrate a higher

willingness to spend, and act as advocates for the company (Harris & Goode, 2014).

Page | 1
 In the present era of saturated competition, retention and attraction of

customers lead to the maximization of profit and wealth of insurance organization.

An important element leading to retention of existing customers and attraction of new

customers is the satisfaction of the services availed. Customer satisfaction is the

outcome of appraisal of goods or services after buying or using them by the

customers. So, customer satisfaction plays a very important role in service

industries. The role of service quality is inevitable in customer satisfaction and it

plays a key role in the enhancement of customer satisfaction. Responsiveness and

empathetic behavior of the employees, physical and information resources,

committed and assured services of the organization lead to maximum customer

satisfaction. The present era of business is full of dynamism and expectations of

customer services are increasing multi-dimensionally. Quality, quantity and price

orientation behavior of customer are changing the profit pattern and governing the

policy formulation for operational efficiency and financial soundness ( Anis Ali,

Mohammad Rumzi Tausif, 2018).

In the Philippine setting, Agulo et al. (2015) assessed one Batangas City

department store’s customer satisfaction on quality service measured in terms of

employee’s professional appearance, customer relation, customer service, and

facilities. Zalatar (2017) predicted each gender’s satisfaction among 200 individual

customers of quick service restaurants to improve service quality dimensions which

are tangibles, reliability/responsiveness, and assurance/empathy. Both studies

emphasized on customer profile. Although there had been previous studies which

explored and used factor analyses to identify determinants of customer satisfaction

(Chakraborty & Sengupta, 2014; El-Adly & Eid, 2016; Pham & Ahammad, 2017; and

Thomas, 2013), none of these studies had focused on the Philippine retail industry.

Page | 2
The Philippines has been ranked as the 16th most attractive retail market among

developing countries in 2016 (A.T. Kearney, 2016) and 18th in 2017 (A.T. Kearney,

2017). It is expected that retail industry would account for one-fifth of the Philippines’

overall economic output in the next decade with its large population, high positive

growth, aggressive expansion of retail portfolio from major developers, and high level

of consumer confidence, making it critical to capture growth opportunities (“Philippine

retail industry booming,” 2017).

A convenience store is part of a retailing industry and it is a small retail business that

stock a range of everyday items such as groceries, snack foods, confectionery, soft drinks,

over-the-counter drugs, toiletries, newspaper and magazine. The fact that c onvenience

stores are the smallest segment of the Philippine grocery market, yet it had the

highest growth in sales at 8%. Its growth rate was 17% in 2016. (US Department of

Agriculture, October 2017)

The Philippine grocery retail market is primed for further growth due to a

strong economy, increasing consumption, and the projected urbanization of 3m

more. It is a $153 billion industry with a CAGR of 9.1% (2017-2022), third to China

and Indonesia. Spurred by a young population, with 19% below 24 years, and a

vibrant business process outsourcing (BPO) industry of 1.3 million with a $24.5

billion revenue, convenience stores (C-stores) are sprouting fast and 7-Eleven is the

country’s first franchise C-store and the largest with 2,027 outlets. It maintains its

dominance by expanding its services to cellphone reloading, bills payment, and

banking, which are great time-savers for busy workers . In today’s business

especially in retailing industry, it has known that customer satisfaction is the key

Page | 3
component for the success of the business and at the same time it plays a vital role

to expand the market value.

It is therefore this study’s aim to examine the relationship between customer

satisfaction and profitability of selected 7-Eleven Convenience store within Cagayan

de Oro City.

Theoretical Framework

The marketing and consumer behavior literature has traditionally suggested

that customer satisfaction is a relative concept, and is always judged in relation to a

standard (Olander 1997). Customer satisfaction can be explained by two types of

theories. Firstly, cognitive theories compare the reality with a certain standard. After

purchasing and using the product, customers evaluate not only the performance of

this product but also the experience they obtained during the process of its

purchasing. Then they compare this real experience with their expectations and if it

is at least as good as they expected (or better), they become satisfied (Chavan &

Ahmad, 2013; Oliver, 2010). The second group of theories is called affective and is

arguing that emotions and subjective feelings are more important. Nevertheless,

most authors opine that customer satisfaction is a result of a simultaneous

interaction between both cognitive and affective evaluation (Bena, 2010; Clerfeuille

et al., 2008). There are also authors denying the influence of the purchasing process

thus stating that only parameters of the product determine customer satisfaction

(Wang & Wallendorf, 2006). On the other hand, some authors expand the model of

customer satisfaction and include the distributors as well as they are in direct contact

with the final consumer and provide their own services also influencing the overall

customer satisfaction.

Page | 4
Conceptual Framework

Customer satisfaction is a buzzword today, once everyone using the

customers’ satisfaction is affected by the importance placed by the customers on

each of the attitudes of the product or service. Customer satisfaction measurement

allows an organization to understand the key drivers that create satisfaction; and

what is really driving their satisfaction during a service experience. Customer

satisfaction is the state of mind that customers have about a company when their

expectations have been meet or exceeded over the lifetime of the product or service.

To help visualize the theoretical framework adopted in this study, the schematic

diagram is provided below.

Figure 1: Conceptual Framework

Page | 5
Statement of the Problem

This study focuses in providing an empirical analysis of the influence of

intangible metrics – such as customer satisfaction and loyalty – on the financial

performance of 7-Eleven convenience store around Cagayan de Oro City with

special attention paid to customer satisfaction and loyalty influence on financial

performance measured through accounting profitability indicators. In this study, the

researcher’s wants to identify some important topics that need to be discuss in this

research. Following the theoretical framework, we formulate several formal research

questions for the current study, namely:

1. What is the profile of the respondents?

1.1 Age

1.2 Sex

1.3 Status

2. What is the level of customer satisfaction towards 7/11 store in terms of

product,

service, price and place when respondents are taken as a whole and when

classified according to its profile?

Page | 6
3. Does customer satisfaction have a positive significant influence on 7/11

convenience store’s Profitability?

