Explaining the pattern Customer’s Loyalty in the Phygital Retail Experience

Document Type : Research Paper

Authors

1 Associate Professor, Department of Business Management, Faculty of management, University of Kharazmi, Tehran, Iran.

2 Master of Business Management, Faculty of Management, University of Kharazmi, Tehran, Iran.

Abstract

Extended Abstract
 
Introduction: In today’s rapidly evolving marketing landscape, businesses are increasingly striving to bridge the gap between physical and digital environments, aiming to create seamless and enriched customer experiences. This convergence has given rise to a new retail paradigm known as "phygital retailing "—a term that combines the words "physical" and "digital."Customer loyalty stands as one of the most critical success factors in modern retail environments. It plays a pivotal role in increasing profitability, reducing customer acquisition costs, and establishing a sustainable competitive advantage for organizations. Loyal customers not only contribute to consistent revenue streams but also act as brand advocates, promoting products or services through word-of-mouth and social media. Moreover, loyalty serves as a strategic asset that supports market share growth and ensures business continuity over time. Given these benefits, understanding the underlying mechanisms that drive customer loyalty—particularly in emerging formats like phygital retail—is of utmost importance. Therefore, this study aims to investigate the key factors influencing customer loyalty within the context of phygital retail experiences, with a specific focus on psychological drivers such as customer engagement. While previous research has primarily concentrated on technological infrastructure and operational efficiency in phygital environments, there remains a notable gap in understanding how emotional and cognitive elements —such as interest, enjoyment, and perceived risk—affect consumer behavior and loyalty formation. By addressing this gap, the present research contributes both theoretically and practically to the growing body of knowledge on omnichannel retail strategies.
Methodology: This study adopts an applied research purpose and follows a descriptive-correlational methodology, which is well-suited for examining relationships among variables in real-world contexts. The target population consists of customers who have interacted with Nitrogen Clothing's phygital retail platform in Qazvin province during the spring season of the year 1403 (2024). To determine the appropriate sample size, the Krejcie and Morgan formula was employed, resulting in a recommended sample of 384 participants. A non-probability convenience sampling method was used to select respondents based on their accessibility and willingness to participate in the study. Data were collected using a standardized questionnaire designed based on validated constructs from prior literature. The questionnaire included items measuring dimensions of customer engagement, customer participation, acceptance of communication programs, and overall customer loyalty. Before conducting the main analysis, the validity of the measurement instrument was assessed using content validity techniques, where expert opinions were sought to ensure that each item accurately reflected the intended construct. Reliability was evaluated using Cronbach’s alpha coefficient and composite reliability, both of which confirmed the internal consistency of the scales used. For data analysis, the Structural Equation Modeling (SEM) technique was applied using AMOS software. The use of confirmatory factor analysis (CFA) further ensured the robustness of the measurement model before evaluating the structural relationships.
Discussion and Results: The findings of the study reveal several important insights regarding the dynamics of customer loyalty in phygital retail environments. First, the dimensions of customer engagement —including risk importance, risk probability, product symbolism, interest, and enjoyment —were found to have a statistically significant and positive impact on customer participation. Among these, interest emerged as the most influential driver, with a path coefficient of 0.32, indicating its crucial role in motivating consumers to actively engage with phygital retail offerings. These results suggest that when customers find the shopping experience interesting and personally relevant, they are more likely to become involved, explore the brand’s offerings across multiple channels, and form deeper connections with the retailer. In contrast, risk probability had the lowest path coefficient (0.21), suggesting that while perceived risks do influence participation, they play a relatively minor role compared to other emotional and cognitive components of engagement. Furthermore, the study demonstrated that customer participation significantly enhances both communication program acceptance (path coefficient = 0.66) and customer loyalty (path coefficient = 0.67). These findings underscore the importance of fostering active involvement from consumers, as it directly translates into stronger brand attachment and commitment. Most notably, communication program acceptance showed the strongest positive effect on customer loyalty, with a path coefficient of 0.88 —the highest among all the studied variables. This indicates that when customers feel aligned with a brand’s messaging, promotions, and interactive content, their level of loyalty increases substantially. It highlights the need for retailers to design personalized, emotionally resonant, and coherent communication strategies that align with the expectations and preferences of phygital shoppers.
Conclusion: This research provides new theoretical and practical insights into the mechanisms that drive customer loyalty in phygital retail settings. By integrating the concept of customer engagement and analyzing its various dimensions, the study deepens our understanding of how psychological and emotional factors influence consumer behavior and long-term brand commitment. From a managerial perspective, the findings offer actionable recommendations for retail marketers and business leaders. Emphasizing interest-driven engagement and designing effective communication programs can significantly boost customer participation and loyalty. Retailers should invest in creating interactive, enjoyable, and meaningful shopping experiences that resonate with customers’ values and interests. Ultimately, the study reinforces the idea that successful phygital retailing goes beyond technology integration; it requires a deep understanding of consumer psychology and emotional triggers. By focusing on mental and affective aspects, companies can craft holistic, personalized, and memorable experiences that differentiate them in an increasingly competitive marketplace.

Keywords

Main Subjects

References

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Journal of Business Administration Researches
Volume 17, Issue 40
June 2025
Pages 167-188

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