The Effect of Customer Satisfaction on B&R Loyalty Model ------... Empirical Study on China’s Logistics Enterprises

The Effect of Customer Satisfaction on B&R Loyalty Model ------ An
Empirical Study on China’s Logistics Enterprises
ZHOU Liyong
Department of Economics and Management, Chongqing University of Arts and Sciences, P.R. China,
402160
[email protected]
Abstract: Under the economic globalization trend and new domestic and international competitive
environment, how to develop and upgrade the comprehensive strength and international competence,
and how to promote industrialization, urbanization, informationization and internationalization, becomes
the very focuses of China’s logistics enterprises. Since the 1990s, the marketing paradigm of
customer-orientation has replaced the product-orientation, therefore, perceived value, the variable from
consumer’s perception, begins to draw academic and industrial attention. However, few studies tended
to analyze the relationships between perceived value, Word-of-mouth communication intention, and
trust. Also, no study combined customer perceived value with the loyalty model of B&R, thus the
authors make a new attempt in this regard, hoping that the conclusion will provide useful reference for
business activities.
Keywords: customer satisfaction; B&R loyalty; empirical study
1 Introduction
Under the economic globalization trend and new domestic and international competitive
environment, how to develop and upgrade the comprehensive strength and international competence,
and how to promote industrialization, urbanization, informationization and internationalization, becomes
the very focuses of China’s logistics enterprises. Competitive advantage theory has been widely
recognized by academics and industries, and people attempt to explore sustainable core competitive
advantage (Wang Shuxiang and Ye Changbing, 2004). Researchers demonstrate how to establish
competitive advantage from different perspectives, such as quality management, value chain
management, BPR, corporate culture, staff behavior and so on (Huang Hua, 2004). Yet all these efforts
are internal improvement rather than external customer-oriented enhancement. With market competition
intensifying and the gradual improvement of market mechanism, from the 1990s, product-oriented
marketing has been replaced by customer-oriented marketing. The two variables, WOM and satisfaction
shared common concerns among academics and industries. In 2006 and 2007, “European marketing
magazine” organized two symposia publishing forefront papers on these two variables. Domestic
concern of the two variables started in recent years, and academic achievements were quite limited. This
paper attempts to combine customer perceived value, WOM, and satisfaction with the loyalty model of
B&R (1996), and analyze their internal interaction, so as to enrich and improve the theory and provide
useful references for corporate management practice.
2 Definitions and Delimitation of Variables
To make the study more rigorous, we must give definitions and delimitation of the variables
involved. (1) Positive WOM. In China’s traditional semantic, WOM contains two meanings: Firstly,
praise and eulogist, or long-term, unified, good views and evaluations formed in public to a product or
service. Secondly, oral communication, that is, the verbal words communicated among people. “Ci Hai”
explaines WOM as “the verbal praise of people”. “Bei”, the monument, here refers to the monument to
praise and eulogize. For example: “Kou Bei Zai Dao”, which means being highly praised by all (Zhang
Mingxing, 2006). Westbrook (1991) defined WOM as “an informal way of communication through
directly talking about the characteristics of a company’s product or service with other consumers”. Katz
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and Lazarafeld (1964) found that 38% buyers are affected by WOM, and 60% buyers are mainly
affected by television, newspaper and magazine advertisements. Webster (1991) proved that relative to
service products, WOM has a significant impact on consumers’ information collection, evaluation and
purchase processes. Reichheld and Sasser (1990) also indicated that positive WOM can not only reduce
costs, but also increase profits and attract new consumers. On the contrary, Solomon (1998) believed
that negative WOM can undermine the credibility of a company. (2) Satisfaction. There were more than
15,000 papers related to satisfaction in the past 20 years, but no common definition was reached. Tse
and Wilton (1988) defined customer satisfaction as the evaluation of difference between previous
experience and later perception of product performance. This definition includes three determining
factors: firstly, customers’ expectation of a product or service performance; secondly, the actual
performance perceived by consumers; thirdly, the difference between the expected and actual
performance. Johnson and Fornell (1991) regarded customer satisfaction as the overall evaluation
formed by a customer to its supplier in a certain period of time. (3) Perceived value. Bai Changhong
(2001) pointed out that customer perceived value is the overall rating of goods or services after
weighing perceived profit against cost. Customer perceived value indicates the subjective awareness of a
company’s products, which is different from the objective value. (4) Customer loyalty. Baldinger and
Robinson (1996) divided brand loyalty through the two dimensions of emotional attitude and behavior.