Hypothesis

Null Hypothesis:

1. There is no positive significant influence of customer satisfaction in 7/11

convenience store Profitability.

2. There is no positive significant influence of customer loyalty in 7/11

convenience store Profitability.

Alternative Hypothesis:

1. There is positive significant influence of customer satisfaction in 7/11

convenience store Profitability.

2. There is positive significant influence of customer loyalty in 7/11 convenience

store Profitability.

Scope and Limitation

This study deals with customer satisfaction of selected company owned 7/11

convenience stores within Cagayan de Oro City. The descriptive and qualitative

method of research will be used in the study. The researchers will gather data

Page | 7
through questionnaires following the random sampling method and supported with

company interview. The data that will be used in interpretation comes from

secondary sources like online websites. Customer satisfaction will be measured from

strongly agree, agree, strongly disagree and disagree.

Significance of the Study

This study is conducted to provide information regarding the relationship

between customer satisfaction and financial performance of 7/11 convenience store.

This research would be beneficial in the persons which involved in this study. They

were the following:

The Management. This study will provide reliable and useful information to

the management who played a vital role in ensuring that the customer’s needs and

wants will be addressed properly. This would help them to formulate new ideas that

could serve as basis in developing their marketing strategies to attract more

customers.

The Customers. Being the respondents of this study, the exercise of

responding to the questionnaire will help the 7/11 store to provide a quality service,

product and better price through getting feedbacks or their opinion about what they

expect to receive or experience from convenience store.

The Researchers. Finding of this study will help the researchers evaluate the

operations and business environment as to what aspects that the management will

take corrective actions.

The Future Researchers. The Findings of this study would provide relevant

information of any convenience store and service oriented business and others

Page | 8
researchers matters relevant to customer satisfaction. This study will encourage

other researchers to conduct similar studies on a wider scope and include variables

not covered in this research.

Definition of Terms

The following terms are defined conceptually and operationally to make these

concepts easily understood:

Image – is the manner which a corporation, firm or business presents

themselves to the public. Business identity is a primary goal of the business

communications, for the purpose to maintain and build identity to accord with and

facilitate the business objectives

Customer Satisfaction – is a term frequently used in marketing. It is a

measure of how products and services by a company meet or surpass customer

expectation.

Customer Loyalty – is the results of consistently positive emotional

experience, physical attribute-based satisfaction and perceived value of an

experience, which includes the product or services.

Perceived Product Quality – defined as customer’s perception of the

overall quality or superiority of a product with respect to its intended purpose, relative

to alternatives. Perceived quality is, first, a perception by customers.

Perceived Service Quality – defined as customer’s perception of the

overall quality or superiority of a product with respect to its intended purpose, relative

to alternatives. Perceived quality is, first, a perception by customers.

Page | 9
 Perceived Value – is the customers’ evaluation of the merits of a product or

service and its ability to meet their needs and expectations, especially in comparison

with its peers.

Page | 10
 CHAPTER II

REVIEW OF RELATED LITERATURE

In the business, customer satisfaction is seen as one of the dimensions of the

financial performance. Increase of customer satisfaction will potentially lead to sales

growth in the short and long term. In otherwise, customer dissatisfaction will bring a

number of risks, such as the decrease in the level of sales, boycotts or protests from

customer organizations, government intervention, and the reaction of competitors

and also the rise of new substitution products to the market.

It is based on the “Marketing Concept” which talks about the satisfaction of

customer needs through integrated marketing with the intent to satisfy the customer

while earning a profit. The basic idea is that a satisfied customer will be more likely

to repurchase, leading to increased sales and market share for the firm. Integrated

marketing activities aimed at producing customer satisfaction include what have

been referred to as the “four p’s” of marketing, namely product, promotion, price, and

place. (Josua Tarigan and Saarce Elsye Hatane, 2019)

According to our research, companies who offer quality products in the market

with good promotion, reasonable price and a store based on a strategic area attracts

the customers. If the company adds a service of quality and which values the

customers’ demands and insights about the store makes the whole company fresh

and likeable by the customers especially those near the vicinity and finds the store

easily accessible on a day to day basis.

Customer loyalty and satisfaction is vital for modern day business for two

main reasons. First, customers are scarce resource, it is far easier to obtain from an

old customer than from a new one. Second, customer loyalty and satisfaction has a

Page | 11
positive effect on the profitability revenues of the company (Rosenberg & Czepiel

2017.)

With our continuous research and understanding about the study,

customer loyalty can be achieved if the company or the store satisfies their

expectation of the products offered and the services rendered while continuously

buying from the same store or brand.

THE RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND FINANCIAL

PERFORMANCE

According to Gupta, S. and Zeithaml, V., utmost customer satisfaction lead to

accelerated cash flow, sales volumes increment, as well as the reduction of the risk

which is related to the cash flow. Customer satisfaction lead to higher future revenue

and reducing operational costs. Satisfaction-profit-chain is a model which shows the

relationship between customer satisfaction and financial performance (Anderson, E.

W. and Mittal, V). This model considered that service performance will lead to

increased customer satisfaction, which eventually produce a higher financial

performance. Based on theory and the results of empirical research, it can be

formulated that there is an influence of customer satisfaction on the financial

performance of the company. (Josua Tarigan and Saarce Elsye Hatane, 2019)

CUSTOMER SATISFACTION

Customer satisfaction is influenced by specific product or service features and

perceptions of quality. Satisfaction is also influenced by customer’s emotional

responses, their attributions and their perception of equity. Increased customer

satisfaction can provide company benefits like customer loyalty, extending the life

cycle of a customer, expanding the life of merchandise of the customer purchase

Page | 12
and increases customers positive word of mouth communication. When the

customer is satisfied with the product or service of the company, it can make the

customer purchase frequently and recommend the products or services to potential

customers. It is impossible for a business organization to grow up in case the

company ignores or disregards the needs of customers (Tao 2014.)

