BUS631: Brand Management

Customer Satisfaction and Customer Loyalty

Customer satisfaction refers to 'the summary psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with the consumer's prior feelings about the consumption experience'. Bloemer and de Ruyter consider customer satisfaction to a particular brand as the experience consumers feel after the consumption of a brand and a subjective assessment of the clients, regarding the extent to which brand performance fulfilled their initial expectations. Oliver argued that even a loyal consumer is vulnerable to situational factors (e.g., competitors' coupons or price cuts), and so satisfaction is not likely to be the sole (reliable) predictor of loyalty.

In the e-commerce context, satisfaction is defined as the contentment of the consumer with deference to his/her previous purchase experiences with an e-commerce firm. By satisfying customer needs and wants, a company creates the most prominent condition in gaining customer loyalty. Moreover, satisfaction can improve customer loyalty in both the online and offline contexts, and the positive relation between satisfaction and loyalty can be stronger online than it is offline, due to the highly customizable ways of interacting with customers.

Customer loyalty to a particular company is the result of the satisfaction felt after the act of consumption of a particular marketing offer. Thus, customer loyalty is considered by some authors to be a higher state than customer fidelity to a company, namely it reflects a state that can be obtained by exceeding customers' initial expectations through superior company performance. Jacoby and Chestnut investigate the psychological sense of loyalty, considering the three elements of the human psyche (affective, conative, and cognitive) as the factors that influence directly (however with different intensity levels) customer loyalty to a particular brand. The authors introduced a second dimension for explaining and understanding loyalty (in addition to the behavioral dimension), namely attitude.

Oliver and Swan define customer loyalty as a deeply held commitment to re-patronize or re- purchase a preferred product, service or brand consistently in the future, despite situational influences and marketing efforts of competitors having the potential to cause switching behavior and influence the buying decision.

In the online context, Srinivasan et al. defined loyalty online as e-loyalty with a particular emphasis on the behavioral dimension of this construct as a favorable attitude of a customer for a web retailer that results in repeat buying behavior. Chen considered that customer loyalty refers to how customers have favorable attitudes toward target e-retailers, shown through repeat purchase intentions and behaviors.

Thus, the following hypothesis is derived: H1: Satisfaction directly and positively influences behavioral loyalty of consumers to purchase using services online.

Mediators

Various empirical studies have shown a direct link between customer satisfaction and loyalty. In addition, Chen examined how four mediating variables (commitment, trust, involvement and perceived value) have an impact in the customer satisfaction–loyalty relation, in an e- setting. Chen's study suggests that perceived value proves to be a complete mediator of satisfaction and loyalty, while commitment, trust and involvement each prove to be partial mediators of satisfaction and loyalty.

Trust

Trust has been defined as 'the expectations held by the consumer that the service provider is dependable and can be relied on to deliver on its promises'. Trust is considered one of the most important factors that can determine the success of a business relationship and McKnight et al. show that trust is the foundation of e-commerce and is the most important factor in the success of online vendors. Based on previous research, this study defines trust as being a belief in the e-retailer's ability (including e-retailer dependability, competence, integrity and benevolence) to fulfil its obligations in a commercial relationship with its customers. Past studies have shown that there is a greater willingness to buy from an online retailer if trust is present and Pavlou empirically proved that trust and satisfaction are positively related. Trust is also a fundamental factor influencing online purchase intentions and in this study we aim to explore the mediating role of trust in relation to satisfaction and loyalty.

Therefore:

H2. Trust acts as a mediator variable between customer satisfaction and customer loyalty in an e- shopping context.

Figure 1. Conceptual model 1: Trust as a mediator in the satisfaction-loyalty relation

Attitude

Attitude refers to a person's favorable or unfavorable evaluation regarding a specific target behavior. Brand attitudes and satisfaction are regarded as distinct concepts in the customer satisfaction literature. According to Oliver, customer satisfaction is relatively transient and is consumption specific, whereas attitudes are relatively enduring. Westbrook and Oliver argued that satisfaction is an evaluation of the totality of the purchase situation relative to expectation, whereas brand attitude is a liking for the product that lacks this element of comparison.

Various empirical research have examined the relation between attitude and behavioral intentions and according to the theory of reasoned action, brand attitudes are a function of beliefs that a brand has desirable or undesirable attributes and evaluations of these attributes. Nonetheless, Suh and Youjae examined how involvement moderates the effect of brand attitudes in the customer satisfaction-loyalty relation. Past studies suggest the possible mediating role of attitude in the customer satisfaction–loyalty relation.

Hence:

H3. Attitude acts as a mediator variable between customer satisfaction and customer loyalty in an e- shopping context.

Figure 2. Conceptual model 2: Attitude as a mediator in the satisfaction-loyalty relation

Hedonic Value

Hedonic value associated with online purchases may include involvement, fantasy, escapism, experiences, fun, pleasure pursued for such transactions. According to Arnold and Reynolds, who examined shopping in physical stores, there are six dimensions of hedonic shopping: (1) Adventure (shopping for stimulation, adventure, and the feeling of being in another world); (2) Social (socializing with friends and family); (3) Gratification (stress relief, alleviating negative mood, treating oneself); (4) Idea (keeping up with trends, seeing new products and innovations); (5) Role (enjoyment derived from shopping for others); and (6) Value (seeking sales, discounts, bargains).

Research shows that when the focus is on joy in the online shopping process, it grows the likelihood of acquiring experiential goods, suggesting that the hedonic performance increases the intensity of online shopping. In addition, hedonic value can be identified as being positively associated with customer satisfaction. Most satisfied customers have a certain level of immersion especially when they are having a pleasant shopping experience. As such, we can assume that as customers experience hedonic motivations in Internet retailing, they may exhibit a certain level of loyalty toward the brand that provides them with such an experience in an online setting. The mediating role of hedonic value in the customer satisfaction–loyalty relation in an e-shopping context remains to be explored.

Therefore, we propose:

H4. Hedonic value acts as a mediator variable between customer satisfaction and customer loyalty in an e-shopping context.

Figure 3. Conceptual model 3: Hedonic value as a mediator in the satisfaction-loyalty relation

Utilitarian Value

With regard to utilitarian motivations, Babin et al. note that people are concerned with efficiency and achieving a specific end when they shop. Performance factors and functional utility were often associated as being paramount in consumers' purchasing process and determining a certain behavior. In this study, we measured how consumers appreciate the functional characteristics of online shopping services: the convenience of e-shopping; the wide range of products available in the electronic environment; and how easily they can compare prices of different products online and obtain information about the available alternatives.

Considering the fact that online purchasing services offer functionalities manageable by consumers, we examine the mediating role of utilitarian value in relation to satisfaction and loyalty, because these relationships have still not been empirically studied in different research settings, such as online shopping services.

Thus, we hypothesize the following:

H5. Utilitarian value acts as a mediator variable between customer satisfaction and customer loyalty in an e-shopping context.

Figure 4. Conceptual model 4: Utilitarian value as a mediator in the satisfaction-loyalty relation