Attitude loyalty and behavior loyalty are respectively divided into 3 levels: high, middle, and low.
Customer loyalty with high level of both attitude loyalty and behavior loyalty is defined as strong
loyalty; customer loyalty with low level of attitude loyalty, middle or high level of behavior loyalty is
defined as weak loyalty; and customer loyalty with high or middle level of attitude loyalty, low or
middle level of behavior loyalty is defined as latent loyalty.
3 Hypotheses and Model Construction
Research showed that when consumers have full confidence on a product, they will actively tell
others the positive information of this product (Reichheld and Sasser, 1990). Brooks (1957) and Richins
(1983) proved that WOM communication (WOMC) often occurred in those consumers who appear to be
satisfaction. Therefore, interaction should exist between satisfaction and positive WOM. According to
the above literature review, we propose the following hypotheses:
H1: Customer satisfaction has positive correlation with positive WOM.
Berry (1996) pointed out that when buyers and sellers perceive value existence, the sense of
satisfaction between the two sides will be strengthened. The study of Urban, Sultan and Qualls on
Web-Sit (2000) indicated that customer satisfaction is an essential element to build up a strong customer
relationships and sustainable market share, and customer perceived value is the foundation of
satisfaction. Similarly, other study found that if customers perceive benefits when buying goods or
services, they will communicate the information to friends around quickly (Herr et al., 1991). Yuan
Yazhong (2008) also believed that customer perceived value is subjective and decided by customers
rather than suppliers. It usually affects a customer’s evaluation and represents satisfaction to the product.
H2a: The higher the customer perceived value, the stronger the satisfaction of customers to the
dealer;
H2b: The higher the customer perceived value, the more WOMC intention of customers.
There has always been controversy on the relationship between customer satisfaction and loyalty in
academic community. Quite a few researches believe that satisfaction equates to loyalty, whereas other
researches think there are at least six differences between the two, thus they can not be equated.
Researchers spent a lot to examine the relationship between customer perceived value and satisfaction,
but few studies examined the relationship between customer perceived value and loyalty (Stewart, 1997).
Dominated by the concept that satisfaction equates to loyalty, exposure of the relationship between
perceived value and satisfaction has become a potential constraint to explore the linkages between
perceived value and customer loyalty. We compensate for this deficiency and propose the following
hypotheses.
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H3: the higher the customer perceived value, the higher likelihood of the customer’s strong loyalty,
the lower likelihood of the customer’s weak loyalty.
4 Hypotheses Examination
4.1 Scale Development and Design
In order to ensure the developed scale’s better reflection of our study purpose, the authors adopt the
guidelines of Anderson and Gerbing (1988) and obtain the scale through the following steps. (1) Based
on the initial research framework, we study a number of core marketing journals to look for applicable
and mature scales. (2) Maintain the scale measurement items unchanged as far as possible. Our
measurement items are excerpted from Positive WOM Scale of Westbrook (1991), Satisfaction Scale of
Tang xiaofei et al. (2007), Perceived Value Scale of Wakefield and Barnes (1996), Attitude and
Behavior Loyalty Scale of Too et al. (2001). (3) Conduct a small sampling pre-test before the official
release of questionnaires to ensure the reliability and validity. (4) Using Likert’s 7 point scale design.
Sampling object is customers of China’s logistics enterprises. The field work lasted 6 months from
November 11, 2007 to May 7, 2008. 640 questionnaires were distributed and 360 valid ones returned.
4.2 Test of Reliability and Validity
We first test the reliability and validity of the large-scale sampling questionnaires before prime
statistical tests. Helms et al. (2006) suggested that all KMO values should exceed 0.6, cumulative
percentage of variance explained (CPVE) should exceed 60% and internal correlation coefficients
should exceed 0.6 so as to maintain good structure validity, and all Cronbach’s α values should 0.6 so as
to maintain good structure reliability. In accordance with the above principles, the authors obtain a scale
with good structure validity and reliability after deleting 3 items (item 1, 7, 8 in attitude loyalty
measurements). The testing results prove our official scale is with scientific and rigorous design,
therefore, the sampling data are reliable (see statistical results in Table 1 below).