The more interesting products provide to customers, the less regret emotions

customer will feel in the process of buying, but the product benefits but can not make

customer satisfaction, only when the customer perceived profits reached a certain

level, the customer will be satisfied with the turn to buy. However, the customer

profits are affected by the cognitive level, the gap between the cognitive level of

different customer make their attention are not the same, STP theory for the

enterprise to provide a reference for all levels of profit to influence customer buying

behavior. The difference is that, the STP theory is based on product differentiation,

but the core of customer satisfaction analysis is the gap between the level of

customer awareness. To make customer satisfaction and the formation of the

customer to buy, Requires that companies first graded on customers according to

the customer profits, customer profit to include all the cognitive interests of the

customer on product or service, is a multi-level and a diversified collection,

enterprises should determine the customer profits classification factors, and

individual factors classification sorting in four aspects of the product, service, image

and personnel. Second, the enterprise should determine target customers combining

with the results of classification of customer profits, for the same product, different

customer value different profit. The same product enables different customers to

achieve the level of satisfaction naturally have a big gap. different from chosen target

market in product marketing, determine target customers in customer marketing is to

Page | 13
determine the importance degree of every profits in the minds of customers, thus

ensuring that provide profit to the customer is which they value. Again, the enterprise

should combine customer perception of the product with its own core competency, to

determine the grade of the product in the minds of customers; product quality usually

refers to the Hierarchy results of the style design, the number of function, the level of

quality or brand reputation, etc. Each of the customers in mind with the most suited

to their grade, not the higher the price the higher the grade for the customer. Finally,

the cognitive level of the customer is constantly changing, the customer profits will

also change, so the company should be prepared to communicate with customers,

master the changes of customer profits and make corresponding adjustments to the

product. Customer awareness of profits from product or service is the prerequisite for

customer satisfaction. For businesses, identify the customer profit is not so easy,

these four steps are closely interlinked, each step in the realization of the companies

closer to customers' needs, but also to a higher degree of customer satisfaction.

(CHEN Jingdong, LIU Yidan, 2014)

CUSTOMER LOYALTY

Austin Business Journal, (vol. 1-3) considered that customer loyalty can be

measured from the tendency of consumer behaviour in making purchase, if

consumers make repeat purchases of a product or service in the same place it has

to be said as loyal customers, but if someone makes purchase only once within

certain time then that person is considered as a not loyal customer. Kursunlouglu, E.

(2014) said that customer loyalty can be created through service improvement to

meet customer needs entirely.

Page | 14
 According to Yu, Y.T. and Dean, A., the customer can have the desire to buy

more (willingness to pay more), or otherwise have a tendency to make a turn to other

company (switching behaviour). They considered that a loyal customer has a high

level of commitment, it makes consumers continue to consume/use a product

(willingness to pay more) and will not switch to another product (switching

behaviour). (Josua Tarigan and Saarce Elsye Hatane, 2019)

Customer loyalty is an essential component to maintain the long term

relationship between a customer and a company. The concept of loyalty is not well

defined in the transport literature, and due to the fact that it is a more recent topic of

study, researchers have not yet agreed on how to measure it, while some

researchers claim that satisfaction should be included in the definition of loyalty,

others claim that it should not.

More generally, Zhao et al. (2014) suggest that loyalty can be divided into two

aspects: the first being related to a person’s continuous behaviour to purchase or

use a product or service, and the second having to do with the consumer’s attitudes

and emotions towards a service on an on-going basis. This means that many

authors claim that loyalty should be based only on (1) intended future usage and (2)

willingness to recommend (Lai & Chen, Minser & Webb, and Zhao et al., 2014)

In addition to the debate about whether or not overall satisfaction should be

included in a loyalty construct, several authors developed loyalty variables that

include additional aspects that complement likeliness to use and willingness to

recommend. For example, Carreira et al. (2014) developed a loyalty variable that in

addition to asking about future usage and positively discussing the agency’s service

with other people, also assessed whether users considered the service provided by

Page | 15
the public transport agency to be their first choice to travel from an origin to a

destination. Other researchers asked survey participants to evaluate different travel

scenarios and assessed the likeliness to continue using public transport based on

the responses (Imaz, Habib, Shalaby, & Idris, 2015). In addition, some studies have

used single-question variables to assess public transport users’ likeliness to continue

using the system (Kim & Ulfarsson, and Şimşekoğlu, Nordfjærn, & Rundmo, 2015).

Because of this on-going debate about how loyalty should be measured, and

whether satisfaction should be seen as contributing to loyalty, this paper reviews

studies that define loyalty in a variety of ways.

THE RELATIONSHIP CUSTOMER LOYALTY AND FINANCIAL PERFORMANCE

Mullen, A. J. (2015) added that customer loyalty is the sign of the difference

between a successful business and not. Customer loyalty gives a huge impact for

the company, where the loyal customers would buy back the products/services that

means they enjoy the things the company or store offers.

According to Williams P.and Nauma E., customer loyalty is able to become a

screening to the company’s financial performance in the future. Reference[4] Found

a positive relationship between customer loyalty and financial performance in the

banking sector in particular to the Return on Assets (ROA).Reference[4] found that

increased one point in satisfaction (on a scale of 1-7) will increase by 0.59% ROA.

Based on theoretical and empirical research, it can be formulated in the hypotheses

that there is an influence of customer loyalty against financial performance.

IMAGE

Corporate image is all about the physical and emotional behavioral with the

firm such as products and strong word of mouth. If a company’s stakeholders see a

Page | 16
positive corporate image for the company, then growth potential is likely to increase

through positive interactions between the stakeholder and the company (Kim, Song,

Lee, & Jin, 2017). Moreover, corporate image is the general concept of the total

company. A positive relationship exists between corporate image and behavioral

intentions, such as those related to patronage as found in various industry sectors.

Corporate image will help retail operators increase their financial gain, and some

marketing strategies involve corporate image guidance.

When companies are socially responsible, consumers would recognize that

as good corporate image and engage in customers ‘revisit intentions that are helpful

and supportive of these companies (Kim et al., 2017). These studies suggest that

consumer perceptions of CSR enhance corporate image. When convenience

companies engage in CSR initiatives, consumers are likely to assume that these

companies have desirable characteristics that resonate with their sense of self which

form the basis of corporate image.

