Chapter II Literature Review
2.5 Customer Loyalty
2.5.2 Construct of Customer Loyalty
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Zeithaml, Berry, and Parasuraman (1996) defined it as “a consumer’s intent to stay with an organization.” Frederick and Schefter (2000) even purported customer loyalty is conceived as a sense of trust between customers and firms, which reveals their behavioral intention to maintain an ongoing relationship.
Customer loyalty in the study concerns both behavioral and psychological aspects.
Hence, the study defines customer loyalty for Brand’s InnerShine beauty drinks as the repurchase intention and the irreplaceable role of the brand within customers’
perceptions.
2.5.2 Construct of Customer Loyalty
Many studies contribute to the refinement of loyalty measurements and elaboration of loyalty constructs. Fornell (1992) considered customer loyalty is composed of repurchase intention and price tolerance of consumers. While large amounts of discussions on measuring the effectiveness of frequency-based loyalty (e.g.
the repeated patronage), some critics remain skeptical on the approach for it neglects the complicated nature of loyalty concept (McMullan et al., 2003). Repeat purchases are not always viewed as outcome of a psychological commitment toward the brand (TePeci, 1999).
To better capture the multifarious dimensions of loyalty construct, researchers propose different measurements. Stum and Thirty (1991) maintained that loyalty can be measured by the following four indicators:
(1) making repeat purchases
(2) purchasing across products and service lines (3) giving referrals
(4) demonstrating an immunity to the “pull” of the competitors.
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Zeithaml (1996) suggested a measure with five dimensions on customer loyalty:
(1) loyalty to company (e.g. to give favorable word of mouth) (2) propensity to switch
(3) willingness to pay more
(4) external response to problem (e.g. to complain with other customers) (5) internal response to problem (e.g. to complain with salesperson)
Bowen and Chen (2001) integrated different measures as a synthesis:
(1) Behavioral measurement: includes consistent, repetitious purchase behavior (2) Attitudinal measurement: concerned with the sense of loyalty, engagement and allegiance, which reflect the emotional and psychological attachment inherent in loyalty.
(3) Composite measurement: a combined one with the previous two dimensions, which measures loyalty by customers' product preferences, propensity of brand-switching, frequency of purchase, recency of purchase and total amount of purchase.
Grønholdt, Martensen, and Kristensen (2000) investigated the latent variable of customer loyalty drawn from the European Customer Satisfaction Index (ECSI) and operationalized by four indicators:
(1) the customer’s intention to repurchase
(2) intention of cross-buying (buy another product from the same company) (3) intention to switch to a competitor (price tolerance)
(4) intention to recommend the brand/company to other consumers.
Since the measure proposed by Grønholdt, Martensen, and Kristensen (2000) provides some insights on loyalty concept with examining the differences across industry, it is applied in the study to examine the customer loyalty for the Brand’s InnerShine beauty drinks.
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Chapter 3 Methodology
In this chapter, methods for conducting the study are displayed in details. The chapter is divided into five sections. Section 1 presents research framework with dictions and a graph. Section 2 discusses the hypotheses and interrelationships among research variables. The definitions and measurements of each variable are provided in Section 3 in details. Section 4 outlines the sampling methods. Section 5 explains some strategies for data collections and analysis.
3.1 Research Framework
Based on the research objectives and previous literature review, the research framework in this study is structured and shown in Figure 3.1.1. Both quantitative and qualitative methods are conducted as complementary approaches in the research.
The research variables encompass brand image, perceived value, customer satisfaction and customer loyalty. The effect of brand image and perceived value as independent variables on customer satisfaction and customer loyalty as dependent variables are examined in the study. H1 indicates that brand image is positively associated with perceived value. H2 assumes brand image is positively related to customer satisfaction. H3 proposes brand image is positively related to customer loyalty. H4 postulates a positive association exists between perceived value and customer satisfaction. H5 assumes perceived value is positively related to customer loyalty. H6 proposes customer satisfaction and customer loyalty are positively correlated. The variances of demographic variables (gender, age, marital status, residential area, levels of education, occupation, monthly income among individuals, purchase channel, and purchase frequency) among each research variables are investigated in H7.
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Figure 3.1.1 Research Framework
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3.2 Hypotheses
Grounded on the literature reviews of previous studies, the study proposes seven hypotheses, which investigate the relationship among perceived value, brand image, customer satisfaction, and customer loyalty. Demographic variables and personal characteristics are also concerned. The basis of each hypothesis is explained as follows:
The Relationship between Brand Image and Perceived Value
Fredericks and Slater (1998) considered image of a brand or company as an important element for the customer value, and therefore affect customer loyalty as well. LeBlanc and Nguyen (1999) conducted a study on college students and found that the image of school had a direct impact on their perceived value of school. Maklan and Knox (1997) argued that customer value can be increased by the improvement of brand image including enhancing the product functionality and quality and creating the prestige and status for the owner of the brand. Grewal, Monroe, and Krishnan (1998) also suggested that brand name is positively correlated to the customers’ perceived quality, and further increases their perceived value afterwards. Recapitulating from the previous findings, this study proposed the first hypothesis as follows:
H1: Brand image has a significantly positive impact on perceived value of customers.