Table 1: test results of reliability and validity
Internal
Cronbach’s
Variable
Item
Correlation
KMO
α
Coefficient
A1: If I like a supplier, I will tell my friends.
0.75
A2: I will actively tell my friends of a good supplier.
0.74
Positive A3: I think I should tell my friends of a good
0.77
0.81
0.72
WOM
supplier.
A4: I do not want to hear negative information of
0.70
this supplier.
B1: On the whole, I am very satisfied with the
0.74
supplier.
B2: I feel satisfied with the relationship investment
0.85
0.80
Satisfaction
0.68
of the supplier.
B3: I think the price of the supplier is very
0.65
satisfactory.
C1: I feel dealing with this supplier is worthy.
0.70
0.70
Perceived C2: I’d like to pay the given price of the supplier.
0.84
0.82
Value
C3 I perceive a high quality of the supplier’s
0.73
products.
Attitude D2: I am willing to put in extra effort to deal with
0.86
0.78
0.76
Loyalty this supplier.
D3: As long as the service is similar, I could just as
0.72
well deal with a different supplier.
D4: I am proud to tell others that I deal with this
0.72
supplier.
D5: For me, this supplier is the best alternative.
0.70
：
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（%）
CPVE
66.5
61.8
70.8
69.0
Behavior
Loyalty
D6: I feel very little loyalty to this supplier.
E1: Compared with other suppliers, I choose this
one on a regular basis.
E2: This supplier stimulates me to deal with it
repeatedly.
E3: I have dealt with this supplier for many times.
0.75
0.68
0.83
0.66
0.75
67.3
0.70
4.3 Hypotheses Examination with SEM
All hypotheses in this study are examined with SEM method. In our SEM model, “perceived
value” is external latent variable; “satisfaction”, “positive WOM”, “attitude loyalty” and “behavior
loyalty” are internal latent variables. According to Joreskog and Sorbom (1996), when using SEM to
examine fit degree of the theoretical model, researchers hope to accept null hypothesis H0 and examine
whether theoretical model can fit observed data. Important observed indicators are taken into
consideration as well as χ2 value. Structural model analysis includes fit indices analysis and overall
interpretation ability of the research model, and fit indices analysis consists of absolute, incremental,
and parsimonious fit indices test (Hairs et al., 1998). As reported in Table 2, the ratio of χ2 and df is
between 1.0 and 3.0, GFI, AGFI, NFI and CFI values all exceed 0.9, RMSEA value is less than 0.05. All
these fit indices are satisfactory.
Table 2: fit indices
Model
χ2
df
χ2/df
p
GFI
AGFI
NFI
CFI
RMSEA
9.66
2.34
2.65
0.15
0.990
0.970
0.980
0.960
0.018
The results suggest that the higher customer perceived value is, the stronger sense of satisfaction
(+0.378) and WOMC intention (+0.336), the effective of satisfaction on WOM is (+0.452), the higher
attitude loyalty (+0.306) and behavior loyalty (+0.2890) of the customer which indicates the customer’s
strong loyalty. Therefore all hypotheses are verified.
Behavior Layalty
Satisfaction
0.378
low
0.306
high
Positive
WOM
Figure 1: statistical results
high
Latent loyalty
middle
Perceived value
low
0.452
Attitude Loyalty
0.289
middle
Weak loyalty
Strong
loyalty
0.336
5 Management Enlightenment
This paper studies the effect of customer perceived value on positive WOMC intention, satisfaction
and customer loyalty. The results illustrate that customers perceived value is the basis of the formation
of positive WOMC intention and satisfaction, and it also has a significant effect on the formation of
customers’ true loyalty. This paper reveals the impact of customer perceived value on other
widely-concerned variables and proves Michael. Porter’s view in the book “Competitive Advantage”
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that company’s competitive advantages are attributed to the creation of customer value. Moreover, it is
in line with Woodruff’s idea that customer perceived value is the next source of competitive advantage.
WOM is regarded by modern marketers as the most economical and reliable communication tool and
media. Therefore, we should take full advantage of this positive factor to enhance company’s core
competence. We hope our study can enrich current academic achievements and provide useful reference
for corporate practice.
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