Ahmad, et al., (2014) said that credibility and brand awareness both are the

key elements in building brand loyalty, which is equally important for marketers and

consumers.

Positive store image and good value merchandise are key for retailers to

achieve and sustain success in an increasingly competitive marketplace. One way of

differentiating one store from another is the unique store image offered to client.

Consumers use store image as an evaluative criterion in the decision-making

process concerning retail outlet selection. A store's perceived image is influenced by

the store name and the quality of merchandise it carries. Moreover, we concluded

that higher estimation on product quality has a positive effect on customer

satisfaction, including the retailer's own brand and own private labels. Some studies

Page | 17
not only indicate a direct effect of perceived quality on customer satisfaction but also

indicate an indirect effect, given the perceived quality increases the value that the

consumer perceive in the store's brand. (Mohammed Hussein Al-Ali K., Nor Erne N.

B., and Siti M. S., 2015)

CUSTOMER EXPECTATION

Customer expectation have been considered as customer pre-purchase

beliefs or evaluative beliefs about the product or service. When making a choice,

customers first construct their expectations of what is to come whenever they receive

new information within a context that is based on the past events. From firm’s

perspective, a tension exists between raising expectations to increase initial

acceptance or trial and lowering expectations to increase satisfaction, and hence,

future sales. As such, it should come as no surprise that service firms are interested

in better understanding how consumers form expectations about quality to manage

customer’s expectations over time. (Jihoon Cho,2016)

Information of customer expectation is important because this factor

influences the customer behavior and management within the limited resources can

manage the expectations of the customer. Customer expectation could be influenced

by the advertising, promotions and positive word of mouth. (Rizwan Ali, Gao

Leifu,2015)

Actually customer‘s satisfaction is the customer‘s evaluation of goods and

services in term of whether it is according to the customer‘s needs and wants or

customers dissatisfied with the product services or the dissatisfied with the

performance of the products and not according to expectation of customers and

Page | 18
sometimes customers more satisfied if products performance is beyond with their

expectations.

Customer satisfaction becomes the most important part of the business field

because when your customer is satisfied then it will provide the profitable business

to the industry. The good behavior of the service providers develops the positive

relationship and impression on the customers which take the lead toward customer

satisfaction.

PERCEIVED PRODUCT QUALITY

There are various academics defining the concept of perceived quality.

Perceived quality is “a special type of association, partly because it influences brand

associations in many contexts and partly because it has been empirically shown to

affect profitability.” It is said that perceived quality is “the consumer’s judgment about

a product’s overall excellence or superiority.” They emphasized that perceived

quality is (1) different from objective or actual quality, (2) a higher level abstraction

rather that a specific attribute of a product, (3) a global assessment that in some

cases resembles attitude, and (4) a judgment usually made within a consumer’s

evoked set. Similarly, the definition of perceived quality by Aaker (2014) is “the

customer’s perception of the overall quality or superiority of the product or service

with respect to its intended purpose, relative to alternatives.” In fact, the perceived

quality is different from actual or objective quality, product-based quality, and

manufacturing quality (Acker, 2014). It can be viewed as the difference between

overall quality and undetected quality. Furthermore, perceived quality may lead to

consumer satisfaction, which is determined by perceived performance and

expectation. Although there are a lot of definitions from many scholars, each of the

Page | 19
definition has a shared common meaning; that is, perceived product quality is the

consumer’s perception of overall components of product--both tangible and

intangible characteristics. It may also include performance, features, reliability,

conformance, durability, serviceability, and aesthetics etc. Above all, it is different

from the actual quality of products. (Somphol Vantamay, 2015)

PERCEIVED SERVICE QUALITY

Service quality has a huge impact on the customer loyalty and customer

satisfaction. Service quality can be defined as that its goal is meet the requirement

which is set by the customers quality is the comparison between what the customer

is expected and what he perceived from the product and services.

The primary responsibilities of employees in customer service positions

usually entail creating and delivering the service in the customers’ presence as well

as providing information, taking instructions and receiving payments and solving

problems. New customers in particular, often rely on customer service personnel for

assistance in learning how to use a service effectively and how to resolve problems.

(Md. Ariful Islam, Proshenjit Ghost, et.Al., 2014)

Today the quality of products and services is of great importance. It is widely

acknowledged that surviving in complex and competitive world requires quality

production. To understand and access the outcomes of efforts realized for good

quality production, quality should be measurable. The quality of goods can easily be

considered by taking into account the certain physical properties. The measurement

of service quality is rather complex because quality in this case depends on many

factors.

Page | 20
 While there have been efforts to study perceived service quality, there has

been no general agreement on the measurement and relationship with customer

satisfaction. (Rizwan Ali, Gao Leifu,2015)

PERCEIVED VALUE

Perceived value is customers’ psychological assessment of the product or

service with the expectations of that product or service.

Perceived value comes down to the price the public is willing to pay for a good

or service. Even a snap decision made in a store aisle involves an analysis of a

product's ability to fulfil a need and provide satisfaction compared to other products

under different brand names.

Perceived product quality affects perceived value because it provides value in

several ways. First, in many contexts, perceived quality of a brand provides a pivotal

reason-to-buy, influencing which brands are included and excluded from

consideration, and the brand that is to be selected. A customer often will lack the

motivation to obtain the information that might lead to an objective determination of

quality in given application. Sometimes, the information may simply be unavailable

or the customer may not have the ability or resources to obtain or proceed it. In

many cases, perceived quality becomes central in the customers’ decisions.