The Relationship between Brand Image and Customer Satisfaction:
Bloemer and de Ruyter (1998) studied the retail settings and manifested that positive store image leads to greater level of satisfaction. Blackston (2000) examined the components for the long-term and positive relationship between corporate image and customers. His study evidenced that a favorable image enhances its dependability and
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trust, and therefore results in satisfaction. Abdullah, Nasser, and Husain (2000) studied the relationship between satisfaction and loyalty via consumers’ evaluation for their preferred cell phone brand. They found that customers’ satisfaction level is positively influenced by their perceived brand image. Based on these study results, the study proposes the second hypothesis as follows:
H2: Brand image has a significantly positive impact on customer satisfaction.
The Relationship between Brand Image and Customer Loyalty:
Osman (1993) proposed a model for articulating the relationship between store image and customer loyalty and noted that both positive store image and purchase experiences in the past among customers cause their loyalty patronage behavior.
Andreassen and Lindestad (1998) contended that brand image impacts intended customers in the future, which also indicates the credence quality of a firm is the key for the repatronage. Study conducted by Martenson (2007) evidenced the impact of the brand image on customer satisfaction and loyalty in grocery retailing. According to the previous research, the study proposes the third hypothesis as follows:
H3: Brand image has a significantly positive impact on customer loyalty.
The Relationship between Perceived Value and Customer Satisfaction:
Fornell et al., (1996) introduced American Customer Satisfaction Index (ACSI) and suggested that perceived value is the determinant of customer satisfaction. Cronin, Brady, and Hult (2000) investigated six different service industries and their finding indicates that both customers’ perceptions on service quality and service value result in satisfaction. McDougall and Levesque (2000) noted that corporates should more
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carefully assesse perceived value from customers for a more effective examination of their satisfaction. On the basis of the previous studies, the study proposes the fourth hypothesis as follows:
H4: Perceived value has a significantly positive impact on customer satisfaction.
The Relationship between Perceived Value and Customer Loyalty:
Dodds, Monroe, and Grewal (1991) considered a positive relationship exists between consumers’ perceived value and their intention to purchase or repurchase. Ravald and Grönroos (1996) argued that by increasing the benefits or reducing the sacrifice for customers their perceived value will be enhanced, and thus leads to loyalty. The study conducted by Parasuraman and Grewal (2000) on service quality also gains insights on the effect of perceived value for it is increased as service quality is improved, and eventually contributes to loyalty. Yang and Peterson (2004) suggested that companies which strive for loyal customers should focus on their satisfaction and perceived value since not only the price but the cost of product or service affects the overall evaluation of customers. In light of the past studies, the study proposes the fifth hypothesis as follows:
H5: Perceived value has a significantly positive impact on customer loyalty.
The Relationship between Customer Satisfaction and Customer Loyalty:
Anderson and Sullivan (1993) stated that the key for the retention of customers is high level of satisfaction for it is directly related to customers’ intention for repurchase.
Bearden and Teel (1983) assumed that marketers should pay more attention on customer satisfaction because it is a significant indicator for repetitive purchase,
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favorable word of mouth and consumer loyalty. Bloemer and Poiesz (1989) contended that “satisfaction can be thought of as an important determinant of brand loyalty.”
Empirical findings from LaBarbera and Mazursky (1983) revealed that brand loyal customers are less likely to switch brands due to higher levels of satisfaction. Based on the previous studies, the study proposes the sixth hypothesis as follows:
H6: Customer satisfaction has a significantly positive impact on customer loyalty.
The Difference among Demographic Variables and each Construct:
Many studies offer some evidence that consumers can be characterized by variables such as age, income, level of education, social participation for better capturing their consumption behaviors (Im, Bayus, Mason, 2003). Kotler (2003) considered geographic, demographic, psychological, and behavioral variables as indicators for analyzing decision making in consumer research. Bennett and Rundle-Thiele (2004) specifically noted that the relationship between satisfaction and loyalty is moderated by personal characteristics such as demographic variables and other factors. Concerning the reviews of the previous studies, the study proposes the seventh hypothesis as follows:
H7: There are significant differences among brand image, perceived value, customer satisfaction, and customer loyalty on different demographic variables.