Second, perceived product quality can be used as a positioning strategy of various

products, whether a car, a computer, or a shirt. These products can be shown as a

premium product for the high-end consumers. Third, a perceived product quality

Page | 21
advantage provides the option of charging a premium price. Also, the price premium

can increase profits and provide resources with which to reinvest in the brand. These

resources can be used in such brand-building activities as increasing awareness or

associations, or in R&D activities to improve the product. A price premium not only

provides resources, but can also reinforce the perceived quality. Fourth, perceived

product quality can also be meaningful to retailers, distributors, and other channel

members and thus aids in gaining distribution. We should know that the image of a

channel member is affected by the products or services included in its line. As a

result, stocking “quality products” can attract customers significantly. (Somphol

Vantamay, 2015)

Page | 22
 CHAPTER 3

RESEARCH METHODOLOGY

Satisfaction is related to the fulfillment of implicit and explicit needs with

various attributes of goods or services (Thomas, 2013). Customer satisfaction is

therefore a measure of how that good or service performs with regards a set of

customer requirements (Hill & Alexander, 2006).

In this chapter presents methodology engaged in this study, sources of data

population and sample, data gathering, instruments and procedure and the statistical

treatment of data. This part of the research answers the questions on how study was

conducted.

Research Method/Design

There has been an increasing competition on a company's competency to

provide high-quality service. Research is one of the greatest tools to succeed in a

competition. Research is an integral part of any business either for a profitable or

non-profitable organization. In other words, it's a way to gather evidence for an

organization. Research is one of the ways of collecting accurate sound and reliable

Page | 23
information about the effectiveness of interventions, by providing the effectiveness

evidence. As service providers and professionals, use techniques and procedures

built by research methodologists to consolidate, improve, develop, refine and

advanced clinical aspects of practice to serve clients better (Kumar 2011.)

In this research work the data is gathered through the sources of primary &

secondary data collection strategies. A survey method is used in this study, to

explore the key points, which are required to be considered while measuring the

customer satisfaction. Questionnaire is prepared covering the intangible parameters

of customer satisfaction considered by the researcher in this study. The study is

engaged in a descriptive design of research in which it employed survey

questionnaires and company interviews as the main gathering instrument and online

audited financial statements as secondary data. The records of Philippine Seven

Corporation was looked over to cope up with necessary information needed in

completing the study.

Research locale

Philippine Seven Corporation (PSC), the country licensee of 7-Eleven

convenience store chain in the country, is now serving customers nationwide as it

opens its 1,500th store in the country. CDO is the second city 7-Eleven ventured into

in Mindanao since securing a foothold in Davao City last May. PSC started to

expand its network in Visayas and Mindanao, beginning with Cebu in 2012, Bacolod

in 2013, and Iloilo in 2014. Mr. Paterno expressed confidence that as 7-Eleven

expands its reach, it will continue to use its first-mover advantage to lead the

convenience store market in Mindanao, especially in Davao and Cagayan De Oro,

which has a significant increase in tourist arrivals and per capita income in the past

Page | 24
years. “Our target is to open 20 stores in CDO and bring our Mindanao presence to

more or less 180 stores in the next three years,” Mr. Paterno said. In connection with

that, the researchers decided to conduct their study in Cagayan de Oro city in

selected company owned 7-Eleven Convenience Stores. Based on 2018 survey,

there are 4 company-owned 7-Eleven convenience stores operated within Cagayan

de Oro city.

Figure 2: Location Map

Population/Respondents

Some of the customers that were present during our survey in selected 7/11

stores under Philippine Seven Corporation were taken as the population of the study.

The researcher decided to consider the major numbers of the customers to maintain

the reliability and validity of the data gathered through the questionnaire.

Page | 25
Instrumentation

The instrument used in gathering information from a customer in this research

was divided into two parts. The first part answers the profile of the respondents

regarding gender, age, status, and address. The second part of the instrument

answered the second question in the problem and the factors according to customer

satisfaction that motivates the beneficiaries in improving their services and product

quality.

The survey questionnaire and question interview guide are available in

appendices.

Data Gathering Procedure

In gathering data, the researchers took the following steps:

1. The researchers made a letter to the Branch Manager of Philippine

Seven Corporation to ask permission to conduct the study

undersigned by their professor.

2. The researchers request the needed information in conducting of

the study such as the number of beneficiaries.

3. To look for related literatures and studies the researchers went to

different libraries and surf to the internet for additional information.

4. The researchers combined all information gathered.

5. The researchers went to the different places wherein Philippine

Seven Corporation have its branches within Cagayan de Oro City.

Page | 26
 6. The researcher personally distributed the instrument to their

respondents during planned time.

7. The researchers personally had an interview with the branch

manager of selected 7-Eleven Convenience Store in Cagayan de

Oro City.

Treatment of data

All data gathered by the instrument were tallied, tabulated, analyzed and

interpreted accordingly.

In measuring the company’s profitability, the researchers used the following

techniques/methods:

Denotatio

Name of the variable n Definitions

Measuring the company’s profitability, this ratio is the
comparison of how much of the revenue incurred during
Profit Margin PM the period was retained in income. Profit margin
indicates the share of income in the revenue, e.g.
relatively low expenses related to sales.
Indicator of how profitable a company is relative to its
Total assets, in percentage. Return on assets gives an
Return on Asset ROA idea as to how efficient management is at using its
assets to generate earnings.
Measure of a corporation’s profitability by revealing how
Return on Equity ROE

Page | 27
 much profit a company generates with the money
shareholders have invested, in percentage.

In measuring the relationship between customer satisfaction and profitability,

the researchers used the following method:

Regression Analysis

Y = ᾶx + b̌

Where:

Y - dependent Variable
ᾶx - intercept/independent variable

b̌ - slope

( ∑ x ) ( ∑ ySx ) -
ᾶ= R= ᾶ
n(∑xy) Sy
(∑x)2 – n(∑x2)

(∑x) (∑xy) – (∑y) (∑x2)

b̌ =
( ∑ x )
2
– n(∑x2)
Sx=
∑x2 - 1/n(∑x)2

Page | 28
 n -1

∑y2 - 1/n(∑y)2
Sy= n-1

Page | 29
 CHAPTER 4

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter discusses the interpretation of the data gathered by the

researchers regarding the perceptions of the customers on the overall performance

of the 7-Eleven Convenience Store. The data are presented, analyzed and

interpreted according to the statement of the research problem.

1. Profile of the customers

The first objective of the study is to know the profile of each customers of the

7-Eleven Convenience Store for it helps the researchers determine the perceived

gains and negative effects of the satisfaction and dissatisfaction of the customers.

The profile of the customers consists of their age, status, and gender.

The following tables show the data and information concerning the profile of

the respondents of the study.

1.1 Age

According to the data, the results of the table presented below helped the

researchers in determining how the different age brackets of the respondents are

considered as one of the factors in identifying whether the store have more sales

depending on the level of maturity and taste and preferences as an adult of the

customers.

Based on the results, the ages of the respondents are ranging from 15 to 20

and above.

Page | 30
 Table 1.1
Age of the respondents

Age Frequency Percent

15-20 34 34
21-25 29 29
26-30 13 13
31-35 7 7
36-40 6 6
41-45 9 9
46-50 2 2
50 & Above 0 0
Total 100 100

Table 1.1 shows that there are 34 of the total respondents who have the age

of 15-20 and 29 of them were ranging from the ages 21-25. There are also 13 of the

respondents who has the age of 26-30 and 7 that are aged 31-35. The number of

respondents with 36-40 years old was at 6 and 9 among them were at the age of 41

to 50. No respondents were sighted at the age of 50 and above. It was shown that

the most prominent among the ages was the respondents having the age of 15-20.

The aforementioned ages by the respondents were important to this study to

analyze which age has the most frequent buyers among all of the ages included in

the survey.

1.2 Status

According to the gathered data, the result of the table presented below helped

the researchers in determining how the status of the respondents can be considered

Page | 31
as one of the factors whether the store’s product prices are in line with how much the

customers are willing to spend or can afford when buying goods or products.

Table 1.2
Status

Status Frequency Percent

Student 43 43
Employed 36 36
Unemployed 8 8
Self-employed 13 13
Total 100 100
Table 1.2

illustrated that majority of the stores’ customers are students taking up 43 percent of

the total percentage of the respondents. It was then followed by the 36 employed

customers and 8 who were unemployed. 13 self-employed customers also

responded to the questionnaire.

The data gathered were important to this study to know which among the

respondents’ current status are the most frequent to buy at some of the chosen 7-

Eleven convenience stores.

1.3 Gender

Table 1.3

Page | 32
 Gender

Gender Frequency Percent

Male 43 43
Female 57 57
Total 100 100

It was shown in Table 1.3 that only 43 percent of the males buy from 7-Eleven

and 57 percent of the females takes the majority of the percentage score. It only

shows that most women like to buy more from the store.

2. The level of customer satisfaction towards 7/11 store in terms of

product, service, price and place when respondents are taken as a

whole

Chart 1: level of customer satisfaction towards 7/11 store in terms of product, service, price and place when respondents are
taken as a whole
60%
53% 54% 55% 55%
53% 52% 52%
50%
42%
40%
33%
30% 26%
24% 23%
20%
20% 19%
15% 14% 14%
11% 11% 12% 12%
9% 9% 10% 10%
10% 6%
2% 3%
0%
Q1 Q2 Q3 Q4 Q5 Q6 Q7

STRONGLY AGREE AGREE DISAGREE STRONGLY DISAGREE

The following are the survey questions provided by the researchers:

Page | 33
1. Do you often visit 7-Eleven convenience store?

2. Does 7/11’s Retail Price Items offer much higher price than the Retail Price of

another Convenience Store?

3. Does 7/11 convenience store offer Quality product than those of the other

Convenience Stores?

4. Does 7/11 convenience store provide good Service Quality than those of the

other Convenience Stores?

5. Do you like the ambiance of the 7/11 convenience store?

6. Is 7/11 more convenient and accessible for you?

7. Do you prefer to choose 7/11 convenience store than those of the other store

because of the influence of other people?

Chart 1 depicts the rank percentage of every questions gathered from the

customers in selected 7-Eleven Convenience Stores under Philippine Seven

Corporation around Cagayan de Oro City. The data shows that in Q1, there are 42%

of the respondents who strongly agreed, 53% agreed, 2% disagreed and 3%

strongly disagreed. This would mean that there are above 50% of the respondents

who often visits the 7-Eleven Convenience Store. Secondly, in Q2, 20% of the

population strongly agreed, 53% agreed, 15% disagreed and 11% strongly

disagreed. In this data, it concludes that most of the respondents agreed in high

pricing of 7-Eleven products. Third, in Q3, 26% of the total respondents strongly

agreed, 54% agreed, 9% disagreed and 11% strongly disagreed. So, this shows that

most of the respondents agreed that 7-Eleven products is of best quality. Fourth, in

Q4, 33% of the respondents strongly agreed, 52% agreed, 6% disagreed and 9%

strongly disagreed. The results displayed that 7-Eleven provides good service quality

compared to other convenience stores. Fifth, in Q5, 24% of the respondents strongly

Page | 34
agreed, 52% agreed, 10% disagree and 14% disagreed. The data shows that most

of the customers had enjoyed the ambiance of 7-Eleven Convenience Store. Sixth,

in Q6, 19% of the respondents strongly agreed, 55% agreed, 14% disagreed and

12% strongly disagreed. Regarding in accessibility and convenience, the data shows

that 7-Eleven stores are more convenient and accessible for them compared to other

convenience store. Lastly, in Q7, the data shows that 23% of the respondents

strongly agreed, 55% agreed, 12% disagreed and 10% strongly disagreed. This

shows that most of the respondents prefer to choose 7-Eleven Convenience against

its competitors.

3. Customer satisfaction have a positive significant influence on 7/11

convenience store’s Profitability

Based on data gathered, among the 100 respondents 53% in average who

agreed in the questions given by the researchers and 27% who strongly agreed.

Also, there are 20% who strongly disagreed/disagreed with all the questions given.