H7-1: There is significant difference among consumers with different genders on brand image, perceived value, customer satisfaction, and customer loyalty.
H7-2: There is significant difference among consumers with different ages on
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brand image, perceived value, customer satisfaction, and customer loyalty.
H7-3: There is significant difference among consumers with different marital statuses on brand image, perceived value, customer satisfaction, and customer loyalty.
H7-4: There is significant difference among consumers with different residential area on brand image, perceived value, customer satisfaction, and customer loyalty.
H7-5: There is significant difference among consumers with different levels of education on brand image, perceived value, customer satisfaction, and customer loyalty.
H7-6: There is significant difference among consumers with different occupations on brand image, perceived value, customer satisfaction, and customer loyalty.
H7-7: There is significant difference among consumers with different monthly incomes among individuals on brand image, perceived value, customer satisfaction, and customer loyalty.
H7-8: There is significant difference among consumers with different purchase channels on brand image, perceived value, customer satisfaction, and customer loyalty.
H7-9: There is significant difference among consumers with different purchase frequencies on brand image, perceived value, customer satisfaction, and customer loyalty.
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3.3 Definition and Measurement of Variables
For the high response rate and the convenience of statistical analysis, structured questionnaire is used for eliciting information from respondents. The design of questionnaire and each research variable will be dilated.
3.3.1 Questionnaire Design
The questionnaire constitutes of five sections, where respondents’ perceptions toward Brand’s InnerShine beauty drinks in brand image, perceived value, customer satisfaction, and customer loyalty are surveyed respectively. The last part is the background information collected from respondents and categorized as demographic variables. The contents of questionnaire are mainly provided from the previous studies (Park et al., 1986; Aaker, 1996; Sweeney and Soutar, 1991; Barbakus et al., 2004;
Grønholdt et al., 2000); however, concerning the validity, they are slightly modified in order to better evaluate consumers’ ideas about edible products.
3.3.2 Research Variables
Each construct in the questionnaire is measured with 7-point Likert scale with
“Strongly disagree” coded as 1, “Disagree” coded as 2, “Disagree somewhat” coded as 3, “Undecided” coded as 4, “Agree somewhat” coded as 5, “Agree” coded as 6,
“Strongly agree” coded as 7.
Independent Variables
Brand Image refers to “all the perceptive associations of customers who had been purchased Brand’s InnerShine beauty drinks,” tested by functional, symbolic, experiential, and organization association four constructs based on the studies from Park, Jaworski & Maclnnis (1986) and Aaker (1996). The operational definitions of the four selected constructs are established as follows:
1. Functional: the quality or function of products or services is designed to solve
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externally generated consumption needs, such as utility and reliability.
2. Symbolic: the products or service fulfill internally generated needs for self-enhancement, role position, group membership, or ego-identification.
3. Experiential: the products or service fulfill internally generated needs for sensory pleasure, variety, or cognitive stimulation.
4. Organization association: customers’ overall impression of the brand along with all the associations with the brand, which are triggered by the messages sent by the organization.
Perceived Value is defined as “the total outcome, based on consumers’
comparison of their perceived costs and benefits,” tested by emotional value, social value, price/value, and quality/performance four constructs, modified from the study of Sweeney & Soutar (2001). The operational definitions of the four selected constructs are established as follows:
1. Emotional value: the utility generated from the feelings or affections that a product creates.
2. Social value: the utility generated from the product’s ability to enhance social self-concept.
3. Price/value: the utility generated from the product due to the reduction of its perceived short term and longer term costs.
4. Quality/performance: the utility generated from the perceived quality and expected performance of the product.
Dependent Variables
Customer Satisfaction denotes “the positive emotional response and perceived evaluation of the product and service performance on Brand's InnerShine beauty
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drinks,” tested by satisfaction for merchandise, satisfaction for service, and overall satisfaction three constructs, grounded on the study of Barbakus, Bienstock & Scotter (2004). The operational definitions of the three selected constructs are established as follows:
1. Satisfaction for merchandise: consumers’ level of satisfaction on the quality of the products provided by the brand.
2. Satisfaction for service: consumers’ level of satisfaction on the service quality provided by the brand.
3. Overall satisfaction: consumers’ overall level of satisfaction derived from the purchase experiences of the products or service provided by the brand.
Customer Loyalty is defined as “the repurchase intention and the irreplaceable role of the brand within customers’ perceptions,” tested by intention to repurchase, intention of cross-buying, price tolerance, and intention to recommend the brand to other customers four constructs, based on the study of Grønholdt, Martensen &
Kristensen (2000). The operational definitions of the four selected constructs are established as follows:
1. Intention to repurchase: customers’ intention for purchasing the products or service with the same brand in the future.