So through the approximate percentage, the researchers were able to get a mean of

ẋ = 33% by adding all the approximate percentage and divided by 3 (observation or

N). Meanwhile, the researches then has an approximate percentage regarding the

satisfaction of the customers by calculating through this formula, (x-ẋ). The results

were shown below:

Page | 35
 Table 2: The dependent and independent Variable.

Customer Satisfaction Profitability

20 12
-6 -3
-13 -9

Regarding on profitability, the researchers used the information of ROE, ROA

and PM by adding up the data from 2015-2018 divided by 4yrs. The results are

presented 25%, 10%, and 4% respectively. By having the results, the researchers

determined the mean of ẋ = 13%. Following the format (x- ẋ) they were able to know

the variance which is presented above.

In this case, the researchers wants to identify the relationship between two

variables using correlation and regression. In correlation the results are presented

below:
  Customer Satisfaction Profitability
Customer Satisfaction 1  
Profitability 0.997934875 1
r=0.99
Based on the

results, the two variables

has a strong positive correlation. To determine the relationship between two

variables the researchers decided to use regression method, the researchers

decided to interpret the important matters that need to be discussed like R Square,

observations, significance F, Coefficients, and P-value.

In statistical modeling, regression analysis is used to estimate the

relationships between two or more variables:

Page | 36
 Dependent variable (aka criterion variable) is the main factor we are trying to

understand and predict. In this study, profitability is our dependent variable.

Independent variables (aka explanatory variables, or predictors) are the

factors that might influence the dependent variable. In this study, the researchers

used customer satisfaction as independent variable.

Regression analysis helps us understand how the dependent variable

changes when one of the independent variables varies and allows to mathematically

determine which of those variables really has an impact.

Based on the statistics, R square measures how much of the change of profitability

is driven by independent variables that researchers provide and this is indicating that

99% variation in profitability. There are exactly three observation analysis that

researchers provided. Significant F is somewhat important. The ideal result of F

significance that this model requires is that, the results should smaller than point

zero five and based on the data, this case has a very strong regression because the

result is 0.04 which is smaller than the ideal target. Coefficients are numbers that go

into the equation of the line. Observing the data given, it begins with 0.11 to 0.65

intercept with a positive slope upward. P-value should be smaller that point zero five.

On the data above, only one variable is below 0.05. To sum it up, the regression

analysis shows an excellent result and the researchers can conclude that there is

positive significant influence of customer satisfaction to company’s profitability. The

summary output are presented below:

Page | 37
Page | 38
30
27.2
Chart 2:
25.7 Company’s
23.8 23.4
25 Profitability
Indicator
20

15
10.6
9.5 9.18 8.8
10

4.5 4.15 4.11 3.86

5

0
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

ROE Linear (ROE) ROA

Linear (ROA) NPM Linear (NPM)

Profitability
2015 2016 2017 2018
Ratios
ROE 27.2% 25.7% 23.8% 23.4%
ROA 10.6% 9.5% 9.18% 8.8%

Page | 39
 NPM 4.5% 4.15% 4.11% 3.86%

This chart was based on company’s computation, to examine the

relationship between capital structure and profitability of Seven Eleven in Cagayan

de Oro City. From the review of empirical literature the researcher perceived that

there is inconsistency in the relationship between capital structure and profitability of

the firm.

This section the researcher tries to develop testable hypothesis to examine the

relationship between capital structure and profitability of seven eleven. The research

hypothesis is developed to estimate the sign of the relation by supporting with

empirical evidence to examine the relationship of performance measurement

variables: Return on Assets (ROA), Return on Equity (ROE), and Net profit Margin

(NPM).

The ROE of 7-Eleven from 2015 to 2016 decreased by 1.5%, 2016 to 2017

decreased by 1.9% and ROE from 2017 to 2018 decreased by 0.4%. The trend of

ROA from 2015 to 2016 decreased by 1.1%, 2016 to 2017 decreased by 0.32% and

ROA from 2017 to 2018 decreased by 0.38. The trend of NPM from 2015-2016

decreased by 0.35%, 2016 to 2017 decreased by 0.04% and NPM from 2017-2018

decreased by 0.25.

CHAPTER 5

SUMMARY, CONCLUSION AND RECOMMENDATION

Page | 40
 This chapter presents the summary, findings and conclusions from which the

recommendations were drawn to give value to the result of the study.

SUMMARY

The overall purpose of this study was to build up an understanding of the

relationship between customer satisfaction and financial performance with regards to

company image, customer loyalty, customer expectation, the perceived product and

service quality, as well as the perceived value in the retailing industry.

Specifically, it sought to answer the following questions:

1. What is the profile of the respondents?

2. What is the level of customer satisfaction towards 7/11 store in terms of

product, service, price and place when respondents are taken as a whole?

3. Does customer satisfaction have a positive significant influence on 7/11

convenience store’s Profitability?

4. Does customer satisfaction gains loyalty to customers?

5. Does Loyalty have a positive significant influence on 7/11 convenience store’s

Profitability?

The study used the descriptive method in determining the customer satisfaction

towards its effect in the financial performance of the company. There are one

hundred customers involved in the study which were also the key respondents of the

study. The researchers analysed and utilized the questions that will be used for the

survey questionnaires to give the respondents clear thoughts about the company.

Page | 41
The collected data are statistically treated using the frequency count, percentage,

and regression analysis.

FINDINGS

The salient findings of the study are as follows:

1. Profile of the Respondents

1.1 Age - The age of the respondents is ranging from fifteen (15) to fifty (50)

and above. The results shows that among all the age brackets, ages 15-20

got the highest percentage out of all the 7 other. This proves that

customers among these age bracket buys more frequently than those of

the others. This is because most of the offered products of 7-Eleven

convenience store fits their needs and wants.

1.2 Status – Among the status presented in table 1.2, students has the

highest percentage garnering an average of 43% followed by the 36

employed customers, 8 unemployed and 13 which are the self-employed

customers. Students has the most percent of the data because the stores

are located at a strategic location near the school vicinities where students

can easily visit the store.

1.3 Gender – The profile of the respondents is classified in terms of gender

combined with their ages and status. There are 43 percent male and

female has 57 percent with a total of 100 percent or respondents.

The data shows that 7-Eleven has more female customers than those of the

males in any of their branches within Cagayan de Oro.

Page | 42
2. The level of customer satisfaction towards 7/11 store in terms of product,

service, price and place when respondents are taken as a whole

Of all the questions answered by the respondents, the data shows that

“agree” was the best picked choices of the respondents having an average

percentage of above 50% of all questions. This would be interpreted in

accordance of the question-asked. The data are interpreted in the following:

Q1. 53% of the respondents agrees that they usually visits 7-Eleven

Convenience Store

Q2. 53% of the respondents agrees that 7-Eleven Convenience store have a

high product pricing.

Q3. 54% of the respondents agrees that 7-Eleven Convenience store offers

product in best quality.

Q4. 52% of the Respondents agrees that 7-Eleven provides good service

quality compared to other convenience store.

Q5. 52% of the respondents enjoys the ambiance provided by the 7-Eleven

Convenience Store.

Q6. 55% of the respondents agrees that 7-Eleven is more convenient and

accessible compared to others.

Q7. 55% of the respondents agrees that they prefer to choose 7-Eleven

against its competitors.

Page | 43
So in total, there is 53.43% (374%/7) in average who agreed with all the questions

provided in this study.

On the other hand, “strongly agree” ranked as no.2 in highest percentage.

The data are interpreted in the following:

Q1. 42% of the respondents strongly agrees that they usually visits 7-Eleven

Convenience Store

Q2. 20% of the respondents strongly agrees that 7-Eleven Convenience store

have a high product pricing.

Q3. 26% of the respondents strongly agrees that 7-Eleven Convenience store

offers product in best quality.

Q4. 33% of the Respondents strongly agrees that 7-Eleven provides good

service quality compared to other convenience store.

Q5. 24% of the respondents strongly agrees that 7-Eleven provides a good

ambiance

Q6. 19% of the respondents strongly agrees that 7-Eleven is more

convenient and accessible compared to others.

Q7. 23% of the respondents agrees that they prefer to choose 7-Eleven

against its competitors.

Therefore, there is 26.71% in average who strongly agrees with all the questions

provided in this

Page | 44
 Study.

Meanwhile, strongly disagree position itself in ranked no.3. The data

are interpreted in the following:

Q1. 3% of the respondents strongly disagrees that they usually visits 7-Eleven

Convenience Store

Q2. 11% of the respondents strongly disagrees that 7-Eleven Convenience

store have a high product pricing.

Q3. 11% of the respondents strongly disagrees that 7-Eleven Convenience

store offers product in best quality.

Q4. 9% of the Respondents strongly disagrees that 7-Eleven provides good

service quality compared to other convenience store.

Q5. 14% of the respondents strongly disagrees that 7-Eleven provides a good

ambiance

Q6. 12% of the respondents strongly disagrees that 7-Eleven is more

convenient and accessible compared to others.

Q7. 10% of the respondents strongly disagrees that they prefer to choose 7-

Eleven against its competitors.

To sum up, there is 10% in average who strongly disagreed with all the

questions provided in this study.

Moreover, disagree places last having a no.4 slot. The data are interpreted in

the following:

Page | 45
 Q1. 2% of the respondents disagrees that they usually visits 7-Eleven

Convenience Store

Q2. 15% of the respondents disagrees that 7-Eleven Convenience store have

a high product pricing.

Q3. 9% of the respondents disagrees that 7-Eleven Convenience store offers

product in best quality.

Q4. 6% of the Respondents disagrees that 7-Eleven provides good service

quality compared to other convenience store.

Q5. 10% of the respondents disagrees that 7-Eleven provides a good

ambiance

Q6. 14% of the respondents disagrees that 7-Eleven is more convenient and

accessible compared to others.

Q7. 12% of the respondents disagrees that they prefer to choose 7-Eleven

against its competitors.

In calculation, there is 9.71% in average disagrees with all the questions

provided in this study.

3. Customer satisfaction have a positive significant influence on 7/11

convenience store’s Profitability.

According to the result of statistics, there is positive significant influence

between customer satisfaction and company’s profitability. This conclusion has

been proven in Chapter 4 using regression analysis.

Conclusion

Page | 46
 The researchers have tested the significant influence of customer satisfaction

on the profitability of 7-Eleven Convenience Store's measure through the use of

ROE, ROA and Profit Margin. They confirmed that the higher the percentage of the

customer satisfaction gets, the profitable the 7-Eleven Convenience store is and that

satisfied customers can possibly become a loyal customers. Through the testing of

regression analysis, they found out that there is a strong correlation between

customer satisfaction and the company’s profitability. On the other hand, they found

out that the independent variables presented in the conceptual framework are the

best driving force towards customer satisfaction that also has effect on the

company's profitability. Also, they discover that customers are a very important factor

in the business world today, and the impact of satisfied customers and ordinary

customers results to a different outcome. The researchers conclude that valuing your

customers and adding variety to the company's store makes the company have a

competitive advantage against their competitors. Making the customers curious and

anticipate for the company's possible gimmicks and product offerings gives the

company assurance in protecting the business physically and financially healthy and

through monitoring the customer's satisfaction, accepting suggestions and advices

from them wholeheartedly.

Page | 47
RECOMMENDATION
The Researcher suggests the following recommendation given:

To the Management. They should maintain their product quality for the

satisfaction of their customer and the management should understand its customer

concerns and needs as well as the employees should be thoroughly trained on their

product and services, and be able to confidently answer questions and converse on

the product. Management should not make assumptions; look for ways to find out

what their customers think about the business. They should set standards in terms of

quality, accuracy, behavior, appearance and good customer service and they must

ensure that the service is consistently good, in every location from everyone, every

day.

To the Future Researchers. The researchers encourages the future

researchers to dwell more about this study and tackle more especially those

important key point which has not discussed in this study.

Page | 48
APPENDICES

Page | 49
CURRICULUM

VITAE

Page | 50
Page | 51