2. Intention of cross-buying: customers’ intention for buying another product or service with the same brand.
3. Price tolerance: customers’ level of acceptance for the products or service provided by the company.
4. Intention to recommend the brand to other customers: customers’ intention for delivering favorable word of mouth to others.
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Demographic Variables
Gender is measured with nominal scale and categorized as “male” (coded ‘1’) and
“female” (coded ‘2’) two groups.
Age is measured with interval scale, ranging from “below 25” (coded ‘1’) to “above 51”
(coded ‘7’) eleven groups. Marital Status is measured with nominal scale and categorized as “single” (including “single,” “divorced,” and “widow/er,” coded ‘1’) and “married” (coded ‘2’) two groups.
Residential Area is measured with nominal scale and categorized as “North Taiwan”
(coded ‘1’), “Central Taiwan” (coded ‘2’), “South Taiwan” (coded ‘3’), “East Taiwan”
(coded ‘4’), “Outlying island” (coded ‘5’), “Other regions” (coded ‘6’) six groups.
Levels of Education is measured with nominal scale and categorized as “below senior high” (coded ‘1’), “bachelor / junior college” (coded ‘2’), “master and above” (coded
‘3’), “Else” (coded ‘4’) four groups.
Occupations is measured with nominal scale and categorized as “students” (coded ‘1’),
“public servants” (coded ‘2’), “manufacturing” (coded ‘3’), “service industry” (coded
‘4’), “professionals” (coded ‘5’), “freelancers” (coded ‘6’), “housekeeping” (coded ‘7’),
“else” (coded ‘8’) eight groups.
Monthly income (Individual) is measured with interval scale, ranging from “under 20,000 NTD” (coded '1') to “more than 60,000 NTD” six groups.
Purchase Channel is measured with nominal scale and categorized as “physical
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channels” (coded ‘1’), “online channels” (coded ‘2’), “all of the above” (coded ‘3’) three groups.
Purchase Frequency is measured with interval scale and categorized as “once a week”
(coded ‘1’),“once a month” (coded ‘2’), “once per three months” (coded ‘3’),“once per six months” (coded ‘4’), “once a year” (coded ‘5’), “less within a year” (coded ‘6’) six groups.
3.4 Sampling
Both quantitative and qualitative methods for sampling are employed to verify the determinants of dependent variables and also better grasp the characteristics and feedbacks of consumers from the target population. Sample size is adjusted and described below.
3.4.1 Questionnaire Survey Main Study
The distribution of questionnaire will be both online and offline for reaching different target populations. Convenience sample will be used in online survey for avoidance of being confined by the time, space, finance, and man power. Concerning the data collection from those who are considered less accessible online, such as the elderly and housewives, questionnaire with purposive sample administered in person will be more appropriate. The platforms for the online questionnaire distribution will be PTT and FashionGuide, for the former is the most visited bulletin board system in Taiwan and the latter is a popular website famous for sharing information of cosmetic, facial care products, and health foods.
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3.4.2 In-depth Interview
Due to the constraints of questionnaire design, an in-depth interview will be used to solicit more information from the customer of Brand’s InnerShine beauty drinks.
Five or six respondents of the previous questionnaire survey will be selected as interviewees. In order to add up the diversity of data, respondents who are different from each other on demographic characteristics will be prioritized for interview. The format of interview will be semi-structured for it is considered as an effective way of probing for more information and clarification of answers. Also, samples with the varied professional, educational and personal histories are able to provide more insights, whose answers may not be well captured in the standardized questionnaire (Barriball and While, 1994).
3.5 Data Collection and Analysis Methods
The data collected with both quantitative and qualitative methods will be adjusted and analyzed with selected tools. Details are explained in the session.
3.5.1 Questionnaire Survey
The results of survey will be coded and inputted in SPSS version 18.0 statistical analysis computer package. Selected strategies for data analysis will be described in the session.
1. Descriptive statistics analysis
To observe the essential features and the tendency of the sampling, descriptive statistics will be adopted. Frequency scores, measure of central tendency and dispersion will be summarized and exhibited by calculating the mean scores and standard deviation, for the tendency of conformity and disconformity from the data can be revealed by the two measures.
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2. Factor analysis
Factor analysis helps researchers to extract the meaningful and unobserved latent variables from the original ones. To convert a set of possibly correlated variables into a set of linearly uncorrelated variables, principal component analysis (PCA) will be used. Some uncorrelated variables can be therefore excluded via the varimax of orthogonal rotation; the rest of components which are not correlated will be excluded.
3. Reliability analysis
To ensure the consistency of the measured results, reliability test is indispensable.
Cronbach's alpha, often used in testing the summated scales, is able to determine
Cronbach's alpha, often used in testing the summated scales, is able to determine